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HomeMy Public PortalAboutBrewster 2015 Report on the Examination of the Basic Financial Statements TOWN OF BREWSTER, MASSACHUSETTS REPORT ON EXAMINATION OF BASIC FINANCIAL STATEMENTS JUNE 30, 2015 TOWN OF BREWSTER, MASSACHUSETTS REPORT ON EXAMINATION OF BASIC FINANCIAL STATEMENTS JUNE 30, 2015 TABLE OF CONTENTS PAGE Independent Auditor’s Report 1 - 2 Management’s Discussion and Analysis 3 – 10 Basic Financial Statements Statement of Net Position 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 Position 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 Funds - Statement of Net Position Proprietary Funds – Statement of Revenues, Expenses, and Changes in Fund Net Position Proprietary Funds – Statements of Cash Flows 19 20 21 Fiduciary Funds – Statement of Fiduciary Net Position 22 Fiduciary Funds – Statement of Changes in Fiduciary Net Position 23 Notes to Basic Financial Statements 24– 62 Required Supplementary Information: Barnstable County Regional Retirement System Schedules: Schedules of Funding Progress and Employer Contributions 63 TOWN OF BREWSTER, MASSACHUSETTS REPORT ON EXAMINATION OF BASIC FINANCIAL STATEMENTS JUNE 30, 2015 TABLE OF CONTENTS Schedule of the Town’s Proportionate Share of the Net Pension Liability Schedule of Town’s Contribution PAGE 64 65 Massachusetts Teachers Retirement System Schedule: Schedule of the State’s Proportionate Share of the Net Pension Liability 66 Other Postemployment Benefit Plan Schedules: Schedules of Funding Progress and Employer Contributions 67 – 68 Notes to Required Supplementary Information 69 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 Report on the Financial Statements 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, 2015, and the related notes to the financial statements, which collectively comprise the Town of Brewster, Massachusetts’s basic financial statements as listed in the table of contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. -1- 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, 2015, and the respective changes in financial position and, where applicable cash flows thereof and the respective budgetary comparison for the general fund for the year then ended in accordance with accounting principles generally accepted in the United States of America. Emphasis of Matter As discussed in Note 15 to the financial statements, the Town Net Pension Liability has significantly increased as of June 30, 2015 due to the implementation of GASB Statement 68, Accounting and Financial Reporting for Pensions. Our opinion is not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis, Barnstable County Retirement System schedules of funding progress, employer contributions, Town’s proportionate share of the net pension liability, Town’s contribution, and Massachusetts Teachers Retirement System’s proportionate share of the net pension liability, and other post-employment benefits – schedules of funding progress and employer contributions and notes to the retirement system on pages 3 – 10, 63 - 65, 66, 67 - 68 and 69 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. February 1, 2016 -2- - 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, 2015. 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 $67.2 million (net position). Of this amount, -$14.9 million is considered unrestricted (unrestricted net position). • The unrestricted net position of the Town’s governmental activities are -$16.5 million. The unrestricted net position of the Town’s business-type activities are $1.6 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 position decreased by $1 million from fiscal 2014. Within this total, net position of governmental activities decreased by $1.2 million from fiscal 2014. Also, net position of business-type activities increased by $246 thousand from 2014. • At June 30, 2015, the Town’s governmental funds had combined ending fund balances of $10.9 million. The combined governmental funds balance decreased by $4.3 million, a 28.4% decrease over the prior year’s ending fund balances. • The Town’s general fund reported a fund balance of $8.6 million at the end of fiscal 2015. The unassigned fund balance for the general fund was $5.3 million or 14% of total general fund expenditures. A total of $1.0 million of the assigned fund balance was designated for funding the fiscal year 2016 budget. • The total cost of all Town services for fiscal 2015 was $46 million, $41 million of which was for governmental activities, and $5 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 position presents information on all assets and liabilities, with the difference between the two reported as net position. Over time, increases or decreases in net position 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 position changed during the most recent fiscal year. All changes in net position 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, postemployment benefits trust, 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”, “postemployment benefits trust”, 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 $67,181,840 at the close of fiscal year 2015. The Town is able to report positive balances of net position, both for the government as a whole, and for its separate governmental and business-type activities in total. The largest component of the Town’s net position 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 $75,535,731, or 112% of total net position. 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. An additional portion of the net position totaling $6,518,261 (9.7% of total) represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net position is ($14,872,152). The Town increased its total liabilities by $4,974,081 over fiscal 2014, and total net position decreased by $961,252 or 1.4%. Net position of governmental activities decreased by $1,207,346, a 2.2% decrease from fiscal 2014. Net position of business-type activities increased by $246,094 or 1.9% from 2014. There was a decrease of $100,919 in net position reported in connection with the water business-type activity, and an increase of $347,013 in net position in connection with the golf department business-type activity, respectively. - 6 - Increase Increase Increase FY 2015 FY 2014 (Decrease)FY 2015 FY 2014 (Decrease)FY 2015 FY 2014 (Decrease) Assets: Current assets 18,169,892$ 19,143,220$ (973,328)$ 6,109,322$ 5,397,803$ 711,519$ 24,279,214$ 24,541,023$ (261,809)$ Noncurrent assets (excluding capital)446,423 534,073 (87,650) 32,720 41,162 (8,442) 479,143 575,235 (96,092) Capital assets 69,031,253 65,213,528 3,817,725 22,487,429 21,969,423 518,006 91,518,682 87,182,951 4,335,731 Total assets 87,647,568 84,890,821 2,756,747 28,629,471 27,408,388 1,221,083 116,277,039 112,299,209 3,977,830 Deferred Outflow of Resources:29,330 - 29,330 5,669 - 5,669 34,999 - 34,999 Liabilities: Current liabilities (excluding debt)1,937,185 1,775,895 161,290 275,505 126,834 148,671 2,212,690 1,902,729 309,961 Noncurrent liabilities (excluding debt)22,497,573 21,466,822 1,030,751 4,206,010 4,044,221 161,789 26,703,583 25,511,043 1,192,540 Current debt 5,342,848 1,319,895 4,022,953 2,776,519 1,112,890 1,663,629 8,119,367 2,432,785 5,686,582 Noncurrent debt 4,197,477 5,419,048 (1,221,571) 7,897,081 8,890,512 (993,431) 12,094,558 14,309,560 (2,215,002) Total liabilities 33,975,083 29,981,660 3,993,423 15,155,115 14,174,457 980,658 49,130,198 44,156,117 4,974,081 Net Position: Net investment in capital assets 63,684,588 58,561,979 5,122,609 11,851,143 12,013,787 (162,644) 75,535,731 70,575,766 4,959,965 Restricted 6,518,261 10,374,490 (3,856,229) - - - 6,518,261 10,374,490 (3,856,229) Unrestricted (16,501,034) (14,027,308) (2,473,726) 1,628,882 1,220,144 408,738 (14,872,152) (12,807,164) (2,064,988) Total net position 53,701,815$ 54,909,161$ (1,207,346)$ 13,480,025$ 13,233,931$ 246,094$ 67,181,840$ 68,143,092$ (961,252)$ Revenues Program Revenues: Charges for services 1,954,050$ 1,745,534$ 208,516$ 6,066,772$ 5,983,569$ 83,203$ 8,020,822$ 7,729,103$ 291,719$ Operating grants and contributions 3,533,495 3,967,541 (434,046) 65,983 78,417 (12,434) 3,599,478 4,045,958 (446,480) Capital grants and contributions 560,999 721,237 (160,238) - - - 560,999 721,237 (160,238) General Revenues: Real Estate and personal property taxes 27,684,177 26,888,922 795,255 - - - 27,684,177 26,888,922 795,255 Tax Liens 124,471 115,054 9,417 - - - 124,471 115,054 9,417 Motor vehicle and other excise taxes 1,349,787 1,306,972 42,815 - - - 1,349,787 1,306,972 42,815 Hotel/Motel Tax and Meals Tax 1,250,849 1,261,973 (11,124) - - - 1,250,849 1,261,973 (11,124) Penalties and interest on taxes 183,757 127,868 55,889 - - - 183,757 127,868 55,889 Payments in Lieu of Taxes 6,873 6,870 3 - - - 6,873 6,870 3 Nonrestricted grants and contributions 1,842,184 2,245,022 (402,838) - - - 1,842,184 2,245,022 (402,838) Unrestricted investment income 28,022 30,102 (2,080) - - - 28,022 30,102 (2,080) Other revenues 23,039 79,906 (56,867) - - - 23,039 79,906 (56,867) Total Revenues 38,541,703 38,497,001 44,702 6,132,755 6,061,986 70,769 44,674,458 44,558,987 115,471 Expenses: General Government 3,422,159 3,349,320 72,839 - - - 3,422,159 3,349,320 72,839 Public Safety 5,988,962 5,675,687 313,275 - - - 5,988,962 5,675,687 313,275 Education 18,244,760 17,944,981 299,779 - - - 18,244,760 17,944,981 299,779 Public Works 2,623,354 2,301,803 321,551 - - - 2,623,354 2,301,803 321,551 Human Services 1,622,408 694,271 928,137 - - - 1,622,408 694,271 928,137 Culture and Recreation 1,131,219 984,429 146,790 - - - 1,131,219 984,429 146,790 Employee Benefits 6,718,312 6,867,537 (149,225) - - - 6,718,312 6,867,537 (149,225) State and County Assessments 585,310 516,612 68,698 - - - 585,310 516,612 68,698 Interest 258,352 260,727 (2,375) - - - 258,352 260,727 (2,375) Golf - - - 3,014,138 3,000,116 14,022 3,014,138 3,000,116 14,022 Water - - - 2,028,036 1,847,968 180,068 2,028,036 1,847,968 180,068 Total Expenses 40,594,836 38,595,367 1,999,469 5,042,174 4,848,084 194,090 45,637,010 43,443,451 2,193,559 Increase/(Decrease) in Net Position before contributions to permanent endowments and transfers (2,053,133) (98,366) (1,954,767) 1,090,581 1,213,902 (123,321) (962,552) 1,115,536 (2,078,088) Contributions to permanent endowments 1,300 4,225 (2,925) - - - 1,300 4,225 (2,925) Transfers 844,487 571,780 272,707 (844,487) (571,780) (272,707) - - - Change in Net Position (1,207,346) 477,639 (1,684,985) 246,094 642,122 (396,028) (961,252) 1,119,761 (2,081,013) Net Position - beginning 54,909,161 54,431,522 477,639 13,233,931 12,591,809 642,122 68,143,092 67,023,331 1,119,761 Net Position - ending 53,701,815$ 54,909,161$ (1,207,346)$ 13,480,025$ 13,233,931$ 246,094$ 67,181,840$ 68,143,092$ (961,252)$ Town of Brewster - Financial Highlights 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, unassigned 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 $10,926,945 a $4,318,790 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, unassigned fund balance of the general fund was $5,258,590, while total fund balance stood at $8,630,011. As a measure of the general fund’s liquidity, it may be useful to compare both unassigned fund balance and total fund balance to total fund expenditures. Unassigned fund balance represents 14% of total general fund expenditures, while total fund balance represents 23% of that same amount. The stabilization fund has accumulated a fund balance of $2,054,490 which represents 5% of general fund expenditures. The 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 $1,674,878 (at two Special Town Meetings) to fund prior year’s unpaid bills, fire and police department expenses, education expenses, human services expense, culture and recreation expenses,, general government equipment and expenses and public works expenses. The Town budgeted $33.4 million in revenues and $39.1 million in expenditures, drawing on transfers and prior year’s surplus to finance the difference. At year end, $386,190 of unexpended appropriation balances was closed out to unassigned 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, 2015, amounts to $91,518,682 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 $3,817,725 during the current fiscal year while the business-type activities capital assets (net of accumulated depreciation) increased by $518,006. Total depreciation was $2.7 million, resulting in a total government-wide increase to capital assets (net of accumulated depreciation) of $4,335,731. Increase Increase FY 2015 FY 2014 (Decrease)FY 2015 FY 2014 (Decrease)FY 2015 FY 2014 Land 39,229,192$ 38,562,192$ 667,000$ 2,874,212$ 2,874,212$ -$ 42,103,404$ 41,436,404$ Construction in Progress 224,693 224,693 - 389,206 - 389,206 613,899 224,693 39,453,885 38,786,885 667,000 3,263,418 2,874,212 389,206 42,717,303 41,661,097 Buildings and improvements 16,572,796 13,985,085 2,587,711 4,348,605 4,418,356 (69,751) 20,921,401 18,403,441 Improvements (other than buildings)2,982,059 2,361,803 620,256 - - - 2,982,059 2,361,803 Machinery, Equipment, and Vehicles 3,337,736 3,643,586 (305,850) 936,963 802,884 134,079 4,274,699 4,446,470 Infrastructure 6,684,777 6,436,169 248,608 13,938,443 13,873,971 64,472 20,623,220 20,310,140 29,577,368 26,426,643 3,150,725 19,224,011 19,095,211 128,800 48,801,379 45,521,854 Total Capital Assets 69,031,253$ 65,213,528$ 3,817,725$ 22,487,429$ 21,969,423$ 518,006$ 91,518,682$ 87,182,951$ 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, 2015 totaled $13,642,200. Within this total, business-type activities have debt of $8,795,000 that is fully supported by their respective program revenues, and governmental activities debt is $4,847,200. Total debt consists of the following: Outstanding Outstanding Governmental Activities June 30, 2015 June 30, 2014 Land Purchase - Copelas 625,000$ 660,000$ Road Betterments - Prell Circle 55,000 67,331$ Road Betterments - Allen Drive 70,000 83,185$ School Construction 385,000 800,000 Library Construction 50,000 100,000 MWPAT Title V 90,000 99,525 Punkhorn Land Acquisition - 6/30/11 535,000 570,000 Heights Road Betterments - 6/30/11 135,000 160,000 Lane Road Betterments - 6/30/11 45,000 55,000 Police Station 840,000 1,010,000 MWPAT #97-1156 Title V 62,200 72,600 Land Purchase 360,000 425,000 Road Betterments - Kings Grant Road 30,000 60,000 Road Betterments - Barons Way Road 15,000 30,000 Land Purchase 1,435,000 1,565,000 Road Betterments - Fiddler's Lane 30,000 45,000 Road Betterments - Herringbrook Lane 20,000 30,000 Road Betterments - 2008 65,000 90,000 Total Governmental Activities 4,847,200$ 5,922,641$ Outstanding Outstanding Business-type Activities June 30, 2015 June 30, 2014 Golf Course 3,490,000$ 4,085,000$ WELL #6 & WATER MAIN - 2,540,000 2,678,597 Water offices/garage 1,600,000 1,725,000 Water Mains 740,000 890,000 Slough Road 390,000 430,000 Water Betterments - Fiddler's Lane 35,000 40,000 Total Business-type Activities 8,795,000$ 9,848,597$ Grand Total - All long-term debt 13,642,200$ 15,771,238$ 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 2016 budget and tax rates including the following: • The Fiscal 2016 tax rate was set at $8.43, a $.17 cent increase over Fiscal 2015. The excess levy capacity was $354,165. • The Board of Selectmen voted during their classification hearing to maintain the same tax rate for all classes of property. • Fiscal 2016 budgetary issues were Health Care Reform, Pension obligations, and State Aid for both the Town and Nauset Regional School District, • GASB45/OPEB Funding: Brewster Invested $1,123,000 with the HSCB in FY 2014 and is committed to an annual contribution. The Fiscal 2015 contribution was $25,000, increasing to $50,000 in Fiscal 2016 and $75,000 in Fiscal 2017. The June 30, 2015 Balance in this fund is $1,226,255. • Coastal Zone Management awarded Brewster a $155,000 Green Infrastructure for Coastal Resilience Pilot Grant. These funds are for the removal of a parking lot at Breakwater Landing, restoration of dune habitat, providing a seasonal boardwalk and relocation of 30 parking spaces to a less vulnerable location. • Approximately $427,900 of Chapter 90 Highway Funds was expended for local roadway repairs and construction during Fiscal 2015, approximately $350,000 Chapter 90 Highway Funds will be expended in Fiscal 2016. • The Town secured $10,000,000 via two Proposition 2 ½ Override approvals – one for Roadway Repairs & Resurfacing. Approximately $2 million in roadway projects are expected each year over the next 5 years. Brewster voters also approved the Design and Construction of a new Fire Station. Construction is expected to start in the fall of 2017. • Fiscal 2016 Community Preservation Projects include funding for Land Acquisition, Historical Captain Elijah Cobb House and Grant/Loan Programs for Affordable Housing. Request for Information This financial report is designed to provide a general overview of the Town of Brewster’s finances for all those with an interest in the government’s finances. Questions concerning any of the information provided in this report or request for additional financial information should be addressed to the Finance Director, 2198 Main Street, Brewster, MA 02631. GOVERNMENTAL BUSINESS-TYPE ACTIVITIES ACTIVITIES TOTAL ASSETS AND DEFERRED OUTFLOWS OF RESOURCES CURRENT: CASH AND SHORT-TERM INVESTMENTS 15,427,599$ 5,166,880$ 20,594,479$ INVESTMENTS 1,153,571 - 1,153,571 RECEIVABLES, NET OF ALLOWANCE FOR UNCOLLECTIBLES: REAL ESTATE AND PERSONAL PROPERTY TAXES 405,209 - 405,209 TAX LIENS 469,123 - 469,123 MOTOR VEHICLE EXCISE TAXES 79,268 - 79,268 USER FEES - 937,848 937,848 DEPARTMENTAL AND OTHER 299,761 - 299,761 INTERGOVERNMENTAL 261,087 - 261,087 SPECIAL ASSESSMENTS 74,274 4,594 78,868 NONCURRENT: RECEIVABLES, NET OF ALLOWANCE FOR UNCOLLECTIBLES: SPECIAL ASSESSMENTS 446,423 32,720 479,143 CAPITAL ASSETS, NET OF ACCUMULATED DEPRECIATION 69,031,253 22,487,429 91,518,682 TOTAL ASSETS 87,647,568 28,629,471 116,277,039 DEFERRED OUTFLOWS OF RESOURCES RELATED TO PENSIONS 29,330 5,669 34,999 TOTAL ASSETS AND DEFERRED OUTFLOWS OF RESOURCES 87,676,898 28,635,140 116,312,038 LIABILITIES CURRENT: ACCOUNTS PAYABLE 1,888,788 199,606 2,088,394 ACCRUED INTEREST 28,897 75,899 104,796 LANDFILL POSTCLOSURE CARE COSTS 19,500 - 19,500 CAPITAL LEASES 186,171 110,519 296,690 BONDS AND NOTES PAYABLE 5,156,677 2,666,000 7,822,677 NONCURRENT: LANDFILL POSTCLOSURE CARE COSTS 360,500 - 360,500 POSTEMPLOYMENT BENEFITS 5,011,580 895,354 5,906,934 NET PENSION LIABILITY 17,125,493 3,310,656 20,436,149 CAPITAL LEASES 385,677 182,081 567,758 BONDS AND NOTES PAYABLE 3,811,800 7,715,000 11,526,800 TOTAL LIABILITIES 33,975,083 15,155,115 49,130,198 NET POSITION NET INVESTMENT IN CAPITAL ASSETS 63,684,588 11,851,143 75,535,731 RESTRICTED FOR: CAPITAL PROJECTS (3,464,201) - (3,464,201) STREETS 102,000 - 102,000 PERMANENT FUNDS: EXPENDABLE 118,033 - 118,033 NONEXPENDABLE 142,913 - 142,913 OTHER PURPOSES 9,619,516 - 9,619,516 UNRESTRICTED (16,501,034) 1,628,882 (14,872,152) TOTAL NET POSITION 53,701,815$ 13,480,025$ 67,181,840$ TOWN OF BREWSTER, MASSACHUSETTS STATEMENT OF NET POSITION JUNE 30, 2015 PRIMARY GOVERNMENT See accompanying notes to the basic financial statements - 11 - OPERATING CAPITAL CHARGES FOR GRANTS AND GRANTS AND NET (EXPENSE) FUNCTIONS/PROGRAMS EXPENSES SERVICES CONTRIBUTIONS CONTRIBUTIONS REVENUE PRIMARY GOVERNMENT: GOVERNMENTAL ACTIVITIES: GENERAL GOVERNMENT 3,422,159$ 334,286$ 335,274$ -$ (2,752,599)$ PUBLIC SAFETY 5,988,962 537,291 1,061,425 - (4,390,246) EDUCATION 18,244,760 120,236 1,094,600 - (17,029,924) PUBLIC WORKS 2,623,354 550,069 37,536 152,459 (1,883,290) HUMAN SERVICES 1,622,408 73,594 136,476 8,540 (1,403,798) CULTURE & RECREATION 1,131,219 338,574 183,377 400,000 (209,268) EMPLOYEE BENEFITS 6,718,312 - 684,807 - (6,033,505) STATE & COUNTY ASSESSMENTS 585,310 - - - (585,310) INTEREST 258,352 - - - (258,352) TOTAL GOVERNMENTAL ACTIVITIES 40,594,836 1,954,050 3,533,495 560,999 (34,546,292) BUSINESS-TYPE ACTIVITIES: GOLF 3,014,138 3,611,741 7,843 - 605,446 WATER 2,028,036 2,455,031 58,140 - 485,135 TOTAL BUSINESS-TYPE ACTIVITIES 5,042,174 6,066,772 65,983 - 1,090,581 TOTAL PRIMARY GOVERNMENT 45,637,010$ 8,020,822$ 3,599,478$ 560,999$ (33,455,711)$ (continued) TOWN OF BREWSTER, MASSACHUSETTS STATEMENT OF ACTIVITIES FISCAL YEAR ENDED JUNE 30, 2015 PROGRAM REVENUES See accompanying notes to the basic financial statements - 12 - GOVERNMENTAL BUSINESS-TYPE ACTIVITIES ACTIVITIES TOTAL CHANGES IN NET POSITION: NET (EXPENSE) REVENUE FROM PREVIOUS PAGE (34,546,292)$ 1,090,581$ (33,455,711)$ GENERAL REVENUES: REAL ESTATE AND PERSONAL PROPERTY TAXES, NET OF TAX REFUNDS PAYABLE 27,684,177 - 27,684,177 TAX LIENS 124,471 - 124,471 MOTOR VEHICLE AND OTHER EXCISE TAXES 1,349,787 - 1,349,787 HOTEL/MOTEL & MEALS TAX 1,250,849 - 1,250,849 PENALTIES AND INTEREST ON TAXES 183,757 - 183,757 PAYMENTS IN LIEU OF TAXES 6,873 - 6,873 GRANTS AND CONTRIBUTIONS NOT RESTRICTED TO SPECIFIC PROGRAMS 1,842,184 - 1,842,184 UNRESTRICTED INVESTMENT INCOME 28,022 - 28,022 CONTRIBUTIONS TO PERMANENT FUNDS 1,300 - 1,300 MISCELLANEOUS 23,039 - 23,039 TRANSFERS, NET 844,487 (844,487) - TOTAL GENERAL REVENUES AND TRANSFERS 33,338,946 (844,487) 32,494,459 CHANGE IN NET POSITION (1,207,346) 246,094 (961,252) NET POSITION: BEGINNING OF YEAR 54,909,161 13,233,931 68,143,092 END OF YEAR 53,701,815$ 13,480,025$ 67,181,840$ (concluded) TOWN OF BREWSTER, MASSACHUSETTS STATEMENT OF ACTIVITIES FISCAL YEAR ENDED JUNE 30, 2015 PRIMARY GOVERNMENT See accompanying notes to the basic financial statements - 13 - TOWN OF BREWSTER, MASSACHUSETTS GOVERNMENTAL FUNDS BALANCE SHEET JUNE 30, 2015 NONMAJOR TOTAL COMMUNITY GOVERNMENTAL GOVERNMENTAL ASSETS GENERAL PRESERVATION FUNDS FUNDS CASH AND SHORT-TERM INVESTMENTS 8,912,267$ 3,623,171$ 2,892,161$ 15,427,599$ INVESTMENTS 1,153,571 - - 1,153,571 RECEIVABLES, NET OF ALLOWANCE FOR UNCOLLECTIBLES: REAL ESTATE AND PERSONAL PROPERTY TAXES 405,209 - - 405,209 TAX LIENS 469,123 - - 469,123 MOTOR VEHICLE EXCISE TAXES 79,268 - - 79,268 DEPARTMENTAL AND OTHER 169 21,295 278,297 299,761 INTERGOVERNMENTAL - - 261,087 261,087 SPECIAL ASSESSMENTS - - 520,697 520,697 TOTAL ASSETS 11,019,607$ 3,644,466$ 3,952,242$ 18,616,315$ LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES LIABILITIES: ACCOUNTS PAYABLE 1,632,580$ 10,646$ 245,562$ 1,888,788$ NOTES PAYABLE - 400,000 3,721,277 4,121,277 TOTAL LIABILITIES 1,632,580 410,646 3,966,839 6,010,065 DEFFERRED INFLOWS OF RESOURCES: UNAVAILABLE REVENUE 757,016 21,295 900,994 1,679,305 FUND BALANCES: NONSPENDABLE - - 142,913 142,913 RESTRICTED - 3,212,525 2,755,021 5,967,546 COMMITTED 2,222,584 - - 2,222,584 ASSIGNED 1,148,837 - - 1,148,837 UNASSIGNED 5,258,590 - (3,813,525) 1,445,065 TOTAL FUND BALANCES 8,630,011 3,212,525 (915,591) 10,926,945 TOTAL LIABILITIES, DEFERRED INFLOW OF RESOURCES AND FUND BALANCES 11,019,607$ 3,644,466$ 3,952,242$ 18,616,315$ See accompanying notes to the basic financial statements - 14 - NONMAJOR TOTAL COMMUNITY GOVERNMENTAL GOVERNMENTAL GENERAL PRESERVATION FUNDS FUNDS REVENUES: REAL ESTATE AND PERSONAL PROPERTY TAXES, NET OF TAX REFUNDS 27,811,126$ -$ -$ 27,811,126$ MOTOR VEHICLE AND OTHER EXCISE TAXES 1,357,045 - - 1,357,045 INTERGOVERNMENTAL 2,891,651 561,307 811,392 4,264,350 PAYMENTS IN LIEU OF TAXES 6,873 - - 6,873 PENALTIES & INTEREST ON TAXES 153,734 - - 153,734 FINES & FORFEITS 36,328 - - 36,328 CHARGES FOR SERVICES 548,544 - 1,298,308 1,846,852 HOTEL/MOTEL & MEALS TAX 1,250,849 - - 1,250,849 INVESTMENT INCOME 27,766 4,987 807 33,560 CONTRIBUTIONS AND DONATIONS - - 59,544 59,544 DEPARTMENTAL AND OTHER 1,212,702 926,620 533,268 2,672,590 TOTAL REVENUES 35,296,618 1,492,914 2,703,319 39,492,851 EXPENDITURES: CURRENT: GENERAL GOVERNMENT 3,364,701 626,437 117,634 4,108,772 PUBLIC SAFETY 5,384,896 - 276,338 5,661,234 EDUCATION 17,619,284 122,078 3,550,031 21,291,393 PUBLIC WORKS 2,119,635 - 776,392 2,896,027 HUMAN SERVICES 648,246 871,077 81,894 1,601,217 CULTURE & RECREATION 739,787 584,138 166,973 1,490,898 EMPLOYEE BENEFITS 5,663,423 - 33,968 5,697,391 STATE & COUNTY ASSESSMENTS 585,310 - - 585,310 DEBT SERVICE PRINCIPAL 1,075,441 - - 1,075,441 INTEREST 244,056 4,065 324 248,445 TOTAL EXPENDITURES 37,444,779 2,207,795 5,003,554 44,656,128 EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES (2,148,161) (714,881) (2,300,235) (5,163,277) OTHER FINANCING SOURCES (USES) OPERATING TRANSFERS IN 2,779,267 - 149,232 2,928,499 OPERATING TRANSFERS OUT (149,232) (338,147) (1,596,633) (2,084,012) TOTAL OTHER FINANCING SOURCES (USES)2,630,035 (338,147) (1,447,401) 844,487 NET CHANGE IN FUND BALANCES 481,874 (1,053,028) (3,747,636) (4,318,790) FUND BALANCES AT BEGINNING OF YEAR 8,148,137 4,265,553 2,832,045 15,245,735 FUND BALANCES AT END OF YEAR 8,630,011$ 3,212,525$ (915,591)$ 10,926,945$ TOWN OF BREWSTER, MASSACHUSETTS GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES FISCAL YEAR ENDED JUNE 30, 2015 See accompanying notes to the basic financial statements - 15 - TOTAL GOVERNMENTAL FUND BALANCES 10,926,945$ CAPITAL ASSETS (NET) USED IN GOVERNMENTAL ACTIVITIES ARE NOT FINANCIAL RESOURCES AND, THEREFORE, ARE NOT REPORTED IN THE FUNDS 69,031,253 ACCOUNTS RECEIVABLE ARE NOT AVAILABLE TO PAY FOR CURRENT-PERIOD EXPENDITURES AND, THEREFORE, ARE DEFERRED IN THE FUNDS 1,679,305 IN THE STATEMENT OF ACTIVITIES, INTEREST IS ACCRUED ON OUTSTANDING LONG-TERM DEBT, WHEREAS IN GOVERNMENTAL FUNDS INTEREST IS NOT REPORTED UNTIL DUE (28,897) 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 (4,847,200) CAPITAL LEASES (571,848) NET PENSION LIABILITY (17,125,493) DEFERRED OUTFLOWS OF RESOURCES 29,330 POSTEMPLOYMENT BENEFITS (5,011,580) LANDFILL POSTCLOSURE CARE COSTS (380,000) NET EFFECT OF REPORTING LONG-TERM LIABILITIES (27,906,791) NET POSITION OF GOVERNMENTAL ACTIVITIES 53,701,815$ TOWN OF BREWSTER, MASSACHUSETTS RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TOTAL FUND BALANCES TO THE STATEMENT OF NET POSITION JUNE 30, 2015 See accompanying notes to the basic financial statements - 16 - NET CHANGE IN FUND BALANCES - TOTAL GOVERNMENTAL FUNDS (4,318,790)$ 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 5,709,366 DEPRECIATION EXPENSE (1,891,641) NET EFFECT OF REPORTING CAPITAL ASSETS 3,817,725 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 (949,848) 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 1,075,441 CAPITAL LEASE - PRINCIPAL PAYMENTS 179,454 DEFERRED AMOUNT ON REFUNDING (22,394) NET EFFECT OF REPORTING LONG-TEM DEBT 1,232,501 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 (922,263) NET CHANGE IN LANDFILL POSTCLOSURE CARE ACCRUAL 19,500 NET CHANGE IN DEFERRED OUTFLOWS OF RESOURCES 29,330 NET CHANGE IN ACCRUED INTEREST ON LONG-TERM DEBT 12,487 NET CHANGE IN NET PENSION LIABILITY (127,988) NET EFFECT OF RECORDING LONG-TERM LIABILITIES (988,934) CHANGE IN NET POSITION OF GOVERNMENTAL ACTIVITIES (1,207,346)$ TOWN OF BREWSTER, MASSACHUSETTS RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF THE GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES FISCAL YEAR ENDED JUNE 30, 2015 See accompanying notes to the basic financial statements - 17 - ACTUAL ORIGINAL FINAL BUDGETARY VARIANCE BUDGET BUDGET AMOUNTS OVER(UNDER) REVENUES: REAL ESTATE AND PERSONAL PROPERTY TAXES, NET OF TAX REFUNDS 27,521,700$ 27,521,700$ 27,811,126$ 289,426$ MOTOR VEHICLE AND OTHER EXCISE TAXES 1,176,007 1,176,007 1,357,045 181,038 INTERGOVERNMENTAL 2,251,490 2,251,490 2,222,272 (29,218) PAYMENTS IN LIEU OF TAXES 6,800 6,800 6,873 73 PENALTIES & INTEREST ON TAXES 87,000 87,000 153,734 66,734 FINES & FORFEITS 19,000 19,000 36,328 17,328 HOTEL/MOTEL & MEALS TAX 1,163,018 1,163,018 1,250,849 87,831 INVESTMENT INCOME 20,000 20,000 20,231 231 DEPARTMENTAL AND OTHER 1,199,664 1,199,664 1,761,246 561,582 TOTAL REVENUES 33,444,679 33,444,679 34,619,704 1,175,025 EXPENDITURES: CURRENT: GENERAL GOVERNMENT 3,689,109 4,034,245 3,938,564 95,681 PUBLIC SAFETY 5,521,222 6,020,222 5,854,047 166,175 EDUCATION 17,720,362 17,971,428 17,965,640 5,788 PUBLIC WORKS 2,145,727 2,374,727 2,510,282 (135,555) HUMAN SERVICES 711,849 941,939 921,785 20,154 CULTURE & RECREATION 768,477 886,977 878,314 8,663 EMPLOYEE BENEFITS 5,012,615 5,005,415 4,999,272 6,143 STATE & COUNTY ASSESSMENTS 528,562 528,562 585,310 (56,748) DEBT SERVICE PRINCIPAL 1,075,446 1,075,446 1,075,441 5 INTEREST 226,231 235,517 235,516 1 TOTAL EXPENDITURES 37,399,600 39,074,478 38,964,171 110,307 EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES (3,954,921) (5,629,799) (4,344,467) 1,285,332 OTHER FINANCING SOURCES (USES): OPERATING TRANSFERS IN 1,483,869 2,076,117 2,779,267 703,150 OPERATING TRANSFERS OUT (92,675) (182,321) (149,232) 33,089 TOTAL OTHER FINANCING SOURCES (USES)1,391,194 1,893,796 2,630,035 736,239 NET CHANGE IN FUND BALANCE (2,563,727) (3,736,003) (1,714,432) 2,021,571 BUDGETARY FUND BALANCE, BEGINNING OF YEAR 5,861,900 5,861,900 5,861,900 - BUDGETARY FUND BALANCE, END OF YEAR 3,298,173$ 2,125,897$ 4,147,468$ 2,021,571$ TOWN OF BREWSTER, MASSACHUSETTS GENERAL FUND STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FISCAL YEAR ENDED JUNE 30, 2015 BUDGETED AMOUNTS See accompanying notes to the basic financial statements - 18 - ASSETS GOLF WATER TOTAL CURRENT: CASH AND SHORT-TERM INVESTMENTS 1,103,510$ 4,063,370$ 5,166,880$ USER FEES, NET OF ALLOWANCE FOR UNCOLLECTIBLES:- 937,848 937,848 SPECIAL ASSESSMENTS - 4,594 4,594 TOTAL CURRENT ASSETS 1,103,510 5,005,812 6,109,322 NONCURRENT: SPECIAL ASSESSMENTS - 32,720 32,720 CAPITAL ASSETS, NET OF ACCUMULATED DEPRECIATION 9,539,474 12,947,955 22,487,429 TOTAL NONCURRENT ASSETS 9,539,474 12,980,675 22,520,149 TOTAL ASSETS 10,642,984 17,986,487 28,629,471 DEFERRED OUTFLOWS OF RESOURCES RELATED TO PENSIONS 3,314 2,355 5,669 TOTAL ASSETS AND DEFERRED OUTFLOWS OF RESOURCES 10,646,298 17,988,842 28,635,140 LIABILITIES CURRENT: ACCOUNTS PAYABLE - 199,606 199,606 ACCRUED INTEREST 53,150 22,749 75,899 CAPITAL LEASES PAYABLE 110,519 - 110,519 BONDS AND NOTES PAYABLE 825,000 1,841,000 2,666,000 TOTAL CURRENT LIABILITIES 988,669 2,063,355 3,052,024 NONCURRENT: POSTEMPLOYMENT BENEFITS 605,419 289,935 895,354 NET PENSION LIABILITY 1,935,303 1,375,353 3,310,656 CAPITAL LEASES PAYABLE 182,081 - 182,081 BONDS AND NOTES PAYABLE 2,865,000 4,850,000 7,715,000 TOTAL NONCURRENT LIABILITIES 5,587,803 6,515,288 12,103,091 TOTAL LIABILITIES 6,576,472 8,578,643 15,155,115 NET POSITION NET INVESTMENT IN CAPITAL ASSETS 5,556,874 6,294,269 11,851,143 UNRESTRICTED (1,487,048) 3,115,930 1,628,882 TOTAL NET POSITION 4,069,826$ 9,410,199$ 13,480,025$ TOWN OF BREWSTER, MASSACHUSETTS PROPRIETARY FUNDS STATEMENT OF NET POSITION JUNE 30, 2015 BUSINESS-TYPE ACTIVITIES - ENTERPRISE FUNDS See accompanying notes to the basic financial statements - 19 - GOLF WATER TOTAL OPERATING REVENUES: CHARGES FOR SERVICES 3,611,741$ 2,455,031$ 6,066,772$ DEPARTMENTAL AND OTHER 7,843 58,140 65,983 TOTAL OPERATING REVENUES 3,619,584 2,513,171 6,132,755 OPERATING EXPENSES: GENERAL SERVICES 2,398,854 1,482,269 3,881,123 DEPRECIATION 436,001 328,602 764,603 TOTAL OPERATING EXPENSES 2,834,855 1,810,871 4,645,726 OPERATING INCOME (LOSS)784,729 702,300 1,487,029 NON-OPERATING REVENUES (EXPENSES): INTEREST EXPENSE (179,283) (217,165) (396,448) INCOME (LOSS) BEFORE OPERATING TRANSFERS 605,446 485,135 1,090,581 OPERATING TRANSFERS: OPERATING TRANSFERS OUT (258,433) (586,054) (844,487) CHANGE IN NET POSITION 347,013 (100,919) 246,094 NET POSITION AT BEGINNING OF YEAR 3,722,813 9,511,118 13,233,931 NET POSITION AT END OF YEAR 4,069,826$ 9,410,199$ 13,480,025$ TOWN OF BREWSTER, MASSACHUSETTS PROPRIETARY FUNDS STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION FISCAL YEAR ENDED JUNE 30, 2015 BUSINESS TYPE ACTIVITIES - ENTERPRISE FUNDS See accompanying notes to the basic financial statements - 20 - TOWN OF BREWSTER, MASSACHUSETTS PROPRIETARY FUNDS STATEMENT OF CASH FLOWS FISCAL YEAR ENDED JUNE 30, 2015 GOLF WATER TOTAL CASH FLOWS FROM OPERATING ACTIVITIES: RECEIPTS FROM CUSTOMERS AND USERS 3,619,584$ 2,536,580$ 6,156,164$ PAYMENTS TO SUPPLIERS (1,090,042) (580,289) (1,670,331) PAYMENTS TO EMPLOYEES (1,217,694) (674,999) (1,892,693) NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 1,311,848 1,281,292 2,593,140 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES: OPERATING TRANSFERS IN (258,433) (586,054) (844,487) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: PROCEEDS FROM THE ISSUANCE OF BONDS AND NOTES 200,000 1,386,000 1,586,000 PRINCIPAL PAYMENTS ON BONDS AND NOTES (595,000) (458,597) (1,053,597) PRINCIPAL PAYMENTS ON CAPITAL LEASES (59,293) - (59,293) ACQUISITION AND CONSTRUCTION OF CAPITAL ASSETS (441,823) (643,698) (1,085,521) INTEREST EXPENSE (189,200) (215,940) (405,140) NET CASH PROVIDED (USED) BY CAPITAL AND RELATED FINANCING ACTIVITIES (1,085,316) 67,765 (1,017,551) NET INCREASE (DECREASE) IN CASH AND SHORT TERM INVESTMENTS (31,901) 763,003 731,102 CASH AND SHORT TERM INVESTMENTS - BEGINNING OF YEAR 1,135,411 3,300,367 4,435,778 CASH AND SHORT TERM INVESTMENTS- END OF YEAR 1,103,510$ 4,063,370$ 5,166,880$ RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES: OPERATING INCOME (LOSS)784,729$ 702,300$ 1,487,029$ ADJUSTMENTS TO RECONCILE OPERATING INCOME (LOSS) TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES: DEPRECIATION 436,001 328,602 764,603 (INCREASE) DECREASE IN ACCOUNTS RECEIVABLE - 23,408 23,408 (INCREASE) DECREASE IN DEFERRED OUTFLOWS OF RESOURCES (3,314) (2,355) (5,669) INCREASE (DECREASE) IN ACCOUNTS PAYABLE - 161,980 161,980 INCREASE (DECREASE) IN NET PENSION LIABILITY 14,463 10,279 24,742 INCREASE (DECREASE) IN POSTEMPLOYMENT BENEFITS 79,969 57,078 137,047 TOTAL ADJUSTMENTS 527,119 578,992 1,106,111 NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 1,311,848$ 1,281,292$ 2,593,140$ BUSINESS TYPE ACTIVITIES - ENTERPRISE FUNDS See accompanying notes to the basic financial statements - 21 - TOWN OF BREWSTER, MASSACHUSETTS FIDUCIARY FUNDS STATEMENT OF FIDUCIARY NET POSITION JUNE 30, 2015 POSTEMPLOYMENT PRIVATE BENEFITS PURPOSE AGENCY TRUST TRUST FUNDS FUNDS ASSETS CASH AND SHORT-TERM INVESTMENTS -$ 60,228$ 82,777$ INVESTMENTS 1,226,255 - - TOTAL ASSETS 1,226,255 60,228 82,777 LIABILITIES ACCOUNTS PAYABLE - - 11,470 OTHER LIABILITIES - - 71,307 TOTAL LIABILITIES - - 82,777 NET POSITION HELD IN TRUST FOR PLAN PARTICIPANTS 1,226,255 - - HELD IN TRUST FOR OTHER PURPOSES - 60,228 - TOTAL 1,226,255$ 60,228$ -$ See accompanying notes to the basic financial statements - 22 - POSTEMPLOYMENT PRIVATE BENEFITS PURPOSE TRUST TRUST FUNDS ADDITIONS: CONTRIBUTIONS: CONTRIBUTIONS FROM GOVERNMENT 25,000$ -$ NET INVESTMENT INCOME (LOSS): INVESTMENT INCOME 39,798 122 TOTAL ADDITIONS 64,798 122 DEDUCTIONS: EDUCATION - 1,000 CHANGE IN NET POSITION 64,798 (878) NET POSITION AT BEGINNING OF YEAR 1,161,457 61,106 NET POSITION AT END OF YEAR 1,226,255$ 60,228$ TOWN OF BREWSTER, MASSACHUSETTS FIDUCIARY FUNDS STATEMENT OF CHANGES IN FIDUCIARY NET POSITION FISCAL YEAR ENDED JUNE 30, 2015 See accompanying notes to the basic financial statements - 23 - TOWN OF BREWSTER, MASSACHUSETTS NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2015 - 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 46.28% in the joint venture. Name Purpose Address Annual Assessment Nauset Regional To provide education services 78 Eldredge Parkway $ 9,507,304 School District Orleans, MA 02653 Cape Cod Regional Technical High School To provide vocational education 351 Pleasant Lake Ave Harwich, MA 02645 $ 734,873 TOWN OF BREWSTER, MASSACHUSETTS NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2015 - 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 position 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, 2015 - 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, net pension liability, and other postemployment 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, 2015 - 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 under the guidelines of the Community Preservation Act of the Massachusetts general laws.  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, 2015 - 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.  The Postemployment Benefit Trust is used to account for the assets held that will fund the long term liability associated with the Towns retiree’s health benefits. Government-Wide and Fund Financial Statements Private-sector standards of accounting and financial reporting issued prior to December 1, 1989, generally are followed in the government-wide, proprietary fund, and fiduciary funds financial statements to the extent that those standards do not conflict with or contradict guidance of the Governmental Accounting Standards Board. Governments also have the option of following subsequent private-sector guidance for their business-type activities and enterprise funds, subject to this same limitation. The Town has elected not to follow subsequent private-sector guidance. 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. TOWN OF BREWSTER, MASSACHUSETTS NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2015 - 29 - 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. 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. TOWN OF BREWSTER, MASSACHUSETTS NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2015 - 30 - Special Assessments Governmental activities special assessments consist primarily of 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. 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, 2015 - 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 position. Any residual balances outstanding between the governmental activities and business-type activities are reported in the statement of net position 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. 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, 2015 - 32 - 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 position. Any residual balances outstanding between the governmental activities and business-type activities are reported in the statement of activities as "Transfers, net". 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 Inflows of Resources Although certain revenues are measurable, they are not available. Available means collected within the current period, or expected to be collected soon enough thereafter, to be used to pay liabilities of the current period. Deferred inflows of resources at the fund level, represents the amount of assets that have been recognized, but the related revenue has not been recognized since it is not available. Deferred inflows of resources at the fund level consist of the succeeding year property tax revenue, Intergovernmental revenue, and other revenue not collected within sixty days after year-end. K. Net Position and Fund Equity Government-Wide Financial Statements (Net Position) Net position are classified into three components: a. Net investment in capital assets – consists of capital assets including restricted capital assets, net of accumulated depreciation and reduced by the outstanding balances of any bonds, mortgages, notes, or other borrowings that are attributable to the acquisition, construction, or improvement of those assets. b. Restricted net position – Consists of net position 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 position have been “restricted” for the following: • Capital Projects represent various ongoing capital projects at June 30, 2015. • 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. TOWN OF BREWSTER, MASSACHUSETTS NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2015 - 33 - • 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 position – All other net position that do not meet the definition of “restricted” or “net investment in capital assets.” Fund Financial Statements (Fund Balances) The Town uses the following criteria for fund balance classification: • For nonspendable fund balance: includes amounts that cannot be spent because they are either (1) not in spendable form or (2) legally or contractually required to be maintained intact. • For restricted fund balance: when constraints placed on the use of the resources are either (1) externally imposed by creditors, grantors, contributors, or laws or regulations of other governments; or (2) imposed by law trough constitutional provisions or enabling legislation. • For committed fund balance: (1) the government’s highest level of decision-making authority and (2) the formal action that is required to be taken to establish (and modify or rescind) a fund balance commitment. • For assigned fund balance: (1) the body or official authorized to assign amounts to a specific purpose and (2) the policy established by the governing body pursuant to which the authorization is given. • For unassigned fund balance: is the residual classification for the general fund. In other governmental funds, if expenditures incurred for specific purposes exceeded the amounts restricted, committed, or assigned to those purposes, it may be necessary to report a negative unassigned fund balance. The Town uses the following criteria for fund balance policies and procedures: • When an expenditure is incurred for purposes for which both restricted and unrestricted fund balance is available, the unrestricted amount will be considered to have been spent. • When an expenditure is incurred for purposes for which committed, assigned, or unassigned fund balance is available, and the least restricted amount will be considered to have been spent. 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 position. 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. TOWN OF BREWSTER, MASSACHUSETTS NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2015 - 34 - 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). 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. Net Pension Liability Governmental Accounting Standards Board (GASB) Statement #68 requires employers participating in a cost-sharing pension plan to recognize pension liabilities as employees provide services to the government and earn their pension benefits. Employers participating in cost-sharing plans are required to recognize their proportionate share of the plan’s collective pension amounts for all benefits provided through the plan including the net pension liability, deferred outflows of resources, deferred inflows of resources, and pension expense. P. 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. TOWN OF BREWSTER, MASSACHUSETTS NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2015 - 35 - Q. 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. R. 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. 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 2015 approved budget authorized $35,564,600 in current year appropriations and other amounts to be raised and $1,835,000 in carryover articles carried over from previous fiscal years. Supplemental appropriations of $1,674,878 were approved at two Special Town Meetings for fiscal year 2015. TOWN OF BREWSTER, MASSACHUSETTS NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2015 - 36 - The Finance Director has the responsibility to ensure that budgetary controls are maintained and monitored through the accounting system. B. Budgetary – GAAP Reconciliation For budgetary financial reporting purposes, the Uniform Municipal Accounting System basis of accounting (established by the Commonwealth) is followed, which differs from the GAAP basis of accounting. A reconciliation of budgetary-basis to GAAP-basis results for the general fund for the fiscal year ended June 30, 2015, is presented below: C. Excess of Expenditures over Appropriations For the fiscal year ended June 30, 2015, actual expenditures exceeded appropriations for the snow and ice. This over-expenditure will be funded by available funds during fiscal year 2016, as is allowed by Massachusetts general laws (MGL). D. Deficit Fund Balances Individual fund deficits exist within the special revenue, capital project funds, and water and golf enterprise funds. These individual deficits will be eliminated through subsequent fiscal year budget transfers, grants, and/or proceeds from long-term debt during fiscal year 2016. Net change in fund balance - budgetary basis (1,714,432)$ Basis of accounting differences: Increase in revenue for on-behalf payments - MTRS 660,839 Increase in expenditures for on-behalf payments - MTRS (660,839) Increase in revenue for the MWPAT subsidy 8,540 Increase in expenditures for the MWPAT subsidy (8,540) Net Stabilization fund activity 7,535 Adjustment for current year articles 2,222,584 Adjustment for current year encumbrances 108,850 Adjustment for expenditures from prior year encumbrances (142,663) Net change in fund balance - GAAP basis 481,874$ TOWN OF BREWSTER, MASSACHUSETTS NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2015 - 37 - 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), and the Depositor’s Insurance Fund (DIF). The Town also carries deposits that are uninsured, uncollateralized, or collateral held by the pledging bank’s trust department not in the Town’s name. The following table illustrates how much of the Town’s bank deposits are insured 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, 2015: Total Bank Balances 20,709,640$ Bank Balances Covered by Deposit Insurance Federal Deposit Insurance Corporation (FDIC)1,141,400 Depositor's Insurance Fund (DIF)15,021,916 Total Bank Balances Covered by Deposit Insurance 16,163,316 Balances Subject to Custodial Credit Risk Bank Balances Collaterallized with Securities Held by the Pledging Financial Institution's Trust Department or Agent but not in the Town's Name 3,668,621 Bank Balances Uninsured and Uncollateralized 877,703 Total Bank Balances Subject to Custodial Credit Risk 4,546,324 Total Bank Balances 20,709,640$ TOWN OF BREWSTER, MASSACHUSETTS NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2015 - 38 - 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. 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. • 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). Presented below are the actual rating as of year-end for each investment type of the Town. Investment type Fair value Minimum Legal Rating Unrated State Retirees Benefits Trust Fund (SRBT) - HCST OPEB Master Trust 1,226,255$ N/A 1,226,255$ Cetrificate of Deposit 1,153,571 N/A 1,153,571 Total Investments 2,379,826$ 2,379,826$ Rating as of Year End • 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 investment in the State Retirees Benefit Trust Fund is not exposed to custodial credit risk because the investment is registered in the name of the Town. The investment in the Certificate of Deposit is not exposed to custodial risk because it is fully insured by the Federal Depositors Insurance Corporation (FDIC) and the Depositors Insurance Fund (DIF). The Town does not have an investment policy for custodial credit risk. TOWN OF BREWSTER, MASSACHUSETTS NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2015 - 39 - • 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. Information about the sensitivity of the fair values of the Town’s investments to market interest rate fluctuations are as follows: Investment maturities (in years) Investment type Fair value Less than 1 State Retirees Benefits Trust Fund (SRBT) - HCST OPEB Master Trust 1,226,255$ 1,226,255$ Certificate of Deposit 1,153,571 1,153,571 Total Investment 2,379,826$ 2,379,826$ • Concentration of Credit Risk The Town places no limit on the amount the government may invest in any one issuer. More than 5% of the Town’s investments are in the following securities: Issuer Percentage of Total Investments State Retirees Benefits Trust Fund (SRBT) - HCST OPEB Master Trust 51.53% Certificate of Deposit 48.47% TOWN OF BREWSTER, MASSACHUSETTS NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2015 - 40 - NOTE 4 – RECEIVABLES The receivables at June 30, 2015 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, 2015, for the water enterprise fund consists of the following: Allowance Gross for Net Receivables:Amount Uncollectibles Amount Real estate and personal property taxes 407,609$ (2,400)$ 405,209$ Tax liens 469,123 - 469,123 Motor vehicle and other excise taxes 138,840 (59,572) 79,268 Departmental and other 540,005 (240,244) 299,761 Intergovernmental 261,087 - 261,087 Special assessments 520,697 - 520,697 Total 2,337,361$ (302,216)$ 2,035,145$ Allowance Gross for Net Receivables:Amount Uncollectibles Amount Water User fees 937,848$ -$ 937,848$ Special Assessments 37,314 - 37,314 Total 975,162$ -$ 975,162$ TOWN OF BREWSTER, MASSACHUSETTS NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2015 - 41 - Governmental funds report deferred inflows of resources 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 component of deferred inflows of resources reported in the governmental funds is as follows: NOTE 5 – CAPITAL ASSETS Capital asset activity for the fiscal year ended June 30, 2015, was as follows: Beginning Decrease/Ending Governmental Activities:Balance Increases Adjustments Balance Capital assets not being depreciated: Land 38,562,192$ 667,000$ -$ 39,229,192$ Construction in progress 224,693 - - 224,693 Total capital assets not being depreciated 38,786,885 667,000 - 39,453,885 Capital assets being depreciated: Building and improvements 25,152,553 3,265,156 - 28,417,709 Capital improvement (other than buildings)3,086,314 823,896 - 3,910,210 Machinery, equipment, and vehicles 10,241,278 411,813 - 10,653,091 Infrastructure 10,887,687 541,501 - 11,429,188 Total capital assets being depreciated 49,367,832 5,042,366 - 54,410,198 Less accumulated depreciation for: Building and improvements (11,167,468) (677,445) - (11,844,913) Capital improvement (other than buildings)(724,511) (203,640) - (928,151) Machinery, equipment, and vehicles (6,597,692) (717,663) - (7,315,355) Infrastructure (4,451,518) (292,893) - (4,744,411) Total accumulated depreciation (22,941,189) (1,891,641) - (24,832,830) Total capital assets being depreciated, net 26,426,643 3,150,725 - 29,577,368 Total governmental activities capital assets, net 65,213,528$ 3,817,725$ -$ 69,031,253$ Nonmajor General Community Governmental Deferred Inflows:Fund Preservation Funds Total Unavailable Revenue 757,016$ 21,295$ 900,994$ 1,679,305$ Deferred Inflows of Resources Analysis TOWN OF BREWSTER, MASSACHUSETTS NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2015 - 42 - Depreciation expense was charged to functions/programs of the primary government as follows: General government 143,502$ Public safety 644,155 Education 493,751 Public works 442,520 Human services 21,191 Culture and recreation 146,522 Total depreciation expense - governmental activities 1,891,641$ Water 328,602$ Golf 436,001 Total depreciation expense - business-type activities 764,603$ Governmental Activities: Business-Type Activities: Beginning Decreases/Ending Business-Type Activities:Balance Increases Adjustments Balance Capital assets not being depreciated: Land 2,874,212$ -$ -$ 2,874,212$ Construction in progress - 389,206 - 389,206 Total capital assets not being depreciated 2,874,212 389,206 - 3,263,418 Capital assets being depreciated: Buildings and improvements 5,674,503 - - 5,674,503 Machinery, equipment, and vehicles 2,675,596 291,468 - 2,967,064 Infrastructure 23,491,427 601,935 - 24,093,362 Total capital assets being depreciated 31,841,526 893,403 - 32,734,929 Less accumulated depreciation for: Buildings and improvements (1,256,147) (69,751) - (1,325,898) Machinery, equipment, and vehicles (1,872,712) (157,389) - (2,030,101) Infrastructure (9,617,456) (537,463) - (10,154,919) Total accumulated depreciation (12,746,315) (764,603) - (13,510,918) Total capital assets being depreciated, net 19,095,211 128,800 - 19,224,011 Total business-type activites capital assets, net 21,969,423$ 518,006$ -$ 22,487,429$ TOWN OF BREWSTER, MASSACHUSETTS NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2015 - 43 - NOTE 6 – CAPITAL LEASES The Town has entered into lease agreements as lessee for financing the acquisition of two Ferrara fire pumper trucks, ambulance, two golf course aerators, a golf course Procore processor, fourteen mowers, and thirty six respirators. 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: Primary Government Assets: Vehicles 1,092,166$ Machinery & Equipment 810,621 Less: Accumulated depreciation (865,227) 1,037,560$ The future minimum lease obligations and the net present value of the minimum lease payments as of June 30, 2015, are as follows: Governmental Year Ending June 30 Activities 2016 326,844$ 2017 225,717 2018 225,717 2019 160,249 Total minimum lease payments 938,527 Less: amounts representing interest (74,079) Present value of minimum lease payments 864,448$ TOWN OF BREWSTER, MASSACHUSETTS NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2015 - 44 - NOTE 7 – INTERFUND TRANSFERS Interfund transfers for the fiscal year ended June 30, 2015, are summarized as follows: (1) Represents budgeted transfers from the various funds to the general fund. (2) Represents budgeted transfers from the general fund to various funds (3) Represents other transfers 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 and expenses for short-term borrowings are accounted for in the general fund, and enterprise fund respectively. Nonmajor General Governmental Operating Transfers Out:Fund Funds Total Nonmajor Governmental Funds 1,578,537$ -$ 1,578,537$ (1) Nonmajor Governmental Funds 18,096 - 18,096 (3) Water Enterprise Fund 586,054 - 586,054 (1) Golf Enterprise Fund 258,433 - 258,433 (1) Community Preservation Fund 338,147 - 338,147 (1) General Fund - 73,232 73,232 (3) General Fund - 76,000 76,000 (2) Total 2,779,267$ 149,232$ 2,928,499$ Operating Transfers In: TOWN OF BREWSTER, MASSACHUSETTS NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2015 - 45 - The following is a summary of changes in short-term debt for the year ended June 30, 2015: Type Purpose Rate (%) Due Date Balance at June 30, 2014 Renewed/ Issued Retired/ Redeemed Balance at June 30, 2015 Governmental Funds BAN Crosby Mansion Septic 0.55 2/21/2015 65,000$ -$ (65,000)$ -$ BAN Eddy School Renovation 0.50 3/16/2016 - 2,908,104 - 2,908,104 BAN Land Acquisition 0.45 8/21/2015 - 400,000 - 400,000 BAN Eddy and Stony Brook Renovation 0.70 11/20/2015 - 470,750 - 470,750 BAN Crosby Mansion Septic 0.50 2/19/2016 - 32,500 - 32,500 BAN DPW Equipment 0.50 11/20/2015 - 66,112 - 66,112 BAN DPW Compactor 0.60 11/20/2015 - 10,987 - 10,987 BAN Eddy School Roof 0.60 3/16/2016 - 232,824 - 232,824 Total Governmental Funds 65,000 4,121,277 (65,000) 4,121,277 Business - Type Activities BAN Various Water Projects 0.60 3/16/2016 - 1,386,000 - 1,386,000 BAN Golf Course Improvements 0.50 11/20/2015 - 200,000 - 200,000 Total Business Type Activities - 1,586,000 - 1,586,000 Total:65,000$ 5,707,277$ (65,000)$ 5,707,277$ TOWN OF BREWSTER, MASSACHUSETTS NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2015 - 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, 2015: Bonds and Notes Payable Schedule -Governmental Funds Project Interest Rate (%) Outstanding at June 30, 2014 Issued Redeemed/ Refunded Outstanding at June 30, 2015 School 3.74 800,000$ -$ 415,000$ 385,000$ Library 3.74 100,000 - 50,000 50,000 MWPAT Title V Septic Var 72,600 - 10,400 62,200 Police Station 3.89 1,010,000 - 170,000 840,000 MWPAT Title V Septic 3.59 99,525 - 9,525 90,000 Land Acquisition 3.64 425,000 - 65,000 360,000 Road Betterments 3.64 60,000 - 30,000 30,000 Road Betterments 3.64 30,000 - 15,000 15,000 Land Acquisition 4.49 525,000 - 50,000 475,000 Land Acquisition 4.49 1,040,000 - 80,000 960,000 Road Betterments 4.49 45,000 - 15,000 30,000 Road Betterments 4.49 30,000 - 10,000 20,000 Road Betterments 3.96 90,000 - 25,000 65,000 Land Acquisition 3.84 570,000 - 35,000 535,000 Road Betterments 3.84 160,000 - 25,000 135,000 Road Betterments 3.84 55,000 - 10,000 45,000 Road Betterments 3.00 67,331 - 12,331 55,000 Road Betterments 3.00 83,185 - 13,185 70,000 Land Acquisition 3 - 3.50 660,000 - 35,000 625,000 Total 5,922,641$ -$ 1,075,441$ 4,847,200$ TOWN OF BREWSTER, MASSACHUSETTS NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2015 - 47 - The annual debt service requirements for principal and interest for Governmental bonds and notes outstanding at June 30, 2015 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, 2015 are as follows: Fiscal Year Principal Interest Total 2016 1,035,400$ 188,150$ 1,223,550$ 2017 550,400 153,997 704,397 2018 520,400 129,816 650,216 2019 485,400 107,939 593,339 2020 485,400 89,049 574,449 2021-2025 1,150,200 252,168 1,402,368 2026-2030 470,000 72,513 542,513 2031-2034 150,000 11,700 161,700 Total 4,847,200$ 1,005,332$ 5,852,532$ Project Interest Rate (%) Outstanding at June 30, 2014 Issued Redeemed/ Refunded Outstanding at June 30, 2015 Golf Course 3.92 4,085,000$ -$ 595,000$ 3,490,000$ Water Mains 3.89 890,000 - 150,000 740,000 Water Betterments - Slough Rd 3.64 430,000 - 40,000 390,000 Water Betterments - Fiddler's Ln 4.49 40,000 - 5,000 35,000 Water Offices/Garage 3.96 1,725,000 - 125,000 1,600,000 Well #6 3 - 3.50 2,678,597 - 138,597 2,540,000 Total 9,848,597$ -$ 1,053,597$ 8,795,000$ Fiscal Year Principal Interest Total 2016 1,080,000$ 356,983$ 1,436,983$ 2017 1,110,000 306,276 1,416,276 2018 1,150,000 253,914 1,403,914 2019 1,180,000 199,545 1,379,545 2020 1,215,000 153,683 1,368,683 2021-2025 1,475,000 425,939 1,900,939 2026-2030 1,065,000 179,786 1,244,786 2031-2034 520,000 44,525 564,525 Total 8,795,000$ 1,920,651$ 10,715,651$ TOWN OF BREWSTER, MASSACHUSETTS NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2015 - 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 $544,695 from scheduled annual payments in FY 2015 from the MSBA for completed school construction projects. Loans Authorized and Unissued As of June 30, 2015, the Town has loans authorized and unissued as follows: Date Description Authorized Amount Crosby mansion 11/15/2010 32,500 Land Acquisition - Copellas 11/13/2012 1,140,000 Road betterments - South Pond 5/6/2013 192,345 Eddy School - Roof Replacement 5/5/2014 3,330,000 Golf Course Improvement 11/18/2013 200,000 Stony School - Window Replacement 5/5/2014 150,000 Road Betterment - Ebeneezer Rd. 5/5/2014 150,225 DPW Compactor and Golf Equipment 11/17/2014 144,550 RT. 6A Water Infrastructure 11/17/2014 971,000 Land Purchase - Eldredge Main 11/17/2014 500,000 Well #3 Access Road 5/4/2015 617,000 Road Repair & Resurfacing 5/4/2015 10,000,000 Road Betterment - Tower Hill 5/4/2015 394,233 Road Betterments - Moss/Common 5/4/2015 112,386 17,934,239$ TOWN OF BREWSTER, MASSACHUSETTS NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2015 - 49 - Changes in Long-term Liabilities The following is a summary of changes in long-term liabilities for the year ended June 30, 2015: 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, 2015: Total Long-Town's Town's Term Debt Estimated Indirect Agency Outstanding Share Debt Nauset Regional School District 464,100$ 46.28%214,785$ Beginning Ending Current Governmental Activities:Balance Additions Reductions Balance Portion Landfill postclosure care costs 399,500$ -$ (19,500)$ 380,000$ 19,500$ Capital Lease 751,302 - (179,454) 571,848 186,171 Postemployment benefits 4,089,317 922,263 - 5,011,580 - Net pension liability 16,997,505 127,988 - 17,125,493 - Bonds and notes payable 5,922,641 - (1,075,441) 4,847,200 1,035,400 Total governmental activities long-term liabilities 28,160,265$ 1,050,251$ (1,274,395)$ 27,936,121$ 1,241,071$ Beginning Ending Current Business-Type Activities:Balance Additions Reductions Balance Portion Postemployment benefits 758,307$ 137,047$ -$ 895,354$ -$ Net Pension Liability 3,285,914 24,742 - 3,310,656 - Capital Lease 154,805 249,704 (111,909) 292,600 110,519 Bonds and notes payable 9,848,597 - (1,053,597) 8,795,000 1,080,000 Total business-type activities long-term liabilities 14,047,623$ 411,493$ (1,165,506)$ 13,293,610$ 1,190,519$ TOWN OF BREWSTER, MASSACHUSETTS NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2015 - 50 - NOTE 10 – GOVERNMENTAL FUND BALANCE CLASSIFICATIONS The Town has classified its governmental fund balances with the following hierarchy. Nonmajor General Community Governmental Fund Preservation Funds Total Fund Balances Nonspendable: Permanent Fund Principal -$ -$ 142,913$ 142,913$ Restricted For: General Government - - 474,862 474,862 Public Safety - - 1,056,957 1,056,957 Education - - 64,467 64,467 Public Works - - 490,298 490,298 Human Services - - 172,363 172,363 Culture & Recreration - - 159,436 159,436 Employee Benefits - - 218,605 218,605 Community Preservation - 3,212,525 - 3,212,525 Expendable Trust Funds - - 118,033 118,033 - 3,212,525 2,755,021 5,967,546 Committed To: Continuing Appropriations General Government 577,854 - - 577,854 Public Safety 469,442 - - 469,442 Education 380,485 - - 380,485 Public Works 383,038 - - 383,038 Human Services 273,238 - - 273,238 Culture & Recreation 138,527 - - 138,527 2,222,584 - - 2,222,584 Assigned To: Encumbered For: General Government 13,900 - - 13,900 Public Safety 275 - - 275 Education 64,818 - - 64,818 Public Works 29,557 - - 29,557 Human Services 300 - - 300 Subsequent Years Expenditures 1,039,987 - - 1,039,987 1,148,837 - - 1,148,837 Unassigned General Fund 3,204,099 - - 3,204,099 General Stabilization Fund 2,054,491 - - 2,054,491 Nonmajor Governmental Funds - - (349,322) (349,322) Nonmajor Capital Projects Education - - (3,387,104) (3,387,104) Public Works - - (77,099) (77,099) 5,258,590 - (3,813,525) 1,445,065 Total Governmental Fund Balances 8,630,011$ 3,212,525$ (915,591)$ 10,926,945$ ` TOWN OF BREWSTER, MASSACHUSETTS NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2015 - 51 - NOTE 11 – STABILIZATION FUND The Town has established several funds where the Town has set aside amounts for emergency and capital needs. These funds consist of the following:  The Stabilization fund is used to account for any appropriation, as approved by a 2/3 vote at the annual or special town meeting for additions or reductions to the fund. Any interest shall be added to and become part of the fund. The Stabilization fund balance is $2,054,491 as of June 30, 2015. The fund was established under chapter 40, sub-section 5B of the Massachusetts General Law.  The Tri-Town Stabilization Fund –The Town of Brewster transferred the Funds out of the Stabilization Fund Tri-Town into a Special Article in Fiscal 2015. There is no longer a Tri-Town Stabilization Fund at June 30, 2015. Initially the funds were for Finance Shared Costs associated with the study, permitting, planning and demolition of the septage treatment plant NOTE 12 – 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 and contents is $47,733,403. 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 2015. 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, six 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 now 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. TOWN OF BREWSTER, MASSACHUSETTS NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2015 - 52 - Health benefits plans for active employees and non-Medicare eligible retirees consist of a traditional medical indemnity plan, two Preferred Provider Organization (PPO) plans and two Exclusive Provider Organization (EPO) plans. All active employee plans are self-funded with Blue Cross and Blue Shield of Massachusetts (BCBSMA) and Harvard Pilgrim Health Care (HPHC) as third party administrators. The Group offers six health plans for Medicare eligible retirees, which include two self-funded Medicare Supplement Medical plans with fully insured Medicare Prescription Drug Plans (PDP’s), one of which is administered by BCBSMA and one by HPHC, one fully insured Medicare Supplement with a PDP provided by Tufts Health Plan, one HMO Medicare wrap plan fully insured by BCBSMA, and two fully insured Medicare Advantage HMO plans, one of which is from BCBSMA and one from Tufts Health Plan. Prior to July 1, 2012, the Group offered two benefit options for each EPO and PPO plan: the Legacy option and the Rate Saver option. On July 1, 2012, the Group changed its plan designs following applicable law to do so. The plan design changes resulted in a single option for each EPO and each PPO. These options are similar in plan design to the Group Insurance Commission’s “benchmark plan” and include additional member cost-sharing features. The Group has adopted a contributory dental insurance plan (self-funded) and a voluntary dental plan, which was premium based through June 30, 2007 and changed to a self funded basis effective July 1, 2007. These plans are administered by Delta Dental Plan of Massachusetts for a monthly administrative fee, based on the number of subscribers. Effective July 1, 2009 the group adopted a voluntary fully funded vision plan from EyeMed Vision Care. The vision plan is optional for employers. The Master Health Plus, Blue Care Elect Preferred PPO plan, Network Blue EPO plan, and Medex 2 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. Medex 2 is combined with a fully insured PDP provided by Blue Cross Blue Shield and called Blue Medicare RX. The Harvard Pilgrim EPO Plan, Harvard Pilgrim PPO plan, and Harvard Pilgrim Health Care Medicare Enhance 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. Medicare Enhance is combined with a fully insured PDP from Coventry First Health. On July 1, 2014 the Group joined with two other Massachusetts municipal joint purchase groups to create the first Massachusetts Municipal Pooling Arrangement (MMRA). The policy year is July 1 through June 30. All participants share the same rates for coverage of claims exceeding $300,000. There is no Aggregating Specific Deductible. If claims experience is below projections, participants are dividend eligible on a collective and proportional basis. Participating governmental entities have agreed to participate for a minimum of three years. The Group does not reinsure its Medex and HPHC Medicare Enhance plans. The policy period covers claims incurred within 12 months and paid within 24 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. TOWN OF BREWSTER, MASSACHUSETTS NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2015 - 53 - 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 194 Town of Brewster employees and 114 retirees/surviving spouses 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, 2015 the Cape Cod Municipal Health Group had total assets of $33,983,737, total liabilities of $13,833,948 (including $13,321,782 in estimated benefits obligations), and a total surplus of $20,149,789. NOTE 13 - 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 2015, the estimated total Town premiums plus implicit costs for the retiree medical program are $516,842. TOWN OF BREWSTER, MASSACHUSETTS NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2015 - 54 - Annual OPEB Cost and Net OPEB Obligation. The Town’s annual other postemployment benefit (OPEB) cost (expense) is calculated based on the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with the parameters of GASBS No. 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years. The following table shows the components of the Town’s annual OPEB cost for the fiscal year, the amount actually contributed to the plan, and changes in the Town’s net OPEB obligation to the plan: The Town’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for 2015 and the six preceding years were as follows: Annual required contribution 1,512,245$ Interest on net OPEB obligation 266,619 Adjustment to annual required contribution (ARC)(202,712) Annual OPEB cost (expense)1,576,152 Contributions made (516,842) Increase in net OPEB obligation 1,059,310 Net OPEB obligation - beginning of year 4,847,624$ Net OPEB obligation - end of year 5,906,934$ Fiscal Year Ended Annual OPEB Cost Percentage of Annual OPEB Cost Contributed Increase in Net OPEB Obligation Net OPEB Obligation 6/30/2009 $ 1,490,990 29.28% $ 1,054,493 $ 1,054,493 6/30/2010 $ 1,591,858 34.27% $ 1,046,291 $ 2,100,784 6/30/2011 $ 1,549,783 36.81% $ 979,284 $ 3,080,068 6/30/2012 $ 1,644,097 39.62% $ 992,709 $ 4,072,777 6/30/2013 $ 1,312,737 29.28% $ 928,407 $ 5,001,184 6/30/2014 $ 1,395,154 111.01% $ (153,560) $ 4,847,624 6/30/2015 $ 1,576,152 32.79% $ 1,059,310 $ 5,906,934 TOWN OF BREWSTER, MASSACHUSETTS NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2015 - 55 - Funded Status and Funding Progress. As of June 30, 2014, the most recent actuarial valuation date, the plan was 6.39% funded. The actuarial accrued liability for benefits was $18.163 million, and the actuarial value of assets was $1.161 million, resulting in an unfunded actuarial accrued liability (UAAL) of $17.002 million. The covered payroll (annual payroll of active employees covered by the plan) was $13.348 million, and the ratio of the UAAL to the covered payroll was 127.4%. 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, 2014, actuarial valuation, the projected unit credit actuarial cost method with amortization payments increasing at 4.0% 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 5.50% 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 2.0% for 1 year and 0.5% for 6 years to an ultimate rate of 5.0% per year. The actuarial value of assets was determined using market value. The UAAL is being amortized with increasing payments at 4.0% over 30 years at transition. The remaining amortization period at July 1, 2015, was 23 years. NOTE 14 – PENSION PLANS A. Plan Descriptions The Town contributes to the Barnstable County Retirement System (The System), a multiple-employer, cost sharing contributory defined benefit pension plan was established in 1937, under Massachusetts General Law (MGL), Chapter 32, and is regulated by the Massachusetts Public Employee Retirement Administration Commission (PERAC). 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. TOWN OF BREWSTER, MASSACHUSETTS NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2015 - 56 - The System issues a publically available audited financial report that may be obtained by contacting the system at 3195 Main Street Barnstable, Ma 02630. The report can also be obtained online at http://www.barnstablecounty.org/barnstable-county-audit-reports/audit-fy14-reports/. The MTRS issues a publically available audited financial report that may be obtained by contacting MTRS at One Charles Park, Cambridge, Massachusetts 02142-1206. B. Benefits The System and MTRS provide retirement, disability and death benefits to plan members and beneficiaries. Massachusetts Contributory Retirement System benefits are with certain exceptions, uniform from system to system. They System provides for retirement allowance benefits up to a maximum of 80% of an employees highest three year average annual rate of regular compensation for those hired prior to April 2, 2012. For persons who became employees on or after April 2, 2012, average salary is the average annual rate of regular compensation received during the five consecutive years that produce the highest average, or, if greater, during the last five years (whether or not consecutive) preceding retirement. Benefit payments are based upon an employee’s age, length of creditable service, level of compensation, and group classification. Employees who become permanently and totally disabled for further duty may be eligible to receive a disability retirement allowance. The amount of benefits to be received in such cases is dependent on several factors, including whether or not the disability is work related, the employee’s age, years of creditable service, level of compensation, veterans’ status and group classification. Employees who resign from service are entitled to request a refund of their accumulated total deductions. Survivor benefits are extended to eligible beneficiaries of employees whose death occurs prior to or following retirement. Cost-of living adjustments granted between 1981 and 1997, and any increase in other benefits imposed by the Commonwealth of Massachusetts’ state law during those years are borne by the Commonwealth and are deposited in to the pension fund. Cost-of-living adjustments granted after 1997 must be approved by the system and all costs are borne by the system. C. Contributions Barnstable County Retirement System Chapter 32 of MGL governs the contributions of plan members and member employees. Active plan employees are required to contribute to the system at rates ranging from 5 to 9% and of their gross regular compensation. The rate is keyed to the date upon which an employee’s membership commences. Employees hired on or after January 1, 1979, contribute an additional 2.0% of annual regular compensation in excess of $30,000. The member units are required to pay into the system, a legislatively mandated actuarial determined contribution that is apportioned among the employers based on active current payroll. The Town’s proportionate share of the required contribution equaled its actual contribution for the year ended June 30, 2015 which was $1,885,218 and 19.86% of covered payroll, actuarially determined as an amount that when combined with plan member contributions, is expected to finance the costs of benefits earned by plan members during the year, with an additional amount to finance any unfunded accrued liability. TOWN OF BREWSTER, MASSACHUSETTS NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2015 - 57 - Massachusetts Teachers’ Retirement System As required by State statutes, teachers of the Town are covered by the Massachusetts Teachers Retirement System (MTRS). Plan members (at varying rates of annual covered compensation) and the Commonwealth of Massachusetts fund contributes to the MTRS. The Pension benefits and administrative expenses paid by the Teachers Retirement Board are the legal responsibility of the Commonwealth of Massachusetts, and thus the Town is not required to contribute. The Commonwealth of Massachusetts contributed “on-behalf” payments to the MTRS totaling $660,839 for fiscal year 2015. In accordance with GASB Statement No. 68, these on-behalf” payments have been recorded in the general fund as intergovernmental revenues and pension expenditures. D. Pension Liabilities, Pension Expense, and Deferred Inflows or Resources Related to Pensions Pension Liabilities At June 30, 2015 the Town reported a liability of $20,436,149 for its proportionate share of the net pension liability. The net pension liability was measured as of December 31, 2014 and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of January 1, 2014. Accordingly, updated procedures were used to roll forward the total pension liability to the measurement date. The Town’s proportion of the net pension liability was based on a projection of the Town’s long-term share of contributions to the pension plan relative to the projected contributions of all participating members. At December 31, 2014, the Town’s proportion was 3.62% which was no increase from its proportion measured as of December 31, 2013. Pension Expense and Deferred Outflows of Resources For the year ended June 30, 2015 the Town recognized pension expense of $2,002,949. At June 30, 2015 the Town reported deferred outflows of resources related to pensions of $34,999 from the net difference between projected and actual investment earnings on pension plan investments. Since the system performs an actuarial valuation bi-annually, there are no reported differences between expected and actual experience or changes of assumptions as of December 31, 2014. The deferred outflows of resources related to pensions will be recognized in future pension expense are as follows: Measurment Period Year ended June 30 Amount 2016 8,750$ 2017 8,750 2018 8,750 2019 8,749 Total Balance of Deferred Inflows 34,999$ TOWN OF BREWSTER, MASSACHUSETTS NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2015 - 58 - E. Actuarial assumptions The total pension liability in the January 1, 2014 actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement that was updated to December 31, 2014. Valuation date January 1, 2014 Actuarial cost method Entry age normal cost method Amortization method Payments increase at 4.0% except for 2010 early retirement incentive, which is a level payment. Remaining amortization period 22 years from July 1, 2014 for 2002 and 2003 Early Retirement Incentives, retiree’s sheriff’s liability and remaining unfunded liability, and 8 years from July 1, 2014 for 2010 Early Retirement Incentive. Asset valuation method Sum of actuarial value at the beginning of the year, contributions and investment earnings based on the actuarial interest assumption less benefit payments and operating expenses plus 20% of the market value at the end of the year in excess of that sum, plus additional adjustment toward market value as necessary so that the final actuarial value is within 20% of market value. Inflation rate 4.0% Projected salary increases Varies by length of service with ultimate rates of 4.25% for Group 1, 4.50% for Group 2 and 4.75% for Group 4. Cost of living adjustments 3.0% of the first $15,000 of retirement income Rates of retirement Varies based upon age for general employees, police and fire employees Rates of disability For general employees, it was assumed that 45% of all disabilities are ordinary (55% are service connected). For police and fire employees, 10% of all disabilities are assumed to be ordinary (90% are service connected). Mortality rates: Pre-retirement The RP-2000 Employee Mortality Table projected generationally with a Scale AA from 2010. Healthy retiree The RP-2000 Healthy Annuitant Mortality Table projected generationally with a Scale AA from 2010. TOWN OF BREWSTER, MASSACHUSETTS NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2015 - 59 - Disabled retiree The RP-2000 Healthy Annuitant Mortality Table set forward three years for males only projected generationally with Scale AA from 2010. Investment rate of return 7.75%, net of pension plan investment expense, including inflation previously 7.875% The long-term expected rate of return on pension plan investments was determined using a building block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. Best estimates of arithmetic real rates of return for each major asset class included in the pension plan’s target asset allocation as of December 31, 2014 are summarized in the following table: Asset Class Target Allocation Long-Term Expected Real Rate of Return Domestic equity 6.60%20.00% International developed markets equity 7.10%16.00% International emrging markets equity 9.40%7.00% Core fixed income 2.20%13.00% High yield fixed income 4.70%10.00% Real estate 4.40%10.00% Commodities 4.40%4.00% Hedge fund, GTAA, risk parity 3.90%10.00% Private equity 11.70%10.00% For the year ended December 31, 2014 the System’s annual money-weighted rate of return on pension plan investments net of pension plan investment expense was 7.58%. The money-weighted rate of return expresses investment performance, net of pension plan investment expense, adjusted for the changing amounts actually invested. F. Discount Rate The discount rate used to measure the total pension liability was 7.75%. The projection of cash flows used to determine the discount rate assumed plan member contributions will be made at the current contribution rate and that contributions will be made at rates equal to the actuarially determined contribution rates. Based on those assumptions, the pension plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. TOWN OF BREWSTER, MASSACHUSETTS NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2015 - 60 - G. Sensitivity of the net pension liability to changes on the discount rate The following presents the net pension liability, calculated using the discount rate of 7.75%, as well as what the net pension liability would be if it were calculated using a discount rate that is 1 percentage point lower (6.75%) or 1 percentage point higher (8.75%) than the current rate: 1% Decrease (6.75%) Current Discount Rate (7.75%) 1% Increase (8.75%) Brewster share of the net pension liability 26,345,345$ 20,436,149$ 15,425,451$ Detailed information about the pension plan’s fiduciary net pension is available in a separately issued Barnstable County retirement system financial report. NOTE 15 – RESTATEMENT DUE TO A CHANGE IN ACCOUNTING STANDARDS During 2015, GASB Statement #68, Accounting and Financial Reporting for Pensions was implemented. This resulted in a restatement of the governmental activities and business type activities beginning net positions at June 30, 2014 to reflect the recording net pension liability. Description Governmental Activities Business-type Activities Water Golf Total Total Net Positions at June 30, 2014, as previously reported 71,906,666$ 16,519,845$ 10,876,192$ 5,643,653$ 16,519,845$ To record the beginning net pension liability (16,997,505) (3,285,914) (1,365,074) (1,920,840) (3,285,914) Total Net Positions at June 30, 2014, as restated 54,909,161$ 13,233,931$ 9,511,118$ 3,722,813$ 13,233,931$ Primary Government Business-type Activities Statement of Net Position TOWN OF BREWSTER, MASSACHUSETTS NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2015 - 61 - NOTE 16 – COMMITMENTS AND CONTINGENCIES The Town participates in a number of federal award programs. However the Town is not subject to the provisions of the Single Audit Act Amendments of 1996, since the Town did not expend more than $500,000 of federal awards during the period ended June 30, 2015. These programs may still be subject to financial and compliance audits. Accordingly, the amount 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 (16 years remaining), and the estimated liability has been recorded in the Statement of Net Position, Governmental Activities. The $380,000 reported as landfill post-closure liability at June 30, 2015 is based on what it would cost to perform all post-closure care at June 30, 2015. 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, 2015, cannot be ascertained, management believes any resulting liability should not materially affect the financial position at June 30, 2015. TOWN OF BREWSTER, MASSACHUSETTS NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2015 - 62 - NOTE 17 – IMPLEMENTATION OF NEW GASB PRONOUNCMENTS During fiscal year 2015, the following GASB pronouncements were implemented: The GASB issued Statement #68, Accounting and Financial Reporting for Pensions – an amendment of GASB Statement No. 27, was implemented in fiscal year 2015. This pronouncement had a significant impact on the basic financial statements. Financial statement changes include the recognition of a net pension liability, pension expense, and deferred inflows/outflows of resources. As noted in Note 15, the financial statements also required a restatement of net position at the beginning of the year. The GASB issued Statement #69, Government Combinations and Disposals of Government Operations, was implemented in fiscal year 2015. This pronouncement requires no additional disclosure and will not impact the basic financial statements. The GASB issued Statement #70, Accounting and Financial Reporting for Nonexchange Financial Guarantees, was implemented in fiscal year 2015. This pronouncement requires no additional disclosure and will not impact the basic financial statements. The GASB issued Statement #71, Pension Transition for Contributions Made Subsequent to the Measurement Date – an amendment of GASB Statement No. 68, was implemented in fiscal year 2015. This pronouncement has a significant impact on the basic financial statements. Future GASB Pronouncements: The GASB issued Statement #72. Fair Value Measurement and Application, which is required to be implemented in 2016. Management’s current assessment is that this pronouncement will not have a significant impact on the Basic Financial Statements. The GASB issued Statement #73, Accounting and Financial Reporting for Pension and Related Assets that are not within the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASB Statement 67 and 68. The provisions of this Statement are effective for 2016 – except those provisions that address employers and governmental non-employer contributing entities for pensions that are not within the scope of Statements 68, which are effective for 2017. Management’s current assessment is that this pronouncement will not have a significant impact on the Basic Financial Statements. The GASB issued Statement #74, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans, which is required to be implemented in 2017. Management’s current assessment is that this pronouncement will not have a significant impact on the Basic Financial Statements. The GASB issued Statement #75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions, which is required to be implemented in 2018. Management’s current assessment is that this pronouncement will have a significant impact on the Basic Financial Statements. The GASB issued Statement #76, The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments, which is required to be implemented in 2016. Management’s current assessment is that this pronouncement will not have a significant impact on the Basic Financial Statements. TOWN OF BREWSTER, MASSACHUSETTS REQUIRED SUPPLEMENTARY INFORMATION BARNSTABLE COUNTY REGIONAL RETIREMENT SYSTEM JUNE 30, 2015 - 63 - The following schedules are presented in accordance with GASB Statement No. 27: Schedules 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] 1/1/2014 776,973,700$ 1,353,810,101$ 576,836,401$ 57.4%253,920,106$ 227.2% 1/1/2012 651,063,981 1,173,483,848 522,419,867 55.5%239,437,303 218.2% 1/1/2010 554,876,554 1,030,210,321 475,333,767 53.9%234,374,075 202.8% 1/1/2008 520,089,855 966,564,614 446,474,759 53.8%249,971,296 178.6% Schedule of Employer Contributions Fiscal Year Ended June 30 Annual Required Contributions (A) Actual Contributions Percentage Contributed (B) Actual Contributions (B/A) Town's Percentage of System Wide Actual Contributions 2014 $ 52,473,575 $ 52,473,575 100%1,885,218$ 3.59% 2012 46,702,087 46,702,087 100%1,381,855 2.96% 2011 43,807,158 43,807,158 100%1,313,399 3.00% 2010 43,893,051 43,893,051 100%1,219,950 2.78% TOWN OF BREWSTER, MASSACHUSETTS REQUIRED SUPPLEMENTARY INFORMATION BARNSTABLE COUNTY RETIREMENT SYSTEM JUNE 30, 2015 The following schedules are presented in accordance with GASB Statement No. 68 Schedule of the Town’s Proportionate Share of the Net Pension Liability December 31, 2014 Town's proportion of the net pension liability 3.62% Town's proportionate share of the net pension liability 20,436,149$ Town's covered-employee payroll (1)9,494,687$ Town's proportionate share of the net pension liability as a percentage of it's covered-employee payroll 215.24% Plan fiduciary net position as a percentage of the total pension liability 60.43% (1) Covered employee payroll as reported in the January 1, 2014 actuarial report. Note: This schedule is intended to present information for 10 years. Until a 10 year trend is compiled by the (System), information is presented for those years for which the information is available. See notes to Required Supplementary Information - 64 - TOWN OF BREWSTER, MASSACHUSETTS REQUIRED SUPPLEMENTARY INFORMATION BARNSTABLE COUNTY RETIREMENT SYSTEM JUNE 30, 2015 December 31 ,2014 Actuarily determined contribution (1)1,885,218$ Contribution in relation to the actuarilly determined contribution (1,885,218) Contribution deficency (excess)-$ Town's covered-employee payroll (2)9,494,687$ Contribution as a percentage of covered - employee payroll 19.86% SCHEDULE OF TOWNS CONTRIBUTION (1) Based on the results on the January 1, 2014 actuarial valuation (including assumptions and methods) for the System which determined the Town’s budgeted appropriation for fiscal year 2015. (2) Town’s covered employee payroll as reported in the January 1, 2014 system actuarial valuation report. Note: This Town schedule is intended to present information for 10 years. Until a 10 year trend is compiled by the (System), information is presented for those years for which the information is available. See notes to Required Supplementary Information - 65 - TOWN OF BREWSTER, MASSACHUSETTS REQUIRED SUPPLEMENTARY INFORMATION MASSACHUSETTS TEACHERS RETIREMNT SYSTEM JUNE 30, 2015 SCHEDULE OF THE STATE’S PROPORTIONATE SHARE OF THE NET PENSION LIABILITY Teacher’s Pension Plan 2015 Towns' proportion of the net pension liability (asset)0% Commonweath's proportion of the net peansion liability (assets)100% Commonwealth's proportionate share of the net pension liability associated with the district 9,511,918$ Employer pension expense and revenue for Commonwealth support 660,839$ - 66 - TOWN OF BREWSTER, MASSACHUSETTS REQUIRED SUPPLEMENTARY INFORMATION OTHER POSTEMPLOYMENT BENEFITS JUNE 30, 2015 - 67 - The following schedules are presented in accordance with GASB Statement No. 45: Schedules of Funding Progress and Employer Contributions 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] 6/30/2008 -$ 19,960,683$ 19,960,683$ 0.0%10,503,689$ 190.0% 6/30/2010 -$ 22,292,830$ 22,292,830$ 0.0%10,692,405$ 208.5% 6/30/2012 -$ 14,718,311$ 14,718,311$ 0.0%11,896,588$ 123.7% 6/30/2014 1,161,457$ 18,163,401$ 17,001,944$ 6.4%13,348,103$ 127.4% Schedule of Employer Contributions: Year Ended June 30 Annual OPEB Cost Percentage of Annual OPEB Cost Contributed Increase in Net OPEB Obligation Net OPEB Obligation 2009 $1,490,990 29.28%1,054,493$ 1,054,493$ 2010 $1,591,858 34.27%1,046,291$ 2,100,784$ 2011 $1,549,783 36.81%979,284$ 3,080,068$ 2012 $1,644,097 39.62%992,709$ 4,072,777$ 2013 $1,312,737 29.28%928,407$ 5,001,184$ 2014 $1,395,154 111.01%(153,560)$ 4,847,624$ 2015 $1,576,152 32.79%1,059,310$ 5,906,934$ 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, 2014 Discount Rate 4.50% Medical Trend: Under 65 10.0% decreasing by 2.0% for 1 year and 0.5% for 6 years to an ultimate rate of 5.0% per year. TOWN OF BREWSTER, MASSACHUSETTS REQUIRED SUPPLEMENTARY INFORMATION OTHER POSTEMPLOYMENT BENEFITS JUNE 30, 2015 - 68 - Over 65 Cost Method 10.0% decreasing by 0.5% for 10 years to an ultimate level of 5.0% per year Projected Unit Credit Cost Method Amortization Method 30 Year Open, Amortization Payments Increasing at 4.0% Remaining Amortization Period 23 years Plan Participants: Current retirees, beneficiaries, and dependants 129 Current active members/participants 186 Total 315 TOWN OF BREWSTER, MASSACHUSETTS REQUIRED SUPPLEMENTARY INFORMATION BARNSTABLE COUNTY RETIREMENT SYSTEM JUNE 30, 2015 Pension Plan Schedules A. Schedule of the Town’s Proportionate Share of the Net Pension Liability The Schedule of Town’s Proportionate Share of the Net Pension Liability details the allocated percentage of the net pension liability; the proportionate share of the net pension liability, and the covered employee payroll. It also demonstrates the net position as a percentage of the pension liability and the net pension liability as a percentage of covered payroll. B. Schedule of Town’s Contribution Governmental employees are required to pay an annual appropriation as established by PERAC. The total appropriation includes the amounts to pay the pension portion of each member’s retirement allowance, an amount to amortize the actuarially determined unfunded liability to zero in accordance with the System’s funding schedule, and additional appropriations in accordance with adopted early retirement incentive programs. The appropriations are payable on July 1, and January 1. The Town may choose to pay the entire appropriation in July at a discounted rate. Accordingly, actual contributions may be less than the “total appropriation”. The pension fund appropriation is allocated to the Town based in covered payroll. - 69 -