SMITHTOWN SPECIAL LIBRARY DISTRICT FINANCIAL STATEMENTS AND SUPPLEMENTARY SCHEDULES WITH INDEPENDENT AUDITOR'S REPORT.

Transcription

1 FINANCIAL STATEMENTS AND SUPPLEMENTARY SCHEDULES WITH INDEPENDENT AUDITOR'S REPORT December 31, 2013

2 TABLE OF CONTENTS Independent Auditor's Report Management's Discussion and Analysis (MD&A) 1 3 Basic Financial Statements: Statement of Net Position 13 Statement of Activities 14 Balance Sheet- Governmental Funds 15 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position 16 Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental Funds 17 Reconciliation of the Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balances to the Statement of Activities 18 Notes to the Basic Financial Statements 19 Required Supplementary Information other than MD &A: Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual- General Fund 35 Schedule of Funding Progress - Other Postemployment Benefits 38

3 Kevin Baldessari, C.P.A. Albert Coster, C.P.A. BALDESSARI & COSTER LLP Certified Public Accountants 84 Covert Avenue Stewart Manor, New York (516) Fax# (516) MEMBERS OF THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS THENEWYORKSTATESOCIETYOF CERTIFIED PUBLIC ACCOUNTANTS INDEPENDENT AUDITOR'S REPORT The Board of Trustees Smithtown Special Library District Smithtown, New York We have audited the accompanying basic financial statements of the Smithtown Special Library District as of and for the year ended December 31, 2013, as listed in the table of contents, and the related notes to the financial statements. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of intemal 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 an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. 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 pe1forming procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers intemal 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 intemal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

4 INDEPENDENT AUDITOR'S REPORT Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Smithtown Special Library District, as of December 31, 2013, and the respective changes in financial position for the year then ended in accordance with accounting principles generally accepted in the United States of America. Changes in Accounting Principles As described in Note 2 to the financial statements, "Changes in Accounting Principles", the Library has adopted the provisions of GASB Statement No. 65, Items Previously Reported as Assets and Liabilities, as ofdecember 31,2013. Other Matter Accounting principles generally accepted in the United States of America require that the management's discussion and analysis, budgetary comparison information and the schedule of funding progress- other postemployment benefits on pages 3 through 12 and 35 through 38 be presented to supplement the basic financial statements. Such information, although not a pmt of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential pmt of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied cettain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. s~-~~~l~ Certified Public Accountants Stewart Manor, New York May 15, BALDESSARI & COSTER LLP

5 MANAGEMENT'S DISCUSSION AND ANALYSIS This section of the Smithtown Special Library District (the "Library") annual financial report presents management's discussion and analysis of the Library's financial performance during the fiscal year ended December 31, This information should be read in conjunction with the financial statements. 1. FINANCIAL HIGHLIGHTS Key financial highlights of the Library's 2013 basic financial statements are as follows: A. Government-wide Financial Statements As described in Note 2 to the financial statements, "Changes in Accounting Principles", the Library has adopted the provisions of GASB Statement No. 65, Items Previously Reported as Assets and Liabilities, as of December 31, The Library's net position was $6,091,662 at December 31, This balance represents a decrease of approximately $1,200,000 compared to the restated prior year. Unrestricted net position, which represents the portion of fund balance available to maintain the Library's continuing obligations to its taxpayers, customers, and creditors, decreased approximately $1,500,000. B. General Fund Financial Statements The Library's general fund - fund balance was $3,250,082 at December 31, This balance represents a decrease of approximately $355,000. At December 31, 2013, the Library had assigned $120,000 of the unassigned fund balance for Librarywide capital improvements. The Library increased the amount appropriated for funding the subsequent year's budget from $300,000 to approximately $545, OVERVIEW OF THE FINANCIAL STATEMENTS This annual report consists of three parts- management's discussion and analysis (MD&A), the basic financial statements and required supplementary information other than MD&A. The basic financial statements consist of government-wide financial statements, fund financial statements, and notes to the financial statements. A graphic display of the relationship of these statements follows: 3 -

6 MANAGEMENT'S DISCUSSION AND ANALYSIS A. Government-Wide Financial Statements The government-wide financial statements are organized to provide an understanding of the fiscal performance of the Library as a whole in a manner similar to a private sector business. There are two government-wide financial statements - the Statement of Net Position and the Statement of Activities. These statements provide both an aggregate and long-term view of the Library's finances. These statements utilize the accrual basis of accounting. This basis of accounting recognizes the financial effects of events when they occur, without regard to the timing of cash flows related to the events. The Statement of Net Position The Statement of Net Position presents information on all of the Library's assets and liabilities, with the difference between the two reported as net position. Increases or decreases in net position may serve as a useful indicator of whether the financial position of the Library is improving or deteriorating. The Statement of Activities The Statement of Activities presents information showing the change in net position during the fiscal year. All changes in net position are recorded at the time the underlying financial event occurs. Therefore, revenues and expenses are reported in the statement for some items that will result in cash flow in future fiscal periods. B. Fund Financial Statements The fund financial statements provide more detailed information about the Library's funds, not the Library as a whole. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The Library also uses fund accounting to ensure compliance with finance-related legal requirements. The funds of the Library are reported in the governmental funds. Governmental Funds Governmental funds statements utilize the modified accrual basis of accounting. This basis of accounting recognizes revenues in the period that they become measurable and available. It recognizes expenditures in the period that they become measurable, funded through available resources and payable within a current period. -4-

7 MANAGEMENT'S DISCUSSION AND ANALYSIS Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, the governmental fund financial statements focus on shorter term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year for spending in future years. Consequently, the governmental fund statements provide a detailed short-term view of the Library's operations and the services it provides. Because the focus of governmental funds is narrower than that of 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, you may better understand the long-term impact of the Library's near-term financing decisions. Both the governmental fund Balance Sheet and the governmental fund Statement of Revenues, Expenditures, and Changes in Fund Balance provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The Library maintains four governmental funds, the general fund, miscellaneous revenue fund, debt service fund and the capital projects fund, each of which is considered to be a major fund and is presented separately in the fund financial statements. 3. FINANCIAL ANALYSIS OF THE LIBRARY AS A WHOLE A. Net Position The Library's total net position decreased by $1,246,674 between fiscal year 2013 and The 2012 balances have been restated. The restatement includes a prior period adjustment decreasing capital assets, net, and net investment in capital assets by $1,246,122 due to a new appraisal of the Library's capital assets inventory. Other assets and unrestricted net deficit decreased $504,206 due to the implementation of GASB 65, Items Previously Reported as Assets and Liabilities. A summary of the Library's Statement of Net Position is as follows: Restated Increase Percentage (Decrease) Change Current and Other Assets $ 4,395,446 $ 5,441,822 $ (1,046,376) (19.23)% Capital Assets, Net 25,025,304 25,543,864 (518,560) (2.03)% Total Assets 29,420,750 30,985,686 (1,564,936) (5.05)% Current and Other Liabilities 880,999 1,461,565 (580,566) (39.72)% Long-Term Liabilities 19,271,382 19,803,786 (532,404) (2.69)% Due to Employees' Retirement System 294,108 58, , % Net Other Postemployment Benefits Obligation 2, , , % Total Liabilities 23,263,774 23,586,898 (323,124) (1.37)% Deferred Inflows of Resources 65,314 60,452 4, % Net Position Net Investment in Capital Assets 7,575,304 7,300, , % Restricted 90,279 86,638 3, % Unrestricted (deficit) (1,573,921) (49,166) (1,524, 755) 3,101.24% Total Net Position $ 6,091,662 $ 7,338,336 $ (1,246,674} (16.99)% - 5 -

8 MANAGEMENT'S DISCUSSION AND ANALYSIS Current and other assets decreased by $1,046,376 as compared to the prior year. The decrease is primarily related to the use of the cash with fiscal agent and the Library construction project. Capital assets, net decreased by $518,560, as compared to the prior year. This decrease is due to depreciation expense in excess of current year additions. The accompanying Notes to Financial Statements, Note 6 "Capital Assets 1 Prior Period Adjustment" provides additional information. Current and other liabilities decreased by $580,566 as compared to the prior year. The decrease is primarily due a reduction in accounts payable and accrued liabilities related to the capital projects. Long-term liabilities decreased by $532,404 as compared to the prior year. This decrease is primarily due to the payment of bonds. Due to employees' retirement system increased $235,566. The Library elected to amortize a portion of the current liability pursuant to Chapter 57 of the Laws of 2010 of New York State resulting in a $261,690 increase to the liability. Additionally, the Library recognized an expense of $26,124 related to the amortization of prior years' retirement incentives. The accompanying Notes to financial Statements, Note 9, "Pension Plans" provides additional information. Net other postemployment benefits obligation (OPES) increased $554,280 as the current year actuarially calculated contribution exceeded the actual contributions. The accompanying Notes to Financial Statements, Note 10 "Postemployment Benefits" provides additional information. Deferred inflows of resources are resources associated with imposed non-exchange revenue transactions, i.e., real property taxes, received before the period for which they were earned. The net investment in capital assets relates to the investment in capital assets at cost such as land; art collection; buildings; improvements other than buildings; permanent fixtures; and, furniture and equipment, net of depreciation and related debt. The restricted component of net position in the amount of $90,279 relates to the Library's reserves for debt and special programs and projects. The increase in restricted net position is primarily due to an increase in special programs. The unrestricted component of net position in the amount of $(1,573,921) relates to the balance of the Library's net position. This number decreased from the prior year by $1,524,755. The Library's assets are not sufficient to cover unfunded liabilities such as net other postemployment benefits. Currently there is no provision in the law to permit the Library to fund OPES by any means other than the "pay as you go" method. The Library's total net position decreased by $1,246,674 or 16.99%; $6,091,662 at December 31, 2013, compared to $7,338,336 at December 31, B. Changes in Net Position The results of this year's operations as a whole are reported in the Statement of Activities in the accompanying financial statements. A summary of this statement for the years ended December 31, 2013 and 2012 follows: - 6-

9 MANAGEMENT'S DISCUSSION AND ANALYSIS Increase Percentage (Decrease) Change Revenues Program Revenues Charges for services $ 113,436 $ 94,264 $ 19, % Operating grants 7,372 5,815 1, % Capital grants 40, ,748 (285,748) (87.72)% General Revenues Real Property Taxes 12,735,318 12,394, , % Other 246, ,463 (84,583), (25.52)% Total Revenues 13,143,006 13,151,760 (8,754) (0.07)% Expenses Personal services 6,570,163 5,820, , % Contractual and other 5,942,031 5,287, , % Depreciation 950, , , % Debt Service- Interest 927! ,541 (31,093} (3.24)% Total Expenses 14,389,680 12,480,789 1,908, % Increase (Decrease) inn et Position $ (1,246,674~ $ 670,971 $,1,917,645J (285.80)% The Library's net position decreased by $1,246,674 and increased by $670,971 for the years ended December 31, 2013 and 2012, respectively. The Library's revenues decreased by $8,754 or 0.07%. The increase in property taxes and charges for services was offset by decreases in state sources and other revenues. Expenditures increased $1,908,891 or 15.29%. The increases were primarily in personal services, employee benefits and depreciation. A graphic display of the distribution of revenues for the two years follows: December 31, 2013 December 31, 2012 Real Property Taxes 97% Real Property Taxes 94% 7-

10 MANAGEMENT'S DISCUSSION AND ANALYSIS A graphic display of the distribution of expenses for the two years follows: December December Debt Service Interest DebtSOivlce, Interest Personal services 47% 4. FINANCIAL ANALYSIS OF THE LIBRARY'S FUNDS At December 31, 2013, the Library's governmental funds reported a combined fund balance of $3,449,133, a decrease of$470,672. A summary of the change in fund balance by fund is as follows: Increase Percentage (Decrease) Change General Fund N onspendable: Prepaids $ 235,029 $ 241,418 $ (6,389) (2.65)% Assigned: Appropriated fund balance 545, , , % Encumbrances 20,987 20, % Capital projects 120, , % Unassigned: Fund Balance 2~3~8!223 3,064,110 (735,887) (24.02)% 3,250,082 3,605,528 (355,446) (9.86)% Miscellaneous Revenue Fund Restricted: Special programs & projects 52,984 50,334 2, o/o Debt Service Fund Restricted: Debt service 37,295 36, % Capital Projects Fund Assigned: Unappropriated 108, ,639 (118,867) (52.22)% Total Fund Balance $ 3,449,133 $ 3,919,805 $ ~470,672) (12.01)% -8-

11 MANAGEMENT'S DISCUSSION AND ANALYSIS A. General Fund The general fund-fund balance decreased $355,446. Total expenditures and other financing uses of $13,449,726 exceeded revenues of $13,094,280. Revenues increased approximately $383,000 compared to the prior year. The increase is primarily due to the increase in property taxes. Total expenditures decreased approximately $1,461,000 compared to the prior year. The transfer to other funds decreased approximately $2,293,000 as the transfer to the capital projects fund was reduced. This decrease was offset by increases in salaries. During the year, the Library elected to defer to future years approximately $262,000 of the current year's Employees' Retirement System contribution. Had the Library not made the election, the deficit would have been that much higher. The operating deficit was planned and the financial results are being monitored by the Board of Trustees and management. The Library cannot continue to operate at a deficit in the long-term and, as such, some combination of additional revenues and expenditure reductions will be made so that the Library can reduce the use of fund balance to fund future budgets. B. Miscellaneous Revenue Fund The miscellaneous revenue fund-fund balance increased from the prior year as current year revenues exceeded current year expenditures. C. Debt Service Fund The debt service fund is used to account for the accumulation of resources and the payment of principal and interest on bonds. The debt service fund-fund balance is the result of transfers and interest earnings on bond proceeds exceeding the bond principal and interest payments. D. Capital Projects Fund The capital projects fund total fund balance decreased $118, GENERAL FUND Bl]DGETARY HIGHLIGHTS A Budget The general fund budget for 2013 was $13,321,568. This was an increase of $671,848 (5.31%) over the 2012 budget. The budget was revised to allow for the transfer of the designated $205,000 to the capital projects fund resulting in a final budget of $13,526,568. The budget was funded through a combination of revenues and appropriated fund balance. The real property tax levy increased by $340,848 (2.75%) and all other estimated revenues increased $31,

12 MANAGEMENT'S DISCUSSION AND ANALYSIS The budget is the Library's anticipated spending plan for the year. Throughout the year, certain lines of the budget may become over expended even though the Library stays within its total budget. At the end of the year, the Library makes budget transfers to eliminate the over expended budget lines. These year-end budget transfers are subsequently approved by the Board of Trustees. B. Change in General Fund's Unassigned Fund Balance (Budget to Actual) The general fund's unassigned fund balance is the component of total fund balance that is the residual of prior years' excess revenues over expenditures, net of transfers to reserves and assignments. It is this balance that is commonly referred to as the "fund balance". The change in this balance demonstrated through a comparison of the actual revenues and expenditures for the year compared to budget follows: Opening, Unassigned Fund Balance $ 3,064,110 Appropriated for Budget Revisions (205,000) Revenues Over Budget 72,712 Expenditures and Encumbrances Under Budget 55,855 Change in Nonspendable Fund Balance 6,389 Change in Assigned Fund Balance (120,000) Appropriated for the 2014 Budget (545,843) Closing, Unassigned Fund Balance $ 2,328,223 OIJening, Unassigned Fund Balance The $3,064,110 shown in the table is the portion of the Library's December 31, 2012, fund balance that was retained as unassigned. This was 23% of the Library's 2013, approved operating budget of $13,321,568. AIJIJrOIJriated for Budget Revisions The Library assigned $325,000 of the unassigned fund balance for library-wide capital improvements. Of this amount, $205,000 was transferred during the year ended December 31, Revenues Over Budget The 2013 budget for revenues was $13,021,568. Actual revenues received for the year were $13,094,280. The excess of actual revenue over estimated or budgeted revenue was $72,712. This change contributes directly to the change to the unassigned portion of the general fund-fund balance from December 31, 2012 to December 31,

13 MANAGEMENT'S DISCUSSION AND ANALYSIS Expenditures and Encumbrances Under Budget Actual expenditures for the year ended December 31, 2013, were $13A49,726, and outstanding encumbrances were $20,987. Combined, expenditures and encumbrances were $55,855 under the revised operating budget of $13,526,568. This under-expenditure contributes to the change to the unassigned portion of the general fund-fund balance from December 31, 2012 to December 31, Change in Nonspendable Fund Balance The increase of $6,389 reflects the increase in the amount restricted for prepaid items. Change in Assigned and Appropriated Fund Balance The Library designated $325,000 for the purpose of capital improvements and necessary renovations to the Library facilities to the capital projects fund. During the year ended December 31, 2013,$205,000 was transferred to the capital projects fund and $120,000 remains as assigned fund balance. Additionally, the Library appropriated $545,843 to fund the 2014 voter approved budget. Closing. Unassigned Fund Balance Based upon the sl)mmary changes shown in the previous table, the Library will begin the 2014 fiscal year with an unassigned fund balance of $2,328,223. This is a decrease of $735,887 from the opening unassigned fund balance. This unassigned portion equals 16.8% of the Library's 2014 operating budget. 6, CAPITAL ASSETS AND DEBT ADMINISTRATION A. Capital Assets As of December 31, 2013, the Library's investment in capital assets totaled $25,025,304 which is a decrease of $518,560 compared with The decrease is due to depreciation expense of $950,038 net of capital asset additions of $431,478. The majority of the additions were for the renovation and expansion of the Library's buildings. A summary of capital assets net of depreciation at year end is as follows: Restated Increase (Decrease) Land $ 1,408,073 $ 1,408,073 $ Art collection 178, ,000 Buildings 21,537,700 21,931,840 (394,140) Improvements other than buildings 375, , Permanent Fixtures 738, ,931 (42,385) Furniture and equipment 787, ,323 (82,465) Capital assets, net $ 25,025,304 $ 25,543,864 $ (~~8,560)_ The Library's capital assets inventory report was updated during the year ended December 31, The 2012 balances have been restated to reflect the updated report. -11-

14 MANAGEMENT'S DISCUSSION AND ANALYSIS B. Debt Administration On December 31, 2013, the Library had total bonds payable of $17,450,000. The bonds were issued through the New York State Dormitory Authority for the renovation/expansion of Library buildings. The bonds mature in 2028 and bear interest ranging from 4% to 6%. The bonds were issued with a $378,557 premium, which is reported as a liability and amortized over the life of the debt as a reduction of the interest expense. A summary of the outstanding debt at December 31, 2013 and 2012, is as follows: Issue Date Interest Rate Increase (Decrease) December 4, %-6.0% $ 17,1 50,000 $ 18,215,000 =$'===~f7=_6;;;,;5,=00;;,;.0do.l 7. ECONOMIC FACTORS AND NEXT YEAR'S BUDGET The general fund 2014 budget, as approved by the voters on October 15, 2013, is $13,841,683. This is an increase of $520,115 (3.90%) over the 2013 budget. The increase is primarily in salaries and benefits. The real property tax levy will increase $285,568 (2.24%) and other estimated revenues will decrease $11,296 (3.95%). The Library appropriated $545,843 in available fund balance to fund the 2014 budget. 8. ADDITIONAL FINANCIAL INFORMATION This financial report is designed to provide the Library's taxpayers, customers and other interested parties with an overview of the Library's financial operations and financial condition. Should the reader have questions regarding the information included in this report or wish to request additional financial information, please contact: Mr. Robert Lusak, Director The Smithtown Special Library District Nesconset Branch 148 Smithtown Boulevard Nesconset, New York

15 Statement of Net Position December 31, 2013 ASSETS Cash Cash with fiscal agent Account> receivable Grant receivable Prepaid expenses Capital assets, not being depreciated Capital assets, net of accumulated depreciation Total Assets LIABILITIES Accounts payable Accrued liabilities Retainage payable Collections in advance Long-term liabilities Due within one year Bonds payable Due after one year Bonds payable Compensated absences payable Due to employees' retirement system Net other postemployment benefits obligation Total Liabilities DEFERRED INFLOWS OF RESOURCES Deferred taxes Total Deferred Inflows of Resources NET POSITION Net investment in capital assets Restricted Special programs & projects Debt service Unrestricted (deficit) Total Net Position $ 3,618, ,420 30,266 40, ,029 1,586,073 23,439,231 29,420, , ,758 25, ,391 16,874,566 1,575, ,108 2,817,285 23,263,774 65,314 65,314 7,575,304 52,984 37,295 (1,573,921) $ 61091,662 See Notes to Financial Statements - 13.

16 SMITHTOWN SPECIAl. UBRARY DISTRICT Statement of Activities For The Year Ended December 31,2013 EXPENSES Library services Personal services Contractual and other services Depreciation Debt service - interest Total Program Expenses Program Revenues Charges for services Operating grants Capital grants Total Program Revenues Net Program Expense General Revenues Real proper~ taxes Other tax items Use of money and proper~ Miscellaneous State sources Total General Revenues Change in Net Position Total Net Position- Beginning of Year, Restated Total Net Position- End of Year $ 6,570,163 5,942, , ,448 14,389, ,436 7,372 40, ,808 14,228,872 12,735, ,683 24,981 60,440 57,776 12,982,198 (1,246,674) 7,338,336 $ 6,091,662 See Notes to Financial Statements - 14-

17 Balance Sheet Governmental Funds December 31, 2013 Miscellaneous Debt Capital General Revenue Service Projects Total ASSETS Cash $ 3,447,890 $ 54,853 $ $ 115,988 $ 3,618,731 Cash with fiscal agent 471, ,420 Accounts receivable 22,428 7,838 30,266 Due from other funds 24,290 35,819 28,742 88,851 Grant receivable 40,000 40,000 Prepaid expenses 235, ,029 Total Assets $ 3,705,347 $ 79,143 $ 507,239 $ 192,568 $ 4,484,297 LIABILITIES Payables Account<> payable $ 102,805 $ $ $ 58,796 $ 161,601 Accrued liabilities 223, , ,758 Retain age payable 25,000 25,000 Due to other funds 62,692 26,159 88,851 Unearned revenues Collections in advance Total Liabilities 389,951 26, ,944 83, ,850 DEFERRED INFLOWS OF RESOURCES Deferred taxes 65,314 65,314 Total Deferred Inflows of Resources 65, ,314 FUND BALANCES Nonspendable: Prepaids 235, ,029 Restricted: Special programs & projects 52,984 52,984 Debt service 37,295 37,295 Assigned: Appropriated 545, ,843 Unappropriated 140, , ,759 Unassigned: Fund balance 2,328,223 2,328,223 Total Fund Balances 3,250,082 52,984 37, ,772 3,449,133 Total Liabilities, Deferred Inflows of Resources and Fund Balances $ 3,705,347 $ 79,143 $ 507,239 $ 192,568 $ 4,484,297 See Notes to Financial Statements - 15-

18 SMITHTOWN SPECIAl, LIBRARY DISTRICT Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position December 31, 2013 Total Governmental Fund Balances $ 3,449,133 Amounts reported for governmental activities in the Statement of Net Position are different because: The cost of building and acquiring capital assets (land, buildings, equipment) financed from the governmental funds are reported as expenditures in the year they are incurred, and the assets do not appear on the Balance Sheet. However, the Statement of Net Position includes those capital assets among the assets of the Library as a whole, and their original costs are expensed annually over their useful lives. Original cost of capital assets Accumulated depreciation Long-term liabilities are not due and payable in the current period and, therefore, are not reported as liabilities in the governmental funds. Long-term liabilities at year end consist of: Bonds payable Compensated absences payable Due to employees' retirement system Net other postemployment benefits obligation Total Government-wide Net Position $ 28,854,069 (3,828, 7 65)_ (17,695,957) (1,5 75,425) (294,108) (2,817,285) 25,025,304 ig_382, 77 5) $ 6,091,662 See Notes to Financial Statements - 16-

19 Statement of Revenues, Expenditures and Changes in Fund Balances- Governmental Funds For The Year Ended December 31, 2013 Miscellaneous Debt Capital General Revenue Service Projects Total REVENUES Real property taxes $ 12,735,318 $ $ $ $ 12,735,318 Other tax items 103, ,683 Library charges, fines & fees 113, ,436 Use of money and property 23, ,981 Miscellaneous 60,440 7,372 67,812 State sources 57,776 40,000 97,776 Total Revenues 13,094!280 7, ,000 13,143,006 EXPENDITURES Salaries 6,570,163 6,570,163 Equipment I capital outlay 67,054 67,054 Contractual and other expenditures 1,785,119 5,085 1,790,204 Employee benefits 3,102,721 3,102,721 Debt service Principal 765, ,000 Interest 954, ,669 Capital outlay 363, ,867 Total Expenditures 11,525,057 5,085 1,719, ,867 13,(>1:~,678 Excess (Deficiency) of Revenues Over Expenditures 1,569,223 2,650 (1, 718,678) (323,867) (470,672) OTHER FINANCING SOURCES AND USES Operating transfers in 1,719, ,000 1,924,669 Operating transfers out (1,924,669) (1. 924,669) Total Other Financing Sources and (Uses) (1,924,669) 1,719, ,000 Net Change in Fund Balance (355,446) 2, (118,867) (470,672) Fund Balances- Beginning of year 3,605!528 50,334 36, ,639 3,919,805 Fund Balances End of year $ 3,250,082 $ 52,984 $ 37,295 $ 108,772 $ 3,449,133 See Notes to Financial Statements - 17.

20 Reconciliation of the Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balances to the Statement of Activities For The Year Ended December 31, 2013 Net Change in Fund Balance $ (470,672) Amounts reported for governmental activities in the Statement of Activities are different because: In the Statement of Activities, certain operating expenses do not require the use of current financial resources and, therefore, are not reported as expenditures in the governmental funds. Increase in compensated absences Increase in amortized ERS obligation Increase in net other postemployment benefits obligation Capital related differences Capital outlays to purchase or build capital assets are reported in governmental funds as expenditures. However, fm governmental activities those costs are capitalized and shown in the Statement of Net Position and allocated over their useful lives as annual depreciation expenses in the Statement of Activities. This is the amount by which capital outlays exceed depreciation in the period. Purchase of capital items Depreciation expense Long-term dept transaction differences Amortization of premium on obligations $ (259,817) (235,566) ~ 431,478 (950,038) 27,221 (1,049,663) (518,560) Repayment of long-term debt is an expenditure in the governmental funds, but it reduces long-term liabilities in the Statement of Net Position and does not affect the Statement of Activities. Repayment of bond principal 765,000 Change in Net Position of Governmental Activities 792,221 $ (1,246,674) See Notes to Financial Statements "18.

21 NOTES TO FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accompanying financial statements of the Smithtown Special Library District (Library) have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP) as prescribed by the Governmental Accounting Standards Board (GASB), which is the standard setting body for establishing governmental accounting and financial reporting principles. The more significant of the Library's accounting policies are described below. The Smithtown Special Library District was established effective January 1, 2002, pursuant to the New York State Legislature and the voters of the Town of Smithtown (Town). Prior to 2002, the Library was known as The Smithtown Library and was a Special Revenue Fund of the Town. A. Reporting Entity The Library is governed by Education Law and other general laws of the State of New York The governing body is the Board of Trustees of the Library. The scope of activities included within the accompanying financial statements are those transactions which comprise library operations, and are governed by, or significantly influenced by, the Board of Trustees. The Library is a system of four buildings which provides books and other resources to the community. The reporting entity is the primary government, the Library, as well as component units and other organizational entities determined to be includable in the Library's financial reporting entity, based on the nature and significance of their relationship with the Library. The financial reporting entity is based on criteria set forth by GASB Statement No. 14, The Financial Reporting Entity and No. 34, Determining Whether Certain Organizations are Component Units. These criteria include legal standing, fiscal dependency, and financial accountability. Based on the application of these criteria, there are no other entities which would be included in the Library's reporting entity. B. Basis of Presentation Government-wide Financial Statements The Statement of Net Position and the Statement of Activities present information about the overall financial activities of the Library. Eliminations have been made to minimize the double counting of interfund transactions. Governmental activities generally are financed through taxes, state aid, intergovernmental revenues, and other exchange and nonexchange transactions. Program specific or discretionary grants and contributions (operating or capital) include revenues arising from mandatory and voluntary nonexchnage transactions with other governments, organizations, or individuals that are restricted for use in a particular program. The Statement of Net Position presents the financial position of the Library at fiscal year end. The Statement of Activities presents a comparison between direct expenses and program revenues for each function of the Library's governmental activities. Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses are not allocated to programs. Program revenues include (a) charges paid by the recipients of goods or services offered by the programs and (b) grants, contributions, and other revenues that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including real property taxes and state aid, are presented as general revenues. -19-

22 NOTES TO FINANCIAL STATEMENTS Fund Financial Statements The fund financial statements provide information about the Library's funds. Separate statements for each fund category are presented. The emphasis of fund financial statements is on major governmental funds as defined by GASB, each displayed in a separate column. The Library's Financial Statements reflect the following fund categories: Governmental Funds: General Fund - is the general operating fund and is used to account for all financial transactions except those required to be accounted for in another fund. Special Revenue Fund - is used to account for the proceeds of specific revenue sources that are legally restricted to expenditures for specified purposes. Miscellaneous Revenue Fynd - This fund is used to account for gifts and donations in which principal and income benefit the Library. Criteria established by the donors govern the use of the funds. Debt Service Fund - is used to account for the accumulation of resources and the payment of principal and interest on long-term general obligation debt of governmental activities. Capital Projects Fund - is used to account for the financial resources used for acquisition, construction, or major repair of capital facilities. C. Measurement Focus and Basis of Accounting The government-wide financial statements are reported on the accrual basis of accounting using the economic resources measurement focus. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash transaction takes place, Nonexchange transactions, in which the Library gives or receives value without directly receiving or giving equal value in exchange, include real property taxes, grants and donations. On an accrual basis, revenue from real property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied and the related expenditures are incurred. The fund statements are reported on the modified accrual basis of accounting using the current financial resources measurement focus. Revenues are recognized when measurable and available. The Library considers all revenues reported in the governmental funds to be available if the revenues are collected within the current period or soon enough thereafter to be used to pay liabilities of the current period, except for property taxes, which are considered to be available if they are collected within 60 days after the end of the year. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt, unfunded claims and judgments, unfunded compensated absences and other postemployment benefits, which are recognized as expenditures to the extent they have matured. General capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of general long-term debt and acquisitions under capital leases are reported as other financing sources. -20-

23 NOTES TO FINANCIAL STATEMENTS D. Property Taxes Calendar Real property taxes are levied annually by the Board of Trustees of the Library no later than November 1st and become a lien on December 1st. The Library's tax levy is collected by the Town of Smithtown from January to June. As per the debt agreement with the New York State Dormitory Authority (DASNY), the Town sends the collected taxes to DASNY. DASNY retains an amount equal to the current year's debt service and remits the balance to the Library. Enforcement Uncollected real property taxes are subsequently enforced by the County of Suffolk in December. E. Restricted Resources When an expense is incurred for purposes for which both restricted and unrestricted resources are available, the Library's policy concerning which to apply first varies with the intended use, and with associated legal requirements, many of which are described elsewhere in these Notes to Financial Statements. F. Interfund Transactions The operations of the Library include transactions between funds. These transactions may be temporary in nature, such as with interfund borrowings. The Library typically loans resources between funds for the purpose of providing cash flow. These interfund receivables and payables are expected to be repaid within one year. Permanent transfers of funds include transfers to provide financing or other services. This includes the transfer of unrestricted general fund revenues to finance various programs that the Library must account for in other funds in accordance with budgetary authorizations. In the government-wide statements, the amounts reported on the Statement of Net Position for interfund receivables and payables represent amounts due between different fund types (governmental activities). Eliminations have been made for all interfund receivables and payables between the funds. The governmental funds report all interfund transactions as originally recorded. Interfund receivables and payables are netted on the accompanying governmental funds balance sheet when it is the Library's practice to settle these amounts at a net balance based upon the right oflegal offset. A detailed disclosure by individual fund for interfund receivables and payables activity is provided subsequently in these Notes to Financial Statements. G. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported revenues and expenses during the reporting period. Accordingly, actual results could differ from those estimates. Estimates and assumptions are made in a variety of areas, including compensated absences, other postemployment benefits, potential contingent liabilities and useful lives of long-lived assets. -21-

24 NOTES TO FINANCIAL STATEMENTS H. Cash and Cash Equivalents The Library's cash and cash equivalents consist of cash on hand, demand deposits, certificates of deposit, and short-term investments with original maturities of three months or less from date of acquisition. I. Receivables Receivables are shown net of allowance for uncollectibles, if any. However, no allowance for uncollectibles has been provided since it is believed that such allowance would not be material. J. Prepaid Expenses Prepaid expenses represent payments made by the Library for which benefits extend beyond year-end. These payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both the government-wide and fund financial statements. These items are reported as assets on the Statement of Net Position or Balance Sheet using the consumption method. A current asset for the prepaid amounts is recorded at the time of purchase and an expense/expenditure is reported in the year the goods or services are consumed. A portion of fund balance has been classified as nonspendable to indicate that prepaids do not constitute available spendable resources. K. Bond Financing Costs Bond financing costs are reported in the government-wide financial statements. These costs represent bond issuance costs which are reported as expenditures in the fund statements, however, they are capitalized in the statement of net position and amortized over the life of the related debt. L. Capital Assets Capital assets are reflected in the government-wide financial statements. Capital assets are reported at actual cost, when the information is available, or estimated historical cost based on professional third-party information. Donated assets are reported at estimated fair market value at the date of donation. All capital assets, except land, and the art collection, are depreciated on a straight line basis over their estimated useful lives. Capitalization thresholds, the dollar value above which asset acquisitions are added to the capital asset accounts, and estimated useful lives of capital assets as reported in the governmentwide statements are as follows: Buildings improvements other than buildings Furniture and equipment M. Collections in Advance Capitalization Threshold $ Estimated Useful Life years years 5-15 years Collections in advance arise when resources are received by the Library before it has a legal claim to them, as when grants monies are received prior to the incurrence of qualifying expenditures or when charges for services monies are received in advance from payers prior to the services bing rendered by the Library. -22-

25 NOTES TO FINANCIAL STATEMENTS These amounts are recorded as liabilities in the financial statements. The liabilites are removed and revenues are recognized in subsequent periods when the Library has legal claim to the resources. N. Deferred Inflows of Resources Deferred inflows of resources are reported when resources associated with imposed non-exchange transaction, e.g., real property taxes, are received before the period for which property taxes are levied. They are reclassified as property tax revenues in the year for which the property taxes are levied, which is generally the subsequent year. 0. Vested Employee Benefits- Compensated Absences Compensated absences consist of unpaid accumulated sick leave and vacation time. Sick leave eligibility and accumulation is specified in collective bargaining agreements and in individual employment contracts. Upon retirement, resignation or death, employees may contractually receive a payment based on unused accumulated sick leave. Vacation eligibility and accumulation is specified in collective bargaining agreements and in individual employment contracts. Some earned benefits may be forfeited if not taken within varying time periods. Consistent with GASB Statement No. 16, Accounting for Compensated Absences, the liability has been calculated using the vesting method and an accrual for that liability is included in the government-wide financial statements. The compensated absences liability is calculated based on the pay rates in effect at year end. In the fund financial statements only the amount of matured liabilities is accrued within the general fund based upon expendable and available financial resources. P. Other Benefits Eligible Library employees participate in the New York State Employees' Retirement System (NYSERS). Library employees may choose to participate in the Library's elective deferred compensation plans established under Internal Revenue Code Sections 403(b) and 457. In addition to providing pension benefits, the Library provides postemployment health insurance coverage and survivor benefits for retired employees and their survivors. Collective bargaining agreements determine if Library employees are eligible for these benefits if they reach normal retirement age while working for the Library. Health care benefits are provided through plans whose premiums are based on the benefits paid during the year. The cost of providing post-retirement benefits is shared between the Library and the retired employees. The Library recognizes the cost of providing health insurance by recording its share of insurance premiums as an expenditure in the general fund, in the year paid. In the governmentwide statements, postemployment costs are measured and disclosed using the accrual basis of accounting

26 NOTES TO FINANCIAL STATEMENTS Q. Accrued Liabilities and Long-Term Obligations Payables, accrued liabilities and long-term obligations are reported in the government-wide financial statements. In the governmental funds, payables and accrued liabilities are paid in a timely manner and in full from current financial resources. Claims and judgments, and compensated absences that will be paid from governmental funds, are reported as a liability in the fund financial statements only to the extent they have matured. Bonds and other long-term obligations that will be paid from governmental funds are recognized as a liability in the fund financial statements when due. Long-term obligations represent the Library's future obligations or future economic outflows. The liabilities are reported as due and payable within one year or due and payable after one year in the Statement of Net Position. R. Equity Classifications Government-wide Statements In the government-wide statements there are three classes of net position: Net investment in capital assets - consists of net capital assets (cost less accumulated depreciation) reduced by outstanding balances of related debt obligations from the acquisition, construction or improvement of those assets. Restricted - reports net position when constraints placed on the assets are either externally imposed by creditors (such as through debt covenants), grantors, contributors, or laws or regulations of other governments, or imposed by law through constitutional provisions or enabling legislation. Unrestricted - reports all other amounts that do not meet the definition of the above two classifications and are deemed to be available for general use by the Library. Fund Balance The fund statements report fund balance classifications according to the relative strength of spending constraints placed on the purpose for which resources can be used, as follows: Nonspendable - Consists of amounts that are inherently nonspendable in the current period either because of their form or because they must be maintained intact. Nonspendable fund balances consists of prepaids. Restricted - Consists of amounts that are subject to externally enforceable legal purpose restrictions imposed by credits, grants, contributors, or laws and regulations of other governments; or through constitutional provisions or enabling legislation. Restricted fund balances, generally referred to as reserves in accordance with New York State law, are created to satisfy legal restrictions, plan for future expenditures or relate to resources not available for general use or appropriation. These reserve funds are established through Board action or voter approval and a separate identity must be maintained for each reserve. Earnings on the invested resources become part of the respective reserve funds; however, separate bank accounts are not necessary for each reserve fund. Fund balance reserves currently in use by the Library include the following: -24-