TOWNSHIP OF HAZLET COUNTY OF MONMOUTH, NEW JERSEY AUDIT REPORT FOR THE YEAR ENDED DECEMBER 31, 2017

Transcription

1 AUDIT REPORT FOR THE YEAR ENDED DECEMBER 31, 2017

2

3 CONTENTS PART I Exhibit Page Independent Auditor's Report 1 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 5 Financial Statements Current Fund Statements of Assets, Liabilities, Reserves and Fund Balance - Regulatory Basis A 11 Statements of Operations and Changes in Fund Balance - Regulatory Basis A-1 13 Statement of Revenues - Regulatory Basis A-2 14 Statement of Appropriations - Regulatory Basis A-3 16 Trust Fund Statements of Assets, Liabilities, Reserves and Fund Balance - Regulatory Basis B 25 General Capital Fund Statements of Assets, Liabilities, Reserves and Fund Balance - Regulatory Basis C 29 Statement of Fund Balance - Regulatory Basis C-1 30 Swimming Pool Utility Fund Statements of Assets, Liabilities, Reserves and Fund Balance - Regulatory Basis D 33 Statements of Operations and Changes in Fund Balance Regulatory Basis D-1 34 Statement of Revenues - Regulatory Basis D-2 35 Statement of Appropriations - Regulatory Basis D-3 36 Sewer Utility Fund Statements of Assets, Liabilities, Reserves and Fund Balance - Regulatory Basis E 39 Statements of Operations and Changes in Fund Balance Regulatory Basis E-1 41 Statement of Revenues - Regulatory Basis E-2 42 Statement of Appropriations - Regulatory Basis E-3 43 Payroll Fund Statements of Assets, Liabilities, Reserves and Fund Balance - Regulatory Basis F 47 General Fixed Assets Account Group Statements of Assets, Liabilities, Reserves and Fund Balance - Regulatory Basis G 51 Notes to Financial Statements 55

4 CONTENTS Additional Information Statement Page Current Fund Schedule of Cash and Investments - Treasurer A-4 91 Schedule of Taxes Receivable and Analysis of Property Tax Levy A-5 92 Schedule of Tax Title Liens Receivable A-6 93 Schedule of Property Acquired for Taxes A-7 94 Schedule of Revenue Accounts Receivable A-8 95 Schedule of Due From State of New Jersey Senior Citizens' and Veterans' Deductions A-9 96 Schedule of Interfund Receivable/(Payable) A Schedule of Other Accounts Receivable A Schedule of Deferred Charges A Schedule of 2016 Appropriation Reserves A Schedule of Reserve for Encumbrances A Schedule of Property Tax Overpayments A Schedule of Prepaid Taxes A Schedule of Fire District Taxes Payable A Schedule of County Taxes Payable A Schedule of Local School District Tax Payable/Receivable A Schedule of Accounts Payable A Schedule of Due to State A Schedule of Various Reserves A Schedule of Grants Receivable A Schedule of Due to Current Fund A Schedule of Reserve for Grants - Appropriated A Schedule of Reserve for Grants - Unappropriated A Trust Fund Schedule of Cash B Schedule of Reserve for Animal Control Fund Expenditures B Schedule of Due From State of New Jersey - Animal Control Trust Fund B Schedule of Due to Current Fund B Schedule of Due From Current Fund - Open Space Trust Fund B Schedule of Reserve for Open Space B Schedule of Due From Current Fund - Trust - Other Fund B Schedule of Reserve for Various Trust Funds B Schedule of Investments - Length of Service Awards Program Fund (LOSAP) B Schedule of Reserve for Funds Held by Trustee - Length of Service Awards Program Fund (LOSAP) B Schedule of Due to Sewer Utility Operating Fund B

5 CONTENTS Statement Page General Capital Fund Schedule of Cash and Investments - Treasurer C Schedule of Analysis of General Capital Fund Cash C Schedule of Deferred Charges to Future Taxation - Funded C Schedule of Deferred Charges To Future Taxation - Unfunded C Schedule of State, Federal, and Local Grants Receivable C Schedule of Due From Current Fund C Schedule of Reserve for Joint Court Improvements C Schedule of Reserve for Debt Service C Schedule of Serial Bonds Payable C Schedule of Green Trust Loan Payable C Schedule of Bond Anticipation Notes C Schedule of Improvement Authorizations C Schedule of Reserve for Encumbrances C Schedule of Capital Improvement Fund C Schedule of Bonds And Notes Authorized But Not Issued C Swimming Pool Utility Fund Schedule of Cash and Investments - Treasurer D Schedule of Accounts Payable D Schedule of Analysis of Swimming Pool Utility Capital Cash D Schedule of Fixed Capital D Schedule of 2016 Appropriations Reserves D Schedule of Fixed Capital Authorized and Uncompleted D Schedule of Reserve for Encumbrances - Swimming Pool Utility Operating Fund D Schedule of Improvement Authorizations D Schedule of Reserve for Encumbrances - Swimming Pool Utility Capital Fund D Schedule of Capital Improvement Fund D Schedule of Reserve for Amortization D Schedule of Deferred Reserve for Amortization D Schedule of Due to Current Fund - Swimming Pool Utility Operating Fund D Schedule of Due to Swimming Pool Utility Operating Fund D Schedule of Due to Current Fund - Swimming Pool Utility Capital Fund D Schedule of Due From Swimming Pool Utility Capital Fund D

6 CONTENTS Sewer Utility Fund Schedule of Cash and Investments - Treasurer E Schedule of Analysis of Sewer Utility Capital Cash E Schedule of Consumer Accounts Receivable E Schedule of Bayshore Sewerage Rent Reserve E Schedule of Sewer Consumer Overpayments E Schedule of 2016 Appropriations Reserves E Schedule of Reserve for Encumbrances - Sewer Utility Operating Fund E Schedule of Due From Tax Title Lien Trust E Schedule of Accounts Payable E Schedule of Fixed Capital E Schedule of Fixed Capital Authorized and Uncompleted E Schedule of Due To Current Fund E Schedule of Improvement Authorizations E Schedule of Reserve for Encumbrances - Sewer Utility Capital Fund E Schedule of Reserve for Improvements E Schedule of Reserve for Amortization E Schedule of Deferred Reserve for Amortization E Schedule of Capital Improvement Fund E Schedule of Due to Current Fund E Schedule of Due to Sewer Utility Operating Fund E Schedule of Due From Sewer Utility Capital Fund E General Fixed Assets Account Group Schedule of Changes in General Fixed Assets G Comments and Recommendations Schedule of Financial Statement Findings 195 Schedule of Prior Year Audit Findings 199 Officials in Office and Surety Bonds 203 Contracts and Agreements Required to be advertised by (N.J.S.A.40A:11-4) 205 Collection of Interest on Delinquent Taxes and Assessments 206 Other Comments 206 Recommendations 206 Acknowledgment 207

7 COUNTY OF MONMOUTH PART I INDEPENDENT AUDITOR'S REPORT AND FINANCIAL STATEMENTS ************

8 This page intentionally left blank

9 INDEPENDENT AUDITOR S REPORT Honorable Mayor and Members of the Township Council Township of Hazlet County of Monmouth Hazlet, New Jersey Report on the Financial Statements We have audited the accompanying statements of assets, liabilities, reserves and fund balance - regulatory basis of the various funds and account group of the Township of Hazlet as of December 31, 2017 and 2016, and the related statements of operations and changes in fund balance - regulatory basis for the years then ended, the related statements of revenues - regulatory basis, and statements of expenditures - regulatory basis for the year ended December 31, 2017 and the related notes to the financial statements, which collectively comprise the Township s basic financial statements as listed in the table of contents. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles and practices prescribed by the Division of Local Government Services, Department of Community Affairs, State of New Jersey. Management is also responsible for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and in compliance with audit requirements prescribed by the Division of Local Government Services, Department of Community Affairs, State of New Jersey. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Township s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. 1

10 We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions Basis for Adverse Opinion on Accounting Principles Generally Accepted in the United States of America As described in Note 1, the financial statements are prepared by the Township of Hazlet on the basis of the financial reporting provisions of the Division of Local Government Services, Department of Community Affairs, State of New Jersey, which is a basis of accounting other than accounting principles generally accepted in the United States of America, to meet the requirements of the State of New Jersey. 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 Accounting Principles Generally Accepted in the United States of America 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 the Township, as of December 31, 2017 and 2016, or the results of its operations and changes in fund balance for the years then ended. Unmodified Opinion on Regulatory Basis of Accounting In our opinion, the financial statements referred to above present fairly, in all material respects, the assets, liabilities, reserves and fund balance - regulatory basis of the various funds of the Township, as of December 31, 2017 and 2016, and the results of its operations and changes in fund balance - regulatory basis of such funds for the years then ended, and the statements of revenues - regulatory basis, statements of expenditures - regulatory basis of the various funds, and general fixed assets group of accounts regulatory basis, for the year ended December 31, 2017 in conformity with accounting principles and practices prescribed by the Division of Local Government Services, Department of Community Affairs, State of New Jersey as described in Note 1. Other Matters Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Township s basic financial statements. The supplemental schedules presented for the various funds are presented for purposes of additional analysis as required by the Division of Local Government Services, Department of Community Affairs, State of New Jersey and are not a required part of the basic financial statements. The supplemental schedules presented for the various funds are the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. Such information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial 2

11 statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements of each of the respective individual funds and account group taken as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated June 29, 2018 on our consideration of the Township's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Township's internal control over financial reporting and compliance. Respectfully submitted, HOLMAN FRENIA ALLISON, P.C. Robert W. Allison Certified Public Accountant Registered Municipal Accountant RMA No. 483 Hazlet, New Jersey June 29,

12 This page intentionally left blank 4

13 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 Honorable Mayor and Members of the Township Council Township of Hazlet County of Monmouth Hazlet, New Jersey We have audited, in accordance with the auditing standards generally accepted in the United States of America, the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States and audit requirements as prescribed by the Division of Local Government Services, Department of Community Affairs, State of New Jersey, the financial statements - regulatory basis of the Township of Hazlet, as of and for the year ended December 31, 2017, and the related notes to the financial statements, which collectively comprise the Township's basic financial statements, and have issued our report thereon dated June 29, Our report indicated that the Township s financial statements were not prepared in accordance with accounting principles generally accepted in the United States of America but rather prepared in accordance with the regulatory basis of accounting prescribed by the Division of Local Government Services, Department of Community Affairs, State of New Jersey. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the Township's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Township s internal control. Accordingly, we do not express an opinion on the effectiveness of the Township s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified. We did identify certain deficiencies in internal control, described in the accompanying schedule of financial statement findings that we consider to be material weaknesses as Finding No. s , , , , , &

14 Compliance and Other Matters As part of obtaining reasonable assurance about whether the Township's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed instances of noncompliance or other matters that are required to be reported under Government Auditing Standards and audit requirements as prescribed by the Division of Local Government Services, Department of Community Affairs, State of New Jersey and which are described in the accompanying schedule of financial statement findings as Finding No. s , , , , & We also noted certain other matters that are not required to be reported under Governmental Auditing Standards, that we reported to management in the accompanying letter of comments and recommendations section of this report as required by the Division of Local Government Services, Department of Community Affairs, State of New Jersey. Township of Hazlet s Response to Findings The Township of Hazlet s response to the findings identified in our audit is described in the accompanying schedule of financial statement findings. The Township s response was not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on it. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the Township's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards and audit requirements as prescribed by the Division of Local Government Services, Department of Community Affairs, State of New Jersey in considering the Township s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Respectfully Submitted, HOLMAN FRENIA ALLISON, P.C. Freehold, New Jersey June 29, 2018 Robert W. Allison Certified Public Accountant Registered Municipal Accountant RMA No

15 BASIC FINANCIAL STATEMENTS 7

16 This page intentionally left blank 8

17 CURRENT FUND 9

18 This page intentionally left blank 10

19 EXHIBIT A Page 1 of 2 CURRENT FUND STATEMENTS OF ASSETS, LIABILITIES, RESERVES AND FUND BALANCE - REGULATORY BASIS DECEMBER 31, 2017 AND 2016 Assets Reference Current Fund: Cash A-4 $ 7,201, $ 7,106, Change Fund A Petty Cash Fund A ,202, ,107, Receivables and Other Assets With Full Reserves: Delinquent Property Taxes Receivable A-5 823, , Tax Title Liens Receivable A-6 116, , Property Acquired for Taxes A-7 721, , Revenue Accounts Receivable A-8 23, , Due From Animal Control Fund A-10 47, Due From Trust Other A , Due From Sewer Utility Operating Fund A , , Due From Sewer Utility Capital Fund A-10 24, , Due From Swimming Pool Utility Operating Fund A-10-16, Due From Swimming Pool Utility Capital Fund A-10 1, , Due From Open Space Trust Fund A Other Accounts Receivable A-11 23, , ,950, ,205, Deferred Charges: Special Emergency Appropriations A-12-39, ,152, ,352, State and Federal Grant Fund: Grants Receivable A-23 79, , Due From Current Fund A , , , , Total Assets $ 9,577, $ 9,762, The accompanying Notes to Financial Statements are an integral part of this Statement. 11

20 EXHIBIT A Page 2 of 2 CURRENT FUND STATEMENTS OF ASSETS, LIABILITIES, RESERVES AND FUND BALANCE - REGULATORY BASIS DECEMBER 31, 2017 AND 2016 Liabilities, Reserves and Fund Balance Reference Appropriation Reserves A-3/A-13 $ 733, $ 1,144, Reserve for Encumbrances A , , Due To General Capital A-10 1,041, ,673, Due To Grant Fund A , , Due To Open Space Trust Fund A , Due To Swimming Pool Utility Operating Fund A , Prepaid Taxes A-16 1,276, , Tax Overpayments A-15 44, , County Taxes Payable A-18 4, , Accounts Payable A-20 39, , Due To State of New Jersey: A , Various Reserves A-22 83, , Due to/from State of New Jersey, Chap. 20 P.L A-9 19, , ,645, ,222, Reserve for Receivables A 1,950, ,205, Fund Balance A-1 2,557, ,924, ,507, ,130, ,152, ,352, Federal and State Grant Fund: Appropriated Reserves A , , Unappropriated Reserves A-26 18, , , , Total Liabilities, Reserves and Fund Balance $ 9,577, $ 9,762, The accompanying Notes to Financial Statements are an integral part of this Statement. 12

21 CURRENT FUND STATEMENTS OF OPERATIONS AND CHANGES IN FUND BALANCE - REGULATORY BASIS FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016 EXHIBIT A Revenue and Other Income Realized: Fund Balance Utilized $ 2,800, $ 2,838, Miscellaneous Revenues Anticipated 4,295, ,301, Receipts From Delinquent Taxes 923, , Receipts From Current Taxes 60,927, ,910, Non-Budget Revenue 210, , Other Credit To Income: Prior Year Interfunds Returned 220, Unexpended Balance of Appropriation Reserves 808, ,165, Total Revenue 70,185, ,520, Expenditures: Budget Appropriations Within "CAPS": Operations: Salaries and Wages 7,412, ,532, Other Expenses 7,619, ,386, Deferred Charges and Statutory 1,933, ,688, Budget Appropriations Excluded from Caps: Operations: Salaries and Wages 99, , Other Expenses 261, , Capital Improvement Fund 707, ,223, Municipal Debt Service 1,449, ,494, Deferred Charges 137, , Interfunds Advanced 660, , Municipal Open Space Tax Payable 231, , State Tax Appeal Adjustment - 41, Special Fire District Taxes 1,913, ,822, County Taxes 7,185, ,035, Local District School Taxes 38,803, ,821, Total Expenditures 67,752, ,372, Excess/(Deficit) in Revenue 2,432, ,148, Fund Balance, January 1 2,924, ,615, ,357, ,763, Decreased By: Utilized as Anticipated Revenue 2,800, ,838, Fund Balance, December 31 $ 2,557, $ 2,924, The accompanying Notes to Financial Statements are an integral part of this Statement. 13

22 CURRENT FUND STATEMENT OF REVENUES - REGULATORY BASIS EXHIBIT A-2 Page 1 of 2 Special N.J.S.A. Excess/ Budget 40A:4-87 Realized (Deficit) Surplus Anticipated $ 2,800, $ - $ 2,800, $ - Miscellaneous Revenues: Licenses: Alcoholic Beverages 21, , Other 45, , , Fees and Permits 145, , , Fines and Costs: Municipal Court 275, , (9,599.37) Interest and Costs on Taxes 125, , , Cable T.V. Franchise Fee 296, , , Hotel/Motel Fees 105, , , Recreation Fees 110, , , Consolidated Municipal Property Tax Relief Aid 109, , Energy Receipts Tax (P.L. 1997, Ch 62 & 67) 1,774, ,774, Payments in Lieu of Tax on State Exempt Property (N.J.S.A. 54:4-5.2a et seq.) 250, , , Uniform Construction Code Fees 325, , , Joint Court - Matawan 161, , , Recycling Tonnage Grant - 39, , Municipal Alliance on Alcoholism and Drug Abuse 50, , Green Meadows Farm 46, , Reserve for Recycling 35, , Total Miscellaneous Revenues 3,875, , ,295, , Receipts From Delinquent Taxes 550, , , Amount to be Raised by Taxes for Support of Municipal Budget: Local Tax for Municipal Purposes Including Reserve for Uncollected Taxes 13,615, ,987, , Budget Totals 20,841, , ,006, ,126, Non-Budget Revenue , , $ 20,841, $ 39, $ 22,217, $ 1,336, The accompanying Notes to Financial Statements are an integral part of this Statement. 14

23 CURRENT FUND STATEMENT OF REVENUES - REGULATORY BASIS EXHIBIT Exhibit A-2 A-2 Page Page 2 of 2 of 2 Analysis of Realized Revenue Allocation of Current Tax Collections: Revenue From Collections $ 60,977, Allocated To School and County Taxes 48,133, Balance for Support of Municipal Budget Appropriations 12,843, Add: Reserve for Uncollected Taxes 1,193, Less: Reserve for Tax Appeals Pending 50, Amount for Support of Municipal Budget Appropriations $ 13,987, Receipts From Delinquent Taxes: Delinquent Tax Collections $ 923, Analysis of Non-Budget Revenue Miscellaneous Revenue Not Anticipated: Administrative Fee Senior Citizens & Vets $ 3, Municipal Clerk 4, Finance Department Receipts 26, Tax Department Receipts 10, Police Department Receipts 10, Interest on Investments 2, CJHIF Dividend Payout 145, Postage DMV Inspection Fines Miscellaneous 6, $ 210, The accompanying Notes to Financial Statements are an integral part of this Statement. 15

24 EXHIBIT A-3 Page 1 of 6 CURRENT FUND STATEMENT OF APPROPRIATIONS - REGULATORY BASIS Appropriations Original Budget After Paid or Budget Chapter 159 Modifications Charged Encumbered Reserved Cancelled General Appropriations Operations - Within "CAPS" GENERAL GOVERNMENT General Administrative Salaries and Wages $ 128, $ - $ 130, $ 126, $ 4, $ $ - Other Expenses 154, , , , , Mayor and Committee Salaries and Wages 23, , , , Other Expenses 5, , , , Municipal Clerk Salaries and Wages 115, , , , Other Expenses 20, , , , Elections: Salaries and Wages Other Expenses 7, , , , Registrar/Vital Statistics Other Expenses 1, , Financial Administration Salaries and Wages 131, , , , Other Expenses 44, , , , Audit Services Other Expenses 55, , , Revenue Administration (Tax Collection) Salaries and Wages 81, , , , Other Expenses 14, , , Tax Assessment Administration Salaries and Wages 57, , , , Other Expenses 67, , , , , Legal Services and Costs Other Expenses 170, , , , , Engineering Services and Costs Other Expenses 105, , , , Land Use Board Salaries and Wages 148, , , , Other Expenses 40, , , , , The accompanying Notes to Financial Statements are an integral part of this Statement. 16

25 EXHIBIT A-3 Page 2 of 6 CURRENT FUND STATEMENT OF APPROPRIATIONS - REGULATORY BASIS Appropriations Original Budget After Paid or Budget Chapter 159 Modifications Charged Encumbered Reserved Cancelled Rent Control Other Expenses Insurance Property/General/Environmental 257, , , Public Officials/Employment Practices/ Other Insurance 53, , , , Workers Compensation 445, , , , Employee Group Insurance 3,300, ,300, ,293, , Health Benefit Waiver 100, , , , Disability Insurance 42, , , , PUBLIC SAFETY Police Salaries and Wages 4,517, ,558, ,385, , Other Expenses 431, , , , , School Crossing Guards Salaries and Wages 108, , , , , Other Expenses 2, , , Police Dispatch/911 Salaries and Wages 242, , , , Emergency Management Other Expenses 22, , , , Aid to First Aid Organizations Other Expenses 60, , , Municipal Prosecutor Salaries and Wages 23, , , , Other Expenses 1, PUBLIC WORKS Streets and Roads Maintenance Salaries and Wages 257, , , , , Other Expenses 267, , , , , Snow Removal Salaries and Wages 60, , , , , Other Expenses 178, , , , , Recycling Salaries and Wages 725, , , , Other Expenses 191, , , , The accompanying Notes to Financial Statements are an integral part of this Statement. 17

26 EXHIBIT A-3 Page 3 of 6 CURRENT FUND STATEMENT OF APPROPRIATIONS - REGULATORY BASIS Appropriations Original Budget After Paid or Budget Chapter 159 Modifications Charged Encumbered Reserved Cancelled Buildings and Ground Salaries and Wages 184, , , , , Other Expenses 171, , , , , Municipal Parking Facility Other Expenses 1, , Vehicle Maintenance (Including Police Vehicles) Other Expenses 600, , , , HEALTH AND HUMAN SERVICES FUNCTIONS Environmental Health Services Salaries and Wages 2, , , , Other Expenses 2, , Open Space Commission Salaries and Wages 1, , , Other Expenses Animal Control Services Other Expenses 25, , , PARKS AND RECREATION Recreation Salaries and Wages 132, , , , , Other Expenses 100, , , , , Recreation Services and Programs Other Expenses 4, , , EDUCATION Township Library Other Expenses 10, , , , , MUNICPAL COURT Municipal Court Salaries and Wages 197, , , , , Other Expenses 49, , , , , Public Defender Salaries and Wages 6, , , Uniform Construction Code Enforcement Functions Salaries and Wages 269, , , , Other Expenses 7, , , , The accompanying Notes to Financial Statements are an integral part of this Statement. 18

27 EXHIBIT A-3 Page 4 of 6 CURRENT FUND STATEMENT OF APPROPRIATIONS - REGULATORY BASIS Appropriations Original Budget After Paid or Budget Chapter 159 Modifications Charged Encumbered Reserved Cancelled UTILITY EXPENSES AND BULK PURCHASES Electricity 200, , , , , Street Lighting 185, , , , Telephone (excluding equipment acquisition) 65, , , , Water and Sewerage 36, , , , Gas (Natural or Propane) 80, , , , Telecommunications 39, , , , Accumulated Leave Total Operations - Within "CAPS" 15,031, ,031, ,673, , , Detail: Salaries and Wages 7,414, ,412, ,003, , , Other Expenses 7,616, ,619, ,670, , , Statutory Expenditures: Contribution To: Public Employees' Retirement System 345, , , , Social Security System (O.A.S.I.) 585, , , , , Police and Firemen's Retirement System of N.J. 978, , , Unemployment Compensation Insurance 20, , , , Defined Contribution Retirement Program 4, , , Total Deferred Charges and Statutory Expenditures - Municipal - Within "CAPS" 1,933, ,933, ,848, , , Total General Appropriations for Municipal Purposes - Within "CAPS" 16,964, ,964, ,522, , , General Appropriations for Municipal Purposes - Excluded from "CAPS" Length of Service Award Program ("LOSAP") 25, , , Total Other Operations - Excluded from "CAPS" 25, , , The accompanying Notes to Financial Statements are an integral part of this Statement. 19

28 EXHIBIT A-3 Page 5 of 6 CURRENT FUND STATEMENT OF APPROPRIATIONS - REGULATORY BASIS Appropriations Original Budget After Paid or Budget Chapter 159 Modifications Charged Encumbered Reserved Cancelled SHARED MUNICIPAL SERVICE AGREEMENTS Handicapped Persons Recreational Opportunities Other Expenses 23, , , Joint Court - Matawan Salaries and Wages 99, , , Other Expenses 55, , , Total Shared Municipal Service Agreements 178, , , , PUBLIC AND PRIVATE PROGRAMS OFFSET BY REVENUES Municipal Alliance Grant County Share 50, , , Local Share 12, , , SFSP Fire District Payment 8, , , Clean Communities - 39, , , Green Meadows Donation 46, , , Total Public and Private Programs Offset by Revenues 118, , , , Total Operations - Excluded from "CAPS" 321, , , , , Detail: Salaries and Wages 99, , , Other Expenses 222, , , , , Capital Improvement Fund: Capital Improvement Fund: 707, , , Total Capital Improvement Fund 707, , , Municipal Debt Service - Excluded From "CAPS" Payment of Bond Principal 390, , , Payment of Bond Anticipation Notes and Capital Notes 805, , , Interest on Bonds 206, , , , Interest on Notes 50, , , , Green Trust Loan Program: Loan Repayments for Principal and Interest 14, , , The accompanying Notes to Financial Statements are an integral part of this Statement. 20

29 EXHIBIT A-3 Page 6 of 6 CURRENT FUND STATEMENT OF APPROPRIATIONS - REGULATORY BASIS Appropriations Original Budget After Paid or Budget Chapter 159 Modifications Charged Encumbered Reserved Cancelled Capital Lease Obligations Approved Prior to 7/1/2007 Principal 47, , , Interest 2, , , , Total Municipal Debt Service - Excluded From "CAPS" 1,516, ,516, ,449, , Deferred Charges - Municipal - Excluded From "CAPS" Deferred Charges: Special Emergency Authorizations - 5 Years 39, , , Deferred Charges to Future Taxation - Ord # , , , Deferred Charges to Future Taxation - Ord # , , , Deferred Charges to Future Taxation - Ord # , , , Total Deferred Charges - Municipal - Excluded From "CAPS" 137, , , Total General Appropriations for Municipal Purposes - Excluded From "CAPS" 2,683, , ,722, ,606, , , Subtotal General Appropriations 19,647, , ,686, ,129, , , , Reserve for Uncollected Taxes 1,193, ,193, ,193, Total General Appropriations $ 20,841, $ 39, $ 20,880, $ 19,322, $ 756, $ 733, $ 67, Adopted Budget $ 20,841, Chapter , $ 20,880, Reserve for Uncollected Taxes $ 1,193, Cash Disbursements 17,135, Reserve for Grants - Appropriated 148, Capital Improvement Fund 707, Deferred Charges 137, $ 19,322, The accompanying Notes to Financial Statements are an integral part of this Statement. 21

30 This page intentionally left blank 22

31 TRUST FUND 23

32 This page intentionally left blank 24

33 EXHIBIT B TRUST FUND STATEMENTS OF ASSETS, LIABILITIES, RESERVES AND FUND BALANCE - REGULATORY BASIS DECEMBER 31, 2017 AND 2016 Assets Reference Animal Control Fund: Cash B-1 $ 51, $ 15, Change Fund B , , Other Trust Funds: Cash B-1 3,241, ,767, ,241, ,767, Open Space Trust Fund: Cash B-1 1,548, ,548, Due From Current Fund B-5 198, ,747, ,548, Length of Service Award Program Fund ("LOSAP"): Cash and Investments - Trustee B-9 308, , Total Assets $ 5,350, $ 4,655, Liabilities and Reserves Reference Animal Control Trust Fund: Due To: State of New Jersey B-3 $ $ Current Fund B-4 47, Reserve for Animal Control Expenditures B-2 4, , , , Other Trust Funds: Reserve for Various Trust Activities B-8 3,193, ,465, Due To Sewer Utility Operating Fund B-11 47, , Due To Current Fund B-7-253, ,241, ,767, Open Space Trust Fund: Due To Current Fund B Reserve for Open Space B-6 1,747, ,548, ,747, ,548, Length of Service Award Program Fund ("LOSAP"): Reserve for Funds Held by Trustee B , , Total Liabilities and Reserves $ 5,350, $ 4,655, The accompanying Notes to Financial Statements are an integral part of this Statement. 25

34 This page intentionally left blank 26

35 GENERAL CAPITAL FUND 27

36 This page intentionally left blank 28

37 EXHIBIT C GENERAL CAPITAL FUND STATEMENTS OF ASSETS, LIABILITIES, RESERVES AND FUND BALANCE - REGULATORY BASIS DECEMBER 31, 2017 AND 2016 Assets Reference Cash C-2 $ 1,257, $ 1,257, Grants Receivable C-6 383, ,014, Due From Current Fund C-7 1,041, ,673, Deferred Charges To Future Taxation: Funded C-4 4,237, ,640, Unfunded C-5 3,834, ,737, Total Assets $ 10,754, $ 13,323, Liabilities and Reserves Reference General Serial Bonds C-10 $ 4,150, $ 4,540, Green Trust Loans C-11 87, , Bond Anticipation Notes C-12 3,791, ,046, Improvement Authorizations: Funded C , ,727, Unfunded C , , Reserve for Encumbrances C , , Capital Improvement Fund C , , Reserve for: Joint Court Improvements C-8 20, , Debt Service C-9 206, , Fund Balance C-1 48, , Total Liabilities and Reserves $ 10,754, $ 13,323, There were bonds and notes authorized but not issued on December 31, 2017 of $42, and on December 31, 2016 was $691, The accompanying Notes to Financial Statements are an integral part of this Statement. 29

38 GENERAL CAPITAL FUND STATEMENT OF CAPITAL FUND BALANCE- REGULATORY BASIS EXHIBIT C-1 Balance, December 31, 2017 & 2016 $ 48, The accompanying Notes to Financial Statements are an integral part of this Statement. 30

39 SWIMMING POOL UTILITY FUND 31

40 This page intentionally left blank 32

41 EXHIBIT D SWIMMING POOL UTILITY FUND STATEMENTS OF ASSETS, LIABILITIES, RESERVES AND FUND BALANCE - REGULATORY BASIS DECEMBER 31, 2017 AND 2016 Assets Reference Operating Fund: Cash and Investments D-4 $ 227, $ 240, Due From Current Fund D , Due From Swimming Pool Capital Fund D , , Total Operating Fund 329, , Capital Fund: Cash and Investments D-4 50, , Due From Swimming Pool Operating Fund D-17 34, Fixed Capital D-7 1,698, ,668, Fixed Capital Authorized and Uncompleted D-9 200, , Total Capital Fund 1,983, ,951, Total Assets $ 2,313, $ 2,192, Liabilities, Reserves and Fund Balances Reference Operating Fund: Appropriation Reserves D-3 $ 57, $ 63, Accounts Payable D-5 8, , Due To Current Fund D-20-16, Due To Swimming Pool Capital Fund D-19 34, Reserve for Encumbrances D-10 4, , , , Fund Balance D-1 224, , Total Operating Fund 329, , Capital Fund: Reserve for Encumbrances D-12-3, Improvement Authorization: Funded D , Capital Improvement Fund D-13 83, , Due To Swimming Pool Operating Fund D Due To Current Fund D-18 1, , Reserve for: Amortization D-14 1,698, ,668, Deferred Reserve for Amortization D , , Total Capital Fund 1,983, ,951, Total Liabilities, Reserves and Fund Balances $ 2,313, $ 2,192, The accompanying Notes to Financial Statements are an integral part of this Statement. 33

42 SWIMMING POOL UTILITY OPERATING FUND STATEMENTS OF OPERATIONS AND CHANGES IN FUND BALANCE - REGULATORY BASIS FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016 EXHIBIT D Revenue and Other Income Realized: Fund Balance Utilized $ 75, $ 142, Membership Fees 318, , Guest Fees 41, , Concessions - 2, Swim Lessons 3, , Swim Team 10, , Use of Pool Facilities - 16, Interest 1, Miscellaneous 27, , Other Credits to Income: Unexpended Balance of Appropriation Reserves 63, , Accrued Interest Cancelled Total Revenue 540, , Expenditures: Operating 345, , Capital Improvements 35, , Debt Service - 70, Deferred Charges and Statutory Expenditures 12, , Total Expenditures 392, , Excess in Revenue 148, , Fund Balance, Beginning 151, , , , Decreased By: Utilized as Anticipated Revenue 75, , Fund Balance, December 31 $ 224, $ 151, The accompanying Notes to Financial Statements are an integral part of this Statement. 34

43 SWIMMING POOL UTILITY CAPITAL FUND STATEMENT OF REVENUES - REGULATORY BASIS EXHIBIT D-2 Excess/ Budget Realized (Deficit) Operating Surplus Anticipated $ 75, $ 75, $ - Membership Fees 270, , , Guest Membership Fees 40, , , Concession Revenue 2, (2,000.00) Swimming Lessons 2, , Swim Team Revenue 2, , , Interest on Investments - 1, , Miscellaneous Revenue Not Anticipated - 27, , $ 392, $ 477, $ 85, The accompanying Notes to Financial Statements are an integral part of this Statement. 35

44 SWIMMING POOL UTILITY OPERATING FUND STATEMENT OF APPROPRIATIONS - REGULATORY BASIS EXHIBIT D-3 Original Budget After Paid or Budget Modifications Charged Encumbrances Reserved Operating: Salaries and Wages $ 180, $ 180, $ 154, $ - $ 25, Other Expenses 165, , , , , Total Operating 345, , , , , Capital Improvements: Capital Improvement Fund 35, , , Total Capital Improvements 35, , , Statutory Expenditures: Contributions To: Social Security System (O.A.S.I.) 12, , , Total Statutory Expenditures 12, , , Total Swimming Pool Utility Appropriations $ 392, $ 392, $ 330, $ 4, $ 57, The accompanying Notes to Financial Statements are an integral part of this Statement. 36

45 SEWER UTILITY FUND 37

46 This page intentionally left blank 38

47 EXHIBIT E Page 1 of 2 SEWER UTILITY FUND STATEMENTS OF ASSETS, LIABILITIES, RESERVES AND FUND BALANCE - REGULATORY BASIS DECEMBER 31, 2017 AND 2016 Assets Reference Operating Fund: Cash and Investments E-4 $ 3,778, $ 2,881, Change Fund E Due from Sewer Utility Capital Fund E Due from Tax Title Lien Trust E-11 47, , ,826, ,929, Receivables and Other Assets with Full Reserves: Consumer Accounts Receivable E-6 363, , Bayshore Sewerage Rent Reserve E-7 752, , ,115, ,576, Deferred Charges: Deficit in Operations E-1-20, Total Operating Fund 4,942, ,527, Capital Fund: Cash and Investments E-4 1,261, ,635, Due from Sewer Utility Operating Fund E , Fixed Capital E-13 11,477, ,477, Fixed Capital Authorized and Uncompleted E-14 1,600, ,600, Total Capital Fund 14,839, ,712, Total Assets $ 19,781, $ 19,240, The accompanying Notes to Financial Statements are an integral part of this Statement. 39

48 EXHIBIT E Page 2 of 2 SEWER UTILITY FUND STATEMENTS OF ASSETS, LIABILITIES, RESERVES AND FUND BALANCE - REGULATORY BASIS DECEMBER 31, 2017 AND 2016 Liabilities, Reserves and Fund Balances Reference Operating Fund: Appropriation Reserves E-3 $ 340, $ 426, Prepaid Rents E 232, Customer Overpayments E-8 16, , Accounts Payable E-12 2, , Reserve for Encumbrances E-10 19, , Due to Current Fund E , , Due to Sewer Utility Capital Fund E , ,280, , Reserve for Receivables and Other Assets E 1,115, ,576, Fund Balance E-1 2,546, ,347, Total Operating Fund 4,942, ,527, Capital Fund: Due to Current Fund E-22 24, , Due to Sewer Utility Operating Fund E Improvement Authorization: Funded E , , Reserve for: Encumbrances E-17 22, , Improvements E , , Amortization E-19 11,477, ,477, Deferred Reserve for Amortization E-20 1,600, ,600, Capital Improvement Fund E-21 1,300, , Total Capital Fund 14,839, ,712, Total Liabilities, Reserves and Fund Balances $ 19,781, $ 19,240, The accompanying Notes to Financial Statements are an integral part of this Statement. 40

49 SEWER UTILITY OPERATING FUND STATEMENTS OF OPERATIONS AND CHANGES IN FUND BALANCE - REGULATORY BASIS FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016 EXHIBIT E Revenue and Other Income Realized: Fund Balance Utilized $ 1,333, $ 766, Sewer Rents 4,098, ,129, Other Credits to Income: Non-Budget Revenues 130, , Unexpended Balance of Appropriation Reserves 427, , Debt Service Reserve Canceled - 4, Accrued Interest Cancelled - 1, Total Revenue 5,991, ,495, Expenditures: Operating 3,877, ,906, Capital Improvements 500, , Debt Service - 51, Deferred Charges and Statutory Expenditures 80, , Total Expenditures 4,458, ,516, Excess/(Deficit) in Revenue 1,532, (20,830.54) Adjustments To Income Before Surplus: Expenditures Included Above Which Are By Statute Deferred Charges To Budget of Succeeding Year - 20, Statutory Excess to Fund Balance 1,532, Fund Balance, January 1 2,347, ,114, ,880, ,114, Decreased By: Utilized as Anticipated Revenue 1,333, , Fund Balance, December 31 $ 2,546, $ 2,347, The accompanying Notes to Financial Statements are an integral part of this Statement. 41

50 SEWER UTILITY OPERATING FUND STATEMENT OF REVENUES - REGULATORY BASIS EXHIBIT E-2 Excess/ Budget Realized (Deficit) Fund Balance Anticipated $ 1,333, $ 1,333, $ - Sewer Rents 3,125, ,098, , Non-Budget Revenues - 130, , $ 4,458, $ 5,563, $ 1,104, Analysis of Non-Budget Revenue Sewer Connection Fees $ 86, Interest on Delinquent Accounts 42, Interest on Investments and Deposits 2, $ 130, The accompanying Notes to Financial Statements are an integral part of this Statement. 42

51 SEWER UTILITY OPERATING FUND STATEMENT OF APPROPRIATIONS - REGULATORY BASIS EXHIBIT E-3 Original Budget After Paid or Budget Modifications Charged Encumbrances Reserved Operating: Salaries and Wages $ 325, $ 325, $ 254, $ 10, $ 60, Other Expenses 3,551, ,551, ,274, , , Total Operating 3,877, ,877, ,529, , , Capital Improvements: Capital Improvement Fund 500, , , Total Capital Improvements 500, , , Statutory Expenditures: Contributions To: Public Employees' Retirement System 30, , , Social Security System (O.A.S.I.) 30, , , , Total Statutory Expenditures 60, , , , Deficit in Operations Prior Years 20, , , Total Sewer Utility Appropriations $ 4,458, $ 4,458, $ 4,097, $ 19, $ 340, Cash Disbursements $ 3,547, Deferred Charges 20, Interfund Transactions 529, $ 4,097, The accompanying Notes to Financial Statements are an integral part of this Statement. 43

52 This page intentionally left blank 44

53 PAYROLL FUND 45

54 This page intentionally left blank 46

55 EXHIBIT F PAYROLL FUND STATEMENTS OF ASSETS, LIABILITIES, RESERVES AND FUND BALANCE - REGULATORY BASIS DECEMBER 31, 2017 AND 2016 Assets Cash $ 99, $ 83, $ 99, $ 83, Liabilities, Reserves and Fund Balances Payroll Liabilities $ 99, $ 83, $ 99, $ 83, The accompanying Notes to Financial Statements are an integral part of this Statement. 47

56 This page intentionally left blank 48

57 GENERAL FIXED ASSETS ACCOUNT GROUP 49

58 This page intentionally left blank 50

59 EXHIBIT G GENERAL FIXED ASSETS ACCOUNT GROUP STATEMENTS OF ASSETS, LIABILITIES, RESERVES AND FUND BALANCE - REGULATORY BASIS DECEMBER 31, 2017 AND 2016 Assets Reference Land G-1 $ 40,891, $ 40,891, Land Improvements G-1 740, , Buildings & Improvements G-1 7,080, ,080, Machinery and Equipment G-1 8,149, ,860, Total Assets $ 56,861, $ 56,572, Liabilities Reference Investment in Fixed Assets G-1 $ 56,861, $ 56,572, Total Liabilities $ 56,861, $ 56,572, The accompanying Notes to Financial Statements are an integral part of this statement. 51

60 This page intentionally left blank 52

61 NOTES TO FINANCIAL STATEMENTS 53

62 This page intentionally left blank 54

63 NOTES TO FINANCIAL STATEMENTS Note 1. Summary of Significant Accounting Policies Description of Financial Reporting Entity The Township of Hazlet, County of Monmouth, New Jersey (hereafter referred to as the Township") is governed by the Township form of government, with a mayor and a 4-member Township Council. Administrative responsibilities are assigned to the Township Manager. Policy is determined by Council and the Manager is responsible for carrying out such policy. Component Units - GASB Statement 14, as amended by GASB Statements 39, 61 and 80, establishes criteria to be used in determining the component units, which should be included in the financial statements of a primary government. The financial statements of the Township are not presented in accordance with GAAP (as discussed below). Therefore, the Township had no component units as defined by GASB Statement No. 14, as amended by GASB Statements 39, 61 and 80. Basis of Accounting, Measurement Focus and Basis of Presentation - The financial statements of the Township contain all funds and account groups in accordance with the Requirements of Audit as promulgated by the State of New Jersey, Department of Community Affairs, Division of Local Government Services. The principles and practices established by the Requirements of Audit 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. Generally, the financial statements are presented using the flow of current financial resources measurement focus and modified accrual basis of accounting with minor exceptions as mandated by these Requirements. In addition, the prescribed accounting principles previously referred to differ in certain respects from accounting principles generally accepted in the United State of America applicable to local government units. The more significant differences are explained further in this note. In accordance with the Requirements, the Township accounts for its financial transactions through the use of separate funds, which are described as follows: Current Fund This fund accounts for revenues and expenditures for governmental operations of a general nature, including federal and state grant funds. Trust Funds These funds account for receipts, custodianship and disbursement of funds in accordance with the purpose for which each reserve was created. General Capital Fund This fund accounts for receipt and disbursement of funds for the acquisition of general capital facilities, other than those acquired in the Current Fund. Swimming Pool & Sewer Utility Operating and Capital Funds These funds accounts for utility operations that are financed through user fees. The funds are operated on a basis similar to private business enterprises where the intent is that the costs of providing the utility to the general public be financed through user fees. Operations relating to the acquisition of capital facilities for utility purposes are recorded in the Utility Capital Fund. General Fixed Asset Account Group The Fixed Asset Account Group of accounts is utilized to account for property, land, buildings, and equipment that have been acquired by other funds of the Township. Payroll Fund This fund accounts for the payroll and payroll tax liabilities of the Township. 55

64 NOTES TO FINANCIAL STATEMENTS Note 1. Summary of Significant Accounting Policies (continued): Budgets and Budgetary Accounting - The Township must adopt an annual budget for its Current, Swimming Pool Utility Fund, and Sewer Utility Fund in accordance with N.J.S.A.40A:4 et seq. N.J.S.A.40A:4-5 requires the governing body to introduce and approve the annual municipal budget no later than February 10 th of each year. At introduction, the governing body must fix the time and place for a public hearing on the budget and must advertise the time and place at least ten days prior to the hearing in a newspaper published and circulating in the municipality. The public hearing must not be held less than twenty-eight days after the date the budget was introduced. After the hearing has been held, the governing body may, by majority vote, adopt the budget or may amend the budget in accordance with N.J.S.A.40A:4-9. Amendments to adopted budgets, if any are detailed in the statements of revenues and expenditures. An extension of the statutory dates for introduction, approval and adoption of the municipal budget may be granted by the Director of Local Government Services, with the permission of the Local Finance Board. Budgets are adopted on the same basis of accounting utilized for the preparation of the Township s financial statements. Once a budget is approved it may be amended after November 1, by a resolution adopted by the governing body. Cash, Cash Equivalents and Investments - Cash and Cash equivalents include petty cash, change funds and cash on deposit with public depositories. All certificates of deposit are recorded as cash regardless of the date of maturity. Under GAAP, investments are reported at fair value but under regulatory basis of accounting, investments are stated at cost with the exception of LOSAP investments which are reported at fair value. Therefore unrealized gains or losses on investments have not been recorded. New Jersey municipal units are required by N.J.S.A.40A:5-14 to deposit public funds in a bank or trust company having its place of business in the State of New Jersey and organized under the laws of the United States or of the State of New Jersey or in the New Jersey Cash Management Fund. N.J.S.A.40A: provides a list of investments, which may be purchased by New Jersey municipal units. In addition, other State statutes permit investments in obligations issued by local utilities and other state agencies. N.J.S.A.17:9-41 et seq. establishes the requirements for the security of deposits of governmental units. The statute requires that no governmental unit shall deposit public funds in a public depository unless such funds are secured in accordance with the Governmental Unit Deposit Protection Act, which was enacted in 1970 to protect governmental units from a loss of funds on deposit with a failed banking institution in New Jersey. Public depositories include State or federally chartered banks savings banks or associations located in or having a branch office in the State of New Jersey, the deposits of which are federally insured. All public depositories must pledge collateral, having a market value at least equal to five percent of the average daily balance of collected public funds, to secure the deposits of Governmental Units. If a public depository fails, the collateral it has pledged, plus the collateral of all other public depositories, is available to pay the amount of their deposits to the Governmental Units. The cash management plan adopted by the Township requires it to deposit funds in public depositories protected from loss under the provisions of the Act. Interfunds - Interfund receivables and payables that arise from transactions between funds are recorded by all funds affected by such transactions in the period in which the transaction is executed. 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. 56

65 NOTES TO FINANCIAL STATEMENTS Note 1. Summary of Significant Accounting Policies (continued): Inventories and Supplies - The cost 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 statements of assets, liabilities, reserves and fund balance. General Fixed Assets Accounting for governmental fixed assets, as required by N.J.A.C.5:30-5.6, differs in certain respects from accounting principles generally accepted in the United States of America. In accordance with the regulations, all local units, including municipalities, must maintain a general fixed assets reporting system that establishes and maintains a physical inventory of nonexpendable, tangible property as defined and limited by the U.S. Office of Management and Budget Circular A-87 (Attachment B, Section 19), except that the useful life of such property is at least five years. The Township has adopted a capitalization threshold of $5,000.00, the maximum amount allowed by the Circular. Generally, assets are valued at historical cost; however, assets acquired prior to December 31, 1985 are valued at actual historical cost or estimated historical cost. In some instances, assets are valued at the assessed valuation of the property at the time of acquisition, which approximates fair value. No depreciation of general fixed assets is recorded. Donated general fixed assets are recorded at their acquisition value as of the date of the transaction. Interest costs relative to the acquisition of general fixed assets are recorded as expenditures when paid. Public domain ("infrastructure") general fixed assets consisting of certain improvements such as roads, bridges, curbs and gutters, streets and sidewalks and drainage systems are not capitalized. Expenditures for construction in progress are recorded in the capital funds until such time as the construction is completed and put into operation. The Township is required to maintain a subsidiary ledger detailing fixed assets records to control additions, retirements, and transfers of fixed assets. In addition, a statement of general fixed assets, reflecting the activity for the year, must be included in the Township's basic financial statements. The regulations require that general fixed assets, whether constructed or acquired through purchase, grant or gift be included in the aforementioned inventory. In addition, property management standards must be maintained that includes accurate records indicating asset description, source, ownership, acquisition cost and date, the percentage of federal participation (if any), and the location, use, and condition of the asset. Periodically, physical inventories must be taken and reconciled with these records. All fixed assets must be adequately controlled to safeguard against loss, damage, or theft. Swimming Pool & Sewer Utility Fixed Assets Property and equipment purchases by a utility fund are recorded in the utility capital account at cost and are adjusted for disposition. The amounts shown do not represent replacement cost or current value. The reserve for amortization and deferred reserve for amortization in the utility capital fund represent the cost of the utility fixed assets reduced by the outstanding balances of bonds, loans, notes, or other borrowings that are attributable to the acquisition, construction or improvement of those assets. Foreclosed property Foreclosed Property or Property Acquired for Taxes is recorded in the Current Fund at the assessed valuation when such property was acquired and is fully reserved. Ordinarily it is the intention of the Township to resell foreclosed property in order to recover all or a portion of the delinquent taxes or assessments and to return the property to a taxpaying basis. For this reason the value of foreclosed property has not been included in the General Fixed Assets Account Group. If such property is converted to a municipal use, it will be recorded in the General Fixed Assets Account Group. Deferred Charges The recognition of certain expenditures is deferred to future periods. These expenditures or deferred charges are generally overexpenditures of legally adopted budget appropriations or emergency appropriations made in accordance with N.J.S.A.40A:4-46 et seq. Deferred charges are subsequently raised as items of appropriation in budgets of succeeding years. 57

66 NOTES TO FINANCIAL STATEMENTS Note 1. Summary of Significant Accounting Policies (continued): Fund Balance Fund Balance included in the Current, Swimming Pool Utility Operating, and Sewer Utility Operating Fund represent the amount available for anticipation as revenue in future year s budgets, with certain restrictions. Revenues are recorded when received in cash except for certain amounts, which are due from other governmental units. Revenue from Federal and State grants are realized when anticipated as such in the Township s budget. Receivables for property taxes are recorded with offsetting reserves on the statement of assets, liabilities, reserves and fund balance of the Township s Current Fund; accordingly, such amounts are not recorded as revenue until collected. Other amounts that are due the Township, which are susceptible to accrual are also recorded as receivables with offsetting reserves and recorded as revenues when received. Utility Revenues Utility charges are levied quarterly based upon a flat service charge and if applicable, an excess consumption or usage charge. Revenues from these sources are recognized on a cash basis. Receivables that are susceptible to accrual are recorded with offsetting reserves on the balance sheet of the Townships utility operating fund. Property Tax Revenues are collected in quarterly installments due February 1, May 1, August 1 and November 1. The amount of tax levied includes not only the amount required in support of the Township s annual budget, but also the amounts required in support of the budgets of the County of Monmouth, Fire District, and Hazlet Township School District. Unpaid property taxes are subject to tax sale in accordance with statutes. County Taxes The municipality is responsible for levying, collecting and remitting County taxes for the County of Monmouth. Operations is charged for the amount due the County for the year, based upon the ratables required to be certified to the County Board of Taxation by January 10 th of the current year. In addition, operations is charged for the County share of Added and Omitted Taxes certified to the County Board of Taxation by October 10 th of the current year and due to be paid to the County by February 15 th of the following year. School Taxes The municipality is responsible for levying, collecting and remitting school taxes for the Hazlet Township School District. Operations are charged for the full amount required to be raised from taxation to operate the local school district January 1 st to December 31 st. Deferred School Taxes School taxes raised in advance in the Current Fund for a school fiscal year (July I to June 30) which remain unpaid at December 31 of the calendar year levied may be deferred to fund balance to the extent of not more than 50% of the annual levy providing no requisition has been made by the school district for such amount. Reserve for Uncollected Taxes The inclusion of the Reserve for Uncollected Taxes appropriation in the Township s annual budget protects the Township from taxes not paid currently. The Reserve, the minimum amount of which is determined on the percentage of collections experienced in the immediate preceding year, with certain exceptions, is required to provide assurance that cash collected in the current year will provide sufficient cash flow to meet expected obligations. Expenditures are recorded on the budgetary basis of accounting. Generally, expenditures are recorded when an amount is encumbered through the issuance of a numerically controlled purchase order or when a contract is executed as required by Technical Accounting Directive No When an expenditure is paid, the amount encumbered is simultaneously liquidated in its original amount. 58

67 NOTES TO FINANCIAL STATEMENTS Note 1. Summary of Significant Accounting Policies (continued): Encumbrances are offset by an account entitled reserve for encumbrances. The reserve is classified as a cash liability under New Jersey municipal accounting. At December 31, this reserve represents the portion of appropriation reserves that has been encumbered and is subject to the same statutory provisions as appropriation reserves. Appropriations for interest payments on outstanding general capital bonds and notes are provided on the cash basis. Appropriations for interest payments on outstanding utility capital bonds and notes are provided on the accrual basis. Appropriation Reserves Appropriation reserves covering unexpended appropriation balances are automatically created at year-end and recorded as liabilities, except for amounts, which may be cancelled by the governing body. Appropriation reserves and reserve for encumbrances at current year end are available until December 31 st of the succeeding year to meet specific claims, commitments or contracts incurred during the preceding year. Any unspent balances at this time are lapsed appropriation reserves and recorded as income. Long-Term Debt - Long-Term Debt relative to the acquisition of capital assets, is recorded as a liability in the General and Utility Capital Fund. Where an improvement is a local improvement, i.e. assessable upon completion, long-term debt associated with that portion of the cost of the improvement to be funded by assessments is transferred to the Trust Fund upon the confirmation of the assessments or when the improvement is fully and permanently funded. Compensated Absences Expenditures relating to obligations for unused vested accumulated vacation and sick leave are not recorded until paid; however, municipalities may establish and budget reserve funds subject to NJSA 40A:4-39 for the future payment of compensated absences. Recent Accounting Pronouncements The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. GASB has recently adopted accounting statements to be used by governmental units when reporting financial position and results of operations in accordance with accounting principles generally accepted in the United States of America. (GAAP). The municipalities in the State of New Jersey do not prepare financial statements in accordance with GAAP and thus do not comply with all of the GASB pronouncements; and there have been no GASB pronouncements effective for the current year that have a significant impact of the Township s financial statements. Note 2. Deposits and Investments The Township is governed by the deposit and investment limitations of New Jersey state law. Deposits Custodial Credit Risk Related to Deposits - Custodial credit risk is the risk that, in the event of a bank failure, the Township s deposits may not be returned. Although the Township does not have a formal policy regarding custodial credit risk, NJSA 17:9-41 et seq. requires that the governmental units shall deposit public funds in public depositories protected from loss under the provisions of the Governmental Unit Deposit Protection Act (GUDPA). GUDPA is a supplemental insurance program set forth by the New Jersey Legislature to protect the deposits of local governmental agencies. The program is administered by the Commissioner of the New Jersey Department of Banking and Insurance. Under the Act, the first $250,000 of governmental deposits in each insured depository is protected by FDIC. Public funds owned by the Township in excess of FDIC insured amounts are protected by GUDPA. However, 59

68 Note 2. Deposits and Investments (continued): NOTES TO FINANCIAL STATEMENTS GUDPA does not protect intermingled trust funds such as salary withholdings, bail funds or funds that may pass to the Township relative to the happening of a future condition. Such funds are shown as Uninsured and Uncollateralized in the schedule below. As of December 31, 2017, the Township s bank balance of $21,904, was insured or collateralized as follows: Insured under FDIC and GUDPA $ 20,119, Uninsured and Uncollateralized 1,785, $ 21,904, Investments Fair Value Measurement The fair value measurements of investments are required to be reported based on the hierarchy established by generally accepted accounting principles. Under GAAP, investments are required to be categorized based on the fair value of inputs of Levels 1, 2 and 3. Under Level 1 inputs, investments are required to be categorized based on quoted market prices in active markets for identical investments. Level 2 inputs are based primarily on using observable measurement criteria, including quoted market prices of similar investments in active and inactive markets and other observable corroborated factors. Level 3 inputs are assets measured at fair value on a recurring basis using significant unobservable measurement criteria based on the best information available. Under regulatory basis of accounting, investments are measured at cost in the Township s financial statements. However, had the financial statements been prepared in accordance with GAAP, the Township s fair value, hierarchy level and maturities of its investments at December 31, 2017 would be as followed: Investment Maturities (in Years) Carrying Fair Value as of December 31, 2017 Less Than Value Level 1 Level 3 Total 1 Year Investment Type Money Markets $ 207, $ 207, $ - $ 207, $ 207, Fixed Account Investment Contract 101, , , , $ 308, $ 207, $ 101, $ 308, $ 308, Fund Trust Fund - LOSAP $ 308, , , , , $ 308, $ 207, $ 101, $ 308, $ 308, Custodial credit risk related to Investments - This is the risk that in the event of the failure of the counterparty (e.g., broker-dealer) to a transaction, the Township will not be able to recover the value of its investment or collateral securities that are in the possession of another party. Other than the rules and regulations promulgated by N.J.S.A. 40A:5-15.1, the Township has no investment policy to limit exposure to custodial credit risk. 60

69 Note 2. Deposits and Investments (continued): NOTES TO FINANCIAL STATEMENTS Interest rate risk - This is the risk that changes in interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. Other than the rules and regulations promulgated by N.J.S.A. 40A:5-15.1, the Township does not have a formal investment policy that limits investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates. Credit risk - Credit risk is the risk that an issuer to an investment will not fulfill its obligation to the holder of the investment. This is measured by assignment of a rating by a nationally recognized rating organization. U.S. Government securities or obligations explicitly guaranteed by the U.S. government are not considered to have credit risk exposure. Concentration of Credit Risk Concentration of credit risk is the risk of loss attributed to the magnitude of a government s investment in a single issuer. Other than the rules and regulations promulgated by N.J.S.A. 40A; , the Township s investment policies place no limit in the amount the Township may invest in any one issuer. More than 5% of the Township s investments are in Money Markets and Fixed Account Investment Contracts. These investments represent 100% of the Township s total investments. Note 3. Property Taxes The following is a three-year comparison of certain statistical information relative to property taxes and property tax collections for the current and previous two years. Comparison Schedule of Tax Rates Tax Rate $ $ $ Apportionment of Tax Rate: Municipal Municipal Open Space County General Local School Fire District Assessed Valuation Year Amount 2017 $ 2,334,999, ,308,732, ,265,331,

70 Note 3. Property Taxes (continued): NOTES TO FINANCIAL STATEMENTS Comparison of Tax Levies and Collections Cash Percentage Of Year Tax Levy Collections Collection 2017 $ 61,795, $ 60,977, % ,882, ,910, % ,564, ,668, % Delinquent Taxes and Tax Title Liens Tax Title Delinquent Total Percentage Of Year Liens Taxes Delinquent Tax Levy 2017 $ 116, $ 823, $ 939, % , , ,057, % , , ,032, % Number of Tax Title Liens Year Number The last tax sale was held on December 5, Note: 4: Property Acquired By Tax Title Lien Liquidation The value of properties acquired by liquidation of tax title liens based on the last assessed valuation of such properties as of December 31, was as follows: Year Amount 2017 $ 721, , ,

71 Note: 5: Sewer Utility Service Charges NOTES TO FINANCIAL STATEMENTS The following is a three-year comparison of Sewer utility charges (rents) and collections for the current and previous two years. Cash Percentage Of Year Beginning Balance Levy Total Collections Collection 2017 $ 824, $ 3,888, $ 4,712, $ 4,098, % ,022, ,950, ,972, ,129, % , ,897, ,793, ,743, % Note 6. Disaggregated Receivable and Payable Balances There are no significant components of receivable and payable balances reported in the financial statements. Note 7. Interfund Receivables, Payables and Transfers The following interfund balances were recorded in the various statements of assets liabilities, reserves and fund balances at December 31, 2017: Interfund Interfund Fund Receivable Payable Current Fund $ 242, $ 1,687, State and Federal Grant Fund 345, Animal Control Trust - 47, Trust Other Fund - 47, Open Space Trust Fund 198, Capital Fund 1,041, Swimming Pool Utility Operating Fund 102, , Swimming Pool Utility Capital Fund 34, , Sewer Utility Operating Fund 47, , Sewer Utility Capital Fund 499, , $ 2,512, $ 2,512, The interfund receivables and payables above predominately resulted from payment made by certain funds on behalf of other funds. All interfund balances are expected to be repaid within one year. 63

72 NOTES TO FINANCIAL STATEMENTS Note 7. Interfund Receivables, Payables and Transfers (continued): A summary of interfund transfers is as follows: Transfers Transfers Fund In Out Current Fund $ - $ 707, Capital Fund 707, Swimming Pool Utility Operating Fund - 35, Swimming Pool Utility Capital Fund 35, Sewer Utility Operating Fund - 500, Sewer Utility Capital Fund 500, $ 1,242, $ 1,242, Transfers are used to (1) move revenues from the fund that statute or budget requires to collect them to the fund that statute or budget requires to expend them (i.e. interest earning), (2) provide cash flow to other funds to temporary finance expenditures that are on a reimbursable basis (i.e. grants), (3) when no bank account exists for a fund, and (4) utilizing surplus or fund balance from one fund as budgeted revenue in another. Note 8. Fixed Assets The following is a summary of changes in the General Fixed Assets Account Group for the year ended December 31, Balance Balance December 31, December 31, 2016 Additions Deletions 2017 Land $ 40,891, $ - $ - $ 40,891, Land Improvements 740, , Buildings and Improvements 7,080, ,080, Machinery & Equipment 7,860, , ,149, $ 56,572, $ 288, $ - $ 56,861,

73 Note 9. Pension Obligations A. Public Employees Retirement System (PERS) NOTES TO FINANCIAL STATEMENTS Plan Description - The State of New Jersey, Public Employees' Retirement System (PERS) is a costsharing multiple-employer 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 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 who were enrolled prior to July 1, Members who were eligible to enroll on or after July 1, 2007 and prior to November 2, Members who were eligible to enroll on or after November 2, 2008 and prior to May 22, Members who were eligible to enroll on or after May 22, 2010 and prior to June 28, Members who were eligible to enroll on or after June 28, 2011 Service retirement benefits of 1/55 th 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 1/60 th 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 with 25 or more years of service credit before age 62 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. Basis of Presentation - The schedules of employer allocations and the schedules of pension amounts by employer (collectively, the Schedules) present amounts that are considered elements of the financial statements of PERS or its participating employers. Accordingly, they do not purport to be a complete presentation of the financial position or changes in financial position of PERS or the participating employers. The accompanying Schedules were prepared in accordance with U.S. generally accepted accounting principles. Such preparation requires management of PERS to make a number of estimates and assumptions relating to the reported amounts. Due to the inherent nature of these estimates, actual results could differ from those estimates. Contributions - The contribution policy for PERS is set by N.J.S.A. 43:15A 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 the fiscal year 2017, the State's pension contribution was less than the actuarial determined amount. The local 65

74 Note 9. Pension Obligations (continued): NOTES TO FINANCIAL STATEMENTS A. Public Employees Retirement System (PERS) (continued): employers' contribution amounts are based on an actuarially determined rate, which includes the normal cost and unfunded accrued liability. Chapter 19, P.L 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. For the year ended December 31, 2017, the Township s contractually required contribution to PERS plan was $365, Components of Net Pension Liability - At December 31, 2017, the Township s proportionate share of the PERS net pension liability was $9,173, The net pension liability was measured as of June 30, The total pension liability used to calculate the net pension liability was determined using update procedures to roll forward the total pension liability from an actuarial valuation as of July 1, 2016, which was rolled forward to June 30, The Township s proportion of the net pension liability was based on the Township s actual contributions to the plan relative to the total of all participating employers contributions for the year ended June 30, The Township s proportion measured as of June 30, 2017, was % which was an increase of % from its proportion measured as of June 30, Collective Balances at December 31, 2017 and December 31, /31/ /30/2016 Actuarial valuation date (including roll forward) June 30, 2017 June 30, 2016 Deferred Outflows of Resources $ 2,422,809 $ 3,308,307 Deferred Inflows of Resources 1,842, Net Pension Liability 9,173,376 11,501,793 Township's portion of the Plan's total net pension Liability % % Pension Expense and Deferred Outflows/Inflows of Resources - At December 31, 2017, the Township s proportionate share of the PERS expense, calculated by the plan as of the June 30, 2017 measurement date is $661, This expense is not recognized by the Township because of the regulatory basis of accounting as described in Note 1, but as previously mentioned the Township contributed $365, to the plan in

75 Note 9. Pension Obligations (continued): NOTES TO FINANCIAL STATEMENTS A. Public Employees Retirement System (PERS) (continued): At December 31, 2017, the Township 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 $ 216,001 $ - Changes of Assumptions 1,848,119 1,841,344 Net Difference between Projected and Actual Earnings on Pension Plan Investments 62,464 - Changes in Proportion and Differences between Township Contributions and Proportionate Share of Contributions 296, $ 2,422,809 $ 1,842,036 67

76 Note 9. Pension Obligations (continued): NOTES TO FINANCIAL STATEMENTS A. Public Employees Retirement System (PERS) (continued): The Township will amortize the above sources of deferred outflows and inflows related to PERS over the following number of years: Deferred Outflow of Resources Deferred Inflow of Resources Differences between Expected and Actual Experience Year of Pension Plan Deferral: June 30, June 30, June 30, June 30, Changes of Assumptions Year of Pension Plan Deferral: June 30, June 30, June 30, June 30, Net Difference between Projected and Actual Earnings on Pension Plan Investments Year of Pension Plan Deferral: June 30, June 30, June 30, June 30, Changes in Proportion and Differences between Contributions and Proportionate Share of Contributions Year of Pension Plan Deferral: June 30, June 30, June 30, June 30,

77 Note 9. Pension Obligations (continued): NOTES TO FINANCIAL STATEMENTS A. Public Employees Retirement System (PERS) (continued): The following is a summary of the deferred outflows of resources and deferred inflows of resources related to PERS that will be recognized in future periods: Year Ending Dec 31, Amount 2018 $ 309, , , (214,679) 2022 (178,174) $ 580,773 Actuarial Assumptions - The total pension asset/(liability) as of the measurement date was determined by using an actuarial valuation as noted in the table below, with update procedures used to roll forward the total pension liability to the measurement date. The actuarial valuations used the following actuarial assumptions: Inflation 2.25% Salary Increases: Through 2026 Thereafter 1.65% % Based on Age 2.65% % Based on Age Investment Rate of Return 7.00% Mortality Rate Table RP-2000 Period of Actuarial Experience Study upon which Actuarial Assumptions were Based July 1, June 30, 2014 Pre-retirement mortality rates were based on the RP-2000 Employee Preretirement Mortality Table for male and female active participants. For State employees, mortality tables are set back 4 years for males and females. For local employees, mortality tables are set back 2 years for males and 7 years for females. In addition, the tables provide for future improvements in mortality from the base year of 2013 using a generational approach based on the plan actuary s modified MP-2014 projection scale. Post-retirement mortality rate were based on the RP-2000 Combined Healthy Male and Female Mortality Tables (setback 1 year for males and females) for service retirements and beneficiaries of former members and a one-year static projection based on the mortality improvement Scale AA. In addition, the tables for service 69

78 Note 9. Pension Obligations (continued): NOTES TO FINANCIAL STATEMENTS A. Public Employees Retirement System (PERS) (continued): retirements and beneficiaries of former members provide for future improvements in mortality from the base year of 2013 using a generational approach based on the plan actuary s modified MP-2014 projection scales. Disability retirement rates used to value disabled retirees were based on the RP-2000 Disabled Mortality Table (set back 3 years for males and set forward 1 year for females). The actuarial assumptions used in the July 1, 2016 valuation were based on the results of an actuarial experience study for the period July 1, 2011 to June 30, It is likely that future experience will not exactly conform to these assumptions. To the extent that actual experience deviates from these assumptions, the emerging liabilities may be higher or lower than anticipated. The more the experience deviates, the larger the impact on future financial statements. Long-Term Expected Rate of Return - In accordance with State statute, the long-term expected rate of return on plan investments (7.00% at June 30, 2017) 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. The long-term expected rate of return was determined using a building block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. Best estimates of arithmetic rates of return for each major asset class included in PERS s target asset allocation as of June 30, 2017 are summarized in the following table: Long-Term Target Expected Real Asset Class Allocation Rate of Return Absolute Return/Risk Mitigation 5.00% 5.51% Cash 5.50% 1.00% U.S. Treasuries 3.00% 1.87% Investment grade credit 10.00% 3.78% Public High Yield 2.50% 6.82% Global Diversified Credit 5.00% 7.10% Credit Oriented Hedge Funds 1.00% 6.60% Debt Related Private Equity 2.00% 10.63% Debt Related Real Estate 1.00% 6.61% Private Real Asset 2.50% 11.83% Equity Related Real Estate 6.25% 9.23% U.S. Equity 30.00% 8.19% Non-U.S. Developed Markets Equity 11.50% 9.00% Emerging Markets Equity 6.50% 11.64% Buyouts/Venture Capital 8.25% 13.08% % 70

79 Note 9. Pension Obligations (continued): NOTES TO FINANCIAL STATEMENTS A. Public Employees Retirement System (PERS) (continued): Discount Rate - The discount rate used to measure the total pension liability was 5.00% as of June 30, The single blended discount rate was based on long-term expected rate of return on pension plan investments of 7.00%, and a municipal bond rate of 3.58% as of June 30, 2017 based on the Bond Buyer Go 20-Bond Municipal Bond Index, which includes tax-exempt general obligation municipals 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 contribution rate in the most recent fiscal year. The State employer contributed 40% of the actuarially determined contributions and the local employers contributed 100% of their actuarially determined 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 2040 and the municipal bond rate was applied to projected benefit payments after that date in determining the total pension liability. Sensitivity of the Township s proportionate share of the Net Pension Liability to Changes in the Discount Rate - The following presents the Township s proportionate share of the net pension liability calculated using the discount rate as disclosed above, as well as what the Township s proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1-percentage-point lower (4.00%) or 1-percentage-point higher (6.00%) than the current rate: 1% Current 1% Decrease Discount Rate Increase (4.00%) (5.00%) (6.00%) Township's Proportionate Share of the Net Pension Liability $ 11,380,195 $ 9,173,376 $ 7,334,822 B. Police and Firemen s Retirement System (PFRS) Plan Description The State of New Jersey, Police and Firemen s Retirement System (PFRS) is a costsharing multiple-employer defined benefit pension plan administered by the State of New Jersey, Division of Pensions and Benefits (the Division). For additional information about PFRS, please refer to the Division s Comprehensive Annual Financial Report (CAFR) which can be found at The vesting and benefit provisions are set by N.J.S.A. 43:16A. PFRS provides retirement as well as death and disability benefits. All benefits vest after ten years of service, except disability benefits which vest after four years of service. The following represents the membership tiers for PFRS: Tier Definition 1 Members who were enrolled prior to May 22, Members who were eligible to enroll on or after May 22, 2010 and prior to June 28, Members who were eligible to enroll on or after June 28,

80 Note 9. Pension Obligations (continued): NOTES TO FINANCIAL STATEMENTS B. Police and Firemen s Retirement System (PFRS) (continued): Service retirement benefits are available at age 55 and are generally determined to be 2% of final compensation for each year of creditable service, as defined, up to 30 years plus 1% for each year of service in excess of 30 years. Members may seek special retirement after achieving 25 years of creditable service, in which benefits would equal 65% (tiers 1 and 2 members) and 60% (tier 3 members) of final compensation plus 1 % for each year if creditable service over 25 years but not to exceed 30 years. Members may elect deferred retirement benefits after achieving ten years of service, in which case benefits would begin at age 55 equal to 2% of final compensation for each year of service. Basis of Presentation - The schedules of employer allocations and the schedules of pension amounts by employer (collectively, the Schedules) present amounts that are considered elements of the financial statements of PFRS or its participating employers. Accordingly, they do not purport to be a complete presentation of the financial position or changes in financial position of PFRS or the participating employers. The accompanying Schedules were prepared in accordance with U.S. generally accepted accounting principles. Such preparation requires management of PFRS to make a number of estimates and assumptions relating to the reported amounts. Due to the inherent nature of these estimates, actual results could differ from those estimates. Contributions - The contribution policy for PFRS is set by N.J.S.A. 43:16A and requires contributions by active members and contributing employers. State legislation has modified the amount that is contributed by the State. The State's contribution amount is based on an actuarially determined rate which includes the normal cost and unfunded accrued liability. For fiscal year 2017, the State contributed an amount less than the actuarially 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, P.L provided an option for local employers of PFRS 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. For the year ended December 31, 2017, the Township s contractually required contributions to PFRS plan was $1,095, The employee contributions for PFRS are 10.00% of employees annual compensation, as defined. Net Pension Liability and Pension Expense - At December 31, 2017 the Township s proportionate share of the PFRS net pension liability was $19,104, The net pension liability was measured as of June 30, The total pension liability used to calculate the net pension liability was determined using update procedures to roll forward the total pension liability from an actuarial valuation as of July 1, 2016, to the measurement date of June 30, The Township s proportion of the net pension liability was based on the Township s actual contributions to the plan relative to the total of all participating employers contributions for the year ended June 30, The Township s proportion measured as of June 30, 2017, was %, which was an increase of % from its proportion measured as of June 30,

81 Note 9. Pension Obligations (continued): NOTES TO FINANCIAL STATEMENTS B. Police and Firemen s Retirement System (PFRS) (continued): Collective Balances at December 31, 2017 and December 31, /31/ /31/2016 Actuarial valuation date (including roll forward) June 30, 2017 June 30, 2016 Deferred Outflows of Resources $ 5,555,697 $ 7,653,706 Deferred Inflows of Resources 4,615,315 2,111,104 Net Pension Liability 19,104,811 22,924,340 Township's portion of the Plan's total net pension Liability % % Pension Expense and Deferred Outflows/Inflows of Resources At December 31, 2017, the Township s proportionate share of the PFRS expense, calculated by the plan as of the June 30, 2017 measurement date was $1,732, This expense is not recognized by the Township because of the regulatory basis of accounting as described in Note 1, but as previously mentioned the Township contributed $1,095, to the plan in At December 31, 2017, the Township had deferred outflows of resources and deferred inflows of resources related to PFRS from the following sources: Deferred Outflows of Resources Deferred Inflows of Resources Differences between Expected and Actual Experience $ 123,941 $ 112,129 Changes of Assumptions 2,355,836 3,128,809 Net Difference between Projected and Actual Earnings on Pension Plan Investments 364,565 - Changes in Proportion and Differences between Township Contributions and Proportionate Share of Contributions 2,711,355 1,374,377 $ 5,555,697 $ 4,615,315 73

82 Note 9. Pension Obligations (continued): NOTES TO FINANCIAL STATEMENTS B. Police and Firemen s Retirement System (PFRS) (continued): The Township will amortize the above sources of deferred outflows and inflows related to PFRS over the following number of years: Deferred Outflow of Resources Deferred Inflow of Resources Differences between Expected and Actual Experience Year of Pension Plan Deferral: June 30, June 30, June 30, June 30, Changes of Assumptions Year of Pension Plan Deferral: June 30, June 30, June 30, June 30, Net Difference between Projected and Actual Earnings on Pension Plan Investments Year of Pension Plan Deferral: June 30, June 30, June 30, June 30, Changes in Proportion and Differences between Contributions and Proportionate Share of Contributions Year of Pension Plan Deferral: June 30, June 30, June 30, June 30,

83 Note 9. Pension Obligations (continued): NOTES TO FINANCIAL STATEMENTS B. Police and Firemen s Retirement System (PFRS) (continued): The following is a summary of the deferred outflows of resources and deferred inflows of resources related to PFRS that will be recognized in future periods: Year Ending Dec 31, Amount 2018 $ 209, , , , (326,248) $ 940,382 Special Funding Situation Under N.J.S.A. 43:16A-15, local participating employers are responsible for their own contributions based on actuarially determined amounts, except where legislation was passed which legally obligated the State if certain circumstances occurred. The legislation which legally obligates the state is as follows: Chapter 8, P.L. 2000, Chapter 318, P.L. 2001, Chapter 86, P.L. 2001, Chapter 511, P.L, 1991, Chapter 109, P.L. 1979, Chapter 247, P.L and Chapter 201, P.L The amounts contributed on behalf of the local participating employers under this legislation is considered to be a special funding situation as defined by GASB Statement No. 68 and the State is treated as a nonemployer contributing entity. Since the local participating employers do not contribute under this legislation directly to the plan (except for employer specific financed amounts), there is no net pension liability to report in the financial statements of the local participating employers related to this legislation. Additionally, the State s proportionate share of the PFRS net pension liability attributable to the Township is $2,139, as of December 31, The net pension liability was measured as of June 30, The total pension liability used to calculate the net pension liability was determined using update procedures to roll forward the total pension liability from an actuarial valuation as of July 1, 2016, to the measurement date of June 30, The State s proportion of the net pension liability associated with the Township was based on a projection of the Township s long-term share of contributions to the pension plan relative to the projected contributions of all participating members, actuarially determined. The State s proportion measured as of June 30, 2017 was %, which was an increase of % from its proportion measured as of June 30, 2016, which is the same proportion as the Township s. At December 31, 2017, the Township s and the State of New Jersey s proportionate share of the PFRS net pension liability were as follows: Township's Proportionate Share of Net Pension Liability $ 19,104,811 State of New Jersey's Proportionate Share of Net Pension Liability Associated with the Township 2,139,900 $ 21,244,711 75

84 Note 9. Pension Obligations (continued): NOTES TO FINANCIAL STATEMENTS B. Police and Firemen s Retirement System (PFRS) (continued): At December 31, 2017, the State s proportionate share of the PFRS expense, associated with the Township, calculated by the plan as of the June 30, 2017 measurement date was $261, Actuarial Assumptions - The total pension asset/(liability) as of the measurement date was determined by using an actuarial valuation as noted in the table below, with update procedures used to roll forward the total pension liability to the measurement date. The actuarial valuations used the following actuarial assumptions: Inflation 2.25% Salary Increases: Through 2026 Thereafter 2.10% % Based on Age 3.10% % Based on Age Investment Rate of Return 7.00% Mortality Rate Table RP-2000 Period of Actuarial Experience Study upon which Actuarial Assumptions were Based July 1, June 30, 2013 Pre-retirement mortality rates were based on the RP-2000 Employee Preretirement Mortality Table for male and female active participants. For State employees, mortality tables are set back 4 years for males and females. For local employees, mortality tables are set back 2 years for males and 7 years for females. In addition, the tables provide for future improvements in mortality from the base year of 2013 using a generational approach based on the plan actuary s modified MP-2014 projection scale. Post-retirement mortality rate were based on the RP-2000 Combined Healthy Male and Female Mortality Tables (setback 1 year for males and females) for service retirements and beneficiaries of former members and a one-year static projection based on the mortality improvement Scale AA. In addition, the tables for service retirements and beneficiaries of former members provide for future improvements in mortality from the base year of 2013 using a generational approach based on the plan actuary s modified MP-2014 projection scales. Disability retirement rates used to value disabled retirees were based on the RP-2000 Disabled Mortality Table (set back 3 years for males and set forward 1 year for females). The actuarial assumptions used in the July 1, 2016 valuation were based on the results of an actuarial experience study for the period July 1, 2010 to June 30, Long-Term Expected Rate of Return - In accordance with State statute, the long-term expected rate of return on plan investments (7.00% at June 30, 2017) 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. The long-term expected rate of return was determined using a building block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges 76

85 Note 9. Pension Obligations (continued): NOTES TO FINANCIAL STATEMENTS B. Police and Firemen s Retirement System (PFRS) (continued): are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. Best estimates of arithmetic rates of return for each major asset class included in PFRS s target asset allocation as of June 30, 2017 are summarized in the following table: Long-Term Target Expected Real Asset Class Allocation Rate of Return Absolute Return/Risk Mitigation 5.00% 5.51% Cash 5.50% 1.00% U.S. Treasuries 3.00% 1.87% Investment grade credit 10.00% 3.78% Public High Yield 2.50% 6.82% Global Diversified Credit 5.00% 7.10% Credit Oriented Hedge Funds 1.00% 6.60% Debt Related Private Equity 2.00% 10.63% Debt Related Real Estate 1.00% 6.61% Private Real Asset 2.50% 11.83% Equity Related Real Estate 6.25% 9.23% U.S. Equity 30.00% 8.19% Non-U.S. Developed Markets Equity 11.50% 9.00% Emerging Markets Equity 6.50% 11.64% Buyouts/Venture Capital 8.25% 13.08% % Discount Rate - The discount rate used to measure the total pension liability was 6.14% as of June 30, The single blended discount rate was based on long-term expected rate of return on pension plan investments of 7.00%, and a municipal bond rate of 3.58% as of June 30, 2017 based on the Bond Buyer Go 20-Bond Municipal Bond Index, which includes tax-exempt general obligation municipals 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 contribution rate in the most recent fiscal year. The State employer contributed 40% of the actuarially determined contributions and the local employers contributed 100% of their actuarially determined 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 2057 and the municipal bond rate was applied to projected benefit payments after that date in determining the total pension liability. 77

86 Note 9. Pension Obligations (continued): NOTES TO FINANCIAL STATEMENTS B. Police and Firemen s Retirement System (PFRS) (continued): Sensitivity of the Township s proportionate share of the Net Pension Liability to Changes in the Discount Rate - The following presents the Township s proportionate share of the net pension liability calculated using the discount rate as disclosed above, as well as what the Township s proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1-percentage-point lower (5.14%) or 1-percentage-point higher (7.14%) than the current rate: 1% Current 1% Decrease Discount Rate Increase (5.14%) (6.14%) (7.14%) Township's Proportionate Share of the Net Pension Liability $ 25,172,162 $ 19,104,811 $ 14,119,792 State of New Jersey's Proportionate Share of Net Pension Liability associated with the Township 2,819,494 2,139,900 1,581,536 $ 27,991,656 $ 21,244,711 $ 15,701,328 Related Party Investments - The Division of Pensions and Benefits does not invest in securities issued by the Township. 78

87 Note 10. Municipal Debt NOTES TO FINANCIAL STATEMENTS The following schedule represents the Township s summary of debt, as filed in the Township s Annual Debt Statement required by the Local Bond Law of New Jersey for the current and two previous years: Issued: General: Bonds, Notes and Loans $ 8,029, $ 8,686, $ 9,590, Utility: Bonds, Notes and Loans , Hazlet Board of Fire Commissioners , Total Debt Issued 8,029, ,686, ,762, Authorized but not issued: General: Bonds, Notes and Loans 42, , ,652, Total Authorized But Not Issued 42, , ,652, Total Gross Debt $ 8,071, $ 9,378, $ 15,414, Deductions: General: Funds on Hand For Payment of Bonds and Notes: Reserve for Debt Service $ 206, $ 206, $ Bond Anticipation Notes - - 4,600, Hazlet Board of Fire Commissioners , Total Deductions 206, , ,653, Total Net Debt $ 7,865, $ 9,172, $ 10,760, Summary of Statutory Debt Condition - Annual Debt Statement The following schedule is a summary of the previous schedule and is prepared in accordance with the required method of setting up the Annual Debt Statement: Gross Debt Deductions Net Debt Local School Debt $ 46,927, $ 46,927, $ - General Debt 8,071, , ,865, $ 54,999, $ 47,133, $ 7,865,

88 Note 10. Municipal Debt (continued): NOTES TO FINANCIAL STATEMENTS Net Debt $7,865, divided by the average Equalized Valuation Basis per N.J.S.A 40A:2-2 as amended, $2,452,962,479.67, equals 0.321%. New Jersey statute 40A:2-6, as amended, limits the debt of a Municipality to 3.5% of the last three preceding year s average equalized valuations of real estate, including improvements and the assessed valuation of Class II Railroad Property. The remaining borrowing power in dollars at December 31, 2017 is calculated as follows: Borrowing Power Under N.J.S. 40A:2-6 as Amended 3 1/2% of Equalized Valuation Basis (Municipal) $ 85,853, Net Debt 7,865, Remaining Borrowing Power $ 77,987, General Debt A. Serial Bonds Payable On August 1 st, 2008, the Township issued $7,678, of General Obligation Bonds. The General Obligation Bonds were issued at an interest rate of 4.375% and mature on August 1 st, On April 15 th, 2016, the Township issued $3,780, of General Obligation Bonds. The General Obligation Bonds were issued at an interest rate of 4.000% and mature on August 1st, Principal and interest due on the outstanding bonds is as follows: Year Principal Interest Total 2018 $ 390, $ 322, $ 712, , , , , , , , , , , , , ,865, , ,161, , , , $ 4,150, $ 1,142, $ 5,292,

89 Note 10. Municipal Debt (continued): NOTES TO FINANCIAL STATEMENTS B. Bond Anticipation Notes Payable Short Term Debt The following is a summary of bond anticipation notes payable accounted for in the General Capital Fund at December 31, 2017: Balance Date of Date of December 31, Description Issue Maturity Rate 2017 Various Capital Improvements 6/22/2017 6/22/ % $ 3,791, $ 3,791, The purpose of these short-term borrowings was to provide resources for general capital construction, acquisitions or improvement projects and other purposes permitted by State Local Bond Law NJSA 40A:2 et. seq. C. Bonds and Notes Authorized But Not Issued As of December 31, 2017, the Township had $42, in various General Capital bonds and notes authorized but not issued. D. Loans Payable New Jersey Environmental Infrastructure Trust In 2002 & 2005 the Township finalized two loan agreements with the State of New Jersey Department of Environmental Protection. The first Trust Loan Agreement of $105, to be repaid over a 20 year period at an interest rate of 2.00%.The proceeds of the loans are to provide for various capital improvements. The second Trust Loan Agreement of $132, to be repaid over a 20 year period at an interest rate of 2.00%. The proceeds of the loans are to provide for various capital improvements. Year Principal Interest Total 2018 $ 13, $ 1, $ 14, , , , , , , , , , , , , $ 87, $ 6, $ 94,

90 Note 10. Municipal Debt (continued): Summary of Principal Debt NOTES TO FINANCIAL STATEMENTS A summary of the changes in long-term and short term debt of the Township is as follows: Balance Balance Balance December 31, Accrued/ Retired/ December 31, Due Within 2016 Increases Decreases 2017 One Year General Capital: General Bonds $ 4,540, $ - $ 390, $ 4,150, $ 390, Green Trust Loans Payable 100, , , , Bond Anticipation Notes 4,046, ,791, ,046, ,791, ,791, Authorized but Not Issued 691, , , $ 9,378, $ 3,791, $ 5,097, $ 8,071, $ 4,194, Note 11. Deferred Compensation Salary Account The Township offers its employees a Deferred Compensation Plan in accordance with Internal Revenue Code Section 457 which has been approved by the Director of the Division of Local Government Services. The Plan, available to all full time employees at their option, permits employees to defer a portion of their salary to future years. The deferred compensation is not available to participants until termination, retirement, death or unforeseeable emergency. Amounts deferred under Section 457 plans must be held in trust for the exclusive benefits of participating employees and not be accessible by the Township or its creditors. Since the Township does not have a fiduciary relationship with the Plan, the balances and activities of the Plan are not reported in the Township s financial statements. Note 12. Accrued Sick, Vacation and Compensation Time As discussed in Note 1 and in accordance with accounting principles prescribed by the State of New Jersey, the cash basis of accounting is followed for recording the Township s liability related to unused vacation, sick pay and compensation time. The Township permits certain employees within limits to accumulate unused vacation, sick pay and compensation time, which may be taken as time off or paid at a later date at an agreed upon rate. In accordance with New Jersey accounting principles, this unused accumulated absences amount is not reported as a liability in the accompanying financial statements. It is estimated that accrued benefits for compensated absences are valued at $1,315, at December 31, The Township has established a Trust Fund in accordance with NJSA 40A:4-39 to set aside funds for future payments of compensated absences. As of December 31, 2017, the Township has reserved in the Other Trust Fund $120, to fund compensated absences in accordance with NJSA 40A:

91 Note 13. Risk Management NOTES TO FINANCIAL STATEMENTS The Township is exposed to various risks of loss related to torts; theft of, damage to and destruction of assets; errors and omissions; injuries to employees; and natural disasters. Joint Insurance Pool The Township is a member of the Monmouth County Municipal Joint Insurance Fund. The Fund provides the Township with the following primary coverage and limits: Crime $50,000 Commercial General Liability $300,000 Law Enforcement Professional Liability $300,000 Bodily Injury and Property Damage Liability (Auto) $300,000 Workers Compensation $300,000 Environmental Legal Liability various The following excess coverage and limits are provided to the Fund s member local units by their membership in the Municipal Excess Liability Joint Insurance Fund (MEL): Worker s Compensation $5,000,000 Commercial General Liability Law Enforcement Professional Liability $5,000,000 $5,000,000 Employer s Liability $5,000,000 Auto Liability $5,000,000 Crime $1,000,000 Contributions to the Funds are payable in two installments and are based on actuarial assumptions determined by the Funds actuaries. The Fund publishes its own financial report for the year ended December 31, 2017 which can be obtained on the Fund s website. New Jersey Unemployment Compensation Insurance The Township has elected to fund its New Jersey Unemployment Compensation Insurance under the Reimbursement Method. Under this plan, the Township is required to reimburse the New Jersey Unemployment Trust Fund, dollar-for-dollar, for unemployment benefits paid to its former employees who were laid off or furloughed and charged to its account with the State. The Township is billed quarterly for amounts due to the State. The following is a summary of Township contributions, reimbursements to the State for benefits paid and the ending balance of the Township s unemployment trust fund for the current and previous two years: Amount Year Contributions Reimbursed Ending Balance 2017 $ 5.23 $ 9, $ 44, , , , , , ,

92 NOTES TO FINANCIAL STATEMENTS Note 14. Contingencies Grantor Agencies The Township receives financial assistance from the State of New Jersey and the U.S. government in the form of grants. Entitlement to the funds is generally conditional upon compliance with terms and conditions of the grant agreements and applicable regulations, including the expenditure of the funds for eligible purposes. Substantially all grants, entitlements and cost reimbursements are subject to financial and compliance audits by grantors. As a result of these audits, costs previously reimbursed could be disallowed and require repayment to the grantor agency. As of December 31, 2017 the Township estimates that no material liabilities will result from such audits. Litigation The Township is a defendant in several legal proceedings that are in various stages of litigation. It is believed that the outcome, or exposure to the Township, from such litigation is either unknown or potential losses, if any, would not be material to the financial statements. Tax Appeals Losses arising from tax appeals are recognized at the time a decision is rendered by an administrative or judicial body; however, municipalities may establish reserves transferred from tax collections or by budget appropriation for future payments of tax appeal losses. There are no significant pending tax appeals as of December 31, Note 15. Tax Abatements The Township is authorized by the New Jersey Housing and Mortgage Financing Act Law of 1983, N.J.S.A. 55:14K-1 et seq. (hereinafter HMFA Law ), and a Resolution of the Council dated March 13, 2007, to enter into property tax abatement agreements for the purpose of attracting affordable housing. The exemption of the projects from real property taxation subject to this law shall not extend beyond the date on which the Agency Mortgage is paid in full, which according to the HMFA Law, may not exceed fifty (50) years. For the year ended December 31, 2017, the Township abated property taxes totaling $508, under this program, including the following tax abatement agreement that exceeded 10 percent of the total, which is the percentage the Township considers to be material for purposes of individual disclosure: Reciepient Purpose Pilot Billings Amount Abated Middle Road Villiage Affordable Housing $ 160, $ 305, Bethany Towers Housing LLC. Affordable Housing 137, , $ 297, $ 508,

93 Note 16. Length of Service Awards Program NOTES TO FINANCIAL STATEMENTS The Township s length of service awards program ( LOSAP ) is reported in the Township s trust fund Statement of Assets, Liabilities, Reserves and Fund Balance - Regulatory Basis. The LOSAP provides tax deferred income benefits to active volunteer firefighters and emergency medical personnel. The tax deferred income benefits for the active volunteer firefighters and emergency medical personnel serving the residents the of the Township come from contributions made solely by the governing body of the Township, on behalf of those volunteers who meet the criteria of a plan created by that governing body. Participants should refer to the Plan agreement for a more complete description of the Plan s provisions. Contributions - If an active member meets the year of active service requirement, a length of service awards program must provide a benefit between the minimum contribution of $100 and a maximum contribution of $1, per year. While the maximum amount is established by statute, it is subject to periodic increases that are related to the consumer price index (N.J.S.A. 40A:14-185(f)). The Division of Local Government Services of the State of New Jersey will issue the permitted maximum annually. The Township elected to contribute between $0.00 and $ for the year ended December 31, 2017 per eligible volunteer, into the Plan, depending on how many years the volunteer has served and the amount of points accumulated during the year. During the year ended December 31, 2017, the Township had not contributed to the plan. Participants direct the investment of the contributions into various investment options offered by the Plan. The Township has no authorization to direct investment contributions on behalf of eligible volunteers nor has the ability to purchase or sell investment options offered by the Plan. The types of investment options, and the administering of such investments, rests solely with the plan administrator. Participant Accounts - Each participant s account is credited with the Township s contribution and Plan earnings, and charged with administrative expenses. The benefit to which a participant is entitled is the benefit that can be provided from the participant s vested account. The Township has placed the amounts deferred, including earnings, in a trust maintained by a third-party administrator for the exclusive benefit of the plan participants and their beneficiaries. Such funds, although subject to the claims of the Township s creditors until distributed as benefit payments, are not available for funding the operations of the Township. The funds may also be used to pay the administrative fees charged by the Plan Administrator. Lincoln Financial Group ( Plan Administrator ), an approved Length of Service Awards Program provider, is the administrator of the Plan. The Township s practical involvement in administering the Plan is essentially limited to verifying the eligibility of each participant and remitting the funds to the Plan Administrator. Vesting - Benefits, plus actual earnings thereon, are one hundred percent (100%) vested after five (5) years of service. Payment of Benefits - Upon retirement or disability, participants may select various payout options, which include lump sum, periodic, or annuity payments. In the case of death, with certain exceptions, any amount invested under the participant's account is paid to the beneficiary or the participant's estate. In the event of an unforeseeable emergency, as outlined in the Plan document, a participant or a beneficiary entitled to vested accumulated deferrals may request the local plan administrator to payout a portion of vested accumulated deferrals. During the year ended December 31, 2017 payouts of $58, were made to vested participants. Forfeited Accounts During the year ended December 31, 2017, no accounts were forfeited. Plan Information - Additional information about the Township s length of service awards program can be obtained by contacting the Plan Administrator. 85

94 This page intentionally left blank 86

95 SUPPLEMENTARY SCHEDULES 87

96 This page intentionally left blank 88

97 CURRENT FUND 89

98 This page intentionally left blank 90

99 CURRENT FUND SCHEDULE OF CASH AND INVESTMENTS - TREASURER EXHIBIT A-4 Balance, December 31, 2016 $ 6,292, Increased By Receipts: Non-Budget Revenues $ 210, Taxes Receivable 61,195, Revenue Accounts Receivable 4,133, State of New Jersey (Ch. 20, P.L. 1971) 173, Interfunds 5,788, Other Accounts Receivable 4, Prepaid Taxes 1,276, Prior Year Interfunds Returned 469, Due to State of New Jersey - Various 15, Various Reserves 16, Decreased By Disbursements: 2017 Budget Appropriations 17,135, Appropriation Reserves 712, Interfunds 6,331, Other Accounts Receivable 17, Tax Overpayments 25, Fire District Taxes 1,913, County Taxes Payable 7,186, Municipal Open Space 231, Local District School Tax 38,803, Due to State of New Jersey - Various 19, ,285, ,577, ,375, Balance, December 31, 2017 $ 7,201,

100 CURRENT FUND SCHEDULE OF TAXES RECEIVABLE AND ANALYSIS OF PROPERTY TAX LEVY EXHIBIT A-5 Chapter 20, P.L Balance Senior Remitted Balance December 31, 2017 Collections Transferred to Citizens and Abated December 31, Year 2016 Levy Added Title Liens Veterans Cancelled 2017 Arrears $ 25, $ - $ - $ - $ - $ - $ - $ - $ 25, , , , , ,761, , , ,271, , , , , $ 949, $ 61,761, $ 33, $ 535, $ 61,195, $ 6, $ 170, $ 13, $ 823, Analysis of 2017 Property Tax Levy Tax Yield General Purpose Tax $ 59,848, Special District Taxes 1,913, Added & Omitted Tax 33, Tax Levy $ 61,795, Local District School Tax $ 38,803, County Taxes: County Tax $ 6,249, County Library Tax 437, County Health Tax 367, County Open Space Tax 126, Due County for Added and Omitted Taxes 4, Total County Taxes 7,185, Fire District Tax 1,913, Local Municipal Open Space Tax 230, Due Municipal Open Space Tax for Added and Omitted Taxes , Local Tax for Municipal Purposes 13,615, Add: Additional Tax Levied 46, ,661, $ 61,795,

101 CURRENT FUND SCHEDULE OF TAX TITLE LIENS RECEIVABLE EXHIBIT A-6 Balance, December 31, 2016 $ 108, Increased By: Interest and Costs at Tax Sale 1, Adjustments to Prior Liens 6, , Balance, December 31, 2017 $ 116,

102 CURRENT FUND SCHEDULE OF PROPERTY ACQUIRED FOR TAXES EXHIBIT A-7 Balance, December 31, 2017 & 2016 $ 721,

103 CURRENT FUND SCHEDULE OF REVENUE ACCOUNTS RECEIVABLE EXHIBIT A-8 Balance Balance December 31, Accrued in December 31, Collections 2017 Miscellaneous Revenues: Licenses: Alcoholic Beverages $ - $ 21, $ 21, $ - Other - 47, , Fees and Permits - 227, , Fines and Costs: Municipal Court 31, , , , Other Revenue: Interest and Costs on Taxes - 201, , Cable T.V. Franchise Fee - 305, , Hotel/Motel Fees - 152, , Recreation Fees - 169, , Consolidated Municipal Property Tax Relief - 109, , Energy Receipts Tax - 1,774, ,774, Payments in Lie of Taxes on State Exempt Property (N.J.S.A. 54:4-2.2a et seq) - 306, , Uniform Construction Code Fees - 375, , Joint Court - Matawan - 167, , Reserve for Recycling - 35, , $ 31, $ 4,159, $ 4,168, $ 23, Cash Receipts $ 4,133, Various Reserves 35, $ 4,168,

104 CURRENT FUND SCHEDULE OF DUE TO/FROM STATE OF NEW JERSEY - SENIOR CITIZENS' AND VETERANS' DEDUCTIONS EXHIBIT A-9 Balance, December 31, 2016 $ (15,736.86) Increased By: Senior Citizens' Deductions per Tax Billings $ 181, Senior Citizens' and Veterans' Deductions Allowed By Tax Collector 2, , Decreased By: 168, Cash Received From State of New Jersey 173, Senior Citizens' and Veterans' Deductions Disallowed By Tax Collector 13, , Balance, December 31, 2017 $ (19,575.90) 96

105 CURRENT FUND SCHEDULE OF INTERFUND RECEIVABLE/(PAYABLE) EXHIBIT A-10 Total Trust Federal & State General Sewer Utility Sewer Utility Swimming Pool Swimming Pool Animal Control Open Space (MEMO ONLY) Other Grant Fund Capital Operating Capital Utility Operating Utility Capital Fund Trust Fund Balance, December 31, 2016 Receivable $ 383, $ 253, $ - $ - $ 102, $ 8, $ 16, $ 1, $ $ Payable (2,010,257.59) - (336,812.67) (1,673,444.92) Increased By: 2017 Anticipated Revenue 135, , Disbursements 7,569, , , ,619, ,631, , , , , , ,705, , , ,619, ,631, , , , , , ,079, , (94,991.60) 945, ,733, , , , , , Decreased By: Receipts 5,788, , , , ,565, , , , Tax Levy 231, , Budget Appropriations 1,504, , ,355, ,524, , , ,986, ,565, , , , , Balance, December 31, 2017 Receivable $ 242, $ - $ - $ - $ 168, $ 24, $ - $ 1, $ 47, $ - Payable $ (1,687,496.00) $ - $ (345,686.91) $ (1,041,130.25) $ - $ - $ (102,072.71) $ - $ - $ (198,606.13) 97

106 CURRENT FUND SCHEDULE OF OTHER ACCOUNTS RECEIVABLE EXHIBIT A-11 Balance, December 31, 2016 $ 10, Increased By: Cash Disbursement 17, , Decreased By: Cash Receipts 4, Balance, December 31, 2017 $ 23, Analysis of Balance Due From Monmouth County SCART $ 3, Due From High School 19, $ 23,

107 CURRENT FUND SCHEDULE OF DEFERRED CHARGES EXHIBIT A-12 Balance Balance December 31, Decreased December 31, Description 2016 By 2017 Budget 2017 Reassessment of Real Property 7/2/2012 $ 39, $ 39, $ - $ 39, $ 39, $ - 99

108 CURRENT FUND SCHEDULE OF 2016 APPROPRIATION RESERVES EXHIBIT A-13 Balance, December 31, Balance after Paid or 2016 Encumbrances Modifications Charged Lapsed Administrative and Executive Other Expenses $ 9, $ 10, $ 19, $ 13, $ 6, Mayor and Committee Salaries and Wages Other Expenses 1, , , , , Municipal Clerk Other Expenses 13, , , Elections: Other Expenses 3, , , Financial Administration Other Expenses 7, , , , , Annual Audit 47, , , Legal Services Other Expenses 38, , , , Engineering Services Other Expenses 29, , , , Land Use Board Other Expenses 2, , , , , Insurance Employee Group Insurance 25, , , , , Health Benefits Waiver 9, , , , Police: Salaries and Wages 136, , , , Other Expenses 35, , , , , Aid to First Aid Organizations Other Expenses - 25, , , Office of Emergency Management Other Expenses 7, , , Streets and Road Maintenance Other Expenses 87, , , , , Snow Removal Other Expenses 132, , , , , Recycling Other Expenses 28, , , , , Buildings and Grounds Other Expenses 18, , , , , Vehicle Maintenance (Including Police Vehicles) Other Expenses 33, , , , Other Expenses , Other Expenses 25, , , , , Township Library Other Expenses 5, , , Municipal Court Other Expenses 5, , , , , Utility Expenses and Bulk Purchases Electricity 20, , , , , Street Lighting 61, , , , , Telephone (excluding equipment acquisition) 5, , , Water and Sewerage 12, , , , Gas (Natural & Propane) 18, , , , , Telecommunications Costs 8, , , , Handicapped Persons Recreational Opportunities - 23, , , All Accounts Without Activity 310, , , Total General Appropriations $ 1,144, $ 407, $ 1,551, $ 743, $ 808, Cash Disbursements $ 712, Accounts Payable 31, $ 743,

109 CURRENT FUND SCHEDULE OF RESERVE FOR ENCUMBRANCES EXHIBIT A-14 Balance, December 31, 2016 $ 407, Increased By: Current Appropriations Charged 756, ,164, Decreased By: Transferred To Appropriation Reserves 407, Balance, December 31, 2017 $ 756,

110 CURRENT FUND SCHEDULE OF PROPERTY TAX OVERPAYMENTS EXHIBIT A-15 Balance, December 31, 2016 $ 40, Increased By: Applied From Taxes 29, , Decreased By: Cash Disbursements 25, Balance, December 31, 2017 $ 44,

111 CURRENT FUND SCHEDULE OF PREPAID TAXES EXHIBIT A-16 Balance, December 31, 2016 $ 535, Increased By: Collection of 2018 Taxes 1,276, ,811, Decreased By: Applied To 2017 Taxes 535, Balance, December 31, 2017 $ 1,276,

112 CURRENT FUND SCHEDULE OF FIRE DISTRICT TAXES PAYABLE EXHIBIT A-17 Balance, December 31, 2016 $ - Increased By: Fire District Levy 1,913, ,913, Decreased By: Cash Disbursement 1,913, Balance, December 31, 2017 $ - 104

113 CURRENT FUND SCHEDULE OF COUNTY TAXES PAYABLE EXHIBIT A-18 Balance, December 31, 2016 $ 5, Increased By: 2017 Tax Levy: County Tax $ 6,249, County Library Tax 437, County Open Space Fund Tax 367, County Health Tax 126, Due County for Added and Omitted Taxes 4, ,185, ,190, Decreased By: Cash Disbursements 7,186, Balance, December 31, 2017 $ 4,

114 EXHIBIT A-19 CURRENT FUND SCHEDULE OF LOCAL SCHOOL DISTRICT TAX PAYABLE/RECEIVABLE Balance, December 31, 2016 $ - Increased By: Levy Calendar Year ,803, ,803, Decreased By: Cash Disbursed 38,803, Balance, December 31, 2017 $ - 106

115 CURRENT FUND SCHEDULE OF ACCOUNTS PAYABLE EXHIBIT A-20 Balance, December 31, 2016 $ 8, Increased By: Transferred From 2016 Appropriation Reserves 31, Decreased By: Cash Disbursements Balance, December 31, 2017 $ 39,

116 CURRENT FUND SCHEDULE OF DUE TO STATE EXHIBIT A-21 Balance Balance December 31, Cash December 31, 2016 Receipts Decreased 2017 Division of Youth and Family Services Marriage Licenses $ $ 2, $ 2, $ Department of Community Affairs Training Fees 3, , , $ 3, $ 15, $ 19, $

117 CURRENT FUND SCHEDULE OF VARIOUS RESERVES EXHIBIT A-22 Balance Balance December 31, December 31, 2016 Increased Decreased 2017 Recycling $ 46, $ 16, $ 35, $ 28, Reserve for Tax Appeals - 50, , State Library Aid 5, , $ 51, $ 66, $ 35, $ 83,

118 GRANT FUND SCHEDULE OF GRANTS RECEIVABLE EXHIBIT A-23 Balance Budget Transferred Balance December 31, Revenue Cash From December 31, 2016 Realized Received Unappropriated 2017 Green Meadows Farm $ - $ 46, $ - $ 46, $ - Municipal Alliance 50, , , , Clean Communities - 39, , Bayshore D.W.I. Saturation Patrol 16, , Drive Sober or Get Pulled Over 5, , Click It or Ticket $ 72, $ 135, $ 83, $ 46, $ 79,

119 GRANT FUND SCHEDULE OF DUE FROM CURRENT FUND EXHIBIT A-24 Balance, December 31, 2016 $ 336, Increased By: Deposited in Current Fund: Grants Receivable $ 83, Grants Unappropriated 18, Budget Appropriations: Grants Appropriated 148, Decreased By: Disbursed by Current Fund: Appropriated Reserves 105, Anticipated Revenue 135, , , , Balance, December 31, 2017 $ 345,

120 GRANT FUND SCHEDULE OF RESERVE FOR GRANTS - APPROPRIATED EXHIBIT A-25 Transferred Balance From Balance December 31, 2017 December 31, 2016 Budgets Expended 2017 Alcohol Enforcement $ 2, $ - $ - $ 2, Body Armor Replacement Grant 3, , Clean Communities Program 40, , , , Drunk Driving Enforcement Fund 36, , Enhanced 911 Grant 2, , Green Meadows Farm 69, , , , Municipal Alliance Grant 47, , , , Recycling Tonnage Grant 131, , Tobacco - Age of Sale Enforcement Program 1, , Comcast Technology Grant Drive Sober or Get Pulled Over Bayshore D.W.I. Saturation Patrol 21, , Drive Sober or Get Pulled Over Year End Holiday Crackdown 5, , Click It or Ticket Matawan Alcohol Education Rehab 1, , $ 363, $ 148, $ 105, $ 406,

121 GRANT FUND SCHEDULE OF RESERVE FOR GRANTS - UNAPPROPRIATED EXHIBIT A-26 Balance Transferred Balance December 31, Cash To Grants December 31, 2016 Received Receivable 2017 Green Meadows Farm $ 46, $ - $ 46, $ - Recycling Tonnage Grant - 14, , Bayshore Task Force Grant - 3, , $ 46, $ 18, $ 46, $ 18,

122 This page intentionally left blank 114

123 TRUST FUND 115

124 This page intentionally left blank 116

125 TRUST FUND SCHEDULE OF CASH EXHIBIT B-1 Animal Control Other Open Space Fund Trust Funds Trust Funds Balance, December 31, 2016 $ 15, $ 2,767, $ 1,548, Increased By Receipts: Reserve for Animal Control Trust Fund Expenditures 35, Due to State of New Jersey 1, Various Reserves - 2,890, , Reserve for Open Space , ,890, , , ,657, ,780, Decreased By Disbursements: Change Fund Due to Current Fund - 660, , Various Reserves - 1,755, ,415, , Balance, December 31, 2017 $ 51, $ 3,241, $ 1,548,

126 ANIMAL CONTROL TRUST FUND SCHEDULE OF RESERVE FOR ANIMAL CONTROL FUND EXPENDITURES EXHIBIT B-2 Balance, December 31, 2016 $ 14, Increased By: Dog License Fees Collected $ 9, Cat License Fees Collected Late Fees Collected Miscellaneous Fees Collected Budget Appropriations 25, , , Decreased By: Expenditures Per R.S. 4: , Balance, December 31, 2017 $ 4, License Fees Collected 2016 $ 10, , $ 21,

127 ANIMAL CONTROL TRUST FUND SCHEDULE OF DUE TO STATE OF NEW JERSEY EXHIBIT B-3 Balance, December 31, 2016 $ Increased By: Cash Receipts 1, , Decreased By: Cash Disbursed 1, Balance, December 31, 2017 $

128 ANIMAL CONTROL TRUST FUND SCHEDULE OF DUE TO CURRENT FUND EXHIBIT B-4 Balance, December 31, 2016 $ Increased By: Dog Expenditures Paid By Current $ 45, Due to State of NJ Paid By Current 1, , Balance, December 31, 2017 $ 47,

129 OPEN SPACE TRUST FUND SCHEDULE OF DUE FROM/(TO) CURRENT FUND EXHIBIT B-5 Balance, December 31, 2016 $ (122.40) Increased By: Open Space Tax Levied 231, , Decreased By: Paid By Current Fund 429, Balance, December 31, 2017 $ (198,606.13) 121

130 OPEN SPACE TRUST FUND SCHEDULE OF RESERVE FOR OPEN SPACE EXHIBIT B-6 Balance, December 31, 2016 $ 1,548, Increased By: Open Space Tax Levy $ 230, Open Space Added and Omitted Levy Cash Receipts , ,779, Decreased By: Paid By Current Fund 32, Balance, December 31, 2017 $ 1,747,

131 TRUST - OTHER FUND SCHEDULE OF DUE TO CURRENT FUND EXHIBIT B-7 Balance, December 31, 2016 $ 253, Increased By: Paid By Current Fund 406, , Decreased By: Cash Disbursements 660, Balance, December 31, 2017 $ - 123

132 TRUST - OTHER FUND SCHEDULE OF RESERVE FOR VARIOUS TRUST FUNDS EXHIBIT B-8 Balance Balance December 31, December 31, 2016 Receipts Disbursements 2017 Tax Title Lien Redemptions $ 130, $ 469, $ 377, $ 223, Tax Sale Premiums 887, , , ,041, Law Enforcement Trust Fund 10, , , , Recreation 81, , , , Developers Escrow 758, , , ,233, Recycling Program 12, , Donations - Memorial Tree Fund 9, , Parking Offenses Adjudication Act 4, , Disaster Fund 3, , Affinity Credit Cards 15, , Tree Replacement 45, , Board of Health 8, , LOSAP 2, , Sidewalk Fund 5, , Donations - Hazlet Township 150th Anniversary 1, , Fireworks Display Donations Public Defender 2, , , Police Unclaimed 1, , Police Department Donations , , , Donations - Recreation 1, , Unemployment Compensation Insurance 54, , , Off Duty Police 170, , , , Accumulated Absences 120, , Grading Trust , , Snow Removal 130, , Municipal Alliance Donations 5, , , $ 2,465, $ 2,485, $ 1,756, $ 3,193,

133 EXHIBIT B-9 LENGTH OF SERVICE AWARDS PROGRAM FUND ("LOSAP") SCHEDULE OF INVESTMENTS Balance, December 31, 2016 $ 324, Increased By: Appreciation on Investments 43, Decreased By: Withdrawals 58, Accounting Charges 1, , , Balance, December 31, 2017 $ 308,

134 EXHIBIT B-10 LENGTH OF SERVICE AWARDS PROGRAM FUND ("LOSAP") SCHEDULE OF RESERVE FOR FUNDS HELD BY TRUSTEE Balance, December 31, 2016 $ 324, Increased By: Appreciation on Investments 43, Decreased By: Withdrawals 58, Accounting Charges 1, , , Balance, December 31, 2017 $ 308,

135 EXHIBIT B-11 TRUST - OTHER FUND SCHEDULE OF DUE TO SEWER UTILITY OPERATING FUND Balance, December 31, 2017 & 2016 $ 47,

136 This page intentionally left blank 128

137 GENERAL CAPITAL FUND 129

138 This page intentionally left blank 130

139 GENERAL CAPITAL FUND SCHEDULE OF CASH AND INVESTMENTS - TREASURER EXHIBIT C-2 Balance, December 31, 2017 & 2016 $ 1,257,

140 GENERAL CAPITAL FUND SCHEDULE OF ANALYSIS OF GENERAL CAPITAL FUND CASH EXHIBIT C-3 Balance December 31, 2017 Capital Improvement Fund $ 929, Capital Fund Balance 48, Grants Receivable (383,175.00) Due from Current Fund (1,041,130.25) Reserve for Joint Court Improvements 20, Reserve for Debt Service 206, Reserves for Encumbrances 109, Ordinance Underground Storage Tank Remediation $ Document Imaging/Scanning / Renovations to Police, Court, Recreation Center / Purchase Furniture for New Municipal Building Various Improvements 9, / Roadway & Drainage Improvements to W Jack St & Library Improvements 11, Acquisition of Pfleger Property for Open Space Preservation / Various Capital Improvements Various Municipal Park Improvements 21, Police SUV's Various Road Improvements & Various Park Improvements 23, Replacement of Union Avenue Pedestrian Bridges (42,716.56) Various Road Improvements & Various Park Improvements 62, Acquisition & Installation of Communications and Technology Equipment Various Road & Park Improvements 71, / Acquisition of Automotive Vehicle 28, Various Road, Park & Building Improvements 300, Improvements to Police Headquarters 555, Acquisition of Public Works Vehicles 131, Various Roads & Park Improvements 62, Radio Communication Improvements 91, Natco Parking Lot Construction 39, $ 1,257,

141 EXHIBIT C-4 GENERAL CAPITAL FUND SCHEDULE OF DEFERRED CHARGES TO FUTURE TAXATION - FUNDED Balance, December 31, 2016 $ 4,640, Decreased By: Serial Bonds Paid $ 390, M.C.I.A. Leases Paid 12, , Balance, December 31, 2017 $ 4,237, Analysis of Balance Serial Bonds Principal $ 4,150, Green Acres Loans Principal 87, $ 4,237,

142 GENERAL CAPITAL FUND SCHEDULE OF DEFFERRED CHARGES TO FUTURE TAXATION - UNFUNDED EXHIBIT C-5 Balance Funded By Balance Bond Unexpended Ordinance December 31, Payments of Budget December 31, Anticipation Improvement Number Improvement Description 2016 BAN's Appropriations 2017 Notes Expenditures Authorizations Road Improvement Program $ 223, $ 112, $ - $ 111, $ 111, $ - $ Various Improvements 90, , Various 2007 Road Improvements & Parkview Drive Sewer 544, , , , Acquisition of Pfleger Property for Open Space Preservation 45, , Various 2008 Capital Improvements 1,027, , , , Various 2009 Capital Improvements 768, , , , Acquisition of Various Capital Equipment 214, , , , / Various 2010 Capital Improvements 245, , , Various Capital Improvements 365, , , , Various Capital Improvements 187, , , , Replacement of Union Avenue Pedestrian Bridges 61, , , , Acquisition & Installation of Communications & Technology Equipment 34, , Acquisition of Information Technology Equipment 179, , , , Improvements to Police Headquarters 445, , , , Radio Communication Improvements 305, , , $ 4,737, $ 805, $ 98, $ 3,834, $ 3,791, $ 42, $ - Improvement Authorizations - Unfunded $ 626, Less: Unexpended Proceeds of Bond Anticipation Notes - Issued: , , , , $ - 134

143 GENERAL CAPITAL FUND SCHEDULE OF STATE, FEDERAL, AND LOCAL GRANTS RECEIVABLE EXHIBIT C-6 Balance, December 31, 2016 $ 1,014, Decreased By: Grant Receipts 631, Balance, December 31, 2017 $ 383, Analysis of Balance Ordinance Number Monmouth County Open Space $ 177, , N.J. Department of Transportation Laurel Avenue Phase III , N.J. Department of Transportation Hazlet Avenue Phase II , $ 383,

144 GENERAL CAPITAL FUND SCHEDULE OF DUE FROM CURRENT FUND EXHIBIT C-7 Balance, December 31, 2016 $ 1,673, Increased By: Capital Improvement Fund $ 707, Grant Receipts Collected by Current 631, Bond Anticipation Notes 550, Deferred Charges 98, ,986, ,660, Decreased By: Paid By Current Fund 2,619, Balance, December 31, 2017 $ 1,041,

145 GENERAL CAPITAL FUND SCHEDULE OF RESERVE FOR JOINT COURT IMPROVEMENTS EXHIBIT C-8 Balance, December 31, 2017 & 2016 $ 20,

146 GENERAL CAPITAL FUND SCHEDULE OF RESERVE FOR DEBT SERVICE EXHIBIT C-9 Balance, December 31, 2017 & 2016 $ 206,

147 GENERAL CAPITAL FUND SCHEDULE OF SERIAL BONDS PAYABLE EXHIBIT C-10 Purpose Outstanding Balance Balance Date of December 31, 2017 Interest December 31, December 31, Issue Original Issue Date Amount Rate 2016 Decreased 2017 General Obligation Bonds of /01/08 $ 7,678, /1/ , % $ 780, $ 390, $ 390, Refunding Bonds of /15/16 3,780, /1/ , % 3,760, ,760, /1/ , % 8/1/ , % 8/1/ , % 8/1/ , % 8/1/ , % 8/1/ , % 8/1/ , % 8/1/ , % 8/1/ , % $ 4,540, $ 390, $ 4,150,

148 Purpose Union Avenue Acquisition Union Avenue Acquisition GENERAL CAPITAL FUND SCHEDULE OF GREEN TRUST LOAN PAYABLE EXHIBIT C-11 Outstanding Balance Balance Date of December 31, 2017 Interest December 31, December 31, Issue Original Issue Date Amount Rate 2016 Decreased /28/2002 $ 105, Various 2.00% $ 36, $ 5, $ 30, /5/ , Various 2.00% 63, , , $ 100, $ 12, $ 87,

149 GENERAL CAPITAL FUND SCHEDULE OF BOND ANTICIPATION NOTES EXHIBIT C-12 Date of Issue of Date Balance Balance Ordinance Original of Date of Interest December 31, December 31, Number Improvement Description Note Issue Maturity Rate 2016 Increase Decrease Road Improvement Program 8/1/2008 6/22/2017 6/22/ % $ 223, $ 111, $ 223, $ 111, Various Improvements 8/3/2007 6/22/2017 6/22/ % 90, , Various 2007 Road Improvements & Parkview Drive Sewer 7/25/2012 6/22/2017 6/22/ % 544, , , , Various 2008 Capital Improvements 8/1/2008 6/22/2017 6/22/ % 1,027, , ,027, , Various 2009 Capital Improvements 7/31/2009 6/22/2017 6/22/ % 768, , , , Acquisition of Various Capital Equipment 7/31/2010 6/22/2017 6/22/ % 214, , , , / Various 2011 Capital Improvements 6/22/2017 6/22/2017 6/22/ % - 245, , Various Capital Improvements 7/26/2011 6/22/2017 6/22/ % 365, , , , Various Capital Improvements 7/23/2013 6/22/2017 6/22/ % 187, , , , Acquisition of IT Equipment 7/22/2014 6/22/2017 6/22/ % 179, , , , Improvements to Police Headquarters 9/15/2015 6/22/2017 6/22/ % 445, , , , Radio Communication Improvements 6/22/2017 6/22/2017 6/22/ % - 305, , $ 4,046, $ 3,791, $ 4,046, $ 3,791, Renewals $ 3,240, Paid By Budget Appropriation 805, Renewals $ 3,240, New BAN's 550, $ 4,046, $ 3,791,

150 GENERAL CAPITAL FUND SCHEDULE OF IMPROVEMENT AUTHORIZATIONS EXHIBIT C-13 Transferred Transferred Balance From To Balance December 31, 2017 Ordinance December 31, 2016 Encumbrances Encumbrances Number Improvement Description Funded Unfunded Payable Expended Payable Cancelled Funded Unfunded Underground Storage Tank Remediation $ $ - $ - $ - $ - $ - $ $ Construction of Municipal Building Document Imaging/Scanning 20, , / Renovations to Police, Court, Recreation Center, Purchase Furniture for New Municipal Building Various Improvements - 9, , / Roadway & Drainage Improvements to W Jack St. & Library Improvements 11, , Acquisition of Pfleger Property for Open Space Preservation Purposes / Various Capital Improvements Various Municipal Park Improvements 21, , Police SUV's Various Capital Improvements , , Various Road Improvements & Various Park Improvements 23, , Various Road Improvements & Various Park Improvements 62, , , , Acquisition & Installation of Communications and Technology Equipment Various Road & Park Improvements 71, , / Acquisition of Automotive Vehicle - 29, , Various Road, Park & Building Improvements 786, , , , , , Improvements to Police Headquarters 60, , , , , , , Acquisition of Public Works Vehicles 131, , , , Various Roads & Park Improvements 1,497, , ,491, , , Radio Communication Improvements - 128, , , , , Natco Parking Lot Construction 39, , , , , $ 2,727, $ 664, , $ 2,444, , $ 174, $ 786, $ 626,

151 GENERAL CAPITAL FUND SCHEDULE OF RESERVE FOR ENCUMBRANCES EXHIBIT C-14 Balance, December 31, 2016 $ 749, Increased By: Charged to Improvement Authorizations 109, , Decreased By: Transferred To Improvement Authorizations 749, Balance, December 31, 2017 $ 109,

152 GENERAL CAPITAL FUND SCHEDULE OF CAPITAL IMPROVEMENT FUND EXHIBIT C-15 Balance, December 31, 2016 $ 221, Increased By: 2017 Budget Appropriation 707, Balance, December 31, 2017 $ 929,

153 GENERAL CAPITAL FUND SCHEDULE OF BONDS AND NOTES AUTHORIZED BUT NOT ISSUED EXHIBIT C-16 Balance Funded By Balance Ordinance December 31, Budget BAN December 31, Number Improvement Description 2016 Appropriations Issued Open Space Preservations $ 45, $ 45, $ - $ Various 2011 Capital Improvements 64, , Replacement of Union Avenue Pedestrian Bridges 61, , , Acquisition & Installation of Communications & Technology Equipment 34, , Various Capital Improvements 181, , Radio Communication Improvements 305, , $ 691, $ 98, $ 550, $ 42,

154 This page intentionally left blank 146

155 SWIMMING POOL UTILITY FUND 147

156 This page intentionally left blank 148

157 SWIMMING POOL UTILITY FUND SCHEDULE OF CASH AND INVESTMENTS - TREASURER EXHIBIT D-4 Operating Capital Balance, December 31, 2016 $ 240, $ 83, Increased By Receipts: Membership Fees $ 318, $ - Guest Membership Fees 41, Swimming Lessons 3, Swim Team Revenue 10, Interest on Investments 1, Miscellaneous Revenue Not Anticipated 27, Due to Swimming Pool Operating Due to Current Fund 304, , , , , , Decreased By Disbursements: 2017 Budget Appropriations 295, Appropriation Reserves Due from Swimming Pool Capital Due to Swimming Pool Operating - - Due to Current Fund 422, , Improvement Authorizations - 33, , , Balance, December 31, 2017 $ 227, $ 50,

158 SWIMMING POOL UTILITY OPERATING FUND SCHEDULE OF ACCOUNTS PAYABLE EXHIBIT D-5 Balance, December 31, 2016 $ 4, Increased By: Transferred From 2016 Appropriation Reserves 3, Balance, December 31, 2017 $ 8,

159 SWIMMING POOL UTILITY CAPITAL FUND SCHEDULE OF ANALYSIS OF SWIMMING POOL UTILITY CAPITAL CASH EXHIBIT D-6 Balance December 31, 2017 Capital Improvement Fund $ 83, Due to/from Swimming Pool Operating Fund (34,953.95) Due to Current Fund 1, Ordinance Number Improvement Authorizations Improvements to the Hazlet Swim & Tennis Club $ 50,

160 SWIMMING POOL UTILITY CAPITAL FUND SCHEDULE OF FIXED CAPITAL EXHIBIT D-7 Balance, December 31, 2016 $ 1,668, Increased By: Improvement Authorizations Expended 29, Balance, December 31, 2017 $ 1,698, Detail: Municipal Swimming Pool $ 779, Site Improvements at Municipal Swimming Pool 136, Various Improvements at the Swim Club Facility 189, Improvement to Existing Building 50, Acquisition of a Four-Wheel Drive Truck 17, Ord Swim Club Renovations 78, Ord Renovations to Swim and Tennis Club 78, Ord Renovations to Swim and Tennis Club 78, Ord Renovations to Swim and Tennis Club 50, Ord Renovations to Swim and Tennis Club 240, $ 1,698,

161 SWIMMING POOL UTILITY OPERATING FUND SCHEDULE OF 2016 APPROPRIATION RESERVES EXHIBIT D-8 Balance Balance December 31, After Paid or 2016 Encumbrances Modifications Charged Lapsed Operating: Salaries and Wages $ 10, $ - $ 10, $ - $ 10, Other Expenses 51, , , , , Total Operating 61, , , , , Statutory Expenditures: Social Security System (O.A.S.I.) 1, , , Total Swimming Pool Utility Fund Appropriations $ 63, $ 4, $ 67, $ 4, $ 63, Cash Disbursements $ Accounts Payable 3, $ 4,

162 EXHIBIT D-9 SWIMMING POOL UTILITY CAPITAL FUND SCHEDULE OF FIXED CAPITAL AUTHORIZED AND UNCOMPLETED Balance Ordinance December 31, Number Improvement Description 2017 & Improvements to the Hazlet Swim & Tennis Club $ 200, $ 200,

163 SWIMMING POOL UTILITY OPERATING FUND SCHEDULE OF RESERVE FOR ENCUMBRANCES EXHIBIT D-10 Balance, December 31, 2016 $ 4, Increased By: Transferred from Budget Appropriations 4, , Decreased By: Transferred to Appropriation Reserves 4, Balance, December 31, 2017 $ 4,

164 SWIMMING POOL UTILITY CAPITAL FUND SCHEDULE OF IMPROVEMENT AUTHORIZATIONS EXHIBIT D-11 Transferred from Ordinance Ordinance Balance December 31, 2016 Encumbrances Balance December 31, 2017 Number Improvement Description Amount Funded Unfunded Payable Expended Funded Unfunded Improvements to the Hazlet Swim & Tennis Club 200, $ 29, $ - $ 3, $ 33, $ $ - $ 29, $ - $ 3, $ 33, $ $ - 156

165 SWIMMING POOL UTILITY CAPITAL FUND SCHEDULE OF RESERVE FOR ENCUMBRANCES EXHIBIT D-12 Balance, December 31, 2016 $ 3, Decreased By: Transferred to Appropriation Reserves 3, Balance, December 31, 2017 $ - 157

166 SWIMMING POOL UTILITY CAPITAL FUND SCHEDULE OF CAPITAL IMPROVEMENT FUND EXHIBIT D-13 Balance, December 31, 2016 $ 48, Increased By: Budget Appropriation 35, Balance, December 31, 2017 $ 83,

167 SWIMMING POOL UTILITY CAPITAL FUND SCHEDULE OF RESERVE FOR AMORTIZATION EXHIBIT D-14 Balance, December 31, 2016 $ 1,668, Increased By: Improvement Authorizations Expended 29, Balance, December 31, 2017 $ 1,698,

168 SWIMMING POOL UTILITY CAPITAL FUND SCHEDULE OF DEFERRED RESERVE FOR AMORTIZATION EXHIBIT D-15 Balance, December 31, 2017 & 2016 $ 200, Ordinance Ordinance Number Improvement Description Date Improvements to the Hazlet Swim & Tennis Club 6/18/ , $ 200,

169 SWIMMING POOL UTILITY OPERATING FUND SCHEDULE OF DUE TO CURRENT FUND EXHIBIT D-16 Balance, December 31, 2016 $ 16, Increased By: Cash Receipts 304, , Decreased By: Cash Disbursements 422, Balance, December 31, 2017 $ (102,072.71) 161

170 EXHIBIT D-17 SWIMMING POOL UTILITY CAPITAL FUND SCHEDULE OF DUE TO (FROM) SWIMMING POOL UTILITY OPERATING FUND Balance, December 31, 2016 $ Increased By: Cash Receipts Decreased By: Due from Utility Operating 35, Balance, December 31, 2017 $ (34,953.95) 162

171 SWIMMING POOL UTILITY CAPITAL FUND SCHEDULE OF DUE TO CURRENT FUND EXHIBIT D-18 Balance, December 31, 2016 $ 1, Increased By: Cash Receipts 33, , Decreased By: Cash Disbursements 33, Balance, December 31, 2017 $ 1,

172 EXHIBIT D-19 SWIMMING POOL UTILITY OPERATING FUND SCHEDULE OF DUE (TO)/FROM SWIMMING POOL UTILITY CAPITAL FUND Balance, December 31, 2016 $ Increased By: Cash Disbursements Decreased By: Due from Utility Operating 35, Balance, December 31, 2017 $ (34,953.95) 164

173 SEWER UTILITY FUND 165

174 This page intentionally left blank 166

175 SEWER UTILITY FUND SCHEDULE OF CASH AND INVESTMENTS - TREASURER EXHIBIT E-4 Operating Capital Balance, December 31, 2016 $ 2,881, $ 1,635, Increased By Receipts: Consumer Acounts Receivable $ 4,098, $ - Non-Budget Revenues 130, Customer Prepayments 232, ,462, ,344, ,635, Decreased By Disbursements: 2017 Budget Appropriations 3,547, Appropriation Reserves 17, Due to Current Fund - 374, ,565, , Balance, December 31, 2017 $ 3,778, $ 1,261,

176 SEWER UTILITY CAPITAL FUND SCHEDULE OF ANALYSIS OF SEWER UTILITY CAPITAL CASH EXHIBIT E-5 Balance December 31, 2017 Capital Improvement Fund $ 1,300, Due to Current Fund 24, Due to Sewer Utility Operating Fund (499,999.93) Reserve for Improvements 115, Reserve for Encumbrances Payable 22, Ordinance Number Improvement Authorizations Various Sewer Utility Improvements: 112, Various Sewer Utility Improvements: 144, Various Sewer Utility Improvements 41, $ 1,261,

177 SEWER UTILITY OPERATING FUND SCHEDULE OF CONSUMER ACCOUNTS RECEIVABLE EXHIBIT E-6 Balance, December 31, 2016 $ 824, Increased By: Sewer Rents Levied $ 3,871, Overpayments Created 16, Decreased By: Collections 4,098, Overpayments Applied 52, Balance Adjustments 197, ,888, ,712, ,349, Balance, December 31, 2017 $ 363,

178 SEWER UTILITY OPERATING FUND SCHEDULE OF BAYSHORE SEWERAGE RENT RESERVE EXHIBIT E-7 Balance, December 31, 2017 & 2016 $ 752,

179 SEWER UTILITY OPERATING FUND SCHEDULE OF SEWER CUSTOMER OVERPAYMENTS EXHIBIT E-8 Balance, December 31, 2016 $ 52, Increased By: Overpayment Created 16, , Decreased By: Applied to Consumer Accounts Receivable 52, Balance, December 31, 2017 $ 16,

180 SEWER UTILITY OPERATING FUND SCHEDULE OF 2016 APPROPRIATION RESERVES EXHIBIT E-9 Balance Balance December 31, After Paid or Balance 2016 Encumbrances Transfers Charged Lapsed Operating: Salaries and Wages $ 71, $ - $ 71, $ - $ 71, Other Expenses 341, , , , , Total Operating 412, , , , , Debt Service: Interest on Notes Total Debt Service Statutory Expenditures: Social Security System (O.A.S.I.) 13, , , Total Sewer Utility Fund Appropriations $ 426, $ 19, $ 445, $ 17, $ 427, Cash Disbursements $ 17, Accounts Payable $ 17,

181 SEWER UTILITY OPERATING FUND SCHEDULE OF RESERVE FOR ENCUMBRANCES EXHIBIT E-10 Balance, December 31, 2016 $ 19, Increased By: Charged to Budget Appropriations 19, , Decreased By: Applied to Appropriation Reserves 19, Balance, December 31, 2017 $ 19,

182 SEWER UTILITY OPERATING FUND SCHEDULE OF DUE FROM TAX TITLE LIEN TRUST EXHIBIT E-11 Balance, December 31, 2017 & 2016 $ 47,

183 SEWER UTILITY OPERATING FUND SCHEDULE OF ACCOUNTS PAYABLE EXHIBIT E-12 Balance, December 31, 2016 $ 1, Increased By: Transfer from 2016 Appropriation Reserve Balance, December 31, 2017 $ 2,

184 SEWER UTILITY CAPITAL FUND SCHEDULE OF FIXED CAPITAL EXHIBIT E-13 Account Balance Balance December 31, December 31, 2016 Increase 2017 Land $ 492, $ - $ 492, Buildings 184, , Pump Stations 588, , Equipment 21, , Furniture and Fixtures 100, , Vehicles 57, , Collection System 9,826, ,826, Collection - Storm Drains 205, , $ 11,477, $ $ 11,477,

185 EXHIBIT E-14 SEWER UTILITY CAPITAL FUND SCHEDULE OF FIXED CAPITAL AUTHORIZED AND UNCOMPLETED Balance Ordinance December 31, Number Improvement Description 2017 & Various Sewer Utility Improvements $ 650, Various Sewer Utility Improvements 500, Various Sewer Utility Improvements 450, $ 1,600,

186 SEWER UTILITY OPERATING FUND SCHEDULE OF DUE TO CURRENT FUND EXHIBIT E-15 Balance, December 31, 2016 $ 102, Increased By: Cash Receipts 3,631, ,733, Decreased By: Cash Disbursements 3,565, Balance, December 31, 2017 $ 168,

187 SEWER UTILITY CAPITAL FUND SCHEDULE OF IMPROVEMENT AUTHORIZATIONS EXHIBIT E-16 Transferred from Transferred to Ordinance Ordinance Balance, December 31, 2016 Encumbrances Encumbrances Balance, December 31, 2017 Number Improvement Description Amount Funded Unfunded Payable Expended Payable Funded Unfunded Various Sewer Utility Improvements $ 650, $ 113, $ - $ 3, $ 4, $ $ 112, $ Various Sewer Utility Improvements 500, , , Various Sewer Utility Improvements 450, , , , , , $ 299, $ - $ 412, $ 389, $ 22, $ 298, $ - 179

188 SEWER UTILITY CAPITAL FUND SCHEDULE OF RESERVE FOR ENCUMBRANCES EXHIBIT E-17 Balance, December 31, 2016 $ 412, Increased By: Charged to Improvement Authorizations 22, , Decreased By: Transferred to Appropriation Reserves 412, Balance, December 31, 2017 $ 22,

189 SEWER UTILITY CAPITAL FUND SCHEDULE OF RESERVE FOR IMPROVEMENTS EXHIBIT E-18 Balance, December 31, 2017 & 2016 $ 115,

190 SEWER UTILITY CAPITAL FUND SCHEDULE OF RESERVE FOR AMORTIZATION EXHIBIT E-19 Balance, December 31, 2016 $ 11,477, Increased By: Improvement Authorizations Expended Balance, December 31, 2017 $ 11,477,

191 EXHIBIT E-20 SEWER UTILITY CAPITAL FUND SCHEDULE OF DEFERRED RESERVE FOR AMORTIZATION Balance Ordinance December 31, Number Improvement Description 2017 & Various Sewer Utility Improvements $ 650, Various Sewer Utility Improvements 500, Various Sewer Utility Improvements 450, $ 1,600,

192 SEWER UTILITY CAPITAL FUND SCHEDULE OF CAPITAL IMPROVEMENT FUND EXHIBIT E-21 Balance, December 31, 2016 $ 800, Increased By: 2017 Budget Appropriations 500, Balance, December 31, 2017 $ 1,300,

193 SEWER UTILITY CAPITAL FUND SCHEDULE OF DUE TO CURRENT FUND EXHIBIT E-22 Balance, December 31, 2016 $ 8, Increased By: Paid by Current Fund 389, , Decreased By: Cash Disbursements 374, Balance, December 31, 2017 $ 24,

194 SEWER UTILITY CAPITAL FUND SCHEDULE OF DUE TO SEWER UTILITY OPERATING FUND EXHIBIT E-23 Balance, December 31, 2016 $ 0.07 Decreased By: Capital Improvement Fund 500, Balance, December 31, 2017 $ (499,999.93) 186

195 SEWER UTILITY OPERATING FUND SCHEDULE OF DUE FROM SEWER UTILITY CAPITAL FUND EXHIBIT E-24 Balance, December 31, 2016 $ 0.07 Decreased By: Capital Improvement Fund 500, Balance, December 31, 2017 $ (499,999.93) 187

196 This page intentionally left blank 188

197 GENERAL FIXED ASSETS ACCOUNT GROUP 189

198 This page intentionally left blank 190

199 GENERAL FIXED ASSETS ACCOUNT GROUP SCHEDULE OF GENERAL FIXED ASSETS EXHIBIT G-1 Balance Balance December 31, December 31, 2016 Additions Deletions 2017 Land $ 40,891, $ - $ - $ 40,891, Land Improvements 740, , Buildings & Improvements 7,080, ,080, Machinery & Equipment 7,860, , ,149, $ 56,572, $ 288, $ - $ 56,861,

200 This page intentionally left blank 192

201 PART II SCHEDULE OF FINANCIAL STATEMENT FINDINGS - GOVERNMENT AUDITING STANDARDS 193

202 This page intentionally left blank 194

203 SCHEDULE OF FINANCIAL STATEMENT FINDINGS This section identifies the significant deficiencies, material weaknesses and instances of noncompliance related to the basic financial statements that are required to be reported in accordance with Government Auditing Standards and with audit requirements prescribed by the Division of Local Government Services, Department of Community Affairs, State of New Jersey. Finding Criteria or specific requirement: The Township is required to have a Note Disclosure related to the Other Post-Employment Benefits offered to employees. Condition: The Note Disclosure was not prepared. Cause: Internal control policies and procedures are not in place to properly prepare the Note Disclosure. Effect or potential effect: Non-compliance with Governmental Accounting Standards Board Statement and rules promulgated by the Division of Local Government Services Recommendation: That the Township prepare a Note Disclosure for the Other Post-Employment Benefits. View of responsible official: The responsible official agrees with this finding and will address the matter as part of their corrective action plan. Finding Criteria or specific requirement: Effective internal controls over cash accounts include preparation of accurate bank reconciliations on a monthly basis. Condition: Certain cash reconciliations were not prepared timely. Cause: Cash reconciliations were not reconciled to the general ledger and/or subsidiary ledgers. Effect or potential effect: Non-Compliance with N.J.S.A. 40A4-57. Recommendation: That the Township completes accurate bank reconciliations on a monthly basis. View of responsible official: The responsible official agrees with this finding and will address the matter as part of their corrective action plan. 195

204 Finding Criteria or specific requirement: N.J.A.C. 5: requires that municipalities maintain a fixed asset accounting system that shall include assets descriptions, estimated or historical costs and other such information as shall be required by the governing body and updated each year with any additions or deletions. Proper internal control practices also dictate that complete and accurate records should be maintained to ensure adequate control over the preparation of the financial statements including related footnotes. Condition: The Township did not maintain a fixed asset accounting system in accordance with N.J.A.C. 5:30:5.6. Cause: Internal control policies and procedures are not in place to properly maintain the fixed asset accounting system. Effect or potential effect: Non-compliance with N.J.A.C. 5: Recommendation: That internal control policies and procedures should be developed to properly maintain the general fixed assets accounting system in accordance with N.J.A.C. 5: View of responsible official: The responsible official agrees with this finding and will address the matter as part of their corrective action plan. Finding Criteria or specific requirement: In accordance with maintaining an internal control environment that is effective in the prevention and/or identification of potential financial statement misstatement and / or misclassification, the Township s subsidiary ledgers should be maintained timely and accurately to support the balances of the general ledger. Condition: The general and subsidiary ledger in all funds was not properly maintained timely and/or accurately. Cause: The subsidiary ledgers are not properly reconciled to the general ledger on a timely basis. Effect or potential effect: The Township does not have proper support for general ledger amounts. Recommendation: That internal control policies and procedures should be developed to properly maintain subsidiary ledgers timely and accurately. View of responsible official: The responsible official agrees with this finding and will address the matter as part of their corrective action plan. 196

205 Finding Criteria or specific requirement: Pursuant to Governmental Accounting Standards Board Statement No.16 and requirements prescribed by the Division of Local Government Services, municipalities are required to disclose the liability for accrued compensated absences in the notes to financial statements Vacation, sick, personal, and other similar time should be accrued as the benefits are earned if the leave is attributable to past services and it is probably that the employer will compensate the employee for the benefits. Condition: The Township did not properly maintain a detailed accounting of accrued compensated absences. Cause: Internal control policies and procedures are not in place to properly maintain the accrued compensated absences liability. Effect or potential effect: Non-compliance with Governmental Accounting Standards Board Statement No.16 and rules promulgated by the Division of Local Government Services. Recommendation: That internal control policies and procedures be developed to properly maintain the accrued compensated absences in accordance with Governmental Accounting Standards Board Statement No.16. View of responsible official: The responsible official agrees with this finding and will address the matter as part of their corrective action plan. Finding Criteria or specific requirement: The Township is required to certify that funds are available prior to release of the funds to vendors. Condition: The Township is not properly certifying that funds are available for use prior to payment of bills. Cause: The Township Clerk is permitting votes on contracts without certifying the payments. Effect or potential effect: The Township could be paying bills without the funds being properly allocated beforehand. Recommendation: That the Township s Clerk should not permit vote on contract award without properly certifying that funds are available for professional services. View of responsible official: The responsible official agrees with this finding and will address the matter as part of their corrective action plan. 197

206 Finding Criteria or specific requirement: According to the Township s Cash Management Plan, as approved by the council, three signatures are required on all disbursements. Condition: The Township is signing checks with only one employee s signature. Cause: Two other employees need to be signing off on the disbursements. Effect or potential effect: The Township is not following its cash management plan. Recommendation: That the Township accurately follow its cash management plan. View of responsible official: The responsible official agrees with this finding and will address the matter as part of their corrective action plan. 198

207 SUMMARY SCHEDULE OF PRIOR YEAR AUDIT FINDINGS This section identifies the status of prior year findings related to the financial statements, federal awards and state financial assistance that are required to be reported in accordance with Government Auditing Standards, Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principals, and Audit Requirements for Federal Awards (Uniform Guidance), and New Jersey OMB s Circular Financial Statement Findings Finding No Condition: The Township did not complete the disclosures for Other Post-Employment Benefits (OPEB) as required by GASB 45. This finding has not been corrected. See Finding Finding No Condition: During our review of cash accounts, we noted that the bank reconciliations were not prepared in a timely manner. This finding has not been corrected. See Finding Finding No Condition: The Sewer Utility Fund Billings were not prepared and mailed out to the residents in a timely manner. This finding has since been corrected. Finding No Condition: During our testing of General Fixed Assets the Township was unable to provide a listing of all General Fixed Assets. This finding has not been corrected. See Finding FEDERAL AWARDS N/A No Federal Single Audit in prior year. STATE FINANCIAL ASSISTANCE N/A No State Single Audit in prior year. 199

208 This page intentionally left blank 200

209 PART III LETTER OF COMMENTS AND RECOMMENDATIONS REGULATORY BASIS 201

210 This page intentionally left blank 202

211 OFFICIALS IN OFFICE AND SURETY BONDS The following officials were in office at December 31, 2017: Name Title Sue Kiley Mayor James DiNardo Councilmember Scott Aagre Councilmember Barbara Ronchetti Councilmember Micahel Glackin Councilmember Dennis Pino Township Administrator Meridith Nelson Chief Financial Officer Evelyn A. Grandi Township Clerk Ashlesha Deshpande Township Tax Collector Robin Young Township Court Administrator Michael D. Pugliese Township Court Judge 203

212 This page intentionally left blank 204

213 Honorable Mayor and Members of the Township Council Township of Hazlet County of Monmouth Hazlet, New Jersey In accordance with requirements prescribed by the Division of Local Government Services, Department of Community Affairs, State of New Jersey, the following are the General Comments and Recommendations for the year ended December 31, GENERAL COMMENTS: Contracts and Agreements required to be advertised by (N.J.S.A.40A:11-4) N.J.S.A.40A:11-4 states every contract or agreement, for the performance of any work or furnishing or hiring of any materials or supplies, the cost or 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 in the aggregate the bid threshold, except by contract or agreement. The bid threshold in accordance with N.J.S.A. 40A:11-4 was $40,000 for the year ended December 31, It is pointed out that the governing body of the municipality has the responsibility of determining whether the expenditures in any category will exceed the statutory minimum within the fiscal year. Where question arises as to whether any contract or agreement might result in violation of the statute, the solicitor's opinion should be sought before a commitment is made. Inasmuch as the system of records did not provide for an accumulation of payments for categories for the performance of any work or the furnishing or hiring of any materials or supplies, the results of such an accumulation could not reasonably be ascertained. Disbursements were reviewed, however, to determine whether any clear-cut violations existed. Our examination of expenditures did not reveal any individual payments or contracts in excess of the bid threshold for the performance of any work, or the furnishing of any materials, supplies or labor other than those where bids had been previously sought by public advertisement or where a resolution had been previously adopted under the provisions of N.J.S.A.40A: