RAHWAY PARKING AUTHORITY (A COMPONENT UNIT OF THE CITY OF RAHWAY) REPORT OF AUDIT FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013

Transcription

1 (A COMPONENT UNIT OF THE CITY OF RAHWAY) REPORT OF AUDIT FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013

2 (A COMPONENT UNIT OF THE CITY OF RAHWAY) TABLE OF CONTENTS Exhibit A B c Schedule Independent Auditor's Report Management's Discussion and Analysis Basic Financial Statements Comparative Statements of Net Position at December 31, 2014 and 2013 Comparative Statements of Revenues, Expenses and Changes in Net Position for the Years ended December 31,2014 and 2013 Comparative Statements of Cash Flows for the years ended December 31, 2014 and 2013 Notes to the Basic Financial Statements Schedule of Revenues and Expenses Compared to Budget for the Fiscal Year Ended December 31, Budgetary Basis 30 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 33 Summary Schedule of Prior Year Audit Findings 34 Roster of Officials and General Comments and Recommendations Roster of Officials 35 General Comments 36 Recommendations 36 Appreciation 36

3 LERCH, VINCI & HIGGINS,LLP CERTIFIED PUBLIC ACCOUNTANTS REGISTERED MUNICIPAL ACCOUNTANTS DIETER P. LERCH, CPA, RMA, PSA GARY J. VINCI, CPA, RMA, PSA GARY W. HlGGINS, CPA, RMA, PSA JEFFREY C. BLISS, CPA, RMA, PSA PAUL J. LERCH, CPA, RMA, PSA DONNA L. JAPHET, CPA, PSA JULIUS B. CONSONI, CPA, PSA DEBRA GOLLE, CPA CINDY JANACEK, CPA, RMA MARK SACO, CPA KEVIN LOMSKI, CPA SHERYL M. NICOLOSI, CPA KATHLEEN WANG, CPA ELIZABETH A. SHICK, CPA, RMA, PSA ANDREW PARENTE, CPA, RMA, PSA ROBERT W. HAAG, CPA, PSA DEBORAH K. LERCH, CPA, PSA RALPH M. PICONE, CPA, RMA, PSA INDEPENDENT AUDITOR'S REPORT Honorable Chairman 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, 2014 and 2013, 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 djsclosures 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 FAlR 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 opmton. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position ofthe Rahway Parking Authority as of December 31, 2014 and 2013, 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. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management's discussion and analysis identified in the table of contents be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming 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 July 31, 2015 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...,;~ f(a ~ItA) L/ ERCH, VINCI & HIGGIN;f,LLP Certified Public Accountants untants Fair Lawn, New Jersey July 31, 2015 Registered Muni 1pal Accountant RMA Number R

6 MANAGEMENT'S DISCUSSION AND ANALYSIS

7 MANAGEMENT'S DISCUSSION AND ANALYSIS YEAR ENDED DECEMBER 31, 2014 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$1,661,193 which was comprised of$1,211,389 of parking fees and permits, $424,684 of ground lease payments, $17,020 of parking fines and $8,100 of other miscellaneous revenues. Operating expenses amounted to $1,061,172 which included $411,886 of employee salary and benefit expenses, $404,279 for operations and $245,007 for depreciation of capital assets. Nonoperating revenues included $2,675 of investment earnings. Nonoperating expenses consisted of $170,000 of payments in lieu of taxes to the City of Rahway and $144,852 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-term financial information about tbe 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 31,2014 FINANCIAL ANALYSIS OF THE AUTHORITY Net Position- The following table summarizes Net Position as of December 31, 2014, 2013 and 2012: (Restated) Net Position: Net Investment in Capital Assets $ 2,132,565 $ 1,723,190 $ 1,715,996 Restricted 904, , ,289 Unrestricted 185, ,627 (43,426) Total Net Position $ 3,222,543 $ 2,920,639 $ 2,530,859 Net position increased $301,844, or 10%, in the year ended December 31,2014. The increase was mainly due to a decrease in bond related costs when compru ed to the previous year. Net position increased $389,780 or 15%, in the year ended December 31, The increase was mainly due to a decrease in interest expense related to the Authority's long-term debt as a result of refinancing. Net position increased $361,849, or 15% in the year ended December 31, The increase was mainly due to a decrease in operating expenses incurred during Capital Assets - The following table summarizes the changes in capital assets between years ended December 31, 2014,2013 and 2012: Capital Assets: Property, Plant and Equipment Construction in Progress Less: Accumulated Depreciation $ 10,926,456 $ I 0,562,962 $ 10,548,361 22,695 2,685,598 2,440,591 2,186,687 Total Capital Assets (Net of Accumulated Depreciation) $ 8,263,553 $ 8,122,371 $ 8,361,674 Total capital assets, net of depreciation increase $141,182 during 2014 and decreased $239,303 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, 2014 The following table summarizes the changes in revenues, expenses and net position for the fiscal years ended December 31,2014,2013 and (Restated) OPERATING REVENUES Parking Fees and Permits $ 1,211,389 $ 1,282,003 $ 1,195,015 Parking Fines 17,020 36,260 35,270 Ground Lease 424, , ,518 Miscellaneous 8,100 30,793 8,771 Total Operating Revenues 1,661,193 1,779,717 1,637,574 OPERATING EXPENSES Cost of Providing Services/Administration 816, , ,702 Depreciation 245, , ,304 Total Operating Expenses 1,061,172 1,032, ,006 OPERATING INCOME 600, , ,568 NONOPERATING REVENUES (EXPENSES) Investment Earnings 2,675 2,920 4,525 Interest Expense and Amortization (144,852) ( 189,989) (221,244) Miscellaneous Revenue (Expense) 14,000 Payment in Lieu of Taxes ( 170,000) (170,000) (170,000) Total Nonoperating Revenues (Expenses) (298, 177) (357,069) (3 86,719) CHANGE IN NET POSITION $ 301,844 $ 389,780 $ 361,849 6

10 DEBT ADMINISTRATION Capital Debt RAHWAY PARKING AUTHORITY MANAGEMENT'S DISCUSSION AND ANALYSIS YEAR ENDED DECEMBER 31, 2014 The Authority had the following outstanding debt as of December 31, 2014, 2013 and 2012: Revenue Bonds $4,780,000 Refunding Bonds $4,460,000 $4,645,000 $4 460 j)_qq $ $4 78_Q,QQO ECONOMIC FACTORS AND NEXT YEAR'S BUDGET The adopted calendar year 2015 budget was approved by the Division of Local Government Services and adopted in December The following is anticipated to be undertaken during calendar year 2015: 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 COMPARATIVE STATEMENTS OF NET POSITION AS OF DECEMBER 3I, 2014 AND 2013 EXHIBIT A Page I ASSETS Current Assets Unrestricted Current Assets: Cash and Cash Equivalents Accounts Receivable Intergovernmental Receivable 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 $ 1,008,387 2, ,011, , , , , , ,284,751 2,296,278 10,949,151 (2,685,598) 8,263,553 8,263,553 $ 1,248,341 2,240 1,630 1,252, , , , , , ,187,300 2,439,511 10,562,962 (2,440,591) 8,!22,371 8,122,371 Total Assets 10,559,831 10,561,882 DEFERRED OUTFLOWS OF RESOURCES Deferred Amount on Refunding 235, ,379 Total Deferred Outflows of Resources Total Assets and Deferred Outflows of Resources 235,489 10,795, ,379 10,820,261 See Accompanying Notes to the Basic Financial Statements 8

13 COMPARATIVE STATEMENTS OF NET POSITION AS OF DECEMBER 31, 2014 AND 2013 EXHIBIT A Page LIABILITIES Current Liabilities (Payable from Unrestricted Assets) Accounts Payable $ 33,764 $ 30,280 Other Liabilities 16,675 15,700 Unearned Revenue 177, ,711 Total Current Liabilities Payable from Unrestricted Assets 228, ,691 Current Liabilities (Payable from Restricted Assets:) Revenue Bonds Payable, Current 185, ,000 Accrued Interest Payable 7,763 7,877 Total Current Liabilities Payable from Restricted Assets 192, ,877 Total Current Liabilities 421, ,568 Noncurrent Liabilities: Revenue Bonds Payable, Net of Unamortized Discount/Premium 4,333,627 4,524,326 Unearned Revenue 2,818,210 2,936,728 Total Noncurrent Liabilities 7,151,837 7,461,054 Total Liabilities 7,572,837 7,899,622 NET POSITION Net Investment in Capital Assets 2,132,505 1,723,190 Restricted for: Bond Service 38,866 39,097 Bond Reserve 315, ,725 Renewal and Replacement 550, ,000 Unrestricted 185, ,627 Total Net Position $ 3,222,483 $ 2,920,639 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, 2014 AND 2013 EXHIBITB OPERATING REVENUES Charges for Deck Parking $ 864,217 $ 905,260 Charges for Permit Parking 242, ,622 Charges for Metered Parking 104, ,121 Parking Fines 17,020 36,260 Ground Lease 424, ,661 Miscellaneous 8,100 30,793 Total Operating Revenues 1,661,193 1,779,717 OPERATING EXPENSES Salaries and Wages 302, ,218 Health Insurance 81,309 65,298 Other Insurance 73,574 96,430 Payroll Taxes 28,110 28,285 Depreciation 245, ,904 Maintenance, Repairs and Supplies 81,576 80,890 Professional Services 107, ,092 Lot and Deck Lighting 46,306 47,513 Lease Expense Office and Telephone 36,578 17,717 Community Relations 2,337 3,143 Bank Charges 30,549 28,917 Pension 12,362 9,790 Travel, Conferences and Training 2, Vehicle Expense 8,661 9,304 Other 2,406 8,164 Total Operating Expenses 1,061,172 1,032,868 OPERATING INCOME 600, ,849 NON-OPERATING REVENUES (EXPENSES) Investment Earnings 2,675 2,920 Gain on Sale of Property 14,000 Payment in Lieu of Taxes/Shared Service Agreement-City of Rahway (170,000) (170,000) Interest Expense (127,661) (51,704) Bond Issuance Costs Refunding Bonds (126,558) Amortization of Deferred Amount on Refunding (22,890) (15,615) Amortization of Premium on Bonds 5,699 3,888 Total Non-Operating Revenues (Expenses) (298,177) (357,069) CHANGE IN NET POSITION 301, ,780 Net Position, January 1 2,920,639 2,530,859 Net Position, December 31 $ 3,222,483 $ 2,920,639 See Accompanying Notes to the Basic Financial Statements 10

15 COMPARATIVE STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 EXHIBITC Page I CASH FLOWS FROM OPERATING ACTIVITIES Receipts from Customers Proceeds from Ground Lease Payments for Employees Salaries and Benefits Payments to Suppliers $ 1,119, ,771 (330,577) (482,104) $ 1,291, ,042 (346,80 1) (390,625) Net Cash Provided by Operating Activities 709, ,194 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Principal Paid on Bonds (185,000) Interest Paid on Bonds (127,775) Purchase of Capital Assets (386, 189) Disposition of Capital Assets 14,000 Payment of Bond Issuance Costs Refunding Bond Proceeds Premium on Issuance of Refunding Bonds Payment to Refunding Escrow Agent (250,000) (70,246) (14,601) (126,558) 4,745,000 68,213 (4,837,362) Net Cash (Used for) Capital and Related Financing Activities (684,964) (485,554) CASH FLOWS FROM NON CAPITAL FINANCING ACTIVITIES Payment in Lieu of Taxes (170,000) (170,000) Net Cash (Used for) Non-Capital Financing Activities (170,000) (170,000) CASH FLOWS FROM INVESTING ACTIVITIES Interest Received Net Cash Provided by Investing Activities 2,675 2,675 2,990 2,990 Net Increase (Decrease) in Cash and Cash Equivalents ( 142,503) 302,630 Cash and Cash Equivalents, January 1 2,435,331 2,132,701 Cash and Cash Equivalents, December 31 $ 2,292,828 ;::,$~=2~.;.4,;;.35:;4,;;,;33~1 ANALYSIS OF BALANCE AT DECEMBER 31 Unrestricted Restricted $ 1,008,387 $ 1,284,441 1,248,341 1,186,990 See Accompanying Notes to the Basic Financial Statements 11 $ 2,292,828,;;.$ ~~2~,4:,;;.3~5,3;;,;3"'-1

16 COMPARATIVE STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 EXHIBITC Page 2 Reconciliation of Operating Income to Net Cash Provided by Operating Activities: Operating Income $ 600,021 $ 746,849 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 Prepaid Items Increase/(Decrease) in Unearned Revenue Increase/(Decrease) in Accounts Payable lncrease/(decrease) in Other Liabilities 245, (140,431) 3, ,904 1,880 (2,240) 28,585 (86,737) 9,703 3,250 Total Adjustments 109, ,345 Net Cash Provided by Operating Activities $ 709,786 $ 955,194 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, 2014 AND 2013 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 2014, the Authority adopted the following GASB statements: GASB 66, Technical Corrections , an Amendment of GASB Statements 10 and 62. The objective of this Statement is to improve accounting and financial reporting for a governmental financial reporting entity by resolving conflicting guidance that resulted from the issuance of two pronouncements, Statements No. 54, Fund Balance Reporting and Governmental Fund Type Definitions and No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements. Another accounting standard that the Agency is currently reviewing for applicability and potential impact on the financial statements is: GASB 68, Accounting and Financial Reporting for Pensions, will be effective beginning with the year ending December 31,2015. 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. 13

19 NOTES TO THE BASIC FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2014 AND 2013 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 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!C), each of which is considered a separate accounting entity. The operations of each sysk:n 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: 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 determination 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 31,2013 balances to conform to the December 31,2014 presentation. D. Measurement Focns 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). Private-sector standards of accounting and financial reporting issued by the Financial Accounting Standards Board (FASB) prior to December I, 1989, generally are followed in proprietary fund financial statements to the extent that those standards do not conflict with or contradict guidance of the Governmental Accounting Standards Board (GASB). Governments also have the option of following subsequent private-sector guidance for their business-type activities and enterprise funds, subject to this same limitation. The Authority has elected not to follow FASB guidance issued subsequent to December I, 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. 14

20 NOTES TO THE BASIC FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31,2014 AND 2013 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) E. Assets, Deferred Outflows, Liabilities and Net Position 1. 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. 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 I) 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. 15

21 NOTES TO THE BASIC FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31,2014 AND 2013 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) E. Assets, Deferred Outflows, Liabilities and Net Position (Continued) 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. 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 2014 and 2013 was $127,661 and $51,704, 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 Outflows of Resources 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 only has one item that qualifies for reporting in this category. It is the deferred amount on refunding (net of amortization) reported in the statement of net position. This amount is deferred and amortized over the life of the debt. 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. 16

22 NOTES TO THE BASIC FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2014 AND 2013 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) E. Assets, Deferred Outflows, Liabilities and Net Position (Continued) 8. 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. 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. 9. 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 year end. 17

23 NOTES TO THE BASIC FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31,2014 AND 2013 NOTE 2 STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY (Continued) 1. Budgets and Budgetary Accounting (Continued) 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. 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. 2. 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 deferred 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, 2014 and 20 13, the Authority has not designated any of its unrestricted net position. NOTE 3 DEPOSITS AND INVESTMENTS 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 Govermnental 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 31,2014 and 2013, the book value of the Authority's deposits was $2,292,828 and $2,435,331, respectively, and bank and brokerage firm balances of the Authority's cash and deposits amounted to $2,305,370 and $2,454,865, respectively. 18

24 NOTES TO THE BASIC FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2014 AND 2013 NOTE 3 DEPOSITS AND INVESTMENTS (Continued) 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 $ 1,284,441 $ 1,020,929 1,186,990 1,267,875 $ 2,3 05,3 70,;:;,$ ~""'2"'", 4;;;;5.;,4,,;:;,;86;,;:;,5 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, 2014 and 2013, 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 ofinvestments. 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, 2014 and

25 NOTES TO THE BASIC FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2014 AND 2013 NOTE 4 CAPITAL ASSETS The following table summarizes the capital asset activity of the Authority for 2014 and 2013: 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 10,949,151 Less, Accumulated Depreciation (2,440,591) (245,007) (2,685,598) Capital Assets, Net $ 8,122,371 $ 141,182 $ $ 8,263,553 Balance, Balance, December 31, December 31, 2012 Additions Dispositions Land and Buildings $ 9,481,755 $ 9,481,755 Parking Lots and Improvements 589,760 $ 14, ,361 Machinery and Equipment 476, ,846 10,548,361 14,601 10,562,962 Less, Accumulated Depreciation (2, 186,687) (253,904) (2,440,591) Capital Assets, Net $ 8,361,674 $ (239,303) $ $ 8,122,371 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

26 NOTES TO THE BASIC FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2014 AND 2013 NOTE 5 LONG-TERM DEBT (Continued) Long-Term Debt (Continued) Revenue Bonds (Continued) On May 14, 2013, the Authority issued $4,745,000 City-Guaranteed Parking Revenue Refunding Bonds ("the 2013 Bonds"). The Bonds were issued to (i) refund, on an advanced basis, the $4,630,000 Outstanding aggregate principal amount of the City Guaranteed Parking Revenue Bonds, Series 2003, dated December I, 2003 and maturing on November 15 in the years 2014 through and including 2018, 2023, 2028 and 2033, respectively (the "Refunded Bonds"), together with the interest accrued and to accrue thereon to the date fixed for redemption thereof, (ii) fund the Bond Reserve Requirement (as defined in the General Bond Resolution) for the Series 2013 Bonds, to the extent required, (iii) fund any other reserves required under the General Bond Resolution, including, but not limited to, as required, the Project Reserve Requirement, and (iv) pay the costs of issuing the Series 2013 Bonds (collectively, the "2013 Project"). The Series 2013 Bonds constitute Additional Bonds under the General Bond Resolution. The Authority's long-term debt is reported net of any unamortized premium or discount. Long-term debt as of December 31, 2014 and 2013 is as follows: Revenue Bonds $ 4,460,000 $ 4,645,000 Less: Current Portion of Revenue Bonds Payable (185,000) (185,000) Add: Unamortized Premium 58,627 64,326 Net Long-Term Portion of Revenue Bonds Payable $ 4,333,627 $ 4,524,326 The changes in the Authority's long-term debt during the years ended December 31, 2014 and 2013 were as follows: Balance, Balance, Due December 31, December 31, Within 2013 Additions Reductions 2014 One Year 2014 Revenue Bonds $ 4,645,000 $ (185,000) $ 4,460,000 $ 185,000 Add: Unamortized Premium 64,326 (5,699) 58,627 Total Revenue Bonds-Net $ 4,709,326 $ $ (190,699) $ 4,518,627 $ 185,000 Balance, Balance, Due December 31, December 31, Within 2012 Additions Reductions 2013 One Year 2013 Revenue Bonds $ 4,780,000 $ 4,745,000 $ ( 4,880,000) $ 4,645,000 $ 185,000 Add: Unamortized Premium 1,210 68,213 (5,097) 64,326 Less: Unamortized Discount (67,841) 67,841 Total Revenue Bonds-Net $ 4,713,369 $ 4,813,213 $ ( 4,817,256) $ 4,709,326 $ 185,000 21

27 NOTES TO THE BASIC FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2014 AND 2013 NOTE 5 LONG-TERM DEBT (Continued) Long-Term Debt (Continued) Revenue Bonds (Continued) The Authority's schedule of principal and interest for long-term debt issued and outstanding as of December 3 I, is as follows: Period Ending Revenue Bonds December 3 I, Principal Interest Total 2015 $ 185,000 $ 125,925 $ 310, , , , , , , , , , , , , ,085, ,825 1,554, ,255, ,875 1,551, ,155,000 91,719 1,246,719 $ 4,460,000 $ 1,450,444 $ 5,910,444 NOTE 6 EMPLOYEE RETIREMENT SYSTEM The State of New Jersey sponsors and administers the following contributory defined benefit public employee retirement system ("retirement system") covering those Authority employees who are eligible for pension coverage. Public Employees' Retirement System (PERS)- established in January 1955, under the provisions ofn.j.s.a. 43: 15A to provide coverage, including post-retirement healthcare for those eligible employees whose local employers elected to do so, to substantially all full-time employees of the State or any county, municipality, school district, or public agency provided the employee is not a member of another State-administered retirement system. Membership is mandatory for such employees and vesting occurs after 10 years of service for pension benefits and, if applicable, 25 years for postretirement healthcare coverage. PERS is a cost-sharing multi-employer defined benefit pension plan. The cost of living increase for PERS is funded directly by the system but is currently suspended as a result of reform legislation. According to state law, all obligations of the PERS retirement system will be assumed by the State of New Jersey should the retirement system be terminated. 22

28 NOTES TO THE BASIC FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2014 AND 2013 NOTE 6 EMPLOYEE RETIREMENT SYSTEM (Continued) The State of New Jersey, Department of the Treasury, Division of Pensions and Benefits, issues publicly available financial reports that include the financial statements and required supplementary information of each of the above systems, funds, and trust. The financial reports may be accessed via the New Jersey Division of Pensions and Benefits website at us/treasury/pensions. Basis of Accounting The financial statements of the retirement system are prepared on the accrual basis of accounting. Employer contributions are recognized when payable to the retirement system. Benefits or refunds are recognized when due and payable in accordance with the terms of the retirement system. Significant Legislation P.L. 2011, c.78, effective June 28, 2011, made various changes to the manner in which PERS and Police and Firemen's Retirement System (PFRS) operate and to the benefit provisions of those systems. This new legislation's provisions impacting employee pension and health benefits include: For new members of PERS hired on or after June 28, 2011 (Tier 5 members), the years of creditable service needed for early retirement benefits increased from 25 to 30 years and the early retirement age increased from 55 to 65. The eligibility age to qualify for a service retirement in the PERS is increased from age 62 to 65 for Tier 5 members. It increased the active member contribution rates as follows. PERS active member rates increase from 5.5 percent of annual compensation to 6.5 percent plus an additional 1 percent phased-in over 7 years for members hired or reappointed on or after June 28, For Fiscal Year 2014, the member contribution rate was 6.78%. The rate increased to 6.92% effective July The phase-in of the additional incremental member contributions for PERS members will take place in July of each subsequent fiscal year. The payment of automatic cost-of-living adjustment (COLA) additional increases to current and future retirees and beneficiaries was suspended. COLA increases may be reactivated at a future date as permitted by this law. It changed the method for amortizing the pension systems' unfunded accrued liability (from a level percent of pay method to a level dollar of pay method). Investment Valuation Investments are reported at fair value. Securities traded on a national or international exchange are valued at the last reported sales price at current exchange rates. Mortgages are valued on the basis of future principal and interest payments, and are discounted at prevailing interest rates for similar instruments. The fair value of real estate investments is based on independent appraisals. Investments that do not have an established market are reported at estimated fair values. 23