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Home My WebLink About2012 Town AuditTOWN OF GROTON Groton, New York FINANCIAL REPORT December 31, 2012 C RECEIVED - FILED OFFICE OF THE TOWN CLERK 101 CONGER BLVD., GROTON, NY DATE e6?v l 3 TIME - VSp.._._ AM -&) TOWN CLFR;� ' TOWN OF GROTON TABLE OF CONTENTS FOR THE YEAR ENDED DECEMBER 31, 2012 IndependentAuditor's Report ............................................................................................................................ 1-2 Financial Statements Balance Sheet - Regulatory Basis - Governmental Funds........................................................................ 3-3a Statement of Revenues, Expenditures, and Changes in Fund Balances - Regulatory Basis - Governmental Funds..................................................................... Budgetary Comparison Schedule - Regulatory Basis - General Townwide Fund .................................... 4-4a 5 Budgetary Comparison Schedule - Regulatory Basis - General Fund Parttown...................................... 6 Budgetary Comparison Schedule - Regulatory Basis - Special Revenue Fund - HighwayTownwide Fund................................................................................................... Budgetary Comparison Schedule - Regulatory Basis - Special Revenue Fund - 7 HighwayFund Parttown............................................................................................................................ 8 Budgetary Comparison Schedule - Regulatory Basis - Special Revenue Fund - LightingDistrict Fund................................................................................................................................. 9 Budgetary Comparison Schedule - Regulatory Basis - Special Revenue Fund - Fire Protection District Fund..................................................................................................................... 10 Statement of Fiduciary Net Assets - Regulatory Basis - Fiduciary Funds ................................................ Schedule of Noncurrent Assets and Liabilities........................................................................................... 11 12 Notes to Financial Statements.............................................................................................................. 13-22 1 1 1 1 1 1 John H. Dietershagen, C.P.A. Jerry E. Mickelson, C.P.A. Thomas K. Van Derzee, C.P.A. Debbie Conley Jordan, C.P.A. Patrick S. Jordan, C.P.A. Duane R. Shoen, C.P.A. Lesley L. Horner, C.P.A. D. Leslie Spurgin, C.P.A. Frederick J. Ciaschi, C.P.A. To the Town Board Town of Groton Groton, New York Ciaschi • Dietershagen . Little . Mickelson & Company, LLP Certified Public Accountants and Consultants INDEPENDENT AUDITOR'S REPORT We have audited the accompanying financial statements of the Town of Groton, State of New York (the Town), which comprise the Town's basic financial statements as listed in the table of contents as of and for the year ended December 31, 2012, and the related notes to the financial statements. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with the financial reporting provisions of the Office of the State of New York Comptroller as applied to governmental units. 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 error or fraud. Auditor's Responsibilit)f Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free 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 opinion. CORTLAND 39 Church Street Cortland, New York 13045 607-753-7439 fax 607-753-7874 -1- ITHACA 401 East State Street — Suite 500 Ithaca, New York 14850 607-272-4444 fax 607-273-8372 www.cdlm.com WATKINS GLEN 108 West Fourth Street Watkins Glen, New York 14891 607-535-4443 fax 607-535-6220 Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Town of Groton, State of New York, as of December 31, 2012, and the changes in financial position and budgetary results for the year then ended, in accordance with the financial reporting provisions of the Office of Comptroller of the State of New York as applied to governmental units, as described in Note 1. Basis of Accounting We draw attention to Note 1 of the financial statements, which describes the basis of accounting. The financial statements are prepared on the basis of the financial reporting provisions of the Office of Comptroller of the State of New York as applied to governmental units, which is a basis of accounting other than accounting principles generally accepted in the United States of America, to comply with the requirements of the Office of Comptroller of the State of New York. Our opinion is not modified with respect to that matter. Restriction on Use This report is intended solely for the information and use of the Town Board and management of the Town of Groton, State of New York, and the Office of the State Comptroller of the State of New York and is not intended to be and should not be used by anyone other than these specified parties. 9 6� t " 1 L411 7 t September 5, 2013 Ithaca, New York -2- TOWN OF GROTON BALANCE SHEET - REGULATORY BASIS GOVERNMENTAL FUNDS DECEMBER 31, 2012 ASSETS Assets: Cash and cash equivalents - Unrestricted Restricted cash and cash equivalents Investments - Unrestricted Investments - Restricted Loans receivable, net of allowance Total Assets LIABILITIES AND FUND BALANCES Liabilities: Accounts payable Accrued liabilities Deferred revenues Total Liabilities Fund Balances: Restricted Assigned Unassigned Total Fund Balances Total Liabilities and Fund Balances General $ General Townwide Parttown Fund Fund $ 5061533 $ 91,559 101224 91,559 60, 000 5761757 $ 91,559 $ 13,567 $ 214 11085 234 14,652 448 10,224 1821526 40,000 3691355 51,111 5621105 91,111 $ 576757 $ 91,559 See Independent Auditor's Report and Notes to Financial Statements -3- Special Total Special Revenue Funds Highway Highway Lighting Fire Protection Townwide Parttown District District Fund Fund Fund Fund $ 573,297 $ 137,144 $ 48,492 $ $ 50,000 280,402 $ 9031699 $ 1371144 $ 487492 $ -0- $ $ 35,040 $ $ 367 $ $ 17,047 52,087 -0- 367 -0- Special Total Grant Governmental Fund Funds 831786 $ 1,440, 811 101224 110,000 280,402 21478 23478 861264 $ 1, 843, 915 $ 49,188 18,366 21478 2,478 27478 70,032 280,402 831786 3747412 5711210 1377144 481125 979,005 420,466 851,612 137,144 487125 -0- 837786 17773,883 $ 903,699 $ 137,144 $ 48,492 $ -0- $ 861264 $ 17843,915 -3a- TOWN OF GROTON STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES REGULATORY BASIS - GOVERNMENTAL FUNDS FOR THE YEAR ENDED DECEMBER 31, 2012 See Independent Auditor's Report and Notes to Financial Statements -4- General General Townwide Parttown Fund Fund REVENUES Real property taxes $ 3931528 $ 138,062 Real property tax items 7,375 Nonproperty tax items 72,569 Departmental income 2,214 2,231 Intergovernmental charges 500 Use of money and property 2,595 329 Licenses and permits 161332 8,600 Fines and forfeitures 191320 Sale of property and compensation for loss 721 Miscellaneous local sources 228 4,720 State sources 61,016 Total Revenues 5031829 226,511 EXPENDITURES Current: General governmental support 3211496 175 Public safety 451204 Public health 101,000 Transportation 641047 Economic assistance and opportunity 131200 Culture and recreation 41852 48,084 Home and community services 986 48,007 Employee benefits 1031842 14,163 Total Expenditures 553,627 211,429 Excess of (Expenditures) Revenues (49,798) 15,082 OTHER FINANCING SOURCES (USES1 Total Other Financing (Uses) Sources -0- -0- Net Changes in Fund Balances (49,798) 15,082 Fund Balances, Beginning of Year 611,903 76,029 Fund Balances, End of Year $ 5621105 $ 91,111 See Independent Auditor's Report and Notes to Financial Statements -4- Special Revenue Funds Highway Highway Lighting Fire Protection Special Townwide Parttown District District Grant Fund Fund Fund Fund Fund $ 580,750 $ 2477425 $ 67000 $ 194,059 $ 487125 $ 128,988 361 218,604 4 066 824 196 74 3,388 234 134,075 807,042 5111312 61196 685,380 4531986 4,015 104,093 43,419 7893473 4971405 47015 17,569 13,907 21181 -0- -0- -0- 0-17,569 171569 133907 21181 834,043 123,237 457944 $ 851,612 $ 1377144 $ 487125 $ -4a - 1943059 435 Total Governmental Funds $ 13559,824 7,375 201,557 4,806 219,104 81084 24,932 19,320 4,109 5,182 195,091 21249,384 321,671 194,059 239,263 101,000 1,207,428 13,200 52,936 48,993 265,517 1947059 -0- 21250,008 -0- 435 (624) -0- -0- -0- -0- 435 (624) -0- 831351 11774,507 -0- $ 831786 $ 117731883 TOWN OF GROTON BUDETARY COMPARISON SCHEDULE - REGULATORY BASIS GENERAL TOWNWIDE FUND FOR THE YEAR ENDED DECEMBER 31, 2012 EXPENDITURES Original Final 49,740 General governmental support Budget Budget Actual REVENUES 200 Transportation 69,266 Real property taxes $ 393,954 $ 393,954 $ 393,528 $ Real property tax items 4,800 4,800 7,375 Departmental income 2,350 2,350 2,214 Intergovernmental charges 1,500 1,500 500 Use of money and property 5,100 5,100 2,595 Licenses and permits 14,000 14,000 16,332 Fines and forfeitures 20,600 20,000 19,320 Sale of property and compensation for loss 721 Miscellaneous local sources 228 State sources 55,000 55,000 61,016 Total Revenues 497,304 496,704 503,829 EXPENDITURES 321,496 Current: 49,740 General governmental support 393,973 Public safety 50,040 Public health 200 Transportation 69,266 Economic assistance and opportunity 13,450 Culture and recreation 7,850 Home and community services 4,000 Employee benefits 118,525 Total Expenditures 657,304 Excess of (Expenditures) (160,000) OTHER FINANCING SOURCES (USES) 553,627 Total Other Financing Sources (Uses) -0- Excess of (Expenditures) and Other Financing (Uses) (2,526) 107,676 Over Revenues and Other Financing Sources (160,000) Appropriated Fund Balance 160,000 Net Change in Fund Balance $ -0- $ Fund Balance, Beginning of Year Fund Balance, End of Year Fay. (Unfay.) Encumbrances Variance $ (426) 2,575 (136) (1,000) (2,505) 2,332 (680) 721 228 6,016 -0- 7,125 390,936 321,496 2,526 66,914 49,740 45,204 4,536 -0- 69,266 64,047 5,219 13,450 13,200 250 7,850 4,852 2,998 4,000 986 3,014 121,462 103,842 17,620 656,704 553,627 2,526 100,551 (160, 000) (49, 798) (2,526) 107,676 -0- -0- -0- (160,000) (49,798)$ (2,526)$ 107,676 160,000 -0- 611,903 $ 562,105 See Independent Auditor's Report and Notes to Financial Statements -5- 1 1 1 1 1 1 1 1 1 1 1 1 TOWN OF GROTON BUDGETARY COMPARISON SCHEDULE - REGULATORY BASIS GENERAL FUND PARTTOWN FOR THE YEAR ENDED DECEMBER 31, 2012 REVENUES Real property taxes Nonproperty tax items Departmental income Use of money and property Licenses and permits Miscellaneous local sources Total Revenues EXPENDITURES Current: General governmental support Public health Economic assistance and opportunity Culture and recreation Home and community services Employee benefits Total Expenditures Excess of (Expenditures) Revenues OTHER FINANCING SOURCES (USES1 Total Other Financing Sources (Uses) Excess of (Expenditures) and Other Financing (Uses) Over Revenues and Other Financing Sources Appropriated Fund Balances Net Change in Fund Balance $ Fund Balance, Beginning of Year Fund Balance, End of Year Original Final 175 Fay. (Unfay.) Budget Budget Actual Variance 138,062 $ 138,062 $ 138,062 $ -0- 47,000 47,000 72,569 25,569 1,300 1,300 2,231 931 800 800 329 (471) 5,050 5,050 8,600 3,550 (40, 000) 41700 4,720 20 1921212 196,912 226,511 29,599 4,175 3,682 175 3,507 101,000 1011000 101,000 -0- 250 250 250 571300 62,143 48,084 14,059 55,314 55,664 48,007 7,657 14,173 141173 14,163 10 232,212 236,912 211,429 25,483 (40, 000) (40, 000) 15,082 55,082 -0- -0- -0- -0- (40,000) (40, 000) 15,082 $ 55,082 40,000 40,000 -0- $ -0- 76,029 $ 91,111 See Independent Auditor's Report and Notes to Financial Statements -6- TOWN OF GROTON BUGETARY COMPARSION SCHEDULE - REGULATORY BASIS SPECIAL REVENUE FUND HIGHWAY TOWNWIDE FUND FOR THE YEAR ENDED DECEMBER 31, 2012 REVENUES Real property taxes Intergovernmental charges Use of money and property Sale of property and compensation for loss Miscellaneous local sources Total Revenues Original Final Budget Bud Actual $ 580,750 $ 580,750 $ 580,750 $ 218,604 2187604 218,604 71500 77500 41066 Employee benefits 116,750 3,388 104,093 12,657 234 806,854 8067854 807,042 Fay. (Unfay.) Variance -0- -0- (3,434) 3,388 234 188 EXPENDITURES Current: Transportation 780,104 869,389 685,380 184,009 Employee benefits 116,750 116,750 104,093 12,657 Total Expenditures 896,854 986,139 789,473 196,666 Excess of (Expenditures) Revenues (90,000) (179,285) 17,569 196,854 OTHER FINANCING SOURCES (USES1 Total Other Financing (Uses) Sources -0- -0- -0- -0- Excess of (Expenditures) and Other Financing (Uses) Over Revenues and Other Financing Sources (90,000) (179,285) 17,569 $ 196,854 Appropriated Fund Balances 145,000 1451000 Appropriated Reserves (55,000) 34,285 Net Change in Fund Balance $ -0- $ -0- Fund Balance, Beginning of Year 834,043 Fund Balance, End of Year $ 851,612 See Independent Auditor's Report and Notes to Financial Statements -7- 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 TOWN OF GROTON BUDGETARY COMPARISON SCHEDULE - REGULATORY BASIS SPECIAL REVENUE FUND HIGHWAY FUND PARTTOWN FOR THE YEAR ENDED DECEMBER 31, 2012 REVENUES Real property taxes Nonproperty tax items Use of money and property State sources Total Revenues EXPENDITURES Current: Transportation Employee benefits Total Expenditures Excess of (Expenditures) Revenues OTHER FINANCING SOURCES (USESI Total Other Financing (Uses) Sources Excess of (Expenditures) and Other Financing (Uses) Over Revenues and Other Financing Sources Appropriated Fund Balances Net Change in Fund Balance Fund Balance, Beginning of Year Fund Balance, End of Year Original Final Fay. (Unfay.) Budget Budget Actual Variance $ 2471425 $ 2471425 $ 2471425 $ -0- 881000 881000 128,988 40,988 11700 11700 824 (876) 1301231 1301231 1347075 31844 467,356 4671356 5117312 43,956 456,731 4561731 453,986 2,745 43,625 43,625 431419 206 500,356 5007356 4971405 2,951 (33, 000) (33, 000) 13,907 461907 -0- -0- -0- -0- (33,000) (33,000) 131907 $ 461907 33,000 331000 $ -0- $ -0- 123,237 $ 137,144 See Independent Auditor's Report and Notes to Financial Statements -8- 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 TOWN OF GROTON BUDGETARY COMPARISON SCHEDULE - REGULATORY BASIS SPECIAL REVENUE FUND LIGHTING DISTRICT FUND FOR THE YEAR ENDED DECEMBER 31, 2012 REVENUES Real property taxes Use of money and property Total Revenues EXPENDITURES Current: Transportation Total Expenditures Excess of Revenues OTHER FINANCING SOURCES (USES) Total Other Financing Sources (Uses) Excess of Revenues and Other Financing Sources Over (Expenditures) and Other Financing (Uses) Net Change in Fund Balance Fund Balance, Beginning of Year Fund Balance, End of Year Original Final Bud Bud Budget Actual $ 61000 $ 6, 000 $ 6,000 $ 196 61000 6,000 6,196 Fay. (Unfay.) Variance -0- 196 196 61000 61000 4,015 11985 6,000 6,000 4,015 1,985 -0- -0- 2,181 2,181 -0- -0- -0- -0- -0- -0- 2,181 $ 2,181 $ -0- $ -0- 21181 45,944 $ 48,125 See Independent Auditor's Report and Notes to Financial Statements -9- 1 1 1 1 1 1 1 1 1 1 1 TOWN OF GROTON BUDGETARY COMPARISON SCHEDULE - REGULATORY BASIS SPECIAL REVENUE FUND FIRE PROTECTION DISTRICT FUND FOR THE YEAR ENDED DECEMBER 31, 2012 REVENUES Real property taxes Total Revenues EXPENDITURES Current: Public Safety Total Expenditures Excess of Revenues OTHER FINANCING SOURCES (USE01 Total Other Financing Sources (Uses) Excess of Revenues and Other Financing Sources Over (Expenditures) and Net Change in Fund Balance Fund Balance, Beginning of Year Fund Balance, End of Year Original Final Fay. (Unfay.) Bud Bud Actual Variance $ 194, 059 $ 1941059 $ 194,059 $ -0- 1941059 194,059 194,059 -0- 194,059 1941059 1941059 -0- 194,059 1941059 194, 059 -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- -0- $ -0- -0- $ -0- -0- -0- -0- See Independent Auditor's Report and Notes to Financial Statements -10- 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 f Total Assets Total Liabilities TOWN OF GROTON STATEMENT OF FIDUCIARY NET ASSETS - REGULATORY BASIS FIDUCIARY FUNDS DECEMBER 31, 2012 ASSETS LIABILITIES See Independent Auditor's Report and Notes to Financial Statements -11- Agency Funds $ -0- -0- 1 1 1 1 1 1 1 1 1 1 1 1 TOWN OF GROTON SCHEDULE OF NONCURRENT ASSETS AND LIABLITIES DECEMBER 31, 2012 NONCURRENT GOVERNMENT ASSETS Land Buildings Machinery and equipment Total Noncurrent Government Assets NONCURRENT GOVERNMENT LIABILITIES Compensated absence Total Noncurrent Government Liabilities See Independent Auditor's Report and Notes to Financial Statements -12- $ 5631000 7301059 2,163, 014 $ 3,456, 073 $ 97,287 $ 97,287 TOWN OF GROTON NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2012 Note 1 - Summary of Siqnificant Accountinq Policies The financial statements of the Town of Groton (the Town) have been prepared in conformity with the requirements of the Office of the New York State Comptroller as applied to governmental units. The basis of accounting differs from generally accepted accounting principles primarily because the Town has not adopted Governmental Accounting Standards Board (GASB) Statement No. 34, "Basic Financial Statements and Management's Discussion and Analysis for State and Local Governments" or GASB Statement No. 45, "Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions." The Governmental Accounting Standards Board is the accepted standard setting body for establishing governmental accounting and financial reporting principles. The amount of these departures has not been determined. The Town's more significant accounting policies are described below. A. Financial Reportinq Entitv The Town, which is located in the County of Tompkins (the County) in the State of New York (the State), was established in 1817. The Town is governed by Town Law, general municipal laws of the State and various local laws. The Town Board is the legislative body responsible for overall operations. The Town Supervisor serves as Chief Executive Officer and Chief Fiscal Officer. The following basic services are provided: fire protection, highway and street maintenance, recreation, public improvements, planning and zoning and general administration. All governmental activities and functions performed for the Town are its direct responsibility. No other governmental organizations have been included or excluded from the reporting entity. The financial reporting entity consists of the following, as defined by Governmental Accounting Standards Board (GASB) Statement No. 14, "The Financial Reporting Entity," as amended by GASB Statement No. 39, "Determining Whether Certain Organizations are Component Units." 1. The primary government, which is the Town, 2. Organizations for which the primary government is financially accountable, and, 3. Other organizations for which the nature and significance of their relationship with the primary government are such that exclusion would cause the reporting entity's financial statements to be misleading or incomplete. The decision to include a potential component unit in the reporting entity is based on the criteria set forth in GASB Statement No. 14, as amended by GASB Statement No. 39, including legal standing, fiscal dependency, and financial accountability. Based on the application of these criteria, there were no component units to include in the Town reporting entity. B. Fund Accountinq The Town uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial 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. -13- 1 TOWN OF GROTON NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2012 The Town records its transactions in the fund types described below: 1. Fund Cateqories a. Governmental Fund Types The Governmental Fund types 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 Fund types. The measurement focus of the Governmental Fund types is based upon determination of financial position and changes in financial position. The following are the Town's Governmental Fund types: i. General Funds The General Funds (Parttown and Town - Outside Village) are the principal operating funds and include all operations not required to be recorded in other funds. Some functions are required to be financed by taxpayers outside the village, therefore, a town with a village must keep two General Funds. ii. Special Revenue Funds Special Revenue Funds are used to account for the proceeds of specific revenue sources legally restricted to expenditure for specified purposes. The following Special Revenue Funds are utilized: a) Highwav Funds The Highway Funds (Parttown and Town - Outside Village) were established pursuant to Highway Law, Section 141, and are used to account for revenues and expenditures for highway purposes. Highway Law, Section 277, requires expenditures for repairs and improvements outside the village be financed by the area outside the village. Therefore, a town with a village must maintain two Highway Funds. b) Special District Funds The Special District Funds (Lighting and Fire Protection District) have been established by the Town to record transactions for operations and maintenance of these activities. c) Special Grant Fund The Special Grant Fund has been established by the Town to account for Community Development Block Grants. b. Fiduciary Fund Tvpes Fiduciary Fund Types are used to account for assets held by the local government in a trustee or custodial capacity. The Town reports the following Fiduciary Fund- i. Trust and Aqencv Fund The Trust and Agency Fund is used to account for money and/or property received and held in the capacity of trustee, custodian or agent. -14- !l 1 r TOWN OF GROTON NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2012 c. Account Groups Account groups are used to establish accounting control and accountability for noncurrent governmental assets and noncurrent governmental liabilities. The two account groups are not "funds." They are concerned only with the measurement of financial position and not results of operations. I . Noncurrent Government Asset Group The noncurrent government asset group accounts for land, buildings, improvements other than buildings and equipment utilized for general governmental purposes. ii. Noncurrent Government Liability Group The noncurrent government liability group accounts for all noncurrent liabilities of the Town. C. Basis of Accountinq/Measurement Focus Basis of accounting refers to when revenues and expenditures and the related assets and liabilities are recognized in the accounts and reported in the financial statements. Basis of accounting relates to the timing of the measurements made, regardless of the measurement focus. Measurement focus is the determination of what is measured, i.e. expenditures or expenses. Modified Accrual Basis - All Governmental Funds are accounted for using the modified accrual basis of accounting. Under this basis of accounting, revenues are recorded when measurable and available. Available means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. Material revenues accrued include real property taxes, State and Federal aid, sales tax and certain user charges. If expenditures are the prime factor for determining eligibility, revenues from Federal and State grants are accrued when the expenditure is made. Expenditures are recorded when incurred. The cost of capital assets is recognized as an expenditure when the asset is received. Exceptions to this general rule are 1) pension costs, 2) expenditures for prepaid expenses and inventory -type items are recognized at the time of purchase, 3) principal and interest on indebtedness are not recognized as an expenditure until due, and 4) compensated absences, such as vacation and sick leave, which vests or accumulates are charged as an expenditure when paid. Account Groups - Noncurrent government assets are recorded at actual or estimated cost or, in the case of gifts or contributions, at fair market value at the time received. No provision for depreciation is made. Noncurrent government liabilities are recorded at par value of the principal amount. No liability is recorded for interest payable to maturity. D. Propertv Taxes Town real property taxes are levied annually on January 1, and become a lien on that date. Taxes are collected during the period of January 1 to March 31 by the Town. The County subsequently enforces uncollected real property taxes. The County pays uncollected real property taxes to the Town no later than May 31. -15- 1 1 1 1 TOWN OF GROTON NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2012 E. Budqets and Budqetary Accountinq 1. Budqet Policies a. No later than October 5, a tentative budget is submitted by the budget officer for the fiscal year commencing the following January 1. The tentative budget includes proposed expenditures and means of financing for all funds. b. After public hearings are conducted to obtain taxpayer comments, no later than November 20, the Town Board adopts the budget. c. All modifications of the budget must be approved by the Town Board. d. Appropriations lapse at year-end. 2. Encumbrances Encumbrance accounting, under which purchase orders, contracts and other commitments for the expenditure of monies are recorded for budgetary control purposes to reserve that portion of the applicable appropriations, is employed in the Governmental Funds. Encumbrances are reported as reservations of fund balances, as they do not constitute expenditures or liabilities. Expenditures for such commitments are recorded in the period in which the liability is incurred. 3. Budqetary Basis of Accountinq Budgets are adopted annually on a basis consistent with requirements of the State. Appropriations authorized for the current year are increased by the amount of encumbrances carried forward from the prior year. An annual legal budget is not adopted for the Special Grant Fund, which is one of the Special Revenue Funds. Budgetary controls for the Special Grant Fund are established in accordance with the applicable grant agreements, which cover a period other than the Town's fiscal year. F. Cash and Cash Equivalents For financial statement purposes, the Town considers all highly liquid investments with original maturities of three months or less as cash equivalents. G. Noncurrent Government Assets - General Fixed assets purchased for general governmental purposes are recorded as expenditures in the Governmental Funds and are capitalized at cost in the noncurrent government assets account group. Contributed fixed assets are recorded at fair market value at the date of contributions. Fixed assets consisting of certain infrastructure type improvements other than buildings; including roads, bridges, curbs and gutters, streets and sidewalks, drainage and lighting systems, have not been capitalized. Such assets normally are immovable and of value only to the Town. Therefore, the purposes of stewardship for capital expenditures can be satisfied without recording these assets. No depreciation has been provided on general fixed assets, nor has interest been capitalized on general fixed assets that are construction in progress. -16- 1 1 1 1 1 1 TOWN OF GROTON NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2012 H. Vacation, Sick Leave and Compensatory Absences Employees of the Town are granted vacation and sick leave in varying amounts. In the event of termination or upon retirement, an employee is not entitled to payment for accumulated vacation time. However, sick leave can be accrued up to 800 hours which is payable upon termination or retirement. The value of unused employee sick leave at year-end is recorded in noncurrent government liability account group. Payment of sick leave recorded in the noncurrent government liability account group is dependent upon many factors; therefore, timing of future payments is not readily determinable. However, management believes sufficient resources will be made available for the payments of sick leave when such payment becomes due. Further, the Town recognizes a liability for vesting sick leave and other compensated absences with similar characteristics and additional salary related payments as employees earn benefits to the extent it is probable that the Town will compensate the employees for the benefits through cash payments (which may be conditioned on the employees' termination or retirement), rather than being taken as absences due to illness or other contingencies. The liability for compensated absences is calculated at rates in effect as of the Balance Sheet date and is recorded in the Governmental Funds if funded from current financial resources and the noncurrent government liability account group for amounts to be paid from future financial resources. Fund Balance Classifications The Town reports its fund balances in accordance with Governmental Accounting Standards Board Statement No. 54, "Fund Balance Reporting and Governmental Fund Type Definitions," Statement No. 54 changes the terminology and classification of fund balance to reflect spending constraints on resources, rather than availability for appropriation. This approach is intended to provide users more consistent and understandable information about a fund's net resources. Constraints are broken into five classifications, nonspendable, restricted, committed, assigned, and unassigned. These classifications serve to inform readers of the financial statements of the extent to which the government is bound to honor any constraints on specific purposes for which resources in a fund can be spent. • Nonspendable Consists of assets inherently nonspendable in the current period either because of their form or because they must be maintained intact; including prepaid items, inventories, long- term portions of loans receivable, financial assets held for resale, and endowments principal. Restricted Consists of amounts subject to legal purpose restrictions imposed by creditors, grantors, contributors, or laws and regulations of other governments and enforced externally; or through constitutional provisions or enabling legislation. Most of the Town's legally adopted reserves are reported here. 17- 1 1 r_j it TOWN OF GROTON NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2012 • Committed Consists of amounts subject to a purpose constraint imposed by formal action of the government's highest level of decision-making authority, the Board of Education, prior to the end of the fiscal year, which requires the same level of formal action to remove said constraint. • Assigned Consists of amounts subject to a purpose constraint representing an intended use established by the government's highest level of decision-making authority, or their designated body or official. The purpose of the assignment must be narrower than the purpose of the General Fund. In funds other than the General Fund, assigned fund balance represents the residual amount of fund balance. • Unassigned Represents the residual classification of the government's General Fund, and could report a surplus or deficit. In funds other than the General Fund, the unassigned classification should only be used to report a deficit balance resulting from overspending amounts restricted, committed, or assigned for specific purposes. The Town has not adopted any resolutions to commit fund balance. Currently, fund balance is assigned by the Town Supervisor for encumbrances and designations. By resolution, the Town Board approves fund balance appropriations for next year's budget. The Town applies expenditures against non -spendable fund balance, restricted fund balance, committed fund balance, assigned fund balance, and then unassigned fund balance. J. Legally Adopted Reserves Fund balance reserves are created to satisfy legal restrictions, plan for future expenditures or relate to resources not available for general use or appropriation. The following reserve funds are available to the Town within the State of New York. These reserve funds are established through Board action or voter approval and a separate identity must be maintained for each reserve. Earnings on the invested resources become part of the respective reserve funds; however, separate bank accounts are not necessary for each reserve fund. These reserves are reported in the fund financial statements as Restricted Fund Balance. Reserves currently in use by the Town include the following: • Unemployment Insurance Reserve This Reserve Fund is used to pay the cost of reimbursement to the State Unemployment Insurance Fund for payments made to claimants where the employer has elected to use the benefit reimbursement method. The reserve may be established by board action and is funded by budgetary appropriations and such other funds as may be legally appropriated. Within sixty days after the end of any fiscal year, excess amounts may either be transferred to another reserve or the excess applied to the appropriations of the next succeeding fiscal year's budget. If the employer elects to convert tax (contribution) basis, excess of fund over sum sufficient to pay pending claims may be transferred to any other Reserve Fund. This reserve is accounted for in the General Fund. -18- TOWN OF GROTON NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2012 • Capital Reserve Capital Reserve is used to accumulate funds to finance all or a portion of future capital projects for which bonds may be issued. This reserve is accounted for in the Highway Townwide Fund. Note 2 - Detail Notes on All Funds A. Assets 1. Cash and Investments The Town's investment policies are governed by State statutes. In addition, the Town has its own written investment policy. Town monies must be deposited in FDIC -insured commercial banks or trust companies located within the State. The Supervisor is authorized to use demand accounts and certificates of deposit for operating purposes. Permissible investments include obligations of the U.S. Treasury and U.S. Agencies, repurchase agreements and obligations of the State or its localities. Collateral is required for demand and time deposits, and certificates of deposit not covered by FDIC. Obligations that may be pledged as collateral are obligations of the United States and its agencies, as well as obligations of the State, its municipalities and school districts. The written investment policy requires repurchase agreements to be purchased from banks located within the State. Underlying securities must be obligations of the Federal government and must have a market value of at least 105% of the cost of the repurchase agreement. Custodial credit risk is the risk that in the event of a bank failure, the Town's deposits may not be returned to it. While the Town does not have a specific policy for custodial credit risk, the State statutes govern the Town's investment policies, as discussed previously in these notes. Governmental Accounting Standards Board Statement No. 40 directs that deposits be disclosed as exposed to custodial credit risk if they are not covered by depository insurance, and the deposits are either uncollateral ized or collateralized with securities held by the pledging financial institution's trust department or agent, but not in the Town's name. The Town's aggregate bank balances of $1,850,903, including certificates of deposit, are either insured or collateralized with securities held by the pledging financial institution in the Town's name. The Town chooses to disclose investments by specifically identifying each. The Town's investment policy for these investments is also governed by State statutes, in addition to the Town's written policy. Investments are stated at fair value and are categorized as either: a. Insured or registered, or investments held by the Town or by the Town's agent in the Town's name, or b. Uninsured and unregistered, with investments held by the financial institution's trust department in the Town's name, or c. Uninsured and unregistered, with investments held by the financial institution or its trust department, but not in the Town's name. -19- i r I TOWN OF GROTON NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2012 At December 31, 2012 the Town had the following investments: Carrying Amount Type of Cost Fair Value Investment Category General - Townwide and Certificate of Deposit Highway - Townwide Funds $ 110,000 $ 110,000 (6 month) (1) Certificate of Deposit Highway - Townwide Fund $ 280,402 $ 2801402 (6 month) (1) The Town does not typically purchase investments for a long enough duration to cause it to believe it is exposed to any material interest rate risk. The Town does not typically purchase investments denominated in a foreign currency and is not exposed to foreign currency risk. 2. Loans Receivable Loans receivable at December 31, 2012 consisted of the following, which are stated at net realizable value: Description Amount Special Grant Fund Rehabilitation loans $ 21478 Special Grant Fund Allowance for uncollectible loans -0- Total Rehabilitation loans $ 2,478 The balance of loans receivable represents a loan in the amounts of $2,825. The loan was made in 2007; principal payments totaling $347 were made during 2012. 3. Noncurrent Government Assets (Fixed Assets) The changes in fixed assets for the fiscal year ended December 31, 2012 are as follows: Balance Balance Beginning End of of Year Additions Deletions Year Land $ 5631000 $ $ $ 563,000 Buildings 730,059 730,059 Machinery and equipment 21153,087 121,384 1111457 21163,014 Total $ 374467146 $ 1217384 $ 111,457 $ 3,456, 073 B. Liabilities Accounts payable consists of amounts owed by the Town for various goods and services. Accrued liabilities represent payroll expense accrued at year-end. Deferred revenues represent loans receivable in the Special Grant Fund. -20- 1 2. Fundinq Policv The System is noncontributory except for employees who joined the New York State and Local Employees' Retirement System after July 27, 1976 who contribute 3% of their salary. Under the authority of the New York State Retirement and Social Security Law, the Comptroller shall certify annually the rates expressed as proportions or payroll or members which shall be used in computing the contributions required to be made by the employer to the pension accumulation fund. The Town is required to contribute at an actuarially determined rate. The Town's contributions made to the System were equal to 100% of the contributions required for each year. The required contributions for the current year and two preceding years were: ERS 2012 $ 931473 2011 631048 2010 39,817 D. Other Postemplovment Benefits The Town provides postretirement healthcare benefits to all employees who retire upon or after attaining at least 20 years of full time service and who are enrolled in the Plan at the time of retirement. Currently, there are four retirees who meet those eligibility requirements. The Town pays 25% of the total premium of the Town for medical insurance for retirees until age 65. If retirees attain insurance through a plan not established by the Town, the Town will pay up to $110 per month to each retiree to apply toward retirees' premium cost. Post -employment benefit expenses are recognized as costs are incurred. During the fiscal year, expenses of $5,280 were recognized for post employment health care. -21- TOWN OF GROTON NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2012 C. Pension Plans 1. Plan Description The Town 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 offers a wide range of plans and benefits, which are related to years of service and final average salary, vesting of retirement benefits, death and disability. Obligations of employers and employees to contribute and benefits to employees are governed by the New York State Retirement and Social Security Law (NYSRSSL). As set forth in the NYSRSSL, the Comptroller of the State of New York (Comptroller) serves as sole trustee and administrative head of the System. The Comptroller shall adopt and may amend rules and regulations for the administration and transaction of the business of the System and for the custody and control of its funds. The System issues a publicly available financial report that includes financial statements and required supplementary information. That report may be obtained by writing to the New York State and Local Retirement Systems, 110 State Street, Albany, NY 12244. 1 2. Fundinq Policv The System is noncontributory except for employees who joined the New York State and Local Employees' Retirement System after July 27, 1976 who contribute 3% of their salary. Under the authority of the New York State Retirement and Social Security Law, the Comptroller shall certify annually the rates expressed as proportions or payroll or members which shall be used in computing the contributions required to be made by the employer to the pension accumulation fund. The Town is required to contribute at an actuarially determined rate. The Town's contributions made to the System were equal to 100% of the contributions required for each year. The required contributions for the current year and two preceding years were: ERS 2012 $ 931473 2011 631048 2010 39,817 D. Other Postemplovment Benefits The Town provides postretirement healthcare benefits to all employees who retire upon or after attaining at least 20 years of full time service and who are enrolled in the Plan at the time of retirement. Currently, there are four retirees who meet those eligibility requirements. The Town pays 25% of the total premium of the Town for medical insurance for retirees until age 65. If retirees attain insurance through a plan not established by the Town, the Town will pay up to $110 per month to each retiree to apply toward retirees' premium cost. Post -employment benefit expenses are recognized as costs are incurred. During the fiscal year, expenses of $5,280 were recognized for post employment health care. -21- 1 1 i TOWN OF GROTON NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2012 E. Noncurrent Government Liabilities The Town has compensated absences outstanding as of December 31, 2012 in the amount of $97,287. Compensated absences represent the value earned and unused portion of accumulated sick leave. F. Fund Balance Detail At December 31, 2012, restricted and assigned fund balance was as follows: Restricted Assigned Unemployment Appropriated Insurance Capital Fund for Next Fund Total Reserve Reserve Balance Year's BudgetBalance Assigned Funds: General Townwide $ 101224 $ $ $ 180, 000 $ 2, 526 $ 1821526 General Parttown 40,000 40,000 Highway Townwide 280,402 162,000 4097210 5711210 Highway Parttown 38,000 991144 1371144 Lighting District 481125 481125 Fire Protection District -0- Special Grant 83,786 -0- Totals $ 101224 $ 280,402 $ 83,786 $ 4201000 $ 559,005 $ 9797005 G. Restricted Fund Balances Portions of fund balance are reserved and are not available for current expenditures as reported in the Balance Sheet. The restricted balances and activity for the year ended December 31, 2012 are as follows: Beginning Interest Released/ Ending Reserved Fund Balance Balance Additions Earned Appropriated Balance Unemployment Insurance Reserve $ 10,192 $ $ 32 $ $ 101224 Capital reserve 313,291 551000 17396 891285 280,402 Total Reserved Fund Balance $ 3231483 $ 551000 $ 11428 $ 89,285 $ 290,626 Note 3 - Commitments and Continqencies A. Risk Financinq and Related Insurance 1. General Information The Town is exposed to various risks of loss related to, but not limited to, torts; theft of, damage to, and destruction of assets; injuries to employees; errors and omissions; natural disasters. 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. -22-