UPPER GWYNEDD TOWNSHIP

Transcription

1 ANNUAL FINANCIAL REPORT Year Ended December 31, 2011

2 INTRODUCTORY SECTION

3 TABLE OF CONTENTS Page No. INTRODUCTORY SECTION Table of Contents Transmittal Letter... 3 FINANCIAL SECTION Independent Auditors' Report... 5 Management's Discussion and Analysis (Unaudited)... 7 Basic Financial Statements Government-Wide Financial Statements Statement of Net Assets Statement of Activities Fund Financial Statements Governmental Funds Balance Sheet Reconciliation of Total Governmental Funds Balances to Net Assets of Governmental Activities Statement of Revenues, Expenditures and Changes in Fund Balances Reconciliation of the Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balances to the Statement of Activities Proprietary Funds Statement of Net Assets Statement of Revenues, Expenses and Changes in Net Assets Statement of Cash Flows

4 TABLE OF CONTENTS Page No. Fiduciary Funds Statement of Fiduciary Net Assets Statement of Changes in Fiduciary Net Assets Notes to the Basic Financial Statements Required Supplementary Information Budgetary Comparison Schedule (Non-GAAP Basis) Trend Data on Infrastructure Condition Pension Plan Funding Progress Postemployment Benefits Other Than Pension Funding Progress SUPPLEMENTARY INFORMATION SECTION Nonmajor Governmental Funds Combining Balance Sheet Combining Schedule of Revenues, Expenditures and Changes in Fund Balances Nonmajor Special Revenue Funds Combining Balance Sheet Combining Schedule of Revenues, Expenditures and Changes in Fund Balances Nonmajor Capital Project Fund Balance Sheet Schedule of Revenues, Expenditures and Changes in Fund Balance

5 Upper Gwynedd Township Parkside Place PO Box 1 West Point, PA To the Citizens of Upper Gwynedd Township State law requires that all general-purpose local governments publish a complete set of financial statements. Pursuant to that requirement, we hereby issue the annual financial report of Upper Gwynedd Township for the year ended December 31, This report consists of management's representations concerning the finances of Upper Gwynedd Township. Management assumes full responsibility for the completeness and reliability of all of the information presented in this report. To provide a reasonable basis for making these representations, management of Upper Gwynedd Township has established a comprehensive internal control framework that is designed both to protect the government's assets from loss, theft, or misuse and to compile sufficient reliable information for the preparation of Upper Gwynedd Township's financial statements. Because the cost of internal controls should not outweigh their benefits, Upper Gwynedd Township's comprehensive framework of internal controls has been designed to provide reasonable rather than absolute assurance that the financial statements will be free from material misstatement. As management, we assert that, to the best of our knowledge and belief, this financial report is complete and reliable in all material respects. Upper Gwynedd Township's financial statements have been audited by Maillie, Falconiero & Company, LLP, a firm of licensed certified public accountants. The goal of the independent audit was to provide reasonable assurance that the financial statements of Upper Gwynedd Township for the year ended December 31, 2011, are free of material misstatement. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management; and evaluating the overall financial statement presentation. The independent auditor concluded, based upon the audit, that there was a reasonable basis for rendering an unqualified opinion that Upper Gwynedd Township's financial statements for the year ended December 31, 2011, are fairly presented in conformity with U.S. generally accepted accounting principles (GAAP). The independent auditors' report is presented as the first component of the financial section of this report. GAAP requires that management provide a narrative introduction, overview and analysis to accompany the basic financial statements in the form of management's discussion and analysis (MD&A). This letter of transmittal is designed to complement the MD&A and should be read in conjunction with it. Upper Gwynedd Township's MD&A can be found immediately following the report of the independent auditors. Factors Affecting Financial Condition The information presented in the financial statements is perhaps best understood when it is considered from the broader perspective of the specific environment within which Upper Gwynedd Township operates. -3-

6 Acknowledgments The preparation of this report would not have been possible without the efficient and dedicated services of the entire staff of the finance and administration departments. We also extend our appreciation to the Township's other elected officials and department heads for their contributions and continued support. Respectfully submitted, Leonard T. Perrone Township Manager (Date) -4-

7 FINANCIAL SECTION

8 POBox 680 Oaks, PA Fax: PO Box 3068 West Chester, PA Fax: Independent Auditors' Report To the Board of Commissioners Upper Gwynedd Township West Point, Pennsylvania We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund and the aggregate remaining fund information of Upper Gwynedd Township as of December 31, 2011, and for the year then ended, which collectively comprise Upper Gwynedd Township's basic financial statements as listed in the table of contents. These financial statements are the responsibility of Upper Gwynedd Township's management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund and the aggregate remaining fund information of Upper Gwynedd Township as of December 31, 2011, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America (GAAP). Accounting principles generally accepted in the United States of America require that the management's discussion and analysis on pages 7 through 15, budgetary comparison information on page 50, trend data on infrastructure condition on page 51, pension plan funding progress on page 52 and postemployment benefits other than pension funding progress on page 53 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 evidence sufficient to express an opinion or provide any assurance. - 5-

9 To the Board of Commissioners Upper Gwynedd Township West Point, Pennsylvania Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise Upper Gwynedd Township's basic financial statements. The combining and individual non major fund financial statements are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise Upper Gwynedd Township's basic financial statements. The introductory section is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has not been subjected to the auditing procedures applied in the audit of the basic financial statements, and, accordingly, we do not express an opinion or provide any assurance on it. Oaks, Pennsylvania July 9,

10 MANAGEMENT'S DISCUSSION AND ANALYSIS (Unaudited) Year Ended December 31, 2011 The discussion and analysis contained herein of Upper Gwynedd Township's financial performance provides an overview of the Township's financial activities for the fiscal year ending December 31, This information needs to be read in conjunction with the Township's financial statements. FINANCIAL HIGHLIGHTS Fund balance is a measure of the financial condition of the Township and is calculated by taking the difference between assets and liabilities. The fund balance of the General Fund at the end of 2011 was $4,858,689. Compared to the prior year, the fund balance improved by $62,653 or 1.3% versus a decrease of $91,203 or 1.9% between the years of 2010 and The Township operated in 2011 without an increase in Property Tax, with the last increase occurring in 1997 fifteen years ago. Taxes were actually lowered by 33% in 2001, resulting in the Township having one of the lowest property tax rates in Montgomery County. In addition, the Township is one of a few municipalities in Montgomery County that offers the Homestead Exemption discount on real estate taxes. The Township continues to work with the Department of Environmental Protection relative to expansion permits for the Waste Water Treatment Plant. Phase I Expansion of the Treatment Plant was completed in Limited construction of Phase II began in 2009, with major construction to continue with PADEP permitting. Phase II construction projects will provide secondary treatment for phosphorous as well as other improvements to optimize the treatment of wastewater. During 2010, the Automated Dissolved Oxygen (DO) Project was completed. The DO Project provides automated control to help assure consistent availability of oxygen in the aeration system in response to variable demand, thereby providing optimized treatment performance and reduced electricity usage. During 2011, the Ultraviolet Light Disinfection (UV) Project was completed. The UV operation will improve the quality of wastewater by killing pathogens without using chlorine. The Township's Waste Water Treatment Plant also continued its aggressive effort towards the elimination of Infiltration/Inflow (1/1) of ground water into the treatment system. This effort involves identifying and either repairing or replacing broken sewer pipes throughout the Township. In 2010, the construction of the Sumneytown Pike Phase II project was completed. The total cost of the project was $11.1 million. Upper Gwynedd Township funded the project through a Montgomery County grant of $4.3 million, construction assessments of $0.7 million, North Wales Water Authority expense reimbursement of $0.5 million, a Township bond issue of $1.2 million and a Land Development Agreement with Merck. OVERVIEW OF THE FINANCIAL STATEMENTS The Township's annual financial report consists of several sections. Taken together, they provide a comprehensive financial look at the Township. The components of the report include an independent auditors' report, management's discussion and analysis, government-wide financial statements, fund financial statements and notes to the basic financial statements. This report also contains other required and supplementary information in addition to the basic financial statements. The independent auditors' report briefly describes the audit engagement and also renders an opinion as to the material components of the Township's financial position. Management's discussion and analysis (MD&A), prepared by the Township's management, provides a narrative introduction and overview that users of the financial statements need in order to interpret the basic financial statements. The MD&A also provides an analysis of key data that is presented in the basic financial statements. It also addresses any other currently known facts, decisions, or conditions that are expected to have a significant effect on financial position or results of operations. -7-

11 MANAGEMENT'S DISCUSSION AND ANALYSIS (Unaudited) Year Ended December 31, 2011 The basic financial statements include the statement of net assets, statement of activities, fund financial statements and the notes to the basic financial statements. Statements of net assets and activities focus on entity-wide presentation using the accrual basis of accounting. They are designed to be more corporate-like in that all activities are consolidated into a total for the Township. The statement of net assets focuses on resources available for future operations. This statement presents a view of the assets the Township owns, the liabilities it owes and the net difference. The statement of activities focuses on gross and net costs of Township programs and the extent to which programs rely on taxes and other revenues. This statement summarizes and simplifies the user's analysis to determine the extent to which programs are self-supporting and/or subsidized by other sources. Fund financial statements focus separately on major Governmental Funds, Proprietary Funds and Fiduciary Funds. Governmental Funds statements follow the more traditional presentation of financial statements. The Township's major Governmental Funds are represented in their own columns, and the remaining funds are combined into a column titled "Nonmajor Governmental Funds." Statements for the Township's Proprietary and Fiduciary Funds follow the Governmental Funds and include net assets, revenues, expenses and changes in net assets and cash flows. The Proprietary Funds represent the Township's two (2) Sewer Funds and can be found in more detail beginning with the statement of net assets, Proprietary Funds. Fiduciary Funds are used to account for resources held for the benefit of parties outside of the government, i.e., Employee Pension Funds. Fiduciary Funds are not reflected in the government-wide statements because the Township cannot use these assets to finance its operations. The notes to the basic financial statements provide additional disclosures required by governmental accounting standards and provide information to assist the reader in understanding the Township's financial condition. Other required supplementary information consisting of budgetary comparisons of the General Fund and pension plan funding progress is provided. Other supplementary information consisting of the balance sheet and statement of revenues, expenditures and changes in fund balances for Nonmajor Governmental Funds is also provided. REPORTING THE TOWNSHIP AS A WHOLE The analysis of the Township as a whole begins with the statement of net assets. Is the Township as a whole better off or worse off as a result of the year's activities? The statement of net assets and the statement of activities report information about the Township as a whole and about its activities in a way that helps to answer this question. We divide the Township into two kinds of activities: Governmental Activities: These are the Township's basic services and are reported in this category. They include general administration, police, public works, code enforcement and parks and recreation. Real estate and EIT taxes, fees and charges and grants finance most of these activities. -8-

12 MANAGEMENT'S DISCUSSION AND ANALYSIS (Unaudited) Year Ended December 31, 2011 Proprietary Activities: This category includes activities and services provided through the Township's two sanitary sewer systems. These activities are funded via user charges. The Township's Sewer Fund is comprised of revenues and expenditures that relate to the sanitary sewer needs of the eastern half of the Township. The Township's Sewer Revenue Fund is comprised of revenues and expenditures that relate to the sanitary sewer needs of the western half of the Township. The Sewer Revenue Fund is almost completely comprised of the collection of revenues from our rate payers. Proportionate payments are made to the Upper Gwynedd-Towamencin Municipal Authority for the Authority's operation, maintenance and debt service funding. The revenue from these activities is: Sewer Fund... $3,288,930 Sewer Revenue Fund... $1,276,698 GOVERNMENT-WIDE FINANCIAL STATEMENTS Statement of Net Assets The following tables reflect the condensed statements of net assets. Table 1 Condensed Statement of Net Assets December 31, 2011 Governmental Activities Business-Type Activities Totals ASSETS Current and other assets $ Capital assets TOTAL ASSETS 6,927,841 35,400,165 42,328,006 $ 14,990,595 23,009,564 38,000,159 $ 21,918,436 58,409,729 80,328,165 LIABILITIES Current and other liabilities Long-term liabilities TOTAL LIABILITIES 554,158 5,468,486 6,022, ,089 3,813,239 3,919, ,247 9,281,725 9,941,972 NET ASSETS Invested in capital assets, net of related debt Restricted Unrestricted 30,062, ,816 5,506,152 19,196,325 14,884,506 49,258, ,816 20,390,658 TOTAL NET ASSETS $ 36,305,362 $ 34,080,831 $ 70,386,193 For more detailed information, see the statement of net assets on page 16 of the annual financial report. -9-

13 MANAGEMENT'S DISCUSSION AND ANALYSIS (Unaudited) Year Ended December 31, 2011 Table 2 Condensed Statement of Net Assets December 31, 2010 Governmental Activities Business-Type Activities Totals ASSETS Current and other assets $ 7,743,341 $ 14,455,375 Capital assets 35,681,479 23,063,243 TOTAL ASSETS 43,424,820 37,518,618 LIABILITIES Current and other liabilities 1,394, ,635 Long-term liabilities 5,759,313 4,023,661 TOTAL LIABILITIES 7,153,861 4,130,296 NET ASSETS Invested in capital assets, net of related debt 30,056,368 19,039,582 Unrestricted 6,214,591 14,348,740 TOTAL NET ASSETS $ 36,270,959 $ 33,388,322 $ 22,198,716 58, ,943,438 1,501 '183 9,782,974 11,284,157 49,095,950 20,563,331 $ 69,659,

14 MANAGEMENT'S DISCUSSION AND ANALYSIS (Unaudited) Year Ended December 31, 2011 Statement of Activities The following tables reflect the revenues and expenses for the current period. Table 3 Changes in Net Assets Year Ended December 31, 2011 Governmental Activities Business-Type Activities Totals REVENUES Program revenues Charges for services $ 747,095 $ 5,440,669 Operating grants and contributions 1,120,936 Capital grants and contributions 33, ,000 General revenues Taxes 6,676,906 Other 44, ,837 Transfers 123,301 (123,301) TOTAL REVENUES 8,746,877 5,532,205 EXPENSES General administration 1,535,647 Public safety 3,824,685 Parks and recreation 381,788 Insurance and employee benefits 451,286 Highways 2,332,248 Interest on long-term debt 186,820 Operating expenses 4,839,696 TOTAL EXPENSES 8,712,474 4,839,696 CHANGE IN NET ASSETS 34, ,509 NET ASSETS, BEGINNING OF YEAR 36,270,959 33,388,322 NET ASSETS, END OF YEAR $ 36,305,362 $ 34,080,831 $ 6,187,764 1,120, ,707 6,676, ,769 14,279,082 1,535,647 3,824, , ,286 2,332, ,820 4,839,696 13,552, ,912 69,659,281 $ 70,386,193 For more detailed information, see the statement of activities on page 17 of the annual financial report

15 MANAGEMENT'S DISCUSSION AND ANALYSIS (Unaudited) Year Ended December 31, 2011 Table 4 Changes in Net Assets Year Ended December 31, 2010 Governmental Activities REVENUES Program revenues Charges for services $ 735,536 Operating grants and contributions 945,419 Capital grants and contributions 4,480,205 General revenues Taxes 6,520,753 Other 63,554 Transfers (420,702) TOTAL REVENUES 12,324,765 EXPENSES General administration 1,619,313 Public safety 3,570,260 Parks and recreation 348,517 Insurance and employee benefits 384,175 Highways 2,284,296 Interest on long-term debt 184,854 Operating expenses TOTAL EXPENSES 8,391,415 CHANGE IN NET ASSETS 3,933,350 NET ASSETS, BEGINNING OF YEAR 32,337,609 NET ASSETS, END OF YEAR $ 36,270,959 Business-Type Activities $ 7,471, , ,702 8,126,414 4,745,959 4,745,959 3,380,455 30,007,867 $ 33,388,322 Totals $ 8,206, ,419 4,480,205 6,520, ,081 20,451 '179 1,619,313 3,570, , ,175 2,284, ,854 4,745,959 13, ,313,805 62,345,476 $ 69,659,281 GENERAL FUND BUDGETARY HIGHLIGHTS Budgetary adjustments and supplemental appropriations in 2011 were not material. Transfers and/or adjustments to the budget are made as a result of unanticipated expenditures and/or revenues

16 MANAGEMENT'S DISCUSSION AND ANALYSIS (Unaudited) Year Ended December 31, 2011 CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets Upper Gwynedd Township's investment in capital assets for its governmental and proprietary activities as of December 31, 2011, totals $82,283,260. The Township's investment in capital assets includes automobiles, trucks, infrastructure improvements and equipment. FigureA-1 Capital Assets (Net of Depreciation, in Thousands of Dollars) Governmental Activities Business-Type Activities Land $ 3,960 $ Sewer plant 33,047 Construction in progress 161 Vehicles 2, Land improvements 843 Buildings and improvements 5,611 Equipment and furniture 1,861 2,612 Infrastructure 29,420 1,797 Accumulated depreciation (8,999) (14,874) TOTAL $ 35,400 $ 23,009 Property, plant, system infrastructure and equipment of the Township are depreciated using the straight-line method. However, for road and street infrastructure, the Township elected to use the modified approach. For 2011, the Township expended $461,006 for road and street maintenance. Approximately 3.5 miles of streets and roads were either recycled or microsurfaced. Current condition levels remain above the Township's minimum targeted condition level. In order to keep condition levels above the minimum target, the Township projects to continually resurface approximately 3.5 miles of roads annually. The modified approach is described in more detail in the required supplementary information to the financial statements. Additional information on the Township's capital assets can be found in Notes A and C to the financial statements

17 MANAGEMENT'S DISCUSSION AND ANALYSIS (Unaudited) Year Ended December 31, 2011 At year-end 2011, the Township had $9,258,239 (see Figure A-2) in outstanding debt. The debt service due within one year is $496,616. FigureA-2 Outstanding Long-Term Debt General Obligation Bonds $ 5,445,000 Pennworks Loan $ 3,813,239 Compensated Absences $ 46,051 ECONOMIC FACTORS IMPACTING FUTURE BUDGETS Upper Gwynedd Township is located approximately 18 miles northwest of center city Philadelphia in Montgomery County. The Township services an area of approximately 8.05 square miles consisting of a residential population of approximately 15,552 (2010 U.S. Census). Due to the desirable nature of the Township, substantial growth in residential population occurred in the two decades prior to the current economic slump (28.6% increase between 1990 and 1980 and 16.8% increase between 2000 and 1990). In addition, the Township and the surrounding communities comprise a dynamic area that provides a desirable place to work. Upper Gwynedd Township's daytime population increases by approximately 15,000 people due to the substantial employment opportunities offered by Merck & Co., Inc., North Penn School District, Icon Clinical Research, Acts Retirement Life Insurance, Colorcon Inc., Lehigh Valley Dairy and many other smaller employers. While the national and worldwide economic downturn that started late 2008 and continues today has negatively impacted the Township's revenue stream, the Township has taken actions to increase its revenue by raising the Local Services Tax in 2009 to $52 per person employed within the Township and reduced its operating costs by various cost containment measures all while maintaining a high level of service. With these actions, the overall financial health of the Township remains strong. This was confirmed during the refinancing of our 2001 General Obligation Bonds in 2010, when the Township was assigned an AA+ credit rating from Standard & Poor's. This is the second highest rating issued by Standard & Poor's and is defined as the Township having very strong capacity to meet its financial commitments. The 2012 Budgets were prepared using a zero based approach resulting in a plan with no increase in either taxes or sewer rental fees

18 MANAGEMENT'S DISCUSSION AND ANALYSIS (Unaudited) Year Ended December 31, 2011 General Fund operating cost budget was limited to a 5. 7% increase versus forecast and a 6.4% increase versus 2011 budget level. General Fund revenue budget was set relatively flat with forecast and slightly better than 2011 budget level due to a 2011 modest improvement in employment wages within the Township expected to continue into The 2012 budgeted shortfall between revenue and expenses will be covered by a planned drawdown of reserves. There is no substantial reason to believe that the 2012 budget will be substantially impacted due to unplanned fluctuations in the general economic condition. REQUESTS FOR INFORMATION This financial report is designed to provide our citizens, taxpayers, investors and creditors with a general overview of the Township's finances and to show the Township's accountability for the funds it receives and disburses. Questions about this report or requests for additional financial information should be made to the Right to Know Officer by mail to Upper Gwynedd Township, PO Box 1, West Point, PA or by telephone at Leonard A. Perrone Township Manager David J. Brill Finance Director - 15-

19 STATEMENT OF NET ASSETS December 31, 2011 Governmental Business-Type Activities Activities Totals ASSETS Cash and cash equivalents $ 4,525,667 $ 10,318,179 $ 14,843,846 Investments 691,730 3,046,858 3,738,588 Accrued investment income 2,461 16,151 18,612 Receivables 376,567 2,498,145 2,874,712 Taxes receivable 205, ,300 Due from other funds 918,826 (918,826) Due from other governmental agencies Prepaid expenses 121,876 30, ,964 Bond issue costs, net 84,664 84,664 Capital assets Land 3,959,692 3,959,692 Construction in progress 160, ,742 Land improvements, net 422, ,453 Buildings and improvements, net 4,158,858 4,158,858 Equipment and furniture, net 605,113 1,771,579 2,376,692 Vehicles, net 894,091 16, ,326 Infrastructure, net 25,359,958 25,359,958 Sewer plant, net 21,061,008 21,061,008 TOTAL ASSETS 42,328,006 38,000,159 80,328,165 LIABILITIES Accounts payable and accrued expenses 140,697 96, ,379 Payroll and withholding taxes payable 185, ,363 Deferred revenues 35,750 35,750 Escrow deposits 126,485 9, ,892 Accrued interest 65,863 65,863 Long-term liabilities Portion due or payable within one year Bonds and note payable 300, , ,616 Portion due or payable after one year Bonds and note payable 5,145,000 3,616,623 8,761,623 Bond discounts (22,565) (22,565) Compensated absences 46,051 46,051 TOTAL LIABILITIES 6,022,644 3,919,328 9,941,972 NET ASSETS Invested in capital assets, net of related debt 30,062,394 19,196,325 49,258,719 Restricted 736, ,816 Unrestricted 5,506,152 14,884,506 20,390,658 TOTAL NET ASSETS $ 36,305,362 $ 34,080,831 $ 70,386,193 See accompanying notes to the basic financial statements

20 STATEMENT OF ACTIVITIES Year Ended December 31, 2011 Program Revenues Operating Capital Net (Expense) Revenue and Changes in Net Assets Charges for Grants and Grants and Governmental Business-Type Functions/Programs Expenses Services Contributions Contributions Activities Activities Totals GOVERNMENTAL ACTIVITIES General government $ 1,535,647 $ 435,856 $ 1 '120,406 $ 33,707 $ 54,322 $ $ 54,322 Public safety 3,824,685 83, (3, 740,413) (3, 740,413) Parks and recreation 381, ,497 (154,291) (154,291) Insurance and employee benefits 451,286 (451,286) (451,286) Highways 2,332,248 (2,332,248) (2,332,248) Interest on long-term debt 186,820 (186,820) (186,820) TOTAL GOVERNMENTAL ACTIVITIES 8,712, ,095 1,120,936 33,707 (6,810,736) (6,810,736) BUSINESS-TYPE ACTIVITIES Sewer Revenue Fund 1,221,958 1,276,698 54,740 54,740 Sewer Fund 3,463,366 3,288,930 (174,436) (174,436) Sewer Expansion Fund 154, , , , ,669 TOTAL BUSINESS-TYPE ACTIVITIES 4,839,696 5,440, , , ,973 TOTAL TOWNSHIP ACTIVITIES $ 13,552,170 $ 6,187,764 $ 1,120,936 $ 133,707 (6,810,736) 700,973 (6, 109, 763) GENERAL REVENUES Taxes Real estate taxes, net 1,553,496 1,553,496 Per capita tax 812, ,445 Real estate transfer tax 334, ,497 Earned income tax 3,976,468 3,976,468 Earnings on investments 26, , ,727 Miscellaneous 18,042 18,042 TRANSFERS, net 123,301 (123,301) TOTAL GENERAL REVENUES AND TRANSFERS 6,845,139 (8,464) 6,836,675 CHANGE IN NET ASSETS 34, , ,912 NET ASSETS AT BEGINNING OF YEAR 36,270,959 33,388,322 69,659,281 NET ASSETS AT END OF YEAR $ 36,305,362 $ 34,080,831 $ 70,386,193 See accompanying notes to the basic financial statements

21 BALANCE SHEET GOVERNMENTAL FUNDS December 31, 2011 Traffic Nonmajor Total General Improvement Governmental Governmental Fund Fund Funds Funds ASSETS Cash and cash equivalents $ 3,142,462 $ 816,476 $ 566,729 $ 4,525,667 Investments 691, ,730 Accrued investment income 2,461 2,461 Accounts receivable 376, ,567 Taxes receivable, net 205, ,300 Due from other funds 1,920, ,476 2,099,560 Due from other governmental agencies Prepaid expenses 121, ,876 TOTAL ASSETS $ 6,461,230 $ $ $ 8,023,911 LIABILITIES AND FUND BALANCES LIABILITIES Accounts payable and accrued expenses $ 138,683 $ 231 $ 1,783 $ 140,697 Payroll and withholding taxes payable 185, ,363 Due to other funds 1 '116,260 64,474 1,180,734 Deferred revenue 35,750 35,750 Escrow deposits 126, ,485 TOTAL LIABILITIES 1,602,541 64,705 1,783 1,669,029 FUND BALANCES Nonspendable, prepaid expenses 121, ,876 Restricted Highway and street projects 135, ,597 Fire protection 601, ,219 Assigned Street lights 87,419 87,419 Traffic improvements 751, ,771 Capital projects 7,606 7,606 Unassigned 4,649,394 4,649,394 TOTAL FUND BALANCES 4,858, , ,422 6,354,882 TOTAL LIABILITIES AND FUND BALANCES $ 6,461,230 $ 816,476 $ 746,205 $ 8,023,911 See accompanying notes to the basic financial statements

22 RECONCILIATION OF TOTAL GOVERNMENTAL FUNDS BALANCES TO NET ASSETS OF GOVERNMENTAL ACTIVITIES December 31, 2011 TOTAL GOVERNMENTAL FUNDS BALANCES Capital assets used in governmental activities are not current financial resources and therefore are not reported in the fund financial statements but are reported in the governmental activities of the statement of net assets. Those assets consist of: Land Land improvements, net of accumulated depreciation of $420,821 Buildings and improvements, net of accumulated depreciation of $1,452,243 Equipment and furniture, net of accumulated depreciation of $1,255,916 Vehicles, net of accumulated depreciation of $1,81 0,123 Infrastructure, not being depreciated Infrastructure, net of accumulated depreciation of $4,060,218 Long-term liabilities applicable to the Township's governmental activities are not due and payable in the current period and accordingly are not reported as fund liabilities. Interest on long-term debt is not accrued in Governmental Funds but rather is recognized as an expenditure when due. All liabilities--both current and long term--are reported in the statement of net assets. Balances at December 31, 2011, are: Accrued interest on bonds Bonds and note payable (Note E) Bond discounts Bond issue costs Compensated absences NET ASSETS OF GOVERNMENTAL ACTIVITIES $ 6,354,882 3,959, ,453 4,158, , ,091 16,051,895 9,308,063 35,400,165 (65,863) (5,445,000) 22,565 84,664 (46,051) (5,449,685) $ 36,305,362 See accompanying notes to the basic financial statements

23 STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS Year Ended December 31, 2011 Traffic Nonmajor Total General Improvement Governmental Governmental Fund Fund Funds Funds REVENUES Real estate taxes, net $ 1,374,020 $ $ 179,476 $ 1,553,496 Earned income taxes 3,976,468 3,976,468 Per capita tax 812, ,445 Real estate transfer tax 334, ,497 Intergovernmental revenues 815, ,659 1,154,113 Licenses and permits 309, ,517 Fees and fines 53,865 53,865 Departmental earnings 378, ,760 Investment income and rents 13,782 12, ,890 Miscellaneous 19,510 19,510 TOTAL REVENUES 8,088,318 12, ,735 8,619,561 EXPENDITURES General government 1,436,578 1,436,578 Public safety 3,512,081 72,857 3,584,938 Parks and recreation 339, ,596 Highways 2,009,671 15,623 2,025,294 Insurance and employee benefits 448, ,725 Debt service Principal retirement 295, ,000 Interest paid 180, ,964 Capital outlay 280,197 57, ,843 TOTAL EXPENDITURES 8,502,812 73,269 72,857 8,648,938 EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES (414,494) (60,761) 445,878 (29,377) OTHER FINANCING SOURCES (USES) Operating transfers out (64,474) (285,357) (349,831) Operating transfers in 473, ,132 Proceeds from sale of fixed assets 4,015 4,015 TOTAL OTHER FINANCING SOURCES (USES) 477,147 (64,474) (285,357) 127,316 NET CHANGE IN FUND BALANCES 62,653 (125,235) 160,521 97,939 FUND BALANCES AT BEGINNING OF YEAR 4,796, , ,901 6,256,943 FUND BALANCES AT END OF YEAR $ 4,858,689 $ 751,771 $ 744,422 $ 6,354,882 See accompanying notes to the basic financial statements. -20-

24 RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES Year Ended December31, 2011 NET CHANGE IN FUND BALANCES- TOTAL GOVERNMENTAL FUNDS Governmental Funds report capital outlays as expenditures. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which depreciation ($619, 157) exceeds capital outlays ($337,843) in the current period (Note C). The issuance of long-term debt (e.g., bonds, note, leases) provides current financial resources to Governmental Funds, while the repayment of the principal of long-term debt consumes the current financial resources of Governmental Funds. Neither transaction, however, has any effect on net assets. Also, Governmental Funds report the effect of issuance costs, premiums, discounts and similar items when debt is first issued, whereas these amounts are deferred and amortized in the statement of activities. This amount is the net effect of these differences in the treatment of long-term debt and related items. Principal repayments Amortization of bond issue costs and discounts Under the modified accrual basis of accounting used in the Governmental Funds, expenditures are not recognized for transactions that are not normally paid with expendable available financial resources. In the statement of activities, however, which is presented on the accrual basis, expenses and liabilities are reported regardless of when financial resources are available. In addition, interest on longterm debt is not recognized under the modified accrual basis of accounting until due rather than as it accrues. This adjustment combines the net changes of four balances (Note E). Compensated absences Accrued interest on bonds The net change in the prepayment for the net OPEB obligation is reported in the government-wide statements but not in the Governmental Funds statements. CHANGE IN NET ASSETS OF GOVERNMENTAL ACTIVITIES $ 97,939 (281,314) 295,000 (7,660) (2,561) 1,804 (68,805) $ =~3;;,;4~,4,;;;03:;, See accompanying notes to the basic financial statements

25 STATEMENT OF NET ASSETS PROPRIETARY FUNDS December 31, 2011 Sewer Sewer Total Revenue Expansion Proprietary Fund Sewer Fund Fund Funds ASSETS Cash and cash equivalents $ 446,556 $ 930,571 $ 8,941,052 $ 10,318,179 Investments 478, ,650 1,661,053 3,046,858 Accrued investment income 2,532 3,689 9,930 16,151 Accounts receivable 475,664 1,530, ,402 2,498,145 Due from other funds 936,784 2,449,171 3,385,955 Prepaid expenses 30,088 30,088 Capital assets 199,500 34,091,953 3,592,321 37,883,774 Accumulated depreciation (59,268) (14,008,211) (806,731) (14,874,210) TOTAL ASSETS 2,479,923 25,934,990 13,890,027 42,304,940 LIABILITIES Accounts payable and accrued expenses 4,441 57,738 34,503 96,682 Due to other funds 42,356 1,855,610 2,406,815 4,304,781 Loan payable to other governments 3,813,239 3,813,239 Escrow deposits 9,407 9,407 TOTAL LIABILITIES 46,797 5,735,994 2,441,318 8,224,109 NET ASSETS Invested in capital assets, net of related debt 140,232 16,270,503 2,785,590 19,196,325 Unrestricted 2,292,894 3,928,493 8,663,119 14,884,506 TOTAL NET ASSETS $ 2,433,126 $ 20,198,996 $ 11,448,709 $ 34,080,831 See accompanying notes to the basic financial statements. -22-

26 STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS PROPRIETARY FUNDS Year Ended December 31, 2011 Sewer Sewer Total Revenue Expansion Proprietary Fund Sewer Fund Fund Funds OPERATING REVENUES Sewer rents $ 1,249,902 $ 3,266,388 $ $ 4,516,290 Connection fees 22,542 22,542 Other 26, ,041 1,001,837 TOTAL OPERATING REVENUES 1,276,698 3,288, ,041 5,540,669 COSTS OF SALES AND SERVICES Payments to Upper Gwynedd-Towamencin Municipal Authority for service charges and lease rentals 1,106,933 26,179 1,133,112 Payroll expenses 835, ,326 Plant utilities 276, ,015 Chemicals 169, ,110 Repairs and maintenance 2, , ,704 Sludge removal 321, ,158 Other 98,834 54, ,599 TOTAL COSTS OF SALES AND SERVICES 1,208,722 1,843,302 3,052,024 ADMINISTRATIVE EXPENSES Professional fees 124,819 6, ,747 Insurance 100, ,309 Employee benefits 292, ,433 TOTAL ADMINISTRATIVE EXPENSES 517,561 6, ,489 OPERATING INCOME BEFORE DEPRECIATION 67, , ,113 1,964,156 DEPRECIATION 13,236 1,023, ,444 1 '184,632 OPERATING INCOME (LOSS) 54,740 (95,885) 820, ,524 OTHER REVENUES (EXPENSES) Investment income 33,106 19,019 62, ,837 Interest expense (78,551) (78,551) Operating transfers in 24,401 24,401 Operating transfers out (70,246) (77,456) (147,702) TOTAL OTHER REVENUES (EXPENSES) (37, 140) (112,587) 62,712 (87,015) CHANGE IN NET ASSETS 17,600 (208,472) 883, ,509 NET ASSETS AT BEGINNING OF YEAR 2,415,526 20,407,468 10,565,328 33,388,322 NET ASSETS AT END OF YEAR $ 2,433,126 $ 20,198,996 $ 11,448,709 $ 34,080,831 See accompanying notes to the basic financial statements

27 STATEMENT OF CASH FLOWS PROPRIETARY FUNDS Year Ended December 31, 2011 Sewer Sewer Total Revenue Expansion Proprietary Fund Sewer Fund Fund Funds CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers $ 1,358,270 $ 2,948,402 $ 482,639 $ 4,789,311 Payments to suppliers (1,208,892) (1,208,311) (10,698) (2,427,901) Payments to employees (1 '127,759) (1 '127,759) Internal activity, payments to other funds (80,361) (13,176) (105,535) (199,072) NET CASH PROVIDED BY OPERATING ACTIVITIES 69, , ,406 1,034,579 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Transfers in (out) to other funds, net (70,246) (53,055) (123,301) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Principal paid on loan (210,422) (21 0,422) Interest paid on loan (78,551) (78,551) Purchase of equipment (239,620) (891,333) (1 '130,953) NET CASH USED BY CAPITAL AND RELATED FINANCING ACTIVITIES (528,593) (891,333) (1,419,926) CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sales of investments, net 108,790 (545,550) 1,209, ,808 Investment income 32,893 17,353 61, ,761 NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES 141,683 (528, 197) 1,271, ,569 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 140,454 (510,689) 746, ,921 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 306,102 1,441,260 8,194,896 9,942,258 CASH AND CASH EQUIVALENTS AT END OF YEAR $ 446,556 $ 930,571 $ 8,941,052 $ 10,318,179 RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED BY OPERATING ACTIVITIES Operating income (loss) $ 54,740 $ (95,885) $ 820,669 $ 779,524 Adjustments to reconcile operating income (loss) to net cash provided by operating activities Depreciation 13,236 1,023, ,444 1 '184,632 Change in assets and liabilities Accounts receivable 81,572 (340,528) (492,402) (751,358) Due from other funds (74,311) 156,051 81,740 Prepaid expenses 21,399 21,399 Accounts payable and accrued expenses (170) 3,394 (3,770) (546) Due to other funds (6,050) (169,227) (1 05,535) (280,812) NET CASH PROVIDED BY OPERATING ACTIVITIES $ 69,017 $ 599,156 $ 366,406 $ 1,034,579 See accompanying notes to the basic financial statements. -24-

28 STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS December31, 2011 Police Total Police Medical Non-Uniformed Fiduciary Pension Fund Benefits Fund Pension Fund Funds ASSETS Cash and cash equivalents $ 601,536 $ 152,214 $ - $ 753,750 Investments 7,425, ,526 2,081,813 9,607,363 Other receivables TOTAL ASSETS 8,027, ,740 2,081,813 ~362,082 LIABILITIES Accounts payable 4, ,152 N NETASSETS (}1 Held in trust for benefits and other purposes $ 8,022,789 $ 252,328 $ 2,081,813 $ 10,356,930 See accompanying notes to the basic financial statements.

29 STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS FIDUCIARY FUNDS Year Ended December 31, 2011 Police Total Police Medical Non-Uniformed Fiduciary Pension Fund Benefits Fund Pension Fund Funds ADDITIONS Contributions $ 360,052 $ 16,850 $ 117,072 $ 493,974 Investment income (loss) (56, 107) 2, (53,443) TOTAL ADDITIONS 303,945 19, , ,531 DEDUCTIONS Benefit payments to retired plan participants 498,822 6, ,154 Administrative 44, ,647 N ' <» TOTAL DEDUCTIONS 543,469 6, ,801 ' CHANGE IN NET ASSETS (239,524) 12, ,406 (109,270) NET ASSETS AT BEGINNING OF YEAR 8,262, ,480 1,964,407 10,466,200 NET ASSETS AT END OF YEAR $ 8,022,789 $ 252,328 $ 2,081,813 $ 10,356,930 See accompanying notes to the basic financial statements.

30 NOTES TO THE BASIC FINANCIAL STATEMENTS December 31, 2011 NOTE A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Scope of Reporting Entity The financial statements of Upper Gwynedd Township (the "Township") include the departments and other organizational units over which the Board of Commissioners exercises oversight responsibility. Consistent with the guidance contained in Governmental Accounting Standards Board (GASB) Statement No. 14, The Financial Reporting Entity, the Township evaluated the possible inclusion of related entities (authorities, boards, councils, etc.) within its reporting entity based on financial accountability and the nature and significance of the relationship. In determining financial accountability in a given case, the Township reviewed the applicability of the criteria listed below. The Township is financially accountable for: Organizations that make up the legal Township entity. Legally separate organizations if Township officials appoint a voting majority of the organization's governing body and the Township is able to impose its will on the organization or if there is a potential for the organization to provide specific financial benefits to, or impose specific financial burdens on, the Township as defined below. Impose Its Will - If the Township can significantly influence the programs, projects, or activities of or the level of services performed or provided by the organization. Financial Benefit or Burden - Exists if the Township ( 1) is entitled to the organization's resources or (2) is legally obligated or has otherwise assumed the obligation to finance the deficits of, or provide support to, the organization, or (3) is obligated in some manner for the debt of the organization. Organizations that are fiscally dependent on the Township. Fiscal dependency is established if the organization is unable to adopt its budget without approval by the Township. Based on the foregoing criteria, the reporting entity includes all the organizations for which the Township is financially accountable or for which there is a significant relationship. In reviewing the criteria for inclusion in the financial statements, the Township considered the following: Upper Gwynedd-Towamencin Municipal Authority is not considered a component unit of the Township's reporting entity because the Township does not exercise sufficient oversight responsibilities for the entity to warrant inclusion in the Township's financial statements. -27-

31 NOTES TO THE BASIC FINANCIAL STATEMENTS December 31, 2011 The Upper Gwynedd Volunteer Fire Company is not a component unit of the Township's reporting entity because the Township does not have sufficient oversight responsibilities for it. The tax collector is an elected officer who is responsible for the collection of real estate tax in Montgomery County and the Township. The Township collections represent a portion of the total real estate tax collection activities. The Township regards the tax collector's office as a separate entity and, therefore, does not account for its activity in the financial statements. Basis of Financial Statement Presentation The basic financial statements of the Township have been prepared in conformity with accounting principles generally accepted in the United States of America as prescribed by the GASB. In June 1999, the GASB issued Statement No. 34, Basic Financial Statements--and Management's Discussion and Analysis--for State and Local Governments. This statement established new financial reporting requirements for state and local governments throughout the United States. They require new information and restructure much of the information that governments have presented in the past. Comparability with reports issued in prior years is affected. The Township adopted the provisions of GASB Statement No. 34 for its fiscal year ended December 31, With the implementation of GASB Statement No. 34, the Township has prepared required supplementary information titled management's discussion and analysis, which precedes the basic financial statements. Other GASB Statements are required to be implemented in conjunction with GASB Statement No. 34. Therefore, the Township implemented the following GASB Statements in 2004: Statement No. 33, Accounting and Financial Reporting for Nonexchange Transactions, Statement No. 37, Basic Financial Statements--and Management's Discussion and Analysis--for State and Local Governments: Omnibus, and Statement No. 38, Certain Financial Statement Note Disclosures. GASB Statement No. 34, among many other changes, adds two new "government-wide" financial statements as basic financial statements required for all governmental units. The statement of net assets and the statement of activities are the two new required statements. Both statements are prepared on the full accrual basis. Previously, in accordance with accounting standards for governmental units, the Township used the modified accrual basis of accounting for certain funds. The modified accrual basis of accounting continues to be the appropriate basis of accounting for Governmental Fund financial statements. In addition, all funds are reported as business-type activities, governmental activities, or Fiduciary Funds. The definitions for these types of activities are discussed in other portions of Note A. -28-