RAHWAY PARKING AUTHORITY (A COMPONENT UNIT OF THE CITY OF RAHWAY) REPORT OF AUDIT FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2015

Transcription

1 (A COMPONENT UNIT OF THE CITY OF RAHWAY) REPORT OF AUDIT FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2015

2 (A COMPONENT UNIT OF THE CITY OF RAHWAY) TABLE OF CONTENTS Exhibit A B c Schedule 2 3 Independent Auditor's Report Management's Discussion and Analysis Basic Financial Statements Comparative Statements of Net Position at December 31, 2015 and 2014 Comparative Statements of Revenues, Expenses and Changes in Net Position for the Years Ended December 31, 2015 and 2014 Comparative Statements of Cash Flows for the Years Ended December 31, 2015 and 2014 Notes to the Financial Statements Required Supplementary Information- Pension Information Schedule of Authority's Proportionate Share ofnet Pension Liability Schedule of Authority's Contributions Notes to the Required Supplementary Infonnation Supplementary Schedules Schedule of Revenues and Expenses Compared to Budget for the Fiscal Year Ended December 31, Budgetary Basis Government Auditing Standards Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards- Independent Auditor's Report Schedule of Findings and Responses Summary Schedule of Prior Year Audit Findings Roster of Officials and General Comments and Recommendations Roster of Officials General Comments Recommendations Appreciation

3 LERCH, VINCI & HIGGINS,LLP CERTIFIED PUBLIC ACCOUNTANTS REGISTERED MUNICIPAL ACCOUNTANTS DIETER P. LERCH. CPA. RMA. PSA GARY J. VINCI,CI'A. RMA. PSA GARY W. HIGGINS. CPA. RMA. PSA JEFFREY C. BLISS. CPA, RMA. PSA PAULJ. LERCH. CPA. RMA. PSA DONNA L. JAPIIET. CPA, PSA JU LI US B. CONSONI. CPA. PSA ANDREW D. PARENTE. CPA. RMA. PSA INDEPENDENT AUDITOR'S REPORT ELIZABETH A. SHICK. CPA. RMA. PSA ROBERTW. HAAG.CPA. PSA DEBORA II K. LERCH. CPA, PSA RALPH M. PICONE. CPA. RMA. PSA DEBRA GOLLE. CPA CINDY JANACEK. CPA. RMA MARK SACO, CPA SHERYL M. NICOLOSI. CPA ROBERT AMPONSAH. CPA Honorable Chaitman and Members of the Board Rahway Parking Authority Rahway, New Jersey Report on the Financial Statements We have audited the accompanying financial statements of the Rahway Parking Authority, a component unit of the City of Rahway as of and for the years ended December 31, 2015 and 2014, and the related notes to the financial statements, which collectively comprise the Rahway Parking Authority's basic financial statements as listed in the table of contents. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements ROUTE 208 FATR LAWN, NJ TELEPHONE C20D FACSIMILE (201)

4 We believe the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Rahway Parking Authority as of December 31,2015 and 2014, and the respective changes in its financial position and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Emphasis of Matter Adoption of New Accounting Pronouncement As discussed in Note I to the financial statements, in the year ended December 31, 2015, the Rahway Parking Authority adopted new accounting guidance, Governmental Accounting Standards Board Statement No. 68, Accounting and Financial Reporting for Pensions. Our opinion is not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management's discussion and analysis and pension information be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming an opinion on the financial statements that collectively comprise the Rahway Parking Authority's basic financial statements as a whole. The supplementary schedules listed in the table of contents are presented for purposes of additional analysis and are not a required part of the basic financial statements. The supplementary schedules listed in the table of contents are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the supplementary schedules listed in the table of contents are fairly stated, in all material respects, in relation to the basic financial statements as a whole. 2

5 Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated May 10, 2016 on our consideration of the Rahway Parking Authority's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Rahway Parking Authority's internal control over financial reporting and compliance..,~ ;;;:~ ~ 4~~, )<!r ; '~~IN(f.; ;GGINS, r,.(p Certified Public Accountants Registered Municipal Accountants /. ere Registered Munici al Accountant RMA Number CR00398 Fair Lawn, New Jersey May 10,2016 3

6 MANAGEMENT'S DISCUSSION AND ANALYSIS

7 MANAGEMENT'S DISCUSSION AND ANALYSIS YEAR ENDED DECEMBER 31, 2015 This section of The Rahway Parking Authority's (the "Authority") annual financial report presents our discussion and analysis of the Authority's financial performance during the fiscal year ended December 31, Please read it in conjunction with the Authority's financial statements and accompanying notes. The Authority was created by a municipal ordinance of the City of Rahway. The principal purpose of the Authority is to provide a means of addressing the current and future parking demands of the City. Financial Highlights The Authority generated operating revenues of$1,765,292 which was comprised of$1,286,232 of parking fees and permits, $446,211 of ground lease payments, $16,130 of parking fines and $16,719 of other miscellaneous revenues. Operating expenses amounted to $1,059,991 which included $374,724 of employee salary and benefit expenses, $430,398 for operations and $254,869 for depreciation of capital assets. Nonoperating revenues included $2,448 of investment earnings. Nonoperating expenses consisted of $170,000 of payments in lieu of taxes to the City of Rahway and $149,941 in interest, amortization and other expenses on long-term debt. OVERVIEW OF FINANCIAL STATEMENTS This annual financial report consists of two parts: Management's Discussion and Analysis (this section) and the basic financial statements. The Authority follows enterprise fund financial reporting; accordingly, the financial statements are presented using the economic resources measurement focus and the accrual basis of accounting. Enterprise Fund statements offer short- and long-te1m financial information about the activities and operations of the Authority. These statements are presented in the manner prescribed by the Government Accounting Standards Board ("GASB"). 4

8 MANAGEMENT'S DISCUSSION AND ANALYSIS YEAR ENDED DECEMBER 31, 2015 FINANCIAL ANALYSIS OF THE AUTHORITY Net Position- The following table summarizes Net Position as of December 31, 2015, 2014 and 2013: (Restated) (Restated) Net Position: Net Investment in Capital Assets $ 2,107,761 $ 2,132,505 $ 1,723,190 Restricted 904, , ,822 Unrestricted 269,212 (143,803) (20,935) Total Net Position $ 3,281,101 $ 2,893,293 $ 2,607,077 Net position increased $387,808 or 13%, in the year ended December 3 I, The increase was mainly due to the net effect of an increase in operating revenues and a decrease in operating expenditures. Net position increased $298,578, or 11%, in the year ended December 31, The increase was mainly due to a decrease in bond related costs when compared to the previous year. Capital Assets - The following table summarizes the changes in capital assets between years ended December 31, 2015,2014 and 2013: Capital Assets: Property, Plant and Equipment $ I 0,986,871 $ I 0,926,456 $ 10,562,962 Construction in Progress 30,984 22,695 11,017,855 I 0,949,!51 10,562,962 Less: Accumulated Depreciation 2,940,467 2,685,598 2,440,591 Total Capital Assets (Net of Accumulated Depreciation) $ 8,077,388 $ 8,263,553 $ 8,122,371 Total capital assets, net of depreciation decreased $186,165 during 2015 and increased $141,182 during This is mainly due to the acquisition of new assets and the depreciation of existing Authority owned capital assets. 5

9 OPERATING ACTIVITIES RAHWAY PARKING AUTHORITY MANAGEMENT'S DISCUSSION AND ANALYSIS YEAR ENDED DECEMBER 31, 2015 The following table summarizes the changes in revenues, expenses and net position for the fiscal years ended December 31, 2015, 2014 and (Restated) OPERATING REVENUES Parking Fees and Permits $ 1,286,232 $ 1,211,389 $ 1,282,003 Parking Fines 16,130 17,020 36,260 Ground Lease 446, , ,661 Miscellaneous 16,719 8,100 30,793 Total Operating Revenues 1,765,292 1,661,193 1,779,717 OPERATING EXPENSES Cost of Providing Services/ Administration 805, , ,964 Depreciation 254, , ,904 Total Operating Expenses 1,059,991 1,064,438 1,032,868 OPERATING INCOME 705, , ,849 NONOPERATING REVENUES (EXPENSES) Investment Earnings 2,448 2,675 2,920 Interest Expense and Amortization (149,941) (144,852) (189,989) Miscellaneous Revenue (Expense) 14,000 Payment in Lieu of Taxes (170,000) (170,000) (170,000) Total Nonoperating Revenues (Expenses) (317,493) (298,177) (357,069) CHANGE IN NET POSITION $ 387,808 $ 298,578 $ 389,780 6

10 DEBT ADMINISTRATION Capital Debt RAHWAY PARKING AUTHORITY MANAGEMENT'S DISCUSSION AND ANALYSIS YEAR ENDED DECEMBER 31, 2015 The Authority had the following outstanding debt as of December 31,2015,2014 and 2013: Refunding Bonds $ $ $ ECONOMIC FACTORS AND NEXT YEAR'S BUDGET The adopted calendar year 2016 budget was approved by the Division of Local Government Services and adopted in December The following is anticipated to be undertaken during calendar year 2016: Maintenance and repair on all exterior parking lots. CONTACTING THE AUTHORITY'S FINANCIAL MANAGEMENT This financial report is designed to provide the City of Rahway, New Jersey citizens with a general overview of the Authority's finances to demonstrate the Authority's accountability for the revenues it receives. If you have questions about this report or need additional financial information, contact the office of the Executive Director at 67 Lewis Street, Rahway, New Jersey

11 BASIC FINANCIAL STATEMENTS

12 ASSETS Current Assets Unrestricted Current Assets: Cash and Cash Equivalents Accounts Receivable Intergovernmental Receivable RAHWAY PARKING AUTHORITY COMPARATIVE STATEMENTS OF NET POSITION AS OF DECEMBER 31,2015 AND 2014 $ ,126,513 $ 3,577 2,250 EXHIBIT A Page I 2014 (Restated) 1,008,387 2, Total Unrestricted Current Assets Restricted Current Assets: Construction Fund Cash and Cash Equivalents Interest Receivable Bond Reserve Fund Cash and Cash Equivalents Interest Receivable Bond Service Fund Cash and Cash Equivalents Interest Receivable Cost of Issuance Cash and Cash Equivalents Renewal and Replacement Fund Cash and Cash Equivalents Interest Receivable Total Restricted Current Assets Total Current Assets Noncurrent Assets Capital Assets: Property, Plant and Equipment Accumulated Depreciation Total Capital Assets, net Total Noncurrent Assets 1,132, , , , , , ,438,831 2,571,171 11,017,855 (2,940,467) 8,077,388 8,077,388 1,011, , , , , , ,284,751 2,296,278 10,949,151 (2,685,598) 8,263,553 8,263,553 Total Assets 10,648,559 10,559,831 DEFERRED OUTFLOWS OF RESOURCES Deferred Amount on Net Pension Liability Deferred Amount on Refunding 48, ,519 9, ,489 Total Deferred Outflows of Resources Total Assets and Deferred Outflows of Resources 262,515 10,911, ,124 10,804,955 See Accompanying Notes to the Basic Financial Statements 8

13 COMPARATIVE STATEMENTS OF NET POSITION AS OF DECEMBER 31,2015 AND 2014 EXHIBIT A Page LIABILITIES (Restated) Current Liabilities (Payable from Unrestricted Assets) Accounts Payable $ 9,374 $ 33,764 Other Liabilities 16,575 16,675 Pension Contribution Payable 14,106 13,492 Unearned Revenue 172, ,798 Total Current Liabilities Payable from Unrestricted Assets 212, ,729 Current Liabilities (Payable from Restricted Assets) Revenue Bonds Payable, Current 185, ,000 Accrued Interest Payable 15,278 7,763 Total Current Liabilities Payable from Restricted Assets 200, ,763 Total Current Liabilities 412, ,492 Noncurrent Liabilities: Revenue Bonds Payable, Net of Unamortized Discount/Premium 4,143,157 4,333,627 Net Pension Liability 368, ,419 Unearned Revenue 2,699,691 2,818,210 Total Noncurrent Liabilities 7,211,162 7,458,256 Total Liabilities 7,623,518 7,892,748 Deferred Inflows of Resources Deferred Amount on Net Pension Liability 6,455 18,914 Total Deferred Inflows of Resources 6,455 18,914 Total Liabilities and Deferred Inflows of Resources 7,629,973 7,911,662 NET POSITION Net Investment in Capital Assets 2,107,761 2,132,505 Restricted for: Bond Service 38,403 38,866 Bond Reserve 315, ,725 Renewal and Replacement 550, ,000 Unrestricted 269,212 (143,803) Total Net Position $ 3,281,101 $ 2,893,293 See Accompanying Notes to the Basic Financial Statements 9

14 COMPARATIVE STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN NET POSITION FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014 EXHIBIT B (Restated) OPERATING REVENUES Charges for Deck Parking $ 913,075 $ 864,217 Charges for Permit Parking 247, ,578 Charges for Metered Parking 125, ,594 Parking Fines I6,130 I 7,020 Ground Lease 446, ,684 Miscellaneous I6,719 8,100 Total Operating Revenues 1,765,292 1,661,193 OPERATING EXPENSES Salaries and Wages 268, ,467 Health Insurance 79,535 81,309 Other Insurance 62,440 73,574 Payroll Taxes 26,915 28,110 Depreciation 254, ,007 Maintenance, Repairs and Supplies 113,390 81,576 Professional Services 124, ,404 Lot and Deck Lighting and Utilities 47,551 46,306 Lease Expense Office and Telephone 10,357 36,578 Community Relations 1,003 2,337 Bank Charges 34,276 30,549 Pension 24,352 15,628 Travel, Conferences and Training 1,110 2,197 Vehicle Expense 5,812 8,661 Other 5,391 2,406 Total Operating Expenses 1,059,991 1,064,438 OPERATING INCOME 705, ,755 NON-OPERATING REVENUES (EXPENSES) Investment Earnings 2,448 2,675 Gain on Sale ofproperty 14,000 Payment in Lieu of Taxes/Shared Service Agreement City of Rahway (170,000) (170,000) Interest Expense (133,441) (127,661) Amortization of Deferred Amount on Refunding (21,970) (22,890) Amortization of Premium on Bonds 5,470 5,699 Total Non-Operating Revenues (Expenses) (317,493) (298,177) CHANGE IN NET POSITION 387, ,578 Net Position, January 1 2,893,293 2,594,715 Net Position, December 31 $ 3,281,101 $ 2,893,293 See Accompanying Notes to the Basic Financial Statements 10

15 COMPARATIVE STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014 EXHIBITC Page I CASH FLOWS FROM OPERATING ACTIVITIES Receipts from Customers Proceeds from Ground Lease Payments for Employees Salaries and Benefits Payments to Suppliers Net Cash Provided by Operating Activities $ 1,210,619 $ 427,692 (295, 189) (523,734) 819,388 1,119, ,771 (330,577) (482, 104) 709,786 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Principal Paid on Bonds (185,000) Interest Paid on Bonds ( 125,926) Purchase of Capital Assets ( 68,704) Disposition of Capital Assets (185,000) (127,775) (386, 189) 14,000 Net Cash (Used for) Capital and Related Financing Activities (379,630) 10( 6:0:84.-'1., 9::_::6'-"4) CASH FLOWS FROM NON CAPITAL FINANCING ACTIVITIES Payment in Lieu of Taxes Net Cash (Used for) Non-Capital Financing Activities (170,000) (170,000) (170,000) (170,000) CASH FLOWS FROM INVESTING ACTIVITIES Interest Received Net Cash Provided by Investing Activities 2,448 2,675 2,448 2,675 Net Increase (Decrease) in Cash and Cash Equivalents Cash and Cash Equivalents, January I Cash and Cash Equivalents, December 31 $ 272,206 (142,503) 2,292,828 2,435,331 2, 565 '034 ~$ _,;;2::,::,2;,;;,;92;;?.,8:;;;2:;;,8 ANALYSIS OF BALANCE AT DECEMBER 31 Unrestricted Restricted $ 1,126,513 $ I,438,521 1,008,387 I,284,441 $ 2,565 '034 ~$ _,;;2::,::,2;,;;,;92:;?.,8:;;;2:;;,8 See Accompanying Notes to the Basic Financial Statements II

16 COMPARATIVE STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014 EXHIBITC Page (Restated) Reconciliation of Operating Income to Net Cash Provided by Operating Activities: Operating Income $ 705,3 0 I "-$..::5c.:96 2, 7'-'5"'-5 Adjustments to Reconcile Operating Income to Net Cash Provided By Operating Activities: Depreciation (Increase )/Decrease in Intergovernmental Receivable (Increase)/Decrease in Other Accounts Receivable (Increase)/Decrease in Deferred Amounts on Net Pension Liability I ncrease/(decrease) in Pension Contribution Payable lncrease/(decrease) in Unearned Revenue Increase/(Decrease) in Net Pension Liability Increase/(Decrease) in Accounts Payable Increase/(Decrease) in Other Liabilities 254, ,007 (1,350) 730 (I,337) (51,820) 9, I, 130 (I 24,294) (140,431) 61,895 (7, 143) (24,390) 3,484 (100) 975 Total Adjustments Net Cash Provided by Operating Activities $ 114, , ,388 $ 709,786 See Accompanying Notes to the Basic Financial Statements 12

17 NOTES TO THE BASIC FINANCIAL STATEMENTS

18 NOTES TO THE BASIC FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31,2015 AND 2014 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Reporting Entity Rahway Parking Authority (the "Authority") is a public body corporate and politic of the State of New Jersey. The Authority was created by a municipal ordinance adopted in 1954 by the City Council of the City of Rahway. The Authority owns and operates parking facilities within the City's boundaries. The Authority is governed by a Board of Commissioners (the "Board") consisting of five members who are appointed by the Mayor with the advice and consent of the City Council. The Board of Commissioners determines policy actions, approves resolutions and selects an executive director to be responsible for the overall operation of the Authority. Rahway Parking Authority includes in its financial statements the primary government and those component units for which the primary government is financially accountable. Component units are legally separate organizations for which the Authority is financially accountable or other organizations for which the nature and significance of their relationship with the primary government is such that exclusion would cause the reporting entity's financial statements to be misleading or incomplete. The Authority is financially accountable for an organization if the Authority appoints a voting majority of the organization's board, and (I) the Authority is able to significantly influence the programs or services performed or provided by the organization; or (2) the Authority is legally entitled to or can otherwise access the organization's resources; the Authority is legally obligated or has otherwise assumed the responsibility to finance the deficits of, or provide financial support to, the organization, or the Authority is obligated for the debt of the organization. Component units may also include organizations that are fiscally dependent on the Authority in that the Authority approves the budget, the issuance of debt or the levying of taxes. Based on the foregoing criteria, the Authority has no component units. The Authority would be includable as a component unit of the City of Rahway on the basis of such criteria. B. New Accounting Standards During 2015, the Authority adopted the following GASB statements: GASB 68, Accounting and Financial Reporting for Pensions, will be effective beginning with the year ending December 31, The objective of this Statement is to improve accounting and financial reporting by state and local governments for pensions. It also improves information provided by state and local governmental employers about financial support for pensions that is provided by other entities. This Statement replaces the requirements of Statement No. 27, Accounting for Pensions by State and Local Governmental Employers, as well as the requirements of Statement No. 50, Pension Disclosures, as they relate to pensions that are provided through pension plans administered as trusts or equivalent arrangements that meet certain criteria. GASB 71, Pension Transition for Contributions Made Subsequent to the Measurement Date- an amendment of GASB Statement No. 68, should be applied simultaneously with the provisions of Statement No. 68. The objective of this Statement is to address an issue regarding application of the transition provisions of Statement No. 68, Accounting and Financial Reporting for Pensions. The issue relates to amounts associated with contributions, if any, made by a state or local government employer or nonemployer contributing entity to a defined benefit pension plan after the measurement date of the government's beginning net pension liability. 13

19 NOTES TO THE BASIC FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2015 AND 2014 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) B. New Accounting Standards (Continued) Other accounting standards that the Authority is currently reviewing for applicability and potential impact on the financial statements include: GASB 72, Fair Value Measurement and Application, will be effective beginning with the fiscal year ending June 30, This Statement addresses accounting and financial reporting issues related to fair value measurements. This Statement provides guidance for determining a fair value measurement for financial reporting purposes. This Statement also provides guidance for applying fair value to certain investments and disclosures related to all fair value measurements. GASB 73, Accounting and Financial Reporting for Pensions and Related Assets that Are Not Within the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASB Statements 67 and 68, will be effective beginning with the fiscal year ending June 30, The objective of this Statement is to improve the usefulness of information about pensions included in the general purpose external financial reports of state and local governments for making decisions and assessing accountability. GASB 74, Financial Reporting for Postemployment Benefit Plans Other than Pension Plans, will be effective beginning with the fiscal year ending June 30, The objective of this Statement is to improve the usefulness of information about postemployment benefits other than pensions (other postemployment benefits or OPEB) included in the general purpose external financial reports of state and local governmental OPEB plans for making decisions and assessing accountability. GASB 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions, will be effective beginning with the fiscal year ending June 30, The primary objective of this Statement is to improve accounting and financial reporting by state and local governments for postemployment benefits other than pensions (other postemployment benefits or OPEB). It also improves information provided by state and local governmental employers about financial support for OPEB that is provided by other entities. GASB 76, The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments, will be effective beginning with the fiscal year ending June 30, The objective of this Statement is to identify- in the context of the current governmental financial reporting environment - the hierarchy of generally accepted accounting principles (GAAP). The "GAAP hierarchy" consists of the sources of accounting principles used to prepare financial statements of state and local governmental entities in conformity with GAAP and the framework for selecting those principles. This Statement reduces the GAAP hierarchy to two categories of authoritative GAAP and addresses the use of authoritative and nonauthoritative literature in the event that the accounting treatment for a transaction or other event is not specified within a source of authoritative GAAP. C. Basis of Presentation - Financial Statements The accounts of the Authority are organized and operated on the basis of funds, in accordance with the 2003 Bond Resolution, as amended and supplemented (see Note I C), each of which is considered a separate accounting entity. The operations of each system are accounted for with a separate set of self-balancing accounting records that comprise its assets, liabilities, net position, revenues and expenses. Government resources are allocated and accounted for in individual funds based upon the purposes for which they are to be spent and the means by which spending activities are controlled. The various activities are grouped into one generic fund type and one broad fund category, as follows: 14

20 NOTES TO THE BASIC FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31,2015 AND 2014 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) C. Basis of Presentation -Financial Statements (Continued) Proprietary Fund Types Enterprise Fund - The Enterprise Fund is used to account for governmental operations which are financed and operated in a manner similar to private enterprises or where the intent of the governing body is that the periodic detetmination of revenues earned, costs incurred and/or net income is appropriate for management accountability purposes. Reclassifications Cettain reclassifications may have been made to the December 31, 2014 balances to conform to the December 31, 2015 presentation. D. Measurement Focus and Basis of Accounting The Authority's financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. All assets and all liabilities associated with these operations are included on the Statement of Net Position. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of the timing of related cash flows. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. The Authority's financial transactions are recorded in accounts that are created by various resolutions adopted by the Authority to meet bond or note covenant requirements (more fully defined in Note I C). Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management of the Authority to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Accordingly, actual results could differ from those estimates. E. Assets, Deferred Outflows of Resources, Liabilities, Deferred Inflows of Resources and Net Position 1. Cash Deposits and Investments Cash and cash equivalents are considered to be cash on hand, cash in banks, certificates of deposit and all short-term investments with original maturities of three months or less from the date of purchase. Investments are reported at market value and are limited by the 2003 Bond Resolution as amended and supplemented thereto. 15

21 NOTES TO THE BASIC FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2015 AND 2014 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) E. Assets, Deferred Outflows of Resources, Liabilities, Deferred Inflows of Resources and Net Position (Continued) 2. Restricted Assets Under the 2003 Bond Resolution, as amended and supplemented, the following funds were required to be created and held by the Authority's Trustee with respect to the construction of a new public parking deck in the City of Rahway: A) Construction Fund B) Revenue Fund C) Bond Service Fund D) Sinking Fund E) Bond Reserve Fund F) Renewal and Replacement Fund G) General Fund H) Transit Removal and Replacement Fund l) Rebate Fund Each of the above funds represents separate accounts held by a trustee. Only those funds and accounts that are presently required by the Trustee are described herein. Construction Fund- To account for all financial resources received by the Authority for the payment of costs related to the construction of a public parking deck. All moneys that are on deposit in the Construction Account if not expended for construction are pledged to secure the payment of the principal of, redemption premium, if any, and the interest on the revenue bonds. Bond Reserve Fund - To account for funds held in accordance with the Bond Resolution to meet the Bond Reserve requirement, an amount which is equal to the maximum annual debt service on outstanding revenue bonds. Bond Service Fund- To account for the accumulation of resources for the payment of principal and interest due during the current fiscal year on outstanding revenue bonds. Renewal and Replacement Fund- To account for the accumulation of resources to meet the renewal and replacement reserve requirement, as certified by the Authority's consulting engineers, in accordance with the Bond Resolution. The Trustee can withdraw from this fund, upon a certification of the consulting engineers, for the use of reasonable and necessary expenses of the Authority with respect to major repairs, renewals, replacements, maintenance items, equipment or operating expenses. 3. Accounts Receivable All receivables are reported at their gross value and where appropriate, are reduced by the estimated portion that is expected to be uncollectible. 16

22 NOTES TO THE BASIC FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31,2015 AND 2014 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) E. Assets, Deferred Outflows of Resources, Liabilities, Deferred Inflows of Resources and Net Position (Continued) 4. Capital Assets All capital assets acquired or constructed by the Authority are stated at cost. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized. Capital assets are defined by the Authority as assets with an initial, individual cost of $2,000 and an estimated useful life in excess of two years. Construction costs are charged to construction in progress until such time as they are completed and certified by the Authority's consulting engineers, at which time they are transferred to their respective asset category and are then depreciated over their useful lives. Interest incurred during the construction phase of capital assets is included as part of the capitalized value of the assets constructed. The total interest expense incurred by the Authority during 2015 and 2014 was $133,441 and $127,661, respectively. None of this amount was included as part of the cost of capital assets under construction for that year. All capital assets are depreciated on the straight-line method based on their asset class and estimated useful lives as follows: Parking Deck Machinery and Equipment 40 Years 5 Years 5. Deferred Ouljlow.f of Resources and Deferred Inflows of Resource,f In addition to assets, the statement of financial position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period and so will not be recognized as an outflow of resources (expense) until then. The Authority has two items that qualizy for reporting in this category. One item is the deferred amount on refunding (net of amortization) reported in the statement of net position. Deferred amounts on debt refundings result from the loss on the transaction when the debt's reacquisition price is greater than the carrying value of the refunded debt. This amount is deferred and amortized over the shorter of the life of the refunded or refunding debt. The other item that qualifies for reporting in this category is the deferred amounts on net pension liability. Deferred amounts on net pension liability are reported in the district-wide statement of net position and result from: (1) differences between expected and actual experience; (2) changes in assumptions; (3) net difference between projected and actual investment earnings on pension plan investments; (4) changes in proportion and differences between employer contributions and proportionate share of contributions; and (5) contributions made subsequent to the measurement date. These amounts are deferred and amortized over future years. 17

23 NOTES TO THE BASIC FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2015 AND 2014 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) E. Assets, Deferred Outflows of Resources, Liabilities, Deferred Inflows of Resources aud Net Position (Continued) 5. Deferred Ouiflows of Resources and Deferred Inflows of Resources (Continued) In addition to liabilities, the statement of financial position will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. The Agency has one type of item that qualifies for reporting in this category. It is the deferred amounts on net pension liability. Deferred amounts on net pension liability are reported in the district-wide statement of net position and result from: ( l) differences between expected and actual experience; (2) changes in assumptions; (3) net difference between projected and actual investment earnings on pension plan investments; and ( 4) changes in proportion and differences between employer contributions and proportionate share of contributions. These amounts are deferred and amortized over future years. 6. Unearned Revenue The Authority defers recognition of payment of user charges until earned. 7. Long-Term Obligations Long-term debt and other long-term obligations are reported as liabilities in the statement of net position. Premiums and discounts are deferred and amortized over the life of the debt. Bonds payable are reported net of the applicable unamortized bond premium or discount. 8. Pensions For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the retirement systems sponsored and administered by the State of New Jersey and additions to/deductions from these retirement systems' fiduciary net position have been determined on the same basis as they are reported by the retirement systems. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. 9. Net Position In the statement of net position, there are three classes of net position: Net Investment in Capital Assets- consists of net capital assets (cost less accumulated depreciation) reduced by outstanding balances of related debt obligations from the acquisition, construction or improvement of those assets. Deferred outflows of resources attributable to the acquisition, construction or improvement of those assets or related debt should also be included. 18

24 NOTES TO THE BASIC FINANCIAL STATEMENTS YEARS ENDED DECEMBER31, 2015 AND 2014 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) E. Assets, Deferred Outflows of Resources, Liabilities, Deferred Inflows ofresonrces and Net Position (Continued) 9. Net Position (Continued) Restricted Net Position- reports net position when constraints placed on the residual amount of noncapital assets are either externally imposed by creditors (such as through debt covenants), grantors, contributors, or laws and regulations of other governments, or imposed by law through constitutional provisions or enabling legislation. Unrestricted Net Position- any portion of net position not already classified as either net investment in capital assets or net position-restricted, is classified as net position-unrestricted. 10. Net Position Flow Assumption Sometimes the Authority will fund outlays for a particular purpose from both restricted and unrestricted resources. In order to calculate the amounts to report as restricted - net position and unrestricted - net position in the financial statements, a flow assumption must be made about the order in which the resources are considered to be applied. It is the Authority's policy to consider restricted- net position to have been depleted before unrestricted- net position is applied. F. Revenues and Expenses Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principal operating revenues of the Authority are charges to customers for permit and metered parking and fines for parking violations. Operating expenses include the cost of operations and services, administrative expenses and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. Transactions or other events that are both unusual in nature and infrequent in occurrence are reported as extraordinary items. NOTE 2 STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY 1. Budgets and Budgetary Accounting The Authority submits its annual operating and capital budget to the State of New Jersey. The budget is prepared in accordance with the Budget Manual for Local Public Authorities as promulgated by the Division of Local Government Services, which differs in certain respects from accounting principles generally accepted in the United States of America. The budgets serve as a plan for expenses and the proposed means for financing them. Unexpended appropriations lapse at yearend. The annual budget is generally approved at least sixty days prior to the beginning of the fiscal year. The budgets must be approved by the Board and submitted to the Division of Local Government Services, Bureau of Authority Regulation for approval prior to adoption. Budget adoptions and amendments are recorded in the Authority's minutes. 19

25 NOTES TO THE BASIC FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31,2015 AND 2014 NOTE 2 STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY (Continued) 1. Budgets and Budgetary Accounting (Continued) The encumbrance method of accounting is utilized by the Authority for budgetary purposes. Under this method purchase orders, contracts and other commitments for expenditures of resources are recorded to reserve a portion of the applicable budget appropriation to ensure the Authority has sufficient cash to operate and pay debt service when due. In accordance with accounting principles generally accepted in the United States of America, outstanding encumbrances at year-end for which goods or services are received, are classified to expenses and accounts payable. All other encumbrances in the annual budgeted funds are reversed at year-end and are either cancelled or are included as reappropriations of fund equity for the subsequent year. Encumbrances at year-end in funds that are budgeted on a project basis automatically carry forward along with their related appropriations and are not subject to annual cancellations and reappropriations. For budgetary purposes, the unrestricted net position as of December 31,2015 and 2014 is $595,685 and $171,895, which excludes the impact of recognizing the net pension liability reported under GASB Statement No Revenues Revenues from user charges are recognized on the accrual basis when earned. Grants received are recognized as revenue when the resources are expended for the purpose specified in the grant agreement. Grant funds received and the related program income not yet expended are reported as unearned revenue. 3. Designated Unrestricted Net Position The Authority is permitted under budgetary accounting practices promulgated by the Division of Local Government Services to designate unrestricted net position. The Authority Board of Commissioners may formally dedicate net position to establish designations of unrestricted net position to meet policy adopted by the Board. As of December 31, 2015 and 2014, the Authority has not designated any of its unrestricted net position. NOTE 3 CASH DEPOSITS AND INVESTMENTS Cash Deposits The Authority's deposits are insured through either the Federal Deposit Insurance Corporation (FDIC), Securities Investor Protection Corporation (SIPC) or New Jersey's Governmental Unit Deposit Protection Act (GUDPA). The Authority is required to deposit their funds in a depository which is protecting such funds pursuant to GUDPA. The New Jersey Governmental Unit Deposit Protection Act requires all banks doing business in the State of New Jersey to pledge collateral equal to at least 5% of the average amount of its public deposits and I 00% of the average amount of its public funds in excess of the lesser of75% of its capital funds or $200 million for all deposits not covered by the FDIC. Bank balances are insured up to $250,000 in the aggregate by the FDIC for each bank. SIPC replaces cash claims up to a maximum of $250,000 for each failed brokerage firm. At December 31, 2015 and 2014, the book value of the Authority's deposits was $2,565,034 and $2,292,828, respectively, and bank and brokerage firm balances of the Authority's cash and deposits amounted to $2,589,691 and $2,305,370, respectively. 20

26 NOTES TO THE BASIC FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2015 AND 2014 NOTE 3 CASH DEPOSITS AND INVESTMENTS (Continued) Cash Deposits (Continued) The Authority's deposits which are displayed on the balance sheet as "cash and cash equivalents" are categorized as: Bank Balance Depository Account Insured Restricted Unrestricted $ 1,438,521 $ 1,151,170 1,284,441 1,020,929 $ 2,589,691,;:;$~=2,~3"'05~,3~7~0 Custodial Credit Risk- Deposits- Custodial credit risk is the risk that in the event of a bank failure, the government's deposits may not be returned to it. The Authority does not have a formal policy for custodial credit risk. As of December 31, 2015 and 2014, none of the Authority's bank balances were exposed to custodial credit risk since all deposits were considered insured by FDIC or GUDPA. Investments New Jersey statutes allow the following securities to be purchased by the Authority: a. Bonds or other obligations of the United States of America or obligations guaranteed by the United States of America. This includes instruments such as treasury bills, notes, and bonds. b. Government Money Market Mutual Funds. c. Any federal agency or instrumentality obligation authorized by Congress and matures within 397 days from the date of purchase, and has a fixed rate of interest not dependent on any index or external factors. d. Bonds or other obligations of the local unit or school districts of which the local unit is a part. e. Any other obligations with maturities not exceeding 397 days, as permitted by the Division of Investments. f. Local government investment pools, such as New Jersey CLASS; and the New Jersey Arbitrage Rebate Management Program. g. New Jersey State Cash Management Fund. h. Repurchase agreements of fully collateralized securities, subject to certain conditions. All marketable securities with a maturity date of three months or more from the date of purchase are deemed to be investments of the Authority as defined by ASB Statement No. 3. All investments are recorded in the financial statements at fair value. The Authority had no outstanding investments as of December 31, 2015 and

27 NOTES TO THE BASIC FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31,2015 AND 2014 NOTE 4 CAPITAL ASSETS The following table summarizes the capital asset activity of the Authority for 2015 and 2014: Balance, Balance, December 31, December 3 I, 2014 Additions Dispositions Land and Buildings $ 9,776,360 $ 9,776,360 Parking Lots and Improvements 647,390 $ 22, ,085 Machinery and Equipment 502,706 $ 37, ,426 Construction in Progress 22,695 30,984 (22,695) 30,984 10,949,151 68,704 11,017,855 Less, Accumulated Depreciation (2,685,598) (254,869) (2,940,467) Capital Assets, Net $ 8,263,553 $ (186,165) $ $ 8,077,388 Balance, Balance, December 31, December 31, 2013 Additions Dispositions Land and Buildings $ 9,481,755 $ 294,605 $ 9,776,360 Parking Lots and Improvements 604,361 43, ,390 Machinery and Equipment 476,846 25, ,706 Construction in Progress 22,695 22,695 10,562, ,189 I 0,949,!51 Less, Accumulated Depreciation (2,440,591) (245,007) (2,685,598) Capital Assets, Net $ 8,122,371 $ 141,182 $ $ 8,263,553 NOTE 5 LONG-TERM DEBT Long-Term Debt Revenue Bonds On December 3, 2003, the Authority issued $5,800,000 City-Guaranteed Parking Revenue Bonds (the "2003 Bonds"). The Bonds were issued to: (i) finance a portion of the costs of constructing a new multi-level parking garage of approximately 180,176 square feet, including 3,000 square feet of office space on land owned by the Authority in the Central Business District Redevelopment Area of the City in the proximity of the Rahway train station, consisting of approximately 524 parking spaces (the "Garage") and including 1,500 square feet per level of office space attached to the Garage; (ii) fund a bond reserve fund in the amount of the Maximum Annual Debt Service on the Series 2003 Bonds; and (iii) pay the costs and expenses incidental to the issuance and delivery of the series 2003 Bonds, including the premium for the Bond Insurance Policy incurred in connection with issuing the Series 2003 Bonds (collectively, the "Project"). These bonds were refunded in