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Home My WebLink About2011 Town AuditITOWN OF GROTON Groton, New York FINANCIAL REPORT ' December 31, 2011 ' RECEIVED -FILED OFFICE OF THE TOWN CLERK ' 101 CONGER BLVD., GROT4N, NY DATE �� t";? 0/ ;X.- ' TIMF �° AM4) ��` WN CLERK TOWN OF GROTON TABLE OF CONTENTS FOR THE YEAR ENDED DECEMBER 31, 2011 IndependentAuditor's Report ............................................................................................................................ 1 Financial Statements Balance Sheet - Regulatory Basis - Governmental Funds........................................................................ 2-2a Statement of Revenues, Expenditures, and Changes in Fund Balances - Regulatory Basis - Governmental Funds..................................................................... 3-3a Budgetary Comparison Schedule - Regulatory Basis - General Townwide Fund .................................... 4 Budgetary Comparison Schedule - Regulatory Basis - General Fund Parttown...................................... 5 Budgetary Comparison Schedule - Regulatory Basis - Special Revenue Fund - HighwayTownwide Fund................................................................................................... Budgetary Comparison Schedule - Regulatory Basis - Special Revenue Fund - 6 HighwayFund Parttown............................................................................................................................ 7 Budgetary Comparison Schedule - Regulatory Basis - Special Revenue Fund - Lighting District Fund......................................................................................................... ....................... 8 Budgetary Comparison Schedule - Regulatory Basis - Special Revenue Fund - Fire Protection District Fund..................................................................................................................... 9 Statement of Fiduciary Net Assets - Regulatory Basis - Fiduciary Funds ................................................ Schedule of Noncurrent Assets and Liabilities........................................................................................... 10 11 Notes to Financial Statements.............................................................................................................. 12-22 11 Ciaschi . Dietershagen . Little . Mickelson & Company, LLP Certified Public Accountants and Consultants INDEPENDENT AUDITOR'S REPORT Supervisor and Town Board Town of Groton Groton, New York We have audited the accompanying financial statements of the Town of Groton (the Town), as of and for the year ended December 31, 2011, as listed in the table of contents. These financial statements are the responsibility of the Town's management. 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 of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the basic financial statements. An audit also includes assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. As described more fully in Note 1, the Town of Groton has prepared these financial statements using accounting practices in conformity with the requirements of the Office of Comptroller of the State of New York as applied to governmental units, which is a comprehensive basis of accounting other than accounting principles generally accepted in the United States of America. The effects on the financial statements of the variances between these regulatory accounting practices and accounting principles generally accepted in the United States of America, although not reasonably determinable, are presumed to be material. During the year ended December 31, 2011, the Town implemented Governmental Accounting Standards Board Statement Number 54, "Fund Balance Reporting and Governmental Fund Type Definitions." In our opinion, the financial statements referred to above presented fairly, in all material respects, the cash and unencumbered cash balances of each fund of the Town of Groton, as of December 31, 2011, and their respective cash receipts and disbursements, and budgetary results for the year then ended, on the basis of accounting described in Note 1. This report is intended solely for the information and use of the Town Board and management of the Town of Groton 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. i August 13, 2012 Ithaca, New York -1 - CORTLAND ITHACA 39 Church Street John H. Dietershagen, C.P.A. Cortland, New York 13045 Jerry E. Mickelson, C.P.A. 607-753-7439 Thomas K. Van Derzee, C.P.A. fax 607-753-7874 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. 11 Ciaschi . Dietershagen . Little . Mickelson & Company, LLP Certified Public Accountants and Consultants INDEPENDENT AUDITOR'S REPORT Supervisor and Town Board Town of Groton Groton, New York We have audited the accompanying financial statements of the Town of Groton (the Town), as of and for the year ended December 31, 2011, as listed in the table of contents. These financial statements are the responsibility of the Town's management. 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 of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the basic financial statements. An audit also includes assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. As described more fully in Note 1, the Town of Groton has prepared these financial statements using accounting practices in conformity with the requirements of the Office of Comptroller of the State of New York as applied to governmental units, which is a comprehensive basis of accounting other than accounting principles generally accepted in the United States of America. The effects on the financial statements of the variances between these regulatory accounting practices and accounting principles generally accepted in the United States of America, although not reasonably determinable, are presumed to be material. During the year ended December 31, 2011, the Town implemented Governmental Accounting Standards Board Statement Number 54, "Fund Balance Reporting and Governmental Fund Type Definitions." In our opinion, the financial statements referred to above presented fairly, in all material respects, the cash and unencumbered cash balances of each fund of the Town of Groton, as of December 31, 2011, and their respective cash receipts and disbursements, and budgetary results for the year then ended, on the basis of accounting described in Note 1. This report is intended solely for the information and use of the Town Board and management of the Town of Groton 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. i August 13, 2012 Ithaca, New York -1 - CORTLAND ITHACA 39 Church Street 401 East State Street — Suite 500 Cortland, New York 13045 Ithaca, New York 14850 607-753-7439 607-272-4444 fax 607-753-7874 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 TOWN OF GROTON BALANCE SHEET - REGULATORY BASIS GOVERNMENTAL FUNDS DECEMBER 31, 2011 LIABILITIES AND FUND BALANCES Liabilities: Accounts payable $ 131473 $ 250 Accrued liabilities 11078 153 Deferred revenues Total Liabilities 14,551 403 Fund Balances: Restricted 101192 Assigned 160,000 407000 Unassigned 4411711 36,029 Total Fund Balances 6111903 762029 Total Liabilities and Fund Balances $ 626,454 $ 76,432 See Independent Auditor's Report and Notes to Financial Statements -2- General General Townwide Parttown Fund Fund ASSETS Assets: Cash and cash equivalents - Unrestricted $ 5561262 $ 767432 Restricted cash and cash equivalents 10,192 Investments - Unrestricted 60,000 Investments - Restricted Loans receivable, net of allowance Total Assets $ 626,454 $ 767432 LIABILITIES AND FUND BALANCES Liabilities: Accounts payable $ 131473 $ 250 Accrued liabilities 11078 153 Deferred revenues Total Liabilities 14,551 403 Fund Balances: Restricted 101192 Assigned 160,000 407000 Unassigned 4411711 36,029 Total Fund Balances 6111903 762029 Total Liabilities and Fund Balances $ 626,454 $ 76,432 See Independent Auditor's Report and Notes to Financial Statements -2- 313,291 5201752 1237237 834,043 123,237 $ 8857588 $ 123,237 $ 45,944 45,944 46,069 $ - 2a - Special Total Special Revenue Funds Highway Highway Lighting Fire Protection Townwide Parttown District District Fund Fund Fund Fund $ 5229297 $ 123,237 $ 467069 $ $ 2,757 507000 310,534 $ 885,588 $ 1231237 $ 467069 $ -0- $ $ 427186 $ $ 125 $ $ 9,359 517545 -0- 125 -0- 313,291 5201752 1237237 834,043 123,237 $ 8857588 $ 123,237 $ 45,944 45,944 46,069 $ - 2a - Special Total Grant Governmental Fund Funds 83,351 $ 114071648 12,949 110,000 310,534 27825 27825 86,176 $ 11843,956 $ 56,034 107590 21825 27825 27825 691449 83, 351 4067834 889,933 477,740 83,351 17774,507 86,176 $ 1,843,956 TOWN OF GROTON STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - REGULATORY BASIS GOVERNMENTAL FUNDS FOR THE YEAR ENDED DECEMBER 31, 2011 See Independent Auditor's Report and Notes to Financial Statements -3- General General Townwide Parttown Fund Fund REVENUES Real property taxes $ 390,144 $ 135,425 Real property tax items 5,919 Nonproperty tax items 63,906 Departmental income 27653 1,855 Intergovernmental charges 1,300 500 Use of money and property 37570 406 Licenses and permits 187373 6,193 Fines and forfeitures 29,921 Sale of property and compensation for loss 19 Miscellaneous local sources 260 State sources 547617 Total Revenues 5067776 208,285 EXPENDITURES Current: General governmental support 349,055 175 Public safety 441407 Public health 1017000 Transportation 657815 Economic assistance and opportunity 13,200 250 Culture and recreation 4,954 53,330 Home and community services 11109 472079 Employee benefits 887321 7,408 Total Expenditures 5667861 209,242 Excess of (Expenditures) Revenues (60,085) (957) OTHER FINANCING SOURCES (USES1 Total Other Financing (Uses) Sources -0- -0- Net Changes in Fund Balances (60,085) (957) Fund Balances, Beginning of Year 6712988 76,986 Fund Balances, End of Year $ 611,903 $ 761029 See Independent Auditor's Report and Notes to Financial Statements -3- Special Revenue Funds Highway Highway Lighting Fire Protection Special Townwide Parttown District District Grant Fund Fund Fund Fund Fund $ 5801875 $ 2477425 $ 67000 $ 1057000 $ 105,675 9012 190,256 57667 17254 172 112" 2,754 260 130,231 7797812 4847585 67172 7687009 4447854 3,866 1007430 391621 8687439 4847475 37866 (88,627) 110 27306 -0- -0- -0- (88,627) 110 2,306 9227670 1237127 43,638 $ 834,043 $ 1237237 $ 457944 $ -3a- 1057000 1,015 Total Governmental Funds $ 1,4641869 5,919 169,581 5,410 192, 056 11,182 24,566 29,921 27773 520 184,848 2,091,645 349,230 105,000 149,407 101,000 1,282, 544 13,450 58,284 48,188 2357780 1057000 -0- 2)237,883 -0- 17015 (146,238) -0- -0- -0- -0- 11015 (146,238) -0- 821336 11920,745 -0- $ 837351 $ 17774,507 TOWN OF GROTON BUDETARY COMPARISON SCHEDULE - REGULATORY BASIS GENERAL TOWNWIDE FUND FOR THE YEAR ENDED DECEMBER 31, 2011 REVENUES Real property taxes $ Real property tax items Departmental income Intergovernmental charges Use of money and property Licenses and permits Fines and forfeitures Sale of property and compensation for loss Miscellaneous local sources State sources Total Revenues EXPENDITURES Current: General governmental support Public safety Public health Transportation Economic assistance and opportunity Culture and recreation Home and community services Employee benefits Total Expenditures Excess of (Expenditures) OTHER FINANCING SOURCES (USES1 Total Other Financing Sources (Uses) Excess of (Expenditures) and Other Financing (Uses) Over Revenues and Other Financing Sources Appropriated Fund Balance Net Change in Fund Balance $ Fund Balance, Beginning of Year Fund Balance, End of Year Original Final 349,055 Fay. (Unfay.) Budeco Budec�t _ Actual Variance 3901144 $ 390,144 $ 3901144 $ -0- 4,200 4,200 5,919 11719 2,350 2,350 2,653 303 11500 1, 500 1,300 (200) 5,100 5,100 3,570 (1,530) 13,000 13,000 18,373 51373 20,500 20,500 29,921 9,421 (156, 000) (156, 000) 19 19 -0- -0- 260 260 55,000 55,000 54,617 (383) 491794 4917794 506,776 14,982 403,691 398,845 349,055 49,790 49,555 49,055 447407 41648 200 200 200 68,073 687073 657815 27258 137700 131700 137200 500 8,350 8,350 47954 37396 4,000 4,000 17109 27891 100,225 105,571 88,321 171250 6471794 6471794 566,861 80,933 (156, 000) (156, 000) (60, 085) 95,915 -0- -0- -0- -0- 0-(156,000) (156,000) (156, 000) (60, 085) $ 957915 1561000 1561000 -0- $ -0- (60, 085) 671,988 $ 611,903 See Independent Auditor's Report and Notes to Financial Statements -4- TOWN OF GROTON BUDGETARY COMPARISON SCHEDULE - REGULATORY BASIS GENERAL FUND PARTTOWN FOR THE YEAR ENDED DECEMBER 31, 2011 REVENUES Real property taxes $ Nonproperty tax items Departmental income Intergovernmental charges Use of money and property Licenses and permits 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) OTHER FINANCING SOURCES (USES) 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 135,425 $ 1357425 $ 1351425 $ -0- 45,000 457000 63,906 181906 17300 1,300 1,855 555 17450 17450 500 (950) 17500 17500 406 (1,094) 57050 57050 61193 17143 189,725 189,725 208,285 18,560 4,175 21678 175 27503 101,000 101,000 101,000 -0- 250 250 250 -0- 57,500 58,672 53,330 5,342 54,352 547677 471079 71598 7,448 71448 71408 40 2241725 2241725 209,242 15,483 (35,000) (35,000) (957) 34,043 -0- -0- -0- -0- (35,000) (35,000) (957) $ 34,043 35,000 35,000 -0- $ -0- (957) 761986 $ 76,029 See Independent Auditor's Report and Notes to Financial Statements -5- 1 1 1 i 1 1 1 1 1 1 1 TOWN OF GROTON BUGETARY COMPARSION SCHEDULE - REGULATORY BASIS SPECIAL REVENUE FUND HIGHWAY TOWNWIDE FUND FOR THE YEAR ENDED DECEMBER 31, 2011 REVENUES Real property taxes Intergovernmental charges Use of money and property Sale of property and compensation for loss Miscellaneous local sources Total Revenues EXPENDITURES Current: Transportation Employee benefits Total Expenditures Excess of (Expenditures) OTHER FINANCING SOURCES (USES1 Total Other Financing (Uses) Sources Excess of (Expenditures) and Other Financing (Uses) Over Revenues and Other Financing Sources Appropriated Fund Balances Appropriated Reserves Encumbrances Carried Forward from Prior Year Net Change in Fund Balance Fund Balance, Beginning of Year Fund Balance, End of Year Original Final 768,009 Fay. (Unfay.) Budget Budget Actual Variance $ 580,875 $ 580,875 $ 580,875 $ -0- 187,523 190,256 190,256 -0- 11,000 11,000 5,667 (5,333) 2,754 2,754 260 260 779,398 782,131 779,812 (2,319) 769,273 905,306 768,009 137,297 115,125 115,125 100,430 14,695 884,398 1,020,431 868,439 151,992 (105,000) (238,300) (88,627) 149,673 -0- -0- -0- -0- (105,000) (238,300) (88,627) $ 149,673 135,000 135,000 (30,000) (30,000) 133,300 $ -0- $ -0- (88,627) 922,670 $ 834,043 See Independent Auditor's Report and Notes to Financial Statements -6- 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, 2011 See Independent Auditor's Report and Notes to Financial Statements -7- Original Final Fay. (Unfay.) Budget Budget Actual Variance REVENUES Real property taxes $ 2471425 $ 2471425 $ 247,425 $ -0- Nonproperty tax items 85,000 85,000 1057675 207675 Use of money and property 3,000 31000 1,254 (1,746) State sources 130,218 1307231 130,231 -0- Total Revenues 4651643 4651656 4847585 18,929 EXPENDITURES Current: Transportation 448,718 4487731 444,854 37877 Employee benefits 46,925 46,925 39,621 77304 Total Expenditures 495,643 4957656 484,475 11,181 Excess of (Expenditures) Revenues (30,000) (30,000) 110 30,110 OTHER FINANCING SOURCES (USESI Total Other Financing (Uses) Sources -0- -0- -0- -0- Excess of Revenues and Other Financing Sources Over (Expenditures) and Other Financing (Uses) (30,000) (30,000) 110 $ 30,110 Appropriated Fund Balances 30,000 30,000 Net Change in Fund Balance $ -0- $ -0- 110 Fund Balance, Beginning of Year 123,127 Fund Balance, End of Year $ 123,237 See Independent Auditor's Report and Notes to Financial Statements -7- 1 1 f 1 1 1 1 1 1 i 1 TOWN OF GROTON BUDGETARY COMPARISON SCHEDULE - REGULATORY BASIS SPECIAL REVENUE FUND LIGHTING DISTRICT FUND FOR THE YEAR ENDED DECEMBER 31, 2011 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 Budeft Budget Actual $ 3,800 $ 3,800 $ 6,000 $ 172 3,800 3,800 6,172 Fay. (U nfay. ) Variance 2,200 172 2,372 3,800 3,800 3,866 (66) 31800 3,800 3,866 (66) -0- -0- 2,306 2,306 -0- -0- -0- -0- -0- -0- 2,306 $ 2,306 $ -0- $ -0- 2,306 43,638 $ 45,944 See Independent Auditor's Report and Notes to Financial Statements -8- TOWN OF GROTON BUDGETARY COMPARISON SCHEDULE - REGULATORY BASIS SPECIAL REVENUE FUND FIRE PROTECTION DISTRICT FUND FOR THE YEAR ENDED DECEMBER 31, 2011 REVENUES Real property taxes Total Revenues EXPENDITURES Current: Public Safety Total Expenditures Excess of Revenues OTHER FINANCING SOURCES (USES) 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.) Budget Budget Actual Variance $ 150,000 $ 105,000 $ 105,000 $ -0- 1507000 105,000 105,000 -0- 150,000 105,000 105,000 -0- 1503000 1057000 1057000 -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 -9- i i 1 1 1 1 1 f 1 1 1 1 1 1 1 1 1 1 Total Assets Total Liabilities TOWN OF GROTON STATEMENT OF FIDUCIARY NET ASSETS - REGULATORY BASIS FIDUCIARY FUNDS DECEMBER 31, 2011 ASSETS LIABILITIES See Independent Auditor's Report and Notes to Financial Statements -10- Agency Funds $ -0- -0- 1 1 1 i 1 1 1 1 1 TOWN OF GROTON SCHEDULE OF NONCURRENT ASSETS AND LIABLITIES DECEMBER 31, 2011 NONCURRENT GOVERNMENT ASSETS Land $ 563,000 Buildings 7307059 Machinery and equipment 27153,087 Total Noncurrent Government Assets $ 3,4467146 NONCURRENT GOVERNMENT LIABILITIES Compensated absences $ 89,611 Total Noncurrent Government Liabilities $ 89,611 See Independent Auditor's Report and Notes to Financial Statements TOWN OF GROTON NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2011 Note 1 - Summary of Significant 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 Comptroller of the State of New York 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, "Account 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 Entity 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." a. The primary government, which is the Town; b. Organizations for which the primary government is financially accountable, and; c. 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. -12- 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. -13- TOWN OF GROTON NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2011 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 The 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) Hiahwav 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. -13- TOWN OF GROTON NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2011 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. -14- 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. -15- TOWN OF GROTON NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2011 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. -15- TOWN OF GROTON NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2011 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. I. Fund Balance Classifications In the year ending December 31, 2011, the Town implemented 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. -16- I r� TOWN OF GROTON NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2011 • 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 has not formally adopted a policy defining the order in which to apply expenditures against fund balances. However, the Town applied expenditures against non -spendable fund balance, restricted fund balance, committed fund balance, assigned fund balance, and unassigned fund balance. J. Leqallv 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. 17- TOWN OF GROTON NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2011 • 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 uncollateralized 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 $1,856,696, 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: 1. Insured or registered, or investments held by the Town or by the Town's agent in the Town's name, or 2. Uninsured and unregistered, with investments held by the financial institution's trust department in the Town's name, or 3. Uninsured and unregistered, with investments held by the financial institution or its trust department, but not in the Town's name. -18- -19- TOWN OF GROTON NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2011 At December 31, 2011 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 $ 3101534$ 310,534 (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, 2011 consisted of the following, which are stated at net realizable value: Description Amount Special Grant Fund Rehabilitation loans $ 89,242 Special Grant Fund Allowance for uncollectible loans (86,417) Special Grant Fund Rehabilitation loans $ 2,825 The balance of loans receivable represents two loans in the amounts of $86,417 and $2,825. The smaller loan was made in 2007; principal payments of $902 and 1,262 were made during 2011 and 2010 respectively. The Town did not receive any loan payments on the larger loan during the year ended 2006. A principal payment of $647 and an interest -only payment of $2,900 were made on the loan in 2007 and 2008, respectively. No principal payments were made in 2009, 2010, or 2011. In 2004 the Town Board authorized the Town Attorney to commence foreclosure proceedings with respect to the larger loan. The Town has received a judgment in the amount of $99,856 with respect to the larger loan; however, the balance has been deemed uncollectible. 3. Noncurrent Government Assets (Fixed Assets) The changes in fixed assets for the fiscal year ended December 31, 2011 are as follows: Balance Balance Beginning End of of Year Additions Deletions Year Land $ 563,000 $ $ $ 563,000 Buildings 730,059 730,059 Machinery and equipment 21054,631 228,975 130,519 21153,087 Total $ 3,347,690 $ 228,975$ 130,519 $ 3,446,146 -19- TOWN OF GROTON NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2011 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. 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. 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 three percent 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 2011 $ 631,048 2010 39,817 2009 441535 The Town's contributions made to the System were equal to 100% of the contributions required for each year. On July 30, 2004, Chapter 260 of the Laws of 2004 of the State of New York was enacted which allows local employers to bond or amortize a portion of their retirement bill for up to ten years in accordance with a specified schedule. This law requires participating employers to make payments on a current basis, while bonding or amortizing existing unpaid amounts relating to the System's fiscal years ending March 31, 2005 through 2007. On August 11, 2010, New York State established the Employer Contribution Stabilization Program, which provides participating local government employers an option to amortize the eligible portion of their annual required contributions to the New York State and Local Retirement System. The Town has opted not to amortize under either law. -20- 11 TOWN OF GROTON NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2011 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 two 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 $2,860 were recognized for post -employment health care. E. Noncurrent Government Liabilities The Town has compensated absences outstanding as of December 31, 2011 in the amount of $89,611. Compensated absences represent the value earned and unused portion of accumulated sick leave. F. Fund Balance Detail At December 31, 2011, restricted and assigned fund balance was as follows: Restricted Assigned Unemployment Appropriated Insurance Capital Fund for Next Fund Total Reserve Reserve Balance Year's Budget Balance Assigned Funds: General Townwide $ 10,192 $ $ $ 160,000 $ $ 1607000 General Parttown 40,000 401000 Highway Townwide 313,291 145,000 375,752 520,752 Highway Parttown 33,000 90,237 123,237 Lighting District 45,944 45,944 Fire Protection District -0- Special Grant 831351 -0- Totals $ 10,192 $ 313,291 $ 83,351 $ 378,000 $ 511,933 $ 8897933 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, 2011 are as follows: Beginning Interest Released/ Ending Reserved Fund Balance Balance Additions Earned Appropriated Balance Unemployment Insurance Reserve $ 10,149$ $ 43$ $ 101192 Capital reserve 278,476 32,755 2,060 313,291 Total Reserved Fund Balance $ 288,625 $ 32,755 $ 2,103 $ -0- $ 323,483 -21 - 11 n TOWN OF GROTON NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2011 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-