Dated: October 26, 2017 Date of Sale: Tuesday, October 17, **Telephone Number to Submit a Bid: (203) **

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1 October 10, 2017 MEMORANDUM TO PROSPECTIVE BIDDERS Re: REGIONAL SCHOOL DISTRICT NO. 14, CONNECTICUT (CONSISTING OF THE MEMBER TOWNS OF BETHLEHEM AND WOODBURY, CONNECTICUT) $22,300,000 General Obligation Bond Anticipation Notes Dated: October 26, 2017 Date of Sale: Tuesday, October 17, 2017 Due: July 25, 2018 Time of Sale: 11:30 A.M. (Eastern Time) **Telephone Number to Submit a Bid: (203) ** As per the Notice of Sale, proposals may be submitted by telephone on Tuesday, October 17, Please note that a representative of Phoenix Advisors, LLC will be available until 11:30 A.M. (Eastern Time) on the day of the sale to assist with telephone bids. We ask that you submit your final bid by telephone at (203) no later than 11:30 A.M. on Tuesday, October 17, An Official Statement has not been prepared by or on behalf of the Issuer for this sale. The issue of notes is exempt from the provisions of Rule 15c2-12, as amended, of the Securities and Exchange Commission. The General Purpose Financial Statements have been excerpted from the Annual Financial Report of the Regional School District No. 14, and the District s member Town of Bethlehem as of June 30, 2016 and the District s member Town of Woodbury, Connecticut as of June 30, These excerpts are included in this package. Copies of the complete reports for June 30 th are available upon request from Phoenix Advisors, LLC, Attention: Barry Bernabe, Managing Director, 53 River Street, Suite 1, Milford, Connecticut, telephone (203) We trust we may be of service. PHOENIX ADVISORS, LLC

2 Telephone Sale Term Sheet $22,300,000 General Obligation Bond Anticipation Notes Regional School District No. 14, Connecticut Date of Sale: Location of Sale: Tuesday, October 17, 2017 at 11:30 A.M. (Eastern Time). Regional School District No. 14, Business Office, 5 Minortown Road, Woodbury, Connecticut Issuer: Regional School District No. 14, Connecticut (the District ). Issue: $22,300,000 General Obligation Bond Anticipation Notes (the Notes ). Dated Date: October 26, 2017 Principal and Interest Due: At maturity on July 25, 2018 Purpose: The Notes are being issued finance renovations to Nonnewaug High School. Denominations: $100,000 plus any odd amount. Redemption: The Notes are not subject to redemption prior to maturity. Security: The Notes will be general obligations of the District and its member towns of Bethlehem and Woodbury and the District will pledge its full faith and credit to the payment of principal of and interest on the Notes when due. Credit Rating: Basis of Award: Form of Legal Opinion and Tax Exemption: Bank Qualification: Registrar, Transfer Agent, Certifying Agent and Paying Agent: Option for No Book Entry: Municipal Advisor: Legal Opinion: Delivery and Payment: Issuer Official: No application for a rating on this Note issue has been made to any credit rating agency. The District does not have an outstanding rating. The District s member Town of Woodbury, Connecticut has an outstanding bond rating from Moody s of Aa2. The District s member Town of Bethlehem, Connecticut does not have an outstanding bond rating. Lowest Net Interest Cost (NIC), as of dated date. Tax-Exempt (See attached Opinion of Bond Counsel and Tax Exemption ) The Notes shall not be designated by the Issuer as qualified tax-exempt obligations under the provisions of Section 265(b) of the Internal Revenue Code of 1986, as amended, for purposes of the deduction by financial institutions for interest expense allocable to the Notes. U.S Bank National Association of Hartford, Connecticut, Goodwin Square, 23rd Floor, 225 Asylum Street, Hartford, Connecticut A bidder for the Notes may request that the Notes be issued in the form of a single fully registered physical certificate in the par amount of the Notes, rather than in book-entry form through the facilities of DTC. See Option for No Book Entry in Notice of Sale. Phoenix Advisors, LLC of Milford, Connecticut will act as Municipal Advisor. Mr. Barry J. Bernabe, Managing Director, Phoenix Advisors, LLC, 53 River Street, Milford, Connecticut, tel: (203) , bbernabe@muniadvisors.com Pullman & Comley LLC of Hartford, Connecticut will act as Bond Counsel. It is expected that delivery of the Notes in book-entry-only form will be made to The Depository Trust Company on or about October 26, Delivery of the Notes will be made against payment in Federal Funds. Questions concerning the sale should be addressed to: Wayne McAllister, Director of Finance and Operations, 5 Minortown Road, Woodbury, Connecticut Phone (203)

3 NOTICE OF TELEPHONE SALE REGIONAL SCHOOL DISTRICT NO. 14, CONNECTICUT $22,300,000 GENERAL OBLIGATION BOND ANTICIPATION NOTES Dated October 26, 2017 : Due July 25, 2018 Bids by TELEPHONE will be received by the REGIONAL SCHOOL DISTRICT NO. 14, CONNECTICUT (the District ), at (203) until 11:30 A.M. (Eastern Time), Tuesday October 17, 2017 (the Bid Date ) for the purchase of the above-captioned REGIONAL SCHOOL DISTRICT NO. 14 General Obligation Bond Anticipation Notes (the Notes ) which mature on July 25, The Issue The Notes will be general obligations of the District and its member towns, Bethlehem and Woodbury (the Member Towns ), and the District will pledge its full faith and credit to pay the principal of and the interest on the Notes. Unless paid from other sources, the Notes are payable from general property tax revenues of the Member Towns. The Member Towns have the power under the Connecticut General Statutes to levy ad valorem taxes on all taxable property in said Member Towns without limit as to rate or amount, except as to classified property such as certified forest land taxable at a limited rate and dwelling houses of qualified elderly persons of low income or of qualified disabled persons taxable at limited amounts. The Notes will be dated October 26, 2017 and will be payable to the registered owners on July 25, They will be issued in principal amounts of $100,000, plus any odd amount. Denominations of less than $100,000 will not be made available. The Notes will bear interest (computed on a 360-day year, 30-day month basis) payable at maturity at the rate or rates per annum fixed in the proposal accepted for their purchase, which rates shall be in multiples of 1/100 of 1% per annum. The Notes are NOT subject to redemption prior to maturity. Bid Requirements Telephone bids will be received until 11:30 A.M. (Eastern Time) by an authorized agent of Phoenix Advisors, LLC, the District s municipal advisor. All telephone bids must be made to (203) and be completed by 11:30 A.M. (Eastern Time) on Tuesday, October 17, Bidders shall recognize that a bid by telephone means that the bidder accepts the terms and conditions of this Notice of Sale and agrees to be bound by such and, further, such bidder recognizes and accepts the risk that its telephone bid may not be received by the District through its agent or may be received later than the time specified as the result of a failure in communications including, but not limited to, a failure in telephonic communications, or the inability to reach the District through its agent by the time required. A bid received after the time specified, as determined in the District s sole discretion, will not be reviewed or honored by the District. A proposal may be for all or any part of the Notes, but any proposal for a part must be for a whole multiple of $100,000 except that one such proposal for a part may include an odd amount. A separate proposal will be required for each part of the Notes for which a separate stated interest rate is bid. Establishment of Issue Price In order to provide the District with information that enables it to comply with certain requirements of the Internal Revenue Code of 1986, as amended (the Code ), relating to the exclusion of interest on the Notes from the gross income of their owners, the winning bidder will be required to complete, execute, and deliver to the District at or prior to the delivery of the Notes an issue price or similar certificate setting forth the reasonably expected initial offering price to the Public (the Initial Offering Price ) or the actual sales price or prices of the Notes, as circumstances may determine, together with the supporting pricing wires or equivalent communications, with such

4 modifications as may be appropriate or necessary, in the reasonable judgment of Bond Counsel. However, such certificate may indicate that the winning bidder has purchased the Notes for its own account in a capacity other than as an Underwriter, and currently has no intent to reoffer the Notes for sale to the Public (as defined below). For purposes of this Establishment of Issue Price section, Bond Counsel may act on behalf of the District. The District intends that the provisions of Treasury Regulations Section (f)(3)(i) (defining competitive sale for purposes of establishing the issue price of the Notes) will apply to the initial sale of the Notes (the Competitive Sale Rule ) because: (1) the District shall disseminate, or have disseminated on its behalf, this Notice of Sale to potential bidders in a manner that is reasonably designed to reach potential bidders; (2) all bidders shall have an equal opportunity to bid; (3) the District anticipates receiving bids from at least three underwriters of municipal bonds who have established industry reputations for underwriting new issuances of municipal bonds; and (4) the District anticipates awarding the sale of the Notes to the bidder who submits a firm offer to purchase the Notes at the lowest net interest cost, as set forth in this Notice of Sale. Any bid submitted pursuant to this Notice of Sale shall be considered a firm offer for the purchase of the Notes, as specified in the bid. Acceptance by the District of a bid pursuant to this Notice of Sale shall constitute a written contract between the District and the winning bidder. In the event that the Competitive Sale Rule is not satisfied, the District shall promptly advise the winning bidder. The District shall treat the first price at which 10% of the Notes (the Actual Sale Rule ) is sold to the Public as the issue price of the Notes. In the event that the Competitive Sale Rule is not satisfied, the winning bidder shall promptly advise the District if the Notes satisfy the Actual Sales Rule as of the Bid Date. The District will not require bidders to comply with the hold-the-offering-price rule. Bids will not be subject to cancellation in the event that the Competitive Sale Rule is not satisfied. If the Competitive Sale Rule is not satisfied, then until the Actual Sale Rule is satisfied for the Notes, the winning bidder agrees to promptly report to the District and Bond Counsel the prices at which the unsold Notes have been sold to the Public. This reporting obligation shall continue, whether or not the Closing Date has occurred, until the Actual Sale Rule is satisfied for the Notes. By submitting a bid, each bidder confirms that: (i) any agreement among underwriters, any selling group agreement and each retail distribution agreement (to which the bidder is a party) relating to the initial sale of the Notes to the Public, together with the related pricing wires, contains or will contain language obligating each Underwriter, each dealer who is a member of the selling group, and each broker-dealer that is a party to such retail distribution agreement, as applicable, to report the prices at which it sells to the Public the unsold Notes allotted to it until it is notified by the winning bidder that the Actual Sales Rule has been satisfied as to the Notes, and (ii) any agreement among underwriters relating to the initial sale of the Notes to the Public, together with the related pricing wires, contains or will contain language obligating each Underwriter that is a party to a retail distribution agreement to be employed in connection with the initial sale of the Notes to the Public to require each broker-dealer that is a party to such retail distribution agreement to report the prices at which it sells to the Public the unsold Notes allotted to it until it is notified by the winning bidder or such Underwriter that the Actual Sales Rule has been satisfied as to the Notes, if and for so long as directed by the winning bidder or such Underwriter and as set forth in the related pricing wires. Sales of any Notes to any person that is a Related Party (as defined below) to an Underwriter shall not constitute sales to the Public for purposes of this Notice of Sale. Further, for purposes of this Notice of Sale: 2

5 Award, Delivery and Payment (1) Public means any person (including an individual, trust, estate, partnership, association, company, or corporation) other than an Underwriter or a Related Party to an Underwriter. (2) Related Party generally means any two or more persons who have greater than 50% common ownership, directly or indirectly. (3) Underwriter means (i) any person that agrees pursuant to a written contract with the Issuer (or with the lead Underwriter to form an underwriting syndicate) to participate in the initial sale of the Notes to the Public, and (ii) any person that agrees pursuant to a written contract directly or indirectly with a person described in clause (i) of this definition to participate in the initial sale of the Notes to the Public (including a member of the selling group or a party to a retail distribution agreement participating in the initial sale of the Notes to the Public). Unless all bids are rejected, the Notes will be awarded on the basis of the lowest net interest cost, computed as to each interest rate stated by adding the total interest which will be paid at such rate and deducting therefrom any premium offered. As between proposals resulting in the same lowest net interest cost, the award will be made on the basis of the highest principal amount of the Notes specified. In the event that two or more bidders offer bids at the same lowest net interest cost and the same principal amount, the District will determine by lot which of such bidders will be awarded the Notes. No bid for less than par and accrued interest, if any, will be considered and the District reserves the right to award to any bidder(s) all or any part of the Notes bid for in its proposal. If a bidder is awarded only a part of the Notes bid for in its proposal, any premium offered in such proposal will be proportionately reduced so that the net interest cost shall be the same as in the bidder s proposal with respect to the amount bid, carried to four places. The purchase price must be paid in Federal Funds. Promptly upon verbal notification that a bidder s proposal may be accepted, the bidder shall confirm to the District the reoffering prices of the Notes. Bids will be finally accepted or rejected promptly after opening and not later than 1:00 P.M. (Eastern Time) on the Bid Date in accordance with the provisions herein. At or prior to the delivery of the Notes the successful bidder shall be furnished, without cost, with the approving opinion of Pullman & Comley, LLC, of Hartford, Connecticut, Bond Counsel. The successful bidder will also be furnished with a receipt of payment for the Notes, a Signature and No Litigation Certificate, dated as of the date of delivery of the Notes, stating that there is no litigation pending, or to the knowledge of the signers thereof, threatened, affecting the validity of the Notes or the power of the District to levy and collect taxes to pay them. The District will have no responsibility to pay for any expenses of the purchaser except to the extent specifically stated in this Notice of Sale. The purchaser will have no responsibility to pay for any of the District s costs of issuance except to the extent specifically stated in this Notice of Sale. The purchaser will be responsible for the clearance or exemption with respect to the status of the Notes for sale under securities or Blue Sky laws and the preparation of any surveys or memoranda in connection with such sale. The District shall have no responsibility for such clearance, exemption or preparation. It is expected that the Notes will be delivered to DTC in New York City on or about October 26, 2017 against payment in immediately available Federal Funds, except in the case that the option for no book entry is selected by the purchaser. The deposit of the Notes with DTC under a book-entry system requires the assignment of CUSIP numbers prior to delivery. It shall be the responsibility of the winning purchaser to obtain CUSIP numbers for the Notes prior to delivery and the District will not be responsible for any delay occasioned by the inability to deposit the Notes with DTC due to the failure of the winning purchaser to obtain such numbers and to supply them to the District in a timely manner. Neither the failure to print such CUSIP number on any note, nor any error with respect thereto, shall constitute a cause for a failure or refusal by the purchaser thereof to accept delivery of and pay for the Notes. 3

6 Right to Reject Bids; Waiver The right is reserved to reject any and all proposals and to reject any proposal not complying with this Notice of Sale and to waive any irregularity or informality with respect to any proposal. Postponement; Change of Terms The District reserves the right to alter any terms of the Notes or this Notice of Sale and to postpone, from time to time, the date or time established for the receipt of the bids. Book-Entry Subject to the paragraph below, the Notes will be issued by means of a book-entry system with no physical distribution of certificates made to the public. The Notes will be issued in registered form and one note certificate for each interest rate will be issued to The Depository Trust Company, New York, New York (DTC), registered in the name of its nominee, Cede & Co., and immobilized in their custody. A book-entry system will be employed, evidencing ownership of the Notes in principal amounts of $100,000, plus any odd amount, if any, with transfers of ownership effected on the records of DTC and its Participants pursuant to rules and procedures adopted by DTC and its Participants. The successful bidder or bidders, as a condition to delivery of the Notes, will be required to deposit the note certificates with DTC, registered in the name of Cede & Co. Principal of and interest on the Notes will be payable by the District or its agent in Federal Funds to DTC or its nominee as registered owner of the Notes. Principal and interest payments to Participants of DTC will be the responsibility of DTC. Principal and interest payments to Beneficial Owners by Participants of DTC will be the responsibility of such Participants and other nominees of Beneficial Owners. The District will not be responsible or liable for payments by DTC to its Participants or by DTC Participants to Beneficial Owners or for maintaining, supervising or reviewing the records maintained by DTC, its Participants or persons acting through such Participants. In the event that (a) DTC determines not to continue to act as securities depository for the Notes and the District fails to identify another qualified securities depository to replace DTC, or (b) the District determines to discontinue the book-entry system of evidence and transfer of ownership of the Notes, the District will authenticate and deliver replacement Notes in the form of fully registered Note certificates directly to the Beneficial Owners of the Notes or their nominees. Option For No Book Entry A bidder for the Notes may request that the Notes be issued in the form of a single fully registered physical certificate in the par amount of the Notes, rather than in book-entry form through the facilities of DTC, provided the bid is for all the Notes at the same interest rate. A bidder for the Notes requesting that the Notes be issued in nonbook-entry form may request that it be designated by the District as the Certifying Agent, Registrar and Paying Agent for the Notes if it is a bank or trust company authorized to act in such capacity pursuant to the Connecticut General Statutes. Any bidder seeking to have the Notes issued in non-book-entry form, or to be designated as Certifying Agent, Registrar and Paying Agent for such Notes, shall indicate this preference to the District at the time of the submission of the bid. The District reserves the right to decline any request to issue the Notes in non-book entry form, or to designate the successful bidder as Certifying Agent, Registrar and Paying Agent for the Notes, if it should determine, in its sole discretion, that issuing the Notes in such manner or with such designation is not in its best interests. If the Notes are issued in non-book-entry form, the successful bidder, and any subsequent registered owner of the Notes, shall not impose on or charge the District any costs or expenses of any re-registration or transfer of Notes from time to time, including any costs of counsel or of converting the Notes to book-entry only form, or for any costs or expenses of services as Certifying Agent, Registrar and Paying Agent for the Notes if the successful bidder is so designated. No Continuing Disclosure or Official Statement Since the Notes mature not more than nine months from the date of issue and are in denominations of $100,000 or more, the undertaking to provide an official statement or continuing disclosure under SEC Rule 15c2-4

7 12 does not apply to the Notes. Therefore, the District will not provide an official statement nor enter into a continuing disclosure agreement with respect to the Notes. Additional Information More information concerning the issue and the District may be obtained from Barry J. Bernabe, Managing Director, Phoenix Advisors, LLC, 53 River Street, Suite 1, Milford, Connecticut (203) Janet Morgan Chairman of the Board of Education George Bauer Treasurer October 10,

8 October, 2017 Regional School District No Minortown Road PO Box 469 Woodbury, CT Re: $22,300,000 General Obligation Bond Anticipation Notes dated October 26, 2017 We have acted as Bond Counsel in connection with the issuance by the Regional School District No. 14 (the District ), in the State of Connecticut, of its $22,300,000 General Obligation Bond Anticipation Notes (the Notes ) dated October 26, 2017 and maturing July 25, In such capacity, we have examined a record of proceedings of the District authorizing the Notes, a Tax Regulatory Agreement of the District dated October 26, 2017 (the Agreement ), such law and such other proceedings, certifications, and documents as we have deemed necessary to render this opinion. As to questions of fact material to our opinion, we have relied upon the certified proceedings and other certifications of public officials furnished to us without undertaking to verify the same by independent investigation. We are of the opinion that when the Notes are duly certified by U.S. Bank National Association, they will be valid and legally binding general obligations of the District and its member towns of Bethlehem and Woodbury payable as to both principal and interest from ad valorem taxes which may be levied by each member town on all the taxable property subject to taxation by the member town in the District within such town without limitation as to rate or amount except as to classified property such as certified forest lands taxable at a limited rate and dwelling houses of qualified elderly persons of low income or of qualified disabled persons taxable at limited amounts pursuant to Connecticut statutes. We are further of the opinion that the Agreement is a valid and binding agreement of the District and was duly authorized by the District. The rights of the holders of the Notes and the enforceability thereof may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors rights generally and by equitable principles, whether considered at law or in equity. The Internal Revenue Code of 1986, as amended (the Code ), establishes certain requirements that must be satisfied at and subsequent to the issuance and delivery of the Notes in order that interest on the Notes be excluded from gross income under Section 103 of the Code. In the Agreement, the District has made covenants and representations designed to assure compliance with such requirements of the Code. The District has covenanted in the Agreement that it will at all times comply with all requirements of the Code that must be satisfied subsequent to the issuance of the Notes to ensure that interest on the Notes shall not be included in gross income for federal income tax purposes retroactive to the date of issuance of the Notes, including covenants regarding, among other matters, the use, expenditure and investment of the proceeds of the Notes. In rendering the below opinions regarding the federal treatment of interest on the Notes, we have relied upon and assumed (i) the material accuracy of the representations, statements of intention and

9 reasonable expectations, and certifications of fact contained in the Agreement, and (ii) continuing compliance by the District with the covenants set forth in the Agreement as to such tax matters. In our opinion, under existing law, interest on the Notes is not included in gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax; however, with respect to certain corporations (as defined for federal income tax purposes) subject to the federal alternative minimum tax, such interest is taken into account in computing the federal alternative minimum tax. We express no opinion regarding other federal income tax consequences caused by the ownership or disposition of, or receipt of interest on the Notes. We are further of the opinion that, under existing statutes, interest on the Notes is excluded from Connecticut taxable income for purposes of the Connecticut income tax on individuals, trusts and estates and is excluded from amounts on which the net Connecticut minimum tax is based for individuals, trusts and estates required to pay the federal alternative minimum tax. We express no opinion regarding other state income tax consequences caused by ownership or disposition of, or receipt of interest on the Notes. We have not undertaken to advise whether any events after the date of issuance of the Notes, including the adoption of federal tax legislation, may affect the tax status of interest on the Notes. Although we have rendered an opinion that interest on the Notes is not includable in gross income for federal income tax purposes, federal income tax liability may otherwise be affected by the ownership or disposition of the Notes. We express no opinion regarding any tax consequence caused by ownership or disposition of, or receipt of interest income on, the Notes not specifically described herein. Respectfully, PULLMAN & COMLEY, LLC 2

10 REGIONAL SCHOOL DISTRICT NO. 14, CONNECTICUT FINANCIAL INFORMATION Excerpted from the Annual Financial Report of The Regional School District No. 14, Connecticut Year Ended June 30, 2016

11 NONNEWAUG REGIONAL SCHOOL DISTRICT #14 TOWNS OF BEThLEHEM AND WOODRURY AUDITED FINANCIAL STATEMENTS AND SUPPLEMENTAL FINANCIAL DATA JUNE 30, 2016 Certified Public Accountants Charles Heaven & Co.

12 TABLE OF CONTENTS Independent Auditors Report 1-3 Management s Discussion and Analysis 4-9 Government-wide Financial Statements: Statement of Net Position 10 Statement of Activities 11 Fund Financial Statements: Independent Auditors Report on Internal Control Over Financial Reporting Basic Financial Statements: Governmental Funds: Balance Sheet 12 Notes to Financial Statements 1840 Fiduciary Funds: performed in accordance with Government Auditing Standards and on Compliance and Other Matters based on an Audit of Financial Statements Non Private Non Budget PAGE June 30, 2016 Nonnewaug Regional School District #14 Towns of Bethlehem and Woodbury Statement of Changes in Assets and Liabilities 50 Agency Funds: Detail Statement of Scholarship Net Position Purpose Trust Funds 48 Purpose Trust Funds 49 Detail Statement of Changes in Scholarship Net Position Private Fund Balance Major Governmental Funds 47 Special Revenue Funds: Combining Balance Sheet Combining Statement of Revenue, Expenditures and Changes in Major Governmental Funds 46 Last Three Fiscal Years 42 Schedule of Employer Contributions Last Ten Fiscal Years 43 Schedule of Investment Returns Last Three Fiscal Years 44 Schedule of District s Proportionate Share of the Net Pension Liability Teachers Retirement Plan 45 Required Supplementary Information: Schedule of Revenues, Expenditures and Changes in Fund Balances General Fund - and Actual (Non GAAP Budgetary Basis) 41 Schedule of Changes in Net Pension Liability and Related Ratios Fiduciary Funds: Statement of Fiduciary Net Position 16 Statement of Changes in Fiduciary Net Position 17 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities 15 to the Statement of Net Position 13 Reconciliation of the Balance Sheet of Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balances 14

13 TABLE OF CONTENTS (continued) AUDIT OF STATE FINANCIAL ASSISTANCE PROGRAMS: Over Compliance: and Report on the Schedule of Expenditures of State Schedule of State Financial Assistance 57 Report on Compliance for Each Major Program; Report on Internal Control Audit Results of State Financial Assistance Programs 59 Financial Assistance Required by the State Single Audit Act PAGE Notes to Schedule of State Financial Assistance 58 June 30, 2016 Nonnewaug Regional School District #14 Towns of Bethlehem and Woodbury

14 Board of Education INDEPENDENT AUDITORS REPORT We have audited the accompanying financial statements of the governmental activities, each major fund, and Nonnewaug Regional School District #14 ended June 30, 2016, and the related notes to the financial statements, which collectively comprise Bethlehem and Woodbuty, Connecticut Nonnewaug Regional School District #14 s basic financial statements as listed in the table of contents. Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the of financial statements that are free from material misstatement, whether due to fraud or error. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our design, implementation, and maintenance of internal control relevant to the preparation and fair presentation 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 obtain reasonable assurance about whether the financial statements are free from material misstatement. financial statements. The procedures selected depend on the auditor s judgment, including the assessment of risk assessments, the auditor considers internal control relevant to the entity s preparation and fair control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of well as evaluating the overall presentation of the financial statements. audit opinions. Auditor s Responsibility Comptroller General of the United States. Those standards require that we plan and perform the audit to Management s Responsibility for the Financial Statements the aggregate remaining fund information of Nonnewaug Regional School District #14, as of and for the year An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the the risks of material misstatement of the financial statements, whether due to fraud or error. In making those We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our 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 accounting policies used and the reasonableness of significant accounting estimates made by management, as Report on the Financial Statements Certified Public Accountants Waterbury, Connecticut Charles Heaven & Co. 1

15 Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of Nonnewaug Regional School District #14, as of June 30, 2016, and the respective changes in financial position for the yeas then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management s discussion and analysis and budgetary comparison information on Pages 4 through 9 the budgetary comparison schedule on page 41, and supplementary pension information on Pages 42 through 45 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential past of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise Nonnewaug Regional School District #14 s basic financial statements. The combining and individual nonmajor fund financial statements, and supplemental schedules are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual nonmajor fund financial statements, and supplemental schedules are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic fmancial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual nonmajor fund financial statements, and supplemental schedules are fairly stated, in all material respects, in relation to the basic financial statements as a whole. -2-

16 Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 28, 2016, on our consideration of Nonnewaug Regional School District #14 s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Nonnewaug Regional School District #14 s internal control over financial reporting and compliance. December 28,

17 the district s performance. Information contained in this section is explained by the more detailed Introduction Our discussion and analysis of Nonnewaug Regional School District #14 (District) financial performance provides the reader an overall narrative review of the School Districts financial activities for the year ended June 30, The intent of this discussion and analysis is to look at the district performance as a whole; however, readers should also review the notes to the financial statements to enhance their understanding of belong. information contained elsewhere in the financial statements, notes to the financial statements and accompanying material. Financial Highlights The following are some of the financial highlights for the June 30, 2016 fiscal year. Overview of Financial Statements comprehensive overview of the District. The basic financial statements are comprised of two kinds of statements that present financial information from different perspectives: by $431,020. State June 30, 2016 Management s Discussion and Analysis (MD&A) Nonnewaug Regional School District #14 o Fiduciary fund statements provide information about the financial relationships in which the District acts solely as a trustee or agent for the benefit of others, to whom the resources - Government-wide financial statements, which comprise the first two statements, provide both shortterm and long-term information about the entity s overall financial position. detail. The fund financial statements comprise the remaining statements. short term as well as what remains for future spending. financial statements focus on reporting the individual parts of the District operations in more financial statements, and required supplementary information. The three sections together provide a This annual report consists of three parts discussion and analysis (this section), the basic debt obligations as of June 30, 2016 were S6,053,124, which compares to the June 30, District has created a new High School Renovation Fund for expenses directly allocated to the Nonnewaug High School Renovation Project. net position is $12,077,742. This is an increase of $431,020 over the prior year net position $11,646,722. and Management s Discussion and Analysis for State and Local Governments, issued June 1999; the GASB Statement No. 37, Basic Financial Statement and Management Discussion and Analysis for and Local Governments: Omnibus, an amendment to GASB Statement No.21 and No.34, issued in June Certain comparative information between the current and the prior year is required to be presented. - Total - Overall revenues were $37,759,752, which were more than expenditures of $37,328,732 - Long-term - The 2015 debt obligations of $5,974,466; an increase of $78,658 primarily due to increases in the pension and other post retirement benefit obligations. management s - Fund o Governmental funds statements tell how general government services were financed in the -4- supplementary information that further explains and supports the financial statements. The financial statements also include notes that explain some of the information in the statements and provide more detailed data. The basic financial statements are followed by a section of required The Management s Discussion and Analysis (MD&A) is an element of the reporting model adopted by the Governmental Accounting Standards Board (GASB) in their Statement No. 34, Basic Financial Statements

18 Nonnewaug Regional School District #14 Management s Discussion and Analysis (MD&A) June 30, 2016 Government-Wide Statements The government-wide statements report information about the District as a whole u5ing accounting methods similar to those used by private-sector companies. The statement of net assets includes all of the government s assets and liabilities. All of the current year s revenues and expenses are accounted for in the statement of activities regardless of when cash is received or paid. The two government-wide statements report the District s net assets and how they have changed. Net assets, the difference between the assets and liabilities, is one way to measure the District s financial health or position. - Over time, increases or decrease in the District s net assets are an indicator of whether its financial health is improving or deteriorating, respectively. - To assess the overall health of the District, one needs to consider additional non-financial factors such as changes in enrollment, changes in program funding by the Federal and State governments, and condition of facilities. The government-wide financial statements of the District include government activities. Most of the District s basic services are included here, such as regular education, food service, maintenance and general administration. Local revenue funding and federal and state grants finance most of these activities. Fund Financial Statements The fund financial statements provide more detailed information about the District s most significant funds, not the District as a whole. Funds are accounting devises that the District uses to keep track of specific sources of funding and spending for particular programs. Some funds are required to be established by state law and by bond covenants. The Board of Education establishes other funds to control and manage money for particular purposes or to show that the District is meeting legal responsibilities for using certain revenues. The District has two kinds of funds: - Governmental funds Most of the District s basic services are included in governmental funds, which generally focus on (I) how cash and other financial assets that can readily be convened to cash flow in and out and (2) the General Fund balance left at year-end that are available for distribution to the member towns to offset future property tax increases. Consequently, the governmental funds statements provide a detailed short-term view that helps you determine whether there are more or fewer financial resources chat can be spent in the near future to finance the District s programs. Because this information does not encompass the additional long-term focus of the government-wide statements, we provide additional information at the bottom of the government funds statements that explains the relationship (or differences) between them. - Fiduciary funds The District is the trustee, or fiduciary, for assets that belong to others; for the District, the student body activities fund is an agency fund. The District is responsible for ensuring the assets reported in these hinds are used only for their intended purposes and by those to whom the assets belong. All of the District s fiduciary activities are reported in a separate statement of fiduciary net assets and a statement of changes in fiduciary net assets. We exclude these activities from the district-wide financial statements because the District cannot use the assets to finance its operations. -5-

19 -6- Net Assets Financial Analysis of the Entity as a Whole The District s combined net position were $12,077,742 at June 30, Receivable - Accumulated Depreciation 15,715,921 16,275,129 miscellaneous Total Governmental Activities Balance Balance June 30, 2016 June Assets Cash and cash equivalents $ 2,979,366 $ 1,667,741 fees 143, ,869 Inventory 14,227 2,139 Capital Assets, Net of Total Assets $19,269,353 $18,489,267 Accounts Payable & Accrued Expenses $ 864,856 $ 508,458 Net Pension Obligation 1,214,286 1,349,743 Liabilities Accrued interest - 3,500 Other Post Retirement Benefit Obligation 2, ,905,601 Unearned Revenue 215, ,420 Total Liabilities $7,133,677 S 6,630,844 Deferred Inflows of Resources Difference between projected and actual earnings on pension plan investments $ 57,934 $ 211,701 Invested in Capital Assets, Net of Related Debt $15,112,771 $ 15,390,039 Restricted 2.027,016 1,075,404 Unrestricted (5,062,045) (4,818,721) Total Net Assets $IZWZ24Z $L2Z Changes in Net Position The District s total revenues were S37,759,752. A summary of the changes in net assets follows. Other General Fund Revenues were more or less than expected as follows: related to educating and caring for students and were $21,607,205 or 58% of the total. Operations and The total cost of all programs and services was $37,328,732. The District s expenses are predominately maintenance of the facilities (plant services), general administrative, debt service, ancillary services and unallocated items accounted for the remaining expenses. Due from State of Connecticut 415, ,389 Net Assets June 30, 2016 Management s Discussion and Analysis (MD&A) Nonnewaug Regional School District #14 Long-TermDebt 2.522,116 2,

20 Total Revenues $37,759,752 $36,713,482 Net Assets End of Year $J Program Revenues: Revenues For the Year Ended The following is a summary of the net increase/(decrease) in the assets of the District. Changes in Net Assets Governmental Activities June June 30, 2015 School Lunch Services 698, ,648 Operating Grants & Contributions 5,492,598 5,087,159 Participating towns 29,666,900 28,967,564 Charges for Services $ 2,459,867 $ 2,341,842 Capital Grants & Contributions 98, General Revenues Capital Outlay - Net Assets Program Expenses Instruction Local Revenues 42, Services 2,717,025 2,762,274 Plant Services 2,104,555 1,835,101 Transportation 1,711,481 1,899,548 Depreciation ,890 8,595,735 Increase/(Decrease) in Net Assets. $ 431,020 $ (365,242) of Year $Jj41 $ 12,011,964 June 30, 2016 Management s Discussion and Analysis (MD&A) Nonnewaug Regional School District #14 Beginning Supporting Instruction $ 16,480,199 $18,217,840 General Administration 2,857,472 2,092,944 unallocated Debt Service 12,725 20,387 Employee benefits - unallocated 743, ,541 unallocated Total Expenses $ 37, $ ,350, ,706-7-

21 Nonnewaug Regional School District #14 Management s Discussion and Analysis (MD&A) June 30, 2016 Governmental Activities The net cost of all governmental activities this year was $29,278,152. The following is a summary of the net cost of governmental activities. Net Cost of Services Instruction $ 12,494,969 $ 14,308,457 Instruction supporting services 2,717,025 2,762,274 General Administration 2,857,472 2,092,944 Plant Services 2,104,555 1,800,308 Transportation 1,630,471 1,825,004 School Lunch Services (18,493) 46,566 Debt Service 12,725 20,387 Depreciation 743, ,541 Capital outlay 1.252,397 (64,402) Employee benefits ,852,743 Total $ $ Financial Analysis of the District s Funds The financial performance of the District as a whole is reflected in its governmental funds as well. As the District completed the year, its governmental funds reported a combined fund balance of $2,472,879 which compares to last year s ending fund balance of $1,463,145. This was an increase in the fund balance of $1,009,734. General Fund Budgetary Expenditure Highlights A schedule of the District s original and final budget amounts compared with actual revenues and expenses are provided in the supplemental section of the audited financial report. General fund expenditures for the fiscal year ended June 30, 2016 totaled $32,736,726 and was equal to the approved budgeted expenditures. Variance include the following key items: Salaries certified Favorable to budget by $102,161 Salaries classified Unfavorable to budget by $198,551 Employee Benefits - Favorable to budget by $379,684. Purchased Services Unfavorable to the budget by $596,970. Transfers to other funds The state legislature established the ability to transfer to a capital reserve fund up to 1% of its approved appropriation. The Board of education again voted to transfer to this fund $325,755 for future capital or non-recurring expenditures. This fund can be carried forward each year and is subject to Board of Education approval for expenditures made from it and the balance at the end of the year is $1,024,

22 Nonnewaug Regional School District #14 Management s Discussion and Analysis (MD&A) June 30, 2016 A summary of interfiand transfers follows: Transfers Received Transfers To Major Funds: From Other Funds Other Funds General Fund $ $ 655,821 Debt Service Fund 283,500 Capital Reserve Fund 325,755 Food Service Fund $ SiZ1. Economic Factors and Next Year s Budgets and Rates At the time these financial statements were prepared and audited, the DistrictS contemplated the following factors that could affect its financial planning process in the future. - The uncertainty of federal and state funding will have an impact on the financial operations of the District. The State of Connecticut is again anticipating reductions to their budget which will impact funding to local schools and towns. This includes the support the State provides to the funding of special needs students whose costs significantly exceeds the average per pupil cost in the District. The estimated revenue loss to Region 14 for the Excess Cost Grant proposed elimination is $415, The Towns of Woodbury and Bethlehem continue to be concerned with the effect the current economic climate may have on their ability to generate revenue while holding taxes steady. The First Selectman from each town has raised concerns about increases in town budgets and the likely decreases in state funding and possible exposure to fund a significant portion of the annual contribution to the CT Teachers Retirement System formerly funded by CT State Government. - The District has sought to reduce staffing levels as student enrollment drops by offering early retirement packages to teachers willing to retire at the end of the June 30, 2016 fiscal year. The effort to reduce staffing has resulted in a 5% overall reduction in staff throughout the District. - The District has continued to subsidize the Food Service Fund with cumulative transfers from the General Fund totaling $140,316 since the fiscal year ending June 30, However, for the year ending June 30, 2016 the Food Service Fund realized a positive change in fund balance excluding the current year transfer of last year fund deficit of $46,566. At June 30, 2016, the Food Service Fund had a fund balance 18,493. Contacting the District s Financial Management This financial report is designated to provide our citizens, taxpayers, parents, participants, investors and creditors with a general overview of the District s finances and to demonstrate the District s accountability for the money it receives. If you have questions about this report, or need additional financial information, contact the business office of Nonnewaug Regional School District #

23 Nonnewaug Regional School District #14 Towns of Bethlehem and Woodbury Statement of Net Position June 30, 2016 Governmental Activities Assets: S Cash and cash equivalents 2,979,366 Receivable - miscellaneous fees 143,913 Inventory 14,227 Due from State of Connecticut 415,926 Non Current Assets: Capital assets - net 15,715,921 Total Assets 19,269,353 Liabilities: Accounts payable 864,856 Net Pension Liability 1,214,286 Other Post Retirement Benefit Obligation 2,316,722 Unearned revenue 215,697 Non Current Liabilities: Due within one year 177,678 Due in more than one year 2,344,438 Total Liabilities 7,133,677 Deferred Inflows of Resources: Difference between projected and actual earnings on pension plan investments 57,934 Net Position: Investment in capital assets, net of related debt 15,112,771 Restricted for: Member towns 95,620 Special accounts 34,245 Food service 18,493 Preschool program 8,597 Debt service 38,143 Other post-employment benefits 807,206 Reserve for Specific Capital Improvements 1,024,712 Unrestricted (5,062,045) Total Net Position $ 12,077,742 The accompanying notes are an integral pan of these financial statements. -10-

24 Change in net position 431,020 Nonnewaug Regional School District #14 Towns of Bethlehem and Woodbury Statement of Activities Year Ended June 30, 2016 Functions Governmental activities: Instructional services Supporting services: Instructional staff Administrative Operation and maintenance of facilities Transportation School lunch services Interest on long-term liabilities Depreciation - unallocated Capital outlay - Employee benefits - unallocated unallocated Total school district Expenses $ 16,480,199 $ 2,717,025 2,857,472 2,104,555 1,711, ,500 12, ,373 1,350,512 8,652,890 $ 37,328,732 $ Charges for Services Program Revenues Operating Grants and Grants and Conirihufions 1,890,120 $ 2,095,110 $ 81, , ,246 3,169,232 Capital Contributions 98,115 2,459,867 $ 5,492,598 $ 98,115 Net (Expense) Revenue and Changes in Net Position Total Governmental Activities $ (12,494,969) (2,717,025) (2,857,472) (2,104,555) (1,630,471) 18,493 (12,725) (743,373) (1,252,397) (5,483,658) (29,278,152) General revenues: Participating towns: Town of Woodbury Town of Bethlehem Unrestricted earnings on investments Miscellaneous Total general revenues 22,479,871 7,187,029 5,522 36,750 29,709,172 Net position - beginning Net position - ending 11,646,722 $ 12,077,742 The accompanying notes are an integral part of these financial statements. 11

25 42,842 Nonnewaug Regional School District #14 Towns of Bethlehem and Woodhury Balance Sheet Governmental Funds June 30, 2016 Assets: Cash and cash equivalents Inventory Due from other hinds Due from St. of Connecticut Accounts receivable Total Assets Liabilities: $ Accounts payable Employment termination benefits Due to other funds Due to pension trust Accrued payroll Unearned revenue Total Liabilities $ Major Funds Capital Project Reserve For High School Specific Capital General Renovation Improvements 2,497, , ,314 94,643 $ 3,398, ,941 94,501 $ $ 1,024,712 Debt Service $ $ $ --- $ 1,024,712 $ 421,944 $ Other Governmental Funds ,297 14,227 46, ,612 49, ,972 $ $ $ $ $ $ 1,071, ,085 Total Governmental Funds 2,979,366 14,227 1,636, , ,913 5,189, ,941-94, ,940 1,636, , , , , ,697 $ 215,697 1,936, , , ,637 2,716,657 Fund Balances: Nonspendable: Inventories Restricted for: Capital and nonrecurring Member towns Committed for: Other post-retirement benefits Debt service Special activities Nonnewaug 115 Renovation Unassigned Total Fund Balances Total Liabilities and Fund Balances $ 95, ,206 14,227 14,227 1,024,712 95, ,206 38,143 38,143 (114,085) 559,948-42,842 (114,085) 4, ,214 1,462,774 (114,085) 1,024,712 38,143 61,335 2,472,879 3,398,908 $ --- $ 1,024,712 $ 421,944 $ 343,972 $ 5,189,536 The accompanying notes are an integral pan of these financial statements. -12-

26 Total net position of governmental activities $ 12,077,742 in the statement of net position is different because: reported in the Total net position reported for governmental activities Total fund balances for governmental funds $ 2,472,879 June 30, 2016 All liabilities - both current and long-term - are The accompanying noles are an integral pafl of these financial statements Net pension liability $ (1,214,286) Other post retirement benefit obligation (2,316,722) Leases payable (603,150) Early retirement payable and other compensated absences (1,731,471) (6,053,124) Termination benefits payable (187,495) Long-term liabilities that pertain to governmental funds, including bonds payable, are not due and payable in the current period and therefore are not reported as fund liabilities. statement of net position. Balances at year-end are: Deferred inflows related to pensions (57,934) pay for current period expenditures, and therefore, are unavailable in the funds: Other long-term assets and deferred outflows of resources are not available to Capital assets used in governmental funds are not financial resources and therefore are not reported in the funds. Capital assets, net of $15,047,742 accumulated depreciation 15,715,921 to the Statement of Net Position Towns of Bethlehem and Woodhury Nonnewaug Regional School District #14 Reconciliation of the Balance Sheet of Governmental Funds

27 280,000 Nonnewaug Regional School District #14 Towns of Bethlehem and Woodhury Statement of Revenue, Expenditures and Changes in Fund Balances Governmental Funds Year Ended June 30,2016 Revenue: Participating towns Federal & state grams Investment income Sales of lunches, milk, and other Tuition Other fees and contributions Expenditures: Total Revenues Salaries - Salaries - certified classified Employee benefits Purchased services Supplies and materials Lability and pwperty insurance Dues and fees Cost of food purchased Capital outlay Debt Service: Principal Interest Total Expenditures Other Financing Sources (Uses): Capital lease proceeds Operating iransfers in (out) Total Expenditures and Other Financing Sources (Uses) Excess (Deficiency) of Revenues and Other Sources over Expenditures and Other Uses Fund Balance - beginning of year Fund Balance - end of year $ General $ 29,666,900 $ 4,923,281 5,479 1,816,998 1,250 36,413,908 15,474,460 3,818,769 8,525,731 4,697, , ,616 71,238 Major Funds Capital Project Resen e for 1,543, ,085 High School Specific Capital Renovation Improvements Other Debt Governmental Service Funds $ $ $ 3, , ,747 73,122 35,500-1,443, , ,117 5,262 22, , ,964 54,563 Total Governmental Funds $ 29,666,900 5,688,828 5, ,747 1,890,120 36,750 37,857,866 15,923,117 4,267,886 8,530,993 4,720,302 1,067, ,616 71, ,964 1,711, ,000 3,500 35,172, , ,500 1,423,107 36,993, ,900 (655,821) , , ,500 46,566 35,683, ,085 (325,755) 1,376,541 36,848, ,647 (114,085) 325,755-67,417 1,009, , ,957 38,143 (6,082) 1,463,145 1,462,774 $ (114,085) $ 1,024,712 38,143 $ 61,335 $ 2,472,879 The accompanying notes are an integral pan of these financial statements. -14-

28 Nonnewaug Regional School District #14 Towns of Bethlehem and Woodbury Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Government Funds to the Statement of Activities Year End June 30, 2016 Net change in fund balances-total governmental funds $ 1,009,734 Amounts reported for governmental activities in the statement of activities are different because: Revenues in the statement of activities do not include revenue from the School Construction Bond Subsidy Grant since this revenue was recognized when the receivable was recorded and not deferred as it was in the fund statements. (98,114) Governmental funds report capital outlays as expenditures. However, in the statement of activities, assets with an initial, individual cost of more than $5,000 are capitalized and the cost is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which capital outlays exceeded depreciation in the current period. Capital outlays 164,165 Depreciation expense (743,373) The governmental funds report bond proceeds as financing sources, while repayment of bond principal is reported as an expenditure. In the statement of net position, however, issuing debt increases long-term liabilities and does not affect the statement of activities and repayment of principal reduces the liability. Also, governmental funds report the effect of issuance costs and premiums when debt is first issued, whereas these amounts are deferred and amortized in the statement of activities, however, interest expense is recognized as it accrues, regardless of when it is due. The net effect of these differences in the treatment of general obligation bonds and related items is as follows: Repayment of bond principal 280,000 Repayment of capital leases Interest expense - general obligation bonds 3,500 Capital lease proceeds (144,900) (559,208) 285,439 In the statement of activities, certain operating expenses - compensated absences (vested days), special termination benefits (early retirement) and pension liability - are measured by the amounts earned during the year. In the governmental funds, however, expenditures for these items are measured by the amount of financial resources used (essentially, the amounts actually paid). During this year the net difference is as followes: Compensated absences and termination benefits (84,934) Post retirement benefit obligation (411,121) Net pension liability 135,457 Change in deferred inflows related to pensions 153,767 Change in net position of governmental activities S 431,020 The accompanying notes are an integral part of these financial statements. -15-

29 Nonnewaug Regional School District #14 Towns of Bethlehem and Woodhury Statement of Fiduciary Net Position Fiduciary Funds June 30, 2016 Assets - Cash and cash equivalents Accounts receivable Investments Total Assets Pension Trust Private Purpose Agency Fund Trust Fund Fund $ $ $ 437, , ,000 3,509,965 $ 3,764,965 $ 437,094 $ 243,137 Liabilities and Net Position: Liabilities: Due to student groups $ --- $ - $ 243,137 Net Position: Held in trust for pension benefits and scholarships $ 3,764,965 $ 437,094 $ - The accompanying notes are an integral part of these financial statements. -16-

30 Nonnewaug Regional School District #14 Towns of Bethlehem and Woodbury Statement of Changes in Fiduciary Net Position Year Ended June 30, 2016 Additions: Contributions Investment income Appreciation in market value Employer contributions Total additions Deductions: Pension benefits Administrative costs Scholarships Net change Total deductions Net Position held in Trust for Pension Benefits and Scholarships: Beginning of Year End of Year Pension Trust Fund $ $ Private Purpose Trust Fund 61,251 58,509 1,128 9, , ,822 62, ,294 22, , ,324 50, ,498 12,304 3,518, ,790 $ 3,764,965 $ 437,094 The accompanying notes are an integral part of these financial statements. -17-

31 Nonnewaug Regional School District #14 Towns of Bethlehem and Woodbury Notes to General-Purpose Financial Statements Note 1 - Summary of Significant Accounting Policies: A. Basis of Presentation: The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP) as applied to government units. The Governmental Accounting Standards Board (GASB) is the accepted standard setting body for establishing governmental accounting and financial reporting principles. Management s Discussion & Analysis provides introductory information on basic financial statements and an analytical overview of the district s financial activities. Government-wide financial statements consist of a statement of net position and a statement of activities, which are prepared on the accrual basis of accounting, These statements distinguish between governmental activities and business-type activities and exclude fiduciary (employee retirement system and agency funds). Capital assets and long-term obligations (general obligation bonds, compensated absences, etc.) are included along with current assets and liabilities. Fund Financial statements provide information about the district s governmental, and fiduciary funds. These statements emphasize major hind activity and, depending on the hind type, utilize different basis of accounting. Governmental funds focus on sources, uses, and balances of current financial resources and often have budgetary orientation, and therefore use a modified accrual basis of accounting utilizing encumbrance accounting. Fiduciary hinds focus on net position and changes in net position, and include assets held in a trustee (Pension Trust Fund and Private Purpose Trust Funds) or agency (Student Activity Funds) and utilize the accrual basis of accounting. Required supplementary information in addition to the MD&A, budgetary comparison schedules are presented for the General Fund, which is the only fund with a legally adopted budget. The original budget for revenues and expenditures and the final adjusted budget are presented in comparison with the actual final budgetary revenues and expenditures (including encumbrances). The Pension Trust Fund presents additional schedules as required by GASB 67. B. Reporting Entity: The school system constitutes an on-going entity established by an act of the state legislature that designated the school board of education as the governing authority. Members of the school board of education are elected by the public and have responsibilities over all activities related to public elementary and secondary school education. The board of education receives local, state, and federal funding, and must therefore comply with various requirements of these funding source entities. However, the board is not included in any other governmental reporting entity as defined in Section 2100, Codification of Governmental Accounting and Financial Standards, since the board of education members are elected by the public and have governing authority. Governing authority includes the power to designate management, the responsibility to significantly influence operations, and primary accountability for fiscal matters. -18-

32 Nonnewaug Regional School District #14 Towns of Bethlehem and Woodbury Notes to General-Purpose Financial Statements Note 1 - Summary of Significant Accounting Policies (continued): For financial reporting purposes, the District s financial statements include all funds and account groups over which the District exercises oversight responsibility in accordance with the criteria set forth in Governmental Accounting Standards Board (GASB) Statement No. 14. Oversight responsibility was determined on the basis of financial independence, selection of governing authority, designation of management, ability to significantly influence operations, accountability for fiscal matters and scope of public services. Based on the aforementioned criteria Nonnewaug Regional School District #14 has no component units. C. Government-wide and Fund Financial Statements Government-wide Financial Statements The statement of net position and the statement of activities display information about the school district as a whole. These statements include the financial activities of the primary government, except for fiduciary funds. The government-wide statement of activities presents a comparison between direct expenses and program revenues for each function or program of the governmental activities of the district. Direct expenses are those that are specifically associated with a service, program or department and therefore clearly identifiable to a particular function. Program revenues include amounts paid by the recipient of goods or services offered by the program and arants and contributions that are restricted to meeting the operational or capital requirements of a particular program. All revenues not classified as program revenues are presented as general revenues of the district. Fund Financial Statements Fund financial statements report detailed information about the District. Their focus is on major funds rather than reporting hinds by type. Each major governmental hind is presented in a separate column, and all nonmajor funds are aggregated into one column. Fiduciary funds are reported by fund type. A description of the various fund financial statements follows: Governmental-Funds: General Fund: This fund is the general operating hind of the District and provides the accounting for budgeted revenue and expenditures applicable to the direct operation of the school system. Special Revenue Funds: These funds account for revenue that is restricted as to its use under specific provisions of law, or donor s intentions. State and Federal Grant Fund, a special revenue fund, accounts for state and federal grants programs which are governed by various rules and regulations of the grantor agencies. -19-

33 Nonnewaug Regional School District #14 Towns of Bethlehem and Woodbury Notes to General-Purpose Financial Statements Note 1 - Summary of Significant Accounting Policies: (continued) Capital Projects Fund: Capital Projects Funds account for financial resources to be used for the acquisition or construction of major capital facilities, which are not financed by Proprietary and Trust Funds. Debt Service Fund: The debt service fund is used to account for the accumulation of resources for, and the payment of, general long-term debt principal, interest, and related costs. Fiduciary Funds: Trust and Agency Funds: Accounts for assets held for the District in a trustee or custodial capacity. Agency funds are custodial in nature (assets equal liabilities) and do not involve measurement of results of operations. Pension Trust Funds: Accounts for the activities of the District s single-employer public employee retirement system (PERS). Private Purpose Trust Funds: Accounts for scholarship funds held in trust for the benefit of individuals. D. Measurement Focus and Basis of Accounting: Measurement Focus: Government-wide Statements The government-wide statements are prepared using the economic resources measurement focus. This is the same approach used in the preparation of proprietary fund financial statements but differs from the manner in which governmental fund financial statements are prepared. Governmental fund financial statements therefore include a reconciliation with brief explanations to better identify the relationship between the government-wide statements and the statements for governmental funds. Fund Financial Statements The accounting and financial reporting treatment applied to a fund is determined by its measurement focus. All governmental funds are accounted for using a flow of current financial resources measurement focus. With this measurement focus, only current assets and current liabilities generally are included on the balance sheet. Operating statements of these funds present increases (i.e., revenues and other financing sources) and decreases (i.e., expenditures and other financing uses) in net current assets. -20-

34 Nonnewaug Regional School District #14 Towns of Bethlehem and Woodbury Notes to General-Purpose Financial Statements Note 1 - Summary of Significant Accounting Policies: (continued) Basis of Accounting: Basis of accounting refers to when revenues and expenditures or expenses are recognized in the accounts and reported in the financial statements. Government-wide financial statements are prepared using the accrual basis of accounting. The Fund financial statements are prepared using either modified accrual for governmental funds or accrual basis for fiduciary funds. Revenues, Exchange and Non-exchange Transactions Revenue resulting from exchange transactions is recorded on the accrual basis when the exchange takes place. On a modified accrual basis, revenues are recognized in the accounting period when they become both measurable and available. Available means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current fiscal year. Nonexchange transactions, in which the District receives value without directly giving equal value in return, include contributions by member towns, grants, entitlements and donations. On an accrual basis, revenue from member towns is recognized in the fiscal year for which the amounts are due. Revenue from grants, entitlements and donations is recognized in the fiscal year in which all eligibility requirements have been met. On the modified accrual basis, revenue from nonexchange transactions must also be available before it can be recognized. In applying the susceptible to accrual concept under the modified accrual basis, the following revenue sources are deemed both measurable and available: contributions by member towns, investment earnings, tuition, grants and student fees. Expenditures/Expenses On the accrual basis of accounting, expenses are recorded at the time they are incurred. The measurement focus of governmental fund accounting is on flow of current financial resources. Expenditures are generally recognized in the accounting period in which the related fund liability is incurred except for (1) principal and interest on general long-term debt, which is recorded when due, and (2) the costs of accumulated unpaid vacation and sick leave, which are reported as fund liabilities in the period in which they will be liquidated with available financial resources rather than in the period earned by employees. B. Fund Equity and Net Assets Governmental Funds: Beginning with fiscal year 2011, the District implemented GASB Statement 54 Fund Balance Reporting and Governmental Fund Type Definitions. This Statement provides more clearly defined fund balance categories to make the nature and extent of the constraints placed on a government s fund balance more transparent. The following classifications describe the relative strength of the spending constraints placed on the purposes for which resources can be used. - Non spendable fund balance amounts that are not in a spendable form (such as inventory) or are required to be maintained intact, legally or contractually. - Restricted fund balance amounts constrained to specific purposes by external parties, constitutional provisions or enabling legislation. - Committed fund balance amounts constrained to specific purposes by the government itself, using its highest level of decision-making authority, the Board of Education. - Assigned fund balance amounts the government intends to use for a specific purpose, but are neither restricted nor committed, as authorized by the Board of Education. - Unassigned fund balance amounts that are available for any purpose. -21-

35 Nonnewaug Regional School District #14 Towns of Bethlehem and Woodhury Notes to General-Purpose Financial Statements Note 1 - Summary of Sianificant Accounting Policies: (continued) F. Deposits and Investments: The deposit of public funds is controlled by the Connecticut General Statutes (Section 7-402). Deposits may be placed with any qualified public depository as defined by statute, which has its main place of business in the State of Connecticut. The District s cash and cash equivalents are comprised of cash on hand, demand deposits, and all other highly liquid, short-term investments with original maturities of three months or less. The Connecticut General Statutes authorize the investment of funds in the obligations of the United States, or may be invested in any state or other tax exempt political subdivision under certain conditions. Funds may also be deposited in the State Treasurer s Short-Term Investment Fund (STW). The provisions of the statutes regarding the investments of municipal pension funds does not specify permitted investments. Therefore investments of such funds is generally controlled by the laws applicable to fiduciaries and the provisions of the applicable pension plan. District Investments are reported at fair value. G. Inventories: Inventories are valued at cost using the first-inifirst-out (FWO) method, except for USDA donated comnodities, which are valued at market value. The cost of governmental fund type inventories, are recorded as expenditures when consumed rather than when purchased. Inventories are comprised of food products for the School Cafeteria Fund. H. Prepayments: Certain payments to vendors provide benefits in future accounting periods and therefore are recorded as prepayments on both government-wide and fund financial statements. I. Capital Assets and Depreciation General capital assets are reported in the government-wide statement of net assets but are not reported in the fund financial statements. All capital assets are capitalized at cost (or estimated historical cost) and updated for additions and retirements during the year. Donated fixed assets are recorded at their fair market values as of the date received. The District follows the policy of not capitalizing assets with a cost of less than $5,000 and a useful life of less than 1 year. The District does not possess any infrastructure. All reported capital assets, with the exception of land, are depreciated. Improvements are depreciated over the remaining useful lives of the related capital assets. Depreciation is computed using the straight-line method over the following useful lives: Description Useful Life Land not depreciated Land improvements Buildings & Improvements Furniture and Equipment

36 interfund transfers. Interfund transfers are reported as other financing sources/uses in governmental funds June 30 by those employees who are currently eligible to receive termination payments and those employees -23- Rows of cash or goods from one fund to another without a requirement for repayment are reported as Note 1 - Summary of Significant Accounting Policies: (continued) J. Thterfund Activity and after nonoperating revenues/expenses in proprietary funds. are accrued as a liability using the vesting method. The liability is based on the sick leave accumulated at N. Estimates Notes to General-Purpose Financial Statements Vacation benefits are accrued as a liability as the benefits are earned if the employee s right to receive compensation are attributable to services already rendered and it is probable that the employer will compensate the employees for the benefits through paid time off or some other means. Sick leave benefits and then assigned fund Nonnewaug Regional School District #14 Towns of Bethlehem and Woodbury The preparation of financial statements in conformity with generally accepted accounting principles statements and accompanying notes. Actual results may differ from those estimates. requires management to make estimates and assumptions that affect the amounts reported in the financial assets), the District s policy is to first apply the expense toward restricted resources and then toward unrestricted resources. hi governmental funds, the District s policy is to first apply the expenditure toward balances before using unassigned balances. restricted fund balance and then to other, less-restrictive classifications When an expense is incurred that can be paid using either restricted or unrestricted resources (net M. Use of Restricted Resources governmental fund liability if due for payment as of the balance sheet date regardless of whether they will be liquidated with current financial resources. However, claims and judgments and compensated absences paid expected to be financed from expendable available financial resources. Long-term debt paid from governmental funds is not recognized as a liability in the fund financial statements until due. For governmental fund financial statements, the accrued liabilities are generally reported as a from governmental funds are reported as a liability in the fund financial statements only for the portion been recorded as a current liability to the extent that the amounts are expected to be paid using expendable The entire compensated absence liability is reported on the government-wide financial statements. For governmental fund financial statements, the amount of accumulated vacation and sick leave of employees has available financial resources. The balance of the liability is not recorded. funds. These amounts are eliminated in the statement of net assets. On fund financial statements, short-term interfund loans are classified as interflrnd due from/to other K. Compensated Absences for whom it is probable they will become eligible to receive termination benefits in the future. The criteria for determining the vacation and sick leave liability is derived from Board policy, negotiated agreements, and L. Accrued Liabilities and Long-term Debt All accrued liabilities and long-term debt are reported in the government-wide financial statements. state laws. committed

37 -24- outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position or fund balance that applies to a future period or periods and so will not be recognized as an outflow of resources (expense/expenditures) until then. inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position or fund balance that applies to a future period of periods and so will not be recognized as an inflow of resources (revenue) until that time. The District reports a deferred inflow of resources related to projected and actual earnings of the pension plan. Compliance, and Accountability: Q. Net Pension Liability In addition to assets, the statement of net position will sometimes report a separate section for deferred In addition to liabilities, the statement of net position will sometimes report a separate section for deferred of Significant Accounting Policies: (continued) Summary Notes to General-Purpose Financial Statements Nonnewaug Regional School District #14 Towns of Bethlehem and Woodbury at the annual public budget meeting. Before March 31, the proposed budget is presented to the finance committee for review. By the end of April the proposed budget will be reviewed and adopted by the Regional Board of Education to be presented to the Regional School Board Central Office administration so that the general fund budget may be prepared. On or before the last Wednesday in January of each year all cost centers submit requests for appropriations Note 2 fiduciary net position. The pension plan s fiduciary net position is determined using the same valuation methods that are used by the pension plan for purposes of preparing its statement of fiduciary net position. The net position liability is measured as of a date (measurement date) no earlier The net pension liability is measured as the portion of the actuarial present value of projected benefits that is attributed to past periods of employee service (total pension liability), net of the pension plan s than the end of the employer s prior fiscal year, consistently applied from period to period. met or when the government has legal claim to the resource, the unearned revenues is removed from the balance sheet, and revenue is recognized. Unearned revenues arise when potential revenue does not meet both the measurable and available criteria for recognition in the current period. Unearned revenues also arise when resources are received before the District has legal claim to them, as when grant monies are received prior to the issuance of qualifying expenditures. In subsequent periods, when both revenue recognition criteria are P. Unearned Revenues Note 1 - Stewardship. 0. Deferred Outflows and Deferred Inflows of Resources

38 Nonnewaug Regional School District #14 Towns of Bethlehem and Woodhury Notes to General-Purpose Financial Statements Note 2 - Stewardship. Compliance, and Accountability (continued): Not less than two weeks before the annual meeting held pursuant to C.G.S. Section 10-47, the board shall hold a public district meeting to present a proposed budget for the next fiscal year. Any person may recommend the inclusion or deletion of expenditures at such time. After the public hearing, the board prepares an annual budget for the next fiscal year. At the annual meeting on the first Monday in May, the board presents a budget which includes a statement of (1) estimated receipts and expenditures for the next fiscal year, (2) estimated receipts and expenditures for the current fiscal year, (3) estimated surplus or deficit in operating funds at the end of the current year, (4) bonded or other debt, (5) estimated per pupil expenditure for the current and for the next fiscal year and (6) such other information as is necessary in the opinion of the board. Persons present and eligible to vote under section 7-6 may accept or reject the proposed budget. The regional board of education may, in the call to the meeting, designate that the vote on the motion to adopt a budget shall be by paper ballots at the district meeting held on the budget or by a yes or no vote on the voting machines in each of the member towns on the day following the district meetings. After budget approval, the board shall estimate the net expenses to be paid by each member town. The budget for the general fund has substantially been prepared on the modified accrual basis. Encumbrances, commitments related to unperformed contracts for goods or services, are recognized as a valid and proper charge against a budget appropriation in the year in which the purchase order, contract or other commitment is issued and, accordingly, encumbrances outstanding at year-end are reflected in the budgetary reports as expenditures in the current year. Actual expenditures in the budgetary statement include current encumbrances as described above. This method of accounting, for encumbrances, is different from that utilized in the balance sheet and statement of revenue and expenditures (GAAP basis). Encumbrances on a GAAP basis are not expenditures but are included in Unassigned Fund Balance. A reconciliation of general fund expenditures and fund balance between the accounting treatment for encumbrances as required by GAAP and legal requirements follows: General Fund Expenditures and Other Revenue Financing Uses Fund Balance Budgetarv/GAAP Reporting Reconciliation: Budgetary statement June 30, 2016 $32,762,187 $ 32,736,726 $ 95,620 Encumbrances June 30, 2016 (372,453) 372,453 Encumbrances June 30, ,307 Payments made on the Districts behalf described in Note 11 3,169,232 3,169,232 Consolidation of the other post-employment benefit fund into the general fund (579,545) 807,206 Employment termination benefits payable not treated as liability and expense on general fund (187,495) 187,495 Revenue budgeted as an offset to expenditures: State of Connecticut special education grant 482, Balance (GAAP) Balance Sheet and Statement of Revenue and Expenditures June $216E3,261 $4A62224 Note 3 - Budgetary Compliance - Special Revenue Fund: No formal budget is adopted. -25-

39 Nonnewaug Regional School District #14 Towns of Bethlehem and Woodbury Notes to General-Purpose Financial Statements Note 4 Cash and Cash Equivalents. Deposits and Investments: A. Cash and Cash Equivalents The following is a summary of cash and cash equivalents at June 30, 2016: Governmental Funds Demand Accounts $ 2,978,866 Cashon hand 500 Fiduciary Fund - Demand Accounts 680,231 Total Cash and Cash Equivalents * Cash equivalents include short-term, highly liquid investments that are both readily convertible to known amounts of cash with a maturity of 60 days. B. Deposits Deposits - Custodial credit risk is the risk that in the event of a bank failure, the District s deposits may not be returned to it. The District does not have a deposit policy for custodial credit risk. As of June 30,2016, $3,705,388 of the District s bank balance of $4,063,822 was exposed to custodial credit risk as follows: C. Investments Uninsured and uncollatedalized $ 3,309,849 Uninsured and collaterialized held by pledging Bank s tmst department not in the District s name 395,539 Total amount subject to custodial credit risk At June 30, 2016, the District s investments consisted of the following: Average Investment Types of Investments Fair Value Credit Rating Maturity Fiduciary Fund Money market funds S 150,807 AAA N/A Equity mutual funds 2,359,216 unrated N/A Fixed income mutual funds ** unrated N/A Total Fiduciary Funds ** These securities are uninsured and unregistered held by counterparties, but not in the District s name. - Ratings - Interest - Credit by Standard & Poor s are provided where applicable to indicate the associated credit risk. N/A indicates not applicable. rate risk - The District 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. risk - The District has no investment policy that would limit its investment choices due to credit risk other than State Statutes governing investments in obligations or any State or political subdivision or in obligations of the State of Connecticut or political subdivision. -26-

40 Note 4 Cash D. Investments are obtained from various pricing sources by the custodian bank. As of June 30, 2016, the District s investments are measured on a recurring basis using Level 1 and intergovernmental grants and entitlements. All receivables are considered collectible in full based on to the first five teachers choosing to accept the plan. The District will pay the teachers health insurance and at the end of June 2016 and are eligible for vacation and sick time payout under the district s current policy. The District categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to unobservable inputs. The District s investments that are classified in Level 1 are measured on a recurring basis, using classified in Level 2 are measured using matrix pricing techniques using various pricing vendors. Matrix pricing is used to value securities based on their relationship to benchmark quoted prices. Fair value is defined as the quoted market value on the last trading day of the period. These prices District does not hold any investments on June 30, 2016 whose fair value was determined using and Cash Equivalents, Deposits and Investments (continued): measure fair values of the assets. Level 1 inputs are quoted prices in an active market for identical assets; Level 2 inputs are significant other observable inputs; and Level 3 inputs are significant market quotations for investments that have quoted prices in active markets. Investments that are information (market quotations for investments that have quoted prices in active markets). The Level 2 or Level 3 inputs. Notes to General-Purpose Financial Statements Note. 5 Receivables and amounts due from State of Connecticut at June 30, 2016 consisted of various fees, interest prior years experience and the stable condition of State programs. and Due from State of Connecticut: At June 30, 2016 the amounts due to and from other funds were as follows: Note 6 - General Fund State and Federal Grants $ 8,590 General Fund High School Renovation 114,085 Receivable Fund Payable Fund Amount Preschool Program General Fund 46,566 Accounts: Reserve for Specific Capital Improvement General Fund 1,024,712 General Fund Debt Service 383,801 Total Note 7 Employment Termination Benefits: For the year ended June 30, 2016, the District offered early retirement incentive plan to all teachers limited health insurance deductibles for the next four years after termination. In addition, the teachers will receive sick pay payouts over a three-year period. In addition, four additional non-teacher employees chose to retire Nonnewaug Regional School District #14 Towns of Bethlehem and Woodbury General Fund Food Service 24,564 General Fund E-Rate Program Receivables Interfiind -27-

41 Nonnewaug Regional School District #14 Towns of Bethlehem and Woodhury Notes to General-Purpose Financial Statements Note 7 - Long-Term Debt: The following is a summary of activity for the year ended June 30, Balance Balance Amounts Due July 1, 2015 Additions Retirements June in One Year GeneraL Obligation Refunding Bond Issued dated November 23, 2010, payable in a final installment of $280,000 in The interest rate for the issued range from 2% to 3% S ,000 Compensated Absences & Other Leave Benefits Vested or accumulated severance and sick leave. 1, , ,844 1,918,966 Technology Leases 605, , , Totals $ $12 $2i $2i2Z.U $2ZL4Z The following is a summary of the District s future annual debt service requirements to maturity for: Technology Leases: Year Endin June 30 Principal hiterest Total 2017 S 177,678 S 12,763 $ 190, ,417 9, , ,089 5, , ,739 2,407 84, $ $ $J

42 Nonnewaug Regional School District #14 Towns of Bethlehem and Woodbury Notes to General-Purpose Financial Statements Note 8 Capital Assets: Capital asset activity for the year ended June 30, 2016 was as follows: Balance Deletions and Balance July 1,2015 Increases Reclasses June 30, 2016 Governmental activities $ $ $ $ Capital assets, not being depreciated Land 494, ,814 Capital assets, being depreciated: ,332,996 Buildings and improvements 28,332,996 Furniture and equipment 1,895, ( ) Total capital assets, being depreciated 30,228, ,165 (144,064) 30,268,849 Accumulated depreciation for: Buildings and improvements 13,383, ,451 Furniture and equipment ( ) 1, Total accumulated depreciation 14,448, ,373 (144,064) 15,047, Total capital assets, being depreciated, net , ,208) Governmental activities capital assets, net $ $ç.22) S inai Note 9 - Employees Retirement System. Non-certified Employee Plan A: Plan Description and Benefits Provided Nonnewaug Regional School District #14 s is the administrator of a single-employer public employee retirement system (PERS) established and administered by the Board of Education for its non-certified employees. The PERS is considered to be a part of the District s reporting entity and is included in the District s financial reports as a pension trust fund. As of July 1,2015, the date of the last actuarial valuation, the plan s membership consisted of the following: Retirees, disabled and beneficiaries currently receiving benefits 21 Terminated employees entitled to benefits but not yet receiving them 6 Current plan members Total The plan is a contributory single employer, defined benefit plan and covers substantially all full-time noncertified employees. In order to be eligible for the plan, the employee must complete 1 year of service and attain a minimum age of 21. Under the plan, all 10 months salaried employees or full-time hourly employees at least 25 years of age and having completed one year of service are eligible. There were no major plan changes for the July 1,2015 actuarial valuation. Normal Retirement Date is the first of the month coincident with or next following the later of age 65 and 10 years of plan participation. The monthly benefit at Normal Retirement is equal to 30% of Average Compensation, reduced proportionately for less than 15 Years of Service. The plan contains a provision for early retirement upon the attainment of age 55 and the completion of 10 Years of Participation. The amount -29-

43 Nonnewaug Regional School District #14 Towns of Bethlehem and Woodbury Notes to General-Purpose Financial Statements Note 9 - Employees Retirement System. Non-certified Employee Plan (continued) of the benefit is based on the employee s Vested Accrued Benefit as of his Early Retirement Date. The benefit is payable in full at Normal Retirement Date! or in an actuarially reduced amount if ihe benefits commence prior to Normal Retirement Date. The death benefit for the plan is the present value of accrued benefits. Participants are entitled to a percentage of accrued pension payable at theft normal retirement dated based upon the following schedule: Full Years of Vested Percentage Credited Services of Accrued Benefit Less than 4 0% 4 40% 5 50% 6 60% 7 70% 8 80% 9 90% loormore 100% Summary of Significant Accounting Policies and Plan Asset Matters Basis of Accounting The pension trust fund s financial statements are prepared using the accrual basis of accounting. Revenues (contributions and investment income) are recognized when they are earned, and expenses (benefits) are recognized when they are due and payable in accordance with the terms of the plan. Method Used to Value Investments Investments are valued at fair value based upon quoted market prices. B: Contributions and Funding Policy: Contribution requirements of the plan members and the District are established and may be amended by the Board of Education. Plan members are required to contribute 5% of their earnings to the plan. The District is required to contribute at an actuarially determined rate. The District s contribution for the year ended June 30, 2016 represented 23.92% of covered payroll. Administrative costs of the plan are financed through investment earnings of the plan s assets. C: Investments Investment Policy: The pension plan s policy in regard to the allocation of invested assets is established and may be amended by the Board of Education by a majority vote of its members. It is the policy of the Board of Education to pursue an investment strategy that reduces risk through the prudent diversification of the portfolio across a broad selection of distinct asset classes. The pension plan s investment policy discourages the use of cash equivalents, except for liquidity purposes, and aims to refrain from dramatically shifting asset class allocations over short time spans. The following was the Board s adopted asset allocation policy as of June 30, 2016: -30-

44 Nonnewaug Regional School District #14 Towns of Bethlehem and Woodbury Notes to General-Purpose Financial Statements Note 9 - Employees Retirement System. Non-certified Employee Plan (continued) Target Asset Class Allocation Cash 5.00% US GovtlCredit Fixed Income 28.00% High Yield Bonds 2.00% US Large and Mid Cap 54.00% US Small Cap 6.00% Int l Equity- Developed 5.00% There were no investments that represented more than 5% of the plan s fiduciary net position. Rate of Return: For the year ended June 30, 2016, the annual money-weighted rate of return on pension plan investments, net of pension plan investment expense, was 1.95%. The money-weighted rate of return expresses investment performance, net of investment expense, adjusted for the changing amounts actually invested. D: Net Pension Liability of the District The components of the net pension liability of the District at June 30, 2016, were as follows: Total pension liability $ 4,979,251 Plan fiduciary net position 3, Net Pension Liability $ Plan fiduciary net position as a percentage of the total pension liability % Actuarial Assumptions The total pension liability was determined by an actuarial valuation as of July 1, 2015, using the following actuarial assumptions, applied to all periods included in the measurement: Inflation 3.00% Salary increases 3.50% Investment rate of return 7.40% Mortality rates were based on the RP-2000 Mortality Table with separate males and female rates, with Total Dataset adjustment, separate tables for non-annuitants and annuitants, projected to the valuation date with Scale AA. The long-term expected rate of return on pension plan investments 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 real rates of return for each major asset class included in the pension plan s target asset allocation as of June 30, 2016 (see the discussion of the pension plan s investment policy) are summarized in the following table: -31-

45 Nonnewaug Regional School District #14 Towns of Bethlehem and Woodbury Notes to General-Purpose Financial Statements Note 9 - Employees Retirement System! Non-certified Employee Plan (continued) Long-Term Target Expected Real Asset Class Allocation Rate of Return Cash 5.00% 2.00% US Govt/Credit Fixed Income 28.00% 3.00% High Yield Bonds 2.00% 6.00% US Large and Mid Cap 54.00% 7.00% US Small Cap 6.00% 7.25% Int l Equity- Developed 5.00% 8.00% Discount Rate: The discount rate used to measure the total pension liability was 7.40%. The projection of cash flows used to determine the discount rate assumed that plan member contributions will be made at the current contribution rate and that District contributions will be made at rates equal to the difference between actuarially determined contribution rates and the member rate. Based on those assumptions, the plan s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payment to determine the local pension liability. E: Net Pension Liability of the District Increase (Decrease) Total Pension Plan Fiduciary Net Pension Liability Net Position Liability (a) (b), (a)-(b) Balances as of June 30, 2015 $ 4,868,210 $ 3,518,467 $ 1,349,743 Changes for the Year Service cost 235, ,893 Interest on total pension liability 363, ,266 Differences between expected and actual experience ( 90,824) (90,824) Employer contributions 597,600 (597,600) Net investment income 68,222 (68,222) Administrative expense (22,030) 22,030 Benefit payments (397,294) (397,294) - Net changes 111, ,498 (135,457) Balances as of June 30, 2016 $ $ $jzj4, Sensitivity of the Net Pension Liability to Changes in the Discount Rate: The following presents the net pension liability of the District, calculated using the discount rate of 7.40%, as well as what the District s pension liability would be if it were calculated using a discount rate that is I percentage point lower (6.40%) or 1 percentage point higher (8.40%) than the current rate: Current 1% Decrease Discount Rate 1% Increase (6.40%) (7.40%) (8.40%) Total Net Pension Liability $ 1,678,513 $ 1,214,286 $ 810,

46 Nonnewaug Regional School District #14 Towns of Bethlehem and Woodbury Notes to General-Purpose Financial Statements Note 9 - Employees Retirement System, Non-certified Employee Plan (continued): F: Pension Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions For the year ended June 30, 2016, the District recognized pension expense of $308,376. At June 30, 2016, the District reported deferred outflows of resources and deferred inflows of resources related to pension from the following sources: Deferred Outflows Deferred Inflows of Resources of Resources Differences between expected and actual experiences $ --- $ (74,605) Net difference between projected and actual earnings of plan investments S $ (74.605) Amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows: Year Ending June 30, 2017 $ (55,235) 2018 (55,234) , , (9.729) $ (57.934) Note 10 State of Connecticut Teachers Retirement System A. General Information about the Pension Plan Teachers, principals, superintendents or supervisors engaged in service of public schools are provided with pensions through the Connecticut State Teachers Retirement System, a cost sharing multiemployer defined benefit pension plan administered by the Teachers Retirement Board. Chapter 167a of the State Statutes grants authority to establish and amend the benefit terms to the Teachers Retirement Board. The Teachers Retirement Board issues a publicly available financial report that can be obtained at B. Summary of Significant Accounting Policies For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pension, and pension expense, information about the fiduciary net position of the Teachers Retirement System have been determined on the same basis as they are reported by the Connecticut Teachers Retirement System. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms, Investments are reported at fair value. C. Benefit Provision The plan provides retirement, disability, and death benefits. Employees are eligible to retire at age 60 with 20 years of credited service in Connecticut, or 35 years of credited service including at least 25 years of service in Connecticut. -33-

47 Nonnewaug Regional School District #14 Towns of Bethlehem and Woodbury Notes to General-Purpose Financial Statements Note 10 - State of Connecticut Teachers Retirement System (continued) Normal Retirement: Retirement benefits for the employees are calculated as 2% of the average annual salary times the years of credited service (maximum benefit is 75% of average annual salary during the 3 years of highest salary). In addition, amounts derived from the accumulation of 1% contributions made prior to July 1, 1989 and voluntary contributions are payable. Early Retirement: Employees are eligible after 25 years of credited service including 20 years of Connecticut service, or age 55 with 20 years of credited service including 15 years of Connecticut service with reduced benefit amounts. Disabiliiy Retirement: Employees are eligible for service-related disability benefits regardless of length of service. Five years of credited service is required for nonservice-related disability eligibility. Disability benefits are calculated as 2% of average annual salary times credited service to date of disability, but not less than 15% of average annual salary, nor more than 50% of average annual salary. D. Contributions State of Connecticut: Per Connecticut General Statutes Section z (which reflects Public Act as amended), contribution requirements of active employees and the State of Connecticut is amended and certified by the State Teachers Retirement Board and appropriated by the General Assembly. The contributions are actuarially determined as an amount that, when combined with employee contributions and investment earnings, is expected to finance the costs of the benefits earned by employees during that year, with any additional amount to finance unfunded accrued liability. Employer (School District): School district employers are not required to make contributions to the plan. Employees: Effective July 1, 1992, each teacher is required to contribute 6% of salary for the pension benefit. E. Pension Liabilities. Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions At June 30, 2016, the District reports no amounts for its proportionate share of the net pension liability, deferred outflows of resources, and deferred inflows of resources, due to the statutory requirement that the State of Connecticut pay 100 percent of the required contribution. The amount recognized by the District as its proportionate share of the net pension liability, the related state support, and the total portion of the net pension liability that was associated with the District were as follows: District s proportionate share of the net pension liability $ State s proportionate share of the net pension liability associated with the District ,506 Total The net pension liability was measured as of June 30, 2015, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation date of June 30, At June 30, 2016, the District has no proportionate share of the net pension liability. -34-

48 Nonnewaug Regional School District #14 Towns of Bethlehem and Woodbury Notes to General-Purpose Financial Statements Note 10 - State of Connecticut Teachers Retirement System (continued) For the year ended June 30, 2016, the District recognized pension expense and revenue of $3,169,232 for on-behaif amounts for the benefits provided by the State. F. Actuarial Assumptions The total pension liability in the June 30, 2014 actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement: Inflation 3.00% Salary increases %. including inflation Investment rate of return 8.50%, net of pension plan investment expense, including inflation Mortality rates were based on the P Combined Mortality Table RP-2000 projected 19 years using scale AA, with a two year setback for males and females for the period after service retirement and for dependent beneficiaries. The actuarial assumptions used in the June 30, 2014 valuation were based on the results of an actuarial experience study for the period July 1, 2005 June 30, Future cost-of-living increases for members who retire on or after September 1, 1992 are assumed to be an annual cost-of-living adjustment of 2%. The long-term expected rate of return on pension plan investments was determined using a log-normal distribution analysis 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 real rates of return for each major asset class included in the plan s target asset allocation are summarized in the following table: Long-Term Target Expected Real Asset Class Allocation Rate of Return Large cap U.S. equities 21.0% 5.8% Developed non-u.s. equities 18.0% 6.6% Emerging markets (non-u.s.) 9.0% 8.3% Core fixed income 7.0% 1.3% Inflation linked bond fund 3.0% 1.0% Emerging market bond 5.0% 3.7% High yield bonds 5.0% 3.9% Real estate 7.0% 5.1% Private equity 11.0% 7.6% Alternative investments 8.0% 4.1% Cash 6.0% 0.4% Total -35-

49 Nonnewaug Regional School District #14 Towns of Bethlehem and Woodbury Notes to General-Purpose Financial Statements Note 10 - State of Connecticut Teachers Retirement System (continued) 0. Discount Rate The discount rate used to measure the total pension liability was 8.50%. The projection of cash flows used to determine the discount rate assumed that plan member contributions will be made at the current contribution rate and the State contributions will be made at the actuarially determined contribution rates in the future years. Based on those assumptions, the pension plan s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to detennine the total pension liability. H. Sensitivity of the Net Pension Liability to Changes in the Discount Rate The District s proportionate share of the net pension liability is $0, and therefore, the change in the discount rate would only impact the amount recorded by the State. I. Pension Plan Fiduciary Net Position Detailed information about the pension plan s fiduciary net position is available in the separately issued financial statements available at J. Other Information Additional information is included in the required supplementary information section of the financial statements. A schedule of contributions is not presented as the District has no obligation to contribute to the plan. Note 1 1 Risk Management and Unpaid Claims Liabilities: The District is exposed to various risks of loss related to torts; theft of, damage to, and distribution of assets; errors and omissions; injuries to employees; and natural disasters. The District maintains commercial insurance coverage for all risks of loss, including workers compensation and employee health and accident insurance. Settled claims resulting from these risks have not exceeded commercial insurance coverage in any of the last three fiscal years. Note 12 - Commitments and Contingencies: Litigation: It is the opinion of the school district officials that there are no material or substantial claims against the district, which will be finally determined so as to result in a judgment or judgments against the district, which would materially effect its financial position. -36-

50 Nonnewaug Regional School District #14 Towns of Bethlehem and Woodhury Notes to General-Purpose Financial Statements Note 12 - Commitments and Contingencies (continued): Grant Programs: The District participates in numerous state and federal grant programs, which are governed by various rules and regulations of the grantor agencies. Costs charged to the respective grant programs are subject to audit and adjustment by the grantor agencies; therefore, to the extent that the District has not complied with the rules and regulations governing the grants, refunds of any money received may be required and the collectibility of any related receivable at June 30, 2015 may be impaired. In the opinion of the District, there are no significant contingent liabilities relating to compliance with the rules and regulations governing the respective grants; therefore, no provision has been recorded in the accompanying combined financial statements for such contingencies. Note 13 Post Retirement Benefits From an accrual accounting perspective, the cost of postemployment healthcare benefits, like the cost of pension benefits, generally should be associated with the periods in which the cost occurs, rather than in the future year when it will be paid. In adopting the requirements of GASB Statement No. 45 during the year ended June 30, 2009, the District recognizes the cost of postemployment healthcare in the year when the employee services are received, reports the accumulated liability from prior years, and provides information useful in assessing potential demand on the District s future cash flows. Recognition of the liability accumulated from prior years will be phased in over 30 years, commencing with the 2009 liability. A. Plan Description The District provides post-retirement benefits for certain employees for current and future health and life insurance benefit expenses through a single-employer defined benefit plan. A bi-annual actuarial valuation is made to determine whether the contributions are sufficient to meet the plan obligations. The latest actuarial valuation was made July 1, The post-retirement plan does not issue stand-alone financial reports. The contribution requirements of plan members and the district are established and may be amended by the District. The District determines the required contribution using the Projected Unit Credit Method. Membership in the plan consisted of the following at July 1, 2014, the date of the last actuarial valuation. B. Funding Policy Retirees and beneficiaries receiving benefits 32 Active plan members 224 Total ZSfi The District has not established a trust fund to irrevocably segregate assets to fund the liability associated with post-employment benefits in accordance with GASB guidelines. -37-

51 basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (or past service cost) over a period no to exceed thirty years. follows: Schedule of Employer Contributions Percentage of Note 13 Post Retirement Benefits (continued) C. Annual OPEB Cost and OPEB Obligations Net OPEB obligation, end of year 4,820,545 S 4,820, % S N/A N/A 5,436,000 $ 5,436, % $ N/A N/A are compared with past expectations and new estimates are made about the future. plan and the annual required contributions of the employer are subject to continual revision as actual results Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts of assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the Annual OPEB Annual OPEB Employer Cost Net OPEB Fiscal Year Ending Cost Contributions Contributed Obligation 6/30/16 $ 557,534 $ 146, % $2,316,722 6/30/14 $ 525,517 $ 187, % $1,514,039 6/30/15 $ 557,673 S 166, % S1,905,601 The District s annual OPEB cost and the percentage of annual OPEB cost contributed to the plan was as 7/1/10 $ --- Date Assets Liability AAL Ratio (Total) of Payroll 7/1/14 $ --- 7/1/12 $ $ 4,946,701 $ 4,946, % $ N/A N/A Actuarial Actuarial Actuarial Covered UAAL as a Valuation Value of Accrued Unfunded Funded Payroll PercentaEe retirees receiving benefits under this plan. The actuarial accrued liability as of July 1,2014 is $4,820,545. As of June 30, 2016 there are 32 Annual OPEB cost 557,534 Interest on net pension obligation 60,562 Adjustment to annual required contribution ( ) Contributions made 146,413 Increase in net OPEB liability 411,121 Net OPEB obligation, beginning of year 1,905,601 OPEB Obligation Annual required contribution $ 566,281 Nonnewaug Regional School District #14 Towns of Bethlehem and Woodbury $ $ Notes to General-Purpose Financial Statements the parameters of GASB Statement 45. The ARC represents a level of funding that, if paid on an ongoing -38- The District s annual other post-employment benefit (OPEB) cost (expense) is calculated on the basis of annual required contribution of the employer (ARC), an amount actuarially determined in accordance with

52 Nonnewaug Regional School District #14 Towns of Bethlehem and Woodbury Notes to General-Purpose Financial Statements Note 13 Post Retirement Benefits (continued) Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. D. Actuarial Assumptions The information presented was determined as part of the actuarial valuation. Additional information as of the last actuarial valuations follows: Note 14 - Transfers: Valuation Date: July 1, 2014 Actuarial Cost Method: Projected Unit Credit Asset Valuation Method: Market Value Amortization Method: Level Percent of Pay Remaining Amortization Period 30 Years Actuarial Assumptions: Investment rate of return 4.00% Medical Inflation rate 3.5% Government interfund transfers during the year ended June 30, 2016 were as follows: Transfers In (Out) General Fund $ (655,821) Debt Service 283,500 Reserve for Specific Capital Improvement 325,755 Food Service 46,566 $ Eliminations Interffind receivables, payables, and transfers are reported in the governmental fund financial statements. In the entity-wide statements, interfund receivables, payables and transfers are eliminated within the governmental activities column. Purpose of Transfers Transfers are used to move unrestricted revenues to finance various programs in accordance with budgetary authorizations and to service debt. -39-

53 Nonnewaug Regional School District #14 Towns of Bethlehem and Woodbury Notes to General-Purpose Financial Statements Note 15 - Operating Deficiencies and Fund Deficits: At June 30, 2016 the following individual funds had deficiencies of revenue over expenditures andlor fund deficits for the year then ended: Operating Fund Deficiency Deficit Hith School Renovation $==Jjj $=JJiQg Note 16 Subsequent Events: In connection with the preparation of the financial statements of Nonnewaug Regional School District #14, subsequent events were evaluated through February 22, 2017, which is the date the financial statements were available to be issued. Note 17 - Implementation of Current GASB Pronouncements hi fiscal year 2016, the District adopted two new statements of financial accounting standard issued by the Governmental Accounting Standards Board (GASB). The new statements include; Statement No. 72, Fair Value Measurement and Application and Statement No. 76, The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments. Note 18 - Implementation of Future GASB Pronouncements The GASB has issued several pronouncements that have effective dates that may impact the June 30, 2017 financial statements. Management has not currently determined what, if any, impact implementation of the following statements may have on the financial statements: Statement No. 73, Accounting and Financial Reporting for Pensions and Related Assets That Are Not within the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASB Statements 67 and 68. Statement No. 74, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans. Statement No.77, Tax Abatement Disclosures. Statement No. 78, Pensions Provided through Certain Multiple-Employer Defined Benefit Pension Plans. Statement No. 79, Certain External Investment Pools and Pool Participants. Statement No. 80, Blending Requirements for Certain Component Units - an amendment of GASB Statement No. 14 Statement No. 82, Pension Issues - an amendment of GASB Statements No 67, No. 68, and No

54 Nonnewaug Regional School District #14 Towns of Bethlehem and Woodbury Schedule of Revenue, Expenditures and Changes in Fund Balances Budget and Actual (NON-GAAP BUDGETARY BASIS) Original General Fund and Final Year Ended June 30, 2016 Budget Revenue: Participating towns S Town of Bethlehem 7,203,854 Town of Woodbury 22,533,205 State of Connecticut Transportation grant 82,613 Adult education grant 5,704 Building projects rants 98,115 Agri-Science/tech grant 1,091,200 Other Investment income Tuition income Other income Total Revenues Expenditures: Current Salaries - certified Salaries - classified Employee benefits Purchased services Supplies and materials Liability and property insurance Dues and fees Capital outlay Total Expenditures Operating Transfers out: Reserve for Specific Capital Improvements OPEB fund Food service Debt Service fund Total Expenditures and Operating Transfers Out 3,000 1,718,035 1,000 32,736,726 15,220,066 3,681,779 5,736,183 5,480,560 1,055, ,825 77, ,079 32,063,126 Actual $ $ 7,187,029 22,479,871 83,278 6,668 98,115 1,083,499 5,479 1,816,998 1,250 32,762,187 15,117,905 3,880,330 5,356,499 4,883,590 1,045, ,616 71, ,847 31,501,360 Variance Over (Under) (16,825) (53,334) (7,701) 2,479 98, , ,161 (198,551) 379, ,970 9,719 (5,791) 6,342 (328,768) 561, ,755 (325,655) ,545 (579,545) - 46,566 (46,566) 673, , ,000 32,736,726 32,736,726 Excess of Revenue Over Expenditures and Transfers ,461 25,461 Fund Balance - beginning of year Fund Balance - end of year $ ,159 $ 70,159 95,620 $ 95,

55 Nonnewaug Regional School District #14 Employee Retirement System, Non-certified Employee Plan Schedule of Changes in Net Pension Liability and Related Ratios Last Three Fiscal Years Total pension liability: Service Cost $ 235,893 $ 223,630 $ 216,068 Interest 363, , ,875 Differences between expected and actual experience (90,824) 27,648 - Eenefit payments, including refunds of member contributions (397,294) (192,023) (170,419) Net change in total pension liability 111, , ,524 Total pension liability - beginning 4,868,210 4,468,700 4,109,176 Total pension liability - ending 4,979,251 4,868,210 4,468,700 Plan fiduciary net position: Contributions - employer 597, , ,806 Net investment income 68, , ,234 Benefit payments, including refunds of member contributions (397,294) (192,023) (170,419) Administrative expenses (22,030) (21,386) (18,968) Net change in plan fiduciary net position 246, , ,653 Plan fiduciary net position - beginning 3,518,467 3,269,702 2,661,049 Plan fiduciary net position - ending 3,764,965 3,518,467 3,269,702 Net Pension Liability - Ending $ 1,214,286 $ 1,349,743 $ 1,198,998 Plan fiduciary net position as a percentage of the total pension liability 75.61% 72.27% 73.17% Covered employee payroll $ 2,498,132 $ 2,504,616 $ 2,400,883 Net pension liability as a percentage of covered employee payroll 48.61% 53.89% 49.94% 42-

56 $ Nonnewaug Regional School District #14 Employee Retirement System, Non-certified Employee Plan Schedule of Employer Contributions Last Ten Fiscal Years Aciuariallydetenninedcontfibution $ 315,120 $ 307,332 $ $ 318,806 $ $ 333,574 $ $ 281,975 $ $ Contributions in relation to the aczuariaflydezermined coninbulion 597, , , , , ,000 Contribution Deficiency (Excess) $ ( ) S (4.120) $ (7.354) $ $ - (16,426) $ 67,703 $ 68,975 $ 82,303 S (9.883) Covered employee payroll $ 2.498,132 $ 2,54,6t6 $ 2.400,883 $ 2,229,09t $ 2,403,920 $ 2, $ 2,278,949 $ t $ 1,525,677 $ 1,339,424 Contributions as a percentage of covered employee payroll 23.92% 12.34% 13.28% 13.85% 12.84% 14.49% 12.37% 10.96% 10.12% 9.85% Notes to Schedule Valuation date: July Measurement date: June 30, 2016 Actuariafly determined contribution rates an calculaled as of June 30. two years prior To the end of the fiscal year in which the contributions are reported. Methods and assumptions used to determine contribution rates: Actuarial cost method Esthy age normal Amonintion method Level dollar: closed period Remaining amortization period 15 years from July 1, t998. Asset valuation method Assets are canted at fair value Inflation 3.00% Salary increases 3.50% Investment rain of return 7.40% Retirement age 65 years Mortality RP-2000 Mortality Table with separate male and female tales, with Total Damsel adjustment. Other: Change of benefit eons Nooe Changes of assumptions None separate tables for noo-annnitants and annuimnls. pmjected to the valuation dare with Scale Ak -43-

57 Nonnewaug Regional School District #14 Employee Retirement System, Non-certified Employee Plan Schedule of Investment Return Last Three Fiscal Years Annual money-weighted rate of return, net of investment expense 1.95% 4.43% 16.55% -44-

58 Nonnewaug Regional School District #14 Schedule of the District s Proportionate Share of the Net Pension Liability State of Connecticut Teachers Retirement System Last Two Fiscal Years District s proportion of the net pension liability 0.00% 0.00% District s proportionate share of the net pension liability $ - $ State s porportionate share of the net pension liability associated with the District 39,553,506 36,559,289 Total $ 39, S 36,559,289 District s covered-employee payroll $ N/A S N/A District s proportionate share of the net pension liability as a percentage of its covered-employee payroll 0.00% 0.00% Plan fiduciary net position as a percentage of the total pension liability 59,50% % Notes to Schedule Actuarial cost method Amortization method Remaining amortization method Asset valuation method Changes in benefit terms Changes of assumptions District s covered-employee payroll Emsy age Level percent of salary, closed 22.4 years 4-year smoothed market None During 2011, rates of withdrawal, retirement and assumed rates of salary increases were adjusted to reflect actual and anticipated experience. These assumptions were recommended as part of the Experience Study for the System for the five-year period ended June 30, Not applicable since 0% proportionate share of the net pension liability 45-

59 49,270 Total Nonnewaug Regional School District #14 Towns of Bethlehem and Woodhury Combining Balance Sheet Nonmajor Governmental Funds Special Revenue Funds June 30, 2016 Assets: Food Special Service Accounts E-Rate State, Federal Program and other Grants $ $ $ $ $ $ Cash and cash equivalents 26,052 60,297 Inventory 14,227 14,227 Due from other funds 46,566 Due from St. of Connecticut 173,612 Accounts receivable 49,270 $ 19,362 34,245 Total Assets 343, ,250 Preschool Program 46,566 59,641 $ 34,245 $ 49,270 $ 154,250 $ 46,566 $ Nomnajor Governmental Funds Liabilities: Due to other funds Unearned revenue Total Liabilities $ 24, $ $ $ $ $ 33,786 15,484 8,590 66, , ,697 41,148 49, ,250 37, ,637 Fund Balances: Nonspendable: Inventones Committed for: Special activities Unassigned Total Fund Balances Total Liabilities and Fund Balances $ 14,227 14,227 34,245 4,266 42,842 8,597 4,266 18,493 34,245 8,597 61,335 59,641 $ 34,245 $ 49, ,250 46,566 $ 343,

60 35,500 Nonnewaug Regional School District #14 Towns of Bethlehem and Woodbury Combining Statement of Revenue, Expenditures and Changes in Nonmajor Governmental Funds Year Ended June 30, 2016 Revenue: Federal, state and other grants Investment income Sales of lunches, milk, and other Tuition Miscellaneous fees and contributions Total Revenues Fund Balances Special Revenue Funds Total Food Special E-Rate State, Federal Preschool Service Accounts Program and other Grants Program S 147,246 $ 45, ,842 $ 569,747 $ 765, ,993 35,542 45, ,842 73,122 73,122 Nonmajor Governmental Funds 569,747 73, ,443,958 Expenditures: Salaries - certified Salaries -classified Employee benefits Purchased services Supplies and materials Cost of food purchased Capital outlay Total Expenditures 375, ,657 73,122 5,262 22, , ,117 38,981 33,184 45,459 59, ,964 17,560 5,262 22, , ,964 37,003 54, ,500 33,184 45, ,842 73,122 1,423,107 Other Financing Sources (Uses) Operating transfers in Total Expenditures and Operating Transfers In 46, , ,934 33,184 45, ,842 73,122 1,376,541 Excess of Revenues over Expenditures 65,059 2, ,417 Fund Balance - beginning of year Fund Balance - end of year $ (46,566) 31, ,597 (6,082) 18,493 $ 34,245 $ $ --- $ 8497 $ 61,

61 Nonnewaug Regional School District #14 Towns o1 Bethlehem and Woodbury Detail Statement of Scholarship Net Position Private Purpose Trust Funds June 30, 2016 Non-Expendable Funds NET ASSETS ASSETS Cash Designated Unreserved Invested Cash Total and Receivables Net Position Blechner 54,761 54,761 Sanford 44,261 44,261 Expendable Funds Albert 2,821 2,821 2,621 Bailey 1,079 1,079 1,079 Besancon 6,087 6,087 6,087 Blinstrubas 2,004 2,004 2,004 Bloss 276, , ,145 Burger 96 Cummings 6,577 Gagne 1,635 LIABILITIES Accounts Reserved for for and Payable Endowment Scholarships Undesignated $ $ $ $ $ Lovett 5,484 5,484 Meeker 1,152 1,152 Mfrfield 10,363 10,363 Oxbury4-H 5,165 5,165 Pierpoint 3,233 3,233 Pomperaug Grange 1,306 1,306 Ruggiero 3,388 3,368 Sprano 2,033 2,033 54,761 44, ,700 Taeo 4,008 4,008 Zane 5,496 $ 437,094 $ 5,496 $ ,577 6,577 1,635 1,635 5,484 1,152 10,363 5,165 3,233 1,306 3, ,008 5,496 - $ 99,022 $ 129,700 $ 208,372 $ 437,

62 Nonnewaug Regional School District #14 Towns of Bethlehem and Woodhury Detail Statement of Changes in Scholarship Net Position Private Purpose Trust Funds Year Ended June 30, 2016 Non-Expendable Funds Blechner Sanford Total Non - Expendable $ Additions Deductions Contributions Interest Total S $ $ $ $ $ $ $ 243 Net Net Net Scholarship Increase Position Position Payments (Decrease) June 30, 2015 June 30, ,000 (866) 55,627 54, ,152 44,261 $ 1,000 $ (757) $ 99,779 $ 99,022 Expendable Funds Al bert Bailey B esanson Blinstrubas B loss Burger Cummings Gagne Loven Meeker Mfrfield Oxbury 4-Fl Pierpoint Pomperaug Grange Ruggiero Sprano Tateo Zone $ S 6$ , , S S Total Expendable $ 61,251 $ 885 $ 62,136 $ $ $ $ 2,815 $ 2,821 1,077 1,079 6,072 6, (496) 2,500 2,004 47,275 14, , , (448) 7,025 6, ,627 1,635 5,471 5, ,151 1, ,339 10, ,152 5, ,226 3,233 1,303 1, ,380 3, (294) 2,327 2, (239) 4,247 4, ,481 5,496 49,075 $ 13,061 $ 325,011 $ 338,

63 Nonnewaug Regional School District #14 Towns of Bethlehem and Woodbury Agency Funds Statement of Changes in Assets and Liabilities Year Ended June 30, 2016 School Activity Funds Balance July 1, 2015 Additions Balance Deductions June 30, 2016 Assets: Cash and investments $ 230,529 $ 505,154 $ 492,546 $ 243,137 Liabilities: Due to student groups $ 230,529 $ 505,154 $ 492,546 $ 243,

64 are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, -51- We have audited, in accordance with the auditing standards generally accepted in the United States of AND ON COMPLIANCE AND OTHER MAEITERS BASED ON AN AUDIT OF FINANCIAL Board of Education and for the year ended June 30, 2016, and the related notes to the financial statements, which collectively America and the standards applicable to financial audits contained in Government Auditing Standards issued major fund, and the aggregate remaining fund information of Nonnewaug Regional School District #14, as of comprise Nonnewaug Regional School District #14 s basic financial statements, and have issued our report thereon dated December 28, District #14 s internal control over financial reporting (internal control) to determine the audit procedures that Regional School District #14 s internal control. but not for the purpose of expressing an opinion on the effectiveness, of Nonnewaug Regional School District 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. section and was not designed to identify all deficiencies in internal control that might be material weaknesses internal control that we consider to be material weaknesses. However, material weaknesses may exist that Our consideration of internal control was for the limited purpose described in the first paragraph of this have not been identified. or, significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in A deficiency in internal control exists when the design or operation of a control does not allow management In planning and performing our audit of the financial statements, we considered Nonnewaug Regional School Internal Control Over Financial Reporting by the Comptroller General of the United States, the financial statements of the governmental activities, each #14 s internal control. Accordingly, we do not express an opinion on the effectiveness of Nonnewaug INDEPENDENT AUDITORS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Nonnewaug Regional School District #14 Bethlehem and Woodhury Connecticut misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in Waterbury, Connecticut Certified Public Accountants - Charles Heaven & Co.

65 Compliance and Other Matters As part of obtaining reasonable assurance about whether Nonnewaug Regional School District #14 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 no instances of noncompliance or other matters that are required to be reported under Gçvernrnenr Auditing Standards. 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 entity s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. December 28,

66 TOWN OF BETHLEHEM, CONNECTICUT FINANCIAL INFORMATION Excerpted from the Annual Financial Report of The Town of Bethlehem, Connecticut Year Ended June 30, 2016

67 Charles Heaven & Co. Certified Public Accountants TOWN OF BETHLEHEM AUDITED FINANCIAL STATEMENTS AND SUPPLEMENTAL FINANCIAL DATA JUNE 30, 2016

68 Town of Bethlehem Table of Contents June 30, 2016 Independent Auditor s Report 1-2 Page Management s Discussion and Analysis 3-13 Basic Financial Statements: Government-Wide Financial Statements Statement of Net Position 14 Statement of Activities 15 Fund Financial Statements Governmental Funds: Balance Sheet 16 Reconciliation of the Balance Sheet of Governmental Funds to The Statement of Net Position 17 Statement of Revenues, Expenditures and Changes in Fund Balances 18 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities 19 Fiduciary Funds: Statement of Fiduciary Net Position - Fiduciary Funds 20 Statement of Changes in Fiduciary Net Position - Pension Trust Fund 21 Notes to Financial Statements Required Supplementary Information: General Fund: Schedule of Revenues, Expenditures, and Changes in Fund Balances General Fund, Budget and Actual, (Non GAAP Budgetary Basis) Notes to Schedule of Revenues, Expenditures and Changes in Fund Balance General Fund, Budget and Actual, (NonGAAP Budgetary Basis) 49 Combining and Individual Fund Statements and Supplemental Schedules: Combining and Individual Fund Statements: Nonmajor Governmental Funds, Special Revenue Funds: Combining Balance Sheet Combining Statement of Revenues, Expenditures and Changes in Fund BaLances Fiduciary Funds: Statement of Changes in Assets and Liabilities - Agency Fund 54 Supplemental Schedules: Statement of Debt Limitation 55 Schedule of Property Taxes Levied, Collected and Outstanding (Report of the Tax Collector) 56

69 Statements Performed in Accordance with Government Auditing Standards and on Compliance and Other Matters Based on An Audit of Financial Independent Auditors Report on Internal Control over Financial Reporting Page June 30, 2016 Schedule of Findings and Questioned Costs Notes to Schedule of State Financial Assistance 63 Schedule of Expenditures of State Financial Assistance 62 with the State Single Audit Act, and on the Schedule of Expenditures of State Financial Assistance to Each Major Program, on Internal Control Over Compliance in Accordance Independent Auditors Report on Compliance with Requirements Applicable Audit of State Financial Assistance Programs: Table of Contents Town of Bethlehem

70 Waterbury, Connecticut 1 We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. and fair presentation of the financial statements in order to design audit procedures that are appropriate in internal control. Accordingly, we express no such opinion. An audit also includes evaluating the made by management, as well as evaluating the overall presentation of the financial statements. assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. appropriateness of accounting policies used and the reasonableness of significant accounting estimates the financial statements. The procedures selected depend on the auditor s judgment, including the the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s b making those risk assessments, the auditor considers internal control relevant to the entity s preparation An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in our audit in accordance with auditing standards generally accepted in the United States of America and obtain reasonable assurance about whether the financial statements are free from material misstatement. Our responsibility is to express opinions on these financial statements based on our audit. We conducted Comptroller General of the United States. Those standards require that we plan and perform the audit to the standards applicable to financial audits contained in Government Auditing Standards, issued by the Auditor s Responsibility the design, implementation, and maintenance of internal control relevant to the preparation and fair Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes presentation of financial statements that are free from material misstatement, whether due to fraud or error. Management s Responsibility for the Financial Statements year ended June 30, and the related notes to the financial statements, which collectively comprise We have audited the accompanying financial statements of the governmental activities, each major fund, the Town of Bethlehem, Connecticut s basic financial statements as listed in the table of contents. and the aggregate remaining fund information of the Town of Bethlehem, Connecticut, as of and for the Report on the Financial Statements Town of Bethlehem, Connecticut To the Board of Finance INDEPENDENT AUDITOR S REPORT Certified Public Accountants Charles Heaven & Co.

71 Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the Town of Bethlehem, Connecticut, as of June 30, 2016, and the respective changes in financial position for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management s discussion and analysis and budgetary comparison information on Pages 3 through 13 and 44 through 49 be presented to supplement the basic financial statements. Such information, although not a pan of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Town of Bethlehem, Connecticut s basic financial statements. The combining and individual nonmajor fund financial statements, and supplemental schedules, are presented for purposes of additional analysis and are not a required pan of the basic financial statements. The combining and individual nonmajor fund financial statements, and supplemental schedules, are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual nonmajor fund financial statements, and supplemental schedules, are fairly stated in all material respects in relation to the basic financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated January 9, 2017, on our consideration of the Town of Bethlehem, Connecticut s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral pan of an audit performed in accordance with Government Auditing Standards in considering the Town of Bethlehem, connecticut s internal control over financial reporting and compliance. rco. ck 45 January 9,

72 Town of Bethlehem, Connecticut Management Discussion and Analysis For the Fiscal Year Ending June 30, 2016 INTRODUCTION The June 30, 2016 Town of Bethlehem Basic Financial statements are presented using the financial reporting requirements of the Government Accounting Standards Board (GASB) Statement 34. GASB Statement 34 requires that the Management of the Town of Bethlehem focus on the most important or major hinds, which always includes the General Fund. The goal is to provide the reader with an objective and readable analysis of the financial performance of the Town for the year. Taken together, the following statements should present whether the Town of Bethlehem s financial position has improved or deteriorated as a result of the year s operations. Fund statements measure and report the operating results of many hinds by measuring cash on hand and other assets that can easily be converted to cash. The Basic Financial Statements includes government-wide financial statements prepared on the accrual basis for all of the Town government s activities. Accrual accounting measures not just current assets and current liabilities, but long-term assets and liabilities as well. It also reports all revenues and all costs of providing services each year, not just those received or paid in the current fiscal year (or shortly thereafter). Showing budgetary compliance has always been an important part of governmental accountability and therefore the financial statements include the original budget as well as the amended final budget. Readers of the Towns financial statements are offered this narrative overview and analysis of financial activities for the year ended June 30, OVERVIEW OF FINANCIAL STATEMENTS The MD&A is intended to serve as an introduction to the Town s basic financial statements and an analytical overview of the government s financial activities. The MD&A provides an objective and easily readable analysis of the Town s financial activities based on currently known facts, decisions, or conditions. The Basic Financial Statements are comprised of three main components: Government Wide Financial Statements Fund Financial statements Notes to the Financial Statements Required Supplementary Information (RSI) Consists of MD&A Budgetary comparison schedules for the general fund to demonstrate whether resources were obtained and used in accordance with the legally adopted budget. Government Wide Financial Statements The government wide financial statements are designed to provide information with a broad overview of the Town s finances in a manner similar to a private sector business. -3-

73 Town of Bethlehem, Connecticut Management Discussion and Analysis For the Fiscal Year Ending June 30, 2016 They include a statement of net position which presents information on all of the Town s assets, deferred outflows, liabilities, and deferred inflows with the difference between assets plus deferred outflows less liabilities and deferred inflows reported as net position. Overtime, increases or decreases in net position may serve as a useful indicator of whether the financial position of the Town is improving or deteriorating. The statement of activities presents information showing how the government s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes). The statement of activities is prepared using the economic resources measurement focus and the accrual basis of accounting. These statements report all assets, liabilities, deferred inflows/outflows, revenues, expenses, and gains and losses of the government. The government-wide financial statements present functions of the Town of Bethlehem that are principally supported by taxes and intergovernmental revenues (governmental activities). The governmental activities of the Town include general government, commissions and boards, highways and public works, public safety, health and welfare, education, and other. Capital assets, including infrastructure are reported along with depreciation expense in the statement of activities. Net position is reported as capital assets net of related debt, restricted, and unrestricted. Expenses presented are reduced by program revenues, resulting in a measurement of net (expense) revenue for each of the government s functions. Program expenses include all direct expenses. General revenues such as taxes and special and extraordinary items are reported separately, ultimately arriving at the change in net position for the period. Special items are significant transactions or other events that are either unusual or infrequent and are within the control of management. The government wide financial statements may be found on pages 14 and 15. Fund Financial Statements A fund is a grouping of related accounts used to maintain control and accountability of resources segregated for specific activities and objectives. In order to comply with financial related legal requirements, the Town employs fund accounting. All of the Town s funds are divided into two categories: governmental funds and fiduciary funds. -4-

74 Town of Bethlehem, Connecticut Management Discussion and Analysis For the Fiscal Year Ending June 30, 2016 Governmental Funds Governmental funds are used to account for essentially the same functions reported as governmental activities in the government wide financial statements. However unlike the government wide financial statements, government fund financial statements focus on near term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be used in evaluating the Town s near term financing decisions. Both governmental balance sheet and governmental statement of revenues, expenditures and changes in fund balances provide a reconciliation to facilitate this comparison between governmental hinds and governmental activitie5. The Town maintains thirteen individual governmental funds. The two major funds General Fund and Reserve Fund for Capital and Nonrecurring Expenditures are each presented separately in the governmental fund balance sheet and in the governmental hind statement revenues, expenditures and changes in fund balances. Major fund are funds whose revenues, expenditures, assets, or liabilities (excluding extraordinary items) are at least 10 percent of corresponding totals for all governmental funds. Other funds that are particularly important are also reported as a major fund. Data from the eleven other governmental funds are combined into a single, aggregated presentation under the caption of other governmental hinds. Individual data for these non-major governmental funds is presented in the form of combining statements in this report. At the Town s Annual Meeting, the Town adopts an annual budget for the General Fund. In order to demonstrate compliance with the approved budget, a budgetary comparison statement for the General Fund is provided. The basic fund financial statements are found on pages 16 and 18 of this report. Fiduciary Funds Fiduciary hinds are used to account for resources held for the benefit of entities outside the Town. These funds are not reported in the government-wide financial statements because these resources are not available to support the Town s own programs. The Town of Bethlehem has an agency fund for the Length of Service Volunteer Awards Program, which benefits the Bethlehem Fire and Ambulance Associations, separate legal entities. Fiduciary funds use the economic resources measurement focus and the accrual basis of accounting. The basic fiduciary fund financial statements are found on pages of this report. NOTES TO THE FINANCIAL STATEMENTS Notes provide additional information that is essential to a full understanding of the data provided in the government wide and fund financial statements. The notes to the basic financial statements are found on pages of this report. -5-

75 Town of Bethlehem, Connecticut Management Discussion and Analysis For the Fiscal Year Ending June 30, 2016 OTHER INFORMATION In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information comparing the Town s budget to actual. This required supplementary information is found on pages of this report. The combining statements referred to earlier in connection with non-major governmental funds are presented immediately following the budgetary comparison. Combining and individual fund statements, the statement of changes in assets and liabilities of the agency fund, and supplemental schedules are found on pages of this report. FINANCIAL HIGHLIGHTS The assets of the Town of Bethlehem exceed its liabilities as of June 30, 2016 by $10,095,237 (net position). Of this amount, $3,936,489 may be used to meet the Town s ongoing obligations to its residents and creditors. Restricted net position totaled $108,171 and the remainder $6,050,577 is invested in capital assets. Total net position increased by $296,110 mainly due to an increase in property taxes, interest, and lien fees. As of June 30, 2016, governmental funds reported combined ending fund balances of S3,479, 179; a decrease of S66,593 from the previous fiscal year s ending fund balances of $3,545,772. The fund balances were held for the following purposes: o Nonspendable: Prepaid Expense $ 5,987 Housing Rehabilitation Loans 213,699 o Restricted for: Housing Rehabilitation Loans 34,595 Nonmajor Fund Purposes 73,576 o Committed to: Land Acquisition 264,116 Capital Projects 444,850 Subsequent Year s Budget 300,000 o Assigned for: Capital Projects 676,460 o Unassigned: 1,465,896 Total Fund Balance At the end of the current Fiscal Year, fund balance for the general fund was $1,765,896, or 17.2% of the total general fund expenditures of $9,601,166 and net operating transfers out of $658,132. GOVERNMENT WIDE FINANCIAL ANALYSIS As noted earlier, net position may serve as a useful indicator of a government s financial position. As indicated on the next page, as of June 30, 2016, the Town s assets exceed liabilities by $10,095,

76 Town of Bethlehem, Connecticut Management Discussion and Analysis For the Fiscal Year Ending June 30, 2016 GOVERNMENT WIDE FINANCIAL ANALYSIS (continued) Below is the summary Statement of Net Position comparing the Town s position with the previous year. Town of Bethlehem Net Position ASSETS Current Assets $ 4,676,103 $ 4,435,587 Capital Assets 5.650,682 6,050,577 Total Assets 10,326,785 10,486,164 LIAB LITWS Current Liabilities 406, ,355 Non Current Liabilities 41,288 48,572 Total Liabilities 447, DEFERRED INFLOWS OF RESOURCES ,000 NET POSifION Net Investment in Capital Assets 5,650,682 6,050,577 Restricted 78, ,171 Unrestricted ,936,489 Total Net Position $ $jç The Largest Portion of the Town s net position reflects its investment in capital assets such as land, buildings, machinery and equipment, and infrastructure. The Town uses these capital assets to provide services to its residents; consequently these assets are not available for future spending. Of the Town s remaining net position as of June 30, 2016, $3,936,489 or 38.99% is unrestricted and may be used to meet its ongoing financial obligations. -7-

77 Other Town of Bethlehem, Connecticut Management Discussion and Analysis For the Fiscal Year Ending June 30, 2016 GOVERNMENT WWE FINANCIAL ANALYSIS (continued) Town of Bethlehem Change in Net Position Program Revenues: Charges for Services Operating Grants and Contributions Capital Grants and Contributions Governmental Activities 2015 % to Total 188, % 1,914, % 169, % 2016 % to Total 181, % 1,863, % 214, % General Revenues: Property taxes, including interest & liens Grants and Contributions, Not Restricted to Specific Programs Investment Earnings Total Revenues Program Expenses: General Government Public safety Public works Health and welfare Culture and recreation Education Total Program Expenses 8,305, % 91, % 9, % 10,679, % 958, % 571, % 1,483, % 98, % 319, % 7,047, % 83, % 10,563, % 8,525, % 82, % 16, % 10,883, % 801, % 607, % 1,245, % 234, % 322, % 7,303, % 71, % 10,587, % Change in Net Position 115, ,110 Net Position - Beginning of the Year 9,683,137 9,799,127 Net Position - End of the Year 9,799,127 10,095,237 The following is an analysis of significant changes in activity from the prior year: The decrease in operating grants and contributions represents the one time dog grant in This also has the effect of increasing public safety expenses since the grant offset that program expense. The increase in capital grants and contributions is mainly due to the OPM Local Capital Improvement Program of $34,

78 Town of Bethlehem, Connecticut Management Discussion and Analysis For the Fiscal Year Ending June 30, 2016 GOVERNMENT WIDE FINANCIAL ANALYSIS (continued) The increase in property tax revenue, including interest and liens, is mainly due to an increase in the mill rate. The mill rate increased by 0.49 from mills to The majority of the Town of Bethlehem s operating revenues are derived from taxes assessed on commercial and private real estate, personal property and motor vehicles. The Town has never been dependent on state and federal grant funding to keep overall costs down. While grant funding is helpful in reducing overall expenses, it does not significantly contribute to total revenues. The decrease in general government expenses is mainly due to the one time pension contribution accmed as of June 30, Another notable decrease was in legal fees of $13,871. The decrease in public works is due to capitalized infrastructure costs vs. maintenance on Town roads. The increase in expenses includes $255,625 in education expenses, as assessed by Regional School District # 14 (determined by a separate approved taxpayer budget). The increase in health and welfare is due to the disbursement of the Housing Rehabilitation Loan Program, a Federal grants. Governmental Funds The focus of the Town of Bethlehem s governmental funds is to provide information on near term inflows, outflows and balances of spendable resources. This information is useful in assessing our financing requirements. In particular, unassigned fund balance may serve as a useful measure of a Town s net resources available for spending at the end of the fiscal year. As of the end of the current fiscal year, our governmental funds reported combined ending fund balances of $3,479,179, a decrease of $66,593. Of this amount, $1,465,896 constitutes unassigned fund balance, which is available for spending at the Town s discretion. The Town of Bethlehem, Connecticut uses governmental fund accounting to emphasize the accountability as a government entity by ensuring and demonstrating compliance with finance-related legal requirements and therefore has established the following funds: -9-

79 Town of Bethlehem, Connecticut Management Discussion and Analysis For the Fiscal Year Ending June 30, 2016 GOVERNMENT WIDE FINANCIAL ANALYSIS (continued) Major Funds The General Fund is the Town s primary operating fund. It accounts for all the financial resources of the Town with the exception of those that are required to be accounted for separately. As of June 30, 2016, this fund reports an unassigned fund balance of $1,465,896 and a committed fund balance of $300,000 for the subsequent year s budget. The Reserve Fund for Capital and Nonrecurring Expenditures is used for financing all or part of planning, construction, reconstruction or acquisition of Capital facilities, improvements or equipment. As of June 30, 2016, the fund transferred $405,000, the change in its fund balance, to the General Fund to reimburse for capital expenditures. Other Governmental Funds, Nonmaior Special Revenue Funds are used to account for specific revenues that are legally restricted to expenditures for a particular use. These funds report all positive nonspendable. restricted and committed fund balances as seen in the combining statements. The Town reports eleven non-major Governmental Funds - Special Revenue Funds, as listed below: The Christmas Town Fund accounts for restricted financial support used for the Christmas Town Festival. The Open Space Fund accounts for the purchase of land for open space. The Dog Fund accounts for fees and other resources related to animal control and safety. The Preservation of Land Records Fund accounts for fees and state grants restricted for document preservation. The School Resource Officer Fund accounts for resources used to provide Resource Officers at public schools. The Food and Fuel Bank accounts for donations to assist those in need. The Special Grants and Donations Fund accounts for resources that are restricted for specific purposes not recorded in another special revenue fund. The Library Trust Fund accounts for resources used to provide public library services. -10-

80 Town of Bethlehem, Connecticut Management Discussion and Analysis For the Fiscal Year Ending June 30, 2016 Other Governmental Funds, Nonmajor (continued) The Housing Rehabilitation Loan Program accounts for federal grants offered in the form of deferred loans to owner/occupants for assistance in the rehabilitation of their homes. Capital Projects Funds: The Appropriated Capital Projects Fund accounts for the financing of all or pan of the planning, construction, reconstruction, or acquisition of capital facilities, improvements, or capital equipment. The Grant Funded Capital Projects Fund accounts for the acquisition of major capital facilities and acquisition of capital equipment funded by intergovernmental grants. Fiduciary Funds Fiduciary Funds are used to account for assets held by the Town in a trustee capacity or as an agent for individuals, private organizations, or other governments. Fiduciary funds are not included in the government-wide statements. The fiduciary funds are as follows: The Pension Trust Fund accounts for the accumulation of resources to be used for retirement benefits. The Agency Fund, the Length of Service Volunteer Award Plan holds assets on behalf of the Volunteer Fire Department and the Volunteer Ambulance Association. General Fund Budgetary Highlights: The original revenue budget of $10,539,862 increased by $111,500 due to a transfer from the Reserve Fund for Capital and Nonrecurring Expenditure Fund of $105,000 and anticipated increase in park and recreating fees of $6,500. The expenditure budget increased by $111,500 to $10,901,362 as follows: besides transfers from one line item to another, as seen in the Schedule of Revenues, Expenditures, and Changes in Fund Balance, the Board of Finance approved an additional appropriation of $6,500 for recreational appropriations and a Town Meeting approved an additional transfer to the Reserve for Capital and Nonrecurring Expenditures Fund of $105,000. Capital Assets: The Town of Bethlehem s investment in capital assets for its governmental use includes land, buildings and improvements, machinery and equipment, vehicles, and infrastructure. Additional information on capital assets can be found in Note 8 of the financial statements. 11

81 Town of Bethlehem, Connecticut Management Discussion and Analysis For the Fiscal Year Ending June 30, 2016 Capital Assets (continued) The breakdown of capital assets, net of accumulated depreciation is as follows: Land $ 1,296,475 $ 1,296,475 Art Collection 21,000 21,000 Buildings & Improvements 1,409,364 1,296,006 Machinery, Equipment, & Vehicles 1,203,547 1,407,246 Infrastructure 1,543,772 2,028,875 Construction in Progress $ The Town s net investment in capital assets increased by $399,895 during the fiscal year. This increase results from current year additions over current year depreciation as follows: Additions: Machinery, Equipment, and Vehicles Vehicles, BVFD equipment, and solar panels $ 329,915 Infrastructure Paving and other road improvements 491,663 Current year depreciation ( 421,683) Net Increase $ Long Term Liabilities The Town has no direct debt as of June 30, The Town has recorded a liability for accrued compensated employee sick leave of $45,230 and pension plan obligation totaling $3,342. As a member of Regional School District #14 the Town is contingently liable for its prorate share of the District s debt. As of June 30, 2016, the District did not hold any long term debt. This potential obligation exists only if the school district is unable to meet its debt requirements. The maximum overall statutory debt limit for the Town is seven times the annual receipts from taxation. Additional Information on long term liabilities can be found in Note 7 of the financial statements. Economic Factors and Next Year s Budget and Rates Economic factors affecting the Town, including those that were considered in preparing the Town s General Fund budget for the fiscal year and those that will affect future budgets are as follows: The Town s mill rate increased by 0.45 mills, to mills. -12-

82 Town of Bethlehem, Connecticut Management Discussion and Analysis For the Fiscal Year Ending June 30, 2016 The Town of Bethlehemts expenditure budget for the fiscal year totals $ ,830, an increase of S 171,968 or 1.59% over last year s original budget. This increase is primarily comprised of the following: o General government increase of $26,159 primarily due to paying the Town Clerk a fixed sum in lieu of fees collected. o Anticipated increase in police protection service cost of $27,030. o o Increases in recreational program costs of S20,968. Planned increases in transfers to the Reserve Fund for Capital and Nonrecurring Expenditures of $133,978. o Increases in capital outlay of $37,800. o o Anticipated decreases in education cost of $42,135 based on the number of students to attend RSD #14. Estimated decreases in contingency and dog fund transfers of $10,000 each. REQUESTS FOR INFORMATION This financial report is designed to provide a general overview of the Town s finances for all those with an interest in the Town s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Office of The Board of Selectmen, 36 Main Street South, P.O. Box 160, Bethlehem, CT

83 Town of Bethlehem Statement of Net Position June 30, 2016 Governmental Activities Assets Current assets Cash and cash equivalents $ 2,434,148 Investments 1,091,962 Receivables, net of allowances: Property tax and interest receivable 662,308 Housing loans receivable 213,699 State of Connecticut 25,844 Other account receivable 1,639 Prepaid expense 5,987 Total current assets 4,435,587 Noncurrent assets: Capital assets not being depreciation 1,318,450 Capital assets, net of accumulated depreciation 4,732,127 Total noncurrent assets 6,050,577 Total Assets 10,486,164 Liabilities Current Liabilities Accounts and other payables 244,068 Deposits - performance bonds 18,287 Total current liabilities 262,355 Noncurrent Liabilities: Compensated absences 45,230 Net pension obligation 3,342 Total noncurrent liabilities 48,572 Total Liabilities 310,927 Deferred Inflows of Resources Deferred grant revenue 80,000 Net Position Net investment in capital assets 6,050,577 Restricted for: Housing rehabilitation loans 34,595 Nonmajor fund purposes 73,576 Unrestricted 3,936,489 Total Net Position $ 10,095,237 The notes to the financial statements are an integral part of this statement. -14-

84 Town of Bethlehem Statement of Activities Year Ended June 30, 2016 Functions/Programs: Governmental Activities: General government Public safety Public works Health and welfare Culture and recreation Education Other Total Governmental Activities Expenses $ 801, ,647 1,245, , ,889 7,303,173 71,892 - Charges for Services Program Revenues Operating Capital Grants and Grants and Contributions Contributions S 37,952 $ 21,315 $ 10,830 28,99! 44,459 59, , ,137 29,617 1,410, S Net (Expense) Revenue and Change In Net Position (742,369) - (596,817) 214,199 (787,998) (2,834) (234,241) (5,892,807) (71,892) $ 10,587,467 $ 181,263 $ 1,863,047 $ 214,199 (8,328,958) General Revenues: Property taxes, interest and lien fees Grants and contributions not restricted to specific programs Unrestricted investment earnings Total General Revenues Change in Net Position Net position, July 1, 2015 Net position, June 30, ,525,777 82,303 16,988 8,625, ,110 9,799,127 $ 10,095,237 The notes to the financial stalements are an integral pan of this statement. -15-

85 Town of Bethlehem Balance Sheet Governmental Funds June 30, 2016 Assets: Major Funds Reserve Fund for Capital and Other Total General Nonrecurring Governmental Governmental Fund Expenditures Funds Funds ,091, , ,844-1, Cash and cash equivalents $ 2,387,192 $ $ 46,956 $ 2,434,148 Investments 1,091,962 Receivables, net of allowances: Property tax and interest receivable 822,308 Housing loans receivable - 213, ,699 State of Connecticut 25,844 Other account receivable 1,639 Prepaid expense 5,987 5,987 Due from other funds 1, , ,109 1,533,665 TotalAssets $ 4,330,041 $ 676,460 $ 1, $ 6,129,252 Liabilities: Accounts and other payables S 239,236 S $ 4,832 S 244,068 Accrued pension plan contribution Due to other funds 1,532,569-1,096 1,533,665 Performance bonds payable ,287 Total Liabilities 1,790,092 5,928 1,796,020 Deferred Inflows of Resources: Deferred grant revenue 80,000 80,000 Unavailable revenue - property taxes and interest 774,053 Total Deferred Inflows of Resources 774,053-80, ,053 Fund Balances: Nonspendable: Prepaid expense - - 5,987 Housing rehabilitation loans ,699 Restricted for: Housing rehabilitation loans ,595 Nonmajor fund purposes ,576 Committed to: Subsequent years budget 300,000 - Land acquisition ,116 Capital projects ,850 Assigned for: Capital projects - 676,460-5, ,699 34,595 73, , , , ,460 Unassigned 1,465,896 Total Fund Balances 1, ,460 1,036,823 3,479,179 Total Liabilities. Deferred Inflows of Resources and Fund Balances $ 4.330,041 $ 676,460 $ 1,122,75? $ 6,129,252 The notes to (he financial statements are an integral part of this statement. -16

86 Town of Bethlehem Reconciliation of the Balance Sheet to the Statement of Net Position - Governmental Funds June 30, 2016 Total net position reported for governmental activities in the Statement of Net Position is different from the governmental fund Balane Sheet due to the following: Total Fund Balances for Governmental Funds $ 3,479,179 Capital assets used in governmental activities are not financial resources, and therefore, are not reported in the funds. Governmental capital assets $10,088,830 Less accumulated depreciation (4,038,253) Net capital assets 6,050,577 Other assets not available to pay for current period expenditures, are deferred or not recognized in the funds. Property taxes, interest, and lien fees 774,053 Allowance for doubtful accounts (160,000) Noncurrent liabilities are not due and payable in the current period, and therefore, are not reported in the governmental funds. Compensated absenses (45,230) Net pension obligation (3,342) Total Net Position of Governmental Activities $ 10,095,237 The notes to the financial statements are an integral part of this statement. -17-

87 Town of Bethlehem Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds Year Ended June 30, 2016 Major Funds Reserve Fund for Capital and Other Total General Nonrecurring Governmental Governmental Fund Expenditures Funds Funds Revenues: Property taxes S 8, $ S $ 8,440,271 Interest and lien fees 115,414 Intergovernmental 1,609, ,227 2,061,672 Investment income 15,092-1,896 16,988 Departmental 164,798-6, ,799 Other 53,116 55, ,341 Total Revenues 10,398, ,349 10,913,485 Expenditures: Current: General government 724,090-20, ,672 Public safety 442,127 21, ,599 Public works 988, ,846 Health and welfare 62, , ,430 Culture and recreation 126, , ,644 Education 7,187, ,144 7,303,173 Other 69,978 Capital outlay 891, ,736 Total Expenditures 9,601,166-1,378,912 10,980,078 Excess (Deficiency) of Revenues Over Expenditures 796,970 - (863,563) (66,593) - 1,063,132 - Other Financing Sources (Uses): Transfers in 405,000 Transfers out (1,063,132) (405,000) 1,468,132 (1,468,132) Total Other Financing Sources (Uses) (658,132) (405,000) 1,063,132 - Net Change in Fund Balances 138,838 (405,000) 199,569 (66,593) Fund Balances: Beginning of Year 1,627,058 1,081, ,254 3,545,772 End of Year $ 1,765,896 $ 676,460 S 1,036,823 $ 3,479,179 The notes to the financial statements am an integral pan of this statement. -18-

88 Town of Bethlehem Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities Year Ended June 30, 2016 Amounts reported for governmental activities in the statement of activities are different due to the following: Net change in fund balances - total governmental funds $ (66,593) Governmental funds report capital outlays as expenditures. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. Capital outlays exceeded depreciation expense in the current period as follows: Total capital outlay $ 821,578 Less current year depreciation (421,683) 399,895 Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds. Property tax revenue (29,908) Some expenses reported in the statement of activities do not require the use of current financial resources, and therefore, are not reported as expenditures in the governmental funds: Change in compensated absenses liability (4,695) Change in net pension obligation (2,589) Change in Net Position of Governmental Activities $ 296,110 The notes io the financial statements are an integral part of this statement. -19-

89 Town of Bethlehem Statement of Fiduciary Net Position Fiduciary Funds June 30, 2016 Pension Trust Fund Lengh of Service Volunteer Award Program Agency Fund Assets: Investments - at fair value $ 730,156 Liabilities: Due to beneficiaries 730,156 Net Position: Held in mist for pension benefils s -s - The notes to the financial statements are an integral part of this statement. -20-

90 Town of Bethlehem Statement of Changes in Fiduciary Net Position Pension Trust Fund Year ended June 30, 2016 Pension Trust Funds Additions: Town contributions $ Deductions: Refunds 5,490 Change in net position 5,490 Net position, beginning of year - as restated Net position, end of year $ - The notes to the financial slatements are an integral pan of this statement, -21-

91 Town of Bethlehem, Connecticut Notes to Financial Statements Note 1 Summary of Significant Accounting Policies The accompanying financial statements of the Town of Bethlehem, Connecticut (the Town) have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) as applied to government units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. The Town s significant accounting policies are described below. A. Reporting Entity The Town was incorporated in 1787 under the provisions of the Connecticut General Statutes, and has a population of approximately 3,422 living within an area of 19.7 square miles. The Town is located in Litchfield Country. It operates under a Board of Selectmen, Town Meeting, Board of Finance form of government and provides a full range of services including public safety, public works, health and welfare, culture and recreation, education, and general administrative services to its residents. The Legislative authority of the Town is vested in the Town Meeting. The First Selectman is the chief executive and administrative officer of the Town and prepares the Town Budget. The Board of Finance is the budget-making authority and is responsible for reviewing/revising the budget, presenting the budget at the Annual Budget Hearing and submitting the budget at the Annual Town and Budget Meeting. The Board of Finance is also responsible for establishing the annual tax rate. The Town has the power to incur indebtedness by issuing bonds or notes as provided by the Connecticut General Statutes. Accounting principles generally accepted in the United States of America require that the reporting entity include 1) the primary government, 2) organizations for which the primary government is financially accountable, and 3) other organizations for which the nature and significance of their relationship with the primary government are such that exclusion would cause the reporting entity s financial statements to be misleading or incomplete. The reporting entity includes the primary government only. The criteria provided by the GASB have been considered and, as a result, the potential component units discussed below are not included in the Town s reporting entities because of their operational significance and financial relationship with the Town. The following related organizations not meeting the above criteria are not included: Bethlehem Firemen s Association, Inc. This potential component unit has a separate governing board elected by its members and provides services to residents, generally within the geographic boundaries of the Town. It is excluded from the reporting entity because the Town does not have the ability to exercise influence or control over the daily operations. Bethlehem Ambulance Association, Inc. This potential component unit has a separate governing board elected by its members and provides services to residents, generally within the geographic boundaries of the Town. It is excluded from the reporting entity because the Town does not have the ability to exercise influence or control over the daily operations. Regional School District No. 14 The School District is an independent unit that provides educational services and facilities for the Towns of Woodbury and Bethlehem. The Town pays an annual assessment to the School District based on student enrollment. -22-

92 Town of Bethlehem, Connecticut Notes to Financial Statements Note 1 - Summary of Significant Accountin2 Policies (continued) B. Jointly Governed Organizations Naugatuck Valley Council of Governments: The Town and eighteen other local municipalities each appoint the governing board of the Naugatuck Valley Council of Governments (the NVCOG) to provide a regional forum for information exchange and regional planning. The NVCOG is supported by assessments to the nineteen member Towns based upon population census. The Town expended $1,549 for the operation of the NVCOG for the year ended June 30, C. Government-Wide and Fund Financial Statements Government-Wide Financial Statements The government-wide financial statements (i.e., the statement of net position and the statement of activities) report information on all of the nonfiduciary activities of the Town. Eliminations have been made to minimize interfund activity. Governmental activities are primarily supported by taxes and intergovernmental revenues. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported as general revenues. Separate financial statements are provided for governmental hinds and fiduciary funds, even though the latter are excluded from the government-wide financial statements. Fund Financial Statements The accounts of the Town are organized and operated on the basis of funds. A hind is an independent fiscal and accounting entity with a self-balancing set of accounts comprised of assets, liabilities, deferred inflows, deferred outflows, hind equity, revenues, and expenditures or expenses, as applicable. Fund accounting segregates funds according to their intended purpose and is used to aid management in demonstrating compliance with finance related legal and managerial requirements. Funds are defined as major or non-major in the basic financial statements according to GASB reporting standards, which categorize funds based on relative size and materiality. Major individual governmental funds are reported in separate columns in the hind financial statements. The other eleven governmental hinds are combined into a single, aggregated presentation under the caption nonmajor governmental funds. Individual fund data for each nonmajor governmental fund is provided in the form of combining statements. -23-

93 Town of Bethlehem, Connecticut Notes to Financial Statements Note 1 - Summary of Significant Accounting Policies (continued) D. Measurement Focus, Basis of Accounting and Financial Statement Presentation The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the fiduciary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. Amounts reported as program revenues in the government-wide financial statements include 1)charges to customers or applicants for goods, services or privileges provided, 2)operating grants and contributions, and 3)capital grants and contributions. Internally dedicated resources are reported as general revenues rather than as program revenues. Likewise, general revenues include all taxes. When both restricted and unrestricted resources are available for use, the Town utilizes restricted resources first, then unrestricted resources as they are needed. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the Town considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences, pension obligations, and claims and judgments, are recorded only when payment is due. Property taxes, when levied, licenses, charges for services, and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as governmental fund revenues of the current fiscal period. In determining when to recognize intergovernmental revenues (grants and entitlements), the legal and contractual requirements of the individual programs are used as guidance. Revenues are recognized when program eligibility requirements have been met. All other revenue items are considered to be measurable and available only when cash is received by the Town. The various fund types included in the financial statements are described below: Governmental Funds are those through which most governmental functions typically are financed. The governmental funds are as follows: The General Fund is the primary operating fund of the Town. It is used to account for all financial transactions and resources except those required to be accounted for in another hind. Revenues are derived primarily from property taxes, state and federal grants, licenses, permits, charges for services, and earnings on investments. Special Revenue Funds account for and report the proceeds of specific revenue sources that are restricted or committed to expenditure for specific purposes other than debt service or capital projects. -24-

94 Town of Bethlehem, Connecticut Notes to Financial Statements Note 1 - Summary of Significant AccountinE Policies (continued) D. Measurement Focus, Basis of Accounting and Financial Statement Presentation (continued) Capital Project Funds account for and report financial resources that are restricted, committed, or assigned to expenditure for capital outlays, including the acquisition or construction of capital facilities and other capital assets. Capital projects funds exclude those types of capital-related outflows financed by proprietary funds or for assets that will be held in trust for individuals, private organizations, or other governments. Fiduciary Funds are used to account for assets held by the town in a trustee capacity or as an agent for individuals, private organizations, and other governments. Fiduciary funds are not included in the government-wide statements. The fiduciary funds are as follows: Pension Trust Funds are used for the accumulation of resources to be used for retirement benefits. Agency Fun4 The Length of Service Volunteer Award Program, is used to hold assets on behalf of the Volunteer Fire Department and Ambulance Association. The Town reports the following major governmental funds: The General Fund is the Town s primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund. The Reserve Fundfor Capital and Nonrecurring Expenditures accounts for resources that have been segregated for capital acquisitions. The Town also reports the following eleven non-major Governmental Funds: Special Revenue Funds: Christmas Town Fund accounts for restricted financial support used for the Christmas Town Festival. Open Space Fund accounts for the purchase of land for open space. Dog Fund accounts for fees and other resources related to animal control and safety. Preservation of Land Records accounts for fees and state grants restricted for document preservation. School Resource Officer Fund accounts for resources used to provide Resource Officers at the public schools. Food and Fuel Bank accounts for donations to assist those in need. Special Grants and Donations accounts for resources that are restricted for specific purposes not recorded in another special revenue fund. Library Trust accounts for all resources used to provide public library services. -25-

95 Town of Bethlehem, Connecticut Notes to Financial Statements Note 1 - Summary of Significant Accounting Policies (continued) D. Measurement Focus, Basis of Accounting and Financial Statement Presentation (continued) Housing Rehabilitation Loan Program accounts for federal grants offered in the form of deferred loans to owner/occupants for assistance in the rehabilitation of their homes. Capital Projects Funds: Appropriated Capital Projects accounts for the financing of all or part of the planning, construction, reconstruction or acquisition of capital facilities, improvements or capital equipment. Grant Funded Capital Projects accounts for the acquisition of major capital facilities and acquisition of capital equipment funded by intergovernmental grants. Use of Restricted Resources The Town has not established a formal policy for its use of restricted and unrestricted (committed, assigned, unassigned) fund balance. However, the Town generally uses restricted fund balance first if the expenditure meets the restricted purpose, followed by committed, assigned and unassigned amounts. E. Cash Equivalents and Investments The Town classifies all highly liquid investments, including certificates of deposit having original maturities of three months or less, as cash equivalents. Certificates of deposit having original maturities of more than three months are reported as investments. The Town s investments consist of governmental fund certificates of deposit and MassMutual Guaranteed Interest Account of the Length of Service Awards Program (LOSAP) Fiduciary Fund. Investments are stated at fair value, primarily utilizing quoted market prices. F. Property Taxes In accordance with Connecticut General Statutes, property taxes are assessed as of October 1, levied on the following July 1, and are due in two installments, July 1, and January 1. Motor vehicle taxes are due in one installment on July 1, and supplemental motor vehicle taxes are due in full January 1. Taxes not paid on or before the first day of the month next succeeding the month in which they became due and payable, or if not due and payable on the first day of the month, on or before the same date of the next succeeding month corresponding to that day of the month on which they become due and payable, are considered delinquent. Continuing liens are filed within two years of the original due date. Delinquent property taxes that are due and payable on the last day of the fiscal year are reported as a receivable on both the government-wide statement of net position, and the governmental fund balance sheet. An allowance, based on historical collection experience, is provided for uncollectible taxes. The allowance at June 30, 2016 is $160,000. Property taxes, interest, and lien fees receivable that are not considered available to liquidate general fund liabilities of the current period are reported as a deferred inflow of resources on the governmental fund balance sheet, and accordingly, are not recognized as revenue in the fund financial statements during the current fiscal period. -26-

96 Town of Bethlehem, Connecticut Notes to Financial Statements Note 1 - Summary of Significant Accounting Policies (continued) G. Capital Assets Capital assets, including property, plant, equipment, and infrastuictute assets (e.g., roads, bridges, sidewalks, and similar items), are reported in the governmental column of the government-wide financial statements. Capital assets are defined by the Town as assets with an initial, individual cost of more than $5,000 with an estimated useful life in excess of two years. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at fair value at the date of donation. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed. As permitted under generally accepted accounting principles, the Town has capitalized only those infrastructure assets acquired since July 1, Property, plant, equipment, and infrastructure assets of the Town are depreciated using the straightline method over the following estimated useful lives: Assets Years Building and improvements Machinery, equipment, and vehicles 4-50 Infrastructure 5-20 Capital asset acquisitions are reported as expenditures and no depreciation is taken in the governmental fund financial statements. H. Compensated Absences Employees accumulate, by prescribed formula, vacation and sick leave for subsequent use or for payment upon termination or retirement. Expenses to be paid in future periods are accrued when incurred in the government-wide financial statements. A liability for these amounts is reported in governmental funds only for amounts expected to be paid with available resources, for example, as a result of employee resignations and retirements. Long-Term Obligations In the government-wide financial statements, long-term debt and other long-term obligations are reported as liabilities in the statement of net position. Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are recognized as an expense in the period they are incurred. Currently, the Town has no general obligation bond debt. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued, including capital leases, is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other fmancing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. -27-

97 Town of Bethlehem, Connecticut Notes to Financial Statements Nate 1 - Summary of Significant Accounting Policies (continued) J. Deferred Outflows/Inflows of Resources In addition to assets and liabilities in the government-wide statement of financial position, the Town reports the financial statement elements, deferred outflows of resources and deferred inflows of resources. These financial statement elements represent consumption or acquisition of net position received in one fiscal period that are applicable to future fiscal periods. The Town reports revenues which are unavailable for spending as deferred inflows of resources in the governmental funds balance sheet. K. Pension Plan Accounting In accordance with GASB criteria, Statements No. 67 and No. 68 are not applicable to the Town s Length of Service Award Program. Plan assets are not held in trust for plan participants, but accumulated for pension purposes in a fiduciary capacity. Therefore, the assets are reported in an agency fund, in conformance with existing GASB criteria, Statement No. 73. In accordance with GASB criteria, the Town does not report allocated insurance contracts of the Town Employees Pension Plan, a fully insured and funded defined benefit pension plan, as assets of its pension trust fund, nor does it report a net pension liability. The following is a summary of pension plan accounting policies: Pension Trust Funds - Employer contributions to the plans are recognized when due pursuant to legal requirements of each plan. Benefits and refunds are recognized when due and payable in accordance with the terms of each plan. Goverrnnentalfiinds - In the governmental funds, expenditures are recognized when they are paid or are expected to be paid with current available resources. Funding Policy - The Town s annual required contribution to the Length of Service Award Program is actuarially determined on an annual basis using the entry age cost method. L. Fund Equity and Net Position Net position represents the difference between assets, deferred outflows of resources, liabilities, and deferred inflows of resources. In the government-wide statement of net position, net position is classified in the following categories: Net Investment in Capital Assets This category groups all capital assets, including infrastructure, into one component of net position. Accumulated depreciation and the outstanding balances of debt that are attributable to the acquisition, construction or improvement of these assets reduce this category. Restricted Net Position This category presents external restrictions imposed by creditors, grantors, contributors or laws or regulations of other governments and restrictions imposed by law through constitutional provisions or enabling legislation. -28-

98 Town of Bethlehem, Connecticut Notes to Financial Statements Note 1 - Summary of Significant Accounting Policies (continued) L. Fund Equity and Net Position (continued) Unrestricted Net Position This category represents the net position of the Town, which is not restricted for any project or other purpose. In the fund financial statements, fund balances of governmental funds are classified in the following five separate categories: Nonspendable Fund Balance Indicates amounts that cannot be spent because they are either not in spendable form, or are legally or contractually required to be maintained intact. Examples are items that are not expected to be converted to cash including inventories and prepaid expenditures. Restricted Fund Balance Indicates amounts that are restricted to specific purposes. The spending constraints placed on the use of fund balance amounts are externally imposed by creditors, grantors, contributors or laws or regulations of other governments and restrictions imposed by law through constitutional provisions or enabling legislation. Committed Fund Balance Indicates amounts that can be used only for specific purposes pursuant to constraints imposed by formal budgetary action at Town Meeting, and subsequent budget amendments, in accordance with provisions of the Connecticut General Statutes. Assigned Fund Balance Indicates amounts that are constrained by the Town s intent to be used for specific purposes, but are neither restricted nor committed. Intent authorized by the actions of the Town s Board of Selectman and Board of Finance. Unassigned Fund Balance Represents the remaining fund balance after amounts are set aside for all other classifications. This category is reported in the General Fund for positive amounts and in any other fund that has a fund deficit. The Town does not have a minimum fund balance policy. L. Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, deferred inflows and outflows of resources at the date of the financial statement, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. M. Encumbrances Encumbrance accounting, under which purchase orders, contracts, and other commitments are recorded in order to reserve that portion of the applicable appropriation, is frequently employed by governmental units as an extension of formal budgetary integration in the governmental funds. The Town is not utilizing encumbrance accounting. -29-

99 Town of Bethlehem, Connecticut Notes to Financial Statements Note 2 Budgets and Budgetary Accounting The Town follows these procedures in establishing budgetary data reflected in the financial statements. Department heads, officers and agencies of the Town file estimates of expenditures to be made and revenues to be collected in the upcoming year to the Board of Finance. These estimates, as revised by the Board of Finance, are recommended as the annual operating budget for adoption at the Town meeting in May. Upon the adoption of the budget, the Board of Finance is authorized to transfer appropriated amounts between departments, and to authorize additional departmental appropriations totaling $20,000 or less. Town meeting approval is required whenever additional appropriations for a department exceed $20,000 in the aggregate. The legal level of control at which expenditures may not exceed appropriations is at the departmental level. Appropriations for capital projects do not lapse until completion of the applicabie projects. All general fund unexpended appropriations lapse at year end. The Town does not have legally adopted annual budgets for its special revenue funds, and grant financed capital project funds, because budgetary control is alternatively achieved by constraints imposed by intergovernmental grant agreements, or Connecticut General Statutes. Note 3 Cash, Cash Equivalents, and Investments Cash, cash equivalents, and investments of governmental funds at June 30, 2016 consisted of: Deposits: Demand Accounts $ 121,444 Certificate of Deposits 1,091,962 Total Deposits 1,213,406 Cash Equivalents: Repurchase Agreements 2,312,704 Less: Certificate of Deposits classified as investments 1,091,962 Total Cash and Cash Equivalents 2,434,148 Agency fund investments of $730,156 consisted of amounts held for the benefit of the Town s Length of Service Award Program via a MassMutual Guaranteed Interest Account. A. Cash Equivalents At June 30, 2016, the Town s cash equivalents amounted to $2,312,

100 Town of Bethlehem, Connecticut Notes to Financial Statements Note 3 Cash. Cash Equivalents, and Investments (continued) B. Investments At June 30, 2016 the Town s investments consisted of the following: Averag Investment Types of Investments Fair Value Credit Rating Maturity Primary Government Certificate of Deposit $ 310,239 * 12/16/2017 CertificateofDeposit 264,116 * 10/08/2017 Certificateof Deposit 258,835 * 2/18)2017 Certificate of Deposit 258,772 * 9/9/2017 Total Primary Government S1,2.L2 * Included in deposits above, therefore insured and collateraliied to the extent described above C. Credit Risk Generally, credit risk is defined as the risk that an issuer of a debt type investment will not fulfill its obligation to the holder. The Town s investing activities conform to Connecticut General Statutes (Section 7-400) which permit municipalities to invest in: 1) obligations of the United States and its agencies; 2) high rated obligations of any state of the United States or of any political subdivision, authority or agency thereof; and 3) shares or other interests in custodial arrangements or pools maintaining constant net asset values and in highly rated no-load open end money market and mutual funds (with constant or fluctuating net asset values) whose portfolios are limited to obligations of the United States and its agencies, and repurchase agreements fully collateralized by such obligations. Assets of the Town s Length of Service Awards Program (LOSAP) Agency Fund may be invested in certain real estate mortgages, in certain savings banks or savings and Loan associations, or in stocks or bonds or other securities selected by the trustee, with the care of a prudent investor and the provisions of the applicable plan. D. Custodial Credit Risk - Deposits This is the risk that in the event of a bank failure, the government s deposits may not be returned to it. The Town does not have a policy for custodial credit risk. The deposit of public funds is controlled by the Connecticut General Statutes (Section 7-402). Connecticut General Statutes require that each depository maintain segregated collateral (not required to be based on a security agreement between the depository and the municipality and, therefore, not perfected in accordance with federal law) in an amount equal to a defined percentage of its public deposits based upon the depository s risk based capital ratio. As of June 30, 2016, the carrying amount of the Town s deposits, including certificates of deposits of $1,091,962 classified as investments, was $3,526,110 and the bank balance was $3,878,671. Of the Town s bank balance, $548,360 was exposed to custodial credit risk, as follows: Uninsured and uncollateralized $ 493,524 Uninsured and collateralized held by pledging Bank s trust department, not in the Town s name Total amount subject to custodial credit risk -31-

101 Town of Bethlehem, Connecticut Notes to Financial Statements Note 3 Cash, Cash Equivalents, and Investments (continued) D. Custodial Credit Risk Deposits (continued) Amounts held in the repurchase agreement accounts were collateralized with collateral held by the Bank s trust departments or agents, but not in the Town s name. E. Custodial Credit Risk Repurchase Investment Account and Investments This is the risk that in the event of the failure of the counterparty (e.g., broker-dealer) to a transaction, a government will not be able to recover the value of its investment or collateral securities that are in the possession of another party. At June 30, 2016, the funds held in the repurchase investment account were collateralized with collateral held by the bank s trust department or agents but not in the Town s name. F. Interest Rate Risk The Town does not have a formal policy that limits investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates. The Town held no debt type investments at June 30, 2016 that were exposed to interest rate risk. G. Fair Value Measurements The Town categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure fair values of the assets. Level 1 inputs are quoted prices in an active market for identical assets; Level 2 inputs are significant other observable inputs; and Level 3 inputs are significant unobservable inputs. The Town did not hold any investments on June 30, 2016 whose fair value was determined using Level 3 inputs. The following is a summary of the fair of June 30, value hierarchy of the fair value of investments of the Town as Investments by Fair Value Level 6/30/2016 Fair Value Measurements Using Quoted Prices in Active Markets Significant Other for Identical Assets Observable Inputs (Level 1) (Level 2) Total Certificates of Deposit MassMutual Guaranteed Interest Account $ - $ - 730,156 1,091,962 $ 1,091, ,156 Total Investments S - S 1,822,118 $ 1,822,

102 Town of Bethlehem, Connecticut Notes to Financial Statements Note 3 Cash, Cash Equivalents, and Investments (continued) 0. Fair Value Measurements (continued) The Towns investments that are classified in Level I are measured on a recurring basis, using market quotations for investments that have quoted prices in active markets. The Towns investments that are classified in Level 2 are measured using matrix pricing techniques using various pricing vendors. Matrix pricing is used to value securities based on their relationship to benchmark quoted prices. Fair value is defined as the quoted market value on the last trading day of the period. These prices are obtained from various pricing sources by our custodian bank. Note 4 Receivables and Deferred Inflows of Resources Receivables at June 30, 2016 for individual major funds and the nonmajor funds in the aggregate, including the applicable allowance for collection losses, are as follows: Property tax Accrued interest and lien fees Housing rehabilitation loans State of Connecticut Other account receivable Total gross receivables General Fund $ 534, ,732 25,844 1, ,791 Nonmajor Funds $ 213, ,699 Total $ 534, , ,699 25,844 1,639 1,063,490 Allowance for collection losses (160,000) (160,000) Total net receivables $ 689,791 S 213,699 $ 903,490 To reflect that a portion of property taxes, interest, and lien fees receivable at June 30, 2016 are not considered available to liquidate general fund Liabilities of the current period, the governmental funds balance sheet reports property tax revenue, unavailable for expenditure in the current fiscal year of $774,053, as a deferred inflow of resources. The amount recorded as housing rehabilitation loans receivable $213,699 represents loans disbursed from the Small Cities, Community Development Block Grant. This grant is administered through the State of Connecticut; however, funds for this grant are federal funds originating with the Department of Housing and Urban Development (HUD). Typically, funds are offered in the form of deferred loans to owner/occupants for assistance in the rehabilitation of his/her home. Deferred loans are 0% interest loans that do not require repayment until a transfer of Title, the Owner s demise or the subject property is no longer the applicant s principal place of residence. MI loans are secured with a mortgage deed, promissory note and memorandum of agreement. -33-

103 Town of Bethlehem, Connecticut Notes to Financial Statements Note 5 Interfund Transfers hterfund transfers for the year ended June 30, 2016 consisted of the following: Major Funds General Fund Reserve for Capital and Nonrecurring Expenditures Nonmajor Funds Dog Fund Libraxy Trust Appropriated Capital Projects Transfers From Transfers To Net Other Funds Other Funds Transfers $ 405,000 $ 1,063, ,000 20, , ,700 - $ (658,132) (405,000) 20, , ,700 Total $ 1,468,132 $ 1,468,132 $ Transfers are used to account for unrestricted revenues collected mainly in the General Fund to finance various programs accounted for in other funds in accordance with budget authorizations. Note 6 Interfund Balances As of June 30, 2016, the amounts due from and due to other funds is as follows. These balances resulted from the time lag between the date that (1) interfund goods and services are provided or reimbursable expenditures occur, (2) transactions are recorded in the accounting systems, and (3) payments between funds are made. Major Funds General Fund Reserve for Capital and Nonrecurring Expenditures Nonmujor Funds Christmas Town Fund Open Space Fund Dog Fund Preservation of Land Records School Resource Officer Fund Special Grants and Donations Housing Rehabilitation Loan Program Appropriated Capital Projects Grant Funded Capital Projects Due From Other Funds $ 1, ,460 14, ,116 6,339 1,852 10,302 34, ,850 80,000 Due to Other Funds $ 1,532,569 1,096 Total S 1,533,665 S 1,533,

104 Town of Bethlehem, Connecticut Notes to Financial Statements Note 7 - Long-Term Debt Long-term debt activity for the year ended June 30, 2016 was as follows: Balance Balance Due Within 6/30/2015 Additions Reductions 6/30/20 16 One Year Compensated absences $ 40,535 $ 35,775 $ 31,080 $ 45,230 $ Net pension obligation - Length of Service Award Program 753 2,589-3,342 $ $=j12 $4j22 $ Overlapping Debt As a member of Regional School District No. 14 (the District ), the Town is contingently liable for its pro mm share of the District s debt. At June the District did not have any outstanding debt. Note 8 Capital Assets Capital asset activity for the year ended June 30, 2016 was as follows: ,000 Beginning Decreases/ Ending Balance Increases Reclasses Balance Capital assets, not being depreciated: Land $ 1,296,475 $ S $ 1,296,475 Construction in progress 176,524 (175,549) 975 Art collection 21,000 Total capital assets, not being depreciated 1,493,999 - (175,549) 1,318,450 Capital assets, being depreciated: Buildings and improvements 2,601, ,601,686 Machinery, equipment and vehicles 2,770, ,915 (22,859) 3,077,480 Infrastructure 2,433, , ,708 3,091,214 Total capital assets, being depreciated 7,805, , ,849 8,770,380 Less accumulated depreciation for: Buildings and improvements 1,192, ,358 Machinery, equipment and vehicles 1,566, ,057 (32,700) 1,670,234 Infrastructure 890, ,268-1,062,339 Total accumulated depreciation 3,649, ,683 (32,700) 4,038,253 Total capital assets being depreciated, net 4,156, , ,549 4,732,127 Governmental activities, capital assets, net $ 5,650,682 S 399,895 $ - $ 6,050,

105 Town of Bethlehem, Connecticut Notes to Financial Statements Note 8 Capital Assets (continued) Depreciation expense was charged to functions/pro ams of the Town as follows: General government $ 38,046 Public safety 110,787 Public works, including depreciation of general infrastructure assets 247,405 Culture and recreation 25,445 $ 421,683 Note 9 Pension and Retirement Plans A. Deferred Compensation Plan Effective November 4, 2015, the Town offers its employees a deferred compensation plan created in accordance with Internal Revenue Code Section 457. All employees may elect to defer a portion of their gross pay up to the maximum allowed by the Code. The Town is required to contribute up to 10% of the participants compensation. The actual annual percentage rate is determined each plan year by the Towns Board of Finance, during the previous year. Eligible employees include all employees working a minimum of 25 hours per week and not participating in the Municipal Employees Retirement System Plan and the Town s Defined Benefit Pension Plan. Town contribution totaled S3,064, which is 6% of active participants compensation. Deferred compensation is not available to participants until termination, retirement, death, or unforeseeable emergencies. All amounts of compensation deferred under the plan, all property and rights purchased with those amounts, and all income attributable to those amounts, property or rights are held in trust for the exclusive benefit of the plan participants and their beneficiaries. It is the opinion of Town officials that the Town has no liability for losses under the plan, and therefore, the accounts of the deferred compensation plan are not reported in the basic financial statements of the Town. B. Town Employee Pension Plan The Town has a defined benefit, fully insured and funded, pension plan covering all full-time eligible employees, excluding elected officials and persons serving in non-compensated appointed positions. To be eligible to participate employees must have attained age 21 but not have attained age 56; and have completed two year of service. At June 30, 2016, this plan was closed to new participants, with one employee accruing benefits and participating in the plan. Plan benefits are funded through individual whole life insurance (with face value of 100 times the assumed monthly retired benefit) and a variable annuity contract for each participant. The Town s contribution obligation is limited to making annual plan contributions in accordance with plan provisions that provide for assumed monthly pension benefits upon participant retirement equal to twenty-five percent of participant monthly compensation. -36-

106 Town of Bethlehem, Connecticut Notes to Financial Statements Note 9 Pension and Retirement Plans (continued) B, Town Employee Pension Plan(continued) Upon reaching normal retirement age, defined as the later of the plan anniversary date nearest the date on which the participant attains age sixty-five or the plan anniversary date ten years subsequent to the participant s entry into the plan, participants are entitled to the exact amount of funds that have accrued to their benefit. Such amounts may be paid in a lump sum or as periodic payments in accordance with plan provisions, and are the obligation of the insurance company. The Town s obligation is limited to funding the participants contracts in accordance with plan provisions and, therefore, in accordance with criteria of the GASB, the Town does not include the insurance contracts as assets of its pension trust fund, nor does it report a net pension liability or a pension benefit obligation. Plan contributions in satisfaction life insurance and annuity contract obligations totaling $4,960 for the year ended June were funded from the General Fund and plan forfeiture proceeds. C. Connecticut Municipal Employees Retirement System Plan Description On July 1,2014, the Town s Public Works bargaining unit employees began participating in the Connecticut Municipal Retirement System (CMERS). CMERS is the public pension plan offered by the State of Connecticut for municipal employees in participating municipalities. The plan was established in 1947 and is governed by Connecticut Statute Title 7, Chapter 113. CMERS is a mukiemployer pension plan administered by the Connecticut State Retirement Conmission. The State Retirement Commission is responsible for the administration of the CMERS. The State Treasurer is responsible for investing CMERS funds for the exclusive benefit of CMERS members. CMERS is considered to be a part of the State of Connecticut financial reporting entity and is included in the State s financial report as a pension trust fund. CMERS issues a financial report that may be obtained by writing to the State of Connecticut, Office of the State Comptroller, 55 Elm Street, Hartford, Connecticut Municipalities may designate which departments (including elective officers if so specified) are to be covered under the CMERS. The Town designates general employees with social security benefits to be part of the plan. There is no minimum age or service requirements. Membership is mandatory for alt regular frill time employees of the department. Benefit Provisions The plan provides retirement, disability, and death benefits. General Employees. Employees are eligible to retire at age 55 with 5 years of continuous service, or 15 years of active aggregate service, or 25 years of aggregate service. Normal Retirement: For members covered by social security, the benefit is I ½% of the average final compensation not in excess of the year s breakpoint plus 2% of average final compensation in excess of the year s breakpoint, times years of service. -37-

107 Town of Bethlehem, Connecticut Notes to Financial Statements Note 9 Pension and Retirement Plans (continued) C. Connecticut Municipal Employees Retirement System (continued) The maximum benefit is 100% of average final compensation and the minimum benefit is $1,000 annually. Both the minimum and maximum include workers compensation and social security benefits. if any member covered by social security retires before age 62, the benefit until age 62 is reached or a social security disability award is received, is computed as if the member is not under social security. Early Retirement: Employees are eligible after 5 years of continuous or 15 years of active aggregate service. The benefit is calculated on the basis of average final compensation and service to date of termination. Deferred to normal retirement age, or an actuarially reduced allowance may begin at the time of separation. Disability Retirement: Employees are eligible for service-related disability benefits from being permanently or totally disabled from enaaging in the service of the municipality provided such disability has arisen out of an in the course of employment with the municipality. Disability benefits are calculated based on compensation and service to the date of the disability with a minimum benefit (including workers compensation benefits) of 50% of compensation at the time of disability. Employees are eligible for non-service-related disability benefits with 10 years of service and being permanently or totally disabled form engaging in gainful employment in the service of the municipality. Disability benefits are calculated based on compensation and service to the date of the disability. Pre-Retirement Death Benefit: The plan also offers a lump sum return of contributions with interest or surviving spouse benefit depending on length of service. Contributions Employer. Participating municipalities make annual contributions consisting of a normal cost contribution, a contribution for the amortization of the net unfunded accrued liability and a prior service amortization payment which covers the liabilities of the system not met by member contributions. Employees. For employees covered by social security, each person is required to contribute 2 ¼% of compensation up to the social security taxable wage base plus 5% of compensation, if any, in excess of such base. Pension liabilities, pension expense, deferred outflows of resources, and deferred inflows of resources related to Pensions The Town became a participant in CMERS on July 1, 2014 and according to the most current actuarial measurement date, June 30, 2015, the Town s proportionate share of net pension liability, deferred outflows of resource, and deferred inflows of resources related to pensions was not available and is considered immaterial to these financial statements. -38-

108 Town of Bethlehem, Connecticut Notes to Financial Statements Note 9 Pension and Retirement Plans (continued) C. Connecticut Municipal Employees Retirement System (continued) For the year ended June , the Town recognized pension expense of $25,283 for the four public works participants. The Town will be part of the June 30, 2016 valuation and measurement, and therefore, expects that the pension liability, deferred outflows of resources, and deferred inflows of resources related to pensions will increase accordingly. Pension Plan Fiduciary Net Position Detailed information about the pension plan s fiduciary net position is available in the separately issued financial statements issued in the State of Connecticut s Comprehensive Annual Financial Report as of and for the year ended June 30, 2015, as adjusted to be in conformance with GASB Statements No. 67 and 68. D. Length of Service Awards Program Summary The Bethlehem Emergency Service Group established a Length of Service Awards Program (LOSAP) in 1988 to provide retirement benefits for members of the Bethlehem Volunteer Fire Department, and the Bethlehem Ambulance Association, Inc. The plan is a single-employer defined benefit plan and is reported in the Town s financial statements as an agency fund, since it holds assets accumulated for benefit purposes in a fiduciary capacity. A separate stand-alone report is not issued. Plan benefits, and contribution requirements, are established by Town appointed committee, which may amend the plan. Summary of Significant Accounting Policies Basis ofaccounting - The Length of Service Awards Program agency fund s financial statements are prepared on the accrual basis of accounting for recognizing assets and liabilities. Receipts and disbursements are reflected in the changes in the assets and liabilities. Employer contributions are recognized when due and a formal commitment to provide the contribution has been made. Valuation of Investments - Investments are valued at fair value. Classes of Employees Covered - Based on the actuarial valuation report dated July 1, 2016, membership consisted of: Active participants 57 Terminated/retired vested participants 41 Total

109 Town of Bethlehem, Connecticut Notes to Financial Statements Note 9 Pension and Retirement Plans (continued) D. Length of Service Awards Program (continued) Contributions The Town s annual required contribution is actuarially determined on an annual basis using the frozen entry age actuarial cost method. Members do not contribute to the plan. Costs of administering the plan are included in annual contributions to the plan which are paid by the General Fund. Benefits The normal retirement date for volunteers is attained at age 62 with one year of credited service. A year of credited service is credited in accordance with the method used to determine active volunteer status. The benefit for members of the Bethlehem Volunteer Fire Department at normal retirement age is equal to $15 per month for each year of credited service to a maximum of $375 per month. The benefit for members of the Bethlehem Ambulance Association, Inc. at normal retirement age is equal to $10 per month for each year of credited service to a maximum of $250 per month. Members terminating service due to attainment of retirement age are fully vested to their accrued benefit. Members terminating for any other reason are subject to a ten year vesting schedule. In the event of disability, members are entitled to receive an immediate lump sum distribution of the actuarial equivalent of the accrued benefit. The plan provides for the greater of the proceeds of a $15,000 life insurance policy or the member s actuarial share of any auxiliary fund or reserve to provide benefits under the plan as a pre-retirement death benefit to designated beneficiaries. Schedule of Funding Progress Accrued Liability Percentage of Actuarial Value of (AAL) Entry AAL Covered Covered Valuation Assets (UAAL) Funded Ratio Payroll Date July 1, Rb-alc) $ 364,578 $ 610,180 S % Wa n/a , , , % n/a n/a , , , % n/a n/a , , , % n/a n/a ,065 1,021, , % Wa n/a ,156 1,164, , % Wa n/a 40-

110 Town of Bethlehem, Connecticut Notes to Financial Statements Nate 9 Pension and Retirement Plans (continued) D. Length of Service Awards Program (continued) Schedule of Employer Conthbutions* Year Ended Annual Required Actual Percentage June 30. Contributions Contribution Contributed 2011 $ 78,086 $ 78, % ,427 88, % ,787 88, % ,495 89, % ,505 90, % ,977 87, % trequired data for the Schedule of Funding Progress and the Schedule of Employer Contributions was not available for periods prior to the fiscal year ended June 30, Beginning with the 2011 fiscal year, the Town is prospectively reporting all required data in conformance with requirements of the Governmental Accounting Standards Boards. Actuarial Assumptions The data presented in the schedule of funding progress and schedule of employer contributions were determined as part of the actuarial valuation the date indicated. Additional information for the plans as of the latest valuation is as follows: Valuation date July 1, 2016 Actuarial cost method Frozen entry age Amortization method Level percentage Asset valuation method Market value Actuarial assumptions Investment rate of return 4.75% Projected salary increases N/A Three Year Trend Information Year Ended Annual Pension Percentage of Net Pension June 30. Cost (APC) APC Contributed Obligation 2014 $ 89, % $ , % , % 3,

111 Town of Bethlehem, Connecticut Notes to Financial Statements Note 9 Pension and Retirement Plans (continued) D. Length of Service Awards Program (continued) Annual Pension Cost and Net Pension Obligation The Town s annual pension cost and net pension obligation to the plan for the current year were as follows: Annual required contribution $ 89,977 Interest on net pension obligation Adjustment to annual required contribution Annual pension cost 89,977 Contribution made*** Change in net pension obligation 2,589 Net pension obligation, beginning of year 753 Net pension obligation, end of year S ***mis amount represents employer contributions made to finance the plan s annual required contribution. Employer contributions as reported in the financial statements include additional amounts contributed to the plan to finance pension administrator costs. Note 10 - Risk Management The Town is exposed to various risks of loss involving torts, theft of, damage to, and destruction of assets, errors and omissions, injuries of employees, nawral disaster and public official liabilities. The Town generally obtains commercial insurance for these risks. Coverage has not been significantly reduced and settled claims have not exceeded commercial coverage in any of the last three fiscal years. The Town obtains its worker compensation and employer liability coverage as a member of Connecticut Interlocal Risk Management Agency (CWJvIA), a public entity risk pool established for the purpose of administering an interlocal risk management program pursuant to the provisions of Connecticut General Statutes. CMA is to be self-sustaining through members premiums but purchases reinsurance for its protection at various levels for all lines of coverage provided. Members may be subject to supplemental assessment in the event of deficiencies; however, potential assessments are limited pursuant to the by laws. Note 11 Commitments and Contingencies It is the opinion of Town officials that there are no claims, material or substantial, against the Town, which will be finally determined so as to result in judgment(s) against the Town, which would materially affect its financial position. -42-

112 Town of Bethlehem, Connecticut Notes to Financial Statements Note 11 Commitments and Contingencies (continued) The Town has received financial assistance from numerous Federal and State agencies in the form of grants and entitlements. The disbursements of hinds received under these programs generally requires compliance with terms and conditions, as specified in the grant agreements, and is subject to audit by the grantor agencies. Any disallowed claims resulting from such audits could become a liability of the General Fund or other applicable funds. However, in the opinion of management, liabilities resulting from disallowed claims, if any, will not have a material effect on the Town s financial statements. The Town is a defendant in several lawsuits that, in the opinion of Town Management, in consultation with legal counsel, will not have a material adverse effect on the Town s financial position. Note 12 - Implementation of Current GASB Pronouncements In fiscal year 2016, the Town adopted two new statements of financial accounting standard issued by the Governmental Accounting Standards Board (GASB). The new statements include: Statement No. 72, Fair Value Measurement and Application and Statement No. 76, The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments. Note 13 - Implementation of Future GASB Pronouncements The GASU has issued several pronouncements that have effective dates that may impact the June financial statements. Management has not currently determined what, if any, impact implementation of the following statements may have on the financial statements: Statement No. 73, Accounting and Financial Reporting for Pensions and Related Assets That Are Not within the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASB Statements 67 and 68. Statement No. 74, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans. Statement No. 77, Tax Abatement Disclosures. Statement No. 78, Pensions Provided through Cenain Multiple-Employer Defined Benefit Pension Plans. Statement No. 79, Certain External Investment Pools and Pool Participants. Statement No. 80, Blending Requirements for Cenain Component Units - an amendment of GA SB Statement No. 14 Statement No. 82, Pension Issues - an amendment of GASB Statements No 67, No, 68, and No. 73. Note 14 - Restatement of the Statement of Fiduciary Net Position Management has determined that the Length of Service Volunteer Awards Program is not a Pension Trust Fund, and therefore, it is being reported in an Agency Fund. The net position of the Pension Trust Fund was restated as of July 1,2015, as follows: Net Position, Pension Trust Funds at June 30, 2015 S 634,555 Assets Reclassed to an Agency Fund 629,065 Net Position, Pension Trust Fund at July 1, 2015 $

113 -44- The accompanying notes are an integral part of these financial statements. 1,319,337 Prior years 140,000 - lnlergovemmental: Property taxes: Total PropertyTaxes 8,341,941 8,341,941 8,440,271 98,330 Interest and lien fees 81,200 81, ,414 34,2(4 Current year $ 8,141,941 $ - Supplemental motor vehicles tax 60,000 60,000 80, , ,141,941 $ 8,143,776 $ 1,835 Revenues: Original Additional Final Final Budget Year Ended June 30, 2016 Variance With Schedule of Revenues, Expenditures and Changes in Fund Balance Required Supplementary Information General Fund Budget and Actual (Non - Budgetary Basis) GAAP - 3,995 $ 140,000 3,881 12, ,442 34,326 14,442 1,600,239 6,000 9, ,800 40,000 2,000 20, ,500 25,000 Other grants - Town of Bethlehem Budget Budgeted Revenue Budget Actual Over (Under) Total Departmental 135,800 6, , ,798 22,498 Planning Inland wetlands 1,800 - Licenses and permits 2,000 - Copier fees Departmental: Conveyance taxes 20,000 - Building official 40,000 - Parks & recreation fees 46,000 6,500 52,500 59,031 6,531 Transfer station 25,000 - Total Investment Income 9,500 - Other Tax collector 3,500 - Lnvestment income: Elderly van grant 12,831 - Town aid roads 214,442 - State owned real property Additional sales tax 3,881 - LOCIP 34,326 - Total Intergovernmental 1,600,239 - Veterans tax relief - Elderly tax relief - Mashantucket Pequot grant 14,442 - Education grants,319, (144) 4,220 2,220 23,039 3,039 44,161 4,161 28, ,738 1,938 1, ,836 7,836 1,256 (2,244) 15,092 5,592 1,609, (980) ,293 (2,149) 34,040 (286) 12, (3,881) 31,078 3, , ,078 1,300,366 (18,971)

114 4,000 Town of Bethlehem Required Supplementary Information Schedule of Revenues, Expenditures and Changes in Fund Balance General Fund Budget and Actual (Non - GAAP Budgetary Basis) Year Ended June 30, 2016 Variance With Original Additional Final Final Budget Budget Budgeted Revenue Budget Actual Over (Under) Other Revenues: Memorial Hall S 5,500 S 5,500 $ 7,050 S 1,550 Accommodations 10,000 10,000 7,389 (2,611) Christmas town festival 20,000-20,000 20, Festival grant/memorial Hall 4,000 4,000 - Sale of equipment 5,000 5,000 5, Telecom tax 10,000 10,000 10, Mrsa municipal projects 7,945-7,945 7,945 - Insurance reimbursement 3,797 3,797 2,797 (1,000) Miscellaneous 2,670 2,670 6,109 3,439 Elderly Van Operations Aircraft Registration Fees (270) Police tickets Rent ,000 1,000 (1.000) Total Other Revenues 71,182 71,182 73, Total Revenue 10,239,862 6,500 10,246,362 10,418, ,774 Other Financing Sources: Operating Transfers In: Capital Nonrecurring Fund 300, , , ,000 Total Revenues and Other Financing Sources $ 10,539,862 $ 111,500 $ 10,651,362 $ 10,823,136 $ 171,774 The accompanying note: arc an integral part of these financial statements. -45-

115 2,000 Town of Bethlehem Required Supplementary Information Schedule of Revenues, Expenditures and Changes in Fund Balance General Fund Budget and Actual (Non - GAAP Budgetary Basis) Year Ended June 30, Variance With Original Additional Final Final Budget Budget Appropriations Budget Actual Over (Under) Expenditures: General government: Selectmen $ 147,183 $ $ 147,183 $ 120,124 $ (27,059) Probate court 1,880-1,880 1,879 (1) Town counsel 30,000 30,000 13,596 (16,404) Elections and town meetings 10,000 1,282 11,282 11,282 - Board of Finance 20,700 20,700 17,891 (2,809) Board of Assessment Appeals 2,500 2, (2,006) Assessor 65,945 65,945 62,912 (3,033) Tax Collector 39,213 39,213 37,376 (1,837) Treasurer 15,857 15,857 13,587 (2,270) Town Clerk ,803 37,129 (674) Registrars 21,004 21,004 17,994 (3,010) Insurance and bonds 102, , ,337 (2,542) Pensions 24,000 24,000 22,851 (1,149) Planning commission 6,000 6,000 4,907 (1,093) Memorial Day 2, ,247 2,247 - Inland wetland commission 12,000 1,200 13,200 12,704 (496) Conservation commission 2,000-1,945 (55) Professional services 40,000-40,000 9,566 (30,434) Town buildings 62,902 62,902 52,471 (10,431) Payroll taxes 61,020 61,020 56,088 (4.932) Vacation pay 16, ,784 16,783 (1) Sick pay 7, ,505 (495) Medical insurance 83, ,155 83,154 (1) Holiday pay 13,200 1,928 15,128 15,128 - Personal days 4, ,949 4,949 - Bereavement Total Genera] Government 828,496 6, , ,090 (110,732) Public Safety: Steel lights 5,000-5,000 4,880 (120) Emergency management Police protection 149,000 13, ,412 (50) Fire protection 132,500 - L32, ,836 (6,664) Length of service awards 95,000-95,000 89,207 (5,793) Ambulance 7,500-7,500 7,500 - Public safety communication 23,095-23,095 23,095 - Fire Marshal 20,000 3,505 23,505 23,505 - Fire pond maintenance 5, ,010 5,009 (1) Immunization (1(K)) Total Public Safety 437,695 17, , ,127 (12,728) The accompanying notes are an integral part or these financial statemenis. -46-

116 The accompanying notes am an integral part of these financial statements. Schedule of Revenues, Expenditures and Changes in Fund Balance Total Expenditures Public Works: Public health nursing Municipal agent CNVRAC Senior Commission Debt Service - Health and Welfare: Total Health and Welfare Building official Social services Health district Required Supplementary Information General Fund Budget and Actual (Non - GAAP Budgetary Basis) Year Ended June 30, 2016 Original Additional Final Town of Bethlehem Budget Appropriations Budget Actual Over (Under) Variance With Final Budget Mental health Vital statistics 3,705 19, ,250 3,705 (6,095) (2,715) (10) 19,257 19,258 (1) Total Public Works 9,811,730 6,500 9,818,230 9,601,166 (217,064 Improved roads Refuse disposal Town land maintenance Snow removal 150, Oil, gas, and tires Road supplies 312, ,973 62,000 77,500 50,000 6,000 Unimproved roads Equipment maintenance 319,000 50,000 6, , , , ,157 3,614 (4,74!) (24,000) (4,157) 105,657 65,205 1,540 (7) (699) 319,000 $ 12,500 $ 409 3, ,379 65,204 48,302 5, ,846 62,306 20,810 46,113 33,445 26,422 7,187,029 27,778 6,476 30,220 69,978 (1,698) (16,254) 107, ,301 13, , ,790 3,927 1,577 Lake management committee Total Other Recreation Contingency Culture and Recreation Town land maintenance Total Culture and Recreation Education Elderly van operations Recreation reimbursed Memorial hail operations Memorial hall reimbursement Cemeteries Other Accommodations Other: 1,000 84,027 10,000 33, , ,000 7,203,854 55, ,000 39,500 34,440 27, ,450 32,974 3,000 6,000 84,028 15,000 33,251 16, , ,864 3,927 6,476 10,000 7,203,854 6,614 (38,418) (37,015) ,810 34,440 27,500 32,974 16,414 40,000 46,114 9,800 1,000 (12,045) (21,722) (1,078) (16,825) (48, , ,562 12,379 $ 12,909 $ (I) (I) $ 12,908 (1 6,582 (3,031 (833) (995) (8,423) (15,000) (2,074) (5,196) (I) (23) interest g I 10 - (10

117 130,432 Town of Bethlehem Required Supplementary Information Schedule of Revenues, Expenditures and Changes in Fund Balance General Fund Budget and Actual (Non - GAAP Budgetary Basis) Year Ended June 30, 2016 Variance With Original Additional Final Final Budget Budget Appropriations Budget Actual Over (Under) Other Financing Uses: Operating Transfers out: Christmas town festival $ 20,000 $ - $ 20,000 $ 20,000 $ - Library fund 130, ,432 - Dog fund 20,000-20,000 20,000 - Appropriated capital projects fund 807, , , ,700 Total Other Financing Uses 978, ,000 1,083,132 1,083,132 - Total Expenditures and Other Financing Uses 10,789, ,500 10,901,362 10,684,298 (217,064) Excess (deficiency) of revenues and other financing sources over expenditures and other financing uses (250,000) - Fund Balance at Beginning of Year 250,000 - (250,000) 250, , ,838 1,627,058 1,377,053 Fund Balance at End of Year $ - $ - $ - $ 1,765,896 $ 1,765,896 The accompanying notes are an integral part of these financial statements. -48-

118 Town of Bethlehem Notes to Schedule of Revenues, Expenditures and Changes in Fund Balance General Fund Budget and Actual (Non-GAAP Budgetary Basis) Year Ended June 30, 2016 Basis: The Schedule of Revenues, Expenditures and Changes in Fund Balance of the General Fund Budget and Actual (Non-GAAP Budgetary Basis) present a comparison of the original and final legally-adopted budget with actual data on a budgetary basis. Reconciliation between Budgetary Basis and Generally Accepted Accounting Principles (GAAP) Basis: The budget for the General Fund has been prepared substantially on the cash basis, whereas actual revenues and expenditures were determined on the modified accrual basis. The budget comparison was not adjusted to the cash basis because the differences were not significant. Expenditures in excess of appropriations in budget line items are primarily due to the addition of accruals at year end. For budget purposes, the Town budgets revenue and expenditures for the Christmas Town Festival on the General Fund. For GAAP purposes, these amounts are offset against each other, since the revenue and expenditures are accounted for in the Christmas Town special revenue fund, a non-major fund. The reconciliation from the budgetary basis to GAAP follows: General Fund Total Revenues Total and Other Expenditures Fund Financing Sources and Transfers Balance Actual - Non-GAAP Budgetary Basis Statement - June 30, 2016 $ 10,823,136 $ 10,684,298 $ 1,765,896 Offset Christmas Town Festival (20,000) (20,000) Actual GAAP - June 30, 2016 $ 10,803,136 $ 10,664,298 $ 1,765,

119 $ 21,718 6,339 $ $ Town of Bethlehem Nonmajor Governmental Funds Combining Balance Sheet June 30,2016 Special Revenue Funds Assets: Cash and cash equivalents $ - Housing loans receivable - Prepaid expense 4,938 - Due from general fund 14, ,116 - Christmas Preservation School Town Open Space Dog of Land Resource Officer Food & Fund Fund Fund Records Fund Fuel Bank - $ 25,696 $ , Total Assets $ 18,993 $ 264,116 $ $ 6,339 $ 1,852 $ 11,715 Liabilities: Accountspayable $ - Due to general fund - Total Liabilities - $ - - 1, $ 2,882 $ $ - - $ Deferred Inflows of Resources Deferred grant revenue Fund Balances: Nonspendable 4,938 - Restricted 14,055 - Committed - Unassigned - 264, , ,852 11, Total Fund Balances 18, ,116 21,718 6,339 1,852 11,715 Total Liabilities, Deferred Inflows of Resources and Fund Balance $ 18,993 $ 264,116 $ 25,696 $ 6,339 $ 1,852 $ 11,

120 1,049 1, ,699 $ $ Town of Bethlehem Nonmajor Governmental Funds Combining Balance Sheet (Continued) June 30,2016 Assets: Cash and cash equivalents $ - Housing loans receivable - Prepaid expense - Due from general fund 10,302 - Special Revenue Funds Capital Project Funds Housing Special Rehabilitation Appropriated Grant Funded Grants and Library Loan Capital Capital Donations Trust Program Projects Projects Total $ 9,545 $ $ - 46, ,699 5,987 34, ,850 80, ,109 Total Assets $ 10,302 $ 10,594 $ 248,294 $ 444,850 $ 80,000 $ 1,122,751 Liabilities: Accounts payable $ - Due to general fund - Total Liabilities - 1,950 $ - - $ $ $ 1, ,950 5, ,832 Deferred Inflows of Resources Deferred grant revenue ,000 80,000 Fund Balances: Nonspendable - 213,699 - Restricted 10,302 7,595 34,595 - Committed - Unassigned , , , , Total Fund Balances - 10,302 8, , ,850 Total Liabilities, Deferred Inflows 1,036,823 of Resources and Fund Balance $ 10,302 $ 10,594 $ 248,294 $ 444,850 $ 80,000 $ 1,122,

121 21,472 Town of BetWehem Nonmajor Governmental Funds Combining Statement of Revenue, Expenditures and Changes in Fund Balances Year Ended June 30,2016 Special Revenue Funds Revenues: Intergovernmental $ - Investment income - Depanmental - Donations and other 22,025 - CMsunas Preservation School Town Open Space Dog of Land Resource Officer Food & Fund Fund Fund Records Fund Fuel Bank $ 1,860 - $ - - 4,721 - $ 3,000 $ 110,000 $ , ,408 Total Revenues 22,025 1,860 4,721 4, ,000 16,420 Expenditures: General government ,337 Public safety 21, Health and welfare - Culture and recreation 18, , Education ,144 Capital outlay Total Expenditures 18, , ,144 14,226 Excess (Deficiency) of Revenues Over Expenditures 3,935 1,860 (16,751) 943 (6,144) 2,194 Other Financing Sources: Operating transfers in ,000 Net Change in Fund Balances 3,935 1,860 3, (6,144) 2,194 Fund Balances (Deficits): Beginning of Year 15, ,256 18,469 5,396 7,996 9,521 EndofYear $ 18,993 $ 264,116 $ $ 6,339 $ 1,852 $ 11,

122 Capital outlay 138,764 $ ,898 $ 160,159 $ Town of Bethlehem Nonmajor Governmental Funds Combining Statement of Revenue, Expenditures and Changes in Fund Balances (Continued) Year Ended June 30, 2016 Revenues: Intergovernmental $ - Investment income - Departmental - Donations and other 10,370 6,422 - Special Revenue Capital Project Housing Special Rehabilitation Appropriated Grant Funded Grants and Library Loan Capital Capital Donations Trust Program Projects Projects Total 1,170 $ 157,898 $ Total Revenues 10,370 7, , ,159 $ 452,227-1,896-6,001-55, ,349 Expenditures: General government 17,245 - Public safety - Health and welfare - Culture and recreation - Education - 20, , , , , , , ,736 Total Expenditures 17, , , , ,159 1,378,912 Excess (Deficiency) of Revenues Over Expenditures (6,875) (131,172) 24 (711,577) - (863,563) Other Financing Sources: Operating transfers in 130, ,700 - Net Change in Fund Balances (6,875) (740) ,123 - Fund Balances (Deficits): Beginning of Year 17,177 9, , ,727 - End of Year $ 10,302 $ 8,644 $ 248,294 $ 444,850 $ - 1,063, , ,254 1,036,

123 Town of Bethlehem Fiduciary Fund Type - Agency Fund Statement of Changes in Assets and Liabilities Year Ended June 30, 2016 Lengh of Service Volunteer Awards Program Balance July Additions Deductions Balance June 30,2016 Assets: Investments at fair values Liabilities: Due to beneficiaries $ 629,065 $ 120,347 $ 19,256 $ 730,156 $ 629,065 $ 120,347 $ 19,256 $ 730,

124 Town of Bethlehem Statement of Debt Limitation Connecticut General Statutes Section 7374(b) Year Ended June 30, 2016 Total Receipts From Taxation (including interest and lien fees) For The Year Ended June 30,2016 (Base) $ 8,618,337 Debt Limitation: 2 1/4 Limes Base General Urban Pension Purposes Schools Sewers Renewal Deficit S 19,391,281 $ - $ - $ 4 1/2 times Base 38,782, /4 times Base 32,318, /4 times Base 3 times Base Total Debt Limitation ,628-25,855,041 19,391,281 38,782,562 32,318,801 28,009,628 25,855,041 Indebtedness: Net pension oblication Total Indebtedness ,342-3,342 Debt Limitation in Excess of Outstanding and Authorized Debt S 19,391,281 $ 38,782,562 $ 32,318,801 $ 28,009,628 $ 25,851,699 NOTE: In no case shall total indebtedness exceed seven times annual receipts from taxation. -55-

125 375 Taxes Total Net Receivable Collections June 30, Town of Bethlehem Schedule of Property Taxes Levied, Collected, and Outstanding (Report of the Tax Collector) Year Ended June 30,2016 Grand List: October 1, Taxes LAWFUL CORRECTIONS Net Transfers Adjusted COLLECTIONS Receivable Lawful Corrections (To) From Taxes Thterest and Refunds and July 1, 2015 Additions Deductions Suspense Receivable Taxes Liens Adjusbnenls $ 8,431, , , , , , , , ,782 - $ 11,066 $ 14,164 S - $ , ,428,522 $ 8,272,662 $ 30,776 $ 1,911 $ 8,303,438 (1,036) 194, ,501 20,576 (1,562) 122,077 (4,038) 118,567 51,611 21,193-72,804 (4,1St) (2,480) - - (1,431) - - (1,367) - - (4,695) 79,035 57,574 30,706 16,428-9,561 6,499-16,060 50,036 5,788 3,932 36,702 5,124 31,314 7,457-12,581 4,135 14,846-18,981 - $ 157,771 91,620 66,956 47,134 48,329 48,013 9,720 44,248 31,578 27,179 - (1,958) - 6,577 10,775 15,824 5,049 1, , , , , (394) (463) ,021 4, ,600-6,673 1, Suspense Book Collections Totals $ 9,052,288 $ 11,274 $ 17,164 $ (21,865) $ 9,024,533 $ 8,490,306 $ 128,041 $ 349 $ 8,618,347 $ 534,

126 TOWN OF WOODBURY, CONNECTICUT FINANCIAL INFORMATION Excerpted from the Annual Financial Report of The Town of Woodbury, Connecticut Year Ended June 30, 2016

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