TOWNSHIP OF POHATCONG REPORT OF AUDIT

Transcription

1 COUNTY OF WARREN REPORT OF AUDIT 2013 NISIVOCCIA LLP CERTIFIED PUBLIC ACCOUNTANTS

2 COUNTY OF WARREN REPORT OF AUDIT 2013

3 TABLE OF CONTENTS YEAR ENDED DECEMBER PART I-Financial Statements and Supplementary Data Independent Auditors' Report Financial Statements Current Fund Comparative Balance Sheet Comparative Statement of Operations and Change in Fund Balance Statement of Revenue Statement of Expenditures Trust Funds Comparative Balance Sheet Statement of Fund Balance - Assessment Trust Fund (Not Applicable) Statement of Revenue - Assessment Trust Fund (Not Applicable) Statement of Expenditures - Assessment Trust Fund (Not Applicable) General Capital Fund Comparative Balance Sheet Statement of Fund Balance Water Utility Fund enot Applicable) Sewer Utility Fund Comparative Balance Sheet Comparative Statement of Operations and Changes in Fund Balance - Sewer Utility Operating Fund Statement of Fund Balance - Sewer Utility Capital Fund Statement of Revenue - Sewer Utility Operating Fund Statement of Expenditures - Sewer Utility Operating Fund Public Assistance Fund Comparative Balance Sheet Notes to Financial Statements Supplementary Data Officials in Office and Surety Bonds Current Fund Schedule of Cash - Treasurer Schedule of Cash - Collector Schedule of Cash - Federal and State Grant Fund (Not Applicable) Schedule of Taxes Receivable and Analysis of Property Tax Levy Schedule of Tax Title Liens Receivable Schedule of Revenue Accounts Receivable Statement of 2012 Appropriation Reserves Schedule of Local School District Taxes Payable Schedule of Grants Receivable - Federal and State Grant Fund Schedule of Appropriated Reserves - Federal and State Grant Fund Schedule of Unappropriated Reserves - Federal and State Grant Fund Trust Funds Schedule of Cash - Treasurer Analysis of Cash - Assessment Trust Fund (Not Applicable) Schedule of Reserve for Animal Control Fund Expenditures - Animal Control Fund 1-3 A A-I A-2 A-3 B B-1 B-2 B-3 C C-l D E E-l E-IA E-2 E-3 F Page 1-16 Schedule 1 A-4 A-5 A-6 A-7 A-8 A-9 A-I0 A-ll A-12 A-13 A-14 B-4 B-5 B-6

4 TABLE OF CONTENTS YEAR ENDED DECEMBER (Continued) PART I -Financial Statements and Supplementary Data (Cont'd) Supplementary Data General Capital Fund Schedule of Cash Analysis of Cash Schedule of Deferred Charges to Future Taxation - Unfunded Schedule of Improvement Authorizations Schedule of Capital Improvement Fund Schedule of Bond Anticipation Notes Payable (Not Applicable) Schedule of Serial Bonds Payable Schedule of NJ Green Acres Loan Payable Schedule of Bonds and Notes Authorized But Not Issued Water Utility Fund (Not AI!I!licable) Sewer Utility Fund Schedule of Cash - Treasurer Analysis of Cash - Sewer Utility Capital Fund Schedule of Cash - Sewer Collector - Sewer Utility Operating Fund Schedule of Consumer Accounts Receivable - Sewer Utility Operating Fund Schedule of Fixed Capital - Sewer Utility Capital Fund Schedule of Fixed Capital Authorized and Uncompleted - Sewer Utility Capital Fund Schedule of Appropriation Reserves - Sewer Utility Operating Fund Schedule of Improvement Authorizations - Sewer Utility Capital Fund Schedule of Capital Improvement Fund - Sewer Utility Capital Fund Schedule of Reserve for Amortization - Sewer Utility Capital Fund Schedule of Deferred Reserve for Amortization - Sewer Utility Capital Fund Schedule of Serial Bonds Payable - Sewer Utility Capital Fund (Not Applicable) Schedule of Loans Payable Schedule of Bonds and Notes Authorized but not Issued - Sewer Utility Capital Fund (Not Applicable) Public Assistance Fund Schedule of Cash - Treasurer PART II - Single Audit Schedule of Expenditures of Federal Awards Schedule of Expenditures of State Awards Notes to Expenditures of Federal and State Awards 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 Schedule of Findings and Responses Summary Schedule of Prior Audit Findings PART III - Comments and Recommendations Comments and Recommendations Summary of Recommendations Schedule C-2 C-3 C-4 C-5 C-6 C-7 C-8 C-9 C-I0 D E-4 E-5 E-6 E-7 E-8 E-9 E-IO E-Il E-12 E-13 E-14 E-15 E-16 E-17 F-l

5 TOWNSHIP OF POHA TCONG PART I INDEPENDENT AUDITOR'S REPORT AND FINANCIAL STATEMENTS AND SUPPLEMENTARY SCHEDULES YEAR ENDED DECEMBER 31, 2013

6 I I vue C I A LLP Certified Public Accountants & Advisors ON I S Mount Arlington Corporate Center 200 Valley Road, Suite 300 Mt. Arlington. NJ Fax Lawrence Business Center 11 Lawrence Road Newton, NJ Fax May 16, 2014 Independent Auditors' Report The Honorable Mayor and Members of the Township Committee Township of Pohatcong Pohatcong, New Jersey Report on the Financial Statements We have audited the financial statements - regulatory basis - of the various funds of the Township of Pohatcong, in the County of Warren (the "Township") as of and for the years ended December 31, 2013 and 2012, and the related notes to the financial statements, as listed in the foregoing 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 practices prescribed or permitted by the Division of Local Government Services, Department of Community Affairs, State of New Jersey (the "Division") to demonstrate compliance with the Division's regulatory basis of accounting, and the budget laws of New Jersey. Management is also responsible for 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. Auditors' Responsibility Our responsibility is to express opinions on these financial statements based on our audits. Except as discussed in the eighth paragraph, we conducted our audits in accordance with auditing standards generally accepted in the United States of America, audits requirements prescribed by the Division, 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 audits to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Township'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 Township's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. Independent Member of BKR International

7 The Honorable Mayor and Members of the Township Council Township of Pohatcong Page 2 2 We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Basis for Adverse Opinion on U.S. Generally Accepted Accounting Principles As described in Note 1, these financial statements are prepared by the township on the basis of accounting practices prescribed or permitted by the Division to demonstrate compliance with the Division's regulatory basis of accounting and the budget laws of New Jersey, which is a basis of accounting other than accounting principles generally accepted in the United States of America. The effects on the financial statements of the variances between the regulatory basis of accounting described in Note 1 and accounting principles generally accepted in the United States of America, although not reasonably determinable, are presumed to be material. Adverse Opinion on U.S. Generally Accepted Accounting Principles In our opinion, because of the significance of the matter discussed in the Basis for the Adverse Opinion on U.S. Generally Accepted Accounting Principles paragraph, the financial statements referred to above, do not present fairly, in conformity with accounting principles generally accepted in the United States of America, the financial position of the Township as of December 31, 2013 and 2012, or the changes in financial position or where applicable, cash flows thereof for the years then ended. Basis for Qualified Opinion The financial statements - regulatory basis - of the various funds of the Township do not include the general fixed assets account group, which should be included to conform with the Technical Accounting Directives prescribed by the Division. As described in Note 1, the amount that should be recorded in the general fixed assets group cannot be determined. Qualified Opinion on Regulatory Basis of Accounting In our opinion, except for the effects on the December 31,2013 and 2012 financial statements of the matter described in the Basis for Qualified Opinion paragraph, the financial statements - regulatory basis - referred to above present fairly, in all material respects, the financial position of the various funds of the Township of Pohatcong at December 31,2013 and 2012, and the results of operations and changes in fund balance, where applicable, of such funds, thereof for the years then ended on the basis of accounting practices prescribed or permitted by the Division to demonstrate compliance with the Division's regulatory basis of accounting and the budget laws of New Jersey, as described in Note 1. Other Matters Supplementary Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Township's financial statements. The supplementary data schedules listed in the table of contents are presented for purposes of additional analysis and are not a required part of the financial statements. The accompanying schedules of expenditures of federal and state awards, as required by the U. S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-profit Organizations; and New Jersey's OMB Circular 04-04, Single Audit Policy for Recipients of Federal Grants, State Grants and State Aid, are also presented for purposes of additional analysis and are not a required part of the financial statements.

8 The Honorable Mayor and Members of the Township Council Township of Pohatcong Page 3 3 The supplementary data schedules and the schedules of expenditures of federal and state awards are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the financial statements. Such 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 supplementary data schedules and the schedules of expenditures of federal and state awards are fairly stated, in all material respects, in relation to the 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 16, 2014 on our consideration of the Township of Pohatcong's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Township of Pohatcong' s internal control over financial reporting and compliance. Mount Arlington, New Jersey May 16,2014 NISIVOCCIA LLP -~~~- William F. Schroeder Registered Municipal Accountant No. 452 Certified Public Accountant

9 COUNTY OF WARREN 2013 CURRENT FUND

10 CURRENT FUND COMPARATIVE BALANCE SHEET - REGULATORY BASIS A lof2 ASSETS December 31, Ref Regular Fund: Cash and Cash Equivalents A-4 $ 2,567, $ 3,078, Change Funds ,567, ,078, Receivables and Other Assets with Full Reserves: Delinquent Taxes Receivable A-7 205, , Tax Title Liens Receivable A-8 183, , Property Acquired for Taxes - Assessed Valuation 335, , Revenue Accounts Receivable A-9 64, , Due from Animal Control Fund B 5, , Due from Other Trust Funds B 63, , Due from Sewer Utility Operating Fund E 178, , Due from Public Assistance Fund F Due from Payroll Account 10, Total Receivables and Other Assets with Full Reserves 1,036, ,078, Deferred Charges: Overexpenditure of Appropriations A-3 98, , Expenditures without an Appropriation 33, , Emergency Authorizations 226, Total Deferred Charges 131, , Total Regular Fund 3,735, ,417, Federal and State Grant Fund: Due from Current Fund A 11, , Grants Receivable A , , Total Federal and State Grant Fund 223, , TOTAL ASSETS $ 3,958, $ 4,729,251.67

11 CURRENT FUND COMPARATIVE BALANCE SHEET - REGULATORY BASIS (Continued) A 20f2 LIABILITIES. RESERVES AND FUND BALANCE Ref December 31, 2012 Regular Fund: Appropriation Reserves: Unencumbered A-3;A-IO $ 171, Encumbered A-3;A-IO 274, Total Appropriation Reserves 446, Accounts Payable - Vendors 13, Prepaid Taxes 75, County Taxes Payable 2, Due to State of New Jersey: Senior Citizen and Veterans Deductions 10, Marriage License Fees DCA Training Fees Due to Federal and State Grant Fund A 11, Due to General Capital Fund C 182, Due to Payroll Account 4, Due to Greenwich Township - Red Light Camera Revenue Reserve for Garden State Trust 746, $ 231, , , , , , , , , , , ,170, Reserve for Receivables and Other Assets A 1,036, Fund Balance A-I 1,952, Total Regular Fund 3,735, ,078, ,168, ,417, Federal and State Grant Fund: Encumbrances Payable - Grants A-13 1, Due to General Capital Fund C 120, Appropriated Grant Reserves A-13 80, Unappropriated Grant Reserves A-14 21, Total Federal and State Grant Fund 223, TOTAL LIABILITIES, RESERVES AND FUND BALANCE $ 3,958, $ 49, , , , , ,729, THE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THIS STATEMENT

12 CURRENT FUND COMPARATIVE STATEMENT OF OPERATIONS AND CHANGE IN FUND BALANCE - REGULATORY BASIS A-I lof2 Year Ended December 31, Ref Revenue and Other Income Realized Fund Balance Utilized Miscellaneous Revenue Anticipated Receipts from: Delinquent Taxes Current Taxes Nonbudget Revenue Other Credits to Income: Increase in Deferred School Tax Cancellation of Reserve for Sale of Municipal Assets Interfunds Returned Unexpended Balance of Appropriation Reserves $ 1,484, ,304, , ,354, , , , , $ 812, ,496, , ,646, , , , , , Total Income 16,106, ,071, Expenditures Budget Appropriations: Municipal Purposes Municipal Open Space Tax County Taxes Local School District Taxes Prior Year Senior Citizen Deductions Disallowed Refund of Prior Year Revenue Expenditure without an Appropriation Due Greenwich Township - Red Light Camera Revenue Interfunds Advanced Total Expenditures 5,753, , ,709, ,038, , , , ,936, ,840, , ,780, ,918, , , , , ,328, Excess in Revenue 1,170, ,742, Adjustment to Income Before Fund Balance: Expenditures Included above Which are by Statute Deferred Charges to Budget of Succeeding Year: Emergency Authorization Expenditure without an Appropriation Overexpenditure of Appropriations 98, , , , , ,822.25

13 CURRENT FUND COMPARATIVE STATEMENT OF OPERATIONS AND CHANGE IN FUND BALANCE - REGULATORY BASIS (Continued) A-I 20f2 Year Ended December 31, Statutory Excess to Fund Balance $ 1,268, $ 2,003, Fund Balance Balance January I 2,168, ,437, Decreased by: Utilized as Anticipated Revenue 1,484, Balance December 31 A $ 1,952, , ,980, , $ 2, I 68, THE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF TillS STATEMENT

14 CURRENT FUND STATEMENT OF REVENUE - REGULATORY BASIS YEAR ENDED DECEMBER 31, 2013 A-2 lof4 Budget Added by NJSA 40A:4-87 Realized Excess or Deficit* Fund Balance Anticipated $ 1,484, $ 1,484, Miscellaneous Revenue: Licenses: Alcoholic Beverages Fines and Costs: Municipal Court Interest and Costs on Taxes Interest on Investments and Deposits Consolidated Municipal Property Tax Relief Aid Energy Receipts Taxes Garden State Trust Fund Reserve for Recycling Tonnage Grant Reserve for Drunk Driving Enforcement Fund Safe and Secure Communities Program Reserve for Body Armor Replacement Grant Police Forfieture Fund Reserve for Obey The Signs or Pay The Fines Grant Reserve for Walmart Grant 7, , , , , , , , , , , , , , , , , , , , , , , , , , , , $ * 337, , Total Miscellaneous Revenue 945, ,304, , o :>...".".tv

15 CURRENT FUND STATEMENT OF REVENUE - REGULATORY BASIS YEAR ENDED DECEMBER (Continued) A-2 20f4 Budget Added by NJSA 40A:4-87 Realized Excess or Deficit* Receipts from Delinquent Taxes $ 230, $ 226, $ 3, * Amount to be Raised by Taxes for Support of Municipal Budget: Local Tax for Municipal Purposes 3,667, ,086, , Budget Totals 6,327, ,101, $ 773, Nonbudget Revenue 208, $ 6,327, $ -0- $ 7,309, tv 0>...".".tv

16 CURRENT FUND STATEMENT OF REVENUE - REGULATORY BASIS YEAR ENDED DECEMBER (Continued) A-2 30f4 Analysis of Realized Revenue Allocation of Current Tax Collections: Collection of Current Taxes Allocated to: School and County Taxes Municipal Open Space Taxes Add: Appropriation "Reserve for Uncollected Taxes" $ 8,748, , $ 12,354, ,928, ,426, , Realized for Support of Municipal Budget $ 4,086, Analysis of Delinguent Taxes: Taxes Receivable Tax Title Liens Receivable $ 225, , $ 226, Analysis of Interest on Investments and Dellosits Collected I Received by Treasurer Due from Animal Control Fund Due from Other Trust Funds Due from Public Assistance Fund $ 1, $ 1,534.02

17 CURRENT FUND STATEMENT OF REVENUE - REGULATORY BASIS YEAR ENDED DECEMBER (Continued) A-2 40f4 Analysis of Nonbudget Revenue Miscellaneous Revenue Not Anticipated: Treasurer: Cable T.V. Franchise Fee Land Use Fees Fees and Permits State Housing Services Administrative Fee FEMA Reimbursements Other Receipts $ 12, , , , , , , $ 203, Collector 5, $ 208, THE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF TillS STATEMENT

18 A-3 lof7 TOWNSHIP OF POHATCONG CURRENT FUND STATEMENT OF EXPENDITURES - REGULATORY BASIS YEAR ENDED DECEMBER 31, 2013 Appropriations Expended By Budget After Paid or Budget Modification Charged Reserved Overexpenditure Unexpended Balance Cancelled Operations Within "CAPS": GENERAL GOVERNMENT: General Administration: Other Expenses Mayor and Council: Salaries and Wages Other Expenses Municipal Clerk: Salaries and Wages Other Expenses Elections: Salaries and Wages Other Expenses Financial Administration: Salaries and Wages Other Expenses Audit Grant Administrator: Other Expenses Collection of Taxes: Salaries and Wages Other Expenses Assessment Search Officer: Salaries and Wages Assessment of Taxes: Salaries and Wages Other Expenses Legal Services and Costs: Other Expenses - Fees $ 48, $ 55, , , , , , , ,00 2, ,300,00 39, , , , , , , , , , , , , , ,510,00 22, , ,900,00 80, , $ 68,767,64 9, , , , , , , , , , , , , $ 1, , , , ,003, , $ 13, o :> ""',...,w

19 CURRENT FUND STATEMENT OF EXPENDITURES - REGULATORY BASIS YEAR ENDED DECEMBER 31, 2013 (Continued) A-3 20f7 Operations Within "CAPS" (Continued): GENERAL GOVERNMENT (Continued): Engineering Services and Costs: Other Expenses Historical Prevention Commission: Salaries and Wages Other Expenses LAND USE ADMINISTRATION: Planning Board: Salaries and Wages Other Expenses INSURANCE: Group Insurance for Employees Other Insurance Premiums PUBLIC SAFETY FUNCTIONS: Police: Salaries and Wages Other Expenses Emergency Management: Salaries and Wages Other Expenses First Aid Contribution: Phillipsburg Emergency Squad Bloomsbury Emergency Squad Fire: Fire Hydrant Pohatcong Fire Dept Municipal Prosecutor: Salaries and Wages Appropriations Expended By Budget After Paid or Budget Modification Charged Reserved $ 35, $ 37, $ 36, $ 1, , , , , , , , , , , , , ,56 258, , , , , , , , ,332, ,332, ,342, , , , , , , , , ,00 15, , , , , , , , , , , , , , , Overexpenditure $ 9, , Unexpended Balance Cancelled N 0;"- --.l'" "'"

20 CURRENT FUND STATEMENT OF EXPENDITURES - REGULATORY BASIS YEAR ENDED DECEMBER (Continued) A-3 30f7 Operations Within "CAPS" (Continued): PUBLIC WORKS FUNCTIONS: Road Repairs and Maintenance: Salaries and Wages Other Expenses Other Expenses- Snow Removal Public Buildings and Grounds: Recycling Other Expenses Salaries and Wages Other Expenses Vehicle Maintenance Tree Maintenance HEALTH AND HUMAN SERVICES FUNCTIONS: Environmental Commission: Salaries and Wages Other Expenses PARKS AND RECREATION FUNCTION: Parks and Education: Other Expenses Donation to Recreation Commission Municipal Court: Salaries and Wages Other Expenses Municipal Court Red Light Program SUB-CODE OFFICIALS: Construction Officials: Other Expenses Zoning Officer: Salaries and Wages Other Expenses Appropriations Expended By Budget After Paid or Budget Modification Charged Reserved $ 264, $ 264, $ 254, $ 10, , , , , , , , , , , , , , , , , , , , , , , , , , , , S.03 18, IS,OOO.OO 17, , , , , , , , , , , , , , , , , , , , , , Overexpenditure $ , , Unexpended Balance Cancelled w 0>..." -.]w

21 CURRENT FUND STATEMENT OF EXPENDITURES - REGULATORY BASIS YEAR ENDED DECEMBER 31, 2013 (Continued) A-3 40f7 Operations Within "CAPS" (Continued): UNCLASSIFIED: Accumulated Compensation Liability Utility Expenses and Bulk Purchases Appropriations Expended By Budget After Paid or Budget Modification Charged Reserved $ 10, $ 10, $ 10, , , $ 168, Overexpenditure Unexpended Balance Cancelled Total Operations Within "CAPS" Detail: Salaries and Wages Other Expenses 3,542, ,562, ,547, , ,026, ,021, ,011, , ,515, ,540, ,536, , $ 98, , , Deferred Charges and Statutory Expenditures Municipal within "CAPS": Deferred Charges: Emergency Authorizations Deficit in Animal Control Fund Deficit in Reserve for Zoning Deposits Deficit in Reserve for Public Defender Deficit in Reserve for Uniform Construction Code Overexpenditure of Appropriations Statutory Expenditures: Contributions to: Public Employees' Retirement Systems Social Security System (O.A.S.!,) Police and Firemen's Retirement System of NJ Unemployment Compensation Insurance Total Deferred Charges and Statutory Expenditures - Municipal Within "CAPS" 94, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , $ Total General Appropriations for Municipal Purposes Within "CAPS" 4,249, ,249, ,229, , , ". 0:>..-." -..lw

22 CURRENT FUND STATEMENT OF EXPENDITURES - REGULATORY BASIS YEAR ENDED DECEMBER 31, 2013 (Continued) A-3 50f7 Operations Excluded from "CAPS": Statutory Expenditures: Reserve for Pending Tax Appeals Public and Private Programs Offset by Revenue: Safe and Secure Communities Grant: Salaries and Wages - State Share Reserve for Recycling Tonnage Grant Drunk Driving Enforcement Fund Reserve for Body Armor Replacement Grant Police Forfeiture Fund Reserve for Obey The Signs or Pay the Fines Grant Reserve for Walmart Grant Appropriations Expended By Budget After Paid or Budget Modification Charged Reserved $ 180, $ 180, $ 180, , , , , , , , , , , , , , , , , , , , , , Overexpenditure Unexpended Balance Cancelled Total Operations Excluded from "CAPS" Detail: Salaries and Wages Other Expenses 229, , , , , , , , , Capital Improvements - Excluded from "CAPS": Capital Improvement Fund Road Improvements Purchase Fire Equipment Purchase Road Equipment Purchase Police Equipment Purchase Mower with Attachment Purchase Computer Equipment Total Capital Improvements - Excluded from"caps" $ 170, $ 170, $ 170, , , , $ 8, , , , , , , , , , , , , , , , , , , , , V> 0;"..."...,W

23 CURRENT FUND STATEMENT OF EXPENDITURES - REGULATORY BASIS YEAR ENDED DECEMBER 31, 2013 (Continued) A-3 60f7 Appropriations Expended By Unexpended Budget After Paid or Balance Budget Modification Charged Reserved Overexpenditure Cancelled Municipal Debt Service Excluded from "CAPS": Payment of Bond Principal $ 270, $ 270, $ 270, Interest on Bonds 134, , , Green Trust Loan Program: Principal 8, , , $ 0.70 Interest Total Municipal Debt Service - Excluded from "CAPS" 412, , , Deferred Charges: Emergency Authorizations 132, , , Deferred Charges to Future Taxation - Unfunded: Ord. # , , , Total Deferred Charges - Municipal- Excluded from "CAPS" 222, , , Judgements (N.1.S.A.40A:4-45.3cc) 40, , , , Total General Appropriations for Municipal Purposes Excluded from "CAPS" 1,418, ,418, ,352, $ 53, , Total General Appropriations Excluded from "CAPS" 1,418, ,418, ,352, , , Subtotal General Appropriations 5,667, ,667, ,582, , $ 98, , Reserve for Uncollected Taxes 660, , , Total General Appropriations $ 6,327, $ 6,327, $ 6,242, $ 171, $ 98, $ 11, Ref. A '" 0)-,..", --lw

24 CURRENT FUND STATEMENT OF EXPENDITURES - REGULATORY BASIS YEAR ENDED DECEMBER (Continued) A-3 70f7 Analysis of Budget After Modification Paid or Charged Adopted Budget $ 6,327, Cash Disbursed Reserve for Uncollected Taxes Deferred Charges: Emergency Authorizations Overexpenditure in Appropriation Due Other Trust Funds Deficit in Animal Control Fund Deficit in Reserve for Zoning Deposits Deficit in Reserve for Public Defender Deficit in Reserve for Uniform Construction Code Due General Capital Fund: Deferred Charges to Future Taxation - Unfunded Encumbrances Transfer to Appropriated Grant Reserves: State and Federal Grants A $ 4,899, , , , , , , , , , , $ 6,242, THE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THIS STATEMENT

25 TOWNSIDPOFPOHATCONG COUNTY OF WARREN 2013 TRUST FUNDS

26 TRUST FUNDS COMPARATIVE BALANCE SHEET - REGULATORY BASIS B lof2 ASSETS Animal Control Fund: Cash - Treasurer Change Fund Deferred Charges: Deficit in Reserve for Animal Control Fund Expenditures B-4 B-6 $ , , , , December 31, $ , , , , Other Trust Funds: Cash Due from Payroll Account Deferred Charges: Deficit in Reserve for: Zoning Deposits Public Defender Fees State Uniform Construction Code Fees B-4 1,096, , ,109, , , ,135, ,034, , ,047, , , , ,085, TOTAL ASSETS $ 1,141, $ 1,091,515.81

27 TRUST FUNDS COMPARATIVE BALANCE SHEET - REGULATORY BASIS B 20f2 LIABILITIES AND RESERVES Animal Control Fund: Due to Current Fund Due to State of NJ Department of Health A $ , , December 31, 2012 $ 6, , Other Trust Funds: Due to Current Fund A Reserve for: Escrow Deposits Environmental Commission Police Outside Employment Tax Sale Premiums Drug Abuse Resistance Education K-9 Open Space Other Deposits Dedicated Revenue - Fire Code Penalties Historical Preservation Commission Council On Affordable Housing Development Land Sale Deposits Parking Offense Adjudication Act Snow Removal Schimer School Deed Restriction TOTAL LIABILITIES AND RESERVES 63, , , , , , , , , , , ,135, $1,141, , , , , , , , , , , ,085, $ 1,091, THE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THIS STATEMENT

28 ASSESSMENT TRUST FUND STATEMENT OF FUND BALANCE - REGULATORY BASIS YEAR ENDED DECEMBER 31, 2013 B-1 NOT APPLICABLE THE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THIS STATEMENT

29 ASSESSMENT TRUST FUND STATEMENT OF REVENUE - REGULATORY BASIS YEAR ENDED DECEMBER B-2 NOT APPLICABLE ASSESSMENT TRUST FUND STATEMENT OF EXPENDITURES - REGULATORY BASIS YEAR ENDED DECEMBER B-3 NOT APPLICABLE THE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF TillS STATEMENT

30 COUNTY OF WARREN 2013 GENERAL CAPITAL FUND

31 GENERAL CAPITAL FUND COMPARATIVE BALANCE SHEET - REGULATORY BASIS C ASSETS Ref December 31, 2012 Cash and Cash Equivalents C-2 $ 34, New Jersey Department of Transportation Grants Receivable 125, FEMA Grant Receivable 76, Due from Current Fund A 182, Due from Federal and State Grant Fund A 120, Due from Sewer Capital Fund E Deferred Charges to Future Taxation: Funded 5,280, Unfunded C-4 843, TOTAL ASSETS $ 6,661, $ $ 340, , , , , ,663, , ,473, LIABILITIES. RESERVES AND FUND BALANCE Serial Bonds Payable C-8 $ 5,280, Green Acres Loan Payable C-9 Improvement Authorizations: Funded C-5 753, Unfunded C-5 570, Capital Improvement Fund C-6 57, Reserve for Encumbrances Reserve for: Purchase of Road Equipment Improvements to Parks Purchase of Fire Equipment Road Improvements Preliminary Costs Fund Balance C-l TOTAL LIABILITIES, RESERVES AND FUND BALANCE $ 6,661, $ $ 5,655, , , , , , , , , , , ,473, THE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THIS STATEMENT

32 GENERAL CAPITAL FUND STATEMENT OF FUND BALANCE - REGULATORY BASIS C-l Ref Balance December 31, 2012 C $ 34, Increased by: Improvement Autborizations Cancelled $ 141, Cancellation of Reserves: Purchase of Road Equipment 36, Improvements to Parks Purchase of Fire Equipment 1, Road Improvements 78, Preliminary Costs 20, Decreased by: Appropriated to Fund Improvement Authorizations 278, , , Balance December 31, 2013 C $

33 COUNTY OF WARREN 2013 WATER UTILITY FUND NOT APPLICABLE

34 COUNTY OF WARREN 2013 SEWER UTILITY FUND

35 SEWER UTILITY FUND COMPARATIVE BALANCE SHEET -REGULATORY BASIS E [ of2 December 31, 20[ ASSETS Operating Fund: Cash and Cash Equivalents Due from Sewer Utility Capital Fund Receivables with Full Reserves: Consumer Accounts Receivable Total Receivables with Full Reserves E-4 E E-7 $ 962, $ 887, , , , , , , , Total Operating Fund 1,026, , Capital Fund: Cash and Cash Equivalents Fixed Capital Fixed Capital Authorized and Uncompleted Total Capital Fund E-4 E-8 E-9 417, [, ,392,829. [3 2,392, , , ,852, ,816, TOTAL ASSETS $ 3,878, $ 3,781,003.15

36 SEWER UTILITY FUND COMPARATIVE BALANCE SHEET-REGULATORY BASIS (Continued) E 20f2 LIABILITlES. RESERVES AND FUND BALANCE Ref December 31, 2012 Operating Fund: Appropriation Reserves: Unencumbered E-3;E-I0 $ 197, Encumbered E-3 4, , Prepaid Rents Due Current Fund A 178, Accrued Interest on Loans 4, Reserve for Sewer Hook-Ups 233, , Reserve for Receivables 64, Fund Balance E-l 344, Total Operating Fund 1,026, Capital Fund: USDA Loan Payable E , Improvement Authorizations: Funded E-ll 12, Capital Improvement Fund E , Due to General Capital Fund C Due to Sewer Utility Operating Fund E Reserve for Amortization E-13 1,876, Deferred Reserve for Amortization E-14 42, Reserve for: Preliminary Costs 1, Debt Service 20, Fund Balance E-IA 137, Total Capital Fund 2,852, TOTAL LIABILITlES, RESERVES AND FUND BALANCE $ 3,878, $ 205, , , , , , , , , , , , , , , I,868, , , , , ,816, $ 3,781, THE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF TillS STATEMENT

37 E-l TOWNSHIP OF POHATCONG SEWER UTILITY OPERATING FUND COMPARATIVE STATEMENT OF OPERATIONS AND CHANGE IN OPERATING FUND BALANCE REGULATORY BASIS Revenue and Other Income Realized Year Ended December 31, Ref Fund Balance Utilized Rents Nonbudget Revenue Other Credits to Income: Appropriation Reserves Lapsed Total Income $ 132, , , , ,102, $ 205, , , , ,022, Expenditures Budget Expenditures: Operating Capital Improvements Debt Service Deferred Charges and Statutory Expenditures Total Expenditures 786, , , , , , , , , , Excess in Revenue I Statutory Excess to Fund Balance 193, , Fund Balance Balance January 1 Decreased by: Utilization as Anticipated Revenue 283, , , , , , Balance December 31 E $ 344, $ 283, THE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THIS STATEMENT

38 SEWER UTlLITY CAPITAL FUND SCHEDULE OF FUND BALANCE - REGULATORY BASIS E-1A Balance December 31,2012 Balance December 31,2013 E E $ 137, $ 137, THE ACCOMPANYING NOTES TO FINANClAL STATEMENTS ARE AN INTEGRAL PART OF TillS STATEMENT

39 SEWER UTILITY OPERATING FUND STATEMENT OF REVENUE - REGULATORY BASIS YEAR ENDED DECEMBER 31, 2013 E-2 Anticipated Realized Excess or Deficit * Fund Balance Anticipated Rents Nonbudget Revenue $ 132, , , $ 132, , , , $ 22, * 22, * 7, $ 912, $ 897,221,44 $ 30, * Analysis of Rents Realized: Cash Received Prepaid Rents $ 755, , $ 757, Analysis of Nonbudget Revenue Treasurer: Interest on Investments and Deposits Due from Sewer Capital Fund: Interest on Investments and Deposits Collector: Interest on Sewer Rents Tax Sale Costs $ $ , , THE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THIS STATEMENT

40 SEWER UTILITY OPERATING FUND STATEMENT OF EXPENDITURES - REGULATORY BASIS YEAR ENDED DECEMBER E-3 Appropriations Expended by Expended by Budget Unexpended After Cash Disbursed Paid or Balance Budget Modification or Charged _ Sharged Reserved Cancelled Operating: Salaries and Wages $ 86,500,00 $ 102, $ 102, $ 102, $ Other Expenses 700, , , , , Capital Improvements: Capital Improvement Fund 85, , , , Debt Service: Payment of Bond Principal 8, , , , Interest on Bonds 25, , , , $ 3, Statutory Expenditures: Contribution to: Social Security System (O.A.S.I.) 7, , , , (N.J.S.A. 43:21-3 et. seq.) $ 912, $ 912, $ 707, $ 712, $ 197, $ 3, Ref. E Cash Disbursed $ 685, Accrued Interest on Loans 21, Encumbered E 4, $ 712, THE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THIS STATEMENT ~

41 COUNTY OF WARREN 2013 PUBLIC ASSISTANCE FUND

42 PUBLIC ASSISTANCE FUND COMPARATIVE BALANCE SHEET - REGULATORY BASIS F ASSETS December 31, Cash and Cash Equivalents F-1 $ 7, $ 7, TOTAL ASSETS $ 7, $ 7, RESERVES Due to Current Fund Reserve for Public Assistance Expenditures A $ , $ , TOTAL RESERVES $ 7, $ 7, THE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THIS STATEMENT

43 NOTES TO FINANCIAL STATEMENTS YEAR ENDED DECEMBER 31, Note 1: Summary of Significant Accounting Policies A. Reporting Entity Except as noted below, the financial statements of the Township of Pohatcong include every board, body, officer or commission supported and maintained wholly or in part by funds appropriated by the Township of Pohatcong, as required by NJ.S. 40A:5-5. Accordingly, the financial statements of the Township of Pohatcong do not include the operations of the volunteer fire and first aid squads. Governmental Accounting Standards Board ("GASB") Codification Section 2100, "Defining the Financial Reporting Entity" establishes standards to determine whether a governmental component unit should be included in the financial reporting entity. The basic criterion for inclusion or exclusion from the financial reporting entity is the exercise of oversight responsibility over agencies, boards and commissions by the primary government. The exercise of oversight responsibility includes financial interdependency and a resulting financial benefit or burden relationship, selection of governing authority, designation of management, ability to significantly influence operations, and accountability for fiscal matters. In addition, certain legally separate, tax-exempt entities that meet specific criteria (i.e., benefit of economic resources, access/entitlement to resources, and significance) should be included in the financial reporting entities. As the financial reporting entity was established in accordance with New Jersey statutes, the requirements of GASB codification section 2100 were not followed and, accordingly, the reporting entity could be different from accounting principles generally accepted in the United States of America. B. Description of Funds The accounting policies of the Township of Pohatcong conform to the accounting principles applicable to municipalities which have been prescribed or permitted by the Division of Local Government Services, Department of Community Affairs, State of New Jersey (the "Division"). Such practices are designed primarily for determining compliance with legal provisions and budgetary restrictions and as a means of reporting on the stewardship of public officials with respect to public funds. Under this method of accounting, the Township of Pohatcong accounts for its financial transactions through the following separate funds: Current Fund - Resources and expenditures for governmental operations of a general nature, including federal and state grant funds. Trust Fund - Receipt, custodianship and disbursement of funds in accordance with the purpose for which each reserve was created. General Capital Fund - Receipt and disbursement of funds for the acquisition of general capital facilities, other than those acquired in the Current Fund. Sewer Utility Operating and Capital Funds Account for the operations and acquisition of capital facilities of the municipally owned sewer utility. Public Assistance Fund - Receipt and disbursement of funds that provide assistance to certain residents of the municipality pursuant to Title 44 of New Jersey Statutes.

44 NOTES TO FINANCIAL STATEMENTS YEAR ENDED DECEMBER (Continued) 2 Note 1: Summary of Significant Accounting Policies (Cont'd) C. Basis of Accounting Basis of accounting refers to when revenue and expenditures or expenses are recognized in the accounts and reported in the financial statements. Basis of accounting relates to the timing of the measurements made, regardless of the measurement focus applied. The following is a summary of the significant accounting policies. Revenue is recorded when received in cash except for certain amounts which may be due from the State of New Jersey and for the prepayment of future years' revenue. Grant revenue is realized in the operating funds when it is budgeted and in the capital funds when improvements are authorized. The amounts recorded as property taxes and consumer accounts receivable have not been included in revenue. Amounts that are due to the municipality, which are susceptible of accrual, are recorded as receivables with offsetting reserves in the Current Fund. Expenditures are charged to operations generally based on budgeted amounts. Exceptions to this general rule include: I. Accumulated unpaid vacation, sick pay and other employee amounts are not accrued. 2. Prepaid expenses, such as insurance premiums applicable to subsequent periods, are charged to current budget appropriations in total. 3. Principal and interest on long-term debt are recognized when due. Expenditures, if any, in excess of appropriations, appropriation reserves or ordinances become deferred charges which must be raised by future taxes. Outstanding encumbrances at December 31 are reported as a cash liability in the financial statements and constitute part of the statutory appropriation reserve balance. Appropriation reserves covering unexpended appropriation balances are automatically created at December 31 of each year and recorded as liabilities, except for amounts which may be cancelled by the governing body. Appropriation reserves are available, until lapsed at the close of the succeeding year, to meet specific claims, commitments or contracts incurred during the preceding fiscal year. Lapsed appropriation reserves are recorded as income. Had the Township's financial statements been prepared under accounting principles generally accepted in the United States of America, encumbrances would not be considered as expenditures; appropriation reserves would not be recorded; revenue susceptible to accrual would have been reflected without offsetting reserves; federal and state grants and assistance would be recognized when earned, not when awarded; and inventories would not be reflected as expenditures at the time of purchase. The cash basis of accounting is followed in the Trust Funds.

45 NOTES TO FINANCIAL STATEMENTS YEAR ENDED DECEMBER (Continued) 3 Note 1: Summary of Significant Accounting Policies (Con!' d) D. Deferred Charges to Future Taxation - The General Capital Fund balance sheet includes both funded and unfunded deferred charges. Funded means that bonds have been issued and are being paid off on a serial basis. Unfunded means the debt has been authorized but not permanently financed. A municipality can eliminate an unfunded deferred charge by raising it in the budget, by collecting a grant, by selling bonds, by loans, or by capital lease purchase agreements. E. Other significant accounting policies include: Management Estimates - The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of revenues and expenditures/expenses during the reporting period. Actual results could differ from those estimates. Cash and Cash Equivalents - Amounts include petty cash, change funds, amount on deposit, and short-term investments with original maturities of three months or less. Investments - Investments are stated at cost or amortized cost, which approximates market. Grants Receivable - Grants receivable represent the total grant awards less amounts collected to date. Because the amount of grant funds to be collected are dependent on the total costs eligible for reimbursement, the actual amount collected may be less than the total amount awarded. Allowance for Uncollectible Accounts - No allowance for uncollectible accounts has been recorded as all amounts are considered collectible. Compensated Absences - Expenditures relating to unused vested accumulated vacation and sick pay are not recorded until paid. Foreclosed Property - Foreclosed property is recorded in the Current Fund at the assessed valuation when such property was acquired, and is fully reserved. Interfunds - Interfund receivables in the Current Fund are recorded with offsetting reserves which are created by charges to operations. Income is recognized in the year the receivables are liquidated. Interfund receivables in the other funds are not offset by reserves. Inventories of Supplies - The cost of inventories of supplies for all funds are recorded as expenditures at the time individual items are purchased. The cost of inventories is not included on the various balance sheets. General Fixed Assets - Property and equipment purchased by the Current, General Capital and Sewer Utility Capital funds are recorded as expenditures at the time of purchase and are not capitalized.

46 NOTES TO FINANCIAL STATEMENTS YEAR ENDED DECEMBER 31, 2013 (Continued) 4 Note I: Summary of Significant Accounting Policies (Cont'd) F. Budget/Budgetarv Control - Annual appropriated budgets are usually prepared in the first quarter for Current, utility operating and open space trust funds. The budgets are submitted to the governing body and the State Division of Local Government Services. Budgets are prepared using the cash basis of accounting. The legal level of budgetary control is established at the line item accounts within each fund. Line item accounts are defined as the lowest (most specific) level of detail as established pursuant to the flexible chart of accounts referenced in NJSA 40A. All budget amendments/transfers must be approved by the Township during the year G. Fund Deficit- There is a deficit in the Reserve for Animal Control Fund Expenditures in the amount of $4, at December 31, 2013 which will be funded in the 2014 budget. There are also deficits in the Other Trust Funds Reserves for Public Defender Fees ($5,394.50) and State Uniform Construction Code Fees ($21,131.19) at December 31, 2013 which will be funded in the 2014 budget. Note 2: Long-Term Debt Summary of Municipal Debt The Local Bond Law governs the issuance of bonds to finance general Township capital expenditures. All bonds are retired in serial installments within the statutory period of usefulness. All bonds issued by the Township are general obligation bonds. The Township's full faith and credit and taxing power has been pledged to the payment of the general obligation debt principal and interest. Summary of Municipal Debt December 31, Issued General: Bonds, Notes and Loans $ 5,280, $ 5,663, $ 6,039, Sewer Utility: Bonds, Notes and Loans 516, , , Net Debt Issued 5,796, ,186, ,570, Authorized but not Issued: General: Bonds and Notes 843, , , Total Authorized but not Issued 843, , , Less: Open Space Deduction per N.J.S.A.40A:2-44(h) 1,462, ,567, ,667, Net Bonds, Notes and Loans Issued and Authorized but not Issued $ 5,177, $ 5,375, $ 5,749,074.86

47 NOTES TO FINANCIAL STATEMENTS YEAR ENDED DECEMBER (Continued) 5 Note 2: Long-Tenn Debt (Cont'd) Summary of Municpal Debt Issued and Outstanding - Prior Year Fund Balance 12/ Additions Retirements Balance 12/ Serial Bonds Payable: General Capital Fund: Loans Payable: General Capital Fund: NJ Green Acres Loans Sewer Utility Capital Fund: USDA Loan $ 6,015, , , $ 6,570, =$====-=0-= $ 360, $ 5,655, , , , , $ 383, $ 6,186, Summary of Municpal Debt Issued and OUtstanding - Current Year Balance Balance Fund 12/ Additions Retirements Serial Bonds Payable: General Capital Fund: $ 5,655, $ 375, $ 5,280, Loans Payable: General Capital Fund: NJGreen Acres Loans 8, , Sewer Utility Capital Fund: USDA Loan 523, , , $ 6,186, $ -0- $ 390, $ 5,796,134.46

48 Note 2: Long-Term Debt (Cont'd) TOWNSHlP OF POHATCONG NOTES TO FINANCIAL STATEMENTS YEAR ENDED DECEMBER (Continued) 6 Summary of Statutory Debt C~mdition - Annual Debt Statement The summarized statement of debt condition, which follows, is prepared in accordance with the required method of setting up the Annual Debt Statement and indicates a statutory net debt of 1.21 %. Gross Debt Deductions Net Debt Local School District Debt Sewer Utility Debt General Debt $ 8,485, , ,123, $ 8,485, , ,462, $ 4,661, $ 15,124, $ 10,463, $ 4,661, Net Debt: $4,661,481 divided by Average Equalized Valuations of $384,681, of Real Property = 1.21%. Borrowing Power Under N.J.S. 40A:2-6 As Amended 3-112% Average Equalized Valuation of Real Property Net Debt Remaining Borrowing Power $ 13,463, ,661, $ 8,802, Calculation of "Self-Liguidating Purpose", Sewer Utility Per NJ.S.40A:2-45 Cash Receipts from Fees, Rents or Other Charges for Year Deductions: Operating and Maintenance Costs Debt Service Excess in Revenue $ 794, , $ 897, , $ 72, Footnote: If there is an "excess in revenue", all such utility debt is deductible. If there is a "deficit", then utility debt is not deductible to the extent of 20 times such deficit amount. The foregoing debt information is in agreement with the Annual Debt Statement filed by the Chief Financial Officer.

49 NOTES TO FINANCIAL STATEMENTS YEAR ENDED DECEMBER 31, 2013 (Continued) 7 Note 2: Long-Term Debt (Cont'd) Analysis of Debt Issued and Outstanding at December 31, 2013 Sewer Utility Capital USDA Loan Payable Description Final Maturity Interest Rate Balance Dec. 31,2013 USDA Loan Payable 4/ % $ 516, General Capital Serial Bonds Payable Final Interest Description Maturity Rate General Improvement Bonds 5/ % Open Space Bonds 5/ % Balance Dec. 31, 2013 $ 3,818, ,462, $ 5,280, Total Debt Issued and Outstanding $ 5,796, USDA Loan In 2005 the Township of Pohatcong entered into a loan agreement with the U.S. Department of Agriculture in the aggregate amount of $572,000 which represents direct obligations of the Township. The remaining loan repayments will continue on a semiannual basis over 40 years at 4.25% interest.

50 NOTES TO FINANCIAL STATEMENTS YEAR ENDED DECEMBER (Continued) 8 Note 2: Long-Term Debt (Cont'd) Schedule of Annual Debt Service for Principal and Interest for the Next Five Years and Thereafter for Bonds and Loans Issued and Outstanding Year Loans PrinciJ2al Interest 2014 $ 8, $ 21, , , , , , , , , , , , , , , , , , , , , PrinciJ2al $ 390, , , , , ,480, , Bonds Interest $ 174, , , , , , , Total $ 594, , , , , ,996, , , , , , $ 516, $ 424, $ 5,280, $ 1,134, $ 7,355, Note 3: Fund Balances Appropriated The amount of fund balance at December 31,2013 included in the Current Fund and Sewer Utility budgets for the year ending December 31, 2014 is $1,151,720 and $86,941, respectively. Note 4: Deferred Charges to be Raised in Succeeding Budgets Certain expenditures are required to be deferred to budgets of succeeding years. At December 31, 2013, the following deferred charges are shown on the balance sheets of the Current Fund, Other Trust Funds and Animal Control Fund: Current Fund: Overexpenditure of Appropriations Expenditures Without an Appropriation Animal Control Fund: Deficit in Reserve for Animal Control Fund Expenditures Balance Dec. 31, 2013 $ 98, , , Required 2014 Budget AJ2J2roJ2riation $ 98, , ,536.15

51 NOTES TO FINANCIAL STATEMENTS YEAR ENDED DECEMBER (Continued) 9 Note 4: Deferred Charges to be Raised in Succeeding Budgets (Cont'd) Other Trust Funds: Deficit in Reserve for: Public Defender Fees State Uniform Construction Code Fees Balance Dec. 31, , , Required 2014 Budget Appropriation 5, , $ 162, $ 162, The appropriations in the 2014 budget are not less than that required by statute. Note 5: Deferred School Taxes Regulations provide for the deferral of not more than 50% of the annual levy when school taxes are raised for a school year and have not been requisitioned by the school district. The Local School District Tax was raised on the school year basis and liability deferred by statute to the succeeding year. The deferred school taxes are summarized as follows: Balance Dec. 31, 2013 Balance Dec. 31, 2012 Increase Local School District Tax $ 3,019, $ 2,959, $ 60, Note 6: Pension Plans Township employees are enrolled in one of two cost-sharing multiple-employer public employee retirement systems: the Public Employees' Retirement System (PERS) or the Police and Fireman's Retirement System (pfrs) of New Jersey. The State of New Jersey sponsor and administers the PERS and PFRS which cover substantially all Township employees. Employees who are members of PERS and retire at a specified age according to the relevant tier category for that employee are entitled to a retirement benefit based upon a formula which takes "final average salary" during years of creditable service. Vesting occurs after 8 to 10 years of service. Enrolled PFRS members may retire at age 55 with a minimum of 10 years of service required for vesting.

52 NOTES TO FINANCIAL STATEMENTS YEAR ENDED DECEMBER 31, 2013 (Continued) 10 Note 6: Pension Plans (Cont'd) The State of New Jersey, Department of the Treasury, Division of Pensions and Benefits, issues publicly available financial reports that include the financial statements and required supplementary information of each of the above systems. The financial reports may be obtained by writing to the State of New Jersey, Department of the Treasury, Division of Pensions and Benefits, PO Box 295, Trenton, New Jersey The contribution policy is set by New Jersey State Statutes and, in most retirement systems, contributions are required by active members and contributing employers. Plan member and employer contributions may be amended by State of New Jersey legislation. The employee contributions for PFRS are 10.00% of employees' annual compensation, as defined. For PERS, the contribution rate was 6.5% of base salary from October I, 2011 thru June 30, 2012 and increased to 6.64% effective July I, Subsequent increases after October I, 2011 are being phased in over 7 years effective on each July 1 st to bring the total pension contribution rate to 7.5% of base salary as of July 1,2018. Employers are required to contribute at an actuarially determined rate in both funds. The actuarially determined employer contribution includes funding for cost-of- living adjustments and noncontributory death benefits. Township contributions to PFRS amounted to $299,754, $293,601, and $349,551 for 2013,2012 and 2011, respectively. Township contributions to PERS amounted to $83,027, $101,524, and $82,020 for 2013, 2012 and 2011, respectively. Note 7: Accrued Sick and Vacation Benefits The Township permits employees to accrue a limited amount of unused vacation and sick pay, which may be taken as time off or paid at a later date at an agreed-upon rate. It is estimated that the current cost of such unpaid compensation would approximate $384, at December 31, This amount is not reported either as an expenditure or a liability. It is expected that the cost of such unpaid compensation would be included in the Township's budget operating expenditures in the year in which it is used. Note 8: Selected Tax Information Property taxes are levied as of January 1 on property values assessed as of the previous calendar year. The tax levy is divided into two billings. The first billing is an estimate of the current year's levy based on the prior year's taxes. The second billing reflects adjustments to the current year's actual levy. The final tax bill is usually mailed on or before June 14th, along with the first half estimated tax bills for the subsequent year. The first half estimated taxes are divided into two due dates, February 1 and May 1. The final tax bills are also divided into two due dates, August 1 and November 1. A ten-day grace period is usually granted before the taxes are considered delinquent and the imposition of interest charges. A penalty may be assessed for any unpaid taxes in excess of $10,000 at December 31 of the current year. Unpaid taxes of the prior year may be placed in lien at a tax sale held after April 1.

53 NOTES TO FINANCIAL STATEMENTS YEAR ENDED DECEMBER (Continued) II Note 8: Selected Tax Information (Cont'd) Tax Rate $ $ $ Apportionment of Tax Rate Municipal* County* Local School Assessed Valuations $ 360,935, $ 344,342, $ 347,412, (*) Includes open space tax. Comparison of Tax Levies and Collections Currently A study of this tabulation could indicate a possible trend in future tax levies. A decrease in the percentage of current collection could be an indication of a probable increase in future tax levies. Currentl;i Cash Percentage of Year Tax Lev;i Collections Collection 2013 $ 12,607, $ 12,354, % ,908, ,646, % ,329, ,056, % Also, increases in future tax levies can also be warranted if revenue sources outside of those directly generated by the municipality, such as federal or state aid, should decline without corresponding decreases in budgeted expenditures. Note 9: Cash and Cash Equivalents Cash and cash equivalents include petty cash, change funds, amounts in deposits, money market accounts, and short-term investments with original maturities of three months or less. Investments are stated at cost, which approximates market. The Township classifies certificates of deposit which have original maturity dates of more than three months but less than twelve months from the date of purchase, as investments.

54 NOTES TO FINANCIAL STATEMENTS YEAR ENDED DECEMBER 31, 2013 (Continued) 12 Note 9: Cash and Cash Equivalents (Cont'd) GASB Statement No. 40, Governmental Accounting Standards Board Deposit and Investment Risk Disclosures, requires disclosure of the level of custodial credit risk assumed by the Township in its cash, cash equivalents and investments, if those items are uninsured or unregistered. Custodial risk is the risk that in the event of bank failure, the government's deposits may not be returned. Interest Rate Risk - In accordance with its cash management plan, the Township ensures that any deposit or investments matures within the time period that approximates the prospective need for the funds, deposited or invested, so that there is not a risk to the market value of such deposits or investments. Credit Risk - The Township limits its investments to those authorized in its cash management plan which are permitted under state statutes as detailed below and on the following page. Deposits: New Jersey statutes require that municipalities deposit public funds in public depositories located in New Jersey which are insured by the Federal Deposit Insurance Corporation, or by any other agency of the United States that insures deposits made in public depositories. Municipalities also permitted to deposit public funds in the State of New Jersey Cash Management Fund. New Jersey statutes require public depositories to maintain collateral for deposits of public funds that exceed insurance limits as follows: The market value of the collateral must equal 5% of the average daily balance of public funds on deposit. In addition to the above collateral requirement, if public funds deposited exceed 75% of the capital funds of the depository, the depository must provide collateral having a market value at least equal to 100% of the amount exceeding 75%. All collateral must be deposited with the Federal Reserve Bank, the Federal Home Loan Bank Board or a banking institution that is a member of the Federal Reserve System and has capital funds of not less than $25,000,000. Investments New Jersey statutes permit the Township to purchase the following types of securities: (I) Bonds or other obligations of the United States of America or obligations guaranteed by the United States of America; (2) Government money market mutual funds; (3) Any obligation that a federal agency or a federal instrumentality has issued in accordance with an act of Congress, which security has a maturity date not greater than 397 days from the date of purchase, provided that such obligation bears a fixed rate of interest not dependent on any index or other external factor; (4) Bonds or other obligations of the local unit or bonds or other obligations of school districts of which the local unit is a part or within which the school district is located;

55 NOTES TO FINANCIAL STATEMENTS YEAR ENDED DECEMBER 31, 2013 (Continued) 13 Note 9: Cash and Cash Equivalents (Cont'd) Investments (Cont'd) (5) Bonds or other obligations, having a maturity date not more than 397 days from the date of purchase, approved by the Division of Investment of the Department of the Treasury for investment by local units; (6) Local government investment pools; (7) Deposits with the State of New Jersey Cash Management Fund; or (8) Agreements for the repurchase of fully collateralized securities if: (a) the underlying securities are permitted investments pursuant to paragraphs (1) and (3) above; (b) (c) (d) (e) the custody of collateral is transferred to a third party; the maturity of the agreement is not more than 30 days; the underlying securities are purchased through a public depository as defined in statute; and a master repurchase agreement providing for the custody and security of collateral is executed. As of December 31, 2013, cash and cash equivalents of the Township of Pohatcong consisted of the following: NJCash Cashon Checking Manage- Fund Hand Accounts mentfund Totals Current $ $ 2,567, $ $ 2,567, Animal Control Trust , , Other Trust 1,096, ,096, General Capital 34, , Sewer Utility Operating 962, , Sewer Utility Capital 417, , Public Assistance 7, , $ $ 5,086, $ $ 5,086, During the period ended December 31, 2013, the Township did not hold any investments. The carrying amount of the Township's cash and cash equivalents at December 31,2013 was $5,086, and the bank balance was $5,131, The $ in the NJ Cash Management Fund is uninsured and unregistered.

56 NOTES TO FINANCIAL STATEMENTS YEAR ENDED DECEMBER 31, 2013 (Continued) 14 Note 10: RiskManagement The Township is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The Township obtains their health benefit coverage through National Benefit Administration, Inc. Payments to National Benefit Administration, Inc. include an administrative fee as well as the payment of actual health benefit claims. Expenses are charged to the respective budgets on a pay-as-you-go basis. Property, Liability and Workers' Compensation The Township of Pohatcong is currently a member of the Public Alliance Insurance Coverage Fund (the "Fund"). The Fund provides its members with Liability, Property and Workers' Compensation Insurance. The Fund is a risk-sharing public entity risk pool that is both an insured and self administered group of governmental entities established for the purpose of providing low-cost insurance coverage for its members in order to keep local property taxes at a minimum. Each member appoints an official to represent their respective entity for the purpose of creating a governing body from which officers for the Fund are elected. As a member of the Fund, the Township of Pohatcong could be subject to supplemental assessments in the event of deficiencies. If the assets of the Fund were to be exhausted, members would become responsible for their respective shares of the Fund's liabilities. The Fund can declare and distribute dividends to members upon approval of the State of New Jersey Department of Banking and Insurance. These distributions are divided amongst the members in the same ratio as their individual assessment relates to the total assessment of the membership body. The members may either receive payment or offset their subsequent year assessments with their respective share of the distribution. The December 31, 2013 audit report of the fund is not filed as of the date of this audit. summarized financial information for the Fund as of December 31, 2012 is as follows: Selected, Public Alliance Insurance Coverage Fund Dec. 31, 2012 Total Assets Net Position Total Revenue Total Expenses Change in Net Position for the Year Ended December 31, 2012 Member Dividends $ 14,080,983 $ 7,142,181 $ 6,863,491 $ 4,409,384 $ 2,454,107 $ -0-

57 NOTES TO FINANCIAL STATEMENTS YEAR ENDED DECEMBER 31, 2013 (Continued) 15 Note 10: Risk Management (Cont'd) Financial statements for the Fund are available at the offices of the Fund's Executive Director: Public Alliance Insurance Coverage Fund Public Entity Group Administrative Services 51 Everett Drive Suite B-40 West Windsor, NJ (609) New Jersey Unemployment Compensation Insurance The Township has elected to fund its New Jersey Unemployment Compensation Insurance under the "Benefit Reimbursement Method". Under this plan, the Township is required to reimburse the New Jersey Unemployment Trust Fund for benefits paid to its former employees and charged to its account with the State. The Township is billed quarterly for amounts due to the State. The following is a summary of employee and employer contributions and reimbursements to the State for benefits paid and the ending balance of the Township's expendable trust fund for the current and previous two years: Year Employer Contributions Employee Contributions Amount Reimbursed Ending Balance $ $ -0-1, , $ -0-2, , $ , Note 11: Interfund Receivables and Payables The following interfund balances remained on the balance sheet at December 31, 2013: Current Fund Federal and State Grant Fund Animal Control Fund Other Trust Fund Interfund Receivable $ 247, , General Capital Fund 302, Sewer Utility Operating Fund Public Assistance Trust Fund $ 560, $ $ Interfund Payable 193, , , , , ,775.67

58 NOTES TO FINANCIAL STATEMENTS YEAR ENDED DECEMBER (Continued) 16 Note 11: Interfund Receivables and Payables (Cont'd) The Chief Financial Officer monitors all interfunds for these accounts and liquidates them periodically throughout the year. The balances remaining at December 31, 2013, represent activity not liquidated by year end which will be liquidated in Note 12: Claims. Commitments and Other Legal Proceedings The Township of Pohatcong is periodically involved in various lawsuits arising in the normal course of business, including claims for property damage, personal injury, and various contract disputes. In the opinion of management, the ultimate outcome of these lawsuits would not have a material adverse effect on the Township ofpohatcong's financial position as of December 31,2013. Amounts received or receivable from grantors, principally the federal and state governments are subject to regulatory requirements and adjustments by the agencies. Any disallowed claims, including amounts previously recognized by the Township as revenue would constitute a liability of the applicable funds. The amount, if any, of expenditures which may be disallowed by the grantors cannot be determined at this time, although Township officials expect such amounts, if any, to be immaterial. Note 13: Pending Tax Appeals The municipality has been advised that certain tax appeals have been filed. The Township expects to vigorously defend the original assessments. However, should any reductions in assessments occur, the amounts to be refunded would be charged to 2014 operations. Note 14: Economic Dependency The Township receives a substantial amount of its support from federal and state governments. A significant reduction in the level of support, if this were to occur, may have an effect on the Township'S programs and activities. Note 15: Open Space Trust Fund The Township created an Open Space Trust Fund with a tax levy of $.05 per $100 of assessed valuation. The funds collected are used to acquire and maintain open space property in the township. As of December 31,2013, the balance in the Open Space Trust Fund was $279,

59 TOWNSHIP OF POHA TCONG SUPPLEMENTARY DATA

60 OFFICIALS IN OFFICE AND SURETY BONDS YEAR ENDED DECEMBER Schedule 1 Name Title Amount of Bond Name of Corporate Surety James R. Kern III Mary Van Lieu Frank Becker David Slack Anthony Vangeli Lorraine Rossetti Susan Schier Carrie Rochelle Wanda Kutzman Louis P. Mellinger Cyndi Lehr Christine Knoble Bernard Murdoch Kevin Benbrook Gwen Steckel Mayor 12/31115 Councilperson 12/31116 Councilperson 12/31115 Councilperson 12/31116 Councilperson 12/31114 Chief Financial Officer thu 12/31116 (1) Administrative Clerk From 5/ (1) Tax Collector/Sewer Collector; Tax $ 50, Searcher $ 950, Township ClerklRegistrar; (1) Searcher of Municipal Liens Magistrate Court Administrator Deputy Court Administrator Tax Assessor Attorney Engineer (1) (1) (1) (1) PAIC MELJIF (1) There is a blanket bond of $50,000 through the Public Alliance Insurance Coverage Fund (PAIC) and a blanket bond of $950,000 through the Municipal Excess Liability Joint Insurance Fund (MELJIF) which covers all employees except the Tax Collector.

61 COUNTY OF WARREN 2013 CURRENT FUND

62 CURRENT FUND SCHEDULE OF CASH - TREASURER. A-4 lof2 Ref. Balance December 31, 2012 A $ 3,078, Increased by Receipts: Tax Collector Revenue Accounts Receivable Miscellaneous Revenue Not Anticipated Due to/from: State efn.j. - Veterans' and Senior Citizens' Deductions Federal and State Grant Fund: Unappropriated Grant Reserves Grant Funds Receivable Animal Control Fund: Interfund Returned: Dog License Official Other Trust Funds: Interfunds Returned: Reserve for Zoning Deposits Reserve for Unemployment Insurance Reserve for: Fire Penalties General Capital Fund FEMAGrant New Jersey Department of Transportation Grant Payroll Account Due to State of N.J. DCA Training Fees Marriage License Fees $ 12,731, ,192, , , , , , , , , , , , ,967, ,046,198.53

63 TOWNSHIP OFPOHATCONG CURRENT FUND SCHEDULE OF CASH - TREASURER (Continued) A-4 20f2 Decreased by Disbursements: 2013 Budget Appropriations 2012 Appropriation Reserves County Taxes Local School District Taxes Due to State of N.J.: Marriage Licenses DCA Training Fees Refunds of Tax Overpayments Due to Greenwich Township - Red Light Camera Revenue Due to/from: Federal and State Grant Fund: Appropriated Grant Reserves Expenditures Animal Control Fund: Interfund Advanced: Animal Control Fund Ex penditures Other Trust Funds: Interfund Advanced: Reserve for Open Space Expenditures Reserve for State Uniform Construction Code Fees General Capital Fund: Interfund Advanced Improvement Authorization Expenditures Payroll Account Refund of Prior Year Revenue Reserve for Third Party Liens $ 4,899, , ,808, ,978, , , , , , , , , , , , , $ 15,479, Balance December 31,2013 A $ 2,567,155.62

64 CURRENT FUND SCHEDULE OF CASH - COLLECTOR YEAR ENDED DECEMBER 31, 2013 A-5 Increased by Receipts: Taxes Receivable Tax Title Liens 2014 Prepaid Taxes Interest and Costs on Taxes Tax Overpayments Miscellaneous Third Party Liens Redeemed Decreased by: Payments to Treasurer $ 12,456, , , , , , , ,731, $ 12,731, FEDERAL AND STATE GRANT FUND SCHEDULE OF CASH YEAR ENDED DECEMBER 31, 2013 A-6 NOT APPLICABLE

65 CURRENT FUND SCHEDULE OF TAXES RECEIVABLE AND ANALYSIS OF PROPERTY TAX LEVY A-7 State ofnj Veterans' Year Balance Dec. 31, Levy and Senior Collections Citizens' Deductions Cancelled Transferred to Tax Balance Title Liens Dec. 31, $ 223, $ 12,607, $ $ 225, $ (1,917.81) 59, ,230, , $ 18, $ 28, $ 205, $ 223, $ 12,607, $ 59, $ 12,456, $ 62, $ 18, $ 28, $ 205, Ref. A A Tax Yield: General Property Tax Business Personal Property Taxes Added Taxes (54: et seq.) $ 12,571,132,45 25, , $ 12,607, Tax Levy: Local School District Taxes $ 6,038, County Taxes $ 2,707, Due County for Added and Omitted Taxes 2, Municipal Open Space Taxes 2,709, , ,928, Local Tax for Municipal Purposes 3,667, Additional Tax Levied 10, ,678, $ 12,607,023.03?' --J

66 CURRENT FUND SCHEDULE OF TAX TITLE LIENS RECEIVABLE A-8 Ref. Balance December 31,2012 A $ 155, Increased by: Transfer from Taxes Receivable Decreased by: Certificates Redeemed - Cash Received Balance December 31,2013 A 28, , , $ 183,281.79

67 CURRENT FUND SCHEDULE OF REVENUE ACCOUNTS RECEIVABLE A-9 Clerk: Licenses: Alcoholic Beverages Municipal Court: Fines and Costs Energy Receipts Taxes Consolidated Municipal Property Tax Relief Aid Interest on Deposits Balance Accrued In Dec. 31, $ 6, $ 89, , , , , $ 89, $ 1,167, Received Balance 2013 Dec. 31, 2013 $ 6, , $ 64, , , , $ 1,192, $ 64, Ref. A A ~

68 TOWNSHIP OF POHA TCONG CURRENT FUND SCHEDULE OF 2012 APPROPRIATION RESERVES YEAR ENDED DECEMBER A-1O 10f3 Balance Balance After Paid or Balance Dec. 31, 2012 Modification Charged Lapsed GENERAL GOVERNMENT: General Administration: Other Expenses $ $ 2, $ $ 1, Administrative and Executive: Mayor and Council: Salaries and Wages 2, , , Other Expenses Municipal Clerk: Salaries and Wages 6, Other Expenses 1, , , Elections: Salaries and Wages Other Expenses 3, Financial Administration: Salaries and Wages Other Expenses 1, , , Collection of Taxes: Salaries and Wages Other Expenses Assessment Search Officer: Salaries and Wages Assessment of Taxes: Salaries and Wages Other Expenses 5, , , Legal Services and Costs: Other Expenses 5, , , Engineering Services and Costs: Other Expenses 4, , , , Historical Preservation Commission: Salaries and Wages Other Expenses 1, , , LAND USE ADMINISTRATION: Planning Board: Salaries and Wages Other Expenses , , INSURANCE Group Insurance for Employees 1, , Other Insurance Premiums

69 CURRENT FUND SCHEDULE OF 2012 APPROPRIATION RESERVES YEAR ENDED DECEMBER (continued) A-IO 20f3 PUBLIC SAFETY FUNCTIONS: Police: Salaries and Wages Other Expenses Emergency Management: Salaries and Wages Other Expenses Fire: Fire Hydrant Municipal Prosecutor: Salaries and Wages PUBLIC WORKS FUNCTIONS: Road Repairs and Maintenance: Salaries and Wages Other Expenses Other Expenses- Snow Removal Public Buildings and Grounds: Recycling Cleanup Expenses Other Expenses Vehicle Maintenance Tree Maintenance HEALTH AND HUMAN SERVICE FUNCTIONS: Environmental Commission: Salaries and Wages PARKS AND RECREATION FUNCTION: Parks and Education: Other Expenses Municipal Court: Salaries and Wages Other Expenses Municipal Court Red Light Program Public Defender (P.L. 1999, Chapter 256): Other Expenses SUB-CODE OFf1CIALS: Construction Officials: Other Expenses Zoning Officer: Salaries and Wages Other Expenses Balance Dec. 31, 2012 $ 14, , , , , , , , , , , , Balance After Modification $ 14, , , , , , , , , , , , , Paid or Charged $ 18, , , , , , , , , $ Balance Lapsed 14, , , , , , , , , , ,305.00

70 CURRENT FUND SCHEDULE OF 2012 APPROPRIATION RESERVES YEAR ENDED DECEMBER (continued) A-IO 30f3 UNCLASSIFIED: Utility Expenses and Bulk Purchases Deferred Charges and Statutory Expenditures - Municipal within "CAPS": Statutory Expenditures: Public Employees' Retirement Systems Unemployment Compensation Insurance Capital Improvements - Excluded fron "CAPS": Road Improvements Purchase Fire Equipment Purchase Road Equipment Purchase Police Equipment New Garage Improvements DPW Garage Roof Improvements Purchase 7 yard Dump Truck with Spreader Purchase Computer Equipment Balance Dec. 31, 2012 Balance After Modification $ 17, $ 17, , , , , , , , , , , , , , , , , Paid or Charged $ 10, $ 3, Balance Lapsed 6, , , , , , , , $ 391, $ 391, $ 197, $ 194, Analysis of Balance December Unencumbered Encumbered Ref. A A $ 231, , $ 391,510.70

71 CURRENT FUND SCHEDULE OF LOCAL SCHOOL DISTRICT TAXES PAYABLE A-ll Balance December 31,2012 School Tax Deferred $ 2,959, Increased by: Levy - July 1, June 30, 2014 $ 6,038, Decreased by: Payments to Local School District 5,978, Increase in School Tax Deferred Balance December 31, 2013 School Tax Deferred 60, $ 3,019,314.53

72 FEDERAL AND STATE GRANT FUND SCHEDULE OF GRANTS RECEIVABLE A-12 Transferred 2013 Budget from Balance Revenue Cash Unappropriated Balance Dec. 31,2012 Realized Received Reserves Dec. 31, 2013 Safe & Secure Communities Program $ 13, $ 13, Safe & Secure Communities Program , $ 30, Safe & Secure Communities Program $ 30, , Clean Communities Grant Recycling Tonnage Grant , $ 1, Body Armor Grant , , Highlands Conformance Grant , , Highlands Conformance Grant , , New Jersey Transit Corporation Grant - Stone Arch 39, , Warren County Historic Preservation Grant - Stone Arch 91, , Wastewater Management Plan Grant 5, , Walmart Grant 2, , Police Forfieture Fund 6, , Reserve for Obey The Signs or Pay the Fines Grant 4, , Reserve for Drunk Driving Enforcement Fund 3, , $ 189, $ 49, $ 13, $ 12, $ 212, Ref. A A ~ -N

73 FEDERAL AND STATE GRANT FUND SCHEDULE OF APPROPRIATED RESERVES A-13 lof2 Safe and Secure Communities: 2013 (State) Emergency Management Grant: Clean Communities Program: 2012 Drunk Driving Enforcement Fund: Recycling Tonnage Grant: Body Armor Replacement Grant: Municipal Stormwater Regulation Program: 2007 Municipal Alcohol Education and Rehabilitation Fund: Balance Dec. 31, 2012 $ 1, , , , , ,257.D1 2, , , Transferred from 2013 Budget $ 30, , , , Cash Disbursed $ 30, ,856.D4 3, , , Encumbrances Payable Balance Dec. 31, 2013 $ 6, , , , , ,257.D1 2, , , , ;;'>...,~ tvw

74 FEDERAL AND STATE GRANT FUND SCHEDULE OF APPROPRIATED RESERVES (Continued) A-13 20f2 Balance Dec. 31, 2012 Transferred from 2013 Budget Cash Disbursed Encumbrances Payable Balance Dec. 31,2013 Delaware River Joint Toll Bridge Commission Grant - Riegelsville Transportation Improvement Projects: Police Forfeiture Grant: 2013 Reserve for Obey The Signs or Pay the Fines 2013 Warren County Historic Preservation Grant: Stone Arch New Jersey Highway Safety - Over the Limit: 2012 Highlands Conformance Grant: Wastewater Management Plan Grant: 2010 Walmart Police Grant: Dare Grant: 2012 $ 10, , $ 53, , , , , , , , , $ 6, , , , , $ 1, $ 10, , , $ 3, , , , G9 Analysis of Balance December Unencumbered Encumbered Ref. A A $ 178, $ 128, , $ 178, $ 49, $ 146, $ 1, A $ 80, A "';> o,... - "'w

75 FEDERAL AND STATE GRANT FUND SCHEDULE OF UNAPPROPRIATED RESERVES A-14 Transferred Balance Cash to Grants Balance Dec. 31,2012 Received Receivable Dec. 31, 2013 Clean Communities Grant $ 11, $ 11, Body Armor $ 1, , $ 1, , Municipal Court Alcohol Education and Rehabilitation Fund 1, , Recycling Tonnage Grant 3, , , , Click it or Ticket 4, , Obey the Signs or Pay the Fines 4, , Walmart Grant 2, , $ 12, $ 21, $ 12, $ 21, Ref. A A

76 COUNTY OF WARREN 2013 TRUST FUNDS

77 TRUST FUNDS SCHEDULE OF CASH-TREASURER B-4 Ref. Animal Control Fund Other Trust Funds Balance December 31, 2012 B $ 2, $ 1,034, Increased by Receipts: Reserve for: Escrow Deposits Public Defender Fees Tax Sale Premiums Parking Offense Adjudication Act Dedicated Revenues - Fire Code Penalties COAH Development Outside Employment State Unifonn Construction Code Fees Open Space Drug Alcohol Resistance Education Other Animal Control Fees: Dog License Fees $ 3, State of New Jersey - Board of Health Other Fees Due Current Fund: Interfunds Returned Red Light Traffic Program Interest - Escrow Interest Earnings 0.49 Decreased by Disbursements: State ofn.!. - Board of Health Reserve for Animal Control Fund Expenditures 3, Reserve for: Escrow Deposits Outside Employment Public Defender Tax Sale Premiums Open Space Dedicated Revenues - Fire Code Penalties Historical Preservation Commission COAH Development Fees State Unifonn Construction Code Fees Environmental Commission Due Current Fund: Interfund Returned 3, , , , $ 84, , , , , , , , , , , , , , , , , ,220, , Balance December 31, 2013 B $ 1, $ 1,096,325.58

78 ASSESSMENT TRUST FUND ANALYSIS OF CASH YEAR ENDED DECEMBER 31, 2013 B-5 NOT APPLICABLE

79 AN1MAL CONTROL FUND SCHEDULE OF RESERVE FOR ANIMAL CONTROL FUND EXPENDITURES B-6 Ref. Balance/(Deficit) December 31, 2012 B $ (3,167.60) Increased by: License Fees Other Fees Budget Appropriation - Deficit in Animal Control Fund Decreased by: Administrative Expenses: Paid By Current Fund Cash Disbursed $ $ 3, , , , , , , Balance/(Deficit) December 31,2013 B $ (4,536.15) License Fees Collected Amount Maximum Allowable Reserve $ $ 4, , ,174.40

80 TOWNSHIP OF PORA TCONG COUNTY OF WARREN 2013 GENERAL CAPITAL FUND

81 GENERAL CAPITAL FUND SCHEDULE OF CASH C-2 Ref. Balance December 31, 2012 C $ 340, Increased by Receipts: Capital Improvement Fund: 2013 Budget Appropriation FEMA Grants Receivable Due Current Fund: Interfunds Returned Due Sewer Utility Capital Fund Interfunds Returned Decreased by Disbursements: Improvement Authorization Expenditures $ 170, , , , , ,323, ,289, Balance December 31, 2013 C $ 34,342.77

82 GENERAL CAPITAL FUND ANALYSIS OF CASH C-3 10f2 Balance Receipts (Deficit) Budget Dec. 31, 2012 Appropriations Miscellaneous Disbursements Improvement Authorizations From Transfers To Balance (Deficit) Dec. 31, 2013 Fund Balance Capital Improvement Fund New Jersey Department of Transportation Gran(.s Receivable FEMA Grant Receivable Due to/(from) Current Fund Due to/(from) Federal and Stale Grant Fund Due to Sewer Utility Capital Fund Reserve for Encnmbrances Reserve for: Purchase of Road Equipment Improvement to Parks Purchase of Fire Equipment Road Improvements Preliminary Costs $ 34, , $ 170, (397,382.71) $ 98, (166,845,78) 684,988,93 ( ) (30,146.25) , , , , , $ 312, $ 259, ,000,00 83, ,656,69 234, , , , , , $ 375, , , , (125,000.00) (76,591.98) (182,205.38) (120,000.00) Ord. Number OJ ; ; ; 09-13; Improvement Description Pohalcong Street Drainage Project Acquisition of Easements in Real Property Purchase of Equipment Acquisition of Real Property Variolls Road Improvements Reconstruction of March Boulevard Flood Damage Repair Project Reconstruction of Liggett Boulevard Renovations to Shimer School and to the Municipal Building Improvements to DPW Garage 3, , , $ 1, , ,979,87 1, , ,308, , (1,908.14) 0, , (159,723.51) - o (') "", NW

83 TOWNSHIP OFPQHATCONG GENERAL CAPITAL FUND ANALYSIS OF CASH C-3 20f2 Om. Number --- Balance Receipts (Deficit) Budget Improvement Description Dec. 31, 2012 Appropriations Miscellaneous Disbursements Improvement Authorizations From Transfers To Balance (Deficit) Dec. 31, Purchase of Road Equipment $ Purchase of Computer Equipment 1, Renovations to Pershing Avenue (10,480.60) Purchase of Police Equipment 1, Purchase of Road Equipment 17, Purchase of Salt Shed Roof Payment of Seulement of Labor Dispute (190,112.60) Improvements to Haig Boulevard 51, Purchase of Police Equipment 4, Purchase of Computer Equipment 1, Purchase of a Dump Truck 16, Police Facilities and Equipment 35, Stonn Damage Repairs 9, Stonn Damage Repairs & Dmin Replacement Paving and Roadway Repair of Still Valley Stone Arch Bridge Replacement on Maple Ave Replacement of Bridge and Retaining Wall (River Road) $ $ 1, , , , $ 2, , , , , , , , , , , , , , , , , $ (10,480.60) (100,839.86) , , , , $ 340, $ $ 813, $ $ 2,508, $ 2,508, $ 34, IV o ()..." IV""

84 GENERAL CAPITAL FUND SCHEDULE OF DEFERRED CHARGES TO FUTURE TAXATION - UNFUNDED C-4 Analysis of Balance December 31,2013 Paid Improvement Unexpended Ord. Balance 2013 by Budget Authorizations Balance Improvement Number Improvement Description Dec. 31, 2012 Authorizations Appropriation Cancelled Dec. 31, 2013 ~enditures Authorizations Pohatcong Street Drainage Project $ 2, $ 2, $ 1, $ ; Acquisition of Easements in Real Property $ Acquisition of Real Property 15, , , Various Road Improvements 116, , , Reconstruction of March Boulevard 11, , , Reconstruction of Ligett Boulevard 123, , , Renovations to Pershing A venue 126, , , , Payment of Settlement of Labor Dispute 360, $ 90, , , , ; Renovations to Shimer School and to 09-13; the Municipal Building $ 178, , , , $ 755, $ 178, $ 90, $ $ 843, $ 272, $ 570, Ref. C C ~

85 TOWNSHIP QE IllliATCONG Q~ERALCAPITALFUND SCHEDlJLE OF IMPROVEMENT AUTHORIZATIONS C Autbori7.a1ions Defem:d Capital Funded by Charges!o RdumFrom Oro_ Improvement Onlinance Balance Dec. 31, 2012 Improvement Various Futu~ Taxation Reserve for Paid or Balance Dec N,_ Description Om, Amount Funded Unfunded nmd Sources - Unfunded Encumbrances Charged Cancelled Funded Unfunded Poha1cong Street Drainage Project $ 20, $ 2, ; Acquisition of~ments in 08/ ; 08.(18 Real Property ,475, $ 3, , 1,90!U4, 4, $ Purch;lS o(equipment , , Acquisition of Real Property , , $ , Various Roatl Improvements , , , RC(;onstruction ofman:h Boulcvanl ll,()25.oo , ; Rood Damage Repair Project 08/ ; ,141, , , Reconstlllction oflisgetl Boulev;mi , ,938,00 45,00 123,938, ; Renov:l.tions to Shimer School Wld to ; 09-13; the Municipal Building ,400, ,672.58, 192,000.00, 178, $ 168, , , Improvements to DPW Grunge , Pur.:hllSC ofro:w Equipment , Pun:hw;c of Computer Equipment 07/ , , Renovlllions to Pershing Avenue , , , Pun:hllSC orpolic(: Equipment , , , Pun:hllSC ofrund Equipment , , , PurchllSC of Salt Shed Roof , Payment of Settlement oflnbor Dispute , Improvements to Haig Boulev;mi , , , , Pun:hllSC ofpoiic(: Equipment 03/ , , , PurchllSC of Computer Equipment , , , Purchw;c of a Dump Truck , , , FoliC(: Fncilities and Equipment 06f> , , , , Storm Damage Rep:l.irs , , , Storm Damage Repairs & Drain Replacement ,000.00, 54, , , Paving and Rondway Repairof Still Valley Stone Arch , , , , Bridge Replacement on Maple Ave 09/ , , , , , Replncement ofbrid~,'c and Retaining Willi (River RowJ) , , , , $ 703, $ $ , 895, $ 178, $ 234,366.32, 1,359,605.05, 141, $ 753, $ Ref. C C C C NJ Department oftrunsportlllion, 500, FEMA Funding 83, Capilal Fund B"hmcc $ 141, C:l.pital Fund Balance 312, DeferI'Cd Charges to Future Taxlllion Unfunded $ 895, ~ Cnsh Disbursed $ 1,289, Due Current Fund 70,308.16, 1,359, o V>

86 GENERAL CAPITAL FUND SCHEDULE OF CAPITAL IMPROVEMENT FUND C-6 Ref. Balance December 31, 2012 Increased by: 2013 Budget Appropriation Decreased by: Appropriated to Finance Improvement Authorizations Balance December 31, 2013 C $ 146, , , , C $ 57,123.36

87 GENERAL CAPITAL FUND SCHEDULE OF BOND ANTICIPATION NOTES PAYABLE YEAR ENDED DECEMBER 31, 2013 C-7 NOT APPLICABLE

88 GENERAL CAPITAL FUND SCHEDULE OF SERlAL BONDS PAYABLE C-8 lof2 Purpose Date of Issue Maturities of Bonds Outstanding Dec. 31, 2013 Interest Balance Date Amount Rate Dec. 31,2012 Matured Balance Dec. 31,2013 General Improvement Bonds 5/ /1/2014 $ 280, % 5/1/ , % 5/ , % 5/ , % 5/ , % 5/ , % 5/ , % 5/ , % 5/ , % 5/1/ , % 5/1/ , % 5/1/ , % $ 4,088, $ 270, $ 3,818, o ()..." NCO

89 C-S 20f2 TOWNSHIP OF POHATCONG GENERAL CAPITAL FUND SCHEDULE OF SERIAL BONDS PAYABLE Purpose Date of Issue Maturities of Bonds Outstanding Dec. 31, 2013 Interest Balance Date Amount Rate Dec. 31, 2012 Matured Balance Dec. 31, 2013 Open Space Bonds $ 110, % , % , % , % 5/ , % 5/ , % , % 5/ , % 5/ , % , % , % 511/ , % $ 1,567, $ 105, $ 1,462, $ 5,655, $ 375, $ 5,2S0,OOO.00 Ref. C C N o ()..." N 00

90 GENERAL CAPITAL FUND SCHEDULE OF NJ GREEN ACRES LOAN PAYABLE C-9 Balance December 31,2012 C $ 8, Decreased by: Principal Matured - Funded by Budget Appropriation 8, Balance December 31, 2013 C $ -0-

91 GENERAL CAPITAL FUND SCHEDULE OF BONDS AND NOTES AUTHORIZED BUT NOT ISSUED C-1O Ordinance Number Balance 2013 Purpose Dec. 31, 2012 Authorizations Paid by Improvement Budget Authorizations Balance Appropriation Cancelled Dec. 31, ; ; 09-13; Pohatcong Street Drainage Project $ 2, Acquisition of Easements in Real Property Acquisition of Real Property 15, Various Road Improvements 116, Reconstruction of March Boulevard 11, Reconstruction of Liggett Boulevard 123, Renovations to Pershing Avenue 126, Payment of Settlement of Labor Dispute 360, Renovations to Shimer School an" to the Municipal Building $ 178, $ 755, $ 178, $ 2, $ , , , , , $ 90, , , $ 90, $ $ 843, ('), o

92 TOWNSIDP OF PORA TCONG COUNTY OF WARREN 2013 WATER UTILITY FUND NOT APPLICABLE

93 COUNTY OF WARREN 2013 SEWER UTILITY FUND

94 SEWER UTILITY FUND SCHEDULE OF CASH - TREASURER E-4 Ref. Operating Capital Balance December 31, 2012 E $ 887, $ 381, Increased by Receipts: Utility Collector 2013 Budget Appropriation Due from Sewer Capital Fund: Interfunds Returned Interest Earned Decreased by Disbursements: 2013 Appropriation Expenditures 2012 Appropriation Reserves Interest on Loans Due General Capital Fund Due to Sewer Operating Fund: Interfund Returned $ 762, , , , , ,669, , $ 85, $ 30, , , , , Balance December 31, 2013 E $ 962, $ 417, ~

95 SEWER UTILITY CAPITAL FUND ANALYSIS OF SEWER UTILITY CAPITAL CASH E-5 Balance Dec. 31, 2012 Receipts Miscellaneous Disbursements Balance Miscellaneous Dec. 31, 2013 Fund Balance Capital Improvement Fund Due General Capital Fund Due Sewer Utility Operating Fund Reserve for Preliminary Costs Reserve for Debt Service $ 137, , $ 85, , , , , $ 30, , $ 137, , , , Improvement Authorizations: Sewer Main Replacement 09120/11 Purchase of Dump Truck 7, , , , $ 381, $ 85, $ 49, $ 417, ~ V>

96 SEWER UTILITY OPERATING FUND SCHEDULE OF CASH - SEWER COLLECTOR YEAR ENDED DECEMBER 31, 2013 E-6 Increased by: Consumer Accounts Receivable Interest on Sewer Rents Tax Sale Costs Decreased by: Disbursed to Treasurer $ 755, , , $ 762,477.75

97 TOWNSHlP OF POHATCONG SEWER UTILITY OPERATING FUND SCHEDULE OF CONSUMER ACCOUNTS RECEIVABLE E-7 Ref. Balance December 31,2012 E $ 57, Increased by: Sewer Rents Levied Decreased by: Collections: Prepayments Applied $ 1, Cash Received 755, , , , Balance December 31,2013 E $ 64,034.32

98 SEWER UTILITY CAPITAL FUND SCHEDULE OF FIXED CAPITAL E-8 Balance Balance Dec. 31, 2012 Dec. 31, 2013 Sanitary Sewer System Sewer Line Jet Cleaner Improvement to Manhole Covers Dump Truck Extension of Sewer Line on Park Avenue Extension of Sanitary Line on Liberty Blvd. Sewer III Study Hire Video Firm to Camera the Emergent Conditions in Township Sewer Lines Purchase of Sewer Utility Equipment Rehabilitation and Refurbishment of Sewer Utility Equipment Sanitary Sewer Rehabilitation Acquisition of a Computer and Computer Related Equipment Russel Avenue Sewer Main Replacement $ 1,166, $ 1,166, , , , , , , , , , , , , , , , , , , , , , , , , $ 2,392, $ 2,392, Ref. E E

99 SEWER UTILITY CAPITAL FUND SCHEDULE OF FIXED CAPITAL AUTHORIZED AND UNCOMPLETED E-9 Ord. No. Ord. Balance Balance Date Improvement Description Dec. 31,2012 Dec. 31, Sewer Main Replacement $ 7, $ 7, Purchase of Dump Truck 35, , $ 42, $ 42, Ref. E E ~

100 SEWER UTILITY OPERATING FUND SCHEDULE OF 2012 APPROPRIATION RESERVES YEAR ENDED DECEMBER E-IO Operating: Salaries and Wages Other Expenses Statutory Expenditures: Unencumbered Balance Dec. 31, 2012 Balance After Modification $ 10, $ 10, , , Social Security System (O.A.S,!.) 6, , Unemployment Compensation Insurance loo.oo $ 205, $ 205, Paid or Charged Balance Lapsed $ $ 10, , , $ $ 205, Ref. E

101 SEWER UTILITY CAPITAL FUND SCHEDULE OF IMPROVEMENT AUTHORIZATIONS E-11 Ord. No Balance Ordinance Dec. 31, 2012 Improvement Description Date Amount Funded Sewer Main Replacement $ 7, $ 7, Purchase of Dump Truck 9/20/ , , $ 12, Balance Dec. 31, 2013 Funded $ 7, , $ 12, Ref. E E

102 SEWER UTILITY CAPITAL FUND SCHEDULE OF CAPITAL IMPROVEMENT FUND E-12 Ref. Balance December 31, 2012 E $ 160, Increased by: 2013 Budget Appropriation Balance December 31, 2013 E 85, $ 245, SEWER UTILITY CAPITAL FUND SCHEDULE OF RESERVE FOR AMORTIZATION E-13 Balance December 31,2012 E $ 1,868, Increased by: Operating Budget - Loan Principal Payments Balance December 31, 2013 E 7, $ 1,876,694.67

103 SEWER UTILITY CAPITAL FUND SCHEDULE OF DEFERRED RESERVE FOR AMORTIZATION E-14 Ord. No. Date of Balance Improvement Description Ordinance Dec. 31, 2012 Balance Dec. 31, Sewer Main Replacement 6121/2011 $ 7, Purchase of Dump Truck 9120/ , $ 42, $ 7, , $ 42, Ref. E E

104 SEWER UTILITY CAPITAL FUND SCHEDULE OF SERIAL BONDS PAYABLE YEAR ENDED DECEMBER E-15 NOT APPLICABLE

105 SEWER UTILITY CAPITAL FUND SCHEDULE OF LOANS PAYABLE E-16 10f3 Balance December 31, 2012 E $ 523, Decreased by: Principal Matured 7, Balance December 31,2013 E $ 516, Schedule of Principal and Interest Payments Outstanding December Payment Balance of Date Interest Principal Loan $ 516, $ 10, $ 3, , , , , / , , , , , , / , , , , , , , , , , , , / , , , /21/18 10, , , /21/19 10, , , , , , , , , , , , /21 9, , , / , , , / , , ,691.57

106 TOWNSHlP OF POHATCONG SEWER UTILITY CAPITAL FUND SCHEDULE OF LOANS PAYABLE (Continued) E-16 2of3 Schedule of Principal and Interest Payments Outstanding December (Cont'd) Payment Balance of Date Interest Principal Loan $ 9, $ 5, $ 430, , , , , , , , , , , , , / , , , / , , , , , , , , , , , , / , , , , , , /28 7, , , , , , , , , /21/30 7, , , , , , / , , , , , , , , , , , , , , , , , , , , , / , , , / , , , / , , , / , , , , , , , , , /21/37 4, , , , , , / , , , / , , , , , ,627.86

107 SEWER UTILITY CAPITAL FUND SCHEDULE OF LOANS PAYABLE (Continued) E-16 30f3 Schedule of Principal and Interest Payments Outstanding December 31, 2013 (Cont'd) Payment Balance of Date Interest Principal Loan $ 3, $ 11, $ 132, /21/40 2, , , / , , , , , , , , , , , , / , , , , , , / , , /21/ , , / , $ 446, $ 516,134.46

108 SEWER UTILITY CAPITAL FUND SCHEDULE OF BONDS AND NOTES AUTHORIZED BUT NOT ISSUED YEAR ENDED DECEMBER 31, 2013 E-17 NOT APPLICABLE

109 COUNTY OF WARREN 2013 PUBLIC ASSISTANCE FUND

110 PUBLIC ASSISTANCE FUND SCHEDULE OF CASH - TREASURER F-I Ref. P.A.T.F. I P.A.T.F. II Fund Total Balance December F $ $ $ Increased by Receipts Interest Earned Balance December F $ $ $

111 TOWNSHIP OF PORA TCONG PART II SINGLE AUDIT YEAR ENDED DECEMBER 31, 2013

112 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED DECEMBER Federal Funding Department Federal Program! Project Name! C.ED.A. Grant Period State ACCOlll1t Nwnber Number From To Grant Award Amount Amount Received Amount of Ex~nditures Cumulative ~nditures DCQarbnent of Homeland Security (Passed thru NJ Department of Law and Public Safety) Total Department of Homeland Security Disaster Grants - Public Assistance FEMA $ 474, $ 474, , $ 474, $ 474, , , DeQartment of Environmental Protection (Passed Thru NJ Department of Environmental Protection Total Department of Environmental Protection U.S Department oftransoortation Municipal Stonnwater Regulation Program State # / / , , $ 1, , , (Passed Thru NJ Department of Maple Ave (Ord. 13-9) , , Transportation) River Road (Ord-J3-1 0) / , , (Passed Thru NJ Department of Click it or Ticket Law and Public Safety) State #1OO YHTS , , Municipal Aid Program - Stone Arch , Total Department of Transportation 379, , , , , * - Expended in the prior year. $ 853,945,90 $ 524, $ 562, SEE ACCOMPANYING NOTES TO SCHEDULES OF EXPENDITURES OF FEDERAL AND STATE AWARDS ~

113 SCHEDULE OF EXPENDITURES OF STATE AWARDS YEAR ENDED DECEMBER Name of State Agency or Department Program Grant Period State Program Account No. From To Grunt Award Amount Amount Received Amount of Expenditures Cumulative Expenditures Department of Environmental Protection Clean Communities Grant ) / ) $ 11, ,1) , $ 11, , , , , Recycling Grant ) , , , Wastewater Management Grant N/A , , Total Department of Environmental Protection 15, , Department of Law and Public Safety Drunk Driving Enforcement Fund /14 3, , Emergency Management Grant / , , , , , , Body Annor Replacement Grant / , , Domestic Violence Training Program Safe and Secure Communities , , ), , , , Total Department of Law and Public Safety 19, , , New Jersey Highlands Council Confonnance Grant N/A N/A , , , , , , Total New Jersey Highlands Council 44, , N/A - Not Available/Applicable SEE ACCOMPANYING NOTES TO SCHEDULES OF EXPENDITURES OF FEDERAL AND STATE A WARDS $ 34, $ 87, $ 168, N

114 NOTES TO SCHEDULES OF EXPENDITURES OF FEDERAL AND STATE AWARDS YEAR ENDED DECEMBER A. BASIS OF PRESENTATION The accompanying schedules of expenditures of federal and state awards (the "Schedules") includes the federal and state grant activity of the Township of Pohatcong under programs of the federal and state governments for the year ended December 31, The information in these schedules is presented in accordance with the requirements of the Office of Management and Budget (OMB) Circular A-133, Audits oj States and Local Governments, and Non-Profit Organizations and New Jersey's OMB Circular NJOMB 04-04, Single Audit Policy Jor Recipients oj Federal Grants, State Grants and State Aid. Because the schedules present only a selected portion of the operations of the Township, they are not intended to and do not present the financial position, changes in fund balance or cash flows of the Township. B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Expenditures reported on the accompanying schedules of expenditures of federal and state awards are reported on the modified accrual basis of accounting. Such expenditures are recognized following the cost principles contained in OMB Circular A-87, Cost PrinciplesJorState, Local and Indian Tribal Governmental Units, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Passthrough identifying numbers are presented where available. C. RELATIONSHIP TO FEDERAL AND STATE FINANCIAL REPORTS Amounts reported in the accompanying schedules agree with the amounts reported in the related federal and state financial reports. D. LOANS PAYABLE At December 31, 2013, the Township had $516, of USDA Loans Payable outstanding which is recorded in the Sewer Utility Capital Fund. Currently, the Township is in the process of repaying the USDA Loan Payable. There were no loan receipts or expenditures in the current year. The project which relates to this loan is complete.

115 4 0) N I S I VOL L I A UP Certified Public Accountants & Advisors Mount Arlington Corporate Center 200 Valley Road, Suite 300 Mt. Arlington, NJ Fax Lawrence Business Center 11 Lawrence Road Newton, NJ ~ Fax Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards Independent Auditor's Report The Honorable Mayor and Members of the Township Committee Township of Pohatcong Pohatcong, New Jersey We have audited, in accordance with auditing standards generally accepted in the United States of America, audit requirements prescribed by the Division of Local Government Services, Department of Community Affairs, State of New Jersey, (the "Division") and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the fmancial statements - regulatory basis - of the various funds of the Township of Pohatcong, in the County of Warren (the "Township") as of, and for the years ended, December 31, 2013 and 2012, and the related notes to the financial statements and have issued our report thereon dated May 16,2014. These financial statements have been prepared in accordance with accounting practices prescribed or permitted by the Division to demonstrate compliance with the Division's regulatory basis of accounting, and the budget laws of New Jersey, which is a basis of accounting other than accounting principles generally accepted in the United States of America. That report contained a qualified opinion on the financial statements as the amount that should be recqrded in the general fixed assets account group could not be determined. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the Township's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Township's internal control. Accordingly, we do not express an opinion on the effectiveness of the Township's internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the Township's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of the internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. Independent Member of BKR International

116 The Honorable Mayor and Members of the Township Committee Township of Pohatcong Page 2 5 We did identify certain deficiencies in internal control, described in the accompanying Schedule of Findings and Responses as Finding 2013-land Finding , that we consider to be significant deficiencies. Compliance and Other Matters As part of obtaining reasonable assurance about whether the Township's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. The Township's Response to the Findings The Township's response to the findings identified in our audit is described in the accompanying Schedule of Findings and Responses. The Township's response was not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on it. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the Township's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Township's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Mount Arlington, New Jersey May 16,2014 NISIVOCCIA LLP William F. Schroeder Certified Public Accountant Registered Municipal Accountant No. 452

117 6 TOWNSHlP OF POHATCONG SCHEDULE OF FINDINGS AND RESPONSES YEAR ENDED DECEMBER 31,2013 Summary of Auditors' Results: The Independent Auditors' Report expresses a qualified opinion on the Township's financial statements, prepared in accordance with accounting practices prescribed or permitted by the Division of Local Government Services, Department of Community Affairs, State of New Jersey to demonstrate compliance with the Division's regulatory basis of accounting and the budget laws of New Jersey as the amount that should be recorded in the general fixed assets account group could not be determined, A significant deficiency was disclosed during the audit of the financial statements as reported in the Independent Auditors' 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, No material weaknesses are reported, No instances of noncompliance material to the financial statements of the Township which would be required to be reported in accordance with Government Auditing Standards, were disclosed during the audit The Township was not subject to the single audit provisions of Federal OMB Circular A-133 and New Jersey OMB's Circular for the year ended December 31, 2013 as both state and federal grant expenditures were less than the single audit thresholds of $500,000 identified in the Circulars. Findings Relating to the Financial Statements which are required to be Reported in Accordance with Generally Accepted Government Auditing Standards: The audit did not disclose any findings required to be reported under Generally Accepted Government Auditing Standards, except as follows: Finding The Township does not maintain an adequate segregation of duties with respect to the recording and treasury functions. Segregation of duties refers to separating those functions that place too much control over a transaction or class of transactions that would enable a person to perpetuate errors and prevent detection within a reasonable period of time. The various departments/offices of the Township are responsible for the issuance of permits and licenses; collection of taxes, utility charges and permits and license fees; and recording of collections. Also, the disbursement of funds, reconciliation of bank accounts, as well as the preparation of payroll and the general ledger, are performed by one person. This is due, in part, to the limited number of personnel of the Township and the decentralized nature of governmental collection procedures. Accordingly, management and the Township Committee should be aware of this situation and realize that the concentration of duties and responsibilities in a limited number of individuals is not desirable from a control point of view. Finding A fixed assets accounting and reporting system has not been implemented. The system is important to internal control in that it provides assurance that assets are safeguarded against loss from unauthorized use or disposition. Management's Response The findings were evaluated; however, due to budgetary constraints there are not sufficient resources to resolve the findings at this time.

118 SCHEDULE OF FINDINGS AND RESPONSES YEAR ENDED DECEMBER Findings and Ouestioned Costs for Federal Awards: Not Applicable - Grant expenditures were below the single audit threshold. Findings and Ouestioned Costs for State Awards: Not Applicable - Grant expenditures were below the single audit threshold.

119 SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS YEAR ENDED DECEMBER The Township's prior year audit findings regarding segregation of duties and a fixed assets accounting and reporting system have not been resolved and are included as findings and

120 PART ill COMMENTS AND RECOMMENDATIONS YEAR ENDED DECEMBER

121 COMMENTS AND RECOMMENDATIONS 9 Contracts and Agreements Required to be Advertised for NJ.S.A. 40A: 11-4 N.J.S.A. 40A:11-3 states: a. "When the cost or price of any contract awarded by the contracting agent in the aggregate does not exceed in a contract year the totai sum of $17,500, the contract may be awarded by a purchasing agent when so authorized by ordinance or resolution, as appropriate to the contracting unit, of the governing body of the contracting unit without public advertising for bids, except that the governing body of any contracting unit may adopt an ordinance or resolution to set a lower threshold for the receipt of public bids or the solicitation of competitive quotations. If the purchasing agent is qualified pursuant to Subsection b. of Section 9 of P.L. 1971, C.198 (NJ.S.A. 40A:11-9), the governing body of the contracting unit may establish that the bid threshold may be up to $25,000. Such authorization may be granted for each contract or by a general delegation of the power to negotiate and award such contracts pursuant to this section. b. Any contract made pursuant to this section may be awarded for a period of 24 consecutive months, except that contracts for professional services pursuant to subparagraph (i) of paragraph (a) of subsection (1) of section 5 of P.L. 1971, C.198 (NJ.S.A. 40A:11-5) may be awarded for a period not exceeding 12 consecutive months. The Division of Local Government Services shall adopt and promulgate rules and regulations concerning the methods of accounting for all contracts that do not coincide with the contracting unit's fiscal year. c. The Governor, in consultation with the Department of the Treasury, shall, no later than March 1 of every fifth year beginning in the fifth year after the year in which P.L.1999, C.440 takes effect, adjust the threshold amount and the higher threshold amount which the governing body is permitted to establish, as set forth in subsection a. of this section, or the threshold amount resulting from any adjustment under this subsection, in direct proportion to the rise or fall of the index rate as that term is defined in section 2 ofp.l. 1971, C.198 (NJ.S.A. 40A:11-2), and shall round the adjustment to the nearest $1,000. The Governor shall, no later than June 1 of every fifth year, notify each governing body of the adjustment. The adjustment shall become effective on July 1 of the year in which it is made." N.J.S.A. 40A:11-4 states: "Every contract awarded by the contracting agent for the provision or performance of any goods or services, the cost of which in the aggregate exceeds the bid threshold, shall be awarded only by resolution of the governing body of the contracting unit to the lowest responsible bidder after public advertising for bids and bidding therefore, except as is provided otherwise in this act or specifically by any other law. The governing body of a contracting unit may, by resolution approved by a majority of the governing body and subject to subsections b. and c. of this section, disqualify a bidder who would otherwise be determined to be the lowest responsible bidder, if the governing body finds that it has had prior negative experience with the bidder." Effective January 1, 2011 and thereafter the bid threshold in accordance with N.J.S. 40A:11-3 is $17,500 and with a qualified purchasing agent may be up to $36,000. The governing body of the Township of Pohatcong has the responsibility of determining whether the expenditures in any category will exceed the bid threshold within the fiscal year. Where question arises as to whether any contract or agreement might result in violation of the statute, the Township Counsel's opinion should be sought before a commitment is made. The minutes indicated that bids were requested by public advertising for various applicable goods and services. The minutes indicated that bids were requested by public advertising per N.J.S.A. 40A:11-4. The minutes also indicated that resolutions were adopted and advertised authorizing the awarding of contracts or agreements for "Professional Services".

122 TOWNSHlP OF POHATCONG COMMENTS AND RECOMMENDATIONS (Continued) 10 Contracts and Agreements Required to be Advertised for N.J.S.A. 40A: 11-4 (Cont'd) Inasmuch as the system of records did not provide for an accumulation of payments for categories for the performance of any work or the furnishing or hiring of any materials or supplies, the results of such an accumulation could not reasonably be ascertained. Disbursements were reviewed, however, to determine whether any clear-cut violations existed. Collection of Interest on Delinquent Taxes and Sewer Rents The statute provides the method for authorizing interest and the maximum rates to be charged for the nonpayment of taxes or sewer rents on or before the date when they would become delinquent. Resolutions Fixing Tax Collection and Sewer Dates and Interest Rates BE IT RESOLVED, that taxes shall be collected quarterly, the dates being February 1, May 1, August 1 and November 1, and that the interest rate of 8% per annum up to the first $1,500 of delinquency, and 18% per annum over $1,500 of delinquency, be collected after the respective due dates. There will be a ten (10) day grace period after which unpaid taxes will be charged interest from the due date. 1f a delinquency is over $10,000 at year end, an additional 6% flat penalty will be included. BE IT RESOLVED, that sewer charges shall be collected quarterly, that dates being January 1, April 1, July 1 and October 1, with a ten (10) day grace period. The interest rate of 18% per annum will be collected after the respective due dates. 1f a delinquency is over $10,000 at year end, an additional 6% flat penalty will be included. It appears from an examination of the Collector's records that interest was collected in accordance with the foregoing resolutions. Delinquent Taxes and Other Charges The last tax sale was held on June 19, 2013, and was complete with respect to all items eligible for sale. The following comparison is made of the number of tax title liens receivable on December 31, of the last three years. Year Number of Liens

123 COMMENTS AND RECOMMENDATIONS (Continued) 11 Delinquent Taxes and Other Charges (Cont'd) It is essential to good management that all means provided by statute be utilized to liquidate tax title liens in order to get such properties back on a taxpaying basis. Verification of Delinquent Taxes and Other Charges A test verification of delinquent charges and current payments was made in accordance with the regulations of the Division of Local Government Services, including the mailing of verification notices as follows: Type Payments of 2014 Taxes Payments of 2013 Taxes Payments of Sewer Utility Charges Delinquent Taxes Delinquent Sewer Utility Charges Tax Title Liens Number Mailed New Jersey Administrative Code Accounting Requirements The Division of Local Government Services has established three (3) accounting requirements which are prescribed in the New Jersey Administrative Code. They are as follows: 1. Maintenance of an encumbrance accounting system. 2. Fixed asset accounting and reporting system. 3. General ledger accounting system. The Township has not implemented a fixed assets accounting and reporting system. It is recommended that the Township fully implement a fixed assets accounting and reporting system. Management's Response: It is the Township's intent to inventory fixed assets when sufficient resources become available.

124 TOWNSIDP OF POHATCONG COMMENTS AND RECOMMENDATIONS (Continued) 12 Municipal Court A summary of Municipal Court transactions for the year 2013 are as follows: RECEIPTS AND DISBURSEMENTS FOR THE YEAR ENDED DECEMBER Balance Dec. 31, 2012 Receipts Disbursements Balance Dec. 31,2013 State of New Jersey $ 19, , , County Municipality Conditional Discharge Parking Offense Adjudication Act Weights and Measures Fish and Game Restitution Public Defender Bail , $ 206, $ 210, , , , , , , , , , , $ 16, , , , , $ 115, $ 1,145, $ 1,171, $ 90, Treasurer's Records Our audit of the Treasurer's records revealed that: 1. The balance sheets of the various funds continue to reflect a significant number of interfund receivables and payables. 2. There are older federal and state grant receivable and appropriated grant reserve balances. 3. There is an older FEMA grant receivable balance in the General Capital Fund. 4. There are several older improvement authorization balances. 5. Dedications by Rider were not obtained for all Trust Fund reserves. 6. Employees' salaries are always not being calculated based on approved salary resolutions, and approved in the minutes. 7. Expenditures were made without an appropriation and there were also over-expenditures of current year budget appropriations which occurred. 8. There is a large balance of unallocated cash in the Police Outside Duty account. 9. There are outstanding checks over a year old in the Animal Control Fund bank reconciliation. 10. The budget for current fund was not entered in the same account lines as the adopted State Budget. 11. One of the bids did not have the required Stockholder Disclosure Certification Form that addresses the names of all stockholders in the corporation or partnership who own 10% or more of its stock of any class, or of all individuals' partners in the partnership who own a 10% or greater interest therein. 12. The interfund activity for the various funds in the general ledgers certain expenses were paid by the Current Fund were not always properly recorded as interfund transactions in the respective funds. 13. Some of the vouchers were not included on the bills list that was approved in the minutes. 14. One salary distribution was not being properly posted to the correct salary line items in the budget.

125 It is recommended that: TOWNSHIP OF POHATCONG COMMENTS AND RECOMMENDATIONS (Continued) Every effort be made to clear tbe current interfund receivables and payables and to limit the number of interfund transactions in tbe future. 2. The Township pursue the collection of the older Federal and State Grant Receivable balances to lessen the impact on tbe Current Fund fund balance. Also, tbe older appropriated grant reserve balances be reviewed for possible cancellation. 3. The Township investigate and pursue the collection of the outstanding FEMA grant receivable in tbe General Capital Fund. 4. The older improvement autborization balances be reviewed for possible cancellation. 5. Dedications by Rider be obtained for all Trust Fund reserves. 6. All employees' salaries be calculated based on approved salary resolutions, and approved in the minutes. 7. Expenditures be monitored more closely to ensure tbat there are no expenditures witbout an appropriation and tbere are no over expenditures of budget appropriations. 8. The Township charge applicable expenses to the Reserve for Outside Police Duty in accordance with Local Finance Notice Managing and Accounting for Outside Employment of Police Officers. 9. Outstanding checks over a year old in the Animal Control Fund bank reconciliation be cancelled by resolution. 10. The Budget be entered into the system in the same account lines as tbe Adopted State Budget. 11. All bids have tbe necessary bid specifications for New Jersey Local Public Agencies in the bid packet that is required by State Statue. 12. The General Ledger interfund activity be recorded in tbe Current Fund as well as the respective funds tbat offset tbe interfunds. 13. All vouchers be included on the bills list tbat is approved in tbe minutes. 14. All salaries be charged to tbe correct salary budget line items. Management's Response The Chief Financial Officer will make every effort to resolve tbese recommendations in Management Suggestion It is suggested that: 1. The client maintain separate bank accounts for Net payroll and Payroll Agency. 2. The Animal Control Fund change fund be maintained in the municipal building. Outside Departments 1. Our review of the Police Office records revealed tbat while improvement was noted from prior years, cash receipts were still not always turned over for deposit witbin forty-eight hours of being collected. 2. Our review of tbe Zoning Department revealed tbat permits are not assigned a number when issued, therefore, we were unable to test if tbey were being issued in numerical sequence. 1. It is recommended that Police Office cash receipts be turned over and deposited witbin forty-eight hours of being collected. 2. It is recommended that zoning permits be issued a number when they are issued or assigned in numerical order.

126 COMMENTS AND RECOMMENDATIONS (Continued) 14 Management's Response The Township will ensure that police cash receipts are turned over and deposited within forty-eight hours of being collected. and the zoning department will issue all permits with a number in numerical sequence.

127 COMMENTS AND RECOMMENDATIONS (Continued) 15 Corrective Action Plan The Township of Pohatcong has initiated a corrective action plan to resolve comments and recommendations from the 2012 audit report. The prior year recommendations regarding an analysis of balance being maintained in the payroll account, bank reconciliations be prepared on a monthly basis for all accounts, bank statements being kept on file, invoices are being obtained from vendors before payment and the change fund of the police department were resolved in the current year. The prior year recommendations pertaining to the older grant receivable and reserve balances being reviewed for proper disposition, salaries being paid in accordance with the salary resolution, a fixed assets accounting and reporting system being implemented, the interfund receivable and payable balances and the timeliness of turnover and deposit of Police cash receipts have not been resolved and are included as recommendations in the 2013 audit report.