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HomeMy WebLinkAboutBP Financial Audit 2018SOUTHERN CAYUGA LAKE INTERMUNICIPAL WATER COMMISSION INDEX December 31, 2018 e Page IndependentAuditor's Report .......................................................................................................... - Management's Discussion and Analysis.................................................................................. II -IX Statementof Net Position................................................................................................................1 Statement of Revenues, Expenses, and Changes in Net Position....................................................2 Statement of Cash Flows Notes to Financial Statements....................................................................................................4-18 } Schedule of Changes in Total OPEB Liability and Related Ratios ....................... ..................19 n Schedule of the Commission's Proportionate Share of the Net Pension Liability ........................20 I Schedule of the Commission's Pension Contributions..................................................................21 r' Operating Expenses — Natural Classification Independent Auditor's Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with GovernmentAuditing Standards........................................................................................ 23-25 e CERTIFIED PUBLIC ACCOUNTANTS BUSkNESS CONSULTANTS INDEPENDENT AUDITOR'S REPORT Board of Commissioners Southern Cayuga Lake Intermunielpal Water Commission Ithaca, New York 14850 RcI)ort on the Financial Statemeittv We have audited the accompanying financial statements of the Southern Cayuga Lake Intermunicipal Water Conirnission, as of and for the year ended December 31, 2018, and the related notes to the financial statements, which collectively comprise the Commission's basic financial statements as listed in the index. Management's Responsihilitifor the Financial Statentents Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes 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 fi-aud or error, Auditor's ResI)onsibiliti, Our responsibility is to express opinions on these financial statements based on our audit. We did " conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Govel'177nent Auditing Standards, issued by the Comptroller General of the United States. Those standards WIM0 require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free fi-oin material misstatement. An audit involves performing procedures to obtain audit evidence about the arnounts 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. 410 Enst Upland Road Ithaca,Newl'ork 148,50 607-272-S550 / 607-273- 6357 (Fax) I, jti %V wm swc I Ip. Cf.) n Y r We believe that the audit evidence we have obtained is sufficient and appropriate to p rovide a basis for our audit opinions. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of Southern Cayuga Lake Intermunicipal Water Commission, as of December 31, 2018, and the changes in financial position, and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management's Discussion and Analysis, the Schedule of Changes in Total OPEB Liability and Related Ratios, the Schedule of the Commission's Proportionate Share of the Net Pension Liability and the Schedule of the Commission's Pension Contributions be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise Southern Cayuga Lake Intermunicipal Water Commission's basic financial statements. The supplementary information presented on page 22 is presented for purposes of additional analysis and is not a required part of the basic financial statements. The information is the responsibility of management and was derived from and relates directly to r the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects, in relation to the basic financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated August 8, 2019 on our consideration of the Southern Cayuga Lake Intermunicipal Water Commission's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Southern Cayuga Lake Intermunicipal Water Commission's internal control over financial reporting and compliance. c5Ce:a,-- ba l%2J%.e.,r to Co, UP Sciarabba Walker & Co., LLP Ithaca, New York August 8, 2019 SOUTHERN CAYUGA LAKE INTERMUNICIPAL WATER COMMISSION MANAGEMENT'S DISCUSSION AND ANALYSIS DECEMBER 31, 2018 The following is a discussion and analysis of the Southern Cayuga Lake Intermunicipal Water Commission's (the Commission) financial performance for the year ended December 31, 2018. This discussion and analysis is designed to a.) assist the reader in focusing on significant financial issues, b.) provide an overview of the Commission's financial activity, and c.) identify changes in the Commission's financial position (its ability to address the next and subsequent year challenges). QThis section is a summary of the Commission's financial activities based on current known facts, decisions, or conditions. The results of the current year are discussed in comparison with the prior year with an emphasis placed on the current year. This section is only an introduction and should be read in conjunction with the Commission's financial statements, which immediately follows this section. ABOUT THE ENTITY The Southern Cayuga Lake Intermunicipal Water Commission is a Joint Entity of its five member municipalities, the Towns of Dryden, Ithaca, and Lansing, and the Villages of Cayuga Heights and Lansing. The Commission was formed by an Agreement of Municipal Cooperation under New York State General Municipal Law Article 5G in 1977. The Commission, as an executive body, manages the Commission's assets including a water treatment plant, a transmission main, and 19 full time staff members. The Commission is comprised of two appointed members from each of the five member municipalities. One member must be an elected official of the municipality. Officers of the Commission are elected annually; the Treasurer has historically been the Supervisor of the Town of Ithaca. The Town of Ithaca, the largest member municipality, serves as the employer of record and as such maintains the fiduciary, trust and agency funds that are not reflected in this report. The Commission audits monthly vouchers for payment prior to their review by the Town of Ithaca board. HIGHLIGHTS Financial Highlights: • Effective January 1, 2018, the Commission changed the water rate billing structure from a 10,000 gallon minimum per quarter to a 5,000 gallon minimum per quarter. On October 11, 2018 the Commission increased the wholesale water rate charged to the five (5) member municipalities to $5.16 per thousand gallons beginning in 2019. • In 2012, the Commission identified a need to plan for future capital improvements and replacements and in 2013, authorized and established the HJ- Capital Improvement/Replacement Capital Project Fund. This capital fund continues to be funded from the annual Operating Fund budget. i II SOUTHERN CAYUGA LAKE INTERMUNICIPAL WATER COMMISSION MANAGEMENT'S DISCUSSION AND ANALYSIS j DECEMBER 31, 2018 Financial Highlights (Continued): • Since 2012, in order to protect the integrity of the system by ensuring an uninterrupted water supply to our member municipalities, the Commission has replaced approximately 7,800 feet of transmission main. In 2018, to provide redundancy for the system, engineering was completed for the installation of approximately 514 feet of a second transmission main between the Raw Water Pump Station and the Treatment Plant. The installation of the second raw water transmission main is scheduled for completion in 2019. • In 2018, the Commission authorized the use of Operating Fund balance to pay off the remaining principal balance on the 2006 Office Addition project serial bond thus reducing future interest expense. • In 2006, the Commission authorized and established a "General Fringe Benefit Cash Reserve" savings account. The purpose for establishing this reserve is to fiscally meet unanticipated economic increases in employee fringe benefits that may occur within the current budgeted operating cycle. (E.g. NYS Retirement, Health Insurance). The Commission will continue to review, and when necessary, add funds to the reserve. At December 31, 2018 there is $105,492 on deposit. • At December 31, 2018 current assets decreased by $246,216 or 6%. • At December 31, 2018 current liabilities decreased by $158,554 or 31%. • At December 31, 2018 net position increased by $614,390 or 9%. • At December 31, 2018 capital assets increased by $242,540 or 2%. • At December 31, 2018 long-term principal indebtedness decreased by $725,000 or 19%. III SOUTHERN CAYUGA LAKE INTERMUNICIPAL WATER COMMISSION MANAGEMENT'S DISCUSSION AND ANALYSIS DECEMBER 31, 2018 OVERVIEW OF THE FINANCIAL STATEMENTS This annual report consists of three parts: MD&A (this section), the basic financial statements, and required supplementary information. The basic financial statements include the statement of net position; statement of revenues, expenses, and changes in net position; and statement of cash flows. The statement of net position presents the Commission's assets, deferred outflows of resources, liabilities, and deferred inflows of resources with the difference reported as net position. Increase and decreases in net position can be an indicator of improvement or deterioration of the Commission's financial position. Changes in net position during the year are reported in the statement of revenues, expenses and changes in net position. All revenues, expenses, and changes are reported as the underlying event occurs that results in revenue, expense, or change. The statement of cash flows presents information on actual cash inflows or outflows as they occur. The financial statements also include notes that explain some of the information in the statements and provide more detailed data. The statements are followed by a section of required supplementary information that further explains and supports the financial statements. FINANCIAL ANALYSIS OF THE COMMISSION AS A WHOLE The Commission continues to fund operations, long term debt, and maintenance from rates and fees collected in its role as the water treatment and supply source for its five (5) member municipalities. Commission staff also operates the distribution system in the member municipalities. The system collectively is known as the Bolton Point — Municipal Water System (BP -MWS). Current assets decreased by $246,216 or 6%. Total net position increased by $614,390 or 9%. Capital assets increased by $242,540 (net of depreciation expense of $512,953) or 2%. Unrestricted net position decreased by $370,869 or 31 %. The Commission's current ratio (ratio of current assets to current liabilities) was 11.03:1 on December 31, 2018. IV it SOUTHERN CAYUGA LAKE INTERAIUNICIPAL WATER COMMISSION 1%1ANAGEMENT'S DISCUSSION AND ANALYSIS DECEMBER 31, 2018 FINANCIAL ANALYSIS OF THE COMMISSION AS A WHOLE (Continued) Figure A-] presents condensed irift.)1-1-nation derived from the Commission's Statenient of Net Position: FIGURE A-1 Condensed Statement of Net Position 2017 2018 Change Current assets $ 4,126,617 $ 3,880,401 246,216) Non -Current assets 9,763,152 10,005,692 242,540 Total Assets 13P9�769 S '13P61093 15 Deferred pension outflow 360,905 478,613 2676) 117,708 Deferred OPEB outflow 76,578 211,843 135,265 Total Deferred Outflows of Resources $ 4371,483 $ 6902456 $ 252,'973 Current liabilities 510,477 351,923 ( 158,554) Non-current liabilities 6,595,035 6,049,545 ( 545,490) Total Liabilities S 71.05 512 $ 6,401,,468 $ ( 704,044) Deferred pension inflow .z� 53,380 392,331 338,951 Total Deferred Inflows of Resources 53,380 S, 392,331 $ 338!2951 Invested in capital assets, net of debt 5,853,007 6,838,065 985,058 Restricted net position 105,291 105,492 201 .Unrestricted net position 1,210,062 839,193 370,869 Total Net Position $ 7,168,3602,750 $ 614.390 WIN V SOUTHERN CAYUGA LADE INTERMUNICIPAL WATER COMMISSION MANAGE, MENT'S DISCUSSION AND ANALYSIS DECEMBER 31, 2018 FINANCIAL ANALYSIS OF THE COMMISSION AS A WHOLE (Continued) Figure A-2 presents condensed inforniation derived from the Cornmission"s Statement of Revenues, Expenses, and Changes in Net Position: FIDUHTWEW Condensed Statement of Revenues, Expenses, and Cliangev 2017 2018 in Net Position REVENUES Operating revenues $ 4,148,058 $ 4,171,096 Nonoperating revenues 31,318 20,532 Total Revenues S 4,179,376 $ 4,191,628 EXPENSES Operating Expenses: Source Of supply 232,138 256,352 Purification 613,340 654,900 Transmission and distril),ution 541,080 637,425 Adrninistration 750,138 542,612 Employee benefits 464,191 451,702 Pension expense 184,782 162,457 Change in OPER 318,596 264,724 Depreciation 468,146 512,953 Total Operating expenses 3,572,411 3,483,125 Nonoperating expenses 122,623 94,113 Total Expenses $ 32695,034 $ 3 577 238 INCREASE IN NET POSITION $ 484,342 1'$ 614,390 f e4 61A0 V1 SOUTHERN CAYUGA LAKE INTERMUNICIPAL WATER COMMISSION MANAGEMENT'S DISCUSSION AND ANALYSIS DECEMBER 31, 2018 FINANCIAL ANALYSIS OF THE COMMISSION AS A WHOLE (Continued) The Statement of Cash Flows presents detailed information about the cash activities of the Commission during the year. The statement is divided into five parts. The first section deals with operating cash flows and shows the net cash used in the operating activities. The second section reflects cash flows from nonoperating, noninvesting, and noncapital financing purposes. The third section deals with the cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital assets and related items and related funding received. The fourth section reflects the cash flows from investing activities and shows interest received from investing activities. The fifth section reconciles the net cash provided by operating activities to the operating income reflected in the Statement of Revenue, Expenses, and Changes in Net Position. Cash and cash equivalents decreased by approximately $230,299 for the year ended December 31, 2018. Figure A-3 presents condensed information derived from the Commission's Statement of Cash Flows: FIGURE A-3 Condensed Statement of Cash Flows 2017 2018 Cash provided by (used in): Operating activities $ 1,419,530 $ 1,377,426 Non capital financing adtivities - - Capital and related financing activities ( 1,532,193) ( 1,613,187) Investing activities 3,950 5,532 Decrease in cash ( 108,713) ( 230,229) Cash, beginning of year 3,451,210 3,342,497 Cash, end of year $ 3,342,4971 $ 3112 268 VII MIA SOUTHERN CAYUGA LAKE INTERMUNICIPAL WATER COMMISSION MANAGEMENT'S DISCUSSION AND ANALYSIS DECEMBER 31, 2018 CAPITAL ASSETS The Commission records expenditures for land, buildings, equipment, machinery, and infrastructure (water transmission systems) as capital assets in the Statement of Net Position. Annual depreciation expense is recorded in the Statement of Revenues, Expenses, and Changes in Net Position to reflect the use of these assets over their useful lives. Land and construction in progress are not subject to depreciation. The COMMiSSiOD's depreciation methods, assumptions regarding -useful lives, and capitalization thresholds are described in Notes 11-1 and 11 in the current year's Notes to the Financial Statements. Figure re A-4 Changes in Net Capital Assets 2017 2018 Change Land 55,507 $ 55,507 Construction in progress 35,145 350,278 315,133 Building-, 5,237,250 5,367,582 130,332 Equipment & Machinery 259,359 267,741 8,382 Infrastructures 4,175,891 3,964,584 211,307) — Total Capital Assets $ 91763,1521 $ 10,005,692 $ 242,5401 Major additions in 2018 included: Infrastructures: T -Main Replacement Building Improvements: Pole barn, roof replacement, fire detection system Equipment and Machinery: two vehicles, tractor, dump trailer, and new server Construction in Progress: SCALA upgrade, T -main and filters Total The Commission currently has one active capital project. Vill $ 21,274 312,721 106,365 350,278 790,638 SOUTHERN CAYUGA LAKE INTERMUNICIPAL WATER COMMISSION MANAGEMENT'S DISCUSSION AND ANALYSIS DECEMBER 31, 2018 DEBT ADMINISTRATION Constitutional Debt Limit The Commission is restricted by the New York State Constitution on the manner of creating and paying indebtedness. The Commission itself can only issue debt of $1,000,000 per year. The member municipalities however, can issue debt on behalf of the Commission, but all respective governing boards must be in agreement. That indebtedness is automatically excluded from their debt limits pursuant to the provisions of Article VIII section 5B of the New York State Constitution. Detailed information regarding the Commission's long-term liabilities is presented in the 2018 Notes to the Financial Statements. Figure A-5 Outstanding Debt 2017 2018 Change Statutory Installment Bonds $ 3,875,000 $ 3,150,000 $ ( 725,000) Compensated Absences 43,509 54,363 10,854 Net Pension Liability 323,770 122,040 ( 201,730) Other Post -Employment Benefits 2,587,756 2,908,142 320,386 Total I $ 61830,035 1 $ 6,234,545 $ ( 595,490) Commission debt is historically recorded as debt held jointly and severally by the member municipalities. Factors Bearing on the Commission's Future It is the view of the Commission and Management of the Bolton Point — Municipal Water System that no negative ensuing issues are anticipated to impede the future success and growth of the water system. FINANCIAL CONTACT The Commission's financial statements are designed to present users (citizens, taxpayers, customers, investors and creditors) with a general overview of the Commission's finances and to demonstrate the Commission's accountability. If you have questions about the report or need additional financial information, contact the Commission Treasurer, Bill Goodman, Town of Ithaca, 215 North Tioga Street, Ithaca, NY 14850, or the General Manager, Steve Riddle, Southern Cayuga Lake Intermunicipal Water Commission, 1402 East Shore Drive, Ithaca, NY 14850. w j SOUTHERN CAYUGA LAKE INTERMUNICIPAL WATER COMMISSION STATEMENT OF NET POSITION December 31, 2018 ASSETS CURRENT ASSETS: Cash $ 3,006,776 Cash, restricted 105,492 Accounts receivable: Water rents 730,037 Due from other governments 7,462 Other receivables 13,106 Prepaid expenses 17,528 TOTAL CURRENT ASSETS CAPITAL ASSETS, 3,880,401 net 10,005,692 TOTAL ASSETS 13,886,093 DEFERRED OUTFLOWS OF RESOURCES 111 DEFERRED PENSION OUTFLOW DEFERRED OPEB OUTFLOW 478,613 tE� 211,843 TOTAL ASSETS AND DEFERRED OUTFLOWS OF RESOURCES $ 14,576,549 LIABILITIES CURRENT LIABILITIES: Accounts payable $ 60,040 Accrued liabilities 89,256 Accrued interest 17,627 Long-term debt, current portion 185,000 TOTAL CURRENT LIABILITIES 351,923 LONG-TERM DEBT, non-current 2,965,000 COMPENSATED ABSENCES 54,363 NET PENSION LIABILITY 122,040 OPEB LIABILITY 2,908,142 TOTAL LIABILITIES 6,401,468 DEFERRED INFLOWS OF RESOURCES DEFERRED PENSION INFLOW 392,331 NET POSITION INVESTED IN CAPITAL ASSETS, net of related debt 6,838,065 RESTRICTED 105,492 UNRESTRICTED 839,193 TOTAL NET POSITION 7,782,750 TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND NET POSITION $ 14,576,549 j� See notes to financial statements. -1- SOUTHERN CAYUGA LAKE INTERMUNICIPAL WATER COMMISSION STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION For the Year Ended December 31, 2018 OPERATING REVENUES: Water charges Other operating revenue TOTAL OPERATING REVENUES OPERATING EXPENSES: Source of supply Purification Transmission and distribution Administration Employee benefits Pension expense Change in OPEB Depreciation TOTAL OPERATING EXPENSES OPERATING INCOME NONOPERATING REVENUES (EXPENSES): Gain on disposal of assets Interest expense Interest income TOTAL NONOPERATING REVENUES (EXPENSES) CHANGE IN NET POSITION NET POSITION, beginning of year, as restated NET POSITION, end of year See notes to financial statements. -2- $ 3,942,280 228,816 4,171,096 256,352 654,900 637,425 542,612 451,702 162,457 264,724 512,953 3,483,125 687,971 15,000 ( 94,113) 5,532 ( 73,581) 614,390 7,168,360 $ 7,782,750 SOUTHERN CAYUGA LAKE INTERMUNICIPAL WATER COMMISSION STATEMENT OF CASH FLOWS FI For the Year Ended December 31, 2018 CASH FLOWS FROM OPERATING ACTIVITIES: Receipts from services provided $ 4,188,317 Payments for goods and services ( 731,584) Payments for wages and benefits ( 2,079,307) NET CASH PROVIDED BY OPERATING ACTIVITIES 1,377,426 CASH FLOWS FROM NON -CAPITAL FINANCING: Operating subsidies - NET CASH PROVIDED BY NON -CAPITAL FINANCING ACTIVITIES _ CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Proceeds from sale of fixed assets 15,000 Acquisition of capital assets ( 755,493) Principal paid on capital debt ( 725,000) Interest paid on capital debt ( 147,694) NET CASH USED IN CAPITAL AND RELATED FINANCING ACTIVITIES ( 1,613,187) CASH FLOWS FROM INVESTING ACTIVITIES: Interest on cash 5,532 NET CASH PROVIDED BY INVESTING ACTIVITIES 5,532 J NET CHANGE IN CASH AND CASH EQUIVALENTS ( 230,229) CASH, beginning of year 3,342,497 CASH, end of year 3,112,268 RECONCILIATION OF OPERATING INCOME TO NET CASH I j PROVIDED BY OPERATING ACTIVITIES: Operating income 687,971 Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation 512,953 Changes in receivables 17,221 Changes in prepaid expenses ( 1,234) Changes in deferred outflows of resources ( 252,973) Changes in deferred inflows of resources 338,951 Changes in liabilities 74,537 aNET CASH PROVIDED BY OPERATING ACTIVITIES $ 1,377,426 See notes to financial statements. -3- U SOUTHERN CAYUGA LAKE INTERMUNICIPAL WATER COMMISSION NOTES TO FINANCIAL STATEMENTS For the Year Ended December 31, 2018 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accompanying financial statements of the Southern Cayuga Lake Intermunicipal Water Commission (the Commission) have been prepared in conformity with generally accepted accounting principles (GAAP) as applied to government units. The Governmental Accounting Standards Board (GASB) is the accepted standard setting body for establishing governmental accounting and financial reporting principles. A. Reporting Entity �j The Town of Ithaca, Town of Dryden, Town of Lansing, Village of Cayuga !!� Heights and Village of Lansing jointly own and operate the Southern Cayuga Lake Intermunicipal Water Commission. The venture operated under the terms of an original agreement dated March 1, 1977 and has been amended several times, the last of which is dated September 11, 2017. This agreement is still in force. Significant provisions of the agreement are as follows: The executive body of the Southern Cayuga Lake Intermunicipal Water Commission consists of ten members. Each member municipality appoints two members. Of the members so appointed, at least one member from each municipality shall be an elected official from the governing body. The Treasurer must be Chief Financial Officer of one of the member municipalities. Currently, the Supervisor for the Town of Ithaca is the Treasurer of the Commission. The Treasurer is annually voted on by the Commission. 2. Maintenance, operating, and debt retirement costs are funded primarily through water rent revenues collected by the member municipalities and paid over to the Commission quarterly. B. Financial Statement Presentation GASB establishes standards for external financial reporting for a special—purpose government engaged only in business -type activities, such as the Commission. The components of net position are classified into three categories as follows: • Invested in Capital Assets, Net of Related Debt Consists of capital assets including restricted capital assets net of accumulated depreciation and reduced by the outstanding balances of any bonds, mortgages, notes or other borrowings that are attributable to the acquisition, construction, or improvement of those assets. • Restricted Net Position Consists of net assets with constraints placed on the use either by 1) external groups such as creditors, grantors, contributors, or laws or regulations of other governments; or 2) law through constitutional '` provisions or enabling legislation. Unrestricted Net Position All other net assets that do not meet the definition of "restricted" or "invested in capital assets, net of related debt." C. Measurement Focus and Basis of Accounting For financial reporting purposes the Commission is considered a special-purpose government engaged only in business -type activities. Accordingly, the Commission's financial statements have been prepared on the accrual basis of accounting with a flow of economic resources measurement focus. Revenues are reported when earned and expenditures when materials or services are received. All intercompany accounts and transactions have been eliminated. D. Budgetary Data Budget Policies - The budget policies are as follows: a. No later than the first Commission regular meeting in September, the Treasurer submits a budget to the Commission for approval. Once approved, but not later than October 5, the Commission Treasurer submits the approved budget as the "Tentative Budget" for the fiscal year commencing the following January 1, to the Town Clerk of the municipality the Treasurer is Chief Financial Officer of. The tentative budget includes proposed expenditures and the proposed means of financing for all funds. b. No later than November 15, the municipality tasked with approving the budget will review the tentative budget, accept it as the Commission's preliminary budget, and advertise and hold a public hearing on the preliminary budget, no later than November 20. c. All modifications of the budget must be approved by the Commission. d. Following the public hearing, the municipality tasked with oversight of the Commission budget will consider final adoption of the budget. e. The Commission will publish the newly adopted budget and circulate it to the Commission member municipalities. f. Appropriations lapse at year-end. E. Cash and Investments For purposes of the Statement of Net Position, the Commission considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. State statutes govern the Commission's investment policies. In addition, the Commission has its own written investment policy. Commission monies must be deposited in FDIC insured commercial banks or trust companies located within the State. The Treasurer is authorized to use demand accounts and certificates of deposit. Permissible investments include obligations of the U.S. Treasury and U.S. Agencies and obligations of New York State or its localities. Collateral is required for demand deposits and certificates of deposit not covered by federal deposit insurance. Obligations that may be pledged as collateral are obligations of the United States and its agencies and obligations of the State and its municipalities and school districts of Tompkins County only. -5- F. Accounts Receivable Accounts receivable are shown gross, with uncollectible amounts recognized under the direct write-off method. No allowance for uncollectible accounts has been provided since it is believed that such an allowance would not be material. All receivables are expected to be collected within the subsequent fiscal year. G. Prepaid Items Prepaid items represent payments made by the Commission for which benefits extend beyond year-end. H. Capital Assets Capital assets are reported at historical costs. The Commission depreciates capital assets using the straight-line method over the estimated useful life of the assets. Capitalization thresholds (the dollar value above which capital asset acquisitions are added to the capital asset accounts) and estimated useful lives of capital assets are as follows: Capitalization Estimated Threshold Useful Life Building and improvements $ 5,000 30-40 years Non -building improvements $ 5,000 15-20 years Equipment and machinery $ 5,000 5-15 years I. Infrastructure The Commission includes long-lived improvements to the water system as capital assets. Infrastructure is reported at historical cost and is depreciated using the straight-line method over the estimated useful lives. Capitalization thresholds and estimated useful lives for infrastructure are as follows: Capitalization Estimated Threshold Useful Life Water system $ 5,000 20 years J. Deferred Outflows/Inflows of Resources In addition to assets, the statement of net position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until then. The Commission has two items that qualify for reporting in this category; the deferred outflow related to pensions and deferred outflows related to other postemployment benefits, reported in the Statement of Net Position. In addition to liabilities, the statement of net position will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future periods(s) and therefore, will not be recognized as an inflow of resources (revenue) until that time. The Commission has one item that qualifies for reporting in this category; the deferred inflow related to pensions reported in the Statement of Net Position. IMM K. Unemployment Insurance Q As of January 1, 1978, the Commission employees are covered by unemployment insurance. The Commission has chosen to discharge its liability to the New York State Unemployment Insurance Fund by means of the benefit reimbursement method. This is a dollar -for -dollar reimbursement to the Unemployment Insurance Fund for the benefits paid to former employees and charged to the Commission's account. The Commission is exempt from federal unemployment insurance tax. L. Compensated Absences The Commission's employees are granted vacation in varying amounts. In the event of termination or upon retirement, an employee is normally entitled to payment for accumulated vacation at various rates, subject to certain maximum limitations. Payment for accumulated vacation recorded in the General Long -Term Debt Account Group is dependent upon many factors; therefore, timing of future payments is not readily determinable. However, management believes that sufficient resources will be made available for the payments for accumulated vacation when such payments become due. The Commission recognizes a liability for vacation Ieave and other compensated absences with similar characteristics and additional salary -related payments as the benefits are earned by the employees, based on the rendering of past service and the probability that the employees will be compensated for the benefits through paid time off or some other means. This includes vacation leave and other compensated absences with similar characteristics that were earned but not used during the current or prior periods and for which employees can receive compensation in a future period. Amounts do not include leave expected to lapse and includes leave that (new) employees will (eventually) qualify for. M. Retiree Accumulated Sick Time In addition to providing pension benefits, the Commission allows retired employees to use accumulated sick time to offset the cost of health insurance. When this accumulated sick time is depleted, the employee pays his/her share of health insurance premiums. The employee does not have the option of taking the accumulated sick time as a cash payment. Health care benefits are provided through an insurance company whose premiums are based on the benefits paid during the year. To be eligible for this benefit the employee must be a retiree from the New York State Employee Retirement System. N. Deferred Compensation The Commission offers their employees a Deferred Compensation Plan (the Plan) created in accordance with Internal Revenue Code Section 457. The Plan, which is available to all eligible participants, permits participants to defer a portion of their salary (25% of gross wages not to exceed $8,000) until future years. Amounts deferred under the Plan are not available to the employee until termination, retirement, death or unforeseeable emergency. Effective, January 1, 1998, all amounts of compensation deferred under the Plan, (1 all property and rights purchased with the amounts, and all income attributable to !lff these amounts are the sole property of the employee. F1 O. Classification of Revenues The Commission has classified its revenues as either operating or nonoperating revenues according to the following criteria: • Operating Revenues — Operating revenues include activities that have the characteristics of exchange transactions, such as 1) water charges, 2) plumbing permits charges, 3) main breaks repair charges, and (4) other. • Nonoperating Revenues — Nonoperating revenues include activities that have the characteristics of non-exchange transactions, such as gifts and contributions, and other revenues that are defined as nonoperating revenues by GASB, such as investment income and sale of capital assets. a P. Restricted Resources When an expense is incurred for purposes for which both restricted and unrestricted net position is available, it is the Commission's policy to apply restricted funds before unrestricted funds, unless otherwise prohibited by legal requirements. j� Q. New Accounting Pronouncements GASB Statement No. 75 "Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions " The primary objective of this Statement is to improve accounting and financial lei reporting by state and local governments for postemployment benefits other than pensions (other postemployment benefits or OPEB). It also improves information provided by state and local governmental employers about financial support for OPEB that is provided by other entities. The Commission adopted GASB Statement No. 75 for its 2018 financial statements (see Note 7). GASB Statement No. 85 "Omnibus 2017" The objective of this Statement is to address practice issues that have been identified during implementation and application of certain GASB Statements. (� This Statement addresses a variety of topics including issues related to blending component units, goodwill, fair value measurement and application, and postemployment benefits (pensions and other postemployment benefits [OPEB]). Specifically, this Statement addresses the following topics: • Blending a component unit in circumstances in which the primary government is a business -type activity that reports in a single column for financial statement presentation. • Reporting amounts previously reported as goodwill and "negative" goodwill. • Classifying real estate held by insurance entities. • Measuring certain money market investments and participating interest- earning investment contracts at amortized cost. Ir • Timing of the measurement of pension or OPEB liabilities and expenditures recognized in financial statements prepared using the current financial resources measurement focus. • Recognizing on -behalf payments for pensions or OPEB in employer financial statements. • Presenting payroll -related measures in required supplementary information for purposes of reporting by OPEB plans and employers that provide OPEB. -8- Classifying employer -paid member contributions for OPEB. Simplifying certain aspects of the alternative measurement method for OPEB. Accounting and financial reporting for OPEB provided through certain multiple -employer defined benefit OPEB plans. The Commission adopted GASB Statement No. 85 for its 2018 financial statements. The adoption did not impact the Commission's financial statements. GASB Statement No. 86 "Certain Debt Extinguishment Issues " The primary objective of this Statement is to improve consistency in accounting and financial reporting for in -substance defeasance of debt by providing guidance for transactions in which cash and other monetary assets acquired with only existing resources—resources other than the proceeds of refunding debt—are placed in an irrevocable trust for the sole purpose of extinguishing debt. This Statement also improves accounting and financial reporting for prepaid insurance on debt that is extinguished and notes to financial statements for debt that is defeased in substance. The Commission adopted GASB Statement No. 86 for its 2018 financial statements. The adoption did not impact the Commission's financial statements. The GASB has issued the following new statements: • Statement No. 83, Certain Asset Retirement Obligations, which will be effective for the year ending December 31, 2019. • Statement No. 84, Fiduciary Activities, which will be effective for the year ending December 31, 2020. • Statement No. 87, Leases, which will be effective for the year ending December 31, 2021. • Statement No. 88, Certain Disclosures Related to Debt, including Direct Borrowings and Direct Placements, which will be effective for the year ending December 31, 2019. • Statement No. 89, Accounting.for Interest Cost Incurred before the End of a Construction Period, which will be effective for the year ending December 31, 2020. • Statement No. 90 Majority Equity Interests - and amendment of GASB Statements No. 14 and No. 61 which will be effective for the year ending December 31, 2020. • Statement No. 91 Conduit Debt Obligations, which will be effective for the year ending December 31, 2021. The Commission is currently reviewing these statements and plans on adoption, as required. NOTE 2 - CASH The Commission's investment policies are governed by state statutes, as previously described in these Notes. Deposits are valued at cost or cost plus interest and are categorized as either: 1. Insured or collateralized with securities held entity's name; 2. Collateralized with securities held by the department or agency in the entity's name; or 3. Uncollateralized. 9 by the entity or by its agent in the pledging financial institution's trust Total financial institution (bank) balances at December 31, 2018 per the bank were $3,112,515. ' p ' Y1 2 3 Cash in bank $ 3.112.515 $ - $ _ NOTE 3 - CAPITAL ASSETS Capital asset balances and activity for the year ended December 31, 2018 were as follows: oBeginning Disposals and Ending Balance Additions Reclassifications Balance CAPITAL ASSETS THAT ARE aNOT DEPRECIATED: Land $ 55,507 $ - $ - $ 55,507 Construction in progress 35,145 350,278 35,145 350,278 TOTAL NON -DEPRECIABLE HISTORICAL COST 90,652 350,278 35,145 405,785 CAPITAL ASSETS THAT ARE aBEING DEPRECIATED: Buildings 9,988,371 312,721 - 10,301,092 Equipment and machinery 1,066,468 106,366 27,732 1,145,102 Infrastructures 4,649,301 21,274 - 4,670,575 TOTAL DEPRECIABLE HISTORICAL COST 15,704,140 440,361 27,732 16,116,769 LESS: ACCUMULATED DEPRECIATION: Buildings 4,751,121 182,389 - 4,933,510 Equipment and machinery 807,109 97,984 27,732 877,361 o Infrastructures 473,410 232,581 - 705,991 TOTAL ACCUMULATED DEPRECIATION 6,031,640 512,954 27,732 6,516,862 TOTAL HISTORICAL COST, net $ 9,763,152 $ 277,685 $ 35,145 $ 10,005,692 NOTE 4 - LIABILITIES A. Pension Plans Plan Description. The Commission participates in the New York State and Local Employees' Retirement System (ERS), and the Public Employees' Group Life Insurance Plan (Systems). These are cost sharing multiple -employer retirement systems. The Systems provide retirement benefits as well as death and disability benefits. 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 Systems. The Comptroller shall adopt and may amend rules and regulations for the administration and transaction of the business of the Systems and for the custody and control of their funds. The Systems issue 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, Gov. Alfred E. Smith State Office Building, Albany, NY 12244. -10- 0 Funding Policy. The Systems are 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 for their first 10 years in the system, and employees who joined on or after January 1, 2010 who generally contribute 3% of their salary for their entire length of service. Under the authority of the NYSRSSL, the Comptroller shall certify annually the rates expressed as proportions of payroll of members, which shall be used in computing the contributions required to be made by employers to the pension accumulation fund. The Commission is required to contribute at an actuarially determined rate. The required contributions for the current year and preceding years were: 2018 $ 142,944 2017 150,072 2016 150,192 2015 149,676 2014 200,009 The contributions are paid each December 151h. Payment can be made in February of the next year; however, by prepaying the annual contribution the Commission saves a 2% annual charge. Pension Liabilities and Deferred Outflows of Resources Related to Pensions At December 31, 2018, the Commission reported the following liability for its proportionate share of the net pension liability for the Systems. The net pension liability was measured as of March 31, 2018. The total pension liability used to calculate the net pension liability was determined by an actuarial valuation. Measurement date March 31, 2018 Net pension liability $ 122,040 Commission's portion of the Plan's total net pension liability 0.003781% Change in proportionate share since prior measurement date 0.000335% At year end December 31, 2018, the Commission recognized pension expenses of $162,457. The Commission reported deferred outflows of resources related to pensions from the following sources: Differences between expected and actual experience Changes of assumptions Net difference between projected and actual investment earnings on pension plan investments Changes in proportion and differences between employer contributions and proportionate share of contributions Contributions made after measurement date Total -11- Deferred Outflows of Resources $ 43,527 80,922 177,253 33,967 142,944 $ 478,613 I The Commission reported deferred inflows of resources related to pensions from the following sources: Deferred Inflows of Resources Differences between expected and actual experience $ 35,969 Changes of assumptions - Net difference between projected and actual investment earnings on pension plan investments 349,879 Changes in proportion and differences between employer contributions and proportionate share of contributions 6,483 Total $ 392,331 The Commission's contributions subsequent to the measurement date for the Systems amounted to $142,944. The Commission's contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended December 31, 2018. The Commission's balances of deferred outflows and inflows of resources related to pension will be recognized in pension expense as follows: 2019 $ 36,156 2020 27,936 2021 ( 82,548) 2022 ( 38,206) Total $ ( 56,662) Actuarial Assumptions The Commission's total pension liability as of the measurement date was determined by using an actuarial valuation as of April 1, 2017, with update procedures used to roll forward the total pension liability to March 31, 2018. The actuarial valuations used the following actuarial assumptions: Actuarial cost method Inflation Investment rate of return Salary scale Projected COLAs Decrement tables Entry age normal 2.5% 7.0% 3.8% 1.3% 04/01/10-03/31/15 System's experience Annuitant mortality rates are based on April 1, 2010 — March 31, 2015 System's experience with adjustments for mortality improvements based on the Society of Actuaries Scale MP -2014. The Commission's long-term rate of return on pension plan investments was determined using a building block method in which best estimate ranges of expected future real rates of return (expected returns net of investment expense and inflation) are developed for each major asset class. These ranges are -12- r i' combined to produce the long term expected rate of return by weighting the expected future real rates of return by each the target asset allocation percentage and by adding expected inflation. Best estimate of the arithmetic real rates of return for each major asset class included in the target asset allocation at the valuation date of March 31, 2018 are as follows: Ll Target Long -Term Expected Asset Class Allocation Real Rate of Return 5' Domestic equity 36% 4.55% International equity 14% 6.35% Privet equity Real estate 10% 10% 7.50% 5.55% Absolute return strategies 2% 3.75% ? Opportunistic portfolio 3% 5.68% Real assets 3% 5.29% Bonds and mortgages 17% 1.31% Cash 1 % -0.25% Inflation -indexed bonds 4% 1.25% 100% Discount rate. The Discount rate used to calculate the total pension liability was 7.0%. The projection of cash flows used to determine the discount rate assumes that the contributions from plan members will be made at the current contribution rates and that contributions from employers will be made at statutorily required rates, actuarially determined. Based upon the assumptions, the Systems' fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. Sensitivity of the Proportionate Share of the Net Pension Liability to the Discount Rate Assumption. The following tables present the Commission's proportionate share of the net pension liability/(asset) calculated using the discount rate of 7.0%, as well as what the Commission's proportionate share of the net pension liability would be if it were calculated using a discount rate that is one percentage point lower (6.0%) or one percent point higher (8.0%) than the current rate: Commission's proportionate share of the net pension (asset)/liability Current 1 % Decrease Assumption I% Increase (6.0%) (7.0%) (8.0%) $ 923,310 $ U -13- 122,040 $ ( 555,821) Pension Plan Fiduciary Net Position. The components of the current -year net pension liabilities of the employers as of March 31, 2018 were as follows: Employers' total pension liability Fiduciary net position Employers' net pension liability Ratio of Plan net position to the employers' total pension asset/(liability) B. Long -Term Debt $ (183,400,590,000) 180,173,145,000 $ { 3,227,445,000) 98.24% The Commission borrows money through its municipal members to acquire land or equipment or to construct buildings and improvements. This enables the cost of these capital assets to be borne by the present and future users receiving the benefit of the capital asset. The municipal members are jointly liable for repayment of the corresponding serial bonds, whereas the Commission is responsible for repayment of the debt based on the agreement of municipal cooperation. At December 31, 2018, the total principal indebtedness outstanding of the Commission was $3,150,000. The following is a summary of the Commission's outstanding long-term debt for the year ending December 31, 2018: Description Joint Water Improvement 4 Joint Water Improvement 5 Total Serial Bonds Date Original Date of Outstanding of Issue Amount I/R Final Maturity 12/31/2018 10/5/2012 $ 2,600,000 2%-3% 6/12/2013 $ 1,500,000 3% - 3.25% Interest on long-term debt paid during the year was: Interest paid Less interest accrued - prior year Plus interest accrued - current year 9/15/2032 $ 1,940,000 6/l/2033 1,210,000 $ 3,150,000 $ 110,824 ( 34,338) 17,567 $ 94,053 Long-term liability balances and activity for the year are summarized below: -14- Serial bonds Other post -employment benefits Net pension liability Compensated absences Total long-term liabilities Serial Bonds Beginning Ending Balance Additions Reductions Balance $ 3,875,000 $ - $ ( 725,000) $ 3,150,000 2,587,756 320,386 - 2,908,142 323,770 - ( 201,730) 122,040 43,509 10,854 - 54,363 $ 6,830,035 $ 331,240 $ ( 926,730) 7-6,234,545 Activity for compensated absences is shown net due to the impracticability of determining these amounts separately. Payments of compensated absences are dependent upon future factors therefore, the timing of such payments cannot be determined. Compensated absences are reflected as a long-term liability in the Statement of Net Position. The following is a summary of the maturity of long-term indebtedness: Total Serial Bonds Total Long -Tenn Debt Year Principal Interest Total 2019 $ 185,000 $ 85,688 $ 270,688 2020 190,000 2021 190,000 2022 195,000 2023 205,000 2024-2033 2,185,000 3,150,000 $ 3,150,000 NOTE 5 -,USE OF ESTIMATES 81,288 76,788 72,288 67,456 340,913 724,421 $ 724,421 271,288 266,788 267,288 272,456 2,525,913 3,874,421 $ 3,874,421 Management uses estimates and assumptions in preparing financial statements. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could differ from those estimates. NOTE 6 - POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS Plan Description. The Commission administers a single -employer defined benefit healthcare plan ("the Retiree Health Plan"), through the payroll of the Town of Ithaca. The plan provides lifetime healthcare insurance for eligible retirees and their spouses through the Commission's group health insurance plan, which covers both active and retired members. The Commission pays a portion of retiree's premiums for healthcare insurance based on the number of years of service to the Commission at the time of retirement. In addition, retiring employees can convert unused sick time to offset portions of healthcare premiums that are the retiree's responsibility. The Commission tracks the accumulated balances and makes premium payments on behalf of the retirees until the balances are exhausted. The Retiree Health Plan does not issue a publicly available financial report. -15- Employees Covered by Benefit Terms At December 31, 2018 the following employees were covered by the benefit terms: Inactive employees and beneficiaries Active employees l� Total Funding Policy. 6 20 26 The Commission contributes a portion of the retiree's healthcare premium according to the schedule. For employees whose most recent date of hire is prior to 1 /l /2015, the following percentages apply: Years of Commission Service Contribution 30 and over 75.0% 25-29 50.0% 15-24 35.0% 5-14 20.0% less than 5 0.0% For employees who were hired on or after 1/1/2015, the following percentages apply: Years of Service Commission Contribution 30 and over 50.0% 25-29 35.0% 10-24 20.0% less than 10 0.0% The OPEB Liability. The Commission's total OPEB Liability of $2,908,142 was measured as of January 1, 2018 and was determined by an actuarial valuation as of January 1, 2018. Actuarial Methods and Assumptions. The actuarial valuation used the following actuarial assumptions: Actuarial cost method Salary increase Discount rate Rate of inflation Premium trend -16- Entry Age Normal 3.5% 3.44% 2.4% 5% for 2019, 6.5% in 2020, with subsequent reductions and an ultimate rate of 3.94% in 2078 DThe discount rate used was Bond Buyer Weekly 20 -Bond index. oMortality rates were based on the sex -distinct RPH-2014 Mortality Tables for employees and healthy annuitants, adjusted backward to 2006 with scale MP -2014, and then adjusted for mortality improvements with scale MP -2017 mortality improvement scale on a fully generational basis. This assumption was based on a review of published mortality tables and the demographics of the Plan. Changes in the total OPEB Liability. Sensitivity of the Total OPEB Liability to Changes in the Healthcare Cost Trend Rates The following presents the total OPEB liability of the Commission, as well as what the Commission's total OPEB liability would be if it were calculated using healthcare cost trend rates that are 1 percentage point lower (5.5-2.94%) or 1 percentage point higher (7.5-4.94%) than the current healthcare cost trend rate: Current Trend 1 % Decrease Rates Total OPEB Liability $ 2,430,790 $ 2,908,142 -17- I% 17- 1% Increase $ 3,523,352 Service cost $ 144,097 Interest 101,816 Changes of benefit terms - Differences between expected and actual experience - Changes of assumptions or other inputs 151,051 Benefit payments ( 76,578) Net change in total OPEB Liability 320,386 Total OPEB Liability - Beginning of year 2,587,756 Total OPEB Liability - End of year $ 2,908,142 DChanges of assumptions and other inputs reflect the effects of changes in the discount rate each period. The discount rate in effect at the current measurement date is 3.44%. Sensitivity Total OPEB of the Liability to Changes in the Discount Rate. The following presents the total OPEB liability of the Commission, as well as what the total OPEB liability would be if it were calculated using a discount rate that is 1 percentage point lower (2.44%) or 1 percentage point higher (4.44%) than the current discount rate: I% Decrease Current I% Increase (2.44%) (3.44%) (4.44%) Total OPEB Liability $ 3,423,624 $ 2,908,142 $ 2,493,389 Sensitivity of the Total OPEB Liability to Changes in the Healthcare Cost Trend Rates The following presents the total OPEB liability of the Commission, as well as what the Commission's total OPEB liability would be if it were calculated using healthcare cost trend rates that are 1 percentage point lower (5.5-2.94%) or 1 percentage point higher (7.5-4.94%) than the current healthcare cost trend rate: Current Trend 1 % Decrease Rates Total OPEB Liability $ 2,430,790 $ 2,908,142 -17- I% 17- 1% Increase $ 3,523,352 9 OPEB Expense and Deferred Outflows of Resources Related to OPEB. For the year ended June 30, 2018, the Commission recognized OPEB expense of $264,724. At June 30, 2018, the Commission reported deferred outflows of resources related to OPEB from the following sources: Deferred Outflows of Resources Differences between expected and actual experience $ - Changes of assumptions or other inputs 132,240 Contributions made after measurement date (including implicit subsidy) 79,603 211,843 The Commission's balances of deferred outflows resources related to pension will be recognized in OPEB expense as follows: 2019 $ 18,811 2020 18,811 2021 18,811 2022 18,811 Thereafter 56,996 $ 132,240 NOTE 7 — ADOPTION OF NEW ACCOUNTING STANDARD For the fiscal year ended December 31, 2018 the Commission adopted GASB Statement No. 75 Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions. The implementation of the Statement No. 75 resulted in adjustments to the beginning OPEB liability, deferred outflows, accrued liabilities, and net position, as follows: After As originally Adoption of presented GASB 75 OPEB liability $ 2,741,379 $ 2,587,756 Accrued liabilities 247,808 109,145 Deferred outflows of resources - OPEB - 76,578 Net position 6,799,496 7,168,360 NOTE 8 - SUBSEQUENT EVENTS Subsequent events were evaluated through August 8, 2019, which is the date the financial statements were available to be issued. 1 -18- SOUTHERN CAYUGA LAKE INTERMUNICIPAL WATER COMMISSION SCHEDULE OF CHANGES IN TOTAL OPEB LIABILITY AND RELATED RATIOS December 31, 2018 Covered payroll over measurement period $ 1,076,861 Total OPEB liability as a percentage of covered payroll 270% Notes to schedule: Changes of Assumptions. Changes of assumptions and other inputs reflect the effects of changes in the discount rate each period. The discount rate in effect at the current measurement date is 3.44%. -19- 2018 Service cost $ 144,097 Interest 101,816 Changes of benefit terms _ Differences between expected and actual experience - Changes of assumptions or other inputs 151,051 Benefit payments ( 76,578) Net change in total OPEB Liability 320,386 Total OPEB Liability - Beginning of year 2,587,756 Total OPEB Liability - End of year $ 2,908,142 Covered payroll over measurement period $ 1,076,861 Total OPEB liability as a percentage of covered payroll 270% Notes to schedule: Changes of Assumptions. Changes of assumptions and other inputs reflect the effects of changes in the discount rate each period. The discount rate in effect at the current measurement date is 3.44%. -19- SOUTHERN CAYUGA LAKE INTERMUNICIPAL WATER COMMISSION SCHEDULE OF THE COMMISSION'S PROPORTIONATE SHARE OF THE NET PENSION LIABILITY For the Year Ended December 31, 2018 2018 2017 Proportion of the net pension liability (asset) 0.003781% 0.003446% Proportionate share of the net pension liability (asset) $ 122,040 $ 323,770 Covered payroll $ 1,076,861 $ 1,138,571 Proportionate share of the net pension liability (asset) as a percentage of its covered payroll Plan fiduciary net position as a percentage of the total pension liability (asset) See accountant's report on supplementary information. -20- 11.33% 98.2% 28.44% 94.7% SOUTHERN CAYUGA LAKE INTERMUNICIPAL WATER COMMISSION SCHEDULE OF THE COMMISSION'S PENSION CONTRIBUTIONS For the Year Ended December 31, 2018 2018 2017 Contractually required contribution $ 142,944 $ 150,072 Contributions in relation to the contractually required contribution 142,944 150,072 Contribution deficiency (excess) $ - $ _ Covered payroll $ 1,076,861 $ 1,138,571 Contributions as a percentage of covered payroll 13.27% 13.18% See accountant's report on supplementary information. -21- I I See accountant's report on supplementary information. 2 -22- SOUTHERN CAYUGA LAKE INTERMUNICIPAL WATER COMMISSION OPERATING EXPENSES — NATURAL CLASSIFICATION For the Year Ended December 31, 2018 Personal services $ 1,132,064 Overtime/administrative 53,480 Employee benefits 451,702 Pension expense 162,457 OPEB 264,724 Equipment 26,336 Clothing, boots 8,482 Tools/equipment parts 13,542 Maintenance, Bolton Point systems 38,693 Maintenance, town and village systems 41,711 Meters 22,754 Phone/telemeter 17,752 Electric power 347,571 Natural gas 15,380 Gasoline and oil 18,686 O Auditor/attorney fees 10,618 Consultants 42,256 Treatment supplies 52,229 Lab supplies 29,028 Office supplies 5,533 Printing/postage 8,094 Equipment maintenance 49,544 Custodial servicesibuildings and grounds 44,678 Travel/schools Advertising 11,726 571 Dues and publications 1,174 Data processing 31,529 Insurance 47,625 Miscellaneous 4,146 Mapping 7,987 Safety program 8,100 Depreciation 512,953 TOTAL OPERATING EXPENSES $ 3,483,125 I See accountant's report on supplementary information. 2 -22- I INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS no %%i VIG SCIARABBA WALKERT-50 CERTIEIEC PUBLIC ACC®U NIANTS fi Ld SUNF.-SS CC WMUTANTS INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS LASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH fl GOVERNMENT AUDITING STANDARDS Board of Commissioners Southern Cayuga Lake Internunicipal Water Commission Ithaca, New York 14850 We have audited, in accordance with the auditing standards generally accepted in the United. States of America and the standards applicable to financial audits contained in Governrnent Aucliting Standards issued by the Comptroller general of the United States, the financial statements of the Souther Cayuga Lake Intermunicipal Water Commission, as of and for the year ended December 31, 2018, and the related notes to the financial statements, which collectively comprise the Commission's basic financial statements, and have issued our report thereon dated August 8, 2019. Internal Control over financial Reporting In planning and performing our audit of the financial statements, we considered the Commission's internal control over financial reporting. (internal control) to determine the audit procedures that are appropriate under circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Commission's internal control. Accordingly, we do not express an opinion on the effectiveness of the Commission's internal control. A deficiency in inlernal control exists when the design or operation of a control does not allow management or employees, in the norrnnal course of performing their assigned functions, to prevent, or detect and correct nmisstatennents on a timely basis. A nrcrterial weakncss is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be material weaknesses or significant deficiencies. given these limitations, during our audit we did not identify any deficiencies in. internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. Compliance and. Other Matters As part of obtaining reasonable assurance about whether the Commission's financial statements are fine of material misstatement, we perfornned tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other- matters that are required to be reported under Governinent Auditing Standards. 410 East Upland Road Ithaca, i`wdcw)',rl, 14850 607..-272-5550 / 6)07-27 3 63,57 (Fix) i�IN mVw,;kVc 11dxo1r1 r', Purtose of this Retort The purpose of this report is solely to describe the scope of our testing of internal control and I? compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. se; oA"hQ v�ka., a Sciarabba Walker & Co., LLP Ithaca, New York August 8, 2019 -25-