WESTVILLE FIRE DISTRICT NO. 1 REPORT OF AUDIT YEAR ENDED DECEMBER 31, 2017

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1 WESTVILLE FIRE DISTRICT NO. 1 REPORT OF AUDIT YEAR ENDED DECEMBER 31, 2017

2 INDEX Roster of Officials FINANCIAL SECTION Independent Auditor's Report REQUIRED SUPPLEMENTARY INFORMATION- PART I Management's Discussion and Analysis BASIC FINANCIAL STATEMENTS District-Wide Financial Statements A-1 Statement of Net Position A-2 Statement of Activities FUND FINANCIAL STATEMENTS Governmental Funds B-1 Balance Sheet B-2 Statement of Revenues, Expenditures and Changes in Fund Balances B-3 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities Fiduciary Funds B-4 Statement of Fiduciary Net Position B-5 Statement of Changes in Fiduciary Net Position NOTES TO FINANCIAL STATEMENTS SCHEDULES RELATED TO ACCOUNTING AND REPORTING FOR PENSIONS (GASB 68) & (GASB 71) C-1 Schedule of the District's Proportionate Share of the Net Pension Liability - PERS C-2 Schedule of District Contributions - PERS NOTES TO REQUIRED SUPPLEMENTARY INFORMATION REQUIRED SUPPLEMENTARY INFORMATION- PART II Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed In Accordance with Government Auditing Standards D-1 Budgetary Comparison Schedule D-2 Schedule of Capital Projects D-3 Schedule of Obligations Under Capital Lease General Comments Other Comments Status of Prior Recommendations Findings and Recommendations Page

3 WESTVILLE FIRE DISTRICT NO. 1 ROSTER OF OFFICIALS Fritz Sims Bryan Miller Deborah Holick William Marsden Travis Lawrence OTHER OFFICIALS Charles Murtaugh Gary D. Thompson, Esquire Eric Farley James Tucker Chairman/Treasurer Vice Chairman Secretary Commissioner Commissioner Administrator Solicitor Fire Chief Fire Safety Official

4 FINANCIAL SECTION 2

5 PETRONI c&1. ASSOCIATES LLC Certified Public Accountants Registered Municipal Accountants 1112 West High Street, Suite IIIII P.O. Box 279 Glassboro, N.J (856) Fax (856) MEMBER: AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS Nid( L. Petmni. CPA. RMA Mat-y A. Carey, RMA Wendy G. Fama, CPA Denise R. Nevico, CPA Deanna L. Rollet, CPA, RMA Honorable Chairman and Members of the Fire District Westville Fire District No West Olive Street Westville, New Jersey INDEPENDENT AUDITOR'S REPORT Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the, Westville Fire District No. 1, as of December 31, 2017, and the related notes to the financial statements, which collectively comprise the Westville Fire District No. 1 's basic financial statements as listed in the table of contents. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America, and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the District's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. 3

6 Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the Westville Fire District No. 1, as of December 31, 2017, and the respective changes in financial position and, where applicable, cash flows thereof 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 the Management's Discussion and Analysis and Budgetary Comparison Information identified in the table of contents be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Westville Fire District No. 1 's basic financial statements. The combining and individual non-major fund financial statements is the responsibility of management and were derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The combining and individual nonmajor fund financial statements is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual nonmajor fund financial statements, listed in the table of contents, are fairly stated, in all material respects, in relation to the basic financial statements as a whole. The introductory section and letter of comments and recommendations section has not been subject to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on it. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated May 3, 2018, on our consideration of the Westville Fire District No. 1 's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe 4

7 the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on 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 the Westville Fire District No. 1's internal control over financial reporting and compliance. PETRONI & ASSOCIATES LLC A4eLQ~ Nick L. Petroni Certified Public Accountant Registered Municipal Accountant #252 May 3,

8 REQUIRED SUPPLEMENTARY INFORMATION- PART I 6

9 WESTVILLE FIRE DISTRICT NO. 1 MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED DECEMBER 31, 2017 INTRODUCTION The Westville Board of Fire Commissioners for Westville Fire District No. 1, hereinafter referred to as the "Fire District" is pleased to present the Annual Financial Report developed in accordance with State of Governmental Accounting Standard No. 34 entitled, "Basic Financial Statement- and Management's Discussion and Analysis - for State & Local Governments" (hereinafter "GASB 34") and related standards. MISSION The mission of the Westville Fire District No. 1 is to provide a professional level of community fire protection, emergency medical and rescue services to the citizens and property owners within the Borough of Westville, in order to prevent or minimize the loss of life, pain and suffering and property damage as a result of fire or other type of emergency. The Fire District's mission will be accomplished by the effective use of its volunteer, career, and physical resources, in cooperation with other public agencies, utilizing state-of-the-art equipment, innovative techniques, and available technology to provide a high level of cost efficient, quality service. RESPONSIBILITY AND CONTROL The Fire District has prepared and is responsible for the financial statements and related information in this report. The opinion of the independent auditors, Petroni & Associates LLC, is included in this report. In management's opinion the financial statements represent fairly and in all material aspects, financial position, and results of operations of the Fire District for the year then ended, in conformity with accounting principles generally accepted in the United States of America. SUMMARY OF ORGANIZATION AND BUSINESS The Fire District is a taxing authority charged with the duty to prevent and extinguish fires and regulate fire hazards (NJSA 40A:14-81 ). The Fire District was created for the purpose of fire suppression and prevention and operating a fire department for said purpose. The Fire District's responsibilities are carried out by a combination of full-time and part-time paid professional firefighters as well as a volunteer force. MANAGEMENT OVERSIGHT The Westville Board of Fire Commissioners consists of five board members who are elected by the residents of the Borough of Westville for three (3) years in alternate time periods. 7

10 FINANCIAL HIGHLIGHTS WESTVILLE FIRE DISTRICT NO. 1 MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED DECEMBER 31, 2017 STATEMENT OF NET POSITION ASSETS Current and Other Assets $ 389, $ 425, Capital Assets 987, ,097, Total Assets 1,376, ,523, DEFERRED OUTFLOWS OF RESOURCES Deferred Outflows Related to Pension 32, , LIABILITIES Other Liabilities 35, , Noncurrent Liabilities 460, , Net Pension Liability 356, , Total Liabilities 851, ,061, DEFERRED INFLOWS OF RESOURCES Deferred Inflows Related to Pension 28, NET POSITION Invested in Capital Assets Net of Related Debt 527, , Restricted 84, , Assigned 92, , Unassigned {176,285.15} (78,610.31} Total Net Position $ 528, $ 599, The Fire District's combined net position on December 31, 2017 and 2016, was $528, and $599,127.40, respectively. This was a decrease of $70, The tax rate for 2017,2016,2015, and 2014 was $.183, $.181, $.16, and $.146, respectively, per $ of assessed valuation. The budget utilized fund balance in 2017, 2016, 2015, and 2014, of $30,000.00, $47,209.00, $19,816.00, and $34,000.00, respectively. 8

11 FINANCIAL HIGHLIGHTS (CONTINUED) WESTVILLE FIRE DISTRICT NO. 1 MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED DECEMBER 31,2017 Change in Net Position Increase {Decrease} Revenues: Program Revenues: Charges for Services $ 18, $ 16, $ 1, General Revenue: Taxes: Property Tax Revenue- General 357, , , Taxes Levied for Debt Service 72, , Miscellaneous Income 170, , , Investment Earnings 1, Loss on Disposal of Assets {193,814.13} 193, Total Revenue 619, , , Expenses: Operating Appropriations: Administration 87, , (5,016.50) Cost of Operations and Maintenance 412, , , Fire Marshall's Office 7, , , First Aid/Ambulance 21, , (151.95) Length of Service Award Program 13, , , Interest on Debt 16, , (2,911.79) Unallocated Depreciation 130, , {2,126.05} Total Expenses 690, , , Increase (Decrease) in Net Position $ {70, } $ {264,014.77} $ 193,

12 FINANCIAL HIGHLIGHTS (CONTINUED) WESTVILLE FIRE DISTRICT NO. 1 MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED DECEMBER 31, 2017 Change in Fund Balance Actual Increase (Decrease} Revenues: Fund Balance $ 30, $ 47, $ 17, Miscellaneous Revenue 192, , , Amount to be Raised by Taxation 429, , (2,852.00} Total Revenues 651, , , Appropriations: Administrative 87, , , Cost of Operations and Maintenance 385, , (11, ) Fire Marshall's Office 7, , (2,575.67) First Aid/Ambulance 21, , Length of Service Award Program 13, , (2,737.44} Total Operating Appropriations 515, , (11,598.43} Other Appropriations: Prior Year Additional Payables 1, (1,803.32) Prior Period Adjustment 20, , Authorized But Not Issued Canceled 10, , Debt Service 72, , Total Other Appropriations 74, , , Total Appropriations 589, , , Excess of Revenues over Expenditures 61, , , Decreased by Utilization as Anticipated Revenue 30, , , Net Change in Fund Balance $ 31, $ 35, $ 4,

13 FINANCIAL HIGHLIGHTS (CONTINUED) WESTVILLE FIRE DISTRICT NO. 1 MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED DECEMBER 31, 2017 CAPITAL ASSETS The Westville Fire District No. 1 's investment in capital assets for its Governmental Activities as of December 31, 2017 and 2016, were $987, and $1,097, (net of accumulated depreciation), respectively. This investment in capital assets includes land, buildings, equipment, furniture, and vehicles (more detailed information about capital assets can be found in Note 6 to the financial statements). Vehicles Equipment Governmental Activities $ 937, $ 1,060, , , $ 987, $ 1,097, LONG-TERM DEBT At December 31, 2017 and 2016, the Fire District had outstanding capital leases of $460, and $514,742.87, respectively. FINAL COMMENTS The Fire District has budgeted its expenses and revenues conservatively in the past and will continue to do so in the future. Maintaining or lowering tax rates while providing quality service are the primary goals of the Fire District. Constant internal monitoring of financial data ensures that these goals can be met. CONTACTING THE FIRE DISTRICT This financial report is designed to provide the Fire District's citizens, taxpayers, customers, investors, and creditors with a general overview of the Fire District's finances and to demonstrate the Fire District's accountability of the money it receives. If you have any questions about this report or need additional financial information, contact Fritz Sims, ChairmanfTreasurer, at Westville Fire District No. 1, 23 West Olive Street, Westville, NJ 08093, or at: fritz.sims@westvillefd.com. 11

14 BASIC FINANCIAL STATEMENTS 12

15 DISTRICT-WIDE FINANCIAL STATEMENTS 13

16 EXHIBIT A-1 WESTVILLE FIRE DISTRICT NO.1 STATEMENT OF NET POSITION FOR THE YEARS ENDED DECEMBER 31,2017 AND 2016 Governmental Activities ASSETS Cash and Cash Equivalents $ 297, $ 347, Prepaid Expenses 6, , Restricted Cash and Cash Equivalents 84, , Capital Assets Net of Depreciation 987, ,097, Total Assets 1,376, ,523, DEFERRED OUTFLOWS OF RESOURCES Deferred Outflows Related to Pension 32, , LIABILITIES Accounts Payable 25, , Due Borough of Westville 1, , Payroll Taxes Payable , Accrued Interest Payable 7, , Noncurrent Liabilities: Due Within One Year 56, , Due Beyond One Year 403, , Net Pension Liability 356, , Total Liabilities 851, ,061, DEFERRED INFLOWS OF RESOURCES Deferred Inflows Related to Pension 28, NET POSITION Invested in Capital Assets, Net of Related Debt 527, , Restricted for: Capital Projects 84, , Assigned: Designated for Subsequent Budget 92, , Unassigned (176,285.15) (78,610.31) Total Net Position $ 528, $ 599, See accompanying notes to the basic financial statements. 14

17 EXHIBIT A-2 WESTVILLE FIRE DISTRICT NO. 1 STATEMENT OF ACTIVITIES FOR THE YEAR ENDED DECEMBER 31,2017 Program Revenues Net (Expense) Revenue and Operating Changes in Net Position Grants and Governmental Functions/Programs Expenses Contributions Activities Total Governmental Activities: Administrative $ 87, $ 87, $ 87, Cost of Operations & Maintenance 412, $13, , , Fire Official's Office 7, , , , First Aid/Ambulance 21, , , Length of Service Award Program 13, , , Interest on Long-Term Debt 16, , , Unallocated Depreciation 130, , , Total Governmental Activities 690, , , , General Revenues: Taxes: Property Taxes, Levied for General Purposes 357, , Taxes Levied for Debt Service 72, , EMS Billing 159, , Penalties & Fines 2, , Interest on Investments 1, , Supplemental Fire 1, , Miscellaneous Income 8, , Prior Year Additional Payables (1,803.32) (1,803.32) Total General Revenues, Special Items, Extraordinary Items, and Transfers 601, , Change in Net Position (70,258.70) (70,258.70) Net Position - Beginning 599, , Net Position - End $ 528, $ 528, See accompanying notes to the basic financial statements. 15

18 FUND FINANCIAL STATEMENTS 16

19 GOVERNMENTAL FUNDS 17

20 EXHIBIT B-1 ASSETS WESTVILLE FIRE DISTRICT NO. 1 BALANCE SHEET GOVERNMENTAL FUNDS DECEMBER 31, 2017 Total General Capital Projects Governmental Fund Fund Funds Cash and Cash Equivalents $ 297, $ 84, $ 382, Total Assets $ 297, $ 84, $ 382, LIABILITIES AND FUND BALANCES Liabilities: Accounts Payable $ 25, $ 25, Due Borough of Westville 1, , Payroll Taxes Payable Total Liabilities 27, , Fund Balances: Restricted for: Capital Projects $ 84, , Assigned Fund Balance: Designated for Subsequent Budget 92, , Unassigned: General Fund 177, , Total Fund Balances 270, , , Total Liabilities and Fund Balances $ 297, $ 84, $ 382, See accompanying notes to the basic financial statements. 18

21 WESTVILLE FIRE DISTRICT NO. 1 BALANCE SHEET GOVERNMENTAL FUNDS DECEMBER 31, 2017 Amounts Reported for Governmental Activities in the Statement of Net Position (A-1) are different because: Payments made to vendors for services that will benefit periods beyond year-end are recorded as expenditures at the time of payment in the funds. Capital assets used in governmental activities are not financial resources and therefore, are not reported in the funds. The costs of assets are $2,211, and the accumulated depreciation is $1,223, Accrued interest payable is not due and payable in the current period and therefore, is not reported as a liability in the funds. Long-term pension liabilities are not due and payable in the current period and therefore are not reported as liabilities in the funds. Long-term liabilities, including leases payable, are not due and payable in the current period and therefore are not reported as liabilities in the funds. $ EXHIBIT B-1 (Continued) , , (7,431.85) (352,693.00) (460,259.25) Net Position of Governmental Activities $ 528, See accompanying notes to the basic financial statements. 19

22 EXHIBIT B-2 WESTVILLE BOROUGH FIRE DISTRICT NO. 1 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS FOR THE YEAR ENDED DECEMBER 31, 2017 Capital Debt Total General Projects Service Governmental Fund Fund Funds REVENUES Amount to be Raised by Taxation $ 357, $ 72, $ 429, EMS Billing 159, , Annual Registration Fees 18, , Penalties and Fines 2, , Interest on Investments 1, , Supplemental Fire 1, , Miscellaneous Income 8, , Total Revenues 549, , , EXPENDITURES Administrative 87, , Cost of Operations & Maintenance 385, , Fire Marshall's Office 7, , First Aid/Ambulance 21, , Length of Service Award Program 13, , Debt Service: Capital Leases: Principal 54, , Interest 17, , Total Expenditures 515, , , Excess (Deficiency) of Revenues Over Expenditures 33, , Other Financing Sources (Uses) Transfers (19,936.86) $ 20, (63.14) Prior Year Additional Payables (1,803.32) (1,803.32) Total Other Financing Sources (Uses) (21,740.18) 20, (63.14) (1,803.32) Excess to Fund Balance 11, , , Fund Balance January 1 258, , , Fund Balance December 31 $ 270, $ 84, $ 355, See accompanying notes to the basic financial statements. 20

23 EXHIBIT B-3 WESTVILLE BOROUGH FIRE DISTRICT NO. 1 RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED DECEMBER 31, 2017 Total Net Change in Fund Balances- Governmental Funds (from B-2) Capital outlays are reported in Governmental Funds as expenditures. However, in the Statement of Activities, the cost of those assets is allocated over their estimated useful lives as depreciation expense. This is the amount by which capital outlays exceeded depreciation in the period. Depreciation Expense Capital Outlays Payments made to vendors for services that will benefit periods beyond year-end are recorded as expenditures at the time of payment in the funds. Repayment of debt principal is an expenditure in the Governmental Funds, but the repayment reduces long-term liabilities in the Statement of Net Position and is not reported in the Statement of Activities. Capital Lease Principal Payments Pension contributions are reported in Governmental Funds as expenditures. However in the Statement of Activities, the contributions are adjusted for actuarial valuation adjustments. $ , (130, ) 20, (6,560.00) 54, (41,073.00) Interest on long-term debt in the Statement of Activities differs from the amounts reported in the Governmental Funds because interest is recorded as an expenditure in the funds when it is due, and thus requires that use of current financial resources. In the Statement of Activities, however, interest expense is recognized as the interest accrues, regardless of when it is due. The net change in the accrued interest was an increase. Change in Net Position of Governmental Activities 1, $ (70,258.70) See accompanying notes to the basic financial statements. 21

24 FIDUCIARY FUNDS 22

25 EXHIBIT B-4 WESTVILLE FIRE DISTRICT NO. 1 STATEMENT OF FIDUCIARY NET POSITION FIDUCIARY FUNDS DECEMBER 31 I 2017 ASSETS LOSAP (Unaudited) Investment NET POSITION LOSAP (Unaudited) Held in Trust for: LOSAP Benefits LOSAP Trust $ 210, $ 210, EXHIBIT B-5 WESTVILLE FIRE DISTRICT NO. 1 STATEMENT OF CHANGES IN FIDUCIARY NET POSITION FIDUCIARY FUNDS FOR THE YEAR ENDED DECEMBER 31 I 2017 ADDITIONS Fire District Budget Appropriations Increase in Investment Value Total Additions DECREASES Withdrawals Administrative Fees Total Decreases Change in Net Position Net Position January 1 Net Position December 31 LOSAP Trust $ $

26 NOTES TO FINANCIAL STATEMENTS 24

27 WESTVILLE BOROUGH FIRE DISTRICT NO. I NOTES TO FINANCIAL STATEMENTS YEAR ENDED DECEMBER 31,2017 AND 2016 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Description of Reporting Entity The Westville Borough Fire District No. I was created in July The governing body of the Borough of Westville adopted an ordinance creating the Fire District, the territorial location of which is coterminous with the Borough. The governing body of any municipality which does not have a paid or part-time fire department may, upon application of at least twenty voters or at least five percent of the registered voters, whichever is greater, by ordinance, designate a territorial location (or locations) for use as a fire district(s). The Fire District is responsible for the prevention and suppression of fire within the Borough. The Fire District encompasses approximately square miles of territory and is coterminous with the boundaries of the Borough. A Board of five commissioners governs the Fire District. The commissioners of the Board are elected at-large for three-year staggered terms with an annual election held the third Saturday of every February. The Chairman and other officers of the Board of the Fire District are selected from amongst the members of the Board. Fire Districts are governed by NJSA 40A:I4-70 et al. and are organized as a taxing authority charged with the responsibility of providing the resources necessary to provide firefighting services. The Fire District is not a component unit of any other financial reporting entity nor does the Fire District have any component units to be presented in accordance with Governmental Accounting Standards Board Statement No. 14. Descriptions of Funds The financial statements of the Fire District conform to accounting principles generally accepted in the United States of America applicable to governmental funds of state and local governments in accordance with the provisions of NJAC 5: Generally, the financial statements are presented using the flow of current financial resources measurement focus and modified accrual basis of accounting. Accordingly, the Fire District accounts for its transactions through the use of funds and account groups: Governmental Funds: General Fund -The General Fund is the general operating fund of the Fire District and is used to account for the inflows and outflows of its financial resources except those required to be accounted for in another fund. The acquisition of certain capital assets, such as firefighting apparatus and equipment, is accounted for in the General Fund when it is responsible for the financing of such expenditures. 25

28 WESTVILLE BOROUGH FIRE DISTRICT NO. 1 NOTES TO FINANCIAL STATEMENTS YEAR ENDED DECEMBER 31,2017 AND 2016 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Governmental Funds (Continued): Special Revenue Fund -The Special Revenue Fund is used to account for the proceeds of specific revenue sources, such as state or federal government grants and appropriations that are legally restricted to expenditures for specified purposes. Capital Projects Fund - The Capital Projects Fund is used to account for all financial resources to be used for the acquisition or construction of major capital facilities such as fire houses and firefighting apparatus. Generally, the financial resources of the Capital Projects Fund are derived from the issuance of debt or by the reservation of fund balance, which must be authorized by the voters as a separate question on the ballot either during the annual election or at a special election. Debt Service Fund - The Debt Service Fund is used to account for resources that will be used to service general long-term debt liabilities recorded in the Debt Service Fund. Basis of Accounting The financial statement of the Westville Borough Fire District No. 1 have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP) as applied to governmental units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. The more significant of the Fire District's accounting policies are described below. Basis of Accounting, Measurement Focus, and Basis of Presentation The Fire District's basic financial statements consist of District-wide statements, including a statement of net position and a statement of activities, and a fund financial statement which provide a more detailed level of financial information. District-Financial Statements - The Statement of Net Position and Statement of Activities display information about the Fire District as a whole. These statements include the financial activities of the overall Fire District except for Fiduciary Funds. Governmental Activities generally are financed through taxes, intergovernmental revenues, and other non-exchange revenues. The Statement of Net Position presents the financial condition of the Governmental Activity of the Fire District at year-end. The Statement of Activities presents a comparison between direct expenses and program revenues for each function of the Fire District'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. Program revenues include (a) fees and charges paid by the recipients of goods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues. The comparison of direct expenses with program revenues identifies the extent to which each governmental function or business segment is self-financing or draws from the general revenues of the Fire District. 26

29 WESTVILLE BOROUGH FIRE DISTRICT NO. 1 NOTES TO FINANCIAL STATEMENTS YEAR ENDED DECEMBER 31,2017 AND 2016 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Net Position - Net position represents the difference between assets and liabilities. Net position invested in capital assets, net of related debt consists of capital assets, net of accumulated depreciation, reduced by outstanding balance 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 Fire District or through external restrictions imposed by creditors, grantors, or laws or regulations of other governments. Revenues - Revenues are recorded when received in cash except for certain amounts which are due from other governmental units. Receipts from Federal and State grants are realized as revenue when anticipated in the budget. Fund balance utilized to balance the budget is recorded as revenue and budgeted transfers from other funds are also recorded as revenue when anticipated in the budget. Expenditures - Expenditures are recorded on the "budgetary" basis of accounting. Generally, expenditures are recorded when an amount is encumbered for goods and services through the issuance of a purchase order in conjunction with the Encumbrance Accounting System. Outstanding encumbrances at December 31 are reported as a cash liability in the financial statements and as accounts payable. Budgeted transfers to other funds are recorded as expenditures when the budget is adopted, to the extent permitted or required by law. Appropriations for principal payments on outstanding bonds and notes are provided on the cash basis; interest is also on the cash basis. Encumbrances - Encumbrance accounting is used for the General Fund and Capital Projects Fund. Encumbrances are recorded when purchase orders are issued but are not considered expenditures until liabilities for payments are incurred. Encumbrances are reported as reservations of fund balance on the balance sheet. Encumbrances do not lapse at the close of the fiscal year but are carried forward as reserved fund balance until liquidated. Income Taxes- As a public body, under existing statutes, the Fire District is exempt from both federal and state taxes. Capital Assets - The Fire District has established a formal system of accounting for its capital assets. Purchased or constructed capital assets are reported at cost. Donated capital assets are valued at estimated fair market value on the date received. The cost of normal repairs and maintenance are not capitalized. The capitalization threshold used by the Fire District is $5, Asset Class Vehicles Firefighting Equipment Computer Equipment Estimated Useful Lives NJSA 40A:14-84 governs the procedures for the acquisition of property and equipment for Fire Districts, and NJSA 40A: to 87 governs the procedures for the issuance of any debt related to such purchases. In summary, Fire Districts may purchase firefighting apparatus, 27

30 WESTVILLE BOROUGH FIRE DISTRICT NO. 1 NOTES TO FINANCIAL STATEMENTS YEAR ENDED DECEMBER 31, 2017 AND 2016 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Capital Assets (Continued)- equipment, land, and buildings to house such property in an amount not exceeding 5 mills on the dollar of the last assessed valuation of property, within the Fire District, upon the approval of the legal voters. Debt may be issued up to $60, or 2 percent of the assessed valuation of property, whichever is larger. Property Taxes- The County Board of Taxation certifies the tax levy of the municipality each year. The tax levy is based on the assessed valuation of taxable property within the municipality. Taxes are payable on the first day of February, May, August, and November. Any taxes that have not been paid by the 11th day of the 11th month in the year levied are subject to being included in the tax sale and the lien enforced by selling the property in accordance with NJSA 54:5 et seq. The municipality is responsible for remitting 100% of the Fire District's tax to them. 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 certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Recent Accounting Pronouncements Not Yet Effective In June 2015, the Governmental Accounting Standards Board (GASB) issued Statement No. 75, "Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions." This statement, which is effective for fiscal periods beginning after June 15, 2017, will not have any effect on the District's financial reporting. In November 2016, the Governmental Accounting Standards Board (GASB) issued Statement No. 83, "Certain Asset Retirement Obligations." This statement, which is effective for fiscal periods beginning after June 15, 2018, will not have any effect on the District's financial reporting. In January 2017, the Governmental Accounting Standards Board (GASB) issued Statement No. 84, "Fiduciary Activities." This statement, which is effective for fiscal periods beginning after December 31, 2018, will not have any effect on the District's financial reporting. In March 2017, the Governmental Accounting Standards Board (GASB) issued Statement No. 85, "Omnibus 2017." This statement, which is effective for fiscal periods beginning after June 15, 2017, will not have any effect on the District's financial reporting. In May 2017, the Governmental Accounting Standards Board (GASB) issued Statement No. 86, "Certain Debt Extinguishment Issued." This statement, which is effective for periods beginning after June 15, 2017, will not have any effect on the District's financial reporting. In June 2017, the Governmental Accounting Standards Board (GASB) issued Statement No. 87, "Leases." This statement, which is effective for periods beginning after December 15, 2019, will not have a significant effect on the District's financial reporting 28

31 NOTE 2: BUDGETARY INFORMATION WESTVILLE BOROUGH FIRE DISTRICT NO. 1 NOTES TO FINANCIAL STATEMENTS YEAR ENDED DECEMBER 31, 2017 AND 2016 Budgets and Budgetary Accounting -The Fire District must adopt an annual budget in accordance with NJSA 40A: et al. The fire commissioners must introduce and approve the annual budget not later than sixty days prior to the annual election. At introduction, the commissioners shall fix the time and place for a public hearing on the budget and must advertise the time and place at least ten days prior to the hearing in a newspaper having substantial circulation in the Borough. The public hearing must not be held Jess than twenty-eight days after the date the budget is introduced. After the hearing has been held, the fire commissioners may, be majority vote, adopt the budget. Amendments may be made to the Fire District's budget in accordance with NJSA 40A: Subsequent to the adoption of the Fire District's budget, the amount of money to be raised by taxation in support of the Fire District budget must appear on the ballot for the annual election for approval of the voters. Fire districts have a prescribed budgetary basis to demonstrate legal compliance. However, the budgets are adopted on principally the same basis of accounting utilized for the preparation of the Fire District's financial statements. NOTE 3: CASH Custodial Credit Risk- Deposits Custodial Credit Risk is the risk that in the event of a bank failure, the government's deposits may not be able to recover the value of its deposits or investments. Deposits are considered to be exposed to Custodial Credit Risk if they are: uncollateralized (securities not pledged to the depositor), collateralized with securities held by the pledging financial institution, or collateralized with securities held by the financial institution's trust department or agent but not in the government's name. The Fire District's policy is based on New Jersey Statutes requiring cash to be deposited only in New Jersey based banking institutions that participate in the New Jersey Governmental Unit Deposit Protection Act (GUDPA) or in qualified investments established in NJSA 40A: (a) that are treated as cash equivalents. At December 31, 2017 and 2016, the carrying amount of the Fire District's deposits was $382, and $412,717.13, respectively. As of December 31, 2017 and 2016, $0 of the Fire District's bank balance of $388, and $417,578.64, respectively, was exposed to Custodial Credit Risk. NOTE 4: INVESTMENTS As of December 31, 2017 or 2016, the Fire District's did not have any investments other than LOSAP. Interest Rate Risk - The Fire District does not have a formal investment policy that limits investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates. However, NJSA 40A: (a) limits the length of time for most investments to 397 days. Credit Risk- NJSA 40A: (a) limits municipal investments to those specified in the statues. The type of allowable investments are Bonds or other obligations of the United States or obligations guaranteed by the United States, Bonds or other obligations of the Borough or 29

32 NOTE 4: INVESTMENTS WESTVILLE BOROUGH FIRE DISTRICT NO. 1 NOTES TO FINANCIAL STATEMENTS YEAR ENDED DECEMBER 31,2017 AND 2016 Credit Risk - Bonds or other obligations of the Borough school district, Bonds or other obligations, having a maturity date not more than 397 days from the date of purchase, approved by the Division of Investment of the Department of Treasury for investment by local units, government money market mutual funds; the State of New Jersey Cash Management Plan; local government investment pools; or repurchase of fully collateralized securities. Concentration of Credit Risk- The Fire District places no limit on the amount the Fire District may invest in any one issuer. Unaudited Investments As more fully described in Note 9, the Fire District has created a Length of Service Award Program (LOSAP) for emergency service volunteers. The LOSAP investments are similar to those allowed in a deferred compensation program as specified in NJSA 43:15B-1 et seq. except that all investments are retained in the name of the Fire District. All investments are valued at contract value. In accordance with NJAC 5: the investments are maintained by Lincoln Benefit Life Company, which is an authorized provider, approved by the Division of Local Government Services. The balance in the account on December 31, 2017 and 2016, amounted to $210, and $197,051.92, respectively. The information on 5% or more invested with Lincoln Benefit Life Company is listed below. Description Fixed Account L VIP SSGA S & P 500 Index Fund All Other Funds Amount $ 136, , , $ 210, NOTE 5: FUND BALANCES APPROPRIATED - GENERAL FUND The following presents the fund balances as of the end of the current and preceding four years and the amount utilized in the subsequent year's budget. Utilized in Balance Subsequent Percentage Year December 31 Budget Utilized 2017 $ 270, $ 92, % , , % , , % , , % , , % NOTE 6: ECONOMIC DEPENDENCY The Westville Fire District No. 1 is not economically dependent on any one business or industry within the Borough since a significant portion of the revenue is derived from taxation. 30

33 NOTE 7: CAPITAL ASSETS WESTVILLE BOROUGH FIRE DISTRICT NO. 1 NOTES TO FINANCIAL STATEMENTS YEAR ENDED DECEMBER 31,2017 AND 2016 The following schedule is a summarization of the changes in capital assets for the year ended December 31, Balance Dec. 31,2016 Vehicles $ 1,995, Equipment 194, Total at Historical Cost 2,190, Less: Accumulated Depreciation Vehicles 935, Equipment 157, Total Accumulated Depreciation 1,092, Capital Assets, Net $ 1,097, Additions $ 20, , , , , $ (1 09,954.48) Deletions Balance Dec. 31,2017 $ 1,995, , ,211, ,058, , ,223, None $ 987, NOTE 8: COM PEN SA TED ABSENCES Full-time employees of the Fire District are entitled to receive paid vacation as follows: 1-3 years - 1 week, over 3 years - 2 weeks, and over 5 years - 3 weeks. Employees are required to take their vacation within the year earned or lose any unused days. The Fire District does permit employees to carryover days which could not be taken due to extenuating circumstances. These requests are handled on an individual basis and require approval by the Board of Fire Commissioners. Based on this policy, there is no liability for compensated absences. The Fire District permits employees to be paid for sick days with no set limitation. The Board's intent was to cover the period between onset of illness and start of disability eligibility. With no set limit on days, there is no liability for compensated absences NOTE 9: LENGTH OF SERVICE AWARD PROGRAM The Board of Commissioners approved the creation of the Length of Service Award Program (LOSAP) by resolution on December 10, The voters of the Westville Borough approved the establishment of a Length of Service Awards Program (LOSAP) Deferred Compensation at the election held February 16, The LOSAP provides tax deferred income benefits to active volunteer firefighters. This plan is made available to all bona fide eligible volunteers who are performing qualified services which are defined as firefighting and prevention services, pursuant to Section 457 of the Internal Revenue Code of 1986, as amended, except for provisions added by reason of the LOSAP as enacted into federal law in The establishment of this LOSAP also complies with New Jersey Public Law 1997, Chapter 388, and the LOSAP Document. The balance is subject to the general creditors of the Fire District. Contributions by the Fire District for qualified participants were $13, and $12, in 2018 and 2017, for those eligible in the years 2017 and As of the date of the audit, the Fire District contributed on behalf of the participants who qualified for the 2017 calendar year, however, the funds have been recorded as accounts payable. 31

34 WESTVILLE BOROUGH FIRE DISTRICT NO. 1 NOTES TO FINANCIAL STATEMENTS YEAR ENDED DECEMBER 31, 2017 AND 2016 NOTE 10: CAPITAL LEASES PAYABLE/LONG TERM DEBT Long-term debt as of December 31, 2017, consisted of the following: Year Total Bonds, Notes, and Loans Issued and Authorized But Not Issued None None 2015 None Balance Balance Dec. 31,2016 Additions Deletions Dec. 31,2017 Capital Leases $ 514, None $ 54, $ 460, Due in One Year $ 56, Bonds Authorized But Not Issued- As of December 31, 2017, the Fire District did not have any authorizations for the issuance of debt. Compensated Absences -The Fire District has no liability for compensated absences as of December 31, Capital Leases Payable- The Fire District has a lease dated April 7, 2014, for a Ford Expedition totaling $28,958.00, under a capital lease for five (5) years at 6.45%. The Fire District also has a lease dated July 14, 2015, for an E-One aerial fire apparatus totaling $549,950.00, under a capital lease for ten (1 0) years at 3.39%. The following is a schedule of the future minimum lease payments under the capital leases, and the present value of the net minimum lease payments at December 31, 2017: Year Ending Dec. 31, Principal Interest Total 2018 $ 56, $ 15, $ 72, , , , , , , , , , , , , , , , , , , , , , $ 460, $ 72, $ 532, NOTE 11: PENSION FUNDS Description of Plans -All eligible employees of the Borough are covered by the Public Employees' Retirement System, (PERS), a cost-sharing, multiple-employer defined benefit pension plan which has been established by state statute and is administered by the New Jersey Division of Pension and Benefits (Division). According to the State of New Jersey Administrative Code, all obligations of the System will be assumed by the State of New Jersey 32

35 NOTE 11: PENSION FUNDS WESTVILLE BOROUGH FIRE DISTRICT NO. 1 NOTES TO FINANCIAL STATEMENTS YEAR ENDED DECEMBER 31,2017 AND 2016 Description of Plans- should the Systems terminate. The Division issues a publicly available financial report that includes the financial statements and required supplementary information for the Public Employees' Retirement System. The reports may be obtained by writing to the Division of Pensions and Benefits, P.O. Box 295, Trenton, New Jersey or can be accessed on the internet at: Public Employees' Retirement System (PERS)- The Public Employees' Retirement System (PERS) was established as of January 1, 1955, under the provisions of NJSA 43: 15A to provide retirement, death, disability, and medical benefits to certain qualified members. The Public Employees' Retirement System is a cost-sharing, multiple-employer plan. Membership is generally required for substantially all full-time employees of the State or any county, municipality, school district or public agency provided the employee is not a member of another state-administered retirement system or other state or local jurisdiction. Funding Policy- The contribution policy is set by NJSA 43:15A, Chapter 62, P.L. of 1994, Chapter 115, P.L. of 1997, and NJSA 18:66 and requires contributions by active members and contributing employers. Plan member and employer contributions may be amended by State of New Jersey legislation. PERS provide for employee contributions of 7.20% to 7.34% of employees' annual compensation, as defined. Subsequent increases will be phased in over 7 years (each July 1) to bring the total pension contribution rate to 7.5% as of July 1, Employers are required to contribute at an actuarially determined rate in PERS. The PERS rates in effect for 2017 are 12.91%, of covered payroll, as reported on June 30, The actuarially determined contribution includes funding for, cost-of-living adjustments, noncontributory death benefits, and post-retirement medical premiums. The Fire District's PERS payments for the years ended December 31, 2017, 2016, and 2015, were $13,926.00, $13,212.00, and $11,592.00, respectively, equal to the required contributions for each year. The total payroll for the years ending December 31,2017,2016, and 2015, was $194,239.77, $190,964.92, and $178, Significant Legislation- Chapter 78, P.L. 2011, effective June 28, 2011, made various changes to the manner in which the Public Employees' Retirement System (PERS) operate and to the benefit provisions of those systems. Chapter 78's provisions impacting employee pension and health benefits include: New members of the PERS hired on or after June 28, 2011, (Tier 5 members) will need 30 years of creditable service and age 65 for receipt of the early retirement benefit without a reduction of% of 1% for each month that the member is under age 65. The eligibility age to qualify for a service retirement in the PERS is increased from age 63 to 65 for Tier 5 members. 33