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Home My WebLink About2017 Fishers Island Fire District ANNUAL FINANCIAL REPORT December 31,2017 I ' I � I , i &COMPANY TABLE OF CONTENTS PAGE INDEPENDENT AUDITOR'S REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A ANNUAL FINANCIAL REPORT UPDATE DOCUMENT: FINANCIAL SECTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 SUPPLEMENTAL SECTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 NOTES TO ANNUAL FINANCIAL REPORT UPDATE DOCUMENT. . . . . . . . 29 INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF ANNUAL FINANCIAL REPORT UPDATE DOCUMENT PERFORMED IN ACCORDANCE WITH GOVERNMENT A UDITING STANDARDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 &COMPANY 437 Madison Avenue, 23rd Floor New York,NY 10022 -212 962 4470 R�. '® 165 Orinoco Drive,Brightwaters, NY 11718 ® 631 665 7040 -Fax 631 665 7014 ®1V1lI /did A PAN �1�TV 15 South Bayles Avenue,Port Washington, NY 11050 GOP 516.883 5510 -Fax 516 767 7438 A PROFESSIONAL CORPORATION OF CERTIFIED PUBLIC ACCOUNTANTS www,sheehanepa.coin INDEPENDENT AUDITOR'S REPORT To the Board of Fire Commissioners Fishers Island Fire District Report on Annual Financial Report Update Document We have audited the accompanying Annual Financial Report Update Document (Financial Section) of Fishers Island Fire District, as of and for the year ended December 31, 2017 and the related notes to the Annual Financial Report Update Document, as listed in the table of contents. Management's Responsibility for the Annual Financial Report Update Document Management is responsible for the preparation and fair presentation of the Annual Financial Report Update Document in accordance with the regulatory basis of accounting as prescribed by the New York State Office of the State Comptroller, as described in Note 1. Management is also responsible for the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of the Annual Financial Report Update Document that is free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express an opinion on the Annual Financial Report Update Document 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 Annual Financial Report Update Document is free from material misstatements. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the Annual Financial Report Update Document. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the Annual Financial Report Update Document, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the District's preparation and fair presentation of the Annual Financial Report Update Document 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 estimates made by management, as well as evaluating the overall presentation of the Annual Financial Report Update Document. -A- An Independent Member of the BDO Alliance USA 1 To the Board of Fire Commissioners Fishers Island Fire District We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Basis for Adverse Opinion on U.S. Generally Accepted Accounting Principles As described more fully in Note 1, the Annual Financial Report Update Document is prepared by Fishers Island 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 Annual Financial Report Update Document 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 Annual Financial Report Update Document referred to above does not present fairly, in accordance with accounting principles generally accepted in the United States of America, the financial position of the Fishers Island Fire District, as of December 31, 2017, or changes in financial position for the year then ended. Unmodified Opinion on Regulatory Basis of Accounting In our opinion, the Annual Financial Report Update Document (Financial Section) referred to above presents fairly, in all material respects, the assets and fund balances of Fishers Island Fire District, as of December 31, 2017, and the revenues it received and expenditures made for the year then ended in conformity with the basis of accounting described in Note 1. Other Matters Our audit was conducted for the purpose of forming an opinion on the Annual Financial Report Update Document (Financial Section) taken as a whole. The Supplemental Section listed on page 2 of the Annual Financial Report Update Document is presented for purposes of additional analysis and is not a required part of the basic Annual Financial Report Update Document. The information, except for the Fire District Questionnaire, has not been subjected to the auditing procedures applied in the audit of the Annual Financial Report Update Document (Financial Section) and, accordingly, we express no opinion on it. &COMPANY To the Board of Fire Commissioners Fishers Island Fire District Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated May 2, 2018 on our consideration of Fishers Island Fire District's internal control over financial reporting and on 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 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 Fishers Island Fire District's internal control over financial reporting and compliance. Brightwaters,New York May 2, 2018 i i &COMPANY All Numbers in This Report Have Been Rounded To The Nearest Dollar ANNUAL FINANCIAL REPORT UPDATE DOCUMENT For The FIRE DISTRICT of Fishers Island County of Suffolk For the Fiscal Year Ended 12/31/2017 AUTHORIZATION ARTICLE 3, SECTION 30 of the GENERAL MUNICPAL LAW- 1. ***Every Municipal Corporation ***shall annually make a report of its financial condition to the Comptroller. Such report shall be made by the Chief Fiscal Officer of such Municipal Corporation *** 5. All reports shall be certified by the officer making the same and shall be filed with the Comptroller*** It shall be the duty of the incumbent officer at the time such reports are required to be filed with the Comptroller to file such report*** State of NEW YORK Office of The State Comptroller i Division of Local Government and School Accountability Albany, New York 12236 I Page 1 FIRE DISTRICT OF Fishers Island *** FINANCIAL SECTION *** Financial Information for the following funds and account groups are included in the Annual Financial Report filed by your government for the fiscal year ended 2016 and has been used by the OSC as the basis for preparing this update document for the fiscal year ended 2017: (A) GENERAL (K) GENERAL FIXED ASSETS (R) RESERVE (TA)AGENCY (V10 GENERAL LONG-TERM DEBT All amounts included in this update document for 2016 represent data filed by your government with OSC as reviewed and adjusted where necessary. r - ***SUPPLEMENTAL SECTION *** The Supplemental Section includes the following sections: 1) Statement of Indebtedness 2) Schedule of Time Deposits and Investments 3) Bank Reconciliation 4) Local Government Questionnaire 5) Schedule of Employee and Retiree Benefits 6) Schedule of Energy Costs and Consumption 7) Schedule of Other Post Employment Benefits (OPEB) All numbers in this report will be rounded to the nearest dollar. I , i Page 2 � Fishers Island FIRE DISTRICT Annual Update Document For the Fiscal Year Ending 2O17 (A)GENERAL Balance Sheet Assets Coux 231.1e7 A200 uO*.Dgq � ' , ` � ` ` � ` ` � . � � ` ' ` � � Page OS� W1un��n�vCodo47117SOO4OOO � Municipality Fishers Island FIRE DISTRICT Annual Update Document For the Fiscal Year Ending 2017 (A)GENERAL Balance Sheet Fund Balance Unassigned Fund Balance 231,197 A917 264,899 7"7 `JiTtj 7! Qnassig,!j�e�cdf,F0,64,Balance g64. � l Funcl'Bal6nce, M. "T ." 01A labilities; 6fe& I nh 6�s An�.F�na—B ��n� Page 4 OSC Municipality Code 471179004000 Fishers Island FIRE DISTRICT Annual Update Document For the Fiscal Year Ending 2017 (A)GENERAL Results of Operation Gf loin 4"T Revenues Real Property Taxe's 398,045 A1001 4022. ,005 T7- TrL—OEAL Rea!Property, Interest And Earnings 16 A2401 10 7 7!tiiol fiW(;7n' Ar�d�.�prty, ,A Insurance Recoveries 15,523 A2680 Corribefisatioin't.q! 6isl��-,��:-,-� TL"T ��§AW T 2 Refunds of Prior Years Expenditures A2701 isc iii, -0, 'k." a a6bus Local;Sources.. 0� Fed Aid Other Public Safety 1,500 A4389 % TOTAL'FecferalAid ',-, iT vi� K� .nues 402,015 Interfund Transfers A5031 --•,'—' -7 'T, -W'7 TOTAL t&'r'So-ur'd 3- 4 (! 4024,11il T, �L�!"6 �LpuesAnd:Other.j�A 8 Page 5 OSC Municipality Code 471179004000 Fishers Island FIRE DISTRICT Annual Update Document For the Fiscal Year Ending 2017 (A)GENERAL Results of Operation Expenditures Fire,Pers Sery 18,388 A34101 21,915 Fire,Equip&Cap Outlay 20,041 A34102 34,940 Fire,Contr Expend 222,443 A34104 177,443 7--`777-777— F -2608T2 234;298. It-0—T-A—L'-,P—u^bli—c—S6—fe—ty"�—',, vLV� 260272,- �,-,-234;298 State Retirement System 2,226 A90108 328 Local Pension Fund, Empl Brifts 88,633 A90258 84,442 Social Security,Employer Cont 1,352 A90308 1,626 Worker's Compensation,Empl Brifts 9,953 A90408 22,293 Life Insurance,Empl Brifts 23,392 A90458 25,326 TOTAL E fr p I b—yq L, Y125,556" 134;015' T , 0' s 7r ,cX386,428 368;313; TOTAL DetaExoi�(Ft6Wskid dffieFuigi� Ix 'HE Page 6 OSC Municipality Code 471179004000 Fishers Island FIRE DISTRICT Annual Update For the Fiscal Year Ending 2O17 (A)GENERAL . Analysis ovChanges inFund Balance Analysis ofChanges inFund Balance Fund Balance'Beginning mYear 202.541 A3021 231.197 Restated Fund Balance-Beg o,Year 202.641 A000u 231.197 ADD'REVENUES AND OTHER SOURCES 415.08* 402.015 DEDUCT-EXPENDITURES AND OTHER USES 38e.428 568.315 Fund Balance'End ufYear 231.1e7 Auouy 264,899 - - � Page OGCMunicipality Code 471179OO4OOO ' � Fishers Island FIRE DISTRICT / Annual Unlent For the Fiscal Year Ending 2O17 . (A)GENERAL � Budget Summary Estimated Revenues � Est Rev'Real Property Taxes 402.000 Al 048N 409.200 Est Rev'Use vfMoney And Property 15 A24e9N 15 � Estimated'|noadunuTransfer o A5031 O � ~~ —^~- --~—� � | � i | | — ! � / � i � | | � � '| ` � | / Page OGC Municipality Code 47117SOU4OOD Fishers Island FIRE DISTRICT Annual Update Document For the Fiscal Year Ending 2017 (A)GENERAL Budget Summary Appropriations App-Public Safety 272,520 A3999N 269,065 App-Employee Benefits 129,495 A9199N 140,150 2 210, ET�tj!�L I p� i!!�!�Oii App-Interfund Transfer 0 A9999N 0 77, 70- 7 Frb'TXD66�—i,us'e's, .4 ITOTALAporbpriatii s 5 nations Other 09 21 402., Page 9 OSC Municipality Code 471179004000 Fishers Island FIRE DISTRICT Annual Update Document For the Fiscal Year Ending 2017 (K)GENERAL FIXED ASSETS Balance Sheet Assets Net Pension Asset-Proportionate Share K108 777�777�-7777-77 MsetC TICIA Fixe& Deferred Outflows of Resources-Pensions 4,519 K496 TTDefe er6d. -7—,7''777— - -7 y- LAs'sets-'a'-n--d=DeT�f6rred:OUffIdWs�bf,,Ror�oijedes'- (-J Page 10 OSC Municipality Code 471179004000 ` ' Fishers Island FIRE DISTRICT Annual Update Document For the Fiscal Year Ending 2O17 (VGENERAL FIXED ASSETS Balance Sheet 4. Liabilities,Deferred Inflows And Fund Balance Total Non-Current Govt Assets 4.519 KI 59 ' ! ~ / / ! | ! / \ ( � / ' � ` ` `- ' Page 11 O8CMunicipality Code 4T1178OO4OOO � / . � Fishers Island FIRE DISTRICT Annual Update Document For the Fiscal Year Ending 3O17 (R)RESERVE Balance Sheet Assets Cash Special Reserves 750.104 Ruuo 750,478 MAL Restrlct6d-��s��s�L 750.11041 50S4 � | � ' / ' � � ' � / ` ' \ ` Page 12 OGCMunicipality Code 47117SOO4OOD Fishers Island FIRE DISTRICT Annual Update Document For the Fiscal Year Ending 2017 (R)RESERVE Balance Sheet ode Description _ 2016 Edpcode2417; z w. Fund Balance Capital Reserve 750,104 R878 750,479 :TOTAL Restricted Fund Balance 750,104 750,479' TOTAL Fund Balance. . 1750,104 750,479: -._._..:. :..r.:. ---__ 70TAL'Liabilities,_Deferred Inflows And Fund Balance. , 750._ ,104-• _...._.f<. _?50,479 Page 13 OSC Municipality Code 471179004000 Fishers Island FIRE DISTRICT Annual Update Document For the Fiscal Year Ending 2017 (R)RESERVE Results of Operation ode Description Revenues Interest&Earnings 375 R2401 375 OTAL Use of Money^And Prbperfy " 375ua: 375 TOTAL cn..o.__ ._.._._......._:..,_, ___...:::;..r .._.,_..,.._._...__.«.....a.»;_.:i:.,......_.._.....%:s^"' ._.....,__....t ...,.:ka1....�.�.......»[....,_: .�'i_.o,....__.- "• ........�:�:. '.�::..�...,�...�.J ' t - -...., .s...s.«5- .._._ '..�.".�."3. ""F��'rzP",..a„.y..�.-,�.,...a_...-,..—...r-.p.-_�.....n_._� ......, �..a- ----'r---�r•>�---..........-..r.l TOTAL§:e Revenu'es•And Other Sources, � ' '375=ma 375 Page 14 OSC Municipality Code 471179004000 r Fishers Island FIRE DISTRICT Annual Update Document For the Fiscal Year Ending 2017 (R)RESERVE Results of Operation 166" Other Uses Transfers,Other Funds R99019 TL _PTA a�i—nijrans rs, 7107 4,4.`- a- u'j -rLes Page 15 OSC Municipality Code 471179004000 Fishers |o|ond FIRE DISTRICT Annual Update Document . For the Fiscal Year Ending 3O17 (R)RESERVE Analysis cfChanges inFund Balance Analysis ofChanges inFund Balance Fund Balance'Beginning u,Year 74e.72e m8021 750.104 / Restated Fund Balance'Beg nfYear 74e.73e R8022 750.1$4 ADD'REVENUES AND OTHER SOURCES 375 375 � DEDUCT'EXPENDITURES AND OTHER USES Fund Balance'End uxYear 750.104 mnooe rso/ng � ' ' � ` ` . ` Page 16 OGCMunicipality Code 471179OO4O00 Fishers Island FIRE DISTRICT Annual Update Document For the Fiscal Year Ending 2017 (TA)AGENCY Balance Sheet ode ;EdpCode ... Assets Service Award Program Assets 1,201,961 TA461 1,243,485 • TOTAL,Investmentsb,.—,�, ,M1: N ,, r_„�-.__`.., "�: "r`�`�".� - =r; . , - '- . :. . s`. >� '•,; 4. .r;,�- , ,485, ___ ='1'201•'961.: _:•" 1 243 TO1ALAssetis and e-ferred%Outfibws.o �a _. f�Resources 0.� ry -a -' ,.1;201,961; „ m 1,,243,486 Page 17 OSC Municipality Code 471179004000 � � Fishers Island FIRE DISTRICT Annual Update Document For the Fiscal Year Ending 2017 � (TA)AGENCY + Balance Sheet P6` 101 ""',~°"°°"° 1,201,961 TAI 1.243,485 � ' � ` , ! � ' ` ` � ` . ' � � ` / Page 18 O8C Municipality Code 471179004000 ' Fishers Island FIRE DISTRICT Annual Update Document For the Fiscal Year Ending 2O17 (V0GENERAL LONG-TERM DEBT Balance Sheet Assets Tota|Nnn~Cunant Govt Liabilities 4.815 W1 29 2.215 Ass '=~~-- ' ' . / _ — Page 19 OGCMunicipality Code 471179DU4UOO Fishers Island FIRE DISTRICT Annual Update Document For the Fiscal Year Ending 2017 (W)GENERAL LONG-TERM DEBT Balance Sheet Net Pension Liability-Proportionate Share 4,085 W638 2,215 lot Lia iii Deferred Inflows of Resources-Pensions 730 W697 Y W y"OTAL Liabilities' Z.21 5 77, 77 TOTAL ra;7 Page 20 OSC Municipality Code 471179004000 VI l - 0.0�.C___r__JIICI - _ _ _ _ __ ._ __ 1JIIC lIl(1 Lli. «v 1 - _ _ _ _ _ _ _ _ 15112/2018 Statement of Indebtedness For the Fiscal Year Ending 2017 First Debt Cops Comp Date of Date of Int. Amt.Orig. O/S Beg. Paid Redeemed Prior Yr. Accreted O/S End Year Code Description Flag Flag Issue Maturity Rate Vary Issued of Year Dur.Year Bond Proc. Adjust. Interest of Year Page 21 Fishers Island FIRE DISTRICT Schedule of Time Deposits and Investments For the Fiscal Year Ending 2017 l ' Page 22 i t Fishers Island FIRE DISTRICT Bank Reconciliation For the Fiscal Year Ending 2017 Include All Checking, Savings and C.D.Accounts fil Bank Add: Less: Adjusted Account Bank Deposit Outstanding Bank Number Balance In Transit Checks Balance *****-5498 $254,612 $0 $10,479 $244,133 *****-5654 $28,526 $0 $0 $28,526 *****-5662 $517,369 $0 $0 $517,369 *****-5704 $20,766 $0 $0 $20,766 *****-9453 $154,392 $0 $0 $154,392 *****-9461 $50,192 $0 $0 $50,192 Total Adjusted Bank Balance $1,015,378 L'etty Cash $.00 Adjustments $.00 Total Cash 9ZCASH $1,015,378 Total Cash Balance All Funds 9ZCASHB * $1,015,378 * Must be equal jl 1 Page 23 OSC Municipality Code 471179004000 Fishers Island FIRE DISTRICT Fire District Questionnaire For the Fiscal Year Ending 2017 Response 1) Has your district adopted a written procurement prolicy and is it complied with? Y 2) Has your district contracted to have an independent audit of its financial statements? Y If not, has the Board of Fire Commissioners performed an internal audit of the Treasurer's records and reports? 3) Does your district have a written travel policy and is it complied with? Y 4) Are monthly bank reconciliations performed? Y 5) What is your district's statutory spending limitation margin (amount)for the next fiscal $290,408 6) Does your district have a Length of Service Award Program (LOSAP)for volunteer firefighters? If so, how are the LOSAP funds invested? Marketable Securities N Annuities Y Life Insurance Y Other(describe) Empire National Bank 7) Has your Fire District adopted an investment policy as required by General Municipal Y Law, Section 39? i , Page 24 Fishers Island FIRE DISTRICT Employee and Retiree Benefits For the Fiscal Year Ending 2017 Total Full Time Employees: Total Part Time Employees: Account Description Total #of Full #of Part #of Retirees Code Expenditures Time Time (All Funds) Employees Employees 90108 State Retirement System $32800 1 9015 Police and Fire Retirement 90258 Local Pension Fund $84,442.0 90308 Social Security $1,62600 90408 Worker's Compensation $22,29300 Insurance 90458 Life Insurance $25,326 013 90508 Unemployment Insurance 90558 Disability Insurance 90608 Hospital and Medical (Dental)Insurance 90708 Union Welfare Benefits 90858 Supplemental Benefit Payment to Disabled Fire Fighters 91890 Other Employee Benefits Total $134,015.0 Computed Total From Financial $134,015.0 Section(comparative purposes only) f Page 25 OSC Municipality 471179004000 Fishers Island FIRE DISTRICT Energy Costs and Consumption For the Fiscal Year Ending 2017 Energy Type Total Total Volume Units Of Alternative Expenditures Measure Units Of Measure asoline $191 41 gallons Diesel Fuel $1,09 26 gallons Fuel Oil $3.501 1,31 gallons Natural Gas cubic feet Electricity $6,4201 22,701 kilowatt-hours oal Itons Propane $37 10711 gallons I , r , t , Page 26 OSC Municipality 471179004000 Fishers Island FIRE DISTRICT Schedule of Other Post Employment Benefits (OPEB) For the Fiscal Year Ending 2017 1 Page 27 FIRE DISTRICT DEMOGRAPHICS Postal or Mailing Address: PO Box 222 Fishers Island NY ;t06� 390 Street Address or PO Box City State Zip (631)788-7019 ( ) Fire District Telephone Number Fire District Fax Number fifiredistrict@flshersisland.net Official Email Address Website Physical Address:(If Different From Postal Address) 250 Athol Crescent Ave Fishers Island :NY 06390 Street Address City State Zip BOARD DEMOGRAPHICS CHIEF FISCAL OFFICER Kristen Peterson reasurer Name - Title — PO Box 222 Fishers Island NY 06390 ' Street Address or PO Box City State Zip (631)788-7019 Telephone Number Fax Number fifdfiredistnct@fishersisland net 12/31/2017 i " Email Address Term End Date CHAIRMAN OF THE BOARD Paul Giles Chairman Name Title PO Box 222 Fishers Island NY 06390 Street Address or PO Box City State Zip (631)788-7019 Telephone Number Fax Number fifired istrict@fishersisland net 12/31/2017 Email Address Term End Date I, Kristen Peterson hereby certify that I am the Chief Fiscal Officer of the Fishers Island Fire District and that the information provided in the annual financial report of the Fishers Island Fire District for the fiscal year ended 12/31/2017 is true and correct to the best of my knowledge and belief. By entering the personal identification number assigned by the Office of the State Comptroller to me as the Chief Fiscal Officer 1 of the Fishers Island Fire District and adopted by me as my signature for use in conjunction with the filing of the Fishers Island Fire District :'s annual financial report, I am evidencing my express intent to authenticate my certification of the Fishers Island Fire District 's annual financial report report for the fiscal year ended 12/31/2017 and filed by means of electronic data transmission. Sheehan&Company,CPA, PC Name of Report Preparer Personal Identification Number Date if different than Chief Fiscal Officer of Chief Fiscal Officer a Fishers Island FIRE DISTRICT Financial Comments For the Fiscal Year Ending 2017 7 Page 29 Fishers Island Fire District NOTES TO ANNUAL FINANCIAL REPORT UPDATE DOCUMENT 1. Summary of significant accounting policies: 1 The Annual Financial Report Update Document of the Fishers Island Fire District (the District), as of and for the year ended December 31, 2017 has been prepared in conformity with the cash (regulatory) basis of accounting as prescribed by the State Comptroller's Office, which is a special purpose framework of accounting other than United States generally accepted accounting principles. i Financial reporting entity: The District is a governmental entity that provides fire protection to the local community. The District receives most of its funding from property taxes. The District is governed by laws of the State of New York. The Board of Fire Commissioners is the legislative body responsible for the overall operation of the District. All activities and functions performed for the District are its direct responsibility. The Treasurer serves as Chief Fiscal Officer of the District. Basis of presentation: The Annual Financial Report Update Document provides information about the District's funds, including the fiduciary fund. The accounts of the District are organized on the basis of funds, each of which is considered a separate i accounting entity. The operations of each fund are segregated for the purpose of carrying on specific activities or attaining certain objectives in accordance with special regulations, restrictions or limitations. The following fund types are used: Governmental: General Fund The General Fund is the principal operating fund of the District and is used to i account for all financial resources except those required to be accounted for in another fund. Equipment Repair Reserve Fund The Equipment Repair Reserve Fund is used to account for and report financial resources to be used for the acquisition and repair of equipment as needed by the District. Capital Reserve Fund The Capital Reserve Fund is used to account for and report financial resources to be used for the acquisition, construction or renovation of major capital facilities. -29- &COMPANY Fishers Island Fire District l NOTES TO ANNUAL FINANCIAL REPORT UPDATE DOCUMENT J 1. Summary of significant accounting policies (continued): i Governmental (continued): ' Interior and Exterior Repairs and Renovations Reserve Fund The Interior and Exterior Repairs and Renovations Reserve Fund is used to account for and report financial resources to be used for interior and exterior repairs and renovations. Pump Repair Reserve Fund The Pump Repair Reserve Fund is used to account for and report financial resources to be used for the repair and acquisition of fire pumps. Fiduciary Fund: The Fiduciary Fund is used to account for assets held by the District in a trustee or custodial capacity. The District utilizes the following fund: Agency Fund The Agency Fund is used to account for and report assets held by the District in the capacity of trustee, custodian or agent for individuals. Agency funds are custodial in nature and do not involve measurement of results of operations. Basis of accounting: The accompanying Annual Financial Report Update Document has been prepared on the cash (regulatory) basis of accounting, which is a special purpose r framework of accounting other than generally accepted accounting principles. Under that basis, the only asset recognized is cash and no liabilities are recognized. All transactions are recognized as either cash receipts or disbursements. Non-cash transactions are not recognized in the Annual Financial Report Update Document. Cash and cash equivalents: Cash and cash equivalents include demand deposits and i , temporary investments with original maturities of three months or less from date of acquisition. Interfund transfers: The operations of the District give rise to certain transactions 4 between funds, including transfers of expenditures and revenues to provide services and construct assets. This is either by budget, Board resolution, permissive referendum or r mandatory referendum. -30- &COMPANY I Fishers Island Fire District NOTES TO ANNUAL FINANCIAL REPORT UPDATE DOCUMENT 1. Summary of significant accounting policies (continued): Fund balances: In accordance with Governmental Accounting Standards Board Statement No. 54, "Fund Balance Reporting and Governmental Fund Type Definitions," (GASB 54), fund balance is broken down into five different classifications: non- spendable, restricted, committed, assigned and unassigned. Non-spendable consists of assets that are inherently non-spendable in the current period _- either because of their form or because they must be maintained intact, including prepaid ` items, inventories, long-term portions of loan receivable, financial assets held for resale and principal of endowments. 9 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. Committed consists of amounts that are subject to a purpose constraint imposed by a formal action of the government's highest level of decision-making authority before the end of the fiscal year and that require the same level of formal action to remove the constraint. The Board of Fire Commissioners is the decision-making authority that can, by Board resolution, prior to the end of the fiscal year, commit fund balance. Assigned consists of amounts that are subject to a purpose constraint that represents an intended use established by the government's highest level of decision-making authority or by their designated body or official. 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. The Board of Fire Commissioners, by Board resolution, can authorize the Treasurer to assign fund balance. Unassigned represents the residual classification for the government'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 balance resulting from overspending for specific purposes for which amounts had been restricted, committed or assigned. When resources are available from multiple classifications, the District spends funds in t the following order: • Restricted amounts are deemed to have been spent when an expenditure is incurred for purposes for which both restricted and unrestricted (committed, assigned or unassigned) amounts are available. I , -31- &COMPANY r Fishers Island Fire District NOTES TO ANNUAL FINANCIAL REPORT UPDATE DOCUMENT 1. Summary of significant accounting policies (continued): Fund balances (continued): • Within unrestricted fund balance, expenditures are deemed to be spent first from committed amounts, followed by assigned amounts and then unassigned amounts when expenditures are incurred for purposes for which amounts in any of those unrestricted fund balance classifications could be used. Real Property taxes: All real property assessments are made by the Town of Southold. Real property tax payments are due in two equal installments; the first half payable on y December 1 (lien and levy date) preceding the year for which the same is levied and the second half payable May 10, with the first half payable without penalty to January 10 and ` the second half payable without penalty to May 31. After May 31, all taxes must be paid to the Suffolk County Treasurenwith a 5% penalty charge and interest at the rate of 1% per month from February 1. The Town of Southold Receiver of Taxes collects all real estate taxes for the District. The Town of Southold Receiver of Taxes distributes the tax collections to the District. All payments made to the District are made in the year for which the tax has been levied. The Town of Southold Receiver of Taxes turns over uncollected items to the Suffolk County Treasurer who continues the collection of these items. Responsibility for the collection of unpaid taxes rests with Suffolk County. General Municipal Law Section 3-c established a tax levy limit for local governments in New York State effective June 24, 2011. This law generally limits the amount by which local government can increase property tax levies to 2% or the rate of inflation, whichever is less. The law does provide exclusions for certain specific costs and allows the governing board to override the tax levy limit with supermajority vote. Budgetary data: The District prepares an operating budget for the General Fund each year. The budget is adopted by the Board of Fire Commissioners as its final budget for the coming year. The budget is not subject to referendum. All budget appropriations lapse at the end of each year. Use of estimates: The preparation of the Annual Financial Report Update Document in conformity with the cash (regulatory) basis of accounting requires management to make significant estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. 4 -32- c�COMPANY Fishers Island Fire District NOTES TO ANNUAL FINANCIAL REPORT UPDATE DOCUMENT 2. Deposits with financial institutions and investments: The District's investment activities are governed by state statutes. Resources must be deposited in Federal Deposit Insurance Corporation (FDIC) insured commercial banks or trust companies located within the state. Collateral is required for demand and time deposits and certificates of deposit not covered by FDIC insurance. The District adopted a formal investment policy allowing investments in special time deposit accounts, certificates of deposit, obligations of the United States of America, obligations guaranteed by agencies of the United States of America where the payment of principal and interest are guaranteed by the United States of America, obligations of the State of New York and obligations issued by a municipality, school district or fire district other than the District. Custodial credit risk is the risk that in the event of a bank failure, the District's deposits may not be returned to it. The GASB directs that deposits be disclosed according to custodial credit risk. The District's custodial risk is specified by the following categories: 1. Insured by FDIC insurance. 2. Collateralized by securities held by the pledging financial institution's trust department or agent but not in the District's name. 3. Collateralized by securities held by the pledging financial institution but not in the District's name. 4. Uncollateralized. The District's deposits held by the banks are categorized, based on the above criteria, as follows: Category Amount 1 $ 250,000 2 775,857 3 - 4 - Total 1 025 857 -33- &COMPANY r� II } Fishers Island Fire District NOTES TO ANNUAL FINANCIAL REPORT UPDATE DOCUMENT 3. Pension Plan: Plan description: The District participates in the New York State and Local Employees' Retirement System (ERS), which is part of the New York State and Local Retirement System (the System). This is a cost-sharing, multiple-employer defined benefit retirement system. The net position of the System is held in the New York State Common Retirement Fund (the Fund), which was established to hold all net assets and record changes in fiduciary net position allocated to the System. The Comptroller of the State of New York serves as the trustee of the Fund and is the administrative head of the System. System benefits are established under the provisions of the New York State Retirement and Social Security Law (NYSRSSL). Once a public employer elects to participate in the System, the election is irrevocable. The New York State Constitution provides that j 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 System is included in the State's financial report as a pension trust fund. That report may be found at www.osc.state.ny.us/retire/publications/index.php or obtained by writing to the New York State and Local Retirement System, 110 State Street, Albany,New York 12244. Benefits provided: The System provides retirement benefits as well as death and disability benefits. Tiers I and 2 Eligibility: Tier 1 members, with the exception of those retiring under special retirement plans, must be at least age 55 to be eligible to collect a retirement benefit. There is no minimum service requirement for Tier 1 members. Tier 2 members, with the exception of those retiring under special retirement plans, must have five years of service and be at least age 55 to be eligible to collect a retirement benefit. The age at which full benefits `;4 may be collected for Tier 1 is 55 and the full benefit age for Tier 2 is 62. i � -34- LJ &COMPANY Fishers Island Fire District NOTES-TO ANNUAL FINANCIAL REPORT UPDATE DOCUMENT 3. Pension Plan (continued): r Benefits provided (continued): r ' ' Tiers I and 2 (continued) Benefit calculation: Generally, the benefit is 1.67% of final average salary for each year of service if the member retires with less than 20 years. If the member retires with 20 or more years of service, the benefit is 2% of final average salary for each year of service. Tier 2 members with five or more years of service can retire as early as age 55 with reduced benefits. Tier 2 members age 55 or older with 30 or more years of service can retire with no reduction in benefits. As a result of Article 19 of the NYSRSSL, Tier 1 and Tier 2 members who worked continuously from April 1, 1999 through October 1, 2000 received an additional month of service credit for each year of credited service they have at retirement, up to a maximum of 24 additional months. Final average salary is the average of the wages earned in the three highest consecutive years. For Tier 1 members who joined on or after June 17, 1971, each year of final average salary is limited to no more than 20% of the previous year. For Tier 2 members, each year of final average salary is limited to no more than 20% of the average of the previous two years. Tiers 3, 4 and 5 Eligibility: Tier 3 and 4 members, with the exception of those retiring under special retirement plans, must have five years of service and be at least age 55 to be eligible to collect a retirement benefit. Tier 5 members, with the exception of those retiring under special retirement plans, must have ten years of service and be at least age 55 to be eligible to collect a retirement benefit. The full benefit age for Tiers 3, 4 and 5 is 62. Benefit calculation: Generally, the benefit is 1.67% of final average salary for each year of service if the member retires with less than 20 years. If a member retires with between 20 and 30 years of service, the benefit is 2% of final average salary for each year of service. If a member retires with more than 30 years of service, an additional benefit of 1.5% of final average salary is applied for each year of service over 30 years. Tier 3 and 4 members with five or more years of service and Tier 5 members with ten or more years of service can retire as early as age 55 with reduced benefits. Tier 3 and 4 members age 55 or older with 30 or more years of service can retire with no reduction in benefits. Final average salary is the average of the wages earned in the three highest consecutive years. For Tier 3, 4 and 5 members, each year of final average salary is limited to no more than 10% of the average of the previous two years. -35- &COMPANY r Fishers Island Fire District NOTES TO ANNUAL FINANCIAL REPORT UPDATE DOCUMENT i 3. Pension Plan (continued): Benefits provided (continued): 1 Tier 6 Eli ibili : Tier 6 members, with the exception of those retiring under special retirement - plans, must have ten years of service and be at least age 55 to be eligible to collect a retirement benefit. The full benefit age for Tier 6 is 63 for ERS members. - Benefit calculation: Generally, the benefit is 1.67% of final average salary for each year of service if the member retires with less than 20 years. If a member retires with 20 years of service, the benefit is 1.75% of final average salary for each year of service. If a member retires with more than 20 years of service, an additional benefit of 2% of final average salary is applied for each year of service over 20 years. Tier 6 members with ten or more years of service can retire as early as age 55 with reduced benefits. Final average salary is the average of the wages earned in the five highest consecutive years. For Tier 6 members, each year of final average salary is limited to no more than 10% of the average of the previous four years. Ordinary Disability Benefits Generally, ordinary disability benefits, usually one-third of salary, are provided to eligible members after ten years of service; in some cases, they are provided after five years of service. Accidental Disability Benefits For all eligible Tier 1 and Tier 2 ERS members, the accidental disability benefit is a pension of 75% of final average salary, with an offset for any Workers' Compensation benefits received. The benefit for eligible Tier 3, 4, 5 and 6 members is the ordinary disability benefit with the years-of-service eligibility requirement dropped. Ordinary Death Benefits Death benefits are payable upon the death, before retirement, of a member who meets eligibility requirements as set forth by law. The first$50,000 of an ordinary death benefit is paid in the form of group-term life insurance. The benefit is generally three times the member's annual salary. For most members, there is also a reduced post-retirement ordinary death benefit available. -36- &COMPANY I Fishers Island Fire District ''I I NOTES TO ANNUAL FINANCIAL REPORT UPDATE DOCUMENT 3. Pension Plan (continued): Benefits provided (continued): -1 Post-Retirement Benefit Increases A cost-of-living adjustment is provided annually to: (i) all pensioners who have attained age 62 and have been retired for five years, (ii) all pensioners who have attained age 55 and have been retired for ten years, (iii) all disability pensioners, regardless of age, who ' have been retired for five years, (iv) ERS recipients of an accidental death benefit, regardless of age, who have been receiving such benefit for five years and (v) the spouse of a deceased retiree receiving a lifetime benefit under an option elected by the retiree at retirement. An eligible spouse is entitled to one-half the cost-of-living adjustment amount that would have been paid to the retiree when the retiree would have met the eligibility criteria. This cost-of-living adjustment is a percentage of the annual retirement benefit of the eligible member as computed on a base benefit amount not to exceed $18,000 of the annual retirement benefit. The cost-of-living percentage shall be 50% of the annual Consumer Price Index as published by the U.S. Bureau of Labor, but cannot be less than 1% or exceed 3%. Contributions: The System is non-contributory except for employees who joined the ERS after July 27, 1976, who contribute 3% of their salary for the first 10 years of membership and employees who joined on or after January 1, 2010 who generally contribute 3% of their salary for their entire length of service. For Tier 6 members, the 1 I, contribution rate varies from 3% to 6% depending on salary. Generally, Tier 5 and 6 members are required to contribute for all years of service. Under the authority of the NYSRSSL, the Comptroller annually certifies the actuarially determined rates expressly used in computing the employers' contributions based on salaries paid during the Systems' fiscal year ending March 31. Contributions for the current year and two F preceding years were equal to 100% of the contributions required and were as follows: ! i Year Ending December 31, Amount G 2017 $ 328 2016 2,226 --i 2015 1,556 Chapter 57 of the Laws of 2013 of the State of New York, Part BB, amending several F-, sections of the Retirement and Social Security Law was enacted that allows local employers to amortize a portion of their retirement bill for up to 12 years in accordance with the following stipulations: -37- '. 6YCOMPANY Fishers Island Fire District NOTES TO ANNUAL FINANCIAL REPORT UPDATE DOCUMENT h 3. Pension Plan (continued): Contributions (continued): I • The maximum amount an employer can amortize is the difference between the normal annual contribution (total bill, excluding payments for deficiency, group life, previous amortizations, incentive costs and prior year adjustments) and the graded contribution. • For subsequent State fiscal years (SFYs), the graded rate will increase or decrease by up to one-half of 1% depending on the gap between the increase or decrease in the System's average rate and the previous graded rate. • The interest rate will be set annually and will be comparable to a 12-year U.S. Treasury Bond plus 1%. • For subsequent SFYs in which the System's average rates are lower than the graded rates, the employer will be required to pay the graded rate. Any additional contributions made will first be used to pay off existing amortizations and then any excess will be deposited into a reserve account and will be used to offset future increases in contribution rates. This law requires participating employers to make payments on a current basis, while amortizing existing unpaid amounts relating to the System's fiscal years when the local employer opts to participate in the program. The District's total pension liability was paid as of December 31, 2017. Pension liabilities, pension expense and deferred outflows of resources and deferred inflows of resources related to pensions: At December 31, 2017, the District reported a liability of$2,215 for its proportionate share of the net pension liability. The net pension liability was measured as of March 31, 2017 and 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 pension plan relative to the projected contributions of all participating members, actuarially determined. I , At March 31, 2017, the District's proportion was 0.0000236%. �) -38- &COMPANY h Fishers Island Fire District 1 ' NOTES TO ANNUAL FINANCIAL REPORT UPDATE DOCUMENT I 3. Pension Plan (continued): ! 4 Pension liabilities, pension expense and deferred outflows of resources and deferred f inflows of resources related to pensions (continued): 1 ' _ At December 31, 2017, the District reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: _ Deferred Deferred Outflows of Inflows of Resources Resources Differences between expected and actual experience $ 55 $336 -G Changes of assumptions 757 - Net difference between projected and actual earnings on pension plan investments 442 - Changes in proportion and differences between District contributions and proportionate share of jcontributions - 294 District contributions subsequent to the measurement date 864 - Total 2 118 630 -, $864 reported as deferred outflows of resources related to pensions resulting from the District's contributions subsequent to the measurements date will be recognized as a reduction of the net pension liability in the year ended March 31, 2018. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows: Amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows: Year Ended March 31: Amount 2018 $323 2019 323 -� 2020 303 J 2021 (326) Actuarial Actuarial assumptions: The total pension liability at March 31, 2017 was determined by using an actuarial valuation as of April 1, 2016, with update procedures used to roll forward the total pension liability to March 31, 2017. The actuarial valuation used the following actuarial assumptions: -39- i &COMPANY Fishers Island Fire District NOTES TO ANNUAL FINANCIAL REPORT UPDATE DOCUMENT a 3. Pension Plan (continued): Actuarial assumptions (continued): 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 to March 31, '2015 System 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 experience study for the period April 1, 2010 to March 31, 2015. The long-term expected rate of return on pension plan investments was determined using a building-block method in which best-estimate ranges of expected future real rates of return (expected return, net investment expenses and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. Best estimates of arithmetic real rates of return for each major asset class included in the target asset allocation as of March 31, 2017 are summarized below: Long-term Expected Real Asset Class Rate of Return Domestic equity 4.55% International equity 6.35% Private equity 7.75% Real estate 5.80% Absolute return strategies 4.00% Opportunistic portfolio 5.89% Real assets 5.54% Bonds and mortgages 1.31% Cash (0.25)% Inflation-indexed bonds 1.50% -40- &COMPANY Fishers Island Fire District NOTES TO ANNUAL FINANCIAL REPORT UPDATE DOCUMENT 3. Pension Plan (continued): Actuarial assumptions (continued): ' The real rate of return is net of the long-term inflation assumption of 2.5%. { 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 current contribution rates and that contributions from employers will be made at statutorily required rates, actuarially. 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 r assumption: The following presents the District's proportionate share of the net pension liability calculated using the discount rate of 7.0%, 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 one-percentage-point lower (6.0%) or one-percentage-point higher (8.0%)than the current rate: 1% Current 1% Decrease Assumption Increase (6.0%) (7.0%) 8( 0%) District's proportionate share of the net pension liability (asset) $7,073 $2,215 $(1,893) Pension plan fiduciary net position: The components of the current-year, net pension liability of the employers as of March 31, 2017, were as follows: (Dollars in Thousands) ' Employees' Retirement System Employers'total pension liability $177,400,586 Plan net position (168,004,363) Employers' net pension liability 9.396.223 Ratio of plan net position to the employers' total pension liability 94.70% -41- &COMPANY i ' l � Fishers Island Fire District NOTES TO ANNUAL FINANCIAL REPORT UPDATE DOCUMENT 4. Length of Service Awards Program (LOSAP): The District's Annual Financial Report Update Document is for the year ended December 31, 2017. The District established a defined benefit LOSAP for the active volunteer firefighters of the District. 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. Participation, vesting and service credit: Active volunteer firefighters who have reached the age of 18 and who have completed one year of service are eligible to ` participate in the Program. Participants acquire a non-forfeitable right to a service award after being credited with five years of'firefighting service or upon attaining the Program's entitlement age and completing one year of Plan participation. The Program's entitlement age is 65. In general, an active volunteer firefighter is credited with a year of firefighting service for each calendar year after the establishment of the Program in which he or she iaccumulates 50 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 five years of firefighting service rendered prior to the establishment of the Program. - Benefits: A participant's benefit under the Program is the actuarial equivalent of a j monthly payment for life, with ten 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 30. Benefits are not payable until the first day of the month coincident with or following the attainment of age 65 and completion of one year of plan participation. Except in the case of disability or death, benefits are payable --� when a participant reaches entitlement age. The Program provides statutorily mandated 1 death and disability benefits. Fiduciary investment and control: Service credit is determined by the Governing Board of the Sponsor, based on the information certified to the Governing Board by the District. The District must maintain all required records on forms prescribed by the �- Governing Board. The Governing Board of the Sponsor has retained and designated Hometown Insurance Agency (Hometown)/RSA Consultants to assist in the administration of the Program. The designated Program administrator's functions include providing basic annual administration services as follows: -42- &COMPANY Fishers Island Fire District NOTES TO ANNUAL FINANCIAL REPORT UPDATE DOCUMENT 4. Length of Service Awards Program (LOSAP) (continued): Fiduciary investment and control (continued): a) Providing participants enrollment forms; b) Providing an annual reminder letter with a review list for the current anniversary date; c) Preparation of Explanation of Plan Benefits; d) Calculation of Schedule of Benefits and cost annually; e) Participants' benefit calculation at time of severance or retirement; f) Auxiliary Fund valuation and suggested deposit; g) Summary of required annual contribution; l h) Annual actuarial review and recommended benefit enhancements. Disbursements of Program assets for the payment of benefits or administrative expenses must be approved. The following is an explanation of the process for approving ' disbursements: , Payment of.benefits: 1. Entitlement benefits - When a participant becomes eligible to receive entitlement benefits, the Plan Sponsor prepares and submits an authorization letter to Hometown indicating the participant's name, address, age, social security number, term of service and other pertinent information. Hometown will then facilitate the disbursement of entitlement benefits. 2. Death benefits - Upon notification from the Plan Sponsor of a participant's death, Hometown forwards an individual claim form to the Plan Sponsor for completion. The Plan Sponsor will then complete and return this form, accompanied by a death certificate, to Hometown, authorizing the disbursement of a death benefit. 3. Disability benefits - When a participant becomes disabled, the Plan Sponsor will notify Hometown in writing of a participant's total and permanent disability. Hometown will then verify that the participant has been declared 100% disabled by the Workers Compensation Board. Subsequent to this verification, Hometown will facilitate the disbursement of disability benefits. Payment of administrative expenses: 1. Per the executed Service Fee Agreement, the Plan Sponsor agrees to payment as contracted. -43- COMPANY I Fishers Island Fire District NOTES TO ANNUAL FINANCIAL REPORT UPDATE DOCUMENT 4. Length of Service Awards Program (LOSAP) (continued): Payment of administrative expenses (continued): '- Authority to invest Program assets is vested in Empire National Bank and First Security Benefit Life Insurance. Subject to restrictions in the Program document, Program assets are invested in accordance with a statutory "prudent person" rule. The Sponsor has invested Plan funds in Group Annuity Contracts with guaranteed floor rates of interest of 3%per annum. 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 and Pension Services, LLC. Portions of the following information are derived from a report prepared by the actuary dated April 2018. Program financial condition: Assets and Liabilities: Actuarial present value of accrued benefits at December 31, 2017: Vested $1,589,131 Non-vested 33,452 Total present value of accrued benefits 1 622 583* Accrued liability at January 1, 2018 $1,872,165* Less assets available for benefits: % of Total Empire National Bank 9.95% $ 123,733 First Security Benefit Annuity 44.22% 549,826 Cash value of life insurance 45.83% 569,926 Total net assets available for benefits 100.00% 1,243,485 Total unfunded liability as of January 1, 2018 628,680** Less unfunded liability for prior service 628,680*** Unfunded normal benefits $ 51 a ' ' -44- i M COMPANY Fishers Island Fire District ' NOTES TO ANNUAL FINANCIAL REPORT UPDATE DOCUMENT ` 4. Length of Service Awards Program (LOSAP) (continued): Program financial condition (continued): Assets and liabilities (continued): * Present value of vested accrued benefits and accrued liability were determined using different actuarial assumptions. ** The unfunded liability was recomputed as of January 1, 2018 because of a change in actuarial assumptions and to incorporate any actuarial or experience gains or losses which occurred in 2017. *** Prior service costs are being amortized over a range of 10 to 19 years at a discount rate of 5.0%. Funded ratio: Assets $1,243,485 Accrued liability $1,872,165 Percent funded 66.4% Receipts and disbursements: Plan net assets, beginning of year $1,201,961 Changes during the year: Plan contributions $ 38,500 Investment income earned 20,165 Past Entitlement Payments (85,800) Death Claims 99,412 Other Miscellaneous 173 Increase in cash value of life policies (A) (30,926) 41,524 Plan net assets, end of year 1 243 485 (A) Increase to life insurance policies is shown net, since it is impracticable to determine the amounts separately. -45- &COMPANY Fishers Island Fire District NOTES TO ANNUAL FINANCIAL REPORT UPDATE DOCUMENT 4. Length of Service Awards Program (LOSAP) (continued): Contributions: Range of Sponsor's contribution recommended by actuary $106,788 to $138,395 Amount of Sponsor's actual contribution(A) $ 80,799 ' (A) Actual contributions include insurance premiums paid in the amount of $42,299, which is included in the increase in cash value of life policies reported above. Administration fees: , y Fees paid to designated program administrator from separate District funds $4,600 Funding methodology and actuarial assumptions: 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 5.0% for determining contribution 5.0% for determining present value of accrued benefits Mortality table used for: Pre-retirement: None Post-retirement: RP2000 Combined Table 5. Commitments and contingencies: The District is exposed to various risks of loss related to torts, theft of, damage to and j destruction of assets, injuries to employees, errors and omissions, 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. -46- & COMPANY Fishers Island Fire District NOTES TO ANNUAL FINANCIAL REPORT UPDATE DOCUMENT 6. Leases: The District entered into a radio repeater ground lease agreement that commenced on June 5, 2014. The lease is a five-year lease expiring on June 5, 2019. Rental payments are $3,500 in year one with an escalation of 3% per year thereafter. The lease agreement calls for a one-time payment of $18,582, which the District paid on January 22, 2015. This one-time payment will cover the life of the lease. The District reported the full amount paid as rental expense for the year ended December 31, 2015. The District has the right to extend the term of the lease for two successive, five-year terms, but not beyond June 5, 2029. The annual basic rent during each renewal term shall continue, including escalation, as though the basic rents set forth from the original term of this lease continue to escalate at a compounded annual rate of 3%. 7. Economic dependency: " For the year ended December 31, 2017, approximately 100% of the District's gross revenues was derived from real property taxes provided by the Town of Southold. C F i -47- COMPANY 437 Madison Avenue,23rd Floor New York,NY 10022 -212.962 4470 gm- 165 Orinoco Drive,Brightwaters,NY 11718 631 665 7040 -Fax- 631 665 7014 : 1O PtNY 15 South Bayles Avenue,Port Washington, NY 11050 516.883.5510 -Fax. 516 767.7438 A PROFESSIONAL CORPORATION OF CERTIFIED PUBLIC ACCOUNTANTS www sheehancpa coin INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF ANNUAL FINANCIAL REPORT UPDATE DOCUMENT PERFORMED IN ACCORDANCE WITH GOVERNMENTAUDITING STANDARDS To the Board of Fire Commissioners Fishers Island Fire District We have audited, in accordance with the 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 Annual Financial Report Update Document of Fishers Island Fire District (the District), as of and for the year ended December 31, 2017 and the related notes to the Annual Financial Report Update Document and have issued our report thereon dated May 2, 2018. Internal Control Over Financial Reporting In planning and performing our audit of the Annual Financial Report Update Document, we considered the 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 opinion on the Annual Financial Report Update Document 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. 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 entity'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. -48- An Independent Member of the 13130 Alliance USA r--I I To the Board of Fire Commissioners Fishers Island Fire District Compliance and Other Matters As part of obtaining reasonable assurance about whether the District's Annual Financial Report Update Document is free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, non-compliance with which could have a direct and material effect on the determination of Annual Financial Report Update Document 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 non-compliance or other matters that are required to be reported under Government Auditing 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. CPA Q.C Brightwaters,New York May 2, 2018 i �i -49- '_.I COMPANY Fishers Island Fire District COMMUNICATION WITH THOSE CHARGED WITH GOVERNANCE December 31,2017 l si &COMPANY 437 Madison Avenue,23rd Floor New York,NY 10022 -212 962 4470 I 165 Orinoco Drive,Brightwaters, NY 11718 631 665 7040 - Fax- 631 665 7014 &CO�/n�n 15 South Bayles Avenue, Port Washington, NY 11050 1V1rt11�1 1 516 883 5510 - Fax 516 767 7438 A PROFESSIONAL CORPORATION OF CERTIFIED PUBLIC ACCOUNTANT S www sheehancpa coin r ' May 2, 2018 To the Board of Fire Commissioners Fishers Island Fire District We have audited the Annual Financial Report Update Document (AUD) of Fishers Island Fire 4 District (the District) for the year ended December 31, 2017. Professional standards require that we provide you with information about our responsibilities under generally accepted auditing standards and Government Auditing Standards, as well as certain information related to the planned scope and timing of our audit. We have communicated such information in our engagement letter to you dated February 2, 2018. Professional standards also require that we communicate to you the following information related to our audit. Significant Audit Findings 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 AUD. No new accounting policies were adopted and the application of existing policies were not changed -- during 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 1 recognized in the financial statements in the proper period. Accounting estimates are an integral part of the AUD 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 AUD and because of the possibility that future events affecting them may differ significantly from those expected. The most sensitive estimate affecting the District's AUD was: The District's estimate of the Length of Service Award Program (LOSAP) is based on an actuarial valuation. We evaluated the key factors and assumptions used to develop the LOSAP estimate in determining that it is reasonable in relation to the AUD taken as a whole. - The AUD disclosures are neutral, consistent and clear. i � I t An Independent Member of the 13130 Alliance USA To the Board of Fire Commissioners Fishers Island Fire District May 2, 2018 Page 2 Difficulties Encountered in Performing the Audit We encountered no significant difficulties in dealing with management in performing and completing our audit. Corrected and Uncorrected 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 i of management. No such misstatements were noted. Disagreements with Management For purposes of this letter, a disagreement with management is a financial accounting, reporting or auditing matter, whether or not resolved to our satisfaction that could be significant to the AUD or the auditor's report. We are pleased to report that no such disagreements arose during the course of our audit. Management Representations We have requested certain representations from management that are included in the management representation letter dated May 2, 2018. Management Consultations with Other Independent Accountants � I - In some cases, management may decide to consult with other accountants concerning auditing and accounting matters, similar to obtaining a "second opinion" on certain situations. If a consultation involves application of an accounting principle to the governmental unit's AUD or a determination of the type of auditor's opinion that may be expressed on that AUD, 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 Findings 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 governmental unit's auditors. However, these discussions occurred in the normal course of our professional - relationship and our responses were not a condition to our retention. 6FCOMPANY To the Board of Fire Commissioners Fishers Island Fire District - May 2, 2018 Page 3 OTHER MATTERS We wish to express our appreciation for the courtesies extended to our staff during the audit and we would be pleased to discuss our comments and recommendations with the Board of Fire Commissioners. Internal Controls During the audit, we noted that some of the District's property tax checks were not deposited into �r the District's account in a timely matter. While we note that it does take some time for the District to receive these checks and time for them to be sent to the bank, we recommend that the District ensures that the mail is checked frequently and that the property tax receipts are deposited timely. Based on the time that it does take for items to get to the District, the District may want to discuss with the Town, having their property tax checks directly deposited into the r- District's account. Len2th of Service Award Prostram During the audit, Sheehan & Company, C.P.A., P.C. was provided with BPAS annual valuation report as of January 1, 2018. The information contained in this report is based on information for the program year ending on December 31, 2017, which is the most recent program year for which complete information is available. Based on our review of the aforementioned report, it was noted that the Plan's actuarial accrued liability at December 31, 2017 was $1,872,165. The Plan's assets at January 1, 2018 were $1,243,485. Accordingly, the Plan's funded ratio at January 1, 2018 was only 66.4%. The Plan has an unfunded liability of$628,680. It was further noted that the District contributed $80,799 to the Plan, which is less than the $106,788 minimum required contribution calculated by BPAS. We recommend the District make contributions to the Plan equal to or greater than the minimum required contribution calculated by BPAS. We further recommend the District meet with BPAS and establish a plan to reduce the Plan's unfunded liability and reach a target funded ratio of at least 80%. I Restriction on Use This information is intended solely for the use of the Fishers Island Fire District's Board of Fire Commissioners and management and the Office of the State Comptroller and is not intended to i- be and should not be used by anyone other than these specified parties. Brightwaters,New York May 2, 2018 COMPANY