BOROUGH OF MATAWAN COUNTY OF MONMOUTH, NEW JERSEY YEARS ENDED DECEMBER 31, 2010 AND 2009 FINANCIAL STATEMENTS AND ADDITIONAL INFORMATION

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1 YEARS ENDED DECEMBER 31, 2010 AND 2009 FINANCIAL STATEMENTS AND ADDITIONAL INFORMATION with INDEPENDENT AUDITOR'S REPORTS and COMMENTS AND RECOMMENDATIONS

2 TABLE OF CONTENTS Year ended December 31,2010 Independent Auditor's Report Financial Statements Current Fund Comparative Balance Sheet - Regulatory Accounting Basis Comparative Statement of Operations and Changes in Fund Balance - Regulatory Accounting Basis Statement of Revenues - Regulatory Accounting Basis Statement of Appropriations - Regulatory Accounting Basis Trust Fund Comparative Balance Sheet - Regulatory Accounting Basis General Capital Fund Comparative Balance Sheet - Regulatory Accounting Basis Comparative Statement of Fund Balance - Regulatory Accounting Basis Water/Sewer Utility Fund Comparative Balance Sheet - Regulatory Accounting Basis Comparative Statement of Operations and Changes in Fund Balance - Regulatory Accounting Basis Comparative Statement of Fund Balance - Water/Sewer Utility Capital Fund - Regulatory Accounting Basis Comparative Statement of Fund Balance - Water/Sewer Utility Assessment Trust Fund - Regulatory Accounting Basis Statement of Revenues - Regulatory Accounting Basis Statement of Expenditures - Regulatory Accounting Basis General Fixed Assets Account Group Comparative Statement of Fixed Assets - Regulatory Accounting Basis Exhibit A A-1 A-2 A-3 B C C-1 D D-1 D-2 D-3 D-4 D-5 E Notes to Financial Statements

3 TABLE OF CONTENTS Year ended December 31, 2010 Supplementary Schedules Current Fund Schedule of Cash - Treasurer Schedule of Change Fund Schedule of Due From State of New Jersey - Senior Citizens' and Veterans' Deductions Schedule of Taxes Receivable and Analysis of Property Tax Levy Schedule of Tax Title Liens Receivable Schedule of Property Acquired for Taxes - Assessed Valuation Schedule of Revenue Accounts Receivable Schedule of Deferred Charges - N.J.SA 40A:4-53 Special Emergency Authorizations Schedule of 2009 Appropriation Reserves Schedule of Encumbrances Payable - Current Fund Schedule of Prepaid Taxes Schedule of County Taxes Payable Schedule of Regional School Taxes (Receivable)/Payable Schedule of Accounts Payable Schedule of Tax Overpayments Payable Schedule of Due To General Capital Fund Schedule of Due To State of New Jersey Schedule of Various Reserves Schedule of State Grants Receivable - Grant Fund Schedule of Reserve for State Grants - Appropriated - Grant Fund Schedule of Reserve for State Grants - Unappropriated - Grant Fund Schedule of Reserve for Encumbrances - Grant Fund Schedule of Due From Current Fund - Grant Fund Schedule of Special Emergency Note Payable Schedule of Deferred Charges Schedule of Due (From)/To Trust - Other Fund Trust Fund Schedule of Cash - Treasurer Schedule of Due (To)/From State of New Jersey - Animal Control Trust Fund Schedule of Reserve for Animal Control Expenditures Schedule of Due (To)/From Current Fund - Trust - Other Fund Schedule of Various Trust Fund Reserves Schedule of Prepaid Railroad Permits Schedule of Investments - Length of Service Awards Program Fund Schedule of Miscellaneous Reserves - Length of Service Awards Program Fund Schedule 1-A 2-A 3-A 4-A 5-A 6-A 7-A 8-A 9-A 10-A 11-A 12-A 13-A 14-A 15-A 16-A 17-A 18-A 19-A 20-A 21-A 22-A 23-A 24-A 25-A 26-A 1-B 2-B 3-B 4-B B 7-B 8-B

4 TABLE OF CONTENTS Year ended December 31, 2010 Supplementary Schedules General Capital Fund Schedule of Cash - Treasurer Schedule of Analysis of General Capital Cash and Investments Schedule of Deferred Charges To Future Taxation - Funded Schedule of Deferred Charges To Future Taxation - Unfunded Schedule of General Serial Bonds Schedule of Bond Anticipation Notes Schedule of Improvement Authorizations Schedule of Capital Improvement Fund Schedule of Due From State of New Jersey Department of Transportation Schedule of Due From Current Fund Schedule of Due From Monmouth County Improvement Authority Schedule of Due (From)/To Water/Sewer Utility Capital Fund Schedule of Green Trust Loan Payable Schedule of Capital Lease Obligations Payable Schedule of Reserve for Encumbrances Schedule of Bonds and Notes Authorized But Not Issued Water/Sewer Utility Fund Schedule of Cash - Treasurer Schedule of Water/Sewer Utility Capital Cash Schedule of Consumer Accounts Receivable Schedule of Fixed Capital Schedule of Fixed Capital Authorized and Uncompleted Schedule of Appropriation Reserves Schedule of Reserve for Encumbrances - Water/Sewer Utility Operating fund Schedule of Accrued Interest on Bonds, Notes and Loans Schedule of Improvement Authorizations Schedule of Capital Improvement Fund Schedule of Reserve for Amortization Schedule of Deferred Reserve for Amortization Schedule of Serial Bonds Schedule of Bond Anticipation Notes Schedule of Due From General Capital Fund Schedule of Due From Water/Sewer Utility Capital Fund Schedule of Due From Water/Sewer Utility Assessment Fund Schedule of Due To Water/Sewer Utility Operating Fund Schedule of Assessments Receivable Schedule of Customer Overpayments Schedule of Reserve for Assessments Receivable Schedule of State of New Jersey Environmental Infrastructure Loan Payable Schedule 1-C 2-C 3-C 4-C 5-C 6-C 7-C 8-C 9-C 10-C 11-C 12-C 13-C 14-C 15-C 16-C D 3-D

5 TABLE OF CONTENTS Year ended December 31, 2010 Water/Sewer Utility Fund (continued) Schedule of Reserve for Encumbrances - Water/Sewer Utility Capital Fund Schedule of Due (To)/From General Capital Fund Schedule of Due To Water/Sewer Utility Operating Fund - Water/Sewer Utility Capital Fund Schedule of Due To Water/Sewer Utility Assessment Fund - Water/Sewer Utility Capital Fund Schedule of Bond and Notes Authorized But Not Issued General Fixed Assets Account Group Schedule of General Fixed Assets E Comments Section Scope of Audit Contracts and Agreements Required to be Advertised per N.J.S. 40A: 11-4 Collection of Interest on Delinquent Taxes and Assessments Tax Sale Confirmation of Delinquent Taxes and Other Charges Comparative Statement of Operations and Changes in Fund Balance - Current Fund Comparative Statement of Operations and Changes in Fund Balance - Water/Sewer Utility Operating Fund Comparative Schedule of Tax Rate Information Apportionment of Tax Rate Assessed Valuations Comparison of Tax Levies and Collection Currently Delinquent Taxes and Tax Title Items Property Acquired By Tax Title Lien Liquidation Comparison of Water/Sewer Utility Fund Levies Comparative Schedule of Fund Balances Officials in Office and Surety Bonds Internal Control Section Report on Internal Control over Financial Reporting and on Compliance Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards Comments and Recommendations

6 Hutchins, Farrell, Meyer & Allison, P,A. Certified Public Accountants" Business & Financial Advisors Robert H. Hutchins, CPA, eva Eugene M. Farrell, CPA, RMA, CFP Rabel1 W. Allison, CPA, RMA Alan E. Meyer, CPA/ABV Joann DiLieto, CPA Patrice R. Antonucci, CPA Thomas L Stetson, CPA INDEPENDENT AUDITOR'S REPORT Monmouth County Office 912 Highway 33 0 Suite 2 Freehold, NJ (732) Fax: (732) Ocean County Office 512 Main Street ~ PO Box 1778 Toms River, NJ (732) Fax: (732) Honorable Mayor and Members of the Borough Council Borough of Matawan, New Jersey We have audited the accompanying regulatory-basis financial statements of the Borough of Matawan, County of Monmouth, New Jersey ("Borough") as of December 31, 2010 and 2009, and for the year ended December 31, 2010 which collectively comprise the Borough's basic financial statements, listed as financial statement exhibits in the Table of Contents. These financial statements are the responsibility of the Borough's management. Our responsibility is to express an opinion on these financial statements based on our audit. Except as discussed in the following paragraph, we conducted our audit in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and in compliance with audit requirements prescribed by the Division of Local Government Services, Department of Community Affairs, State of New Jersey ("Division"). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. As described in Note 1, the Borough prepares its financial statements using accounting practices that demonstrate compliance with the regulatory basis of accounting and budget laws prescribed or permitted by the Division, which practices differ from accounting principles generally accepted in the United States of America. The effects on the financial statements of the variances between these regulatory accounting practices and accounting principles generally accepted in the United States of America, although not reasonably determinable, are presumed to be material. In addition, the financial statements of the Length of Service Award Program Fund ("LOSAP") have not been audited, and we were not required by the Division to audit nor were we engaged to audit the LOSAP Fund financial statements as part of our audit of the Borough's financial statements. The LOSAP Fund financial activities are included in the Borough's Trust Fund, and represent 19.54% and 16.45% of the assets and liabilities, respectively, of the Borough's Trust Funds as of December 31,2010 and 2009.

7 Honorable Mayor and Members of the Borough Council Borough of Matawan, New Jersey Page 2 In our opinion, because of the effects of the Borough's preparing its financial statements on the basis of accounting discussed in the preceding paragraph, the financial statements referred to above do not present fairly, in conformity with accounting principles generally accepted in the United States of America, the financial position of the Borough as of December 31, 2010 and 2009, or the changes in its financial position, or, where applicable, its cash flows for the year ended December 31, Further, the Borough has not presented a Management's Discussion and Analysis that accounting principles generally accepted in the United States of America has determined is necessary to supplement, although not required to be part of, the basic financial statements. Also in our opinion, except for the effects of such adjustments, if any, as might have been determined to be necessary had the LOSAP Fund financial statements been audited, the regulatory-basis financial statements referred to above present fairly, in all material respects, the financial position, on a regulatory accounting basis, of the various funds of the Borough as of December 31, 2010, and the results of operations and changes in fund balance - regulatory basis of such funds for the year then ended and the Statements of Revenues - Regulatory Basis and the Statement of Expenditures - Regulatory Basis of the various funds for the year ended December 31, 2010 on the basis of accounting described in Note 1. In accordance with Government Auditing Standards, we have also issued our report dated July 27, 2011 on our consideration of the Borough's internal control structure over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. Our audit was performed for the purpose of forming an opinion on the regulatory-basis financial statements taken as a whole. The accompanying supplementary schedules and Comments section listed in the Table of Contents are presented for purposes of additional analysis as required by the Division and are not a required part of the regulatory-basis financial statements. Such information has been subjected to the auditing procedures applied in the audit of the financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole, on the basis of accounting described in Note 1. July 27, 2011 fi~, "ja;vr,e!j, IJ1iqfh S /ft!uof1" '1./1. ---r7fr'='~ «eft :Amson Registered Municipal Accountant (#483)

8 FINANCIAL STATEMENTS

9 CURRENT FUND EXHIBITS

10 Exhibit A CURRENT FUND COMPARATIVE BALANCE SHEET - REGULATORY ACCOUNTING BASIS December 31,2010 and 2009 Asset. Referenc~ Liabilities Re?erves and Fund Balance Reference Current Fund: Cash - Treasurer 1-A $ 1,455,832,86 $ 1,404,25833 Cash - Change Fund 2-A ,455,982,86 1,404,408,33 Due From State of New Jersey 3-A ,00 Appropriation Reserves A-3,9-A $ 168, $ 226, ,456, ,404,908,33 Encumbrances Payable 10-A 216,381,98 255,737,85 Prepaid Taxes 11-A 140,329J6 97, Receivables With Full Reserves: County Taxes Payable 12-A 27, , Delinquent Property Taxes Receivable 4-A 25, ,19564 Regional School Taxes Payable 13-A Tax Title Liens Receivable 5-A 17,830,81 7, Various Reserves 18-A 27, , Property Acquired for Taxes- Special Emergency Notes Payable 24-A 50,000,00 100,000,00 Assessed Valuation 6-A 125, ,90000 Accounts Payable 14-A 38, , Due From Trust - Other Fund 26-A 5, Tax Overpayments 15-A 7,713,53 11, Revenue Accounts Receivable 7-A 10,615,10 6, Due To Federal and State Grant Fund 23-A 100, ,566,24 180, , General Capital Fund 16-A 205, , Trust - Other Fund 26-A 2, Deferred Charges: State New Jersey 17-A 150,00 200,00 Special Emergency Authorization 8-A 50,000,00 104,800,00 Reserve for Tax Appeals A 18,994,76 18,994,76 Deficit in Operations 25-A 11,33879 Overexpenditure of Appropriation 1,003,867,31 1, Reserves 25-A Reserve for Receivables and Other Assets A 180, , , , Fund Balance A-1 502, ~6, ,686, ,676, ,686, ,676, Federal and State Grants: Federal and State Grants: Appropriated Reserves 20-A 121, State Grants Receivable 19-A 47, , Unappropriated Reserves 21-A 24, , Due From Current Fund 23-A 100, , Reserve for Encumbrances 22-A 1, , , , , T ota! Assets $ 1,834,59161 $ 1,975, Total Liabilities, Reserves and Fund Balance $ 1,834, $ 1,975, See accompanying notes

11 Exhibit A-1 CURRENT FUND COMPARATIVE STATEMENT OF OPERATIONS AND CHANGES IN FUND BALANCE REGULATORY ACCOUNTING BASIS Years ended December 31, 2010 and 2009 Reference Revenue and Other Income Realized: Fund Balance Utilized A-2 $ 365,000,00 Miscellaneous Revenue Anticipated A-2 2,496, $ 3,435,405,63 Receipts From Delinquent Taxes A-2 1,748,60 4,933,85 Non-Budget Revenue A-2 94,838,55 145,239,34 Receipt From Current Taxes A-2,4-A 25,273,661,37 24,436,657,91 Other Credits To Income: Unexpended Balance of Appropriation Reserves 9-A 60, , Total Revenue 28,292,988,70 28,055, Expenditures: Budget Appropriations Within "CAPS": Operations: Salaries and Wages A-3 3,616,925,00 3,550,891,83 Other Expenses A-3 3,426,443,00 3,441, Deferred Charges and Statutory Expenditures A-3 450,738,84 566,574,04 Appropriations Excluded From "CAPS": Operations: Other Expenses A-3 786,701,66 658,335,69 Capital Improvements A-3 45,000,00 45,000,00 Municipal Debt Service A-3 1,353,953,76 1,227,498,06 Deferred Charges A-3 54,800,00 268,360,00 County Taxes 12-A 2,813,656,84 2,704,115,12 County Share of Added Taxes 12-A 27,144,97 17,719,01 Regional School Taxes 13-A 15,287,627,50 15,185,403,17 Prior Year Senior Citizens' Disallowed A-1 1,250,00 Refund Prior Year's Tax Revenue 1-A 27,662,94 21,720,99 Refund of Prior Year Revenue 1-A 20,915,64 6,00 Total Expenditures 27,911,570,15 27,688,128,32 Excess in Revenue 381,418,55 367,459,88 Fund Balance, January 1 A 486,197,00 118,737,12 867,615,55 486,197,00 Decreased By: Utilized as Anticipated Revenue A-1 365,000,00 Fund Balance, December 31 A $ 502,615,55 $ 486,197,00 See accompanying notes,

12 Exhibit A-2 BOROUGH OF MATAWAN Page 1 of 2 CURRENT FUND STATEMENT OF REVENUES - REGULATORY ACCOUNTING BASIS Year ended December 31,2010 Excess/ Reference Budget Realized (Deficit) Surplus Anticipated A-1 $ 365, $ 365, Miscellaneous Revenues: Licenses: Alcoholic Beverages 7-A 15, , $ (169.98) Other 7-A 9, , , Fees and Permits 7-A 33, , , Fines and Costs - Municipal Court 7-A 134, , , Interest and Costs on Taxes 7-A 52, , , PILOT - Senior Citizens Housing Complex 7-A 83, , , Cable Television Fees 7-A 41, , , Railroad Parking Lot Fees and Permits 7-A 245, , Rental of Matawan Municipal Community Center 7-A 51, , Cell Tower Rentals 7-A 30, , , Energy Receipts Tax 7-A 1,451, ,450, (710.35) Uniform Construction Code Fees 7-A 169, , , Senior Citizen and Veterans Administrative Fee 7-A 1, , (66.16) Uniform Fire Safety Act 7-A 56, , Due From: Trust Fund 7-A 5, , Off Duty Police Trust Fund Reserve 7-A 29, , Recycling Tonnage Grant 19-A 16, , Clean Communities Program 19-A 13, , Alcohol Education and Rehabilitation Fund 19-A Total Miscellaneous Revenues A-1 2,440, ,496, , Receipts From Delinquent Taxes A-2 6, , (4,521.40) Property Taxes for Support of Municipal Budget Appropriations: Local Tax for Municipal Purposes Including Reserve for Uncollected Taxes A-2 7,052, ,271, , Budget Totals A-3 9,864, ,135, , Non-Budget Revenue A-1,A-2, i-a 94, , Total General Revenues A-3 $ 9,864, $ 10,230, $ 365, See accompanying notes.

13 Exhibit A-2 Page 2 of 2 CURRENT FUND STATEMENT OF REVENUES - REGULATORY ACCOUNTING BASIS Year ended December 31,2010 Analysis of Realized Revenue Reference Allocation of Current Tax Collections: Revenue From Collections School and County Taxes Balance for Support of Municipal Budget Appropriations Add: "Appropriation Reserve for Uncollected Taxes" Amount for Support of Municipal Budget Appropriations A-1,4-A 12-A,13-A A-2 A-3 A-2 $ 25,273, ,128, ,145, , $ 7,271,83206 Receipts From Delinquent Taxes: Delinquent Tax Collections A-2,4-A $ 1, Miscellaneous Revenue Not Anticipated: Board of Health Burial Fees Copier Fees IDA - Drug Subsidy Inspection Fee Polling Place Rental Returned Check Fee S.C.A.R.T. Various Reimbursements Sale of Assets Refunds YMCA Electric Bill JIF Dividend Void Prior Year Checks Miscellaneous $ 1, , , , , , , , , , , A-1,1-A $ 94, See accompanying notes.

14 Exhibit A-3 Page 1 of 6 CURRENT FUND STATEMENT OF APPROPRIATIONS, REGULATORY ACCOUNTING BASIS Year ended December 31,2010 GENERAL APPROPRIATIONS Operations - Within "CAPS" Appro:priations Original Budget After.Budget Modifications Paid or Charged Expended Reserved Unexpended Balance Canyelled GENERAL GOVERNMENT Genera! Administration: Salaries and Wages Other Expenses Mayor and Council: Salaries and Wages Other Expenses Municipal Clerk Salaries and Wages Other Expenses Financial Administraflon (Treasury): Salaries and Wages Other Expenses Audit Services: Other Expenses Tax Collection Salaries and Wages Other Expenses Tax Assessment Administration: Salaries and Wages Other Expenses Legal Services: Other Expenses Engineering Services: Other Expenses Historical Sites Office: Salaries and Wages Other Expenses Land Use Administration: Salaries and Wages Other Expenses INSURANCE Genera! Liability Workmen's Compensation Employee Group Health $ 28, $ 28,66000 $ 66, , , , , , , , , , , ,690,00 11, , , , , , , , , , , , , , , , , , , , , , , , ,490_00 994, ,612,90 $ , , , , , , _64 11, , , , , , , , , , , , , , _01 7, , , , , See accompanying notes.

15 Exhibit A-3 Page 2 of 6 CURRENT FUND STATEMENT OF APPROPRIATIONS - REGULATORY ACCOUNTING BASIS Year ended December 31,2010 GENERAL APPROPRIATIONS Operations - Within "CAPS" Appropriations Original Budget After Budget Modifications Paid or Charged Expended Resety~g Unexpended Balance Cancelled PUBLIC SAFETY Municipal Court: Salaries and Wages Other Expenses Public Defender: Other Expenses Police Department" Salaries and Wages Other Expenses Office of Emergency Management: Salaries and Wages Other Expenses Aid to Volunteer Squad: Other Expenses Fire: Other Expenses Uniform Fire Safety: Salaries and Wages Other Expenses Municipal Prosecutor's Office: Other Expenses 97, , , , , , ,468, ,478,000_00 190, , , , , , , , , , , , , , , , , , , ,477, , , , , , , , , , , , PUBLIC WORKS Railroad Parking' Salaries and Wages Other Expenses Streets and Road Maintenance Salaries and Wages Other Expenses Shade Tree Commission: Salaries and Wages Other Expenses Solid Waste Collection: Salaries and Wages Other Expenses Buildings and Grounds: Salaries and Wages Other Expenses Vehicle Maintenance: Salaries and Wages Other Expenses , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , See accompanying notes.

16 Exhibit A-3 Page 3 of 6 CURRENT FUND STATEMENT OF APPROPRIATIONS - REGULATORY ACCOUNTING BASIS Year ended December 31, 2010 GENERAL APPROPRIATIONS Operations - Within "CAPS" Appropriations Original Budget After Budget Modifications Paid or Charged Expended Reserved Unexpended Balance Cancelled HEALTH AND HUMAN SERVICES Board of Health: Salaries and Wages Other Expenses Environmental Health Services: Other Expenses Welfare/Administration of Public Assistance: Other Expenses 4, ,000,00 100,00 50,00 4,000,00 54,400, , , , PARK AND RECREATION Recreation Services and Programs: Salaries and Wages Other Expenses 12,000,00 15, ,000,00 15,500,00 12, , , OTHER COMMON OPERATING FUNCTIONS Accumulated Sick Leave 9, ,000,00 9, STATE UNIFORM CONSTRUCTION CODE OFFICIALS Construction Code Official: Salaries and Wages Other Expenses Division of Property Maintenance: Salaries and Wages Other Expenses 124,060,00 15, , ,00 129, , , ,00 128, , , , UTILITY EXPENSE AND BULK PURCHASES Utilities Street Lighting 291, ,000,00 283, ,000,00 243, , , Total Operations Within "CAPS" 7,042, ,042, ,887, Contingent ~OO.OO 1, , Total Operations Including Contingent Within "CAPS" 7,043, ,043, ,887, , Detail: Salaries and Wages Other Expenses 3,560, , ,616, ,426, , ,283, , , See accompanying notes.

17 Exhibit A-3 Page4of6 CURRENT FUND STATEMENT OF APPROPRIATIONS - REGULATORY ACCOUNTING BASIS Year ended December 31,2010 GENERAL APPROPRIATIONS Operations - Within "CAPS" Appropriations Original Budget After Budget Modificati9JJ~ Paid or Charged Expended R~_erv~_q Unexpended Balance Cancelled Deferred Charges and Statutory Expenditures - Municipal - Within "CAPS" Deferred Charges: Overexpenditure of Appropriation Reserves Deficit in Operations ,338, , , Statutory Expenditures: Contribution To: Public Employees' Retirement System Social Security System (OAS.!,) Police and Firemen's Retirement System Unemployment Insurance 82, , , , , , , , , , , , Total Deferred Charges and Statutory Expenditures Municipal - Within "CAPS" 450, , , Total General Appropriations for Municipal Purposes Within "CAPS" 7,494, , ,333, GENERAL APPROPRIATIONS Operations - Excluded From "CAPS" Monmouth County 911 Program Maintenance of Joint Free Public Library Length of Service Award Program Employee Group Health Insurance Contribution to PERS Contribution to PFRS 11, , , , , , , , , , , , , , , , , Total Other Operations Excluded From "CAPS" 734, , , , INTERLOCAL MUNICIPAL SERVICE AGREEMENTS HAM Program - Aberdeen Township 21, , ~ , Totallnterlocal Municipal Service Agreements 21, , , , See accompanying notes

18 f~l:!lpita-3 Page 5 of 6 CURRENT FUND STATEMENT OF APPROPRIATIONS - REGULATORY ACCOUNTING BASIS Year ended December 31,2010 GENERAL APPROPRIATIONS Operations - Excluded From "CAPS" Appropriations Original Budget After Budget Modifications Paid or.charged Expended Reserved Unexpended Balance Cancelled PUBLIC AND PRIVATE PROGRAMS OFFSET BY REVENUES Clean Communities Program Alcohol Education and Rehabilitation Fund Recycling Tonnage Grant 13,720,03 742,55 16, ,720, , ,720, ,023,78 Total Public and Private Programs Offset By Revenues 30,486,36 30,486,36 30,486,36 Total Operations - Excluded From "CAPS" 786,701,66 786, ,702,14 7, Detail: Other Expenses 786, , , Capital Improvements - Excluded From "CAPS" Capital Improvement Fund 45, , ,000,00 Total Capital Improvements - Excluded From "CAPS" 45,000,00 45,000,00 45,000,00 Municipal Debt Service - Excluded From "CAPS" Payment of Bond Principal Payment of Bond Anticipation Notes and Capital Notes Interest on Bonds Interest on Notes Green Trust Loan Repayment for Principal and Interest Capital Lease Obligations Approved Prior to 07/01/07: Principal Interest Capital Lease Obligations Approved After to 07/01/07: Principal Interest 683,816,00 44, ,926,57 51, ,345,00 150,200,00 32,427,00 31, ,959,00 683, , ,926,57 51,034,84 18,345,00 150,200,00 32, , ,959,00 683, ,300,00 338,925,96 50, , ,200,00 32, , ,959,00 $ 0,61 53,08 0,96 Total Municipal Debt Service - Excluded From "CAPS" 1,354, ,354, ,353, ,65 See accompanying notes.

19 f,xhibit A-3 Page 6 of 6 CURRENT FUND STATEMENT OF APPROPRIATIONS - REGULATORY ACCOUNTING BASIS Year ended December 31,2010 GENERAL APPROPRIATIONS Operations - Excluded From "CAPS" Appropriations Original Budget After Budget Modifications Paid or Charged Expended Reserved -"._-- Unexpended Balance Cancelleg Deferred Charges - Municipal - Excluded From "CAPS" Special Emergency Authorizations - 5 Years (N.J.S. 40A:4-55) 58,360,00 58,360,00 54,800, Total Deferred Charges - Municipal- Excluded From "CAPS" 58,360,00 58,360,00 54,800,00 3,560,00 Total General Appropriations for Municipal Purposes - Excluded From "CAPS" 2,244,070,07 2,244, ,232, , , Subtotal General Appropriations 9,738, ,738,176,91 9,566,344,86 168, ,614,65 Reserve for Uncollected Taxes 126,600,00 126, , Total General Appropriations $ 9,864, $ 9,864,776,91 $ 9,692,944,86 $ 168, $ 3,614,65 Reference A-2 A-3 A A-3 Analysis of Paid or Charged: Reserve for Uncollected Taxes Cash Disbursements Encumbrances Payable Deferred Charges: Emergency Authorizations Special Emergency Authorizations Reserve for Appropriated Grants A-2 1-A 10-A 25-A 8-A 20-A $ 126, ,252,907,09 216, , , , $ 9.692,944,86 See accompanying notes

20 TRUST FUND EXHIBIT

21 Exhibit B TRUST FUND COMPARATIVE BALANCE SHEET - REGULATORY ACCOUNTING BASIS December 31,2010 and 2009 Assets Reference Liabilities and Reserves Reference Anima! Control Fund: Anima! Control Trust Fund: Due To State of New Jersey 2-B $ 8.40 Cash 1-B $ $ 1, Reserve For Animal Control Fund Due From State of New Jersey 2-B 8.40 Expenditures 3-B $ , , , Other Trust Funds: Other Trust Funds: Prepaid Railroad Permits 6-B 162, , Cash 1-B 1,069, ,105, Due To Current Fund 4-B 5, Due From Current Fund 4-B 2, Various Reserves 5-B 910, , ,072, ,105, ,072, ,105, Payroll Agency Fund: Payroll Agency Fund: Cash B 77, , Payroll Deductions Payable B 77, , Length of Service AWard Program Length of Service Award Program Fund ("LOSAP") - Unaudited: Fund ("LOSAP") - Unaudited: Investments 7-B 279, , Miscellaneous Reserves 8-B 279, , Total Assets $ 1,429, $ 1,407, Total Liabilities and Reserves $ 1,429, $ 1,407, See accompanying notes.

22 GENERAL CAPITAL FUND EXHIBITS

23 Exhibit C GENERAL CAPITAL FUND COMPARATIVE BALANCE SHEET - REGULATORY ACCOUNTING BASIS December 31, 2010 and 2009 Assets Reference Liabilities, Reserves and Fund Balance Reference Cash 1-C $ Special Emergency Note C,1-C Due From: State of NJ Department of Transportation 9-C Monmouth County Improvement Authority 11-C Current Fund 10-C Water/Sewer Utility Capital Fund 12-C Deferred Capital Lease Obligations 14-C Deferred Charges to Future Taxation: Funded 3-C Unfunded 4-C Total Assets $ Serial Bonds Payable Bond Antlcipation Notes Green Trust Loan Payable Capital Lease Obligation Payable 352, $ 180, Improvement Authorizations: 50, ,00000 Funded Unfunded 140, , Reserve For: 9, , Encumbrances 205, , State of NJ Department of Transporation 601, Capital Improvement Fund 659, , Due To: Water/Sewer Utility Operating Fund 6,913, ,611, Water/Sewer Utility Capital Fund 11,355, _,122, Fund Balance 19, $ 13,657, Total Liabilities, Reserves and Fund Balance 5-C $ 6,725, $ 7,409, C 2,394, ,437, C 187, , C 659, , C 430, , C 8,982, ,667, C 121, , C 37, C 1, ,34429 C C 165, C-1 15, $ 19,685, $ 13,657, See accompanying notes.

24 Exhibit C-1 GENERAL CAPITAL FUND COMPARATIVE STATEMENT OF FUND BALANCE REGULATORY ACCOUNTING BASIS Years ended December 31,2010 and 2009 Reference Balance, December 31,2009 C $ Increased By: Refunds $ 5.00 Bond Anticipation Note Premium 15, C 15, Balance, December 31, 2010 C $ 15, See accompanying notes.

25 WATER/SEWER UTILITY FUND EXHIBITS

26 Exhibit 0 WATER/SEWER UTILITY FUND COMPARATIVE BALANCE SHEET - REGULATORY ACCOUNTING BASIS December 31, 2010 and 2009 Assets Reference Liabilities Reserves and Fund Balance.~ Reference Operating Fund: Operating Fund: Appropriation Reserves 0-5,6-0 $ 262, $ 85, Cash 1-0 $ 573, $ 150, Reserve for Encumbrances , , Change Fund Reserve to Pay BANs , Interiunds Receivable 15-0,16-0, , , Customer Overpayments , , Accrued Interest on Bonds, Notes , and Loans , ~ , , Receivables With Full Reserves: Reserve for Receivables 0 183, , Consumer Accounts Receivable 3-D 183, , Fund Balance , ~ ,810,70 Total Operating Fund 893, Total Operating Fund 893, , Assessment Trust Fund: Assessment Trust Fund: Due To Water/Sewer Utility Cash 1-0 5, Operating Fund Due From Water/Sewer Utility Reserve for Assessments Capital Fund 0,1-0 5, Receivable , Assessments Receivable , Fund Balance 0-3 4, ,959.6@. Total Assessment Trust Fund 33, , , ~ Capital Fund: Serial Bonds ,012, ,188, Bond Anticipation Notes ,647, ,335, State of N.J. Environmental Infrastructure l.oan Payab!e ,702, ,833, Reserve for Encumbrances , , Improvement Authorizations: Funded , , Capital Fund' Unfunded 9-0 7,828, ,762, Cash and Cash Equivalents , , Capital Improvement Fund , ,000,00 Due From General Capital Fund , Interiunds Payable 24-0,25-0, , , Fixed Capital ,389, ,389, Reserve for Amortization ,650, ,343, Fixed Capital Authorized and Deferred Reserve for Amortization , Uncompleted 5-0 9,648, ,498, Fund Balance , Total Capital Fund 28,234, ,7J4.06 Total Capital Fund 28,234, ,489,794,06 Total Assets $ 29,161, $ 27,944, Total Liabilities, Reserves and Fund Balances $ 29,161, $ 27,944,3?5.3~ See accompanying notes.

27 Exhibit 0-1 WATER/SEWER UTILITY OPERATING FUND COMPARATIVE STATEMENT OF OPERATIONS AND CHANGES IN FUND BALANCE REGULATORY ACCOUNTING BASIS Years ended December 31,2010 and 2009 Reference Revenue and Other Income Realized: Fund Balance Utilized 0-4 $ 48, $ 38, Water and Sewer Rents and Charges 0-4,3-0 4,572, ,130, Miscellaneous Revenue 0-4,1-0 44, , Accrued I nterest Cancelled 8-D 14, , Other Credits To Income: Unexpended Balance of Appropriation Reserves , , Total Revenue 4,695, ,328, Expenditures: Operating 0-5 3,649, ,644, Debt Service , , Deferred Charges , , Capital Improvements , ,344, ,280, Excess in Revenue , , Fund Balance, January , , , , Decreased By: Utilized as Anticipated Revenue , , Fund Balance, December 31 0 $ 351, $ 48, See accompanying notes.

28 Exhibit 0-2 WATER/SEWER UTILITY CAPITAL FUND COMPARATIVE STATEMENT OF FUND BALANCE REGULATORY ACCOUNTING BASIS Years ended December 31,2010 and 2009 Balance, December 31, Reference $ Increased By: Bond Anticipation Note Premium 24-0 Balance, December 31, , $ 17, See accompanying notes.

29 Exhibit D-3 WATER/SEWER UTILITY ASSESSMENT TRUST FUND COMPARATIVE STATEMENT OF FUND BALANCE REGULATORY ACCOUNTING BASIS Years ended December 31,2010 and 2009 Reference Balance, December 31,2010 and 2009 D $ 4, See accompanying notes.

30 Exhibit D-4 WATER/SEWER UTILITY OPERATING FUND STATEMENT OF REVENUES - REGULATORY ACCOUNTING BASIS Year ended December 31,2010 Budget Realized Excess/ (Deficit) Fund Balance Anticipated $ 48,000,00 $ 48,000,00 Water/Sewer Rents 4,255,868,94 4,572,296,25 Miscellaneous 40,500,00 44,383,38 $ 4,344,368,94 $ 4,664,679,63 Reference D-5 D-1 $ 316,427,31 3,883,38 $ 320,310,69 D-4 Analysis of Miscellaneous Revenue Not Anticipated Interest on Delinquent Accounts $ 44,383,38 See accompanying notes,

31 Exhibit 0-5 WATER/SEWER UTILITY FUND STATEMENT OF EXPENDITURES - REGULATORY ACCOUNTING BASIS Year ended December 31, 2010 A~~roeriations Original Budget After Paid or Budget Modifications Charged Reserved Operating: Salaries and Wages $ 685, $ 690, $ 677, $ 12, Other Expenses 942, , , , Acquisition of Water 455, , , , Bayshore Regional Sewerage Authority 1,566, ,536, ,444, , Total Operating 3,649, ,649, ,387, ,909,45 Capital Improvement Fund: Capital Improvements 25, , , Total Capital Improvement Fund 25, , , Debt Service: Payment on Bond Principal 176, , , Payments on Notes 18, , , Interest on Bonds 153, , , Interest on Notes 48, , , Water Treatment Loan: Principal 131,376,46 131,376,46 131,376,46 Interest 49, , , Total Debt Service 578, , , Statutory Expenditures: Contributions To: Social Security System (OAS.!,) 51, , , PERS 40, , , Total Statutory Expenditures 91, , , Total Water/Sewer Utility Appropriations $ 4,344, $ 4,344, $ 4,081,520,44 $ 262, Reference Cash Disbursed 1-0 $ 3,801, Reserve for Encumbrances , Accrued Interest ,031,48 $ 4,081,520,44 See accompanying notes.

32 GENERAL FIXED ASSETS ACCOUNT GROUP EXHIBIT

33 Exhibit E GENERAL FIXED ASSETS ACCOUNT GROUP COMPARATIVE STATEMENT OF GENERAL FIXED ASSETS REGULATORY ACCOUNTING BASIS December 31,2010 and 2009 Balance December 31, Reference 2010 Land 1-E $ 4,540,000,00 Buildings and Improvements 1-E 4,081,908,00 Machinery, Equipment and Vehicles 1-E 4,267,529,66 Total General Fixed Assets $ 12,889,437,66 Investment in General Fixed Assets 1-E $ 12,889,437,66 Balance December 31, 2009 $ 4,540,000,00 4,081,908,00 4,236,149,95 $ 12,858,057,95 $ 12,858,057,95 See accompanying notes,

34 NOTES TO FINANCIAL STATEMENTS

35 NOTES TO FINANCIAL STATEMENTS Years ended December 31, 2010 and Summary of Significant Accounting Policies A. Reporting Entity The Governmental Accounting Standards Board ("GASB") is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. GASB has adopted accounting statements to be used by governmental units when reporting financial position and results of operations in accordance with accounting principles generally accepted in the United States of America ("GAAP"). The municipalities in the State of New Jersey do not prepare financial statements in accordance with GAAP and thus do not comply with all of the GASB pronouncements. The financial statements of the Borough of Matawan, County of Monmouth, New Jersey ("Borough") include every board, body, officer or commission maintained wholly or in part by funds appropriated by the Borough, as required by the provision of N.J.S. 40A:S-S. The financial statements, however, do not include the operation of School Boards, Volunteer Fire Departments/Fire Districts and First Aid Squads which are subject to separate audit and are considered component units under GAAP. Included within the financial statements are taxes levied, collected and turned over to School Boards and appropriations for contributions to Volunteer Fire Departments and First Aid Squads. Complete financial statements of the above component units can be obtained by contacting the Treasurer of the respective entity. The financial statements of the Board of Education, the Matawan-Aberdeen Public Library, First Aid Organization and Volunteer Fire Companies are reported separately since their activities are administered by separate boards. B. Description of Funds GASB is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. GASB Codification establishes three fund types to be used by general purpose governmental units when reporting financial position and results of operations in accordance with GAAP. The accounting policies of the Borough conform to the accounting principles and practices applicable to municipalities prescribed by the Division of Local Government Services, Department of Community Affairs, State of New Jersey. The accompanying financial statements are presented in the format prescribed by the State of New Jersey. Such principles and practices are designed primarily for determining compliance with legal provisions and budgetary restrictions and are a means of reporting on the stewardship of public officials with respect to public funds. Under this method of accounting, the Borough accounts for its financial transactions through the following separate funds: Current Fund - is used to account for all revenues and expenditures applicable to the general operations of Borough departments. Trust Funds - are used to account for assets held by the Borough in a trustee capacity or as an agent for individuals and other governmental agencies. Funds held by the Borough which have restrictions placed on the use of such funds are recorded in the Trust Fund.

36 NOTES TO FINANCIAL STATEMENTS Years ended December 31,2010 and Summary of Significant Accounting Policies (continued) B. Description of Funds (continued) General Capital Fund - is used to account for financial resources to be used for the acquisition of general capital facilities. The major resources are derived from the sale of serial bonds and bond anticipation notes. Water/Sewer Utility Operating and Capital Funds - are used to account for water/sewer operations that are financed through user fees. The funds are operated on a basis similar to private business enterprises where the intent is that the costs of providing the water/sewer utility to the general public be financed through user fees. Operations relating to the acquisition of water/sewer capital facilities are recorded within the Water/Sewer Utility Capital Fund. General Fixed Assets Account Group - The Borough has complied with Technical Accounting Directive No issued by the Division of Local Government Services. Technical Accounting Directive No utilizes the following accounting policies: Fixed assets used in governmental operations (general fixed assets) are accounted for in the General Fixed Assets Account Group. Public domain (infrastructure) general fixed assets consisting of certain improvements other than buildings, such as roads, bridges, curbs and gutters, streets and sidewalks and drainage systems are not capitalized. All fixed assets are valued at historical cost or estimated historical cost if actual historical cost is not available, except for land which is valued at estimated market value. No depreciation is provided for in the financial statements. Expenditures for construction in progress are recorded in the Capital Funds until such time as the construction is completed and put into operation. Fixed assets acquired through grants in aid or contributed capital are not accounted for separately.

37 NOTES TO FINANCIAL STATEMENTS Years ended December 31, 2010 and Summary of Significant Accounting Policies (continued) C. Measurement Focus, Basis of Accounting and Basis of Presentation The accounting principles and practices prescribed for municipalities by the Division of Local Government Services differ in certain respects from GAAP applicable to local government units. The more Significant differences follow. A modified accrual basis of accounting is followed by the Borough. accrual basis follow: Modifications from the Revenues Revenues are recorded as received in cash except for statutory reimbursements and grant funds, which are due from other governmental units. State and federal grants for operating purposes are realized as revenues when anticipated in the Borough budget. Receivables for property taxes are recorded with offsetting reserves within the Current Fund. Other amounts that are due to the Borough which are susceptible to accrual are recorded as receivables with offsetting reserves. These reserves are liquidated and revenues are recorded as realized upon receipt of cash. GAAP requires the recognition of revenues for general operations in the accounting period in which they become available and measurable. Expenditures (a) (b) (c) (d) Disbursements for Current Fund inventory-type items are considered expenditures at the time of purchase; Prepaid expenses are not recorded; Interest on long-term debt included in the General Capital Fund is recorded as an expenditure when paid; The encumbrance method of accounting, which records commitments such as purchase orders and contracts as a charge against the current year's budget in addition to expenditures made or accrued, is utilized. The cash basis of accounting, however, is followed for recording the Borough's share of contributions for fringe benefits, such as retirement plans, accrued sick leave and vacation leave. Appropriation reserves are recorded at December 31 for unexpended appropriation balances except for amounts which, according to state statutes, may be cancelled by the governing body. The appropriation reserves are available to satisfy specific claims, commitments or contracts incurred during the preceding fiscal year. At the end of the succeeding fiscal year, the remaining unexpended balances lapse to fund balance through other credits to revenue.

38 NOTES TO FINANCIAL STATEMENTS Years ended December 31,2010 and Summary of Significant Accounting Policies (continued) C. Measurement Focus, Basis of Accounting and Basis of Presentation (continued) Had the Borough's financial statements been prepared under generally accepted accounting principles, the encumbrance method of accounting would be followed for expenditures presently reflected on a paid or charged basis, appropriation reserves would not be recorded, revenues susceptible to accrual would have been reflected without offsetting reserves and inventories would not be reflected as expenditures at the time of purchase. Accordingly, the accompanying financial statements are not intended to present financial position and results of operations in conformity with generally accepted accounting principles. D. Budgets and Budgetary Accounting An annual budget is required to be adopted and integrated into the accounting system to provide budgetary control over revenues and expenditures. Budget amounts presented in the accompanying financial statements represent amounts adopted by the Borough and approved by the State Division of Local Government Services in accordance with N.J.S.A. 40A:4 et seq. E. Grants Current Fund - State and federal grants and assistance awards made on the basis of entitlement periods are recorded as revenues when entitlement occurs. Trust Fund - State and federal grants and assistance awards are dedicated by rider in the Trust Fund. A receivable and corresponding spending reserve are recorded when the grant is awarded. Capital Fund - State and federal grants and assistance awards are recorded as a funding source for improvement authorizations or are established as receivables with an offsetting reserve.

39 NOTES TO FINANCIAL STATEMENTS Years ended December 31,2010 and Summary of Significant Accounting Policies (continued) F. Assessment and Collection of Property Taxes New Jersey statutes require that taxable valuation of real property be prepared by the local unit tax assessor as of October 1 in each year and filed with the County Board of Taxation by January 10 of the following year. Upon the filing of certified adopted budgets by the Local Unit, Local School District, County and Special Districts, the tax rate is struck by the County Tax Board based on the certified amounts in each of the taxing districts for collection to fund the budgets. Pursuant to statute, this process is to be completed on or before May 3, with a completed duplicate of the tax rolls to be delivered to the Local Unit Tax Collector on or before May 13. New Jersey statutes require that each local unit provide for sufficient anticipated cash receipts equal to the "lawful yearly expenditure" which includes the total amount of property taxes to be raised by the local unit. Taxes are levied on an annual basis and are due quarterly on February 1, May 1, August 1, and November 1. Any taxes not paid as of December 31 are subject to tax sale and lien in the subsequent year, with the exception of bankruptcies. The date of tax sale is at the discretion of the tax collector. G. Foreclosed Property Real property acquired for taxes is recorded in the Current Fund at assessed valuation when such property is acquired and is fully reserved. H. Interfund Receivables Interfund receivables created by cash transfers from the Current Fund are recorded with offsetting reserves created by charges to operations. Income is recognized in the year the receivables are liquidated. Interfund receivables in other funds are not offset by reserves. I. Deferred Charges to Future Taxation Funded and Unfunded Upon the authorization of capital projects, the Borough establishes deferred charges for the costs of the capital projects to be raised by future taxation. Funded deferred charges relate to permanent debt issued, whereas unfunded deferred charges relate to temporary or non-funding of the authorized cost of capital projects. According to N.J.S.A. 40A:2-4, the Borough may levy taxes on all taxable property within the local unit to repay the debt. Annually, the Borough raises the debt requirements for that particular year in the Current Fund budget. As funds are raised, the deferred charges are reduced.

40 NOTES TO FINANCIAL STATEMENTS Years ended December 31, 2010 and Summary of Significant Accounting Policies (continued) J. Pension Plans Substantially, all Borough employees participate in the Public Employees' Retirement System ("PERS") and the Police and Fireman's Retirement System ("PFRS"). The Division of Pensions within the Treasury Department of the State of New Jersey is the administrator of the funds and charges municipalities annually for their respective contributions. The plans provide retirement and disability benefits, annual cost of living adjustments, and death benefits to plan members and beneficiaries. The plans are cost sharing multiple-employer defined benefit plans and as such do not maintain separate records for each municipality in the state and, therefore, the actuarial data for the Borough is not available. The Division of Pensions issues publicly available financial reports for each of the plans that include financial statements and required supplementary information. The reports may be obtained by writing the State of New Jersey, Division of Pensions. Covered employees are required by State statute to contribute a certain percentage of their salary to the plan. Each member's percentage is based on age determined at the effective date of enrollment. In addition, PERS and PFRS bill the Borough annually at an actuarially determinable rate for its required contribution. The current rate is 5.5% for PERS and 8.5% for PFRS of annual covered payroll PERS $ 163, , , PFRS $ 486, , , K. Volunteer Length of Service Award Plan The Borough has established a Volunteer Length of Service Award Plan ("LOSAP") ("Plan") to ensure retention of the Borough's volunteer First Aid squad. The Plan shall be construed under the laws of the State of New Jersey and is established with the intent that it meets the requirements of a "length of service award plan under Section 457(e)11 of the Internal Revenue Code". Annual Contributions - The annual contribution to be made by the Borough for each active volunteer member shall be $ $1, per year of active emergency service, commencing with the year Appropriations - Appropriations for the purpose of funding the Borough's LOSAP shall be included as a separate line item in the Borough's budget, commencing with the year Periodic Increases - Notwithstanding the provisions above, the annual contribution to be made by the Borough for each active volunteer member shall be subject to periodic increases based upon the "consumer price index factor" pursuant to subsection f. of section 3 of P.L 1997, c. 388 (N.J.SA 40A:14-185).

41 NOTES TO FINANCIAL STATEMENTS Years ended December 31,2010 and Summary of Significant Accounting Policies (continued) K. Volunteer Length of Service Award Plan (continued) Estimated Cost - The estimated cost of the program to the Borough has been calculated to be approximately $54, per year. (This amount may vary annually, however, based upon the total number of eligible active volunteer members in the program). L. Deposits and Investments Deposits New Jersey statutes permit the deposit of public funds in institutions located in New Jersey which are insured by the Federal Deposit Insurance Corporation ("FDIC"), or by any other agencies of the United States that insure deposits, the State of New Jersey Cash Management Fund and government money market mutual funds through registered broker/dealers and banks. The New Jersey Governmental Unit Deposit Protection Act ("GUDPA") requires public depositories to maintain collateral for deposit of public funds that exceed insurance limits as follows: The market value of the collateral must equal 5 percent of the average daily balance of public funds; or If the public funds deposited exceed 75 percent of the capital funds of the depository, the depository must provide collateral having a market value equal to 100 percent of the amount exceeding 75 percent. All collateral must be deposited with the Federal Reserve Bank, the Federal Home Loan Bank Board or a banking institution that is a member of the Federal Reserve System and has capital funds of not less than $25,000,000. The State of New Jersey Cash Management Fund is authorized by statute and regulations of the State Investment Council to invest in fixed income and debt securities which mature within one year. Collateralization of Fund investments is generally not required.

42 NOTES TO FINANCIAL STATEMENTS Years ended December 31,2010 and Summary of Significant Accounting Policies (continued) L. Deposits and Investments (continued) Investments New Jersey statutes establish the following securities as eligible for the investment of Borough funds: (a) (b) (c) (d) (e) (f) (g) Bonds or other obligations of the United States or obligations guaranteed by the United States. Government Money Market Mutual Funds. Any obligation that a federal agency or a federal instrumentality has issued in accordance with an Act of Congress, which security has a maturity date not greater than 397 days from the date of purchase, provided that such obligation bears a fixed rate of interest not dependent on any index or other external factor. Bonds or other obligations of the Borough, or bonds or other obligations of school districts of which the Borough is a part or within which the school district is located. Bonds or other obligations, having a maturity date of not more than 397 days from the date of purchase, that are approved by the New Jersey Department of Treasury, Division of Investments. Local Government Investment Pools. Deposits with the State of New Jersey Cash Management Fund established pursuant to Section 1 of P.L. 1977, C. 281 (C. 52: 18A:90.4). Repurchase agreements (15.1 (a)(8)) must comply with the following conditions: (a) (b) (c) (d) (e) The underlying securities are permitted investments, pursuant to the list contained in (a) and (c) above. The custody of the collateral is transferred to a third party. This means the bank must contract with a trusted third party to hold the collateral to ensure it is not pledged against any other investments. The maturity of the agreement is not more than 30 days. The underlying securities are purchased through a GUDPA bank. A master repurchase agreement providing for the custody and security of collateral is executed.

43 NOTES TO FINANCIAL STATEMENTS Years ended December 31,2010 and Summary of Significant Accounting Policies (continued) L. Deposits and Investments (continued) Investments (continued) Local Government Investment Pools ("LGIP") (15.1 (e)(2)) are subject to the following requirements: (a) (b) (c) It is managed in accordance with the SEC's government money market rules (2a-7). It is rated in the highest category by a nationally recognized statistical rating organization. Have their portfolio limited to U.S. Government securities as defined in 2a-7 and repurchase agreements that are collateralized by such U.S. Government securities. Every local unit must have a Cash Management Plan ("Plan"); the Plan is subject to audit. In addition, when the Plan permits investments for more than one year, the investment must approximate the prospective use of funds. This primarily relates to U.S. securities and local bond issue purchases. The law also requires that cash management plans provide for the CFO to give the governing body a monthly report that summarizes: (a) (b) (c) (d) All investments made or redeemed over the past month. Each organization holding local unit funds. The amount of securities purchased or sold, class or type of securities purchased, book value, earned income, fees incurred, and market value of all investments as of the report date. Other information that may be required by the governing body. The Borough is permitted to invest public funds in accordance with N.J.SA 40A: These investments include bonds or other obligations of the United States or obligations guaranteed by the United States, Government Money Market Mutual Funds, bond or other obligations of the Borough or bonds or other obligations of the school district, local government investment pools, and agreements for the repurchase of fully-collateralized securities, if purchased in accordance with N.J. SA 40A: The Borough is also permitted to invest Length of Service Award Program ("LOSAP") funds with the types of eligible investments authorized in N.JAC. 5: These investments include interest-bearing accounts or securities in which savings banks of New Jersey are authorized to invest their funds, New Jersey Cash Management Fund, fixed and variable individual or group annuity contracts, mutual fund shares or fixed and variable life insurance contracts.

44 NOTES TO FINANCIAL STATEMENTS Years ended December 31, 2010 and 2009 M. Inventories of Supplies The costs of inventories of supplies for all funds are recorded as expenditures at the time the individual items are purchased. The costs of inventories are not included on the various balance sheets. 2. Deposits and Investments The Borough considers petty cash, change funds, cash in banks, certificates of deposit and deposits with the New Jersey Cash Management Fund as Cash and Cash Equivalents. Deposits The Borough's deposits are insured through either the Federal Deposit Insurance Corporation ("FDIC") or New Jersey's Governmental Unit Deposit Protection Act ("GUDPA"). GUDPA requires all banks doing business in the State of New Jersey to maintain additional collateral in the amount of 5% of the average public deposits and to deposit these amounts with the Federal Reserve Bank for all deposits not covered by FDIC. Bank balances at December 31,2010 and 2009 are insured up to $250, in the aggregate by the FDIC for each bank. At December 31, 2010 and 2009, the book values of the Borough's deposits were $3,561, and $3,518,480.14, respectively. Custodial Credit Risk Related to Deposits Custodial Credit Risk is the risk that, in the event of a bank failure, the Borough's deposits might not be recovered. Although the Borough does not have a formal policy regarding custodial credit risk, NJSA 17:9-41 et seq. requires that governmental units shall deposit public funds in public depositories protected from loss under the provisions of GUDPA. Under the Act, the first $250, of governmental deposits in each insured depository is protected by the FDIC. Public funds owned by the municipality in excess of FDIC insured amounts are protected by GUDPA. However, GUDPA does not protect intermingled trust funds such as salary with holdings, bail funds, or funds that may pass to the municipality relative to the happening of a future condition. Such funds are shown as Uninsured and Uncollateralized in the schedule below. At December 31, 2010 and 2009, the Borough's bank balances of $3,633, and $3,779,935.44, respectively, were exposed to Custodial Credit Risk as follows: Insured Uninsured and Uncollateralized 2010 $ 2,275, ,358, $ $ 2,269, ,510, Lll

45 NOTES TO FINANCIAL STATEMENTS Years ended December 31,2010 and Deposits and Investments (continued) Investments Custodial Credit Risk For an investment, this is the risk that, in the event of the failure of the counterparty, the Borough will not be able to recover the value of its investments or collateral securities that are held by an outside party. The Borough does not have a policy for Custodial Risk. As of December 31,2010 and 2009, $279, and $231,686.75, respectively, of the Borough's investments was exposed to Custodial Credit Risk, as follows: Fair Value (LOSAP) Book Value Total Reported Value Uninsured and Collateralized: Collateral held by pledging financial Institution's Trust Department but not in the Borough's name ~ $ $ Uninsured and Collateralized: Collateral held by pledging financial Institution's Trust Department but not in the Borough's name $ $ $ I nterest Rate Risk The Borough 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. Credit Risk State law limits investments as noted above (N.J.S.A. 40A:5-15.1). The Borough does not have an investment policy that would further limit its investment choices. The fair value of the above-listed investments were based on quoted market prices.

46 NOTES TO FINANCIAL STATEMENTS Years ended December 31,2010 and Interfund Balances and Activity Balances due to/from other funds at December 31, 2010 consist of the following: Due to General Capital Fund from Current Fund representing a cash advance Due to Grant Fund from Current Fund representing a cash advance Due to Water/Sewer Utility Operating Fund from General Capital Fund representing a cash advance Due to Water/Sewer Utility Operating Fund from Water/Sewer Utility Capital Fund representing a cash advance Due to Water/Sewer Utility Operating Fund from Water/Sewer Utility Assessment Fund representing a cash advance Due to Trust Fund from Current Fund representing a cash advance Due to Water/Sewer Utility Assessment Fund from Water/Sewer Utility Capital Fund representing a cash advance Due to Water/Sewer Utility Capital Fund from General Capital Fund representing a cash advance $ 205, , , , , , Taxes, Water/Sewer Receivables Taxes receivable as of December 31,2010 consist of the following: Current Delinquent $ 24, $ 1, $ 17, $ 43, In 2010, the Borough collected $1, from Delinquent Taxes, which represented 17.15% of the Delinquent Tax Receivable at December 31, Taxes receivable as of December 31,2009 consist of the following: Current Delinquent $ 10, $ 0.00 $ 7, $ 17, In 2009, the Borough collected $3, from Delinquent Taxes, which represented % of the Delinquent Tax Receivable at December 31, 2008.

47 NOTES TO FINANCIAL STATEMENTS Years ended December 31, 2010 and Taxes, Water/Sewer Receivables (continued) Water/Sewer Utility Water/Sewer Utility Receivables as of December 31, 2010 consist of the following: Current Delinquent $ 183, $ 0.00 $ 0.00 $ 183, In 2010, the Borough collected $134, from Water/Sewer Utility Rents, which represented % of the Water/Sewer Utility Rents Receivable at December 31, Water/Sewer Utility Receivables as of December 31, 2009 consist of the following: Current Delinquent $ 134, $ 0.00 $ 0.00 $ 134, In 2009, the Borough collected $123, from Water/Sewer Utility Rents, which represented % of the Water/Sewer Utility Rents Receivable at December 31, 2008.

48 NOTES TO FINANCIAL STATEMENTS Years ended December 31,2010 and Fixed Assets The following is a summary of changes in the General Fixed Assets Account Group for the years 2010 and Balance, Balance, December 31, December 31, Additions Deletions 2010 Land and Land Improvements $ 4,540, $ 4,540, Building and Building Improvements 4,081, ,081, Machinery and Equipment 4,236, $ 31, ,267, Total $ $ 31, $ 000 $ ,66 Balance, Balance, December 31, December 31, Additions Deletions 2009 Land and Land Improvements $ 4,540,000,00 $ 4,540,000,00 Building and Building Improvements 3,993,300,00 $ 88, ,081,908,00 Machinery and Equipment 4,214,687,95 21,462,00 4,236,149,95 Total ~ ,95 ~ 1 j Q,O:ZO QQ $ 0,00 $ ,95

49 NOTES TO FINANCIAL STATEMENTS Years ended December 31, 2010 and Long-Term Debt Summary of Municipal Debt (Excluding Current and Operating Debt and Type I School Debt) Issued General: Bonds, Notes and Loans Water/Sewer Utility: Bonds, Notes and Loans $ 9,307, ,362, $10,048, , $10,024, , Net Debt Issued , ,405, ,488, Authorized But Not Issued General: Bonds and Notes 8,998, Water/Sewer Utility: Bonds and Notes 7,917, Total Authorized But Not Issued Net Bonds and Notes Issued & Authorized But Not Issued $ ,685, ,175, ,860, $ ,350, , ,875, $

50 NOTES TO FINANCIAL STATEMENTS Years ended December 31,2010 and Long-Term Debt (continued) Summary of Statutory Debt Condition - Annual Debt Statement The summarized statement of debt condition which follows is prepared in accordance with the required method of setting up the Annual Debt Statement and indicates a statutory net debt of 1.30%. Gross Debt Deductions Net Debt School District Debt $ 8,986, $ 8,986, General Debt 18,306, ,560, $13,746, Water/Sewer Utility Debt 15,280, ,280, $42, $ $ Net Debt $13,746, divided by Equalized Valuation Basis per N.J.SA 40A:2-2 as amended, $1,058,971, = 1.30%. Borrowing Power Under N.J.S. 40A:2-6 as Amended 3.5% of Equalized Valuation Basis (Municipal) Less: Net Debt Remaining Borrowing Power $ 37,063, ,746, $ Calculation of Self-Liguidating Purpose - Water/Sewer Utility Fund per NJS 40A:2-45 Cash Receipts from Fees, Rents or Other Charges for Year Deductions: Operating, Maintenance Costs and Statutory Expenditures Debt Service per Water/Sewer Account Total Deductions Excess In Revenues $ 3,649, , $ 4,664, ,227, $

51 NOTES TO FINANCIAL STATEMENTS Years ended December 31, 2010 and Long-Term Debt (continued) The Borough's long-term debt consisted of the following at December 31, 2010: Purpose Date of Issue Original Issue Interest Rate Balance, December 31, 2010 General Bonds General Improvement General Improvement Refunding Bonds 12/01/04 12/01/05 04/12/07 $ 1,277, Various 3,790, Various 3,920, Various $ 870, ,688, ,167, $ Water/Sewer Utility Bonds Water/Sewer Improvement Water/Sewer Improvement Refunding Bonds 12/ /01/05 04/12/07 $ 2,876, Various 468, % 454, Various $ 2,300, , , $ 3 012, Debt Service requirements for bonded debt during the next several years are as follows: General CaQital Fund Year PrinciQal Interest Total 2011 $ 707, $ 311, $ 1,018, , , ,012, , , ,008, , , ,004, , , ,003, ,710, , ,038, , , , $ Q $ 1,561, $ 8 287,334.34

52 NOTES TO FINANCIAL STATEMENTS Years ended December 31, 2010 and Long-Term Debt (continued) Water/Sewer Utility Capital Fund Year Principal Interest $ 179, , , , , ,212, , $ 146, , , , , , , $ 326, , , , , ,591, , $ ,00 $ $ Loans Payable On June 27, 2002, the Borough entered into a low-interest rate loan funded by the State of New Jersey Green Trust Loan Program in the sum of $295, The interest rate is 2.00% and the loan matures on January 15, The proceeds have been used to help with the Lakefront Recreation Area. On October 15, 2001, the Borough entered into loan agreements funded by the New Jersey Infrastructure Trust in the amount of $2,800, for water/sewer system improvements. $1,400, was funded by a trust loan with interest rates ranging from 4.00% to 5.00%. The remaining $1,400, was funded by a fund loan with 0.00% interest. Debt Service requirements for loans issued and outstanding during the next several years are as follows: General Capital Fund Year Principal Interest Total 2011 $ 14, $ 3, $ 18, , , , , , , , , , , , , , , , , , $ ,22 :Il $ 2jQ,956.48

53 NOTES TO FINANCIAL STATEMENTS Years ended December 31,2010 and Long-Term Debt (continued) Water/Sewer Utility Capital Fund Principal Interest $ 137, , , , , , , $ 46, , , , , , , $ 183, , , , , , , $ $ $ Capital Lease Obligations The Borough participates in the Monmouth County Improvement Authority ("Authority") Capital Equipment Lease Program ("Program"). Under the Program, the Borough purchases equipment with the proceeds of an Authority bond issue and then pays the Authority in the form of lease payments. Debt Service requirements for Capital Lease obligations during the next several years are as follows: Year Principal Interest Total 2011 $ 154, $ 25, $ 179, , , , , , , , , , , , , , , , , , , $ $ Z39"\5.00 $ 6Q8,Q45.QQ

54 NOTES TO FINANCIAL STATEMENTS Years ended December 31, 2010 and Long-Term Debt (continued) Capital Lease Obligations (continued) The Borough adopted an ordinance on July 21, 2009, entering into a capital equipment lease with the Authority. The amount of the lease was $200,000.00, with an interest rate of 5.5%, and the final payment due on October 1, The following is a schedule of the future minimum lease payments under this capital lease at December 31, 2010: Year Principal Interest Total 2011 $ 36, $ 3, $ 39, , , , , , , , , , Bond Anticipation Notes $ ~O $ The Borough issues bond anticipation notes to temporarily fund various capital projects prior to the issuance of serial bonds. The term of the notes cannot exceed one year but the notes may be renewed from time to time for a period not exceeding ten years. All such notes must be paid no later than the tenth anniversary of the date of the original note. The State of New Jersey also prescribes that, on or before the third anniversary date of the original note, a payment of an amount at least equal to the first legally payable installment of the bonds in anticipation of which such notes were issued be paid or retired. Legal installments must be paid if the notes are to be renewed beyond the fourth anniversary date of the original issuance. On December 31,2010, the Borough's outstanding Bond Anticipation Notes were as follows: General Capital Fund Original Ordinance Issue Date of Interest Number Purpose Date Maturity Rate Amount 05-21/07-24 Various Roadway Imps. 04/12/06 03/02/ % $ 342, /07-03/ Various Roadway Imps. 07/19/07 03/02/ % 975, /07-02 Various Capital Imps. 07/19/07 03/02/ % 166, /07-22 Multipark Development & Sidewalk Imps. 07/19/07 03/02/ % 235, Road Imp. Program 03/05/09 03/02/ % 665, Preliminary Planning Expensesllmps. To Lake Lefferts/Lake Matawan Dams 03/03/10 03/02/ % 11, $.2,39440Q.QO

55 NOTES TO FINANCIAL STATEMENTS Years ended December 31,2010 and Bond Anticipation Notes (continued) Water/Sewer Utility Capital Fund Original Ordinance Issue Date of Interest Number Purpose Date Maturity Rate Replacement of Water Mains 04/12/06 03/02/ % Replacement of Water Mains 04/12/06 03/02/ % 99-13/01-19 Reconstruction & Imps. to Sewer System 07/29/08 03/02/ % Reconstruction of Pump Stations 07/29/08 03/02/ % Water Main & Sanitary Sewer Imps. 07/29/08 03/02/ % Sanitary Sewer Imps. To Park Avenue 03/05/09 03/02/ % 09-07/16 Water Treatment Plant Improvements 03/03/10 03/02/ % Amount $ 1,236, , , , , , , $2,6472QQ,QO 8. Bonds and Notes Authorized But Not Issued At December 31, 2010, the Borough had authorized but not issued bonds and notes of the General Capital Fund totaling $8,998,719.01, and of the Water/Sewer Utility Fund totaling $7,917, Deferred Charges to be Raised In Succeeding Years' Budgets The following deferred charge is shown on the December 31, 2010 Current Fund Balance Sheet and will be raised in succeeding year's budgets. Special Emergency Authorization $ 50 OQP 00

56 NOTES TO FINANCIAL STATEMENTS Years ended December 31, 2010 and Fund Balance Appropriated Current Fund The Current Fund balance at December 31, 2010 was $502, of which $200, was appropriated and included as anticipated revenue for the year ended December 31, Water/Sewer Utility Operating Fund The Water/Sewer Utility Operating Fund balance at December 31, 2010 was $351, of which $50, was appropriated and included as anticipated revenue for the year ended December 31, Accrued Sick and Vacation Benefits - Unaudited As discussed in Note 1 and in accordance with accounting principles prescribed by the State of New Jersey, the cash basis of accounting is followed for recording the Borough's liability related to unused vacation and sick pay. Effective for financial statements dated December 31,1987, the State has required all municipalities to disclose the estimated current cost of unused sick and vacation benefits at year-end. The Borough has permitted employees to accrue unused vacation and sick leave, which may be taken off or paid at a later date with the exception of sick leave. The Borough estimated the current cost of such unpaid compensation as of December 31, 2010 to be approximately $362, The amount is not reported either as an expenditure or liability. 12. Unemployment Compensation Insurance Effective January 1, 1978, most municipal employees were eligible for unemployment compensation insurance (N.J.SA 43:21-3 et seq.). The Borough has elected to provide a selfinsured plan whereby the municipal cost and employee contributions are deposited in a trust fund from which claims, if any, will be paid. All funds collected from employees are transmitted to the state for this period. The Reserve for Unemployment Compensation Insurance at December 31, 2010 and 2009 totaled $11, and $27.60, respectively.

57 NOTES TO FINANCIAL STATEMENTS Years ended December 31, 2010 and Contingent Liabilities State and Federal Grants The Borough receives financial assistance from the State of New Jersey and the U.S. government in the form of grants. Entitlement to the funds is generally conditional upon compliance with terms and conditions of the grant agreements and applicable regulations, including the expenditure of the funds for eligible purposes. Substantially all grants, entitlements and cost reimbursements are subject to financial and compliance audits by grantors. As a result of these audits, costs previously reimbursed could be disallowed and require repayment to the grantor agency. As of December 31, 2010, the Borough estimates that no material liabilities will result from such audits. Pending Litigation There are actions, which have been instituted against the Borough which are either in the discovery stage or whose final outcome cannot be determined at the present time. In the opinion of the administration, the amount of ultimate liability with respect to these actions will not materially affect the financial position of the Borough. 14. Risk Management The Borough is exposed to various risks of loss related to torts, theft of, damage to and destruction of assets; error and omission, injuries to employees; and natural disaster. The Borough is a member of the Middlesex County Municipal Joint Insurance Fund. The joint insurance pool is both an insured and self-administered group of municipalities established for the purpose of insuring against property damage, general liability, motor vehicles and equipment liability and workmen's compensation. The Joint Insurance Fund will be selfsustaining through member premiums. The Joint Insurance Fund participates in the Municipal Excess Liability Program which has a contract for excess liability insurance for property, general liability, auto liability, public official liability, law enforcement liability and workman's compensation. 15. Post Employment Benefits In 2010, the Borough started contributing to the State Health Benefits Program ("SHBP"), a cost-sharing, multiple-employer defined benefit post-employment healthcare plan administered by the State of New Jersey Division of Pensions and Benefits. SHBP was established in 1961 under N.J. SA 52: et seq. to provide health benefits to State employees, retirees, and their dependents.

58 NOTES TO FINANCIAL STATEMENTS Years ended December 31, 2010 and Post Employment Benefits (continued) The SHBP was extended to employees, retirees, and dependents of participating local public employers in Local employers must adopt a resolution to participate in the SHBP. In 1991, the Township authorized participation in the SHBP's post-retirement benefit program through resolution number Eligibility to participate in the SHBP's post-retirement benefit program begins after 25 years of credited service with the Borough. During 2009, the Borough adopted resolution # under the provisions of N.J.S.A. 52: This resolution requires that non-union employees must work 15 years or more within the Borough in order to be eligible for health benefits upon retirement. Rules governing the operation and administration of the program are found in Title 17, Chapter 9 of the New Jersey Administrative Code. SHBP provides medical, prescription drugs, mental health/substance abuse, and Medicare Part B reimbursement to retirees and their covered dependents. The State Health Benefits Commission is the executive body established by statute to be responsible for the operation of the SHBP. The State of New Jersey Division of Pensions and Benefits issues a publicly-available financial report that includes financial statements and required supplementary information for the SHBP. That report may be obtained by writing to: State of New Jersey Division of Pensions and Benefits, PO Box 295, Trenton, New Jersey or by visiting their website at sept2008.pdf. Funding Policy Participating employers are contractually required to contribute based on the amount of premiums attributable to their retirees. Post-retirement medical benefits under the plan have been funded on a pay-as-you-go basis since Prior to 1994, medical benefits were funded on an actuarial basis. Contributions to pay for the health premiums of participating retirees in the SHBP are billed to the Township on a monthly basis. Plan members or beneficiaries receiving benefits do not make any contributions. The Borough's contributions to SHBP for the year ended December 31, 2010, was approximately $1,221,874.44, which equaled the required contributions for the year. There were approximately 30 retired participants eligible at December 31, Deferred Compensation Program The Borough has instituted a Deferred Compensation Plan ("Plan") pursuant to Section 457 of the Internal Revenue Code and P.L. 1977, C.381; P.L. 1978, C.39; P.L. 1980, C.78; and P.L. 1997, C.116 of the Statutes of New Jersey. The Plan is an arrangement whereby a public employer may establish a Plan and permit its employees to voluntarily authorize a portion of their current salary to be withheld and invested in one or more of the types of investments permitted under the governing regulations. The Borough has engaged a private contractor to administer the Plan.

59 NOTES TO FINANCIAL STATEMENTS Years ended December 31,2010 and Length of Service Award Program ("LOSAP") - Unaudited The Borough has established a Volunteer Length of Service Award Plan ("LOSAP") ("Plan") to ensure retention of the Borough's volunteer First Aid Squad. The Plan shall be construed under the laws of the State of New Jersey and is established with the intent that it meets the requirements of a "length of service award plan under Section 457(e)11 of the Internal Revenue Code". Annual Contributions - The annual contribution to be made by the Borough for each active volunteer member shall be $1, per year of active emergency service, commencing with the year Appropriations - Appropriations for the purpose of funding the Borough's LOSAP shall be included as a separate line item in the Borough's budget, commencing with the year Periodic Increases - Notwithstanding the provisions above, the annual contribution to be made by the Borough for each active volunteer member shall be subject to periodic increases based upon the "consumer price index factor" pursuant to subsection f. of section 3 of P.L. 1997, c. 388 (N.J.S.A. 40A:14-185). Criteria for Eligibility; Contributions; Points - Any active volunteer member shall eligible to participate in the LOSAP Plan immediately upon commencement of the member's performance of active voluntary services in the emergency service organization. Annual contributions shall only be made by the Borough, however, for those active volunteer members who have earned the minimum number of points for performing certain volunteer services on a yearly basis. Determination as to Eligibility - Each emergency service organization shall provide to the Borough Administrator, acting as the Plan Administrator of LOSAP Plan, a certified list as to the active volunteer members who are initially eligible to participate in the Plan and those who are eligible to participate as of each January 1 thereafter. The Plan Administrator shall forward said certified list to the Borough Council for approval, in accordance with the provisions of N.JAC. 5: The decision of the Borough Council as to such active member's eligibility shall be binding upon the Plan Administrator, participants, beneficiaries and any and all other persons having an interest hereunder, subject to appropriate judicial review. Terms of Participation - The Plan Administrator shall have the right to require any active volunteer member at the time of his or her becoming a participant to agree, in writing, to be bound by the terms, covenants and conditions of the LOSAP and accompanying trust. Each participant shall furnish to the Plan Administrator all pertinent information required for the administration of the LOSAP. The Plan Administrator shall rely upon all such information furnished. Vesting - The active volunteer member shall not be permitted to receive a distribution of the fund in his or her LOSAP account until the completion of a five-year vesting period.

60 NOTES TO FINANCIAL STATEMENTS Years ended December 31,2010 and Length of Service Award Program ("LOSAP") - Unaudited (continued) Termination of Service - Any participant who terminates service as an active volunteer member shall cease to participate hereunder. A former participant may resume participation immediately upon returning to the service of the emergency service organization as an active volunteer member. Any active volunteer member who terminates service with the emergency service organization, subsequently returns to service and again becomes a participant shall be treated as a new participant for purposes of eligibility unless said participant was fully vested prior to his or her termination from service. Reporting Requirements - N.JAC. 5: requires that the Borough perform a separate review report of the Plan in accordance with the Arnerican Institute of Certified Public Accountants Statements for Accounting and Auditing Review Services. 18. Subsequent Event On January 15, 2011, the Borough issued Bonds in the amount of $9,195, ($5,275, General Improvement Bonds and $3,920, Utility Bonds). The Bonds are payable through 2031, have an average coupon rate of 4.889%, and a total interest cost of 4.233%.

61 SUPPLEMENTARY SCHEDULES

62 CURRENT FUND SCHEDULES

63 Schedule i-a CURRENT FUND SCHEDULE OF CASH - TREASURER Year ended December 31,2010 Balance, December 31, 2009 Reference A $ 1,404, Increased By Receipts: Miscellaneous Revenue Not Anticipated A-2 $ 94, Due From State of New Jersey - Senior Citizens' and Veterans' Deductions 3-A 69, Taxes Receivable 4-A 25,108, Revenue Accounts Receivable 7-A 2,466, Prepaid Taxes 11-A 140, Accounts Payable 14-A 1, Tax Overpayments 15-A 7, Interfunds Returned 16-A 50, Due To State of New Jersey 17-A 1, Various Reserves 18-A 13, Grants Receivable 19-A 152, Special Emergency Note Payable 24-A 50, Interfunds Receivable 26-A 2, Reserve for Unappropriated Grants 21-A 24, ,182, ,586, Decreased By Disbursements: Refund Prior Year's Tax Revenue A-1 27, Refund of Prior Year Revenue A-1 20, Budget Appropriations A-3 9,252, Appropriation Reserves 9-A 404, County Taxes 12-A 2,831, Regional School Taxes Payable 13-A 15,287, Tax Overpayments 15-A 11, Due To State of New Jersey 17-A 1, Various Reserves 18-A 16, Special Emergency Note Payable 24-A 100, Reserve for Appropriated Grants 20-A 176, ,131, Balance, December 31,2010 A $ 1,455,832.86

64 Schedule 2-A CURRENT FUND SCHEDULE OF CHANGE FUND Year ended December 31, 2010 Reference Balance, December 31,2010 and 2009 A $

65 Schedule 3-A CURRENT FUND SCHEDULE OF DUE FROM STATE OF NEW JERSEY SENIOR CITIZENS' AND VETERANS' DEDUCTIONS Year ended December 31, 2010 Reference Balance, December 31, 2009 A $ Increased By: Senior Citizens' Deductions Per Billing $ 11, Veterans' Deductions Per Tax Billing 57, Seniors Citizens'Nets' Deduction Allowed by Tax Collector A Decreased By: Cash Receipts 1-A 69, Senior Citizens Deductions Disallowed by Collector: A , , , Balance, December 31,2010 A $

66 Schedule 4-A CURRENT FUND SCHEDULE OF TAXES RECEIVABLE AND ANALYSIS OF PROPERTY TAX LEVY Year ended December 31,2010 Balance December 31, Year Levy Added Senior Citizens' Senior Citizens' and Veterans' and Veterans' Deductions Collections Deductions Disallowed Allowed Transfer Balance to December 31, Liens CaD_celled $ 10, $ 25,154, $ 242,46582 $ 1, $ $ 97J , $ 69, $ 7, $ 1,29902 $ 10, , ~47062 $ 10, $ 25,154, $ 242, $ $ 97, $ 25,108,51431 $ 69, $ 10, $ 94, $ 25, Reference A 4-A 4-A 3-A 11-A 1-A 3-A 5-A 4-A A Analysis of Property Tax Levy Tax Yield Reference General Purpose Tax: General Property Tax Added and Omitted Taxes 4-A 4-A $ 25,154, , $ 25,396, Tax Levy: County Taxes Due County for Added Taxes Local District School Tax Local Taxes for Municipal Purposes Add: Additional Tax Levied 12-A 12-A 13-A A-2 4-A $ 2,813, ,14497 $ 2,840, ,287, ,052, ,48407 $ 25,396, Analysis of Current Year Tax Collecti9ns 2009 Cash Collections of 2010 Taxes 2010 Cash Collections of 2010 Taxes Senior Citizens' and Veterans' Allowed on 2010 Taxes Disallowed on 2010 Taxes 4-A 4-A 3-A 3-A $ 97, ,106,765,71 69,75000 (59027) A-1,A-2 $ 25,273,661.37

67 Schedule 5-A CURRENT FUND SCHEDULE OF TAX TITLE LIENS RECEIVABLE Year ended December 31, 2010 Reference Balance, December 31, 2009 A $ 7, Increased By: Transfers From Taxes Receivable 4-A 10, Balance, December 31,2010 A $ 17,830.81

68 Schedule 6-A CURRENT FUND SCHEDULE OF PROPERTY ACQUIRED FOR TAXES - ASSESSED VALUATION Year ended December 31, 2010 Reference Balance, December 31, 2010 and 2009 A $ 125,900.00

69 Schedule 7-A CURRENT FUND SCHEDULE OF REVENUE ACCOUNTS RECEIVABLE Year ended December 31,2010 Balance December 31, 2009 Accrued in 2010 Collections Balance December 31, 2010 Licenses: Alcoholic Beverages Other Fees and Permits Fines and Costs ~ Municipal Court Interest and Costs on Taxes PILOT - Senior Citizens Housing Complex Cable Television Fees Railroad Parking Lot Fees and Permits Rental of Matawan Municipal Community Center Cell Tower Rentals Energy Receipts Tax Uniform Construction Code Fees Senior Citizen and Veterans Administrative Fee Uniform Fire Safety Act Due From: Trust Fund Off Duty Police Trust Fund Reserve $ 6, $ 15, , , , , , , , , , ,450, , , , , , $ 15, , , , , , , , , , ,450, , , , , , $ 10, $ 6, $ 2,470, $ 2,466, $ Reference A 7-A 1-A A

70 Schedule 8-A CURRENT FUND SCHEDULE OF DEFERRED CHARGES - N.J.S.A. 40A:4-53 SPECIAL EMERGENCY AUTHORIZATIONS Year ended December 31, 2010 Balance Raised December 31, in 2010 Year Description Amount 2009 Budget 12/29/05 Tax Maps $ 24, $ 4, $ 4, /05106 Revaluation of Real Property 250, , , $ 104, $ 54, Reference A A-3 Balance December 31, 2010 $ 50, $ 50, A

71 Schedule 9-A Page 1 of 3 CURRENT FUND SCHEDULE OF 2009 APPROPRIATION RESERVES Year ended December 31, 2010 GENERAL GOVERNMENT General Administration: Other Expenses Mayor and Council: Salaries and Wages Other Expenses Municipal Clerk: Salaries and Wages Other Expenses Financial Administration (Treasury): Other Expenses Revenue Administration (Tax Collection): Salaries and Wages Other Expenses Tax Assessment Administration: Salaries and Wages Other Expenses Legal Services: Other Expenses Engineering Services: Other Expenses Downtown Redevelopment: Salaries and Wages Other Expenses Historical Sites Office: Other Expenses Balance December $ , , , $ Balance After Modifications 2, , , , , , , Paid or Charged $ 2, , , , , , $ Balance Lapsed , , LAND USE ADMINISTRATION Planning Board: Salaries and Wages Other Expenses , , INSURANCE General Liability Workmen's Compensation Employee Group Health , ,

72 Schedule 9-A BOROUGH OF MATAWAN Page 2 of 3 CURRENT FUND SCHEDULE OF 2009 APPROPRIATION RESERVES Year ended December 31,2010 Balance Balance Paid December 31, After or Balance 2009 Modifications Charged Lapsed PUBLIC SAFETY Municipal Court: Salaries and Wages Other Expenses Public Defender: Other Expenses Police Department: Salaries and Wages 3, , , Other Expenses 14, , , , Office of Emergency Management: Salaries and Wages Other Expenses 4, , , Fire: Other Expenses 1, , , , Uniform Fire Safety: Other Expenses 3, , , Municipal Prosecutor's Office: Other Expenses PUBLIC WORKS Railroad Parking: Salaries and Wages 8, , , , Other Expenses 16, , , , Streets and Road Maintenance: Salaries and Wages 1, , , Other Expenses , , Shade Tree Commission: Salaries and Wages Other Expenses , Solid Waste Collection: Other Expenses 3, , , , Buildings and Grounds: Salaries and Wages , , Other Expenses , , Vehicle Maintenance: Salaries and Wages Other Expenses 1, , , HEALTH AND HUMAN SERVICES Public Health Services (Board of Health): Other Expenses 3, , , Environmental Health Services: Other Expenses Welfare/Administration of Public Assistance: Other Expenses

73 Schedule 9-A Page 3 of 3 CURRENT FUND SCHEDULE OF 2009 APPROPRIATION RESERVES Year ended December 31, 2010 PARK AND RECREATION Recreation Services and Programs: Other Expenses Balance December 31, , Balance After Modifications 4, Paid or Charged 1, Balance Lapsed 2, OTHER COMMON OPERATING FUNCTIONS Accumulated Sick Leave Salary and Wage Adjustment 9, , , , , , UNIFORM CONSTRUCTION CODE Construction Code Official: Salaries and Wages Other Expenses Division of Property Maintenance: Salaries and Wages Other Expenses , , , UTILITY EXPENSE AND BULK PURCHASES Utilities Street Lighting 25, , , , , , Contingent 1, , , Statutory Expenditures: Contribution To: Social Security System (OAS.I.) 8, , , , OPERATIONS EXCLUDED FROM CAPS Monmouth County 911 Program Length of Service Awards Program 2, , , , , , INTERLOCAL MUNICIPAL SERVICE AGREEMENTS HAM Program - Aberdeen Township 2, , , , Total General Appropriations $ 226, $ 481, $ 421, $ 60, Reference A A-1 Appropriation Reserves Encumbrances Payable 9-A 10-A $ 226, , $ 481, Cash Disbursements Accounts Payable 1-A 14-A $ 404, , $ 421,007.54

74 Schedule 10-A CURRENT FUND SCHEDULE OF ENCUMBRANCES PAYABLE Year ended December 31,2010 Balance, December 31,2009 Reference A $ 255, Increased By: Transferred From 2010 Appropriations A-3 Decreased By: Transferred To Appropriation Reserves 9-A 216, , , Balance, December 31,2010 A $ 216,381.98

75 Schedule 11-A CURRENT FUND SCHEDULE OF PREPAID TAXES Year ended December 31, 2010 Balance, December 31, 2009 Increased By: Cash Receipts Reference A 1-A $ 97, , Decreased By: Applied To Taxes Receivable 4-A 238, , Balance, December 31, 2010 A $ 140,329.76

76 Schedule 12-A CURRENT FUND SCHEDULE OF COUNTY TAXES PAYABLE Year ended December 31, 2010 Balance, December 31,2009 Reference A $ 17, Increased By: 2010 Tax Levy: County Tax County Health Budget A-1,4-A $ 2,602, A-1,4-A 49, County Open Space Fund Tax A-1,4-A 162, Due County for Added Taxes A-1,4-A 27, Decreased By: Cash Disbursements 1-A 2,840, ,858, ,831, Balance, December 31,2010 A $ 27,145.86

77 Schedule 13-A CURRENT FUND SCHEDULE OF REGIONAL SCHOOL TAXES (RECEIVABLE)/PAYABLE Year ended December 31,2010 Reference Balance, December 31,2009: School Tax Receivable A $ 10,00 I ncreased By: Levy (School Year July 1, 2009 to June 30, 2010) A-1,4-A 15,287,627,50 Decreased By: Cash Disbursements 1-A Balance, December 31,2010: School Tax Payable A $ 15,287,637,50 15,287,627,50 10, Liability for Local District School Tax Tax Payable, December 31,2010 A $ Tax Paid 1-A Less: Tax Receivable, December 31, A Amount Charged To 2010 Operations A-1 $ ,287,627,50 15,287,637, ,287,627,50

78 Schedule 14-A CURRENT FUND SCHEDULE OF ACCOUNTS PAYABLE Year ended December 31, 2010 Reference Balance, December 31,2009 A $ 21, Increased By: Cash Receipts 1-A $ 1, Charged To 2009 Appropriation Reserves 9-A 16, , Balance, December 31,2010 A $ 38,964.41

79 Schedule 15-A CURRENT FUND SCHEDULE OF TAX OVERPAYMENTS PAYABLE Year ended December 31,2010 Reference Balance, December 31,2009 A $ 11, Increased By: Cash Receipts 1-A Decreased By: Cash Disbursements 1-A 7, , , Balance, December 31,2010 A $ 7,713.53

80 Schedule 16-A CURRENT FUND SCHEDULE OF DUE TO GENERAL CAPITAL FUND Year ended December 31,2010 Reference Balance, December 31,2009 A $ 155, Increased By: Cash Receipt 1-A 50, Balance, December 31, 2010 A $ 205,608.31

81 Schedule 17 -A CURRENT FUND SCHEDULE OF DUE TO STATE OF NEW JERSEY Year ended December 31,2010 Marriage License Fees Balance December 31, 2009 Increased Decreased $ 200,00 $ 1,350,00 $ 1,400,00 Reference A i-a i-a Balance December 31, 2010 $ 150,00 A

82 Schedule 18-A CURRENT FUND SCHEDULE OF VARIOUS RESERVES Year ended December 31,2010 Reserve for: Master Plan Library State Aid Damage Claims Revaluation Reference Balance, December 31, 2009 Increased Decreased $ $ 4, $ 4, , , , , $ 30, $ 13, $ 16, A 1-A 1-A Balance, December 31, 2010 $ , $ 27, A

83 Schedule 19-A GRANT FUND SCHEDULE OF STATE GRANTS RECEIVABLE Year ended December 31, 2010 Increased By Balance Revenue Transferred December 31, Anticipated From Grants Unappropriated Balance Cash December 31, Receipts 2010 Monmouth County Environmental Health Act Over The Limit, Under Arrest 2007 Year-End Crackdown Bayshore DWO Saturation Patrol Domestic Violence Training Grant CDBG - Street Improvements & ADA Curb Cut and Drainage Clean Communities Program Alcohol Education and Rehabilitation Fund Recycling Tonnage Grant $ 1, , , , $ 13, $ 13, , , $ 1, , , $ 152, , $ 200, $ 30, $ Reference A A-2 21-A $ $ 47, A A

84 Schedule 20-A GRANT FUND SCHEDULE OF RESERVE FOR STATE GRANTS - APPROPRIATED Year ended December 31, 2010 Balance Transferred December 31, 2010 From 2009 Authorizations Encumbrances Expended Monmouth County Environmental Health Act $ 3, Drunk Driving Enforcement Fund 5, $ 5, Over The Limit, Under Arrest 2007 Year-End Crackdown 1, Bayshore DWI Saturation Patrol 1, Recycling Tonnage Grant 19, , Clean Communities Program 7, $ , Alcohol Education and Rehabilitation Fund Municipal Drug Alliance Police OEM Grant 2, Gov Connect Grant Historic Sites Grant 2, NJ DCA Share Grant 10, Domestic Violence Training Grant Cablevision Grant 1, , Clean Communities Program Alcohol Education and Rehabilitation Fund Recycling Tonnage Grant 8, NJ DCA Smart Future Grant 6, Stormwater Management Program 4, Historic Sites 2, CDBG - Street Improvements & ADA Curb Cut and Drainage 187, , Clean Communities Program $ 13, , Alcohol Education and Rehabilitation Fund Recycling Tonnage Grant 16, $ 268, $ 30, $ $ 176, Reference A A-3 22-A 1-A,23-A Transferred Balance To December 31, Encumbrances 2010 $ 3, , , $ 1, , , , , , , , , , , _6, $ 1, $ 121, A A

85 Schedule 21-A GRANT FUND SCHEDULE OF RESERVE FOR STATE GRANTS - UNAPPROPRIATED Year ended December 31, 2010 Balance December 31, 2009 Cash Receipts Transferred to Grants Receivable Balance December 31, 2010 Recycling Tonnage Grant Alcohol Education and Rehabilitaiton Fund Body Armor Replacement Grant Clean Communities Program Drunk Driving Enforcement Fund $ 16, , $ , , , $ 16, , $ , , , $ 30, $ 24, $ 30, $ 24, Reference A 1-A A-3,19-A A

86 Schedule 22-A GRANT FUND SCHEDULE OF RESERVE FOR ENCUMBRANCES Year ended December 31,2010 Reference Balance, December 31,2009 A $ Increased By: Charged to Appropriated Reserves 20-A Decreased By: Transferred to Appropriated Reserves 20-A 1, , Balance, December 31, 2010 A $ 1,800.00

87 Schedule 23-A GRANT FUND SCHEDULE OF DUE FROM CURRENT FUND Year ended December 31,2010 Reference Balance, December 31, 2009 A $ 99, Increased By: Deposited in Current Fund: Grants Receivable 19-A $ 152, Grants Unappropriated 21-A 24, Budget Approprations 20-A 30, Decreased By: Disbursed by Current Fund: Appropriated Reserves 20-A 176, Anticipated Revenue 19-A 30, , , , Balance, December 31,2010 A $ 100,274.02

88 Schedule 24-A CURRENT FUND SCHEDULE OF SPECIAL EMERGENCY NOTE PAYABLE Year ended December 31, 2010 Ordinance Number Description Date of Issue of Original Note Date of Maturity Interest Rate Balance December 31, 2009 Increase Balance December 31, Decrease Special Emergency Appropriation for the Preparation and Completion of Revaluation % $ 100, $ 50, $ 100, $ 50, Reference A 1-A 1-A A

89 Schedule 25-A CURRENT FUND SCHEDULE OF DEFERRED CHARGES Year ended December 31,2010 Balance December 31, Description 2009 Deficit in Operations $ 11, $ Overexpenditure of Appropriation Reserves $ 11, $ Raised Balance in 2010 December 31, Budget , , $ 0.00 Reference A A-3 A

90 Sched u Ie 26-A CURRENT FUND SCHEDULE OF DUE (FROM)/TO TRUST - OTHER FUND Year ended December 31,2010 Reference Balance, December 31, 2009 Increased By: Cash Receipts A A-1,1-A $ (5,409.76) 2, Decreased By: Anticipated As Revenue A-2 (2,778.28) 5, Balance, December 31,2010 A $ 2,631.48

91 TRUST FUND SCHEDULES

92 80ROUGH OF MATAWAN Schedule 1-8 TRUST FUND SCHEDULE OF CASH - TREASURER Year ended December 31, 2010 Reference Animal Control Fund Other Trust Funds 8alance, December 31, $ 1, Increased 8y Receipts: Due To State of New Jersey Prepaid Railroad Permits 6-8 Various Trust Funds 5-8 Reserve for Animal Control Trust Fund 3-8 2, , , Decreased 8y Disbursements: Due To: State of New Jersey Current Fund 4-8 Various Trust Funds 5-8 Reserve for Animal Control Trust Fund 3-8 3, , alance, December 31, $ $ 1,105, , ,560, ,722, ,827, , ,750, ,758, $ 1,069,703.74

93 Schedule 2-B ANIMAL CONTROL TRUST FUND SCHEDULE OF DUE (TO)/FROM STATE OF NEW JERSEY Year ended December 31, 2010 Reference Balance, December 31, 2009 B $ (840) Increased By: 2010 License Fees 1-B Decreased By: Payments 1-B (346.80) Balance, December 31, 2010 B $ 840

94 Schedule 3-B ANIMAL CONTROL TRUST FUND SCHEDULE OF RESERVE FOR ANIMAL CONTROL EXPENDITURES Year ended December 31, 2010 Reference Balance, December 31, 2009 Increased By: Fees Collected Decreased By: Expenditures Under R.S. 4:19-15:11 Balance, December 31,2010 B 1-B 1-B B $ 1, , , , $ License Fees Collected $ 3, , $ 5,607.40

95 Schedule 4-B TRUST - OTHER FUND SCHEDULE OF DUE (TO)/FROM CURRENT FUND Year ended December 31, 2010 Reference Balance, December 31, 2009 B $ (5,409.76) Decreased By: Cash Disbursed 1-B 8, Balance, December 31, 2010 B $ 2,631.48

96 Schedule 5-B TRUST FUND SCHEDULE OF VARIOUS TRUST FUND RESERVES Year ended December 31,2010 Balance December 31, 2009 Increase Decrease Fire Safety Penalty Monies $ 33, $ 17, $ 9, Tax Title Lien Redemptions Payable 4, , , POAA Police Firearms Donations 32, , , Tax Title Lien Premiums 118, , , Off Duty Police 37, , , Public Defender 4, , , Unemployment Compensation , , Law Enforcement 8, , , Recreation Commission 32, , , Railroad Parking 40, , , Developer Escrow 608, , , $ 920,99809 $ 1,739, $ 1,750, Reference B 1-B Balance December 31, 2010 $ 42, , , , , , , , , , , $ 910, B Cash Receipts 1-B $ 1,560, Prepaid Railroad Permits Applied 6-B 179, $ 1,739,201.53

97 Schedule 6-B TRUST - OTHER FUND SCHEDULE OF PREPAID RAILROAD PERMITS Year ended December 31, 2010 Reference Balance, December 31, 2009 B $ 179, Increased By: Cash Receipts 1-B Decreased By: Realized 5-B 162, , , Balance, December 31,2010 B $ 162,202.14

98 Schedule 7-B (Unaudited) LENGTH OF SERVICE AWARDS PROGRAM FUND ("LOSAP") SCHEDULE OF INVESTMENTS Year ended December 31, 2010 Reference Balance, December 31, 2009 B $ 231, Increased By: Borough Contributions 8-B $ 40, Appreciation on Investments 8-B 29, Decreased By: Withdrawals and Charges 8-B 69, , , Balance, December 31, 2010 B $ 279,355.04

99 Schedule 8-B (Unaudited) LENGTH OF SERVICE AWARDS PROGRAM FUND ("LOSAP") SCHEDULE OF MISCELLANEOUS RESERVES Year ended December 31,2010 Reference Balance, December 31, 2009 B $ 231, Increased By: Borough Contributions 7-B $ 40, Appreciation on Investments 7-B 29, Decreased By: Withdrawals and Charges 7-B 69, , , Balance, December 31, 2010 B $ 279,355.04

100 GENERAL CAPITAL FUND SCHEDULES

101 Schedule 1-C GENERAL CAPITAL FUND SCHEDULEOFCASH-TREASURER Year ended December 31, 2010 Balance, December 31, 2009 Reference C $ 180, Increased By: Fund Balance C-1 $ 15, Deferred Charges to Future Taxation Unfunded 4-C 53, Bond Anticipation Notes 6-C 2,394, Capital Improvement Fund 8-C 45, Due From: NJ Department of Transportation 9-C 37, Monmouth County Improvement Authority 11-C 106,067,42 Water/Sewer Utility Capital Fund 12-C 767, Special Emergency Note C 50, Decreased By: Bond Anticipation Notes 6-C 2,437, Improvement Authorizations 7-C 702, Due From: Current Fund 10-C 50, Monmouth County Improvement Authority 11-C 107, ,468, ,649, ,296, Balance, December 31,2010 C $ 352,358.28

102 Schedule 2-C GENERAL CAPITAL FUND SCHEDULE OF ANALYSIS OF GENERAL CAPITAL CASH AND INVESTMENTS Year ended December 31,2010 Balance December 31, 2010 Capital Improvement Fund Fund Balance Special Emergency Note Due From: State of NJ Department of Transportation Monmouth County Improvement Authority Current Fund Due To: Water/Sewer Utility Capital Fund Water/Sewer Utility Operating Fund Reserve for Encumbrances $ 1,844,29 15,273,33 (50,000,00) (140,000,00 ) (9,35340) (205,608,31 ) 165, ,915,75 Ordinance Number / / /07/ Improvement Description Preliminary Planning Expenses and Improvements to Lake Lefferts and Lake Matawan Dams Lochslea Heights and Ivy Court Roadway Imp, and Edgemere Drive Drainage Improvements Various Improvements to Burrowes Mansion Community Center Purchase of Various Equipment Acquisition of a Dump Truck Renovations to Matawan Aberdeen Library and Clinton Street Community Center Multipark Development and Sidewalk Improvements Various Capital Improvements Various Road Improvements 2008 Road Improvement Program Various Road Improvements (5,776.80) 799,55 1, , ,764,30 4, , ,942,16 (112,500,00) 51, , $ 352,358,28 Reference C,1-C

103 Schedule 3-C GENERAL CAPITAL FUND SCHEDULE OF DEFERRED CHARGES TO FUTURE TAXATION - FUNDED Year ended December 31,2010 Reference Balance, December 31,2009 C $ 7,611,237,84 Decreased By: Bonds Paid Green Trust Loan 5-C 13-C $ 683,816,00 14,375,62 698,191,62 Balance, December 31,2010 C $ 6,913,046,22

104 Schedule ±.Q GENERAL CAPITAL FUND SCHEDULE OF DEFERRED CHARGES TO FUTURE TAXATION - UNFUNDED Year ended December 31,2010 Ordinance No. Improvement Description Balance December 31, 2009 Increased Decreased Cancelled Balance December 31, 2010 ~~~---"" Bond Anticipation Notes Analysis of Balance Expended Unexpended Improvement Authorizations / / / Preliminary Planning Expenses and Improvements to Lake Lefferts and Lake Matawan Dams Railroad Area Improvements Multipark Development and Sidewalk Improvements Various Road Improvements Various Road Improvements Various Capital Improvements 2008 Road Improvement Program Refunding of Bonds Various Road Improvements $ 695, , , , ,140, , , $ 4,560, ,954, $ is,ooodo 18, , $ 190, $ 695, , ,087, , , , ,954, $ 11, , , , , _.._- S 5, S , , ,560,000,00 2,954, $ 4,122, $ L~14, $ 91, $ 190, $ 11,355, $ 2, $ 118, ,842, geference C 7-C,16-C 7-C,16-C C 6 C 2 C NJ DOT Grants Funded By Budget Appropriation 1 C 1 C $ 37, S3,600.QQ_ $ C Improvement Authorizations - Unfunded Less: Unexpended Proceeds of Bond Anticipation Notes - Issued: 2-C 05-11/ C 06-26/ C C $ 8,982, , , , $ 8,842,942.21

105 Schedule 5-C GENERAL CAPITAL FUND SCHEDULE OF GENERAL SERIAL BONDS Year ended December 31,2010 Maturities of Balance Balance Amount of Bonds Outstanding Interest December 31, December 31, Purpose Date of Issue OriQinal Issue December 31,2010 Rate 2009 Decreased 2010 General Improvement $ 2,496, $ 121, $ 121, General Improvement , $ 96, % , % , % , % , % 966, , $ 870,00000 General Improvement , , % , % % , % , % , % , % % , % 2,923, , ,688, Refunding Bonds ,920, , % , % , % , % , % , % , % , % , % , % 3.398, , ,167, $ 7,409, $ 683, $ 6,725, Reference C 3-C C

106 Schedule (i-c GENERAL CAPITAL FUND SCHEDULE OF BOND ANTICIPATION NOTES Year ended December 31, 2010 Ordinance ~.umber Improveme.nt Description Date of Balance, Issue of Date of Date of Interest December 31, Orioinai Note Issue Maturity Rate 2009 Balance, December 31, Increased Decreased / / / / Various Roadway Improvements Various Roadway Improvements Various Capital Improvements Multipark Development and Sidewalk Improvements 2008 Road Improvement Program Preliminary Planning Expenses and Improvements to Lake Lefferts and Lake Matawan Dams 04112/06 03/03/10 03/02/ % $ 361, /19/ /02/ % 990, /19/07 03/03/10 03/02/ % 171, /19/ /02/ % 250, /05/09 03/03/10 03/02/ % 665, /03/10 03/03/10 03/02/ % $ 342, $ 361, $ 342, , , , , , , , , , , , , , , $ 2,437, $ 2,394, $ 2,437, $ 2,394, Reference C 1-C,4-C 1-C C,4-C

107 BOHOUGH OF MATAWAN Schedule 7;f;, GENERAL CAPITAL FUND SCHEDULE OF IMPROVEMENT AUTHORIZATIONS Year ended December 31, 2010 Ordinance Numbgr improvement Description QSlill Amount Balance Decemoor Funded Unfund~g Increased Transferred From Encumbrances funfjlded Transferred To Encumbrances Balance,'pecember 31, 2010 Can. \Wgg El-m.9QQ!,.Infunded / / f / / /07 03/ Preliminary Planning Expenses and improvements to Lake Lefferts and Lake Matawan Dams Construction of Parking Lot Main Street Renovation of Clinton and Jackson Street Park. Lochslea Heights and Ivy Court Roadway Imp and Edgemere Drive Drainage Improvements Various Improvements to Burrowes Mansion Community Center Hailroad Area Improvements Purchase of VariOUS Equipment 2003 Road Program Acquisition of a Dump Truck Various Road Improvements Renovations to Matawan Aberdeen library and Clmton Street Community Center Multi-Park Development and Sidewalk improvements Various Road Improvements Various Capital Improvements 2008 Road Improvement Program Refunding of BondS Various Road Improvements f12i97 09! / / /04 11/03/04 11/15/ / /09110 $ 1,500, ,835, ,00 196, , ,000, , ,220,000, , , ,030, ,200, , ,560, , $ $ 682, ,55 1, , , , ,764,30 4, , , , ,560, , , ,881, , ,707,50 1, , ,112,75 617, , ,278,75 1,295, , , $ , , , , , $ 200, ,662,02 123, ,23 4,764,30 4,519,87 ~,50000 $ 678, ,681,36 30,942,16 51,138,15 4, ,954,50000 $ 140, S 1,66700~94.. 7,810,00000 $ $ 702,762.88_,$ 121,915,75 S 200,00000 $ 430, $ 8,982,703.88,ReferenJ&, C c 15-C 1-C 15-C C CA-C Deferred Charges to Future Taxation - Unfunded Capital Improvement Fund Due From State of New Jersey DOT 4-C 8-C 9-C $ 7,514, , ~Q009_ $ 7,810,00000 Deferred Charges to Future Taxation Unfunded Capital Improvement Fund 4-C 8.. C $ 190, , $ 200,00000

108 Schedule 8-C GENERAL CAPITAL FUND SCHEDULE OF CAPITAL IMPROVEMENT FUND Year ended December 31,2010 Reference Balance, December 31,2009 C $ 102, Increased By: 2010 Budget Appropriation 1-C $ 45, Improvement Authorization Cancelled 7-C 10, Decreased By: Improvement Authorizations 7-C 55, , , Balance, December 31,2010 C $ 1,844.29

109 Schedule 9-C GENERAL CAPITAL FUND SCHEDULE OF DUE FROM STATE OF N.J. DEPARTMENT OF TRANSPORTATION Year ended December 31,2010 Reference Balance, December 31,2009 C $ 37, Increased By: Improvement Authorization Ord. # C 140, , Decreased By: Cash Received 1-C 37, Balance, December 31, 2010 C $ 140,000.00

110 Schedule 10-C GENERAL CAPITAL FUND SCHEDULE OF DUE FROM CURRENT FUND Year ended December 31,2010 Reference Balance, December 31, 2009 C $ 155, Increased By: Special Emergency Note Paydown 1-C 50, Balance, December 31,2010 C $ 205,608.31

111 Schedule 11-C GENERAL CAPITAL FUND SCHEDULE OF DUE FROM MONMOUTH COUNTY IMPROVEMENT AUTHORITY Year ended December 31,2010 Reference Balance, December 31,2009 C $ 8,332,90 Increased By: Cash Disbursements 1-C 107,087,92 115,420,82 Decreased By: Cash Receipts 1-C 106, Balance, December 31, 2010 C $ 9,353.40

112 Schedule 12-C GENERAL CAPITAL FUND SCHEDULE OF DUE (FROM)ITO WATER/SEWER UTILITY CAPITAL FUND Year ended December 31,2010 Reference Balance, December 31,2009 C $ (601,810,65) Increased By: Cash Receipts Bond Anticipation Note Premiums Bond Anticipation Notes Issued 1-C $ 400,000,00 17,154,55 350,000,00 767,154,55 Balance, December 31,2010 C $ 165,343,90

113 Schedule 13-C GENERAL CAPITAL FUND SCHEDULE OF GREEN TRUST LOAN PAYABLE Year ended December 31,2010 Reference Balance, December 31, 2009 C $ 201, Decreased By: Paid by Budget Appropriation 3-C 14, Balance, December 31,2010 C $ 187,621.22

114 Schedule 14-C GENERAL CAPITAL FUND SCHEDULE OF CAPITAL LEASE OBLIGATIONS PAYABLE Year ended December 31,2010 Reference Balance, December 31, 2009 C $ 840, Decreased By: Paid by Budget Appropriation 14-C 181, Balance, December 31, 2010 C $ 659,100.00

115 Schedule 15-C GENERAL CAPITAL FUND SCHEDULE OF RESERVE FOR ENCUMBRANCES Year ended December 31,2010 Reference Balance, December 31, 2009 C $ 820, Increased By: Transferred From Improvement Authorizations 7-C Decreased By: Transferred To Improvement Authorizations 7-C 121, , , Balance, December 31,2010 C $ 121,915.75

116 Schedule 16-C GENERAL CAPITAL FUND SCHEDULE OF BONDS AND NOTES AUTHORIZED BUT NOT ISSUED Year ended December 31,2010 Ordinance No. Balance December 31, Notes Improvement Description 2009 Authorizations Issued Balance December 31, Cancelled Preliminary Planning Expenses and Improvements to Lake Lefferts and Lake Matawan Dams $ 695, $ 11, Railroad Area Improvements 190, Multipark Development 650, Various Road Improvements 150, Refunding of Bonds $ 4,560, Various Road Improvements 2,954, $ 190, $ 684, , , ,560, ,954, $ 1,685, $ 7,514, $ 11, Reference 16-C 4-C 6-C $ 190, $ 8,998, C 16-C

117 WATER/SEWER UTILITY FUND SCHEDULES

118 Schedule 1-0 WATER/SEWER UTILITY FUND SCHEDULE OF CASH - TREASURER Year ended December 31,2010 Reference Operating Capital Assessment Trust Balance, December 31,2009 o $ 150, $ 602, $ 5, Increased By Receipts: Rents Rent Overpayments Miscellaneous Revenue Capital Improvement Fund Interfund 3-D $ 4,565, , , ,614, $ 25, , , Decreased By Disbursements: 2010 Appropriations Accrued Interest Appropriation Reserves Reserve to Pay BANs Interfunds Improvement Authorizations ,14-0 0, ,801, , , , ,764, ,190, , , , , $ 5, , , Balance, December 31, 2010 o $ 573, $ 32, $ 0.00

119 Schedule 2-D WATERISEWER UTILITY CAPITAL FUND SCHEDULE OF WATERISEWER UTILITY CAPITAL CASH Year ended December 31, 2010 Balance December 31, 2010 Interfunds Payable Interfunds Receivable Capital Improvement Fund Encumbrances Payable Fund Balance Ordinance Number 95-39/ / / / Improvement Description Ten-Inch Water Main, Route 34 to Colonial Shops Reconstruction and Improvement of Sanitary Sewer System Reconstruction of Somerset PI. Pump Station and Force Main and Reconstruction of Buttonwood Manor Pump Station Water Main and Sanitary Sewer Improvement Various WaterlSewer Utility Improvements Replacement of Water Mains $ 140, (165,343.90) 22, , , , , (87, ) (200,000.00) 159, , $ 32, Reference D,1-D

120 Schedule 3-D WATER/SEWER UTILITY OPERATING FUND SCHEDULE OF CONSUMER ACCOUNTS RECEIVABLE Year ended December 31, 2010 Reference Balance, December 31,2009 D $ 134, Increased By: Water Sewer Rents Levied 3-D Decreased By: Collections 1-D $ 4,565, Overpayments Applied 20-D 6, ,621, ,756, ,572, Balance, December 31,2010 D $ 183,795.02

121 Schedule 4-D WATER/SEWER UTILITY CAPITAL FUND SCHEDULE OF FIXED CAPITAL Year ended December 31, 2010 Water System: 1962 and Prior Distribution Mains and Accessories Pumping Station and Structures Water Tanks Spring Wells Water Plant Miscellaneous Hydrants Sewer System: Disposal Plant and Trunk Lines Treatment Plant Pumping Stations Distribution Balance December 31, 2010 and 2009 $ 312, ,603, , , , ,443, , , , , ,806, ,650, $ 18,389, Reference D

122 Schedule 5-D WATER/SEWER UTILITY CAPITAL FUND SCHEDULE OF FIXED CAPITAL AUTHORIZED AND UNCOMPLETED Year ended December 31, 2010 Ordinance Number 95-39/ /01-19/ / / / / / Balance, December 31, Description 2009 Increased Ten-Inch Water Main, Route 34 to Colonial Shops $ 11, Reconstruction and I mprovement of Sanitary Sewer System 249, Reconstruction of Somerset PI. Pump Station and Force Main and Reconstruction of Buttonwood Manor Pump Station 219, Water Main and Sanitary Sewer Improvement 555, Replace Water Mains on Matawan Avenue and Daniel Drive 360, Replace Water Mains on Broad Street From Main to Little Street 52, Various Water/Sewer Utility Improvements 200, Water Treatment Plant Improvements 350, Water Treatment Plant Improvements 6,500, Replacement of Water Mains $ 1,150, $ 8.498, $ 1,150, Balance, December 31, 2010 $ 11, , , , , , , , ,500, ,150, $ 9,648, Reference D 9-D D

123 Schedule 6-D WATER/SEWER UTILITY FUND SCHEDULE OF APPROPRIATION RESERVES Year ended December 31, 2010 Operating: Salaries and Wages Other Expenses Acquisition of Water Bayshore Regional Sewerage Authority Statutory Expenditures: Contributions To: Social Security System (OAS.!,) Balance Balance December 31, After 2009 Transfers $ 9, $ 9, , , , , , , , , $ 85, $ 140, Paid or Charqed Balance Lapsed $ 6, $ 3, , , , , , $ 123, $ 16, Reference D 1-D D-1 Appropriation Reserves Encumbrances D $ 85, D 54, $ 140,001.96

124 Schedule 7 -D WATER/SEWER UTILITY OPERATING FUND SCHEDULE OF RESERVE FOR ENCUMBRANCES Year ended December 31,2010 Reference Balance, December 31, 2009 D $ 54, Increased By: Charged To Budget Appropriations D-5 Decreased By: Transferred To Appropriation Reserves 6-D 28, , , Balance, December 31,2010 D $ 28,375.99

125 Schedule 8-D WATERISEWER UTILITY OPERATING FUND SCHEDULE OF ACCRUED INTEREST ON BONDS, NOTES AND LOANS Year ended December 31, 2010 Reference Balance, December 31, 2009 D $ 73,232,00 Increased By: Budget Appropriations D-5 Decreased By: Cash Disbursed 1-D $ 247,124,11 Cancelled D-1 14,418,37 252, , , Balance, December 31,2010 D $ 63,721,00 Analysis of Balance - December 31,2010 Outstanding December 31, Interest 2010 Rate From To Period Bond Anticipation Notes: $ 2,647,000,00 1,50% 03103/10 12/31/ days Serial Bonds: $ 2,300,000,00 Various 12/01/10 12/31/10 30 days 258,000,00 Various 12/01/10 12/31/10 30 days 454,575,00 Various 12/01/10 12/31/10 30 days NJ Environmental Infrastructure Trust Loan: $ 1,702, Various 08/01/10 12/31/ days Amount $ 32,536,00 9,147,00 1,020,00 1,752,00 19,266,00 $ 63,721,00

126 Schedule 9::.Q WATERISEWER UTILITY CAPITAL FUND SCHEDULE OF IMPROVEMENT AUTHORIZATIONS Year ended December 31,2010 Ordinance Number Description Balance Transferred December 31, 2009 From FUlJged Unfunded Al,l!Dorized Encumbrances Transferred Balance To December 31, 2010 Expended Encumbrances Funded Unfunded 95,39102,05 Ten-Inch Water Main, Route 34 to Colonial Shops 99,13101,151 Reconstruction and Improvement of Sanitary 02,16 Sewer System 02,02102,07 Reconstruction of Somerset PI. Pump Station and Force Main and Reconstruction of Buttonwood Manor Pump Station 02-18/07-27 Water Main and Sanitary Sewer Improvements 08,24 Various Water/Sewer Utility Improvements 05,20107,26 Replace Water Mains on Matawan Avenue and Daniel Drive 05,22107,25 Replace Water Mains on Broad Street from Main to Little Street 09,07116 Water Treatment Plant Improvements 09,25 Water Treatment Plant Improvements 10,18 Replacement of Water Mains $ 11,365,52 $ 39,709,11 $ 138,796,79 47, , ,344A9 161,531_00 25,112,50 11, , , ,685,19 6,500, $ 1,150,00000 $ 11,36552 $ 132,435,17 $ 7,381,02 $ 38,689,71 16,938,20 2,941,40 37, ,268,92 2, , , ,902,00 11, , , ,500, , ,092, Reference $ 11, $ 6,762, $ 1,150, $ 211,80291 D D 5,D 23,D $ 200, $ 37, $ 68, $ 7,828, ,D 23-0 D D

127 Schedule 10-D WATER/SEWER UTILITY CAPITAL FUND SCHEDULE OF CAPITAL IMPROVEMENT FUND Year ended December 31,2010 Balance, December 31, Increased By: Budget Appropriation Reference 2009 D 1-D $ 55, , Decreased By: Improvement Authorizations , , Balance, December 31, 2010 D $ 22,500.00

128 Schedule 11-0 WATER/SEWER UTILITY CAPITAL FUND SCHEDULE OF RESERVE FOR AMORTIZATION Year ended December 31,2010 Reference Balance, December 31, 2009 Increased By: Serial Bond Payment State of New Jersey Environmental Infrastructure Loan Payment Balance, December 31,2010 o 13-0 $ 176,184, , D $ 12,343,226,81 307, $ 12,650,787.27

129 Schedule 12-D WATER/SEWER UTILITY CAPITAL FUND SCHEDULE OF DEFERRED RESERVE FOR AMORTIZATION Year ended December 31,2010 Ordinance Number 95-39/ S Balance Ordinance December 31, Improvement Description Date 2009 Ten-Inch Water Main Route 34 to 10/03/95 & Colonial Shops 03/19/02 $ 11, Replacement of Water Mains 12/09/10 Balance December 31, Increased 2010 $ 11, $ 57, , Replacement of Water Mains OS/16/05 24, , Replacement of Water Mains OS/16/05 13,SOO.00 13,SOOOO $ 11, $ 95, $ 106, Reference Capital Improvement Fund 10-D Reserve To Pay BANs 14-D Budget Appropriations 14-D D $ 57, S, S, $ 95, D

130 Sche9...l!!e 13-0 WATERISEWER UTILITY CAPITAL FUND SCHEDULE OF SERIAL BONDS Year ended December 31,2010 Maturities of Amount of Bonds Outstanding Balance Balance Date of Original December 31, 2010 Interest December 31, December 31, Purpose Issue Issue Date Amount Rate 2009 Decreased 2010 Water/Sewer Improvements 12/01/00 $ 721,000,00 $ 35,18400 $ 35,184,00 WaterrSewer Improvements 12101/04 2,876,000,00 12/01/11 12 $ 96,000, % 12/01/13 96,000, % 12/01/14 96, % 12/01/15 191,000, % 12/01/ , % 12101/19 192,000, % 12/01/ ,000, % 12101/22 192,000, % 12/01/ ,000, % 2,396, ,00000 $ 2,300,000,00 Water/Sewer Improvements 12101/05 468,000,00 12/01/11 47,000, % 12/01/12 49, % 12/01/13 51,000, % 12/01/14 54, % 12/01/15 57,000, % 303,000,00 45,000,00 258,000,00 Refunding Bonds 04/12/07 454, /01/11 36,834, % 12/01/12 38, % 12/01/13 39, % 12/01/14 40,996, % 12101/15 43,833, % 12/01/16 45, % 12/01/17 49,078, % 12/01/18 51,319, % 12/01/19 53,560, % 12/01/20 56,025, % 454,575,00 454,57500 $ 3,188,75900 $ 176,184,00 $ 3,012,575,00 Reference 0 11-D D

131 Schedule 14-D WATERISEWER UTILITY CAPITAL FUND SCHEDULE OF BOND ANTICIPATION NOTES Year ended December 31,2010 Ordinance Number Improvement Description Original Issue Date Date of Issue Date of Maturity Interest Rate Balance December 31, 2009 Increased Decreased Balance December 31, 2010 OS-20 OS Replacement of Water Mains Replacement of Water Mains Reconstruction and Improvements to Sewerage System Reconstruction of Pump Statjons Water Main and Sanitary Sewer Improvements Sanitary Sewer Improvements to Park Avenue Water Treatment Plant Improvements OSI S0% 1.S0% 1.50% 1.S0% 1.S0% 1.S0% S0% $ 1,260, S, S0, , , , $ 1,236, , S , , , S0, $ 1,260, S, S0, , , , $ 1,236, , S0, , , , S0, $ 2,335,00000 $ 2,647, $ 2,335, $ 2,647, Reference D D Due From General Capital Fund Renewal 24-D 14-D $ 3S0, ,297, Paid By Operating Fund: Budget Appropriation Reserve For BANs Renewal 12-D 1-D,12-D 14-D $ 2,647, $ 18, , ,297, $ 2,335,000.00

132 Schedule 15-0 WATER/SEWER UTILITY OPERATING FUND SCHEDULE OF DUE FROM GENERAL CAPITAL FUND Year ended December 31, 2010 Reference Balance, December 31,2010 and 2009 D $

133 Schedule 16-0 WATER/SEWER UTILITY OPERATING FUND SCHEDULE OF DUE FROM WATER/SEWER UTILITY CAPITAL FUND Year ended December 31,2010 Reference Balance, December 31,2010 and 2009 o $ 135,390.53

134 Schedule 17 -D WATER/SEWER UTILITY OPERATING FUND SCHEDULE OF DUE FROM WATER/SEWER UTILITY ASSESSMENT FUND Year ended December 31, 2010 Reference Balance, December 31,2010 and 2009 D $

135 Schedule 18-0 WATER/SEWER UTILITY ASSESSMENT TRUST FUND SCHEDULE OF DUE TO WATER/SEWER UTILITY OPERATING FUND Year ended December 31, 2010 Reference Balance, December 31,2010 and 2009 o $

136 Schedule 19-0 WATERISEWER UTILITY ASSESSMENT TRUST FUND SCHEDULE OF ASSESSMENTS RECEIVABLE Year ended December 31, 2010 Ordinance Number Improvement Description Date of Confirmation Annual Installments Due Date Balance, December 31, 2010 and Freneau Sewer Extension 03101/ /01/88-97 $ 28, Reference 0

137 Schedule 20-0 WATER/SEWER UTILITY OPERATING FUND SCHEDULE OF CUSTOMER OVERPAYMENTS Year ended December 31,2010 Reference Balance, December 31, I ncreased By: Cash Received 1-0 Decreased By: Overpayments 3-D $ 6, , , , Balance, December 31,2010 D $ 3,750.21

138 Schedule 21-D WATER/SEWER UTILITY ASSESSMENT TRUST FUND SCHEDULE OF RESERVE FOR ASSESSMENTS RECEIVABLE Year ended December 31,2010 Ordinance Number 72-2 Improvement Description Freneau Sewer Extension Balance, December 31, 2010 and 2009 $ 28, Reference D

139 Schedule 22-D WATER/SEWER UTILITY CAPITAL FUND SCHEDULE OF STATE OF NEW JERSEY ENVIRONMENTAL INFRASTRUCTURE LOAN PAYABLE Year ended December 31,2010 Reference Balance, December 31,2009 D $ 1,833, Decreased By: Paid by Operating Budget 11-D 131, Balance, December 31, 2010 D $ 1,702,568.46

140 Schedule 23-0 WATER/SEWER UTILITY CAPITAL FUND SCHEDULE OF RESERVE FOR ENCUMBRANCES Year ended December 31, 2010 Reference Balance, December 31, Increased By: Improvement Authorization 9-0 Decreased By: Improvement Authorization 9-0 Balance, December 31, $ 211, , , , $ 37,570.68

141 Schedule 24-D WATER/SEWER UTILITY CAPITAL FUND SCHEDULE OF DUE (TO)/FROM GENERAL CAPITAL FUND Year ended December 31,2010 Reference Balance, December 31, 2009 D $ (601,810.65) Decreased By: Bond Anticipation Note Premium D-2 $ 17, Cash Disbursed 1-D 400, Bond Anticipation Note Issued 14-D 350, , Balance, December 31, 2010 D $ 165,343.90

142 Schedule 25-0 WATER/SEWER UTILITY CAPITAL FUND SCHEDULE OF DUE TO WATER/SEWER UTILITY OPERATING FUND Year ended December 31,2010 Reference Balance, December 31,2010 and 2009 o $ 135,390.53

143 Schedule 26-D WATER/SEWER UTILITY CAPITAL FUND SCHEDULE OF DUE TO WATER/SEWER UTILITY ASSESSMENT FUND Year ended December 31, 2010 Reference Balance, December 31,2009 D $ 0.00 Increased By: Cash Receipts 1-D 5, Balance, December 31,2010 D $ 5,165.67

144 Schedule 27-0 WATER/SEWER UTILITY CAPITAL FUND SCHEDULE OF BONDS AND NOTES AUTHORIZED BUT NOT ISSUED Year ended December 31,2010 Ordinance Number Balance December 31, 2010 Description 2009 Authorizations Balance Notes December 31, Issued / / Reconstruction of Somerset Place, Victoria Court and Buttonwood Manor Pump Station $ 125, Water Main and Sanitary Sewer Improvements 200, Water Treatment Plant Improvements 350, Water Treatment Plant Improvements 6,500, Replacement of Water Mains $ 1,092, $ 350, $ 125, , ,500, ,092, $ 7,175, $ 1,092, Reference $ 350, $ 7,917,

145 GENERAL FIXED ASSETS ACCOUNT GROUP SCHEDULE

146 Schedule 1-E GENERAL FIXED ASSETS ACCOUNT GROUP SCHEDULE OF GENERAL FIXED ASSETS Year ended December 31, 2010 Land and Land Improvements $ 4,540, Buildings and Improvements 4,081, Balance December 31, 2009 Additions Machinery and Equipment 4,236, $ 31, $ 12,858, $ 31, Reference E 1-E Balance December 31, 2010 $ 4,540, ,081, ,267, $ 12,889, E

147 COMMENTS SECTION

148 COMMENTS Year ended December 31, 2010 An audit of the financial accounts and transactions of the Borough of Matawan, County of Monmouth, New Jersey ("Borough") for the year ended December 31, 2010, has recently been completed. The results of the audit are herewith set forth. Scope of Audit The audit covered the financial transactions of the Tax ColiectorlTreasurer, the activities of the Mayor and Borough Council and the records of the various outside departments. The audit did not and could not determine the character of services rendered for which payment had been made or for which reserves had been set up, nor could it determine the character, proper price or quantity of materials supplied for which claims had been passed. Cash on hand was counted and cash balances were reconciled with independent certifications obtained directly from the depositories. Revenues and receipts were verified as to source and amount insofar as the records permitted. Our audit was made in accordance with auditing standards generally accepted in the United States of America and in compliance with the audit requirements prescribed by the Division of Local Government Services, Department of Community Affairs, State of New Jersey and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Therefore, our audit included the procedures noted above as well as tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. Contracts and Agreements Required to be Advertised per N.J.S. 40A:11-4 N.J.S. 40A:11-4 states "Every contract awarded by the contracting agent, for the provision or performance of any goods or services, the cost of which in the aggregate exceeds the bid threshold (40A:11-3), shall be awarded only by resolution of the governing body of the contracting unit to the lowest responsible bidder after public advertising for bids and bidding therefor, except as is provided otherwise in this act or specifically by any other law. The governing body of a contracting unit may, by resolution approved by a majority of the governing body and subject to subsections b. and c. of this section, disqualify a bidder who would otherwise be determined to be the lowest responsible bidder, if the governing body finds that it has had prior negative experience with the bidder". The governing body of the municipality has the responsibility of determining whether the expenditures in any category will exceed the bid threshold within the fiscal year and, where question arises as to whether any contract or agreement might result in violation of the statute, the solicitor's opinion shall be sought before a commitment is made.

149 COMMENTS Year ended Decem ber 31, 2010 Contracts and Agreements Required to be Advertised per N.J.S. 40A:11-4 (continued) The minutes indicate that bids were requested by public advertising for the following items: Operations and Maintenance of Water Treatment System Instrumentation Maintenance Services Third Party Purchase of Surplus Water Allocation Emergency Generator Solid Waste and Recyclable Materials Collection Service The system of records did not provide for an accumulation of payments by categories of materials or supplies, or related work or labor. Disbursements were reviewed, however, to determine whether any clear-cut violations existed. The examination of expenditures did not reveal any individual payments, contracts or agreements in excess of the bid threshold "for the performance of any work or the furnishing of labor materials and supplies or the hiring of teams or vehicles", other than where bids had been previously sought by public advertisement or where a resolution had been previously adopted under the provision of N.J.S. 40A:11-6. The minutes indicate that resolutions were adopted and advertised authorizing the awarding of contracts or agreements for "professional services" per N.J.S. 40A: Collection of Interest on Delinquent Taxes and Utility Assessments The statute provides the method of authorizing interest and the maximum rate to be charged for nonpayment of taxes or assessments on or before the date when they would become delinquent. The Governing Body, on January 1, 2010, adopted the following resolution authorizing interest to be charged on delinquent taxes: WHEREAS, N.J. SA 54:4-66 provides that taxes shall be payable in quarterly installments due on February 1, May 1, August 1 and November 1, after which dates, if unpaid, shall become delinquent; and that a period of ten calendar days grace for the payment of taxes following said date be fixed and established; and NOW, THEREFORE, BE IT RESOLVED, by the Governing Body of the Borough of Matawan that, if payment is not made by the tenth calendar day of the rnonth on which the installment becomes payable, an interest charge of eight percent (8%) per annum will be assessed on the first $1, of the delinquency and eighteen percent (18%) per annum on any amount in excess of $1,500.00, to be calculated from the date the tax was payable until the date of actual payment. NOW, THEREFORE, BE IT FURTHER RESOLVED, that a taxpayer who has a delinquency in excess of $10,000.00, who fails to pay that delinquency prior to the end of a calendar year will be charged a penalty of six percent (6%) of the amount of the delinquency plus interest calculated to December 31.