Loading...
HomeMy WebLinkAbout2020 Town AuditTOWN OF CORTLANDVILLE Cortland, New York FINANCIAL REPORT For the Year Ended December 31, 2020 TOWN OF CORTLANDVILLE TABLE OF CONTENTS Independent Auditors’ Report 1-2 Required Supplementary Information Management’s Discussion and Analysis 3-3j Basic Financial Statements Government-Wide Financial Statements Statement of Net Position 4 Statement of Activities 5 Governmental Fund Financial Statements Balance Sheet - Governmental Funds 6 Reconciliation of Governmental Funds Balance Sheet to the Statement of Net Position 7 Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds 8 Reconciliation of Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the Statement of Activities 9 Statement of Fiduciary Net Position - Fiduciary Funds 10 Statement of Changes in Fiduciary Net Position 11 Notes to Financial Statements 12-37 Required Supplementary Information Budgetary Comparison Schedule - General Townwide Fund - Non-U.S. GAAP Budget Basis 38 Budgetary Comparison Schedule - General Parttown Fund - Non-U.S. GAAP Budget Basis 39 Budgetary Comparison Schedule - Highway Parttown - Non-U.S. GAAP Budget Basis 40 Budgetary Comparison Schedule - Water Fund - Non-U.S. GAAP Budget Basis 41 Budgetary Comparison Schedule - Sewer Fund - Non-U.S. GAAP Budget Basis 42 Schedule of Changes in the Town’s Total OPEB Liability and Related Ratios 43-43a Schedule of the Town’s Contributions - NYSLRS Pension Plan 44-44a Schedule of the Town’s Proportionate Share of the Net Pension Liability 45 Notes to Required Supplementary Information 46-48 Report Required Under Government Auditing Standards Independent Auditors’ Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards 49-50 INDEPENDENT AUDITORS’ REPORT Town Council Town of Cortlandville Cortland, New York Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the Town of Cortlandville, (the Town), as of and for the year ended December 31, 2020, and the related notes to the financial statements, which collectively comprise the Town’s basic financial statements as listed in the table of contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with 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 fraud or error. Auditors’ Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ 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 Town’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 Town’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Insero & Co. CPA s, LLP The Highest Standard | (800) 232-9547 | www.inserocpa.com 2 Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the Town of Cortlandville, as of December 31, 2020, and the respective changes in financial position for the year then ended in accordance with accounting principles generally accepted in the United States of America. Emphasis of a Matter During the year ended December 31, 2020, the Town adopted Government Accounting Standards Board (GASB) Statement No. 84, “Fiduciary Activities.” There was no effect on net position or fund balance. Our opinion is not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management’s Discussion and Analysis, Budgetary Comparison Schedules, Schedule of Changes in the Town’s Total OPEB Liability and Related Ratios, Schedule of the Town’s Contributions - NYSLRS Pension Plan, Schedule of the Town’s Proportionate Share of Net Pension Liability, and the related notes to required supplementary information on pages 3-3j and 38-48, 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 Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated November 1, 2021 on our consideration of the Town of Cortlandville’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 the Town’s internal control over financial reporting and compliance. Respectfully submitted, Insero & Co. CPAs, LLP Certified Public Accountants Ithaca, New York November 1, 2021 TOWN OF CORTLANDVILLE MANAGEMENT’S DISCUSSION AND ANALYSIS DECEMBER 31, 2020 3 Our discussion and analysis of the Town of Cortlandville’s (the Town) financial performance provides an overview of the Town’s financial activities for the fiscal year ended December 31, 2020. This section is a summary of the Town’s financial activities based on currently known facts, decisions, or conditions. It is also based on both the Government-wide and fund-based financial statements. The results of the current year are discussed in comparison with the prior year, with an emphasis placed in the current year. Please read it in conjunction with the Town’s financial statements, which begin on page 4. Financial Highlights  The assets and deferred outflows of resources of the Town exceeded its liabilities and deferred inflows of resources at the close of the most recent fiscal year by $8,321,819 (net position) compared to $8,560,855 in 2019.  The Town follows Governmental Accounting Standards Board (GASB) Statement No. 75, “Accounting and Financial Reporting by Employers for Postemployment Benefits Other than Pensions.” This statement requires the Town to record a liability and expense for a portion of the Actuarial Accrued Liability. This liability amounted to $9,504,194 at December 31, 2020 and expense recognized amounted to $346,898.  During the year ended December 31, 2020, the Town recorded its proportionate share of the net pension liability along with deferred inflows and outflows of resources related to pensions in accordance with the parameters of GASB Statement No. 68, “Accounting and Financial Reporting for Pensions.” Current year recognition resulted in an increase of Government-wide expenses of $346,898.  During the year, the Town had expenses that were $239,036 more than the $8,290,610 generated in tax and other revenues for governmental programs. Comparatively, in the prior year, expenses were $348,757 less than the $8,276,096 generated in tax and other revenues for government programs.  The General Funds recorded a decrease in fund balances of $266,159 in 2020. General Funds combined fund balances at year end were $1,642,415.  The Town’s long-term debt decreased $462,500 during the current fiscal year, to a total of $7,069,000 as a result of debt payments. TOWN OF CORTLANDVILLE MANAGEMENT’S DISCUSSION AND ANALYSIS DECEMBER 31, 2020 3a Using this Annual Report This annual report consists of a series of basic financial statements. The Statement of Net Position and the Statement of Activities (on pages 4-5) provide information about the Town as a whole and present a longer-term view of the Town’s finances. Governmental Fund financial statements start on page 6. For Governmental Activities, these statements tell how these services were financed in the short term, as well as what remains for future spending. The Governmental Fund financial statements also report the Town’s operations in greater detail than the Government-wide financial statements by providing information about the Town’s most significant funds. The remaining statements provide financial information about activities for which the Town acts solely as a trustee or agent for the benefit of those outside the government. Following these statements are notes that provide additional information that is essential to a full understanding of the data provided in the financial statements. In addition to the basic financial statements, the annual report contains other information in the form of statements for those funds that are not considered major funds and, therefore, are not presented individually in the basic financial statements. The report also includes schedules comparing the Town’s final budgets to actual revenues and expenditures for the General Funds and Major Special Revenue Funds. Reporting the Town as a Whole Our analysis of the Town as a whole begins on page 4, with the Government-wide financial statements. The Statement of Net Position and the Statement of Activities report information about the Town as a whole and about its activities in a way that helps answer the question of whether the Town, as a whole, is better off or worse off, as a result of the year’s activities. These statements include all assets and liabilities using the accrual basis of accounting, which is similar to the accounting used by most private-sector companies. All of the current year’s revenues and expenses are taken into account, regardless of when the cash is received or paid. These two statements report the Town’s net position and changes in it. One can think of the Town’s net position, the difference between assets, deferred outflows, and liabilities, as one way to measure the Town’s financial health, or financial position. Over time, increases or decreases in the Town’s net position are one indicator of whether its financial health is improving or deteriorating. One will need to consider other nonfinancial factors, however, such as changes in the Town’s property tax base and the condition of the Town’s infrastructure, to assess the overall health of the Town. In the Statement of Net Position and the Statement of Activities, all of the Town’s activities, which are governmental in nature, are reported in one column, including public safety, public health, transportation, economic assistance, culture and recreation, home and community services, and general administration. Property and sales taxes, and state and federal grants, finance most of these activities. TOWN OF CORTLANDVILLE MANAGEMENT’S DISCUSSION AND ANALYSIS DECEMBER 31, 2020 3b Reporting the Town’s Most Significant Funds Governmental Fund Financial Statements Analysis of the Town’s Major Funds begins on page 6. The Governmental Fund financial statements provide detailed information about the most significant funds not on the Town as a whole. Some funds are required to be established by New York State law. However, management establishes many other funds to help it control and manage money for particular purposes or to show it is meeting legal responsibilities for using certain taxes and grants. Governmental Funds: All of the Town’s services are reported in the Governmental Funds, which focus on how money flows into and out of those funds, and the balances left at year end that are available for spending. These funds are reported using modified accrual accounting, which measures cash and all other financial assets that can be readily converted to cash. The Governmental Fund statements provide a detailed short-term view of the Town’s general governmental operations and the basic services it provides. Governmental Fund information helps determine whether there are more or fewer financial resources that can be spent in the near future to finance the Town’s programs. The relationship (or differences) between Governmental Activities (reported in the Government-wide financial statements) and Governmental Funds is explained in a reconciliation following the Governmental Fund financial statements. The Town as Trustee: The Town is the trustee, or fiduciary, for other assets that are held on behalf of others. All of the Town’s Fiduciary Activities are reported in separate statements on page 10 and 11. We exclude these activities from the Town’s other financial statements because the Town cannot use these resources to finance its operations. The Town is responsible for ensuring the resources reported in this fund are used for their intended purposes. The Town as a Whole The Town’s combined net position for fiscal year ended December 31, 2020 decreased from $8,560,855 to $8,321,819. A portion of the Town’s net position reflects its investment in capital assets (e.g. land, buildings, machinery, equipment, and infrastructure) less any related debt used to acquire those assets that is still outstanding. The Town has chosen not to report infrastructure assets acquired prior to January 1, 2003, in accordance with the transition provisions of GASB Statement No. 34. An additional portion of the Town’s net position represents resources subject to external restrictions on how they may be used and are reported as restricted. The remaining category of total net position is unrestricted and may be used to meet the government’s ongoing obligations and services to creditors and citizens. TOWN OF CORTLANDVILLE MANAGEMENT’S DISCUSSION AND ANALYSIS DECEMBER 31, 2020 3c Our analysis below focuses on the net position (Figure 1), and changes in net position (Figure 2), of the Town’s Governmental Activities. Figure 1 - Net Position Current Assets 6,783,972$ 5,966,022$ 817,950$ 13.7% Noncurrent Assets 1,512,764 2,261,247 (748,483) (33.1%) Capital Assets, Net 20,005,676 20,318,173 (312,497) (1.5%) Total Assets 28,302,412 28,545,442 (243,030) (0.9%) Pensions 1,335,600 473,707 861,893 181.9% OPEB 1,869,191 547,612 1,321,579 241.3% Total Deferred Outflows of Resources Current Liabilities 3,599,669 3,860,507 (260,838) (6.8%) Noncurrent Liabilities 18,010,320 14,991,901 3,018,419 20.1% Total Liabilities 21,609,989 18,852,408 2,757,581 14.6% Pensions 38,373 159,029 (120,656) (75.9%) OPEB 1,537,022 1,994,469 (457,447) (22.9%) Total Deferred Inflows of Resources 1,575,395 2,153,498 Net Investment in Capital Assets 10,091,676 9,786,673 305,003 3.1% Restricted 1,823,359 1,960,182 (136,823) (7.0%) Unrestricted (3,593,216) (3,186,000) (407,216) (12.8)% Total Net Position 8,321,819$ 8,560,855$ (239,036)$ (2.8%) Governmental Activities (26.8%)(578,103) 213.8%3,204,791 2,183,472 1,021,319 Dollar Change Percent Change 2020 - 2019 2020 - 201920202019 The increase in current assets is primarily based on an increase in receivables, offset partly by decreased cash. Noncurrent assets decreased largely because of the use of restricted cash. Capital assets decreased mainly due to depreciation expenses exceeding capital outlay. Current liabilities decreased largely due to decreases in BANs payable and interest payable. Noncurrent liabilities increased based on increased net pension liability proportionate share and other postemployment benefits liability, partially offset by a decrease in bonds payable. Deferred outflows of resources - pensions increased and deferred inflows of resources - pensions decreased based on actuarially determined amounts provided the NYSLRS. The increase in deferred outflows of resources - OPEB and decrease in deferred inflows of resources - OPEB is based on an actuarial valuation of the Town’s OPEB plan. TOWN OF CORTLANDVILLE MANAGEMENT’S DISCUSSION AND ANALYSIS DECEMBER 31, 2020 3d Figure 2 demonstrates the operations of the Town’s Governmental Activities. Figure 2 - Changes in Net Position REVENUES Program Revenues Charges for Services 3,362,643$ 2,840,844$ 521,799$ 18.4% Operating Grants and Contributions 281,908 258,232 23,676 9.2% Capital Grants and Contributions 87,173 659,724 (572,551) (86.8)% General Revenues Property Taxes and Tax Items 2,033,508 2,001,519 31,989 1.6% Nonproperty Taxes 2,527,104 2,479,926 47,178 1.9% Use of Money and Property 8,465 10,462 (1,997) (19.1)% Other General Revenues (10,191) 25,389 (35,580) (140.1)% Total Revenues 8,290,610$ 8,276,096$ 14,514$ 0.2% PROGRAM EXPENSES General Governmental Support 2,008,707$ 1,765,060$ 243,647$ 13.8% Public Safety 64,932 63,854 1,078 1.7% Public Health 3,630 3,851 (221) (5.7)% Transportation 2,899,269 2,930,423 (31,154) (1.1)% Economic Assistance and Opportunity 21,500 18,429 3,071 16.7% Culture and Recreation 414,078 397,894 16,184 4.1% Home and Community Services 2,905,755 2,481,289 424,466 17.1% Interest on Long-Term Debt 211,775 266,539 (54,764) (20.5%) Total Expenses 8,529,646$ 7,927,339$ 602,307$ 7.6% CHANGE IN NET POSITION (239,036)$ 348,757$ (587,793)$ (168.5)% Governmental Activities and Total Government Dollar Change Percent Change 2020 - 2019 2020 - 20192020 2019 Charges for services increased mainly due to increased building permit fees and increased water and sewer rents. Operating grants and contributions increased primarily due to an increase in mortgage tax, partially offset by a decrease in the Community Development Grant. Capital grants and contributions decreased mainly due to less CHIPS funding. Additionally, two New York State grants were received in 2019 but not in 2020. Total expenses increased in 2020 primarily due to increased pension and OPEB expenses. TOWN OF CORTLANDVILLE MANAGEMENT’S DISCUSSION AND ANALYSIS DECEMBER 31, 2020 3e Figures 3 and 4 show the sources of revenue for 2020 and 2019. Figure 3 - Revenue by Source 2020 Charges for Services 40.56%Other General Revenues (0.12)% Operating Grants and Contributions 3.40%Capital Grants and Contributions 1.05% Use of Money and Property 0.10% Nonproperty Taxes 30.48% Real Property Taxes/Items 24.53% Figure 4 - Revenue by Source 2019 Charges for Services 34.33%Other General Revenues 0.31% Operating Grants and Contributions 3.12% Capital Grants and Contributions 7.97% Use of Money and Property 0.13% Nonproperty Taxes 29.96% Real Property Taxes/Items 24.18% The cost of all Governmental Activities this year was $8,529,646. However, as shown in the Statement of Activities, the net expense of these activities was $4,797,922, because some of the cost was paid by those who directly benefited from the programs or by other governments and organizations that subsidized certain programs with grants and contributions. Overall, the Town’s governmental program revenues, including fees for services and grants, were $3,731,724. The Town paid for the remaining “public benefit” portion of Governmental Activities with $4,558,886 in taxes and other revenues, such as interest and general entitlements. TOWN OF CORTLANDVILLE MANAGEMENT’S DISCUSSION AND ANALYSIS DECEMBER 31, 2020 3f The total cost and revenue comparison of the Governmental Activities for each of the Town’s largest programs follows. Note that the Town’s home and community service activities, which provide water and sewer services, include debt service costs in their fee structures. Because debt service costs are not expenses of this function, the excess revenue generated by these activities is used to make principal and interest payments. The difference between cost and revenue shows the financial burden placed on the Town’s taxpayers by each of these functions. Figure 5 - Program Cost and Revenue Comparison - Governmental Activities 2020 0500,0001,000,0001,500,0002,000,0002,500,0003,000,0003,500,0004,000,000 Cost Revenue Figure 6 - Program Cost and Revenue Comparison - Governmental Activities 2019 0 500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 3,500,000 4,000,000 Cost Revenue TOWN OF CORTLANDVILLE MANAGEMENT’S DISCUSSION AND ANALYSIS DECEMBER 31, 2020 3g THE TOWN’S FUNDS As the Town completed the year, its Governmental Funds, as presented in the Balance Sheet on page 6, reported a decrease in combined fund balance. The increase is primarily due to expenditures in excess of revenues. Figure 7 shows the changes in fund balances during the year for the Town’s funds. Figure 7 - Governmental Funds - Fund Balances at Years Ended General Fund - Townwide 850,045$ 1,225,893$ (375,848)$ General Fund - Parttown 792,370 682,681 109,689 Highway Fund - Parttown 2,758,238 2,244,847 513,391 Water Fund 2,091,092 2,001,571 89,521 Sewer Fund 1,510,304 1,275,578 234,726 Special Grant Fund 93,043 141,051 (48,008) Capital Projects Fund (3,495,939)(3,308,045)(187,894) Non-Major Fund 275,306 275,251 55 Totals 4,874,459$ 4,538,827$ 335,632$ Dollar Change 2020 2019 2020 - 2019 General Funds Budgetary Highlights Over the course of the year, the Town Council and management of the Town revised the Town budgets several times. These budget amendments consisted of transfers between functions.  Resources and other financing sources available for appropriation were $159,108 less than the final budget. Expenditures and other financing uses were $730,692 favorable when compared to budget due to cost containment measures. Capital Assets and Debt Administration Capital Assets At the end of December 31, 2020, the Town had $41,383,755, less accumulated depreciation of $21,378,079, invested in a broad range of capital assets, including buildings, machinery and equipment, roads, and bridges. TOWN OF CORTLANDVILLE MANAGEMENT’S DISCUSSION AND ANALYSIS DECEMBER 31, 2020 3h Figure 8 - Capital Assets, Net of Depreciation Land 1,220,406$ 1,220,406$ -$ Improvements 4,556,255 4,717,585 (161,330) Buildings 7,111,070 7,049,485 61,585 Machinery and Equipment 1,410,986 1,337,590 73,396 Infrastructure 5,706,959 5,993,107 (286,148) Totals 20,005,676$ 20,318,173$ (312,497)$ Governmental Activities and Total Government Dollar Change 20192020 2020 - 2019 Depreciation expense during the year amounted to $1,154,792. The Town has not reported any infrastructure assets prior to 2003, in accordance with the transition provisions of GASB Statement No. 34. Debt Administration Debt (bonds and BANs), considered a liability of Governmental Activities, decreased, bringing total debt to $9,914,000 as of December 31, 2020, as shown in Figure 9. Of the amount of bonds and notes outstanding, $1,562,000 is subject to the constitutional debt limit and represented 2.20% of the Town’s statutory debt limit. The Town’s bond rating is currently Aa3 from Moody’s. Figure 9 - Major Outstanding Debt at Years Ending Bond Anticipation Notes 2,845,000$ 3,000,000$ (155,000)$ (5.2%) Serial Bonds 7,069,000 7,531,500 (462,500) (6.1%) Totals 9,914,000$ 10,531,500$ (617,500)$ (5.9%) Percent Change 2020 - 201920202019 2020 - 2019 Governmental Activities and Total Government Dollar Change ECONOMIC FACTORS AND NEXT YEAR’S BUDGET AND RATES  Approved 2021 budget shows an increase in tax rate of $0.05 per $1,000 of assessed value. The Town Board did not override the tax cap.  Water benefit tax decreased $17.123874 per unit and the Sewer benefit tax decreased $5.06832. The number of units calculated changes year to year as well as debt being paid down or added. The water units had an increase in units and the sewer had a decrease in units. TOWN OF CORTLANDVILLE MANAGEMENT’S DISCUSSION AND ANALYSIS DECEMBER 31, 2020 3i  In 2014, the Town Alienated under Home Rule Request a Town Park in exchange of 101 acres signed by the Governor, Andrew M. Cuomo, in August of 2014, and took effect immediately. The Town exercised its option in 2017 and began construction of the Gutchess Lumber Sports Complex - Phase I in 2018. Phase I of the project was completed in June 2020. The Town received a BAN of $3,000,000 in January 2018 to finance part of the project. The BAN was renewed in January 2019 and again in January 2020. The BAN is due January 2021. The Town was awarded and received Capital Grant #AC571/CFA #74852 in the amount of $250,000 from the Dormitory Authority of the State of New York in October 2019. There is one grant pending in the amount of $862,000 from Empire State Development, which the Town expects to receive in 2021 or 2022.  Construction of a Restroom and Pavilion at the Gutchess Lumber Sports complex was completed in 2019.  NYS OCR has approved the use of the Town's uncommitted program income of $84,292, as well as CDBG loan repayments received by the Town since April 1, 2018, for the purchase of playground equipment to be installed at the Gutchess Lumber Sports complex per Town Board Resolution #185 adopted July 11, 2018. Construction of the playground was completed in 2020.  The Town Board awarded a bid in the amount of $642,000 for the "Town of Cortlandville Miscellaneous Water and Sewer Improvements" projects in August of 2020 to complete the Lime Hollow Chlorine Contact Time Water Main Loop; Hillside Drive Sewer Repairs; and Route 281 Water Main Extension. The Town did not go to bond for the projects; the projects will be paid for using water and sewer fund balance. This was completed in 2021.  The Town of Cortlandville was awarded a Community Development Block Grant in 2019 (CDBG #287HR323-19) for a Town-Wide Housing and Rehabilitation Project in the amount of $336,000. The CDBG project commenced in 2020 and is ongoing in 2021.  The Town submitted a 2019 Consolidated Funding Application (CFA) for the New York State Department of Environmental Conservation's Water Quality Improvement Project (WQIP #93785) Program for a Source Water Protection Grant to acquire three parcels totaling 107+ acres for the purpose of protecting the town's drinking water supply wells (Lime Hollow wells). The Town was awarded $178,240. The Town is continuing to work on paperwork to receive funds in 2021 or 2022.  Economic factors: Unknown financial impact as a result of the novel coronavirus pandemic (COVID-19) in 2020. The pandemic may have an effect on sales tax revenue for the Town as well as other economic concerns affecting the community. A hiring freeze was implemented in the Town of Cortlandville in June 2020. The State of New York has reduced their funding about 20% for CHIPS and Revenue Sharing. The Town may receive the 20% that was held back in 2020, in 2021. TOWN OF CORTLANDVILLE MANAGEMENT’S DISCUSSION AND ANALYSIS DECEMBER 31, 2020 3j Contacting the Town’s Financial Management This financial report is designed to provide our citizens, taxpayers, customers, investors, and creditors with a general overview of the Town's finances and to show the Town's accountability for the money it receives. If you have any questions about the report or need any additional financial information contact Thomas Williams, Supervisor, Town of Cortlandville, at 3577 Terrace Road, Cortland, New York 13045. TOWN OF CORTLANDVILLE STATEMENT OF NET POSITION DECEMBER 31, 2020 See Notes to Financial Statements 4 Governmental Activities ASSETS Current Assets Cash and Cash Equivalents - Unrestricted 4,865,054$ Due from State and Federal Governments 302,803 Due from Other Governments 964,155 Other Receivables 471,542 Prepaid Expenses 169,823 Loans Receivable, Current Portion 10,595 Total Current Assets 6,783,972 Noncurrent Assets Cash and Cash Equivalents - Restricted 1,261,635 Loans Receivable, Long-Term Portion 251,129 Capital Assets, Non-Depreciable 1,220,406 Other Capital Assets, Net of Accumulated Depreciation 18,785,270 Total Noncurrent Assets 21,518,440 Total Assets 28,302,412 DEFERRED OUTFLOWS OF RESOURCES Pensions 1,335,600 Other Postemployment Benefits 1,869,191 Total Deferred Outflows of Resources 3,204,791 LIABILITIES Current Liabilities Accounts Payable 203,410 Accrued Liabilities 112,143 Bond Anticipation Notes Payable 2,845,000 Interest Payable 96,616 Current Portion of Noncurrent Obligations: Bonds Payable 342,500 Total Current Liabilities 3,599,669 Noncurrent Liabilities and Obligations Bonds Payable 6,726,500 Other Postemployment Benefits Liability 9,504,194 Net Pension Liability - Proportionate Share 1,779,626 Total Noncurrent Liabilities 18,010,320 Total Liabilities 21,609,989 DEFERRED INFLOWS OF RESOURCES Pensions 38,373 Other Postemployment Benefits 1,537,022 Total Deferred Inflows of Resources 1,575,395 NET POSITION Net Investment in Capital Assets 10,091,676 Restricted 1,823,359 Unrestricted (3,593,216) Total Net Position 8,321,819$ TOWN OF CORTLANDVILLE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED DECEMBER 31, 2020 See Notes to Financial Statements 5 Net (Expense) Revenue and Change in Net Position Operating Capital Total Charges for Grants and Grants and Governmental Expenses Services Contributions Contributions Activities Governmental Activities General Governmental Support 2,008,707$ 337,206$ 237,081$ $ - (1,434,420)$ Public Safety 64,932 201,214 - - 136,282 Public Health 3,630 - - - (3,630) Transportation 2,899,269 - - 87,133 (2,812,136) Economic Assistance and Opportunity 21,500 - - - (21,500) Culture and Recreation 414,078 - - - (414,078) Home and Community Services 2,905,755 2,824,223 44,827 40 (36,665) Interest on Long-Term Debt 211,775 - - - (211,775) Total Governmental Activities 8,529,646$ 3,362,643$ 281,908$ 87,173$ (4,797,922) Real Property Taxes 1,975,936 Real Property Tax Items 57,572 Nonproperty Tax Items 2,527,104 Use of Money and Property 8,465 Sale of Property and Compensation for Loss (17,726) Miscellaneous Local Sources 7,535 4,558,886 (239,036) 8,560,855 8,321,819$ GENERAL REVENUES Total General Revenues Change in Net Position Net Position - Beginning Net Position - Ending FUNCTIONS/PROGRAMS Program Revenues TOWN OF CORTLANDVILLE BALANCE SHEET GOVERNMENTAL FUNDS DECEMBER 31, 2020 See Notes to Financial Statements 6 Non-Major Governmental Fund Special Revenue Fund General General Highway Special Capital Highway Total Townwide Parttown Parttown Water Sewer Grant Projects Townwide Governmental Fund Fund Fund Fund Fund Fund Fund Fund Funds Cash and Cash Equivalents - Unrestricted 557,142$ 536,014$ 2,095,083$ 594,780$ 775,201$ -$ 31,528$ 275,306$ 4,865,054$ Cash and Cash Equivalents - Restricted 241,370 20,664 300,433 132,989 473,136 93,043 - - 1,261,635 Due from Other Funds - - - 697,450 13,350 - - - 710,800 Due from State and Federal Governments 136,559 - - 166,244 - - - - 302,803 Due from Other Governments - 250,000 414,155 300,000 - - - - 964,155 Other Receivables 28,333 - (952) 207,808 236,353 - - - 471,542 Prepaid Expenses 85,840 3,860 48,390 17,725 14,008 - - - 169,823 Loans Receivable - - - - - 261,724 - - 261,724 Total Assets 1,049,244$ 810,538$ 2,857,109$ 2,116,996$ 1,512,048$ 354,767$ 31,528$ 275,306$ 9,007,536$ LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES Liabilities Accounts Payable 58,723$ 18,168$ 98,871$ 25,904$ 1,744$ -$ -$ -$ 203,410$ Accrued Liabilities 112,143 - - - - - - - 112,143 Due to Other Funds 28,333 - - - - - 682,467 - 710,800 Bond Anticipation Note Payable - - - - - - 2,845,000 - 2,845,000 Total Liabilities 199,199 18,168 98,871 25,904 1,744 -3,527,467 -3,871,353 Unavailable Revenues - - - - - 261,724 - - 261,724 Total Deferred Inflows of Resources -----261,724 --261,724 Fund Balances Nonspendable 85,840 3,860 48,390 17,725 14,008 - - - 169,823 Restricted 241,370 20,664 300,433 432,989 473,136 93,043 - - 1,561,635 Assigned 517,667 95,874 2,409,415 1,640,378 1,023,160 - - 275,306 5,961,800 Unassigned 5,168 671,972 - - - - (3,495,939) - (2,818,799) Total Fund Balances (Deficit)850,045 792,370 2,758,238 2,091,092 1,510,304 93,043 (3,495,939) 275,306 4,874,459 Total Liabilities, Deferred Inflows of Resources, and Fund Balances 1,049,244$ 810,538$ 2,857,109$ 2,116,996$ 1,512,048$ 354,767$ 31,528$ 275,306$ 9,007,536$ Special Revenue Funds Deferred Inflows of Resources Major Funds ASSETS TOWN OF CORTLANDVILLE RECONCILIATION OF GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET POSITION DECEMBER 31, 2020 See Notes to Financial Statements 7 Total Governmental Fund Balances 4,874,459$ 20,005,676 The Town’s proportion of the net pension liability is not reported in the funds.(1,779,626) Deferred Inflows of Resources - Unavailable Revenue 261,724$ Deferred Inflows of Resources - Pension (38,373) Deferred Inflows of Resources - OPEB (1,537,022) Deferred Outflows of Resources - Pension 1,335,600 Deferred Outflows of Resources - OPEB 1,869,191 1,891,120 Accrued Interest Payable (96,616) Other Postemployment Benefits Liability (9,504,194) Bonds Payable (7,069,000)(16,573,194) Net Position of Governmental Activities 8,321,819$ Capital assets of the governmental funds,net of accumulated depreciation,used in Governmental Activities are not financial resources and, therefore, are not reported in the funds. Deferred inflows of resources are not recognized as revenue until a future period and, therefore, are not reported as revenue in Governmental Funds. Deferred outflows and inflows of resources related to OPEB and pensions do not affect current period expenditures and, therefore, are not reported as assets and liabilities, respectively, in the Governmental Funds. Certain accrued obligations and expenses reported in the Statement of Net Position do not require the use of current financial resources and, therefore, are not reported as liabilities in Governmental Funds. Long-term liabilities are not due and payable in the current period and,therefore, are not reported in the funds. Amounts reported for Governmental Activities in the Statement of Net Position are different because: TOWN OF CORTLANDVILLE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS FOR THE YEAR ENDED DECEMBER 31, 2020 See Notes to Financial Statements 8 Non-Major Governmental Fund Special Revenue Fund General General Highway Special Capital Highway Total Townwide Parttown Parttown Water Sewer Grant Projects Townwide Governmental Fund Fund Fund Fund Fund Fund Fund Fund Funds REVENUES Real Property Taxes 1,440,261$ 79,544$ 456,131$ 192,194$ 294,980$ -$ -$ -$ 2,463,110$ Real Property Tax Items 57,572 - - - - - - - 57,572 Nonproperty Tax Items 109,580 250,000 2,277,104 - - - - - 2,636,684 Departmental Income 62,251 212,033 - 1,085,226 1,251,823 93,646 - - 2,704,979 Intergovernmental Charges - - - - 726 - 40 - 766 Use of Money and Property 3,790 113 449 207 229 3,522 100 55 8,465 Licenses and Permits 12,586 - - - - - - - 12,586 Fines and Forfeitures 141,244 - - - - - - - 141,244 Sale of Property and Compensation for Loss - - 2,753 1,775 1,775 - - - 6,303 Miscellaneous Local Sources 2,203 - 5,332 - - - - - 7,535 State Sources 218,543 18,538 87,133 - - - - - 324,214 Federal Sources 214 - - - - 44,613 - - 44,827 Total Revenues 2,048,244 560,228 2,828,902 1,279,402 1,549,533 141,781 140 55 8,408,285 EXPENDITURES General Governmental Support 1,215,411 61,010 - 8,327 - - - - 1,284,748 Public Safety 64,932 - - - - - - - 64,932 Public Health - 2,211 - - - - - - 2,211 Transportation 257,454 - 1,850,480 - - - - - 2,107,934 Economic Assistance and Opportunity 21,500 - - - - - - - 21,500 Culture and Recreation 79,089 125,833 - - - - - - 204,922 Home and Community Services 36,619 174,738 - 820,508 902,253 105,497 - - 2,039,615 Employee Benefits 526,167 86,747 465,031 90,080 24,900 - - - 1,192,925 Debt Service Principal 252,500 - - 163,489 201,511 - - - 617,500 Interest 137,968 - - 37,665 88,407 - - - 264,040 Capital Outlay - - - - - - 427,326 - 427,326 Total Expenditures 2,591,640 450,539 2,315,511 1,120,069 1,217,071 105,497 427,326 - 8,227,653 Excess of Revenues (Expenditures)(543,396) 109,689 513,391 159,333 332,462 36,284 (427,186) 55 180,632 OTHER FINANCING SOURCES (USES) Interfund Transfers In 167,548 - - - - - 84,292 - 251,840 Interfund Transfers (Out)- - - (69,812) (97,736) (84,292) - - (251,840) BANs Redeemed from Appropriations - - - - - - 155,000 - 155,000 Total Other Financing Sources (Uses)167,548 --(69,812) (97,736) (84,292) 239,292 -155,000 Net Changes in Fund Balances (375,848) 109,689 513,391 89,521 234,726 (48,008) (187,894) 55 335,632 Fund Balances (Deficit), Beginning 1,225,893 682,681 2,244,847 2,001,571 1,275,578 141,051 (3,308,045) 275,251 4,538,827 Fund Balances (Deficit), Ending 850,045$ 792,370$ 2,758,238$ 2,091,092$ 1,510,304$ 93,043$ (3,495,939)$ 275,306$ 4,874,459$ Special Revenue Funds Major Funds TOWN OF CORTLANDVILLE RECONCILIATION OF GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED DECEMBER 31, 2020 See Notes to Financial Statements 9 Net Change in Fund Balances - Total Governmental Funds 335,632$ Capital Outlay 866,324$ Depreciation Expense (1,154,792) Net Book Value of Disposed Assets (24,029) (312,497) ERS (346,898) Repayments (177,592) BANs Redeemed from Appropriations (155,000)$ Debt Principal Payments 617,500 462,500 Change in Interest Payable 52,265 Other Postemployment Benefits Liability (252,446) Change in Net Position of Governmental Activities (239,036)$ Cash outflows of resources from the issuance of loans to qualified recipients under revolving loan programs are recorded as expenditures, whereas loan repayments are recorded as revenue in the fund financial statements. In the Government-wide statements, these transactions affect only cash and loans receivable and are not recorded in the Statement of Activities. This is the amount of loan repayments. Bond proceeds provide current financial resources to Governmental Funds,but issuing debt increases long- term liabilities in the Statement of Net Position. Repayment of bond principal is an expenditure in the Governmental Funds, but the repayment reduces long-term liabilities in the Statement of Net Position. Amounts reported for Governmental Activities in the Statement of Activities are different because: Governmental Funds report capital outlay as expenditures.However,in the Statement of Activities,the cost of those assets is allocated over their estimated useful lives as depreciation expense. This is the amount by which depreciation expense and the book value of disposed assets exceeded capital outlay in the current period. Changes in the Town's proportionate share of net pension liabilities have no effect on current financial resources and, therefore, are not reported in the Governmental Funds. In addition, changes in the Town's deferred outflows of resources and deferred inflows of resources related to pensions do not affect current financial resources and are also not reported in the Governmental Funds. Some expenses reported in the Statement of Activities do not require the use of current financial resources and, therefore, are not reported as expenditures in Governmental Funds. Long-term obligations,such as those associated with employee benefits,are reported in the Statement of Net Position. Therefore expenses which result in an (increase) or decrease in these long-term obligations are not reflected in the Governmental Fund financial statements. In addition, changes in deferred outflows of resources and deferred inflows of resources do not affect current financial resources and are also not reported in the Governmental Funds. TOWN OF CORTLANDVILLE STATEMENT OF FIDUCIARY NET POSITION FIDUCIARY FUND DECEMBER 31, 2020 See Notes to Financial Statements 10 Custodial Funds ASSETS Cash - Unrestricted -$ Total Assets -$ LIABILITIES Other Liabilities -$ Total Liabilities -$ TOWN OF CORTLANDVILLE STATEMENT OF CHANGES IN FIDUCIARY NET POSITION FOR THE YEAR ENDED DECEMBER 31, 2020 See Notes to Financial Statements 11 Custodial Fund Custodial Fund Balance, Beginning of Year -$ Custodial Fund Balance, End of Year -$ TOWN OF CORTLANDVILLE NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2020 12 Note 1 Summary of Significant Accounting Policies The basic financial statements of the Town of Cortlandville (Town) have been prepared in conformity with generally accepted accounting principles (U.S. 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. The significant government's accounting policies are described below. Financial Reporting Entity The Town, which was established in 1829, is governed by its Charter, Town Law, other general laws of the State of New York, and various local ordinances. The Town Board is the legislative body responsible for overall operations, the Town Supervisor serves as chief executive officer, and as chief fiscal officer. The following basic services are provided: highways and streets, water, sanitation, health, culture and recreation, public improvements, planning and zoning, and general administration. Fire protection is provided by a separate department which is funded by a Fire Tax District (the District). The District is funded by means of a tax on the real property tax bill to the Town’s taxpayers. In 2020, the Town collected and the submitted tax revenue in the amount of $780,750 to the District. The financial reporting entity consists of the following, as defined by GASB Statement No. 14, “The Financial Reporting Entity,” as amended.  The primary government, which is the Town,  Organizations for which the primary government is financially accountable, and  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 basic 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, including legal standing, fiscal dependency, and financial accountability. Based on the application of these criteria, no component units have been included in the Town's reporting entity. Basic Financial Statements The Town's basic financial statements include both Government-wide (reporting the Town as a whole) and Governmental Fund financial statements (reporting the Town's funds). The Government-wide and Governmental Fund financial statements categorize primary activities as governmental. The Town's general governmental support, public safety, public health transportation, economic assistance, culture and recreation, and home and community services are classified as Governmental Activities. TOWN OF CORTLANDVILLE NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2020 13 Note 1 Summary of Significant Accounting Policies - Continued Government-Wide Financial Statements The Government-wide financial statements include a Statement of Net Position and a Statement of Activities. These statements present summaries of activities for the primary government (Governmental and Business-type). Government-wide financial statements do not include the activities reported in the Fiduciary Funds. The focus of the Government-wide financial statements addresses the sustainability of the Town as an entity and the change in the Town's net position resulting from the current year's activities. In the Government-wide Statement of Net Position, the Governmental Activities column is presented on a consolidated basis and is reported on a full accrual, economic resource basis, which recognizes all long-term assets and receivables as well as long-term debt and obligations. The Town's net position is reported in three parts - net investment in capital assets, restricted, and unrestricted. The Town first utilizes restricted resources to finance qualifying activities. The Statement of Activities reports both the gross and net cost for each of the Town's functions or programs. Gross expenses are direct expenses, including depreciation, that are specifically associated with a service, program, or department and are, therefore, clearly identifiable to a particular function. These expenses are offset by program revenues - charges paid by the recipients of the goods or services offered by the programs, grants, and contributions - that are restricted to meeting the program or capital requirements of a particular program. Revenues which are not classified as program revenues are presented as general revenues of the Town, with certain limited exceptions. The net cost represents the extent to which each function or program is self-financing or draws from the general revenues of the Town. The Town does not allocate indirect costs. Indirect costs are reported in the function entitled "general governmental support." Governmental Fund Financial Statements The financial transactions of the Town are reported in individual funds in the fund financial statements. Each fund is accounted for by providing a separate set of self- balancing accounts that comprise its assets, liabilities, reserves, fund balance, revenues, and expenditures or expenses. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain government functions or activities. The Town records its transactions in the funds described below. Governmental Funds Governmental Funds are those through which most governmental functions are financed. The acquisition, use, and balances of expendable financial resources, and the related liabilities, are accounted for through Governmental Funds. The measurement focus of the Governmental Funds is based upon determination of financial position and changes in financial position under the modified accrual basis of accounting. The following paragraphs describe the Town’s Governmental Funds. TOWN OF CORTLANDVILLE NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2020 14 Note 1 Summary of Significant Accounting Policies - Continued Governmental Funds - Continued Major Funds General Funds - Principal operating funds which include all operations not required to be recorded in other funds. There are two general funds; one accounting for activity affecting the entire Town (General Townwide) and a second which accounts for activity outside the Village of McGraw (General Parttown). Special Revenue Funds  Highway Parttown Fund - Established pursuant to Highway Law §141, used to account for revenues and expenditures for highway purposes outside the Village of McGraw.  Water Fund - Established by law to account for revenues derived from charges for water consumption and the application of such revenues toward related operating expenses and debt retirement.  Sewer Fund - Established by law to account for revenues derived from charges for sewer usage and the application of such revenues toward related operating expenses and debt retirement.  Special Grant Fund - Established by law to account for activities under the Housing and Community Development Act of 1974. Capital Projects Fund - Used to account for financial resources to be used for the acquisition, construction, or renovation of major capital facilities. Non-Major Fund Special Revenue Fund  Highway Townwide Fund - Established pursuant to Highway Law §141, used to account for revenues and expenditures for highway purposes of the entire Town. Fiduciary Fund Types 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:  Custodial Fund - Used to account for money and/or property received and held in the capacity of trustee, custodian or agent. TOWN OF CORTLANDVILLE NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2020 15 Note 1 Summary of Significant Accounting Policies - Continued Basis of Accounting/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 basic 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, such as expenditures or expenses. Accrual Basis The Government-wide financial statements are presented on the “economic resources” measurement focus and the accrual basis of accounting. Accordingly, all of the Town's assets and liabilities, including capital assets, as well as infrastructure assets and long-term liabilities, are included in the accompanying Statement of Net Position. The Statement of Activities presents changes in net position. Under the accrual basis of accounting, revenues are recognized when earned and expenses are recognized when incurred. Modified Accrual Basis The Governmental Fund financial statements are prepared 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 that are accrued include real property taxes, state and federal aid, sales tax, and certain user charges. The Town considers property tax receivables collected within 60 days after yearend to be available and recognizes them as revenues of the current year. All other revenues that are deemed collectible within one year after year end are recognized as revenues in the current year. 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) principal and interest on indebtedness are not recognized as an expenditure until due, and 2) compensated absences, such as vacation and sick leave, which vest or accumulate, are charged as an expenditure when paid. Property Taxes Real property taxes are levied annually by the Town no later than January 1 and become a lien on January 1. Town taxes are payable from January 1 to a date not later than June 1, and are deposited directly to the credit of the Town fiscal officer. The Town collects all real estate taxes for Town and Cortland County purposes. The Town distributes the collected tax money to the Town Supervisor prior to distributing the balance collected to the county on June 1. The Town thereby is assured of 100% tax collection. Responsibility for the collection of unpaid taxes rests with the County. Uncollected tax liens are sold annually by the County. TOWN OF CORTLANDVILLE NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2020 16 Note 1 Summary of Significant Accounting Policies - Continued Cash and Cash Equivalents For financial statement purposes, all highly liquid investments having maturities of three months or less are considered cash equivalents. Investments Investments are stated at fair value. Receivables Property tax receivables are stated net of the estimated allowance for uncollectible amounts. Amounts due from state and federal governments represent amounts owed to the Town to reimburse it for expenditures incurred pursuant to state and federal programs. Other receivables represent amounts owed to the Town, which include sewer rents, water rents, and assessments. No provision has been made for uncollectible accounts for amounts due from the state and federal governments and other receivables as it is believed that such amounts would be immaterial. Capital Assets All capital assets are valued at historical cost or estimated historical cost. Contributed assets are reported at fair market value as of the date received. Additions, improvements, and other capital outlays that significantly extend the useful life of an asset are capitalized. Other costs incurred for repairs and maintenance are expensed as incurred. Depreciation on all assets is provided on the straight-line basis over the estimated useful lives of the assets. Governmental capital assets purchased or acquired with an original cost of at least $1,000 and having a useful life of greater than one year are capitalized. The estimated useful lives for governmental capital assets are as follows: Buildings 40 Years Machinery and Equipment 5-20 Years Infrastructure 15-60 Years Unearned Revenues The Town reports unearned revenues on its Statement of Net Position and its Balance Sheet - Governmental Funds. Unearned revenues arise when resources are received by the Town before it has legal claim to them, as when grant monies are received prior to the incidence of qualifying expenditures. In subsequent periods, when the Town has legal claim to the resources, the liability for unearned revenues is removed and revenues are recorded. TOWN OF CORTLANDVILLE NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2020 17 Note 1 Summary of Significant Accounting Policies - Continued Deferred Inflows and Deferred Outflows of Resources In addition to assets, the Statement of Net Position reports 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 and will not be recognized as an outflow of resources (expense/expenditure) until then. The Town reports deferred outflows of resources related to pensions and other postemployment benefits in the Statement of Net Position. The types of deferred outflows of resources related to pensions and other postemployment benefits are described in Notes 6 and 7, respectively. The Town has deferred inflows of resources related to unavailable revenue, which is reported only on the Balance Sheet - Governmental Funds. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period(s) and will not be recognized as an inflow of resources (revenue) until that time. At December 31, 2020, the Town’s deferred inflows of resources related to revenues consisted of $261,724 in rehabilitation loans receivable. In addition, the Statement of Net Position reports a separate section for deferred inflows of resources related to pensions and other postemployment benefits; these types of deferred inflows of resources are described in Notes 6 and 7, respectively. Insurance and Risk Management The Town maintains insurance coverage for most risk including, but not limited to, property damage and personal injury liability. Judgments and claims are recorded when it is probable that an asset has been impaired or a liability has been incurred and the amount of loss can be reasonably estimated. No settlements exceeded insurance coverage in any of the past three years. Vacation, Sick Leave, and Compensatory Absences Town employees are granted vacation, sick leave, and other leave benefits as defined in agreements between the Town and employee representative units. Limited amounts of leave time may be accumulated up to 40 hours and the cost, therefore, is recognized when payment is made to employees. In the event of termination, an employee is entitled to payment for accumulated vacation, unused compensatory absences, and one half of accumulated sick leave. Equity Classifications - Governmental Activities and Fiduciary Fund Equity is classified as net position and displayed in three components:  Net Investment in Capital Assets - 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. TOWN OF CORTLANDVILLE NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2020 18 Note 1 Summary of Significant Accounting Policies - Continued Equity Classifications - Governmental Activities and Fiduciary Fund - Continued  Restricted - Consists of resources 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 - Consists of all other resources which do not meet the definition of "restricted" or "net investment in capital assets." Equity Classifications - Governmental Funds The Town follows GASB Statement No. 54, which reports 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 endowment 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.  Committed - Consists of amounts subject to a purpose constraint imposed by formal action of the government’s highest level of decision-making authority prior to the end of the fiscal year and 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 Funds. In funds other than the General Funds, assigned fund balance represents the residual amount of fund balance.  Unassigned - Represents the residual classification of the government’s General Funds and could report a surplus or deficit. In funds other than the General Funds, the unassigned classification should only be used to report a deficit balance resulting from overspending amounts restricted, committed, or assigned for specific purposes. TOWN OF CORTLANDVILLE NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2020 19 Note 1 Summary of Significant Accounting Policies - Continued Equity Classifications - Governmental Funds - Continued The Town Council has not adopted any resolutions to commit or assign fund balance. Currently, fund balances are assigned by the Town Clerk for encumbrances and the board, by resolution, approves fund balance appropriations for next year’s budget. Town management applies expenditures against nonspendable fund balance, restricted fund balance, committed fund balance, assigned fund balance, and unassigned fund balance. Interfund Activity Interfund activity is reported as loans, services provided, reimbursements, or transfers. Loans are reported as interfund receivables and payables as appropriate and are subject to elimination upon consolidation. Services provided, deemed to be at market or near market rates, are treated as revenues and expenditures/expenses. Reimbursements occur when one fund incurs a cost, charges the appropriate benefiting fund, and reduces its related cost as a reimbursement. All other interfund transactions are treated as transfers. Transfers between Governmental Funds are netted as part of the reconciliation to the Government- wide financial statements. Revenues Substantially all governmental fund revenues are accrued. Property tax receivables expected to be received later than 60 days after year end are deferred. In applying GASB Statement No. 33 to grant revenues, the provider recognizes liabilities and expenses and the recipient recognizes receivables and revenue when the applicable eligibility requirements, including time requirements, are met. Resources transmitted before the eligibility requirements are met are reported as advances by the provider and unearned revenue by the recipient. Restricted Ressources When an expense is incurred for purposes for which both restricted and unrestricted net resources are available, it is the Town’s policy to apply restricted funds before unrestricted funds, unless otherwise prohibited by legal requirements. Use of Estimates The presentation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. TOWN OF CORTLANDVILLE NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2020 20 Note 1 Summary of Significant Accounting Policies - Continued Future Changes in Accounting Standards  GASB Statement No. 87, “Leases,” effective for the year ending December 31, 2022.  GASB has issued Statement No. 89, “Accounting for Interest Cost Incurred Before the End of a Construction Period,” effective for the year ending December 31, 2022.  GASB has issued Statement No. 90, “Majority Equity Interests - an amendment of GASB Statements No. 14 and No. 61,” effective for the year ending December 31, 2021.  GASB has issued Statement No. 91, “Conduit Debt Obligations,” effective for the year ending December 31, 2023.  GASB Statement No. 92, “Omnibus 2020,” effective for the year ending December 31, 2022. The Town will evaluate the impact each of these pronouncements may have on its financial statements and will implement them as applicable and material. Note 2 Cash and Investments The Town's investment policies are governed by state statutes. In addition, the Town has its own written investment policy. The Town of Cortlandville's monies must be deposited in Federal Deposit Insurance Corporation (FDIC) insured commercial banks or trust companies located within the state. The Town Supervisor is authorized to use demand accounts and certificates of deposit. Permissible investments include obligations of the U.S. Treasury and U.S. Agencies, repurchase agreements, and obligations of New York State or its localities. Collateral is required for demand and time deposits and certificates of deposit at 105% of all deposits 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. The written investment policy requires repurchase agreements to be purchased from banks located within the state and underlying securities must be obligations of the Federal Government. Underlying securities 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, New York State statutes govern the Town’s investment policies, as discussed previously. TOWN OF CORTLANDVILLE NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2020 21 Note 2 Cash and Investments - Continued GASB 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 $6,315,918 are either insured or collateralized with securities held by the pledging financial institution in the Town’s name. Restricted Cash Total restricted cash of $1,261,635 is composed of $879,762 reserved for capital purposes, $80,594 reserved for insurance, $93,043 for community development, $130,660 reserved for debt, $1,646 for park improvements, and $75,930 reserved for retirement contributions. Note 3 Property Taxes At December 31, 2020, total real property taxes receivable was $28,333. No allowance for uncollectible taxes has been reported, as all property taxes are deemed collectible. Note 4 Other Receivables Other receivables at December 31, 2020 were as follows: Description Amount Highway - Parttown Assessments (952)$ Water Fund Rents 207,808 Sewer Fund Rents 236,353 Total 443,209$ TOWN OF CORTLANDVILLE NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2020 22 Note 5 Capital Assets A summary of changes in capital assets at December 31, 2020 is as follows: Deletions/ Balance at Governmental Activities Additions Reclassifications 12/31/2020 Non-Depreciable Capital Assets: Land 1,220,406$ -$ -$ 1,220,406$ Total Non-Depreciable Capital Assets 1,220,406 - - 1,220,406 Depreciable Capital Assets: Buildings 9,084,690 277,504 - 9,362,194 Improvements 6,193,604 149,822 - 6,343,426 Machinery and Equipment 5,673,514 438,998 (112,291) 6,000,221 Infrastructure 18,457,508 - - 18,457,508 Total Depreciable Capital Assets 30,324,626 866,324 (112,291) 40,163,349 Total Historical Cost 31,545,032 866,324 (112,291) 41,383,755 Less Accumulated Depreciation: Buildings 2,035,205 215,919 - 2,251,124 Improvements 1,476,019 311,152 - 1,787,171 Machinery and Equipment 4,335,924 341,573 (88,262) 4,589,235 Infrastructure 12,464,401 286,148 - 12,750,549 Total Accumulated Depreciation 20,311,549 1,154,792 (88,262) 21,378,079 Governmental Activities Capital Assets, Net 20,318,173$ (288,468)$ (24,029)$ 20,005,676$ Balance at 12/31/19 Depreciation expense was charged to functions as follows: General Governmental Support 72,640$ Transportation 351,026 Culture and Recreation 207,300 Home and Community Services 523,826 Total 1,154,792$ TOWN OF CORTLANDVILLE NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2020 23 Note 6 Pension Obligations - New York State and Local Employees’ Retirement System (ERS) (the System) Plan Descriptions and Benefits Provided Employees’ Retirement System (ERS) The Town participates in the New York State and Local Employees’ Retirement System (ERS). This is a cost-sharing multiple-employer retirement system. The System provides retirement benefits as well as death and disability benefits. The net position of the System is held in New York State Common Retirement Fund (the Fund), which was established to hold all net assets and record changes in plan net position allocated to the System. The Comptroller of the New York State serves as the trustee of the Fund and is the administrative head of the System. System benefits are established under the provisions of the New York State Retirement and Social Security Law (RSSL). Once a public employer elects to participate in the System, the election is irrevocable. The New York State Constitution provides that pension membership is a contractual relationship and plan benefits cannot be diminished or impaired. Benefits can be changed for future members only by enactment of a state statute. The Town also participates in the Public Employees’ Group Life Insurance Plan (GLIP), which provides death benefits in the form of life insurance. The System is included in the state’s financial report as a pension trust fund. That report, including information with regard to benefits provided, may be found at www.osc.state.ny.us/retire/publications/index.php or obtained by writing to the New York State and Local Retirement System, 110 State Street, Albany, New York 12244. The System is noncontributory except for employees who joined after July 27, 1976, who contribute 3% of their salary for the first ten years of membership, and employees who joined on or after January 1, 2010, who generally contribute 3.0 to 3.5% of their salary for their entire length of service. In addition, employee contribution rates under ERS Tier VI vary based on a sliding salary scale. For ERS, the Comptroller annually certifies the actuarially determined rates expressly used in computing the employers’ contributions based on salaries paid during the System’s fiscal year ending March 31. Summary of Significant Accounting Policies The System’s financial statements, from which the System’s fiduciary respective net position is determined, are prepared using the accrual basis of accounting. Member contributions are recognized when due and the employer has a legal requirement to provide the contributions. Benefits and refunds are recognized when due and payable in accordance with the terms of the plan. Plan investments are reported at fair value. For detailed information on how investments are valued, please refer to the System’s annual reports. Contributions Contributions for the current year and two preceding Plan years were equal to 100% of the contributions required, and were as follows: 2020 2019 2018 ERS $ 278,538 $ 276,192 $ 281,685 TOWN OF CORTLANDVILLE NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2020 24 Note 6 Pension Obligations - New York State and Local Employees’ Retirement System (ERS) (the System) - Continued Pension Liabilities, Pension Expense, and Deferred Outflows of Resources, and Deferred Inflows of Resources Related to Pensions At December 31, 2020, the Town reported the following liability for its proportionate share of the net pension liability for the System. The net pension liability was measured as of March 31, 2020. The total pension liability used to calculate the net pension liability was determined by an actuarial valuation. The Town’s proportionate share of the net pension liability was based on a projection of the Town’s long-term share of contributions to the System relative to the projected contributions of all participating members, actuarially determined. This information was derived from reports provided to the Town by the ERS System. ERS Actuarial Valuation Date April 1, 2019 Net Pension Liability 26,480,579,097$ Town's Proportionate Share of the Plan's Total Net Pension Liability 1,779,626 Town's Share of the Plan's Total Net Pension Liability 0.0067205% For the year ended December 31, 2020, the Town recognized pension expense of $288,866 for ERS in the financial statements. At December 31, 2020, the Town reported deferred outflows of resources and deferred inflows of resources related to the pensions from the following sources: Deferred Outflows Deferred Inflows of Resources of Resources Differences Between Expected and Actual Experience 104,738$ -$ Changes of Assumptions 35,833 30,941 Net Differences Between Projected and Actual Earnings on Pension Plan Investments 912,323 - Changes in Proportion and Differences Between the Town’s Contributions and Proportionate Share of Contributions 65,475 7,432 Town’s Contributions Subsequent to the Measurement Date 217,231 - Total $ 1,335,600 $ 38,373 TOWN OF CORTLANDVILLE NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2020 25 Note 6 Pension Obligations - New York State and Local Employees’ Retirement System (ERS) (the System) - Continued Pension Liabilities, Pension Expense, Deferred Outflows of Resources, and Deferred Inflows of Resources Related to Pensions - Continued Town contributions subsequent to the measurement date, reported as deferred outflows of resources, will be recognized as a reduction of the net pension liability in the year ending December 31, 2021. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows: Year Ending ERS 2021 189,638$ 2022 274,626 2023 342,833 2024 272,899 2025 - Thereafter - Actuarial Assumptions The total pension liability as of the measurement date was determined by using an actuarial valuation as noted in the table below, with update procedures used to roll forward the total pension liability to the measurement date. The actuarial valuations used the following actuarial assumptions: ERS Measurement Date March 31, 2020 Actuarial Valuation Date April 1, 2019 Investment Rate of Return 6.8% Salary Increases 4.2% Cost of Living Adjustments 1.3% Inflation Rate 2.5% Annuitant mortality rates are based on April 1, 2010 - March 31, 2015, System experience with adjustments for mortality improvements based on the Society of Actuaries’ Scale MP-2018. The actuarial assumptions used in the April 1, 2019, valuation are based on the results of an actuarial experience study for the period April 1, 2010 - March 31, 2015. TOWN OF CORTLANDVILLE NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2020 26 Note 6 Pension Obligations - New York State and Local Employees’ Retirement System (ERS) (the System) - Continued Actuarial Assumptions - Continued The 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 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 estimates of the arithmetic real rates of return for each major asset class included in the target asset allocation are summarized below: ERS Measurement Date March 31, 2020 Asset Type: Domestic Equities 4.1% International Equities 6.2% Real Estate 5.0% Private Equity/Alternative Investments 6.8% Absolute Return Strategies 3.3% Opportunistic Portfolio 4.7% Real Assets 6.0% Cash 0.0% Inflation-Indexed Bonds 0.5% Mortgages and Bonds 0.8% Discount Rate The discount rate used to calculate the total pension liability was 6.8%. The projection of cash flows used to determine the discount rate assumes that contributions from plan members will be made at the current contribution rates and contributions from employers will be made at statutorily required rates, actuarially. Based on the assumptions, the System’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. The following presents the Town’s proportionate share of the net pension liability calculated using the discount rate of 6.8%, as well as what the Town’s proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1 percentage point lower or higher than the current rate: Current 1% Decrease Assumption (5.8%) (6.8%) Town’s Proportionate Share of the 3,266,117$ 1,779,626$ 410,562$ Net Pension Liability ERS 1% Increase (7.8%) TOWN OF CORTLANDVILLE NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2020 27 Note 6 Pension Obligations - New York State and Local Employees’ Retirement System (ERS) - Continued Pension Plan Fiduciary Net Position The components of the current-year net pension liability of the employers as of the respective valuation dates were as follows: Dollars in Thousands ERS Valuation Date March 31, 2020 Employers' Total Pension Liability 194,596,261$ Plan Net Position (168,115,682) Employers’ Net Pension Liability 26,480,579$ Ratio of Plan Net Position to the Employers' Total Pension Liability 86.4% Payables to the Pension Plans For ERS, employer contributions are paid annually based on the System’s fiscal year which ends on March 31. Accrued retirement contributions as of December 31, 2020 represent the projected employer contribution for the period of April 1, 2020 through December 31, 2020 based on estimated ERS wages multiplied by the employer’s contribution rate, by tier. Accrued retirement contributions as of December 31, 2020 amounted to $-0-. Effect on Net Position Changes in the net pension liability and deferred outflows and inflows of resources for the year ended December 31, 2020 resulted in the following effect on net position: Beginning Ending Balance Change Balance ERS Net Pension Liability 450,179$ 1,329,447$ 1,779,626$ Deferred Outflows of Resources (473,707) (861,893) (1,335,600) Deferred Inflows of Resources 159,029 (120,656) 38,373 Total Effect on Net Position 135,501$ 346,898$ 482,399$ TOWN OF CORTLANDVILLE NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2020 28 Note 7 Other Postemployment Benefits Postemployment Benefits Other Than Pensions (OPEB) The Town follows GASB Statement No. 75, “Accounting and Financial Reporting for Postemployment Benefits Other than Pensions.” General Information about the OPEB Plan Plan Description - The Town provides medical and Medicare Part B benefits to retired employees and their eligible dependents. The benefits provided to employees upon retirement are based on provisions in various contracts that the Town has in place with different classifications of employees. The plan is a single-employer defined benefit healthcare plan administered by the Town. Article 11 of the State Compiled Statutes grants the authority to establish and amend benefit terms and financing requirements to the Town Board. No assets are accumulated in a trust that meets the criteria in paragraph 4 of GASB Statement No. 75. The Plan does not issue separate financial statements, as there are no assets legally segregated for the sole purpose of paying benefits under the plan. Benefits Provided - The Town provides healthcare benefits for eligible retirees and their spouses. Benefit terms are dependent on which contract each employee falls under. The specifics of each contract are on file at the Town offices and are available upon request. Employees Covered by Benefit Terms - At December 31, 2020, the following employees were covered by the benefit terms: Inactive Employees or Beneficiaries Currently Receiving Benefit Payments 22 Active Employees Fully Eligible for Benefits 40 Total 62 TOWN OF CORTLANDVILLE NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2020 29 Note 7 Other Postemployment Benefits - Continued Total OPEB Liability The Town’s total OPEB liability of $9,504,194 was measured as of January 1, 2020 and was determined by an actuarial valuation as of January 1, 2019. Actuarial Assumptions and Other Inputs - The total OPEB liability in the January 1, 2019 actuarial valuation was determined using the following actuarial assumptions and other inputs, applied to all periods included in the measurement unless otherwise specified: Single Discount Rate 2.7% Salary Scale 3.5% Inflation Rate 2.4% Healthcare Cost Trend Rate 7.5%, declining to 3.94% in 2079 Mortality rates were based on the RPH-2014 Mortality Table with generational mortality adjusted to 2006 using scale MP-2014 and projected forward with scale MP-2019. Turnover rates were based on the experience under the NYS and Local Retirement System, as reported in June 2019. Retirement rates were based on the experience under the New York State and Local Retirement System, as reported in June 2019. The actuarial assumptions used in the January 1, 2019 valuation were consistent with the requirements of GASB Statement No. 75 and Actuarial Standards of Practice (ASOPs). Total OPEB Liability Balance at December 31, 2019 7,472,722$ Changes for the Year Service Cost 249,163 Interest Cost 311,431 Changes of Benefit Terms - Differences Between Expected and Actual Experience - Changes in Assumptions or Other Inputs 1,722,944 Benefit Payments (252,066) 2,031,472 Balance at December 31, 2020 9,504,194$ TOWN OF CORTLANDVILLE NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2020 30 Note 7 Other Postemployment Benefits - Continued Total OPEB Liability - Continued Sensitivity of the total OPEB liability to changes in the discount rate - The following presents the total OPEB liability of the Town as well as what the Town’s total OPEB liability would be if it were calculated using a discount rate that is 1 percentage point lower or higher than the current discount rate: 1% Decrease (1.74%) Discount Rate (2.74%) 1% Increase (3.74%) Total OPEB Liability 11,156,695$ 9,504,194$ 8,188,528$ Sensitivity of the Total OPEB Liability to Changes in the Healthcare Cost Trend Rate - The following presents the total OPEB liability of the Town, as well as what the Town’s total OPEB liability would be if it were calculated using a healthcare cost trend rate that is 1 percentage point lower or higher than the current healthcare cost trend rate: Total OPEB Liability 7,982,719$ 9,504,194$ 11,463,168$ 1% Decrease Healthcare Cost Trend Rate 1% Increase For the year ended December 31, 2020, the Town recognized OPEB expense of $511,262. OPEB Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to OPEB At December 31, 2020, the Town reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources: Differences Between Expected and Actual Experience -$ 1,011,035$ Changes in Assumptions or Other Inputs 1,610,375 525,987 Contributions Subsequent to Measurement Date 258,816 - Total 1,869,191$ 1,537,022$ Deferred Outflows of Resources Deferred Inflows of Resources TOWN OF CORTLANDVILLE NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2020 31 Note 7 Other Postemployment Benefits - Continued OPEB Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to OPEB - Continued Town contributions subsequent to the measurement date, reported as deferred outflows of resources, will be recognized as a reduction of the OPEB liability in the year ending December 31, 2021. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized in pension expense as follows: Amount 2021 (49,332)$ 2022 (49,332) 2023 (100,466) 2024 156,764 2025 115,719 2026 and Thereafter - December 31, Fiscal Year Ending Current Year Activity The following is a summary of current year activity: Beginning Ending Balance Change Balance Other Postemployment Benefits Liability 7,472,722$ 2,031,472$ 9,504,194$ Deferred Outflows of Resources (547,612) (1,321,579) (1,869,191) Deferred Inflows of Resources 1,994,469 (457,447) 1,537,022 Total Effect on Net Position 8,919,579$ 252,446$ 9,172,025$ TOWN OF CORTLANDVILLE NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2020 32 Note 8 Short-Term Debt - Bond Anticipation Notes Notes issued in anticipation of proceeds from the subsequent sale of bonds are recorded as current liabilities of the funds that will actually receive the proceeds from the issuance of the bonds. Such notes may be classified as long-term debt when (1) the intention is to refinance the debt on a long-term basis, and (2) the intention can be substantiated through a post balance sheet issuance of long-term debt or by an acceptable financing agreement. State law requires that bond anticipation notes (BANs) issued for capital purposes be converted to long-term financing within five years after the original issue date. The Town issues BANs to finance capital improvements. Changes in short-term debt outstanding are as follows: Payable at Payable at 12/31/2019 Issued Redeemed 12/31/2020 Bond Anticipation Notes 3,000,000$ 3,000,000$ 3,155,000$ 2,845,000$ Interest expense on short-term debt for fiscal year 2020 was $90,000. BANs redeemed from appropriations totaled $155,000. Note 9 Long-Term Debt At December 31, 2020, the total outstanding indebtedness of the Town aggregated $9,914,000. Of this amount, $1,562,000 was subject to the constitutional debt limit and represented 2.20% of its debt limit. Serial Bonds and Notes The Town borrows money in order to acquire land or equipment or construct buildings and improvements. This enables the cost of these capital assets to be borne by the present and future taxpayers receiving the benefit of the capital assets. These long-term liabilities, which are full faith and credit debt of the local government, are recorded in the general Government- wide financial statements. The provision to be made in future budgets for capital indebtedness represents the amount exclusive of interest, authorized to be collected in future years from taxpayers and others for liquidation of the long-term liabilities. TOWN OF CORTLANDVILLE NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2020 33 Note 9 Long-Term Debt - Continued Debt Maturity Schedule The following is a summary of bonds outstanding at December 31, 2020 with corresponding maturity schedules: Description of Issue Date Issued Original Amount Interest Rate Final Maturity Balance Outstanding Polkville Water Improvements 2012 980,000$ 2.00%2050 896,000$ Town Hall Building 2007 275,000 4.57%2026 165,000 Town Hall Expansion 2006 325,000 4.57%2026 195,000 NYSEFC Sewer Improvements 2005 1,475,000 2.48%2035 1,225,000 Route 13 Sewer Project 2016 2,754,000 1.63%2053 2,528,000 Public Improvements 2017 1,675,000 2-3.00%2032 1,385,000 Highway Garage Project 2018 750,000 3.95%2038 675,000 Total 7,069,000$ Interest paid on certain Serial Bonds varies from year to year, in accordance with the interest rates specified in bond agreements. The following is a summary of maturing debt service requirements for general obligation bonds and notes: Bonds Bonds Year Principal Interest Total 2021 342,500$ 165,683$ 508,183$ 2022 349,500 153,641 503,141 2023 355,500 144,496 499,996 2024 361,500 135,210 496,710 2025 368,500 125,724 494,224 2026-2030 1,702,500 492,732 2,195,232 2031-2035 1,417,500 284,724 1,702,224 2036-2040 652,500 165,858 818,358 2041-2045 589,000 108,367 697,367 2046-2050 640,000 55,349 695,349 2051-2053 290,000 9,474 299,474 Total 7,069,000$ 1,841,258$ 8,910,258$ TOWN OF CORTLANDVILLE NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2020 34 Note 9 Long-Term Debt - Continued Changes in Indebtedness The following is a summary of changes in the Town’s indebtedness for the year ended December 31, 2020: Balance Maturities/Balance Governmental Activities 12/31/2019 Payments 12/31/2020 General Obligation Bonds 7,531,500$ -$ (462,500)$ 7,069,000$ 342,500$ Total 7,531,500$ -$ (462,500)$ 7,069,000$ 342,500$ Amount Due Within One Year New Issues/ Additions Interest Paid on Short-Term and Long-Term Debt 264,040$ Prior Year Accrued Interest (148,881) Current Year Accrued Interest 96,616 Interest Expense 211,775$ Note 10 Interfund Balances During the course of normal operations, the Town has numerous transactions between funds including expenditures and transfers of resources primarily to provide services. The Governmental Funds financial statements generally reflect such transactions as transfers. The Town also loans resources between funds for the purpose of mitigating the effects of transient cash flow issues. All interfund payables are expected to be repaid within one year. Interfund balances at December 31, 2020 are as follows: Interfund Interfund Interfund Interfund Receivables Payables Revenue Expense General Fund - Townwide -$ 28,333$ 167,548$ -$ General Fund - Parttown - - - - Water Fund 697,450 - - 69,812 Sewer Fund 13,350 - - 97,736 Special Grant Fund - - - 84,292 Capital Projects Fund - 682,467 84,292 - Total 710,800$ 710,800$ 251,840$ 251,840$ TOWN OF CORTLANDVILLE NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2020 35 Note 11 Reconciliation Between Restricted Fund Balance and Restricted Net Position Restricted Fund Balance in Governmental Fund Financial Statements 1,561,635$ Reconciling Item: Special Grant Fund Deferred Inflows of Resources 261,724 Restricted Net Position in the Government-Wide Financial Statements 1,823,359$ Note 12 Fund Balance Detail At December 31, 2020, nonspendable, restricted and assigned fund balance in the governmental funds was as follows: General General Highway Total Townwide Parttown Parttown Water Sewer Special Non-Major Fund Fund Fund Fund Fund Grant Fund Fund Nonspendable Prepaid Expenses 85,840$ 3,860$ 48,390$ 17,725$ 14,008$ -$ -$ Total Nonspendable Fund Balance 85,840$ 3,860$ 48,390$ 17,725$ 14,008$ -$ -$ Restricted Unemployment Insurance Reserve 80,594$ -$ -$ -$ -$ -$ -$ Retirement Contribution Reserve 30,116 19,018 353 13,033 13,410 - - Reserve for Debt 130,660 - - - - - - Other - 1,646 - - - 93,043 - Capital Reserve - - 300,080 419,956 459,726 - - Total Restricted Fund Balance 241,370$ 20,664$ 300,433$ 432,989$ 473,136$ 93,043$ -$ Assigned Appropriated for Next Year’s Budget 517,667$ 95,874$ 1,000,000$ -$ -$ -$ 275,062$ Encumbrance - - 197,624 - - - - Remaining Fund Balance - - 1,211,791 1,640,378 1,023,160 - 244 Total Assigned Fund Balance 517,667$ 95,874$ 2,409,415$ 1,640,378$ 1,023,160$ -$ 275,306$ TOWN OF CORTLANDVILLE NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2020 36 Note 13 Restricted Fund Balances Portions of fund balance are restricted and are not available for current expenditures as reported in the Governmental Funds Balance Sheet. The balances and activity for the year ended December 31, 2020 of the Governmental Funds reserves were as follows: Beginning Interest Ending Balance Additions Earned Appropriated Balance Unemployment Insurance Reserve 82,846$ -$ 16$ (2,268)$ 80,594$ Retirement Contribution Fund Reserve 75,919 - 11 - 75,930 Park Improvements 1,646 - - - 1,646 Capital Reserve 1,088,744 90,800 218 - 1,179,762 Reserve for Debt 130,660 - - - 130,660 Special Grant Fund 141,051 141,781 - (189,789) 93,043 Total Restricted Fund Balance 1,520,866$ 232,581$ 245$ (192,057)$ 1,561,635$ Reserved Fund Balance Note 14 Contingencies The Town is exposed to various risks of loss related 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 for these risks have not exceeded commercial insurance coverage for the past three years. The Town has several tax review proceedings pending. All of these proceedings are currently in negotiation and expected to be resolved; no adjustments have been made for potential refunds. Note 15 Environmental Liability The Town was designated a potentially responsible party by the New York State Department of Environmental Conservation (NYSDEC) for an inactive waste site located in the Town. The site was closed using grant funds at no cost to the Town. Monitoring of the site is estimated to cost $1,250,000 over the next 25 years. In 2017, the Board authorized the Supervisor to sign an Order on Consent and Administrative Settlement received by the NYSDEC that requires the Town to undertake future costs stemming from the monitoring and maintenance of the site. No liability has been recorded in the financial statements due to the uncertainty regarding the amount for which the Town will be responsible. TOWN OF CORTLANDVILLE NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2020 37 Note 16 Stewardship, Compliance and Accountability Deficit Fund Balance At December 31, 2020, the Capital Projects Fund had a deficit fund balance of $3,495,939. This deficit will be eliminated as short-term debt is converted to long-term debt and other sources of funds. Deficit Net Position The Town reported an unrestricted net deficit of $3,593,216 at December 31, 2020. This is primarily due to the reporting of the OPEB liability and is not expected to be eliminated in the near term. Note 17 Tax Abatements For the year ended December 31, 2020, the Town was subject to tax abatements negotiated by the Cortland County Industrial Development Agency (CCIDA). Abatement agreements entered into by CCIDA reduce property taxes collected by the Town. Information relevant to disclosure of the program for the year ended December 31, 2020 is as follows: Amount of Tax Abatement Program Taxes Abated Economic Development: Real Property Tax 18,709$ Total 18,709$ Note 18 Subsequent Event On January 28, 2021, the Town renewed a $2,685,000 BAN due January 28, 2022 at an interest rate of .42%. Note 19 Economic Uncertainty - COVID-19 In March 2020, the COVID-19 outbreak was declared to be a pandemic. Actions taken around the world to help mitigate the spread of the coronavirus include restrictions on travel, quarantines in certain areas, and forced closures of certain types of public places and businesses. Coronavirus and actions taken to mitigate it have had and are expected to continue to have an adverse impact on the economies and financial markets of many countries, including the area in which the Town exists. While it is unknown how long these conditions will last and what the complete financial effect will be, the Town expects disruptions to businesses and residents, which could negatively impact operating results in future periods. TOWN OF CORTLANDVILLE BUDGETARY COMPARISON SCHEDULE GENERAL TOWNWIDE FUND - NON-U.S. GAAP BUDGET BASIS FOR THE YEAR ENDED DECEMBER 31, 2020 See Notes to Required Supplementary Information 38 Original Final Budget Budget Actual Variance REVENUES Real Property Taxes 1,440,261$ 1,440,261$ 1,440,261$ -$ Real Property Tax Items 48,378 48,378 57,572 9,194 Nonproperty Tax Items 110,000 110,000 109,580 (420) Departmental Income 42,250 42,250 62,251 20,001 Use of Money and Property 4,100 4,100 3,790 (310) Licenses and Permits 10,500 10,500 12,586 2,086 Fines and Forfeitures 200,000 200,000 141,244 (58,756) Miscellaneous Local Sources - - 2,203 2,203 State Sources 141,000 141,000 218,543 77,543 Federal Sources 247 247 214 (33) Total Revenues 1,996,736 1,996,736 2,048,244 51,508 EXPENDITURES General Governmental Support 1,343,301 1,354,282 1,215,411 138,871 Public Safety 76,500 76,500 64,932 11,568 Transportation 310,480 310,480 257,454 53,026 Economic Assistance and Opportunity 21,000 22,207 21,500 707 Culture and Recreation 412,730 412,730 79,089 333,641 Home and Community Services 34,000 43,731 36,619 7,112 Employee Benefits 513,412 541,629 526,167 15,462 Debt Service (Principal and Interest)385,468 390,468 390,468 - Total Expenditures 3,096,891 3,152,027 2,591,640 560,387 Excess of Revenues (Expenditures) (1,100,155) (1,155,291) (543,396) 611,895 OTHER FINANCING SOURCES (USES) Proceeds of Obligations 350,000 350,000 - (350,000) Interfund Transfers In 167,548 167,548 167,548 - Total Other Financing Sources (Uses)517,548 517,548 167,548 (350,000) Excess of Revenues and Other Financing Sources Over Expenditures and Other Financing (Uses)(582,607) (637,743) (375,848) 261,895$ Appropriated Fund Balance 582,607 637,743 Net Change in Fund Balance -$ -$ (375,848) Fund Balance, Beginning 1,225,893 Fund Balance, Ending 850,045$ TOWN OF CORTLANDVILLE BUDGETARY COMPARISON SCHEDULE GENERAL PARTTOWN FUND - NON-U.S. GAAP BUDGET BASIS FOR THE YEAR ENDED DECEMBER 31, 2020 See Notes to Required Supplementary Information 39 Original Final Budget Budget Actual Variance REVENUES Real Property Taxes 79,544$ 79,544$ 79,544$ -$ Nonproperty Tax Items 250,000 250,000 250,000 - Departmental Income 73,200 73,200 212,033 138,833 Use of Money and Property 100 100 113 13 State Sources 18,000 18,000 18,538 538 Total Revenues 420,844 420,844 560,228 139,384 EXPENDITURES General Governmental Support 70,743 69,200 61,010 8,190 Public Health 3,000 3,000 2,211 789 Culture and Recreation 176,700 178,243 125,833 52,410 Home and Community Services 264,306 264,306 174,738 89,568 Employee Benefits 106,095 106,095 86,747 19,348 Total Expenditures 620,844 620,844 450,539 170,305 Excess of Revenues (Expenditures) (200,000) (200,000) 109,689 309,689 Appropriated Fund Balance 200,000 200,000 Net Change in Fund Balance -$ -$ 109,689 Fund Balance, Beginning 682,681 Fund Balance, Ending 792,370$ TOWN OF CORTLANDVILLE BUDGETARY COMPARISON SCHEDULE HIGHWAY PARTTOWN - NON-U.S. GAAP BUDGET BASIS FOR THE YEAR ENDED DECEMBER 31, 2020 See Notes to Required Supplementary Information 40 Original Final Budget Budget Actual Encumbrances Variance REVENUES Real Property Taxes 455,577$ 455,577$ 456,131$ -$ 554$ Nonproperty Tax Items 2,050,000 2,050,000 2,277,104 - 227,104 Use of Money and Property 150 150 449 - 299 Sale of Property and Compensation for Loss - - 2,753 - 2,753 Miscellaneous Local Sources - - 5,332 - 5,332 State Sources 243,481 243,481 87,133 - (156,348) Total Revenues 2,749,208 2,749,208 2,828,902 - 79,694 EXPENDITURES Transportation 3,169,539 3,169,539 1,850,480 197,624 1,121,435 Employee Benefits 529,669 529,669 465,031 - 64,638 Total Expenditures 3,699,208 3,699,208 2,315,511 197,624 1,186,073 Excess of Revenues (Expenditures) (950,000) (950,000) 513,391 (197,624)$ 1,265,767$ Budgetary Provisions for Other Uses (50,000) - Appropriated Fund Balance 1,000,000 950,000 Net Change in Fund Balance -$ -$ 513,391 Fund Balance, Beginning 2,244,847 Fund Balance, Ending 2,758,238$ TOWN OF CORTLANDVILLE BUDGETARY COMPARISON SCHEDULE WATER FUND - NON-U.S. GAAP BUDGET BASIS FOR THE YEAR ENDED DECEMBER 31, 2020 See Notes to Required Supplementary Information 41 Original Final Budget Budget Actual Variance REVENUES Real Property Taxes 192,194$ 192,194$ 192,194$ -$ Departmental Income 839,000 839,000 1,085,226 246,226 Use of Money and Property 100 100 207 107 Sale of Property and Compensation for Loss 7,000 7,000 1,775 (5,225) Total Revenues 1,038,294 1,038,294 1,279,402 241,108 EXPENDITURES General Governmental Support 10,000 10,000 8,327 1,673 Home and Community Services 636,342 1,005,447 820,508 184,939 Employee Benefits 114,946 114,946 90,080 24,866 Debt Service (Principal and Interest)192,194 201,154 201,154 - Total Expenditures 953,482 1,331,547 1,120,069 211,478 Excess of Revenues (Expenditures) 84,812 (293,253) 159,333 452,586 OTHER FINANCING SOURCES (USES) Interfund Transfers (Out)(84,812) (69,812) (69,812) - Total Other Financing Sources (Uses)(84,812) (69,812) (69,812) - Excess of Revenues and Other Financing Sources Over Expenditures and Other Financing (Uses)-(363,065) 89,521 452,586$ Appropriated Fund Balance - 363,065 Net Change in Fund Balance -$ -$ 89,521 Fund Balance, Beginning 2,001,571 Fund Balance, Ending 2,091,092$ TOWN OF CORTLANDVILLE BUDGETARY COMPARISON SCHEDULE SEWER FUND - NON-U.S. GAAP BUDGET BASIS FOR THE YEAR ENDED DECEMBER 31, 2020 See Notes to Required Supplementary Information 42 Original Final Budget Budget Actual Variance REVENUES Real Property Taxes 294,980$ 294,980$ 294,980$ -$ Departmental Income 987,325 987,325 1,251,823 264,498 Intergovernmental Charges 726 726 726 - Use of Money and Property 100 100 229 129 Sale of Property and Compensation for Loss 7,000 7,000 1,775 (5,225) Total Revenues 1,290,131 1,290,131 1,549,533 259,402 EXPENDITURES General Governmental Support 10,000 2,824 - 2,824 Home and Community Services 814,157 950,402 902,253 48,149 Employee Benefits 52,520 52,520 24,900 27,620 Debt Service (Principal and Interest)289,918 289,918 289,918 - Total Expenditures 1,166,595 1,295,664 1,217,071 78,593 Excess of Revenues (Expenditures) 123,536 (5,533) 332,462 337,995 OTHER FINANCING SOURCES (USES) Interfund Transfers (Out)(123,536) (97,736) (97,736) - Total Other Financing Sources (Uses) (123,536) (97,736) (97,736) - Excess of Revenues and Other Financing Sources Over Expenditures and Other Financing (Uses)-(103,269) 234,726 337,995$ Appropriated Fund Balance - 103,269 Net Change in Fund Balance -$ -$ 234,726 Fund Balance, Beginning 1,275,578 Fund Balance, Ending 1,510,304$ TOWN OF CORTLANDVILLE SCHEDULE OF CHANGES IN THE TOWN'S TOTAL OPEB LIABILITY AND RELATED RATIOS FOR THE LAST 10 FISCAL YEARS See Notes to Required Supplementary Information 43 2020 2019 2018 Service Cost 249,163$ 318,761$ 305,831$ Interest Cost 311,431 333,875 332,908 Changes of Benefit Terms - - - Differences Between Expected and Actual Experience (1,612,841) - Changes in Assumptions or Other Inputs 1,722,944 (839,075) 468,886 Benefit Payments (252,066) (229,789) (214,202) 2,031,472 (2,029,069) 893,423 Total OPEB Liability - Beginning 7,472,722 9,501,791 8,608,368 Total OPEB Liability - Ending 9,504,194$ 7,472,722$ 9,501,791$ Covered Employee Payroll 2,317,975$ 1,542,739$ 2,133,472$ Liability as a % of Covered Employee Payroll 410%484%445% *Information for periods prior to implementation of GASB Statement No. 75 will be completed for each year going forward as it becomes available. 43a 2017 2016 2015 2014 2013 2012 2011 $ *$ *$ *$ *$ *$ *$ * ******* ******* ******* ******* ******* ******* ******* 8,608,368$ $ *$ *$ *$ *$ *$ * $ *$ *$ *$ *$ *$ *$ * TOWN OF CORTLANDVILLE SCHEDULE OF THE TOWN'S CONTRIBUTIONS NYSLR PENSION PLAN FOR THE YEARS ENDED DECEMBER 31, See Notes to Required Supplementary Information 44 2020 2019 2018 Contractually Required Contribution 278,538$ 276,192$ 281,685$ Contributions in Relation to the Contractually Required Contribution (278,538)(276,192) (281,685) Contribution Deficiency (Excess)- - - Town's Covered Employee Payroll 2,019,083 1,948,061 1,882,997 Contributions as a Percentage of Covered Employee Payroll 13.80%14.18% 14.96% * Information Not Available 44a 2017 2016 2015 2014 2013 2012 2011 275,760$ 354,575$ 374,517$ 354,583$ 329,969$ 330,497$ 205,690$ (275,760) (354,575) (374,517) (354,583) (329,969) (330,497) (205,690) - - - - - - - 1,841,476 1,824,459 1,886,537 1,841,761 1,789,298 1,343,189 * 14.97% 19.43% 19.85% 19.25% 18.44% 24.61% * TOWN OF CORTLANDVILLE SCHEDULE OF THE TOWN'S PROPORTIONATE SHARE OF THE NET PENSION LIABILITY FOR THE YEARS ENDED DECEMBER 31, See Notes to Required Supplementary Information 45 2020 2019 2018 2017 2016 2015 Town's Proportion of the Net Pension Liability 0.0067205%0.0063537%0.0063251%0.0064701%0.0069912%0.0067653% Town's Proportionate Share of the Net Pension Liability 1,779,626$ 450,179$ 204,139$ 607,946$ 1,122,102$ 228,548$ Town's Covered Employee Payroll 2,019,083 1,948,061 1,882,997 1,841,476 1,824,459 1,886,537 Town's Proportionate Share of the Net Pension Liability as a Percentage of its Covered Employee Payroll 88.1%23.1%10.8%33.0%61.5%12.1% Plan Fiduciary Net Position as a Percentage of the Total Pension Liability 86.4%96.3%98.2%90.7%90.7%97.9% TOWN OF CORTLANDVILLE NOTES TO REQUIRED SUPPLEMENTARY INFORMATION DECEMBER 31, 2020 46 Note 1 Budget Basis of Accounting Except as indicated below, budgets are adopted annually on a basis consistent with accounting principles generally accepted in the United States of America. Appropriations authorized for the current year are increased by the amount of encumbrances carried forward from the prior year. Encumbrances are not considered a disbursement in the financial plan or an expenditure in U.S. GAAP-based financial statements. Encumbrances reserve a portion of the applicable appropriation for purchase orders, contracts, and other commitments not expended at year end, thereby ensuring that appropriations are not exceeded. Note 2 Budget Policies Budget policies are as follows:  Annual operating budgets are maintained for the following Governmental Fund Types: o General Funds o Special Revenue Funds (Highway, Water, and Sewer Funds) The Special Grant Fund does not have an annual budget because individual projects have separate budgets, which are not prepared on an annual basis. No later than September 15, the budget officer submits a tentative budget to the Town Board for the fiscal year commencing the following January 1. The tentative budget includes proposed expenditures and the proposed means of financing for all funds. After public hearings are conducted to obtain taxpayer comments, no later than October 15, the governing board adopts the budget. Annual budgets adopted represent the legal limit on expenditures for that period. At the end of each year unexpended, unencumbered appropriations lapse. Encumbered appropriations do not lapse and are carried forward. Expenditures may not legally exceed appropriations at the fund level. All modifications of the budget must be approved by the Town Council. The Town Council may increase the appropriations budget during the fiscal year where additional revenues or expenditures not involved in the original adopted budget are identified. Note 3 Reconciliation of the Budget Basis to U.S. GAAP No adjustment is necessary to convert the excess of revenues and other sources over expenditures and other uses on the U.S. GAAP basis to the budget basis. Encumbrances, if present, are presented in a separate column and are not included in the actual results at December 31, 2020. TOWN OF CORTLANDVILLE NOTES TO REQUIRED SUPPLEMENTARY INFORMATION DECEMBER 31, 2020 47 Note 4 Schedule of Changes in the Town’s Total OPEB Liability and Related Ratios Changes in assumptions and other inputs reflect the effects of changes in the discount rate each period. The following are the discount rates in each period: 2020 - 2.74% 2019 - 4.10% 2018 - 3.44% Note 5 Schedule of the Town’s Proportionate Share of the Net Pension Liability The Schedule of the Town’s Proportionate Share of the Net Pension Liability, required supplementary information, presents six years of information. This schedule will present ten years of information as it becomes available from the pension plans. Note 6 Schedule of the Town’s Contributions - NYSLRS Pension Plans and Schedule of the Town’s Proportionate Share of the Net Pension Liability The Schedule of the Town’s Contributions presents partial information and will present ten years of information as it becomes available. NYSLRS Changes in Benefit Terms There were no significant legislative changes in benefits. Changes of Assumptions There were changes in the economic (investment rate of return, inflation, COLA, and salary scales) and demographic (pensioner mortality and active member decrements) assumptions used in the April 1, 2019 actuarial valuation. TOWN OF CORTLANDVILLE NOTES TO REQUIRED SUPPLEMENTARY INFORMATION DECEMBER 31, 2020 48 Note 6 Schedule of the Town’s Contributions - NYSLRS Pension Plans and Schedule of the Town’s Proportionate Share of the Net Pension Liability - Continued NYSLRS - Continued Methods and Assumptions Used in Calculations of Actuarially Determined Contributions The April 1, 2019 actuarial valuation determines the employer rates for contributions payable in fiscal year 2020. The following actuarial methods and assumptions were used: Actuarial Cost Method Inflation Salary Scale Investment Rate of Return Cost of Living The System is funded using the Aggregate Cost Method. All unfunded actuarial liabilities are evenly amortized (as a percentage of projected pay) over the remaining worker lifetimes of the valuation cohort. Asset Valuation Period Five-year phase in deferred recognition of each year’s net investment income/loss in excess of (or less than) 7.5% at a rate of 20% per year, until fully recognized after five years. For fiscal years ending prior to June 30, 2015, realized and unrealized appreciation in excess of (or less than) the assumed inflationary rate of 3.0% is subject to the five-year phase in. 1.3% annually. 2.5% 3.8% in ERS, indexed by service. 7.0% compounded annually, net of investment expenses, including inflation. INDEPENDENT AUDITORS’ REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Town Council Town of Cortlandville Cortland, New York We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of governmental activities, each major fund, and the aggregate remaining fund information of the Town of Cortlandville, (the Town), as of and for the year ended December 31, 2020, and the related notes to the financial statements, which collectively comprise the Town’s basic financial statements, and have issued our report thereon dated November 1, 2021. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the Town's internal control over financial reporting (internal control) as a basis for designing the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Town’s internal control. Accordingly, we do not express an opinion on the effectiveness of the Town’s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the Town’s financial statements will not be prevented, or detected and corrected, on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. Insero & Co. CPA s, LLP The Highest Standard | (800) 232-9547 | www.inserocpa.com 50 Compliance and Other Matters As part of obtaining reasonable assurance about whether the Town's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the financial statements. 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 Government Auditing Standards. Purpose of This Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the Town’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 Town’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Respectfully submitted, Insero & Co. CPAs, LLP Certified Public Accountants Ithaca, New York November 1, 2021