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HomeMy Public PortalAboutBrewster 2010 Report on the Examination of the Basic Financial StatementsTOWN OF BREWSTER, MASSACHUSETTS REPORT ON EXAMINATION OF BASIC FINANCIAL STATEMENTS JUNE 30, 2010 TOWN OF BREWSTER, MASSACHUSETTS REPORT ON EXAMINATION OF BASIC FINANCIAL STATEMENTS JUNE 30, 2010 TABLE OF CONTENTS PAGE Independent Auditor’s Report 1 – 2 Management’s Discussion and Analysis 3 – 10 Basic Financial Statements Statement of Net Assets 11 Statement of Activities 12 – 13 Governmental Funds – Balance Sheet 14 Governmental Funds – Statement of Revenues, Expenditures, and Changes in Fund Balances 15 Reconciliation of the Governmental Funds Balance Sheet Total Fund Balances to the Statement of Net Assets 16 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities 17 General Fund – Statement of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual 18 Proprietary Fund – Statement of Net Assets 19 Proprietary Fund – Statement of Revenues, Expenses, and Changes in Fund Net Assets 20 Proprietary Fund – Statement of Cash Flows 21 Fiduciary Funds – Statement of Fiduciary Net Assets 22 Fiduciary Funds – Statement of Changes in Fiduciary Net Assets 23 Notes to Basic Financial Statements 24 – 56 Required Supplementary Information: Other Post Employment Benefits – Schedules of Funding Progress and Employer Contributions 57– 58 R. E. BROWN & COMPANY CERTIFIED PUBLIC ACCOUNTANTS 25 CEMETERY STREET – P.O. BOX 230 Mendon, Massachusetts 01756 Phone: (508) 478-3941 Fax: (508) 478-1779 INDEPENDENT AUDITOR’S REPORT To the Honorable Board of Selectmen Town of Brewster, Massachusetts We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the Town of Brewster, Massachusetts as of and for the year ended June 30, 2010, which collectively comprise the Town’s basic financial statements as listed in the table of contents. These financial statements are the responsibility of Town of Brewster, Massachusetts’ management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes 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 the significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the Town of Brewster, Massachusetts, as of June 30, 2010, and the respective changes in financial position, and, where applicable, cash flow thereof 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 December 21, 2010, on our consideration of the Town of Brewster, Massachusetts’ internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. The management’s discussion and analysis on pages 3 through 10, and other post employment benefits information: schedules of funding progress and employer contributions on pages 57through 58 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 R. E. Brown & Company December 21, 2010 - 3 - Management’s Discussion and Analysis As management of the Town of Brewster (the Town), we offer readers of the Town’s financial statements this narrative overview and analysis of the financial activities of the Town for the fiscal year ended June 30, 2010. We encourage readers to consider this information in addition to the statements and notes. The Town complies with financial reporting requirements issued by the Governmental Accounting Standards Board (GASB). GASB is the authoritative standard setting body that provides guidance on how to prepare financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP). Users of these financial statements, such as investors and rating agencies, rely on the GASB to establish consistent reporting standards for all governments in the United States. This consistent application is the only way users can assess the financial condition of one government compared to others. Financial Highlights The assets of the Town exceeded its liabilities at the close of the fiscal year by $81.9 million (net assets). Of this amount, $11.5 million is considered unrestricted (unrestricted net assets). The unrestricted net assets of the Town’s governmental activities are $7.4 million and may be used to meet the government’s ongoing obligations to citizens and creditors. The unrestricted net assets of the Town’s business-type activities are $4.1 million and may be used to meet the ongoing obligations of the Town’s water and golf department business-type activities. The government’s total net assets increased by $1.174 million, or 1.45%, from fiscal 2009. Within this total, net assets of governmental activities increased by $771 thousand, a 1.15% increase from fiscal 2009. Also, net assets of business-type activities increased by $403 thousand or 3% from 2009. At June 30, 2010, the Town’s governmental funds had a combined ending fund balance of $13.1 million. The combined governmental funds balance decreased by $1.5 million, an 11% decrease over the prior year’s ending fund balance. The Town’s general fund reported a fund balance of $4.69 million at the end of fiscal 2010. The unreserved fund balance for the general fund was $3.43 million or 10.69% of total general fund expenditures. A total of $734 thousand of the unreserved fund balance was designated for funding the fiscal year 2011 budget. The total cost of all Town services for fiscal 2010 was $38.3 million, $33.5 million of which was for governmental activities, and $4.8 million of which was for business-type activities. - 4 - Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to the Town’s basic financial statements. These basic financial statements are comprised of three components: 1. Government-wide Financial Statements 2. Fund Financial Statements 3. Notes to the Basic Financial Statements Government-wide Financial Statements – The government-wide financial statements are designed to provide readers with a broad overview of finances, in a manner similar to private-sector business. The statement of net assets presents information on all assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position is improving or deteriorating. The statement of activities presents information showing how the government’s net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs,regardless of the timing of related cash flows.Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future periods, (e.g., uncollected taxes). Both of the government-wide financial statements distinguish functions that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees or charges (business-type activities).The governmental activities include general government, public safety, education, public works, human services, culture and recreation, employee benefits, debt service, and state and county assessments. The business-type activities include water and golf department services. Fund Financial Statements – A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. Fund accounting is used to ensure and demonstrate compliance with finance related legal requirements. All of the funds can be divided into three main categories: governmental funds, proprietary funds and fiduciary funds. Governmental Funds – governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental funds statements focus on near-term inflows and outflows of spendable resources,as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government’s near-term financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government’s near-term financing decisions. Both, the Governmental Funds Balance Sheet and the Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. - 5 - The Town of Brewster adopts an annual appropriated budget for its general fund. A budgetary comparison statement has been provided for the general fund to demonstrate compliance with this budget. Proprietary Funds – Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The Town has two enterprise funds: Water Enterprise Fund accounts for the water activity of the Town. Golf Enterprise Fund accounts for the golf activity of the Town. Fiduciary Funds –Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statements, as the resources of those funds are not available to support the Town’s own programs. The accounting used for fiduciary funds is much like that used for proprietary funds. Private-purpose trust funds and agency funds are each reported and combined into a single, aggregate presentation in the fiduciary funds financial statements under the captions “private purpose trust funds” and “agency funds”, respectively. Notes to the basic financial statements –The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. Government-wide Financial Analysis: The chart on the following page summarizes key financial components of the Town’s financial statements. As noted earlier, assets exceed liabilities by $81,945,777 at the close of fiscal year 2010. The Town is able to report positive balances in all categories of net assets, both for the government as a whole, and for its separate governmental and business-type activities. The largest component of the Town’s net assets are its investment in capital assets (e.g., land, buildings, machinery, and equipment), less any related outstanding debt used to acquire those assets, and is $67,664,988, or 82.6% of total net assets. The Town uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the investment in the Town’s capital assets is reported net of its related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. The second largest component of the Town’s net assets are its unrestricted net assets totaling $11,459,826 (13.96%), which may be used to meet the government’s ongoing obligations to its citizens and creditors. The Town increased its total liabilities by $284,024 over fiscal 2009, while total net assets increased by $1,173,935, or 1.45%. Net assets of governmental activities increased by $771,075, a 1.15% increase from fiscal 2009. Net assets of business-type activities increased by $402,860 or 3% from 2009.There was an increase of $146,528 in net assets reported in connection with the water business-type activity, and an increase of $256,332 in net assets in connection with the golf department business-type activity, respectively. An additional portion of the net assets totaling $2,820,963 or 3.44%, represents resources that are subject to external restrictions on how they may be used. - 6 - Increase Increase Increase FY 2010 FY 2009 (Decrease) FY 2010 FY 2009 (Decrease) FY 2010 FY 2009 (Decrease) Assets: Current assets 18,486,441$18,841,134$(354,693)$4,596,961$4,621,544$(24,583)$23,083,402$23,462,678$(379,276)$ Noncurrent assets (excluding capital)2,964,682 3,495,261 (530,579) 76,011 60,532 15,479 3,040,693 3,555,793 (515,100) Capital assets 61,664,456 58,819,884 2,844,572 21,041,013 21,533,250 (492,237) 82,705,469 80,353,134 2,352,335 Total assets 83,115,579 81,156,279 1,959,300 25,713,985 26,215,326 (501,341) 108,829,564 107,371,605 1,457,959 Liabilities: Current liabilities (excluding debt)2,407,760 2,020,837 386,923 213,264 226,012 (12,748) 2,621,024 2,246,849 374,175 Noncurrent liabilities (excluding debt)1,728,619 983,445 745,174 303,098 139,551 163,547 2,031,717 1,122,996 908,721 Current debt 2,648,785 1,556,403 1,092,382 1,060,000 1,055,000 5,000 3,708,785 2,611,403 1,097,382 Noncurrent debt 8,217,261 9,253,515 (1,036,254) 10,305,000 11,365,000 (1,060,000) 18,522,261 20,618,515 (2,096,254) Total liabilities 15,002,425 13,814,200 1,188,225 11,881,362 12,785,563 (904,201) 26,883,787 26,599,763 284,024 Net Assets: Capital assets net of related debt 57,912,321 55,457,750 2,454,571 9,752,667 9,171,464 581,203 67,664,988 64,629,214 3,035,774 Restricted 2,820,963 2,913,256 (92,293)---2,820,963 2,913,256 (92,293) Unrestricted 7,379,870 8,971,073 (1,591,203) 4,079,956 4,258,299 (178,343) 11,459,826 13,229,372 (1,769,546) Total net assets 68,113,154$67,342,079$771,075$13,832,623$13,429,763$402,860$81,945,777$80,771,842$1,173,935$ Revenues Program Revenues: Charges for services 1,805,190$1,742,091$63,099$5,898,205$5,945,130$(46,925)$7,703,395$7,687,221$16,174$ Operating grants and contributions 3,726,490 3,591,985 134,505 95,260 84,266 10,994 3,821,750 3,676,251 145,499 Capital grants and contributions 2,038,103 1,510,071 528,032 ---2,038,103 1,510,071 528,032 General Revenues: Real Estate and personal property taxes 23,010,219 22,254,370 755,849 --- 23,010,219 22,254,370 755,849 Tax Liens 82,249 52,429 29,820 ---82,249 52,429 29,820 Motor vehicle and other excise taxes 1,099,731 1,107,036 (7,305)---1,099,731 1,107,036 (7,305) Hotel/Motel Tax 521,491 580,184 (58,693)---521,491 580,184 (58,693) Penalties and interest on taxes 186,749 90,913 95,836 ---186,749 90,913 95,836 Payments in Lieu of Taxes 6,805 6,796 9 ---6,805 6,796 9 Nonrestricted grants and contributions 976,647 1,134,888 (158,241)---976,647 1,134,888 (158,241) Unrestricted investment income 81,893 243,369 (161,476)---81,893 243,369 (161,476) Other revenues 26,661 39,944 (13,283)---26,661 39,944 (13,283) Total Revenues 33,562,228 32,354,076 1,208,152 5,993,465 6,029,396 (35,931) 39,555,693 38,383,472 1,172,221 Expenses: General Government 2,834,231 2,763,802 70,429 ---2,834,231 2,763,802 70,429 Public Safety 4,712,808 4,806,417 (93,609)---4,712,808 4,806,417 (93,609) Education 16,101,861 15,932,850 169,011 --- 16,101,861 15,932,850 169,011 Public Works 2,060,784 2,024,111 36,673 ---2,060,784 2,024,111 36,673 Human Services 548,049 569,327 (21,278)---548,049 569,327 (21,278) Culture and Recreation 734,984 875,745 (140,761)---734,984 875,745 (140,761) Employee Benefits 5,582,151 5,223,753 358,398 ---5,582,151 5,223,753 358,398 State and County Assessments 521,179 486,295 34,884 ---521,179 486,295 34,884 Interest 402,849 444,117 (41,268)---402,849 444,117 (41,268) Golf --- 3,030,398 3,075,689 (45,291) 3,030,398 3,075,689 (45,291) Water --- 1,852,464 1,779,729 72,735 1,852,464 1,779,729 72,735 Total Expenses 33,498,896 33,126,417 372,479 4,882,862 4,855,418 27,444 38,381,758 37,981,835 399,923 Increase/(Decrease) in Net Assets before Transfers 63,332 (772,341) 835,673 1,110,603 1,173,978 (63,375) 1,173,935 401,637 772,298 Transfers 707,743 669,414 38,329 (707,743) (669,414) (38,329)--- Change in Net Assets 771,075 (102,927) 874,002 402,860 504,564 (101,704) 1,173,935 401,637 772,298 Net Assets - beginning 67,342,079 67,445,006 (102,927) 13,429,763 12,925,199 504,564 80,771,842 80,370,205 401,637 Net Assets - ending 68,113,154$67,342,079$771,075$13,832,623$13,429,763$402,860$81,945,777$80,771,842$1,173,935$ Total Governmental Business-type Primary Activities Activities Government - 7 - Financial analysis of the Government’s Funds As noted earlier, the Town uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental funds –The focus of governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing financing requirements. In particular,unreserved fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year. As of the end of the current fiscal year, governmental funds reported combined ending fund balances of $13,101,489, a $1,565,361 decrease from the prior year’s ending fund balance. The general fund is the primary operating fund. At the end of the current fiscal year, unreserved fund balance of the general fund was $3,428,280, while total fund balance stood at $4,696,883. As a measure of the general fund’s liquidity, it may be useful to compare both unreserved fund balance and total fund balance to total fund expenditures. Unreserved fund balance represents 10.69% of total general fund expenditures, while total fund balance represents 14.65% of that same amount. The stabilization fund has accumulated a fund balance of $3,273,812, which represents 10.21% of general fund expenditures: $1.1 million of the total fund balance has been committed for compliance with the requirements of GASB Statement No. 45. These funds can be used for general or capital purposes upon Town Meeting approval. General Fund Budget Highlights During the fiscal year the operating budget was amended by $67,448 at one Special Town Meeting to fund prior year’s unpaid bills, fire department expenses, natural resources expenses, education expenses, school building capital improvements, land acquisition, golf and public works expenses. The Town budgeted $ 28.6 million in revenues and $ 32.8million in expenditures, drawing on transfers and prior year’s surplus to finance the difference.At year end, $588,160 of unexpended appropriation balances was closed out to undesignated fund balance. - 8 - Capital Asset and Debt Administration Capital Assets - In conjunction with the operating budget, the Town annually prepares capital budgets for the upcoming fiscal year. The Town’s investment in capital assets for governmental and business type activities, as summarized below, as of June 30, 2010, amounts to $82,705,469 net of accumulated depreciation. The investment in capital assets includes land, buildings and improvements, capital improvements (other than buildings), machinery, equipment and vehicles, infrastructure, and construction in progress. The governmental activities capital assets (net of accumulated depreciation) were increased by $2,844,572 during the current fiscal year while the business-type activities capital assets (net of accumulated depreciation) decreased by $492,237. Total depreciation was $2.1 million, resulting in a total government-wide increase to capital assets (net of accumulated depreciation) of $2,352,335. The following major capital asset acquisitions occurred during the fiscal year: The Town purchased one (1) Open Space property in fiscal 2010 with funds from the Community Preservation Act, The Brewster Conservation Trust and a Self Help State Grant, obtaining 36.3 acres of pine/oak woods for conservation, groundwater protection and passive recreation in the Punkhorn Parklands. CPA Recreation Funds contributed $250,000 towards the construction of Tennis Courts, with the Stabilization Fund contributing $250,000 and Free Cash funding $100,000 of this $600,000 project. The Recreation Department was successful in obtaining a $40,000 matching Grant from the United States Tennis Association. The tennis courts were open for play the summer of 2010. Increase Increase Increase FY 2010 FY 2009 (Decrease)FY 2010 FY 2009 (Decrease)FY 2010 FY 2009 (Decrease) Land 36,677,192$35,502,192$1,175,000$2,874,212$2,874,212$-$39,551,404$38,376,404$1,175,000$ Construction in Progress 948,014 42,742 905,272 2,993,337 2,848,448 144,889 3,941,351 2,891,190 1,050,161 37,625,206 35,544,934 2,080,272 5,867,549 5,722,660 144,889 43,492,755 41,267,594 2,225,161 Buildings and improvements 15,744,061 16,355,073 (611,012) 1,942,373 2,009,741 (67,368)17,686,434 18,364,814 (678,380) Improvements (other than buildings)599,528 597,389 2,139 ---599,528 597,389 2,139 Machinery, Equipment, and Vehicles 4,103,293 3,793,734 309,559 694,358 722,432 (28,074)4,797,651 4,516,166 281,485 Infrastructure 3,592,368 2,528,754 1,063,614 12,536,733 13,078,417 (541,684)16,129,101 15,607,171 521,930 24,039,250 23,274,950 764,300 15,173,464 15,810,590 (637,126)39,212,714 39,085,540 127,174 Total Capital Assets 61,664,456$58,819,884$2,844,572$21,041,013$21,533,250$(492,237)$82,705,469$80,353,134$2,352,335$ Activities Activities Government Capital Assets (Net of Depreciation) Total Governmental Business-type Primary - 9 - Long Term Debt - The Town’s debt burden is reasonable in relation to other communities its size. Outstanding long-term debt, as of June 30, 2010, totaled $19,846,825. Within this total, business-type activities have debt of $11,365,000 that is fully supported by their respective program revenues, and governmental activities debt is $8,481,825. Total debt consists of the following: Outstanding Outstanding Governmental Activities June 30, 2010 June 30, 2009 School Construction 2,525,000$2,970,000$ Library Construction 300,000 350,000 MWPAT Title V - Sewer 137,625 147,150 Road Betterments - Beach Plum Rd -15,000 Police Station 1,695,000 1,870,000 Road Betterments - Highlands Rd 10,000 20,000 Road Betterments - Millstone Rd 75,000 105,000 Road Betterments - Commons Way Rd 80,000 100,000 Road Betterments - Meetinghouse Rd 105,000 135,000 MWPAT #97-1156 Title V - Sewer 114,200 124,601 Land Purchase 685,000 750,000 Road Betterments - Kings Grant Road 180,000 210,000 Road Betterments - Barons Way Road 90,000 110,000 Land Purchase 2,095,000 2,230,000 Road Betterments - Fiddler's Lane 120,000 140,000 Road Betterments - Herringbrook Lane 80,000 95,000 Road Betterments - 2008 190,000 220,000 Total Governmental Activities 8,481,825$9,591,751$ Outstanding Outstanding Business-type Activities June 30, 2010 June 30, 2009 Golf Course 6,170,000$6,630,000$ Golf Course Irrigation 400,000 500,000 Water offices/garage 2,225,000 2,350,000 Water Mains 1,495,000 1,655,000 Telemetry System -15,000 Water Betterments - Williams Drive 5,000 10,000 Standpipe #2 135,000 205,000 Standpipe Rehabilitation 280,000 350,000 Slough Road 590,000 630,000 Water Betterments - Fiddler's Lane 65,000 75,000 Total Business-type Activities 11,365,000$12,420,000$ Outstanding Debt at Year End Please refer to Notes 5 and 9 for further discussion of the major capital asset and debt activity. - 10 - Economic Factors and Next Year’s Budgets & Rate The Town’s leadership (elected and appointed officials) considered many factors when setting the fiscal 2011 budget and tax rates including the following: The fiscal 2011 tax rate was set at $6.94, a $.74 cent increase over fiscal 2010. The excess levy capacity was $20,634. The Board of Selectmen voted during their classification hearing to maintain the same tax rate for all classes of property. A Golf Course Renovation Project was funded at $215,000 Fiscal 2011 budget constraints are the increase in Health Care Costs, Pension obligations and reduction in State Aid. The Town meeting voters did approve increases in both the Meals Tax and Room Occupancy Tax with an effective date of July 1, 2010. MSBA reimbursement for a school roof has allowed the Town to set aside over one million dollars towards GASB45/OPEB funding. The Town was awarded $1,362,000 of Stimulus Funds for the Stony Brook Salt Marsh Fish Passage Restoration Project in FY 2010. The Restoration Project was completed in November of 2010. The Town has appropriated $150,000 towards Cape Cod Water Resource Restoration Projects. These stormwater restoration projects are being coordinated with Barnstable County Natural Resource Conservation Service (NRSC) with 3 projects currently in process. Request for Information This financial report is designed to provide a general overview of the Town of Brewster’s finances for all those with an interest in the government’s finances. Questions concerning any of the information provided in this report or request for additional financial information should be addressed to the Finance Director, 2198 Main Street, Brewster, MA 02631. - 11- GOVERNMENTAL BUSINESS-TYPE ACTIVITIES ACTIVITIES TOTAL ASSETS CURRENT: CASH AND SHORT-TERM INVESTMENTS 16,017,822$ 3,701,807$ 19,719,629$ RECEIVABLES, NET OF ALLOWANCE FOR UNCOLLECTIBLES: REAL ESTATE AND PERSONAL PROPERTY TAXES 424,165 - 424,165 TAX LIENS 324,652 - 324,652 MOTOR VEHICLE EXCISE TAXES 78,026 - 78,026 USER FEES - 886,818 886,818 DEPARTMENTAL AND OTHER 119,432 - 119,432 INTERGOVERNMENTAL 1,409,164 - 1,409,164 SPECIAL ASSESSMENTS 103,522 7,567 111,089 DEFERRED AMOUNT ON REFUNDING 9,658 769 10,427 NONCURRENT: RECEIVABLES, NET OF ALLOWANCE FOR UNCOLLECTIBLES: INTERGOVERNMENTAL 2,178,784 - 2,178,784 SPECIAL ASSESSMENTS 734,530 69,087 803,617 DEFERRED AMOUNT ON REFUNDING 51,368 6,924 58,292 CAPITAL ASSETS, NET OF ACCUMULATED DEPRECIATION 61,664,456 21,041,013 82,705,469 TOTAL ASSETS 83,115,579 25,713,985 108,829,564 LIABILITIES CURRENT: ACCOUNTS PAYABLE 1,774,188 46,676 1,820,864 ACCRUED INTEREST 87,656 138,437 226,093 LANDFILL POSTCLOSURE CARE COSTS 28,500 - 28,500 POSTEMPLOYMENT BENEFITS 517,416 28,151 545,567 CAPITAL LEASE 104,618 - 104,618 BONDS AND NOTES PAYABLE 2,544,167 1,060,000 3,604,167 NONCURRENT: LANDFILL POSTCLOSURE CARE COSTS 476,500 - 476,500 POSTEMPLOYMENT BENEFITS 1,252,119 303,098 1,555,217 CAPITAL LEASE 810,361 - 810,361 BONDS AND NOTES PAYABLE 7,406,900 10,305,000 17,711,900 TOTAL LIABILITIES 15,002,425 11,881,362 26,883,787 NET ASSETS INVESTED IN CAPITAL ASSETS, NET OF RELATED DEBT 57,912,321 9,752,667 67,664,988 RESTRICTED FOR: STREETS 572,371 - 572,371 PERMANENT FUNDS: EXPENDABLE 115,383 - 115,383 NONEXPENDABLE 119,838 - 119,838 OTHER PURPOSES 2,013,371 - 2,013,371 UNRESTRICTED 7,379,870 4,079,956 11,459,826 TOTAL NET ASSETS 68,113,154$ 13,832,623$ 81,945,777$ PRIMARY GOVERNMENT See accompanying notes to the basic financial statements TOWN OF BREWSTER, MASSACHUSETTS STATEMENT OF NET ASSETS JUNE 30, 2010 -12 - OPERATING CAPITAL CHARGES FOR GRANTS AND GRANTS AND NET (EXPENSE) FUNCTIONS/PROGRAMS EXPENSES SERVICES CONTRIBUTIONS CONTRIBUTIONS REVENUE PRIMARY GOVERNMENT: GOVERNMENTAL ACTIVITIES: GENERAL GOVERNMENT 2,834,231$ 432,264$ 72,556$ 1,318,703$ (1,010,708)$ PUBLIC SAFETY 4,712,808 180,650 936,566 30,000 (3,565,592) EDUCATION 16,101,861 151,908 1,177,567 - (14,772,386) PUBLIC WORKS 2,060,784 566,881 466,616 675,872 (351,415) HUMAN SERVICES 548,049 67,474 31,996 13,528 (435,051) CULTURE & RECREATION 734,984 406,013 215,115 - (113,856) EMPLOYEE BENEFITS 5,582,151 - 826,074 - (4,756,077) STATE & COUNTY ASSESSMENTS 521,179 - - - (521,179) INTEREST 402,849 - - - (402,849) TOTAL GOVERNMENTAL ACTIVITIES 33,498,896 1,805,190 3,726,490 2,038,103 (25,929,113) BUSINESS-TYPE ACTIVITIES: GOLF 3,030,398 3,670,669 4,113 - 644,384 WATER 1,852,464 2,227,536 91,147 - 466,219 TOTAL BUSINESS-TYPE ACTIVITIES 4,882,862 5,898,205 95,260 - 1,110,603 TOTAL PRIMARY GOVERNMENT 38,381,758$ 7,703,395$ 3,821,750$ 2,038,103$ (24,818,510)$ (continued) PROGRAM REVENUES TOWN OF BREWSTER, MASSACHUSETTS STATEMENT OF ACTIVITIES FISCAL YEAR ENDED JUNE 30, 2010 See accompanying notes to the basic financial statements - 13 - GOVERNMENTAL BUSINESS-TYPE ACTIVITIES ACTIVITIES TOTAL CHANGES IN NET ASSETS: NET (EXPENSE) REVENUE FROM PREVIOUS PAGE (25,929,113)$ 1,110,603$ (24,818,510)$ GENERAL REVENUES: REAL ESTATE AND PERSONAL PROPERTY TAXES, NET OF TAX REFUNDS PAYABLE 23,010,219 - 23,010,219 TAX LIENS 82,249 - 82,249 MOTOR VEHICLE AND OTHER EXCISE TAXES 1,099,731 - 1,099,731 HOTEL/MOTEL TAX 521,491 - 521,491 PENALTIES AND INTEREST ON TAXES 186,749 - 186,749 PAYMENTS IN LIEU OF TAXES 6,805 - 6,805 GRANTS AND CONTRIBUTIONS NOT RESTRICTED TO SPECIFIC PROGRAMS 976,647 - 976,647 UNRESTRICTED INVESTMENT INCOME 81,893 - 81,893 MISCELLANEOUS 26,661 - 26,661 TRANSFERS, NET 707,743 (707,743) - TOTAL GENERAL REVENUES AND TRANSFERS 26,700,188 (707,743) 25,992,445 CHANGE IN NET ASSETS 771,075 402,860 1,173,935 NET ASSETS: BEGINNING OF YEAR 67,342,079 13,429,763 80,771,842 END OF YEAR 68,113,154$ 13,832,623$ 81,945,777$ (concluded) PRIMARY GOVERNMENT See accompanying notes to the basic financial statements TOWN OF BREWSTER, MASSACHUSETTS STATEMENT OF ACTIVITIES FISCAL YEAR ENDED JUNE 30, 2010 - 14 - NONMAJOR TOTAL COMMUNITY GOVERNMENTAL GOVERNMENTAL ASSETS GENERAL PRESERVATION STABILIZATION FUNDS FUNDS CASH AND SHORT-TERM INVESTMENTS 6,112,036$ 3,184,081$ 3,273,812$ 3,447,893$ 16,017,822$ RECEIVABLES, NET OF ALLOWANCE FOR UNCOLLECTIBLES: REAL ESTATE AND PERSONAL PROPERTY TAXES 424,165 - - - 424,165 TAX LIENS 324,652 - - - 324,652 MOTOR VEHICLE EXCISE TAXES 78,026 - - - 78,026 DEPARTMENTAL AND OTHER 7,286 17,208 - 94,938 119,432 INTERGOVERNMENTAL 2,756,538 - - 831,410 3,587,948 SPECIAL ASSESSMENTS - - - 838,052 838,052 TOTAL ASSETS 9,702,703$ 3,201,289$ 3,273,812$ 5,212,293$ 21,390,097$ LIABILITIES AND FUND BALANCES LIABILITIES: ACCOUNTS PAYABLE 1,483,211$ 3,712$ -$ 287,265$ 1,774,188$ DEFERRED REVENUES 3,522,609 17,208 - 1,505,361 5,045,178 NOTES PAYABLE - 1,175,000 - 294,242 1,469,242 TOTAL LIABILITIES 5,005,820 1,195,920 - 2,086,868 8,288,608 FUND BALANCES: RESERVED FOR: ENCUMBRANCES AND CONTINUING APPROPRIATIONS 1,268,603 - - - 1,268,603 PERPETUAL PERMANENT FUNDS - - - 119,838 119,838 UNRESERVED DESIGNATED FOR SUBSEQUENT YEARS' EXPENDITURES 734,264 - - - 734,264 UNDESIGNATED REPORTED IN: GENERAL FUND 2,694,016 - - - 2,694,016 SPECIAL REVENUE FUNDS - 2,005,369 3,273,812 2,585,742 7,864,923 CAPITAL PROJECTS FUNDS - - - 304,462 304,462 PERMANENT FUNDS - - - 115,383 115,383 TOTAL FUND BALANCES 4,696,883 2,005,369 3,273,812 3,125,425 13,101,489 TOTAL LIABILITIES AND FUND BALANCES 9,702,703$ 3,201,289$ 3,273,812$ 5,212,293$ 21,390,097$ JUNE 30, 2010 BALANCE SHEET GOVERNMENTAL FUNDS TOWN OF BREWSTER, MASSACHUSETTS See accompanying notes to the basic financial statements - 15 - NONMAJOR TOTAL COMMUNITY GOVERNMENTAL GOVERNMENTAL GENERAL PRESERVATION STABILIZATION FUNDS FUNDS REVENUES: REAL ESTATE AND PERSONAL PROPERTY TAXES, NET OF TAX REFUNDS 23,072,946$ -$ -$ -$ 23,072,946$ MOTOR VEHICLE AND OTHER EXCISE TAXES 1,087,549 - - - 1,087,549 INTERGOVERNMENTAL 3,344,764 629,863 - 1,373,139 5,347,766 PAYMENTS IN LIEU OF TAXES 6,805 - - - 6,805 PENALTIES & INTEREST ON TAXES 159,767 - - - 159,767 FINES & FORFEITS 39,367 - - - 39,367 CHARGES FOR SERVICES 589,198 - - 1,621,427 2,210,625 HOTEL/MOTEL TAX 521,491 - - - 521,491 INVESTMENT INCOME 55,183 22,377 22,302 5,834 105,696 CONTRIBUTIONS AND DONATIONS - - - 71,168 71,168 DEPARTMENTAL AND OTHER 887,499 695,487 - 110,086 1,693,072 TOTAL REVENUES 29,764,569 1,347,727 22,302 3,181,654 34,316,252 EXPENDITURES: CURRENT: GENERAL GOVERNMENT 2,498,357 1,755,103 - 77,543 4,331,003 PUBLIC SAFETY 4,489,744 - - 71,219 4,560,963 EDUCATION 15,323,134 - - 447,592 15,770,726 PUBLIC WORKS 1,795,727 - - 1,429,486 3,225,213 HUMAN SERVICES 467,705 - - 55,308 523,013 CULTURE & RECREATION 752,036 - - 685,023 1,437,059 EMPLOYEE BENEFITS 4,704,290 - - 745 4,705,035 STATE & COUNTY ASSESSMENTS 521,179 - - - 521,179 DEBT SERVICE PRINCIPAL 1,109,926 - - - 1,109,926 INTEREST 402,091 - - 3,148 405,239 TOTAL EXPENDITURES 32,064,189 1,755,103 - 2,770,064 36,589,356 EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES (2,299,620) (407,376) 22,302 411,590 (2,273,104) OTHER FINANCING SOURCES (USES) OPERATING TRANSFERS IN 2,414,009 - - 395,000 2,809,009 OPERATING TRANSFERS OUT (145,000) (325,955) (400,000) (1,230,311) (2,101,266) TOTAL OTHER FINANCING SOURCES (USES)2,269,009 (325,955) (400,000) (835,311) 707,743 NET CHANGE IN FUND BALANCES (30,611) (733,331) (377,698) (423,721) (1,565,361) FUND BALANCES AT BEGINNING OF YEAR 4,727,494 2,738,700 3,651,510 3,549,146 14,666,850 FUND BALANCES AT END OF YEAR 4,696,883$ 2,005,369$ 3,273,812$ 3,125,425$ 13,101,489$ TOWN OF BREWSTER, MASSACHUSETTS GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES FISCAL YEAR ENDED JUNE 30, 2010 See accompanying notes to the basic financial statements - 16 - TOTAL GOVERNMENTAL FUND BALANCES 13,101,489$ CAPITAL ASSETS (NET) USED IN GOVERNMENTAL ACTIVITIES ARE NOT FINANCIAL RESOURCES AND, THEREFORE, ARE NOT REPORTED IN THE FUNDS 61,664,456 ACCOUNTS RECEIVABLE ARE NOT AVAILABLE TO PAY FOR CURRENT-PERIOD EXPENDITURES AND, THEREFORE, ARE DEFERRED IN THE FUNDS 5,045,178 IN THE STATEMENT OF ACTIVITIES, INTEREST IS ACCRUED ON OUTSTANDING LONG-TERM DEBT, WHEREAS IN GOVERNMENTAL FUNDS INTEREST IS NOT REPORTED UNTIL DUE (87,656) LONG-TERM LIABILITIES ARE NOT DUE AND PAYABLE IN THE CURRENT PERIOD AND, THEREFORE, ARE NOT REPORTED IN THE GOVERNMENTAL FUNDS BONDS AND NOTES PAYABLE (8,481,825) CAPITAL LEASES (914,979) DEFERRED AMOUNT ON REFUNDING 61,026 POSTEMPLOYMENT BENEFITS (1,769,535) LANDFILL POSTCLOSURE CARE COSTS (505,000) NET EFFECT OF REPORTING LONG-TERM LIABILITIES (11,610,313) NET ASSETS OF GOVERNMENTAL ACTIVITIES 68,113,154$ See accompanying notes to the basic financial statements TOWN OF BREWSTER, MASSACHUSETTS RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TOTAL FUND BALANCES TO THE STATEMENT OF NET ASSETS FISCAL YEAR ENDED JUNE 30, 2010 - 17 - NET CHANGE IN FUND BALANCES - TOTAL GOVERNMENTAL FUNDS (1,565,361)$ GOVERNMENTAL FUNDS REPORT CAPITAL OUTLAYS AS EXPENDITURES. HOWEVER, IN THE STATEMENT OF ACTIVITIES THE COST OF THOSE ASSETS IS ALLOCATED OVER THEIR ESTIMATED USEFUL LIVES AND REPORTED AS DEPRECIATION EXPENSE. CAPITAL OUTLAY 4,237,676 DEPRECIATION EXPENSE (1,393,104) NET EFFECT OF REPORTING CAPITAL ASSETS 2,844,572 REVENUES IN THE STATEMENT OF ACTIVITIES THAT DO NOT PROVIDE CURRENT FINANCIAL RESOURCES ARE FULLY DEFERRED IN THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES. THEREFORE, THE RECOGNITION OF REVENUE FOR VARIOUS TYPES OF ACCOUNTS RECEIVABLE (I.E. REAL ESTATE AND PERSONAL PROPERTY, MOTOR VEHICLE EXCISE, ETC.) DIFFER BETWEEN THE TWO STATEMENTS. THIS AMOUNT REPRESENTS THE NET CHANGE IN DEFERRED REVENUE (754,024) THE ISSUANCE OF LONG-TERM DEBT (E.G., BONDS) PROVIDES CURRENT FINANCIAL RESOURCES TO GOVERNMENTAL FUNDS, WHILE THE REPAYMENT OF THE PRINCIPAL OF LONG- TERM DEBT CONSUMES THE FINANCIAL RESOURCES OF GOVERNMENTAL FUNDS. NEITHER TRANSACTION, HOWEVER, HAS ANY EFFECT ON NET ASSETS. ALSO, GOVERNMENTAL FUNDS REPORT THE EFFECT OF ISSUANCE COSTS, PREMIUMS, DISCOUNTS, AND SIMILAR ITEMS WHEN DEBT IS FIRST ISSUED, WHEREAS THESE AMOUNTS ARE DEFERRED AND AMORTIZED IN THE STATEMENT OF ACTIVITIES. DEBT SERVICE PRINCIPAL PAYMENTS 1,109,926 DEFERRED AMOUNT ON REFUNDING (9,658) NET EFFECT OF REPORTING LONG-TEM DEBT 1,100,268 SOME EXPENSES REPORTED IN THE STATEMENT OF ACTIVITIES DO NOT REQUIRE THE USE OF CURRENT FINANCIAL RESOURCES AND, THEREFORE, ARE NOT REPORTED AS EXPENDITURES IN THE GOVERNMENTAL FUNDS. NET CHANGE IN POSTEMPLOYMENT BENEFITS (877,116) NET CHANGE IN CAPITAL LEASE S (47,812) NET CHANGE IN LANDFILL POSTCLOSURE CARE ACCRUAL 58,500 NET CHANGE IN ACCRUED INTEREST ON LONG-TERM DEBT 12,048 NET EFFECT OF RECORDING LONG-TERM LIABILITIES (854,380) CHANGE IN NET ASSETS OF GOVERNMENTAL ACTIVITIES 771,075$ See accompanying notes to the basic financial statements FISCAL YEAR ENDED JUNE 30, 2010 CHANGES IN FUND BALANCES OF THE GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND TOWN OF BREWSTER, MASSACHUSETTS - 18 - ACTUAL ORIGINAL FINAL BUDGETARY VARIANCE BUDGET BUDGET AMOUNTS OVER(UNDER) REVENUES: REAL ESTATE AND PERSONAL PROPERTY TAXES, NET OF TAX REFUNDS 22,848,627$ 22,848,627$ 23,072,946$ 224,319$ MOTOR VEHICLE AND OTHER EXCISE TAXES 1,110,000 1,110,000 1,087,549 (22,451) INTERGOVERNMENTAL 2,489,041 2,489,041 2,505,162 16,121 PAYMENTS IN LIEU OF TAXES 6,796 6,796 6,805 9 PENALTIES & INTEREST ON TAXES 73,000 73,000 159,767 86,767 FINES & FORFEITS 22,000 22,000 39,367 17,367 HOTEL/MOTEL TAX 560,000 560,000 521,491 (38,509) INVESTMENT INCOME 120,000 120,000 55,183 (64,817) DEPARTMENTAL AND OTHER 1,434,770 1,434,770 1,476,697 41,927 TOTAL REVENUES 28,664,234 28,664,234 28,924,967 260,733 EXPENDITURES: CURRENT: GENERAL GOVERNMENT 3,210,976 3,143,752 2,909,122 234,630 PUBLIC SAFETY 4,732,683 4,765,780 4,656,929 108,851 EDUCATION 15,662,999 15,706,249 15,659,783 46,466 PUBLIC WORKS 1,994,366 1,992,144 1,905,402 86,742 HUMAN SERVICES 490,127 487,232 477,169 10,063 CULTURE & RECREATION 796,529 803,165 801,241 1,924 EMPLOYEE BENEFITS 3,901,214 3,956,214 3,886,450 69,764 STATE & COUNTY ASSESSMENTS 476,692 476,692 521,179 (44,487) DEBT SERVICE PRINCIPAL 1,109,926 1,109,926 1,109,926 - INTEREST 386,758 388,564 388,563 1 TOTAL EXPENDITURES 32,762,270 32,829,718 32,315,764 513,954 EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES (4,098,036) (4,165,484) (3,390,797) 774,687 OTHER FINANCING SOURCES (USES): OPERATING TRANSFERS IN 1,839,338 1,913,715 2,414,009 500,294 OPERATING TRANSFERS OUT (159,397) (166,410) (145,000) 21,410 TOTAL OTHER FINANCING SOURCES (USES)1,679,941 1,747,305 2,269,009 521,704 NET CHANGE IN FUND BALANCE (2,418,095) (2,418,179) (1,121,788) 1,296,391 BUDGETARY FUND BALANCE, BEGINNING OF YEAR 4,539,504 4,539,504 4,539,504 - BUDGETARY FUND BALANCE, END OF YEAR 2,121,409$ 2,121,325$ 3,417,716$ 1,296,391$ See accompanying notes to the basic financial statements BUDGETED AMOUNTS TOWN OF BREWSTER, MASSACHUSETTS GENERAL FUND STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FISCAL YEAR ENDED JUNE 30, 2010 - 19 - ASSETS GOLF WATER TOTAL CURRENT: CASH AND SHORT-TERM INVESTMENTS 977,262$ 2,724,545$ 3,701,807$ USER FEES, NET OF ALLOWANCE FOR UNCOLLECTIBLES:- 886,818 886,818 SPECIAL ASSESSMENTS - 7,567 7,567 DEFERRED AMOUNT ON REFUNDING - 769 769 TOTAL CURRENT ASSETS 977,262 3,619,699 4,596,961 NONCURRENT: SPECIAL ASSESSMENTS - 69,087 69,087 DEFERRED AMOUNT ON REFUNDING - 6,924 6,924 CAPITAL ASSETS, NET OF ACCUMULATED DEPRECIATION 10,548,541 10,492,472 21,041,013 TOTAL NONCURRENT ASSETS 10,548,541 10,568,483 21,117,024 TOTAL ASSETS 11,525,803 14,188,182 25,713,985 LIABILITIES CURRENT: ACCOUNTS PAYABLE - 46,676 46,676 ACCRUED INTEREST 95,483 42,954 138,437 POSTEMPLOYMENT BENEFITS 445 27,706 28,151 BONDS AND NOTES PAYABLE 585,000 475,000 1,060,000 TOTAL CURRENT LIABILITIES 680,928 592,336 1,273,264 NONCURRENT: POSTEMPLOYMENT BENEFITS 223,924 79,174 303,098 BONDS AND NOTES PAYABLE 5,985,000 4,320,000 10,305,000 TOTAL NONCURRENT LIABILITIES 6,208,924 4,399,174 10,608,098 TOTAL LIABILITIES 6,889,852 4,991,510 11,881,362 NET ASSETS INVESTED IN CAPITAL ASSETS, NET OF RELATED DEBT 3,978,541 5,774,126 9,752,667 UNRESTRICTED 657,410 3,422,546 4,079,956 TOTAL NET ASSETS 4,635,951$ 9,196,672$ 13,832,623$ See accompanying notes to the basic financial statements BUSINESS-TYPE ACTIVITIES - ENTERPRISE FUNDS TOWN OF BREWSTER, MASSACHUSETTS PROPRIETARY FUNDS STATEMENT OF NET ASSETS JUNE 30, 2010 - 20 - GOLF WATER TOTAL OPERATING REVENUES: CHARGES FOR SERVICES 3,670,669$ 2,227,536$ 5,898,205$ DEPARTMENTAL AND OTHER 4,113 91,147 95,260 TOTAL OPERATING REVENUES 3,674,782 2,318,683 5,993,465 OPERATING EXPENSES: GENERAL SERVICES 2,293,710 1,308,452 3,602,162 DEPRECIATION 408,991 325,539 734,530 TOTAL OPERATING EXPENSES 2,702,701 1,633,991 4,336,692 OPERATING INCOME (LOSS)972,081 684,692 1,656,773 NON-OPERATING REVENUES (EXPENSES): INTEREST EXPENSE (327,697) (218,473) (546,170) INCOME (LOSS) BEFORE OPERATING TRANSFERS 644,384 466,219 1,110,603 OPERATING TRANSFERS: OPERATING TRANSFERS OUT (388,052) (319,691) (707,743) CHANGE IN NET ASSETS 256,332 146,528 402,860 NET ASSETS AT BEGINNING OF YEAR 4,379,619 9,050,144 13,429,763 NET ASSETS AT END OF YEAR 4,635,951$ 9,196,672$ 13,832,623$ See accompanying notes to the basic financial statements FISCAL YEAR ENDED JUNE 30, 2010 STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET ASSETS PROPRIETARY FUNDS TOWN OF BREWSTER, MASSACHUSETTS BUSINESS TYPE ACTIVITIES - ENTERPRISE FUNDS - 21 - GOLF WATE R TOTAL CASH FLOWS FROM OPERATING ACTIVITIES: RECEIPTS FROM CUSTOMERS AND USERS 3,674,782$ 2,307,016$ 5,981,798$ PAYMENTS TO SUPPLIERS (1,056,054) (610,437) (1,666,491) PAYMENTS TO EMPLOYEES (1,121,751) (654,856) (1,776,607) NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 1,496,977 1,041,723 2,538,700 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES: OPERATING TRANSFERS IN (388,052) (319,691) (707,743) NET CASH PROVIDED (USED) BY NONCAPITAL FINANCING ACTIVITIES (388,052) (319,691) (707,743) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: PRINCIPAL PAYMENTS ON BONDS AND NOTES (560,000) (495,000) (1,055,000) ACQUISITION AND CONSTRUCTION OF CAPITAL ASSETS (121,018) (121,275) (242,293) INTEREST EXPENSE (329,765) (223,900) (553,665) NET CASH PROVIDED (USED) BY CAPITAL AND RELATED FINANCING ACTIVITIES (1,010,783) (840,175) (1,850,958) NET INCREASE (DECREASE) IN CASH AND SHORT TERM INVESTMENTS 98,142 (118,143) (20,001) CASH AND SHORT TERM INVESTMENTS - BEGINNING OF YEAR 879,120 2,842,688 3,721,808 CASH AND SHORT TERM INVESTMENTS- END OF YEAR 977,262$ 2,724,545$ 3,701,807$ RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES: OPERATING INCOME (LOSS)972,081$ 684,692$ 1,656,773$ ADJUSTMENTS TO RECONCILE OPERATING INCOME (LOSS) TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES: DEPRECIATION 408,991 325,539 734,530 (INCREASE) DECREASE IN ACCOUNTS RECEIVABLE - (11,666) (11,666) INCREASE (DECREASE) IN ACCOUNTS PAYABLE - (10,112) (10,112) INCREASE (DECREASE) IN POSTEMPLOYMENT BENEFITS 115,905 53,270 169,175 TOTAL ADJUSTMENTS 524,896 357,031 881,927 NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 1,496,977$ 1,041,723$ 2,538,700$ BUSINESS TYPE ACTIVITIES - ENTERPRISE FUNDS FISCAL YEAR ENDED JUNE 30, 2010 STATEMENT OF CASH FLOWS PROPRIETARY FUNDS TOWN OF BREWSTER, MASSACHUSETTS See accompanying notes to the basic financial statements - 22 - PRIVATE PURPOSE AGENCY TRUST FUNDS FUNDS ASSETS CASH AND SHORT-TERM INVESTMENTS 64,741$ 593,694$ LIABILITIES ACCOUNTS PAYABLE - 12,587 OTHER LIABILITIES - 581,107 TOTAL LIABILITIES - 593,694 NET ASSETS HELD IN TRUST FOR OTHER PURPOSES 64,741$ -$ See accompanying notes to the basic financial statements JUNE 30, 2010 STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS TOWN OF BREWSTER, MASSACHUSETTS - 23 - PRIVATE PURPOSE TRUST FUNDS ADDITIONS: INVESTMENT INCOME:162$ DEDUCTIONS: EDUCATIONAL SCHOLARSHIPS 1,000 CHANGE IN NET ASSETS (838) NET ASSETS AT BEGINNING OF YEAR 65,579 NET ASSETS AT END OF YEAR 64,741$ See accompanying notes to the basic financial statements FISCAL YEAR ENDED JUNE 30, 2010 STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS FIDUCIARY FUNDS TOWN OF BREWSTER, MASSACHUSETTS TOWN OF BREWSTER, MASSACHUSETTS NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2010 - 24 - NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accompanying basic financial statements of the Town of Brewster, Massachusetts (the Town) have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The Governmental Accounting Standards Board (GASB) is the recognized standard- setting body for establishing governmental accounting and financial reporting principles. The following is a summary of the more significant Town accounting policies: A. Reporting Entity Primary Government The Town is a municipal corporation that is governed by an elected five member Board of Selectmen (the Board). The Board is responsible for appointing a Town Administrator whose responsibility is to manage the day to day operations. For financial reporting purposes, the Town has included all funds, organizations, account groups, agencies, boards, commissions and institutions. The Town has also considered all potential component units, blended or discretely presented, for which it is financially accountable as well as other organizations for which the nature and significance of their relationship with the Town are such that exclusion would cause the basic financial statements to be misleading or incomplete. Blended component units, although legally separate entities, are, in substance, part of the government’s operations and discretely presented component units are reported in a separate column in the government-wide financial statements to emphasize that they are legally separate from the government. It has been determined that there are no component units (blended or discretely presented) for inclusion in the primary government’s financial reporting entity. Joint Ventures Municipal joint ventures pool resources to share the costs, risks and rewards of providing services to their participants, the general public or others. The Town is a participant in the following joint ventures: The Nauset Regional School District (the District) is governed by an eleven (11) member school committee consisting of three (3) elected representatives from the Town of Brewster. The Town is indirectly liable for debt and other expenditures of the District and is assessed annually for its share of the operating and capital costs. Separate financial statements may be obtained by writing to the Treasurer of the District at the above address. The Town has an equity interest of approximately 49.58% in the joint venture. Name Purpose Address Annual Assessment Nauset Regional To provide education services 78 Eldredge Parkway $ 8,745,345 School District Orleans, MA 02653 Cape Cod Regional Technical High School To provide vocational education 351 Pleasant Lake Ave Harwich, MA 02645 $ 683,190 TOWN OF BREWSTER, MASSACHUSETTS NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2010 - 25 - The Cape Cod Regional Technical High School is governed by a twenty-one (21) member school committee consisting of two (2) elected representatives from the Town of Brewster. The Town is indirectly liable for debt and other expenditures of the District and is assessed annually for its share of the operating and capital costs. Separate financial statements may be obtained by writing to the Treasurer of the District at the above address. The Town has no equity interest in the joint venture. Pursuant to an inter-municipal agreement authorized by state statutes, the Town joined the Town of Orleans, and the Town of Eastham to provide for sharing of the capital, operating and maintenance and other costs of a Septic Treatment Facility (Tri-Town Septage Facility) for the mutual advantage of the Towns. A three member Board of Managers for the joint venture is appointed for oversight purposes, such Board consisting of the chairman of each Town’s Board of Selectmen. An annual budget for the operation and management of the facility is prepared by the facility superintendent and submitted to the Board of Managers. B. Government-Wide and Fund Financial Statements Government-Wide Financial Statements The government-wide financial statements (i.e., statement of net assets and the statement of activities) report information on all of the non-fiduciary activities of the primary government.Governmental activities, which are primarily supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which are supported primarily by user fees and charges. Fund Financial Statements Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds, even though fiduciary funds are excluded from the government-wide financial statements. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. Nonmajor funds are aggregated and displayed in a single column. Major Fund Criteria A fund is considered major if it is the primary operating fund of the Town or it meets the following criteria: a. If the total assets, liabilities, revenues, or expenditures/expenses of an individual governmental or enterprise fund are at least 10 percent of the corresponding element (assets, liabilities, etc.) for all funds of that category or type (total governmental or total enterprise funds), and b. If the total assets, liabilities, revenues, or expenditures/expenses of the individual governmental fund or enterprise fund are at least 5 percent of the corresponding element for all governmental and enterprise funds combined. Additionally, any other governmental or enterprise fund that management believes is particularly significant to the basic financial statements may be reported as a major fund. Fiduciary funds are reported by fund type. TOWN OF BREWSTER, MASSACHUSETTS NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2010 - 26 - C. Measurement Focus, Basis of Accounting and Financial Statement Presentation Government-Wide Financial Statements The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Under this method, revenues are recorded when earned and expenses are recorded when the liabilities are incurred. Real estate and personal property taxes are recognized as revenues in the fiscal year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. The statement of activities demonstrates the degree to which the direct expenses of a particular function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include the following: a.Charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment. b.Grants and contributions that are restricted to meeting the operational requirements of a particular function or segment. c.Grants and contributions that are restricted to meeting the capital requirements of a particular function or segment. Taxes and other items not identifiable as program revenues are reported as general revenues. For the most part, the effect of interfund activity has been removed from the government-wide financial statements. Exceptions are charges between the general fund and the various enterprise funds. Elimination of these charges would distort the direct costs and program revenues reported for the functions affected. Fund Financial Statements Governmental Fund Financial Statements Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under the modified accrual basis of accounting, revenues are recognized when susceptible to accrual (i.e., when they become both measurable and available). Measurable means the amount of the transaction can be determined and available means collectible within the current period or soon enough thereafter to pay liabilities of the current period. Expenditures are recorded when the related fund liability is incurred, except for interest on general long- term debt which is recognized when due, and the noncurrent portion of landfill post closure care costs, capital leases, and other post-employment benefits (OPEB) which are recognized when the obligations are expected to be liquidated with current expendable available resources. TOWN OF BREWSTER, MASSACHUSETTS NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2010 - 27 - In applying the susceptible to accrual concept to intergovernmental revenues, there are essentially two types of revenues. In one, moneys must be expended on the specific purpose or project before any amounts will be paid to the Town; therefore, revenues are recognized based upon the expenditures incurred. In the other, moneys are virtually unrestricted and are usually revocable only for failure to comply with prescribed compliance requirements. These resources are reflected as revenues at the time of receipt or earlier if the susceptible to accrual criteria are met. The Town considers property taxes as available if they are due and collected within 60 days after fiscal year-end. Licenses and permits, user charges, fines and forfeitures, and miscellaneous revenues are recorded as revenues when received. Investment earnings are recorded as earned. The Town reports the following major governmental funds: The General fund is the primary operating fund of the Town. It is used to account for all financial resources, except those that are required to be accounted for in another fund. The Community Preservation fund is a special revenue fund used to account for the accumulation of resources to purchase open space, assist in development of affordable housing, and preservation of historic property. The Stabilization fund is a special revenue fund used to account for the accumulation of resources to provide general and/or capital reserves. The Nonmajor Governmental funds consist of other special revenue, capital projects and permanent funds that are aggregated and presented in the nonmajor governmental funds column on the governmental funds financial statements. The following describes the general use of these fund types: The Special Revenue fund is used to account for the proceeds of specific revenue sources (other than permanent funds or capital projects funds) that are restricted by law or administrative action to expenditures for specified purposes. The Capital Projects fund is used to account for financial resources to be used for the acquisition or construction of major capital facilities (other than those financed by enterprise and trust funds). The Permanent fund is used to account for financial resources that are legally restricted to the extent that only earnings, not principal, may be used for purposes that support the governmental programs. Proprietary Fund Financial Statements Proprietary fund financial statements are reported using the flow of economic resources measurement focus and use the accrual basis of accounting. Under this method, revenues are recorded when earned and expenses are recorded when the liabilities are incurred. TOWN OF BREWSTER, MASSACHUSETTS NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2010 - 28 - Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with the proprietary funds principal ongoing operations. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. The following major proprietary funds are reported: The Water Enterprise fund is used to account for water activities. The Golf Enterprise fund is used to account for golf activities. Fiduciary Fund Financial Statements Fiduciary fund financial statements are reported using the flow of economic resources measurement focus and use the accrual basis of accounting. Fiduciary funds are used to account for assets held by the Town in a trustee capacity for others that cannot be used to support the governmental programs. The following fiduciary fund types are reported: The Private-Purpose Trust fund is used to account for trust arrangements, other than those properly reported in the permanent fund (nonmajor governmental funds), under which principal and investment income exclusively benefit individuals, private organizations, or other governments. The Agency fund is used to account for assets held in a purely custodial capacity. Government-Wide and Fund Financial Statements For the government-wide financial statements, and proprietary and fiduciary fund accounting, all applicable Financial Accounting Standards Board (FASB) pronouncements issued on or prior to November 30, 1989, are applied, unless those pronouncements conflict with or contradict GASB pronouncements. D. Cash and Investments Government-Wide and Fund Financial Statements Cash and short term investments are considered to be cash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition. Investments are reported at fair value. E. Accounts Receivable Government-Wide and Fund Financial Statements The recognition of revenue related to accounts receivable reported in the government-wide financial statements and proprietary and fiduciary funds financial statements are reported under the accrual basis of accounting. The recognition of revenue related to accounts receivable reported in the governmental funds financial statements are reported under the modified accrual basis of accounting. TOWN OF BREWSTER, MASSACHUSETTS NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2010 - 29 - Real Estate, Personal Property Taxes and Tax Liens Real estate and personal property taxes are based on values assessed as of each January 1 and are normally due on the subsequent November 1 and May 1. Property taxes that remain unpaid after the respective due dates are subject to penalties and interest charges. By law, all taxable property in the Commonwealth must be assessed at 100% of fair market value. Once levied, which is required to be at least 30 days prior to the due date, these taxes are recorded as receivables in the fiscal year of levy. Based on the Town’s experience, most property taxes are collected during the year in which they are assessed. Liening of properties on which taxes remain unpaid occurs annually. The Town ultimately has the right to foreclose on all properties where the taxes remain unpaid. A statewide property tax limitation statute known as “Proposition 2 ½” limits the amount of increase in property tax levy in any fiscal year. Generally, Proposition 2 ½ limits the total levy to an amount not greater than 2 ½ % of the total assessed value of all taxable property within the Town. Secondly, the tax levy cannot increase by more than 2 ½ % of the prior year’s levy plus the taxes on property newly added to the tax rolls. Certain provisions of Proposition 2 ½ can be overridden by a Town-wide referendum. Real estate receivables are secured via the tax lien process and are considered 100% collectible. Accordingly, an allowance for uncollectibles is not reported. Personal property taxes cannot be secured through the lien process. The allowance of uncollectibles is estimated based on historical trends and specific account analysis. Motor Vehicle Excise Motor vehicle excise taxes are assessed annually for each vehicle registered in the Town and are recorded as receivables in the fiscal year of the levy. The Commonwealth is responsible for reporting the number of vehicles registered and the fair values of those vehicles. The tax calculation is the fair value of the vehicle multiplied by $25 per $1,000 of value. The allowance for uncollectibles is estimated based on historical trends and specific account analysis. Water User fees are levied semi-annually based on meter readings and are subject to penalties if they are not paid by the respective due date. Water liens are processed in December of every year and included as a lien on the property owner's tax bill. Water charges and related liens are recorded as receivables in the fiscal year of the levy. Since the receivables are secured via the lien process, these accounts are considered 100% collectible and therefore do not report an allowance for uncollectibles. Special Assessments Governmental activities special assessments consist primarily of Sewer, Road Betterments, and Title V receivables which are recorded as receivables in the fiscal year accrued. Since the receivables are secured via the lien process, these assets are considered 100% collectable and therefore do not report an allowance for uncollectibles. TOWN OF BREWSTER, MASSACHUSETTS NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2010 - 30 - Departmental and Other Departmental and other receivables consist primarily of ambulance receivables and are recorded as receivables in the fiscal year accrued. The allowance for uncollectibles for the ambulance receivables is estimated based on historical trends and specific account analysis. Intergovernmental Various federal and state grants for operating and capital purposes are applied for and received annually. For non-expenditure driven grants, receivables are recognized as soon as all eligibility requirements imposed by the provider have been met. For expenditure driven grants, receivables are recognized when the qualifying expenditures are incurred and all other grant requirements are met. These receivables are considered 100% collectible and therefore do not report an allowance for uncollectibles. F. Inventories Government-Wide and Fund Financial Statements Inventories of the governmental funds and the water and golf enterprise funds are recorded as expenditures at the time of purchase. Such inventories are not material in total to the basic financial statements, and therefore are not reported. G. Capital Assets Government-Wide and Proprietary Fund Financial Statements Capital assets, which include land, vehicles, buildings and improvements, capital improvements, machinery and equipment, and infrastructure (e.g., water mains, roadways, and similar items) and construction in progress, are reported in the applicable governmental or business-type activities column of the government-wide financial statements, and the proprietary fund financial statements. Capital assets are recorded at historical cost, or at estimated historical cost, if actual historical cost is not available. Donated capital assets are recorded at the estimated fair market value at the date of donation. Except for the capital assets of the governmental activities column in the government-wide financial statements, construction period interest is capitalized on constructed capital assets if material. All purchases and construction costs in excess of $15,000, and all land costs, are capitalized at the date of acquisition or construction, respectively, with expected useful lives of five years or greater. TOWN OF BREWSTER, MASSACHUSETTS NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2010 - 31 - Capital assets (excluding land and construction in progress) are depreciated on a straight-line basis. The estimated useful lives of capital assets are as follows: The cost of normal maintenance and repairs that do not add to the value of the assets or materially extend asset lives are not capitalized and are treated as expenses when incurred. Improvements are capitalized. Governmental Fund Financial Statements Capital asset costs are recorded as expenditures in the fiscal year of purchase for the various funds. H. Interfund Receivables and Payables During the course of its operations, transactions occur between and within individual funds that may result in amounts owed between funds. Government-Wide Financial Statements Transactions of a buyer/seller nature between and within governmental funds are eliminated from the governmental activities in the statement of net assets. Any residual balances outstanding between the governmental activities and business-type activities are reported in the statement of net assets as "internal balances". Fund Financial Statements Transactions of a buyer/seller nature between and within funds are not eliminated from the individual fund statements. Receivables and payables resulting from these transactions are classified as "Due from other funds" or "Due to other funds" on the balance sheet. I. Interfund Transfers During the course of its operations, resources are permanently reallocated between and within funds. These transactions are reported as operating transfers in and operating transfers out. Government-Wide Financial Statements Operating transfers between and within governmental funds are eliminated from the governmental activities in the statement of net assets. Any residual balances outstanding between the governmental activities and business-type activities are reported in the statement of activities as "Transfers, net". Asset Class Estimated Useful Life (in years) Buildings and Improvements 20-40 Capital Improvements (other than buildings) 20 Machinery, Equipment and Vehicles 5-15 Infrastructure 40 TOWN OF BREWSTER, MASSACHUSETTS NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2010 - 32 - Fund Financial Statements Operating transfers between and within funds are not eliminated from the individual fund statements and are reported as operating transfers in and operating transfers out. J. Deferred Revenue Deferred revenue at the governmental fund financial statement level represents billed receivables that do not meet the available criterion in accordance with the current financial resources measurement focus and the modified accrual basis of accounting. Deferred revenue is recognized as revenue in the conversion to the government-wide (full accrual) financial statements. K. Net Assets and Fund Equity Government-Wide Financial Statements (Net Assets) Net assets are classified into three components: a.Invested in capital assets, net of related debt – consists of capital assets including restricted capital assets, net of accumulated depreciation and reduced by the outstanding balances of any bonds, mortgages, notes, or other borrowings that are attributable to the acquisition, construction, or improvement of those assets. b.Restricted net assets – Consists of net assets with constraints placed on the use either by (1) external groups such as creditors, grantors, contributors, or laws or regulations of other governments; or (2) law through constitutional provisions or enabling legislation. Net assets have been “restricted” for the following: Streets represent amounts committed by the Commonwealth of Massachusetts for the repair and/or construction of streets. Permanent funds -expendable represents amounts held in trust for which the expenditures are restricted by various trust agreements. Permanent funds -nonexpendable represents amounts held in trust for which only investment earnings may be expended. Other specific purpose represents restrictions placed on assets from outside parties. c.Unrestricted net assets – All other net assets that do not meet the definition of “restricted” or “invested in capital assets, net of related debt.” TOWN OF BREWSTER, MASSACHUSETTS NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2010 - 33 - Fund Financial Statements (Fund Balances) a.Fund balances consist of funds that are reserved for amounts, that are not available for appropriation, that are legally restricted by outside parties for a specific future use, and designations of fund balances that represent tentative management plans that are subject to change. Fund balances have been reserved for the following: Encumbrances and continuing appropriations represents amounts obligated under purchase orders, contracts and other commitments for expenditures that are being carried over to the ensuing fiscal year. Perpetual permanent funds represent amounts held in trust for which only investment earnings may be expended. Fund balances have been designated for the following: Subsequent year's expenditures represents amounts appropriated for the fiscal year 2011 operating budget. b.Undesignated fund balances – all other fund balances that do not meet the definition of “reserved” or “designated.” L. Long-term debt Government-Wide and Proprietary Fund Financial Statements Long-term debt is reported as liabilities in the government-wide and proprietary fund statement of net assets. Material bond premiums and discounts are deferred and amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of the applicable bond premium or discount. Governmental Fund Financial Statements The face amount of governmental funds long-term debt is reported as other financing sources. Bond premiums and discounts, as well as issuance costs, are recognized in the current period. Bond premiums are reported as other financing sources and bond discounts are reported as other financing uses. Issuance costs, whether or not withheld from the actual bond proceeds received, are reported as general government expenditures. M. Investment Income Excluding the permanent funds, investment income derived from major and nonmajor governmental funds is legally assigned to the general fund unless otherwise directed by Massachusetts General Laws (MGL). TOWN OF BREWSTER, MASSACHUSETTS NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2010 - 34 - N. Compensated Absences Employees are granted sick and vacation leave in varying amounts. Upon retirement, termination or death, certain employees are compensated for unused sick and vacation leave (subject to certain limitations) at their then current rates of pay. The total amount of sick and vacation costs to be paid in future years is not material to the basic financial statements and has not been recorded on the basic financial statements. O. Post Retirement Benefits Government-Wide and Fund Financial Statements In addition to providing pension benefits, health and life insurance coverage is provided for retired employees and their survivors in accordance with Chapter 32B, of Massachusetts General Laws, under various contributory plans. The cost of providing health and life insurance is recognized by recording the employer's 50% share of insurance premiums in the general fund in the fiscal year paid. All benefits are provided through third-party insurance carriers and health maintenance organizations that administer, assume, and pay all claims. P. Use of Estimates Government-Wide and Fund Financial Statements The preparation of the accompanying financial statements in conformity with accounting principles generally accepted in the United States of America, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenditures/expenses during the reporting period. Actual results could vary from estimates that were used. Q. Total Column Government-Wide Financial Statements The total column presented on the government-wide financial statements represents consolidated financial information. Fund Financial Statements The total column on the fund financial statements is presented only to facilitate financial analysis. Data in this column is not comparable to the consolidated financial information. TOWN OF BREWSTER, MASSACHUSETTS NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2010 - 35 - NOTE 2 – STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY A. Budgetary Basis of Accounting Pursuant to Chapter 44, Section 32 of the Massachusetts General Laws, the Town adopts an annual budget for the general fund as well as for those special revenue funds for which the provisions of Chapter 44,Section 53fl1/2 have been adopted. The budgets for all departments and operations of the Town, except that of the public schools, are prepared under the direction of the Town Administrator. The School Department budget is prepared under the direction of the School Committee. The level of expenditures may not legally exceed appropriations for each department or undertaking in the following categories: (1) salaries and wages; (2) ordinary maintenance; and (3) capital outlays. The majority of appropriations are non-continuing which lapse at the end of each fiscal year. Others are continuing appropriations for which the governing body has authorized that an unspent balance from a prior fiscal year be carried forward and made available for spending in the current fiscal year. Carryover articles, not encumbrances, are included as part of the subsequent fiscal year's original budget. Original and supplemental appropriations are enacted upon by a Town Meeting vote. Management may not amend the budget without seeking the approval of the governing body. The Town’s Finance Committee can legally transfer funds from its reserve fund to other appropriations within the budget without seeking Town Meeting approvals. The original fiscal year 2010 approved budget authorized $31,374,010 in current year appropriations and other amounts to be raised and $1,388,260 in carryover articles carried over from previous fiscal years. Supplemental appropriations of $67,448 were approved at one Special Town Meeting for fiscal year 2010. The Finance Director has the responsibility to ensure that budgetary controls are maintained and monitored through the accounting system. B. Budgetary – GAAP Reconciliation For budgetary financial reporting purposes, the Uniform Municipal Accounting System basis of accounting (established by the Commonwealth) is followed, which differs from the GAAP basis of accounting. A reconciliation of budgetary-basis to GAAP-basis results for the general fund for the fiscal year ended June 30, 2010, is presented below: Net change in fund balance -budgetary basis (1,121,788)$ Basis of accounting differences: Increase in revenue for on-behalfpayments -MTRS 826,074 Increase in expenditures for on-behalf payments - MTRS (826,074) Increase in revenue for the MWPAT subsidy 13,528 Increase in expenditures for the MWPAT subsidy (13,528) Adjustment for current year articles 838,615 Adjustment for current year encumbrances 315,289 Adjustment for expenditures from prior yearencumbrances (62,727) Net change in fund balance -GAAP basis (30,611)$ TOWN OF BREWSTER, MASSACHUSETTS NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2010 - 36 - C. Excess of Expenditures over Appropriations For the fiscal year ended June 30, 2010, actual expenditures exceeded appropriations for snow and ice removal. This over-expenditure will be funded by available funds during fiscal year 2011. D. Deficit Fund Balances Individual fund deficits exist within the special revenue, capital project fund, and water enterprise funds. These individual deficits will be eliminated through subsequent fiscal year budget transfers, grants, and/or proceeds from long-term debt during fiscal year 2011. NOTE 3 – DEPOSITS AND INVESTMENTS State and local statutes place certain limitations on the nature of deposits and investments available to the Town. Deposits (including demand deposits, term deposits and certificates of deposit) in any one financial institution may not exceed certain levels unless collateralized by the financial institutions involved. Deposits Custodial Credit Risk - Deposits Custodial credit risk is the risk that in the event of bank failure, the Town’s deposits may not be returned. Massachusetts General Law Chapter 44, Section 55, limits the deposits “in a bank or trust company, or banking company to an amount not exceeding sixty percent (60%) of the capital and surplus of such bank or trust company or banking company, unless satisfactory security is given to it by such bank or trust company or banking company for such excess.” The Town does not have a formal deposit policy for custodial credit risk. The Town carries deposits that are fully insured by the Federal Deposit Insurance Corporation (FDIC), the Depositor’s Insurance Fund (DIF) , or collateralized with securities held by the Town or the Town’s agent in the Town’s name. The Town also carries deposits that are not collateralized and are uninsured. TOWN OF BREWSTER, MASSACHUSETTS NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2010 - 37 - The following table illustrates how much of the Town’s bank deposits are insured or collateralized, and how much of the Town’s bank deposits are uninsured, uncollateralized, or collateral held by the pledging bank’s trust department not in the Town’s name as of June 30, 2010: TOTAL BANK BALANCES 19,116,727$ BANK BALANCES COVERED BY DEPOSIT INSURANCE FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC)1,600,000 DEPOSITOR'S INSURANCE FUND (DIF)13,940,461 TOTAL BANK BALANCES COVERED BY DEPOSIT INSURANCE 15,540,461 BALANCES SUBJECT TO CUSTODIAL CREDIT RISK BANK BALANCES COLLATERALIZED WITH SECURITIES HELD BY THE PLEDGING FINANCIAL INSTITUTION'S TRUST DEPARTMENT OR AGENT BUT NOT IN THE TOWN'S NAME 1,458,280 BANK BALANCES UNINSURED AND UNCOLLATERALIZED 2,117,986 TOTAL BANK BALANCES SUBJECT TO CUSTODIAL CREDIT RISK 3,576,266 TOTAL BANK BALANCES 19,116,727$ On October 3, 2008, FDIC deposit insurance temporarily increased from $100,000 to $250,000 per depositor through December 31, 2009. This temporary increase in coverage has recently been extended through December 31, 2013. Investments Investments can also be made in securities issued by or unconditionally guaranteed by the U.S. government or agencies that have a maturity of less than one year from the date of purchase, repurchase agreement guaranteed by the U.S. government or agencies that have a maturity of less than one year from the date of purchase, repurchase agreements guaranteed by such securities with maturity dates of no more than 90 days from the date of purchase, and units in the Massachusetts Municipal Depository Trust (MMDT). The Treasurer of the Commonwealth of Massachusetts oversees the financial management of the MMDT, a local investment pool for cities, towns, and other state and local agencies within the Commonwealth. The Town’s fair value of its investment in MMDT represents their value of the pool’s shares. The Town’s Trust Funds have expanded investment powers including the ability to invest in equity securities, corporate bonds, annuities and other specified investments. TOWN OF BREWSTER, MASSACHUSETTS NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2010 - 38 - The composition of the Town’s bank recorded deposits and investments fluctuates depending primarily on the timing of property tax receipts, proceeds from borrowings, collections of state and federal aid, and capital outlays throughout the year. The Town did not hold or own any fixed income securities as of June 30, 2010. Credit Risk Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. For short-term investments that were purchased using surplus revenues, Massachusetts General Law Chapter 44, Section 55, limits the Town’s investments to the top rating issued by at least one nationally recognized statistical rating organization (NRSROs). The Town has not adopted a formal policy related to Credit Risk. Custodial Credit Risk For an investment, this is the risk that, in the event of a failure by the counterparty, the Town will not be able to recover the value of its investments or collateral security that are in possession of an outside party. The Town does not have an investment policy for custodial credit risk. Interest Rate Risk Interest rate risk is the risk of changes in market interest rates which will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater the risk of its fair value to change with the market interest rates. The Town does not have a formal investment policy that limits investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates. TOWN OF BREWSTER, MASSACHUSETTS NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2010 - 39 - NOTE 4 – RECEIVABLES The receivables at June 30, 2010 for the Town’s individual major and nonmajor governmental funds, in the aggregate, including the applicable allowances for uncollectible accounts, are as follows: The receivables at June 30, 2010, for the enterprise funds consist of the following: Allowance Gross for Net Receivables:Amount Uncollectibles Amount Real estate and personal property taxes 427,465$(3,300)$424,165$ Taxliens 324,652 -324,652 Motorvehicle and other excise taxes 120,208 (42,182) 78,026 Departmental and other 229,340 (109,908) 119,432 Intergovernmental 3,587,948 - 3,587,948 Special assessments 838,052 -838,052 Total 5,527,665$(155,390)$5,372,275$ Allowance Gross for Net Receivables:Amount Uncollectibles Amount Water User fees 886,818$-$886,818$ SpecialAssessments 76,654 -76,654 Total 963,472$-$963,472$ TOWN OF BREWSTER, MASSACHUSETTS NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2010 - 40 - Governmental funds report deferred revenue in connection with receivables for revenues that are not considered to be available to liquidate liabilities of the current period. Governmental funds also defer revenue recognition in connection with revenues that have been received, but not yet earned. At the end of the current fiscal year, the various components of deferred revenue reported in the governmental funds were as follows: Nonmajor General Community Governmental ReceivableType:Fund Preservation Funds Total PropertyTaxes 389,165$-$-$389,165$ TaxLiens 324,652 -- 324,652 Motorvehicle&otherexcisetaxes 78,026 --78,026 Departmentalandother 7,286 17,208 94,938 119,432 Intergovernmental 2,723,480 - 572,371 3,295,851 Specialassessments -- 838,052 838,052 Total 3,522,609$17,208$1,505,361$5,045,178$ DeferredRevenueAnalysis TOWN OF BREWSTER, MASSACHUSETTS NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2010 - 41 - NOTE 5 – CAPITAL ASSETS Capital asset activity for the fiscal year ended June 30, 2010, was as follows: Beginning Ending Governmental Activities:Balance Increases Decreases Balance Capital assets not being depreciated: Land 35,502,192$1,175,000$-$36,677,192$ Construction in progress 42,742 905,272 -948,014 Total capital assets not being depreciated 35,544,934 2,080,272 - 37,625,206 Capital assets being depreciated: Building and improvements 24,423,023 -- 24,423,023 Capital improvement (other than buildings)843,940 49,234 -893,174 Machinery, equipment, and vehicles 7,348,248 840,620 - 8,188,868 Infrastructure 5,737,492 1,267,550 - 7,005,042 Total capital assets being depreciated 38,352,703 2,157,404 - 40,510,107 Less accumulated depreciation for: Building and improvements (8,067,950) (611,012)- (8,678,962) Capital improvement (other than buildings)(246,551) (47,095)-(293,646) Machinery, equipment, and vehicles (3,554,514) (531,061)- (4,085,575) Infrastructure (3,208,738) (203,936)- (3,412,674) Total accumulated depreciation (15,077,753) (1,393,104)- (16,470,857) Total capital assets being depreciated, net 23,274,950 764,300 - 24,039,250 Total governmental activities capital assets, net 58,819,884$2,844,572$-$61,664,456$ TOWN OF BREWSTER, MASSACHUSETTS NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2010 - 42 - Depreciation expense was charged to functions/programs of the primary government as follows: General government 55,087$ Public safety 529,189 Education 380,368 Public works 335,493 Human services 25,036 Culture and recreation 67,931 Total depreciation expense -governmental activities 1,393,104$ Water 325,539$ Golf 408,991 Total depreciation expense -business-type activities 734,530$ Governmental Activities: Business-Type Activities: Beginning Ending Business-Type Activities:Balance Increases Decreases Balance Capital assets not being depreciated: Land 2,874,212$-$-$2,874,212$ Constructioninprogress 2,848,448 144,889 - 2,993,337 Total capital assetsnot being depreciated 5,722,660 144,889 - 5,867,549 Capital assets being depreciated: Buildings andimprovements 2,683,617 -- 2,683,617 Machinery, equipment, andvehicles 1,965,261 97,404 - 2,062,665 Infrastructure 20,147,457 -- 20,147,457 Total capital assetsbeing depreciated 24,796,335 97,404 - 24,893,739 Less accumulated depreciation for: Buildings andimprovements (673,877) (67,368)-(741,245) Machinery, equipment, andvehicles (1,242,829) (125,478)- (1,368,307) Infrastructure (7,069,039) (541,684)- (7,610,723) Total accumulated depreciation (8,985,745) (734,530)- (9,720,275) Total capital assetsbeingdepreciated, net 15,810,590 (637,126)- 15,173,464 Total business-type activites capital assets, net 21,533,250$(492,237)$-$21,041,013$ TOWN OF BREWSTER, MASSACHUSETTS NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2010 - 43 - NOTE 6 – CAPITAL LEASES The Town has entered into lease agreements as lessee for financing the acquisition of two Ferrara fire pumper trucks and a street sweeper. The lease agreements qualify as capital leases for accounting purposes and, therefore, have been recorded at the present value of the future minimum lease payments as of the inception date. The assets acquired through the capital leases are as follows: Governmental Activities Assets: Vehicles 1,075,349$ Less: Accumulated depreciation (138,532) 936,817$ The future minimum lease obligations and the net present value of the minimum lease payments as of June 30, 2010, are as follows: Governmental Year Ending June 30 Activities 2011 146,504$ 2012 146,504 2013 146,504 2014 146,504 2015 107,632 2016 107,632 2017 107,632 2018 107,632 2019 107,632 Totalminimumlease payments 1,124,176 Less:amounts representing interest (209,197) Present value of minimumlease payments 914,979$ TOWN OF BREWSTER, MASSACHUSETTS NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2010 - 44 - NOTE 7 – INTERFUND TRANSFERS Interfund transfers for the fiscal year ended June 30, 2010, are summarized as follows: (1) Represents budgeted transfers from the various funds to the general fund. (2) Represents other budgeted transfers. (3) Represents other transfers. Nonmajor General Governmental Operating Transfers Out:Fund Funds Total Nonmajor GovernmentalFunds 1,221,581$-$1,221,581$(1) Nonmajor GovernmentalFunds 8,730 -8,730 (3) Water Enterprise Fund 319,691 -319,691 (3) Golf Enterprise Fund 388,052 -388,052 (3) CommunityPreservation Fund 325,955 -325,955 (1) Stabilization Fund 150,000 -150,000 (1) Stabilization Fund -250,000 250,000 (3) General Fund -100,000 100,000 (3) General Fund -45,000 45,000 (2) Total 2,414,009$395,000$2,809,009$ OperatingTransfersIn: TOWN OF BREWSTER, MASSACHUSETTS NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2010 - 45 - NOTE 8 – SHORT-TERM FINANCING Under state law, and with the appropriate authorization, the Town is authorized to borrow funds on a temporary basis as follows: To fund current operations prior to the collection of revenues by issuing revenue anticipation notes (RANS). To fund grants prior to reimbursement by issuing grant anticipation notes (GANS). To fund Capital project costs incurred prior to selling permanent debt by issuing bond anticipation notes (BANS). To fund current project costs and other approved expenditures incurred, that are anticipated to be reimbursed by the Commonwealth through the issuance of State Aid anticipation notes (SAANS). Short-term loans are general obligations of the Town and maturity dates are governed by statute. Interest expenditures for short-term borrowings are accounted for in the general fund. The following is a summary of changes in short-term debt for the year ended June 30, 2010: Type Purpose Rate (%) Due Date Balanceat June30, 2009 Renewed/ Issued Retired/ Redeemed Balanceat June30, 2010 BAN Land Acquisition 1.79 12/10/09 351,000$-$(351,000)$-$ BAN StormwaterImprovements 1.15 10/15/10 -57,242 -57,242 BAN Road betterments 1.15 10/15/10 -237,000 -237,000 BAN Land Acquisition 1.15 10/15/10 -500,000 -500,000 BAN Land Acquisition 1.15 12/15/10 -675,000 -675,000 Total Governmental Funds 351,000$1,469,242$(351,000)$1,469,242$ TOWN OF BREWSTER, MASSACHUSETTS NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2010 - 46 - NOTE 9 – LONG-TERM DEBT The Town is subject to a dual-level, general debt limit: the normal debt limit and the double debt limit. Such limits are equal to 5% and 10%, respectively, of the valuation of taxable property in the Town as last equalized by the Commonwealth’s Department of Revenue. Debt may be authorized up to the normal debt limit without state approval. Authorizations under the double debt limit however require the approval of the Commonwealth’s Emergency Finance Board. Additionally, there are many categories of general long-term debt which are exempt from the debt limit but are subject to other limitations. The following is a summary of the changes in long-term debt for the year ended June 30, 2010: Bonds and Notes Payable Schedule -Governmental Funds Project Interest Rate (%) Outstanding at June 30, 2009 Issued Redeemed/ Refunded Outstanding at June 30, 2010 School 3.74 2,970,000$-$445,000$2,525,000$ Library 3.74 350,000 -50,000 300,000 MWPAT Title V Septic Var 124,601 -10,401 114,200 Road Betterments 4.80 15,000 -15,000 - Police Station 5.51 340,000 -170,000 170,000 Police Station 3.89 1,530,000 -5,000 1,525,000 Road Betterments 3.80 20,000 -10,000 10,000 Road Betterments 3.59 105,000 -30,000 75,000 Road Betterments 3.62 100,000 -20,000 80,000 Road Betterments 3.62 135,000 -30,000 105,000 MWPAT Title V Septic 3.59 147,150 -9,525 137,625 Land Acquisition 3.64 750,000 -65,000 685,000 Road Betterments 3.64 210,000 -30,000 180,000 Road Betterments 3.64 110,000 -20,000 90,000 Land Acquisition 4.49 775,000 -50,000 725,000 Land Acquisition 4.49 1,455,000 -85,000 1,370,000 Road Betterments 4.49 140,000 -20,000 120,000 Road Betterments 4.49 95,000 -15,000 80,000 Road Betterments 3.96 220,000 -30,000 190,000 Total 9,591,751$-$1,109,926$8,481,825$ TOWN OF BREWSTER, MASSACHUSETTS NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2010 - 47 - The annual debt service requirements for principal and interest for Governmental bonds and notes outstanding at June 30, 2010 are as follows: Bonds and Notes Payable Schedule -Water and Golf Enterprise Funds The annual debt service requirements for principal and interest for water and golf enterprise funds bonds and notes outstanding at June 30, 2010 are as follows: Project Interest Rate (%) Outstanding at June 30, 2009 Issued Redeemed/ Refunded Outstandingat June 30,2010 Golf Course 4.75 945,000$-$460,000$485,000$ Golf Course 3.92 5,685,000 --5,685,000 Golf Course 3.64 500,000 -100,000 400,000 Water Mains 5.51 305,000 -155,000 150,000 Water Mains 3.89 1,350,000 -5,000 1,345,000 Telemetry 5.51 15,000 -15,000 - Water Betterments - Williams Dr 3.80 10,000 -5,000 5,000 Standpipe #2 3.80 205,000 -70,000 135,000 Standpipe Rehabilitation 3.62 350,000 -70,000 280,000 Water Betterments - Slough Rd 3.64 630,000 -40,000 590,000 Water Betterments - Slough Rd 4.49 75,000 -10,000 65,000 Water Offices/Garage 3.96 2,350,000 -125,000 2,225,000 Total 12,420,000$-$1,055,000$11,365,000$ Fiscal Year Principal Interest Total 2011 1,060,000$553,665$1,613,665$ 2012 1,060,000 508,192 1,568,192 2013 1,025,000 462,485 1,487,485 2014 1,050,000 414,945 1,464,945 2015 915,000 368,245 1,283,245 2016-2020 5,060,000 1,150,438 6,210,438 2021-2025 800,000 245,425 1,045,425 2026-2028 395,000 53,495 448,495 Total 11,365,000$3,756,890$15,121,890$ Fiscal Year Principal Interest Total 2011 1,074,925$355,278$1,430,203$ 2012 1,049,925 310,840 1,360,765 2013 1,034,925 267,428 1,302,353 2014 994,925 225,238 1,220,163 2015 944,925 181,934 1,126,859 2016-2020 2,487,000 460,221 2,947,221 2021-2025 735,200 125,968 861,168 2026-2027 160,000 10,800 170,800 Total 8,481,825$1,937,707$10,419,532$ TOWN OF BREWSTER, MASSACHUSETTS NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2010 - 48 - Massachusetts School Building Authority Reimbursements Chapter 645 of the Act of 1948 as amended (“Chapter 645”) created a statewide school building assistance program. Pursuant to this program, cities and towns issued bonds for eligible school building projects and were reimbursed over a period of years by the Commonwealth according to a statutory percentage for such city or town. Legislation enacted as part of the Commonwealth’s Fiscal 2001 budget repealed 645 and created a new school building assistance program codified as Chapter 70B of the Massachusetts General Laws. Among other changes, the new program includes grants for alternatives to construction and calculates grants for each project based on a number of factors. The new legislation does not affect the reimbursement percentages for bonds previously issued under Chapter 645, and the grants for certain “grandfathered” projects will be based on the statutory percentages provided for in Chapter 645. The Town has been approved for a 65% percent state school construction grant through the Massachusetts School Building Authority (MSBA) to cover eligible project costs, including debt service associated with the financing of these projects, subject to annual appropriation by the state legislature. The Town received $544,696 from scheduled annual payments in FY 2010 from the MSBA for completed school construction projects. Loans Authorized and Unissued As of June 30, 2010, the Town has loans authorized and unissued as follows: Date Description Authorized Amount Septage Betterments 5/6/1996 28,600$ Road betterments -Standish Heights 5/4/2009 & 10/19/09 237,000 Stony Brook School Construction 10/19/2009 2,550,000 LandAcquisition- Bates Property 10/19/2009 1,175,000 LandAcquisition- Matthews Property 5/3/2010 755,000 Road betterments -Hazel Lane 5/3/2010 98,300 4,843,900$ TOWN OF BREWSTER, MASSACHUSETTS NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2010 - 49 - Changes in Long-term Liabilities The following is a summary of changes in long-term liabilities for the year ended June 30, 2010: The governmental activities long-term liabilities are generally liquidated by the general fund. Overlapping Debt The Town pays assessments under formulas which include debt service payments to other governmental agencies providing services to the Town, (commonly referred to as overlapping debt). The following summary sets forth the long-term debt of such governmental agencies and the estimated share being financed by the Town as of June 30, 2010: Total Long- Town's Town's Term Debt Estimated Indirect Agency Outstanding Share Debt Nauset Regional School District 1,565,100$49.58% 775,977$ Less: MSBAReimbursement (1,342,850) 49.58% (665,785) Net OutstandingDebt/OverlappingDebt 222,250$110,192$ Beginning Ending Current Governmental Activities:Balance Additions Reductions Balance Portion Landfill postclosure care costs 563,500$-$(58,500)$505,000$28,500$ Capital Lease 867,167 182,162 (134,350) 914,979 104,618 Postemployment benefits 892,419 877,116 -1,769,535 517,416 Bondsand notes payable 9,591,751 - (1,109,926) 8,481,825 1,074,925 Total governmental activities long-termliabilities 11,914,837$1,059,278$(1,302,776)$11,671,339$1,725,459$ Beginning Ending Current Business-TypeActivities:Balance Additions Reductions Balance Portion Postemployment benefits 162,074$169,175$-$331,249$28,151$ Bondsand notes payable 12,420,000 - (1,055,000) 11,365,000 1,060,000 Total business-typeactivities long-termliabilities 12,582,074$169,175$(1,055,000)$11,696,249$1,088,151$ TOWN OF BREWSTER, MASSACHUSETTS NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2010 - 50 - NOTE 10 – STABILIZATION FUND At June 30, 2010, $3,273,812 has been set aside in the stabilization fund, which is classified as a major fund in the governmental funds financial statements. The stabilization fund balance can be used for general and/or capital purposes as approved by Town Meeting vote. NOTE 11 – RISK FINANCING The Town is exposed to various risks of loss related to torts; theft of, damage to or destruction of assets; errors and omissions; injuries to employees; employee’s health and life; and natural disasters. Buildings are fully insured against fire, theft, and natural disaster to the extent that losses exceed $1,000 per incident. The fully insurable value of Town buildings is $44,296,447. The Town is insured for general liability; however, Chapter 258 of the Massachusetts General Laws limits the Town’s liability to a maximum of $100,000 per claim in all matters except in actions relating to federal civil rights, eminent domain and breach of contract. Such claims are charged to the general fund. There were no such claims in 2010. The Town is a member of the Cape Cod Municipal Health Group, (CCMHG) which is a Massachusetts Municipal Joint Health Insurance purchase group. The Group includes fourteen Towns, five school districts, five fire districts, six water districts, one recreation authority, one education collaborative, Veterans Services of Cape Cod, Barnstable County, Orleans/Brewster/Eastham Groundwater Protection District and Cape Cod Regional Transit Authority as participants. In addition, the Group entered into a Joint Negotiation Purchase of Health Coverage with the Dukes County Municipal Health Group which consists of Dukes County Commissioners; the Towns of Chilmark, Edgartown, Gosnold, Oak Bluffs, Tisbury, West Tisbury, and Aquinnah; Martha’s Vineyard Refuse Disposal and Resource Recovery District; Martha’s Vineyard Commission; Martha’s Vineyard Land Bank Commission; Oak Bluffs Water District; Martha’s Vineyard Regional School District; Up-Island Regional School District; Martha’s Vineyard Charter School; and Martha’s Vineyard Transit Authority. Health benefits consist of a traditional medical indemnity program and a Medex program with Blue Cross Blue Shield of Massachusetts. The traditional medical indemnity program consists of Master Health Plus and Master Health/ Master Medical, and Master Medical Medicare Carveout plans. In addition, the Group adopted an Exclusive Provider Organization plan with Harvard Pilgrim Health Care (HPHC) and a self funded medi- wrap plan, Harvard Pilgrim Health Care Enhance Medicare. All of these plans are self-funded. The Group adopted three Medicare Choice plans: Medicare HMO Blue, Managed Blue for Seniors and Tufts Medicare Preferred (fully insured). The Group has adopted Blue Cross/Blue Shield (BC/BS) Network Blue, a self-funded, Exclusive Provider Organization (EPO) plan as well as two Preferred Provider Organization (PPO) plans. Blue Care Elect Preferred PPO is administered by BCBS, and Harvard Pilgrim PPO is administered by HPHC. Both PPO plans are self-funded. Also, the Group has adopted a contributory dental insurance plan (self-funded) and a voluntary dental plan, which was premium based through June 30, 2008 and changed to a self funded basis effective July 1, 2008. The traditional medical indemnity plans, Blue Care Elect Preferred PPO plan, Network Blue EPO plan, and Medex plan are on a claims-paid basis, and are administered by Blue Cross Blue Shield of Massachusetts for a monthly administration fee based on the number of individual, single parent/single child, and family plan subscribers for that particular month. TOWN OF BREWSTER, MASSACHUSETTS NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2010 - 51 - The Harvard Pilgrim EPO Plan, Harvard Pilgrim PPO plan, and Harvard Pilgrim Health Care Enhance Medicare plan are on a claims-paid basis, and are administered by Harvard Pilgrim health care for a monthly administration fee based on the number of individual and family plan subscribers for that particular month. The contributory dental insurance plan is on a claims-paid basis for subscribers whose employers pay a portion (50% or more) of the monthly cost. The voluntary dental plan is on a fixed premium basis for all other subscribers (an employee pay-all plan). The contributory dental plan is administered by Delta Dental Plan of Massachusetts for a monthly administration fee based on the number of subscribers. The voluntary dental plan is fully insured by Delta Dental Plan of Massachusetts. The Group has a specific excess medical and prescription drug claims reinsurance contract with an insurance carrier covering claims paid in excess of $150,000, and $150,000 per individual, to a lifetime maximum amount payable of $2,000,000, and $2,000,000 at June 30, 2010 and 2009 respectively, for the traditional medical indemnity, preferred provider organization (PPO), and exclusive provider organization (EPO) plan contracts. The Group reinsures its Carveout A plan with a policy with a $50,000 specific deductible. The Group does not reinsure it Medex and HPHC Medicare Enhance plans. The policy period covers claims incurred within twelve months and paid within twenty-four months. The Group’s Board may deal with certified surpluses and deficits through the rate setting process and this is the preferred method. Alternatively, the Group may deal with certified surpluses and deficits by making direct distributions to members in the case of a certified surplus or may require direct payments from members in the case of a certified deficit. The Group provides health care coverage for employees that qualify for and select health care coverage as an employee benefit as well as retired employees. There are 182 Town of Brewster employees and 80 retirees who participate in the Group’s health care programs. The Town contributes 75% of the premium cost for employees and 50% of the premium cost for retirees and surviving spouses. As of June 30, 2009, the Cape Cod Municipal Health Group had total assets of $33,435,384, total liabilities of $15,208,162 (including $13,490,965 in estimated benefits obligations), and a total surplus of $18,227,222. TOWN OF BREWSTER, MASSACHUSETTS NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2010 - 52 - NOTE 12. POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS GASB Statement No. 45,Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions,requires the following disclosures with regard to the retiree medical, dental, and life insurance benefits: Plan Description.The Post Retirement Benefits Plan of the Town of Brewster (The Plan) is a single- employer defined benefit healthcare plan administered by the Town of Brewster. The Plan provides medical, dental and life insurance benefits to eligible retirees and their spouses. Town meeting vote is the authority to establish and amend benefit provisions to the Town. The Town has accepted various sections of Massachusetts General laws Chapter 32B to provide ½ of the premium cost of retirees’ health and life insurance costs. Funding Policy.The contribution requirements of plan members and the Town are established and may be amended by local by-law. The required contribution is based on projected pay-as-you-go financing requirements. For Fiscal Year 2010, the estimated total Town premiums plus implicit costs for the retiree medical program are $545,567. Annual OPEB Cost and Net OPEB Obligation.The Town’s annual other postemployment benefit (OPEB) cost (expense) is calculated based on the annual required contribution of the employer (ARC),an amount actuarially determined in accordance with the parameters of GASBS No. 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years. The following table shows the components of the Town’s annual OPEB cost for the fiscal year, the amount actually contributed to the plan, and changes in the Town’s net OPEB obligation to the plan: Annualrequired contribution 1,577,699$ Interest on net OPEB obligation 52,725 Adjustment to annualrequired contribution (ARC) (38,566) AnnualOPEB cost (expense)1,591,858 Contributions made 545,567 Increase in net OPEB obligation 1,046,291 Net OPEB obligation - beginning of year 1,054,493$ Net OPEB obligation - end of year 2,100,784$ TOWN OF BREWSTER, MASSACHUSETTS NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2010 - 53 - The Town’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for 2010 and the two preceding years were as follows: Funded Status and Funding Progress.As of June 30, 2008, the most recent actuarial valuation date, the plan was 0.0% funded. The actuarial accrued liability for benefits was $19.960 million, and the actuarial value of assets was $0.0 million, resulting in an unfunded actuarial accrued liability (UAAL) of $19.961 million. The covered payroll (annual payroll of active employees covered by the plan) was $10.504 million, and the ratio of the UAAL to the covered payroll was 190.0%. Actuarial valuations of an ongoing plan involve 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 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 multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. Actuarial Methods and Assumptions.Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the 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 actuarial 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. In the June 30, 2008, actuarial valuation, the projected unit credit actuarial cost method with amortization payments increasing at 4.5% was used. Under this method, the normal cost and actuarial liability are both based on an accrual of projected benefits over the period for which benefits are accrued. The normal cost is the actuarial present value of one year’s benefit accrual on this basis. The actuarial accrued liability is the actuarial present value of the projected benefit times the ration of past service to total service. The actuarial assumptions included a 5.0% investment rate of return (net of administrative expenses), which is a blended rate of the expected long-term investment returns on plan assets and on the employer’s own investments calculated based on the funded level of the plan at the valuation date, and an annual healthcare cost trend rate of 10.0% decreasing by .75% for 6 years and by 0.50% for 1 year to an ultimate level of 5.00% per year. The actuarial value of assets was determined using market value. The UAAL is being amortized with increasing payments at 4.5% over 30 years at transition. The remaining amortization period at July 1, 2010, was 28 years. Fiscal Year Ended Annual OPEB Cost Percentage of Annual OPEB Cost Contributed Net OPEB Obligation 6/30/2008 N/A N/A N/A 6/30/2009 $ 1,490,990 29.28% $ 1,054,493 6/30/2010 $ 1,591,858 34.27% $ 2,100,784 TOWN OF BREWSTER, MASSACHUSETTS NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2010 - 54 - NOTE 13 – PENSION PLAN A. Plan Descriptions The Town contributes to the Barnstable County Contributory Retirement System (the “System”), a cost sharing, multiple-employer, defined benefit pension plan administered by the Barnstable County Retirement Board. Substantially all employees are members of the “System” except for public school teachers and certain school administrators who are members of the Massachusetts Teachers’ Retirement System (MTRS) to which the Town does not contribute. The “System” and the MTRS are contributory defined benefit plans and membership in both the “System” and the MTRS is mandatory upon commencement of employment for all permanent, full-time employees. The “System” and the MTRS provide retirement, disability and death benefits to plan members and beneficiaries. Chapter 32 of the Massachusetts General Laws assigns authority to establish and amend benefit provisions of the plan, and grant cost-of-living increases, to the State legislature. The “System” issues a publicly available financial report, which can be obtained through the Commonwealth of Massachusetts, Public Employee Retirement Administration Commission (“PERAC”), One Ashburton Place, Boston, Massachusetts 02108. B. Funding Policies Barnstable County Contributory Retirement System Plan members are required to contribute to the “System” at rates ranging from 5% to 11% of annual covered compensation. The Town is required to pay into the “System”, its share of the remaining system- wide, actuarially determined, contribution plus administration costs, which are apportioned among the employers, based on active covered payroll. The Commonwealth of Massachusetts reimburses the “system” for a portion of the benefit payments for the cost of living increases. The contributions to the “System” for years ended June 30, 2010, 2009, and 2008 were $1,203,862, $1,078,259, and $1,021,329, respectively, which were equal to its required contributions for each of these years. Massachusetts Teachers’ Retirement System Plan members (at varying rates of annual covered compensation) and the Commonwealth of Massachusetts fund contributions to the MTRS. The Commonwealth of Massachusetts contributed “on- behalf” payments to the MTRS totaling $826,074 for fiscal year 2010. In accordance with GASB Statement No. 24, these on-behalf” payments have been recorded in the general fund as intergovernmental revenues and pension expenditures. TOWN OF BREWSTER, MASSACHUSETTS NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2010 - 55 - NOTE 14 – COMMITMENTS AND CONTINGENCIES The Town participates in a number of federal award programs. Although the grant programs have been audited in accordance with the provisions of the Single Audit Act Amendments of 1996 through June 30, 2010, these programs are still subject to financial and compliance audits. The amount, if any, of expenditures which may be disallowed by the granting agencies cannot be determined at this time, although it is believed the amount, if any, would not be material. The Town’s landfill was capped in 2000 by order of the Department of Environmental Protection (DEP). The Town is responsible for post-closure monitoring of the site for thirty years (21 years remaining), and the estimated liability has been recorded in the Statement of Net Assets, Governmental Activities. The $505,000 reported as landfill post-closure liability at June 30, 2010 is based on what it would cost to perform all post-closure care at June 30, 2010. Actual costs may be higher due to inflation, changes in technology or changes in regulations. Various legal actions and claims are pending. Litigation is subject to many uncertainties, and the outcome of individual litigated matters is not always predictable. Although the amount of liability, if any, at June 30, 2010, cannot be ascertained, management believes any resulting liability should not materially affect the financial position at June 30, 2010. NOTE 15 – PRIOR PERIOD ADJUSTMENT – UNBILLED REVENUE The following Net Assets have been restated to reflect the recording of unbilled revenue in the Water enterprise fund at June 30, 2009. Primary Major Government Fund Business- Type Water Description Activities Enterprise TotalNetAssetsatJune 30, 2009, as previouslyreported 12,628,763$8,249,144$ Torecordunbilledrevenue 801,000 801,000 TotalNetAssetsatJune 30, 2009, as restated 13,429,763$9,050,144$ TOWN OF BREWSTER, MASSACHUSETTS NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2010 - 56 - NOTE 16 – IMPLEMENTATION OF NEW GASB PRONOUNCMENTS During fiscal year 2010, the following GASB pronouncements were implemented: The GASB issued Statement #51 Accounting and Financial Reporting for Intangible Assets was implemented in FY2010. This pronouncement did not require additional disclosure or impact the basic financial statements. The GASB issued Statement #53 Accounting and Financial Reporting for Derivative Instruments was implemented in FY2010. The Town does not invest in derivative instruments. Therefore, this pronouncement did not require additional disclosure or impact the basic financial statements. The GASB issued Statement #58 Accounting and Financial Reporting for Chapter 9 Bankruptcies was implemented in FY2010. This pronouncement did not require additional disclosure or impact the basic financial statements. Future GASB Pronouncements: The GASB issued Statement #54 Fund Balance Reporting and Governmental Fund Type Definitions which is required to be implemented in FY2011. Management believes this pronouncement will require additional disclosure and reclassify/redefine some fund balances in the basic financial statements. The GASB issued Statement #57 OPEB Measurement by Agent Employers and Agent Multiple- Employer Plans which is required to be implemented in FY2012. Management does not believe that this pronouncement will require additional disclosure or impact the basic financial statements. The GASB issued Statement #59 Financial Instruments Omnibus which is required to be implemented in FY2012. Management does not believe that this pronouncement will require additional disclosure or impact the basic financial statements.ces in the basic financial statements. TOWN OF BREWSTER, MASSACHUSETTS REQUIRED SUPPLEMENTARY INFORMATION OTHER POSTEMPLOYMENT BENEFITS - 57 - Schedules of Funding Progress and Employer Contributions The following schedules are presented in accordance with GASB Statement No. 45: Projected Schedule of Funding Progress: Actuarial Valuation Date Actuarial Value of Assets (a) Actuarial Accrued Liability (AAL) - Entry Age (b) Unfunded AAL (UAAL) (b - a) Funded Ratio (a/b) Covered Payroll (c) UAAL as a Percentage of Covered Payroll [(b - a)/c] 7/1/2008 -$19,960,683$19,960,683$0.0%10,503,689$190.0% Schedule of Employer Contributions (1): Year Ended June 30 Annual OPEB Cost Percentage of Annual OPEB Cost Contributed * Net OPEB Obligation 2009 $1,490,990 29.28% 1,054,493$ 2010 $1,591,858 34.27% 2,100,784$ (1) A three-year display will be shown on a go forward basis. Based on expected premium payments. The required information presented above was determined as part of the actuarial valuations at the dates indicated. Additional information as of the latest actuarial valuation follows: Valuation date June 30, 2008 Discount Rate 5.00% Medical Trend 10.00% decreasing by 0.75% for 6 years and by .50% for 1 year to an ultimate level of 5.00% per year. Year 2016 and thereafter Cost Method Projected Unit Credit Cost Method Amortization Method 30 Year Open, Amortization Payments Increasing at 4.50% Remaining Amortization Period 28 TOWN OF BREWSTER, MASSACHUSETTS REQUIRED SUPPLEMENTARY INFORMATION OTHER POSTEMPLOYMENT BENEFITS - 58 - Plan Participants: Current retirees, beneficiaries, and dependants 82 Current active members/participants 181 Total 263