Annual Financial Report of the. Town of Ledyard, Connecticut. Year Ended June 30, 2013

Annual Financial Report of the Year Ended June 30, 2013

Town of ledyard, Connecticut Table of Contents Introductory Section Page List of Principal Officials 1 Organizational Chart 2 Financial Section Independent Auditor's Report 3-5 Management's Discussion and Analysis 6-15 Exhibits Basic Financial Statements Government-Wide Financial Statements A Statement of Net Position 16-17 B Statement of Activities 18 Fund Financial Statements C D E F Balance Sheet and Reconciliation of Fund Balance to Net Position of Governmental Activities - Governmental Funds 19-20 Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental Funds 21 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to Statement of Activities 22-23 Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual - General Fund 24 G Statement of Net Position - Proprietary Funds 25 H Statement of Revenues, Expenses and Changes in Fund Net Position - Proprietary Funds 26 Statement of Cash Flows - Proprietary Funds 27 J Statement of Fiduciary Net Position 28 K Statement of Changes in Fiduciary Net Position 29 L Notes to Financial Statements 30-58

Table of Contents Page RSI Required Supplementary Information 1 Schedules of Funding Progress 59 2 Schedules of Employer Contributions 60 Schedules Supplemental Schedules General Fund 1 Schedule of Revenues and Other Financing Sources- Budget and Actual 61-63 2 Schedule of Expenditures and Other Financing Uses - Budget and Actual 64-65 3 Report of Tax Collector 66 Nonmajor Governmental Funds 4 Combining Balance Sheet 67-68 5 Combining Statement of Revenues, Expenditures and Changes in Fund Balances 69-70 Fiduciary Funds 6 Agency Funds - Combining Statement of Changes in Assets and Liabilities 71 Tables Trend Information 1 Net Position by Component 72 2 Changes in Net Position 73-74 3 Changes in Fund Balances, Governmental Funds 75 4 Tax Rates, Levies and Cash Collections 76 5 Schedule of Debt Limitation 77 6 Legal Debt Margin Information 78

Table of Contents Page Federal Single Audit Schedule of Expenditures of Federal Awards Notes to Schedule of Expenditures of Federal Awards Summary Schedule of Prior Year Audit Findings Schedule of Findings and Questioned Costs Independent Auditor's Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards Independent Auditor's Report on Compliance for Each Major Federal Program and Report on Internal Control over Compliance Required by OMB Circular A-133 79 80 81 82-83 84-85 86-87 State Single Audit Schedule of Expenditures of State Financial Assistance Notes to Schedule of Expenditures of State Financial Assistance Summary Schedule of Prior Year Audit Findings Schedule of Findings and Questioned Costs Independent Auditor's Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards Independent Auditor's Report on Compliance for Each Major State Program and Report on Internal Control over Compliance Required by the State Single Audit Act 88 89 90 91-92 93-94 95-96

Introductory Section

List of Principal Officials June 30, 2013 Town Council Linda C. Davis, Chairman Fred Allyn, III Kevin Dombrowski Stephen Eichelberg John Marshall Mary K. McGrattan Mike France William D. Saums Sharon L. Wadecki Administration John A. Rodolico, Mayor Treasurer Director of Finance Assessor Tax Collector Town Clerk Town Attorney Nancy R. Gosselin Marcia Hancock Paul Hopkins Joan L. Carroll Michael D. Curley Eileen Duggan Board of Education Sharon Hightower, Chairman julia Cronin Stephanie Calhoun Robert Beaver Joan Disco Mimi Peck-Llewellyn Thomas Malone Rebecca Graebner Gordon E. Strickland, Jr. Superintendent of Schools Business Manager Michael Graner, PhD William Merrill 1

TOWN OF LEDYARD CONNECTICUT ORGANIZATIONAL CHART VOTERS OF VOTERS APPOINTS APPOINTS APPOINTS I\.) I TREASURER PLANNING COMMISSION INLAND WETLAND & WATERCOURSE COMMISSION HISTORICAL DIST. COMMISSION PARK & REC. COMMISSION I PARK & REC. DIRECTOR I BOARD OF TAX REVIEW COUNCIL CLERK BUILDING CODE BOARD OF APPEALS FIRE MARSHAL HOUSING AUTHORITY ZONING BOARD OF APPEALS TOWN ATTORNEY DIRECTOR OF CIVIL DEFENSE DIRECTOR OF PUBLIC HEALTH NURSING SERVICE BOARD NURSING SUPERVISOR DIRECTOR OF FINANCE TOWN CLERK DIRECTOR OF PUBLIC WORKS BUILDING OFFICER PLANNING DIRECTOR CONSTABLES DOG WARDEN SOCIAL SERVICE BOARD SENIOR CITIZENS COMMISSION LIBRARY COMMISSION I LIBRARY DIRECTOR I ASSESSOR

Financial Section

Co H N Pi) RE Z N I C K ACCOUNTING TAX ADVISORY CohnReznick LLP cohnreznick.com Independent Auditor's Report Town Council Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund and the aggregate remaining fund information of the, as of and for the year ended June 30, 2013, and the related notes to the financial statements, which collectively comprise the Town's basic financial statements as listed in the table of contents Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. 3

Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund and the aggregate remaining fund information of the, as of June 30, 2013, and the respective changes in financial position and, where applicable, cash flows thereof and the respective budgetary comparison for the general fund 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 the schedules of Funding Progress and Employer Contributions - Ledyard Retirement System and Other Post-Employment Benefit Plan on pages 6-15 and pages 59 and 60, respectively, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements 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 's basic financial statements. The introductory section, supplemental schedules and the trend information section are presented for purposes of additional analysis and are not a required part of the basic financial statements. The schedule of expenditures of Federal awards, as required by U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, and the schedule of expenditures of state financial assistance, as required by the State Single Audit Act, are presented for purposes of additional analysis and are also not a required part of the basic financial statements. 4

The supplemental schedules, the schedule of expenditures of Federal awards and the schedule of expenditures of state financial assistance 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 supplemental schedules, the schedule of expenditures of Federal awards and the schedule of expenditures of state financial assistance are fairly stated in all material respects in relation to the basic financial statements as a whole. The introductory and trend information sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated June xx, 2014, on our consideration of the '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 with the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the 's internal control over financial reporting and compliance, New London, Connecticut June 19, 2014 5

Town of Ledyard Connecticut 741 Colonel Ledyard Highway Ledyard, CT 06339 Tel: (860) 464.3235 Fax: (860) 464.1126 Management's Discussion and Analysis For The Year Ended June 30,2013 As management of the Town of Ledyard, we offer readers of the Town of Ledyard's financial statements this narrative overview and analysis of the financial activities of the Town for the fiscal year ended June 30, 2013. Financial Highlights The assets of the Town exceeded its liabilities at the close of the most recent fiscal year by $68,055,167 (net position). Of this amount, $47,289,291 was attributable to governmental activities and $20,765,876 to business-type activities. The Town's total net position decreased by $701,761. This was primarily due to net changes in the governmental funds. As of the close of the current fiscal year, the Town's governmental funds reported combined ending fund balances of $4,288,371, a decrease of $817,351 in comparison with the prior year. The decrease is due to the expenditure of short-term borrowing proceeds prior to securing permanent financing. At the end of the fiscal year, the unassigned fund balance for the general fund was $4,082,361 or 8.3%> of total general fund expenditures and transfers out (budgetary basis). Overview of the Basic Financial Statements This discussion and analysis is intended to serve as an introduction to the Town of Ledyard's basic financial statements. The Town of Ledyard's basic financial statements comprise three components: 1) government-wide financial statements, 2) fund financial statements and 3) notes to the basic financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. Government-wide financial statements. The government-wide financial statements are designed to provide readers with a broad overview of the Town's finances, in a manner similar to a private-sector business. The statement of net position presents information on all of the Town's assets and liabilities, with the difference between the two reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the Town is improving or deteriorating. WWW.TOWN.LEDYARD.CT.US 6

MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED) The statement of activities presents information showing how the Town'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 and earned but unused vacation leave). Both of the government-wide financial statements distinguish functions of the Town of Ledyard that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the Town include general government, public safety, health and welfare, public works, library, parks and recreation and education. The business-type activities of the Town are for water operations and sewer operations. The government-wide financial statements can be found on Exhibits A and B. Fund financial statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The Town of Ledyard uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the Town can be divided into three categories: governmental funds, proprietary funds and fiduciary funds. 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, governmental 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 useful in evaluating a government's near-term financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the Town's near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The Town maintains 13 individual governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures and changes in fund balances for the three funds considered to be major funds. Data from the other 10 governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these nonmajor governmental funds is provided in the form of combining statements in Schedules 4 and 5. Major Governmental Funds Nonmajor Governmental Funds General Capital Projects Town Aid Road Fund Library Commission Animal Control Cafeteria Education Grants Sawmill Restoration Miscellaneous State Grants Housing Rehab Program Coastal Management Parks and Recreation Endowment Fund The Town adopts an annual budget for its general fund. A budgetary comparison statement has been provided for the general fund to demonstrate compliance with this budget. The basic governmental fund financial statements can be found on Exhibits C, D and F. 7

MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED) Proprietary funds. The Town of Ledyard maintains two different types of proprietary funds. Enterprise funds are used to report the same functions presented as business-type activities in the governmentwide financial statements. The Town uses an enterprise fund to account for its water operations and its sewer operations. Internal service funds are an accounting device used to accumulate and allocate costs internally among the Town's various functions. The Town uses an internal service fund to account for its medical benefits. Because these services predominantly benefit governmental rather than business-type functions, they have been included within governmental activities in the government-wide financial statements. Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail. The proprietary fund financial statement provides information for the water operations and for the sewer operations, which are considered to be major funds of the Town. The internal service fund financial statement provides information for the Town's medical plan benefits. The basic proprietary fund financial statements can be found on Exhibits G, H and I. Fiduciary funds. Fiduciary funds are used to account for resources held for the benefit of parties outside the Town. Fiduciary funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support the Town's own programs. The accounting used for fiduciary funds is much like that used for proprietary funds. The basic fiduciary fund financial statements can be found on Exhibits J and K. Notes to financial statements. The 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 financial statements can be found on Exhibit L. Other information. In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the Town of Ledyard's progress in funding its obligation to provide pension and other post employment benefits to its employees. The combining statements and supplemental schedules referred to earlier in connection with nonmajor governmental funds are presented immediately following the required supplementary information on pension and other post employment benefits. Government-Wide Financial Analysis As noted earlier, net position may serve over time as a useful indicator of a government's financial position. For the Town of Ledyard, assets exceeded liabilities by $68,055,167 at the close of the fiscal year. 8

MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED) T own of Ledyard Summary Statement of Net Position June 30, 2013 and 2012 Governmental Business-Type Activities Activities Totals 2013 2012 2013 2012 2013 2012 Current and other assets $ 10,745,966 $ 12,567,098 $ 3,704,924 $ 3,955,835 $ 14,450,890 $ 16,522,933 Capital assets (net) 62 1 690 1 732 57 1 697 1 019 22 1 353 1 393 22 1 825 1 162 85 1 044 1 125 80 1 522 1 181 Total assets 73 1 436 1 698 70 1 264 1 117 26 1 058 1 317 26 1 780 1 997 99 1 495 1 015 97 1 045 1 114 Deferred outflows of resources 42 1 570 47 1 891 79 1 819 89 1 796 122 1 389 137 1 687 Long-term liabilities outstanding 19,377,401 15,405,367 4,011,687 4,812,243 23,389,088 20,217,610 Other liabilities 6 1 812 1 576 6}99 1 141 1136 1 573 1 1 409 1 122 8 1 173 1 149 8 1 208 1 263 Total liabilities 26 1 189 1 977 22 1 204 1 508 5 1 372 1 260 6 1 221 1 365 31 1 562 1 237 28 1 425 1 873 Net position: Net investment in capital assets 43,235,275 44,232,219 17,645,971 17,328,873 60,881,246 61,561,092 Restricted for specific purpose 273,482 276,177 273,482 276,177 Unrestricted 3}80 1 534 3 1 599 1 104 3 1 119 1 905 3132 1 555 619 1 439 6 1 919 1 659 Total net position ~ 47 289 291 ~ 48 107500 ~ 20 765 876 ~ 20 649 428 ~ 68 055 167 ~ 68 756 928 The largest portion of the Town's net position, $60,881,246, reflects its investment in capital assets (e.g., land, buildings, machinery and equipment, infrastructure) less any related debt and related liabilities used to acquire those assets that are still outstanding. The Town uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the Town's investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. An additional portion of the Town's net position $273,482 (0.4%) represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net position, $4,784,722, may be used to meet the Town's ongoing obligations to citizens and creditors. Governmental activities. Already noted was the statement of activities' purpose in presenting information on how the Town's net position changed during the most recent fiscal year. A summary of changes in net position follows. For the fiscal year, net position decreased $818,209. The decrease was due to the use of bond anticipation note proceeds for project funding as those proceeds are not recognized in the statement of activities until such time they become permanent. The reader should remember that the basis of accounting used in the government-wide statement of activities excludes capital expenditures, while its revenues include general taxes whose primary purpose is for the construction of those very assets or their related debt service. 9

MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED) Town of Ledyard Changes in Net Position Years Ended June 30,2013 and 2012 Governmental Business-Type Activities Activities Totals 2013 2012 2013 2012 2013 2012 Revenues: Program revenues: Charges for services $ 4,293,481 $ 3,532,589 $ 1,386,969 $ 2,194,126 $ 5,680,450 $ 5,726,715 Operating grants and contributions 18,976,481 18,946,454 18,976,481 18,946,454 Capital grants and contributions 738,645 716,858 738,645 716,858 General revenues: Property taxes 30,538,621 30,234,872 30,538,621 30,234,872 Grants and contributions not restricted to specific programs 1,766,584 1,350,462 1,766,584 1,350,462 Gain on sale of assets 608,756 608,756 Investment income 21,849 25,928 2,458 2,230 24,307 28,158 Miscellaneous 100,628 20,975 100,628 20,975 Total revenues 56,436,289 55,436,894 1,389,427 2,196,356 57,825,716 57,633,250 Expenses: General government 2,923,002 2,846,379 2,923,002 2,846,379 Public safety 4,594,102 4,355,143 4,594,102 4,355,143 Health and welfare 1,851,934 1,850,902 1,851,934 1,850,902 Public works 4,380,592 4,421,800 4,380,592 4,421,800 Library 796,715 831,065 796,715 831,065 Parks and recreation 716,999 672,338 716,999 672,338 Education 40,823,987 40,543,114 40,823,987 40,543,114 Interest expense 541,918 520,333 541,918 520,333 Water department 1,263,218 1,359,053 1,263,218 1,359,053 Sewer department 635,010 634,244 635,010 634,244 Total expenses 56,629,249 56,041,074 1,898,228 1,993,297 58,527,477 58,034,371 Change in net position before transfers (192,960) (604,180) (508,801) 203,059 (701,761) (401,121 ) Transfers (625,249) (660,985~ 625,249 660,985 Change in net position (818,209) (1,265,165) 116,448 864,044 (701,761 ) (401,121 ) Net position - July 1 48,107,500 49,372,665 20,649,428 19,785,384 68,756,928 69,158,049 Net position - June 30 $ 47,289,291 $ 48,107,500 $ 20,765,876 $ 20,649,428 $ 68,055,167 $ 68,756,928 Significant changes from the prior year for revenues are as follows: Charges for services increased by $760,892 due to an overall increase in fees from multiple sources. Property tax revenues increased $303,749 due to an increase in the tax levy and an increase in suspense collections. Gain on sale of assets decreased $608,756 due to the sale of town owned lot in the prior year. 10

MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED) Governmental Activities (Continued) Revenues Governmental activities revenues totaled $56,436,289 for the fiscal year. Property taxes are the largest revenue source for the Town and represent 54.1 % of governmental revenues. Operating grants and contributions revenues are the Town's second largest revenue. Operating grants and contributions revenues include grants for the school lunch program, education, law enforcement and public works. Operating grants and contributions revenues account for 33.6% of governmental revenues for the year. Charges for services, the third largest revenue, amount to 7.6% of governmental revenues. Charges for services include the school lunch program, adult education, nurses, vocational agriculture and other tuition and park and recreation programs. Grants and contributions not restricted to specific programs account for 3.1 % and include elderly tax relief and Mashantucket/Mohegan grant in lieu of tax contributions. Capital grants and contributions amount to 1.3% of revenue and are made up of mostly school building grants, public works grants and LOCIP grant. Investment income represents less than 0.1 % of governmental revenue. Miscellaneous revenues account for the remaining governmental revenues and amount to 0.2% of governmental revenues. Expenses Significant changes from the prior year are as follows: Public safety expenses increased by $238,959 due to police outside overtime and related benefits. Education expenses increased $280,873 due to increased healthcare costs and contractual obligations. Governmental activities expenses totaled $56,629,249 for the fiscal year. Of the expenditures, 72.1 % or $40,823,987 was for education. Public safety expenses amounted to $4,594,102, or 8.1 %, while public works amounted to $4,380,592 or 7.7%. Library expenses were $796,715 or 1.4%. Park and recreation expenses were $716,999 or 1.2%. Interest expense was $541,918 or 1.0%. General government expenses were $2,923,002, or 5.2%, and health and welfare expenses were $1,851,934 or 3.3%. Business-Type Activities Revenues General revenues do not support the Town's business-type activities; thus, the largest source of revenues comes from charges for services, assessments and transfers from the general fund. Of the $1,389,427 in revenue from the Water department and Sewer department, 99.8% comes from charges for services and assessments. Investment income makes up the final 0.2% of revenues for the Town's business activities. Significant changes from the prior year were as follows: Charges for services decreased $807,157 due to new water assessments added during the prior year. Investment income remained level. Expenses Business-type expenses totaled $1,263,218 and $635,010 for the Water and Sewer departments, respectively, for the fiscal year ended June 30, 2013. 11

MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED) Financial Analysis of the Town's Funds As noted earlier, the Town uses fund accounting to ensure and demonstrate compliance with financerelated legal requirements. Governmental funds. The focus of the Town's governmental funds is to provide information on nearterm inflows, outflows and balances of spendable resources. Such information is useful in assessing the Town's financing requirements. In particular, unassigned fund balance may serve as a useful measure of a government's net resources available for spending at the end of the fiscal year. The combined fund balances of governmental funds at June 30, 2013 was $4,288,371, a decrease of $817,351 in comparison with the prior year. This was due to the expenditure of short-term borrowing proceeds prior to securing permanent financing. General Fund The general fund is the operating fund of the Town. At the end of the current fiscal year, unassigned fund balance of the general fund was $4,082,361. Current tax collections were 98.5% of the adjusted tax levy. The fund balance of the general fund increased by $320,190 during the fiscal year primarily due to greater than projected revenues and less than budgeted expenditures. Capital Projects Fund The capital projects fund's expenditures and other financing uses exceeded revenues and other financing sources by $2,964,660 for the fiscal year. This is due to the expenditure of short-term borrowing proceeds prior to securing permanent financing. Town Aid Road Fund The town aid road fund's revenues and other financing sources exceeded expenditures by $1,809,204 for the fiscal year. This is due to the issuance of $3,500,000 of permanent financing in the current year. Proprietary funds. The Town's proprietary funds provide the same information found in the government-wide financial statements, but in more detail. The Town's enterprise fund posted an overall increase in net position of $116,448 for the fiscal year. This was primarily due to an increase usage fees. The Town's self-insured medical benefits fund recorded a decrease in net position for the year of $1,097,778. This was due to a planned decrease in the general fund contribution and an increase in medical claims. Water Fund Unrestricted net position of the water fund at the end of the year amounted to $1,168,104. Sewer Fund Unrestricted net position of the sewer fund at the end of the year amounted to $1,951,801. 12

MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED) Financial Analysis of the Town's Funds (Continued) Self-Insured Medical Benefits Internal Service Fund Unrestricted net position of the self-insured medical benefits fund at the end of the year amounted to $586,991. Other factors concerning the finances of these funds have already been addressed in the discussion of the Town's business-type activities. General Fund Budgetary Highlights A detailed budgetary comparison schedule for the fiscal year ended June 30, 2013 can be found on Exhibit F. A summary of that schedule follows: Original Budget Final Actual Variance with Final Budget Revenues & Other Financing Sources Taxes All other revenues Appropriation of fund balance Transfers in $30,724,093 17,780,403 250,000 415,056 $30,724,093 17,780,403 469,614 415,056 $30,453,940 18,595,004 485,980 $ (270,153) 814,601 (469,614) 70,924 Total 49,169,552 49,389,166 49,534,924 145,758 Expenditures & Other Financing Uses Expenditures Transfers out 47,375,676 1,793,876 47,595,290 1,793,876 47,420,858 1,793,876 174,432 Total 49,169,552 49,389,166 49,214,734 174,432 Change in Fund Balance $ $ $ 320 190 $ 320 190 During the year, there were additional appropriations of $219,614 from fund balance. Overall, revenues exceeded budgetary estimates and expenditures fell below budgeted amounts. 13

MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED) Capital Assets and Debt Administration At June 30, 2013, the Town of Ledyard's investment in capital assets in both governmental and business-type activities amounted to $85,044,125, net of depreciation. This includes land, buildings, equipment, distribution and collection system and infrastructure. Capital assets for governmental activities increased by 8.7% (net), while business-type capital assets decreased 2.1 % (net). These changes included the following: Construction in progress increased $3,613,529 for governmental-type activities. Distribution and collection system decreased $440,101 for business-type activities. The increase in the governmentaltype activities was due to work on the Aljen Heights water project and the decrease in the business-type activities was due substantially to depreciation expense far exceeding new acquisitions. Town of Ledyard Capital Assets - Net June 30, 2013 and 2012 Governmental Activities Business-Type Activities Totals 2013 2012 2013 2012 2013 2012 Land Construction in progress Land improvements Buildings and improvements Distribution and collection system Machinery and equipment Vehicles I nfrastructu re Total $ 6,068,580 $ 5,897,828 $ 984,286 $ 984,286 4.354,370 740,841 1,162,455 1,218,085 35,765,423 36,492,561 43,009 45,020 20,960,748 21,400,849 1,754,399 1,332,996 349,820 374,754 3,146,671 3,001,272 15,530 20,253 10,438,834 9,013,436 $ 62,690,732 $ 57,697,019 $ 22,353,393 $ 22,825,162 $ 7,052,866 $ 6,882,114 4,354,370 740,841 1,162,455 1,218,085 35,808,432 36,537,581 20,960,748 21,400,849 2,104,219 1,707,750 3,162,201 3,021,525 10,438,834 9,013,436 $ 85,044,125 $ 80,522,181 Additional information on the Town's capital assets can be found on Exhibit L (III) C. 14

MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED) Capital Assets and Debt Administration (Continued) Long-term Debt For the year ended June 30, 2013, the Town's long-term debt decreased by $1,901,834. At the end of the current fiscal year, the Town had total bonded and note debt outstanding of $17,060,052. Of this amount, $12,320,911 less $41,976 to be funded from state grants comprises debt backed by the full faith and credit of the Town and $4,739,141 is water and sewer operations debt for which the Town is liable in the event of default by the property owners subject to the water and sewer assessments. Town of Ledyard's Outstanding Debt General Obligation, Sewer Bonds, Clean Water and Water Notes Governmental Activities Business-T~l2e Activities Totals 2013 2012 2013 2012 2013 2012 General purpose bonds. $ 4,138,300 $ 4,582,000 $ $ $ 4,138,300 $ 4,582,200 School bonds... 2,934,900 3,279,900 2,934,900 3,279,900 Sewer bonds... 57,000 61,000 550,000 605,000 607,000 666,000 Water bonds... 3,779,800 4,026,900 2,610,000 3,050,000 6,389,800 7,076,900 Clean water notes... 1,410,911 1,479,913 667,256 812,840 2,078,167 2,292,753 Water notes... 911,885 1,064,133 911,885 1,064,133 TotaL... ~12 32Q 911 ~13429913 ~ 4 739 141 ~ 5531 973 ~17 060 052 ~18 961 886 The Town maintains an "Aa2" rating from Moody's for general obligation debt. State statutes limit the amount of general obligation debt a governmental entity may issue to 2 % to 4 % times total tax collections including interest and lien fees and the tax relief for the elderly freeze grant. The current debt limitation for the Town is $212,581,523, which is significantly in excess of the Town's outstanding general obligation debt. Additional information on the Town's long-term debt can be found in Exhibit L (III) F. Next Year's Budget and Rates The Town elected and appointed officials considered many factors when setting the fiscal year 2013-14 budget. The Town decided that it was important to continue the support of the schools and adopt a budget designed to promote long-term fiscal stability. In order to meet the objectives of the 2013-14 budget, the Town recognized the need to continue its pattern of cost containment. The 2013-14 general fund budget will be $50,136,531, an increase of 1.9% over the prior year amended budget. Downward pressures on the 2013-14 estimated revenue, especially in the area of grants from the state, reduced non-tax revenues. Requests for Information This financial report is designed to familiarize our citizens, taxpayers and customers with the Town's finances and to demonstrate the Town's fiscal accountability for its operation. Questions concerning this report, or request for additional financial information, should be directed to Finance Director, 741 Colonel Highway, Ledyard, CT 06339-1541, Telephone (860) 464-3235. 15

Basic Financial Statements

Exhibit A (1 of 2) Statement of Net Position June 30, 2013 Governmental Activities Business-Type Activities Total Current assets: Cash Investments Receivables: Property taxes Assessments Use charges Intergovernmental Other Internal balances Other asset $ 8,316,437 2,208,408 511,753 164,510 382,528 (1,143,080) 10,832 $ 150 174,242 139,331 1,143,080 $ 8,316,587 2,208,408 511,753 174,242 139,331 164,510 382,528 10,832 Total current assets 10,451,388 1,456,803 11,908,191 Noncurrent assets: Restricted assets: Temporarily restricted cash Permanently restricted cash 31,084 42,414 31,084 42,414 Total restricted assets 73,498 73,498 Receivables (net): Property taxes Assessment Loans 151,323 69,757 2,248,121 151,323 2,248,121 69,757 Total receivables (net 221,080 2,248,121 2,469,201 Capital assets (net of accumulated depreciation): Land Construction in progress Land improvements Buildings and improvements Distribution and collection system Machinery and equipment Vehicles Infrastructure 6,068,580 4,354,370 1,162,455 35,765,423 1,754,399 3,146,671 10,438,834 984,286 43,009 20,960,748 349,820 15,530 7,052,866 4,354,370 1,162,455 35,808,432 20,960,748 2,104,219 3,162,201 10,438,834 Total capital assets (net of accumulated depreciation) 62,690,732 22,353,393 85,044,125 Total noncurrent assets 62,985,310 24,601,514 87,586,824 Total assets 73,436,698 26,058,317 99,495,015 Deferred Outflows of Resources Deferred charge on refunding 42,570 79,819 122,389 (Continued) 16

Exhibit A (2 of 2) Statement of Net Position June 30, 2013 Governmental Business-Type Activities Activities Total Liabilities Current liabilities: Accounts payable $ 2,496,601 $ 65,290 $ 2,561,891 Accrued payroll and related liabilities 215,112 45,734 260,846 Accrued interest payable 220,843 52,633 273,476 Unearned revenue 150,711 402,575 553,286 Interim funding obligation 2,115,717 2,115,717 Bond anticipation notes 280,000 280,000 Bonds and notes payable 1,110,395 794,341 1,904,736 Landfill postclosure costs 13,000 13,000 Compensated absences 210,197 210,197 Total current liabilities 6,812,576 1,360,573 8,173,149 Noncurrent liabilities: Bonds, BAN's, notes payable and related liabilities 15,991,915 3,992,900 19,984,815 Landfill postclosure costs 182,000 182,000 Compensated absences 840,790 840,790 Net OPEB obligation 1,629,988 1,629,988 Net pension obligation 732,708 18,787 751,495 Total noncurrent liabilities 19,377,401 4,011,687 23,389,088 Total liabilities 26,189,977 5,372,260 31,562,237 Net Position Net investment in capital assets 43,235,275 17,645,971 60,881,246 Restricted for: Endowments: Nonexpendable 42,414 42,414 Expendable 31,084 31,084 General government 32,020 32,020 Library 38,823 38,823 Education 129,141 129,141 Unrestricted 3,780,534 3,119,905 6,900,439 Total net position $ 47,289,291 $ 20,765,876 $ 68,055,167 (Concluded) See Notes to Financial Statements. 17

Exhibit B Statement of Activities Year Ended June 30, 2013 Program Revenues Net Revenues (Expenses) and Changes in Net Position Operating Capital Charges for Grants and Grants and Governmental Business-Type Functions/Programs Expenses Services Contributions Contributions Activities Activities Total Governmental activities: General government $ 2,923,002 $ 371,719 $ 120,020 $ $ (2,431,263) $ $ (2,431,263) Public safety 4,594,102 595,741 138,892 (3,859,469) (3,859,469) Health and welfare 1,851,934 753,692 24,231 (1,074,011) (1,074,011) Public works 4,380,592 196,529 491,500 738,645 (2,953,918) (2,953,918) Library 796,715 16,088 15,696 (764,931) (764,931) Parks and recreation 716,999 215,320 192 (501,487) (501,487) Education 40,823,987 2,144,392 18,185,950 (20,493,645) (20,493,645) Interest expense 541,918 (541,918) (541,918~ Total governmental activities 56,629,249 4,293,481 18,976,481 738,645 (32,620,642) (32,620,642) Business-type activities: Water department 1,263,218 882,606 (380,612) (380,612) Sewer department 635,010 504,363 (130,647) (130,647) -\. ex> Total business-type activities 1,898,228 1,386,969 (511,259) (511,259) Total $ 58,527,477 $ 5,680,450 $ 18,976,481 $ 738,645 $ (32,620,642) $ (511,259) $ (33,131,901) General revenues: Property taxes $ 30,538,621 $ $ 30,538,621 Grants and contributions not restricted to specific programs 1,769,584 1,766,584 Investment income 21,849 2,458 24,307 Miscellaneous 100,628 100,628 Transfers (625,249) 625,249 Total general revenues and transfers 31,802,433 627,707 32,430,140 Change in net position (818,209) 116,448 (701,761) Net position - July 1, 2012 48,107,500 20,649,428 68,756,928 Net position - June 30,2013 $ 47,289,291 $ 20,765,876 $ 68,055,167 See Notes to Financial Statements.

ExhibitC (1 of 2) Balance Sheet Governmental Funds June 30, 2013 Other Total Capital Town Aid Governmental Governmental General Projects Road Fund Funds Funds Assets Cash $ 8,289,183 $ $ $ 100,752 $ 8,389,935 Investments 2,208,408 2,208,408 Receivables: Property taxes 628,615 628,615 Intergovernmental 121,485 121,485 Loans 69,757 69,757 Other 316,449 63,069 3,010 382,528 Due from other funds 941,735 3,291,277 790,943 361,377 5,385,332 Other 9,902 930 10,832 Total assets $ 12,394,292 $ 3,354,346 $ 793,953 $ 654,301 $ 17,196,892 Liabilities Accounts payable $ 611,433 $ 1,357,287 $ 9,385 $ 119,825 $ 2,097,930 Accrued payrolilliabilities 215,112 215,112 Due to other funds 6,920,166 566,301 500 27,107 7,514,074 Unearned revenue 67,756 82,955 150,711 Interim funding obligation 2,115,717 2,115,717 Bond anticipation notes 280,000 280,000 Total liabilities 7,746,711 4,387,061 9,885 229,887 12,373,544 Deferred Inflows of Resources Unavailable revenue - property taxes 465,220 465,220 Unavailable revenue - loans 69,757 69,757 Total deferred inflows of resources 465,220 69,757 534,977 Fund Balances Nonspendable 42,414 42,414 Restricted 199,984 199,984 Committed 784,068 68,092 852,160 Assigned 100,000 61,260 161,260 Unassigned 4,082,361 (1,032,715) (17,093~ 3,032,553 Total fund balances 4,182,361 (1,032,715) 784,068 354,657 4,288,371 Total liabilities, deferred inflows of resources and fund balances $ 12,394,292 $ 3,354,346 $ 793,953 $ 654,301 $ 17,196,892 (Continued) 19

Exhibit C (2 of 2) Reconciliation of Fund Balance to Net Position of Governmental Activities June 30, 2013 Amounts reported for governmental activities in the statement of net position (Exhibit A) are different from the governmental fund balance sheet. The details of this difference are as follows: Total fund balance (Exhibit C, Page 1) Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds: Beginning net capital assets Current year capital asset additions Depreciation expense Disposal of capital assets Other long-term assets are not available to pay for current period expenditures and, therefore, are deferred in the funds: Property tax interest and lien accrual Property tax receivable - accrual basis change Housing rehab loan receivables - accrual basis change School building grant receivable Allowance for doubtful accounts Internal service funds are used by management to charge the cost of medical insurance premiums to individual departments: The assets and liabilities of the internal service funds are included in governmental activities in the statement of net position Some liabilities, including bonds payable, are not due and payable in the current period and, therefore, are not reported in the funds: Bonds and notes payable BAN payable Deferred charge on refunding Bond premium Landfill closure and post closure liability Compensated absences Net OPEB obligation Net pension obligation Accrued interest payable Net assets of governmental activities $ $ 4,288,371 57,697,019 6,509,130 (1,485,011 ) (30,406) 146,461 465,220 69,757 43,025 (112,000) 586,991 (12,320,911 ) (4,705,000) 42,570 (76,399) (195,000) (1,050,987) (1,629,988) (732,708) (220,843) 47,289,291 (Concluded) See Notes to Financial Statements. 20

Exhibit 0 Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds Year Ended June 30, 2013 Other Total Capital Town Aid Govemmental Govemmental General Projects Road Fund Funds Funds Revenues: Property taxes $ 30,453,940 $ $ $ $ 30,453,940 Intergovemmental 18,857,628 803,645 148,117 1,384,252 21,193,642 Charges for services 3,264,246 422,799 779 535,900 4,223,724 Investment income 17,130 1,261 203 18,594 Contributions 54,788 54,788 Other 100,628 100,628 Total revenues 52,592,944 1,328,333 148,896 1,975,143 56,045,316 Expenditures: Current: General govemment 1,193,417 112,277 1,305,694 Department of finance 825,076 825,076 Commissions 26,851 26,851 Boards and committees 4,954 4,954 Fixed charges 6,379,297 6,379,297 Public safety 3,265,307 851 3,266,158 Health and welfare 1,228,034 1,228,034 Public works 2,517,318 2,517,318 Library 532,980 18,521 551,501 Parks and recreation 404,799 116,698 521,497 Education 32,958,749 1,708,881 34,667,630 Capital outlay 6,180,640 1,839,692 8,020,332 Debt service 1,628,076 1,628,076 Total expenditures 50,964,858 6,180,640 1,839,692 1,957,228 60,942,418 Excess (deficiency) of revenues over expenditures 1,628,086 {4,852,307~ {1,690,796~ 17,915 {4,897,102~ Other financing sources (uses): Issuance of debt 1,205,000 3,500,000 4,705,000 Transfers in 485,980 853,571 1,339,551 Transfers out {1,793,876~ p70,924~ {1,964,800~ Net other financing sources (uses) {1,307,896~ 1,887,647 3,500,000 4,079,751 Net changes in fund balances 320,190 (2,964,660) 1,809,204 17,915 (817,351) Fund balances - July 1, 2012 3,862,171 1,931,945 p,025,136~ 336,742 5,105,722 Fund balances - June 30, 2013 $ 4,182,361 $ (1,032,715) $ 784,068 $ 354,657 $ 4,288,371 See Notes to Financial Statements. 21

Town of ledyard, Connecticut Exhibit E (1 of 2) Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to Statement of Activities Year Ended June 30, 2013 Amounts reported for governmental activities in the statement of activities (Exhibit 8) are due to: Net change in fund balances - Total governmental funds (Exhibit D) 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. This is the amount by which capital outlays exceeded depreciation in the current period: Total Capital outlay Depreciation expense The net effect of various miscellaneous transactions involving capital assets (i. e., sales, trade-ins and donations) is to increase net position. In the statement of activities, only the loss on the sale of capital assets is reported. However, in the governmental funds, the proceeds from the sale increase financial resources. Thus, the change in net assets differs from the change in fund balance by the cost of the capital assets sold: Total Capital asset disposals Capital asset donations Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds and revenues recognized in the fund financial statements are not recognized in the statement of activities: Total School building grant receipts Change in property tax and loans receivable - accrual basis change Change in property tax interest and lien revenue The issuance of long-term debt (e.g., bonds, leases) provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net assets. Also, governmental funds report the effect of issuance costs, premiums, discounts, and similar items when debt is first issued, whereas these amounts are deferred and amortized in the statement of activities. The details of these differences in the treatment of long-term debt and related items are as follows: $ (817,351 ) 6,230,747 (1,485,011 ) 4,745,736 (30,406) 278,383 247,977 (45,103) 118,961 35,477 109,335 Total Debt issued or incurred: General obligation bonds Principal repayments: General obligation bonds (4,705,000) 1,109,002 (3,595,998) (Continued) 22

Town of ledyard, Connecticut Exhibit E (2 of 2) Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to Statement of Activities Year Ended June 30, 2013 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 governmental funds: Total Compensated absences Landfill post closure Net pension obligation Net OPES obligation Net amortization of premiums and deferred charges Accrued interest payable Internal service funds are used by management to charge costs of medical insurance premiums to individual departments The net revenue of the activities of the internal service fund is reported with governmental activities Change in net position of governmental activities (Exhibit S) $ $ (17,394) 13,000 7,914 (390,806) 1,058 (23,902) (410,130) (1,101,033) 3,255 (818,209) (Concluded) See Notes to Financial Statements. 23

Exhibit F General Fund Statement of Revenues, Expenditures and Changes in Fund Balance Budget and Actual Year Ended June 30, 2013 Original Budget Final Budget Actual Variance With Final Budget Revenues: Property taxes Intergovernmental Charges for services Investment income $ 30,724,093 14,965,593 2,798,810 16,000 $ 30,724,093 14,965,593 2,798,810 16,000 $ 30,453,940 15,313,628 3,264,246 17,130 $ (270,153) 348,035 465,436 1,130 Total revenues 48,504,496 48,504,496 49,048,944 544,448 Expenditures: Current: General government Department of finance Commissions Boards and committees Fixed charges Public safety Health and welfare Public works Library Parks and recreation Education Debt service 1,187,283 806,385 46,342 7,940 6,332,236 3,197,273 1,248,908 2,486,747 539,821 428,969 29,544,964 1,548,808 1,195,664 825,076 27,397 5,244 6,407,129 3,264,219 1,228,261 2,518,337 533,081 417,842 29,544,964 1,628,076 1,193,417 825,076 26,851 4,954 6,379,297 3,265,307 1,228,034 2,517,318 532,980 404,799 29,414,749 1,628,076 2,247 546 290 27,832 (1,088) 227 1,019 101 13,043 130,215 Total expenditures 47,375,676 47,595,290 47,420,858 174,432 Excess (deficiency) of revenues over expenditures 1,128,820 909,206 1,628,086 718,880 Other financing sources (uses): Appropriation of fund balance Transfers in Transfers out 250,000 415,056 {1,793,876~ 469,614 415,056 {1,793,876~ 485,980 ~1,793,876~ (469,614) 70,924 Net other financing sources (uses) {1,128,820~ ~909,206~ ~1,307,896~ {398,690~ Net change in fund balance $ $ 320,190 $ 320,190 Fund balance - July 1, 2012 3,862,171 Fund balance - June 30, 2013 $ 4 1 182,361 See Notes to Financial Statements. 24

Exhibit G Statement of Net Position Proprietary Funds June 30, 2013 Business-Type Activities Enterprise Funds Governmental Activities Assets Major Funds Internal Water Sewer Total Service Fund Current assets: Cash $ $ 150 $ 150 $ Receivables (net): Assessments 134,626 39,616 174,242 Use charges 81,858 57,473 139,331 Due from other funds 113,142 1,506,528 1,619,670 985,662 Total current assets 329,626 1,603,767 1,933,393 985,662 Noncurrent assets: Receivables: Assessments 1,817,463 430,658 2,248,121 Capital assets (net): Land 682,578 301,708 984,286 Buildings and improvements 38,953 4,056 43,009 Distribution and collection system 16,834,717 4,126,031 20,960,748 Machinery and equipment 315,362 34,458 349,820 Vehicles 7,415 8,115 15,530 Total capital assets (net) 17,879,025 4,474,368 22,353,393 Total noncurrent assets 19,696,488 4,905,026 24,601,514 Total assets 20,026,114 6,508,793 26,534,907 985,662 Deferred Outflows of Resources Deferred charge on refunding 79,819 79,819 Liabilities Current liabilities: Accounts payable 8,067 5,111 13,178 398,671 Accrued interest payable 47,766 4,867 52,633 Due to other funds 481,833 46,869 528,702 Unearned revenue 402,575 402,575 Other 28,223 17,511 45,734 Bonds, notes and loans payable 598,758 195,583 794,341 Total current liabilities 1,567,222 269,941 1,837,163 398,671 Noncurrent liabilities: Bonds, notes and loans payable and related liabilities 2,971,227 1,021,673 3,992,900 Net pension obligation 10,521 8,266 18,787 Total noncurrent liabilities 2,981,748 1,029,939 4,011,687 Total liabilities 4,548,970 1,299,880 5,848,850 398,671 Net Position Net investment in capital assets 14,388,859 3,257,112 17,645,971 Unrestricted 1,168,104 1,951,801 3,119,905 586,991 Total net position $ 15,556,963 $ 5,208,913 $ 20,765,876 $ 586,991 See Notes to Financial Statements. 25

Exhibit H Statement of Revenues, Expenses and Changes in Fund Net Position Proprietary Funds Year Ended June 30, 2013 Business-Type Activities Entererise Funds Governmental Activities Major Funds Internal Water Sewer Total Service Fund Operating revenues: Charges for services $ 852,167 $ 504,363 $ 1,356,530 $ 5,170,907 Other 30,439 30,439 Total operating revenues 882,606 504,363 1,386,969 5,170,907 Operating expenses: Medical claims 5,501,472 Administration 770,468 Personnel services 66,594 273,774 340,368 Repairs and maintenance 1,225 31,086 32,311 Contracted and purchased services 691,473 28,322 719,795 Materials and supplies 19,437 43,769 63,206 Utilities 16,208 61,758 77,966 Depreciation 314,264 157,505 471,769 Total operating expenses 1,109,201 596,214 1,705,415 6,271,940 Operating income (loss) ~226,5951 ~91,8511 ~318,4461 p,101,0331 Nonoperating revenues (expenses): Investment income 2,458 2,458 3,255 Interest expense (154,017) (38,7961 (192,813) Net nonoperating revenues (expenses) ~151,5591 ~38,7961 ~190,3551 3,255 Income (loss) before transfers ~378,1541 (130,6471 ~508,8011 ~1,097,7781 Transfers: Transfers in 700,524 239,781 940,305 Transfers out ~315,0561 ~315,0561 Net transfers 385,468 239,781 625,249 Change in net position 7,314 109,134 116,448 (1,097,778) Total net position - July 1, 2012 15,549,649 5,099,779 20,649,428 1,684,769 Total net position - June 30,2013 $ 15,556,963 $ 5,208,913 $ 20,765,876 $ 586,991 See Notes to Financial Statements. 26

Exhibit I Statement of Cash flows Proprietary Funds Year Ended June 30, 2013 Business-Type Activities Enteq~rise Funds Governmental Activities Major Funds Internal Water Sewer Total Service Fund Cash flows from operating activities: Receipts from customers $ 1,047,934 $ (696,429) $ 351,505 $ 5,170,907 Payments to suppliers (620,289) (141,943) (762,232) (1,756,130) Payments to employees (66,697) (273,863) (340,560) Claims paid ~5,455,078l Net cash provided by (used in) operating activities 360,948 ~1, 112,235) ~751,287) ~2,040,301) Cash flows from non capital financing activities: Transfers from other funds 700,524 239,781 940,305 Transfers to other funds ~315,056) ~315,056) Net cash provided by (used in) noncapital financing activities 385,468 239,781 625,249 Cash flows from capital and related financing activities: Principal payments (bonds and notes) (588,283) (200,584) (788,867) Interest payments ~160,591) ~39,198) p99,789) Net cash flows provided by (used in) capital and related financing activities ~748,874l {239,782) {988,656) Cash flows from investing activities; Investment income 2,458 2,458 3,255 Net change in cash and cash equivalents (1,112,236) (1,112,236) (2,037,046) Cash and cash equivalents - July 1, 2012 1,112,386 1,112,386 2,037,046 Cash and cash equivalents - June 30, 2013 $ $ 150 $ 150 $ Reconciliation to Exhibit G - Cash Cash and cash equivalents per above $ $ 150 $ 150 $ Cash and cash equivalents reported as investments Cash - Exhibit G $ $ 150 $ 150 $ Reconciliation of operating net income (loss) to net cash provided by (used in) operating activities: Operating income (loss) $ (226,595) $ (91,851) $ (318,446) $ (1,101,033) Adjustments to reconcile operating income (loss) to net cash provided by (used in) operating activities: Depreciation 314,264 157,505 471,769 (Increase) decrease in: Receivables 188,910 36,491 225,401 Due from other funds (23,582) (1,237,283) (1,260,865) (985,662) Increase (decrease) in: Accounts payable (70,491) 5,102 (65,389) 46,394 Due to other funds 178,545 17,890 196,435 Net pension obligation (113) (90) (203) Other 10 1 11 Net cash provided by (used in) operating activities $ 360,948 $ ~1, 112,235) $ {751,287) $ {2,040,301) See Notes to Financial Statements. 27

Exhibit J Statement of Fiduciary Net Position Fiduciary Funds June 30, 2013 Pension Private- Trust Purpose Agency Fund Trust Funds Funds Assets Cash $ $ 330,470 $ 455,505 Investments: Equity mutual funds 10,152,648 Bond mutual fund 4,916,364 Money market mutual funds 402,757 Total investments 15,471,769 Receivables: Accrued interest and dividends 10,999 Employer contribution 450,000 Total receivables 460,999 Due from other funds 29,816 22,296 Total assets 15,962,584 330,470 477,801 Liabilities Accounts payable 477,801 Net Position Held in trust for: Employees' pension benefits 15,962,584 Individuals 330,470 Net position held in trust for pension benefits and other purposes $ 15,962,584 $ 330,470 $ See Notes to Financial Statements. 28

Exhibit K Statement of Changes in Fiduciary Net Position Fiduciary Funds Year Ended June 30, 2013 Pension Trust Fund Private Purpose Trust Funds Additions: Contributions: Employer Plan members Private contributions $ 933,453 344,068 $ 25,332 Total contributions 1,277,521 25,332 Investment income (loss): Net change in fair value of investments Interest and dividends 1,036,539 324,947 1,821 Total investment income (loss) 1,361,486 1,821 Less investment expenses 35,571 Net investment income (loss) 1,325,915 1,821 Total additions 2,603,436 27,153 Deductions: Benefits Ad min istration Scholarships awarded 650,366 52,750 52,457 Total deductions 703,116 52,457 Changes in net position 1,900,320 (25,304) Net position - July 1, 2012 14,062,264 355,774 Net position - June 30, 2013 $15,962,584 $ 330,470 See Notes to Financial Statements. 29

Town of ledyard, Connecticut Exhibit L Notes to Financial Statements History and Organization The Town of Ledyard was incorporated in 1836 and covers an area of 40.5 square miles. The Town operates under the provisions of its Charter and General Statutes of the State of Connecticut. The Mayor, who is the chief executive officer, is directly responsible for the administration of all departments, agencies, and offices. The Town provides the following services: general government, public safety, public works, parks and recreation, library, health and human services, water pollution control and education. The legislative power of the Town is vested in the Town Council, which consists of nine members, unless otherwise provided by the Charter. The Department of Finance, under the supervision of the Director of Finance (appointed by the Mayor), is responsible for keeping accounts and financial records, the assessment and collection of taxes, the collection of special assessments and other revenues, the custody and disbursement of Town funds, the control over expenditures and such other powers and duties as may be required by ordinance or resolution of the Town Council. The Town Treasurer, appointed by the Town Council, has all power and duties conferred or imposed by law. The Town has the power to incur indebtedness by issuing bonds and notes as provided by the Connecticut General Statutes. I. Summary of Significant Accounting Policies A. Government-Wide and Fund 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 primary government. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment is offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function 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 instead as general revenues. Separate financial statements are provided for governmental funds, proprietary funds and fiduciary funds, even though the latter are excluded from the government-wide financial statements. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. B. 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 proprietary fund and fiduciary fund financial statements. Agency funds do not have a measurement focus but are accounted for on the accrual basis of accounting. 30

Town of ledyard, Connecticut Exhibit l Notes to Financial Statements Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenues as soon as all eligibility requirements imposed by the provider have been met. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. 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 and claims and judgments, are recorded only when payment is due. Property taxes, expenditure reimbursement type grants, certain intergovernmental revenues, transfers, and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. All other revenue items are considered to be measurable and available only when cash is received by the Town. 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 Capital Projects Fund accounts for the financial revenues to be used for major capital asset construction and/or purchases. The Town Aid Road Fund is used to account for the general maintenance of the Town's roads. The Town reports the following major proprietary funds: The Water Fund accounts for the activities of the Town's water operations. The Sewer Fund accounts for the activities of the Town's sewer operations. Additionally, the Town reports the following fund types: The Internal Service Fund is used to account for self-insured health benefits for Town employees. The Pension Trust Fund accounts for the activities of the Ledyard Retirement System, which accumulates resources for pension benefit payments to qualified employees. The Private-Purpose Trust Funds are used to account for resources restricted for various scholarships. All resources of the fund, including any earnings on invested resources, may not be used to support the Town's activities. There is no requirement that any portion of these resources be preserved as capital. 31

Exhibit L Notes to Financial Statements The Agency Funds account for monies held on behalf of students and amounts held for performance bonds. As a general rule, the effect of interfund activity has been eliminated from the governmentwide financial statements. Exceptions to this general rule are payments-in-lieu of taxes and other charges between the Town's water and sewer funds and various other functions of the Town. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. Amounts reported as program revenues include 1) charges to customers or applicants for goods, services, or privileges provided, 2) operating grants and contributions and 3) capital grants and contributions, including special assessments. Internally dedicated resources are reported as genera/ revenues rather than as program revenues. Likewise, general revenues include all taxes. Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principal operating revenues of the water and sewer enterprise funds and of the Town's internal service fund are charges to customers for sales and services. Operating expenses for the enterprise fund and the internal service fund include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. C. Assets, Liabilities, Deferred Outflows/Inflows of Resources and Net Position or Equity 1. Deposits and Investments Deposits - The Town's cash and cash equivalents consist of cash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition. Investments - In general, State of Connecticut Statutes allow the Town to invest in obligations of the United States of America or United States government sponsored corporations, in shares or other interests in any custodial arrangement, pool, or no-load, open-end management type investment company or investment trust (as defined), in obligations of any state or political subdivision rated within the top two rating categories of any nationally recognized rating service, or in obligations of the State of Connecticut or political subdivision rated within the top three rating categories of any nationally recognized rating service. For the capital nonrecurring fund, not more than 31 %) can be invested in equity securities. Investment income is recorded in the fund in which it was earned. 32

Exhibit L Notes to Financial Statements Allowable investments under the pension fund's investment policy include separately managed accounts and/or mutual funds or co-mingled funds, including marketable and non-marketable alternatives and exchange traded funds. Professional money managers are employed for security selection, diversification, turnover and allocation of holdings among selected securities and industry groups, and particularly detailed in the Investment Policy Statement of each of the Plan's separately managed accounts or in the prospectus/offering memorandum for each mutual fund or co-mingled fund or exchange traded fund in the portfolio. No securities are purchased or carried on margin. The Pension Board is the trustee of the pension plans and is responsible for overall investment policy. Any change in investment manager or individual security purchase must have their approval. Investments for the Town are reported at fair value. State Treasurers Investment Fund is an investment pool managed by the State of Connecticut Office of the State Treasurer. Investments must be made in instruments authorized by Connecticut General Statutes 3-27c - 3-27e. Investment guidelines are adopted by the State Treasurer. The fair value of the position in the pool is the same as the value of the pool shares. The balance of the fixed income investments was invested in a 2a-7 like pool which operates under State Statutes. The fair value of the position in the pool is the same as the value of the pool shares. 2. Receivables and Payables a. Interfunds Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as either "due to/from other funds" (i.e., the current portion of interfund loans) or "advances to/from other funds" (i.e., the non-current portion of interfund loans). Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as "internal balances." b. Property Taxes and Other Receivables In the government-wide financial statements, all trade, property tax and water and sewer use are shown net of an allowance for uncollectibles. Allowance percentages range from 2% to 25% of outstanding receivable balances, and are calculated upon prior collection history. In the fund financial statements, all property taxes receivable at June 30, which have not been collected within sixty days of June 30, have been recorded as deferred inflows of resources, since they are not considered to be available to finance expenditures of the current year. Taxes collected during the sixty day period have been recorded as revenue. The entire balance is recorded as revenue in the governmentwide financial statements. 33