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HomeMy WebLinkAbout2017 y0VT"OCQ RECEIVED J U L 14 2018 G� 0 S-T 30u$ho[d Tows rjerj SOUTHOLD FIRE DISTRICT P.O. BOX 908. SOUTHOLD, N.Y. 11971 (631) 765-4305 FAX (631) 765-5076 July 11, 2018 Town of Southold Southold Town Hall Main Road,P.O. Box 1179 Southold,New York 11971 Re: Southold Fire District Dear Sir/Madam: In connection with the above matter, enclosed herewith please find a copy of the Auditor's Report prepared by Cullen& Danowski, LLP for the fiscal period beginning on January 1, 2017 and ending on December 31, 2017. If you have should have any questions or problems,please do not hesitate to contact me at 765-4305, x 27. 5ncerely, f . Mill Ar e Fire District Secretary y VINCENT D CULLEN,CPA (1950-2013) CULLEN(&`DAN,QWj SK1, LLP JAMES E.DANOWSKI,CPA CERTIFIED IiuBLc ACCOUNTANTS PETER F.RODRIGUEZ,CPA JILL S.SANDERS,CPA DONALD J.HOFFMANN,CPA CHRISTOPHER V.REINO,CPA ALAN YU,CPA June 8,2018 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 31,2017, 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. The memorandum that accompanies this letter summarizes the status of the prior year management letter comment. This letter does not affect our report dated June 8, 2018, on the financial statements of the Southold Fire District. 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. &cJ-.t yJ V, L4)0 Very truly yours, Cullen&Danowski,LLP 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, 2017 STATUS OF PRIOR YEAR COMMENT 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 prior year audit, we noted that the District capitalized assets that were ordered but had not yet been received,valued at$73,838. Current Status:Corrected. All assets that were added to the inventory have been received and paid for by the District. CURRENT YEAR COMMENTS There are no current year comments to report. Page 2 ` VINCENT D.CULLEN,CPA (1950-2013) CULLEN��&DANQWSKJ, LLP CERTIFIED P�'UBLIdAC-tdUNTANTS JAMES E. ODRIGU Z,CPA \ PETER F ROD SANDERS, CPA JILL S SANDERS,CPA DONALD J.HOFFMANN,CPA CHRISTOPHER V.REINO,CPA ALAN YU,CPA June 8,2018 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 31,2017,and have issued our report thereon dated June 8, 2018. Professional standards require that we provide you with the following information related to our audit. Our Responsibilities under U.S. Generally Accepted Auditing Standards and Government Auditing Standards As stated in our engagement letter dated December 13, 2017, 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 . o PHONE:631-473-3400•FAX:631-473-4863•WWW.CDLLP.NET Southold Fire District For the Year Ended December 31,2017 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 Matters Qualitative Aspects of Accounting Practices Management is responsible 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, 2017. 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. 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. Management has corrected all such misstatements. In addition, none of the misstatements detected as a result of audit procedures and corrected by management were material, either individually or in the aggregate to each opinion unit's financial statements taken as a whole. Page 2 Southold Fire District For the Year Ended December 31, 2017 Disagreements with Mana eg ment 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 8,2018. 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 We were engaged to report on the schedule of revenues, expenditures and changes in fund balance - budget and actual - general fund - operating, which accompanies the financial statements but is not RSI. With respect to the supplementary information accompanying the financial statements, we made certain inquiries of management and evaluated the form, content, and methods of preparing the information to determine.that the information complies with the financial reporting provisions of the New York State Office of the State Comptroller, the method of preparing it has not changed from the prior period, and the information is appropriate and complete in relation to our audit of the financial statements. We compared and reconciled the supplementary information to the underlying accounting records used to prepare the financial statements or to the financial statements themselves. This information is intended solely for the use of the Board of Fire Commissioners and management of Southold Fire District and is not intended to be and should not be used by anyone other than these specified parties. Very truly yours, &tt&yv Y lrJ, Ld.� Cullen&Danowski,LLP Page 3 Southold Fire District AUC 260 Adjusting journal Entries For the Year Ended December 31,2017 Account Descri tion Debit Credit Adjusting journal Entry#1 General Fund-To reverse balance of prior year prepaids in account balance at December 31,2017. AO.4050.2410.000 Rentals 3,944.45 AO.5060.3410.403 FP-Admin.Expenses/Miscellaneous 1,750.00 AO.5110.3410.480 FP-Insurance Costs 23,780.12 AO.5130.9010.800 Emp.Benefits-State Retirement System Contribution 6,953.50 AO.1050.0480.000 Prepaid Expenses 36,428.07 Total 36,428.07 36.428.07 Adjusting journal Entry#2 General Fund-To reverse prior year encumbrances and prepaids to equity at December 31,2017. AO.3010 0806.000 Nonspendable•Prepaids 98,525.01 AO.3305.0915.001 Assigned:Unappropriated/Encumbrances 99,054.00 AO.3310.0917.000 Unassigned.Fund Balance 197,579.01 Total 197.579.01 197,579.01 Adjusting journal Entry#3 General Fund-To record prepaid taxes at December 31,2017. AO.1050 0480.000 Prepaid Expenses 9,180.09 AO.4050.2410.000 Rentals 9,180.09 Total 9.180.09 9.180.09 Adjusting Journal Entry#4 General Fund-To record prepaid ERS at December 31,2017. AO.1050.0480.000 Prepaid Expenses 7,089.50 AO.5130.9010.800 Emp.Benefits-State Retirement System Contribution 7,089.50 Total 7,089.50 7,089.50 Adjusting journal Entry#5 General Fund-To record prepaid insurance at December 31,2017. AO.1050.0480.000 Prepaid Expenses 23,839.58 AO.5110.3410.480 FP-Insurance Costs 23,839.58 Total 23,839.58 23,839.58 Adjusting journal Entry#6 General Fund-To record accounts payable found through subsequent disbursement testing. AO.5090.3410.445 FP-Building Costs/Maintenance 1,46672 AO.2000.0600.000 Accounts Payable 1,466.72 Total 1,466.72 1,466.72 Adjusting journal Entry#7 General Fund-To adjust reserve for prepaid expenditures. AO 3310.0917.000 Unassigned:Fund Balance 126,195.53 AO.3010.0806.000 Nonspendable:Prepaids 126,195.53 Total 126,195.53 126.195.53 Adjusting journal Entry#8 General Fund-To encumber audit fee at December 31,2017. AO.3310.0917.000 Unassigned-Fund Balance 12,500.00 AO.3305.0915.001 Assigned-Unappropriated/Encumbrances 12,500.00 Total 12,500.00 12,500.00 Adjusting journal Entry#9 Capital Projects Fund-To encumber balance on bond project at December 31,2017. H2.3020.0910.000 Restricted Fund Balance-Capital Projects Fund 1,249,226.75 H2.3020.0915.000 Restricted-Capital Projects/Encumbrances 1,249,226.75 Total 1,249,226.75 1.249,226.75 1of1 ~I i Southold Fire District Financial Statements (Regulatory Basis) with Independent Auditor's Report December 31, 2017 Y i SOUTHOLD FIRE DISTRICT Table of Contents December 31,2017 Page Independent Auditor's Report 1 Basic Financial Statements(Regulatory Basis) Balance Sheet-Governmental Funds and Account Groups 3 —� Statement of Revenues, Expenditures and Changes in Fund Balance-Governmental Funds 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 21 Independent Auditors 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 22 i FIi VINCENT D.CULLEN,CPA -1-TI I r-, C1 950-2013) 0- CERTIFIED DAI�IQWSKI, LLP. CERTIFIED PU-BP.ICLACCObNTANTS JAMES F. ODRIGU Z,CPA PETER F.RODRIGUEZ,CPA � L JILL S.SANDERS,CPA DONALD 1.HOFFMANN,CPA CHRISTOPHER V.REINO,CPA INDEPENDENT AUDITOR'S REPORT ALAN YU,CPA s � i 1 � To-the Board of Fire Commissioners Southold Fire District _ Southold,New York E We have audited the accompanying financial statements (regulatory basis) of the Southold Fire District, as of and for the year ended December 31, 2017, 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 � I 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. 1650 ROUTE 112,PORT JEFFERSON STATION,NEW YORK 11776-3060 - 1 PHONE:631-473-3400•FAX:631-473-4863•WWW.CDLLP.NET I 1 7 Basis for Adverse Opinion on U.S.Generally Accepted Accounting Principles 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 meet 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. �i 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 ' 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, 2017, 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 respective financial position of each fund and account group of the Southold Fire District, as of December 31, 2017, 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 j Other 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 t statements as a whole on the basis of accounting described in Note 1. Other Reporting Required by Government Auditing Standards In accordance with GovernmentAuditing Standards,we have also issued our report dated June 8, 2018, 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. &,P,&yJ ge LJ-7 June 8,2018 -2- I SOUTHOLD FIRE DISTRICT Balance Sheet-Governmental Funds and Account Groups December 31,2017 Governmental Funds Account Groups Non-Current Non-Current General Capital Governmental Governmental Fund Projects Assets Liabilities Total ASSETS Cash Unrestricted $ 554,839 $ 100 $ $ $ 554,939 Restricted 992,788 1,353,677 2,346,465 Due from other funds 100 100 Prepaids 126,196 126,196 Land 670,752 670,752 Construction work in progress 346,323 346,323 Buildings and improvements 3,501,501 3,501,501 Equipment 4,240,590 4,240,590 Amount to be provided for retirement of long-term debt 1,743,513 1,743,513 Total Assets 1,673,923 1,353,777 8,759,166 1,743,513 13,530,379 DEFERRED OUTFLOWS OF RESOURCES Pensions - Total Assets and Deferred Outflows of Resources $ 1,673,923 $ 1,353,777 $ 8,759,166 $ 1,743,513 $ 13,530,379 LIABILITIES Accounts payable $ 71,574 $ $ $ $ 71,574 Accrued liabilities 3,221 3,221 Due to other funds 100 100 Bonds payable 1,700,000 1,700,000 Net pension liability- proportionate share 43,513 43,513 Total Liabilities 74,795 100 - 1,743,513 1,818,408 FUND BALANCE Investment in non-current governmental assets 8,759,166 8,759,166 Nonspendable 126,196 126,196 Restricted: Capital,equipment 961,119 961,119 Capital,building 31,669 31,669 Unspent bond proceeds 1,353,677 1,353,677 Assigned:Unappropriated 12,500 12,500 Unassigned 467,644 467,644 Total Fund Balance 1,599,128 1,353,677 8,759,166 - 11,711,971 Total Liabilities and Fund Balance $ 1,673,923 $ 1,353,777 $ 8,759,166 $ 1,743,513 $ 13,530,379 See Notes to Financial Statements -3- i SOUTHOLD FIRE DISTRICT Statement of Revenues,Expenditures and Changes in Fund Balance-Governmental Funds For the Year Ended December 31,2017 General Fund Total `�! Capital Capital Governmental J, Operating Reserve Total Projects Funds REVENUES Real property taxes $ 1,883,890 $ $ 1,883,890 $ $ 1,883,890 Interest and earnings 2,971 8,763 11,734 11,734 ' Rentals 25,352 25,352 25,352 Miscellaneous 300 300 300 t Total Revenues 1,912,513 8,763 1,921,276 - 1,921,276 EXPENDITURES i Personal services 291,809 291,809 291,809 Equipment and capital outlay 105,703 105,703 105,703 Fire protection 603,238 603,238 603,238 State retirement system 28,222 28,222 28,222 _ Service award program 356,931 356,931 356,931 Social security 22,295 22,295 22,295 Workers'compensation 59,045 59,045 59,045 Medical and accident insurance 37,581 37,581 37,581 Debt service-principal 150,000 150,000 150,000 Debt service-interest 6,300 6,300 6,300 Capital outlay - 764,255 764,255 Total Expenditures 1,661,124 - 1,661,124 764,255 2,425,379 Excess of Revenues Over Expenditures 251,389 8,763 260,152 (764,255) (504,103) OTHER SOURCES AND USES Proceeds from debt 1,700,000 1,700,000 - Operating transfers in - 417,932 417,932 Operating transfers out (417,932) (417,932) (417,932) I Total Other Sources and Uses (417,932) - (417,932) 2,117,932 1,700,000 'I Net Change in Fund Balances (166,543) 8,763 (157,780) 1,353,677 1,195,897 Fund Balance-Beginning of Year 772,883 984,025 1,756,908 1,756,908 t Fund Balance-End of Year $ 606,340 $ 992,788 $ 1,599,128 $ 1,353,677 $ 2,952,805 1 s i� See Notes to Financial Statements -4- SOUTHOLD FIRE DISTRICT Statement of Fiduciary Net Position-Fiduciary Fund December 31,2017 J Agency ASSETS Service award program assets $ 3,967,387 Total Assets $ 3,967,387 LIABILITIES t_. Service awards $ 3,967,387 Total Liabilities $ 3,967,387 - I i h I I 1 ! -I Il i r ` I A See Notes to Financial Statements -5- i _ SOUTHOLD FIRE DISTRICT Notes to Financial Statements i 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements of the Southold Fire District (District) as of and for the year ended December 31, - 2017, have been prepared in accordance with the financial reporting provisions of the New York State Office of the State Comptroller, which is a comprehensive basis of accounting other than accounting principles generally accepted in the United States of America (GAAP) for governmental units. The Governmental Accounting Standards Board (GASB) is the standard-setting body for establishing GAAP for governmental units. The financial statements of the District have been prepared using only the modified accrual basis of accounting. This method differs from GAAP, which requires the preparation of additional financial statements using the accrual basis of accounting. The accrual basis financial statements require the capitalization and depreciation of property and equipment and the recording of long-term liabilities. Under the modified accrual basis of accounting, property and equipment are recorded as an expenditure when purchased,the proceeds of long-term debt are reported as other financing sources and the 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 ti 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 f j General Municipal Law and other laws of the state of New York and its subdivisions. The scope of activities included in the accompanying financial statements is the transactions which comprise the District's operations. The primary function of the District is to provide fire-protection, rescue and emergency services to the community. Services such as firefighting, fire prevention and public education support the primary function. ' I 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 r- Fund Financial Statements The District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to assist management by segregating transactions related to certain government functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts. -6- SOUTHOLD FIRE DISTRICT - Notes to Financial Statements (Continued) - The District records its transactions in the fund types described below: , I 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 following are the District's governmental fund types: 'l 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. 1 r Capital Projects Fund - is primarily used to account for the financial resources used for the A acquisition,construction,renovation or major repair of capital facilities and other capital assets, , i such as equipment. Fiduciary Funds Fiduciary funds are used to account for assets held by the District in a trustee or custodial capacity. Agency Fund- the agency fund is used to account for money (and/or property) received and i 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 capital assets and general long-term obligations. The two account groups are not "funds". They are 7" 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. 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. C. Measurement Focus and Basis of Accounting nThe 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 i 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. 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. l � - 7- , 4 SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) 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. E. Interfund Transactions The operations of the District include transactions between funds. These transactions may be temporary in nature,such as with interfund borrowings.The District typically loans resources between funds for the purpose of providing cash flow.These interfund receivables and payables are expected to be repaid within one year. Permanent transfers of funds include transfers to provide financing for the acquisition,construction or renovation of major capital facilities or equipment. A detailed disclosure by individual fund for interfund receivables, payables, transfers in and transfers out is provided subsequently in these Notes to Financial Statements. F. 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, liabilities, and disclosure of contingencies 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 ti— and assumptions are made in a variety of areas, including actuarial assumptions and methods underlying pension reporting. - G. Cash '- Cash consists of cash on hand, demand deposits and short-term investments with original maturities of i three months or less from date of acquisition. -- Certain cash balances are restricted by various legal and contractual obligations,such as legal reserves. H. Prepaid Items { 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. A portion of fund balance has been classified as nonspendable to indicate that prepaids do not constitute available spendable resources. I. 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. ~' Donated assets are reported at acquisition value at the date of donation. The capital threshold, the dollar value above which asset acquisitions are added to the capital assets accounts, is $1,000 for all assets. I � __ -8- SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) j J. Other Benefits 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 Service Award Program. District employees may choose to participate in the District's elective deferral compensation plan established under Internal Revenue Code Section 457. K. Fund Balance The governmental fund statements report fund balance classifications according to the relative istrength 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,which are recorded in the general fund. ryi Restricted-Consists of amounts that are subject to externally enforceable legal purpose restrictions —` imposed by creditors, grantors, contributors, or laws and regulations of other governments; or through constitutional provisions or enabling legislation.The District has established the following 4 restricted fund balances: t_ 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 i equipment. The establishment of any capital reserve is subject to mandatory referendum (voter r approval). Expenditures from a "specific" reserve require a resolution by the Board of Fire Commissioners. Expenditures from a "type" reserve require a resolution by the Board of Fire Commissioners,subject to permissive referendum. Unspent Bond Proceeds is Unspent bond proceeds are recorded as restricted fund balance because they are subject to external constraints contained in the bond agreement. These restricted funds are accounted for - - in the capital projects fund. I ?-� 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 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. 1 ( 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 of available resources. �_- -9- SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) i 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 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 assigned fund balance to the extent that there is an assignment and then from the unassigned fund - balance. 2. STEWARDSHIP.COMPLIANCE AND ACCOUNTABILITY A. Budgets The District administration prepares a proposed budget for approval by the Board for the general fund, the only fund with a legally adopted budget. Budgets are adopted annually on the modified accrual basis of accounting. Appropriations are established by the adoption of the budget, are recorded at the program line item level, and 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 of Fire Commissioners as a result of selected new revenue sources not included in the original budget (when permitted by law) and appropriation of fund balances.These supplemental appropriations may occur subject to legal restrictions,if the Board of Fire Commissioners {- 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: t i Budget approved by the Board of Fire Commissioners $ 1,908,800 Prior year's surplus-transfer to capital projects fund for land purchase 197,932 —� Encumbrances from prior year 99,054 1 }}}( Final Budget $ 2,205,786 B. Encumbrances Encumbrance accounting is used for budget control and monitoring purposes and is reported as a part ( of the governmental funds. Under this method, purchase orders, contracts and other commitments for J 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 subsequent period. Related expenditures are recognized at that time, as the liability is incurred or the l commitment is paid. J ! - 10- SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) _f 3. DEPOSITS WITH FINANCIAL INSTITUTIONS AND INVESTMENTS The District's investment policies are governed by state statutes and District policy. Resources must be deposited in Federal Deposit Insurance Corporation (FDIC) insured commercial banks or trust companies �( located within the State. Permissible investments include obligations of the U.S. Treasury and U.S. Agencies, repurchase agreements and obligations of New York State or its localities. Collateral is required for demand and time deposits and certificates of deposit not covered by FDIC insurance. Obligations that may be pledged as collateral are obligations of the United States and its Agencies and obligations of New York State and its municipalities. Investments are stated at fair value. l 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 deposits are as follows: A. Uncollateralized, B. Collateralized by securities held by the pledging financial institution, or L_ C. Collateralized by securities held by the pledging financial institution's trust department or agent i but not in the District's name. The District's aggregate bank balances were covered by FDIC insurance or fully collateralized by securities 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 not exposed to any material interest rate risk. Investment pool: The District participates in the Cooperative Liquid Assets Securities System - New York (NYCLASS), a multi-municipal cooperative investment pool agreement pursuant to New York State General Municipal Law Article 3-A and 5-G, whereby it holds a portion of the investments in cooperation with other participants.The investments are highly liquid and are considered to be cash equivalents.All NYCLASS investment and collateral policies are in accordance with General Municipal Law,Sections 10 and 11. Total investments of the cooperative at December 31, 2017 are $813,344,597, which consisted of $192,355,811 in repurchase agreements collateralized by a U.S. Government Agency Security, - $147,037,407 in U.S. Treasury Securities, $251,439,483 in treasury bills and $222,511,896 in collateralized bank deposits,with various interest rates and due dates. I The following amounts are included as cash: Carrying Fund Amount General fund $ 335,604 j General fund-Capital reserves 479,646 —' $ 815,250 The above amounts represent the cost of the investment pool shares, which approximates 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 - 1�^1 SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) 4. CAPITAL ASSETS Capital assets balances and activity for the year ended December 31, 2017,were as follows: I� J Balance Balance December 31, December 31, 2016 Additions Deletions 2017 Land $ 258,752 $ 412,000 $ - $ 670,752 Construction work in progress - 346,323 - 346,323 Buildings and improvements 3,500,517 4,484 (3,500) 3,501,501 Equipment 4,173,276 92,916 (25,602) 4,240,590 $ 7,932,545 $ 855,723 $ (29,102) $ 8,759,166 } 5. CAPITAL RESERVES I Activity for the capital reserves during the year under audit is as follows: ^� Building Equipment Reserve Reserve Total Reserve Balance-Beginning of Year $ 31,429 $ 952,596 $ 984,025 1 Additions to Reserve: Interest 240 8,523 8,763 t Reserve Balance-End of Year $ 31,669 $ 961,119 $ 992,788 6. INTERFUND TRANSACTIONS Interfund balances at December 31, 2017,are as follows: Interfund Receivables Payable Transfers In Transfers Out General fund $ 100 $ $ $ 417,932 -- i Capital projects fund 100 417,932 $ 100 $ 100 $ 417,932 $ 417,932 The District transferred from the general fund to the capital projects fund in accordance with the approved budget and a board resolution to purchase a property. 1 ' -r - 12- SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) (� 7. LONG-TERM LIABILITIES �I Long-term liability balances and activity for the year are summarized below: !�I !� Balance Balance Amounts December 31, December 31, Due Within r 2016 Additions Reductions 2017 One Year Long-term debt: Bonds payable $ 150,000 $ 1,700,000 $ 150,000 $ 1,700,000 $ 100,000 The general fund has typically been used to liquidate long-term liabilities. A. Bonds Payable Bonds payable are comprised of the following: Outstanding at Issue Final Interest December 31, Description Date Maturity Rate 2017 Serial bond 12/1/2017 6/1/2032 2.236% $ 1,700,000 The following is a summary of debt service requirements for bonds payable: - Fiscal Year Ending December 31, Principal Interest Total 2018 $ 100,000 $ 36,894 $ 136,894 2019 100,000 34,658 134,658 2020 100,000 32,422 132,422 - 2021 100,000 30,186 130,186 _ 2022 100,000 27,950 127,950 2023-2027 575,000 103,694 678,694 2028-2032 625,000 34,938 659,938 Total $ 1,700,000 $ 300,742 $ 2,000,742 Interest on long-term debt for the year was$6,300. 8. PENSION PLANS nA. New York State and Local Employees'Retirement System LJ Plan Description The District participates in the New York State and Local Employees' Retirement System (ERS). This is a cost-sharing, multiple-employer defined benefit retirement system. The system provides retirement, disability, withdrawal and death benefits to plan members and beneficiaries related to years of service and final average salary. - 13 - SOUTHOLD FIRE DISTRICT Notes to Financial Statements L, (Continued) Provisions and Administration Obligation of employers and employees to contribute and benefits to employees are governed by the New York State Retirement and Social Security Law (NYSRSSL).The net position of 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 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 ERS. 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, including information with regard to benefits provided may be found at www.osc.state.ny.us/retireIpublications/index.php or may be obtained by writing 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 15th less a 1% discount or by February 15t. The District paid 100% of the required contributions as billed by the ERS for the current year. The District's average contribution rate was 12.5% of covered payroll for the ERS'fiscal year ended March 31, 2017. The Comptroller annually certifies the actuarially determined rates expressly used in computing the 7 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: 2017 2016 2015 District contributions paid $ 28,222 $ 27,814 $ 32,748 B. Pension Liabilities _, At December 31, 2017,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, 2017. The total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. The District's proportion of the net pension liability was based on a projection of the District's long-term share of contributions to the system relative to the projected contributions of all participating members,actuarially determined. This information was provided by the ERS in reports provided to the District. - 14- SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) Measurementdate March 31, 2017 District's proportionate share of r I the net pension asset/(liability) $ (43,513) J District's portion of the Plan's total net pension asset/(liability) 0.0004631% Change in proportion since the prior measurement date (0.0000615) 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: ` Measurementdate March 31,2017 Actuarial valuation date April 1,2016 Inflation 2.5% - Salary increases 3.8% Investment rate of return(net of investment expense,including inflation) 7.0% —' Cost of living adjustments 1.3% 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, 2016 valuation are based on the results of an actuarial i experience study for the period April 1,2010-March 31, 2015. 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 i Target Expected Rate _J Allocation of Return Measurement date March 31,2017 Asset type Domestic equity 36.00 % 4.55 % International equity 14.00 % 6.35 % Real estate 10.00 % 5.80 % Alternative investments 18.00 % 4.00-7.75% Bonds and mortgages 17.00 % 1.31 Cash 1.00 % (0.25)% _ Inflation indexed bonds 4.00 % 1.50 % 100.00 % — - 15 - SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) Discount Rate The discount rate used to calculate the total pension liability was 7.0%. The projection of cash flows —, used to determine the discount rate assumes that contributions from plan members will be made at the J� 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. 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 asset/liability would be if it were calculated using a discount rate that is 1 percentage point lower (6.0%) or 1 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) $ (138,971) $ (43,513) $ 37,197 i Pension Plan Fiduciary Net Position �I The components of the current-year net pension liability of the employers as of the respective measurement date were as follows: (Dollars in Thousands) Measurement date March 31,2017 Employers'total pension liability $ (177,400,586) Plan fiduciary net position 168,004,363 Employers'net pension liability $ (9,396,223) Ratio of plan fiduciary net position to the employers'total pension liability 94.70% 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$7,090 for the period January 1, 2018 through March 31, 2018. Employee contributions are remitted monthly. - 16- SOUTHOLD FIRE DISTRICT Notes to Financial Statements (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 r 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, 2017. 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 —i 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. r , Benefits A participant's benefit under the program is life annuity with 10 years certain equal to $20 multiplied by the person's total number of years of firefighting service. The number of years of firefighting service used to compute the benefit cannot exceed 40, and except in the case of disability or death, benefits are payable when a participant reaches entitlement age. The program provides statutorily mandated death and disability benefits. -- Fiduciary Investment and Control Service credit is determined by the governing board of the sponsor, based on information certified to `- the governing board by each fire company having members who participate in the program. Each fire company must maintain all required records on forms prescribed by the governing board. The governing board of the sponsor has retained and designated Hometown/RSA Consultants to assist in the administration of the program. The designated program administrator's primary responsibility is to administer the plan for the exclusive benefit of the participants and their beneficiaries. Such duties include, but are not limited to, determining eligibility of firefighters to participate in the plan, compute participant entitlement, authorize disbursements to participants, compute necessary contribution amounts, maintain all necessary records and consult with the sponsor and the trustee on long-term investment plans. Disbursements of program assets for the payment of benefits or administrative expenses must be reviewed by the trustee, the Board of Fire Commissioners, and signed by at least two board members prior to being disbursed by the administrator. 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 -' - 17- SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) _ J Authority to invest program assets is vested in the administrator, with the Board of Fire Commissioners' prior written approval. Subject to restrictions in the program document, program assets are invested in accordance with a statutory"prudent person"rule.The program document calls for all investment decisions to be chosen and approved by the trustee, prior to being invested by the administrator. The sponsor is required to retain an actuary to determine the amount of the sponsor's contributions to the plan.The actuary retained by the sponsor for this purpose is BPAS Actuarial&Pension Services, LLC. Portions of the following information are derived from a report prepared by the actuary dated March 2018 for the plan year ended December 31,2017. _ Program Financial Condition Assets and Liabilities Actuarial Present Value of Benefits at December 31,2017 $ 5,049,971 i Less: Assets Available for Benefits oho of total Trust 1.04% $ 41,132 Annuities 81.15% 3,219,422 Insurance contracts 17.82% 706,833 Total Net Assets Available for Benefits 3,967,387 Total Unfunded Benefits 1,082,584 _ Less:Unfunded Liability for Prior Service (1,082,584) Unfunded Normal Benefits $ - Prior Service Costs Prior service costs are being amortized over a range of 10 years at a discount rate of 5.00%. Receipts and Disbursements _ Plan Net Assets,Beginning of Year $ 3,741,290 Changes during the year +Plan contributions $ 301,000 +Investment income earned 99,367 +Insurance receipts 124,583 +/-Changes in fair market value of investments 28,417 -Plan benefit withdrawals (327,270) 226,097 Plan Net Assets,End of Year $ 3,967,387 �' -18- - SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) Contributions i Amount of sponsor's contribution recommended by actuary: $ 348,291 Amount of sponsors actual contribution: 301,000 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 5.00% Mortality tables used for Withdrawal None Disability None Retirement RP2-RP-2000 Mortality Table Death(actives) None Death(inactives) None I Other None D. Deferred Compensation Plan The District has established a deferred compensation plan in accordance with Internal Revenue Code §457 for all employees. The District makes no contributions in this Plan. The amount of$3,424 was deferred by eligible employees for the year ended December 31, 2017. 9. COMMITMENTS AND CONTINGENCIES I A. Encumbrances All encumbrances are classified as either restricted or assigned fund balance. At December 31, 2017, the District encumbered the following amounts: Restricted: - Capital Projects Fund Capital Outlay $ 1,249,227 Assigned:Fund Balance General Fund Fire protection 12,500 - $ 1,261,727 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. _I - 19- i SOUTHOLD FIRE DISTRICT - Notes to Financial Statements (Continued) C. Litigation The District is not aware of any material, pending or threatened litigation claims against the District. The District is also unaware of any unasserted claims or assessments that would require financial statement disclosure. 10. SPENDING LIMITATION The District did not exceed the statutory spending limitation imposed by New York State Law for the year ended December 31, 2017,and the budget for the year ending December 31,2018. 11. SUBSEQUENT EVENT 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. tl I� i_ - 20- I I � I SOUTHOLD FIRE DISTRICT Schedule of Revenues,Expenditures and Changes in Fund Balance- Budget and Actual-General Fund-Operating For the Year Ended December 31,2017 Board- Final Budget Approved Final Variance with Budget Budget Actual Actual REVENUES Real property taxes $ 1,883,884 $ 1,883,884 $ 1,883,890 $ 6 Interest and earnings 2,971 2,971 _ Rentals 24,916 .24,916 25,352 436 Miscellaneous 300 300 Total Revenues 1,908,800 1,908,800 1,912,513 $ 3,713 APPROPRIATED FUND BALANCE Prior years'surplus 197,932 Prior year's encumbrances '99,054 Total Appropriated Fund Balance - 296,986 Total Revenues and Appropriated Fund Balance $ 1,908,800 $ 2,205,786 Final Budget Variance with Year End Actual and Encumbrances Encumbrances EXPENDITURES Personal services $ 274,036 $ 292,700 291,809 $ $ 891 Equipment and capital outlay 100,000 182,054 105,703 76,351 Fire protection 641,500 646,142 603,238 12,500 30,404 State retirement system 38,000 ;28,358 28,222 136 Service award program 360,000 360,000 356,931 3,069 Social security 20,964 22,300 22,295 5 Workers'compensation 60,000 62,000 59,045 2,955 Medical and accident insurance 38,000 ' 38,000 37,581 419 Debt service-principal 150,000 150,000 150,000 - Debt service-interest 6,300 6,300 6,300 - Total Expenditures 1,688,800 1,787,854 1,661,124 12,500 114,230 OTHER USES Operating transfers out 220,000 417,932 417,932 - i Total Expenditures and Other Uses $ 1,908,800 $ 2,205,786 2,079,056 $ 12,500 $ 114,230 Net Change in Fund Balance (166,543) Fund Balance-Beginning of Year 772,883 Fund Balance-End of Year $ 606,340 Note to Other Supplementary Information Budget Basis of Accounting Budgets are adopted on the modified accrual basis of accounting. See Paragraph on Other Supplementary Information Included in Auditor's Report -21- �I VINCENT D.CULLEN,CPA l (1950-2013) CULLEN &-D -QWSM, LLP CERTIFIED P,UBLICIACCO'UNTANTS JAMES E. ,CPA � PETER F RODRIGUDRIGUEZ,CPA _ JILL S.SANDERS,CPA DONALD 1.HOFFMANN,CPA r CHRISTOPHER V.REINA CPA ALAN YU,CPA I� I INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING T AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS I PERFORMED IN ACCORDANCE WITH GOVERNMENTA UDITING 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, 2017, 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 8, 2018. 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 I 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 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. I� 1 I 16SO ROUTE 112,PORT JEFFERSON STATION,NEW YORK 11776-3060 PHONE:631-473-3400•FAX:631-473-4863•WWW.CDLLP.NET -22 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 _ GovernmentAuditing Standards. 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. L�GC�I.u�rt/ � uJ� LLQ June 8, 2018 I I 1 { -23 -