FINANCIAL STATEMENTS AND SUPPLEMENTAL INFORMATION YEAR ENDED DECEMBER 31, 2016
December 31, 2016 TABLE OF CONTENTS Independent Auditors Report... 3-4 Management s Discussion and Analysis... 5-12 Basic Financial Statements: Government-wide Financial Statements: Statement of Net Position...13 Statement of Activities... 14-15 Fund Financial Statements: Balance Sheet - Governmental Funds...16 Reconciliation of the Balance Sheet for Governmental Funds to the Statement of Government-wide Net Position...17 Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental Funds...18 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Government-wide Statement of Activities...19 Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual - General Fund...20 Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Statement of Net Position Highway Aid Fund.. 21 Statement of Revenues, Expenditures, and Changes in Fund Balances Budget and Actual Statement of Net Position Open Space Fund...22 Statement of Fiduciary Net Position - Fiduciary Funds...23 Statement of Changes in Fiduciary Net Position - Fiduciary Funds...24 Notes to Financial Statements... 25-53 Required Supplementary Information: Schedule of Changes in the Net Pension Liability and Related Ratios - Police Pension Plan...55 Schedule of Changes in the Net Pension Liability and Related Ratios Non-Uniform Pension Plan 56 Schedule of Contributions - Police Pension Plan...57 Schedule of Contributions - Non-Uniform Pension Plan...58 Combining and Individual Fund Statements and Schedules: Combining Balance Sheet - Nonmajor Governmental Funds... 59 Combining Statement of Revenues, Expenditures and Changes in Fund Balances - Nonmajor Governmental Funds...60 Combining Statement of Fiduciary Net Position Fiduciary Funds...61 Combining Statement of Changes in Fiduciary Net Position Fiduciary Funds...62
936 Easton Rd., PO Box 754 Warrington, PA 18976 163 S. Broad St., Lansdale, PA 19446 252 W. Swamp Rd., Unit 9, Doylestown, PA 18901 130 Almshouse Rd., Suite 201A, Richboro, PA 18954 24 Arnett Ave., Suite 111, Lambertville, NJ 08530 215-343-2727 www.bbco-cpa.com Board of Supervisors Township of Franconia Franconia Township, Pennsylvania Report on the Financial Statements INDEPENDENT AUDITORS REPORT We have audited the accompanying financial statements of the governmental activities, the discreetly presented component unit, each major fund, and the aggregate remaining fund information of the Township of Franconia as of and for the year ended December 31, 2016, and the related notes to the financial statements, which collectively comprise the Township s basic financial statements as listed in the table of contents. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles 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. Auditors 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. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of 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 auditors 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.
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 Township of Franconia, Pennsylvania, as of December 31, 2016 and the respective changes in financial position and, where applicable, cash flows thereof and the respective budgetary comparison for the general fund, open space fund, and highway aid fund for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other-Matters Required Supplemental Information Accounting principles generally accepted in the United States of America require that the management s discussion and analysis on pages 5 through 12, and the historical trend information on pages 55 through 58 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 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 Township of Franconia s, Pennsylvania, basic financial statements. The combining and individual nonmajor fund statements and schedules are presented for additional analysis and are not a required part of the basic financial statements. The combining and individual nonmajor fund statements and schedules are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the financial statements. Such information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects, in relation to the basic financial statements as a whole. Warrington, PA June 29, 2017 Bee, Bergvall and Company, P.C. Certified Public Accountants
Management s Discussion and Analysis Year Ended December 31, 2016 Our discussion and analysis of the Township of Franconia s financial performance provides an overview of the Township s financial activities for the year ended December 31, 2016. Please read it in conjunction with the Township s financial statements that begin on page 13. Financial Highlights The assets of the Township exceeded its liabilities at the close of 2016 by $14,104,307 as outlined in the Statement of Net Position. Of this amount, $11,127,710 represents the Township's net investment in capital assets, while $5,623,641 represents amounts which are restricted for open space, fire protection, highway, library, capital project, and park and recreation purposes. The Township's unrestricted net position deficit as of December 31, 2016 totaled $2,647,044. The results of the Township's operations for the year ending December 31, 2016 as outlined in the Statement of Activities produced a positive change in net position of $1,774,842. As of the close of the current calendar year, the Township's governmental funds reported a combined ending fund balance of $4,930,134 as outlined in the Balance Sheet -Governmental Funds. Of this amount, $5,623,641 represents amounts which are restricted as outlined above, while the General Fund unassigned fund balance deficit position as of December 31, 2016 totaled $693,507. The net positive change in the governmental funds fund balance for the year ending December 31, 2016 as outlined in the Statement of Revenues, Expenditures, and Changes in Fund Balance - Governmental Fund was $1,685,614. The Township's Net Position as of December 31, 2015 on the Statement of Activities was restated from $11,989,802 to $12,329,465. $419,841 of this increase related to a change in the accounting methodology for earned income tax from the modified accrual basis to the full accrual basis. As a result of a reevaluation of the employment status of those employees who primarily work for the Township's discretely presented component unit, the Township also reduced its Net Position as of 'December 31, 2015 by $80,178 in order to recognize the full net pension liability for its non-uniform pension plan. USING THIS ANNUAL REPORT This annual report is presented in a format consistent with the presentation requirements of the Governmental Accounting Standards Board (GASB). -5-
Management s Discussion and Analysis Year Ended December 31, 2016 Report Components This annual report consists of five parts as follows: Government-Wide Financial Statements: The statement of net position and the statement of activities (on pages 13-15) provide information about the activities of the Township government-wide (or as a whole ) and present a longer-term view of the Township s finances. The government-wide financial statements include not only the Township of Franconia itself (known as the Primary Government), but also the legally separate entity which is financially accountable to the Township (known as the component unit). The component unit is the Franconia Sewer Authority. Information for the component unit is reported separately from the financial information presented for the Township itself. Fund Financial Statements: Fund financial statements focus separately on major Governmental Funds and Fiduciary Funds. Governmental Funds statements follow the more traditional presentation of financial statements. The Township s major Governmental Funds are presented in their own columns, and the remaining funds are combined into a column titled Other Governmental Funds. Statements for the Township s Fiduciary Funds follow the Governmental Funds and include net position, additions, deductions, and changes in net position. Fiduciary Funds are used to account for resources held for the benefit of parties outside the government. Fiduciary Funds are not reflected in the government-wide statements because the Township cannot use these assets to finance its operations. Notes to the Financial Statements: The notes to the financial statements are an integral part of the government-wide and fund financial statements and provide expanded explanation and detail regarding the information reported in the statements. Required Supplementary Information: This management s discussion and analysis (pages 5-12) and the schedules of changes in the net pension liability and related ratios and schedules of contributions for both the police and non-uniform pension plans (pages 55-58) represent financial information required by GASB to be presented. Such information provides users of this report with additional data that supplements the government-wide statements, fund financial statements, and notes (referred to as the basis financial statements ). Other Information: The combining and individual nonmajor fund statements and schedules (pages 59-62) present additional financial information which is not required by GASB to be presented, but is designed to provide the reader with additional data that supplements the basic financial statements. -6-
Management s Discussion and Analysis Year Ended December 31, 2016 REPORTING THE TOWNSHIP AS A WHOLE The Township s Reporting Entity Presentation This annual report includes all activities for which the Franconia Township Board of Supervisors is fiscally responsible. These activities, defined as the Township s reporting entity, are operated within separate entities that make up the primary government. The Government-Wide Statement of Net Position and the Statement of Activities Our financial analysis of the Township as a whole begins on page 13. The governmentwide financial statements are presented on pages 13-15. One of the most important questions asked about the Township s finances is, Is the Township as a whole better off or worse off as a result of the year s activities? The statement of net position and the statement of activities report information about the Township as a whole and about its activities in a way that helps answer this question. These statements include all of the Township s assets and liabilities resulting from the use of the accrual basis of accounting. These two statements report the Township s net position and changes in it. You can think of the Township s net position - the difference between assets/deferred outflows and liabilities/deferred inflows - as one way to measure the Township s financial health or financial position. Over time, increases or decreases in the Township s net position are one indicator of whether its financial health is improving or deteriorating. You will need to consider other nonfinancial factors, however, such as changes in the Township s tax base and the condition of the Township s roads, to assess the overall health of the Township. A FINANCIAL ANALYSIS OF THE TOWNSHIP AS A WHOLE Net Position The net position of both the Township and its discretely presented component unit as of December 31, 2016 and 2015, are presented below: -7-
Management s Discussion and Analysis Year Ended December 31, 2016 Governmental Activities Discretely Presented Component Units 2016 2015 2016 2015 (restated) (restated) Current and other assets $ 5,807,033 $ 4,045,985 $ 1,941,311 $ 1,578,362 Other non current assets 216,531 246,644 Capital assets 18,730,424 18,919,233 31,660,508 32,337,845 Total Assets 24,537,457 22,965,218 33,818,350 34,162,851 Deferred outflows 455,211 618,429 471,896 520,403 Long term liabilities 10,289,985 10,314,646 13,964,375 14,413,839 Other liabilities 510,885 834,696 838,576 628,453 Total Liabilities 10,800,870 11,149,342 14,802,951 15,042,292 Deferred inflows 87,491 104,840 - - Net Position Net investment in capital assets 11,127,710 10,856,525 17,239,014 17,579,917 Restricted/Assigned 5,623,641 4,335,781 99,385 104,961 Unrestricted (2,647,044) (2,862,841) 2,148,896 1,956,084 Total Net Position $ 14,104,307 $ 12,329,465 $ 19,487,295 $ 19,640,962 At the end of the current fiscal year, the Township is able to report a positive balance in the category of net position for the government as a whole. However, The Township continues to report a net position deficit in the unrestricted category. This figure did improve by $250,035 as a result of 2016's operations and stood at $2,647,044 as of December 31, 2016. Increases in the levels of net position restricted for open space, capital projects, and highway projects were the most significant contributors to the $1,287,860 increase in the restricted net position category, while the Township's net position invested in capital assets, net of related debt increased primarily as a result of payments made on the Township's outstanding debt issues during 2016. The Township's overall cash position increased by $1,764,460 during 2016, while total liabilities were reduced by $348,472, primarily as a result of payments made on the Township's debt and a lower overall level of accounts payable and accrued expenses as of December 31, 2016. -8-
Management s Discussion and Analysis Year Ended December 31, 2016 Changes in Net Position For the years ended December 31, 2016 and 2015, net position of both the Township and its discretely presented component unit changed as presented below: REVENUES Program Revenues: Charges for services 1,213,373 Governmental Activities Discreetly Presented Component Units 2016 2015 2016 2015 (restated) (restated) $ $ 802,557 $ 2,664,791 $ 2,595,176 Operating grants and contributions 989,614 1,311,401 - - Capital grants and contributions - - 546,705 369,594 General Revenues: Property taxes 1,586,793 1,512,837 - - Transfer tax 343,270 - - - Earned income tax 3,075,377 3,441,591 - - Other taxes 373,712 666,876 - - Investment income (loss) 12,059 8,087 6,802 10,832 Other 329,521 931,426 22,100 10,400 Total Revenues 7,923,719 8,674,775 3,240,398 2,986,002 EXPENSES Administration 861,085 1,735,157 - - Permits and licenses 176,195 136,319 - - Police and emergency service 2,382,046 2,549,314 - - Public works 1,615,757 1,430,115 - - Library 265,108 200,604 - - Parks and recreation 23,288 32,682 - - Depreciation 245,848 239,015 - - Debt service 235,829 300,645 - - Sewer 343,721 329,171 3,394,065 3,262,590 Total Expenses 6,148,877 6,953,022 3,394,065 3,262,590 Change in Net Position 1,774,842 1,721,753 (153,667) (276,588) Net Position - Beginning 12,329,465 10,607,712 19,640,962 19,917,550 Net Position - Ending $ 14,104,307 $ 12,329,465 $ 19,487,295 $ 19,640,962-9-
Management s Discussion and Analysis Year Ended December 31, 2016 Changes in Net Position (Continued) The figures in the "Governmental Activities" column for 2015 in the table shown above include the effects of the $419,841 restatement of earnings applicable to a change made in the methodology applicable to the accounting for earned income tax. They also include a change in the presentation of professional fee charges and developer reimbursements applicable to ongoing development projects within the Township between 2015 and 2016. Revenue from real estate taxes increased by $73,956, with the bulk of this increase attributable to an increase in the Library Tax millage in 2016. Earned income, real estate transfer, and local services tax revenues increased in 2016 as local economic conditions continued to improve. Revenue from Act 209 assessment fees was up by $189,264 in 2016 as a result of continued development of new residential properties during the year. Revenue from operating grants and contributions was down by $321,787 in 2016 as the Township had received a one-time State Liquid Fuels turnback grant in the amount of $694,010 in 2015 for the purpose of funding work to be done by the Township on a number of state roads. Changes made to the Township's personnel structure in 2015 and 2016 and lower levels of legal and engineering fees were the primary catalysts for the decrease in overall expenses in 2016 shown in the above table. Governmental Activities To aid in understanding the statement of activities, some additional explanation is given. Of particular interest is the format that is significantly different from a typical statement of revenues, expenses, and changes in fund balance. You will notice that expenses are listed first, followed by program revenues and then general revenues. The result is a net (expense)/revenue presentation. This type of format highlights the relative financial burden of each of the functions on the Township s taxpayers. It also identifies how much each function draws from the general revenues or if it is self-financing through fee and grants or contributions. All other governmental revenues are reported as general. It is important to note that all taxes are classified as general revenue, even if restricted for a specific purpose. GENERAL FUND BUDGETARY HIGHLIGHTS The General Fund had an excess of revenues over expenditures in 2016 of $690,034 and an excess of expenditures over revenues of $136,088 for 2015. In 2016, an operating surplus of $174,614 was anticipated; however, actual revenues and transfers exceeded budgeted revenues by $410,180, while actual expenses and transfers were less than budgeted expenses by $105,240. In 2015, an operating surplus of $18,474 was anticipated; however, actual revenues exceeded budgeted revenues by $2,605,745, and actual expenses and transfers were more than budgeted expenses and transfers by $2,488,131. -10-
Management s Discussion and Analysis Year Ended December 31, 2016 CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets The Township s investment in capital assets for its governmental activities as of December 31, 2016 totaled $18,730,424 (net of accumulated depreciation), while its discretely presented component unit s investment in capital assets as of that date totaled $31,660,508. Capital asset values are summarized in the following table: Balance Balance Governmental Activities 12/31/2016 12/31/2015 Non-Depreciable Assets Land $ 8,660,301 $ 8,660,301 Developmental rights 5,733,772 5,733,772 Other Capital Assets Building and Improvements 1,513,391 1,566,188 Equipment and Vehicles 340,393 405,430 Infrastructure 2,482,567 2,553,542 $ 18,730,424 $ 18,919,233 Component units Non-Depreciable Assets Land $ 652,012 $ 652,012 Construction in progress 304,372 327,280 Other Capital Assets Sewer system and equipment 30,704,124 31,358,553 $ 31,660,508 $ 32,337,845 Additional information on the Township s and component unit s assets can be found in Note III C on pages 38-39 of this report. Long-Term Liabilities At the end of the current fiscal year, the Township had outstanding long-term liabilities totaling $10,289,985, while its discretely present component unit had outstanding longterm liabilities totaling $14,421,494. -11-
Management s Discussion and Analysis Year Ended December 31, 2016 Long-term liabilities are summarized in the following table: Balance Balance 12/31/2016 12/31/2015 Governmental Activities Bonds and notes payable $ 7,602,714 $ 8,003,001 Capital leases 38,635 59,707 Compensated absences 24,419 56,424 Net pension liability 2,624,217 2,667,766 $ 10,289,985 $ 10,786,898 Component unit Bonds and notes payable $ 14,421,494 $ 14,757,928 Additional information on the Township s and component unit s liabilities can be found in Note III F on pages 41-43 of this report. ECONOMIC FACTORS AND NEXT YEARS S BUDGET AND RATES The Township of Franconia is an integral part of the Indian Valley, situated in northern Montgomery County, PA. The Township has one of the lowest real estate tax rates in the county, and based on FBI crime statistics, is consistently ranked as one of the safest communities in Pennsylvania. Franconia Township is seeing a spurt of new residential development, including THP s Lincoln Wood s project, an 83 unit residential subdivision of single family homes which is currently under construction. WB Homes currently has its Highland Ridge project currently under construction, a 23 unit resident subdivision. Each of these projects will add increased permit fees, transfer taxes, earned income taxes and real estate taxes for the township. New building permits, both residential and commercial, continue to increase. 2016 saw a 20% increase in building permit activity over 2015, with the trend expected to continue into 2017. Franconia Township has become a very desirable community to live in based upon its low tax rate, low crime rate, and excellent school system. The Township s real estate tax rate is expected to remain stable for 2017 and beyond. The Township has done an outstanding job in the past year with managing internal staffing, while continuing to offer quality services to its residents. By keeping personnel costs low as compared to similar like-sized communities, Franconia Township should be able to continue to offer an extremely low tax rate for both businesses and residents alike. -12-
ASSETS TOWNSHIP OF FRANCONIA STATEMENT OF NET POSITION December 31, 2016 Primary Government Governmental Activities Discretely Presented Component Unit Franconia Sewer Authority Cash and cash equivalents $ 4,242,702 $ 1,207,424 Receivables 1,172,537 851,033 Restricted cash and cash equivalents 391,794 99,385 Land 8,660,301 652,012 Other capital assets (net of accumulated depreciation) 10,070,123 31,008,496 Total Assets 24,537,457 33,818,350 DEFERRED OUTFLOWS OF RESOURCES Unamortized deferred loss on refunding - 471,896 Changes in pension assumptions 152,822 Net difference between projected and actual earnings on pension plan investments 302,389 - Total Deferred Outflows of Resources 455,211 471,896 LIABILITIES Accounts payable and other current liabilities 119,091 225,347 Accrued interest payable - 156,110 Developer's escrows payable 391,794 Non-current liabilities: Due within one year 499,885 457,119 Due after one year 7,165,883 13,964,375 Pension liability 2,624,217 - Total Liabilities 10,800,870 14,802,951 DEFERRED INFLOWS OF RESOURCES Differences between expected and actual experience on pension plan liability 87,491 - Total deferred inflows 87,491 - NET POSITION Net investment in capital assets 11,127,710 17,239,014 Restricted Fire 473 - Street Light and fire hydrant 1,288 Highways 1,077,894 - Library 1,706 - Open Space 3,803,500 - Sewer - 99,385 Recycling 67,819 - Assigned Capital 670,961 - Unrestricted (2,647,044) 2,148,896 Total Net Position $ 14,104,307 $ 19,487,295 The notes to the financial statements are an integral part of this statement. -13-
STATEMENT OF ACTIVITIES For the Year Ended December 31, 2016 Governmental Activities Total Police and Primary Permits & Emergency Government Total Administrative Licenses Services Expenses: Program expenses $ 5,667,200 $ 5,667,200 $ 861,085 $ 176,195 $ 2,382,046 Depreciation 245,848 245,848 23,870 336 102,941 Interest expense 235,829 235,829 235,829 - - Total Expenses 6,148,877 6,148,877 1,120,784 176,531 2,484,987 Program Revenues: Charges for services 1,213,373 1,213,373 173,985 442,449 116,362 Operating grants and contributions 989,614 989,614 77,757-204,285 Capital grants and contributions - - - - - Total Program Revenues 2,202,987 2,202,987 251,742 442,449 320,647 Net (Expense) Revenue (3,945,890) (3,945,890) (869,042) 265,918 (2,164,340) General Revenues: Taxes: Property 1,586,793 1,586,793 Transfer tax 343,270 343,270 Earned income tax 3,075,377 3,075,377 Other taxes 373,712 373,712 Investment earnings 12,059 12,059 Loss on sale of capital assets (7,602) (7,602) Miscellaneous 337,123 337,123 Total General Revenues 5,720,732 5,720,732 Change in Net Position 1,774,842 1,774,842 Net Position - Beginning, restated 12,329,465 12,329,465 Net Position - Ending $ 14,104,307 $ 14,104,307-14-
Governmental Activities Discretely Presented Component Unit Public Park & Franconia Township Works Library Sewer Recreation Sewer $ 1,615,757 $ 265,108 $ 343,721 $ 23,288 $ 2,139,334 104,261 - - 14,440 798,422 - - - - 456,309 1,720,018 265,108 343,721 37,728 3,394,065 449,442-31,135-2,664,791 707,572 - - - - - - - - 546,705 1,157,014-31,135-3,211,496 (563,004) (265,108) (312,586) (37,728) (182,569) - - - - 6,802-22,100 28,902 (153,667) 19,640,962 $ 19,487,295 The notes to the financial statements are an integral part of this statement. -15-
BALANCE SHEET - GOVERNMENTAL FUNDS December 31, 2016 Other Total Open Capital Highway Governmental Governmental General Space Reserve Aid Funds Funds ASSETS Cash and cash equivalents $ 394,956 $ 2,376,398 $ 315,961 $ 851,412 $ 303,975 $ 4,242,702 Investments - - - - - - Receivables 611,848 200,382 - - 3,413 815,643 Restricted - Cash and cash equivalents 391,794 - - - - 391,794 Due from other funds - 1,227,377 355,000 - - 1,582,377 TOTAL ASSETS $ 1,398,598 $ 3,804,157 $ 670,961 $ 851,412 $ 307,388 $ 7,032,516 LIABILITIES Accounts payable and accrued wages $ 111,089 $ 657 $ - $ 5,547 $ 1,798 $ 119,091 Due to other funds 1,582,377 - - - - 1,582,377 Developers' escrows 391,794 - - - - 391,794 Total Liabilities 2,085,260 657-5,547 1,798 2,093,262 DEFERRED INFLOWS OF RESOURCES Unavailable revenue - property taxes 6,845 - - - 2,275 9,120 Total Deferred Inflows of Resources 6,845 - - - 2,275 9,120 FUND BALANCES Restricted for: Highway and streets - - - 845,865 232,029 1,077,894 Street lights & fire hydrant 1,288 1,288 Fire - - - - 473 473 Open Space - 3,803,500 - - - 3,803,500 Library - - - - 1,706 1,706 Recycling - - 67,819 67,819 Assigned for: Capital projects - - 670,961 - - 670,961 Unassigned (693,507) - - - - (693,507) Total Fund Balances (693,507) 3,803,500 670,961 845,865 303,315 4,930,134 TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES $ 1,398,598 $ 3,804,157 $ 670,961 $ 851,412 $ 307,388 $ 7,032,516 The notes to the financial statements are an integral part of this statement. -16-
RECONCILIATION OF THE BALANCE SHEET FOR GOVERNMENTAL FUNDS TO THE STATEMENT OF GOVERNMENT-WIDE NET POSITION December 31, 2016 Amounts reported for governmental activities in the statement of net position are different because: Total fund balances - total governmental funds $ 4,930,134 Capital assets used in governmental activities are not financial resources and, therefore, are reported in the funds. Cost of capital assets $ 22,426,946 Accumulated depreciation (3,696,522) 18,730,424 Because the focus of governmental funds is on short-term financing, some assets will not be available to pay for current-period expenditures. Those assets (for example, receivables) are offset by deferred revenues in the governmental funds and thus are not included in fund balance. Real estate tax receivable 9,120 Earned income tax receivable 356,894 366,014 Deferred inflows and outflows or resources related to pensions are applicable to future periods and, therefore, are not reported in the funds. Change in pension assumptions 152,822 Net difference between projected and actual earnings on pension plan investments 302,389 Differences between expected and actual experience on pension plan liability (87,491) 367,720 Long term 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 (7,602,714) Compensated absences (24,419) Capital leases (38,635) Pension liability (2,624,217) (10,289,985) Total Net position of governmental activities $ 14,104,307 The notes to the financial statements are an integral part of this statement. -17-
STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS For the Year Ended December 31, 2016 Other Total Open Capital Highway Governmental Governmental General Space Reserve Aid Funds Funds Revenues Taxes: Property $ 1,185,440 $ - $ - $ - $ 412,233 $ 1,597,673 Transfer 343,270 - - - - 343,270 Earned income 2,113,961 1,024,363 - - - 3,138,324 Local service 373,712 - - 373,712 Fees, licenses and permits 257,809 - - - - 257,809 Investment income and rent 50,639 5,137 159 3,452 836 60,223 Intergovernmental revenues 271,513 - - 393,638 135,695 800,846 Fines and forfeitures 27,662 - - - - 27,662 Program revenues 1,065,726 - - - - 1,065,726 Other 32,250 88,700-218,953 339,903 Total Revenues 5,721,982 1,118,200 159 397,090 767,717 8,005,148 Expenditures Current: General government 790,335 12,689 - - 14,454 817,478 Public safety 2,279,645-67,059-249,486 2,596,190 Sewer 343,721 - - - - 343,721 Highways and roads 1,113,685 - - 438,759 64,117 1,616,561 Library - - - - 265,108 265,108 Culture and recreation 19,043 - - - 4,245 23,288 Debt service: - Principal 50,000 402,000 34,000 - - 486,000 Interest 65,519 170,310 - - - 235,829 Total Expenditures 4,661,948 584,999 101,059 438,759 597,410 6,384,175 Excess (Deficiency) of Revenues Over Expenditures 1,060,034 533,201 (100,900) (41,669) 170,307 1,620,973 Other Financing Sources (Uses) Debt proceeds - - 64,641-64,641 Transfers in - - 350,000-20,000 370,000 Transfers out (370,000) - - - (370,000) Total Other Financing Sources (Uses) (370,000) - 414,641-20,000 64,641 Net Change in Fund Balances 690,034 533,201 313,741 (41,669) 190,307 1,685,614 Fund Balance - Beginning, restated (1,383,541) 3,270,299 357,220 887,534 113,008 3,244,520 Fund Balance - Ending $ (693,507) $ 3,803,500 $ 670,961 $ 845,865 $ 303,315 $ 4,930,134 The notes to the financial statements are an integral part of this statement. -18-
RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE GOVERNMENT-WIDE STATEMENT OF ACTIVITIES For the Year Ended December 31, 2016 Amounts reported for governmental activities in the statement of activities are different because: Net change in fund balances--total governmental funds $ 1,685,614 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 outlay $ 64,641 Depreciation expense (245,848) (181,207) The effect of sales of capital assets is to decrease net position. (7,602) Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds. (73,827) 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 position. Also, governmental funds report the effect of premiums, discounts, and similar items when debt is first issued, whereas these amounts are deferred and amortized in the statement of activities. This amount is the net effect of these differences in the treatment of long-term debt and related items. Repayment of debt 486,000 Issuance of new debt (64,641) 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. Compensated absences 32,005 Pension expense (101,500) 421,359 (69,495) Change in net position of governmental activities $ 1,774,842 The notes to the financial statements are an integral part of this statement. -19-
GENERAL FUND STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL For the Year Ended December 31, 2016 GENERAL FUND Budgeted Amounts Variance with Original Final ACTUAL Final Budget Revenues Taxes Property $ 1,165,456 $ 1,165,456 $ 1,185,440 $ 19,984 Transfer 250,000 250,000 343,270 93,270 Earned income 2,105,000 2,105,000 2,113,961 8,961 Local service 362,000 362,000 373,712 11,712 Fees, licenses and permits 252,300 252,300 257,809 5,509 Investment income and rent 43,705 43,705 50,639 6,934 Intergovernmental revenues 204,367 204,367 271,513 67,146 Fines and forfeitures 27,600 27,600 27,662 62 Program revenues 900,874 900,874 1,065,726 164,852 Other 500 500 32,250 31,750 Total Revenues 5,311,802 5,311,802 5,721,982 410,180 Expenditures Current General government 989,041 989,041 790,335 (198,706) Public safety 2,310,361 2,310,361 2,279,645 (30,716) Sewer 330,702 330,702 343,721 13,019 Highways and roads 1,127,802 1,127,802 1,113,685 (14,117) Culture and recreation 24,300 24,300 19,043 (5,257) Debt service 184,982 184,982 115,519 (69,463) Total Expenditures 4,967,188 4,967,188 4,661,948 (305,240) Excess (Deficiency) of Revenues Over Expenditures 344,614 344,614 1,060,034 715,420 Other Financing Sources (Uses) Transfers out (170,000) (170,000) (370,000) 200,000 Total Other Financing Sources (U (170,000) (170,000) (370,000) 200,000 Net Change in Fund Balances 174,614 174,614 690,034 515,420 Fund Balance - Beginning, restated (174,614) (174,614) (1,383,541) Fund Balance - Ending $ - $ - $ (693,507) The notes to the financial statements are an integral part of this statement. -20-
HIGHWAY AID FUND STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL STATEMENT OF NET POSITION For the Year Ended December 31, 2016 Highway Aid Fund Variance with Budgeted Amounts Final Budget Original Final ACTUAL Over (under) Revenues Interest and rent $ 450 $ 450 $ 3,452 $ 3,002 Intergovernmental revenues 383,776 383,776 393,638 9,862 Total Revenues 384,226 384,226 397,090 12,864 Expenditures Current: Highways and roads 337,500 337,500 438,759 101,259 Total Expenditures 337,500 337,500 438,759 101,259 Excess (Deficiency) of Revenues Over Expenditures 46,726 46,726 (41,669) (88,395) Fund Balance - Beginning 3,180 3,180 887,534 Fund Balance - Ending $ 49,906 $ 49,906 $ 845,865 The notes to the financial statements are an integral part of this statement. -21-
OPEN SPACE FUND STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL STATEMENT OF NET POSITION For the Year Ended December 31, 2016 Open Space Fund Variance with Budgeted Amounts Final Budget Original Final ACTUAL Over (under) Revenues Taxes $ 950,000 $ 950,000 $ 1,024,363 $ 74,363 Interest and rent 3,200 3,200 5,137 1,937 Other - - 88,700 88,700 Total Revenues 953,200 953,200 1,118,200 165,000 Expenditures Current: General government 15,000 15,000 12,689 (2,311) Debt Service 599,942 599,942 572,310 (27,632) Total Expenditures 614,942 614,942 584,999 (29,943) Excess (Deficiency) of Revenues Over Expenditures 338,258 338,258 533,201 194,943 Fund Balance - Beginning, restated 3,270,299 3,270,299 3,270,299 Fund Balance - Ending $ 3,608,557 $ 3,608,557 $ 3,803,500 The notes to the financial statements are an integral part of this statement. -22-
STATEMENT OF FIDUCIARY NET POSITION - FIDUCIARY FUNDS December 31, 2016 ASSETS Pension Trust Current Assets Cash and cash equivalents $ 472,850 Investments, at fair value Common stock 186,945 Mutual funds-equities 2,956,040 Mutual funds-international equity 682,551 Certificates of deposits 465,000 Mutual funds-fixed income 400,516 US Agencies 1,042,119 Corporate Bonds 941,914 Receivable 29,270 TOTAL ASSETS $ 7,177,205 NET POSITION Net Position Restricted for Pension and Other Employee Benefits $ 7,177,205 The notes to the financial statements are an integral part of this statement. -23-
STATEMENT OF CHANGES IN FIDUCIARY NET POSITION FIDUCIARY FUNDS For the Year Ended December 31, 2016 Additions Contributions Pension Trust Member contributions $ 49,647 Municipal contributions 204,293 State contributions 170,611 Total Contributions 424,551 Investment Income Net appreciation (depreciation) in fair value of investments 296,618 Interest and dividends 232,167 Total Investment Income 528,785 Less: investment expense (43,535) Net Investment Income 485,250 Total Additions 909,801 Deductions Administrative expense 7,000 Benefits 218,186 Total Deductions 225,186 Change in Net Position 684,615 Net Position Restricted for Pension and Other Employee Benefits: Beginning of Year 6,492,590 End of Year $ 7,177,205 The notes to the financial statements are an integral part of this statement. -24-
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2016 I. Summary of Significant Accounting Policies A. Reporting entity The Board of Supervisors ( the Board ) is the basic level of government which has financial accountability and control over all activities related to municipal functions in the Township. The Board receives funding from local, state and federal sources and must comply with the concomitant requirements of these funding source entities. However, the Board is not included in any other governmental reporting entity as defined by the Government Accounting Standards Board since Board members are elected by the public and have decision-making authority, the authority to levy taxes, the power to designate management, the ability to significantly influence operations and have primary accountability for fiscal matters. The Township follows the criteria promulgated by GASB for purposes of determining the scope of its reporting entity. As required by GAAP, the basic financial statements of the reporting entity include those of the Township of Franconia (the Primary Government ) and its component unit, the Franconia Sewer Authority (the Authority ). The Authority is considered a component unit of the Township as its governing board is appointed by the Township, the Township guarantees much of its debt and its activities are considered significant in determining the reporting entity. The financial statements of the component unit have been included in the financial reporting entity as a discretely presented component unit. Accordingly, the component unit columns in the basic financial statements include the financial data of the Authority in a separate column to emphasize that it is legally separate from the Township. B. 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 Township. All fiduciary activities are reported only in the fiduciary fund financial statements. Governmental activities, which normally are supported by taxes, intergovernmental revenues, and other nonexchange transactions, are reported separately from business-type activities, which rely to a significant extent on fees and charges to external customers for support. The statement of activities reports the expenses of a given function offset by program revenues directly connected with the functional program. A function is an assembly of similar activities and may include portions of a fund or summarize more than one fund to capture the expenses and program revenues associated with a distinct functional activity. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include: (1) charges for services which report fees and other charges to users of the Township s services; (2) operating grants and contributions which finance annual operating activities; and (3) capital grants and contributions which fund the acquisition, construction, or rehabilitation of capital assets. These revenues are subject to externally imposed restrictions to these program uses. Taxes and other revenue sources not properly included with program revenues are reported as general revenues. -25-
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2016 I. Summary of Significant Accounting Policies (Continued) B. Government-wide and fund financial statements (continued) While separate government-wide and fund financial statements are presented, they are interrelated. The governmental activities column incorporates data from governmental funds, while business-type activities incorporate data from the government s enterprise funds. 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. As a general rule, the effect of interfund activity has been eliminated from the government-wide financial statements. Exceptions to this general rule are payments in lieu of taxes where the amounts are reasonably equivalent in value to the interfund services provided and other charges between the government s proprietary functions and various other functions of the government. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. Fund Financial Statements Fund financial statements are provided for governmental funds, including its fiduciary funds. Separate statements for each fund category governmental and fiduciary - are presented. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column. All remaining governmental funds area aggregated and reported as nonmajor funds. Major individual governmental and enterprise funds are reported as separate column is in the fund financial statements. C. Measurement focus, basis of accounting, and financial statement presentation The government-wide statements report using the economic resources measurement focus and the accrual basis of accounting generally including the reclassification or elimination of internal activity (between or within funds). Fiduciary fund financial statements also report using the same focus and basis of accounting although internal activity is not eliminated in these statements and any agency funds reported have no measurement focus. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property tax revenues, net of any uncollectible amounts, are recognized in the year for which they are levied while grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. -26-
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2016 I. Summary of Significant Accounting Policies (Continued) C. Measurement focus, basis of accounting, and financial statement presentation (continued) Governmental fund financial statements reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized when they are both measurable and available. Available means collectible within the current period or soon enough thereafter to pay current liabilities. The Township considers revenues to be available if they are collected within 60 days of the end of the fiscal year. Property taxes levied but collected beyond 60 days after year-end are recorded as deferred revenue to be recognized as revenue when the taxes are collected. 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. General capital asset acquisitions are reported as expenditures in governmental funds. Property taxes, franchise taxes, licenses, 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 government. Basis of Presentation - Fund Accounting and Measurement Focus The accounts of the Township are organized on the basis of funds, each of which is considered a separate accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, fund equity, revenues and expenditures, or expenses as appropriate. Government resources are allocated to and accounted for in individual funds based upon the purposes for which they are to be spent and the means by which spending activities are controlled. The following is a description of the fund types used by the Township in the accompanying basic financial statements. The government reports the following major governmental funds: The General Fund is the government 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 Open Space Fund - The Open Space Fund is used to account for resources for the acquisition of open space, including development rights. The Capital Reserve Fund is used to account for resources for the acquisition or construction of specific capital facilities by the Township. -27-
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2016 I. Summary of Significant Accounting Policies (Continued) C. Measurement focus, basis of accounting, and financial statement presentation (continued) The Highway Aid Fund - The Highway Aid Fund, as required by law, accounts for revenue from the State Motor License Fund (gasoline tax distribution, etc.) and the approved expenditure of such monies for highway purposes. Trust and Agency Funds - are used to account for assets held by the Township in a trustee or agent capacity for individuals and/or other funds. Pension Trust Fund - This fund is used to account for resources required to be held in trust for the members and beneficiaries of the Township s defined benefit pension plans - the Police Pension Fund and the Non-Uniform Pension Fund. Major revenue sources susceptible to accrual include: property taxes, earned income taxes, interest earnings, special assessments, levies, intergovernmental revenues and charges for services. In general, other revenues are recognized when cash is received. In applying the susceptible to accrual concept to intergovernmental revenues, there are essentially two types of revenues. In one, monies must be expended for the specific purpose or project before any amounts will be paid to the Township; therefore, revenues are recognized based upon the expenditures incurred. In the other, monies are virtually unrestricted and are usually revocable only for failure to comply with prescribed compliance requirements. These resources are reflected as revenues at the time of receipt or earlier if the susceptible to accrual criteria are met. When both restricted and unrestricted resources are available for use, it is the Township s policy to use restricted resources first, then unrestricted resources as needed. During the course of operations the government has activity between funds for various purposes. Any residual balances outstanding at year end are reported as due from/to other funds and advances to/from other funds. While these balances are reported in fund financial statements, certain eliminations are made in the preparation of the government-wide financial statements. Balances between the funds included in governmental activities (i.e., the governmental funds) are eliminated so that only the net amount is included as internal balances in the governmental activities column. Similarly, balances between the funds included in business-type activities (i.e., the enterprise funds) are eliminated so that only the net amount is included as internal balances in the business-type activities column. -28-