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HomeMy WebLinkAbout2016 • I VINCENT D.CULLEN,CPA L (1950-2013) CULLEN(&-DANQWSK1, LLP CERTIFIED PU&LICLAC�'UNTANTS JAMES F. ODRIGU Z,CPA PETER A ROD SANDERS, CPA JILL S.SANDERS,CPA DONALD J.HOFFMANN,CPA RECEIVED CHRISTOPHER V.REINO,CPA ALAN YU,CPA JUN 2 8 2017 Southold Town Clerk June 6, 2017 The Board of Fire Commissioners Southold Fire District Southold, New York In planning and performing our audit of the financial statements of the Southold Fire District(District) as of and for the year ended December 31, 2016,in accordance with auditing standards generally accepted in the United States of America, we considered the District's internal control over financial reporting (internal control) as a basis for designing auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the District's internal control.Accordingly,we do not express an opinion on the effectiveness of the District's internal control. However, during our audit we became aware of a deficiency in internal control that we do not consider a significant deficiency or a material weakness. The memorandum that accompanies this letter summarizes our comments and suggestions concerning those matters. This letter does not affect our report dated June 6, 2017,on the financial statements of the Southold Fire District. We will review the status of these comments during our next audit engagement.We have already discussed many of these comments and suggestions with various District personnel,and we will be pleased to discuss them in further detail at your convenience, to perform any additional study of these matters, or to assist you in implementing the recommendations. This communication is intended solely for the information and use of the Board of Fire Commissioners, management, others you deem appropriate within the District, and any governmental authorities you need to share this information with. It is not intended to be, and should not be, used by anyone other than these specified parties. Very truly yours, &tom 7, Lj-)a Cullen&Danowski,LLP 0 1650 ROUTE 112,PORT JEFFERSON STATION,NEW YORK 11776-3060 0 PHONE:631-473-3400•FAX:631-473-4863•WWW.CDLLP.NET J Southold Fire District For the Year Ended December 31,2016 STATUS OF PRIOR YEAR COMMENTS There were no prior year comments. CURRENT YEAR COMMENTS Capital Assets The responsibility of safeguarding the District's investment in capital assets is important to sound fiscal management. The responsibilities can only be discharged through adequate capital asset accounting. In addition to maintaining this record for accountability purposes, the District also needs this information for insurance and financial reporting purposes. During our current year audit,we noted that the District capitalized assets that were ordered but had not yet been received,valued at$73,838. We recommend that the District insure assets are not added to the inventory until items have been received and paid for by the District. Page 2 VINCENT D.CULLEN,CPA (1950-2013) CULLEN &'DANOWSM LLP CERTIFIED PETER R R IC�ACCObNTANTS JAMES E. ODRIG U Z,CPA = � ,CPA JILL S..SANDERS,CPA DONALD J.HOFFMANN,CPA CHRISTOPHER V.REINO,CPA ALAN YU,CPA June 6,2017 To the Board of Fire Commissioners Southold Fire District Southold,New York We have audited the financial statements of the Southold Fire District (District) for the year ended December 31, 2016, and have issued our report thereon dated June 6, 2017. Professional standards require that we provide you with the following information related to our audit. Our Responsibilities under U.S. Generally Accented Auditing Standards and Government Auditing Standards As stated in our engagement letter dated November 1, 2016, our responsibility, as described by professional standards, is to express opinions about whether financial statements prepared by management with your oversight are fairly presented, in all material respects, in accordance with the financial reporting provisions of the New York State Office of the State Comptroller, which is a comprehensive basis of accounting other than accounting principles generally accepted in the United States of America (GAAP) as applied to governmental units. Our audit of the financial statements does not relieve you or management of its responsibilities. In planning and performing our audit,we considered the District's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinions on the financial statements and not to provide assurance on the internal control over financial reporting. As part of obtaining reasonable assurance about whether the financial statements are free of material misstatement,we performed tests of the District's compliance with certain provisions of laws, regulations, contracts and grants, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit. While our audit provides a reasonable basis for our opinion,it does not provide a legal determination on the District's compliance with those requirements. Our responsibility for the supplementary information accompanying the financial statements, as described by professional standards, is to evaluate the presentation of the supplementary information in relation to the financial statements as a whole and to report on whether the supplementary information is fairly stated,in all material respects,in relation to the financial statements as a whole. We are responsible for communicating significant matters related to the audit that are, in our professional judgment, relevant to your responsibilities in overseeing the financial reporting process. However,we are not required to design procedures specifically to identify such matters. 1650 ROUTE 112,PORT JEFFERSON STATION,NEW YORK 11776-3060 PHONE:631-473-3400•FAX:631-473-4863•WWW.CDLLP.NET ,r Southold Fire District For the Year Ended December 31, 2016 Our Responsibility for Other Information in Documents Containing Audited Financial Statements Our responsibility for other information in documents containing the District's audited financial statements does not extend beyond the financial information identified in our report and we have no professional obligation to perform procedures to corroborate such other information. In the event the financial statements are incorporated into a printed document, please forward a printer's proof for our approval before final production. Planned Scope and Timing of the Audit We performed the audit according to the planned scope and timing previously communicated to you in our engagement letter. Significant Audit Findings Qualitative Aspects of Accounting Practices Management has the responsibility for the selection and use of appropriate accounting policies. The significant accounting policies used by the District are described in Note 1 to the financial statements. No new accounting policies were adopted and the application of existing policies was not changed during the year ended December 31, 2016. We noted no transactions entered into by the District during the year for which there is a lack of authoritative guidance or consensus. All significant transactions have been recognized in the financial statements in the proper period. Accounting estimates are an integral part of the financial statements prepared by management and are based on management's knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. Management feels that their estimates are reasonable in relation to the financial statements taken as a whole. The most sensitive estimate affecting the financial statements was: • Historical Cost Value of Certain Capital Assets - Management's estimate of the historical cost value of Land and Buildings is based on replacement cost converted to estimated historical cost using a conversion factor based on the year the item was placed into service. • Actuarial Assumptions and Methods Underlying Pension Reporting - Management's acceptance of various actuarial assumptions and methods underlying the calculation of the District's pension reporting is based on the actuarial valuations prepared by the actuary for the ERS. Difficulties Encountered in Performing the Audit We encountered no significant difficulties in dealing with management in performing and completing our audit. Page 2 Southold Fire DistrictSouthold Fire District For the Year Ended December 31, 2016 Corrected Misstatements Professional standards require us to accumulate all known and likely misstatements identified during the audit,other than those that are trivial,and communicate them to the appropriate level of management. In our judgment, none of the adjustments correcting misstatements that we proposed, which were accepted and recorded by the District and are attached to this communication, either individually or in the aggregate,indicate matters that could have a significant effect on the District's financial reporting process. Disagreements with Management For purposes of this letter, professional standards define a disagreement with management as a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditor's report. We are pleased to report that no such disagreements arose during the course of our audit. Management Representations We have requested certain representations from management that are included in the management representation letter dated June 6,2017. Management Consultations with Other Independent Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters,similar to obtaining a "second opinion" on certain situations. If a consultation involves application of an accounting principle to the District's financial statements or a determination of the type of auditor's opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants. Other Audit Finding or Issues We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the District's auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention. Other Matters With respect to the supplementary information accompanying the financial statements, we made certain inquiries of management and evaluated the form, content, and methods of preparing the information to determine that the information complies with the financial reporting provisions of the New York State Office of the State Comptroller, the method of preparing it has not changed from the prior period, and the information is appropriate and complete in relation to our audit of the financial statements. We compared and reconciled the supplementary information to the underlying accounting records used to prepare the financial statements or to the financial statements themselves. Page 3 Southold Fire DistrictSouthold Fire District For the Year Ended December 31, 2016 This information is intended solely for the use of the Board of Fire Commissioners and management of Southold Fire District and is not intended to be and should not be used by anyone other than these specified parties. Very truly yours, &ct&,,i ge, L)--e Cullen&Danowsla, LLP Page 4 Southold Fire District Adjusting journal Entries December 31,2016 Account Description Debit Credit Adjusting journal Entry#1 To adjust to opening equity at 12/31/16. A0.1050.0480.000 Prepaid Expenses 18,140.25 A0.3310.0917.000 Unassigned:Fund Balance 31,296.49 A0.2000.0600.000 Accounts Payable 37,081.73 A0.2090.0630.002 Due to Other Funds-Capital Project 12,355.01 Adjusting journal Entry#2 To adjust opening equity for void check#17047 written in November 2015 and voided in 2016. A0.3310.0917.000 Unassigned:Fund Balance 15.03 A0.5060.3410.403 FP-Admin.Expenses/Miscellaneous 15.03 Adjusting journal Entry#3 To reverse PY balances at 12/31/16. A0.2000.0600.000 Accounts Payable 37,081.73 A0.5110.3410.480 FP-Insurance Costs 9,953.25 A0.5130.9010.800 Emp.Benefits-State Retirement System Contribution 8,187.00 A0.1050.0480.000 Prepaid Expenses 18,140.25 A0.5040.3410.202 FP-Equip.&Capital Outlay/Fire Dept. 13,455.04 A0.5085.3410.430 FP-Firefighting Expenses/Pagers 13,455.04 A0.5100.3410.461 FP-Fire Equip.&Alarms/Equipment Maintenance 434.65 A0.5110.3410.480 FP-Insurance Costs 9,737.00 Adjusting journal Entry#4 To adjust A/P for negative insurance expense payable carried from the PY. A0.5110.3410.480 FP-Insurance Costs 21,238.00 A0.2000.0600.000 Accounts Payable 21,238.00 Adjusting journal Entry#5 To record prepaid expenditures at 12/31/16. A0.1050.0480.000 Prepaid Expenses 30,733.62 A0.3310.0917.000 Unassigned:Fund Balance 30,733.62 A0.3010.0806.000 Nonspendable:Prepaids 30,733.62 A0.5110.3410.480 FP-Insurance Costs 23,780.12 A0.5130.9010.800 Emp.Benefits-State Retirement System Contribution 6,953.50 Adjusting journal Entry#6 To record accounts payable found through subsequent disbursement testing at 12/31/16. A0.5070.3410.415 FP-Utility&Water Expenses/Utilities&Telephone 1,418.76 A0.5100.3410.460 FP-Fire Equip.&Alarms/Apparatus Maintenance 1,429.57 A0.2000.0600.000 Accounts Payable 2,848.33 Adjusting journal Entry#7 To record prepaid taxes at 12/31/16 A0.1050.0480.000 Prepaid Expenses 3,944.45 A0.3310.0917.000 Unassigned:Fund Balance 3,944.45 A0.3010.0806.000 Nonspendable:Prepaids 3,944.45 A0.4050.2410.000 Rentals 3,944.45 4 Southold Fire District Adjusting journal Entries December 31,2016 Account Description Debit Credit Adjusting journal Entry#8 To reclassify expenditure to capital outlay code at 12/31/16. A0.5040.3410.203 FP-Equip.&Capital Outlay/Fire House 45,300.00 A0.5070.3410.415 FP-Utility&Water Expenses/Utilities&Telephone 45,300.00 Adjusting journal Entry#9 To reclassify insurance recovery to revenue code at 12/31/16. A0.5100.3410.460 FP-Fire Equip.&Alarms/Apparatus Maintenance 3,954.86 A0.4065.2680.000 Insurance Recoveries 3,954.86 Adjusting journal Entry#10 To record additional encumbrance at 12/31/16. A0.3310.0917.000 Unassigned:Fund Balance 13,000.00 A0.3305.0915.001 Assigned:Unappropriated/Encumbrances 13,000.00 Adjusting journal Entry#11 To adjust transfer between cash accounts at 12/31/16. A0.2090.0630.002 Due to Other Funds-Capital Project 12,102.20 A0.5200.9950.900 Operating Transfers Out-Equipment Reserve 12,102.20 H0.4200.5031.000 Operating Transfers In 12,102.20 H0.1030.0390.000 Due from Other Funds/General 12,102.20 Adjusting journal Entry#12 To adjust to opening equity in the Equipment Reserve at 12/31/16. H0.1030.0390.000 Due from Other Funds/General 12,102.20 H0.3020.0910.000 Restricted for Capital 12,102.20 Adjusting journal Entry#13 To adjust to opening equity in the Building Reserve at 12/31/16. H1.1030.0391.002 Due from Other Funds-General Fund 252.81 H1.3020.0910.000 Restricted for Capital 252.81 RECEIVED JUN 2 8 2017 y' Southold Town Clerk i Southold Fire District Financial Statements (Regulatory Basis) with Independent Auditor's Report December 31, 2016 I i � I �Oi7TnvI.I3 F IRS Lid T RIC T Table of Contents December 31, 2016 I Paye 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 Ir 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 21 Independent Auditor's Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements -I Performed in Accordance with Government Auditing Standards 22 4 1 ; I I 1 f r__ VINCENT D.CULLEN,CPA �J �� C1 950-2013) CULLEN�,-I-QAINQWSK1, LLP CERTIFIED PU-B-L�ICIACCO'bNTANTS JAMES E.PETER R RODRIGUDANOWSZ,CPA - DRIGUEZ,CPA JILL S.SANDERS,CPA DONALD J.HOFFMANN,CPA I CHRISTOPHER V.REINO,CPA INDEPENDENT AUDITOR'S REPORT ALAN YU,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, 2016, and the related notes to the financial statements, as listed in the table of contents. Ij Management's Responsibility for the Financial Statements N 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. i 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 i_ 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. � i - 1- 1650 ROUTE 112,PORT JEFFERSON STATION,NEW YORK 11776-3060 PHONE:631-473-3400•FAX:631-473-4863•WWW.CDLLP.NET . i Basis for Adverse Opinion on U.S.Generally Accepted Accounting Principles i� As described in Note 1,the financial statements are prepared by the Southold Fire District, 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 E with the requirements of the New York State Office of the State Comptroller. The effects on the financial statements of the variances between the regulatory basis of accounting described in Note 1 and accounting principles generally accepted in the United States of America, although not reasonably determinable,are presumed to be material. Adverse Opinion on U.S.Generally Accepted Accounting Principles In our opinion, because of the significance of the matter discussed in the "Basis for Adverse Opinion on U.S. -- Generally Accepted Accounting Principles" paragraph, the financial statements referred to above do not j present fairly, in accordance with accounting principles generally accepted in the United States of America, the financial position of the Southold Fire District, as of December 31, 2016, and the respective changes in financial position for the year then ended. Unmodified Opinion on Regulatory Basis of Accounting In our opinion, the financial statements referred to above present fairly, in all material respects, the W respective financial position of each fund and account group of the Southold Fire District, as of December 31, 2016, and their respective changes in financial position 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. Other Matters f- Oth er Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Southold Fire District's basic financial statements. The other supplementary information on page 21 is presented for purposes of additional analysis and is not a required part of the basic financial statements. The other supplementary information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to'the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the other supplementary information is fairly stated, in all material respects, in relation to the basic financial statements as a whole on the basis of accounting described in Note 1. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards,we have also issued our report dated June 6, 2017, 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. �., C� 9L ��1�.ri,Bctta�LcJ� LLQ June 6, 2017 -2- _ SOUTI•IOLD FIRE DIS T RICTL Balance Sheet-General Fund and Account Groups December 31,2016 f ) Account Groups Non-Current Non-Current j General Governmental Governmental P Fund Assets Liabilities Total ASSETS I f Cash Unrestricted $ 721,127 $ $ $ 721,127 Restricted 984,025 984,025 - Prepaids 98,525 98,525 1 ! Land 258,752 258,752 - Buildings and improvements 3,500,517 3,500,517 _ Equipment 4,173,276 4,173,276 �^ Amount to be provided for retirement of long-term debt 244,174 244,174 Total Assets 1,803,677 7,932,545 244,174 9,980,396 r , DEFERRED OUTFLOWS OF RESOURCES Pensions 85,688 85,688 d, l Total Assets and Deferred Outflows of Resources $ 1,803,677 $ 8,018,233 $ 244,174 $ 10,066,084 LIABILITIES d Accounts payable $ 44,602 $ $ $ 44,602 - Accrued liabilities 2,167 2,167 Bonds payable 150,000 150,000 lr Net pension liability-proportionate share 84,194 84,194 Total Liabilities 46,769 - 234,194 280,963 DEFERRED INFLOWS OF RESOURCES Pensions 9,980 9,980 i FUND BALANCE Investment in non-current governmental assets 8,018,233 8,018,233 Nonspendable 98,525 98,525 f Restricted: Capital,equipment 952,596 952,596 Capital,building 31,429 31,429 Assigned:Unappropriated 99,054 99,054 Unassigned 575,304 575,304 Total Fund Balance 1,756,908 8,018,233 - 9,775,141 +_ Total Liabilities,Deferred Inflows of Resources and Fund Balance $ 1,803,677 $ 8,018,233 $ 244,174 $ 10,066,084 I J ' Ii See Notes to Financial Statements -3- A � SOU T HOLD FIRE DISTRICT Statement of Revenues,Expenditures and Changes in Fund Balance-General Fund For the Year Ended December 31,2016 Lj Capital I Operating Reserve Total L � REVENUES Real property taxes $ 1,872,786 $ $ 1,872,786 I�) Interest and earnings 1,226 1,476 2,702 j Rentals 20,791 20,791 Sale of equipment 10,982 10,982 + Insurance recoveries 3,955 3,955 t- Total Revenues 1,909,740 1,476 1,911,216 EXPENDITURES JJ Personal services 264,432 264,432 Equipment and capital outlay 221,485 221,485 Fire protection 435,718 435,718 State retirement system 29,048 29,048 Service award program 357,543 357,543 Social security 20,175 20,175 Workers'compensation 56,795 56,795 Medical and accident insurance 33,851 33,851 Debt service-principal 150,000 150,000 ' Debt service-interest 12,450 12,450 J Total Expenditures 1,581,497 - 1,581,497 Excess of Revenues Over Expenditures 328,243 1,476 329,719 OTHER SOURCES AND USES Operating transfers in 200,000 200,000 �I Operating transfers out (200,000) (200,000) Total Other Sources and Uses (200,000) 200,000 - L j Net Change in Fund Balances 128,243 201,476 329,719 Fund Balance-Beginning of Year 644,640 782,549 1,427,189 Fund Balance-End of Year $ 772,883 $ 984,025 $ 1,756,908 r 1 � i ` I r Ii ! -I ( See Notes to Financial Statements -4- r t _J JOU T HOLD FIRE DISTRICT Statement of Fiduciary Net Position-Fiduciary Fund December 31,2016 Trust and Agency a ASSETS Service award program assets $ 3,741,290 it �E Total Assets $ 3,741,290 i LIABILITIES 1 Service awards $ 3,741,290 L Total Liabilities $ 3,741,290 J ti r' J l _r i l—� 1 1 ^r I i f i i I See Notes to Financial Statements L° --� SOU T HOLD FIRE DISTRICT Notes to Financial Statements { 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES t The financial statements of the Southold Fire District (District) as of and for the year ended December 31, 2016, have been prepared in accordance with the financial reporting provisions of the New York State 4r Office of the State Comptroller, which is a comprehensive basis of accounting other than accounting principles generally accepted in the United States of America (GAAP) for governmental units. The Governmental Accounting Standards Board (GASB) is the standard-setting body for establishing GAAP for governmental units. The financial statements of the District have been prepared using only the modified �— accrual basis of accounting. This method differs from GAAP,which requires the preparation of additional financial statements using the accrual basis of accounting. The accrual basis financial statements require 1 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 �P( 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 r y government-wide financial statements and management's discussion and analysis. The accounting practices used to prepare these financial statements do not require compliance with GASB 34. The significant accounting policies of the District are described below: A. Financial Reporting Entity The District is a district corporation and political subdivision of the state of New York,distinct from the municipalities in which it is located. In general, the District is governed by an elected board of commissioners (Board) and is required to have a treasurer and a secretary. The District has the legal - authority to levy taxes on real property and to borrow in its own name. The District is governed by General Municipal Law and other laws of the state of New York and its subdivisions. The scope of activities included in the accompanying financial statements is the transactions which comprise the District's operations. The primary function of the District is to provide fire-protection, rescue and emergency services to the l community. Services such as firefighting, fire prevention and public education support the primary function. The financial reporting entity includes all funds, functions and organizations over which the District's Board exercises oversight responsibility. Oversight responsibility is determined on the basis of financial interdependency, selection of governing authority, designation of management, ability to significantly influence operations and accountability for fiscal matters. ! B. Basis of Presentation Fund Financial Statements The District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to assist management by segregating transactions related to certain government functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts. � f �f -6- r � SO THOLD FIRE DISTRICT Notes to Financial Statements (Continued) �( The District records its transactions in the fund types described below: Governmental Funds Governmental funds are those through which most governmental functions are financed. The acquisition, use and balances of expendable financial resources and the related liabilities are accounted for through governmental funds. The measurement focus of the governmental funds is based upon determination of financial position and changes in financial position. The District utilizes the following governmental fund: )�? General Fund - the general fund is the principal operating fund of the District. It is used to J account for all financial resources except those required to be accounted for in another fund. ,j Fiduciary Funds Fiduciary funds are used to account for assets held by the District in a trustee or custodial capacity. Trust and Agency Fund - the trust and agency fund is used to account for money (and/or property) received and held in the capacity of trustee, custodian,or agent. ; I Account Groups Account groups are used to establish accounting control and accountability for the District's capital ,r 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 �t 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 District,as well as deferred inflows of resources related to pensions C. Measurement Focus and Basis of Accounting The governmental 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 ;J 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. j`t - 7- � I SOU T HOLD FIRE DISTRICT Notes to Financial Statements (Continued) E. Use of Estimates i 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, deferred outflows of resources, liabilities and deferred inflows of resources and disclosure of contingent assets and liabilities at the date of the financial statements and the reported revenues and expenditures during the reporting period. Accordingly, actual results could differ from those estimates. Estimates and L assumptions are made in a variety of areas, including actuarial assumptions and methods underlying pension reporting. F. Cash f 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. - Certain cash balances are restricted by various legal and contractual obligations,such as legal reserves. G. Prepaid Items 1 Prepaid items 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 assets on the Balance Sheet using the consumption method. Under the consumption method, a current asset for the prepaid item is recorded at the time of receipt and/or purchase and an expenditure is reported in the year the goods or services are consumed. �✓i A portion of fund balance has been classified as nonspendable to indicate that prepaids do not �t constitute available spendable resources. �+ H. Capital 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 accounts,is$1,000 for all assets. I. Deferred Outflows of Resources Deferred outflows of resources represents a consumption of net position that applies to a future �j reporting period and so will not be recognized as an outflow of resources (expense) until that time. Deferred outflows of resources, in the non-current governmental assets account group, relates to pensions and consists of the District's proportionate share of changes in the collective net pension Lj liability of the retirement system not included in the collective pension expense and District contributions to the retirement system subsequent to the measurement date. U r iJ -8- � I SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) �I { f J. Deferred Inflows of Resources Deferred inflows of resources represents an acquisition of net position that applies to a future period and so will not be recognized as an inflow of resources (revenue) until that time. The District has one r- j item that qualifies for reporting in this category. This item is related to pensions reported in the non- current governmental liabilities account group, which consists of the District's proportionate share of changes in the collective net pension liability of the retirement system not included in the collective j pension expense. K. Other Benefits �J Eligible District employees participate in the New York State and Local Employees' Retirement System. Eligible volunteer firefighters and ambulance volunteers participate in the District sponsored Length of L1 L-?, Service Award Program. District employees may choose to participate in the District's elective deferral compensation plan �) established under Internal Revenue Code Section 457. f � L. Fund Balance The governmental 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: i l Nonspendable - Consists of amounts that are inherently nonspendable in the current period either �J 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 -r through constitutional provisions or enabling legislation.The District has established the following 1/ 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 Ji 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 Commissioners. The purpose of the assignment must be Ll 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 j 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. -9- SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) 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. In circumstances where an expenditure is incurred for a purpose for which amounts are available in �i multiple fund balance classifications (e.g., expenditures related to reserves) the expenditure is to be spent first from the restricted fund balance to the extent that an approved permissive referendum is in place or the reserve has been appropriated by the Board of Fire Commissioners, and then from the unrestricted fund balance. Expenditures incurred in the unrestricted fund balances shall be applied j� first to the assigned fund balance to the extent that there is an assignment and then to the unassigned fund balance. 2. STEWARDSHIP.COMPLIANCE AND ACCOUNTABILITY L A. Budgets 1 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 modified accrual l basis of accounting. Appropriations are adopted at the program line item level. ?~f 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: l Budget approved by the Board of Fire Commissioners $ 1,896,950 Encumbrances from prior year 33,355 J Final Budget $ 1,930,305 j B. Encumbrances Encumbrance accounting is used for budget control and monitoring purposes and is reported as a part �—i of the governmental funds. Under this method, purchase orders, contracts and other commitments for iLi the expenditure of monies are recorded to reserve applicable appropriations. Outstanding encumbrances as of year-end are presented as part of assigned fund balance, unless classified as restricted, and do not represent expenditures or liabilities. These commitments will be honored in the I� subsequent period. Related expenditures are recognized at that time, as the liability is incurred or the commitment is paid. 1 -10- ! _i SOU T HOLD FIRE DISTRICT Notes to Financial Statements I'� (Continued) U 3. DEPOSITS WITH FINANCIAL INSTITUTIONS AND INVESTMENTS The District's investment policies are governed by state statutes and District policy. Resources must be deposited in Federal Deposit Insurance Corporation (FDIC) insured commercial banks or trust companies located within the State. Permissible investments include obligations of the U.S. Treasury and U.S. L_j 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, the District may be unable to recover deposits or collateral securities that are in possession of an outside agency. GASB directs that deposits be disclosed as exposed to custodial credit risk if they are not covered by depository insurance and the i deposits are as follows: 1 A. Uncollateralized, B. Collateralized by securities held by the pledging financial institution, or C. Collateralized by securities held by the pledging financial institution's trust department or agent but not in the District's name. J The District's aggregate bank balances were covered by FDIC insurance or fully collateralized by securities and/or letters of credit pledged on the District's behalf at year end. The District did not have any investments at year end or during the year. Consequently, the District was f i not exposed to any material interest rate risk. Investment pool: The District participates in the Cooperative Liquid Assets Securities System - New York (NYCLASS), a multi-municipal cooperative investment pool agreement pursuant to New York State General Municipal { Law Article 3-A and 5-G, whereby it holds a portion of the investments in cooperation with other participants.The investments are highly liquid and are considered to be cash equivalents.All NYCLASS investment and collateral policies are in accordance with General Municipal Law,Sections 10 and 11. f Total investments of the cooperative at December 31, 2016 are $542,790,231, which consisted of $15,738,052 in municipal bonds, $179,241,187 in repurchase agreements collateralized by a U.S. `- Government Agency Security, $148,084,228 in U.S. Treasury Securities, $49,991,318 in treasury bills and$149,735,446 in collateralized bank deposits,with various interest rates and due dates. The following amounts are included as cash: Carrying Fund Amount 1 ti General fund $ 33,153 General fund-Capital reserves 475,985 f $ 509,138 L 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 - i _ SOU T HOLD FIRE DISTRICT Notes to Financial Statements i (Continued) J 4. CAPITAL ASSETS - The District obtained an independent appraisal dated December 31, 2011. This appraisal has been updated for current year additions and deletions. Capital assets balances and activity for the year ended December 31,2016,were as follows: IJ Balance Balance December 31, December 31, L 2015 Additions Deletions 2016 Land $ 258,752 $ - $ - $ 258,752 Buildings and improvements 3,472,949 95,430 (67,862) 3,500,517 Equipment 4,181,713 106,644 (115,081) 4,173,276 $ 7,913,414 $ 202,074 $ (182,943) $ 7,932,545 5. CAPITAL RESERVES I Activity for the capital reserves during the year under audit is as follows: J Building Equipment -� Reserve Reserve Total Reserve Balance-Beginning of Year $ 31,339 $ 751,210 $ 782,549 1 Additions to Reserve: Planned budgeted increase 200,000 200,000 Interest 90 1,386 1,476 Reserve Balance-End of Year $ 31,429 $ 952,596 $ 984,025 6. LONG-TERM LIABILITIES 4 r Long-term liability balances and activity for the year are summarized below: —' Balance Balance Amounts U December 31, December 31, Due Within 2015 Additions Reductions 2016 One Year j Long-term debt: Bonds payable $ 300,000 $ - $ 150,000 $ 150,000 $ 150,000 The general fund has typically been used to liquidate long-term liabilities. l ( A. Bonds Payable sBonds payable are comprised of the following: Outstanding at Issue Final Interest December 31, -' Description Date Maturity Rate 2016 Serial bond 6/24/2002 7/9/2017 3.7-4.2% $ 150,000 - 12- i __J SOU T HOLD FIRE DISTRICT Notes to Financial Statements (Continued) } The following is a summary of debt service requirements for bonds payable: Fiscal Year Ending December 31, Principal Interest Total 2017 $ 150,000 $ 6,300 $ 156,300 Interest on long-term debt for the year was$12,450. 7. PENSION PLANS 1 ; A. New York State and Local Employees'Retirement System Plan Description i The District participates in the New York State and Local Employees' Retirement System (ERS). This is a cost-sharing, multiple-employer public employee retirement system. The system provides �f( retirement, disability, withdrawal and death benefits to plan members and beneficiaries related to years of service and final average salary. Provisions and Administration Obligation of employers and employees to contribute and benefits to employees are governed by the 1 New York State Retirement and Social Security Law (NYSRSSL). The net position of the ERS is held in ,{ the New York State Common Retirement Fund (the Fund),which was established to hold all net assets and record changes in plan net position allocated to the ERS. As set forth in the NYSRSSL, the Comptroller of the State of New York serves as the trustee of the Fund and is the administrative head of the ERS. The Comptroller shall adopt and may amend rules and regulations for the administration �- and transaction of business of the ERS and for the custody and control of its funds. Once a public employer elects to participate in the 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, including information with regard to benefits provided may be found at www.osc.state.ny.us/retire/publications/index php or may be obtained by writing 1 to: New York State and Local Employees' Retirement System, 110 State Street,Albany,NY 12244. Funding Policies 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. Employers are required to contribute at an actuarially determined rate based on covered salaries paid. For the ERS, the Comptroller annually certifies the actuarially determined rates expressly used in computing the employers' contributions for the ERS' fiscal year ended March 315, and employer contributions are either paid by December r w 15th less a 1% discount or by February 1st. The District paid 100% of the required contributions as 14 billed by the ERS for the current year and each of the two preceding years. � - 13- SOU T HOLD FIRE DISTRICT Notes to Financial Statements (Continued) 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: 2016 2015 2014 District contributions paid $ 27,814 $ 32,748 $ 32,081 1 B. Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions At December 31, 2016,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, 2016. 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. Measurement date March 31,2016 District's proportionate share of the net pension asset/(liability) $ (84,194) District's portion of the Plan's total net pension asset/(liability) 0.0005246% {" Change in proportion since the 4 prior measurement date 0.0000222 Deferred outflows of resources have been reported in the non-current governmental assets group. Deferred Deferred -- Outflows Inflows �} of Resources of Resources Differences between expected and i actual experience $ 425 $ 9,980 Changes of assumptions 22,452 Net difference between projected and actual earnings on pension plan investments 49,949 r. j J Changes in proportion and differences between the District's contributions and �r proportionate share of contributions 12,862 l Total $ 85,688 $ 9,980 i1 - 14- -� SOU T HOLD 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: �J Measurement date March 31,2016 I Actuarial valuation date April 1,2015 Interest rate 7.0% Salary scale 3.8% Decrement tables April 1,2010- r March 31,2015 System's Experience Inflation rate 2.5% Annuitant mortality rates are based on April 1, 2010- March 31, 2015 System's experience with adjustments for mortality improvements based on the Society of Actuaries scale MP-2014. The actuarial assumptions used in the April 1, 2015 valuation are based on the results of an actuarial experience study for the period April 1, 2010-March 31, 2015. r� 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 Measurement date March 31,2016 Asset type Domestic equity 38.0% 7.30% International equity 13.0% 8.55% Real estate 8.0% 8.25% Alternative investments 19.0% 6.75-11.00% Bonds and mortgages 18.0% 4.00% ! Cash 2.0% 2.25% ~' Inflation indexed bonds 2.0% 4.00% 100.0% ii r^, ,I i - 15 - i -OUT—OLD FIRE DISTRICT Notes to Financial Statements (Continued) �J _ Discount Rate The discount rate used to calculate the total pension liability was 7.0% (the discount rate used at the prior year's measurement date of March 31, 2015 was 7.5%). The projection of cash flows used to j 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 r 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. Sensitivity 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 7.0% for ERS, 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(6.0%) or 1 y� percentage point higher (8.0%)than the current rate: Current 1%Decrease Assumption 1%Increase (6.00)% (7.00)% (8.00)% District's proportionate share of —' the net pension asset(liability) $ (189,852) $ (84,194) $ 5,082 Pension Plan Fiduciary Net Position l The components of the current-year net pension liability of the employers as of the respective measurement date were as follows: i (Dollars in Thousands) Measurement date March 31,2016 --' Employers'total pension liability $ (172,303,544) + I Plan fiduciary net position 156,253,265 _ Employers'net pension liability $ (16,050,279) f � Ratio of plan fiduciary net position to the employers'total pension liability 90.68% 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$6,954 for the period January 1, 2017 through March 31, 2017. Employee contributions are remitted monthly. -16- SOUTHOLD FIRE DISTRICT Notes to Financial Statements 1 . (Continued) 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, 2016. 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 non-forfeitable right to a service award after being credited with 5 years of firefighting services or upon attaining the WI 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 J 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. . I The governing board of the sponsor has retained and designated Hometown/RSA Consultants to assist in the administration of the program. The designated program administrator's primary responsibility is to administer the plan for the exclusive benefit of the participants and their beneficiaries. Such duties include, but are not limited to, determining eligibility of firefighters to participate in the plan, compute participant entitlement, authorize disbursements to participants, compute necessary contribution amounts, maintain all necessary records and consult with the sponsor and the trustee on long-term investment plans. Disbursements of program assets for the 1 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 -17- _i Sail T HOLD 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. I — Authority to invest program assets is vested in the administrator, with the Board of Fire Commissioners' prior written approval. Subject to restrictions in the program document, program assets are invested in accordance with a statutory"prudent person"rule.The program document calls for all investment decisions to be chosen and approved by the trustee, prior to being invested by the administrator. r � _ 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 February 2017 for the plan year ended December 31,2016. —� Program Financial Condition Assets and Liabilities j Actuarial Present Value of Benefits at December 31,2016 $ 4,920,423 j Less: Assets Available for Benefits j %of total Trust 1.81% $ 67,621 j Annuities 80.06% 2,995,125 Insurance contracts 18.14% 678,544 Total Net Assets Available for Benefits 3,741,290 - Total Unfunded Benefits 1,179,133 Less: Unfunded Liability for Prior Service (1,179,133) r Unfunded Normal Benefits $ - Prior Service Costs i t Prior service costs are being amortized over 10 years at a discount rate of 5.00%. 1 , i - 18- SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) _} Receipts and Disbursements Plan Net Assets,Beginning of Year $ 3,629,479 ` Changes during the year +Plan contributions $ 295,000 - +Investment income earned 99,889 +Insurance receipts 63,660 +/-Changes in fair market value of investments (40,481) -Plan benefit withdrawals (306,257) - 111,811 Plan Net Assets,End of Year $ 3,741,290 Contributions 7i J 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 Normal Costs li 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 investment5.00/o o I ! Mortality tables used for Withdrawal None Disability None Retirement RP2-RP-2000 Mortality Table Death(actives) None Death(inactives) None Other None D. Deferred Compensation Plan The District has established a deferred compensation plan in 2016 in accordance with Internal Revenue Code §457 for all employees. The District makes no contributions in this Plan. No amount was t deferred by eligible employees for the year ended December 31, 2016. ' I IJ - 19 - I~k SOU T HOLD FIRE DISTRICT Notes to Financial Statements (Continued) 8. COMMITMENTS AND CONTINGENCIES i - A. Encumbrances All encumbrances are classified as either restricted or assigned fund balance. At December 31, 2016, the District encumbered the following amounts: Assigned: Fund Balance General Fund --i Equipment and capital outlay $ 86,054 Fire protection 13,000 -4 $ 99,054 B. Risk Management jThe 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. 9. SPENDING LIMITATION 1 The District did not exceed the statutory spending limitation imposed by New York State Law for the year -, ended December 31, 2016,and the budget for the year ending December 31,2017. ; i - 10. SUBSEQUENT EVENT j The District has evaluated subsequent events through the date of the auditor's report, which is the date - the financial statements were available to be issued. No significant events were identified that would require adjustment of or disclosure in the financial statements. I ;41 r , ' f i I -20- SOUTHOLD FIRE DISTRICT Schedule of Revenues,Expenditures and Changes in Fund Balance- Budget and Actual-General Fund-Operating For the Year Ended December 31,2016 Board- Final Budget Approved Final Variance with Budget Budget Actual Actual i REVENUES Real property taxes $ 1,872,760 $ 1,872,760 $ 1,872,786 $ 26 Interest and earnings 1,226 1,226 Rentals 24,190 24,190 20,791 (3,399) Sale of equipment 10,982 10,982 Insurance recoveries 3,955 3,955 Total Revenues 1,896,950 1,896,950 1,909,740 $ 12,790 I APPROPRIATED FUND BALANCE - Prior year's encumbrances - 33,355 Total Revenues and Appropriated Fund Balance $ 1,896,950 $ 1,930,305 Final Budget _ Variance with Year End Actual and Encumbrances Encumbrances EXPENDITURES Personal services $ 269,392 $ 290,000 264,432 $ $ 25,568 Equipment and capital outlay 135,000 308,441 221,485 86,054 902 - Fire protection 619,500 468,794 435,718 13,000 20,076 State retirement system 35,000 29,314 29,048 266 j Service award program 360,000 358,500 357,543 957 Social security 20,608 20,806 20,175 631 Workers'compensation 60,000 57,000 56,795 205 - Medical and accident insurance 35,000 35,000 33,851 1,149 Debt service-principal 150,000 150,000 150,000 - Debt service-interest 12,450 12,450 12,450 - Total Expenditures 1,696,950 1,730,305 1,581,497 99,054 49,754 OTHER USES Operating transfers out 200,000 200,000 200,000 - I Total Expenditures and Other Uses $ 1,896,950 $ 1,930,305 1,781,497 $ 99,054 $ 49,754 Net Change in Fund Balance 128,243 Fund Balance-Beginning of Year 644,640 Fund Balance-End of Year $ 772,883 i t . I - f See Paragraph on Other Supplementary Information Included in Auditor's Report -21- I VINCENT D.CULLEN,CPA C1 950-2013) C U L L E N S�DANO, WS KI, LLP CERTIFIED PU-Bli ICAC-COUNTANTS JAMES E.DANOWSKI,CPA PETER F.RODRIGUEZ,CPA JILL S.SANDERS,CPA JJJ 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 j 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, 2016, 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 June 6, 2017. 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 jappropriate 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. I A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the District's financial statements will not be prevented, or detected and corrected on a timely basis.A significant deficiency is a deficiency, or a combination of deficiencies,in internal control that is less severe than a material weakness, - yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this _ section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. 1650 ROUTE 112,PORT JEFFERSON STATION,NEW YORK 11776-3060 - 22 - PHONE: 22 - PHONE:631-473-3400•FAX:631-473-4863•WWW.CDLLP.NET Compliance and Other Matters .� As part of obtaining reasonable assurance about whether the Southold Fire District's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However,providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly,we do not express such an opinion.The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. We noted certain matters that we have reported to the Board of Fire Commissioners and management of the Southold Fire District in a separate letter dated June 6, 2017. 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. June 6,2017 ' i i ; I li - 23 -