CITY OF NORTH TONAWANDA, NEW YORK BASIC FINANCIAL STATEMENTS AND SINGLE AUDIT WITH INDEPENDENT AUDITOR'S REPORT YEAR ENDED DECEMBER 31, 2015

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1 BASIC FINANCIAL STATEMENTS AND SINGLE AUDIT WITH INDEPENDENT AUDITOR'S REPORT YEAR ENDED DECEMBER 31, 2015

2 Table of Contents Independent Auditor's Report Management s Discussion and Analysis Page No. Basic Financial Statements: Government-wide Financial Statements: Statement of Net Position Statement of Activities...18 Fund Financial Statements: Balance Sheet - Governmental Funds Reconciliation of Statement of Net Position to Governmental Fund Balances...21 Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities...24 Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual - General Fund Statement of Fiduciary Net Position - Fiduciary Funds...27 Notes to the Financial Statements Required Supplementary Information: Combining Balance Sheets - Special Revenue Fund Types Combining Statement of Revenues, Expenditures and Changes in Fund Balances - Special Revenue Fund Types Schedule of the Local Government s Proportionate Share Of the Net Pension Liability Schedule of the Local Government Contributions... 58

3 Page No. 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 Report on Compliance with Requirements Applicable to Each Major Program and Internal Control Over Compliance in Accordance with OMB Circular A Schedule of Expenditures of Federal Awards Notes to the Schedule of Expenditures of Federal Awards Schedule of Findings and Questioned Costs Summary Schedule of Prior Audit Findings Corrective Action Plan * * * * *

4 Amato, Fox & Company, PC Certified Public Accountants Amato Fox INDEPENDENT AUDITOR S REPORT Honorable Mayor and Members of Common Council City of North Tonawanda North Tonawanda, New York Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the City of North Tonawanda, New York, as of and for the year ended, and the related notes to the financial statements, which collectively comprise the City of North Tonawanda 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 opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the Unites 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 evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. 36 Niagara Street Tonawanda, New York Phone: Fax: info@amatofox.com

5 An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. 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, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the City of North Tonawanda, New York, as of, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management s Discussion and Analysis 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. 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.

6 Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City of North Tonawanda s basic financial statements. The Combining and Individual Fund Statements and Schedules, and the Financial Statements of Individual Funds are presented for purposes of additional analysis and are not a required part of the basic financial statements. The Combining and Individual Fund Statements and Schedules, and the Financial Statements of Individual Funds are the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the schedules are fairly stated, in all material respects, in relation to the basic financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated May 11, 2016 on our consideration of the City of North Tonawanda 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 City of North Tonawanda s internal control over financial reporting and compliance. Tonawanda, New York May 11, 2016

7 Management s Discussion and Analysis This section of the City of North Tonawanda s (City) annual financial report presents a discussion and analysis of the City s financial performance during the fiscal year ended. Please read it in conjunction with the City s basic financial statements following this section. FINANCIAL HIGHLIGHTS - The assets of the City exceeded liabilities at the close of the 2015 fiscal year by $46,583,972 (net position). Of this amount, $3,722,179 is restricted for specific purposes (restricted net position), $(3,212,103) is unrestricted, and $46,073,896 is invested in capital assets, net of related debt. - The City s total net position increased by $1,397,871. This change is largely due to implementation of GASB As of, the City s governmental funds reported combined fund balances of $18,164,390 an increase of $262,102 in comparison with the prior year. Approximately 26.6% of the combined fund balances, $4,838,664 is available to meet the City s current and future needs (unassigned fund balance). Approximately 45.3% of the combined fund balances, $8,229,038 constitutes assigned fund balance which are available to meet specific current and future operational needs. - At the end of the fiscal year, unassigned fund balance for the General Fund was $5,103,396 or 14.6% of total general expenditures. OVERVIEW OF THE FINANCIAL STATEMENTS This annual report consists of three parts - Management s Discussion and Analysis (this section), the Basic Financial Statements and Notes to the Financial Statements. Basic Financial Statements Government-wide Financial Statements are designed to provide readers with a broad overview of the City s finances, in a manner similar to a private sector business. The Statement of Net Position presents information on all City assets and liabilities, with the difference between the two reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the City is improving or deteriorating.

8 Management s Discussion and Analysis The Statement of Activities presents information showing how net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will result in cash flows in future fiscal periods (i.e., unallocated taxes and earned but unused vacation leave). Both of these government-wide financial statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenues (governmental activities). The City does not have any functions that are intended to recover all or, in part, a portion of their costs through user fees and charges (business-type activities). The governmental activities of the City include general government support, public safety, transportation, economic assistance and opportunity, culture and recreation, home and community services, and interest and fiscal charges. The government-wide financial statements can be found on pages of this report. Fund Financial Statements A fund is a grouping of related accounts that are used to maintain control over resources that have been segregated for specific activities or objectives. The City, like other state and local governments, uses fund accounting to ensure and demonstrate finance related legal compliance. All funds of the City can be divided into two categories: governmental funds and fiduciary funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental funds financial statements focus on near-term inflows and outflows of spendable resources, as well as, balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a City s near-term financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the governmental-wide financial statements. By doing so, readers may better understand the long-term impact of the government s near-term financial decisions. Both the governmental funds balance sheet and the governmental funds statement of revenues, expenditures and changes in fund balance provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The City maintains three individual governmental funds. Information is presented separately in the governmental funds balance sheet and in the governmental funds statement of revenues, expenditures and changes in fund balances for the General Fund, the Capital Projects Fund, and the Special Revenue Funds.

9 Management s Discussion and Analysis The City adopts an annual appropriated budget for its General, Sewer, Water and Capital Funds. A budgetary comparison statement has been provided for the General Fund to demonstrate compliance with this budget. The basic governmental fund financial statements can be found on pages of this report. Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statements because the resources of these funds are not available to support the City s own programs. The City has two fiduciary funds. The Agency Fund is used to account for funds held by the City as agent for employees withholdings, monies due to other governments, and other miscellaneous items. The Private Purpose Trust is used to account for donated funds used for the purposes designated by the donors. The basic fiduciary funds financial statements can be found on page 27 of this report. Notes to the Basic Financial Statements provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The Notes can be found on pages of this report. GOVERNMENT-WIDE FINANCIAL ANALYSIS As noted earlier, net position may serve, over time, as a useful indicator of a government s financial position. In the case of the City, assets exceeded liabilities by $46,583,972 at the close of the fiscal year. The summary of the City s net position is on the following page.

10 Management s Discussion and Analysis Summary of City of North Tonawanda s Net Position- Table 1 Governmental Governmental Percent of Activities Activities Increase (Decrease) Current and other assets $ 23,777,456 $ 24,230, % Capital assets 59,351,998 58,297, % Total assets 83,129,454 82,527, % Deferred Outflows of Resources 3,756,803 - Total Deferred Outflows of Resources 3,756,803 - Current liabilities 3,127,840 3,632, % Long-term liabilities 34,266,296 34,189, % Total liabilities 37,394,136 37,822, % Deferred Inflows of Resources 2,908,149 2,816, % Total Deferred Inflows of Resources 2,908,149 2,816, % Net position: Net investment in capital assets 46,073,896 45,352, % Restricted 3,722,179 3,376, % Unrestricted (3,212,103) (3,543,004) -9.3% Total net position $ 46,583,972 $ 45,186, % The largest portion of the City s net position reflects its investment in capital assets of $46,073,896 (e.g. land, buildings, improvements, infrastructure, and equipment), less any related debt used to acquire those assets that are still outstanding. The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities.

11 Management s Discussion and Analysis Another portion of the City s net position represents restricted net position of $3,722,179 which is reserved for insurance, certain encumbrances, workers compensation, and debt. The remaining component of total net position is unrestricted, which consists of net position that does not meet the definition of net investment in capital assets or restricted. Unrestricted net position is $(3,212,103) at. Governmental activities. Governmental activities increased the City s net position by $1,397,871. Summary of City of North Tonawanda s Changes in Net Position- Table 2 Revenues: Program revenues: Percent of Increase (Decrease) Charges for services $ 9,521,447 $ 9,284, % Operating grants and contributions 3,447,556 3,441, % Capital grants and contributions 1,426,598 3,357, % General revenues: Property taxes 15,760,892 15,679, % Real property tax items 1,250,758 1,287, % Non-property tax items 9,149,735 8,776, % Use of money and property 320, , % Sale of property and compensation for loss 584, , % Miscellaneous 249,647 32, % Interfund Revenue 9,270 5, % State and Federal Aid 4,749,016 4,803, % Total revenues 46,469,876 47,343, %

12 Management s Discussion and Analysis Summary of City of North Tonawanda s Changes in Net Position- Table 2 (Continued) Percent of Increase (Decrease) Expenses: General government support $ 6,223,563 $ 4,643, % Public safety 16,020,200 18,670, % Transportation 7,056,858 9,553, % Economic assistance and opportunity 2,933,837 1,039, % Culture and recreation 2,971,339 3,307, % Home and community services 9,489,950 10,027, % Interest and fiscal charges 376, , % Total expenses 45,072,005 47,694, % Change in net position 1,397,871 (350,386) % Net position- beginning 45,186,101 45,536, % Net position - ending $ 46,583,972 $ 45,186, % Business-type activities. The City does not have any business type activities.

13 FINANCIAL ANALYSIS OF THE CITY S FUNDS Management s Discussion and Analysis As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance related legal requirements. Governmental Funds. The general governmental functions are contained in the General, Special Revenue and Capital Projects Funds. The focus of the City s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City s financing requirements. In particular, unassigned fund balance may serve as a useful measure of a government s net resources available for spending at the end of the fiscal year. At, the City s governmental funds reported combined fund balances of $18,164,390, an increase of $262,102 in comparison with the prior year. Approximately 26.6% of the combined fund balances, $4,838,664, constitutes unassigned fund balance, which is available to meet the City s current and future operational needs. Approximately 45.3% of the combined fund balances, $8,229,038 constitutes assigned fund balance which are available to meet specific current and future operational needs. The remainder of fund balance is restricted to indicate that it is not available for new spending because it has already been committed. The General Fund is the chief operating fund of the City. At, unassigned fund balance of the General Fund was $5,103,396, while total fund balance reached $8,812,388. As a measure of General Fund s liquidity, it may be useful to compare both unassigned fund balance and total fund balance to total fund expenditures. Unassigned fund balance represents 14.6% of total fund expenditures, while total fund balance also represents 25.2% of that same amount. Revenues for governmental functions totaled $46,469,876 in fiscal year ended, which represents a decrease of 1.9% from the fiscal year ended December 31, 2014.

14 Management s Discussion and Analysis The following table presents the amount of revenues from various sources, as well as, increases or decreases from the prior year: Revenues Classified by Source: Governmental Funds- Table 3 Amount of Percent of December 31, Percent of December 31, Increase Increase 2015 Amount Total 2014 Amount (Decrease) (Decrease) Revenues Real property taxes and tax items $ 17,011, % $ 16,966,524 $ 45, % Non-property tax items 9,149, % 8,776, , % Departmental income 8,585, % 8,461, , % Intergovernmental charges 267, % 207,697 59, % Use of money and property 320, % 324,175 (3,745) -1.16% Licenses and permits 290, % 275,282 15, % Fines and forfeitures 377, % 339,306 38, % Sale of property and compensation for loss 584, % 353, , % Miscellaneous 249, % 32, , % Interfund Revenue 9, % 5,044 4, % State and Federal Aid 9,623, % 11,602,588 (1,979,418) % Total Revenues $ 46,469, % $ 47,343,986 $ (874,110) -1.85% The following provides an explanation of revenues by source that changed significantly over the prior year: - Sale of property increased because there was no property tax sale in Miscellaneous increased because the city received VTL/Tribal Compact moneys from the County during the fiscal year end 12/31/15. - State and Federal Aid decreased due to the completion of two major state funded construction projects in 2014.

15 Management s Discussion and Analysis The following table presents expenditures, by function, compared to prior year amounts: Expenditures by Function: Governmental Funds Table 4 Amount of Percent of December 31, Percent of December 31, Increase Increase 2015 Amount Total 2014 Amount (Decrease) (Decrease) Expenditures: General governmental support $ 4,335, % $ 3,828,171 $ 507, % Public safety 10,208, % 10,209,779 (1,022) -0.01% Transportation 5,822, % 7,733,368 (1,910,878) % Economic assistance and opportunity 2,828, % 2,714, , % Culture and recreation 2,973, % 2,383, , % Home and community services 7,469, % 7,890,708 (420,992) -5.34% Employee benefits 12,550, % 12,433, , % Debt service: Principal 2,205, % 2,335,600 (130,600) -5.59% Interest 352, % 401,131 (48,819) % Total Expenditures $ 48,745, % $ 49,930,938 $ (1,185,062) The following provides an explanation of expenditures that changed significantly over the prior year: - Transportation increased due to the completion of two major construction projects in Culture and recreation increased due to the ongoing expense of Gratwick Riverside Marina, the installation of new kayak launches and the construction of the Erie Canal bike path.

16 Management s Discussion and Analysis Statement of Revenues, Expenditures and Changes in Fund Balance: Governmental Funds- Table 5 Special Capital General Revenue Projects Total Fund Balance at December 31, 2013 $ 10,068,667 $ 6,028,922 $ 2,261,650 $ 18,359,239 Revenues 33,508,776 10,348,081 3,487,129 47,343,986 Expenditures (34,341,316) (9,969,581) (5,620,040) (49,930,937) Excess (Deficiency) of Revenues over Expenditures (832,540) 378,500 (2,132,911) (2,586,951) Other Financing Sources (Uses), Net (66,403) 767 2,195,636 2,130,000 Excess (Deficiency) of Revenues and other Financing Sources over Expenditures (898,943) 379,267 62,725 (456,951) Fund Balance at December 31, ,169,724 6,408,189 2,324,375 17,902,288 Revenues 34,458,866 10,348,406 1,622,604 46,429,876 Expenditures (34,950,544) (9,929,181) (3,866,151) (48,745,876) Excess (Deficiency) of Revenues over Expenditures (491,678) 419,225 (2,243,547) (2,316,000) Other Financing Sources (Uses), Net 134,342 39,342 2,364,418 2,538,102 Excess (Deficiency) of Revenues and other Financing Sources over Expenditures (357,336) 458, , ,102 Fund Balance at $ 8,812,388 $ 6,866,756 $ 2,445,246 $ 18,124,390

17 Management s Discussion and Analysis GENERAL FUND BUDGETARY HIGHLIGHTS Differences between the total original budget and the final amended budget for the City of North Tonawanda are shown on page 25 and 26. CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets The City s investment in capital assets for its governmental activities as of, amounted to $59,351,998 (net of accumulated depreciation). This investment in capital assets includes land, land improvements, infrastructure, buildings, and machinery and equipment. Capital assets net of depreciation are presented below: Summary of City of North Tonawanda s Capital Assets (Net of Depreciation) - Table 6 Percent of Change Land $ 4,965,144 $ 5,397, % Work in Progress 736,899 5,500, % Buildings and improvements 24,265,186 24,212, % Machinery and equipment 18,844,825 5,220, % Land Improvements and Infrastructure 10,539,944 17,966, % Total $ 59,351,998 $ 58,297,336

18 Long-term Obligations Management s Discussion and Analysis At, the City had total long-term obligations that consisted of serial bonds combined with a Section 108 Loan, BANs included in long term obligations, workers compensation, amortized retirement contributions, local retirement incentive, compensated absences, and other postemployment benefits and net pension liability. A summary is as follows: Summary of Long-Term Obligations- Table Serial bonds $ 13,359,102 NYS retirement system 2,888,395 Local retirement incentive 105,000 Compensated absences 1,599,513 Workers' compensation 3,937,839 Other postemployment benefits 10,740,000 Net Pension Liability 1,636,447 Total long term obligations $ 34,266,296 New York State statutes limit the amount of general obligation debt a governmental entity may issue to 7% of its five-year valuation. The current debt-limitation for the City is $86,680,148, which is significantly greater than the City s outstanding general obligation debt. Since 2012, the City s general obligation debt has maintained an A1 rating from Moody s Investment Service. Additional information on the City s long-term obligations can be found on pages of the Notes to the Financial Statements. Request for Information This financial report is designed to provide a general overview of the City s finances for all those with an interest in the government s finances. Questions concerning any of the information provided in this report, or requests for additional financial information, should be addressed to the Office of the City Accountant, 216 Payne Avenue, North Tonawanda, New York

19 BASIC FINANCIAL STATEMENTS

20 Statement of Net Position Governmental ASSETS AND DEFERRED OUTFLOWS Activities ASSETS Cash $ 13,161,883 Receivables (Net of Allowances for Estimated Uncollectables): Taxes 3,738,885 Accounts 2,895,767 State and Federal 1,466,187 Due from Other Governments 1,140,225 Prepaid Expenses 1,374,509 Capital Assets: Land 4,965,144 Work in Progress 736,899 Other Capital Assets, Net of Depreciation 53,649,955 Total Assets 83,129,454 DEFERRED OUTFLOWS OF RESOURCES Pensions 3,756,803 Total Deferred Outflows of Resources 3,756,803 Total Assets and Deferred Outflows of Resources $ 86,886,257

21 Statement of Net Position Governmental LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND NET POSITION Activities Liabilities: Accounts Payable $ 1,573,689 Accrued Liabilities 231,961 Accrued Interest 144,744 Due to Other Governments 1,177,446 Long-term Liabilities: Due within one year 16,674,626 Due in more than one year 15,955,223 Net Pension Liability- Proportionate Share 1,636,447 Total Liabilities 37,394,136 Deferred Inflows of Resources: Pensions 278,179 Unavailable Revenue- Property Taxes 2,629,970 Total Deferred Inflows of Resources 2,908,149 Net Position: Net Investment in Capital Assets 46,073,896 Restricted 3,722,179 Unrestricted (3,212,103) Total Net Position 46,583,972 Total Liabilities, Deferred Inflows of Resources and Net Position $ 86,886,257

22 Statement of Activities Net (Expense) Charges Operating Capital Grants Revenue and for Grants and And Changes in Expenses Services Contributions Contributions Net Position Functions/Programs: Governmental Activities: General Government Support $ (6,223,563) $ 459,516 $ - $ - $ (5,764,047) Public Safety (16,020,200) 450,044 33,673 11,241 (15,525,242) Health - 19, ,578 Transportation (7,056,858) 164, , ,100 (6,405,792) Economic Assistance and Opportunity (2,933,837) 100, , ,055 (1,656,511) Culture and Recreation (2,971,339) 1,344, ,123 - (1,512,363) Home and Community Services (9,489,950) 6,982,227 2,861, , ,231 Interest and Fiscal Charges (376,258) (376,258) Total Governmental Activities $ (45,072,005) $ 9,521,447 $ 3,447,556 $ 1,426,598 (30,676,404) General Revenues: Property Taxes Levied for General Purposes 15,760,892 Real Property Tax Items 1,250,758 Non-property Tax Items 9,149,735 Use of Money and Property 320,430 Sales of Property and Compensation for Loss 584,527 Miscellaneous 249,647 Interfund Revenues 9,270 State and Federal Aid 4,749,016 Total General Revenues 32,074,275 Change in Net Position 1,397,871 Total Net Position at Beginning of Year (Restated) 45,186,101 Total Net Position of End of Year $ 46,583,972

23 GOVERNMENTAL FUNDS Balance Sheet ASSETS Total Special Capital Governmental General Revenue Projects Funds Cash $ 7,165,706 $ 5,015, ,882 $ 13,161,883 Receivables (Net of Allowances for Estimated Uncollectables): Taxes 3,738, ,738,885 Accounts 272,013 2,523,754-2,795,767 State and Federal 165,759-1,300,428 1,466,187 Due from Other Funds 757,573 5,983 16, ,440 Due from Other Governments 740, ,000 1,140,225 Prepaid Expenses 922,097 63, ,003 1,374,509 Total Assets $ 13,762,258 $ 7,608,441 $ 3,087,197 $ 24,457,896

24 GOVERNMENTAL FUNDS Balance Sheet LIABILITIES, DEFERRED INFLOWS AND FUND BALANCES Total Special Capital Governmental General Revenue Projects Funds Liabilities: Accounts Payable $ 947,225 $ 295,300 $ 331,164 $ 1,573,689 Accrued Liabilities 178,345 53, ,961 Due to Other Funds 16,884 6, , ,240 Due to Other Governments 1,177, ,177,446 Total Liabilities 2,319, , ,951 3,277,336 Deferred Inflows of Resources: Unavailable Revenue- Property Taxes 2,629, ,629,970 Total Deferred Inflows of Resources 2,629, ,629,970 Fund Balances: Non-Spendable 922,097 63, ,003 1,374,509 Restricted Fund Balance 1,543,676 82,260 2,096,243 3,722,179 Assigned Fund Balance 1,243,219 6,985,819-8,229,038 Unassigned Fund Balance 5,103,396 (264,732) - 4,838,664 Total Fund Balances 8,812,388 6,866,756 2,485,246 18,164,390 Total Liabilities, Deferred Inflows and Fund Balances $ 13,762,258 $ 7,222,241 $ 3,087,197 $ 24,071,696

25 Reconciliation of Statement of Net Position to Governmental Fund Balances Governmental Activities Amounts Reported for Governmental Activities in the Statement of Net Position are Different Because: Total Governmental Fund Balances $ 18,164,390 Capital assets are not financial resources and therefore not reported in the funds Capital Assets 110,105,541 Depreciation (50,753,543) Deferred Outflows of Employees Retirement System Liability 1,684,246 Deferred Outflows of Police and Fire Retirement System Liability 2,072,557 63,108,801 Long-term liabilities that are not due and payable in the current period and therefore are not reported within the funds: Bonds Payable (7,570,000) BANs payable, classed as long-term debt (5,708,102) Section 108 Loan Payable (81,000) NYS Retirement System (2,888,395) Local Retirement Incentive (105,000) Compensated Absences (1,599,513) Accrued Workers' Compensation Obligation (3,937,839) Other Postemployment Benefits (10,740,000) Deferred Inflows of Police and Fire Retirement System (278,179) Proportionate Share of Employees Retirement System Liability (902,122) Proportionate Share of Police and Fire Retirement System Liability (734,325) (34,544,475) Interest accrual on long-term debt, which is not recognized in the funds until it is paid (144,744) Net Position of Governmental Activities $ 46,583,972

26 GOVERNMENTAL FUNDS Statement of Revenues, Expenditures and Changes in Fund Balances For the Year Ended Revenues: Total Special Capital Governmental General Revenue Projects Funds Real Property Taxes $ 15,760,892 $ - $ - $ 15,760,892 Real Property Tax Items 1,250, ,250,758 Non-property Tax Items 9,149, ,149,735 Departmental Income 1,650,787 6,935,178-8,585,965 Intergovernmental Charges 81, , ,583 Use of Money and Property 93, , ,430 Licenses and Permits 290, ,453 Fines and Forfeitures 377, ,446 Sale of Property and Compensation for Loss 574,659 9, ,527 Miscellaneous 212,828-36, ,647 Interfund Revenue 9, ,270 State Aid 4,986, ,837 1,428,129 6,729,745 Federal Aid 20,432 2,861,752 11,241 2,893,425 Total Revenues 34,458,866 10,348,406 1,662,604 46,469,876

27 GOVERNMENTAL FUNDS Statement of Revenues, Expenditures and Changes in Fund Balances For the Year Ended Expenditures: Current: Total Special Capital Governmental General Revenue Projects Funds General Government Support $ 4,256,690 $ 42,985 $ 35,895 $ 4,335,570 Public Safety 10,009, ,278 10,208,757 Transportation 4,086,336-1,736,154 5,822,490 Economic Assistance and Opportunity 58,207 2,755,734 14,099 2,828,040 Culture and Recreation 2,112, ,445 2,973,229 Home and Community Services 1,458,046 4,991,390 1,020,280 7,469,716 Employee Benefits 11,178,568 1,372,194-12,550,762 Debt Service - Principal 1,560, ,000-2,205,000 Debt Service - Interest 230, , ,312 Total Expenditures 34,950,544 9,929,181 3,866,151 48,745,876 Excess (Deficiency) of Revenues Over Expenditures (491,678) 419,225 (2,203,547) (2,276,000) Other Sources and (Uses): Proceeds of Obligations - - 2,538,102 2,538,102 Transfers from Other Funds 203,670 50,000 19, ,998 Transfers to Other Funds (69,328) (10,658) (193,012) (272,998) Total Other Sources and (Uses) 134,342 39,342 2,364,418 2,538,102 Net Change in Fund Balances (357,336) 458, , ,102 Fund Balance at Beginning of Year 9,169,724 6,408,189 2,324,375 17,902,288 Fund Balance at End of Year $ 8,812,388 $ 6,866,756 $ 2,485,246 $ 18,164,390

28 GENERAL FUND Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balance- Governmental Funds For the Year Ended Amounts Reported for Governmental Activities in the Statement of Activities are Different Because: Governmental Activities Net change in fund balances - total governmental funds $ 262,102 Debt service principal recorded as an expenditure for the governmental funds but it is not recorded in the statement of activities. Debt service principal payments are reductions in liabilities. 1,595,000 Capital outlay expenditures for capital assets are recorded in governmental funds as expenditures. Such expenditures are not recorded in the statement of activities because they are recorded as capital assets. 3,501,465 Depreciation recorded on the statement of activities but not in statement for governmental funds. (2,446,803) The issuance of long-term debt is recorded as a revenue on the governmental funds but not on the statement of activities. (1,928,102) Net payment of long-term retirement payable expensed in statement for governmental funds but not in statement of activities. 524,717 Debt service principal recorded as an expenditure for the governmental funds but it is not recorded in the statement of activities. Debt service principal payments are reductions in liabilities. 14,000 Net payment of long-term local retirement payable expensed in statement for governmental funds but not in statement of activities. 105,000 Net change in compensated absences not reflected in governmental funds. (69,157) Net accrued workers' compensation liability 460,973 Net accrued interest for bonds not reported in funds. (23,946) Accrued post-employment benefit obligation liability increases long-term liabilities in the statement of net position and related expenditures in the statement of activities, but not to governmental funds. Net post-employment benefit contribution is an expenditure in governmental funds, but the contribution reduces long-term liabilities in the statement of net position. This is the amount by which accrued post-employment benefit liability adjustment exceeds the contribution. (1,460,000) Change in deferred outflows of Employees Retirement System 244,397 Change in deferred outflows of Police and Fire Retirement System 215,530 Change in deferred inflows of Police and Fire Retirement System (278,179) Proportionate share of Employees Retirement System liability 304,588 Proportionate share of Police and Fire Retirement System liability 376,286 Change in Net Position of Governmental Activities $ 1,397,871

29 GENERAL FUND Statement of Revenues, Expenditures and Changes in Fund Balance- Budget and Actual For the Year Ended Original Final Budgetary Variance Budget Budget Actual Final Budget Revenues: Real Property Taxes $ 15,786,139 $ 15,786,139 $ 15,760,892 $ (25,247) Real Property Tax Items 1,175,000 1,175,000 1,250,758 75,758 Non-property Tax Items 9,515,000 9,515,000 9,149,735 (365,265) Departmental Income 1,492,506 1,512,506 1,650, ,281 Intergovernmental Charges 90,062 95,262 81,168 (14,094) Use of Money and Property 123, ,000 93,659 (29,341) Licenses and Permits 284, , ,453 5,853 Fines and Forfeitures 244, , , ,446 Sale of Property and Compensation for Loss 695, , ,659 (120,541) Miscellaneous 1, , ,828 77,818 Interfund Revenues 30,500 30,500 9,270 (21,230) State Aid 4,963,940 5,087,241 4,986,779 (100,462) Federal Aid 16,000 18,096 20,432 2,336 Total Revenues 34,416,957 34,701,554 34,458,866 (242,688)

30 GENERAL FUND Statement of Revenues, Expenditures and Changes in Fund Balance- Budget and Actual For the Year Ended Original Final Budgetary Variance Budget Budget Actual Final Budget Expenditures: Current: General Government Support $ 4,150,494 $ 4,657,973 $ 4,256,690 $ 401,283 Public Safety 10,155,301 10,274,346 10,009, ,867 Transportation 4,213,809 4,195,309 4,086, ,973 Economic Opportunity and Development 63,200 63,550 58,207 5,343 Culture and Recreation 1,914,120 2,052,086 2,112,784 (60,698) Home and Community Services 1,419,638 1,478,488 1,458,046 20,442 Employee Benefits 12,963,986 12,274,736 11,178,568 1,096,168 Debt Service - Principal 1,595,000 1,570,050 1,560,000 10,050 Debt Service - Interest 246, , ,434 12,195 Total Expenditures 36,721,957 36,809,167 34,950,544 1,858,623 Excess (Deficiency) of Revenues Over Expenditures (2,305,000) (2,107,613) (491,678) (1,615,935) Other Sources and (Uses): Transfers from Other Funds 250, , ,670 46,330 Transfers to Other Funds - (75,000) (69,328) (5,672) Total Other Sources and (Uses) 250, , ,342 40,658 Net Change in Fund Balances (2,055,000) (1,932,613) (357,336) 1,575,277 Fund Balance at January 1, ,169,724 9,169,724 9,169,724 - Fund Balance at $ 7,114,724 $ 7,237,111 $ 8,812,388 $ 1,575,277

31 FIDUCIARY FUNDS Statement of Fiduciary Net Position Private Purpose Trust Agency Fund Assets: Cash and Cash Equivalents $ 149,987 $ 272,175 Total Assets $ 149,987 $ 272,175 Liabilities: Agency Liabilities $ 49,987 $ 272,175 Due to Other Funds 100,000 - Total Liabilities 149, ,175 Net Position $ - $ - Total Liabilities and Net Position $ 149,987 $ 272,175

32 Note 1 - Summary of Significant Accounting Policies Notes to the Financial Statements The financial statements of the City of North Tonawanda, New York (the "City") have been prepared in conformity with accounting principles generally accepted in the United States of America as applied to governmental units. The Governmental Accounting Standards Board (GASB) is the accepted standard setting body for establishing governmental accounting and financial reporting principles. The more significant of the City's accounting policies are described below. Financial Reporting Entity - The City of North Tonawanda, New York, which was incorporated in 1897, is governed by City Law and other general laws of the State of New York and various local laws and ordinances. The Common Council is the legislative body responsible for overall operations of the City. The Mayor serves as Chief Executive Officer and the City Treasurer as the Chief Fiscal Officer of the City. The City provides the following basic services: general government support, police protection and law enforcement, fire protection, safety inspection, highway maintenance, culture, recreation programs, street lighting, refuse collection, water, and wastewater. All governmental activities and functions performed for the City of North Tonawanda are its direct responsibility. No other governmental organizations have been included or excluded from the reporting entity. The financial reporting entity consists of (a) the primary government which is the City of North Tonawanda, (b) organizations for which the primary government is financially accountable, and (c) other organizations for which the nature and significance of their relationship with the primary government are such that exclusion would cause the reporting entity's financial statements to be misleading or incomplete as set forth in GASB Statement 61. Government-wide and Financial Statements - The government-wide financial statements (i.e., the statement of net position and the statement of activities) report information on all of the non-fiduciary activities of the government. The effects of interfund activity have been removed from these statements. Government activities are normally supported by taxes and intergovernmental revenues.

33 Note 1 - Summary of Significant Accounting Policies (Cont.) Notes to the Financial Statements The statement of activities demonstrates the degree to which the direct expenses of a given function or segment is offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include: (1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function, and (2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function. Taxes and other items not properly included among program revenues are reported instead of general revenues. Separate financial statements are provided for governmental funds and fiduciary funds, even though the latter are excluded from the government-wide financial statements. Major individual governmental funds are reported as separate columns in the fund financial statements. Measurement Focus, Basis of Accounting and Financial Statement Presentation - Measurement focus is the determination of what is expressed in reporting an entity s financial performance and position, (i.e., expenditures or expenses). A particular measurement focus is accomplished both by considering what resources will be measured and the basis of accounting. Basis of accounting refers to when revenues, expenditures/expenses, and the related assets and liabilities are recognized in the accounts and reported in the financial statements. Basis of accounting relates to timing of the measurements made, regardless of the measurement focus. Accrual Basis - Under the accrual basis of accounting, revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Modified Accrual Basis - Under this basis of accounting, revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the City considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Revenues from federal, state, or other grants designated for specific City expenditure are recognized when the related expenditures are incurred.

34 Notes to the Financial Statements Note 1 - Summary of Significant Accounting Policies (Cont.) Measurement Focus, Basis of Accounting and Financial Statement Presentation (Cont.) - Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due and expenditures for inventory-type items and for prepayments (except retirement) are recognized at the time of the disbursements. The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the fiduciary fund financial statements. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Property taxes associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. All other revenue items are considered to be measurable and available only when cash is received by the government. The City reports the following major governmental funds: General Fund - The principal operating fund that includes all operations not required to be recorded in other funds. Special Revenue Funds - used to account for the proceeds of specific revenue sources that are legally restricted to expenditures for specified purposes. The following Special Revenue Funds are utilized: Water Fund - This fund accounts for the revenues and expenditures derived from providing water services to City residents. Sewer Fund - This fund accounts for the revenues and expenditures derived from providing sanitary sewer services to City residents. Special Grant Fund - This fund is used to account for the grant proceeds that are made available to the City by the United States Department of Housing and Urban Development. Capital Projects Fund - Used to account for financial resources to be used for the acquisition or construction of major capital facilities.

35 Note 1 - Summary of Significant Accounting Policies (Cont.) Notes to the Financial Statements Measurement Focus, Basis of Accounting and Financial Statement Presentation (Cont.) Agency Fund - Used to account for money and property received and held in the capacity of custodian or agent. The Agency Fund is custodial in nature and does not involve measurement of results of operations. Agency funds, such as payroll withholdings, are reported as liabilities. Private Purpose Trust - Used to account for donated funds used for the purposes designated by the donors. Government-wide financial statements apply all applicable Governmental Accounting Standards Board ( GASB ) pronouncements issued on or before November 30, 1989, unless those pronouncements conflict with or contradict GASB pronouncements: Statements and Interpretations of the Financial Accounting Standards Board ( FASB ), Accounting Principles Board ( APB ) Opinions, and Accounting Research Bulletins ( ARB's ) of the Committee on Accounting Procedure. As a general rule, the effect of interfund activity has been eliminated from the government-wide financial statements. Amounts reported as program revenues include: (1) charges to customers or applicants for goods, services, or privileges provided, (2) operating grants and contributions, and (3) capital grants and contributions. General revenues are those that cannot be associated directly with program activities. When both restricted and unrestricted resources are available for use, it is the government s policy to use restricted resources first, then unrestricted resources as they are needed. Property Tax Revenue Recognition - Property taxes attach an enforceable lien on property as of December 31. Taxes are levied on April 1. The City bills and collects its own taxes and also serves as collector of Niagara County and North Tonawanda City School District property taxes. City property tax revenues are recognized when levied to the extent that they result in current receivables. The City is responsible for School District taxes reaching fourteen months delinquency. An allowance for uncollectible taxes has been recorded for those property taxes, which have been deemed to be uncollectible. The City may not annually levy taxes, other than the debt service on City indebtedness in excess of 2% of the average full valuation of taxable real estate in the City for the previous years. This maximum taxing power for the year ended amounted to $24,765,757. The 2015 tax levy of $15,786,139, less $2,095,709 in exclusions, represents approximately 55.3% of the maximum taxing power.