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Home My WebLink About2008 Town of Ithaca Audit ReportFINANCIAL STATEMENTS OF TOWN OF ITHACA ITHACA, NEW YORK FOR THE YEAR ENDED DECEMBER 31, 2008 TOWN OF ITHACA INDEX December 31, 2008 Independent Auditor's Report_________________ Management's Discussion and Analysis Financial Statements ------------------------------------------------------------------- Independent Auditor's Report on Compliance and on Internal Control over Financial Reporting Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards __--------------------- -------------. --------------------------------------- Tab 1 2 3 :1 TOWN OF ITHACA TABLE OF CONTENTS December 31, 2008 Page Independent Auditor's Report ................................................................................................ - Management's Discussion and Analysis........................................................................ I -XVIII Statementof Net Assets....................................................................................:.........................1 Statementof Activities...............................................................................................................2 Balance Sheet — Governmental Funds.......................................................................................3 Reconciliation of the Total Fund Balances Shown in the Governmental Funds to the Statement of Net Assets...........................................................4 Statement of Revenues, Expenditures, and Changes in. Fund Balances........................................................................................................................... 5-6 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balance of the Governmental Funds to the Change in Net Assets Shown in the Statement of Activities ........................................... 7-8 Statement of Fiduciary Net Assets.............................................................................................9 Notes to Financial Statements............................................................................................10-30 Schedule of Funding Progress for the Retiree Health Plan.........................................31 Schedule of Revenues and Expenditures Compared to Budget — MajorFunds.................................................................................................................. 32-33 Capital Projects Fund - Detailed Balance Sheet...............................................................34 Capital Projects Fund - Detailed Revenues and Expenditures................................................35 Independent Auditor's Report on Compliance and on Internal Control over Financial Reporting Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards................................................................................... 36-37 TOWN OF ITHACA "COMMUNICATION WITH THOSE CHARGED WITH GOVERNANCE" YEAR ENDED DECEMBER 31, 2008 SCIARABBA WALKER ° CERTIFIED PUBLIC ACCOUNTANTS BUSINESS CONSULTANTS August 3, 2009 To the Supervisor and Town Board Town of Ithaca Ithaca, NY 14850 We have audited the financial statements of the Town of Ithaca for the year ended December 31, 2008, and have issued our report thereon dated August 3, 2009. Professional standards require that we provide you with the following information related to our audit. Our Responsibility under U.S. Generallv Accented Auditing Standards As stated in our engagement letter dated April 20, 2009, our responsibility, as described by professional standards, is to express our opinion about whether the financial statements prepared by management with your oversight are .fairly presented, -in all material -respects,, in conformity with U.S. generally accepted accounting principles. Our audit of the financial, statements does not relieve you or management of your responsibilities. Other Information in Documents Containing Audited Financial Statements , We are not responsible for other information in documents containing the entity's financial statements and our report does not extend beyond the financial information identified inthe report. We do not have an obligation to perform any procedures to corroborate other information contained in these documents. Planned Scope and Timing of the Audit We performed the audit according to the planned scope and timing previously communicated to you in our engagement letter. Significant Audit Findings Qualitative Aspects of Accounting Practices Management is responsible for the selection and use of appropriate accounting policies. In accordance with. the terms of our engagement letter, we' will advise management about the appropriateness of accounting policies and their application. The significant accounting policies used by Town of Ithaca are described in Note 1 to the financial statements. In 2008, the Town implemented Government Accounting Statement No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions and Governmental Accounting Statement No. 50, Pension Disclosures— an amendment of GASB Statements No. 25 and No. 27. We noted no transactions entered into by the governmental unit during the year for which there is a lack of authoritative guidance or consensus. There are no significant transactions that have been recognized in the financial statements in a different period than when the transaction occurred. Accounting estimates are an integral part of the financial statements prepared by management and are based on management's knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. The most sensitive estimates affecting the financial statements are the estimates of the annual required contribution (ARC) and actuarial accrued liability (AAL) for providing other postemployment benefits under the provisions of Government Accounting Statement No. 45. We evaluated the key factors and assumptions used to develop the estimates in determining that they are reasonable in relation to the financial statements taken as a whole. 200 East Buffalo Street, Suite 402 28 North Main Street Ithaca, New York 14850 Cortland, New York 13045 607-272-5550 / 607-273-6357 (Fax) 607-756-0073 / 607-756-0052 (Fax) www.sdarabbawalker.com Difficulties Encountered in Performing the Audit We encountered no significant difficulties in dealing with management in performing and completing our audit. Corrected and Uncorrected Misstatements Professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that are trivial, and communicate them to the appropriate level of management. We noted no misstatements that we considered material and management has made adjustments that we have recommended. Disagreements with Management For purposes of this letter, professional standards define a disagreement with management as a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditor's report. We are pleased to report that no such disagreements arose during the course of our audit. Management Representations We have requested certain representations from management that are included in the management representation letter dated August 3, 2009. Management Consultations with Other Independent Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a "second opinion" on certain situations. If a consultation involves application of an accounting principle to the governmental unit's financial statements or a determination of the type of auditor's opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants. Other Audit Findings or Issues We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the governmental unit's auditors. However, these discussions occurred in the normal course of our professional relationship, and our responses were not a condition to our retention. Other Matters Our audit engagements include various procedures that may change from year to year. Procedures include performing a risk assessment of the entity and developing a preliminary audit strategy. We considered the firm's past experience with the Town, the staff, complexity of accounting transactions, the internal accounting policies and procedures, and the industry. This evaluation then led to determining the focus of the audit, based on our assessed risk. We performed additional audit procedures which included sending third party confirmations and comparing them to internal records, applying analytical procedures to balances, vouching deposits to the records and deposit slips, and vouching expenses to the supporting documentation. We also selected a sample of expenditures and tested the related controls over approval and signature. When this process was complete, we prepared the financial statements at the fund level, prepared the conversion workpapers from information gathered during the audit, and prepared the government wide statements. We also updated sections of the Management's Discussion and Analysis. In 2008, the Town implemented Government Accounting Statement No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions. The statement requires that employers measure, recognize and disclose on an annual basis amounts associated with the cost of providing other postemployment benefits (OPEB). The Town's 2008 Statement of Activities reflects an expense of $323,000, the annual required contribution (ARC), based on an actuarial estimate of the current period expense associated with providing current and future benefits. The Town's 2008 Statement of Net Assets reflects a liability of the same amount. That liability is to be incremented in future years by the annual measurement of the ARC. In arriving at the estimate, the Town utilized an alternative measurement method that is permitted for employers with fewer than 100 employees who are participating in their plan. The method involves some simplified calculations that are performed in a spreadsheet and does not require the services of an actuary. The Town's projected liability is based on the Town's commitment to provide a percentage of the cost of a retiree's annual health insurance premiums based on the number of years of service at the time of retirement. The measurement of other post -employment benefits does not include accumulated sick time that can be spent down upon retirement to cover retiree's portions of health insurance premiums. The Town has recorded a separate liability of $255,000 to estimate that obligation. The actuarial accrued liability (AAL) for future benefits to be paid was estimated at $3,302,265 at December 31, 2008. The estimate is particularly sensitive to assumptions regarding trends in healthcare costs and interest rates. The assumptions underlying the calculation are detailed in Note 9 to the Town's 2008 financial statements. Statement 45 permits an employer to offset the accumulated liability associated with OPEB with assets that are irrevocably transferred to a trust or equivalent arrangement in which the assets are used exclusively to provide benefits to retirees in accordance with the terms of the plan. Thus the Town could determine that they wish to fund a portion of the AAL by designating assets in the manner described above. This information is intended solely for the use of the Supervisor, Town Board and management of the Town of Ithaca and is not intended to be and should not be used by anyone other than these specified parties. Very truly yours, Certified Public Accountants l SC BA !- WALKER&CLLPO CERTIFIED PUBLIC ACCOUNTANTS BUSINESS CONSULTANTS INDEPENDENT AUDITOR'S REPORT August 3, 2009 Supervisor and Town Board Town of Ithaca Ithaca, New York 14850 We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the Town of Ithaca, as of and for the year ended December 31, 2008; which collectively comprise the Town's basic financial statements as listed in the table of contents. These basic financial statements are the -responsibility of the Town of Ithaca's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America 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 basic j financial statements are free of material misstatements. An auditincludes examining, on a test basis, _ evidence supporting the amounts and- disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as - evaluating the overall financial statement presentation. We' believe that our audit provides a reasonable basis for our opinion. -- In our opinion, the financial statements referred to in the first paragraph 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 Ithaca, as of December 31, 2008, and the respective changes in financial position for the year then ended, in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued our report dated August 3, 2009, on our consideration of the Town of Ithaca's internal control structure and on our tests of its compliance with laws and regulations. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. The Management Discussion and Analysis (pages I -XVIII), the Schedule of Funding Progress for the Retiree Health Plan (page 31) and the Schedule of Revenues and Expenditures Compared to Budget- Major Funds (pages 32-33) are not a required part of the basic financial statements, but are supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it. j 200 East Buffalo Street, Suite 402 Ithaca, New York 14850 607-272-5550 / 607-273-6357 (Fax) 28 North Main Street Cortland, New York 13045 607-756-0073 / 607-756-0052 (Fax) www.sciarabbawalker.com � 1] I! Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Town of Ithaca's basic'financial statements. The supplementary ' information presented on pages 34 through 35 is presented for the purpose of additional analysis and is not a required part of the basic financial statements. The information has been subjected to the. auditing procedures applied in the audit of the basic financial statements and, in our opinion, r- is fairly stated in all material respects in relation to the basic financial statements taken as a 1 whole. Certified Public Accountants 1 The following is a discussion and analysis of the Town of Ithaca's financial performance for the year ended December 31, 2008. The Town of Ithaca discussion and analysis is designed to (a) assist the reader in focusing on significant financial issues, (b) provide an overview of the Town's financial activity, (c) identify changes in the Town's financial position (its ability to address the next and subsequent year challenges), (d) identify any material deviations from the financial plan (the approved budget), and (e) identify individual fund issues or concerns. The section is a summary of the Town's financial activities based on currently known facts, decisions, or conditions as provided by the Town's Budget Officer. 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 on the current year. This section is only an introduction and should be read in conjunction with the Town's financial j statements, which immediately follow this section. HIGHLIGHTS Financial Highlights: • The Town's net assets, as, reflected in the Statement of Net Assets, increased by $270,415 (2.1%). • Revenue, as reflected in the statement of activities, increased $259,752 (2.0%). • Government -wide expenditures increased by $798,014 (6.7%). • The General Townwide Fund (the primary operating fund) unreserved fund balance increased by $329,515 (or 18.1 %) for the year ending December 31, 2008. Town Highlights: • In 2005 the Ithaca Town Board established a "General Townwide Fringe Benefit Cash Reserve" savings account. The purpose for establishing this reserve is to fiscally meet unanticipated economic increases in employee fringe benefits that may occur within the current budgeted operating cycle. (E.g. NYS Retirement, Health Insurance) At the beginning of 2008, $297,704 was on reserve for future budgetary expenditures. For the year ending 2008. the cash reserve increased to $300,000. This increase is attributed to 2008 interest earnings. • The Town's five (5) year capital plan continues to make strides. In 2008 $54,026 of annual funding was deposited to the Parks and Open Space Cash Reserve. Construction of the multi-purpose recreational and commuter Pew Trail on the East Hill was completed in 2008. This project had an approximate cost of $265,000, with approximately $87,000 provided by taxpayer funds and the remaining $178,000 coming from a Federal Transportation Enhancement Program Grant implemented by the NYS Department of Transportation. • Persistent monitoring of budgeted and actual revenue and expenses continues to help the Town Board maintain a stable, affordable tax rate while delivering quality services to Town residents. At January 1, 2008, the Town's General Townwide Fund (the primary J operating fund) had a beginning unreserved fund balance of $1,740,390,. At December 31, 2008, the unreserved fund balance was increased by net revenues and expenses to j $2,069,740. This reflects a net increase of $329,350 or 18.9%. For 2009, $430,773 of the fund balance has been appropriated to help fund 2009 budgeted General Townwide Fund expenditures. OVERVIEW OF THE FINANCIAL STATEMENTS This annual report consists of three parts: MD&A (this section), the basic financial statements, and required supplementary information. The basic financial statements include two kinds of statements that present different views of the Town: • The first two statements are government -wide financial statements that provide both short-term and long-term information about the Town's overall financial status. • The remaining statements are fund financial statements that focus on individual parts of the Town, reporting the Town's operations in more detail than the government -wide statements. The fund financial statements concentrate on the Town's most significant funds. • The governmental funds statements tell how basic services such as water and sewer were financed in the short term as well as what remains for future spending. • Fiduciary funds statements provide information about the financial relationships in which the Town acts solely as a trustee or agent for the benefit of others. The financial statements also include notes that explain some of the information in the statements and provide more detailed data. - The statements are followed by a section of required supplementary information that further explains and supports the financial statements with a comparison of the Town's budget for the year. II Figure A-1 summarizes the major features of the Town's financial statements, including the portion of the Town's activities they cover and the types of information they contain. The remainder of this overview section of MD&A highlights the structure and contents of each of the statements. Figure A-1 Major Features of the Government -wide and Fund Financial Statements Scope Required financial statements Accounting basis and measurement focus Type of asset/liability information Type of inflow/out flow information Government -wide Entire Government (except fiduciary funds) • Statement of net assets • Statement of activities Accrual accounting and economic resources focus All assets and liabilities, both financial and capital, short-term and long-term All revenues and expenses during year, regardless of when cash is received or paid Fund Financial Statements Governmental Fiduciary Funds Funds ' The activities of the Instances in -which the Town that are not Town administers proprietary or resources on behalf of fiduciary. someone else. • Balance sheet • Statement of fiduciary • Statement of net assets revenues, expenditures, and changes in fund balances Modified accrual accounting and current financial focus Generally, assets expected to be used up and liabilities that come due during the year or soon thereafter; no capital assets or long-term liabilities included Revenues for which cash is received during or soon after the end of the year; expenditures when goods or services have been received and the related liability is due and payable � III �_'i • Statement of changes in fiduciary net assets Accrual . accounting and economic resources focus All assets and liabilities, both short-term and long-term; funds do not - currently contain capital assets, although they can All additions and deductions during the year, regardless of when cash is received or paid I U TOWN OF ITHACA I! MANAGEMENT'S DISCUSSION AND ANALYSIS DECEMBER 31, 2008 Government -Wide Statements The government -wide statements report information about the Town as a whole using accounting methods similar to those used by private -sector companies. The statement of net assets includes all of the Town's assets and liabilities. All of the current year's revenues and expenses are accounted for in the statement of activities regardless of when cash is received or paid. The two government -wide statements report the Town's net assets and how they have changed. Net assets, the difference between the Town's assets and liabilities, are one way to measure the Town's financial health or position. • Over time, increases or decreases in the Town's net assets are an indicator of whether its financial position is improving or deteriorating, respectively. j . To assess the Town's overall health, you need to consider additional non-financial factors such as changes in the Town's property tax base and the condition of facilities and infrastructures In the government -wide financial statements, the Town's activities are shown as governmental activities: Most of the Town's basic services are included here, such as water and sewer services (home and community services), road maintenance (transportation), and administration (general - governmental support). Property taxes and charges for services finance most of these activities. Fund Financial Statements The fund financial statements provide more detailed information about the Town's funds, i focusing on its most significant or "major" funds — not the Town as a whole. Funds are accounting devices the Town uses to keep track of specific sources of funding and spending on particular programs: j Some funds are required by State law and by bond covenants. • The Town establishes other funds to control and to manage money for particular purposes (such as repaying its long-term debts) or to show that it is properly using certain revenues. L �I TOWN OF ITHACA MANAGEMENT'S DISCUSSION AND ANALYSIS DECEMBER 31, 2008 The Town has two kinds of funds: • Governmental Funds: Most of the Town's basic services are included in governmental funds, which generally focus on (1) how cash and other financial assets that can readily be converted to cash flow in and out and (2) the balances left at year end that are available for spending. Consequently, the governmental funds statements provide a detailed short-term view that helps you determine whether there are more or fewer financial resources that can be spent in the near future to finance the Town's programs. Because this information does not encompass the additional .long-term focus of the government -wide statements, reconciling statements (page 4 and pages 7-8) have been added to explain the relationship Or differences) between them. • Fiduciary Funds -Agency Funds: The Town acts in an agency capacity for assets that are ultimately transferred to others, such as payroll withholdings. The Town also reports deposits associated with its rental activities in this fund. The Town excludes these activities from the government -wide financial statements because it cannot use these assets to finance its operations. FINANCIAL ANALYSIS OF THE TOWN AS A WHOLE The Town's combined net assets increased by $270,415 or 2.1%. Current assets decreased by $706,467 or 9.7%. Capital assets increased by $357,693 (net of 2008 depreciation expense of $483,636) or 2.9% Long-term debt decreased by $717,000 or 14.4%. The decrease reflects 2008 principal payments. Investments in capital assets- net of related debt increased by $1,074,692 or 14.7%. The increase !, reflects the net increase in 2008 capital assets of $357,692 and the 2008 decrease in debt of $717,000. V Lj TOWN OF ITHACA MANAGEMENT'S DISCUSSION AND ANALYSIS DECEMBER 31, 2008 Unrestricted net assets decreased by $860,619 or 18.0%. The Town's current ratio (ratio of current assets to current liabilities) -was 3.7:1 at December 31, 2008. The Town's quick ratio (cash and assets easily converted to cash compared to current liabilities) was 2.8; 1 at December 31, 200 8. LJ Figures A-2 and A-3 present condensed information derived from the Town's government -wide statements. Li VI FIGURE A-2 4,7; M T Condensed G I Li Current assets $ 7,275,026 $ 6,568,559 $ 706-,467) Non-current assets 12,286,040 12,643,732, 357,692 T 90i — 3 77 i's ji Curr6nt liabilities 2,366,584 1,775,259 ��5) 591,325) Non-current liabilities 4,372,890 4,345,026 27,864) 74�, W 2 $.�' W�. "Ph t16;1 . -, 739 .. .6 Invested in capital assets, net of debt 7,323,040 8,397,732 1,074,692 Restricted 710,031 766,373 56,342 Unrestricted 4,788,520 3,927,901 860,619) net assets fl092 006_ Li VI I L TOWN OF ITHACA MANAGEMENT'S DISCUSSION AND ANALYSIS DECEMBER 31, 2008 "S IL -CRE A -8; PF. mRq�NET 0 Vii Figure A-3 ®r. 41yi9p -51, .2 ;00-, Nim REVENUES Program revenues: Charges for services $ 3,250,403 $ 3,354,059 $ 103,656 3.2% Operating grants and contributions 178,073 175,725 2,348) -1.3% Capital grants and contributions 146,358 117,541 28,817) -19.7% General revenues: Property taxes 5,477,173 5,717,800 240,627 4.4% Non property taxes 2,732,871 2,809,417 76,546 2.8% Unrestricted state aid 314,698 376,221 61,523 19.5% Interest earnings 355,847 148,400 207,447) -58.3% Other general revenues 315,571 331,583 16,012 5.1% 52" PROGRAM EXPENSES General goverment support 2,205,137 $ 2,279,088 $ 73,951 3.4% Public safety 2,981,835 3,194,929 203,094 6.8% Transportation 2,242,791 2,521,867 279,076 12.4% Culture and recreation 827,047 787,612 39,435) -4.8% Home and community services 3,705,507 3,986,835 281,328 7.6% 7,$.„, -12,7, "S IL -CRE A -8; PF. mRq�NET 0 Vii Li TOWN Off'-ITHACA MANAGEMENT'S DISCUSSION AND ANALYSIS -� DECEMBER 31, 2008 Figure A-4 shows the sources of revenue for 2008 I FIGURE A-4 Sources of Revenue for 2008 - Interest State sources 1.14% Federal.sources 4.33% 0.28% Fines and fees — 1.95% { . Charges for services 25.74% Other -- 1.12% . I_ Taxes 65.44 1 Li Figure A-5 represents .the Town's -2008 expenditures by program. FIGURE_ A-5 Expenditures by Program 1 Interest on long-term - Depreciation debt General support 3.79% 1.66 /° 17.13% Home and community L-'� services 1—I 28.45% I —Public safety C / 24.96%' Culture and recreation / J 6.02%IT I 1 Transportation 18.00% L� `!I]EI �i TOWN OF ITHACA MANAGEMENT'.S DISCUSSION AND ANALYSIS -DECEMBER 31, 2008 Total costs of services provided by the Town (Figure A-6) were $12,760,331. These charges were offset by grants and contributions of $293,266 and charges for services of $3,354,059, resulting in net cost of services of $9,113,006. General government support Public safety Transportation Culture and recreation Home and community services Figure A-6 $ 2,580,597 $ Total�Gost of Services, 3 fi Highway Fund Total Dollar = 4�Cliange x ( 284,861) x .. $ 2,205,137- $ 2,279,088 $ 73,951 2,98.1,835 3,184,929 203,094 2,242,791- 2,521,867 279,076 827,047 787,612 ( 39,435) 3,705,507 3,986,835 281,328 $, °12,760,331, $ k11,962,317' 7„'798041 2. {i,t, X, Oki Du 'K Cha viv_, _ ., _..��.' 2U0- I _��, ` 3 .:_ mange General government support $ 1,922,593 $ 2,009,025 $ - 86,432 Public safety 2,980,783 3,183,678- 202,895 Transportation 2,220,485 2,496,990 276,505 Culture and recreation 768,285 725,703 ( 42,582) Home and communi services 495,337 697,610 202,273 FINANCIAL ANALYSIS OF THE TOWN'S FUNDS U Figure A-7 shows the changes in fund balances for the year for the Town's funds as presented in the Town's Statement of Revenues, Expenditures and Changes in Fund Balance -Governmental Funds. U At December 31, 2008, the Town reported a combined fund balance of $4,930,619. Total fund balance decreased by $5.04,632 in 2008. r U Figure A-7 General Fund $ 2,580,597 $ 3,063,727 $ 483,130 Highway Fund 854,979 570,118 ( 284,861) Water Fund 471,510 526,010 54,500 Sewer Fund 2,124,738 2,012,201 ( 112,537) Fire.Fund 74,197 31,970 ( 42,227) Capital Projects Fund ( 734,985) ( 1,340,930) ( 605,945) Other Funds 64,215 67,523 3,308 an Total Funat . , 93-0 1 $ 's , , . ..50432);1`752 ;4 fiv u TOWN OF ITHACA MANAGEMENT'S DISCUSSION AND ANALYSIS DECEMBER 31, 2008 GENERAL FUND BUDGETARY HIGHLIGHTS Over the course of the year, the town revised the General Fund budget to reflect additional changes in budgeted revenues and expenditures. Actual revenues fall short of revised budget estimates by $134,878 and actual expenditures were under budgeted expenditures by $195,816. Figure A-8 summarizes the General Fund original and revised budgets, actual expenditures and LJ the variances for the year ended December 31, 2008. i Figure A-8 _ Fz fiCondensed Budgetary '6'1 h, Variance `;1Compa142,90n Genual Fund' y Fa_orable Budget Revised Budgei Actual t oraile) u rt ,(iTnfa REVENUES 'uJ Real property taxes $ 1,815,001 $ 1,827,755 $ 1,827,755 $ - Non -property taxes 757,981 1,207,610 1,266,576 58,966 State sources 354,200 467,947 467,951 4 All other 567,777 840,077 646,229 ( 193,848) 1.; $' 3,494;959;:_ $ 4,343 389 °'$„ :4,208,511 $ :134 878); ,;.5_ _To"talRe�enues t u`, ,. * „;; „ , .(_ EXPENDITURES General government support $ 1,559,928 $ 1,4753553 $ 1,475,553 $ - j Public safety 125,362 55,401 55,401 - Transportation 284,849 287,450 287,450 - Culture and recreation 896,062 690,166 690,166 - Home and community services 732,568 733,419 733,418 1 `-J Employee benefits 778,430 832,883 637,068 195,815 - :Total Expenditures,, $ 4,377,199; 195,816` .. 1.. Other financing sources 536,187 338,671 338,671 - Other financing uses i u $ 184,996 $ 184,996 $ 184,997 $ 1 CAPITAL ASSETS The town records expenditures for land, buildings, equipment, machinery and infrastructures (roads, water and sewer systems) as capital assets in the Statement of Net Assets. Annual depreciation expense is recorded in the Statement of Activities to reflect the use of these assets over their useful lives. Land and construction in progress are not subject to depreciation. The Town's depreciation methods, assumptions regarding useful lives and capitalization thresholds are described in. -Notes 1J and 1K in the current year's Notes to the Financial Statements. `l In 2008, the Town expended $918,748 on capital additions. Equipment with a cost basis of $138,784 was sold or retired in 2008. Figure A-9 reflects the changes in net capital assets. !i X 011 i ! TOWN OF ITHACA MANAGEMENT'S DISCUSSION AND ANALYSIS DECEMBER 31, 2008 Figure A-9 Governmental P- N -ry r Change.Total Dollar s ua Land $ 293,163 $ 293,163 $ - Construction in progress 1,570,895 2,274,913 704,018 L' Buildings 3,342,040 3,226,307 ( 115;733) Equipment and machinery 1,945,008 1,881,440 ( 63,568) Furniture and furnishings 52,653 34,284 ( 18,369) Non -building improvements 32,779 25,659 ( 7,120) Infrastructures 5,049,502 4,907,967 ( 141,535) n Total „ . , _�u�f¢F $fi >4 12;286,04Q $ 12,643,733: Major additions in 2008 included: Capital projects related to water and sewer improvements $ 697,415 Equipment acquisitions 214,730 Park infrastructure 6,603 Total $ 918.748 DEBT ADMINISTRATION Long-term debt decreased by $717,000. The Town's- liability for compensated absences increased $8,160 to $135,050 during 2008. In 2008, the Town implemented the provisions of Governmental Accounting Standards Board Statement No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions. The standard requires that a liability be recognized based on an actuarial measure of the current year funding costs associated with long-term liabilities for post - employment benefits. The Town recorded a liability of $322,544 in the Government -wide statements. The Town continues to recognize a liability for accumulated sick time that can be credited to employee's portions of health insurance at the date of retirement. The liability was $254,860 at December 31, 2008. The Town's most recent bond rating, as determined by Moody's Investor Service, Inc., is Aa3. 7 - XI TOWN OF ITHACA MANAGEMENT'S DISCUSSION AND ANALYSIS DECEMBER 31, 2008 Constitutional Debt Limit The Town of Ithaca is restricted by the New, York State Constitution, Article VIII, Section 2, on the manner of creating and paying local indebtedness. The Town can only create debt for "Town" purposes. The outstanding payback period for indebtedness is restricted to the period of usefulness. As the issuer of debt- (borrower) the Town is required to pledge in full faith and credit for the payments of principal and interest to the bondholder (investor). As required under the New York State Constitution, the Town of Ithaca cannot create debt in excess of 7% of the five (5) year average full valuation of taxable property. The following summary provides information regarding the Town's indebtedness, debt limit and net debt -contracting margin as of December 31, 2008. Five-year average full valuation of taxable property Debt limit- 7% thereof Inclusions: Bonds Bond anticipation notes Total inclusions Exclusions: Water and sewer debt. (1) Total exclusions Total net indebtedness Net debt contracting margin The percent of debt contracting power exhausted is...... $ 1,058,337,733 74,083,641 4,246,000 4,246,000 ( 3,486,000) $ ( 3,486,000) $ 760,000 $ 73,323,641 1.0% (1) Sewer and Water indebtedness are excluded pursuant to Section 136.00(4-a) and 136.00(2), respectively, of the Local Finance Law Detailed information regarding the Town's long-term liabilities is presented in Note 6C in 2008 Notes to the Financial Statements. Figure A-10 reflects changes in the Town's debt for 2008. 1i TOWN OF ITHACA MANAGEMENT'S DISCUSSION AND ANALYSIS DECEMBER 31, 2008 Serial Bonds Bond anticipation notes Compensated absences Other post -employment benefits Liability for accrued sick time to be applied to retirees health coverage Figure A-10 Goveran`rmna' 1;°Activities �£ r `20D u :2008 $ 4,963,000 $ 4,246,000 $ 126,890 135,050 - 322,544 717,000) 8,160 322,544 229,972 254,860 24,888 X349;8? k"'11 4,958454$ . r( 4,61408)' Figure- A-11 depicts historical changes in fund balances for the Town of Ithaca for the period 2004 through 2008. Information for the Capital Projects Fund is omitted. Figure A-12 reflects revenues. generated through water and sewer benefit assessments in comparison to debt service (principal and interest payments) associated with debt incurred to expand infrastructures I associated with providing the services. Historical information is provided for the years 2000 through 2008, budgeted information for 2009 and estimated information for the years 2010 through 2011. XIII 11 i TOWN OF ITHACA - MANAGEMENT'S DISCUSSION AND ANALYSIS _ DECEMBER 31, 2008 Factors Bearing on the Town's Future • In 2008 residential construction, as in most all local communities across the Nation, within the Town of Ithaca has slowed down. Current building permits are for home renovations, and updating. Large developers have future construction plans in the pipeline but are finding financing and materials costly and in some cases difficult to come by. While residential and commercial construction has slowed down the real property revenue tax base continues to expand, however, the continued expansion of both residential and commercial properties push lasting fiscal stress for water, sewer, highway, parks and recreational infrastructure services. • In 2008 it became clear that the Town's sewer infrastructure system will need upgrades, repairs and maintenance. Key to the success of the Town's sewer infrastructure is the Town settling its financial share for newly laid interceptors throughout the system with the City of Ithaca. The Town's Capital Improvement Plan has addressed this on-going need over future periods. Annual estimated costs range from $250,000 to $500,000. Major infrastructure improvements will be financed by issuing short-term (bond anticipation notes) and long-term serial bonds borrowing. • In 2008, sales tax revenues exceeded budget. However; with the rise in gasoline costs and other consumer -goods, local buying has begun to decrease. In 2009 the Town is expecting a sales tax revenue loss of 12.7% to 17%. The Town is also anticipating a sharp decline in two other major municipal resource streams; they are mortgage tax and interest income. These expected declines are directly attributed to the slow housing and financial markets. Like other local communities across the United States, a downward 'shift in consumer spending, a slow down in all new construction and declining real estate sales accompanied by the Federal Reserve adjustments in interest rates will greatly impact revenue resources and create a greater need to utilize fund balance. Heavy declines in revenue resources, excessive increases in expenses (E.g. capital indebtedness, expanding labor costs) and surplus fund balance will have a direct impact on real property taxes. These concerns make it ever more important for the' Town of Ithaca or any local community to monitor its fund balance position throughout the current and ensuing operating cycle. FINANCIAL CONTACT The Town's financial statements are designed to present users (citizens, taxpayers, customers, investors and creditors) with a general overview of the Town's finances and to demonstrate the Town's accountability. If you have questions about the report or need additional financial information, contact the Town's Supervisor, Town of Ithaca, 215 North Tioga Street, Ithaca, NY, 14850. L XVIII � I LJ TOWN OF ITHACA STATEMENT OF NET ASSETS December 31, 2008 ASSETS LIABILITIES CURRENT LIABILITIES: Accounts payable CURRENT ASSETS: Accrued liabilities 1,142,532 Cash_ $ 4,937,470 Bond interest payable Cash, restricted .766,373 577,000 Accounts receivable: 1,775,259 LONG-TERM DEBT, non current State and federal aid - ``' Water and sewer rents 481,422 sDue from other governments 313,441 1 Li Other receivables 915 Prepaid expenses 68,938 l TOTAL CURRENT ASSETS 6,568,559 CAPITAL ASSETS, net: 10,368,819 Construction in progress 2,274,913 i TOTAL CAPITAL ASSETS 12,643,732 TOTAL ASSETS $ 19,212,291 LIABILITIES CURRENT LIABILITIES: Accounts payable $ - Accrued liabilities 1,142,532 Deferred revenues 2,035 Bond interest payable 53,692 Long-term debt, current portion 577,000 TOTAL CURRENT LIABILITIES 1,775,259 LONG-TERM DEBT, non current 3,669,000 LONG-TERM LIABILITIES 676,026 TOTAL LIABILITIES 6,120,285 NET ASSETS INVESTED IN CAPITAL ASSETS, net of related debt 8,397,732 RESTRICTED: Culture and recreation 463,779 Equipment 2,593 Benefits 300,001 UNRESTRICTED 3,927,901 TOTAL NET ASSETS 13,092,006 TOTAL LIABILITIES AND NET ASSETS $ 19,212,291 See Notes to Financial Statements. - 1 - J TOWN OF ITHACA STATEMENT OF ACTIVITIES December 31, 2008 Governmental Activities Functions/ Programs General governmental support Public safety Transportation Culture and recreation Home and community services GENERAL REVENUES: Real property taxes and related tax items Non -property taxes Interest earnings Fines and fees- town court State aid not restricted to specific purposes Other miscellaneous revenues TOTAL GENERAL REVENUES CHANGE IN NET ASSETS NET ASSETS, beginning of year NET ASSETS, end of year See Notes to Financial Statements. Program Revenue Charges for Operating Grants Expenses Services and Contributions $ 2,279,088 $ 38,706 $ 113,816 3,184,929 1,251 - 2,521,867 24,877 - 787,612 - 61,909 3,986,835 3,289,225 - $ 12,760,331 $ 3,354,059 $ 175,725 r - Program Revenue Net (Expenses) Capital Grants Revenues and and Contributions Changes in Net Assets $ 117,541 $ ( 2,009,025) - ( 3,183,678) - ( 2,496,990) - ( 725,703) - ( 697,610) $ 117,541 ( 9,113,006) 5,717,800 2,809,417 148,400 254,673 376,221 76,910 9,383,421 270,415 12,821,591 $ 13,092,006 -2- TOWN OF ITHACA BALANCE SHEET - GOVERNMENTAL FUNDS December 31, 2008 Major Funds See Notes to Financial Statements. General Highway Water ASSETS AND OTHER DEBITS: Unrestricted cash $ 2,348,606 $ 577,641 $ 385,034 Restricted cash 659,524 85,587 13,546 Bond anticipation notes receivable - - - Due from other funds - - - Due from state and federal governments - - - .Due from other governments 257,849 1,142 - Prepaid expenses 49,342 14,527 3,213 Other receivables 915 - 129,806 TOTAL ASSETS AND OTHER DEBITS $ 3,316,236 $ 678,897 $ 531,599 LIABILITIES, FUND EQUITY AND OTHER CREDITS: LIABILITIES: Accounts payable - - - Accrued liabilities 250,474 108,779 5,509 Due to other funds - - 80 Other liabilities 2,035 - - Bond anticipation notes payable - TOTAL LIABILITIES 252,509 108,779 5,589 FUND BALANCES - RESERVED Special reserve 659,524 82,994 13,546 Reserved for highway machinery - 2,593 - 659,524 85,587 13,546 FUND BALANCES - UNRESERVED Appropriated - ensuing year's budget 458,920 459,339 142,087 Unappropriated 1,945,283 25,192 370,377 TOTAL UNRESERVED 2,404,203 484,531 512,464 TOTAL FUND BALANCE 3,063,727 570,118 526,010 TOTAL FUND EQUITY AND OTHER CREDITS 3,063,727 570,118 526,010 TOTAL LIABILITIES, FUND EQUITY AND OTHER CREDITS $ 3,316,236 $ 678,897 $ 531,599 See Notes to Financial Statements. Nonmaj or Funds Major Funds Other Governmental Funds Capital Sewer Fire Projects $ 748,253 $ 604,522 $ 205,891 $ 7,716 - - 1,125,725 - - 80 - - 1,856 - - 131,125 - - $ 2,014,755 $ 604,522 $ 205,891 $ Nonmaj or Funds Total Other Governmental Funds Funds 67,523 $ 4,937,470 - 766,373 - 1,125,725 - 80 - 258,991 - 68,938 - 261,846 67,523 $ 7,419,423 2,554 572,552 421,096 -. 1,360,964 - - - - .80 - - - - 2,035 - - - 1,125,725 - 1,125,725 2,554 572,552 1,546,821 - 2,488,804 7,716 - . - - 763,780 - - - - 2,593 7,716 - - - 766,373 552,606 31,970 - - 1,644,922 1,451,879 - ( 1,340,930) 67,523 2,519,324 2,004,485 31,970 ( 1,340,930) 67,523 4,164,246 2,012,201 31,970 ( 1,340,930) 67,523 4,930,619 2,012,201 31,970 ( 1,340,930) 67,523 4,930,619 $ 2,014,755 $ 604,522 $ 205,891 $ 67,523 $ 7,419,423 -3- TOWN OF ITHACA RECONCILIATION OF THE TOTAL FUND BALANCES SHOWN IN THE GOVERNMENTAL FUNDS TO THE STATEMENT OF NET ASSETS As of December 31, 2008 Total fund balances in the fund financial statements for the government funds. $ 4,930;619 This amount differs from the balance of Net Assets in the Statement of Net Assets due to the following: Capital assets are included as assets in the government -wide statements and - are added, net of accumulated depreciation Long term liabilities for bonded debt are included as liabilities in the government - wide statements and are deducted Receivables for revenues earned and measurable, but not available to provide financial resources, are included in the government -wide statements as assets and are added 12;643,732 ( 4,246,000) 274,942 Long term liabilities for compensated absences and other post employment benefits are included in the government=wide statements as liabilities and are deducted ( 457,595) Current liabilities for bond interest payable are included in the government - wide statements as liabilities and are deducted ( 53,692) Total Net Assets - End of Year $ 13,092,006 See notes to financial statements. -4- TOWN OF ITHACA STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES . GOVERNMENTAL FUNDS For The Year Ended December 31, 2008 REVENUES: Real property taxes Real property tax items Non -property tax items: Sales tax Other non -property tax items Departmental income Intergovernmental charges Use of money and property Rental Income Licenses and permits Fines and forfeitures Sale of property and compensation for loss Local sources State sources: Mortgage tax State aid per capita NYS highway improvement (CHIPS) Miscellaneous Federal aid TOTAL REVENUES Other Sources: Inter -fund transfers Proceeds of obligations TOTAL REVENUES AND OTHER SOURCES See Notes to Financial Statements. Major Funds General Highway Water $ 1,771,501 $ - $ 704,863 56,254 - - 1,190,298 1,542,841 - 76,278 - . - 230,291 - 1,794,286 61,909 24,877 441 67,045 6,641 3,733 45,779 - - 10,593 - - 254,673 - 2,479 19,160 - ( 26,540) 26,481 17,029 372,390 - 95,200 - - 74,019 361 - 4,208,511 1,694,019 338,671 - 4,547,182 1,694,019 2,520,352 30,425 2,550,777 Sewer $ 154,863 Major Funds Fire $ 3,008,606 9,580 Capital Proj ects 1,293,645 - - 1,368 - - 11,871 48,101 7,400 1,461,747 60,850 1,522,597 18,258 3,084,545 3,084,545 36,427 43,827 91,275 135,102 Nonmaj or Funds Total Other Governmental Funds Funds $ 12,132 $ 5,651,965 - 65,834 - 2,733,139 - 76,278 - 3,318,222 - 88,595 3,608 148,399 - 45,779 - 10,593 - 254,673 - 21,639 - 16,970 - 372,390 - 95,200 - 74,019 - 18,619 - 36,427 15,740 13,028,741 -5- 1,093,762 1,614,983 1,109,502 14,643,724 TOWN OF ITHACA STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS For The Year Ended December 31, 2008 (continued) Major Funds See Notes to Financial Statements. General Highway Water EXPENDITURES:. General governmental support 1,475,553 315 53,517 Public safety 55,401 - - Transportation 287,450 1,541,562 - Culture and recreation 690,166 - - Home and community services 733,418 - 1,511,001 Employee benefits 637,067 399,092 72,242 r Debt service (principal and interest) - - - TOTAL EXPENDITURES 3,879,055 1,940,969 1,636,760 —, Other Uses: Interfund transfers 184,997 37,911 859,517 — TOTAL EXPENDITURES AND OTHER USES 4,064,052 1,978,880 2,496,277 EXCESS (DEFICIT) OF REVENUES OVER EXPENDITURES 483,130 ( 284,861) 54,500 OTHER CHANGES IN FUND BALANCES - - - NET INCREASE (DECREASE) 483,130 ( 284,861) 54,500 FUND BALANCE, beginning of year 2,580,597 854,979 471,510 FUND BALANCE, end of year $ 3,063,727 $ 570,118 $ 526,010 ' See Notes to Financial Statements. Nonmaj or Major Funds Funds Total Capital Other Governmental Sewer Fire Projects Funds Funds 40,664 3,745 - - 1,573,794 - 3,123,027 - . 1,484 3,179,912 - - - 12,848 1,841,860 - - - - 690,166 1,211,173 - 6,604 - 3,462,196 33,289 - 704,018 - 1,845,708 - - - 939,737 939,737 1,285,126 3,126,772 710,622 954,069 13,533,373 350,008 - 30,425 152,125 1,614,983 1,635,134 3,126,772 741,047 1,106,194 15,148,356 ( 112,537) ( 42,227) ( 605,945) 3,308 ( 504,632) ( 112,537) ( 42,227) ( 605,945) 3,308 ( 504,632) 2,124,738 74,197 ( 734,985) 64,215 5,435,251 $ 2,012,201 $ 31,970 $ ( 1,340,930) $ 67,523 $ 4,930,619 TOWN OF ITHACA RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE OF THE GOVERNMENTAL FUNDS TO THE CHANGE IN NET ASSETS SHOWN IN THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED DECEMBER 31, 2008 Net change in Fund Balances shown for total Governmental Funds. $ ( 504,632) This amount differs from the change in net assets reflected in the Statement of Activities due to the following: Capital outlays for the acquisition of capital assets and capital projects are reported in the Governmental Funds as expenditures. In the Statement of Activities, the cost of those assets is allocated over their useful lives and reported annually as depreciation expense. In the Statement of Activities, acquisition costs are removed and depreciation expense is added as follows: Capital expenditures 918,748 Depreciation expense ( 483,636) 435,112 Major revenues are recorded in'the Governmental Funds when they are earned, measurable and available to provide current financial resources. In the Statement of Activities, major revenues are recognized when they are earned and measurable, regardless of when they become available. Current year revenues, earned and measurable, are recognized in the Statement of Activities. The Governmental Funds include amounts that were earned and measurable in the prior year, and these amounts are removed to prevent overstating revenues on the Statement of Activities: Current year revenues 274,942 Prior year revenues ( 254,864) 20,078 Bond principal payments are reflected as expenditures in the Governmental Funds. These payments are reflected on the Statement of Net Assets as a reduction of debt obligations and are not included in the Statement of Activities. Bond principal payments for the current year are as follows: 717,000 Interest on debt is reported in the Governmental- Funds when the payments are rendered. In the Statement of Activities, interest expense is allocated over the time periods it pertains to. Interest expense allocated to applicable periods is less than Governmental Funds interest expense by the following amount: 10,981 Payments for compensated absences are reported in the Governmental Funds as they are due. In the Statement of Activities, these amounts are reported in the periods that the liabilities are incurred. Current -year expenditures for amounts due from prior years are removed and an expense is recognized for current year liabilities that have not been paid: Prior year expenses 126,890 Current year expenses ( 135,050) ( 8,160) -7- TOWN OF ITHACA RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE OF THE GOVERNMENTAL FUNDS TO THE CHANGE IN NET ASSETS SHOWN IN THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED DECEMBER 31, 20.08 Payments for other post employment benefits are reported in the Governmental Funds as they are due. In the Statement of Activities, an expense is recognized based on an actuarial estimate of the the current year cost associated with amortizing the estimated present value of future benefits over a thirty-year period. Proceeds from equipment sales are reported as revenue in the Governmental Funds. In the Statement of Activities, the proceeds of sales are measured against the net book value (cost less accumulated depreciation) of the disposed assets and a gain or loss is recognized. The difference between the proceeds from equipment sales per the Governmental Funds and the loss per the Statement of Activities is the following: Interfund transactions are eliminated in the Statement of Activities. The amounts offset, and have a zero effect on operations: Transfers In Transfers Out Change in net assets ( '322,544) ( 77,420) 1,614,983 1,614,983 - $ 270,415 TOWN OF ITHACA STATEMENT OF FIDUCIARY NET ASSETS AGENCY FUNDS December M, 2008 ASSETS: Cash TOTAL ASSETS LIABILITIES: Accounts payable TOTAL LIABILITIES NET ASSETS TOTAL LIABILITIES AND NET ASSETS See Notes to Financial Statements. WM $ 58,489 $ 58,489 $ 58,489 58,489 TOWN OF ITHACA NOTES TO FINANCIAL STATEMENTS December 31, 2008 NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: The accompanying financial statements of the _ Town of Ithaca have been prepared in conformity with generally accepted accounting principles (GAAP) as applied to government units. The Governmental Accounting Standards Board (GASB) is the accepted standard setting body for- establishing governmental accounting and financial reporting principles. In June 1999, the GASB, unanimously approved Statement No. 34, Basic Financial Statements — and Management's Discussion and Analysis — for State and Local Governments. Certain of the significant changes in the Statement include the following: • A Management's Discussion and Analysis (MD&A) section providing an analysis of the Town's overall financial position and results of operations. • Financial statements prepared using full accrual accounting for all of the Town's activities. • A change in the fund financial statements to focus on the major funds. These and other changes are reflected in the accompanying financial statements (including notes to financial statements). A. Financial Reporting Entity The Town of Ithaca, which was established in 1821, is governed by the Town Law, other general municipal laws of the State of New York, and various local laws. The Town Board is the legislative body responsible for the overall operation, the Town Supervisor serves as Chief Executive Officer and Chief Fiscal Officer. The Town provides the following principal services: fire protection, transportation (streets and highways), recreation, planning and zoning, general administration, public improvements, water and sewer. Street lighting is provided by the Town Board in nine separate areas of the Town called lighting districts. ' It is funded by means of a tax on the real property situated within each district. The Town provides for intersection street lighting from the General Fund appropriations. Fire protection for certain areas of the Town outside the village is provided by the +J Town Board via the Ithaca Fire Protection District. This district is funded by means of a tax on the real property situated within the district. Services for fire protection are contracted out through the City of Ithaca and the Village of Cayuga Heights. -10- �i All governmental activities and functions performed for the Town of Ithaca are its direct responsibility. No other governmental organization has been included or excluded from the reporting entity. The financial reporting entity consists of the following, as defined by Governmental Accounting Standards Board (GASB) Statement #14, "The Financial Reporting Entity:" 1. The primary government which is the Town of Ithaca. 2. Organizations for which the primary government is financially accountable, and; 3. Other organizations for which the nature and significance of their relationship with the. primary government is such that exclusion would cause the reporting entity's general purpose 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 #14, including legal standing, fiscal dependency, and financial accountability. Excluded from the Reporting Entity: 1. Joint Venture - Other Municipalities Southern Cayuga Lake Intermunicipal Water Commission (SCLIWC) is a joint venture involving the Towns of Ithaca, Dryden, Lansing and the Villages of Cayuga Heights and Lansing. The joint venture operates under terms of an original agreement dated March 1, 1977 and has been amended several times, the last on which is dated January 1, 1992. SCLIWC's executive body consists of ten members, two members being appointed by each municipality. The Treasurer of SCLIWC is traditionally the Town of Ithaca's Supervisor. The Town of Ithaca owns a majority (51.87%) of the Commission and must adopt its budget and any subsequent amendments. Although the Commission is related to the Town of Ithaca, it is not included in the Town of Ithaca reporting entity. A separate audited financial statement is available from the administrative offices of the Southern Cayuga Lake Intermunicipal Water Commission, Ithaca, New York. For the year ended December 31, 2008, the audited financial statements of the Commission show: Total Assets $ 7,349,594 Total Liabilities $ 4,006,631 Net Assets $ 3,342,963 In 2005, the Water Commission completed construction on a facility expansion and renovation. The total project cost of $2.14 million was financed through fund balance appropriations and $1.5 million in 20 year statutory installment bonds. Also in 2007, the Commission completed construction on a 3 million gallon water tank on East Hill in the Town of Ithaca at a cost of $2.08 million. The project was J financed through fund balance appropriations and $1.5 million in 20 year statutory instalhnent bonds. The Town of Ithaca will bear responsibility for r , approximately 44% of the principal and interest payments on the debt associated with these projects, which will be reflected in the rate the Water Commission charges for water sales. i✓+ _J1 2. Joint Venture - City of Ithaca, Town of Dryden The Town of Ithaca is also a participant in the' joint sewer activity known as the Ithaca Area Wastewater Treatment Plant. The other participants are the Town of Dryden and the City of Ithaca. The City of Ithaca has custody of the joint activity money. The governing body has established charges at rates intending to be self- sustaining to cover all operating costs and debt service. Any shortfall in revenues is to be provided by equal share contributions from the participants. The following information regarding the Wastewater Treatment Plant is from the separately issued financial statements of the joint venture issued for. the year December 31, 2007: B. Basis of Presentation 1. Government -wide Statements The Statement of Net Assets and the Statement of Activities present financial information about the Town's governmental activities. These statements include the financial activities of the overall government in its entirety, except. those that are fiduciary. Eliminations have been made to minimize the double counting of internal transactions. Governmental activities generally are financed through taxes, state aid, intergovernmental revenues, and other exchange and nonexchange transactions. Operating grants include operating - specific and discretionary (either operating or capital)grants, while the capital grants column reflects capital -specific grants. The Statement of Activities presents a comparison between direct expenses and program revenues for each function of the Town's governmental activities. Direct expenses are those that are specifically associated with.and are clearly identifiable to a particular function: Program revenues include charges paid by the recipients of goods or services offered by the programs, and grants and contributions that are restricted to meeting the, operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues. 2. Fund Financial Statements The fund statements provide information about the Town's funds, including fiduciary funds. Separate statements for each fund category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on J major Governmental Funds, each displayed in a separate column. All remaining Governmental Funds are aggregated and reported as non -major funds. Year Ending December 31, 2007 Total Assets $ 28,523,256 Total Liabilities 2,470,869 Total Equity 26,052,387 Total Revenues 2,890,284 Total Expenses 37991,801 B. Basis of Presentation 1. Government -wide Statements The Statement of Net Assets and the Statement of Activities present financial information about the Town's governmental activities. These statements include the financial activities of the overall government in its entirety, except. those that are fiduciary. Eliminations have been made to minimize the double counting of internal transactions. Governmental activities generally are financed through taxes, state aid, intergovernmental revenues, and other exchange and nonexchange transactions. Operating grants include operating - specific and discretionary (either operating or capital)grants, while the capital grants column reflects capital -specific grants. The Statement of Activities presents a comparison between direct expenses and program revenues for each function of the Town's governmental activities. Direct expenses are those that are specifically associated with.and are clearly identifiable to a particular function: Program revenues include charges paid by the recipients of goods or services offered by the programs, and grants and contributions that are restricted to meeting the, operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues. 2. Fund Financial Statements The fund statements provide information about the Town's funds, including fiduciary funds. Separate statements for each fund category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on J major Governmental Funds, each displayed in a separate column. All remaining Governmental Funds are aggregated and reported as non -major funds. u (-1 The Town of Ithaca reports the following major Governmental Funds: • General Fund. This is the Town's primary operating fund. It l accounts for all financial transactions that are not required by law or other provision to be accounted for in other funds. • Highway Fund. Used to account for revenues and expenditures for parttown highway purposes. • Water Fund. Established by law to account for revenues derived from charges for water consumption and benefit assessments and the application of such revenues toward related operating expenses and i debt retirement. • Sewer Fund. Established by law to account for revenues derived from - , sewer rents and benefit assessments and used for related operating j expenses and debt retirement. • Fire Protection District Fund. Used to record transactions involving the Town Fire Protection District and the contracts for fire protection with the City of Ithaca and Village of Cayuga Heights. j Capital Projects Fund. Used to account for capital improvements finances from current monies transferred from other funds, federal and state grants and proceeds of obligations. The Town also reports the following non -major funds: i.J _ Lighting District Fund. Used to record operation and maintenance transactions. Revenues derived from special districts' assessment. • Debt -Service Fund. Used to account for interest earned on proceeds ,— of borrowing for water and sewer capital projects. Interest earned is transferred to the Debt Service Fund from the Capital Projects Fund L and then to the Operating Funds for payment of principal and interest. Annual principal and interest payments due on serial bonds is transferred from the water and sewer funds. Payments are made directly from the Debt Service Fund to the respective paying agents. The Town reports the following fiduciary funds: �J • Agency Fund. Used to account for those funds held in custody and subsequent distributions, transmittal or release to other governments, individuals or to other funds. C. Measurement Focus and Basis of Accounting The Government -Wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are i recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash transaction takes place. Nonexchange transactions, in which the Town gives or receives value without } --� directly receiving or giving equal value in exchange, include property taxes, grants and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from grants (� -13- 1 � � l_J i L and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied. The Governmental- Funds are reported using the current financial resources measurement focus and 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. 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 the related fund liability is incurred, except for principal and interest on general long-term debt, claims and judgments, and compensated absences, which are recognized as expenditures to the extent they have matured. General capital asset acquisitions are reported as expenditures in Governmental Funds. Proceeds of general long-term debt and acquisitions under capital leases are reported as other financing sources. D. Property Taxes Town real property taxes are levied annually on January 1, and become a lien on that date. Property owners can elect to pay their taxes using one of two options. Taxpayers may elect to pay their bill in two installments equal to lh the total bill, plus a 2.5% processing fee. If the installment option is selected, the first payment is due between January 1 and January 14, without penalty, or between January 15, and January 20, with 1% interest (election to pay in installments ceases January 20). The second installment is due on or before July 1, payable to the County Division of Budget and Finance. Taxpayers may elect to pay their tax bill in full. Using this method, taxes are collected during the period January 1 to January 31 at face value and from February 1 to May 31 with interest added. The Town Receiver of Taxes collects all real estate taxes for Town and County purposes. The Town Receiver 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. E. Budgetary Data j 1. Budget Policies — The budget policies are as follows: a. No later than October 5, the budget officer submits a tentative budget- to the Town Board for the fiscal year commencing the �I following January 1. The tentative budget includes proposed expenditures and the proposed means of financing for all funds. b. After public hearings are conducted to obtain taxpayer comments, no later than November 20, the Town Board adopts the budget. { j -14- F111 L C. All modifications of the budget must be approved by the Town Board. However, the Town Supervisor is authorized.to transfer j certain budgeted amounts within departments. 1 d. Appropriations lapse at year-end. 2. Encumbrances Encumbrance accounting, under which purchase orders, contracts and I other commitments for the expenditure of monies are recorded for budgetary control purposes to reserve that portion of the applicable appropriations, is employed in all funds. Encumbrances are reported as j reservations of fund balances since they do not constitute expenditures or liabilities. Expenditures for such commitments are recorded in the period in which the liability is incurred. F. Cash and Investments The Town of Ithaca's investment policies are governed by State statutes. In j addition, the Town of Ithaca has its own written investment policy. Town of L! Ithaca s; monies must be deposited in FDIC insured commercial banks or trust companies located within the State. The supervisor is authorized to use demand account and certificates of deposit. Permissible investments include obligations jof the U.S. Treasury and U.S. Agencies, repurchase agreements, and obligations of New York State or its localities. Collateral is required for demand deposits and certificates of deposit not covered by federal deposit insurance. Obligations that may be pledged as collateral are obligations of the United States and its agencies and obligations of the State and its municipalities and school districts. The written investment policy requires repurchase agreements to be purchased from banks located within the state and that underlying securities must be obligations of the federal government and New York State. Underlying securities must have market value of at least the cost of the repurchase agreement. G. Accounts Receivable Accounts receivable are shown gross, with uncollectible amounts recognized under the direct write-off method. No allowance for uncollectible accounts has i been provided since it is believed that such allowance would not be material. All `- receivables are expected to be collected within the subsequent fiscal year. H. Due To/From.Other Funds Amounts due to and due from within the same fund type are eliminated in the j I Government -wide statements. Inter -fund receivables and payables are detailed in Note 4 on page 22. I. Inventories and Prepaid Items 1� Purchases of inventoriable items are recorded as expenditures in . the Governmental Funds at the time of purchase. Inventory -type items are considered J immaterial and, consequently, are not provided in the Government -wide statements. j -15- J. L. L Prepaid items represent payments made by the Town for which benefits extend beyond year-end. Capital Assets Capital assets are reported at historical costs. 'The Town depreciates capital assets using the straight-line method over the estimated useful life of the assets. Capitalization thresholds (the dollar value above which capital asset acquisitions are added to the capital asset accounts) and .estimated useful lives of capital assets reported in the Government -wide statements are as follows: Building and improvements Non -building improvements Equipment and machinery Furniture and furnishings Infrastructure The Town includes long-lived improvements to roads, water and sewer systems as capital assets in the Government -wide statements. Infrastructures are reported at historical costs and are depreciated using the straight-line method over their estimated useful lives. Capitalization thresholds and estimated useful lives for infrastructures are as follows: Road systems Water and sewer systems Vested Employee Benefits Estimated Capitalization Useful Threshold Life $ 10,000 20 years 10,000 40 years Employees accrue (earn) vacation leave based on the number of years employed up to a maximum of 20 days a year. Upon separation from service, employees are paid for unused vacation time. Employees accrue (earn) sick leave at the rate of one day per month and may accumulate such credits upto a total of 120 days. Employees who retire apply any unused sick leave to pay for individual cost employee health insurance benefits and potentially add accumulated sick time to be credited to their service time in the New York State Retirement System. In 2008, the Town has recognized a liability of $254,860 based on accumulated sick time balances currently being spent down by retirees and accumulated sick time balances of current Town employees who have reached minimum retirement age and would- be eligible to apply accumulated sick time towards the payment of health insurance premiums. The balance is allocated to a current ($36,428) and long-term ($218,432) liability in the Government -wide statements. The liability for accrued vacation time is reflected in the Government -wide statements under as a long-term liability. -16- Estimated Capitalization Useful Threshold Life $ 5,000 30=40 years 5;000 15-20 years 51000 5-15 years 5,000 10 years The Town includes long-lived improvements to roads, water and sewer systems as capital assets in the Government -wide statements. Infrastructures are reported at historical costs and are depreciated using the straight-line method over their estimated useful lives. Capitalization thresholds and estimated useful lives for infrastructures are as follows: Road systems Water and sewer systems Vested Employee Benefits Estimated Capitalization Useful Threshold Life $ 10,000 20 years 10,000 40 years Employees accrue (earn) vacation leave based on the number of years employed up to a maximum of 20 days a year. Upon separation from service, employees are paid for unused vacation time. Employees accrue (earn) sick leave at the rate of one day per month and may accumulate such credits upto a total of 120 days. Employees who retire apply any unused sick leave to pay for individual cost employee health insurance benefits and potentially add accumulated sick time to be credited to their service time in the New York State Retirement System. In 2008, the Town has recognized a liability of $254,860 based on accumulated sick time balances currently being spent down by retirees and accumulated sick time balances of current Town employees who have reached minimum retirement age and would- be eligible to apply accumulated sick time towards the payment of health insurance premiums. The balance is allocated to a current ($36,428) and long-term ($218,432) liability in the Government -wide statements. The liability for accrued vacation time is reflected in the Government -wide statements under as a long-term liability. -16- ii -U, The Town's employees participate in the New York State Employee's Retirement j System. In addition to providing pension benefits, the Town of Ithaca provides health insurance coverage for retired employees. Substantially all of the Town's employees may become eligible for these benefits if they reach normal retirement age while working for the Town. Health care benefits are provided through an insurance company whose. premiums are based on, the benefits paid during the year for the community. These benefits are further discussed in Note 9. M. Unemployment Insurance As of January 1, 1978, Town employees are covered by unemployment insurance. The Town has chosen to discharge its liability to the 'New York State Unemployment Insurance Fund by means of the benefit reimbursement method. This is a dollar -for -dollar reimbursement to the Unemployment Insurance Fund for the benefits paid to former employees and charged to the Town's account. The Town is exempt for federal unemployment insurance tax. N. . Deferred Compensation The Town offers their employees a Deferred Compensation Plan (the Plan) created in accordance with Internal Revenue Code Section 457. The Plan, which is available to all eligible participants, permits participants to defer a portion of their salary (25% of Gross wages not to exceed $8,000) until future years. Amounts deferred under the Plan are not available to the employee until U termination, retirement, death or unforeseeable emergency. Effective, January 1, 1998, all amounts of compensation deferred under the Plan, all property and rights purchased with the amounts, and all income attributable to these amounts are the sole property of the employee.. As required, the Town Supervisor is the Chairman of the Town's Deferred Compensation Committee and Trustee. O. Risk Retention The Town of Ithaca is exposed to various risks of loss related to employee injury. During 1996 the Town established reservations of fund balance to finance certain j uninsured risks of loss in the interest of lower annual insurance costs. Claims that will be paid from these reserves are for small employee medical claims. During the year ended December 31, 2008, $11,205 was paid out on behalf of the employees. i L P. Restricted Resources U -� When an expense is incurred for purposes for which both restricted and unrestricted net assets are available, it is the Town's policy to apply restricted funds before unrestricted funds, unless otherwise prohibited by legal requirements. -17- Q. Equity Classification 1. Goveirunent-wide Statements Equity is classified as net assets and displayed in three components: I • Invested in Capital Assets, Net of Related Debt Consists of capital assets including restricted capital assets, net of (� accumulated depreciation and reduced by the outstanding balances of any L} bonds, mortgages, notes or other borrowings that are attributable to the acquisition, construction, or improvement of those assets. �i • Restricted Net Assets �t Consists of net assets with constraints placed on the use either by 1) 1 ! external groups such as creditors, grantors, contributors, or laws or i regulations of other governments; or 2) law through constitutional provisions or enabling legislation. • Unrestricted Net Assets All other net assets that do not meet the definition of_ "restricted" or "invested in capital assets, net of related debt." 2. Fund Financial Statements - Reserves a. The General Town -Wide Fund equity includes reserve funds established for the purpose of future park development and purchasing rights as outlined in the Town's Open Space Plan. The balance at the end of 2008 was $463,779. This Reserve Fund was designated by Board Resolution No. 170 of October 2, 1997. Interest earnings and additional funding for the year both increased the Reserve Fund. b. The Highway Equipment equity includes reserve funds established for highway machinery. The balance at the end of 2008 was $2,593. This Reserve Fund was designated by Board resolution No. 193 of November 8, 1984, and any unexpended appropriation for machinery at year end is to be transferred to the Reserve Fund. The Reserve Fund is also increased by interest earned for the year. c. The General Town -Wide Fund, the General -Part Town Highway Fund, the Water Fund, and the Sewer Fund equity includes funds established for fiscally managing annual economic increases and decreases in employee fringe benefits (E.g. NYS Retirement Costs, Health Insurance). The aggregate balance at the end of 2008 was $300,001. This Reserve Fund was established at the June 13, 2005 Town Board meeting under Board Resolution No. 084. The reserve is funded on an annual basis as assessed by the Town Board. The reserve cash is increased by interest earned for the year. The balance by fund is as follows: -18- U General Town Wide Fund $ 151,170 General Part -Town Fund 44,575 General Part -Town Highway Fund 82,994 Water Fund 13,546 i J Sewer Fund 7,716 300.001 f _ R. Inter -fund Transfers The operations of the Town gives rise to certain transactions between funds, including transfers to provide services and construct assets. The amounts reported on the Statement of Revenues, Expenditures -and Changes in Fund Balance - Governmental Funds for inter -fund transfers have been eliminated for the Statement of Activities. A detailed description of the individual fund transfers that occurred during the year is provided subsequently in these Notes. S. Change in Accounting Policy ! In 2008, The Town implemented the provisions of Governmental Accounting Standards Board Statement No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions. The standard is being applied prospectively by the Town and establishes measurement and disclosure criteria for non -pension postemployment benefits (Note 9). In 2008, the Town implemented the Governmental Accounting Standards Board Statement No. 50, Pension Disclosures—an amendment of GASB Statements No. 25 and No. 27. This statement more closely aligns the financial reporting requirements for pensions with those for other postemployment benefits (OPEB) and, in doing so, enhances information disclosed in notes to financial statements or presented as required supplementary information (RSI) by pension- plans -and by employers that provide pension benefits. The applicable provisions of this statement are reflected in Note 6. T. New Accounting Pronouncements GASB Statement No. 49 In November 2006, the GASB issued Statement No. 49, "Accounting and Financial Reporting for Pollution Remediation Obligations." This statement addresses accounting and financial reporting standards for pollution (including contamination) remediation obligations, which are obligations to address the current or potential detrimental effects of existing pollution by" participating in pollution remediation activities such as site assessments and cleanups. Statement No. 49 had no impact on the 2008 financial statements. ' GASB Statement No. 51 J In June 2007, the GASB issued Statement No. 51, "Accounting and Financial Reporting for Intangible Assets." This statement clarifies pertinent provisions of GASB Statement No. 34, which address capital asset reporting requirements. The Town is required to adopt GASB Statement No. 51 for its 2010 financial statements. 110 j -19- � U I, GASB Statement No. 52 In November 2007, the GASB issued Statement No. 52, "Land and Other Real Estate Held as Investments by Endowments." This statement establishes 1 consistent standards for the reporting of land and other real estate held as "_I investments by essentially similar entities. It requires endowments to report their land and other real estate investments at fair value. Governments also are required I to report the changes in fair value as investment income and to disclose the Umethods and significant assumptions employed to determine fair value, and other information that they currently present for other investments reported at fair value. The Town is required to adopt GASB Statement No. 52 for its 2009 financial statements. I GASB Statement No. 53 j In June 2008, the GASB issued Statement No. 53, "Accounting and Financial Reporting for Derivative Instruments." This statement addresses the recognition, measurement, and disclosure of information regarding derivative instruments entered into by state and local governments. The Town is required to adopt GASB Statement No. 53 for its 2010 financial statements. - GASB Statement No. 54 In March 2009, the GASB issued Statement No. 54, "Fund Balance Reporting and J Governmental Fund Type Definitions." This statement enhances the usefulness of fund balance information by providing clearer fund balance classifications that can be more consistently applied and by clarifying the existing governmental fund �`i type definitions. This statement establishes fund balance classifications that comprise a hierarchy based primarily on the extent to which -a government is bound to observe constraints imposed upon the .use of the resources reported in governmental funds. The Town is required to adopt GASB Statement No. 54 for its 2011 financial statements. NOTE 2 — EXPLANATION OF CERTAIN DFFERENCES BETWEEN 9OV-4RNMENTAL4FUND STATEMENTS AND GOVERNMENT -WIDE STATEMENTS Due to the differences in the measurement focus and basis of accounting used in the governmental fund statements and the Government -wide statements, certain financial transactions are treated differently. The differences result primarily from the economic focus of the Statement of Activities, compared with the current financial resources focus of the Government Funds. A. Total Fund Balances of Governmental Funds vs. Net Asset of Governmental Activities: Total fund balances of the Town's Governmental Funds differ from "net assets" of governmental activities reported in the Statement of Net Assets. This difference primarily results from the additional long-term economic focus of the Statement of Net Assets versus the solely current financial resources focus of the Governmental Fund Balance Sheet. � U 0 -20- The basic financial statements contain a detailed reconciliation of the items creating the differences between fund balance reported in the Governmental Fund Statements and Net Assets reported on the Statement of Net Assets. B. Explanation of Difference between Governmental Funds Operating Statement and the Statement of Activities: Differences between the Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balance and the Statement of Activities fall into one of three broad categories. The amounts shown below represent these differences as -follows: • Long-term revenue differences arise because Governmental Funds report revenues only when they are considered "available," whereas the Statement of Activities reports revenues when earned. Differences in long-term expenses arise because Governmental Funds report on a modified accrual basis, whereas the accrual basis of accounting is used on the Statement of Activities. • Capital related differences include the difference between proceeds for the sale of capital assets reported on governmental fund statements and the gain or loss on the sale of assets as reported on the Statement of Activities, and the difference between recording an expenditure for the purchase of capital items in the governmental fund statements and depreciation expense on those items as recorded in the Statement of Activities. • Long-term debt transaction differences occur because both interest and principal payments are recorded as expenditures in the Governmental Fund statements, whereas interest payments are recorded in the Statement of Activities as incurred, and principal payments are recorded as a reduction of liabilities in the Statement of Net Assets. The basic financial statements contain a detailed reconciliation of the items creating the differences between the change in fund balance reported in the Governmental Fund Statements and the change in net assets reported in the Statement of Activities. NOTE 3 — CASH A. Cash The Town of Ithaca's investment policies are governed by State statutes, as previously described in these Notes. Deposits are valued at cost or cost plus interest and are categorized as either: 1. Insured or collateralized with securities held by the entity or by its agent in the entity's name; 2. Collateralized with securities held by the pledging financial institution's trust department or agency in the entity's name; or 3.. Uncollateralized. Total financial institution (bank) balances at December 31, 2008, per the bank, were $5,706,008 and $58,547. Governmental funds Agency funds $ -21- 1 2 5:703.843 S 58.489 3 S - NOTE 4 — INTER -FUND ACTIVITY Inter -fund receivables and payables at December 31, 2008, were as follows: Inter- Fund Inter- Fund Fund Type Receivables Payables General town -wide $ - $ - General - part town - - Highway - - Water - 80 Sewer 80 - Capital Projects - - Debt Service - - Agency - - $ 80 $ 80 Inter -fund revenues and expenditures at December 31, 2008, were as follows: -22- Inter- Fund Inter- Fund Fund Type Revenues Expenditures General town -wide $ 338,671 $ 147,085 General - part town - 37,912 Highway - 37,911 Water 30,425 859,517 Sewer 60,850 350,008 Capital Projects 91,275 30,425 Debt Service 1,093,762 152,125 $ 1,614,983 $ 1,614,983 -22- - NOTE 5 - CAPITAL ASSETS I� Capital asset balances and activity for the year ended December 31, 2008, were as follows: a I' ' Governmental Activities 1 CAPITAL ASSETS THAT ARE 1 j NOT DEPRECIATED: Land Construction in progress TOTAL NON -DEPRECIABLE HISTORICAL COST CAPITAL ASSETS THAT ARE DEPRECIATED Buildings Equipment and machinery I, Furniture and furnishings Non -building improvements - Infrastructures TOTAL DEPRECIABLE HISTORICAL COST LESS ACCUMULATED DEPRECIATION Buildings Equipment and machinery Furniture and furnishings Non building improvements Infrastructures TOTAL ACCUMULATED DEPRECIATION - TOTAL HISTORICAL COST, net Beginning Disposals & Ending Balance - Additions Reclassifications Balance $ 293,163 $ - $ - $ 293,163 1,570,895 704,018 - 2,274,913 1,864,058 704,018 - 2,568,076 3,959,825 - - 3,959,825 3,009,573 214,730 138,784 3,085,519 183,691 - - 183,691 288,830 - - 288,830 5,641,394 - - 5,641,394 13,083,313 214,730 138,784 13,159,259 617,785 115,733 - 733,518 1,064,565_ 200,879 61,364 1,204,080 131,038 18,369 - 149,407 256,051 7,120 - 263,171 591,892 141,535 - 733,427 2,661,331 483,636 61,364 3,083,603 $ 12,286,040 $ 435,112 $ 77,420 $ 12,643,732 Depreciation was charged to governmental functions as follows: i General government support j Transportation Culture and recreation Home and community services - Total Depreciation Expense a� i' i! �I - 23 - $ 93,456 192,947 19,599 177,634 $ 483,636 U, NOTE 6 - LIABILITIES A. Pension Plans Plan Description The Town of Ithaca participates in the New York State and, Local Employees' Retirement System (ERS) and the Public Employees' Group Life Insurance Plan (Systems). . These are cost-sharing multiple -employer retirement systems. The Systems provide retirement benefits as well as death and disability benefits. Obligations of employers and employees to contribute and benefits to employees are governed by the New York State Retirement and Social Security Law (NYSRSSL). As set forth in the NYSRSSL, the Comptroller of the State of New York (Comptroller) serves as sole trustee and administrative head of the Systems. The Comptroller shall 'adopt and may amend rules and regulations for the administration and transaction of the business of the Systems and for the custody and control of their funds. The Systems issue a publicly available financial report that includes financial statements and required supplementary information. That report may be obtained by writing to the New York State and Local Retirement Systems, Gov. Alfred E. Smith State Office Building, Albany, NY 12244. Funding Policy The Systems are noncontributory except for employees who joined the New York ' State and Local Employees' Retirement System after July. 27, 1976 who contribute 3% of their salary.. Under the authority of the NYSRSSL, the Comptroller shall certify annually the rates expressed as proportions of member payroll and employer contributions, used in computing the contributions required to be made by employers to the pension accumulation fund. Chapter 126- adds Article 19 'Benefits Enhancements" of the New York State and Local Employees Retirement System. An Eligible Tier III or IV member with ten or more years of membership or ten years credited service, will not be required to contribute to the Retirement System. Effective in 2000 the Town adopted Section 41j of the 1 Retirement System. This allows a retiring municipal employee to add service credit by using accumulated sick time. The Town of Ithaca is required to contribute at an actuarially determined rate. The required contributions for the current year and four preceding years were: ERS 2008 $ 233,032 2007 $ 235,438 2006 $ 240,374 2005 $ 246,646 2004 $ 273,864 1 �Li -24- � U Town contributions made to the Systems were equal to 100% of the contributions required for each year. Since 1989, the Systems' billings have been based on Chapter 62 of the Laws of 1989 of the State of New York. This legislation requires participating employers to make payments on a current basis, while .I amortizing existing unpaid amounts relating to the Systems' fiscal years ended March 31, 1988 and 1989 (which otherwise were to have been paid on June 30, 1989 and 1990, respectively) over a 17 year period, with an 8.75% interest factor added. Local governments were given the option. to prepay this liability. The j Town's total unpaid liability at the end of 2,008 fiscal year was $0. a. Southern Cayuga Lake Intermunicipal Water Commission Pension Plan The Southern Cayuga Lake Intermunicipal Water Commission's payroll is prepared through the Town of Ithaca, resulting in the New York State and Local Retirement Plan billings being a combination of the Town's and the Water Commission's. The Water Commission is remitted along with the Town's share. �B. Short -Term Debt Liabilities for bond anticipation notes (BANS) are generally accounted' for in the Capital Projects Fund. The notes or renewal thereof may not extend more than five years beyond the original date of issue unless a portion is redeemed within five years and within each 12 month period thereafter. For short-term financing the Town of Ithaca redeems (pays down) one-fifth (115) of the original BAN borrowing. State law requires that BANs issued for capital purposes be converted to long- term obligations within five years after the original issue date. However, BANs issued for assessable improvement projects may be renewed for periods equivalent to the maximum life of the permanent financing, provided that stipulated annual reductions of principal are made. In 2007, the Town borrowed $1,217,000 from the Sewer Fund through the issuance of two bond anticipation notes in the amounts of $693,000 and $594,000. The BANs bear annual interest at 4.50% and the proceeds are being used to fund water improvement projects. The BANs are expected to be redeemed with the proceeds from the issuance of serial bonds. The BANs are considered interfund obligations and the receivable and the payable are eliminated in the government - wide statements. C. Long -Term Debt Bonds: The Town of Ithaca 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. At December 31, 2008, the total principal indebtedness outstanding of the Town of Ithaca aggregated $4,246,000. Of this amount, $760,000 was subject to the Town's constitutional debt limit and represented 1.1% of its debt limit. Further calculations disclosed that the Town of Ithaca meets the 7% indebtedness requirement and has not exhausted its borrowing and repayment abilities. -25- lJ The following is a summary of the Town of Ithaca's outstanding serial bonds and bond anticipation notes for the year ending December 31, 2008: Original Date Original Interest Maturity Outstanding Description of Issue Amount Rate Date 12/31/2008 1991 Public Improvement 7/26/91 4,465,000 6.63% 7/26/11 $ 750,000 2003 Public Improvement 12/29/03 1,000,000 3.95% 12/29/17 640,000 2004 Water Improvement 2/12/04 13000,000 3.88% 2/12/19 736,000 2004 Public Improvement 11/15/04 2,000,000 4.35% 11/15/24 1,600,000 2005 Water Improvement 9/28/05 500,000 3.60% 9/28/15 400,000 2006 Public Improvement 1/7/06 200,000 3.75% 1/7/11 120,000 Total Serial Bonds Payable $ 4,246,000 Interest on long-term debt paid during the year was: Interest paid $ 222,736 Less interest accrued -prior year ( 64,675) Plus interest accrued- current year 53,693 $ 211,754 Interest expense has been allocated to the following government functions: Transportation $ 32,604 Home and community services 179,150 $ 211,754 Long-term liability balances and activity for the year are summarized below: Governmental Activities Serial bonds Bond anticipation notes Total serial bonds and bond anticipation notes Other liabilities: Compensated absences Other post -employment benefits Total long-term liabilities Beginning Ending Balance Issued Redeemed Balance $ 4,963,000 $ - $ ( 717,000) $ 4,246,000 $ 4,963,000 $ - $ ( 717,000) $ 4,246,000 126,890 8,160 - 135,050 - 558,449 - 558,449 $ 126,890 $ 566,609 $ ( 717,000) $ 693,499 -26- L] I F_ Activity for compensated absences is shown at net due to the impracticability of determining these amounts separately. Payments of compensated absences are dependent upon future factors and, therefore, the timing of such payments cannot be determined. Compensated absences are reflected as a long-term liability in the Statement of Net Assets. The following is a summary of the maturity of long-term indebtedness: Serial Bonds Year Principal Interest Total 2009 577,000 187,080 764,080 2010 578,000 157,699 735,699' 2011 588,000 128,281 716,281 2012 298,000 98,511 396,511 2013 298,000 .86,803 384,803 2014-2018 1,240,000 264,947 1,504,947 2019-2023 567,000 79,489 646,489 2024 & beyond 100,000 2,250 102,250 Total Serial Bonds $ 4,246,000 $ 1,005,060 $ 5,251,060 NOTE 7 — UNRESTRICTED BALANCES Of the $3,910,428 in unrestricted net assets, $950,229 has been appropriated by the Town for 2008 expenditures. NOTE 8 — DEFICIT FUND -BALANCE- CAPITAL PROJECTS FUND The deficit fund balance in the Capital Projects Fund is expected to be eliminated through recognition of the proceeds of long-term financing to fund ongoing projects. NOTE 9 -POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS Plan Description. The Town of Ithaca administers a single -employer defined benefit healthcare plan ("the Retiree Health Plan"). The plan provides lifetime healthcare insurance for eligible retirees and their spouses through the Town's group health insurance plan, which covers both active and retired members. The Town pays a portion of retiree's premiums for healthcare insurance based on the number of years of service to Li the Town at the time of retirement. In addition, retiring employees can covert unused sick and vacation time to offset portions healthcare premiums that are the retiree's responsibility. The Town tracks the accumulated balances and makes premium payments on behalf of the retirees until the balances are exhausted. The Retiree Health Plan does not issue a publicly available financial report. -27- U Funding Policy. The Town contributes a portion of the retiree's healthcare premium according to the following schedule: Years of Town Service Contribution 30 and over 75.0% 25-29 50.0% 15-24 35.0% 5-14 20.0% less than 5 0.0% For fiscal year 2008, the Town contributed $26,898 to the plan. Annual OPEB Cost and Net OPEB Obligation. The Town's annual. other postemployment benefit (OPEB) cost (expense) is calculated based on the annual required contribution of the employer (ARC). The Town has elected to calculate the ARC and related information using the alternative measurement method permitted by GASB Statement 45 for employers in plans with fewer than one hundred total plan members. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and to amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years. The following table shows the components of the Town's annual OPEB cost for the year, the amount actually contributed to the plan, and changes in the Town's net OPEB obligation to the Retiree Health Plan (the Town implemented GASB 45 in 2008, so there was no prior calculation of an OPEB obligation): The Town's annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for fiscal year 2008 is as follows (Note: Information for the two preceding years is not available due to implementation of GASB 45 in 2008): Annual required contribution $ 349,442 - Net Interest on net OPEB obligation - Annual OPEB Adjustment to annual required contribution -- �- Annual OPEB expense 349,442 L) Contributions made ( 26,898) $ 322,544 Increase in net OBEB obligation 322,544 Net OPEB obligation- beginning of year - Net OPEB obligation- end of year $ 322,544 The Town's annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for fiscal year 2008 is as follows (Note: Information for the two preceding years is not available due to implementation of GASB 45 in 2008): Percentage of - Net j Year Annual Annual OPEB OPEB —' Ended OPEB Cost Cost Contributed Obligation 12/31/2008 $ 349,442 7.70% $ 322,544 U { -28- � 0 � Funded Status and Funding Progress. As of December 31, 2008, the actuarial accrued liability for benefits was $3,302,265, all of which was unfunded. The covered payroll (annual payroll of active employees covered by the plan) was $2,461,734 and the ratio of the unfunded actuarial accrued liability to the covered payroll was 134.1 percent. The projection of future benefit payments for an ongoing plan involves estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan (j and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, presented as required supplementary - ( information following the notes to the financial statements, presents multi-year trend information about whether the actuarial value of plan assets is increasing or decreasing ` - over time relative to the actuarial accrued liabilities for benefits. Methods and Assumptions. Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. The following simplifying assumptions were made: Retirement age for active employees—Based on the historical average retirement age for the covered group, active plan members were assumed to retire at age 62, or at the first subsequent year in which the member would qualify for benefits. w ! Marital status—Marital status of members at the calculation date was assumed to continue throughout retirement. Mortality—Life expectancies were based on mortality tables from the National Center for Health Statistics. The 1999 United States Life Tables for Males and for Females were used. Turnover—Non-group-specific age -based turnover data from GASB Statement 45 were used as the basis for assigning active members a probability of remaining employed until the assumed retirement age and for developing an expected future working lifetime assumption for purposes of allocating to periods the present value of total -benefits to be �J paid. Healthcare cost trend rate—The expected rate of increase in healthcare insurance premiums was based on current premium rates and projections of the Office of the Actuary at the Centers for Medicare & Medicaid Services. A rate of 15.0 percent was used initially, reduced to an ultimate rate of 6.0 percent after six years. Health insurance premiums -2008 health insurance premiums for retirees were used as the basis for calculation of the present value of total benefits to be paid. Inflation rate—The expected long-term inflation assumption of 2.8 percent was based on projected changes in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI -W) in The 2007 Annual Report of the Board of Trustees of the Federal U -29- (l� U L Old Age and Survivors Insurance and Disability Insurance Trust Funds for an intermediate growth scenario. U� Payroll growth rate—The expected long-term payroll growth rate was assumed to equal the rate of inflation. Based on the historical and expected returns of the Town's short-term investment — portfolio, a discount rate of 4.0 percent was used. In addition, a simplified version of the entry age actuarial cost method was used. The unfunded actuarial accrued liability is being amortized as a level percentage of projected payroll on an open basis. The remaining amortization period at December 31, 2008, was thirty years. i i� 1 Li U - I� ji j J -30- Actuarial Valuation Date 12/31/2008 TOWN OF ITHACA SCHEDULE OF FUNDING PROGRESS FOR THE RETIREE HEALTH PLAN December 31;2008 Actuarial Accrued Actuarial Liability Value (AAL) Unfunded of Simplified AAL Assets . Entry Age (UAAL) (a) (b) (b -a) $ - $ 3,302,265 $ 3,302,262 See Independent Auditor's Report. Funded Ratio (a/b) 0.00% Covered Payroll (c) $ 2,461,734 UAAL as a Percentage of Covered. Payroll ((b -a) / c) 134.1% -31- TOWN OF ITHACA SCHEDULE OF REVENUES AND EXPENDITURES COMPARED TO BUDGET MAJOR FUNDS December 31, 2008 REVENUES: Real property taxes Real property tax items Nonproperty tax items Departmental income Intergovernmental charges Interest income Licenses and permits Fines and forfeitures Sale of property and compensation for loss Local sources State sources TOTAL REVENUES OTHER SOURCES: Interfund transfers Proceeds of obligations Appropriated fund balance TOTAL REVENUES AND OTHER SOURCES EXPENDITURES: General governmental support Public safety Transportation Culture and recreation Home and community services Employee benefits Debt service (principal and interest) TOTAL EXPENDITURES OTHER USES: Interfund transfers TOTAL EXPENDITURES AND OTHER USES Original Budget $ 1,771,501 43,500 757,981 100,350 54,427 110,000 3,000 300,000 354,200 3,494,959 395,871 140,316 531,049 4,562,195 1,559,928 125,362 284,849 896,062 732,568 778,430 4,377,199 184,996 4,562,195 GENERAL Modified Budget $ 1,771,501 56,254 1,207,610 230,292 .61,909 112,066 10,593 ,254,673 2,066 168,478 467,947 4,343,389 338,671 4,682,060 1,475,553 55,401 287,450 690,166 733,419 832,883 4,074,872 184,996 4,259,868 EXCESS (DEFICIT) OF REVENUES OVER. EXPENDITURES - 422,192 FUND BALANCE, beginning of year 2,580,598 2,580,598 FUND BALANCE, end of year $ 2,580,598 $ 3,002,790 $ See Independent Auditor's Report. 336,518 - - 1,978,359 1,725,214 1,694,019 420, HIGHWAY 315 Original Modified 1,541,562 Budget Budget Actual- - 1,968,494 1,940,969 1,542,841 1,542,841 1,542,841 12,000 24,877 24,877 10,000 6,641 6,641 16,000 19,160 19,160 - 57,676 26,481 61,000 74,019 74,019 1,641,841 1,725,214 1,694,019 336,518 - - 1,978,359 1,725,214 1,694,019 420, 315 315 1,559,328 1,541,562 1,541,562 380,700 426,617 399,092 1,940,448 1,968,494 1,940,969 37,911 37,911 37,911 1,978,359 2,006,405 1,978,880 - ( 281,191) ( 284,861) 854,979 854,979 854,979 $ 854,979 $ 573,788 $ 570,118 -32- TOWN OF ITHACA i SCHEDULE OF REVENUES AND EXPENDITURES COMPARED TO BUDGET MAJOR FUNDS (continued) December 31, 2008 r— WATER - Original Modified Budget Budget Actual REVENUES: Real property taxes $ 697,763 $ 697,763 $ 697,763 Real property tax items 6,000 7,100 7,100 Nonproperty tax items - - - Departmental income 1,772,000 1,794,286 1,794,286 Intergovernmental charges 500 441 441 _ Interest income 3,000 3,733 3,733 _ Licenses and permits - - - Fines and forfeitures - - - —t Sale of property and compensation for loss - - - Local sources - 50,714 17,029 State sources - - - TOTAL REVENUES 2,479,263 2,554,037 2,520,352 OTHER SOURCES: ' Interfund transfers - - - Proceeds of obligations 1,500,000 - 30,425 Appropriated fund balance ( 5,200) - - TOTAL REVENUES AND OTHER SOURCES 3,974,063 2,554,037 2,550,777 EXPENDITURES: - General governmental support 51,417 53,517 53,517 Public safety Transportation - - - Culture and recreation - - - -I Home and community services 2,988,723 1,511,001 1,511,001 Employee benefits 94,400 77,578 72,242 Debt. service (principal and interest) - - - -� TOTAL EXPENDITURES 3,134,540 1,642,096 1,636,760 OTHER USES: t Interfund transfers 839,523 859,517 859,517 E TOTAL EXPENDITURES AND OTHER USES 3,974,063 2,501,613 2,496,277 EXCESS (DEFICIT) OF REVENUES OVER EXPENDITURES - 52,424 54,500 FUND BALANCE, beginning of year 471,510 471,510 471,510 FUND BALANCE, end of year $ 471,510 $ 523,934 $ 526,010 } See Independent Auditor's Report. Original Budget $ 147,763 $ 6,700 1,427,000 1,000 54,000 1,636,463 SEWER Modified Budget 147,763 $ 7,100 1,293,645 1,368 72,721 1,522,597 60,850 560,752 - - - - 2,197,215 1,522,597 1,522,597 3,087,006 3,084,545 44,117 40,664 40,664 600 3,746 - - 3,268,281 3,227,742 1,756,320 1,211,173 1,211,173 - - 46,770 34,324 33,289 - - 1,847,207 1,286,161 1,285,126 3,268,881 3,231,488 3,084,545 3,745 3,123,027 3,126,772 350,008 350,068 FIRE - - Original Modified 1,636,169 Actual Budget Budget Actual 154,863 $ 3,008,606 $ 3,008,606 $ 3,008,606 - 9,400 9,580 9,580 1,293,645 - 74,197 - 1,368 - - - 11,871 50,000 48,101 48,101 - 19,000 18,258 18,258 1,461,747 3,087,006 3,084,545 3,084,545 60,850 560,752 - - - - 2,197,215 1,522,597 1,522,597 3,087,006 3,084,545 44,117 40,664 40,664 600 3,746 - - 3,268,281 3,227,742 1,756,320 1,211,173 1,211,173 - - 46,770 34,324 33,289 - - 1,847,207 1,286,161 1,285,126 3,268,881 3,231,488 3,084,545 3,745 3,123,027 3,126,772 350,008 350,068 350,008 - - - 2,197,215 1,636,169 1,635,134 3,268,881 3,231,488 3,126,772 - ( 113,572) ( 112,537) ( 181,875) ( 146,943) (. 42,227) 2,124,738 2,124,738 2,124,738 74,197 74,197 74,197 $ 2,124,738 $ 2,011,166 $ 2,012,201 $ ( 107,678) $ ( 72,746) $ 31,970 -33 - CASH: Cash in savings TOTAL CASH TOTAL ASSETS TOWN OF ITHACA CAPITAL PROJECT FUND DETAILED BALANCE SHEET December 31, 2008 ASSETS First Street Interceptors Active Projects Gateway trail Trumansburg Water Main $ 55,670 $ 84,969 $ 42,473 55,670 84,969 42,473 $ 55,670 $ 84,969 $ 42,473 LIABILITIES AND FUND BALANCE LIABILITIES: Accrued liabilities $ 421,096 $ Ban payable - TOTAL LIABILITIES 421,096 FUND BALANCE: Unappropriated fund balance TOTAL FUND BALANCE TOTAL LIABILITIES & FUND EQUITY $ See Independent Auditor's Report. ( 365,426) ( 365,426) 55,670 $ 641,663 - 641,663 84,969 ( 5.99,190) 84,969 ( 599,190) 84,969 $ 42,473 Completed Project Hanshaw Rd Pew Water Bike Main Trail Total $ 22,779 $ - $ 205,891 22,779 - 205,891 $ _ 22,779 $ - $ 205,891 421,096 484,062 - 1,125,725 484,062 - 1,546,821 ( 461,283) - ( 1,340,930) ( 461,283) - ( 1,340,930) $ 22,779 $ - $ 205,891 -34- TOWN OF ITHACA CAPITAL PROJECTS FUND DETAILED REVENUES AND EXPENDITURES December 31, 2008 REVENUE: Interest earnings Interfund transfers State and federal grants TOTAL REVENUE EXPENDITURES: Sewer construction contract Park and development costs Engineering design Contract administration Bidding process Water construction contract Interfund transfers Survey Inspection Legal services TOTAL EXPENDITURES See Independent Auditor's Report. Active projects First Trumansburg Street Gateway Water Interceptors Trail Main $ 3,181 $ 772 $ 1,598 - - 52,027 $ 3,181 $ 772 $ 53,625 $ 421,591 $ - $ - - - 10,000 - - 4,000 - - 2,500 - - 98,192 - - 17,342 - - 1,000 - - 16,964 - - 1,921. $ 421,591 $ - $ 151,919 Hanshaw Rd Water Main $ 1;405 39,248 $ 40,653 1,000 2,000 2,500 139,785 13,083 1,000 1,566 160,934 Completed Proj ect Pew Bike Trail $ 444 36,427 $ 36,871 N 6,603 6,603 Total $ 7,400 91,275 36,427 $ 135,102 $ 421,591 6,603 11,000 6,000 5,000 237,977 30,425 2,000 16,964 3,487 $ 741,047 -35- TOWN OF ITHACA INDEPENDENT AUDITORS' REPORT ON 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 YEAR ENDED DECEMBER 31, 2008 -36- r' 1 SCIARABBA WALKERLLP CERTIFIED PUBLIC ACCOUNTANTS -I BUSINESS CONSULTANTS INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN l ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS August 3, 2009 . Supervisor and Town Board I Town of Ithaca ` l Ithaca, New York 14850 We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the Town of Ithaca, as of and for the year ended December 31, 2008, which collectively comprise the Town's basic financial statements, I, and have -issued our report thereon dated August 3, 2009. 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 J Comptroller General of the United States. Internal Control over Financial Reporting In planning and performing our audit, we considered the Town of Ithaca's internal control over financial reporting, as a basis for designing our auditing procedures for the purpose of _! expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Town of Ithaca's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Town of Ithaca's internal control over financial reporting. A control deficiency exists when the design or' operation ofa control does not allow management or employees, in the normal course of performing their assigned functions,, to prevent or detect misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the Town of Ithaca's ability to initiate, authorize, record, process, or report financial data reliably in accordance with ? generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the Town of Ithaca's financial statements that is more than inconsequential will not be prevented or detected by the Town of Ithaca's internal control. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected by the Town of Ithaca's internal control. Our consideration of the internal control over financial reporting was for the limited " 1 purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in the internal control that might be significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above. U 200 East Buffalo Street, Suite 402 28 North Main Street Ithaca, New York 14850 Cortland, New York 13045 607-272-5550 / 607-273-6357 (Fax) 607-756-0073 / 607-756-0052 (Fax) www.sciarabbawalker.com F Compliance and Other Matters As part of obtaining reasonable assurance about whether the Town of Ithaca's financial statements are free of 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 determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. We noted certain matters that we reported to management of the Town of Ithaca in a separate letter dated August 3, 2009. This report is intended solely for the information and use of the Town Board, management and others within the entity, and is not intended to be and should not be used by anyone other than these specified parties. However, this report is a matter of public record and its distribution is not limited. �P Certified Public Accountants