HomeMy WebLinkAbout2015-06-02 Board of Selectmen Packet - Part 2 MELANSON HEATH
ACCOUNTANTS•AUDITORS
10 New England Business
Center Dr.•Suite 107
Andover,MA 01810
(978)749-0005
melansonheath.com
March 19, 2015 Additional Offices:
Nashua,NH
Manchester,NH
Greenfield,MA
Mr. Robert LeLacheur Ellsworth,ME
Town Manager
16 Lowell Street
Reading, MA 01867
Dear Mr. LeLacheur:
Enclosed is the Town of Reading, Massachusetts's governance letter. The purpose
of the governance letter is to inform in writing those charged with governance about
certain results of the annual audit. This communication will be verbally made at the
May 13, 2015 meeting with the audit committee.
Please distribute the enclosed letter to all parties charged with the governance of the
Town. As always, we will be available to discuss the results of the audit or any other
applicable issues in more detail, at any time.
Sincerely,
s_Sc � I
MELANSON H EATH
ACCOUNTANTS•AUDITORS
10 New England Business
Center Dr.•Suite 107
Andover,MA 01810
(978)749-0005
melansonheath.com
Town of Reading, Massachusetts
16 Lowell Street Additional Offices:
Reading, MA 01867 Nashua,NH
Manchester,NH
Greenfield,MA
Ellsworth,ME
Dear Town Manager and Board of Selectmen:
We have audited the financial statements of the Town of Reading, Massachusetts as
of and for the year ended June 30, 2014 and have issued our report thereon dated
March 19, 2015. Professional standards require that we advise you of the following
matters relating to our audit.
Our Responsibility in Relation to the Financial Statement Audit
As communicated in our engagement letter, our responsibility, as described by profes-
sional standards, is to form and express an opinion about whether the financial state-
ments that have been prepared by management with your oversight are presented fairly,
in all material respects, in conformity with accounting principles generally accepted in the
United States of America. Our audit of the financial statements does not relieve you or
management of your respective responsibilities.
Our responsibility, as prescribed by professional standards, is to plan and perform our
audit to obtain reasonable, rather than absolute, assurance about whether the financial
statements are free of material misstatement. An audit of financial statements includes
consideration of internal control over financial reporting as a basis for designing 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 over financial
reporting. Accordingly, as part of our audit, we considered the internal control of the
Town solely for the purpose of determining our audit procedures and not to provide any
assurance concerning such internal control.
We are also responsible for communicating significant matters related to the audit that
are, in our professional judgment, relevant to your responsibilities in overseeing the
financial reporting process. However, we are not required to design procedures for the
purpose of identifying other matters to communicate to you.
We have provided our findings regarding significant control deficiencies over financial
reporting and material weaknesses and material noncompliance, and other matters
noted during our audit in a separate letter to you dated March 19, 2015.
Planned Scope and Timing of the Audit
We conducted our audit consistent with the planned scope and timing we previously
communicated to you.
Compliance with All Ethics Requirements Regarding Independence
The engagement team and others in our Firm have complied with all relevant ethical
requirements regarding independence. Safeguards that have been applied to eliminate
threats to independence or reduce them to an acceptable level include annual certifica-
tion by all Firm staff of independence.
Qualitative Aspects of the Entity's Significant Accounting Practices
Significant Accounting Policies
Management has the responsibility to select and use appropriate accounting policies. A
summary of the significant accounting policies adopted by the Town is included in the
notes to the financial statements. There have been no initial selection of accounting
policies and no changes in significant accounting policies or their application during the
year ended June 30, 2014. No matters have come to our attention that would require
us, under professional standards, to inform you about (1) the methods used to account
for significant unusual transactions and (2) the effect of significant accounting policies in
controversial or emerging areas for which there is a lack of authoritative guidance or
consensus.
Significant Accounting Estimates
Accounting estimates are an integral part of the financial statements prepared by man-
agement and are based on management's current judgments. Those judgments are
normally based on knowledge and experience about past and current events and
assumptions about future events. Certain accounting estimates are particularly sensitive
because of their significance to the financial statements and because of the possibility
that future events affecting them may differ markedly from management's current
judgments.
The m .
most sensitive accounting estimates affecting the financial statements are.
• Estimated lives and depreciation methods for depreciable assets.
• Collectability of receivables.
• Net OPEB obligation.
Management's estimates of the above are based on various criteria. We evaluated the
key factors and assumptions used to develop these estimates and determined that it is
2
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reasonable in relation to the basic financial statements taken as a whole and in relation
to the applicable opinion units.
Financial Statement Disclosures
Certain financial statement disclosures involve significant judgment and are particularly
sensitive because of their significance to financial statement users. We noted no partic-
ularly sensitive disclosures affecting the Town's financial statements.
Identified or Suspected Fraud
We have not identified or obtained information that indicates that fraud may have
occurred.
Significant Difficulties Encountered during the Audit
We encountered no significant difficulties in dealing with management relating to the
performance of the audit.
Uncorrected and Corrected Misstatements
For purposes of this communication, professional standards require us to accumulate
all known and likely misstatements identified during the audit, other than those that we
believe are trivial, and communicate them to the appropriate level of management.
Further, professional standards require us to also communicate the effect of uncor-
rected misstatements related to prior periods on the relevant classes of transactions,
account balances or disclosures, and the financial statements as a whole and each
applicable opinion unit. Management has corrected all identified misstatements.
In addition, professional standards require us to communicate to you all material,
corrected misstatements that were brought to the attention of management as a result
of our audit procedures. None of the misstatements identified by us as a result of our
audit procedures and corrected by management were material, either individually or in
the aggregate, to the financial statements taken as a whole or the applicable opinion
units.
Disagreements with Management
For purposes of this letter, professional standards define a disagreement with
management as a matter, whether or not resolved to our satisfaction, concerning a
financial accounting, reporting, or auditing matter, which could be significant to the
Town's financial statements or the auditor's report. No such disagreements arose during
the course of the audit.
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Representations Requested from Management
We have requested certain written representations from management, which are
included in the letter dated March 19, 2015.
Management's Consultations with Other Accountants
In some cases, management may decide to consult with other accountants about
auditing and accounting matters. Management informed us that, and to our knowledge,
there were no consultations with other accountants regarding auditing and accounting
matters.
Other Significant Matters, Findings or Issues
In the normal course of our professional association with the Town, we generally discuss
a variety of matters, including the application of accounting principles and auditing stand-
ards, operating and regulatory conditions affecting the entity, and operational plans and
strategies that may affect the risks of material misstatement. None of the matters
discussed resulted in a condition to our retention as the Town's auditors.
Other Information in Documents Containing Audited Financial Statements
Pursuant to professional standards, our responsibility as auditors for other information in
documents containing the Town's audited financial statements does not extend beyond
the financial information identified in the audit report, and we are not required to perform
any procedures to corroborate such other information. However, in accordance with
such standards, we have read the information (if applicable) and considered whether
such information, or the manner of its presentation, was materially inconsistent with the
presentation in the financial statements.
Our responsibility also includes communicating to you any information which we believe
is a material misstatement of fact. Nothing came to our attention that caused us to
believe that such information, or its manner of presentation, is materially inconsistent
with the information, or manner of its presentation, appearing in the financial statements.
This report is intended solely for the information and use of the governing body and
management of the Town and is not intended to be and should not be used by anyone
other than these specified parties.
Sincerely,
March 19, 2015
4 ���
TOWN OF READING, MASSACHUSETTS
Management Letter
For the Year Ended June 30, 2014
Sb4
TABLE OF CONTENTS
PAGE
INTRODUCTORY LETTER 1
STATUS OF PRIOR YEAR RECOMMENDATIONS:
1. Update Existing Fund Balance Policy 5
2. Improve Controls over Change Orders and Adjustments 5
CURRENT YEAR RECOMMENDATIONS:
3. Ensure Proper Allocation of Expenditures 6
MELANSON HEATH
ACCOUNTANTS•AUDITORS
10 New England Business
Center Dr.•Suite 107
Andover,MA 01810
(978)749-0005
melansonheath.com
Additional Offices:
Nashua,NH
Manchester,NH
Greenfield,MA
To the Board of Selectmen and Town Manager Ellsworth,ME
Town of Reading, Massachusetts
In planning and performing our audit of the basic financial statements of the Town of
Reading, Massachusetts as of and for the year ended June 30, 2014, in accordance
with auditing standards generally accepted in the United States of America, we con-
sidered the Town's internal control over financial reporting (internal control) as a
basis for designing our auditing procedures for the purpose of expressing our opin-
ions on the financial statements, but not for the purpose of expressing an opinion on
the effectiveness of the entity's internal control. Accordingly, we do not express an
opinion on the effectiveness of the Town's internal control over financial reporting.
A deficiency in internal control exists when the design or operation of a control
does not allow management or employees, in the normal course of performing their
assigned functions, to prevent, or detect and correct misstatements on a timely
basis. A material weakness is a deficiency, or a combination of deficiencies, in inter-
nal control, such that there is a reasonable possibility that a material misstatement of
the entity's financial statements will not be prevented, or detected and corrected on
a timely basis.
Our consideration of internal control was for the limited purpose described in the first
paragraph and was not designed to identify all deficiencies in internal control that
might be material weaknesses. Given these limitations, during our audit we did not
identify any deficiencies in internal control that we consider to be material weak-
nesses. However, material weaknesses may exist that have not been identified.
During our audit, we became aware of other matters that we believe represent
opportunities for strengthening internal controls and operating efficiency. The recom-
mendations that accompany this letter summarize our comments and suggestions
concerning those matters.
The Town's written responses to our comments and suggestions have not been
subjected to the auditing procedures applied in the audit of the financial statements
and, accordingly, we express no opinion on it.
3 � 1 5
This communication is intended solely for the information and use of management,
Board of Selectmen, others within the organization, and is not intended to be, and
should not be, used by anyone other than these specified parties.
The purpose of this communication, which is an integral part of our audit, is to
describe for management and those charged with governance, including those
overseeing the financial reporting process, the scope of our testing of internal
control and the results of that testing. Accordingly, this communication is not
intended to be and should not be used for any other purpose.
/" I 14_0:4
March 19, 2015
4 ) 4
STATUS OF PRIOR YEAR RECOMMENDATIONS:
1. Update Existing Fund Balance Policy
Prior Year Issue:
In the prior year, we recommended the Town update the fund balance policy
to incorporate accounting changes that resulted from the implementation of
Governmental Accounting Standard Board Statement (GASB) #54.
Current Year Status:
This issue has not been resolved.
Further Action Needed:
We continue to recommend that the Town's fund balance policy be updated
to include (but not limited to):
• Establish desired level of unassigned fund balance.
• Specify prioritization of use of fund balance amounts when multiple
sources are used for one project, grant or activity (i.e., general fund
monies are appropriated to partially fund a capital project, or a grant
match).
• Specify the body or official authorized to make assignments of fund
balance and applicable time constraints on each assignment.
• Distinguish between encumbrance (commitments related to contracts
not yet performed and orders not yet filled) and other assignments
(previously called designations).
• Define any approval process for modifying existing assignments.
This will provide improved guidance over fund balance issues in accordance
with current GASB 54 terminology.
Town's Response:
The Town Accountant is hoping to complete the policy and get Board of
Selectmen approval within the next several months.
2. Improve Controls over Change Orders and Adjustments
Prior Year Issue:
In the prior year we noted a situation where a contract was awarded to the
lowest bidder at approximately $850,000. However, expenditures under
this contract totaled approximately $1,350,000. This exceeded the original
contract sum by approximately $500,000, or 59%. While the increase in
expenditures were subject to the Town's normal internal controls and
received required approval by department heads, the Town Accountant did
not certify that an appropriation was available for the additional work.
We recommended the Town review and revise, if necessary, its procedures
related to procurement to adhere to best business practices, as well as
ensure compliance with State procurement laws. This would help ensure
compliance with the State procurement laws, and possibly enable the Town
to enter into more advantageous contracts.
Current Year Status:
This issue was satisfactorily resolved.
CURRENT YEAR RECOMMENDATIONS:
3. Ensure Proper Allocation of Expenditures
Several revolving funds carry a year-end fund balance that represents
reserves of as much as six to twenty-four months of respective expenditures.
This may result from an incomplete matching of program costs against the
program generated revenues.
We recommend that the Town review the revolving funds to ensure a proper
matching of revenues and expenditures is occurring. This will help ensure that
transactions are posted to appropriate accounts and funds within the general
ledger.
Town's Response:
The Town Accountant and the School Finance Director will work together
to ensure that going forward projected revenues and expenses are closely
aligned within each revolving fund. In addition, budgeted support from these
revolving funds will be taken unless mitigating circumstances exist that merit
a change in the budgeted support. Any change in the budgeted school
revolving fund support will be approved by the School Committee.
6 S6t1
TOWN OF
READING, MASSACHUSETTS
Annual Financial Statements
For the Year Ended June 30, 2014
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TABLE OF CONTENTS
PAGE
INDEPENDENT AUDITORS' REPORT 1
MANAGEMENT'S DISCUSSION AND ANALYSIS 5
BASIC FINANCIAL STATEMENTS:
Government-wide Financial Statements:
Statement of Net Position 15
Statement of Activities 16
Fund Financial Statements:
Governmental Funds:
Balance Sheet 18
Reconciliation of Total Governmental Fund Balances to
Net Position of Governmental Activities in the Statement
of Net Position 19
Statement of Revenues, Expenditures, and Changes
in Fund Balances 20
Reconciliation of the Statement of Revenues, Expenditures,
and Changes in Fund Balances of Governmental Funds to
the Statement of Activities 21
Statement of Revenues and Other Sources, and Expenditures
and Other Uses - Budget and Actual - General Fund 22
Proprietary Funds:
Statement of Net Position 23
Statement of Revenues, Expenses, and Changes in Fund
Net Position 24
Statement of Cash Flows 25
Fiduciary Funds:
Statement of Fiduciary Net Position 26
Statement of Changes in Fiduciary Net Position 27
Notes to Financial Statements 29
Electric Light Plant Notes to the Financial Statements 58
•
PAGE
REQUIRED SUPPLEMENTARY INFORMATION:
Schedule of Funding Progress 77
SUPPLEMENTARY INFORMATION:
Combining Balance Sheet - Nonmajor Governmental Funds 78
Combining Statement of Revenues, Expenditures and
Changes in Fund Balances - Nonmajor Governmental Funds 82
Combining Schedule of Net Position - Nonmajor Proprietary Funds 86
Combining Schedule of Revenues, Expenses and Changes
in Fund Net Position - Nonmajor Proprietary Funds 87
Combining Schedule of Cash Flows - Nonmajor Proprietary Funds 88
MELANSONHEATH
ACCOUNTANTS•AUDITORS
10 New England Business
Center D.•Suite 107
Andover,MA 01810
INDEPENDENT AUDITORS' REPORT melans nheath5
melansonheath.com
To the Board of Selectmen Additional Offices:
Town of Reading, Massachusetts Nashua,NH
Manchester,NH
Greenfield,MA
Ellsworth,ME
Report on the Financial Statements
We have audited the accompanying financial statements of the governmental activi-
ties, the business-type activities, each major fund, and the aggregate remaining fund
information of the Town of Reading, Massachusetts, as of and for the year June 30,
2014, (except for the Reading Contributory Retirement System, which is as of and
for the year ended December 31, 2013) and the related notes to the financial state-
ments, which collectively comprise the Town's basic financial statements as listed in
the Table of Contents.
Management's Responsibility for the Financial Statements
The Town's 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 and the standards applicable to financial
audits contained in Government Auditing Standards, issued by the Comptroller
General of the United States. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts
and disclosures in the financial statements. The procedures selected depend on the
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 assess-
ments, 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 manage-
ment, 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.
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 Reading, Massachusetts, as of June 30, 2014, 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.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that
Management's Discussion and Analysis and Schedule of Funding Progress be pre-
sented 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 supple-
mentary 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 evidence sufficient to express an opinion or
provide any assurance.
2 S 19 11
Other Information
Our audit was conducted for the purpose of forming opinions on the financial state-
ments that collectively comprise the Town's basic financial statements. The accom-
panying supplementary information appearing on pages 78 through 88 is presented
for purposes of additional analysis and is not a required part of the basic financial
statements. Such information is the responsibility of management and was derived
from and relates directly to the underlying accounting and other records used to
prepare the financial statements. The information has been subjected to the auditing
procedures applied in the audit of the financial statements and certain additional
procedures, including comparing and reconciling such information directly to the
underlying accounting and other records used to prepare the financial statements or
to the financial statements themselves, and other additional procedures in accord-
ance with auditing standards generally accepted in the United States of America. In
our opinion, the information is fairly stated in all material respects in relation to the
financial statements as a whole.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report
dated March 19, 2015 on our consideration of the Town's internal control over finan-
cial reporting and on our tests of its compliance with certain provisions of laws, regu-
lations, contracts, and grant agreements and other matters. The purpose of that
report is to describe the scope of our testing of internal control over financial report-
ing and compliance and the results of that testing, and not to provide an opinion on
internal control over financial reporting or on compliance. That report is an integral
part of an audit performed in accordance with Government Auditing Standards in
considering Town's internal control over financial reporting and compliance.
M
March 19, 2015
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MANAGEMENT'S DISCUSSION AND ANALYSIS
As management of the Town of Reading, Massachusetts we offer readers this narra-
tive overview and analysis of the financial activities of the Town for the June 30,
2014. Unless otherwise noted, all amounts reported in this analysis are
expressed in thousands.
A. OVERVIEW OF THE FINANCIAL STATEMENTS
This discussion and analysis is intended to serve as an introduction to the basic
financial statements. The basic financial statements are comprised of three com-
ponents: (1) government-wide financial statements, (2) fund financial statements,
and (3) notes to the financial statements. This report also contains other supple-
mentary information in addition to the basic financial statements themselves.
Government-wide financial statements. The government-wide financial state-
ments are designed to provide readers with a broad overview of our finances in
a manner similar to a 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 finan-
cial 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 fiscal periods (e.g., uncollected taxes and earned but unused
vacation leave).
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 and charges (business-type activities).
The governmental activities include general government, public safety, educa-
tion, public works, health and human services, and culture and recreation. The
business-type activities include water supply and distribution, sewer disposal,
landfill, electric, and storm water activities.
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 activi-
ties or objectives. Fund accounting is used to ensure and demonstrate compli-
ance with finance-related legal requirements. All of the funds can be divided into
three categories: governmental funds, proprietary funds, and fiduciary funds.
5 3�ZG
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 fund financial 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 deci-
sions. Both the governmental fund balance sheet and the governmental fund
statement of revenues, expenditures and changes in fund balances provide
a reconciliation to facilitate this comparison between governmental funds and
governmental activities.
An annual appropriated budget is adopted for the general fund. A budgetary
comparison statement has been provided for the general fund to demonstrate
compliance with this budget.
Proprietary funds. Proprietary funds are maintained as follows:
Enterprise funds are used to report the same functions presented as business-
type activities in the government-wide financial statements. Specifically, enter-
prise funds are used to account for water, sewer, landfill, electric, and storm
water operations.
Proprietary funds provide the same type of information as the business-type
activities reported in the government-wide financial statements, only in more
detail. The proprietary fund financial statements provide separate information
for the water, sewer, landfill, electric, and storm water operations. Water and
electric operations are considered to be major funds.
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 because the resources of those funds are
not available to support the Town's own programs. The accounting used for fidu-
ciary funds is much like that used for proprietary funds.
Notes to 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.
Other information. In addition to the basic financial statements and accom-
panying notes, this report also presents certain required supplementary infor-
6 �t,21
mation which is required to be disclosed by accounting principles generally
accepted in the United States of America.
B. FINANCIAL HIGHLIGHTS
• As of the close of the current fiscal year, the total of assets exceeded liabili-
ties by $243,845 (i.e., net position), a change of$7,547 in comparison to the
prior year.
• As of the close of the current fiscal year, governmental funds reported com-
bined ending fund balances of $33,993, a change of$2,456 in comparison to
the prior year.
• At the end of the current fiscal year, unassigned fund balance for the general
fund was $11,399, a change of $891 in comparison to the prior year.
• Total bonds payable at the close of the current fiscal year was $33,959, a
change of$(30) in comparison to the prior year.
C. GOVERNMENT-WIDE FINANCIAL ANALYSIS
The following is a summary of condensed government-wide financial data for the
current and prior fiscal years.
NET POSITION
Governmental Business-Type
Activities Activities Total
2014 2013 2014 2013 2014 2013
Current and other assets $ 44,805 $ 40,444 $ 59,192 $ 48,672 $ 103,997 $ 89,116
Capital assets 122,418 124,529 90,648 91,533 213,066 216,062
Total assets 167,223 164,973 149,840 140,205 317,063 305,178
Long-term liabilities outstanding 37,795 39,458 17,372 14,428 55,167 53,886
Other liabilities 10,173 7,702 7,876 7,292 18,049 14,994
Total liabilities 47,968 47,160 25,248 21,720 73,216 68,880
Net position:
Net investment in capital assets 99,820 99,515 81,328 81,395 181,148 180,910
Restricted 17,586 17,475 4,131 2,734 21,717 20,209
Unrestricted 1,848 823 39,132 34,356 40,980 35,179
Total net position $ 119,254 $ 117,813 $ 124,591 $ 118,485 $ 243,845 $ 236,298
I
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CHANGES IN NET POSITION
Governmental Business-Type
Activities Activities Total
2014 2013 2014 2013 2014 2013
Revenues:
Program revenues:
Charges for services $ 7,599 $ 7,043 $ 97,545 $ 95,370 $ 105,144 $ 102,413
Operating grants and
contributions 21,561 21,759 - 53 21,561 21,812
Capital grants and
contributions 2,126 1,388 181 31 2,307 1,419
General revenues:
Property taxes 55,753 54,504 - - 55,753 54,504
Excises 3,226 3.090 - - 3,226 3,090
Penalties, interest, and
other taxes 972 853 - - 972 853
Grants and contributions
not restricted to specific
programs 3,086 3,417 - - 3,086 3,417
Investment income 1,112 542 138 33 1,250 575
Other 1,107 857 757 1,077 1,864 1,934
Total revenues 96,542 93,453 98,621 96,564 195,163 190,017
Expenses:
General government 5,384 4,943 - - 5,384 4,943
Public safety 12,381 11,826 - - 12,381 11,826
Education 65,725 64,838 - - 65,725 64,838
Public works 8,278 8,062 - - 8,278 8,062
Human services 999 935 - - 999 935
Culture and recreation 3,372 3,134 - - 3,372 3,134
Interest on long-term debt 934 1,220 - - 934 1,220
Intergovernmental 1,025 951 - - 1,025 951
Electric - - 79,409 79,431 79,409 79,431
Water - - 4,395 4,356 4,395 4,356
Other - - 5,714 5.542 5,714 5,542
Total expenses 98,098 95,909 89,518 89,329 187,616 185,238
Change in net position
before transfers (1,556) (2,456) 9,103 7,235 7,547 4,779
Transfers in (out) 2,997 2,915 (2.997) (2,915) - -
Change in net position 1,441 459 6,106 4,320 7,547 4,779
Net position- beginning of year 117,813 117,354 118,485 114,165 236,298 231,519
Net position -end of year $ 119.254 $ 117,813 $ 124,591 $ 118.485 $ 243,845 $ 236,298
As noted earlier, net position may serve over time as a useful indicator of a
government's financial position. At the close of the most recent fiscal year,
total net position was $243,845, a change of $7,547 from the prior year.
8 5 b 7,3
The largest portion of net position $181,148 reflects our investment in capital
assets (e.g., land, buildings, machinery, and equipment); less any related debt
used to acquire those assets that is still outstanding. These capital assets are
used to provide services to citizens; consequently, these assets are not available
for future spending. Although the investment in capital assets is reported net of
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 net position $21,717 represents resources that are sub-
ject to external restrictions on how they may be used. The remaining balance
of unrestricted net position $40,980 may be used to meet the government's
ongoing obligations to citizens and creditors.
Governmental activities. Governmental activities for the year resulted in a
change in net position of $1,441. Key elements of this change are as follows:
General fund expenditures exceeding revenues $ (1,661)
PILOT from RMLD 2,301
Enterprise fund indirect costs 696
Subtotal General Fund 1,336
Special revenue and permanent fund revenues
exceeding expenditures 1,664
Current year revenue used for the acquisition
of capital assets 3,480
Depreciation expense exceeding debt service
principal (3,162)
Increase in net OPEB obligation (1,650)
Other (227)
Total $ 1,441
Business-type activities. Business-type activities for the year resulted in a
change in net position of$6,106. Key elements of this change are as follows:
• The electric operations had revenues of$85,267 and expenses and
transfers of$81 ,711, resulting in a change in net position of $3,556.
• The water operations had revenues of$5,984 and expenses and transfers
of $4,808, resulting in a change in net position of$1,176.
• The sewer operations had revenues of$6,976 and expenses and
transfers of$5,760, resulting in a change in net position of$1,216.
• The landfill operations did not report any revenues or expenditures.
• The storm water management operations had revenues of $395 and
expenses of $237, resulting in a change in net position of $158.
9 b2�
D. FINANCIAL ANALYSIS OF THE GOVERNMENT'S FUNDS
As noted earlier, fund accounting is used 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$33,993, a change of $2,456 in comparison to the prior
year. Key elements of this change are as follows:
General fund expenditures exceeding revenues $ (1,661)
PILOT from RMLD 2,301
Enterprise fund indirect costs 696
Subtotal General Fund 1,336
Sale of Audobon Road property 311
Special education tuition receipts 239
Other special revenue fund revenues
exceeding expenditures 501
Capital project fund expenditures
exceeding expenditures (544)
Permanent fund revenues exceeding expenditures 613
Total $ 2,456
The general fund is the chief operating fund. At the end of the current fiscal year,
unassigned fund balance of the general fund was $11,399, while total fund bal-
ance was $15,848. 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 general
fund expenditures. Refer to the table below.
% of
Total General
General Fund 6/30/14 6/30/13 Change Fund Expenditures
Unassigned fund balance $ 11,399 $ 10,508 $ 891 13.2%
Total fund balance 15,848 14,177 1,671 18.4%
10 5 �,j
The total fund balance of the general fund changed by $1,671 during the current
fiscal year. Key factors in this change are as follows:
General fund:
Use of free cash and overlay surplus as a funding source $ (2,280)
Use of MSBA grant for debt service (817)
Revenues in excess of budget 1,307
Expenditures less than budget 1,847
Expenditures of prior year encumbrances less
than current year encumbrances 1,073
Unused overlay 541
Total $ 1,671
Included in the total general fund balance are the Town's stabilization accounts
with the following balances:
6/30/14 6/30/13 Change
Stabilization - general $ 1,553 $ 1,550 $ 3
Stabilization - smart growth 353 310 43
Stabilization - sick buy-back 12 55 (43)
Total $ 1 ,918 $ 1,915 $ 3
The following table reflects the trend in all the components of the general fund's
fund balance:
Last Six Fiscal Years
Assigned for
Restricted Committed for Subsequent
As of for Debt Stabilization Assigned for Year's Total Fund
30-Jun Service Fund Encumbrances Expenditures Unassigned Balance
2009 $ - $ 350 (b) $ 1,210 S 763 $ 7,976 (b) $ 10,299
2010 12,530 375 (b) 1,488 1,491 7,822 (b) 23,706
2011 11,833 705 (b) 1,006 928 8,649 (b) 23,121
2012 1,033 (a) 400 (b) 1,492 1,476 9,728 (b) 14,129 (a)
2013 817 365 1,087 1,400 10,508 14,177
2014 - 365 2,034 2,050 11,399 15,848
(a)The Town used$10,800 of debt reserves to pay down school related debt.
(b)Reclassified the Town's general stabilization account to unassigned fund balance.
Proprietary funds. Proprietary funds provide the same type of information found
in the business-type activities reported in the government-wide financial state-
ments, but in more detail.
Net position of the enterprise funds at the end of the year amounted to $124,591 ,
a change of$6,106 in comparison to the prior year. Factors concerning the
finances of proprietary funds have already been addressed in the entity-wide
discussion of business-type activities.
11 - ta
L
I
E. GENERAL FUND BUDGETARY HIGHLIGHTS
Differences between the original budget and the final amended budget resulted
in an overall change in appropriations of$1,101. Major reasons for these
amendments include:
• $ 575 increase in snow and ice funding
• $ 447 increase in School technology/capital expenses
• $ 300 increase in stabilization account funding
• $ 79 increase in other departmental expenses
• $(300) decrease in health insurance/workers compensation
Of this increase, $879 was funded by free cash, $113 through the tax levy, $96
from additional state aid, and $68 from transfers in from other funds. In addition,
other local revenues were reduced by $(55).
F. CAPITAL ASSET AND DEBT ADMINISTRATION
Capital assets. Total investment in capital assets for governmental and business-
type activities at year-end amounted to $213,066 (net of accumulated deprecia-
tion), a change of$(2,996) from the prior year. This investment in capital assets
includes land, buildings and system, improvements, and machinery and
equipment.
Major capital asset events during the current fiscal year included the following:
Governmental additions:
• $ 2,333 in roadway improvements
• $ 756 in library renovations
• $ 403 in various school improvements
• $ 126 for a sidewalk snow plow
Business-type additions:
• $ 3,894 in electric improvements
• $ 67 in water improvements
• $ 300 in sewer improvements
• $ 55 in stormwater improvements
Additional information on capital assets can be found in the Notes to Financial
Statements.
12 U
I
Long-term debt. At the end of the current fiscal year, total bonded debt out-
standing was $35,959, all of which was backed by the full faith and credit of the
government.
Additional information on capital assets and long-term debt can be found in the
Notes to Financial Statements.
G. ECONOMIC FACTORS AND NEXT YEAR'S BUDGETS AND RATES
The adopted FY15 General Fund budget of$82,332 is a 2.6% increase over the
prior year. The FY15 budget is balanced.
FY2015 State aid will be $13,282 which represents a 1.4% percent increase over
prior year.
The tax levy for FY15 of$58,795 represents a 4.2% increase over the prior year.
The FY15 tax rate is $14.70 per thousand compared to $14.74 in the prior year.
Overall, property values increased 4.5% to $3,999,638.
For FY2015, the Board of Selectmen, acting as the Water and Sewer Commis-
sioners, voted to increase Water Rates by 3.1% and Sewer Rates by 1.7% for all
customers effective for all billings after September 10, 2014. These increases are
expected to cover all operations, planned infrastructure improvements, and debt.
The State passed legislation allowing Massachusetts municipalities to pass a
Local Option Meals Tax of 0.75% with 100% of the revenue going to the Town.
Reading voted to accept this local option at their November 2010 Town Meeting.
We received revenue in FY2014 totaling $355. The FY15 revenue budgeted for
this tax is $350.
The Town is working on an $18,400 capital improvement project for remodeling
our library. In April 2013, voters approved $14,900 of debt exclusion. In April
2014, voters approved an additional $3,500 of debt exclusion. Note that of these
totals, the state has approved $5,100 of grant funding for the project; the balance
will be the local share.
At April 2012 Town Meeting, the Town voted to adopt Massachusetts General
Laws Chapter 32B, Section 20 which allows the Town to set up an irrevocable
trust for (OPEB), Other Post-Employment Benefits liabilities. Currently, the funds
set aside in this trust are invested in MMDT, which invests in US Treasuries,
commercial paper, and very short-term bonds according to the prudent investor
rule set forth in Chapter 203C. The Town is exploring the possibility of investing
the funds in the (SRBT) State Retiree Benefits Trust Fund administered by PRIM.
The SRBT funds are invested in Pension Reserve Investment Trust (PRIT).
Investment in PRIT offers higher returns which would reduce the Town's
unfunded OPEB liability.
13 �..
REQUESTS FOR INFORMATION
This financial report is designed to provide a general overview of the Town of
Reading's finances for all those with an interest in the government's finances.
Questions concerning any of the information provided in this report or requests
for additional financial information should be addressed to:
Town Accountant
Town Hall
16 Lowell Street
Reading, MA 01867
14 S1;711
TOWN OF READING, MASSACHUSETTS
STATEMENT OF NET POSITION
JUNE 30,2014
Governmental Business-Type
Activities Activities Total
ASSETS
Current:
Cash and short-term investments $ 23,296,746 $ 24,675,891 $ 47,972,637
Restricted cash - 19,219,111 19,219,111
Investments 19,052,464 - 19,052,464
Receivables,net of allowance for uncollectibles:
Property taxes 308,675 - 308,675
Excises 124,504 - 124,504
User fees - 11,739,265 11,739,265
Departmental and other 661,129 - 661,129
Intergovernmental 860,401 - 860,401
Prepaid assets - 772,766 772,766
Inventory - 1,465,119 1,465,119
Other assets 3,525 - 3,525
Noncurrent:
Restricted investments - 1,292,906 1,292,906
Investment in associated companies - 26,994 26,994
Receivables,net of allowance for uncollectibles:
Property taxes 497,542 - 497,542
Capital assets being depreciated, net 117,208,492 88,649,152 205,857,644
Capital assets not being depreciated 5,209,566 1,998,500 7,208,066
TOTAL ASSETS 167,223,044 149,839,704 317,062,748
LIABILITIES
Current:
Warrants payable 1,886,134 4,572,219 6,458,353
Accrued liabilities 4,886,469 730,746 5,617,215
Unearned revenues 201,409 - 201,409
Tax refunds payable 510,000 - 510,000
Customer advances for construction - 400,656 400,656
Customer deposits - 749,900 749,900
Due to retirement trust - 1,374,538 1,374,538
Retainage payable 1,104,104 - 1,104,104
Notes payable 1,000,000 - 1,000,000
Other current liabilities 585,319 48,062 633,381
Current portion of long-term liabilities:
Bonds and loans payable 2,345,347 1,453,239 3,798,586
Accrued employee benefits 54,097 195,937 250,034
Noncurrent:
Bonds and loans payable, net of current portion 19,654,992 12,505,648 32,160,640
Accrued employee benefits 1,491,527 2,782,656 4,274,183
Net OPEB obligation 14,249,155 434,870 14,684,025
TOTAL LIABILITIES 47,968,553 25,248,471 73,217,024
NET POSITION
Net investment in capital assets 99,819,968 81,328,246 181,148,214
Restricted for.
Grants and other statutory restrictions 7,887,610 4,130,585 12,018,195
Permanent funds:
Nonexpendable 3,042,918 - 3,042,918
Expendable 6,656,154 - 6,656,154
Unrestricted 1,847,841 39,132,402 40,980,243
TOTAL NET POSITION $ 119,254,491 $ 124,591,233 $ 243,845,724
The accompanying notes are an integral part of these financial statements.
15 sb3b
TOWN OF READING,MASSACHUSETTS
STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30,2014
•
Program Revenues
Operating Capital
Charges for Grants and Grants and Net(Expenses)
Expenses Services Contributions Contributions Revenues
Governmental Activities:
General government $ 5,384,032 $ 391,799 $ 211,963 $ - $ (4,780,270)
Public safety 12,380,412 2,428,752 94,875 - (9,856,785)
Education 65,725,154 3,907,540 20,971,717 - (40,845,897)
Public works 8,277,697 176,836 1,250 1,104,797 (6,994,814)
Health and human services 998,524 70,216 236,981 - (691,327)
Culture and recreation 3,372,336 623,893 43,844 1,021,024 (1,683,575)
Interest on long-term debt 934,019 - - - (934,019)
Intergovernmental 1,025,356 - - - (1,025,356)
Total Governmental Activities 98,097,530 7,599,036 21,560,630 2,125,821 (66,812,043)
Business-Type Activities:
Electric operations 79,409,332 84,364,480 - 24,117 4,979,265
Water operations 4,394,603 5,972,166 - - 1,577,563
Other 5,713,772 7,208,116 - 157,500 1,651,844
Total Business-type Activities 89,517,707 97,544,762 - 181,617 8,208,672
Total $ 187,615,237 $ 105,143,798 $ 21,560,630 $ 2,307,438 (58,603,371)
The accompanying notes are an integral part of these financial statements. (continued)
16 ,b31
I
TOWN OF READING,MASSACHUSETTS
STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30,2014
(continued)
Business-
Governmental Type
Activities Activities Total
Change in Net Position:
Net(Expenses)revenue from previous page $ (66,812,043) $ 8,208,672 $ (58,603,371)
General Revenues and Transfers:
Property taxes 55,752,791 - 55,752,791
Excises 3,225,690 - 3,225,690
Penalties,interest and other taxes 972,304 - 972,304
Grants and contributions not restricted
to specific programs 3,085,799 - 3,085,799
Investment income 1,112,085 138,011 1,250,096
Other 1,106,936 757,279 1,864,215
Transfers,net 2,997,290 (2,997,290) -
Total general revenues and transfers 68,252,895 (2,102,000) 66,150,895
Change in Net Position 1,440,852 6,106,672 7,547,524
Net Position:
Beginning of year 117,813,639 118,484,561 236,298,200
End of year $ 119,254,491 $ 124,591,233 $ 243,845,724
17 i, 3
TOWN OF READING, MASSACHUSETTS
GOVERNMENTAL FUNDS
BALANCE SHEET
JUNE 30,2014
Nonmajor Total
Governmental Governmental
General Funds Funds
ASSETS
Cash and short-term investments $ 11,989,514 $ 11,307,232 $ 23,296,746
Investments 9,544,214 9,508,250 19,052,464
Receivables:
Property taxes 892,836 - 892,836
Excises 200,465 - 200,465
Departmental and other 595,162 65,967 661,129
Intergovernmental - 860,401 860,401
Other assets 3,525 - 3,525
TOTAL ASSETS $ 23,225,716 $ 21,741,850 $ 44,967,566
LIABILITIES
Warrants payable $ 819,746 $ 1,066,388 $ 1,886,134
Accrued liabilities 4,337,583 224,586 4,562,169
Unearned revenue - 201,409 201,409
Retainage payable - 1,104,104 1,104,104
Notes payable - 1,000,000 1,000,000
Other liabilities 585,319 - 585,319
TOTAL LIABILITIES 5,742,648 3,596,487 9,339,135
DEFERRED INFLOWS OF RESOURCES 1,634,982 - 1,634,982
FUND BALANCES
Nonspendable - 3,042,918 3,042,918
Restricted - 15,902,823 15,902,823
Committed 364,628 - 364,628
Assigned 4,084,921 - 4,084,921
Unassigned 11,398,537 (800,378) 10,598,159
TOTAL FUND BALANCES 15,848,086 18,145,363 33,993,449
TOTAL LIABILITIES, DEFERRED INFLOWS OF
RESOURCES,AND FUND BALANCES $ 23,225,716 $ 21,741,850 $ 44,967,566
The accompanying notes are an integral part of these financial statements.
18 S 3
TOWN OF READING, MASSACHUSETTS
RECONCILIATION OF TOTAL GOVERNMENTAL FUND
BALANCES TO NET POSITION OF GOVERNMENTAL
ACTIVITIES IN THE STATEMENT OF NET POSITION
JUNE 30, 2014
Total governmental fund balances $ 33,993,449
• Capital assets used in governmental activities are not financial
resources and, therefore, are not reported in the funds. 122,418,058
• Revenues are reported on the accrual basis of accounting
and are not deferred until collection. 962.402
• In the Statement of Activities, interest is accrued on outstanding
long-term debt, whereas in governmental funds interest is not
reported until due. (324,300)
• Long-term liabilities, (bonds payable, accrued employee benefits
and net OPEB obligation) are not due and payable in the current period,
and, therefore. are not reported in the governmental funds. (37,795,118)
Net position of governmental activities $ 119,254,491
The accompanying notes are an integral part of these financial statements.
19 Cb �
tf
l
TOWN OF READING, MASSACHUSETTS
GOVERNMENTAL FUNDS
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
FOR THE YEAR ENDED JUNE 30, 2014
Nonmajor Total
Governmental Governmental
General Funds Funds
Revenues:
Property taxes $ 56,375,530 $ - $ 56,375,530
Excises 3,348,216 - 3,348,216
Penalties, interest and other taxes 972,304 - 972,304
Departmental 1,563,221 5,682,000 7,245,221
Licenses and permits 170,753 - 170,753
Fines and forfeitures 115,324 - 115,324
Intergovernmental 21,425,719 5,346.531 26,772,250
Investment income 136,322 765.413 901,735
Other 310,426 719,518 1,029,944
Total Revenues 84.417,815 12,513,462 96,931,277
Expenditures:
Current:
General government 3,991,015 129,831 4,120,846
Public safety 8,992,105 836,875 9,828,980
Education 46,313,176 7,263,614 53,576,790
Public works 6,270,374 1,630,353 7,900,727
Health and human services 598,509 221,521 820,030
Culture and recreation 2,029,192 1,311,293 3,340,485
Employee benefits 12,881,809 - 12,881,809
Debt service 3,977,419 - 3,977,419
Intergovernmental 1,025,356 - 1,025,356
Total Expenditures 86,078,955 11,393,487 97,472,442
Excess (deficiency)of revenues
over expenditures (1,661,140) 1,119,975 (541,165)
Other Financing Sources (Uses):
Transfers in 3,332,445 - 3,332,445
Transfers out - (335,155) (335,155)
Total Other Financing Sources (Uses) 3,332,445 (335,155) 2,997,290
Net change in fund balances 1,671,305 784,820 2,456,125
Fund Balances, at Beginning of Year 14,176,781 17,360,543 31,537,324
Fund Balances, at End of Year $ 15,848.086 $ 18,145,363 $ 33,993,449
The accompanying notes are an integral part of these financial statements.
20 5125
TOWN OF READING, MASSACHUSETTS
RECONCILIATION OF THE STATEMENT OF REVENUES
EXPENDITURES,AND CHANGES IN FUND BALANCES OF
GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2014
Net changes in fund balances-Total governmental funds $ 2,456,125
• 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:
4.061,511
Capital outlay purchases, net of dispositions
Depreciation (6.172,291)
• 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. (600,535)
• 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 position:
Repayments of debt 3,010,000
Current year amortization of bond premiums 210,350
• In the Statement of Activities, interest is accrued on outstanding
long-term debt, whereas in governmental funds interest is not
reported until due. 33,400
• Some expenses reported in the statement of activities, such as
compensated absences, do not require the use of current financial
resources and therefore, are not reported as expenditures in the
governmental funds:
Accrued employee benefits 92,358
Net OPEB obligation (1,650,066)
Change in net position of governmental activities $ 1,440,852
The accompanying notes are an integral part of these financial statements.
21 5 3�2
TOWN OF READING,MASSACHUSETTS
GENERAL FUND
STATEMENT OF REVENUES AND OTHER SOURCES,AND EXPENDITURES AND OTHER USES-
BUDGET AND ACTUAL
FOR THE YEAR ENDED JUNE 30,2014
Budgeted Amounts Variance with
Final Budget
Original Final Actual Positive
Budget Budget Amounts (Negative)
Revenues and Transfers:
Taxes $ 55,719,440 $ 55,832,440 $ 55,832,440 $ -
Excise taxes 2,825,000 2,792,288 3,348,216 555,928
Penalties,interest and other taxes 850,000 872,000 972,304 100,304
Departmental 1,500,000 1,500,000 1,563,221 63,221
Licenses and permits 140,000 140,000 170,753 30,753
Fines and forfeitures 110,000 100,000 115,324 15,324
Intergovernmental 13,100,000 13,196,149 13,446,085 249,936
Investment income 125,000 90,000 136,322 46,322
Other 126,349 126,349 310,426 184,077
Transfers in 3,505,054 3,573,154 3,634,233 61,079
Total Revenues and Transfers 78,000,843 78,222,380 79,529,324 1,306,944
Expenditures and Transfers:
General government 4,232,620 4,413,300 4,112,498 300,802
Public safety 9,124,790 9,380,468 9,161,580 218,888
Education 38,831,373 39,387,874 38,795,610 592,264
Public works 6,071,699 6,559,029 6,239,366 319,663
Health and human services 699,800 651,802 602,509 49,293
Culture and leisure 2,339,197 2,397,668 2,349,556 48,112
Intergovernmental 985,619 1,036,794 1,025,356 11,438
Employee benefits 13,565,050 13,215,050 12,908,309 306,741
Debt service 4,368,000 3,977,500 3,977,419 81
Transfers out - 300,000 300,000 -
Total Expenditures and Transfers 80,218,148 81,319,485 79,472,203 1,847,282
Excess(deficiency)of revenues and other
sources over expenditures and other uses (2,217,305) (3,097,105) 57,121 3,154,226
Other Financing Sources:
Use of free cash
For operating budget support 1,050,000 1,629,800 - (1,629,800)
For stabilization account funding - 300,000 - (300,000)
Use of overlay surplus 350,000 350,000 - (350,000)
Use of RMHS debt service reserve 817,305 817,305 - (817,305)
Total Other Financing Sources 2,217,305 3,097,105 - (3,097,105)
Excess of revenues and other
sources over expenditures and other uses $ - $ - $ 57,121 $ 57,121
The accompanying notes are an integral part of these financial statements.
22 -- "
TOWN OF READING,MASSACHUSETTS
PROPRIETARY FUNDS
STATEMENT OF NET POSITION
JUNE 30,2014
Business-Type Activities
Enterprise Funds
Electric
Division Water Non Major
Fund Fund Funds Total
ASSETS
Current:
Cash and short-term investments $ 11,533,212 $ 8,255,132 $ 4,887,547 $ 24,675,891
User fees,net of allowance for uncollectibles 7,871,050 1,660,010 2,208,205 11,739,265
Prepaid expenses 772,766 - - 772,766
Inventory 1,407,500 56,203 1,416 1,465,119
Total current assets 21,584,528 9,971,345 7,097,168 38,653,041
Noncurrent
Restricted cash and cash equivalents 19,219,111 - - 19,219,111
Restricted investments 1,292,906 - - 1,292,906
Investment in associated companies 26,994 - - 26,994
Capital assets being depreciated,net 68,928,263 13,484,818 6,236,071 88,649,152
Capital assets not being depreciated 1,265,842 121,823 610,835 1,998,500
Total noncurrent assets 90,733,116 13,606,641 6,846,906 111,186,663
TOTAL ASSETS 112,317,644 23,577,986 13,944,074 149,839,704
LIABILITIES
Current:
Warrants payable 4,407,535 22,118 142,566 4,572,219
Accrued liabilities 592,810 117,693 20,243 730,746
Customer advances for construction 400,656 - - 400,656
Customer deposits 749,900 - - 749,900
Due to pension trust 1,374,538 - - 1,374,538
Other current liabilities - - 48,062 48,062
Current portion of long-term liabilities:
Bonds and loans payable - 1,336,200 117,039 1,453,239
Accrued employee benefits 195,937 - - 195,937
Total current liabilities 7,721,376 1,476,011 327,910 9,525,297
Noncurrent:
Bonds and loans payable - 12,255,800 249,848 12,505,648
Accrued employee benefits 2,722,934 34,824 24,898 2,782,656
Net OPEB obligation - 302,890 131,980 434,870
TOTAL LIABILITIES 10,444,310 14,069,525 734,636 25,248,471
NET POSITION
Net investment in capital assets 70,194,105 4,376,598 6,757,543 81,328,246
Restricted for depreciation fund 4,130,585 - - 4,130,585
Unrestricted 27,548,644 5,131,863 6,451,895 39,132,402
TOTAL NET POSITION $ 101,873,334 $ 9,508,461 $ 13,209,438 $ 124,591,233
0
The accompanying notes are an integral part of these financial statements.
23 g 65 8
TOWN OF READING,MASSACHUSETTS
PROPRIETARY FUNDS
STATEMENT OF REVENUES,EXPENSES AND CHANGES IN FUND NET POSITION
FOR THE YEAR ENDED JUNE 30,2014
Business-Type Activities
Enterprise Funds
Electric
Division Water Non Major
Fund Fund Funds Total
Operating Revenues:
Charges for services $ 84,364,480 $ 5,972,166 $ 7,208,116 $ 97,544,762
Total Operating Revenues 84,364,480 5,972,166 7,208,116 97,544,762
Operating Expenses:
Personnel expenses - 960,830 547,249 1,508,079
Non-personnel expenses - 342,230 205,560 547,790
Intergovernmental 1,397,270 1,854,203 4,499,328 7,750,801
Depreciation 3,779,635 873,176 433,155 5,085,966
Energy purchases 60,823,626 27,538 26,380 60,877,544
Operating 11,002,998 - - 11,002,998
Maintenance 2,290,843 - - 2,290,843
Total Operating Expenses 79,294,372 4,057,977 5,711,672 89,064,021
Operating Income 5,070,108 1,914,189 1,496,444 8,480,741
Nonoperating Revenues(Expenses):
Intergovernmental revenue - - 157,500 157,500
Investment income 120,832 11,511 5,668 138,011
Interest expense - (336,626) (2,100) (338,726)
Loss on disposal of capital assets (114,960) - - (114,960)
Other 757,279 -
757,279
Total Nonoperating Revenues(Expenses) 763,151 (325,115) 161,068 599,104
Income Before Transfers and Contributions 5,833,259 1,589,074 1,657,512 9,079,845
Capital contributions 24,117 - - 24,117
Transfers out (2,301,221) (413,013) (283,056) (2,997,290)
Change in Net Position 3,556,155 1,176,061 1,374,456 6,106,672
Net Position at Beginning of Year 98,317,179 8,332,400 11,834,982 118,484,561
Net Position at End of Year $ 101,873,334 $ 9,508,461 $ 13,209,438 $ 124,591,233
The accompanying notes are an integral part of these financial statements.
24 �1 31
TOWN OF READING,MASSACHUSETTS
PROPRIETARY FUNDS
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30,2014
Business-Type Activities
Enterprise Funds
Electric
Division Water Non Major
Fund Fund Funs Total
Cash Flows From Operating Activities:
Receipts from customers and users $ 80,249,266 $ 6,027,136 $ 7,017,622 $ 93,294,024
Payments to vendors and employees (74,778,752) (1,711,621) (736,224) (77,226,597)
Customer refund,purchase power,and fuel charge adjustments 4,675,419 - - 4,675,419
Payments to other governments - (1,854,203) (4,499,328) (6,353,531)
Net Cash Provided By Operating Activities 10,145,933 2,461,312 1,782,070 14,389,315
Cash Flows From Noncapital Financing Activities:
MMWEC surplus 391,726 - 391,726
Intergovernmental revenue - - 157,500 157,500
Other 365,553 - - 365,553
Transfer out (2,301,221) (413,013) (283,056) (2,997,290)
Net Cash(Used For)Noncapital Financing Activities (1,543,942) (413,013) (125,556) (2,082,511)
Cash Flows From Capital and Related Financing Activities:
Proceeds from issuance of bonds and notes - 4,012,000 192,500 4,204,500
Acquisition of capital assets (3,894,282) (67,022) (354,350) (4,315,654)
Capital grants and contributions 19,619 - - 19,619
Principal payments on bonds and notes - (935,000) (78,539) (1,013,539)
Interest expense - (336,626) (2,100) (338,726)
Net Cash(Used For)Capital and Related Financing Activities (3,874,663) 2,673,352 (242,489) (1,443,800)
Cash Flows From Investing Activities:
(Increase)decrease in restricted cash and investments (2,466,799) - - (2,466,799)
Investment income 120,832 11,511 5,668 138,011
Net Cash Provided By Investing Activities (2,345,967) 11,511 5,668 (2,328,788)
Net Change in Cash and Short-Term Investments 2,381,361 4,733,162 1,419,693 8,534,216
Unrestricted Cash and Short Term Investments,Beginning of Year 9,151,851 3,521,970 3,467,854 16,141,675
Unrestricted Cash and Short Term Investments,End of Year $ 11,533,212 $ 8,255,132 $ 4,887,547 $ 24,675,891
Reconciliation of Operating Income to Net Cash
Provided By(Used For)Operating Activities:
Operating income $ 5,070,108 $ 1,914,189 $ 1,496,444 $ 8,480,741
Adjustments to reconcile operating income(loss)to net
cash provided by(used for)operating activities:
Depreciation 3,779,635 873,176 433,155 5,085,966
Changes in assets and liabilities:
User fees receivables 510,327 54,970 (190,494) 374,803
Inventory and prepayments 80,209 27,098 , (787) 106,520
Warrants payable (571,282) (415,416) 41,744 (944,954)
Accrued liabilities (147,480) 15,734 4,473 (127,273)
Other liabilities 49,878 - (3,311) 46,567
Due to pension trust 1,374,538 - - 1,374,538
Net OPEB obligation - (8,439) 846 (7,593)
Net Cash Provided By Operating Activities $ 10,145,933 $ 2,461,312 $ 1,782,070 $ 14,389,315
The accompanying notes are an integral part of these financial statements.
25 5 I. 11 tj
TOWN OF READING,MASSACHUSETTS
FIDUCIARY FUNDS
STATEMENT OF FIDUCIARY NET POSITION
JUNE 30,2014
Municipal
Pension Light Municipal
Trust Fund Pension Light
(As of Trust OPEB OPEB Agency
December 31,2013) Funds Trust Fund Trust Fund Funds
ASSETS
Cash and short term investments $ 1,900,316 $ 2,632,367 $ 1,876,510 $ 1,846,042 $ 342,524
Investments 110,085,635 1,292,906 - - -
Accounts receivable 77,480 - - - -
Due from proprietary fund - 1,374,538 - - -
Other - - - - 2,763
Total Assets 112,063,431 5,299,811 1,876,510 1,846,042 345,287
LIABILITIES AND NET POSITION
Warrants payable - - - - 19,366
Other liabilities 8,857 - - - 325,921
Total Liabilities 8,857 - - - 345,287
NET POSITION
Total net position held in trust for
pension benefits and other purposes $ 112,054,574 $ 5,299,811 $ 1,876,510 $ 1,846,042 $ -
The accompanying notes are an integral part of these financial statements.
26 5 ( 'l'
TOWN OF READING,MASSACHUSETTS
FIDUCIARY FUNDS
STATEMENT OF CHANGES IN FIDUCIARY NET POSITION
FOR THE YEAR ENDED JUNE 30,2014
Pension Municipal Municipal
Trust Fund Light Light
(As of Pension OPEB OPEB
December 31,2013) Trust Funds Trust Fund Trust Fund
Additions:
Contributions:
Employers $ 4,747,889 $ 1,374,538 $ 508,899 $ 343,095
Intergovernmental 339,508 - - -
Plan members 2,254,760 - - -
Total contributions 7,342,157 1,374,538 508,899 343,095
Investment Income:
Increase in fair value of investments 14,951,078 74,220 2,690 7,436
Less: management fees (582,058) - _ -
Net investment income 14,369,020 74,220 2,690 7,436
Total additions 21,711,177 1,448,758 511,589 350,531
Deductions:
Benefit payments to plan members,beneficiaries,
and other systems 8,374,020 - - -
Refunds and transfers to other systems 117,846 - - -
Administrative expenses 117,334 - - -
Other - 1,346,039 - -
Total deductions 8,609,200 1,346,039 - -
Net increase(decrease) 13,101,977 102,719 511,589 350,531
Net position:
Beginning of year,as restated 98,952,597 5,197,092 1,364,921 1,495,511
End of year $ 112,054,574 $ 5,299,811 $ 1,876,510 $ 1,846,042
The accompanying notes are an integral part of these financial statements.
27 5,6 4,(L
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28 56 ( 3
TOWN OF READING, MASSACHUSETTS
Notes to Financial Statements
1. Summary of Significant Accounting Policies
The accounting policies of the Town of Reading, Massachusetts (the Town)
conform to generally accepted accounting principles (GAAP) as applicable to
governmental units. The following is a summary of the more significant
policies:
A. Reporting Entity
The Town is a municipal corporation governed by an elected Board of
Selectmen. As required by generally accepted accounting principles,
these financial statements present the government and applicable com-
ponent units for which the government is considered to be financially
accountable. In fiscal year 2014, it was determined that no entities met the
required GASB 14 (as amended) criteria of component units. The Reading
Contributory Retirement System was established to provide retirement
benefits primarily to employees and their beneficiaries. The System is
presented using the accrual basis of accounting and is reported as a
pension trust fund in the fiduciary fund financial statements. Additional
financial information of the System can be obtained by contacting the
System located at 16 Lowell Street, Reading, Massachusetts 01867.
B. Government-wide and Fund Financial Statements
Government-wide Financial Statements
The government-wide financial statements (i.e., the Statement of Net
Position and the Statement of Activities) report information on all of the
nonfiduciary activities of the primary government. For the most part, the
effect of interfund activity has been removed from these statements.
Governmental activities, which normally are supported by taxes and
intergovernmental revenues, are reported separately from business-type
activities, which rely to a significant extent on fees and charges for support.
The Statement of Activities demonstrates the degree to which the direct
expenses of a given function or segment is offset by program revenues.
Direct expenses are those that are clearly identifiable with a specific func-
tion or segment. Program revenues include (1) charges to customers
or applicants who purchase, use, or directly benefit from goods, services,
or privileges provided by a given function or segment and (2) grants and
contributions that are restricted to meeting the operational or capital
requirements of a particular function or segment. Taxes and other items
not properly included among program revenues are reported instead as
general revenues.
29 _<13,1/11t
Fund Financial Statements
Separate financial statements are provided for governmental funds,
proprietary funds, and fiduciary funds, even though the latter are excluded
from the government-wide financial statements. Major individual govern-
mental funds and major individual enterprise funds are reported as sepa-
rate columns in the fund financial statements.
C. Measurement Focus, Basis of Accounting, and Financial Statement
Presentation
Government-wide Financial Statements
The government-wide financial statements are reported using the eco-
nomic resources measurement focus and the accrual basis of accounting,
as is the proprietary fund and fiduciary fund financial statements. Reve-
nues are recorded when earned and expenses are recorded when a
liability is incurred, regardless of the timing of related cash flows. Property
taxes are recognized as revenues in the year for which they are levied.
Grants and similar items are recognized as revenue as soon as all eligi-
bility requirements imposed by the provider have been met. As a general
rule, the effect of interfund activity has been eliminated from the govern-
ment-wide financial statements.
Amounts reported as program revenues include (1) charges to customers
or applicants for goods, services, or privileges provided, (2) operating
grants and contributions, and (3) capital grants and contributions, includ-
ing special assessments. Internally dedicated resources are reported as
general revenues rather than as program revenues. Likewise, general
revenues include all taxes and excises.
Fund Financial Statements
Governmental fund financial statements are reported using the current
financial resources measurement focus and the modified accrual basis of
accounting. Revenues are recognized as soon as they are both measur-
able and available. Revenues are considered to be available when they
are collectible within the current period or soon enough thereafter to pay
liabilities of the current period. For this purpose, the Town considers
property tax revenues to be available if they are collected within 60 days
of the end of the current fiscal period. All other revenue items are consid-
ered to be measurable and available only when cash is received by the
government. Expenditures generally are recorded when a liability is
incurred, as under accrual accounting. However, debt service expendi-
tures, as well as expenditures related to compensated absences and
claims and judgments, are recorded only when payment is due.
The government reports the following major governmental funds:
• The general fund is the government's primary operating fund.
It accounts for all financial resources of the general government,
except those required to be accounted for in another fund.
30 5 �y /
Proprietary funds distinguish operating revenues and expenses from non-
operating items. Operating revenues and expenses generally result from
providing services and producing and delivering goods in connection with
a proprietary fund's principal ongoing operations. The principal operating
revenues of the enterprise fund are charges to customers for sales and
services. Operating expenses for enterprise funds include the cost of
sales and services, administrative expenses and depreciation on capital
assets. All revenues and expenses not meeting this definition are reported
as nonoperating revenues and expenses.
The Town reports the following major proprietary funds:
• Electric Enterprise Fund
• Water Enterprise Fund
The Town reports the following fiduciary funds:
• The pension trust fund accounts for the activities of the Employees
Contributory Retirement System, which accumulates resources for
pension benefit payments to qualified employees.
• The municipal light pension trust fund accounts for the activities of
the Municipal Light Employees Contributory Retirement System,
which accumulates resources for pension benefit payments to
qualified employees.
• The OPEB trust fund accounts for reserves set aside by the Town to
fund future OPEB costs.
• The municipal light OPEB trust fund accounts for reserves set aside
by the Municipal Light Department to fund future OPEB costs.
• The agency fund is custodial in nature and is used to account for
funds held for others.
D. Cash and Short-Term Investments
Cash balances from all funds, except those required to be segregated by
law, are combined to form a consolidation of cash. Cash balances are
invested to the extent available, and interest earnings are recognized in the
General Fund. Certain special revenue, proprietary, and fiduciary funds
segregate cash, and investment earnings become a part of those funds.
Deposits with financial institutions consist primarily of demand deposits,
certificates of deposits, and savings accounts. A cash and investment pool
is maintained that is available for use by all funds. Each fund's portion of
this pool is reflected on the combined financial statements under the cap-
tion "cash and short-term investments". The interest earnings attributable
to each fund type are included under investment income.
31 12 /t
I
For purpose of the statement of cash flows, the proprietary funds consider
investments with original maturities of three months or less to be short-
term investments.
E. Investments
State and local statutes place certain limitations on the nature of deposits
and investments available. Deposits in any financial institution may not
exceed certain levels within the financial institution. Non-fiduciary fund
investments can be made in securities issued by or unconditionally guar-
; anteed by the U.S. Government or agencies that have a maturity of one
year or less from the date of purchase and repurchase agreements guar-
anteed by such securities with maturity dates of no more than 90 days
from the date of purchase.
Investments for the Contributory Retirement System and Trust Funds
consist of marketable securities, bonds and short-term money market
investments. Investments are carried at market value.
F. Property Tax Limitations
Legislation known as "Proposition 2'/2" limits the amount of revenue that
can be derived from property taxes. The prior fiscal year's tax levy limit is
used as a base and cannot increase by more than 2.5 percent (excluding
new growth), unless an override or debt exemption is voted. The actual
fiscal year 2014 tax levy reflected an excess capacity of$118,969.
G. Inventories
Inventories are valued at cost using the first-in/first-out (FIFO) method.
The costs of governmental fund-type inventories are recorded as expendi-
tures when purchased rather than when consumed. No significant inven-
tory balances were on hand in governmental funds.
H. Capital Assets
Capital assets, which include property, plant, equipment, and infrastruc-
ture assets are reported in the applicable governmental or business-type
activities columns in the government-wide financial statements. Capital
assets are defined by the Town as assets with an initial individual cost of
more than $5,000 and an estimated useful life in excess of two years.
Such assets are recorded at historical cost or estimated historical cost if
purchased or constructed. Donated capital assets are recorded at
estimated fair market value at the date of donation.
The costs of normal maintenance and repairs that do not add to the value
of the asset or materially extend assets lives are not capitalized.
32 Sia7
Major outlays for capital assets and improvements are capitalized as pro-
jects are constructed. Interest incurred during the construction phase of
capital assets of business-type activities is included as part of the capital-
ized value of the assets constructed.
Capital assets are depreciated using the straight-line method over the
following estimated useful lives:
Assets Years
Land improvements 20
Buildings and improvements 20-50
Machinery, equipment, and
furnishings 5-20
Infrastructure 50
I. Compensated Absences
It is the Town's policy to permit employees to accumulate earned but
unused vacation and sick pay benefits. All vested sick and vacation pay is
accrued when incurred in the government-wide, proprietary, and fiduciary
fund financial statements. A liability for these amounts is reported in gov-
ernmental funds only if they have matured, for example, as a result of
employee resignations and retirements.
J. Long-Term Obligations
In the government-wide financial statements, and proprietary fund types in
the fund financial statements, long-term debt, and other long-term obliga-
tions are reported as liabilities in the applicable governmental activities,
business-type activities, or proprietary fund type Statement of Net
Position.
K. Fund Equity
Fund equity at the governmental fund financial reporting level is classified
as "fund balance". Fund equity for all other reporting is classified as "net
position".
Fund Balance - Generally, fund balance represents the difference
between the current assets and current liabilities. The Town reserves
those portions of fund balance that are legally segregated for a specific
future use or which do not represent available, spendable resources
and therefore, are not available for appropriation or expenditure.
Unassigned fund balance indicates that portion of fund balance that is
available for appropriation in future periods.
33 5 h9 g
The Town's fund balance classification policies and procedures are as
follows:
1) Nonspendable funds are either unspendable in the current form
(i.e., inventory or prepaid items) or can never be spent (i.e., per-
petual care).
2) Restricted funds are used solely for the purpose in which the fund
was established. In the case of special revenue funds, these funds
are created by statute or otherwise have external constraints on
how the funds can be expended.
3) Committed funds are reported and expended as a result of motions
passed by the highest decision making authority in the government
(i.e., the Town Meeting).
4) Assigned funds are used for specific purposes as established by
management. These funds, which include encumbrances, have
been assigned for specific goods and services ordered but not yet
paid for. This account also includes fund balance (free cash) voted
to be used in the subsequent fiscal year.
5) Unassigned funds are available to be spent in future periods.
When an expenditure is incurred that would qualify for payment from multi-
ple fund balance types, the Town uses the following order to liquidate lia-
bilities: restricted, committed, assigned and unassigned.
Net Position - Net position represents the difference between assets/
deferred outflows and liabilities/deferred inflows. Net investment in capital
assets consist of capital assets, net of accumulated depreciation, reduced
by the outstanding balances of any borrowing used for the acquisition,
construction or improvement of those assets. Net position is reported as
restricted when there are limitations imposed on their use either through
the enabling legislation adopted by the Town or through external
restrictions imposed by creditors, grantors, or laws or regulations of other
governments. The remaining net position is reported as unrestricted.
L. Use of Estimates
The preparation of basic financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities
and disclosures for contingent assets and liabilities at the date of the basic
financial statements, and the reported amounts of the revenues and
expenditures/expenses during the fiscal year. Actual results could vary
from estimates that were used.
34
2. Stewardship, Compliance, and Accountability
A. Budgetary Information
At the annual town meeting, the Finance Committee presents an operating
and capital budget for the proposed expenditures of the fiscal year com-
mencing the following July 1. The budget, as enacted by town meeting,
establishes the legal level of control and specifies that certain appropria-
tions are to be funded by particular revenues. The original budget is
amended during the fiscal year at special town meetings as required by
changing conditions. In cases of extraordinary or unforeseen expenses,
the Finance Committee is empowered to transfer funds from the Reserve
Fund (a contingency appropriation) to a departmental appropriation.
"Extraordinary" includes expenses which are not in the usual line, or are
great or exceptional. "Unforeseen" includes expenses which are not fore-
seen as of the time of the annual meeting when appropriations are voted.
Departments are limited to the line items as voted. Certain items may
exceed the line item budget as approved if it is for an emergency and for
the safety of the general public. These items are limited by the Massa-
chusetts General Laws and must be raised in the next year's tax rate.
Formal budgetary integration is employed as a management control
device during the year for the General Fund and Proprietary Funds.
Effective budgetary control is achieved for all other funds through provi-
sions of the Massachusetts General Laws.
At year-end, appropriation balances lapse, except for certain unexpended
capital items and encumbrances which will be honored during the subse-
quent year.
B. Budgetary Basis
The General Fund final appropriation appearing on the "Budget and
Actual" page of the fund financial statements represents the final amended
budget after all reserve fund transfers and supplemental appropriations.
C. Budget/GAAP Reconciliation
The budgetary data for the General Fund is based upon accounting princi-
ples that differ from generally accepted accounting principles (GAAP).
Therefore, in addition to the GAAP basis financial statements, the results
of operations of the general fund are presented in accordance with budg-
etary accounting principles to provide a meaningful comparison to budg-
etary data.
35
The following is a summary of adjustments made to the actual revenues
and other sources, and expenditures and other uses, to conform to the
budgetary basis of accounting.
Revenues Expenditures
and Other and Other
General Fund Financing Sources Financing Uses
Revenues/Expenditures
(GAAP Basis) $ 84,417,815 $ 86,078,955
Other financing sources/uses
(GAAP Basis) 3,332,445 -
Subtotal (GAAP Basis) 87,750,260 86,078,955
To adjust property tax revenue
to the budgetary basis (543,090) -
Reverse beginning of year
appropriation carryforwards
from expenditures - (895,719)
Add end-of-year appropriation
carryforwards to expenditures - 1,968,601
To reverse the effects of non-
budgeted State contributions
for teacher retirements (7,979,634) (7,979,634)
To record stabilization activity 300,864 300,000
Other 924 -
Budgetary Basis $ 79,529,324 $ 79,472,203
D. Deficit Fund Equity
The Town reported various special revenue and capital project funds
reflecting individual deficit account balances as of June 30, 2014. The
deficits in these funds will be eliminated through future intergovernmental
revenues, bond proceeds, and transfers from other funds.
3. Cash and Short-Term Investments
Custodial Credit Risk- Deposits. Custodial credit risk is the risk that in the
event of a bank failure, the Town's and Contributory Retirement System's
(the System) deposits may not be returned. Massachusetts General Law
Chapter 44, Section 55, limits the Town's deposits "in a bank or trust
company or banking company to an amount not exceeding sixty percent 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
36 /( ✓ 1
banking company for such excess. Massachusetts General Law Chapter 32,
Section 23, limits the System's deposits "in a bank or trust company to an
amount not exceeding ten percent of the capital and surplus of such bank or
trust company. The Town and System do not have a deposit policy for
custodial credit risk.
As of June 30, 2014, $41,142,027 of the Town's and $104,482 of the
System's bank balances of$74,745,357 and $401,208, respectively, were
exposed to custodial credit risk. However, $39,721,938 of the Town's
exposed balance and the entire System's exposed balance was on deposit
with the Massachusetts Municipal Depository Trust (MMDT).
4. Investments
A. 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 invest-
ments that were purchased using surplus revenues, Massachusetts
General Law, Chapter 44, Section 55, limits the Town's investments to
the top rating issued by at least one nationally recognized statistical rating
organization (NRSROs).
The Town and System do not have a policy for credit risk.
Presented below (in thousands) is the actual rating as of year-end for
each investment of the Town:
Exempt
Fair From Average
Investment Type Value Disclosure Rating
Domestic corporate bonds $ 4,244 $ - A2
Foreign corporate bonds 2,519 - A3
Certificates of deposits 11,586 11,586
Corporate equities 2,398 2,398
Federal agency securities 891 - AAA
Total investments $ 21.638 $ 13.984
Massachusetts General Law, Chapter 32, Section 23, limits the investment
of System funds, to the extent not required for current disbursements, in the
PRIT Fund or in securities, other than mortgages or collateral loans, which
are legal for the investment of funds in savings banks under the laws of the
Commonwealth, provided that no more than the established percentage of
assets, is invested in any one security.
37 5L52
At June 30, 2014, the Contributory Retirement System maintained its invest-
ments in the State Investment Pool* with a fair value of$110,085,635. This
investment type is not rated.
*Fair value is the same as the value of the pool share. The Pension Reserves Investment
Trust was created under Massachusetts General Law, Chapter 32, Section 22, in December
1983. The Pension Reserves Investment Trust is operated under contract with a private
investment advisor, approved by the Pension Reserves Investment Management Board. The
Pension Reserves Investment Management Board shall choose an investment advisor by
requesting proposals from advisors and reviewing such proposals based on criteria adopted
under Massachusetts General Law, Chapter 30B.
B. Custodial Credit Risk
The custodial credit risk for investments is the risk that, in the event of the
failure of the counterparty (e.g. broker-dealer) to a transaction, a govern-
ment will not be able to recover the value of its investment or collateral
securities that are in the possession of another party. The Town and
System do not have policies for custodial credit risk.
The System's investments of$110,085,635 were exposed to custodial
credit risk as uninsured and uncollateralized. However, the investments
were held in the State Investment Pool (PRIT).
Of the Town's investment of$21,638,276, the government has a custodial
credit risk exposure of$21,638,276 because the related securities are
uninsured, unregistered and held by the Town's brokerage firm, which is
also the Counterparty to these securities. The Town manages this custo-
dial credit risk with SIPC and excess SIPC.
C. Concentration of Credit Risk
The Town places no limit on the amount the Town may invest in any one
issuer. Investments in any one issuer (other than U.S. Treasury securities
and mutual funds) that represent 5% or more of total investments are as
follows (in thousands):
Investment Issuer Amount
NBTC - CDARS - General Fund $ 2,010
SPDR S&P 500 ETF 1,733
NBTC - CDARS - General Fund 1,507
NBTC - CDARS - General Fund 1,507
NBTC - CDARS - General Fund 1,507
NBTC - CDARS - General Fund 1,506
NBTC - CDARS - General Fund 1,502
Total $ 11,272
38 53
Massachusetts General Law Chapter 32, Section 23 limits the amount the
System may invest in any one issuer or security type, with the exception of
the PRIT Fund.
The System does not have an investment in one issuer greater than 5% of
total investments, with the exception of the PRIT Fund.
a Interest Rate Risk
Interest rate risk is the risk that changes in market interest rates will ad-
versely affect the fair value of an investment. Generally, the longer the
maturity of an investment, the greater the sensitivity of its fair value to
changes in market interest rates. The Town and System do 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 invest-
ments to market interest rate fluctuations is as follows (in thousands):
Investment Maturities (in Years)
Fair Less
Investment Type Value Than 1 1-5 6-10
Debt-related Securities:
Domestic corporate bonds $ 4,244 $ - S 32 $ 4,212
Foreign corporate bonds 2,519 - - 2,519
Federal agency securities 891 - - 891
Total $ 7,654 $ - $ 32 $ 7,622
E. Foreign Currency Risk
Foreign currency risk is the risk that changes in foreign exchange rates
will adversely affect the fair value of an investment. The Town and System
do not have policies for foreign currency risk.
5. Taxes Receivable
Real estate and personal property taxes are levied and based on values
assessed on January 1st of every year. Assessed values are established by
the Board of Assessor's for 100% of the estimated fair market value. Taxes
are due on a quarterly basis and are subject to penalties and interest if they
are not paid by the respective due date. Real estate and personal property
taxes levied are recorded as receivables in the fiscal year they relate to.
Fourteen days after the due date for the final tax bill for real estate taxes, a
demand notice may be sent to the delinquent taxpayer. Fourteen days after
39 5 170
the demand notice has been sent the tax collector may proceed to file a lien
against the delinquent taxpayers' property. The Town has an ultimate right
to foreclose on property for unpaid taxes. Personal property taxes cannot be
secured through the lien process.
Taxes receivable at June 30, 2014 consist of the following (in thousands):
Real Estate
2014 $ 224
224
Personal Property
2014 4
2013 2
2012 2
2011 2
2010 5
Prior 10
25
Tax Liens 547
Deferred Taxes 97
Total $ 893
6. Allowance for Doubtful Accounts
The receivables reported in the accompanying entity-wide financial state-
ments reflect the following estimated allowances for doubtful accounts (in
thousands):
Governmental
Property taxes $ 86
Excises 75
7. Intergovernmental Receivables
This balance represents reimbursements requested from Federal and State
agencies for expenditures incurred in fiscal 2014.
8. Transfers In/Out
The Town reports interfund transfers between many of its funds. The sum of
all transfers presented in the table agrees with the sum of interfund transfers
40 _ 155
presented in the governmental fund financial statements. The following is an
analysis of interfund transfers made in fiscal year 2014.
Fund Transfers In Transfers Out
General Fund $ 3,332,445 $ -
Nonmajor Governmental Funds:
Revolving funds - 60,155
Receipts reserved for appropriation - 225,000
Gifts and donations - 50,000
Major Enterprise Funds:
Electric Division fund - 2,301,221
Water fund - 413,013
Nonmajor Enterprise Funds:
Sewer fund - 283,056
Total $ 3,332,445 $ 3,332,445
The transfers from the water and sewer funds to the general fund are made to
cover indirect costs of water and sewer funds incurred in the general fund.
The transfer from the electric division fund to the general fund is a payment in
lieu of taxes (PILOT). The Town's routine transfers include transfers made to
move (1) unrestricted revenues or balances that have been collected or accu-
mulated in the general fund to other funds based on budgetary authorization,
and (2) revenues from a fund that by statute or budgetary authority must
collect them to funds that are required by statute or budgetary authority to
expend them.
9. Capital Assets
Capital asset activity for the year ended June 30, 2014 was as follows (in
thousands):
41 -0°
Beginning Ending
Balance Increases Decreases Balance
Governmental Activities:
Capital assets, being depreciated:
Land improvements $ 3,672 $ 21 $ - $ 3,693
Buildings and improvements 133,737 312 (8) 134,041
Machinery, equipment, and furnishings 9,709 702 (223) 10,188
Infrastructure 34,538 1,948 - 36,486
Total capital assets, being depreciated 181.656 2,983 (231) 184,408
Less accumulated depreciation for:
Land improvements (1,063) (200) - (1,263)
Buildings and improvements (35,533) (3,702) 8 (39,227)
Machinery, equipment. and furnishings (4,643) (944) 223 (5,364)
Infrastructure (20,020) (1,326) - (21,346)
Total accumulated depreciation (61,259) (6,172) 231 (67,200)
Total capital assets, being depreciated, net 120,397 (3,189) - 117,208
Capital assets, not being depreciated:
Land 3,981 - - 3,981
Construction in progress 151 1,144 (66) 1,229
Total capital assets, not being depreciated 4,132 1,144 (66) 5,210
Governmental activities capital assets. net $ 124,529 $ (2,045) $ (66) $ 122,418
Beginning Ending
Balance Increases Decreases Balance
Business-Type Activities:
Capital assets, being depreciated:
Land improvements $ 1,437 $ - $ - $ 1,437
Buildings and improvements 16,701 4 (91) 16,614
Machinery, equipment, and furnishings 34,903 978 (518) 35,363
Infrastructure 108,640 3,090 (739) 110,991
Total capital assets, being depreciated 161,681 4,072 (1,348) 164,405
' Less accumulated depreciation for:
Land improvements (258) (70) - (328)
Buildings and improvements (9,814) (477) 91 (10,200)
Machinery, equipment, and furnishings (20,325) (1,256) 518 (21,063)
Infrastructure (41,506) (3,283) 624 (44,165)
Total accumulated depreciation (71,903) (5,086) 1,233 (75,756)
Total capital assets. being depreciated, net 89,778 (1,014) (115) 88,649
Capital assets, not being depreciated:
Land 1,450 - - 1,450
Construction in progress 305 244 - 549
Total capital assets, not being depreciated 1.755 244 - 1,999
Business-type activities capital assets, net $ 91,533 $ (770) $ (115) $ 90,648
42 5 bc2
Depreciation expense was charged to functions of the Town as follows (in
thousands):
Governmental Activities:
General government $ 260
Public safety 547
Education 3,436
Public works 1,687
Health and human services 33
Culture and recreation 209
Total depreciation expense - governmental activities $ 6,172
Business-Type Activities:
Electric $ 3,780
Water 873
Other - Sewer 402
Other- Stormwater 31
Total depreciation expense - business-type activities $ 5,086
10. Warrants Payable
Warrants payable represent 2014 expenditures paid by July 15, 2014.
11. Anticipation Notes Payable
The Town had the following notes outstanding at June 30, 2014:
Interest Date of Date of Balance at
Rate Issue Maturity 6/30/14
West Street roadway improvements 0.40% 06/19/14 09/26/14 $ 1,000,000
Total $ 1,000,000
The following summarizes activity in notes payable during fiscal year 2014:
Balance Balance
Beginning New End of
of Year Issues Maturities Year
West Street roadway improvements $ - $ 1,000,000 $ - $ 1.000,000
Total $ - $ 1.000.000 $ - $ 1.000,000
43 /�5r43
12. Long-Term Debt
A. General Obligation Bonds
The Town issues general obligation bonds to provide funds for the acquisi-
tion and construction of major capital facilities. General obligation bonds
have been issued for both governmental and business-type activities.
General obligation bonds currently outstanding are as follows:
Amount
Serial Outstanding
Maturities Interest as of
Governmental Activities: Through Rate(s) % 6/30/14
Barrow Elementary School 04/15/24 3.96% $ 1,250,000
Wood End Elementary School 04/15/24 3.96% 1,500,000
Wood End Elementary School 04/15/24 3.92% 100.000
Wood End Elementary School 04/15/24 3.94% 300,000
Wood End Elementary School 04/15/24 3.94% 450,000
Downtown Improvement projects 11/01/17 3.45% 260,000
Parker School refunding 07/01/17 3.05% 720,000
Ladder truck 07/01/17 3.05% 320,000
Fire truck 08/01/15 4.61% 105,000
Energy Improvements 08/01/25 4.61% 3,660,000
RMHS refinance 02/01/24 2.25% 10,440,000
Coolidge refinance 02/01/15 0.59% 5,000
Killam Roof 02/01/22 1.83% 536,000
Birch Meadows windows 02/01/22 1.83% 264,000
Total Governmental Activities: $ 19,910,000
Amount
Serial Outstanding
Maturities Interest as of
Business-Type Activities: Through Rate(s) % 6/30/14
Water treatment plant 06/30/15 3.38% $ 100,000
MWRA buy-in 04/15/27 4.00% 2.060,000
MWRA buy-in 11/01/27 3.05% 5,460,000
MWRA buy-in 07/01/17 3.05% 320,000
MWRA water system pipeline 08/15/21 0.00% 1.640,000
MWRA water system pipeline 08/12/23 0.00% 4.012,000
MWPAT septic 02/01/17 0.00% 8,133
MWRA sewer 08/17/14 0.00% 32,934
MWRA sewer 08/15/16 0.00% 133,320
MWRA sewer 05/19/19 0.00% 192,500
Total Business-Type Activities: $ 13,958,887
44 12 1
B. Future Debt Service
The annual payments to retire all general obligation long-term debt
outstanding as of June 30, 2014 are as follows:
Governmental Principal Interest Total
2015 $ 2,135,000 $ 852,730 $ 2,987,730
2016 2,030,000 778,458 2,808,458
2017 2,045,000 692,960 2,737,960
2018 2,055,000 605,275 2,660,275
2019 1,810,000 521,093 2,331,093
2020 - 2024 9,505,000 1,346,342 10,851,342
2025 330,000 6,188 336,188
Total $ 19,910,000 $ 4,803,046 $ 24,713,046
The general fund has been designated as the sole source to repay the
governmental-type general obligation debt outstanding as of June 30, 2014:
Business-Type Principal Interest Total
2015 $ 1,453,239 $ 312,340 $ 1,765,579
2016 1,320,305 284,531 1,604,836
2017 1,320,305 256,785 1,577,090
2018 1,275,865 228,795 1,504,660
2019 1,195,865 205,575 1,401,440
2020 - 2024 5,373,308 697,875 6,071,183
2025 - 2028 2,020,000 162,338 2,182,338
Total $ 13,958,887 $ 2,148,239 $ 16,107,126
C. Changes in General Long-Term Liabilities
During the year ended June 30, 2014, the following changes occurred in
long-term liabilities (in thousands):
Equals
Total Total Less Long-Term
Balance Balance Current Portion
7/1/13 Additions Reductions 6/30/14 Portion 6/30/14
Governmental Activities
Bonds payable $ 22,920 $ - $ (3,010) $ 19.910 $ (2,135) $ 17,775
Unamortized bond premiums 2,301 - (211) 2.090 (210) 1,880
Total bonds payable 25,221 - (3,221) 22.000 (2,345) 19,655
Other:
Accrued employee benefits 1,638 57 (149) 1,546 (54) 1,492
Net OPEB obligation 12,599 4,759 (3,109) 14,249 - 14,249
Totals $ 39,458 $ 4.816 $ (6.479) $ 37.795 $ (2.399) $ 35,396
45 .hG6
Equals
Total Total Less Long-Term
Balance Balance Current Portion
7/1/13 Additions Reductions 6/30/14 Portion 6/30/14
Business-Type Activities
Bonds payable $ 10,768 $ 4,205 $ (1,014) $ 13,959 $ (1,453) $ 12,506
Total bonds payable 10.768 4,205 (1,014) 13,959 (1,453) 12,506
Other:
Accrued employee benefits 3.218 146 (386) 2,978 (196) 2,782
Net OPEB obligation 442 927 (934) 435 - 435
Totals $ 14.428 $ 5.278 $ (2,334) $ 17,372 $ (1,649) $ 15,723
D. Bond Authorizations
Long-term debt authorizations which have not been issued or rescinded
as of June 30, 2014 are as follows:
Date Authorized Purpose Amount
November 2010 Killam School remodeling $ 329,772
November 2010 Birch Meadow School remodeling 110,607
November 2010 MWRA water system pipeline 235,000
November 2012 MWRA Ill sewer loan 71,000
January 2013 Library renovations 14,900,000
April 2013 MWRA Ill sewer loan 460,000
April 2013 MWRA water loan 2,113,000
November 2013 West street roadway improvements 1,000,000
February 2014 Library renovations 3,500,000
April 2014 West street roadway improvements 300,000
Total $ 23,019,379
13. Deferred Inflows of Resources
The Town has implemented GASB 65, Items Previously Reported as Assets
and Liabilities. Deferred inflows of resources are the acquisition of net assets
by the Town that are applicable to future reporting periods. Deferred inflows
of resources have a negative effect on net position, similar to liabilities.
Governmental funds report unavailable revenues in connection with receivables
that are not considered to be available to liquidate liabilities of the current
period.
The balance of the General Fund unavailable revenues account is equal to
the total of all June 30, 2014 receivable balances, except real and personal
property taxes that are accrued for subsequent 60-day collections.
46 Q
14. Restricted Net Position
The accompanying entity-wide financial statements report restricted net posi-
tion when external constraints from grantors or contributors are placed on net
position.
Permanent fund restricted net position are segregated between nonexpend-
able and expendable. The nonexpendable portion represents the original
restricted principal contribution, and the expendable represents accumulated
earnings which are available to be spent based on donor restrictions.
15. Governmental Funds - Balances
Fund balances are segregated to account for resources that are either not
available for expenditure in the future or are legally set aside for a specific
future use.
The Town implemented GASB Statement No. 54 (GASB 54), Fund Balance
Reporting and Governmental Fund Type Definitions, which enhances the use-
fulness of fund balance information by providing clearer fund balance classifi-
cations that can be more consistently applied and by clarifying existing gov-
ernmental fund type definitions.
The following types of fund balances are reported at June 30, 2014:
Nonspendable - Represents amounts that cannot be spent because they are
either (a) not in spendable form or (b) legally or contractually required to be
maintained intact. This fund balance classification includes general fund
reserves for prepaid expenditures and nonmajor governmental fund reserves
for the principal portion of permanent trust funds.
Restricted - Represents amounts that are restricted to specific purposes by
constraints imposed by creditors, grantors, contributors, or laws or regulations
of other governments, or constraints imposed by law through constitutional
provisions or enabling legislation. This fund balance classification includes
general fund encumbrances funded by bond issuances, various special reve-
nue funds, and the income portion of permanent trust funds.
Committed - Represents amounts that can only be used for specific pur-
poses pursuant to constraints imposed by formal action of the Town's highest
level of decision-making authority. This fund balance classification includes
general fund encumbrances for non-lapsing, special article appropriations
approved at Town Meeting, and various special revenue funds.
Assigned - Represents amounts that are constrained by the Town's intent to
use these resources for a specific purpose. This fund balance classification
includes general fund encumbrances that have been established by various
Town departments for the expenditure of current year budgetary financial
resources upon vendor performance in the subsequent budgetary period. The
47
Town follows an informal policy that permits management to assign fund
balance amounts to a specific purpose, although fund balance to be applied
against a subsequent year's budget is voted by Town Meeting.
Unassigned - Represents amounts that are available to be spent in future
periods.
Following is a breakdown of the Town's fund balances at June 30, 2014:
Nonmajor Total
General Governmental Governmental
Fund Funds Funds
Nonspendable
Nonexpendable permanent funds $ - $ 3.042,918 $ 3,042.918
Total Nonexpendable - 3.042,918 3,042.918
Restricted
Federal grants - 6,004 6,004
State grants
Circuit Breaker - 1,186,248 1,186,248
State aid to libraries - 181,427 181,427
Other - 18,072 18,072
Revolving funds:
Extended day program - 668,577 668,577
RISE preschool program - 474,070 474,070
Special Education tuition - 840,705 840,705
All-day kindergarten program - 655,141 655,141
Inspection permit - 810,298 810,298
Recreation - 249,027 249,027
Athletic activities - 176,007 176,007
School lunch - 345,717 345,717
Other - 327,419 327,419
Receipts reserved for appropriation
Sale of real estate - 891,056 891,056
Affordable housing fund - 260,391 260,391
Sale of cemetery lots - 180,529 180,529
Other - 13,207 13,207
Gifts and donations - 603,718 603,718
Expendable permanent funds
Healthcare - 4,581,561 4,581,561
Cemetery - 1,629,958 1,629,958
Other - 444,635 444,635
Town capital project funds
Library renovations - 1,282,150 1,282,150
Other 29,707 29,707
School capital project funds - 47,199 47,199
Total Restricted - 15,902,823 15,902,823
(continued)
48 3136'3
(continued)
Nonmajor Total
General Governmental Governmental
Fund Funds Funds
Committed
Smart growth stabilization fund 353,000 - 353,000
Sick buy-back stabilization fund 11,628 - 11,628
Total Committed 364,628 - 364.628
Assigned
For encumbrances
General government 235,506 - 235,506
Public safety 188,728 - 188,728
Education 1.059,084 - 1,059.084
Public works 152,708 - 152,708
Health and human services 10,550 - 10,550
Culture and recreation 348,345 - 348,345
Employee benefits 40,000 - 40,000
For next year's expenditures 2,050,000 - 2,050,000
Total Assigned 4,084,921 - 4,084,921
Unassigned(1) 11,398,537 (800,378) 10,598,159
Total Unassigned 11,398,537 (800.378) 10,598,159
Total Fund Balance $ 15,848.086 $ 18.145.363 S 33,993,449
(1) Includes$1.5 million in general Stabilization.
16. Subsequent Events
Debt
Subsequent to June 30, 2014, the Town has incurred the following additional
debt:
Interest Issue Maturity
Amount Rate Date Date
Roadway/pedestrian improvements bond
anticipation notes $ 1,000,000 1.25% 09/26/14 02/06/15
2015 general obligation bonds 15,800,000 3.00-4.00% 01/15/15 04/15/27
17. Commitments and Contingencies
Outstanding Legal Issues - There are several pending legal issues in which
the Town is involved. The Town's management is of the opinion that the
potential future settlement of such claims would not materially affect its finan-
cial statements taken as a whole.
49 ��
Abatements - There are several cases pending before the Appellate Tax
Board in regard to alleged discrepancies in property assessments. According
to Town counsel, the probable outcome of these cases at the present time is
indeterminable, although the Town expects such amounts, if any, to be
immaterial.
Grants - Amounts received or receivable from grantor agencies are subject to
audit and adjustment by grantor agencies, principally the federal government.
Any disallowed claims, including amounts already collected, may constitute
a liability of the applicable funds. The amount of expenditures which may be
disallowed by the grantor cannot be determined at this time, although the
Town expects such amounts, if any, to be immaterial.
18. Post-Employment Healthcare and Life Insurance Benefits
Other Post-Employment Benefits
GASB Statement 45, Accounting and Financial Reporting by Employers for
Postemployment Benefits Other Than Pensions, requires governments to
account for other post-employment benefits (OPEB), primarily healthcare, on
an accrual basis rather than on a pay-as-you-go basis. The effect is the recog-
nition of an actuarially required contribution as an expense on the Statement of
Activities when a future retiree earns their post-employment benefits, rather
than when they use their post-employment benefit. To the extent that an entity
does not fund their actuarially required contribution, a post-employment benefit
liability is recognized on the Statement of Net Position over time.
A. Plan Description
In addition to providing the pension benefits described in Note 19, the
Town provides post-employment health and life insurance benefits for
retired employees through the Town's Massachusetts Interlocal Insurance
Association (MIIA) Health Benefits Trust. Benefits, benefit levels,
employee contributions, and employer contributions are governed by
Chapter 32 of the Massachusetts General Laws. As of June 30, 2013, the
actuarial valuation date, approximately 683 retirees and 509 active
employees meet the eligibility requirements. The plan does not issue a
separate financial report.
B. Benefits Provided
The Town provides post-employment medical, prescription drug, and life
insurance benefits to all eligible retirees and their surviving spouses. All
active employees who retire from the Town and meet the eligibility criteria
will be eligible to receive these benefits.
50
C. Funding Policy
Retirees contribute 29% of the cost of the medical and prescription drug
plan, as determined by the MIIA Health Benefits Trust. Retirees also
contribute 50% of the premium for a $5,000 life insurance benefit. The
Town contributes the remainder of the medical, prescription drug, and life
insurance plan costs on a pay-as-you-go basis.
D. Annual OPEB Costs and Net OPEB Obligation
The Town's fiscal 2014 annual OPEB expense is calculated based on
the annual required contribution of the employer (ARC), an amount actu-
arially determined in accordance with the parameters of GASB Statement
No. 45. The ARC represents a level of funding that, if paid on an ongoing
basis, is projected to cover the normal cost per year and amortize the
unfunded actuarial liability over a period of thirty years. The following table
shows the components of the Town's annual OPEB cost for the year end-
ing June 30, 2014, the amount actually contributed to the plan, and the
change in the Town's net OPEB obligation based on an actuarial valuation
as of June 30, 2013.
Governmental Water Sewer Stormwater Electric
Funds Fund Fund Fund Fund Total
Annual Required Contribution(ARC) $ 4.689,105 $ 110,074 $ 47,945 $ 4,758 $ 768,378 $ 5,620,260
Interest on net OPEB obligation 724,448 24,128 8,481 1,682 - 758,739
Adjustment to ARC (654,924) (27,517) (9,673) (1.918) - (694,032)
Annual OPEB cost 4,758,629 106,685 46,753 4,522 768,378 5.684.967
Contributions made (2,658,563) (69,909) (36,693) (52) (425,283) (3,190.500)
Additional funding to trust (450.000) (45,215) (7,901) (5,783) (343,095) (851.994)
Increase in net OPEB obligation 1,650,066 (8,439) 2,159 (1,313) - 1,642.473
Net OPEB obligation-beginning of year 12,599,089 311.329 109,436 21.698 - 13,041,552
Net OPEB obligation-end of year $ 14,249,155 $ 302,890 $ 111,595 S 20.385 $ - $ 14,684.025
The Town's annual OPEB cost, the percentage of annual OPEB cost
contributed to the plan, and the net OPEB obligation were as follows:
Annual Percentage of
OPEB OPEB Net OPEB
Fiscal Year Ended Cost Cost Contributed Obligation
2014 $ 5,684,967 71.11% $ 14,684,025
2013 $ 5,346,430 100.32% $ 13,041,552
2012 $ 6,956,808 50.08% $ 13,058,486
2011 $ 6,733,892 48.16% $ 9,248,292
2010 $ 6,522,905 57.09% $ 5,757,459
2009 $ 6,326,701 53.24% $ 2,958,316
51
The Town's net OPEB obligation as of June 30, 2014 is recorded as a
component of the "noncurrent liabilities" line item.
E. Funded Status and Funding Progress
The funded status of the plan as of June 30, 2013, the date of the most
recent actuarial valuation was as follows:
Actuarial accrued liability (AAL) $ 67,170,840
Actuarial value of plan assets 2,860,432
Unfunded actuarial accrued liability (UAAL) $ 64,310,408
Funded ratio (actuarial value of plan assets/AAL) 4.26%
Covered payroll (active plan members) N/A
UAAL as a percentage of covered payroll N/A
Actuarial valuations of an ongoing plan involve estimates of the value of
reported amounts and assumptions about the probability of events far into
the future. Examples include assumptions about future employment, mor-
tality, 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
to past expectations and new estimates are made about the future. The
schedule of funding progress, presented as required supplementary infor-
mation following the notes to the financial statements, presents multi-year
trend information about whether the actuarial value of plan assets is
increasing or decreasing over time relative to the actuarial accrued liability
for benefits.
F. Actuarial Methods and Assumptions
Projections of benefits for financial reporting purposes are based on the
plan as understood by the Town 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 Town and plan members
to that point. The actuarial methods and assumptions used include tech-
niques that are designed to reduce 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, 2013 actuarial valuation, the Projected Unit Credit actuarial
cost method was used. The actuarial assumptions included a blended
5.75% investment rate of return for governmental funds, a funded 7.75%
investment rate of return for enterprise funds, and an initial annual health-
care cost trend rate of 8.5% which decreases to a 5.0% long-term rate for
all healthcare benefits after seven years. The amortization costs for the
52 4
initial UAAL is a level percentage of payroll amortization, with governmen-
tal fund amortization payments increasing at 2.5% per year for a period of
30 years (open), and enterprise fund amortization payments increasing at
2.5% per year for a period of 18 years (closed). In open amortization, the
period is reset to the initial value every year and the UAAL is re-amortized,
while under a closed amortization the remaining period decreases and the
UAAL is eventually paid off.
19. Contributory Retirement System
The Town follows the provisions of GASB Statement No. 27, Accounting for
Pensions for State and Local Government Employees, (as amended by
GASB 50) with respect to the employees' retirement funds.
A. Plan Description and Contribution Information
Substantially all employees of the Town (except teachers and administrators
under contract employed by the School Department) are members of the
Reading Contributory Retirement System (Reading CRS), a cost sharing,
multiple employer defined benefit PERS. Eligible employees must partici-
pate in the Reading CRS. The pension plan provides pension benefits,
deferred allowances, and death and disability benefits. Chapter 32 of the
Massachusetts General Laws establishes the authority of the Reading
CRS Retirement Board. Chapter 32 also establishes contribution percent-
ages and benefits paid. The Reading CRS Retirement Board does not have
the authority to amend benefit provisions. As required by Massachusetts
General Laws, the System issues a separate report to the Commonwealth's
Public Employee Retirement Administration Commission.
Membership of each plan consisted of the following at December 31, 2013:
Retirees and beneficiaries receiving benefits 327
Terminated plan members entitled to but not yet
receiving benefits 35
Active plan members 341
Total 703
Number of participating employers 2 •
Employee contribution percentages are specified in Chapter 32 of the
Massachusetts General Laws. The percentage is determined by the
participant's date of entry into the system. All employees hired after
January 1, 1979 contribute an additional 2% on all gross regular earn-
ings over the rate of$30,000 per year. All Group 1 members (general
employees) with 30 or more years of creditable service, hired on or after
53
56 bI
April 2, 2012, contribute 6% on all gross regular earnings per year. The
percentages are as follows:
Before January 1, 1975 5%
January 1, 1975 - December 31, 1983 7%
January 1, 1984 - June 30, 1996 8%
Beginning July 1, 1996 9%
Employers are required to contribute at actuarially determined rates as
accepted by the Public Employee Retirement Administration Commission
(PERAC).
Schedule of Employer Contributions:
Year Ended Annual Required Percentage
June 30 Contribution Contributed
2005 $ 3,405,725 100%
2006 $ 3,488,686 100%
2007 $ 3,696,695 100%
2008 $ 3,785,501 100%
2009 $ 3,600,826 100%
2010 $ 3,686,795 100%
2011 $ 4,231,461 100%
2012 $ 4,420,321 100%
2013 $ 4,543,434 100%
2014 $ 4,747,889 100%
B. Summary of Significant Accounting Policies
Basis of Accounting - Contributory retirement system financial statements
are prepared using the accrual basis of accounting. Plan member contri-
butions are recognized in the period in which the contributions are due.
Employer contributions are recognized when due and the employer has
made a formal commitment to provide the contributions. Benefits and
refunds are recognized when due and payable in accordance with the
terms of the plan.
Method Used to Value Investments - Investments are reported at fair
value in accordance with PERAC requirements.
54
C. Funded Status and Funding Progress
The information presented below is from the Reading Contributory
Retirement System's most recent valuation.
Actuarial UAAL as
Accrued a Percent-
Actuarial Liability Unfunded age of
Actuarial Value of (AAL) - AAL Funded Covered Covered
Valuation Assets Entry Age (UAAL) Ratio Payroll Payroll
Date u (b-a) (a/b) j(b-a)/cl
07/01/13 $ 101,349 $ 140,807 $ 39,458 72.0% $ 22,547 175.0%
The Schedule of Funding Progress following the notes to the financial
statements presents multi-year trend information about the actuarial
value of plan assets relative to the actuarial accrued liability for benefits.
D. Actuarial Methods and Assumptions
The annual required contribution for the current year was determined as part
of the actuarial valuation using the entry age normal actuarial cost method.
Under this method an unfunded actuarial accrued liability of$39.5 million
was calculated. The actuarial assumptions included (a) 7.75% investment
rate of return and (b) a projected salary increase of 4.75% - 8.00% per year.
Liabilities for cost of living increases have been assumed at an annual
increase of 3%, on the first $12,000 of benefit payments. The actuarial value
of assets is determined by projecting the market value of assets as of the
beginning of the prior plan year with the assumed rate of return during that
year (7.75%) and accounting for deposits and disbursements with interest at
the assumed rate of return. An adjustment is then applied to recognize the
difference between the actual investment return and expected return over a
five-year period. As of June 30, 2014, the unfunded actuarially accrued
liability is being amortized over 19 years using a 4.5% increase in payments
method.
E. Teachers
As required by State statutes, teachers of the Town are covered by the
Massachusetts Teachers Retirement System (MTRS). The MTRS is
funded by contributions from covered employees and the Commonwealth
of Massachusetts. The Town is not required to contribute.
All persons employed on at least a half-time basis, who are covered under
a contractual agreement requiring certification by the Board of Education
are eligible, and must participate in the MTRS.
55 ,S/ 10
Based on the Commonwealth of Massachusetts' retirement laws, employ-
ees covered by the pension plan must contribute a percentage of gross
earnings into the pension fund. The percentage is determined by the
participant's date of entry into the system and gross earnings, up to
$30,000, as follows:
Before January 1, 1975 5%
January 1, 1975 - December 31, 1983 7%
January 1, 1984 - June 30, 1996 8% *
July 1, 1996 - June 30, 2001 9% *
Beginning July 1, 2001 11%
*Effective January 1, 1990, all participants hired after January 1, 1979, who have
not elected to increase to 11%, contribute an additional 2% of salary in excess of
$30,000.
The Town's current year covered payroll for teachers and administrators
was not available.
In fiscal year 2014, the Commonwealth of Massachusetts contributed
$7,979,634 to the MTRS on behalf of the Town. This is included in the
education expenditures and intergovernmental revenues in the general
fund.
20. Risk Management
The Town is exposed to various risks of loss related to torts; theft of, damage to
and destruction of assets; errors and omissions; and natural disasters for which
the government carries commercial insurance. There were no significant reduc-
tions in insurance coverage from the previous year and have been no material
settlements in excess of coverage in any of the past three fiscal years.
21. Beginning Net Position Restatement
The beginning (January 1, 2013) net position of the Town has been restated
as follows:
Fund Basis Financial Statements:
Pension
Trust Fund
(As of
December 31, 2013)
As previously reported $ 100,175,593
Present contributory retirement
system consistent with plan year (1,222,996)
As restated $ 98,952,597
56
J
22. Implementation of New GASB Standards
The GASB has issued Statement 68 Accounting and Financial Reporting for
Pensions, which is required to be implemented in fiscal year 2015. Manage-
ment's current assessment is that this pronouncement will have a significant
impact on the Town's basic financial statements by recognizing as a liability
and expense, the Town's applicable portion of the actuarially accrued
unfunded pension liability.
57 -?
Town of Reading, Massachusetts Municipal Light Department
Notes to Financial Statements
1. Summary of Significant Accounting Policies
The significant accounting policies of the Town of Reading Municipal Light
Department ("the Department") (an enterprise fund of the Town of Reading)
are as follows:
A. Business Activity - The Department purchases electricity for distribution to
more than 25,000 customers within the towns of Reading, North Reading,
Wilmington, and Lynnfield.
B. Regulation and Basis of Accounting - Under Massachusetts General
Laws, the Department's electric rates are set by the Municipal Light Board.
Electric rates, excluding the fuel charge, cannot be changed more often
than once every three months. Rate schedules are filed with the Massa-
chusetts Department of Public Utilities (DPU). While the DPU exercises
general supervisory authority over the Department, the Department's rates
are not subject to DPU approval. The Department's policy is to prepare its
financial statements in conformity with generally accepted accounting
principles.
Proprietary funds distinguish operating revenues and expenses from non-
operating items. Operating revenues and expenses generally result from
providing services and producing and delivering goods in connection with
a proprietary fund's principal ongoing operations. The principal operating
revenues of the Department's enterprise fund are charges to customers
for electric sales and services. Operating expenses for the Department's
enterprise funds include the cost of sales and services, administrative
expenses and depreciation on capital assets. All revenues and expenses
not meeting this definition are reported as nonoperating revenues and
expenses.
C. Concentrations - The Department operates within the electric utility indus-
try. In 1998, the Commonwealth of Massachusetts enacted energy dereg-
ulation legislation that restructured the Commonwealth's electricity indus-
try to foster competition and promote reduced electric rates. Energy
deregulation created a separation between the supply and delivery por-
tions of electricity service and enabled consumers to purchase their
energy from a retail supplier of their choice. Municipal utilities are not
currently subject to this legislation.
D. Retirement Trust - The Reading Municipal Light Department Employees'
Pension Trust (the "Pension Trust") was established on December 30,
58 �� 4r
1966, by the Reading Municipal Light Board pursuant to Chapter 64 of the
General Laws of the Commonwealth of Massachusetts.
The Pension Trust constitutes the principal instrument of a plan estab-
lished by the Municipal Light Board to fund the Department's annual
required contribution to the Town of Reading Contributory Retirement
System (the System), a cost sharing, multi-employer public employee
retirement system.
E. Other Post-Employment Benefits Trust - The Other Post-Employment
Benefits Liability Trust Fund (the "OPEB Trust") was established by the
Reading Municipal Light Board pursuant to Chapter 32B, Section 20 of the
General Laws of the Commonwealth of Massachusetts.
The OPEB Trust constitutes the principal instrument of a plan established
by the Municipal Light Board to fund the Department's annual actuarially
determined OPEB contribution for future retirees.
F. Revenues - Revenues are based on rates established by the Department
and filed with the DPU. Revenues from sales of electricity are recorded on
the basis of bills rendered from monthly meter readings taken on a cycle
basis and are stated net of discounts. Recognition is given to the amount
of sales to customers which are unbilled at the end of the fiscal period.
G. Cash and Short-term Investments - For the purposes of the Statement of
Cash Flows, the Department considers both restricted and unrestricted
cash on deposit with the Town Treasurer to be cash or short-term invest-
ments. For purpose of the Statement of Net Position, the proprietary funds
consider investments with original maturities of three months or less to be
short-term investments.
H. Investments - State and local statutes place certain limitations on the
nature of deposits and investments available. Deposits in any financial
institution may not exceed certain levels within the financial institution.
Non-fiduciary fund investments can be made in securities issued or
unconditionally guaranteed by the U.S. Government or agencies that
have a maturity of one year or less from the date of purchase and
repurchase agreements guaranteed by such securities with maturity
dates of no more than 90 days from date of purchase.
Investments for the Department and the Trust consist of domestic and
foreign fixed income bonds which the Department intends to hold to
maturity. These investments are reported at fair market value in the
proprietary fund and fiduciary fund financial statements.
I. Inventory - Inventory consists of parts and accessories purchased for use
in the utility business for construction, operation, and maintenance pur-
59 V) 2-
poses and is stated at average cost. Meters and transformers are capi-
talized when purchased.
J. Capital Assets and Depreciation - Capital assets, which include property,
plant, equipment, and utility plant infrastructure, are recorded at historical
cost or estimated historical cost when purchased or constructed. Donated
capital assets are recorded at estimated fair market value at the date of
the donation.
The cost of normal maintenance and repairs that do not add to the value
of the asset or materially extend asset lives are not capitalized.
Major outlays for capital assets and improvements are capitalized as they
are acquired or constructed. Interest incurred during the construction phase
of proprietary fund capital assets is included as part of the capitalized value
of the constructed asset. When capital assets are retired, the cost of the
retired asset, less accumulated depreciation, salvage value and any cash
proceeds, is charged to the Department's unrestricted net position
account.
Massachusetts General Laws require utility plant in service to be depre-
ciated at an annual rate of 3%. To change this rate, the Department must
obtain approval from the DPU. Changes in annual depreciation rates may
be made for financial factors relating to cash flow for plant expansion,
rather than engineering factors relating to estimates of useful lives.
K. Accrued Compensated Absences - Employee vacation leave is vested
annually but may only be carried forward to the succeeding year with
supervisor approval and, if appropriate, within the terms of the applicable
Department policy or union contract. Generally, sick leave may accumu-
late according to union and Department contracts and policy, and is paid
upon normal termination at the current rate of pay. The Department's
policy is to recognize vacation costs at the time payments are made. The
Department records accumulated, unused, vested sick pay as a liability.
The amount recorded is the amount to be paid at termination at the cur-
rent rate of pay.
L. Long-Term Obligations - The proprietary fund financial statements report
long-term debt and other long-term obligations as liabilities in the propri-
etary fund statement of Net Position.
M. Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosures for contingent assets and liabilities
at the date of the financial statements, and the reported amounts of the
revenues and expenses during the fiscal year. Actual results could vary
from estimates that were used. 4q3 60
N. Rate of Return - The Department's rates must be set such that earnings
attributable to electric operations do not exceed eight percent of the net
cost of plant. The audited financial statements are prepared in accordance
with auditing standards generally accepted in the United States of
America. To determine the net income subject to the rate of return, the
Department performs the following calculation. Using the net income per
the audited financials, the return on investment to the Town of Reading
is added back, the fuel charge adjustment is added or deducted, and
miscellaneous debits/credits (i.e., gain/loss on disposal of fixed assets,
etc.) are added or deducted, leaving an adjusted net income figure for
rate of return purposes. Investment interest income and bond principal
payments are then deducted from this figure to determine the net income
subject to the rate of return. The net income subject to the rate of return
is then subtracted from the allowable eight percent rate of return, which
is calculated by adding the book value of net plant and the investment in
associated companies less the contributions in aid of construction multi-
plied by eight percent. From this calculation, the Municipal Light Board will
determine what cash transfers need to be made at year-end.
0. Comparative Financial Information — The financial statements include
certain prior-year comparative information. Such information does not
include sufficient detail to constitute a presentation in conformity with
generally accepted accounting principles. Accordingly, such information
should be read in conjunction with the Department's financial statements
for the year ended June 30, 2013, from which the summarized information
was derived.
2. Cash and Investments
Total cash and investments as of June 30, 2014 are classified in the
accompanying financial statements as follows:
Proprietary Fund:
Unrestricted cash and short-term investments $ 11,533,212
Restricted cash and short-term investments 19,219,111
Restricted investments 1,292,906
Fiduciary funds:
Cash and short-term investments - Pension Trust 2,632,367
Cash and short-term investments - OPEB Trust 1,846,042
Investments - Pension Trust 1,292,906
Total cash and investments $ 37,816,544
61 bq "I
Cash and short-term investments at June 30, 2014 consist of the following:
Cash on hand $ 3,000
Deposits with financial institutions 37,813,544
Total cash and investments $ 37,816,544
Disclosures Relating to Interest Rate Risk
Interest rate risk is the risk that the fair value of an investment will be
adversely affected by changes in market interest rates. Generally, the
longer the maturity of an investment, the greater the sensitivity of its fair
value to changes in market interest rates. The Department manages its
exposure to interest rate risk by purchasing a combination of shorter term
and longer term investments and by timing cash flows from maturities so
that a portion of the portfolio is maturing or coming close to maturity evenly
over time as necessary to provide the cash flow and liquidity needed for
operations.
As of June 30, 2014, the Department (including the Pension Trust and OPEB
Trust) held cash and short-term investments in pooled investments with the
Massachusetts Municipal Depository Trust (MMDT), FDIC-insured savings
accounts, and 90-day FDIC-insured bank certificates of deposit. Because of
their immediate liquidity and/or short-term maturity, these funds are classified
as cash and short-term investments in the accompanying financial statements
and are not considered to be exposed to significant interest rate risk.
As of June 30, 2014, the Department and Pension Trust held investments in
domestic and foreign fixed income bonds with varying maturity dates as
follows:
Restricted Pension Maturity
Investments Trust Date
Corporate bonds
AT&T Inc $ 212,158 $ 212,158 12/01/22
General Electric Cap Corp 206,472 206,472 01/09/23
Wells Fargo & Co 208,098 208,098 08/15/23
Rabobank Nederland Bank 254,085 254,085 11/09/22
Teva Pharmaceut fin BV 207,109 207,109 12/18/22
BNP Paribas 204,984 204,984 03/03/23
Total $ 1,292,906 $ 1,292,906
62 .01 g5/
Disclosures Relating to Credit Risk
Generally, credit risk is the risk that the issuer of an investment will not fulfill
its obligation to the holder of the investment. This is measured by the assign-
ing of a rating by a nationally recognized statistical rating organization. As of
June 30, 2014, the Department and Pension Trust held investments in
domestic and foreign fixed income bonds with varying ratings as follows:
Restricted Pension Moody's
Investment Type Investments Trust Rating
Corporate bonds
AT&T Inc $ 212,158 $ 212,158 A3
General Electric Cap Corp 206,472 206,472 Al
Wells Fargo & Co 208,098 208,098 A3
Rabobank Nederland Bank 254,085 254,085 A2
Teva Pharmaceut fin BV 207,109 207,109 A3
BNP Paribas 204,984 204,984 Al
Total $ 1,292,906 $ 1,292,906
Concentration of Credit Risk
The Department follows the Town of Reading's investment policy, which does
not limit the amount that can be invested in any one issuer beyond that stipu-
lated by Massachusetts General Laws. At June 30, 2014, the Department and
Pension Trust investments were held in domestic and foreign fixed income
bonds, as detailed in the sections above. Five of the bonds each individually
represent approximately 16% of the Department's and System's total invest-
ments, while the investment in Rabobank Nederland Bank represents approx-
imately 20%.
Custodial Credit Risk
Custodial Credit Risk for deposits is the risk that, in the event of the failure of a
depository financial institution, the Department will not be able to recover its
deposits or will not be able to recover collateral securities that are in the pos-
session of an outside party. The custodial credit risk for investments is the risk
that, in the event of the failure of the counterparty (e.g., broker-dealer) to a
transaction, the Department will not be able to recover the value of its invest-
ments or collateral securities that are in the possession of another party.
Massachusetts General Laws, Chapter 44, Section 55, limits deposits "in a
bank or trust company or banking company to an amount not exceeding sixty
percent 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 Department follows the
Massachusetts statute as written, as well as the Town of Reading's deposit
policy for custodial credit risk.
63 5 logy
Because the Department pools its cash with the Town of Reading, the spe-
cific custodial credit risk of the Department's deposits could not be readily
determined at June 30, 2014.
As of June 30, 2014, none of the Department's (including Pension Trust and
OPEB Trust) short-term mutual fund investments were exposed to custodial
credit risk.
As of June 30, 2014, none of the Department or Pension Trust investments
were exposed to custodial credit risk because the related securities are
registered in the Department's name.
3. Restricted Cash and Investments
The Department's proprietary fund restricted cash and investment balances
represent the following reserves:
06/30/14 06/30/13
Cash Investments Cash Investments
Depreciation fund $ 4,130,585 $ - $ 2,733,147 $ -
Construction fund 1,000,000 - 1,500,000 -
Deferred fuel reserve 4,132,695 - 2,609,487 -
Deferred energy conservation reserve 457,261 - 319,022 -
Rate stabilization 6,723,797 - 6,692,239 -
Reserve for uncollectible accounts 200,000 - 200,000 -
Sick leave benefits 1,674,873 1,292,906 3,131,522 -
Hazardous waste fund 150,000 - 150,000 -
Customer deposits 749,900 - 700,021 -
Total $ 19.219,111 S 1,292,906 S 18,035,438 $ -
The Department maintains the following reserves:
- Depreciation fund - The Department is normally required to reserve
3.0% of capital assets each year to fund capital improvements.
- Construction fund — This represents additional funds set aside to fund
capital expenditures.
- Deferred fuel reserve - The Department transfers the difference
between the customers' monthly fuel charge adjustment and actual
fuel costs into this account to be used in the event of a sudden
increase in fuel costs.
- Deferred energy conservation reserve - This account is used to reserve
monies collected from a special energy charge added to customer bills.
Customers who undertake measures to conserve and improve energy
efficiency can apply for rebates that are paid from this account.
64 6q1
- Rate stabilization - This represents amounts set aside to help stabilize
cost increases resulting from fluctuations in purchase power costs.
- Reserve for uncollectible accounts - This account was set up to offset
a portion of the Department's bad debt reserve.
- Sick leave benefits - This account is used to offset the Department's
actuarially determined compensated absence liability.
- Hazardous waste fund -This reserve was set up by the Board of
Commissioners to cover the Department's insurance deductible in
the event of a major hazardous materials incident.
- Customer deposits - Customer deposits that are held in escrow.
4. Accounts Receivable
Accounts receivable consists of the following at June 30, 2014:
Customer Accounts:
Billed $ 2,227,603
Less allowances:
Uncollectible accounts (200,000)
Sales discounts (231,632)
Total billed 1,795,971
Unbilled, net 5,622,269
Total customer accounts 7,418,240
Other Accounts:
Merchandise sales 34,746
MMWEC surplus 390,088
Intergovernmental grants 27,976
Total other accounts 452,810
Total net receivables $ 7,871,050
5. Prepaid Expenses
Prepaid expenses consist of the following:
Insurance and other $ 269,616
Purchase power 24,964
NYPA prepayment fund 259,957
WC Fuel - Watson 218,229
Total $ 772,766 1w u
65 S ✓9"
6. Inventory
Inventory is comprised of supplies and materials at June 30, 2014, and is
valued using the average cost method.
7. Investment in Associated Companies
Under agreements with the New England Hydro-Transmission Electric Com-
pany, Inc. (NEH) and the New England Hydro-Transmission Corporation
(NHH), the Department has made the following advances to fund its equity
requirements for the Hydro-Quebec Phase II interconnection. The Depart-
ment is carrying its investment at cost, reduced by shares repurchased. The
Department's equity position in the Project is less than one-half of one percent.
Investment in associated companies consists of the following, at June 30, 2014:
New England Hydro-Transmission (NEH & NHH) $ 26,994
8. Capital Assets
The following is a summary of fiscal year 2014 activity in capital assets (in
thousands):
Beginning Ending
Balance Increases Decreases Balance
Business-Type Activities
Capital assets, being depreciated:
Structures and improvements $ 14,179 $ 4 $ - $ 14,183
Equipment and furnishings 31,359 867 (439) 31,787
Infrastructure 80,449 3,023 (733) 82,739
Total capital assets, being depreciated 125,987 3,894 (1.172) 128,709
Less accumulated depreciation for:
Structures and improvements (7,748) (388) - (8,136)
Equipment and furnishings (18,959) (970) 439 (19,490)
Infrastructure (30,352) (2,422) 619 (32,155)
Total accumulated depreciation (57,059) (3,780) 1,058 (59,781)
Total capital assets, being depreciated, net 68,928 114 (114) 68,928
Capital assets, not being depreciated:
Land 1,266 - - 1,266
Total capital assets, not being depreciated 1,266 - - 1,266
Capital assets, net $ 70,194 $ 114 $ (114) $ 70,194
66
9. Accounts Payable
Accounts payable represent fiscal 2014 expenses that were paid after June 30,
2014.
10. Accrued Liabilities
Accrued liabilities consist of the following at June 30, 2014:
Accrued payroll $ 304,089
Accrued sales tax 235,908
Other 52,813
Total $ 592,810
11. Customer Deposits
This balance represents deposits received from customers that are held in
escrow.
12. Customer Advances for Construction
This balance represents deposits received from vendors in advance for work
to be performed by the Department. The Department recognizes these
deposits as revenue after the work has been completed.
13. Accrued Employee Compensated Absences
Department employees are granted sick leave in varying amounts. Upon
retirement, termination, or death, employees are compensated for unused
sick leave (subject to certain limitations) at their then current rates of pay.
14. Restricted Net Position
The proprietary fund financial statements report restricted net position when
external constraints are placed on net position. Specifically, restricted net
position represents depreciation fund reserves, which are restricted for future
capital costs.
67 �bi�
15. Post-Employment Healthcare and Life Insurance Benefits
Other Post-Employment Benefits
The Department follows GASB Statement 45, Accounting and Financial
Reporting by Employers for Post-employment Benefits Other Than Pensions.
Statement 45 requires governments to account for other post-employment
benefits (OPEB), primarily healthcare, on an accrual basis rather than on a
pay-as-you-go basis. The effect is the recognition of an actuarially required
contribution as an expense on the Statement of Activities when a future
retiree earns their post-employment benefits, rather than when they use their
post-employment benefit. To the extent that an entity does not fund their
actuarially required contribution, a post-employment benefit liability is
recognized on the Statement of Net Position over time.
A. Plan Description
In addition to providing the pension benefits described in Note 16, the
Department provides post-employment health and life insurance benefits
for retired employees through the Town of Reading's Massachusetts Inter-
local Insurance Association (MIIA) Health Benefits Trust. Benefits, benefit
levels, employee contributions and employer contributions are governed
by Chapter 32 of the Massachusetts General Laws. As of June 30, 2013,
the actuarial valuation date, approximately 84 retirees and 52 active
employees meet the eligibility requirements. The plan does not issue
a separate financial report.
B. Benefits Provided
The Department provides post-employment medical, prescription drug,
and life insurance benefits to all eligible retirees and their surviving
spouses. All active employees who retire from the Department and
meet the eligibility criteria will be eligible to receive these benefits.
C. Funding Policy
As of the June 30, 2013, the actuarial valuation date, retirees were
required to contribute 29% of the cost of the medical and prescription
drug plan, as determined by the MIIA Health Benefits Trust. Retirees also
contribute 50% of the premium for a $5,000 life insurance benefit. The
Department contributes the remainder of the medical, prescription drug,
and life insurance plan costs on a pay-as-you-go basis.
D. Annual OPEB Costs and Net OPEB Obligation
The Department's fiscal 2014 annual OPEB expense is calculated based
on the annual required contribution of the employer (ARC), an amount
actuarially determined in accordance with the parameters of GASB State-
ment No. 45. The ARC represents a level of funding that, if paid on an
68
ongoing basis, is projected to cover the normal cost per year and amortize
the unfunded actuarial liability over a period of twenty years. The following
table shows the components of the Department's annual OPEB cost for
the year ending June 30, 2014, the amount actually contributed to the
plan, and the change in the Department's net OPEB obligation based on
an actuarial valuation as of June 30, 2013.
Annual Required Contribution (ARC) $ 538,576
Interest on net OPEB obligation 229,802
Annual OPEB cost 768,378
Projected benefit payments (425,283)
Increase in net OPEB obligation 343,095
Net OPEB obligation - beginning of year -
Contributions to OPEB Trust (343,095)
Net OPEB obligation - end of year $ -
See Part E for additional information
The Department's annual OPEB cost, the percentage of annual OPEB cost
contributed to the plan, and the net OPEB obligation for fiscal year 2014 and
the two preceding fiscal years were as follows:
Annual Percentage of
OPEB OPEB Net OPEB
Fiscal Year Ended Cost Cost Contributed Obligation
2014 $ 768,378 100.00% $ -
2013 $ 604,987 100.00% $ -
2012 $ 587,945 75.55% $ 1,335,089
The Department's net OPEB obligation as of June 30, 2013 is recorded
as a component of the "noncurrent liabilities" line item in the Statements
of Net Position.
69
E. Funded Status and Funding Progress
The funded status of the plan as of June 30, 2013, the date of the most
recent actuarial valuation was as follows:
Actuarial accrued liability (ML) $ 7,588,993
Actuarial value of plan assets 1,495,511
Unfunded actuarial accrued liability (UAAL) $ 6,093,482
Funded ratio (actuarial value of plan assets/AAL) 19.7%
Covered payroll (active plan members) N/A
UAAL as a percentage of covered payroll N/A
In 2010, the Department's Board of Commissioners voted to accept the
provisions of Massachusetts General Law Chapter 32B §20, to create an
Other Post-Employment Benefits Liability Trust Fund as a mechanism to
set aside monies to fund its OPEB liability. In 2013, the Commissioners
voted to create an OPEB trust instrument in alignment with the Town of
Reading. In fiscal year 2014, the Department contributed $343,095 to this
trust, which was equal to all of its actuarially determined annual contribu-
tions through June 30, 2014. The assets and net position of this trust are
reported in the Department's Statement of Fiduciary Net Position.
Actuarial valuations of an ongoing plan involve estimates of the value of
reported amounts and assumptions about the probability 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
to past expectations and new estimates are made about the future. The
schedule of funding progress, presented as required supplementary
information following the notes to the financial statements, presents multi-
year trend information about whether the actuarial value of plan assets is
increasing or decreasing over time relative to the actuarial accrued liability
for benefits.
F. Actuarial Methods and Assumptions
Projections of benefits for financial reporting purposes are based on the
plan as understood by the Department and the plan members and include
the types of benefits provided at the time of each valuation and the his-
torical pattern of sharing of benefit costs between the Department and
plan members to that point. The actuarial methods and assumptions
used include techniques that are designed to reduce short-term volatility
70
56 r43
in actuarial accrued liabilities and the actuarial value of assets, consistent
with the long-term perspective of the calculations.
In the June 30, 2013 actuarial valuation, the Projected Unit Credit actuarial
cost method was used. The Department's actuarial value of assets was
$1,495,511. The actuarial assumptions included a 7.75% investment rate
of return and an initial annual health care cost trend rate of 8.5% which
decreases to a 5.0% long-term rate for all health care benefits after eight
years. The amortization costs for the initial UAAL is a level percentage of
payroll amortization, with amortization payments increasing at 2.5% per
year for a period of 18 years.
16. Pension Plan
The Department follows the provisions of GASB Statement No. 27, (as
amended by GASB 50) Accounting for Pensions for State and Local
Government Employees, with respect to the employees' retirement funds.
Chapter 32 of the Massachusetts General Laws assigns the System the
authority to establish and amend benefit provisions of the plan, and the
State legislature has the authority to grant cost-of-living increases. The
System issues a publicly available financial report which can be obtained
through the Town of Reading Contributory Retirement system at Town
Hall, Reading, MA.
A. Plan Description
The Department contributes to the Town of Reading Contributory Retire-
ment System (the System), a cost sharing, multiple-employer, defined
benefit pension plan administered by a Town Retirement Board. The
System provides retirement, disability and death benefits to plan mem-
bers and beneficiaries. Chapter 32 of the Massachusetts General Laws
assigns the System the authority to establish and amend benefit provi-
sions of the plan, and grant cost-of-living increases.
B. Funding Policy
Plan members are required to contribute to the System at rates ranging
from 5% to 11% of annual covered compensation. The Department is
required to pay into the System its share of the remaining system wide
actuarially determined contribution plus administration costs which are
apportioned among the employers based on active covered payroll. The
contributions of plan members and the Department are governed by
Chapter 32 of the Massachusetts General Laws. The Department's con-
tributions to the System for the years ended June 30, 2014, June 30,
2013, and June 30, 2012 were $1,346,039, $1,288,076, and $1,336,326,
respectively, which were equal to its annual required contributions for
each of these years.
71 Sb/bif
17. Participation in Massachusetts Municipal Wholesale Electric
Company
The Town of Reading, acting through its Light Department, is a participant in
certain Projects of the Massachusetts Municipal Wholesale Electric Company
(MMWEC).
MMWEC is a public corporation and a political subdivision of the Common-
wealth of Massachusetts, created as a means to develop a bulk power supply
for its Members and other utilities. MMWEC is authorized to construct, own or
purchase ownership interests in, and to issue revenue bonds to finance,
electric facilities (Projects). MMWEC has acquired ownership interests in
electric facilities operated by other entities and also owns and operates its
own electric facilities. MMWEC sells all of the capability (Project Capability) of
each of its Projects to its Members and other utilities (Project Participants)
under Power Sales Agreements (PSAs). Among other things, the PSAs
require each Project Participant to pay its pro rata share of MMWEC's costs
related to the Project, which costs include debt service on the revenue bonds
issued by MMWEC to finance the Project, plus 10% of MMWEC's debt ser-
vice to be paid into a Reserve and Contingency Fund. In addition, should a
Project Participant fail to make any payment when due, other Project Partici-
pants of that Project may be required to increase (step-up) their payments
and correspondingly their Participant's share of that Project's Project Capa-
bility to an additional amount not to exceed 25% of their original Participant's
share of that Project's Project Capability. Project Participants have cove-
nanted to fix, revise and collect rates at least sufficient to meet their obliga-
tions under the PSAs.
MMWEC has issued separate issues of revenue bonds for each of its eight
Projects, which are payable solely from, and secured solely by, the revenues
derived from the Project to which the bonds relate, plus available funds
pledged under MMWEC's Amended and Restated General Bond Resolution
(GBR) with respect to the bonds of that Project. The MMWEC revenues
derived from each Project are used solely to provide for the payment of the
bonds of any bond issue relating to such Project and to pay MMWEC's cost
of owning and operating such Project and are not used to provide for the
payment of the bonds of any bond issue relating to any other Project.
MMWEC operates the Stony Brook Intermediate Project and the Stony Brook
Peaking Project, both fossil-fueled power plants. MMWEC has a 3.7% interest
in the W.F. Wyman Unit No. 4 plant, which is operated and owned by its
majority owner, FPL Energy Wyman IV, LLC, a subsidiary of NextEra Energy
Resources LLC, and a 4.8% ownership interest in the Millstone Unit 3 nuclear
unit, operated by Dominion Nuclear Connecticut, Inc. (DNCI), the majority
owner and an indirect subsidiary of Dominion Resources, Inc. DNCI also
owns and operates the Millstone Unit 2 nuclear unit. The operating license for
the Millstone Unit 3 nuclear unit extends to November 25, 2045.
72 'H�` r
A substantial portion of MMWEC's plant investment and financing program is
an 11 .6% ownership interest in the Seabrook Station nuclear generating unit
operated by NextEra Energy Seabrook, LLC (NextEra Seabrook), the majority
owner and an indirect subsidiary of NextEra Energy Resources LLC. The
operating license for Seabrook Station extends to March, 15, 2030. NextEra
Seabrook has submitted an application to extend the Seabrook Station
operating license for an additional 20 years.
Pursuant to the PSAs, the MMWEC Seabrook and Millstone Project Partici-
pants are liable for their proportionate share of the costs associated with
decommissioning the plants, which costs are being funded through monthly
Project billings. Also the Project Participants are liable for their proportionate
share of the uninsured costs of a nuclear incident that might be imposed
under the Price-Anderson Act (Act). Originally enacted in 1957, the Act has
been renewed several times. In July 2005, as part of the Energy Policy Act
of 2005, Congress extended the Act until the end of 2025.
Reading Municipal Light Department has entered into PSAs and Power
Purchase Agreements (PPAs) with MMWEC. Under both the PSAs and
PPAs, the Department is required to make certain payments to MMWEC
payable solely from Department revenues. Under the PSAs, each Participant
is unconditionally obligated to make all payments due to MMWEC, whether or
not the Project(s) is completed or operating, and notwithstanding the suspen-
sion or interruption of the output of the Project(s).
MMWEC is involved in various legal actions. In the opinion of MMWEC
management, the outcome of such actions will not have a material adverse
effect on the financial position of the company.
Total capital expenditures for MMWEC's Projects amounted to $1,609,213,000,
of which $115,506,000 represents the amount associated with the Department's
share of Project Capability of the Projects in which it participates, although such
amount is not allocated to the Department. MMWEC's debt outstanding for the
Projects includes Power Supply Project Revenue Bonds totaling $225,280,000,
of which $9,478,000 is associated with the Department's share of Project
Capability of the Projects in which it participates, although such amount is not
allocated to the Department. After the July 1, 2014 principal payment, MMWEC's
total future debt service requirement on outstanding bonds issued for the
Projects is $184,003,000, of which $6,937,000 is anticipated to be billed to the
Department in the future.
The estimated aggregate amount of Reading Municipal Light Department's
required payments under the PSAs and PPAs, exclusive of the Reserve and
Contingency Fund billings, to MMWEC at June 30, 2014 and estimated for
future years is shown below.
73
S�; b �a
For the years ended June 30, 2015 $ 2,574,000
2016 2,700,000
2017 1,472,000
2018 190,000
2019 -
2020 1,000
Total $ 6,937,000
In addition, under the PSAs, the Department is required to pay to MMWEC
its share of the Operation and Maintenance (O&M) costs of the Projects in
which it participates. The Department's total O&M costs including debt service
under the PSAs were $14,021,000 and $12,353,000 for the years ended
June 30, 2014 and 2013, respectively.
18. Renewable Energy Certificates
In 2003, the Massachusetts Department of Energy and Environmental Affairs
adopted the Massachusetts Renewable Energy Portfolio Standard (RPS), a
regulation that requires Investor Owned Utilities (IOUs) to purchase mandated
amounts of energy generated by renewable resources (Green Energy) as a
percentage of their overall electricity sales. The Massachusetts RPS applies
only to IOUs, so the Department is currently exempt from this mandate.
Energy suppliers meet their annual RPS obligations by acquiring a sufficient
quantity of RPS-qualified renewable energy certificates (RECs) that are
created and recorded at the New England Power Pool (NEPOOL) Generation
Information System (GIS). Suppliers can purchase RECs from electricity
generators or from other utilities that have acquired RECs.
As part of its ongoing commitment to Green Energy, the Department has
entered into Purchase Power Agreements (PPAs) with Swift River Hydro LLC
and Concord Steam Corporation to purchase power generated from renew-
able energy resources. These PPA's include the Department taking title to
RECs, which certify that the energy produced was the product of a renewable
resource. Because the Department is exempt from the RPS provisions, it has
the option of holding these RECs until they expire or selling them through the
NEPOOL GIS.
74 Lb i ti
Information regarding the Department fiscal year 2014 REC activity and
balances is as follows:
REC Sales During Fiscal 2014
Certificates Amount
Various 1,107 $ 70,848
Various 1,809 96,781
Various 752 18,988
Various 938 59,094
Various 1,680 107,100
Various 3,533 189,899
Various 1,142 29,121
Various 2,432 155,040
Various 245 15,300
Various 618 33,187
Various 166 4,316
Various 291 15,335
Various 98 2,421
14,811 $ 797,430
(1) Sale proceeds netted against fiscal year 2014
purchased power fuel charge.
REC Holdings at June 30, 2014
Banked Projected Total Estimated
Certificates Certificates Certificates Value
CT Class I - 4,890 4,890 $ 283,620
MA Class II - 3.631 3,631 149,940
Total - 8,521 8,521 $ 433,560
Because there are currently no clear accounting guidelines under GAAP or
IFRS for RECs and the Department does not have a formal policy for the
future disposition of RECs, the estimated fair value of the Department's REC
holdings at June 30, 2014 are not reported as an asset on the Proprietary
Fund Statements of Net Position.
19. Leases
Related Party Transaction - Property Sub-Lease
The Department is sub-leasing facilities to the Reading Town Employees
Federal Credit Union. The original sub-lease agreement commenced in
75 Sb� b$
December 2000 and was extended by various amendments through
November 30, 2011. An additional amendment, effective December 1, 2011,
extends the lease through November 30, 2014. The following is the future
minimum rental income for the years ending June 30:
2015 $ 3,630
Total $ 3,630
20. Implementation of New GASB Standards
The Governmental Accounting Standards Board has issued Statement No.
68, Accounting and Financial Reporting for Pensions, which the Department
is required to implement in fiscal year 2015. Management's current assess-
ment is that this pronouncement will have a significant impact on the
Department's basic financial statements by requiring the Department to
recognize, as a liability and expense, its applicable portion of the Town of
Reading Contributory Retirement System's actuarially accrued unfunded
pension liability.
At January 1 , 2014, the date of the most recent actuarial valuation of the
Department's Retirement trust, the Department's portion of the Town of
Reading Contributory Retirement System's unfunded actuarially accrued
liability was $9,176,022. As of June 30, 2014, the department has
accumulated total assets of$5,299,811 in the Pension Trust.
76
121c),
TOWN OF READING, MASSACHUSETTS
SCHEDULE OF FUNDING PROGRESS
REQUIRED SUPPLEMENTARY INFORMATION
June 30, 2014
(Unaudited)
(Amounts Expressed in thousands)
Employees' Retirement System
Actuarial UAAL as
Accrued a Percent-
Actuarial Liability Unfunded age of
Actuarial Value of (AAL) - AAL Funded Covered Covered
Valuation Assets Entry Age (UAAL) Ratio Payroll Payroll
Date u (b-a) (a/b) j(b-a)/cl
07/01/13 $ 101,349 $ 140,807 $ 39,458 72.0% $ 22,547 175.0%
07/01/11 $ 91,359 $ 134,440 $ 43,081 68.0% $ 20,934 205.8%
06/30/09 $ 83,167 $ 121,918 $ 38,751 68.2% $ 21,005 184.5%
06/30/07 $ 84,784 $ 112,012 $ 27,228 75.7% $ 19,313 141.0%
06/30/06 $ 77,151 $ 106,238 $ 29,087 72.6% $ 18,860 154.2%
06/30/05 $ 71,468 $ 102,153 $ 30,685 70.0% $ 18,048 170.0%
06/30/04 $ 66,580 $ 95,961 $ 29,381 69.4% $ 17,487 168.0%
06/30/03 $ 62,897 $ 91,302 $ 28,405 68.9% $ 16,734 169.7%
06/30/02 $ 60,933 $ 86,888 $ 25,955 70.1% $ 16,855 154.0%
06/30/01 $ 58,286 $ 82,550 $ 24,264 70.6% $ 16,129 150.4%
06/30/00 $ 54,076 $ 78,486 $ 24,410 68.9% $ 15,798 154.5%
Other Post-Employment Benefits
Actuarial UAAL as
Accrued a Percent-
Actuarial Liability Unfunded age of
Actuarial Value of (AAL) - AAL Funded Covered Covered
Valuation Assets Entry Age (UAAL) Ratio Payroll Payroll
Date L u (a/b) u j(b-a)/cl
06/30/13 $ 2,860 $ 67,170 $ 64,310 4.26% N/A N/A
06/30/11 $ 1,167 $ 94,458 $ 93,291 1.24% N/A N/A
06/30/08 $ - $ 60.023 $ 60,023 0.0% N/A N/A
See Independent Auditors' Report.
TOWN OF READING, MASSACHUSETTS
COMBINING BALANCE SHEET
NONMAJOR GOVERNMENTAL FUNDS
JUNE 30, 2014
Special Revenue Funds
Federal State Revolving
Grants Grants Funds
ASSETS
Cash and short-term investments $ (2,903) $ 965,057 $ 4,797,312
Investments - - -
Receivables:
Departmental and other - - 65,967
Intergovernmental 118,299 742,102 -
Total Assets $ 115,396 $ 1,707,159 S 4,863,279
LIABILITIES AND FUND BALANCE
Liabilities:
Warrants payable $ 2,382 $ 387,713 $ 56,753
Accrued liabilities 119,421 15,641 89,524
Unearned revenue - - 201.409
Notes payable - - -
Retainage payable - - -
Total Liabilities 121,803 403,354 347,686
Fund Balances:
Non-spendable - - -
Restricted 6.004 1,385,747 4,546,961
Unassigned (12.411) (81,942) (31,368)
Total Fund Balance (6.407) 1,303,805 4,515,593
Total Liabilities, Deferred
Inflows, and Fund Balance $ 115,396 $ 1,707.159 $ 4,863,279
See Independent Auditors' Report.
78 5b111
Special Revenue Funds
Receipts Gifts and
Reserved Donations Subtotals
$ 1,345,183 $ 612,663 $ 7,717,312
65,967
860,401
$ 1,345,183 $ 612,663 $ 8,643,680
$ - $ 8,945 $ 455,793
224,586
201,409
8,945 881,788
1,345,183 603,718 7,887,613
(125,721)
1,345,183 603,718 7,761,892
$ 1,345,183 $ 612,663 $ 8,643,680
(continued)
79 52, 11 L
TOWN OF READING, MASSACHUSETTS
COMBINING BALANCE SHEET
NONMAJOR GOVERNMENTAL FUNDS
JUNE 30, 2014
(continued)
Capital Project Funds
Town School
Capital Capital
Project Funds Project Funds Subtotals
ASSETS
Cash and short-term investments $ 2,410,612 $ 980,522 $ 3,391,134
Investments - - -
Receivables:
Departmental and other - -
Intergovernmental - - -
Total Assets $ 2,410,612 S 980,522 $ 3,391,134
LIABILITIES AND FUND BALANCE
Liabilities:
Warrants payable $ 483,152 S 119,479 $ 602,631
Accrued liabilities - - -
Unearned revenue - - -
Notes payable 1,000,000 - 1,000,000
Retainage payable - 1,104,104 1,104,104
Total Liabilities 1,483,152 1,223,583 2,706,735
Fund Balances:
Non-spendable - - -
Restricted 1,311,857 47,199 1,359,056
Unassigned (384,397) (290,260) (674,657)
Total Fund Balance 927,460 (243,061) 684,399
Total Liabilities, Deferred
Inflows, and Fund Balance $ 2,410,612 $ 980.522 $ 3,391,134
See Independent Auditors' Report.
80 i13
Permanent Funds
Total
Town School Nonmajor
Trust Trust Governmental
Funds Funds Subtotals Funds
$ - $ 198,786 $ 198,786 $ 11,307,232
9,508,250 - 9,508,250 9,508,250
- - - 65,967
- - - 860,401
$ 9,508,250 $ 198,786 $ 9,707,036 $ 21,741,850
$ 7,936 $ 28 $ 7,964 $ 1,066,388
- - 224,586
- - - 201,409
- - - 1,000,000
- - - 1,104,104
7,936 28 7,964 3,596,487
2,917,866 125,052 3,042,918 3,042,918
6,582,448 73,706 6,656,154 15,902,823
- - - (800,378)
9,500,314 198,758 9,699,072 18,145,363
$ 9,508,250 $ 198,786 $ 9,707,036 $ 21,741,850
81 ,5 h. b y
TOWN OF READING, MASSACHUSETTS
COMBINING STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES
NONMAJOR GOVERNMENTAL FUNDS
FOR THE YEAR ENDED JUNE 30, 2014
Special Revenue Funds
Federal State Revolving
Grants Grants Funds
Revenues:
Departmental $ - $ - $ 5,646,240
Intergovernmental 1,260,673 2,830,197 234,637
Investment income - - 92
Other - - 14,928
Total Revenues 1,260,673 2,830,197 5,895,897
Expenditures:
Current:
General government - - 71,458
Public safety 20,338 65,659 746,944
Education 1,141,609 1,671,465 3,933,657
Public works - 1,106,047 4,908
Health and human services 52,903 42,718 19,901
Culture and recreation 15,658 8,006 503,326
Total Expenditures 1,230,508 2,893,895 5,280,194
Excess (deficiency) of revenues over
(under) expenditures 30,165 (63,698) 615,703
Other Financing Sources (Uses):
Transfers out - - (60,155)
Total Other Financing Sources (Uses) - - (60,155)
Change in fund balances 30,165 (63,698) 555,548
Fund Balances, beginning of year (36,572) 1,367,503 3,960,045
Fund Balances, end of year $ (6,407) $ 1,303,805 $ 4,515.593
See Independent Auditors' Report.
82 5h,
Special Revenue Funds
Receipts Gifts and
Reserved Donations Subtotals
$ 35,760 $ - $ 5,682,000
- - 4,325,507
2,391 - 2,483
311,000 278,826 604,754
349,151 278,826 10,614,744
4,868 2,879 79,205
- 3,934 836,875
- 121,235 6,867,966
- - 1,110,955
- 2,720 118,242
- 24,407 551,397
4,868 155,175 9,564,640
344,283 123,651 1,050,104
(225,000) (50,000) (335,155)
(225,000) (50,000) (335,155)
119,283 73,651 714,949
1,225,900 530,067 7,046,943
$ 1,345,183 $ 603,718 $ 7,761,892
(continued)
83 Sb 1/(1
TOWN OF READING, MASSACHUSETTS
COMBINING STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES
NONMAJOR GOVERNMENTAL FUNDS
FOR THE YEAR ENDED JUNE 30, 2014
(continued)
Capital Project Funds
Town School
Capital Capital
Project Funds Project Funds Subtotals
Revenues:
Departmental $ - $ - $ -
Intergovemmental 1,021,024 - 1,021,024
Investment income - - -
Other - - -
Total Revenues 1,021,024 - 1,021,024
Expenditures:
Current:
General govemment 17,785 - 17,785
Public safety - - -
Education - 387,574 387,574
Public works 399,397 - 399,397
Health and human services - - -
Culture and recreation 759,896 - 759,896
Total Expenditures 1,177,078 387,574 1,564,652
Excess (deficiency)of revenues over
(under)expenditures (156,054) (387,574) (543,628)
Other Financing Sources (Uses):
Transfers out - - -
Total Other Financing Sources (Uses) - - -
Change in fund balances (156,054) (387,574) (543,628)
Fund Balances, beginning of year 1,083,514 144,513 1,228,027
Fund Balances, end of year $ 927,460 $ (243,061) $ 684,399
See Independent Auditors'Report.
84 51) il)
Permanent Funds
Total
Town School Nonmajor
Trust Trust Govemmental
Funds Funds Subtotals Funds
$ - $ - $ - $ 5,682,000
- - - 5,346,531
755,833 7,097 762,930 765,413
113,664 1,100 114,764 719,518
869,497 8,197 877,694 12,513,462
32,841 - 32,841 129,831
- - - 836,875
- 8,074 8,074 7,263,614
120,001 - 120,001 1,630,353
103,279 - 103,279 221,521
- - - 1,311,293
256,121 8,074 264,195 11,393,487
I 613,376 123 613,499 1,119,975
q - - - (335,155)
- - - (335,155)
613,376 123 613,499 784,820
8,886,938 198,635 9,085,573 17,360,543
$ 9,500,314 $ 198,758 $ 9,699,072 $ 18,145,363
85 56 i
TOWN OF READING, MASSACHUSETTS
NONMAJOR PROPRIETARY FUNDS
COMBINING SCHEDULE OF NET POSMON
JUNE 30,2014
Business-Type Activities
Enterprise Funds
Landfill
Sewer Closure and Stormwater
Fund Postclosure Management Total
ASSETS
Current:
Cash and short-term investments $ 3,756,797 $ 59,798 $ 1,070,952 $ 4,887,547
User fees, net of allowance for uncollectibles 2,092,199 - 116,006 2,208,205
Inventory 1,416 - - 1,416
Total current assets 5,850,412 59,798 1,186,958 7,097,168
Noncurrent:
Capital assets being depreciated, net 5,878,913 - 357,158 6,236,071
Capital assets not being depreciated 250,731 - 360,104 610,835
Total noncurrent assets 6,129,644 - 717,262 6,846,906
TOTAL ASSETS 11,980,056 59,798 1,904,220 13,944,074
LIABILITIES
Current:
Warrants payable 130,039 11,736 791 142,566
Accrued liabilities 16,687 - 3,556 20,243
Other current liabilities - 48,062 - 48,062
Current portion of long-term liabilities:
Bonds payable 117,039 - - 117,039
Total current liabilities 263,765 59,798 4,347 327,910
•
i Noncurrent:
Bonds payable, net of current portion 249,848 249,848
Accrued employee benefits 14,073 - 10,825 24,898
1 Net OPEB obligation 111,595 - 20,385 131,980
Total noncurrent liabilities 375,516 - 31,210 406,726
TOTAL LIABILITIES 639,281 59,798 35,557 734,636
NET POSITION
Net investment in capital assets 6,040,281 - 717,262 6,757,543
Unrestricted 5,300,494 - 1,151,401 6,451,895
TOTAL NET POSITION $ 11,340,775 $ - $ 1,868,663 $ 13,209,438
14 See Independent Auditors'Report.
86 .0011
TOWN OF READING. MASSACHUSETTS
NONMAJOR PROPRIETARY FUNDS
COMBINING SCHEDULE OF REVENUES, EXPENSES AND CHANGES IN FUND NET POSITION
FOR THE YEAR ENDED JUNE 30, 2014
Business-Type Activities
Enterprise Funds
Landfill
Sewer Closure and Stormwater
Fund Postclosure Management Total
Operating Revenues:
Charges for services $ 6.813,869 $ - $ 394,247 $ 7,208.116
Total Operating Revenues 6,813,869 - 394,247 7,208,116
Operating Expenses:
Personnel expenses 399,571 - 147,678 547,249
Non personnel expenses 146,962 - 58,598 205,560
Intergovernmental 4,499,328 - - 4,499,328
Depreciation 402,192 - 30,963 433,155
Energy purchases 26,380 - - 26,380
Total Operating Expenses 5,474,433 - 237.239 5,711,672
Operating Income 1,339,436 - 157,008 1,496,444
Nonoperating Revenues(Expenses):
Intergovernmental revenue 157.500 - - 157.500
Investment income 4,411 - 1,257 5,668
Interest expense (2.100) - - (2.100)
Total Nonoperating Revenues (Expenses) 159.811 - 1,257 161,068
Income Before Transfers 1,499,247 - 158,265 1,657,512
Transfers out (283,056) - - (283,056)
Change in Net Position 1,216,191 - 158,265 1,374,456
Net Position at Beginning of Year 10,124,584 - 1,710,398 11,834,982
Net Position at End of Year $ 11.340,775 $ - $ 1.868 663 $ 13.209.438
See Independent Auditors' Report.
87 5 1) / D
TOWN OF READING,MASSACHUSETTS
NONMAJOR PROPRIETARY FUNDS
COMBINING SCHEDULE OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30,2014
Business-Type Activities
Enterprise Funds
Landfill
Sewer Closure and Stormwater
Fund Postclosure Management Total
Cash Flows From Operating Activities:
Receipts from customers and users $ 6,613,907 $ - $ 403,715 $ 7,017,622
Payments to vendors and employees (443,936) (8,594) (283,694) (736,224)
Payments to other governments (4,499,328) - - (4,499,328)
Net Cash Provided By(Used For)Operating Activities 1,670,643 (8,594) 120,021 1,782,070
Cash Flows From Noncapital Financing Activities:
Intergovernmental revenue 157,500 - - 157,500
Transfer out (283,056) - - (283,056)
Net Cash(Used For)Noncapital Financing Activities (125,556) - - (125,556)
Cash Flows From Capital and Related Financing Activities:
Proceeds from issuance of bonds and notes 192,500 - - 192,500
Acquisition of capital assets (299,618) - (54,732) (354,350)
Principal payments on bonds and notes (78,539) - - (78,539)
Interest expense (2,100) - - (2,100)
Net Cash(Used For)Capital and Related Financing Activities (187,757) - (54,732) (242,489)
Cash Flows From Investing Activities:
Investment income 4,411 - 1,257 5,668
Net Cash Provided By Investing Activities 4,411 - 1,257 5,668
Net Change in Cash and Short-Term Investments 1,361,741 (8,594) 66,546 1,419,693
Cash and Short Term Investments, Beginning of Year 2,395,056 68,392 1,004,406 3,467,854
Cash and Short Term Investments,End of Year $ 3,756,797 $ 59,798 $ 1,070,952 $ 4,887,547
Reconciliation of Operating income(Loss)to Net Cash
Provided By(Used For)Operating Activities:
Operating income $ 1,339,436 $ - $ 157,008 $ 1,496,444
Adjustments to reconcile operating income(loss)to net
cash provided by(used for)operating activities:
Depreciation 402,192 30,963 433,155
Changes in assets and liabilities:
User fees receivables (199,962) - 9,468 (190,494)
Inventory and prepayments (787) - - (787)
Warrants payable 116,344 (5,283) (69,317) 41,744
Accrued liabilities 11,261 - (6,788) 4,473
Other liabilities - (3,311) - (3,311)
Net OPEB obligation 2,159 - (1,313) 846
Net Cash Provided By(Used For)Operating Activities $ 1,670,643 $ (8,594) $ 120,021 $ 1,782,070
See Independent Auditors'Report.
88 51,( 24