BOROUGH OF LEBANON COUNTY OF HUNTERDON REPORT OF AUDIT

Transcription

1 COUNTY OF HUNTERDON REPORT OF AUDIT 2015

2 TABLE OF CONTENTS FOR THE YEAR ENDED DECEMBER 31, 2015 Exhibit Page PART I Independent Auditor's Report 2-4 FINANCIAL STATEMENTS-REGULATORY BASIS Current Fund A Comparative Balance Sheet-Regulatory Basis 6-7 A-1 Comparative Statement of Operations and Changes in Fund Balance-Regulatory Basis 8-9 A-2 Statement of Revenues-Regulatory Basis A-3 Statement of Expenditures-Regulatory Basis Trust Fund B Comparative Balance Sheet-Regulatory Basis 21 General Capital Fund C Comparative Balance Sheet-Regulatory Basis 22 C-1 Comparative Statement of Fund Balance-Regulatory Basis 23 General Fixed Asset Account Group D Statement of General Fixed Assets-Regulatory Basis 24 Notes to the Financial Statements SUPPLEMENTARY DATA Current Fund A-4 Schedule of Cash-Treasurer A-5 Schedule of Cash and Reconciliation-Treasurer Per N.J.S. 40A: A-6 Schedule of Due from State of New Jersey for Veterans and Senior Citizens' Deductions 50 A-7 Schedule of Taxes Receivable 51 A-8 Schedule of Tax Title Liens Receivable 52 A-9 Schedule of Revenue Accounts Receivable 53 A-10 Schedule of Property Acquired for Taxes-Assessed Valuation 54 A-11 Schedule of Due from Federal and State Grant Fund 54 A-12 Schedule of Federal and State Grants Receivable 55 A-13 Schedule of Deferred Charges 56 A-14 Schedule of Prior Year Appropriation Reserves A-15 Schedule of Reserve for Encumbrances 60 A-16 Schedule of Accounts Payable 60 A-17 Schedule of Reserve for Codification of Ordinances 61 A-18 Schedule of Prepaid Taxes 61 A-19 Schedule of Tax Overpayments 62

3 TABLE OF CONTENTS FOR THE YEAR ENDED DECEMBER 31, 2015 (Continued) Exhibit PART I (Continued) Page Current Fund (Continued) A-20 Schedule of County Taxes Payable 62 A-21 Schedule of Local Municipality School Tax Payable 63 A-22 Schedule of Regional High School Tax 64 A-23 Schedule of Due to Other Trust Fund 65 A-24 Schedule of Due to General Capital Fund 65 A-25 Schedule of Fees Payable to Outside Agencies 66 A-26 Schedule of Reserve for Master Plan 67 A-27 Schedule of Due to Outside Lien Holders 68 A-28 Schedule of Appropriated Reserves for Federal and State Grants A-29 Schedule of Unappropriated Reserves for State Grants 71 A-30 Schedule of Due to Regular Fund 71 A-31 Schedule of Reserve for Encumbrances 72 A-32 Schedule of Accounts Payable 72 Trust Fund B-1 Schedule of Cash-Treasurer 74 B-2 Schedule of Cash and Reconciliation - Treasurer Per N.J.S. 40A: B-3 Schedule of Reserve for Animal Control Fund Expenditures 76 B-4 Schedule of Due to State of New Jersey 77 B-5 Schedule of Due from Current Fund-Other Trust Funds 77 B-6 Schedule of Reserve for Developers' Deposits 78 B-7 Schedule of Reserve for Unemployment 79 B-8 Schedule of Reserve for Tax Sale Premiums 79 B-9 Schedule of Reserve for Recreation Commission 80 B-10 Schedule of Payroll Withholdings 81 General Capital Fund C-2 Schedule of Cash Activity 83 C-3 Schedule of Due from Current Fund 84 C-4 C-5 Schedule of Due from Lebanon Borough Sewerage Authority Schedule of Deferred Charges to Future Taxation-Funded C-6 Schedule of Deferred Charges to Future Taxation-Unfunded 86 C-7 Schedule of NJ D.O.T. Grants Receivable 87 C-8 Schedule of Improvement Authorizations 88 C-9 Schedule of Capital Improvement Fund 89 C-10 Schedule of Reserve for Preliminary Plan Expenses 89 C-11 Schedule of Retained Percentages Due to Contractors 90 C-12 Schedule of Reserve for Payment of Debt Service 90 C-13 Schedule of General Serial Bonds Payable 91 C-14 Schedule of Bond Anticipation Notes Payable 92 C-15 Schedule of Bonds and Notes Authorized but not Issued 93

4 TABLE OF CONTENTS FOR THE YEAR ENDED DECEMBER 31, 2015 (Continued) Exhibit Page PART II Independent Auditor's 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 1 Schedule of Expenditures of State Awards 97 Notes to Schedule of Expenditures of State Awards 98 PART III Schedules of Statistical Data Schedule of Insurance 108 Schedule of Officials 109 General Comments Recommendations 114

5 1 INDEPENDENT AUDITORS REPORT FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014

6 Independent Auditors Report To the Honorable Mayor and Members of the Borough Council Borough of Lebanon Lebanon, New Jersey Report on the Financial Statements We have audited the accompanying financial statements - regulatory basis of the various funds and account group of the Borough of Lebanon (the Municipality), as of and for the years then ended December 31, 2015 and 2014, and the related notes to the financial statements which collectively comprise the Municipality s basic financial statements. 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). 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 misstatements, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express opinions on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America, audit 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 Municipality 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 114 Broad Street, Flemington, NJ (908) Fax (908) info@bkc cpa.com

7 Bedard, Kurowicki & Co., CPA s, PC Page 3 Municipality 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. 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, the financial statements are prepared by the Municipality on the basis of the financial reporting provisions of the Division, 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 Adverse Opinion on U.S. Generally Accepted Accounting Principles paragraph, the financial statements referred to above do not present fairly, in accordance with accounting principles generally accepted in the United States of America, the financial position of each fund of the Municipality as of December 31, 2015 and 2014, or the changes in financial position for the years then ended. Unmodified Opinion on Regulatory Basis of Accounting In our opinion, the financial statements - regulatory basis - referred to above present fairly, in all material respects, the financial position of the various funds and account group of the Municipality as of December 31, 2015 and 2014, and the results of operations and changes in fund balance of such funds, thereof for the years then ended in accordance with the basis of financial reporting prescribed by the Division 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 of the various funds and account group that collectively comprise the Municipality s financial statements. The supplementary information listed in the table of contents and schedule of expenditures of federal awards, as required by Title 2 U.S. Code of Federal Regulations Part

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9 FINANCIAL STATEMENTS REGULARTORY BASIS 5

10 CURRENT FUND COMPARATIVE BALANCE SHEET-REGULATORY BASIS 6 A 1 of 2 ASSETS Balance Balance Ref. 12/31/ /31/2014 Regular Fund: Cash: Treasurer A-4 $ 1,586,587 $ 1,011,627 Due from State of NJ Veterans' & Senior Citizens' Deductions A Receivables with Full Reserves: Delinquent Property Taxes Receivable A-7 182,218 39,930 Tax Title Liens Receivable A-8 1, Property Acquired for Taxes A , ,300 Due from Federal and State Grant Fund A-11 6,125 - Prepaid Local School Tax A-21 33,572 33,572 Prepaid Regional High School Tax A-22 49,876 49,876 Total Receivables with Full Reserves: 378, ,629 Deferred Charges: Overexpenditures of Budget Appropriations A Overexpenditures of Appropriation Reserves A Total Regular Fund 1,965,818 1,242,950 Federal & State Grant Fund: Cash A-4-37,746 State, Federal and County Grants Receivable A-12 97,826 97,826 Total Federal and State Grant Fund 97, ,572 TOTAL ASSETS $ 2,063,644 $ 1,378,522 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

11 CURRENT FUND COMPARATIVE BALANCE SHEET-REGULATORY BASIS (Continued) 7 A 2 of 2 LIABILITIES, RESERVES AND FUND BALANCE Balance Balance Ref. 12/31/ /31/2014 Regular Fund: Appropriation Reserves A-3;A-14 $ 104,620 $ 120,013 Reserve for Encumbrances A-15 13,176 12,261 Accounts Payable A-16 4,545 4,500 Reserve for Codification of Ordinances A-17 4,295 4,295 Prepaid Taxes A-18 31,246 13,428 Tax Overpayments A-19 8,648 9,180 County Taxes Payable A Due to Other Trust Fund A-23 6, Due to General Capital Fund A , ,100 Fees Payable to Outside Agencies A-25 15,465 12,535 Reserve for Master Plan A-26 30,656 30,656 1,199, ,797 Reserve for Receivables A 378, ,629 Fund Balance A-1 387, ,524 Total Regular Fund 1,965,818 1,242,950 Federal & State Grant Fund: Appropriated Reserves for State & Federal Grants A-28 88, ,690 Unappropriated Reserves for State Grants A-29-9,512 Due to Regular Fund A-30 6,125 - Reserve for Encumbrances A-31-20,370 Accounts Payable A-32 3,000 - Total Federal & State Grant Fund 97, ,572 TOTAL LIABILITIES, RESERVES AND FUND BALANCE $ 2,063,644 $ 1,378,522 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

12 CURRENT FUND COMPARATIVE STATEMENT OF OPERATIONS AND CHANGES IN FUND BALANCE-REGULATORY BASIS 8 A-1 1 of 2 REVENUES AND OTHER INCOME REALIZED For the Year Ending Ref. 12/31/ /31/2014 Fund Balance Utilized A-2 $ 387,000 $ 398,000 Miscellaneous Revenue Anticipated A-2 481, ,570 Receipts from Delinquent Taxes A-2 39,967 21,410 Receipts from Current Taxes A-2 5,867,616 5,786,410 Nonbudget Revenue A-2 11,447 17,916 Other Credits to Income: Unexpended Balance of Appropriation Reserves A-14 72,024 58,619 Tax Overpayment Balances Canceled A Trust Fund Balances Canceled A Interfunds Returned-Net - 13,519 Unexpended Balance of Reserve for Encumbrances - 1,940 Due to Outside Lien Holders Canceled - 49 Total Income 6,859,897 6,807,821 EXPENDITURES Budget and Emergency Appropriations: Operations: Salaries and Wages A-3 270, ,058 Other Expenses A-3 739, ,283 Capital Improvements A-3 20,000 10,000 Deferred Charges & Statutory Expenditures A-3 124,512 61,297 Debt Service A-3 424, ,735 County Taxes A-20 1,034, ,768 County Share of Added Taxes A Local District School Taxes A-21 2,309,487 2,205,150 Regional High School Taxes A-22 1,672,502 1,712,476 Interfunds Created (Net) A-2 6,125 - Prior Year Senior Citizen Deductions Disallowed A Refund of Prior Year Revenue-State Tax Board Judgment & Permanently Disabled Veteran - 23,410 Total Expenditures $ 6,602,550 $ 6,456,009 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

13 CURRENT FUND COMPARATIVE STATEMENT OF OPERATIONS AND CHANGES IN FUND BALANCE-REGULATORY BASIS (Continued) 9 A-1 2 of 2 For the Year Ending Ref. 12/31/ /31/2014 Excess in Revenue $ 257,347 $ 351,812 Adjustments to Income Before Fund Balance: Expenditures Included Above which are by Statute Deferred Charges to Budget of Succeeding Years: Overexpenditure of Budget Appropriations A Statutory Excess to Fund Balance 257, ,068 FUND BALANCE Balance January 1, A 517, , , ,524 Decreased by: Utilized as Anticipated Revenue A-2 387, ,000 Balance December 31, A $ 387,871 $ 517,524 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

14 CURRENT FUND STATEMENT OF REVENUES-REGULATORY BASIS FOR THE YEAR ENDED DECEMBER 31, A-2 1 of 3 Anticipated NJS Excess or Ref. Budget 40A:4-87 Realized (Deficit ) Fund Balance Anticipated A-1 $ 387,000 $ - $ 387,000 $ - Miscellaneous Revenues: Licenses: Alcoholic Beverage A-9 7,500-7,500 - Fees and Permits A-9 7,000-6,310 (690) Interest & Costs on Taxes A-9 7,500-24,387 16,887 Interest on Investments & Deposits A-2 1,100-1, Building Rent A-9 15,600-15,600 - NJ Hotel Occupancy Tax A-9 128, ,227 (2,773) Energy Receipts Taxes A-9 91,815-91, Hunterdon County Open Space Grant Phase III A-12-7,275 7,275 - Clean Communities Program A-12-4,000 4,000 - NJ Recycling Tonnage Grant-Prior Year Reserve A-29 9,512-9,512 - Reserve to Pay Debt Service-General Capital Fund A-24 65,100-65,100 - Lebanon Borough Sewerage Authority Debt Service Payment: Principal A-4 110, ,010 - Interest A-4 13,726-13,726 - A-1 $ 456,863 $ 11,275 $ 481,735 $ 13,597 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

15 CURRENT FUND STATEMENT OF REVENUES-REGULATORY BASIS FOR THE YEAR ENDED DECEMBER 31, 2015 (Continued) 11 A-2 2 of 3 Anticipated NJS Excess or Ref. Budget 40A:4-87 Realized (Deficit ) Receipts from Delinquent Taxes A-1;A-7 $ 27,733 $ - $ 39,967 $ 12,234 Property Tax for Support of Municipal Budget Appropriations: Local Tax for Municipal Purposes A-2 996,596-1,105, ,858 Budget Totals 1,868,192 11,275 2,014,156 $ 134,689 Non-Budget Revenues A-1;A ,447 Ref. A-3 $ 1,868,192 $ 11,275 $ 2,025,603 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

16 CURRENT FUND STATEMENT OF REVENUES-REGULATORY BASIS FOR THE YEAR ENDED DECEMBER 31, 2015 (Continued) 12 A-2 3 of 3 Allocation of Current Tax Collections Ref. Tax Collections A-1;A-7 $ 5,867,616 Allocated to: Local District School Taxes A-7 $ 2,381,237 Regional High School Taxes A-7 1,646,146 County Taxes A-7 1,034,779 5,062,162 Amount for Support of Municipal Budget 805,454 Add: Appropriation- "Reserve for Uncollected Taxes" A-3 300,000 Realized for Support of Municipal Budget A-2 $ 1,105,454 Interest on Investments & Deposits Analysis Treasurer A-4 $ 1,204 Other Trust Fund A Treasurer: Non-Budget Revenue A-2 $ 1,273 Poll Rent $ 80 Administrative Fees: NJ Veterans' & Senior Citizens' Deductions 275 NJ Homestead Rebate 105 Newsletter Advertising Fees 825 Miscellaneous 1,484 Miscellaneous Refunds 100 Summer Park Recreation Revenues 6,535 Cable TV Franchise Fee 1,965 In Lieu of Taxes 78 A-2;A-4 $ 11,447 Balance Balance Increase Interfund Receivable Analysis Ref. 12/31/ /31/2014 (Decrease ) Due from Federal & State Grant Funds A-11 $ 6,125 $ - $ 6,125 Prepaid Local School Tax A-21 33,572 33,572 - Prepaid Regional High School Tax A-22 49,876 49,876 - $ 89,573 $ 83,448 $ 6,125 Ref. A-1 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

17 CURRENT FUND STATEMENT OF EXPENDITURES-REGULATORY BASIS FOR THE YEAR ENDED DECEMBER 31, A-3 1 of 8 Operations within "CAPS": General Government: Mayor and Council: Other Expenses 3,500 Appropriations Expended by Budget After Paid or Over- Balance Budget Modification Charged Reserved Expended Canceled $ $ 3,500 $ 3,151 $ 349 $ - $ - Communications 1,200 2,290 2, Municipal Clerk: Salaries and Wages 142, , ,297 7, Other Expenses 22,000 22,000 21, Codification of Ordinances 2,500 2,500 2, Registrar of Vital Statistics: Salaries and Wages 2,000 2,000 1, Other Expenses 1,000 1, Financial Administration: Salaries and Wages 22,000 22,800 22, Other Expenses 1,000 1, Audit Services 21,000 21,000 21,000 Data Processing Services 11,000 11,000 9,366 1, Tax Assessment Administration: Salaries and Wages 14,400 14,400 14, Other Expenses 4,200 4, , Revenue Administration: Salaries and Wages 16,800 16,800 16, Other Expenses 1,600 1,600 1, SEE ACCOMPANY NOTES TO FINANCIAL STATEMENTS

18 CURRENT FUND STATEMENT OF EXPENDITURES-REGULATORY BASIS FOR THE YEAR ENDED DECEMBER 31, 2015 (Continued) 14 A-3 2 of 8 Operations Within "CAPS": (Continued) General Government: (Continued) Legal Services and Costs: Other Expenses 70,000 Appropriations Expended by Budget After Paid or Over- Balance Budget Modification Charged Reserved Expended Canceled $ $ 98,000 $ 97,845 $ 155 $ - $ - Engineering Services and Costs: Other Expenses 20,000 18,000 13,004 4, Historical Committee: Other Expenses Planning Board: Other Expenses 1,500 1,500 1, Board of Adjustment: Salaries and Wages 12,650 12,650 12, Environmental Commission: Other Expenses 1,000 1,000 1, Insurance: General Liability 22,700 23,712 23, Worker's Compensation 14,800 15,396 15, Employee Group Health 44,000 44,000 33,195 10, Public Safety: Public Safety: Salaries and Wages Other Expenses 50,000 42,302 37,356 4, SEE ACCOMPANY NOTES TO FINANCIAL STATEMENTS

19 CURRENT FUND STATEMENT OF EXPENDITURES-REGULATORY BASIS FOR THE YEAR ENDED DECEMBER 31, 2015 (Continued) 15 A-3 3 of 8 Operations within "CAPS": (Continued) Public Safety: (Continued) Crossing Guards: Salaries & Wages 28,000 Appropriations Expended by Budget After Paid or Over- Balance Budget Modification Charged Reserved Expended Canceled $ $ 28,000 $ 26,747 $ 1,253 $ - $ - Aid to Volunteer Fire Co 71,000 51,000 51, First Aid Organization Contribution 10,000 10,000 10, Office of Emergency Management: Other Expenses 4,000 4, , Public Works: Streets & Road Maintenance: Salaries and Wages 4,500 2, , Other Expenses 70,000 70,000 69, Solid Waste Collection: Other Expenses 60,000 60,000 55,171 4, Shade Tree: Other Expenses 6,500 6,500 6, Buildings and Grounds: Salaries and Wages 12,500 12,500 12, Other Expenses 33,000 35,000 34, SEE ACCOMPANY NOTES TO FINANCIAL STATEMENTS

20 CURRENT FUND STATEMENT OF EXPENDITURES-REGULATORY BASIS FOR THE YEAR ENDED DECEMBER 31, 2015 (Continued) 16 A-3 4 of 8 Operations within "CAPS": (Continued) Health and Human Services: Board of Health: Salaries and Wages 2,500 Appropriations Expended by Budget After Paid or Over- Balance Budget Modification Charged Reserved Expended Canceled $ $ 2,500 $ 2,248 $ 252 $ - $ - Other Expenses Parks and Recreation: Recreation Services: Salaries and Wages 17,000 15,000 12,688 2, Other Expenses 2,500 2,500 2, Contribution-Senior Citizens 2,500 2,500 2,500 Maintenance of Parks: Other Expenses 14,000 14,000 4,118 9, Utilities: Electricity 17,100 17,100 12,670 4, Street Lighting 15,000 15,000 9,155 5, Telephone 7,700 7,900 7, Water Natural Gas (Propane) 10,000 10,000 5,336 4, Sewerage Gasoline Fire Hydrant 25,150 25,150 18,862 6, Landfill and Solid Waste Disposal Cost 56,000 56,000 42,879 13, Total Operations Within "CAPS" 974, , , , Detail: Salaries and Wages 274, , ,991 13, Other Expenses 699, , ,155 87, SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

21 CURRENT FUND STATEMENT OF EXPENDITURES-REGULATORY BASIS FOR THE YEAR ENDED DECEMBER 31, 2015 (Continued) 17 A-3 5 of 8 Appropriations Expended by Budget After Paid or Over- Balance Budget Modification Charged Reserved Expended Canceled Deferred Charges & Statutory Expenditures Municipal within "CAPS": Deferred Charges: Overexpenditure of Budget Appropriations $ 256 $ 256 $ 256 $ - $ - $ - Overexpenditure of Appropriation Reserves Statutory Expenditures: Social Security System (OASI) 19,000 19,300 19, Public Employees Retirement System 19,550 19,550 19, State Unemployment Insurance Total Deferred Charges & Statutory Expenditures 39,734 40,134 39, Total General Appropriations for Municipal Purposes Within "CAPS 1,014,002 1,014, , , Operations-Excluded from CAPS : Fair Housing Plan Ch 222 PL 1985: Administrative & Executive: Other Expenses 1,500 1,500-1, Inter-Local Municipal Service Agreement: Municipal Court: Other Expenses 13,800 13,800 13, SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

22 CURRENT FUND STATEMENT OF EXPENDITURES-REGULATORY BASIS FOR THE YEAR ENDED DECEMBER 31, 2015 (Continued) 18 A-3 6 of 8 Appropriations Expended by Budget After Paid or Over- Balance Budget Modification Charged Reserved Expended Canceled Operations Excluded from "CAPS": (Continued) Public & Private Programs Offset by Revenues: NJ DEP Recycling Tonnage Grant: Other Expenses $ 9,512 $ 9,512 $ 9,512 $ - $ - $ - DEPA Clean Communities Program: Other Expenses - 4,000 4, Hunterdon County Open Space Grant Phase III: Other Expenses - 7,275 7, Total Operations-Excluded from "CAPS" 24,812 36,087 34,128 1, Detail: Other Expenses 24,812 36,087 34,128 1, Capital Improvements-Excluded from "CAPS": Acquisition of Turnout Gear 10,000 10,000 9, Acquisition of a Photo Copier 10,000 10,000 9, Total Capital Improvements Excluded from "CAPS" 20,000 20,000 19, Municipal Debt Service-Excluded from "CAPS": Payment of Bond Principal 280, , , Interest on Bonds 145, , , Total Municipal Debt Service Excluded from "CAPS" 425, , , SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

23 CURRENT FUND STATEMENT OF EXPENDITURES-REGULATORY BASIS FOR THE YEAR ENDED DECEMBER 31, 2015 (Continued) 19 A-3 7 of 8 Appropriations Expended by Budget After Paid or Over- Balance Budget Modification Charged Reserved Expended Canceled Deferred Charges-Municipal-Excluded from "CAPS": Deferred Charges to Future Taxation-Unfunded: Acquisition of a Fire Truck $ 74,378 $ 74,378 $ 74,378 $ - $ - $ - Main Street II Improvements 10,000 10,000 10, Total Deferred Charges-Municipal Excluded from "CAPS" 84,378 84,378 84, Total General Appropriations for Municipal Purposes Excluded from "CAPS" 554, , ,927 2, Subtotal General Appropriations 1,568,192 1,579,467 1,474, , Reserve for Uncollected Taxes 300, , , Total General Appropriations $ 1,868,192 $ 1,879,467 $ 1,774,787 $ 104,620 $ - $ 60 Ref. A-2 A-3 A-1; A-3 A; A-1 A-1;A-13 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

24 CURRENT FUND STATEMENT OF EXPENDITURES-REGULATORY BASIS FOR THE YEAR ENDED DECEMBER 31, 2015 (Continued) 20 A-3 8 of 8 Paid or Ref. Charged Analysis of Paid or Charged Reserve for Uncollected Taxes A-2 $ 300,000 Cash Disbursed A-4 1,371,655 Deferred Charges A Reserve for Encumbrances A-15 13,176 Due to Other Trust Fund A Due to General Capital Fund A-24 84,378 Reserve for Federal & State Grants-Appropriated A-28 20,787 1,791,526 Less: Refunds Received A-4 16,739 A-3 $ 1,774,787 Budget After Modification Adopted Budget A-2 $ 1,868,192 Added by NJS 40A:4-87 A-2 11,275 A-3 $ 1,879,467 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

25 21 B TRUST FUND COMPARATIVE BALANCE SHEET-REGULATORY BASIS ASSETS Balance Balance Ref. 12/31/ /31/2014 Animal Control Fund: Cash B-1 $ 1,042 $ 753 Other Trust Funds: Cash B-1 212, ,620 Due from Current Fund B-5 6, , ,617 TOTAL ASSETS $ 219,992 $ 240,370 LIABILITIES AND RESERVES Animal Control Fund: Reserve for Animal Control Fund Expenditures B-3 $ 1,041 $ 752 Due to State Board of Health B , Other Trust Funds: Reserve for Trusts: Developers' Deposits B-6 161, ,700 Unemployment Compensation B-7 13,641 13,111 Tax Sale Premium B-8 24,400 19,100 Recreation Commission B-9 18,936 18,103 Payroll Withholdings Payable B , ,617 TOTAL LIABILITIES AND RESERVES $ 219,992 $ 240,370 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

26 22 C GENERAL CAPITAL FUND COMPARATIVE BALANCE SHEET-REGULATORY BASIS ASSETS Balance Balance Ref. 12/31/ /31/2014 Due from Current Fund C-3 $ 979,141 $ 287,100 Due from Lebanon Borough Sewerage Authority C-4-221,929 Deferred Charges to Future Taxation: Funded C-5 3,341,000 3,621,000 Unfunded C-6 1,823, ,521 NJ DOT Grants Receivable C-7 160,000 33,750 TOTAL ASSETS $ 6,303,284 $ 5,083,300 LIABILITIES, RESERVES AND FUND BALANCE General Serial Bonds Payable C-13 $ 3,341,000 $ 3,621,000 Bond Anticipation Notes Payable C-14 1,412,500 - Improvement Authorizations: Funded C-8 233, ,318 Unfunded C-8 988, ,500 Capital Improvement Fund C-9 162, ,823 Reserve for Preliminary Plan Expenses C-10 1,100 1,100 Retained Percentages Due to Contractors C-11 7,175 7,176 Reserve for Payment of Debt Service C , ,300 Fund Balance C-1 7,083 7,083 TOTAL LIABILITIES, RESERVES AND FUND BALANCE $ 6,303,284 $ 5,083,300 Bonds and Notes Authorized But Not Issued C-15 $ 410,643 $ 919,521 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

27 23 C-1 GENERAL CAPITAL FUND COMPARATIVE STATEMENT OF FUND BALANCE-REGULATORY BASIS For the Year Ending Ref. 12/31/ /31/2014 Balance December 31, 2014 C $ 7,083 $ 7,083 Balance December 31, 2015 C $ 7,083 $ 7,083 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

28 24 D GENERAL FIXED ASSETS ACCOUNT GROUP STATEMENT OF GENERAL FIXED ASSETS-REGULATORY BASIS AS OF DECEMBER 31, 2015 AND 2014 GENERAL FIXED ASSETS Land and Land Improvemetns $ 279,200 $ 279,200 Buildings & Building Improvements 4,632,895 4,531,640 Furniture, Machinery & Equipment 288, ,737 Vehicles 1,028, ,503 Construction in Progress - 80,719 Total General Fixed Assets $ 6,229,555 $ 5,486,799 Investment in General Fixed Assets $ 6,229,555 $ 5,486,799 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

29 NOTES TO THE FINANCIAL STATEMENTS 25

30 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2015 AND NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Reporting Entity Except as noted below, the financial statements-regulatory basis of the Borough of Lebanon (the Municipality) include every board, body, office or commission supported and maintained wholly or in part by funds appropriated by the Municipality, as required by N.J.S. 40A:5-5. Component units are legally separate organizations for which the Municipality is financially accountable. The Municipality is financially accountable for an organization if the Municipality appoints a voting majority of the organization s governing board and (1) the Municipality is able to significantly influence the programs or services performed or provided by the organization; or (2) the Municipality is legally entitled to or can otherwise access the organization s resources; the Municipality is legally obligated or has otherwise assumed the responsibility to finance the deficits of or provide financial support to the organization; or the Municipality is obligated for the debt of the organization. Component units may also include organizations that are fiscally dependent on the Municipality in that the Municipality approves the budget, the issuance of debt or the levying of taxes. The Lebanon Borough Sewerage Authority is a component unit of the Municipality. However, under the regulatory basis of accounting in New Jersey, the component units are neither blended nor shown in a discrete presentation in the financial statements of the Municipality. The Authority does have an independent audit performed and a copy is available at the Authority s office. B. Description of Funds and Account Group The accounting policies of the Municipality conform to the accounting principles applicable to municipalities, which have been prescribed by the New Jersey Division of Local Government Services, Department of Community Affairs, (State of New Jersey). Such principles and 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 Municipality accounts for its financial transactions through the following separate funds and account group: Governmental Funds: Current Fund - resources and expenditures for governmental operations of a general nature, including federal and state grant funds. Trust Fund - receipts, custodianship and disbursement of funds in accordance with the purpose for which each reserve was created. General Capital Fund - receipts and disbursement of funds for the acquisition of general capital facilities, other than those acquired in the Current Fund. Account Groups: General Fixed Assets Account Group - to account for all fixed assets of the Municipality. Neither infrastructure nor depreciation of assets of the municipality is recorded in the group.

31 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2015 AND NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) C. Basis of Accounting The accounting principles and practices prescribed for municipalities by the State of New Jersey differ in certain respects from accounting policies generally accepted in the United States of America (GAAP). The more significant differences, which may be material, are discussed further in part D of Note 1. A modified accrual basis of accounting is followed with minor exceptions. Budget and Budgetary Procedures - the State of New Jersey has promulgated the form and procedures for the municipality s cash basis budget in the Local Budget Law (N.J.S.A 40A:4-1). The municipality is only required to adopt budgets for the Current Fund and any Utility Fund, if applicable. The municipality must introduce and approve its annual budget no later than February 10 th and adopt no later than March 20 th of its budget year, unless extended by the Director of the Division of Local Government Services (the Director). All budgets shall be introduced, approved, amended and adopted by resolution passed by not less than a majority of the full membership of the governing body. The approved budget must be advertised and a public hearing must be held prior to adoption. No budget or amendment thereof shall be adopted unless the Director has certified his approval thereof. Emergency and special emergency appropriations may be made by resolution adopted by a 2/3 vote of the full membership of the governing body. All emergency appropriations must be raised in full in the succeeding year s budget, while special emergency appropriations financed from surplus funds shall be raised in installments of a least 20% annually until fully provided for. Transfers between current year appropriations are allowed only during the last two months of the fiscal year. Transfers between prior year appropriation reserves are allowed only during the first three months of the fiscal year. Revenues - are recorded when received in cash except for certain amounts, which are due from other governmental units. Receipts from Federal and State grants are realized as revenue when anticipated in the Municipal budget. Receivables for property taxes are recorded with offsetting reserves on the balance sheet of the Municipality's Current Fund; accordingly, such amounts are not recorded as revenue until collected. Other amounts that are due the Municipality which are susceptible to accrual are also recorded as receivables with offsetting reserves and recorded as revenue when received.

32 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2015 AND NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) C. Basis of Accounting (Continued) Expenditures - are recorded on the "budgetary" basis of accounting. Generally, expenditures are recorded when an amount is encumbered for goods or services through the issuances of a purchase order in conjunction with the Encumbrance Accounting System. Outstanding encumbrances at year-end are reported as a cash liability in the financial statements and constitute part of the Municipality's statutory Appropriation Reserve balance. Appropriation reserves covering unexpended appropriation balances are automatically created at December 31st of each year and recorded as liabilities, except for amounts, which may be canceled 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. Appropriations for principal payments on outstanding general capital and utility bonds and notes are provided on the cash basis; interest on general capital indebtedness is on the cash basis, whereas interest on utility indebtedness is on the accrual basis. Foreclosed Property - is recorded in the Current Fund at the assessed valuation when such property was acquired and is fully reserved. Tax Title Liens - are taxes which have been put up for sale but not been purchased. The Municipality then accepts the lien which will earn 18% per annum until the lien is paid off by the property owner. The Municipality may choose to foreclose and return the property to the tax rolls. 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 costs of inventories of supplies for all funds are recorded as expenditures at the time individual items are purchased. The costs of inventories are not included on the various balance sheets. Deferred Charges to Future Taxation - Funded and Unfunded (Capital Fund) - upon authorization of capital projects, the Municipality establishes deferred charges for the costs of the projects that are to be raised by future taxation. Deferred charges that relate to permanent debt issued are shown as funded. All other deferred charges are shown as unfunded. General Fixed Assets - in accordance with New Jersey Administrative Code Section 5:30-5.6, Accounting for Governmental Fixed Assets, as promulgated by the State of New Jersey, which differs in certain respects from generally accepted accounting principles, all local units are required to have and maintain a fixed assets accounting and reporting system. In accordance with this administrative code requirement, fixed assets acquired after December 31, 1985 shall be valued on the basis of actual cost; prior to that time, they may be valued at cost or estimated historical cost. Fixed assets used in governmental operations (general fixed assets) are accounted for in the General Fixed Assets Account Group. Public domain ("infrastructure") general fixed assets consisting of certain improvements other than buildings, such as roads, bridges, curbs and gutters, streets and sidewalks and drainage systems are not capitalized. No depreciation has been provided for in the financial statements. Fixed assets acquired through grants in aid or contributed capital has not been accounted for separately.

33 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2015 AND NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) D. Departures from Generally Accepted Accounting Principles As noted, the accounting principles and practices used differ in some respects from generally accepted accounting principles (GAAP) for local governmental units. The more significant differences, which may be material, are as follows: 1. Financial Reporting Model - These statements are not based on the requirements as promulgated by GASB Statement No. 34, Basic Financial Statements-and Management s Discussion and Analysis-for State and Local Governments. This statement made dramatic changes to the financial reporting requirements of state and local governments for GAAP purposes. 2. Revenues - GAAP records taxes, utility charges and other revenues as income when levied and there is no reserve for receivables for unpaid balances. 3. Expenditures - GAAP records expenditures when incurred and does not reflect appropriation reserve balances or deferred charges to future taxation. 4. Interfunds - GAAP does not require offsetting reserves for Interfund receivables and resulting revenue recognition when Interfunds are liquidated. 5. Inventories - GAAP requires inventories to be reported on the balance sheet at year-end. 6. Fixed Assets - GAAP does not require the establishment of a reserve for amortization for utility fixed assets but does require the recording of depreciation as an operating expense of the utility. 7. Grant Accounting - GAAP requires that grants be recorded within a special revenue fund and revenues are not to be realized until earned. 8. Capital Funds - GAAP requires separate funds for the recording of capital projects and payment of debt service while New Jersey requirements incorporates these transactions within one fund. 9. Compensated absence liabilities for sick and vacation pay and for contributions to state administered pension plans are not recorded until paid. 10. Losses arising from tax appeals and other contingencies are not recorded until paid. 11. Financial Reporting Model - These statements are not based on the requirements as promulgated by GASB Statement Number 68, Accounting and Financial Reporting for Pensions-an amendment of GASB Statement Number 27. This statement made dramatic changes to the financial reporting requirements of state and local governments as it relates to reporting for pensions for GAAP purposes. Information regarding pension activity is disclosed in note 9. It is not practicable to determine the effect of these differences on the financial statements.

34 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2015 AND NOTE 2: DEPOSITS AND INVESTMENTS State Requirements for Deposits and Investments New Jersey statutes require each local unit to adopt a cash management plan and shall deposit and/or invest according to that plan, which shall include: 1. The designation of public depositories ad defined in Section 1 of PL 1970 Chapter 236 (C17:9-41) and permit deposits in designated depositories; 2. The designation of any fund that meets the requirements established pursuant to Section 8 PL 1977, Chapter 396(C40A5-15.1); 3. The authorization for investments as permitted pursuant to Section 8 of PL 1977, Chapter 396 (C.40A:5-15.1); or 4. Any combination of these designations or authorizations. Deposit and Investment Risk GASB Statement Number 40 Deposit and Investment Risk Disclosures requires state and local governments to communicate key information about deposit and investment risks. Required disclosures are as follows: 1. Custodial credit risk disclosures are required for: Deposits that are uninsured and either (a) uncollateralized or (b) collateralized with securities held by the pledging financial institution, or its trust department or agent but not in the government s name. Investment securities that are uninsured, are not registered in the name of the government, and are held by either (a) the counterparty or (b) the counterparty s trust department or agent but not in the government s name. As the municipality has no such investments, this disclosure is not applicable. 2. Credit quality ratings for investments in debt securities, external investment pools, money market funds, bond mutual funds, and other pooled investments of fixed-income securities. As the municipality has no such investments, this disclosure is not applicable. 3. Disclosure of investments by amount and issuer for any issuer that represents five percent of more of total investments. This requirement does not apply to investments issued or explicitly guaranteed by the U.S. Government and Investments in mutual funds or pools. This disclosure is reported below under Concentration of Credit Risk.

35 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2015 AND NOTE 2: DEPOSITS AND INVESTMENTS (Continued) Deposit and Investment Risk (Continued) 4. Interest rate risk disclosures are required for all debt investments and non-money market like pools. As the municipality has no such investments, this disclosure is not applicable. 5. Investments that are exposed to foreign currency risk should be disclosed. As the municipality has no such investments this disclosure is not applicable. Concentration of Credit Risk The State of New Jersey does not place any limit on the amount that the municipality may invest with any one issuer. As of December 31, 2015, the municipality had no investments. NOTE 3: TAX ASSESSMENTS AND PROPERTY TAXES Property valuations (assessments) are determined on true values as arrived at by a cost approach, market data approach and capitalization of net income where appropriate. Current assessments are the results of new assessments on a like basis with established comparable properties for newly assessed or purchased properties. This method assures equitable treatment to like property owners. Upon the filing of certified adopted budgets by the municipality, the municipality's local school, and the county, the tax rate is struck by the County Board of Taxation based on the certified amounts in each of the taxing Municipalities for collection to fund the budgets. The statutory provision for the assessment of property, levying of taxes and the collection thereof are set forth in N.J.S.A 54:4 et seq. Special taxing Municipalities are permitted in New Jersey for various special services rendered to the properties located within the special Municipalities. Tax bills are mailed annually in June. The taxes are due August 1 and November 1 respectively, and are adjusted to reflect the current fiscal year's total tax liability. The preliminary taxes due March 1 and May 1 of the succeeding fiscal year are based upon one-half of the current year's total tax. Tax installments not paid on or before the due date are subject to interest penalties of eight percent per annum on the first $1,500 of the delinquency and eighteen percent per annum on any amount in excess of $1,500. Pursuant to Chapter 75, PL 1991, the governing body may also fix a penalty to be charged to a taxpayer with a delinquency in excess of $10,000 who fails to pay that delinquency prior to the end of the calendar year. The penalty so fixed shall not exceed six percent of the amount of the delinquency. These interest and penalties are the highest permitted under the New Jersey Statutes. Delinquent taxes are annually included in a tax sale in accordance with New Jersey Statutes.

36 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2015 AND NOTE 4: LONG-TERM DEBT The Local Bond Law of the State of New Jersey governs the authorization of debt by municipalities to finance certain general municipal and utility capital expenditures. Among its provisions are requirements that bonds must mature within the statutory period of usefulness of the projects bonded. Bond anticipation notes may also be issued to temporarily finance capital projects for periods not greater than one year and may be reissued in yearly installments not to exceed ten years. All bonds and notes issued by the municipality are general full faith and credit obligations. Summary of Municipal Debt Year 2015 Year 2014 Year 2013 Issued: General: Bonds $ 3,341,000 $ 3,621,000 $ 3,891,000 Notes and Loans 1,412, Authorized but not issued: General: Bonds and Notes 410, , ,021 Net Bonds and Notes Issued & Authorized but not Issued $ 5,164,143 $ 4,540,521 $ 4,123,021 Summary of Statutory Debt Condition - 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 1.85%. Gross Debt Deductions Net Debt Regional School District Debt $ 49,724 $ 49,724 - General Debt 5,164, ,200 $ 5,013,943 $ 5,213,867 $ 199,924 $ 5,013,943 Net Debt $5,013,943 divided by Equalized Valuation Basis per N.J.S. 40A:2-2 as amended, $271,167,411 equals 1.85%. Borrowing Power Under N.J.S. 40A:2-6 As Amended 3 1/2% of Equalized Valuation Basis (Municipal) $ 9,490,859 Net Debt 5,013,943 Remaining Borrowing Power $ 4,476,916

37 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2015 AND NOTE 4: LONG-TERM DEBT (Continued) Changes in Long-Term Debt During the years ended December 31, 2014 and 2015, the following changes occurred in long-term debt. Balance Balance Jan.1, 2014 Additions Reductions Dec. 31, 2014 Issued Debt: General: Bonds $ 3,891,000 $ - $ 270,000 $ 3,621,000 Authorized but not Issued Debt: General: Bonds and Notes 232,021 $ 712,500 25, ,521 Total $ 4,123,021 $ 712,500 $ 295,000 $ 4,540,521 Balance Balance Jan.1, 2015 Additions Reductions Dec. 31, 2015 Issued Debt: General: Bonds $ 3,621,000 $ - $ 280,000 $ 3,341,000 Notes - 1,412,500-1,412,500 Authorized but not Issued Debt: General: Bonds and Notes 919, ,000 1,496, ,643 Total $ 4,540,521 $ 2,400,500 $ 1,776,878 $ 5,164,143 On April 8, 2002, the Municipality issued $1,849,000 general obligation bonds dated April 1, The bonds have an effective interest rate of 4.68% with interest rates ranging from 4.60% to 4.75%. Annual principal installments ranging from $90,000 to $164,000 began April 1, 2003 and continue through April 1, The purpose of the bonds is to finance previously authorized capital projects of the Municipality. Included in the $1,849,000 bonds is $1,356,000 of the Borough s share of the expansion costs of the sewerage treatment capacity of the Readington-Lebanon Sewerage Authority. By contract, the Lebanon Borough Sewerage Authority is responsible for 73.34% of the debt service and will reimburse the Municipality annually for their share. On February 17, 2011, the Municipality issued $3,522,000 in general obligation bonds dated February 24, The interest rate on the bonds ranges from 2.00% to 4.35%. Annual principal installments ranging from $120,000 to $240,000 began on February 1, 2013 and continue through February 1, The bonds were issued to refund $2,857,000 of bond anticipation notes previously issued to finance improvements to the municipal building and to permanently finance the cost of the improvement of various roads in the Borough in the amount of $665,000.

38 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2015 AND NOTE 4: LONG-TERM DEBT (Continued) Schedule of Annual Debt Service for Principal and Interest for Outstanding Bonds Year Principal Interest Total 2016 $ 290,000 $ 133,046 $ 423, , , , , , , , , , ,000 98, , , ,873 1,301, ,140, ,677 1,316, ,000 5, ,155 Totals $ 3,341,000 $ 1,134,844 $ 4,475,844 NOTE 5: FUND BALANCES APPROPRIATED Fund balances at December 31, 2015, which were appropriated and included as anticipated revenue in their own respective funds for the year ending December 31, 2016, were as follows: Current Fund $ 300,000 NOTE 6: SCHOOL TAXES Local Municipality Tax and Regional High School Tax have been raised and liabilities deferred by statute, resulting in the school taxes payable set forth in the Current Fund liabilities as follows: Local District School Tax Regional High School Tax Balance Balance Balance Balance Balance of Tax Dec. 31, 2015 $ 1,157,047 Dec. 31, 2014 $ 1,085,297 Dec. 31, 2015 $ 438,697 Dec. 31, 2014 $ 465,053 Deferred 1,190,619 1,118, , ,929 Tax Payable (Prepaid) $ (33,572) $ (33,572) $ (49,876) $ (49,876)

39 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2015 AND NOTE 7: TAXES COLLECTED IN ADVANCE Taxes collected in advance, include discounts allowed for prepayments and the amount set forth as cash liabilities in the financial statements as follows: Balance Balance Dec.31, 2014 Dec.31, 2015 Prepaid Taxes $ 13,428 $ 31,246 Less: Discount Allowed - - Cash Liability for Taxes Collected in Advance $ 13,428 $ 31,246 NOTE 8: PENSIONS Employees, who are eligible for a pension plan, are enrolled in one of three pension systems administered by the Division of Pensions, Treasury Department of the State of New Jersey. The three State-administered plans are: (1) The Public Employees' Retirement System (2) Defined Contribution Retirement Program (3) The Police and Firemen's Retirement System Plan Description The State of New Jersey, Public Employees Retirement System (PERS) is a cost-sharing multipleemployer defined benefit pension plan administered by the State of New Jersey, Division of Pensions and Benefits (the Division). For additional information about PERS, please refer to t h e Division s Comprehensive Annual Financial Report (CAFR) which can be found at The vesting and benefit provisions are set by N.J.S.A. 43:15A. PERS provides retirement, death and disability benefits. All benefits vest after ten years of service, except for medical benefits, which vest after 25 years of service or under the disability provisions of PERS. The following represents the membership tiers for PERS: Tier Definition 1. Members enrolled prior to July 1, Members eligible to enroll on or after July 1, 2007 and prior to November 2, Members eligible to enroll on or after November 2, 2008 and prior to May 22, Members eligible to enroll on or after May 22, 2010 and prior to June 28, Members eligible to enroll on or after June 28, 2011

40 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2015 AND NOTE 8: PENSIONS (Continued) Service retirement benefits of 1/55th of final average salary for each year of service credit is available to tiers 1 and 2 members upon reaching age 60 and to tier 3 members upon reaching age 62. Service retirement benefits of 1/60th of final average salary for each year of service credit is available to tier 4 members upon reaching age 62 and tier 5 members upon reaching age 65. Early retirement benefits are available to tiers 1 and 2 members before reaching age 60, tiers 3 and 4 before age 62 with 25 or more years of service credit and tier 5 with 30 or more years of service credit before age 65. Benefits are reduced by a fraction of a percent for each month that a member retires prior to the age at which a member can receive full early retirement benefits in accordance with their respective tier. Tier 1 members can receive an unreduced benefit from age 55 to age 60 if they have at least 25 years of service. Deferred retirement is available to members who have at least 10 years of service credit and have not reached the service retirement age for the respective tier. Allocation Methodology and Reconciliation to Financial Statements GASB Statement No. 68, Accounting and Financial Reporting for Pensions, requires participating employers in PERS to recognize their proportionate share of the collective net pension liability, collective deferred outflows of resources, collective deferred inflows of resources and collective pension expense excluding that attributable to employer-paid member contributions. The employer allocation percentages presented in the Division s schedule of employer allocations and applied to amounts presented in the schedule of pension amounts by employer are based on the ratio of the contributions as an individual employer to total contributions to the PERS during the years ended June 30, 2015 and Employer allocation percentages have been rounded for presentation purposes, therefore amounts presented in the schedule of pension amounts by employer may result in immaterial differences. Although the Division administers one cost-sharing multiple-employer defined benefit pension plan, separate (sub) actuarial valuations are prepared to determine the actuarial determined contribution rate by group. Following this method, the measurement of the collective net pension liability, deferred outflows of resources, deferred inflows of resources, and pension expense excluding that attributable to employer-paid member contributions are determined separately for each individual employer of the State and local groups of the plan. To facilitate the separate (sub) actuarial valuations, the Division maintains separate accounts to identify additions, deductions, and fiduciary net position applicable to each group. The allocation percentages presented for each group in the schedule of employer allocations are applied to amounts presented in the schedules of pension amounts by employer. The allocation percentages for each group as of June 30, 2015 and 2014 are based on the ratio of each employer s contributions to total employer contributions of the group for the fiscal years ended June 30, 2015 and 2014, respectively.

41 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2015 AND NOTE 8: PENSIONS (Continued) Contributions The contribution policy for PERS is set by N.J.S.A 15A and requires contributions by active members and contributing employers. State legislation has modified the amount that is contributed by the State. The State s pension contribution is based on an actuarially determined amount which includes the employer portion of the normal cost and an amortization of the unfunded accrued liability. Funding for noncontributory group insurance benefits is based on actual claims paid. For fiscal years 2015 and 2014, the State s pension contribution was less than the actuarial determined amount. The local employers contribution amounts are based on an actuarially determined rate which includes the normal cost and unfunded accrued liability. Chapter 19, PL 2009 provided an option for local employers of PERS to contribute 50% of the normal and accrued liability contribution amounts certified for payments due in State fiscal year Such employers will be credited with the full payment and any such amounts will not be included in their unfunded liability. The actuaries will determine the unfunded liability of those retirement systems, by employer, for the reduced normal and accrued liability contributions provided under this law. This unfunded liability will be paid by the employer in level annual payments over a period of 15 years beginning with the payments due in the fiscal year ended June 30, 2012 and will be adjusted by the rate of return on the actuarial value of assets. The contribution policy is set by state statutes and contributions are required by active members and contributing employers. Plan member and employer contributions may be amended by State of New Jersey legislation. Significant legislation which became effective October 1, 2011 will gradually increase the employee contribution rate for PERS members. Effective October 1, 2011, the rate increased from 5.50% to 6.50% of annual contractual compensation for employees enrolled in the PERS pension plans. The rate will increase each year on the first of July over a seven year phasein period until the withholding rate reaches 7.50% effective July 1, Collective Net Pension Liability and Actuarial Information Components of Net Pension Liability The components of the Municipality s allocable share of the net pension liability for PERS as of June 30, 2015 and 2014 are as follows: Total Pension Liability $ 982,954 $ 861,682 Plan Fiduciary Net Position 471, ,771 Net Pension Liability $ 511,843 $ 412,911 Plan Fiduciary Net Position as a Percentage of the Total Pension Liability 47.93% 52.08%

42 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2015 AND NOTE 8: PENSIONS (Continued) The total pension liability for the June 30, 2015 measurement date was determined by an actuarial valuation as of July 1, 2014, which was rolled forward to June 30, The total pension liability for the June 30, 2014 measurement date was determined by an actuarial valuation as of July 1, This actuarial valuation used the following actuarial assumptions, applied to all periods in the measurement: Inflation Rate 3.04% Salary Increases (based on age): % % Thereafter 3.15% % Investment Rate of Return 7.90% Mortality rates were based on the RP-2000 Combined Healthy Male and Female Mortality Tables (setback one year for females) with adjustments for mortality improvements from the base year of 2012 based on Projection Scale AA. The actuarial assumptions used in the July 1, 2014 valuation were based on the results of an actuarial experience study for the period July 1, 2008 to June 30, Long-Term Expected Rate of Return In accordance with State statute, the long-term expected rate of return on plan investments is determined by the State Treasurer, after consultation with the Directors of the Division of Investments and Division of Pensions and Benefits, the board of trustees, and the actuaries. Best estimates of arithmetic real rates of return for each major asset class included in PERS s target asset allocation as of June 30, 2015 are summarized in the following table: Long-Term Target Expected Asset Class Allocation Rate of Return Cash 5.00% 1.04% U.S. Treasuries 1.75% 1.64% Investment Grade Credit 10.00% 1.79% Mortgages 2.10% 1.62% High Yield Bonds 2.00% 4.03% Inflation-Indexed Bonds 1.50% 3.25% Broad U.S. Equities 27.25% 8.52% Developed Foreign Equities 12.00% 6.88% Emerging Market Equities 6.40% 10.00% Private Equity 9.25% 12.41% Hedge Funds/Absolute Return 12.00% 4.72% Real Estate (Property) 2.00% 6.83% Commodities 1.00% 5.32% Global Debt ex U.S. 3.50% -0.40% REIT 4.25% 5.12%

43 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2015 AND NOTE 8: PENSIONS (Continued) Discount Rate The discount rate used to measure the total pension liability was 4.90% and 5.39% as of June 30, 2015 and 2014, respectively. This single blended discount rate was based on the long-term expected rate of return on pension plan investments of 7.9%, and a municipal bond rate of 3.80% and 4.29% as of June 30, 2015 and 2014, respectively, based on the Bond Buyer Go 20-Bond Municipal Bond Index which includes tax-exempt general obligation municipal bonds with an average rating of AA/Aa or higher. The projection of cash flows used to determine the discount rate assumed that contributions from plan members will be made at the current member contribution rates and that contributions from employers will be made based on the average of the last five years of contributions made in relation to the last five years of recommended contributions. Based on those assumptions, the plan s fiduciary net position was projected to be available to make projected future benefit payments of current plan members through Therefore, the long-term expected rate of return on plan investments was applied to projected benefit payments through 2033, and the municipal bond rate was applied to projected benefit payments after that date in determining the total pension liability. Sensitivity of the Collective Net Pension Liability to Changes in the Discount Rate The following presents the collective net pension liability of the Municipality as of June 30, 2015 and 2014, respectively, calculated using the discount rate as disclosed above as well as what the collective net pension liability would be if it was calculated using a discount rate that is 1% point lower or 1% point higher than the current rate: 2015 At Current Discount Rate (4.90%) $ 511,843 At a 1% Lower Rate (3.90%) 636,159 At a 1% Higher Rate (5.90%) 407, At Current Discount Rate (5.39%) $ 412,911 At a 1% Lower Rate (4.39%) 519,456 At a 1% Higher Rate (6.39%) 323,440 Collective Deferred Outflows of Resources and Deferred Inflows of Resources At June 30, 2015, the Municipality reported deferred outflows of resources and deferred inflows of resources related to PERS from the following sources: Deferred Outflows of Resources Deferred Inflows of Resources Differences between expected and actual experience $ 12,211 $ - Changes of assumptions 54,968 - Net difference between projected and actual earnings on pension plan investments 8,229 Changes in proportion and differences between Municipalities contributions and proportionate share of - contributions 16,386 Total $ 83,565 $ 8,229

44 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2015 AND NOTE 8: PENSIONS (Continued) The following presents a summary of changes in the collective deferred outflows of resources and deferred inflows of resources (excluding employer specific amounts) for the year ended June 30, 2015: Beginning Ending Balance Increases Decreases Balance Deferred Outflows of Resources: Changes of Assumptions and Differences Between Expected and Actual Experience $ 13,425 $ 68,134 $ 14,379 $ 67,180 Deferred Inflows of Resources: Difference Between Projected and Actual Earnings on Pension Plan Investments 25,442 (13,565) 3,647 8,230 Net of Deferred Outflows/(Inflows) $ 58,950 Amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions (excluding employer specific amounts, deferrals from the Municipality s contributions subsequent to the measurement date, and deferrals from change on proportion) will be recognized in pension expense as follows: Year Ending June 30, 2016 $ 10, , , , ,662 Total $ 58,950 Pension Expense For the year ended June 30, 2015, the Municipality recognized net pension expense of $55,290 which represents the Municipality s proportionate share of allocable plan pension expense of $33,577, plus the net amortization of deferred amounts from changes in proportion of $3,532 plus the actual contribution paid by the Municipality in the current year of $18,181.

45 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2015 AND NOTE 8: PENSIONS (Continued) The components of allocable pension expense, which exclude amounts attributable to employer paid member contributions and pension expense related to specific liabilities of individual employers, for the Municipality for the year ending June 30, 2015 are as follows: Service Cost $ 20,111 Interest on Total Pension Liability 47,929 Member Contributions (11,125) Administrative Expense 374 Expected Investment Return Net of Investment Expense (34,245) Pension Expense Related to Specific Liabilities of Individual Employers (199) Recognition of Deferred Inflows/Outflows of Resources: Amortization of Assumption Changes or Inputs 11,792 Amortization of Expected Versus Actual Experience 2,587 Amortization of Projected Versus Actual Investment Earnings on Pension Plan Investments (3,647) Pension Expense $ 33,577 The Federal Insurance Contribution Act also covers borough employees. Defined Contribution Retirement Program (DCRP) The Defined Contribution Retirement Program (DCRP) was established as of July 1, 2008 under the provisions of Chapter 92, PL 2008 and Chapter 103, PL 2008 (N.J.S.A 43:15:c-1 et seq). The DCRP is a cost-sharing multiple-employer defined contribution pension fund. The DCRP provides eligible members and their beneficiaries with a tax-sheltered, defined contribution retirement benefit, along with life insurance and disability coverage. Vesting and benefit provisions are established by N.J.S.A 43:15: C-1 et seq. Information as to the comparison of the actuarially computed value of vested benefits with the system's assets is available from the State Retirement System.

46 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2015 AND NOTE 9: POST RETIREMENT BENEFITS Plan Description - The Municipality has the option of participating in the State Health Benefits Program (SHBP), a cost-sharing, multiple-employer defined benefit post-employment healthcare plan administered by the State of New Jersey Division of Pensions and Benefits. SHBP was established in 1961 under N.J.S.A 52: et seq., to provide health benefits to State employees, retirees, and their dependents. Rules governing the operation and administration of the program are found in Title 17, Chapter 9 of the New Jersey Administrative Code, SHBP provides medical, prescription drugs, mental health/substance abuse, and Medicare Part B reimbursement to retirees and their covered dependents. Participation - The Municipality has elected not to participate in the SHBP as a post-retirement benefit. NOTE 10: ACCRUED SICK AND VACATION BENEFITS The Borough has permitted certain employees to accrue unused sick pay which may be taken off as time or paid at a later date at an agreed upon rate. The monetary value of these earned and unused employee benefits have not been accrued by either charges to operations or to budgets of prior years. At December 31, 2015 and 2014, we have estimated this liability to be approximately $59,220 and $52,747, respectively. This amount is not reported either as an expenditure or liability due to the likelihood of all employees terminating in one fiscal year being improbable. The policy of not reflecting the accrued benefit in the financial statements is not in agreement with GASB Statement Number 12, but is in accordance with reporting procedures promulgated by the State of New Jersey. NOTE 11: FIXED ASSETS The following schedule is a summarization of the changes in general fixed assets for the years ended December 31, 2014 and 2015: Balance Balance Land Dec. 31, 2013 Additions $ 279,200 $ - Deletions $ - Dec. 31, 2014 $ 279,200 Building & Building Improvements 4,531, ,531,640 Furniture, Machinery & Equipment 316, ,737 Vehicles 278, ,503 Construction in Progress 30,438 $ 50,281-80,719 Totals $ 5,436,518 $ 50,281 $ - $ 5,486,799 Balance Balance Dec. 31, 2014 Additions Deletions Dec. 31, 2015 Land $ 279,200 $ - $ - $ 279,200 Building & Building Improvements 4,531, ,255-4,632,895 Furniture, Machinery & Equipment 316,737 9,485 37, ,957 Vehicles 278, ,000-1,028,503 Construction in Progress 80,719 20, ,255 - Totals $ 5,486,799 $ 881,276 $ 138,520 $ 6,229,555

47 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2015 AND NOTE 12: INTERFUNDS RECEIVABLE AND PAYABLE The following Interfund balances remained on the various balance sheets of the Borough as of December 31, Interfund Interfund Fund Receivable Payable Current Fund: Federal and State Grant Fund $ 6,125 $ - General Capital Fund - 979,141 Other Trust Funds - 6,851 Federal and State Grant Fund: Current Fund - 6,125 General Capital Fund: Current Fund 979,141 - Other Trust Funds: Current Fund 6,851 - $ 992,117 $ 992,117 The balances due from the General Capital Fund and the Other Trust Fund and to the Federal and State Grant Fund represent activity for those funds transacted for in the Current Fund bank account. The municipality does not maintain separate bank accounts for the Federal and State Grant Fund, the General Capital Fund or the Tax Sale Premium Trust Fund. NOTE 13: LITIGATION During the normal course of operations, lawsuits are occasionally brought against the municipality. There are presently no outstanding lawsuits that would result in a contingent liability to the Borough. NOTE 14: CONTINGENT LIABILITIES The Borough is not economically dependent on any one business or industry located within the municipality. NOTE 15: RISK MANAGEMENT The Municipality 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 Municipality is a member of the Statewide Insurance Fund (the Fund ). The Fund is operated in accordance with regulations of the New Jersey Department of Banking and Insurance and the Division of Local Government Services of the Department of Community Affairs. The Fund was established for the purpose of providing low cost insurance coverage as well as providing stability in coverage. All members contributions to the fund are based on actuarial assumptions for claims paid as determined by the Fund s actuary. The Commissioner of Banking and Insurance may order additional assessments to supplement the Fund s claim, loss retention or administrative accounts to assure the payment of the Fund s obligations.

48 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2015 AND NOTE 15: RISK MANAGEMENT (continued) The following coverages are offered by the Fund to its members: a) Workers Compensation and Employers Liability b) General Liability and Auto Liability c) Property Damage d) Boiler and Machinery e) Law Enforcement Liability f) Public Officials Liability g) Employment Practice Liability h) Crime i) Umbrella Liability j) Environmental Impairment Liability k) Excess Liability l) Non-owned Aircraft Liability m) Cyber Liability Property and Liability Insurance - The Municipality maintains commercial insurance coverage for property, liability, and surety bonds. Significant losses are covered by commercial insurance for all major programs and there have been no significant reductions in insurance coverage. Settlement amounts have not exceeded insurance coverage for the current or the three prior years. New Jersey Unemployment Compensation Insurance - The Municipality has elected to fund its NJ Unemployment Compensation Insurance under the "Benefit Reimbursement Method." Under this plan, the Municipality is required to reimburse the NJ Unemployment Trust Fund for benefits paid to its former employees and charged to its account with the State. The Municipality is billed quarterly for amounts due to the State. The following is a summary of Municipality contributions, and interest earnings, employee contributions, reimbursements to the State for benefits paid and the ending balance of the Municipality s unemployment trust fund for the current and previous two years: Municipal Interest Employee Amount Ending Year 2015 Deposits $ - Earnings $ 13 Deposits $ 517 Reimbursed $ - Balance_ 13, , ,142 12,963 NOTE 16: SUBSEQUENT EVENTS The Municipality has evaluated subsequent events through June 17, 2016, which is the date the financial statements were available to be issued and no additional items were noted for disclosure.

49 SUPPLEMENTARY DATA 45

50 46 COUNTY OF HUNTERDON 2015 CURRENT FUND

51 47 DO NOT USE, PRINTED IN WORD AFTER NOTES COUNTY OF HUNTERDON 2015 CURRENT FUND

52 CURRENT FUND SCHEDULE OF CASH-TREASURER 47 A-4 1 of 2 Federal and State Ref. Regular Fund Grant Fund Balance December 31, 2014 A $ 1,011,627 $ 37,746 Increased by Receipts: Nonbudget Revenue A-2 $ 11,447 Interest on Investments & Deposits A-2 1,204 Lebanon Borough Sewerage Authority A-2 123,736 Appropriation Refunds A-3 16,739 State of NJ-Senior Citizens' & Veterans' A-6 13,750 Taxes Receivable A-7 5,878,024 Revenue Accounts Receivable A-9 270,839 Due to Other Trust Fund A-23 15,400 State Grants Receivable A-12 $ 11,275 Prepaid Taxes A-18 31,246 Tax Overpayments A-19 1,884 Due to General Capital Fund A-24 1,481,273 Fees Payable to Outside Agencies A-25 9,040 Due to Outside Lien Holders A-27 39,002 Due to Regular Fund A-30-6,125 7,893,584 17,400 8,905,211 55,146 SEE INDEPENDENT AUDITORS' REPORT

53 CURRENT FUND SCHEDULE OF CASH-TREASURER (Continued) 48 A-4 2 of 2 Federal and State Ref. Regular Fund Grant Fund Decreased by Disbursements: Current Year Budget Appropriations A-3 $ 1,371,655 Due from Federal & State Grant Fund A-11 6,125 Prior Year Appropriation Reserves A-14 47,944 Reserve for Encumbrances A-15 12,261 County Taxes A-20 1,034,928 Local District School Taxes A-21 2,309,487 Regional High School Taxes A-22 1,672,502 Due to Other Trust Fund A-23 10,100 Due to General Capital Fund A ,510 Fees Payable to Outside Agencies A-25 6,110 Due to Outside Lien Holders A-27 39,002 Appropriated Reserve for State Grants A-28 - $ 37,776 Reserve for Encumbrances A-31-17,370 $ 7,318,624 $ 55,146 Balance December 31, 2015 A;A-5 $ 1,586,587 $ - SEE INDEPENDENT AUDITORS' REPORT

54 49 A-5 CURRENT FUND SCHEDULE OF CASH AND RECONCILIATION-TREASURER PER N.J.S. 40A:5.5 Federal and Regular State Grant Ref. Fund Fund Balance December 31, 2015 A-4 $ 1,586,587 $ - Increased by: Receipts 401,853 11,436 1,988,440 11,436 Decreased by: Disbursements 883,596 - Balance January 31, 2016 $ 1,104,844 $ 11,436 Cash Reconciliation January 31, 2016 Balance Per Statement: TD Bank $ 1,368,673 $ 11,436 1,368,673 11,436 Less: Outstanding Checks 263,829 - Book Balance $ 1,104,844 $ 11,436 SEE INDEPENDENT AUDITORS' REPORT

55 50 A-6 CURRENT FUND SCHEDULE OF DUE FROM STATE OF NEW JERSEY VETERANS' AND SENIOR CITIZENS' DEDUCTIONS Ref. Balance December 31, 2014 A $ 860 Increased by: Senior Citizens' Deductions per Tax Levy $ 2,000 Veterans' Deductions per Tax Levy 12,000 Veterans Deductions Allowed by Tax Collector ,250 Less: Deductions Disallowed by Tax Collector: Senior Citizens 250 Veterans 250 A-7 13,750 14,610 Decreased by: Received from State of New Jersey A-4 13,750 Prior Year Senior Citizens Deductions Allowed by Tax Collector A ,000 Balance December 31, 2015 A $ 610 SEE INDEPENDENT AUDITORS' REPORT

56 51 A-7 CURRENT FUND SCHEDULE OF TAXES RECEIVABLE Senior Citizens' & Over- Transferred Balance Collected Veterans' payments to Tax Balance Year 12/31/2014 Levy Added Deductions Applied Title Liens Canceled 12/31/ $ 39,930 $ - $ 250 $ - $ 39,967 $ - $ - $ - $ 85 $ ,062,908-13,428 5,838,057 13,750 2, , ,090 $ 39,930 $ 6,062,908 $ 250 $ 13,428 $ 5,878,024 $ 13,750 $ 2,381 $ 139 $ 13,148 $ 182,218 Ref. A Below Reserve A-18 A-4 A-6 A-19 A-8 Reserve A Analysis of Current Year Property Tax Levy Tax Yield: General Property Tax $ 6,058,922 Added Taxes 3,986 A-7 $ 6,062,908 Tax Levy: Local District School Tax A-21 $ 2,381,237 Regional High School Tax A-22 1,646,146 County Tax: Regular Tax $ 863,539 Library Tax 86,503 Open Space Tax 84,054 Due County for Added Taxes 683 Total County Taxes A-20 1,034,779 Local Tax for Municipal Purposes A-2 996,596 Add: Additional Tax Levied 4,150 1,000,746 A-7 $ 6,062,908 SEE INDEPENDENT AUDITORS' REPORT

57 52 A-8 CURRENT FUND SCHEDULE OF TAX TITLE LIENS RECEIVABLE Ref. Balance December 31, 2014 A $ 951 Increased by: Transferred from Taxes Receivable A-7 $ 139 Interest & Costs on Tax Sale Reserve 440 Balance December 31, 2015 A $ 1, SEE INDEPENDENT AUDITORS' REPORT

58 53 A-9 CURRENT FUND SCHEDULE OF REVENUE ACCOUNTS RECEIVABLE Balance Accrued in Collected Balance Ref. 12/31/ Treasurer 12/31/2015 Alcoholic Beverage Licenses A-2 $ - $ 7,500 $ 7,500 $ - Fees and Permits A-2-6,310 6,310 - Interest & Costs on Taxes A-2-24,387 24,387 - Building Rent A-2-15,600 15,600 - NJ Hotel Occupancy Tax A-2-125, ,227 - Energy Receipts Tax A-2-91,815 91,815 - $ - $ 270,839 $ 270,839 $ - Ref. A Reserve A-4 A SEE INDEPENDENT AUDITORS' REPORT

59 54 A-10 CURRENT FUND SCHEDULE OF PROPERTY ACQUIRED FOR TAXES (AT ASSESSED VALUATION) Ref. Balance December 31, 2014 A $ 105,300 Balance December 31, 2015 A $ 105,300 CURRENT FUND SCHEDULE OF DUE FROM FEDERAL AND STATE GRANT FUND A-11 Ref. Balance December 31, 2014 A $ - Increased by: Disbursements A-4 6,125 Balance December 31, 2015 A $ 6,125 SEE INDEPENDENT AUDITORS' REPORT

60 55 A-12 CURRENT FUND SCHEDULE OF FEDERAL AND STATE GRANTS RECEIVABLE Balance Balance Balance Grant 12/31/2014 Revenue Received Canceled 12/31/2015 Highlands Council Grant: Plan Conformance $ 94,826 $ - $ - $ - $ 94, Hunterdon County Open Space Grant Phase III - 7,275 7, Clean Community Program Grant - 4,000 4, Green Community Program Grant 3, ,000 $ 97,826 $ 11,275 $ 11,275 $ - $ 97,826 Ref. A A-2 A-4 A SEE INDEPENDENT AUDITORS' REPORT

61 56 A-13 SCHEDULE OF DEFERRED CHARGES Raised in Balance Added in 2015 Balance 12/31/ Budget 12/31/2015 Over expenditure of: Budget Appropriations $ 256 $ - $ 256 $ - Appropriation Reserves $ 834 $ - $ 834 $ - Ref. A A-3 A SEE INDEPENDENT AUDITORS' REPORT

62 CURRENT FUND SCHEDULE OF PRIOR YEAR APPROPRIATION RESERVES FOR THE YEAR ENDED DECEMBER 31, A-14 1 of 3 Balance Balance After Balance 12/31/2014 Transfer Expended Lapsed Mayor and Council: Other Expenses $ 1,130 $ 1,130 $ 45 $ 1,085 Communications Municipal Clerk: Salaries and Wages Other Expenses 1,493 1, Codification of Ordinances 10,000 10,000 7,106 2,894 Registrar of Vital Statistics: Salaries and Wages Other Expenses Financial Administration: Salaries and Wages Other Expenses Data Processing Services Tax Assessment Administration: Salaries and Wages Other Expenses 4,135 4,135-4,135 Revenue Administration: Salaries and Wages Other Expenses Legal Services & Costs: Other Expenses 12,217 9,692 4,642 5,050 Engineering Services & Costs: Other Expenses 6,663 6, ,344 Historical Committee: Other Expenses 1,000 1,000-1,000 Planning Board: Other Expenses 1,358 1,358-1,358 Board of Adjustment: Salaries and Wages Environmental Commission: Other Expenses Insurance: General Liability Worker's Compensation Employee Group Health 5,442 5,442 3,596 1,846 Public Safety: Salaries and Wages Other Expenses 7,906 7,906 6,755 1,151 SEE INDEPENDENT AUDITORS' REPORT

63 CURRENT FUND SCHEDULE OF PRIOR YEAR APPROPRIATION RESERVES FOR THE YEAR ENDED DECEMBER 31, 2015 (Continued) 58 A-14 2 of 3 Balance Balance After Balance 12/31/2014 Transfer Expended Lapsed Crossing Guards: Salaries and Wages $ 1,449 $ 1,449 $ - $ 1,449 Office of Emergency Management: Other Expenses 4,000 4,000-4,000 Streets and Road Maintenance: Salaries and Wages 2,430 2,430-2,430 Other Expenses 6,100 8,125 6,125 2,000 Solid Waste Collection: Other Expenses 3,546 3,546-3,546 Shade Tree: Other Expenses 3,035 3, ,695 Public Buildings and Grounds: Salaries and Wages Other Expenses 4,487 4,487 1,872 2,615 Vehicle Maintenance: Other Expenses Board of Health: Salaries and Wages Other Expenses Recreation: Salaries and Wages Other Expenses Contribution-Senior Citizens Maintenance of Parks: Other Expenses Utilities: Electricity 3,803 3,803 2,279 1,524 Street Lighting 3,659 3,659 1,739 1,920 Telephone Water Natural Gas (Propane) 2,285 2, ,428 Sewerage Gasoline Fire Hydrant 6,288 6,288 6,287 1 Landfill/Solid Waste Disposal Cost 17,666 17,666 4,517 13,149 SEE INDEPENDENT AUDITORS' REPORT

64 CURRENT FUND SCHEDULE OF PRIOR YEAR APPROPRIATION RESERVES FOR THE YEAR ENDED DECEMBER 31, 2015 (Continued) 59 A-14 3 of 3 Balance Balance After Balance 12/31/2014 Transfer Expended Lapsed Contribution to: Public Employee Retirement System $ 2,063 $ 2,063 $ - $ 2,063 Unemployment Insurance Fair Housing Plan Ch 222 PL1985: Other Expenses Inter-Local Municipal Service Agreement: Municipal Court: Other Expenses Acquisition of Turnout Gear $ 120,013 $ 120,013 $ 47,989 $ 72,024 Ref. A A-4 A-1 Ref. Cash Disbursed A-4 $ 47,944 Transferred to Accounts Payable A $ 47,989 SEE INDEPENDENT AUDITORS' REPORT

65 60 A-15 CURRENT FUND SCHEDULE OF RESERVE FOR ENCUMBRANCES Ref. Balance December 31, 2014 A $ 12,261 Increased by: Current Year Budget Charges A-3 13,176 25,437 Decreased by: Disbursements A-4 12,261 Balance December 31, 2015 A $ 13,176 CURRENT FUND SCHEDULE OF ACCOUNTS PAYABLE A-16 Ref. Balance December 31, 2014 A $ 4,500 Increased by: Transferred from Appropriation Reserves A Balance December 31, 2015 A $ 4,545 SEE INDEPENDENT AUDITORS' REPORT

66 61 A-17 CURRENT FUND SCHEDULE OF RESERVE FOR CODIFICATION OF ORDINANCES Ref. Balance December 31, 2014 A $ 4,295 Balance December 31, 2015 A $ 4,295 CURRENT FUND SCHEDULE OF PREPAID TAXES A-18 Ref. Balance December 31, 2014 A $ 13,428 Increased by: Collection of Subsequent Year's Taxes A-4 31,246 44,674 Decreased by: Applied to Current Year's Taxes Receivable A-7 13,428 Balance December 31, 2015 A $ 31,246 SEE INDEPENDENT AUDITORS' REPORT

67 62 A-19 CURRENT FUND SCHEDULE OF TAX OVERPAYMENTS Ref. Balance December 31, 2014 A $ 9,180 Increased by: Overpayments Received A-4 1,884 11,064 Decreased by: Canceled to Fund Balance A-1 $ 35 Applied to Taxes Receivable A-7 2,381 2,416 Balance December 31, 2015 A $ 8,648 CURRENT FUND SCHEDULE OF COUNTY TAXES PAYABLE A-20 Ref. Balance December 31, 2014 A $ 832 Increased by: Current Year Levy: County Taxes $ 863,539 County Library Tax 86,503 County Open Space Tax 84,054 Due County for Added Taxes 683 A-1;A-7 1,034,779 1,035,611 Decreased by: Disbursements A-4 1,034,928 Balance December 31, 2015 A $ 683 SEE INDEPENDENT AUDITORS' REPORT

68 63 A-21 CURRENT FUND SCHEDULE OF LOCAL MUNICIPALITY SCHOOL TAX PAYABLE Ref. Balance December 31, 2014 School Tax Payable (Prepaid) A $ (33,572) School Tax Deferred (50%) 1,118,869 $ 1,085,297 Increased by: Levy-School Year July 1, 2014 to June 30, 2015 A-7 2,381,237 3,466,534 Decreased by: Disbursements A-4 2,309,487 Balance December 31, 2015 School Tax Payable (Prepaid) A (33,572) School Tax Deferred (50%) 1,190,619 $ 1,157,047 Current Year Liability for Local School Tax Tax Paid $ 2,309,487 Add: Tax Payable December 31, ,572 2,343,059 Less: Tax Payable December 31, ,572 Amount Charged to Operations A-1 $ 2,309,487 SEE INDEPENDENT AUDITORS' REPORT

69 64 A-22 CURRENT FUND SCHEDULE OF REGIONAL HIGH SCHOOL TAX Ref. Balance December 31, 2014 School Tax Payable (Prepaid) A $ (49,876) School Tax Deferred (37.50%) 514,929 $ 465,053 Increased by: Levy-School Year July 1, 2013 to June 30, ,286 Levy-School Year July 1, 2014 to June 30, ,302,860 A-7 1,646,146 2,111,199 Decreased by: Disbursements A-4 1,672,502 Balance December 31, 2015 School Tax Payable (Prepaid) A (49,876) School Tax Deferred (37.50%) 488,573 $ 438,697 Current Year Liability for Regional High School Tax Tax Paid $ 1,672,502 Add: Tax Payable December 31, ,876 1,722,378 Less: Tax Payable December 31, ,876 Amount Charged to Operations A-1 $ 1,672,502 SEE INDEPENDENT AUDITORS' REPORT

70 65 A-23 CURRENT FUND SCHEDULE OF DUE TO OTHER TRUST FUND Ref. Balance December 31, 2014 A $ 997 Increased by: Receipts A-4 $ 15,400 Health Insurance Withholdings Due to Current Fund A Decreased by: Interest on Investments A-2 69 Trust Balances Canceled A-1 73 Disbursements-Current Fund A-4 10,100 16,096 17,093 10,242 Balance December 31, 2015 A $ 6,851 CURRENT FUND SCHEDULE OF DUE TO GENERAL CAPITAL FUND A-24 Ref. Balance December 31, 2014 A $ 287,100 Increased by: Current Year Budget Appropriations A-3 $ 84,378 Receipts A-4 1,481,273 Decreased by: Anticipated Revenue in Current Year Budget A-2 65,100 Disbursements A-4 808,510 1,565,651 1,852, ,610 Balance December 31, 2015 A $ 979,141 SEE INDEPENDENT AUDITORS' REPORT

71 66 A-25 CURRENT FUND SCHEDULE OF FEES PAYABLE TO OUTSIDE AGENCIES Ref. Balance December 31, 2014 A $ 12,535 Increased by: Receipts A-4 9,040 21,575 Decreased by: Disbursements A-4 6,110 Balance December 31, 2015 A $ 15,465 SEE INDEPENDENT AUDITORS' REPORT

72 67 A-26 CURRENT FUND SCHEDULE OF RESERVE FOR MASTER PLAN Ref. Balance December 31, 2014 A $ 30,656 Balance December 31, 2015 A $ 30,656 SEE INDEPENDENT AUDITORS' REPORT

73 68 A-27 CURRENT FUND SCHEDULE OF DUE TO OUTSIDE LIEN HOLDERS Ref. Balance December 31, 2014 A $ - Increased by: Receipts A-4 39,002 39,002 Decreased by: Disbursements A-4 39,002 Balance December 31, 2015 A $ - SEE INDEPENDENT AUDITORS' REPORT

74 CURRENT FUND SCHEDULE OF APPROPRIATED RESERVES FOR FEDERAL AND STATE GRANTS 69 A-28 1 of 2 Transferred Grant Balance from Current Paid or Balance Balance Period Grant 12/31/2014 Year Budget Charged Canceled 12/31/ /01/14 Clean Communities to 06/30/15 Program $ 3,150 $ - $ 3,150 $ - $ - 01/01/15 Clean Communities to 06/30/16 Program - 4,000 1,576-2,424 01/01/05 NJ Division of Parks and to 12/31/09 Forestry-Green Community Program /01/05 Emergency Management State & Local All Hazards to 12/31/09 Emergency Operations Plan /01/15 Recycling Tonnage to 12/31/16 Grant - 9,512 8, /01/12 Highlands Council Grantto 12/31/16 Plan Conformance 82,416-3,992-78,424 SEE INDEPENDENT AUDITORS' REPORT

75 CURRENT FUND SCHEDULE OF APPROPRIATED RESERVES FOR FEDERAL AND STATE GRANTS (Continued) 70 A-28 2 of 2 Transferred Grant Balance from Current Paid or Balance Balance Period Grant 12/31/2014 Year Budget Charged Canceled 12/31/ /01/12 Highlands Council Grant - to 12/31/13 Council on Affordable Housing (COAH) 3rd Round Grant $ 5,516 $ - $ - $ - $ 5,516 01/01/ Hunterdon County Open Space to 12/31/17 Grant Phase III - 7,275 6, /01/14 County of Hunterdon to 12/31/15 Open Space Municipal Grant Program 14,311-14, $ 105,690 $ 20,787 $ 37,776 $ - $ 88,701 Ref. A A-3 A-4 A SEE INDEPENDENT AUDITORS' REPORT

76 71 A-29 CURRENT FUND SCHEDULE OF UNAPPROPRIATED RESERVES FOR STATE GRANTS Ref. Balance December 31, 2014 A $ 9,512 Decreased by: Anticipated as Revenue in Current Year Budget A-2 9,512 Balance December 31, 2015 A $ - CURRENT FUND SCHEDULE OF DUE TO REGULAR FUND A-30 Ref. Balance December 31, 2014 A $ - Increased by: Receipts A-4 6,125 Balance December 31, 2015 A $ 6,125 SEE INDEPENDENT AUDITORS' REPORT

77 72 A-31 CURRENT FUND SCHEDULE OF RESERVE FOR ENCUMBRANCES Ref. Balance December 31, 2014 A $ 20,370 Decreased by: Disbursements A-4 $ 17,370 Transferred to Accounts Payable A-32 3,000 20,370 Balance December 31, 2015 A $ - CURRENT FUND SCHEDULE OF ACCOUNTS PAYABLE A-32 Ref. Balance December 31, 2014 A $ - Increased by: Transferred from Reserve for Encumbrances A-31 3,000 Balance December 31, 2015 A $ 3,000 SEE INDEPENDENT AUDITORS' REPORT

78 73 COUNTY OF HUNTERDON 2015 TRUST FUND

79 74 B-1 TRUST FUND SCHEDULE OF CASH-TREASURER Ref. Animal Control Fund Other Trust Funds Balance December 31, 2014 B $ 753 $ 238,620 Increased by Receipts: Animal Control Fees B-3 $ 2,611 $ - State Fees B Due to Current Fund B Developers' Deposits B-6-10,913 Unemployment Reserve B Recreation Commission B-9-12,727 Payroll Withholdings Payable B ,488 2, ,800 Decreased by Disbursements: 3, ,420 Animal Control Fund B-3 2,322 - Due to State of New Jersey B Due to Current Fund B Developers' Deposits B-6-38,607 Recreation Commission B-9-11,894 Payroll Withholdings Payable B ,611 2, ,321 Balance December 31, 2015 B $ 1,042 $ 212,099 SEE INDEPENDENT AUDITORS' REPORT

80 75 B-2 TRUST FUND SCHEDULE OF CASH AND RECONCILIATION-TREASURER PER N.J.S. 40A:5-5 Animal Control Other Trust Ref. Funds Funds Balance December 31, 2015 B-1 $ 1,042 $ 212,099 Increased by: Receipts 1,314 33,846 2, ,945 Decreased by: Disbursements - 33,119 Balance January 31, 2016 $ 2,356 $ 212,826 Cash Reconciliation January 31, 2016 Balance per Statement: TD Bank $ 2,356 $ 213,510 Add: Deposit-in-Transit - - 2, ,510 Less: Outstanding Checks and Payroll Adjustments Book Balance $ 2,356 $ 212,826 SEE INDEPENDENT AUDITORS' REPORT

81 76 B-3 TRUST FUND SCHEDULE OF RESERVE FOR ANIMAL CONTROL FUND EXPENDITURES Ref. Balance December 31, 2014 B $ 752 Increased by: Dog License Fees Received B-1 2,611 3,363 Decreased by: Administrative Expenses B-1 2,322 Balance December 31, 2015 B $ 1,041 License Fee Collections 2013 $ 2, ,277 Maximum Allowable Reserve $ 4,340 SEE INDEPENDENT AUDITORS' REPORT

82 77 B-4 TRUST FUND SCHEDULE OF DUE TO STATE OF NEW JERSEY Ref. Balance December 31, 2014 B $ 1 Increased by: State Fees Received B Decreased by: Remitted to State on New Jersey B Balance December 31, 2015 B $ 1 TRUST FUND SCHEDULE OF DUE FROM CURRENT FUND-OTHER TRUST FUNDS B-5 Ref. Balance December 31, 2014 B $ 997 Increased by: Tax Sale Premiums Refunded in Current Fund B-8 15,400 Charges to Current Fund Budget Appropriations: Disbursements B Due from Payroll Agency B Decreased by: Interest on Investments B-1 $ 69 Payroll Agency Balances Canceled B-1 73 Tax Sale Premiums Refunded in Current Fund B-8 10,100 16,096 17,093 10,242 Balance December 31, 2015 B $ 6,851 SEE INDEPENDENT AUDITORS' REPORT

83 78 B-6 TRUST FUND SCHEDULE OF RESERVE FOR DEVELOPERS' DEPOSITS Ref. Balance December 31, 2014 B $ 188,700 Increased by Receipts: Developer's Deposits $ 10,690 Interest Earned on Deposits 223 B-1 10, ,613 Decreased by: Disbursements B-1 38,607 Balance December 31, 2015 B $ 161,006 SEE INDEPENDENT AUDITORS' REPORT

84 79 B-7 TRUST FUND SCHEDULE OF RESERVE FOR UNEMPLOYMENT Ref. Balance December 31, 2014 B $ 13,111 Increased by: Interest Earnings $ 13 Employee Withholdings 517 B Balance December 31, 2015 B $ 13,641 TRUST FUND SCHEDULE OF RESERVE FOR TAX SALE PREMIUMS B-8 Ref. Balance December 31, 2014 B $ 19,100 Increased by: Tax Sale Premiums Received in Current Fund B-5 15,400 34,500 Decreased by: Tax Sale Premiums Refunded in Current Fund B-5 10,100 Balance December 31, 2015 B $ 24,400 SEE INDEPENDENT AUDITORS' REPORT

85 80 B-9 TRUST FUND SCHEDULE OF RESERVE FOR RECREATION COMMISSION Ref. Balance December 31, 2014 B $ 18,103 Increased by Receipts: Recreation Fees $ 265 Senior Citizens Fees 10,456 Current Fund Budget Appropriations 2,000 Interest Earnings 6 B-1 12,727 30,830 Decreased by Disbursements: Senior Citizens Activities B-1 11,894 Balance December 31, 2015 B $ 18,936 Analysis of Balance at December 31, 2015 Recreation Reserve $ 14,111 Senior Citizens Reserve 4,825 $ 18,936 SEE INDEPENDENT AUDITORS' REPORT

86 81 B-10 TRUST FUND SCHEDULE OF PAYROLL WITHHOLDINGS Ref. Balance December 31, 2014 B $ 603 Increased by: Payroll Taxes Withheld B-1 $ 103,858 Health Insurance Reimbursements Withheld B-1 13,630 Due from Current Fund-Overpaid Health Insurance B , ,578 Decreased by: Payroll Taxes Remitted 103,494 Health Insurance Reimbursements Remitted 14,117 B-1 117,611 Balance December 31, 2015 B $ 967 SEE INDEPENDENT AUDITORS' REPORT

87 82 COUNTY OF HUNTERDON 2015 GENERAL CAPITAL FUND

88 83 C-2 GENERAL CAPITAL FUND SCHEDULE OF CASH ACTIVITY Balance Transfers Balance Description Date 12/31/2014 From To 12/31/2015 Capital Improvement Fund $ 214,823 $ 52,000 $ - $ 162,823 Due to/from Current Fund (287,100) 1,565, ,610 (979,141) NJ DOT Grants Receivable (33,750) 160,000 33,750 (160,000) Reserve for Preliminary Plan Expenses 1, ,100 Due from Lebanon Borough Sewerage Authority (221,929) - 221,929 - Retained Percentages Due to Contractors 7, ,175 Reserve for Payment of Debt Service 195,300 65,100 20, ,200 Fund Balance 7, ,083 Improvement Authorizations Borough Hall Roof Upgrade 05/17/00 5, ,675 Expansion of the Sewerage Treatment Capacity of 08/17/00 the Readington Lebanon Sewerage Authority 221, , Purchase of Street Signs & Safety Items 04/18/01 3, ,944 Reconstruction of Various Roads & Sidewalks 07/17/02 (63,523) - - (63,523) Main Street Improvement Project 04/20/05 (14,000) - - (14,000) Main Street II Improvements 07/19/06 (10,000) - 10,000 - Acquisition of a Fire Truck 06/20/07 (74,378) - 74,378 - Improvements to the Municipal Building 09/19/07 11, ,017 Acquisition of Public Safety Equipment 05/20/09 (45,120) - - (45,120) Improvement to Roads 03/24/10 41,220 9,321-31,899 Acquisition of Laptop Computers and Software 07/21/10 3, ,033 Acquisition of a Pumper Fire Engine 11/17/14 37, , ,500 - Improvements to Various Roadways and Parking Areas 05/20/15-34, , ,835 Improvements to Brunswick Avenue 10/20/ , ,000 $ - $ 2,858,167 $ 2,858,167 $ - SEE INDEPENDENT AUDITORS' REPORT

89 84 C-3 GENERAL CAPITAL FUND SCHEDULE OF DUE FROM CURRENT FUND Ref. Balance December 31, 2014 C $ 287,100 Increased by: Current Year Municipal Budget Appropriations: Deferred Charge to Future Taxation-Unfunded C-6 $ 84,378 Received in Current Fund: NJ D.O.T. Grant for Ordinance Financed by Grant C-7 33,750 Improvement Authorization Refunds C-8 15,023 Reserve for Payment of Debt Service C-12 20,000 Bond Anticipation Note Issuance Proceeds C-15 1,412,500 Decreased by: Improvement Authorizations Disbursed C-8 808,509 Retained Percentages Due to Contractors C-11 1 Reserve for Payment of Debt Service Anticipated as Revenue in Current Year Budget C-12 65,100 1,565,651 1,852, ,610 Balance December 31, 2015 C $ 979,141 GENERAL CAPITAL FUND SCHEDULE OF DUE FROM LEBANON BOROUGH SEWERAGE AUTHORITY C-4 Ref. Balance December 31, 2014 C $ 221,929 Decreased by: Improvement Authorization Balance Canceled C-8 221,929 Balance December 31, 2015 C $ - SEE INDEPENDENT AUDITORS' REPORT

90 85 C-5 GENERAL CAPITAL FUND SCHEDULE OF DEFERRED CHARGES TO FUTURE TAXATION-FUNDED Ref. Balance December 31, 2014 C $ 3,621,000 Decreased by: Current Year Budget Appropriations: Serial Bond Principal C ,000 Balance December 31, 2015 C $ 3,341,000 SEE INDEPENDENT AUDITORS' REPORT

91 86 C-6 GENERAL CAPITAL FUND SCHEDULE OF DEFERRED CHARGES TO FUTURE TAXATION-UNFUNDED Analysis of Balance December 31, 2015 Financed Funded by Unexpended by Bond Balance Budget Balance Improvement Anticipation Improvement Description 12/31/2014 Authorizations Appropriation 12/31/2015 Expenditures Authorizations Notes Reconstruction of Various Roads & Sidewalks $ 63,523 $ - $ - $ 63,523 $ 63,523 $ - $ - Main Street Improvement Projects 14, ,000 14, Main Street II Improvements 10,000-10, Acquisition of a Fire Truck 74,378-74, Acquisition of Public Safety Equipment 45, ,120 45, Acquisition of a Pumper Fire Engine 712, , ,500 Improvements to Various Roadways and Parking Areas - 988, , , ,000 $ 919,521 $ 988,000 $ 84,378 $ 1,823,143 $ 122,643 $ 288,000 $ 1,412,500 Ref. C C-8 C-3;C-15 C C-2 C-8 SEE INDEPENDENT AUDITORS' REPORT

92 87 C-7 GENERAL CAPITAL FUND SCHEDULE OF NJ D.O.T. GRANTS RECEIVABLE Ref. Balance December 31, 2014 C $ 33,750 Increased by: Appropriated to Finance Improvement Authorizations C-8 160, ,750 Decreased by: Received in Current Fund C-3 33,750 Balance December 31, 2015 C $ 160,000 SEE INDEPENDENT AUDITORS' REPORT

93 88 C-8 GENERAL CAPITAL FUND SCHEDULE OF IMPROVEMENT AUTHORIZATIONS Balance Dec. 31, Paid or Balance Balance Dec. 31, 2015 Improvement Description Date Amount Funded Unfunded Authorizations Charged Canceled Funded Unfunded Borough Hall Roof Upgrade 05/17/00 $ 35,000 $ 5,675 $ - $ - $ - $ - $ 5,675 $ - Expansion of the Sewerage Treatment Capacity of the Readington Lebanon Sewerage Authority 08/17/00 1,506, , , Purchase of Street Signs & Safety Items 04/18/01 20,000 3, ,944 - Improvements to the Municipal Building 09/19/07 3,000,000 11, ,017 - Acquisition of Public Safety Equipment 05/20/09 50, Improvement to Roads 03/24/10 700,000 41, ,321-31,899 - Acquisition of Laptop Computers and Software 07/21/10 10,000 3, ,033 - Acquisition of a Pumper Fire Engine 11/17/14 750,000 37, , , Improvements to Various Roadways & Parking Areas 05/20/15 1,040, ,040,000 34,165-17, ,000 Improvements to Brunswick Avenue 10/20/15 160, , ,000 - $ 324,318 $ 712,500 $ 1,200,000 $ 793,486 $ 221,929 $ 233,403 $ 988,000 Ref. C C Below C-3 C Deferred Charges-Unfunded C-6 $ 988,000 NJ DOT Grants Receivable C-7 160,000 Capital Improvement Fund C-9 52,000 $ 1,200,000 Cash Disbursed in Current Fund C-3 $ 808,509 Refunds Received in Current Fund C-3 (15,023) $ 793,486 SEE INDEPENDENT AUDITORS' REPORT

94 89 C-9 GENERAL CAPITAL FUND SCHEDULE OF CAPITAL IMPROVEMENT FUND Ref. Balance December 31, 2014 C $ 214,823 Decreased by: Appropriated to Finance Improvement Authorizations C-8 52,000 Balance December 31, 2015 C $ 162,823 GENERAL CAPITAL FUND SCHEDULE OF RESERVE FOR PRELIMINARY PLAN EXPENSES C-10 Ref. Balance December 31, 2014 C $ 1,100 Balance December 31, 2015 C $ 1,100 SEE INDEPENDENT AUDITORS' REPORT

95 90 C-11 GENERAL CAPITAL FUND SCHEDULE OF RETAINED PERCENTAGES DUE TO CONTRACTORS Ref. Balance December 31, 2014 C $ 7,176 Decreased by: Disbursed in Current Fund C-3 1 Balance December 31, 2015 C $ 7,175 Schedule of Retained Percentages December 31, 2015 Ordinance Date Name of Contractor Number Retained Amount TM Brennan /8/2013 $ 7,175 GENERAL CAPITAL FUND SCHEDULE OF RESERVE FOR PAYMENT OF DEBT SERVICE C-12 Ref. Balance December 31, 2014 C $ 195,300 Increased by: Sale of Fire Truck Received in Current Fund C-3 20, ,300 Decreased by: Anticipated Revenue In Current Year Budget C-3 65,100 Balance December 31, 2015 C $ 150,200 SEE INDEPENDENT AUDITORS' REPORT

96 91 C-13 GENERAL CAPITAL FUND SCHEDULE OF GENERAL SERIAL BONDS PAYABLE Purpose Maturities of Bonds Outstanding Date of Original Balance Dec. 31, 2015 Interest Balance Issued in Matured in Balance Issue Issue Date Amount Rate 12/31/ /31/2015 General Improvement of /01/02 $ 1,849,000 04/01/16 $ 155, % $ - $ - $ - $ - 04/01/17 164, , , ,000 General Improvement of /24/11 3,522,000 02/01/16 135, % /01/17 140, /01/18 145, /01/19 150, /01/20 160, /01/21 170, /01/22 175, /01/23 180, /01/24 190, /01/25 200, /01/26 210, /01/27 220, % /01/28 235, /01/29 235, /01/30 240, % /01/31 237,000 3,152, ,000 3,022,000 $ 3,621,000 $ - $ 280,000 $ 3,341,000 Ref. C C-5 C SEE INDEPENDENT AUDITORS' REPORT

97 92 C-14 GENERAL CAPITAL FUND SCHEDULE OF BOND ANTICIPATION NOTES PAYABLE Date of Original Current Current Ordinance Note Note Note Balance Balance Number Purpose Issue Issue Maturity Dec. 31, 2014 Increased Decreased Dec. 31, Acquisition of a Pumper Fire Engine 10/01/15 10/01/15 09/30/16 $ - $ 712,500 $ - $ 712, Improvements to Various Roadways and Parking Areas 10/01/15 10/01/15 09/30/16-700, ,000 $ - $ 1,412,500 $ - $ 1,412,500 C Below Below C SEE INDEPENDENT AUDITORS' REPORT

98 93 C-15 GENERAL CAPITAL FUND SCHEDULE OF BONDS AND NOTES AUTHORIZED BUT NOT ISSUED Funded by Budget Ordinance Balance Current Year Notes Approp- Balance Ord. # Improvement Description Date 12/31/2014 Authorizations Issued riations 12/31/ Reconstruction of Various Roads 07/17/ & Sidewalks 04/16/03 $ 63,523 $ - $ - $ - $ 63, Main St Improvement Project 04/20/05 14, , Main Street II Improvements 07/19/06 10, , Acquisition of a Fire Truck 06/20/07 74, , Acquisition of Public Safety Equipment 05/20/09 45, , Acquisition of a Pumper Fire Engine 11/17/14 712, , Improvements to Various Roadways 05/20/15-988, , ,000 $ 919,521 $ 988,000 $ 1,412,500 $ 84,378 $ 410,643 Ref. C C-6 C SEE INDEPENDENT AUDITORS' REPORT

99 94 PART II REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING SCHEDULES OF FEDERAL AND STATE FINANCIAL ASSISTANCE

100 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 To the Honorable Mayor and Members of the Borough Council Borough of Lebanon Lebanon, New Jersey We have audited, in accordance with the 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 financial statements - regulatory basis of the various funds and account group of the Borough of Lebanon, in the County of Hunterdon, (the Municipality) as of and for the years ended December 31, 2015 and 2014, and the related notes to the financial statements and have issued our report thereon dated June 17, 2016, 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 an unmodified opinion on the financial statements - regulatory basis. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the Municipality 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 Municipality s internal control. Accordingly, we do not express an opinion on the effectiveness of the Municipality 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 Municipality 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 114 Broad Street, Flemington, NJ (908) Fax (908) info@bkc cpa.com

101

102 97 Schedule 1 SCHEDULE OF EXPENDITURES OF STATE AWARDS FOR THE YEAR ENDED DECEMBER 31, 2015 Award Grant Period Balance Returned to Balance State Grantor Amount From To 12/31/14 Receipts Expended State of NJ 12/31/15 Green Communities Program $ 2,000 01/01/03 12/31/03 $ 290 $ - $ - $ - $ 290 Green Communities Program 3,000 01/01/14 12/31/ ,000 - (3,000) Emergency Management State & Local All Hazards Emergency Operations Plan 2,406 01/01/04 12/31/ Clean Communities Program 4,000 01/01/14 6/30/15 3,150-3,150 - Clean Communities Program 4,000 01/01/15 6/30/16-4,000 1,576-2,424 NJ Recycling Tonnage Grant 9,512 01/01/14 12/31/15 9,512-8, Highlands Council Grant-Plan Conformance 127,500 01/01/11 12/31/15 (12,410) - 3,992 - (16,402) Highlands Council COAH 3rd Round Grant 12,500 01/01/12 12/31/15 5, ,516 County of Hunterdon-Open Space Municipal Grant Program: Prior Year 42,400 01/01/14 12/31/15 31,681-31, Current Year 7,275 01/01/15 12/31/16-7,275 6, NJ D.O.T. Myrtle Avenue Improvements 135,000 01/01/14 12/31/15 (33,750) 33, NJ D.O.T. Brunswick Avenue Improvements 160,000 07/01/15 6/30/ $ 3,996 $ 45,025 $ 58,146 $ - $ (9,125) SEE INDEPENDENT AUDITORS' REPORT

103 98 NOTES TO SCHEDULE OF EXPENDITURES OF STATE AWARDS FOR THE YEAR ENDED DECEMBER 31, 2015 NOTE 1: GENERAL The accompanying Schedule of State Awards (the Schedule ) includes the state grant activity of the Borough of Lebanon, County of Hunterdon (the Municipality ) under programs of the state governments for the year ended December 31, The information in this schedule is presented in accordance with the requirements of the Non-Profit Organizations and the schedule of expenditures of state financial assistance as required by New Jersey s OMB Circular 15-08, Single Audit Policy for Recipients of Federal Grants. State Grants and State Aid. Because the schedule presents only a selected portion of the operations of the Municipality, it is intended to and do not present the financial position, changes in fund balance or cash flows of the Municipality. NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Expenditures reported on the Schedule are reported on the cash basis of accounting. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Negative amounts, if any, shown on the Schedule represent adjustments or credits made in the normal course of business to amounts reported as expenditures in prior years. Pass-through identifying numbers are presented where available. NOTE 3: RELATIONSHIP TO FEDERAL AND STATE FINANCIAL REPORTS Amounts reported in the Schedules agree with the amounts reported in the related federal and state financial reports. SEE INDEPENDENT AUDITORS REPORT

104 99 PART III STATISTICAL DATA INSURANCE SCHEDULE LIST OF OFFICIALS GENERAL COMMENTS AND RECOMMENDATIONS

105 100 SCHEDULES OF STATISTICAL DATA

106 101 SCHEDULES OF STATISTICAL DATA COMPARATIVE SCHEDULE OF OPERATIONS AND CHANGE IN FUND BALANCE-CURRENT FUND FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014 Revenue and Other Income Realized Amount % Amount % Fund Balance Utilized $ 387, $ 398, Miscellaneous Revenue Anticipated 481, , Collection of Delinquent Taxes & Tax Title Liens 39, , Collection of Current Tax Levy 5,867, ,786, Unexpended Balance of Appropriation Reserves 72, , Other Credits to Income 11, , Total Income 6,859, ,807, Expenditures Budget Expenditures: Municipal Purposes 1,579, ,547, County Taxes 1,034, , Local & Regional School Taxes 3,981, ,917, Other Deductions 6, , Total Expenditures 6,602, ,456, Excess in Revenue 257, ,812 Adjustment to Income Before Fund Balance: Expenditures Included Above Which Are By Statute Deferred Charges to Budget of Succeeding Year Statutory Excess to Fund Balance 257, ,068 Fund Balance Fund Balance January 1, 517, , , ,524 Less: Utilization as Anticipated Revenue 387, ,000 Fund Balance December 31, $ 387,871 $ 517,524 SEE INDEPENDENT AUDITORS' REPORT

107 102 COMPARATIVE SCHEDULE OF TAX RATE INFORMATION SCHEDULES OF STATISTICAL DATA (Continued) Apportionment Regional Total Local High Tax Year Municipal County School School Rate 2015 $ 0.36 $ 0.37 $ 0.85 $ 0.59 $ * * * Revaluation of Real Property in 2007 & 2011 ASSESSED AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY Percentage of Net Assessed Net Assessed Estimated Full of Estimated Full Year Valuations Cash Valuations Cash Valuations 2015 $ 279,728,603 $ 280,317, % ,970, ,423, % ,695, ,132, % ,346, ,970, % 2011 * 278,021, ,015, % ,663, ,253, % ,202, ,175, % ,061, ,364, % 2007 * 343,851, ,323, % ,713, ,300, % * Revaluation of Real Property in 2007 & 2011 COMPARISON OF TAX LEVIES AND COLLECTION CURRENTLY A study of this tabulation could indicate a possible trend in future tax levies. A decrease in percentage of current collection could be an indication of probable increases in future tax levies. Currently Cash Percentage Year Tax Levy Collections of Collections 2015 $ 6,062,908 $ 5,867, % ,832,350 5,786, % ,730,949 5,675, % ,640,867 5,578, % ,787,603 5,518, % ,676,175 5,115, % ,190,040 5,107, % ,212,106 5,237, % ,353,022 5,041, % ,139,174 4,634, % Increases in future tax levies can also be warranted if revenue sources outside of those directly generated by the municipality, such as federal and state aid, should decline without corresponding decreases in budgeted expenditures. SEE INDEPENDENT AUDITORS' REPORT

108 103 ASSESSED VALUES DISTRIBUTION Total Vacant Total Personal Assessed Year Land Residential Commercial Farmland Industrial Apartments Real Property Property Values 2006 $ 10,517,914 $ 74,578,400 $ 71,527,250 $ 456,600 $ 9,741,900 $ 166,822,064 $ 891,149 $ 167,713, * 25,286, ,037, ,971, ,824 18,021,700 $ 1,301, ,466,124 1,385, ,851, ,244, ,402, ,616, ,824 17,298,000 1,301, ,710,324 1,350, ,061, ,349, ,128, ,826, ,859 11,213,400 1,301, ,666,659 1,536, ,202, ,632, ,305, ,168, ,859 11,213,400 1,301, ,468,659 1,194, ,663, * 3,071, ,497, ,201, ,279 9,668,000 10,678, ,827,379 1,194, ,021, ,378, ,203,500 89,249, ,279 8,748,080 17,275, ,565, , ,346, ,382, ,148,400 88,706, ,923 8,172,380 19,915, ,036, , ,695, ,541, ,328,000 88,137, ,923 8,172,380 21,079, ,970, ,970, ,529, ,414,600 88,252, ,923 8,713,980 26,106, ,728, ,728,603 * Revaluation of Real Property in 2007 & 2011 DELINQUENT TAXES AND TITLE LIENS SCHEDULES OF STATISTICAL DATA (Continued) This tabulation includes a comparison, expressed in percentage, of the total of delinquent taxes and tax title liens, in relation to the tax levies of the last ten years. Amount of Amount of Tax Title Delinquent Total Percentage Year Liens Taxes Delinquent of Tax Levy 2006 $ 8,152 $ 97,745 $ 105, % ,152 97, , % , , , % ,152 65,806 73, % ,539 59,291 67, % ,679 58,694 67, % ,835 48,551 57, % ,967 26,091 35, % ,930 40, % , , , % SEE INDEPENDENT AUDITORS' REPORT

109 104 SCHEDULES OF STATISTICAL DATA (Continued) PROPERTY ACQUIRED BY TAX TITLE LIEN LIQUIDATION The value of property acquired by liquidation of tax title liens on December 31, on the basis of the last assessed valuation of such properties was as follows: Year Amount 2015 $ 105, , , , , , , , , ,300 COMPARATIVE SCHEDULE OF FUND BALANCES Utilized in Budget of Year Fund Succeeding Ending Balance Year Current Fund 2015 $ 387,871 $ 300, , , , , , , , , , , , , , , ,024, , , ,000 SEE INDEPENDENT AUDITORS' REPORT

110 105 SCHEDULES OF STATISTICAL DATA SCHEDULE OF DEBT INCURRING CAPACITY FOR THE YEAR ENDED DECEMBER 31, 2015 Municipality: 1. Equalized Valuations of Real Property (2015, 2014, 2013) $ 271,167, Permitted Municipal Debt Limitation (3.5%) 9,490, Net Debt Issued, Outstanding & Authorized 5,013, Excess School Borrowing - 5. Total Charges to Borrowing Margin 5,013, Remaining Municipal Borrowing Capacity $ 4,476,916 Local School District: 1. Permitted School District Debt Limitation is 3.0% of $271,167,411 $ 8,135, Debt Issued, Outstanding & Authorized - 3. Remaining Local School Borrowing Capacity $ 8,135,022 GROSS & STATUTORY NET DEBT AS OF DECEMBER 31, Gross Debt Statutory Net Debt Year Amount Amount Percentage 2015 $ 5,213,867 $ 5,013, % ,612,913 4,345, % ,216,998 3,862, % ,626,638 4,184, % ,931,521 4,386, % ,211,569 4,949, % ,915,265 4,458, % ,295,415 4,643, % ,475,432 4,638, % ,763,131 1,746, % SEE INDEPENDENT AUDITORS' REPORT

111 106 SCHEDULES OF STATISTICAL DATA SCHEDULE OF INDEBTEDNESS FOR THE YEAR ENDED DECEMBER 31, 2015 General Purposes: Bonds, Notes and Loans Issued and Outstanding: Bonds $ 3,341,000 Notes 1,412,500 Bonds and Notes Authorized but not Issued 410,643 Local School District: Bonds, Notes and Loans Issued and Outstanding: Bonds - Notes - Bonds and Notes Authorized but not Issued - Regional School District: Bonds 49,724 Notes - Bonds and Notes Authorized but not Issued - $ 5,164,143-49,724 Total Gross Debt 5,213,867 Statutory Deductions: Municipal 150,200 Local School District - Regional School District 49, ,924 Total Net Debt $ 5,013,943 Debt Estimated % Overlapping Debt as of December 31, 2015: Outstanding Applicable Local School District Debt $ % - Regional School District Debt 1,475, % 49,724 County Debt 62,494, % 812,067 $ 861,791 SEE INDEPENDENT AUDITORS' REPORT

112 107 SCHEDULES OF STATISTICAL DATA SCHEDULE OF INDEBTEDNESS FOR THE YEAR ENDED DECEMBER 31, 2015 (Continued) Year Assessed Valuation Gross Debt $ 5,213,867 Per Capita (Population 2010 Census-1,359) 3,837 Percent of Average Equalized Valution Basis 2015 $ 271,167, % Percent of Net Valuation Taxable 2015 $ 279,728, % Net Municipal Debt $ 5,013,943 Per Capita (Population 2010 Census-1,359) 3,689 Percent of Average Equalized Valution Basis 2015 $ 271,167, % Percent of Net Valuation Taxable 2015 $ 279,728, % Overall Debt (Gross & Overlapping Debt) $ 6,075,658 Per Capita (Population 2010 Census-1,359) 4,471 Percent of Average Equalized Valution Basis 2015 $ 271,167, % Percent of Net Valuation Taxable 2015 $ 279,728, % SEE INDEPENDENT AUDITORS' REPORT

113 108 SCHEDULE OF INSURANCE FOR THE YEAR ENDED DECEMBER 31, 2015 (Unaudited) Coverage Deductible Worker's Compensation-Statewide Insurance Fund Through Arch Insurance Company Injury Per Accident Statutdory Limits Disease Per Employee $ 2,000,000 $ - Disease Policy Limit 2,000,000 - Property-Statewide Insurance Fund Through Lexington Insurance Company: Fund Limit 150,000,000 1,000 Boiler and Machinery-Statewide Insurance Fund through Chubb Insurance Company: Fund Limit 100,000,000 10,000 General Package-Statewide Insurance Fund Through Torus Specialty Insurance Company: General Liability 10,000,000 - Automobile Liability 10,000,000 - Excess General Liability and Automobile Liability 5,000,000 - Professional Liability-Statewide Insurance Fund Through National Casualty Insurance Company: Public Officials Liability 2,000,000 2,500 Employment Practices Liability 2,000,000 2,500 Crime-Statewide Insurance Fund Through Zurich Insurance Company: Tax Collector and Treasurer's Bond 1,000,000 5,000 Employee Dishonesty Bond 1,000,000 5,000 Pollution Liability-Statewide Insurance Fund Through ACE American Insurance Company: Per Incident Limit 1,000,000 25,000 Adequacy of insurance coverage is the responsibility of the municipality. SEE INDEPENDENT AUDITORS' REPORT

114 109 SCHEDULE OF OFFICIALS (UNAUDITED) OFFICIALS IN OFFICE AND SURETY BONDS The following officials were in office during the period under audit: Name Michael Reino Richard Burton Samuel Berger Robert Junge John Knoble James Pittinger Bonnie Schmidt Title Mayor Council President Councilman Councilman Councilman Councilman Councilwoman * * * * * * Name Karen Romano Kay Winzenried Joseph Novak Jeffrey Burd Paul Ferriero Title Clerk Tax Collector, CFO, Treasurer Attorney Assessor Engineer There is in force a Faithful Performance Bond issued by the Public Alliance Insurance Coverage Fund covering all Borough employees in the aggregate of $50,000 and an excess crime bond pool issued by Municipal Excess Liability Joint Insurance Fund which covers all Borough employees in the aggregate of $950,000.

115 GENERAL COMMENTS AND RECOMMENDATIONS 110

116 111 GENERAL COMMENTS CONTRACTS AND AGREEMENTS REQUIRED TO BE ADVERTISED FOR N.J.S. 40A:11-4 N.J.S. 40A:11-2 states "Every contract or agreement, for the performance of any work or the furnishing or hiring of any materials or supplies, the cost of the contract price whereof is to be paid with or out of public funds not included within the terms of Section 3 of this act, shall be made or awarded only by the governing body of the contracting unit after public advertising for bids and bidding therefore, except as is provided otherwise in this act or specifically by any other law. No work, materials or supplies shall be undertaken, acquired or furnished for a sum exceeding the aggregate $17,500, except by contract or agreement." The governing body of the Municipality has the responsibility of determining whether the expenditures in any category will exceed the statutory bid limit within the fiscal year. Where question arises as to whether any contract or agreement might result in violation of the statute, the Borough Counsel's opinion should be sought before a commitment is made. The minutes indicated that contracts were awarded for the following items: Inlet Repairs Street Sweeping Contracted Services Road Improvements Building Renovations Codification of Ordinances Photocopier The minutes also indicated that resolutions were adopted authorizing the awarding of contracts or agreements for "Professional Services" per N.J.S. 40A:11-5 as follows: Engineer Auditor Municipal Attorney Appraisals Contracted Services Municipal Building Insurance Agents Planning Board Attorney Architect Bond Attorney Special Council Construction Manager The minutes also indicated that a cooperative inter-local agreement was entered into with the County of Hunterdon for snow and ice control materials, Tewksbury Township for public works and Road maintenance services and Lebanon Borough School District for landscaping and snow plowing. 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.

117 112 GENERAL COMMENTS (Continued) COLLECTION OF INTEREST ON DELINQUENT TAXES AND ASSESSMENTS The statute provides the method for authorizing interest and the maximum rates to be charged for the nonpayment of taxes or assessments on or before the date when they would become delinquent. The governing body adopted the following resolution authorizing interest to be charged on delinquent taxes: BE IT RESOLVED that the rate of interest to be charged by the Borough of Lebanon for nonpayment of taxes or assessments on or before the date they would become delinquent, shall be eight percent (8%) on the first $1,500 and 18% per annum on the balance over $1,500 provided however that no interest shall be charged if payment of any installment is made within ten days after the date upon which the same became payable. Any installment received after the expiration of the said ten day grace period, shall bear interest from the due date. In addition to the above interest charges the municipality has authorized, by resolution, to charge additional penalties as follows: Six percent (6%) penalty on any delinquency exceeding $10,000 on any given parcel of property and who fails to pay the delinquency prior to the end of the calendar year. It appears from a test examination of the Collector's records that interest was generally collected in accordance with the foregoing resolution. DELINQUENT TAXES AND TAX TITLE LIENS The annual tax sale was held by the Municipality. Inspection of tax sale certificates on file revealed that all tax sale certificates were available for audit. The following comparison is made of the number of tax title liens receivable on December 31, of the last ten years: Year 2015 Number of Liens

118 113 GENERAL COMMENTS (Continued) SIGNIFICANT DEFICIENCIES Segregation of Duties Condition: An overall lack of segregation of duties in all accounting control processes. Criteria: Segregation of duties for the recordkeeping and treasury functions would increase the likelihood that misstatement of the financial statement amounts due to error or fraud would be detected within a reasonable period of time. Cause: The small size of the Municipality s administrative staff. Effect: Because of the lack of segregation of duties, errors in accounting control processes could be made and not detected by existing control mechanisms in place. Recommendation: Procedures should be implemented by the Municipality to reduce the risk of errors occurring and going undetected. Views of Responsible Officials and Planned Corrective Action: (unaudited) The officials of the Municipality have determined that the Municipality is effectively and efficiently served with a single individual performing these functions. The Municipality has implemented compensating controls and continues to consider risk assessment as it relates to the likelihood of misstatement of financial statement amounts due to error or fraud.

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