Central Fire Protection District of Santa Cruz County Financial Statements and Supplementary Information
TABLE OF CONTENTS Page No. Independent Auditor's Report 1-2 Management's Discussion and Analysis 3-9 Government-Wide Financial Statements Statements of Net Position 10-11 Statements of Activities 12-13 Governmental Funds Financial Statements Balance Sheets - Governmental Funds 14-15 Reconciliation of the Governmental Funds Balance Sheets to the Government - Wide Statements of Net Position 16 Statements of Revenues, Expenditures and Changes in Fund Balances - Governmental Funds 17-18 Reconciliation of the Statements of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statements of Activities 19 GASB 45 Trust Fund Financial Statement Statements of Plan Position and Changes in Plan Net Position 20 Notes to Financial Statements 21-50 Required Supplementary Information (RSI) (Unaudited) GASB 68 Pension RSI Schedule of Proportionate Share of Net Pension Liability and Related Ratios 51 Schedule of Contributions 52 Budgetary Comparison Schedules Revenues and Expenditures- Budget and Actual - General Fund 53-55 Revenues and Expenditures - Budget and Actual - Vehicle Replacement Fund 56 Revenues and Expenditures - Budget and Actual - Capital Outlay Fund 57 Revenues and Expenditures - Budget and Actual - Fleet Maintenance 58 Revenues and Expenditures - Budget and Actual Economic Stability Fund 59 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 60-61 Nonaccounting Information Independent Auditor's Report on Nonaccounting Information 62 Nonaccounting Information - Financial Policy 63-64
INDEPENDENT AUDITOR'S REPORT Board of Directors Central Fire Protection District of Santa Cruz County Santa Cruz, California We have audited the accompanying financial statements of the governmental activities, and each major fund of Central Fire Protection District of Santa Cruz County as of and for the years ended June 30, 2017 and 2016, and the related notes to the financial statements, which collectively comprise Central Fire Protection District of Santa Cruz County'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 audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America, the State Controller's Minimum Audit Requirements and Reporting Guidelines for California Special Districts, and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the 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.
Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, and each major fund of Central Fire Protection District of Santa Cruz County as of, and the respective changes in financial position for the years then ended in conformity with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information (RSI) Accounting principles generally accepted in the United States of America require that the management's discussion and analysis, GASB 68 pension RSI and budgetary comparison information as listed in the table of contents 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 Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated May 25, 2018, on our consideration of Central Fire Protection District of Santa Cruz County's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Central Fire Protection District of Santa Cruz County's internal control over financial reporting and compliance. May 25, 2018 Armanino LLP San Jose, California - 2 -
Management's Discussion and Analysis Central Fire Protection District of Santa Cruz County (the "District") provides fire protection and emergency response for the City of Capitola, the community of Soquel, and the unincorporated area of Live Oak. This section on the District's financial report presents our discussion and analysis of the District's financial performance and conditions during the fiscal year that ended on June 30, 2017 with comparative totals for 2016. Description of the Basic Financial Statements The financial statements consist of the following parts: Management's discussion and analysis; the basic financial statements government-wide; governmental fund financial statements; notes to the financial statements; and required supplementary information (budgetary comparison table). The basic government-wide and governmental fund financial statements present the financial results on different methods of accounting. Included in the financial statements are reconciliations that explain the difference between the two methods. Government-wide financial statements are prepared on the accrual basis of accounting and economic resources focus. The required financial statements are: Statement of Net Position and Statement of Activities. The Statement of Net Position reports all assets, liabilities, and deferred inflows/outflows of resources, with the difference reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the long term financial position of the District is improving or deteriorating. The Statement of Activities presents information on how the net position of the District 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 when cash is paid or received. Governmental funds financial statements are prepared on the modified accrual basis of accounting and current financial resources focus. The required financial statements are: Balance Sheet and Statement of Revenues, Expenditures, and Changes in Fund Balances. The Balance Sheet shows only assets and liabilities that come due during the year or soon thereafter; no capital assets or Noncurrent liabilities are included. The Statement of Revenues, Expenditures, and Changes in Fund Balances reports revenues for which cash has been received during or soon after the end of the year; expenditures are recorded when goods or services have been received and payment is due during the year or soon after the end of the year. The Government-Wide and Governmental Funds financial statements show the results of the following funds: General Fund - Most of the District's basic services are accounted for in this fund. Vehicle Replacement Fund - The District transfers amounts to this fund to account for vehicle replacements. Capital Outlay - The District transfers sufficient amounts to this fund to manage large facility and equipment replacement costs. - 3 -
Management's Discussion and Analysis Description of the Basic Financial Statements (continued) Fleet Maintenance - The District transfers amounts to this fund, a percentage of total cost covering the cost of in-house maintenance. Economic Stability - The District transfers amounts to this fund to insulate the District and help fund the District during downturns in property tax revenue. Condensed Government-Wide Financial Data - 4-2017 2016 Current assets $ 12,488,606 $ 11,372,542 Station and equipment, net of accumulated depreciation 9,308,999 9,481,114 Total assets 21,797,605 20,853,656 Deferred outflows of resources 5,208,048 2,025,422 Total assets and deferred outflows of resources $27,005,653 $22,879,078 Current liabilities $ 1,548,527 $ 1,482,410 Noncurrent liabilities, net of current portion 28,613,406 25,024,744 Total liabilities 30,161,933 26,507,154 Deferred inflow of resources 1,257,013 1,910,908 Net position Net investment in capital assets 9,308,999 9,172,936 Unrestricted (13,722,292) (14,711,920) Total net position (deficit) (4,413,293) (5,538,984) Total liabilities, deferred inflows of resources and net position (deficit) $27,005,653 $22,879,078 2017 2016 Expenditures, net of program revenue $15,500,325 $13,846,274 General revenues Property tax 15,703,346 14,657,823 Use of money and property (interest income) 79,076 54,378 Aid from other government agencies 410,610 376,713 Other revenues Insurance proceeds 83,013 183,338 Service center charges (fleet maintenance) 343,707 192,577 Other revenue 6,264 14,127 Change in net position $ 1,125,691 $ 1,632,682
Management's Discussion and Analysis Financial Analysis of the District as a Whole The District's net position increased by $1,125,691 for the fiscal year ended June 30, 2017, or approximately 20.33 percent, to a total deficit of $4,413,293. Of the deficit of $4,413,293 in net position, $9,308,999 are invested in capital assets (net of accumulated depreciation and related debt). Financial Analysis of the District's Funds Governmental Fund balances increased by $1,064,922. The main reasons for the difference between the $1,064,922 increase in District net position and the $1,125,691 increase in fund balances, is the difference in accounting for fixed assets, pension liability, other post-employment benefits (health insurance) and long term debt payments. Capital Assets As of June 30, 2017, the District had invested $16,714,830 in a broad range of capital assets including land, structures and improvements, and equipment. Major fixed asset additions for the fiscal year ended June 30, 2017 consisted of the following: 2017 Station improvements (including fleet maintenance building re-roofing) $ 81,207 Equipment (communication and extraction equipment and imager) $108,583 Mobile equipment (including mechanics truck) $ 87,109 Noncurrent Liabilities At June 30, 2017, the District had $29,703,406 in noncurrent liabilities, prior to reduction for current portion, which consist of (1) net pension liability, (2) net other postemployment benefit obligation, (3) compensated absences, and (4) a debt, the original proceeds of which were used to pre pay the CalPER's Side Fund Liability. During the year ended June 30, 2017, the District noncurrent liabilities increased by $3,607,782. Increase in noncurrent liabilities resulted from: an increase of $4,705,250 in the net pension liability, an increase in other postemployment benefit obligation of $233,300, a decrease in compensated absences of $19,590, decrease in the land and building debt of $308,178 due to pay off, and decrease on the debt used to pay off CalPER's Side Fund Liability of $1,003,000 due to making required payments. - 5 -
Management's Discussion and Analysis Budget Highlights, Economic Factors and Next Year's Budget The District, like many local government and special districts in California, has embarked on a path to redefine services in a changing economic climate. The District is challenged by changing fiscal rules driven to address unfunded liabilities due to the economic pressure that originates from national economic policy, state legislative rule making, and funding based on local conditions. Property tax revenue has grown in 2016 & 2017, at a rate of 6.70% and 6.66% respectively, with a projected growth rate of 5.00% in 2018. The District will be challenged to creatively and thoughtfully address consistently increasing personnel benefit expenses with existing revenues. The District continues to evaluate changing conditions, anticipate future impacts, develop fiscal strategies and engage in collective bargaining that allows continued high levels of service to the community at an affordable and responsible level. Workers' Compensation During this reporting year of 2016/2017, the District realized a significant increase of $108,777, or 34%, in workers' compensation cost. This is due in part to recent injury and claim experience. The current forecast by SCCFAIG is for significantly increasing workers' compensation costs over the coming years. Public Employees Retirement System (CalPERS) Employee retirement expense represents a significant fiscal impact on the District. The District's combined expense is approximately $2,893,361 which is comprised of $1,890,361 in employer contributions to CalPERS with the remaining $1,003,000 contributed to the PERS Side Fund. Over the past several years, pension costs have significantly increased due to CalPERS receiving lower than expected returns on its investment portfolio, changes in methodology calculations, unfavorable changes in member demographics, and the lowering of its discount rate to 7% to address unfunded liabilities over a period of time. This methodology will inherently increase employer rates for several years as those funding factors are implemented. Employee/Retiree Health Insurance Employee and retiree health insurance premium expense is a significant annual expense subject to regulatory impact and economic conditions. Health plan rates are negotiated by the California Public Retirement System Healthcare Administration. The District continues to seek cost containment through labor negotiations with the three bargaining units. The Board of Directors has established a District contribution for employees and retirees at 85% of the third most expensive plan, while allowing for the option of enhanced medical coverage being made available if a member wishes to pay the increased cost differential. - 6 -
Management's Discussion and Analysis Other Post-Employment Benefits (OPEB) The District provides post-employment health benefits for employees who retire from the District. The benefits are based on the Memorandum of Understanding (MOU) with all three labor groups, and/or Board adopted Resolutions. The District's annual OPEB cost is calculated based on the annual required contribution of the employer (ARC), and the amount actuarially determined in accordance with GASB Statement No.45. The ARC represents a level of funding that, if paid - on an ongoing basis - is projected to cover the normal cost each year and amortize any unfunded actuarial liabilities over a period not to exceed thirty years. Prior to joining a post-employment investment trust fund with the CalPERS system, the District's past practice was "pay as you go". Modest reductions in OPEB liabilities were realized by a membership in the trust. In conjunction with joining the trust, the District also committed to a prepayment plan with its latest valuation actuarial methodology and continues to seek sustainable solutions to manage the cost of benefits provided to District employees. Operational Services and Supplies Operational services and supplies make up approximately 15% of the annual operating budget. Spending has increased over the past year due to the replacement of outdated equipment, supply cost, as well as inflationary increases in utility costs. The District's staff continues to work hard to seek out and secure the best pricing. Competitive bidding in conjunction with partnering of other governmental agencies has also been utilized this past year to help curtail costs and control spending. General Budget Comparisons The following is a side-by-side comparison of expenditure budget adoptions by category and financial trends from 2016 to 2017. The expanded expenditure budget can be found on pages 51 to 56. 2017 2016 Salaries and employee benefits $12,644,933 $11,847,945 Services and supplies $ 2,067,529 $ 1,568,028 Other charges $ 1,129,067 $ 1,153,651 Fixed assets $ 119,273 $ 241,511 Contingencies $ 100,000 $ 100,000 Contingencies - Fiscal Year 2016/2017 With the uncertainty of the economy, contingency funding is needed for unexpected expenditures, and has remained the same dollar amount as last fiscal year. - 7 -
Management's Discussion and Analysis Apparatus and Equipment Replacement Staff has implemented a long term vehicle replacement schedule recognizing the effects of the replacement cycle, inflation factors, and industry-driven price increases as a planning tool for future budget development. An additional plan is also in place for large-value equipment purchases. The District intends to purchase four new apparatus in the upcoming fiscal year to replace a portion of its ageing fleet. Future MOU - Employee Salary and Benefits Memorandum of Understanding (MOU) contract agreements with bargaining groups Administration and Management - expire at the end of calendar year 2017, with Local 3605's MOU expiring at the end of calendar year 2018. The District's bargaining groups will jointly meet and confer on salary, benefits, working conditions, and terms within this coming year. Appropriation Limit For Fiscal Year 2016-17 the appropriations limitation for the District was $33,742,988. The table below illustrates the computation used to derive the appropriation limits. Appropriations subject to limit $ 15,322,645 Calculation of 2016-2017 limit: 2015-2016 appropriations limit $ 31,755,118 Change in assessment roll 105.37% % change in county population 100.84% Total change factor 106.26% 2016-2017 appropriations limitations $ 33,742,988 Amount under appropriations limitation $(18,420,343) Excess appropriations subject to limitation $ -0- - 8 -
Management's Discussion and Analysis Summary Over the fiscal year, the District staff has worked to complete all facility maintenance and repairs, control spending in response to economic conditions and yet maintain cost effective emergency services to the communities we serve. Over the next several years, close attention to revenue sources and evaluation of necessary expenditures will have to be made to continue the overall readiness and fiscal sustainability of the District. Contacting the District's Financial Management The Management Discussion and Analysis Report are respectfully prepared as a general overview of the District's financial process. If you have any questions, comments or suggestions, please contact our District Administrative Office at 930 17th Avenue, Santa Cruz, California 95062 or telephone (831) 479-6842. - 9 -
GOVERNMENT-WIDE FINANCIAL STATEMENTS
Statements of Net Position 2017 2016 Assets Cash in county treasury Santa Cruz County $ 12,178,090 $ 11,153,381 Accounts receivable Capitola RDA and strike team 30,752 38,581 Service center charges 107,227 18,763 Prepaid expenses 172,537 161,817 Current assets 12,488,606 11,372,542 Station and equipment - net of accumulated depreciation Land 2,845,037 2,845,037 Structures and improvements 7,191,769 7,110,562 Equipment 6,678,024 6,482,332 Total station and equipment 16,714,830 16,437,931 Less: accumulated depreciation (7,405,831) (6,956,817) Station and equipment, net of accumulated depreciation 9,308,999 9,481,114 Total assets 21,797,605 20,853,656 Deferred outflows of resources Contributions 1,890,361 1,672,160 Difference between actual and projected earnings on plan assets 2,828,294 - Actuarial change in proportion 489,393 353,262 Total deferred outflow of resources 5,208,048 2,025,422 Total assets and deferred outflows of resources $ 27,005,653 $ 22,879,078 The accompanying notes are an integral part of these financial statements. - 10 -
Statements of Net Position (Continued) LIABILITIES AND NET POSITION 2017 2016 Liabilities Due within one year - current liabilities Accounts payable $ 123,599 $ 124,416 Accrued salaries and benefits 334,928 282,969 Accrued interest on long-term liabilities - 4,145 Current portion of long-term liabilities 1,090,000 1,070,880 Total current liabilities 1,548,527 1,482,410 Due in more than one year - noncurrent liabilities Net pension liability 21,918,653 17,213,403 Net other postemployment benefit obligation 5,312,443 5,079,143 Compensated absences 1,329,310 1,348,900 Long-term debt Purchase lot and building - 308,178 Debt funds use to pay off CalPER's Side Fund Liability 1,143,000 2,146,000 29,703,406 26,095,624 Less: current portion of debt (1,090,000) (1,070,880) Total noncurrent liabilities 28,613,406 25,024,744 Total liabilities 30,161,933 26,507,154 Deferred inflow of resources Differences between actual and projected earnings on plan assets - 416,052 Differences between expected and actual actuarial experience 123,337 166,867 Changes in assumptions 574,089 821,322 Differences between actual and proportionate share of contributions 559,587 506,667 Total deferred inflow of resources 1,257,013 1,910,908 Net position (deficit) Net investment in capital assets 9,308,999 9,172,936 Unrestricted net position General fund (13,722,292) (14,711,920) Total net position (deficit) (4,413,293) (5,538,984) Total liabilities, deferred inflows of resources and net position (deficit) $ 27,005,653 $ 22,879,078 The accompanying notes are an integral part of these financial statements. - 11 -
Statements of Activities For the Year Ended June 30, 2017 (With Comparative Totals for 2016) Fees and Emergency Operating Charges for Response Grants and Totals Expenditures Services Recovery Contributions 2017 2016 Governmental activates Fire protection Salaries and benefits $ 13,466,112 $ 25,671 $ 77,625 $ - $ 13,362,816 $ 11,724,205 Services and supplies 1,759,127 177,112 - - 1,582,015 1,516,186 Contributions to other agencies 17,658 - - - 17,658 18,151 Interest on long-term liabilities 88,822 - - - 88,822 144,245 Depreciation 449,014 - - - 449,014 443,487 Total governmental activities 15,780,733 202,783 77,625-15,500,325 13,846,274 General revenues Property tax 15,703,346 14,657,823 Use of money and property 79,076 54,378 Aid from other government agencies State homeowners property tax relief 101,445 101,700 RDA supplemental increment pass-through 309,165 275,013 Other revenue Other revenue 6,264 14,127 Insurance proceeds 83,013 183,338 Service center charges (fleet maintenance) 343,707 192,577 Total general revenues 16,626,016 15,478,956 Changes in net position 1,125,691 1,632,682 Net position (deficit) Program Revenues Net position (deficit) - beginning of the year (5,538,984) (7,171,666) Net positon (deficit) - end of the year $ (4,413,293) $ (5,538,984) The accompanying notes are an integral part of these financial statements. - 12 -
Statements of Activities For the Year Ended June 30, 2016 (With Comparative Totals for 2015) Emergency Operating Charges for Response Grants and Totals Expenditures Services Recovery Contributions 2016 2015 Expenditures Fire protection Salaries and benefits $ 12,288,032 $ 239,492 $ 324,335 $ - $ 11,724,205 $ 10,667,854 Services and supplies 1,516,186 - - - 1,516,186 1,205,090 Contributions to other agencies 18,151 - - - 18,151 18,866 Interest on long-term liabilities 144,245 - - - 144,245 188,614 Depreciation 443,487 - - - 443,487 464,005 Total governmental activities 14,410,101 239,492 324,335-13,846,274 12,544,429 General revenues Property tax 14,657,823 13,736,290 Use of money and property 54,378 33,685 Aid from other government agencies State homeowners property tax relief 101,700 101,942 RDA supplemental increment pass-through 275,013 186,615 Government grants - 10 Other revenue Other revenue 14,127 118,250 Insurance proceeds 183,338 65,631 Service center charges 192,577 161,161 Gain (loss) on deposal of asset - 5,500 Total general revenues 15,478,956 14,409,084 Changes in net position 1,632,682 1,864,655 Net position (deficit) Program Revenues Net position - beginning of the year, as previously reported (7,171,666) 12,009,227 Prior period adjustment, restated as of July 1, 2014 for GASB 68 Pension Accounting (note 12) - (21,045,548) Net position (deficit) - beginning of the year, as restated (7,171,666) (9,036,321) Net positon (deficit) - end of the year $ (5,538,984) $ (7,171,666) The accompanying notes are an integral part of these financial statements. - 13 -
GOVERNMENTAL FUNDS FINANCIAL STATEMENTS
CENTRAL FILE PROTECTION DISTRICT OF SANTA CRUZ COUNTY Balance Sheets - Governmental Funds June 30, 2017 ASSETS AND OTHER DEBITS 2017 Totals Governmental Fund Types (Memorandum Vehicle Capital Fleet Economic Only) General Replacement Outlay Maintenance Stability 2017 Assets Cash $ 7,728,036 $ 2,392,340 $ 921,591 $ 210,110 $ 926,013 $ 12,178,090 Accounts receivable 30,752 - - 107,227-137,979 Prepaid expenses 168,338 - - 4,199-172,537 Total assets $ 7,927,126 $ 2,392,340 $ 921,591 $ 321,536 $ 926,013 $ 12,488,606 LIABILITIES, AND FUND BALANCE Liabilities Accounts payable $ 47,571 $ - $ 69,050 $ 6,978 $ - $ 123,599 Accrued salaries and benefits 325,054 - - 9,874-334,928 Total liabilities 372,625-69,050 16,852-458,527 Fund balance Assigned fund balance Imprest cash 300 - - - - 300 Capital improvements - - 424,571 - - 424,571 Equipment - - 427,970 - - 427,970 Compensated absences 313,364 - - - - 313,364 Mobile equipment vehicle replacement - 2,392,340 - - - 2,392,340 Fleet maintenance - - - 304,684-304,684 Economic stability - - - - 926,013 926,013 Unassigned fund balance Unreserved, undesignated 7,240,837 - - - - 7,240,837 Total fund balance and other credits 7,554,501 2,392,340 852,541 304,684 926,013 12,030,079 Total liabilities and fund balances $ 7,927,126 $ 2,392,340 $ 921,591 $ 321,536 $ 926,013 $ 12,488,606 The accompanying notes are an integral part of these financial statements. - 14 -
CENTRAL FILE PROTECTION DISTRICT OF SANTA CRUZ COUNTY Balance Sheets - Governmental Funds June 30, 2016 ASSETS AND OTHER DEBITS 2016 Totals Governmental Fund Types (Memorandum Vehicle Capital Fleet Only) General Replacement Outlay Maintenance 2016 Assets Cash $ 7,916,343 $ 2,010,209 $ 1,025,634 $ 201,195 $ 11,153,381 Accounts receivable 38,581 - - 18,763 57,344 Prepaid expenses 157,563 - - 4,254 161,817 Total assets $ 8,112,487 $ 2,010,209 $ 1,025,634 $ 224,212 $ 11,372,542 LIABILITIES, AND FUND BALANCE Liabilities Accounts payable $ 96,723 $ - $ - $ 27,693 $ 124,416 Accrued salaries and benefits 275,282 - - 7,687 282,969 Total liabilities 372,005 - - 35,380 407,385 Fund balance Assigned fund balance Imprest cash 300 - - - 300 Capital improvements - - 643,080-643,080 Equipment - - 382,554-382,554 Compensated absences 313,364 - - - 313,364 Mobile equipment vehicle replacement - 2,010,209 - - 2,010,209 Fleet maintenance - - - 188,832 188,832 Unassigned fund balance Unreserved, undesignated 7,426,818 - - - 7,426,818 Total fund balance and other credits 7,740,482 2,010,209 1,025,634 188,832 10,965,157 Total liabilities and fund balances $ 8,112,487 $ 2,010,209 $ 1,025,634 $ 224,212 $ 11,372,542 The accompanying notes are an integral part of these financial statements. - 15 -
Reconciliation of the Governmental Funds Balance Sheets to the Government - Wide Statements of Net Position _ 2017 2016 Total fund balances - Governmental Funds $ 12,030,079 $ 10,965,157 Amounts to be reported for governmental activities in the Statement of Net Assets are different because: Capital assets used in governmental funds are not financial resources and therefore are not reported as assets in the governmental funds. Total historical cost of capital assets 16,714,830 16,437,931 Less: accumulated depreciation (7,405,831) (6,956,817) Deferred outflows of resources reported in the Statement of Net Position are not reported in governmental funds. 5,208,048 2,025,422 Interest payable on long-term debt does not require current financial resources. Therefore, interest payable is not reported as a liability in governmental funds. - (4,145) Long-term liabilities were not due and payable in the current period and therefore, are not reported as liabilities in the governmental funds. Long-term liabilities at June 30 consist of the following: Net pension liability (21,918,653) (17,213,403) Net other postemployment benefit obligation (5,312,443) (5,079,143) Compensated absences (1,329,310) (1,348,900) Long-term debt Purchase of 410 Kennedy - (308,178) Debt funds use to pay off CalPER's Side Fund Liability (1,143,000) (2,146,000) Deferred inflows of resources reported in the Statement of Net Position are not reported in governmental funds. (1,257,013) (1,910,908) Net position $ (4,413,293) $ (5,538,984) The accompanying notes are an integral part of these financial statements. - 16 -
Statements of Revenues, Expenditures and Changes in Fund Balances - Governmental Funds For the Year Ended June 30, 2017 _ 2017 Totals Governmental Funds (Memorandum Vehicle Capital Fleet Economic Only) General Replacement Outlay Maintenance Stability 2017 Revenues Property taxes $ 15,703,346 $ - $ - $ - $ - $ 15,703,346 Use of money and property 45,525 18,759 7,782 1,454 5,556 79,076 Aid from other government agencies 488,235 - - - - 488,235 Charges for services 202,783 - - 343,707-546,490 Other revenue 89,277 - - - - 89,277 Total revenues 16,529,166 18,759 7,782 345,161 5,556 16,906,424 Expenditures Salaries and employee benefits 12,053,316 - - 330,357-12,383,673 Services and supplies 1,311,631-42,731 404,765-1,759,127 Other charges 1,130,342-291,461 - - 1,421,803 Fixed assets 96,288 71,628 108,983 - - 276,899 Total expenditures 14,591,577 71,628 443,175 735,122-15,841,502 Excess (deficiency) of revenues over expenditures 1,937,589 (52,869) (435,393) (389,961) 5,556 1,064,922 Other financing sources Insurance proceeds - - - - - - Sale of fixed assets - - - - - - Operating transfers out of General fund to the: Capital improvements (150,000) - 150,000 - - - Equipment (112,300) - 112,300 - - - Mobile vehicle replacement (435,000) 435,000 - - - - Fleet Maintenance (505,813) - - 505,813 - - Economic stability (920,457) - - - 920,457 - Operating transfers out of capital outlay - - - - - - Excess (deficiency) of revenues and other financing sources over expenditures (185,981) 382,131 (173,093) 115,852 926,013 1,064,922 Beginning fund balance 7,740,482 2,010,209 1,025,634 188,832-10,965,157 Ending fund balance $ 7,554,501 $ 2,392,340 $ 852,541 $ 304,684 $ 926,013 $ 12,030,079 The accompanying notes are an integral part of these financial statements. - 17 -
Statements of Revenues, Expenditures and Changes in Fund Balances - Governmental Funds For the Year Ended June 30, 2016 _ 2016 Totals Governmental Funds (Memorandum Vehicle Capital Fleet Only) General Replacement Outlay Maintenance 2016 Revenues Property taxes $ 14,657,823 $ - $ - $ - $ 14,657,823 Use of money and property 34,923 11,922 6,406 1,127 54,378 Aid from other government agencies 701,048 - - - 701,048 Charges for services 239,492 - - 192,577 432,069 Other revenue 197,465 - - - 197,465 Total revenues 15,830,751 11,922 6,406 193,704 16,042,783 Expenditures Salaries and employee benefits 11,549,142 - - 310,124 11,859,266 Services and supplies 1,140,011 - - 376,175 1,516,186 Other charges 1,147,065 - - - 1,147,065 Fixed assets 111,774 - - 9,324 121,098 Total expenditures 13,947,992 - - 695,623 14,643,615 Excess (deficiency) of revenues over expenditures 1,882,759 11,922 6,406 (501,919) 1,399,168 Other financing sources Operating transfers out of General fund to the: Capital improvements (150,000) - 150,000 - - Equipment (112,300) - 112,300 - - Mobile vehicle replacement (349,620) 349,620 - - - Fleet maintenance (482,407) - - 482,407 - Operating transfers out of Vehicle replacement - - - - - Operating transfers out of capital outlay 119,243 - (119,243) - - Excess (deficiency) of revenues and other financing sources over expenditures 907,675 361,542 149,463 (19,512) 1,399,168 Beginning fund balance 6,832,807 1,648,667 876,171 208,344 9,565,989 Ending fund balance $ 7,740,482 $ 2,010,209 $ 1,025,634 $ 188,832 $ 10,965,157 The accompanying notes are an integral part of these financial statements. - 18 -
Reconciliation of the Statements of Revenues, Expenditures and Changes in the Fund Balances of Governmental Funds to the Statements of Activities For the Years Ended 2017 2016 Net change in Fund Balances - total Governmental Funds $ 1,064,922 $ 1,399,168 Amounts reported for governmental activities in the statement of activities (Statement B) are different because: Government Funds report capital outlays as expenditures. However, in the statement of activities, the cost of these assets are allocated over the estimated useful lives as depreciation expense. This is the amount by which capital outlays exceeded depreciation expense during the year. Expenditures for capital assets 276,899 121,098 Less current year depreciation expense (449,014) (443,487) Repayment of principal on long-term liabilities is an expenditure for Governmental Funds, but the repayment reduces long-term liabilities on the Government-Wide Statement of Net Position. Principal payments made on long-term liabilities during the year consist of the following: Debt used to pay off CalPER's Side Fund Liability 1,003,000 923,000 Debt used to fund purchase of lot and building 308,178 59,886 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. Change in compensated absences 19,590 (24,187) Change in other post-employment benefits (233,300) (351,900) Change in pension liability and deferred inflows and outflows (868,729) (52,677) In the Governmental Funds interest expenses on long-term debt is measured by the amount of financial resources used, which is the amounts actually paid. In the Government - Wide statement of activities, interest expense is measured by the amounts accrued during the year. Interest paid was more or (less) than accrued. 4,145 1,781 Change in net position of Governmental Activities $ 1,125,691 $ 1,632,682 The accompanying notes are an integral part of these financial statements. - 19 -
GASB 45 TRUST FUND FINANCIAL STATEMENTS
Statements of Plan Position and Changes in Plan Net Position For the Years Ended STATEMENTS OF PLAN POSITION 2017 2016 Assets Cash and short-term investments $ 1,355,667 $ 856,512 Net position held in trust for other post employment benefits $ 1,355,667 $ 856,512 STATEMENTS OF CHANGES IN PLAN NET POSITION Additions Operating transfers $ 424,100 $ 330,100 Investment income 75,933 46,963 Total additions 500,033 377,063 Deductions Professional services 878 530 Total deductions 878 530 Net increase 499,155 376,533 Net position held in trust for other post employment benefits Beginning of year 856,512 479,979 End of year $ 1,355,667 $ 856,512 The accompanying notes are an integral part of these financial statements. - 20 -
Notes to Financial Statements 1. General Information Organization The Central Fire Protection District of Santa Cruz County was organized October 17, 1987, under the authority of Section 56000 et seq. of the California Government Code, and operates under the provisions of the Fire Protection District Law of 1987 (beginning with Health and Safety Code Section 13800). The District provides fire protection for the City of Capitola, the Town of Soquel, the area east of the City of Santa Cruz known as Live Oak, and portions of the surrounding area. The District has reviewed criteria to determine whether other entities with activities that benefit the District should be included within its financial reporting entity. The criteria include, but are not limited to, whether it exercises oversight responsibility (which includes financial interdependency, selection of governing authority, designation of management, ability to significantly influence operations and accountability for fiscal matters). The District has determined that no outside entity meets the above criteria, and therefore, no agency has been included as a component unit in the District's financial statements. In addition, the District is not aware of any entity that would exercise such oversight responsibility that would result in the District being considered a component unit of that entity. District officials The District is governed by a board of seven directors. The following were in office at June 30, 2017: Term Expires November Owen Miller, Chair 2020 John Lucchesi, Vice-Chair 2020 David Burnham 2020 James Cupples 2018 Barry Franchi 2018 Christopher Hass 2018 Kevin Walter 2020 Steven Hall was the Fire Chief at June 30, 2017. Accounting records The official accounting records of the District are maintained in the office of the Auditor/Controller of Santa Cruz County. Supporting documents are maintained by the District. - 21 -
Notes to Financial Statements 1. General Information (continued) Minutes Minutes were recorded for meetings and contained approvals for disbursement. Budgetary procedure The District prepares a fiscal year budget in accordance with applicable laws and regulations. 2. Summary of Significant Accounting Policies Basis of accounting and measurement focus The accounts of the District are organized on the basis of funds or account groups, each of which is considered to be a separate accounting entity. The operations of each fund are summarized by providing a separate set of self-balancing accounts which include its assets, liabilities, fund equity, revenues and expenses or expenditures. The District uses a chart of accounts based on the uniform accounting system prescribed by the State Controller. The District's financial statements are prepared in accordance with generally accepted accounting principles (GAAP). The Governmental Accounting Standards Board (GASB) is responsible for establishing GAAP for state and local governments through its pronouncements (Statements and Interpretations). Financial statement presentation Government-Wide Financial Statements The District's Government-Wide Financial Statements include a statement of net position and a statement of activities and changes in net position. These statements present summaries of governmental activities for the District. The basic Government-Wide financial statements are presented on an economic resources measurement focus and the accrual basis of accounting. Accordingly, all of the District's assets and liabilities, deferred inflows/outflows of resources, including capital assets, and noncurrent liabilities are included in the accompanying statement of net position. The statement of activities presents changes in net position. Under the accrual basis of accounting, revenues are recognized in the period in which they are earned while expenses are recognized in the period the liability is incurred. - 22 -
Notes to Financial Statements 2. Summary of Significant Accounting Policies (continued) Financial statement presentation (continued) The District's governmental-wide net position is classified in the following categories: Net investment in capital assets - Includes amount of the net position that is invested in capital assets net of accumulated depreciation and any related debt. Restricted - Includes amounts that can be spent only for the specific purposes stipulated by a formal action of the government's highest level of decision-making authority, external resource providers, constitutionally, or through enabling legislation. Unrestricted - Includes amounts that are technically available for any purpose and includes all amounts not contained in other classifications. Governmental Funds Financial Statements The District's Government Funds financial statements include a balance sheet and a statement of revenues, expenditures and changes in fund balances for all major governmental funds and nonmajor funds. An accompanying schedule is presented to reconcile and explain the differences in net position as presented in these statements of net position presented in the Government-Wide financial statements. All governmental funds are accounted for on a spending or current financial resources measurement focus and the modified accrual basis of accounting. Accordingly, only current assets and current liabilities are included on the balance sheet. The statement of revenues, expenditures and changes in fund balances presents increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in net current assets. Under the modified accrual basis of accounting, revenues are recognized in the accounting period in which they become both measurable and available to finance expenditures of the current period. Accordingly, revenues are recorded when received in cash, except that revenues subject to accrual (generally 60 days after year end) are recognized when due. Expenditures are recorded in the accounting period in which the related fund liability is incurred. Reconciliation of the Governmental Funds financial statements to the Government-Wide financial statements is provided to explain the differences created by the different measurement focus and basis of accounting. The District's governmental fund balance is classified in the following categories: Nonspendable - Includes amounts that are not in a spendable form or are required to be maintained intact. - 23 -
Notes to Financial Statements 2. Summary of Significant Accounting Policies (continued) Financial statement presentation (continued) Restricted - Includes amounts that can be spent only for the specific purposes stipulated by external resource providers, constitutionally, or through enabling legislation. Committed - Includes amounts that can be used only for the specific purposes determined by a formal action of the government's highest level of decision-making authority. Commitments may be changed or lifted only by the government taking the same formal action that imposed the constraint originally. Assigned - Includes amounts intended to be used by the government for specific purposes. Intent can be expressed by the governing body or by an official or body to which the governing body delegates the authority. Unassigned - Includes amounts that are technically available for any purpose and includes all amounts not contained in other classifications. Total columns on combined statements - overview Total columns on the combined statement are captioned "memorandum only" to indicate that they are presented only to facilitate analysis. Data in these columns do not present financial position or results of operations in conformity with generally accepted accounting principles. Neither is such data comparable to a consolidation. Interfund eliminations have not been made in the aggregation of this data. Property tax revenue The County of Santa Cruz assesses properties, bills, and collects property taxes for the District. Assessed values are determined annually by the County Assessor as of March 1, and become a lien on real property as of that date. Taxes are due November 1 and February 1 and are delinquent if not paid by December 10 and April 10, respectively. The County bills and collects property taxes and remits them to the District under the State authorized method of apportioning taxes whereby all local agencies, including special districts, receive from the County their respective shares of the amount of ad valorem taxes collected. Cash in County Treasury The Districts cash is held in the Santa Cruz County (the "County") Treasury Pool, which is not rated by national credit rating agencies. See Note 3 to these financial statements for information regarding the Pools investments, interest rate risk, concentration of credit risk and custodial credit risk. The County Treasurer pools cash with other County and Special District funds and invests to maximize income consistent with safe and prudent investment practices within the guidelines of the County's investment pool. The County routinely reviews its investment policy. The estimated - 24 -
Notes to Financial Statements 2. Summary of Significant Accounting Policies (continued) Cash in County Treasury (continued) fair value of investments in the pool is based on quoted market prices. The fair value of the District's position in the pool is the same as the value of the pool shares. The value of the pool shares may be withdrawn at any time based on an amortized cost basis, which is different than the fair value of the District's position in the pool. Information regarding the investments within the pool, including risks, can be found in the County's Comprehensive Annual Financial Report. Accounts receivable All accounts receivable, if any, are shown net of any allowance for uncollectible accounts. All receivables which have been remitted within 60 days subsequent to fiscal year end are considered measurable and available and recognized as income in the government-fund financial statements. Prepaid items Certain payments to vendors reflect costs applicable to future fiscal years and are recorded as prepaid items in both the government-wide and government fund financial statements. Capital assets Capital assets, which include land, buildings, improvements, and equipment are reported in the Government-Wide financial statements. Capital assets are recorded at historical cost or estimated historical cost if actual cost is not available. Donated assets are valued at their estimated fair value on the date donated. The District capitalization thresholds for reporting capital assets as of June 30, 2017 is $5,000. Depreciation is recorded on the straight-line method over the useful lives of the assets as follows: Buildings Equipment 20-30 years 3-10 years District special expense Fire hose couplings and nozzles are peculiar to fire districts, the manual of the State Controller provides that purchases of such items be charged to the expense account "District special expense". - 25 -
Notes to Financial Statements 2. Summary of Significant Accounting Policies (continued) Liability for compensated absences The District is required to recognize a liability for employees' rights to receive compensation for future absences. On, the liability for compensated absences was $1,329,310 and $1,348,900, respectively. Deferred outflows/inflows of resources In addition to assets, the statement of financial position will sometimes report deferred outflows of resources. Deferred outflows of resources, represent a consumption of net position that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until then. Currently, the items included in deferred outflows of resources relate to GASB 68 Pension accounting and are reported on the government-wide financial statement. In addition to liabilities, the statement of financial position will sometimes report deferred inflows of resources. Deferred inflows of resources, represent an acquisition of net position that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until then. Currently, the items included in deferred inflows of resources are related to GASB 68 Pension accounting and are reported on the government-wide financial statement. Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Upcoming accounting pronouncement GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions, addresses accounting and financial reporting requirements for postemployment benefits other than pensions (other postemployment benefits or OPEB). The requirements of this statement are effective for the District's fiscal year beginning after June 15, 2017 (2017-18). The statement requires recording the net OPEB liability. The District has obtained a valuation report preliminarily indicating a net OPEB liability of approximately $16,500,000. The District is analyzing this data to determine the effect on the financial statements. Expenditures over appropriations Required Supplementary Information budgetary comparison schedules report budget to actual. Total governmental fund expenditures were under appropriations limit. Individual expenditures over appropriations for the year ended June 30, 2017 were caused by year end reclassification journal entries. - 26 -