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Home My WebLink AboutFinancial Reports - 19954 TOWN OF MANSFIELD, MASSACHUSETTS GENERAL PURPOSE FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA JUNE 30, 1995 (With Auditor's Report Thereon) TOWN OF MANSFIELD, MASSACHUSETTS TABLE OF CONTENTS JUNE 30, 1995 PAGE Independent Auditor's Report 1-2 Independent Auditor's Report on Compliance with 3 Laws and Regulations based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards Independent Auditor's Report on Internal Control 4-5 Structure Related Matters Noted in a Financial Statement Audit Conducted in Accordance with Government Auditing Standards General Purpose Financial Statements Combined Balance Sheet - All Fund Types and Account Group 6-7 Combined Statement of Revenues, Expenditures, and Changes in Fund Balances - All Governmental Fund Types and Expendable Trust Funds 8 Combined Statement of Revenues, and Expenditures - Budget and Actual - Budgetary Basis 9 Combined Statement of Revenues, Expenses, and Changes in Retained Earnings/Fund Balances - Proprietary Fund Type & Similar Trust Funds 10 Combined Statement of Cash Flows - Proprietary Fund Types & Similar Trust Funds 11 Notes To General Purpose Financial Statements 12-32 Supplemental Data General Fund Schedule of Taxes Receivable 33 BROWN & BARRETT Certified Public Accountants 25 Cemetery Street - P.O. Box 230 Mention, Massachusetts 01756 (508) 478-3941 Robert E. Brown B, C.P.A. FAX: (508) 478-1779 Stephen G. Barrett, C.P.A. AUDITOR'S REPORT Honorable Board of Selectmen Town of Mansfield, Massachusetts We have audited the accompanying general purpose financial statements of the Town of Mansfield, Massachusetts as of and for the year ended June 30, 1995, as listed in the table of contents. These general purpose financial statements are the responsibility of the Town's management. Our responsibility is to express an opinion on these general purpose financial statements based on our audit. We did not audit the financial statements of the Light Department which statements reflect total assets and revenues of 21 percent and 99 percent, respectively of the related combined totals. Those statements were audited by other auditors whose reports have been furnished to us, and our opinion, insofar as it relates to the amounts included for the Light Department, is based solely on the reports of the other auditors. We conducted our audit in accordance with generally accepted auditing standards, Government Auditing Standards, issued by the Comptroller General of the United States, and the provisions of Office of Management and Budget Circular A-128, "Audits of State and Local Governments". Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the general purpose financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the general purpose financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. As described in Note 1, the financial statements of the Mansfield Electric Department were prepared in conformity with the accounting practices prescribed by the Massachusetts Department of Public Utilities, which is a comprehensive basis of accounting other than generally accepted accounting principles. Consistent with the practice of most municipalities in the Commonwealth of Massachusetts, the Town does not capitalize the cost of general fixed assets as required by generally accepted accounting principles. The effects on financial position, results of operations and changes in financial position due to these departures from generally accepted accounting principles is not reasonably determinable. no The general purpose financial statements do not include amounts for accrued compensated absences, which, in our opinion, should be included in the general purpose financial statements to conform with generally accepted accounting principles. In our opinion, except for the effect of: 1) not capitalizing fixed assets in a General Fixed Asset Account Group, and 2) not recording accrued compensation absences, the general purpose financial statements referred to in the first paragraph present fairly, in all material respects, the financial position of the Town of Mansfield, Massachusetts, as of June 30, 1995, and the results of its operations and the cash flows of its nonexpendable trust funds for the year then ended in conformity with generally accepted accounting principles. Our audit was made for the purpose of forming an opinion on the general purpose financial statements taken as a whole. The supplementary data listed in the table of contents are presented for purposes of additional analysis and are not a required part of the general purpose financial statements of the Town of Mansfield, Massachusetts. The supplementary data have been subjected to the auditing procedures applied in the examination of the general purpose financial statements and, in our opinion, are fairly stated in all material respects in relation to the general purpose financial statements taken as a whole. B own & Barrett 8W� Certified Public Accountants April 3, 1996 -2- BROWN & BARRETT Certified Public Accountants 25 Cemetery Street - P.O. Box 230 Mendon, Massachusetts 01756 (508) 478-3941 Robert E. Brown R, C.P.A. FAX; (508) 478-1779 Stephen G. Barrett, C.P.A. INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE WITH LAWS AND REGULATIONS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Honorable Board of Selectmen Town of Mansfield, Massachusetts We have audited the general purpose financial statements of the Town of Mansfield, Massachusetts for the year ended June 30, 1995 and have issued our report thereon, which was qualified in several respects, dated April 3, 1996. We have conducted our audit in accordance with generally accepted auditing standards, Government Auditing Standards, issued by the Comptroller General of the United States, and the provisions of Office of Management and Budget Circular A-128, "Audits of State and Local Governments". Those standards and OMB Circular A-128 require that we plan and perform the audit to obtain reasonable assurance about whether the general purpose financial statements are free of material misstatement. Compliance with laws, regulations, contracts, and grants applicable to the Town of Mansfield, Massachusetts, is the responsibility of Town of Mansfield, Massachusetts, management. As part of obtaining reasonable assurance about whether the general purpose financial statements are free of material misstatement, we performed tests of the Town's compliance with certain provisions of laws, regulations, contracts, and grants. However, our objective was not to provide an opinion on overall compliance with such provisions. The results of our tests indicate that, with respect to the items tested, the Town of Mansfield, Massachusetts, complied, in all material respects, with the provisions referred to in the preceding paragraph. With respect to items not tested, nothing came to our attention that caused us to believe that the Town had not complied, in all material respects, with those provisions. This report is intended for the use of management of the Town of Mansfield, Massachusetts. This restriction is not intended to limit the distribution of this report, which is a matter of public record. Brown &WA& Bar rett 94- Certified Public Accountants April 3, 1996 -3- BROWN & BARRETT Certified Public Accountants 25 Cemetery Street - P.O. Box 230 Mendon, Massachusetts 01756 (508) 478-3941 Robert E. Brown II, C.P.A. FAX: (508) 478-1779 Stephen G. Barrett, C.P.A. INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL STRUCTURE RELATED MATTERS NOTED IN A FINANCIAL STATEMENT AUDIT CONDUCTED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS To the Honorable Board of Selectmen Town of Mansfield, Massachusetts We have audited the general purpose financial statements of the Town of Mansfield, Massachusetts for the year ended June 30, 1995, and have issued our report thereon, which was qualified in several respects, dated April 3, 1996. We have conducted our audit in accordance with generally accepted auditing standards, Government Auditing Standards, issued by the Comptroller General of the United States, and the provisions of Office of Management and Budget Circular A-128, "Audits of State and Local Governments". Those standards and OMB Circular A-128 require that we plan and perform the audit to obtain reasonable assurance about whether the general purpose financial statements are free of material misstatement. In planning and performing our audit of the general purpose financial statements of the Town of Mansfield, Massachusetts, for the year ended June 30, 1995, we considered its internal control structure in order to determine our auditing procedures for the purpose of expressing our opinion on the general purpose financial statements and not to provide assurance on the internal control structure. The management of the Town of Mansfield, Massachusetts is responsible for establishing and maintaining an internal control structure. In fulfilling this responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of internal control structure policies and procedures. The objectives of an internal control structure are to provide management with reasonable, but not absolute, assurance that assets are safeguarded against loss from unauthorized use or disposition, and that transactions are executed in accordance with management's authorization and recorded properly to permit the preparation of financial statements in accordance with generally accepted accounting principles. Because of inherent limitations in any internal control structure, errors or irregularities may nevertheless occur and not be detected. Also, projection of any evaluation of the structure to future periods is subject to the risk that procedures may become inadequate because of changes in conditions or that the effectiveness of the design and operation of policies and procedures may deteriorate. For the purpose of this report, we have classified the significant internal control structure policies and procedures in the following categories: * Revenue * Expenditure - Purchasing and Payroll * Treasury * Financial reporting For all of the control categories listed above, we obtained an understanding of the design of relevant policies and procedures and whether they have been placed in operation, and we assessed control risk. Our consideration of the internal control structure would not necessarily disclose all matters in the internal control structure that might be material weaknesses under standards established by the American Institute of Certified Public Accountants. A material weakness is a condition in which the design or operation of one or more internal control elements does not reduce to a relatively low level the risk that errors and irregularities in amounts that would be material in relation to the general purpose financial statements being audited may occur and not be detected within a timely manner by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control structure and its operations that we consider to be a material weakness as defined above. However, we noted certain matters involving the internal control structure and its operation that we have reported to the management of the Town of Mansfield, Massachusetts, in a separate letter dated April 3, 1996. This report is intended for the use of management of the Town of Mansfield, Massachusetts. 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RC IH� � FC FGI�P,yIy,77:WWagzW'u)E �gzWHWP�WS2 W'G��w-711 Wq DHFC OpI 0 H� a� O Q O Q In PW'. ]LRm W N 7W H W r 1 TOWN OF MANSFIELD, MASSACHUSETTS COMBINED STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES ALL GOVERNMENTAL FUND TYPES AND EXPENDABLE TRUST FUNDS YEAR ENDED DUNE 30, 1995 FIDUCIARY GOVERNMENTAL FUND TYPES FUND TYPES TOTALS SPECIAL CAPITAL EXPENDABLE (MEMORANDUM GENERAL REVENUE PROJECTS TRUST ONLY) REVENUE: PROPERTY TAXES $ 19,009,704 $ - $ - $ - $ 19,009,704 INTERGOVERNMENTAL - STATE 5,515,979 349,632 965,449 - 6,831,060 INTERGOVERNMENTAL - FEDERAL - 1,066,563 - - 1,066,563 MOTOR VEHICLE EXCISE TAX 1,472,657 - - - 1,472,657 INVESTMENT INCOME 280,928 1,934 - 207,413 490,275 WATER - 1,978,022 - - 1,978,022 SEWER - 1,522,752 - - 1,522,752 DEPARTMENTAL 2,737,760 1,142,441 21,928 3,902,129 TOTAL REVENUES 29,017,028 6,061,344 965,449 229,341 36,273,162 EXPENDITURES: GENERAL GOVERNMENT 1,129,253 105,578 58,154 - 1,292,985 PUBLIC SAFETY 3,378,458 141,762 51,445 1,874 3,573,539 EDUCATION 15,186,947 1,384,965 1,048,268 3,200 17,623,380 PUBLIC WORKS 1,657,847 299,494 1,902,399 2,285 3,862,025 WATER - 877,752 - - 877,752 SEWER - 955,870 - - 955,870 HUMAN SERVICES 201,161 1,820 - - 202,981 CULTURE & RECREATION 672,890 260,694 18,020 3,430 955,034 DEBT & INTEREST 2,845,649 298,357 - - 3,144,006 STATE & COUNTY ASSESSMENTS 273,068 - - - 273,068 EMPLOYEE BENEFITS 3,621,886 3,621,886 TOTAL EXPENDITURES 28,967,159 4,326,292 3,078,286 10,789 36,382,526 EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES 49,869 1o735,052 (2,112,837) 218,552 (109,364) OTHER FINANCING SOURCES (USES) FOND PROCEEDS - - 1,850,000 - 1,850,000 OPERATING TRANSFERS IN 1,055,914 229,851 510,247 6,827 1,802,839 OPERATING TRANSFERS OUT (405,247) (1,160,914) (229,851) (1,796,012) TOTAL OTHER FINANCING SOURCES (USES) 650,667 (931,063) 2,130,396 6,827 1,856,827 EXCESS (DEFICIENCY) OF REVENUES AND OTHER FINANCING SOURCES OVER EXPENDITURES AND OTHER USES 700,536 803,989 17,559 225,379 1,747,463 FUND BALANCE AT BEGINNING OF YEAR 2,579,592 1,638,058 1,705,740 4,427,162 10,350,552 FUND BALANCE AT END OF YEAR $ 3,280,128 $ 2,442,047 $ 1,723,299 $ 4,652,541 $ 12,098,015 The accompanying notes are an integral part of these general purpose financial statements -8- H w H H PQ ppHaW 'S.qW�N FCFGWH m c7 m � O w W W W to I00W O E CW1 E [Ws] FP] 2W H O U W u1M m om O\ r w T01 W II Wa ww O Hw r m w HH lD II a(� I I I I HlD I m I I I I VI VI 11 0 1 1 01 r 1 00 N II (QS N dl lO l0 l0 rl M O r r l0 II o� Hul l0 Nr H H HH V 11 iii-�� VT II it r M O N rl r O o VI VI VI II Ow w N O w m m W W 1p II I I I IM1D IOl I I IHVII IMl im O41 IMM NII N N N C Ow m 10 m yl W 1D II Id µl 1Dw I -I mO N N H H M H N II rl II N +? 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HqH mWjsH HHgH W 14 ,Jy' �U) W I� �i]FI PI r)m f[xL7 [Fn ��-iII ['s�w.]1 '(�H]y H 2 U' m II��m�i �Wj H �" 2 m H f�'yWI H h U�HH-1 �FH-CI [xw�I�CWy HPi �W-IHE em Up Fq 0 �0 �WmIHO� E d72 2.PW7i P8RC 7, O�i PAS W,7.�O WW GL "w �C7 L700-I qF0 N gP.�FC a � � Hr.GUHU W w >+I-7 W� NE- rq PmYYY4E js7 O W H wwa Q1 �C w HHH lq WW p FA wNNW p q Ha'H W'W' b WO UO r.0 FCH U 00 W' O P>7a Pl �z�wIo w[WxggW7 FC0 2��I�i-77 pp9 -1 w,��i�7 IEEp�++HH P4 X NW x w',�THjy�H W 114NR-I�fW� P WCZW'1 PIwPai3v� UAWWE w OooH w o- N TOWN OF MANSFIELD, MASSACHUSETTS COMBINED STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN RETAINED EARNINGS/FUND EQUITY - PROPRIETARY FUND TYPE AND SIMILAR TRUST FUNDS YEAR ENDED JUNE 30, 1995 (EXCEPT LIGHT DEPARTMENT AS OF ➢ECEMBER 31, 1994) PROPRIETARY FIDUCIARY FUND TYPE FUND TYPE ENTERPRISE NON- TOTALS ELECTRIC EXPENDABLE (MEMORANDUM LIGHT TRUST ONLY) OPERATING REVENUES: USER CHARGES - ELECTRIC LIGHT $17,719,092 $ - $17,719,092 PROCEEDS FROM COURT JUDGMENT 1,267,760 1,267,760 INVESTMENT INCOME - 6,821 6,821 BEQUESTS - 2,050 2,050 TOTAL OPERATING REVENUES 18,986,852 8,871 18,995,723 OPERATING EXPENSES: POWER PRODUCTION, TRANSMISSION AND DISTRIBUTION 15,904,907 - 15,904,907 GENERAL AND ADMINISTRATIVE 364,016 - 364,016 DEPRECIATION EXPENSE 408,478 - 408,478 PAYMENT IN LIEU OF TAXES 180,000 180,000 TOTAL OPERATING EXPENSES 16,857,401 16,857,401 OPERATING INCOME (LOSS) 2,129,451 8,871 2,138,322 NONOPERATING REVENUES(EXPENSES): INTEREST INCOME 68,808 - 68,808 INTEREST EXPENSE (8,237) - (8,237) FORFEITED DISCOUNTS 133,062 - 133,062 OTHER REVENUE 61,218 - 61,218 OTHER EXPENSES (5,622) - (5,622) TOTAL NONOPERATING REVENUES (EXPENSES) 249,229 249,229 INCOME BEFORE OTHER FINANCING SOURCES (USES) 2,378,680 8,871 2,387,551 OTHER FINANCING SOURCES (USES): OPERATING TRANSFERS IN OPERATING TRANSFERS OUT - (6,827) (6,827) TOTAL OTHER FINANCING SOURCES (USES): - (6,827) (6,827) NET INCOME (LOSS) 2,378,680 2,044 2,380,724 FUND BALANCE AT BEGINNING OF YEAR 9,690,431 198,211 9,888,642 FUND BALANCE AT END OF YEAR $12,069,111 $ 200,255 $12,269,366 The accompanying notes are an integral part of these general purpose financial statements -10- TOWN OF MANSFIELD, MASSACHUSETTS COMBINED STATEMENT OF CASH FLOWS PROPRIETARY FUND TYPE AND SIMILAR TRUST FUNDS YEAR ENDED JUNE 30, 1995 (EXCEPT LIGHT DEPARTMENT AS OF DECEMBER 31, 1994) PROPRIETARY FIDUCIARY FUND TYPE FUND TYPES ENTERPRISE NON- TOTALS ELECTRIC EXPENDABLE (MEMORANDUM LIGHT TRUST ONLY) CASH FLOWS FROM OPERATING ACTIVITIES: NET INCOME $ 2,378,680 $ 2,044 $ 2,380,724 ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO NET CASH PROVIDED BY OPERATIONS DEPRECIATION 408,478 - 408,478 DECREASE IN ACCOUNTS RECEIVABLE 51,434 - 51,434 INCREASE IN OTHER ACCOUNTS RECEIVABLE (498,117) - (498,117) INCREASE IN MATERIALS AND SUPPLIES (148,453) - (148,453) DECREASE IN PREPAYMENTS - 92,826 - 92,826 DECREASE IN ACCOUNTS PAYABLE (85,892) (85,892) INCREASE IN MISCELLANEOUS CURRENT & ACCRUED LIABILITIES 16,875 - 16,875 DECREASE IN RESERVE FOR UNCOLLECTABLE ACCOUNTS 9,917 9,917 INCREASE IN TAX COLLECTIONS PAYABLE (767) (767) NET CASH PROVIDED BY (USED) OPERATING ACTIVITIES: 2,224,981 2,044 2,227,025 CASH FLOWS FROM INVESTING ACTIVITIES: NET ADDITIONS TO UTILITY PLANT (550,886) - (550,886) DECREASES IN ADVANCES 26,637 - 26,637 INCREASE IN DEPRECIATION FUND (408,478) (408,478) NET CASH PROVIDED BY (USED) INVESTING ACTIVITIES: (932,727) (932,7271 NET INCREASE (DECREASE) IN CASH 1,292,254 2,044 1,294,298 CASH - BEGINNING OF PERIOD 1,300,266 198,211 1,498,477 CASH - END OF PERIOD $ 2,592,520 $ 200,255 $ 2,792,775 The accompanying notes are an integral part of these general purpose financial statements -11- TOWN OF MANSFIELD, MASSACHUSETTS NOTES TO THE GENERAL PURPOSE FINANCIAL ST JUNE 30, 1995 Note 1. Summary of Significant Accounting Policies A. Reporting Entity The government is a municipal corporation governed by an elected five -member board of selectmen. It has been determined that there are no component units for inclusion in the primary government's financial reporting entity. B. Basis of Presentation The financial condition and results of operations of the Town's funds are presented as of and for the year ended June 30, 1995, except for the Mansfield Electric Department, which is presented as of and for the year ended December 31, 1994. The accounting policies of the Town conform with generally accepted accounting principles ("GAAP"), except that the Town does not maintain, and therefore does not report, a general fixed assets account group in accordance with generally accepted accounting principles. Such departure from GAAP is permissible under the Massachusetts Uniform Municipal Accounting System. The Mansfield Electric Department's policy is to prepare its financial statements in conformity with the accounting practices prescribed by the Massachusetts Department of Public Utilities (DPU) which require that certain items be charged or credited directly to surplus. Generally accepted accounting principles, would require the same items to be charged or credited to operating income. Accordingly, the accompanying financial statements are not intended to present financial position and results of operations in conformity with generally accepted accounting principles. C. Fund Accounting The accounts of the Town are presented on the basis of funds and an account group, each of which is considered a separate accounting entity. The operations of each fund are accounted for in a set of self -balancing accounts that comprise its assets, liabilities, fund equity, revenues, expenditures or expenses and other financing sources and uses. The various funds and account group are grouped by fund categories and fund types as follows: Governmental Funds Types. Governmental Fund Types are those through which most governmental functions are typically financed. The acquisition, use, and balances of the government's expendable financial resources and the related current liabilities are accounted for through governmental funds. The governmental funds maintained by the Town are as follows: General Fund - is the general operating fund of the Town. It is used to account for all financial resources except those required to be accounted for in another fund. Special Revenue Funds - are used to account for the proceeds of specific revenue sources (other than expendable trusts or major capital projects) that are legally restricted to expenditure for specified purposes. -12- TOWN OF MANSFIELD, MASSACHUSETTS NOTES TO THE GENERAL PURPOSE FINANCIAL ST JUNE 30, 1995 Note 1. Summary of Significant Accounting Policies, continued Capital Projects Funds - are used to account for financial resources to be used for the acquisition or construction of major capital facilities other than those financed by trust funds. Proprietary Funds - are accounted for on the flow of economic resources measurement focus and use the accrual basis of accounting. Under this method, revenues are recorded when earned and expenses are recorded at the time the liabilities are incurred. The proprietary fund maintained by the Town is as follows: Enterprise Funds - are used to account for operations that are financed and operated in a manner similar to private business enterprises where the intent of the Town is that costs (expenses, including depreciation) of providing goods or services to the general public on a continuing basis are financed or recovered primarily through user charges. The enterprise fund maintained by the Town is for electricity services. Fiduciary Funds. Fiduciary funds are used to account for assets held by the Town in a trustee capacity or as an agent for individuals, private organizations, other governmental units, and/or other funds. Fiduciary funds maintained by the Town are as follows: Agency Funds - are used to account for funds that are custodial in nature and do not involve the measurement of operations. Expendable Trust Funds - are used to account for trust fund principal and income that may be expended in accordance with conditions of the trust. Expendable trust funds are accounted for in essentially the same manner as governmental funds. Nonexpendable Trust Funds - are used to account for trusts where the principal must remain intact. Generally income earned on nonexpendable trust principal may be expended in accordance with the conditions of the trust. Account Groups. Account groups are used to establish accounting control and accountability for the Town's general fixed assets, the unmatured principal of its general long-term debt and other long-term obligations that relate to the governmental funds. The Town does not maintain a general fixed asset group of accounts. The account group maintained by the Town is as follows: General Long -Term Debt Account Group - is used to account for unmatured long-term general obligation bonds payable. -13- TOWN OF MANSFIELD, MASSACHUSETTS NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS JUNE 30, 1995 Note 1. Summary of Significant Accounting Policies, continued D. Basis of Accounting The accounting and financial reporting treatment applied to a fund is determined by its measurement focus. All governmental funds and expendable trust funds are accounted for using a current financial resources measurement focus. With this measurement focus, only current assets and current liabilities generally are included on the balance sheet. Operating statements of these funds present increases (i.e., revenues and other financing sources) and decreases (i.e., expenditures and other financing uses) in net current assets. All proprietary funds and nonexpendable trust funds are accounted for on a flow of economic resources measurement focus. With this measurement focus, all assets and all liabilities associated with the operation of these funds are included on the balance sheet. Fund equity (i.e., net total assets) is segregated into contributed capital and retained earnings components. Proprietary fund -type operating statements present increases (e.g., revenues) and decreases (e.g., expenses) in net total assets. The modified accrual basis of accounting is used by all governmental fund types, expendable trust funds and agency funds. Under the modified accrual basis of accounting, revenues are recognized when susceptible to accrual (i.e., when they become both measurable and available). "Measurable" means the amount of the transaction can be determined and "available" means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. The Town considers property taxes as available if they are collected within 60 days after year end. Expenditures are recorded when the related fund liability is incurred. Principal and interest on general long-term debt are recorded as fund liabilities when due. The accrual basis of accounting is utilized by proprietary fund types and nonexpendable trust funds. Under this method, revenues are recorded when earned and expenses are recorded at the time liabilities are incurred. The Town reports deferred revenue on its combined balance sheet. Deferred revenues arise when a potential revenue does not meet both the "measurable" and "available" criteria for recognition in the current period. Deferred revenues also arise when resources are received by the Town before it has a legal claim to them, as when grant monies are received prior to the incurrence of qualifying expenditures. In the subsequent periods, when both revenue recognition criteria are met, or when the government has a legal claim to the resources, the liability for deferred revenue is removed from the combined balance sheet and revenue is recognized. -14- TOWN OF MANSFIELD, MASSACHUSETTS NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS JUNE 30, 1995 Note 1. Summary of Significant Accounting Policies, continued E. Budgets An annual budget is adopted for the Town's General Fund and the Water and Sewer Special Revenue Fund. Although legislative approval is required for certain capital project and borrowing authorizations, annual budgets are not prepared for any other fund and therefore comparison of budget to actual is only presented for the General Fund and the Water and Sewer Special Revenue Fund. The Town's annual budget is adopted on a statutory basis that differs in some respects from generally accepted accounting principles (GAAP). The major differences between the budget and GAAP basis are that: (a) Budgeted revenues are recorded when cash is received, except for real estate and personal property taxes, which are recorded as revenue when levied (budget), as opposed to when susceptible to accrual (GAAP); (b) Encumbrances are treated as expenditures in the year the commitment is made. Also, certain appropriations, known as special articles, do not lapse and are treated as budgetary expenditures in the year they are authorized. F. Cash and Investments Cash balances from all funds, except those required to be segregated by law, are combined to form a pool of cash. Cash balances are invested to the extent available and interest earnings are recognized in the General Fund, certain Special Revenue Funds, Capital Projects funds where required by state law and the Fiduciary Funds. Cash includes amounts in demand deposits as well as short-term investments with a maturity date within three months of the date acquired by the Town. Investments are stated at cost or amortized cost, except for investments in the deferred compensation plan which are reported at market value. G. Accounts Receivable Real and Personal Property Taxes. Real and Personal Property Taxes are based on values assessed as of each January 1 and are normally due on the subsequent November 1 and May 1. By law, all taxable property in the Commonwealth must be assessed at fair cash value. Taxes due and unpaid after the respective due dates are subject to interest and penalties assessed at 140-. The Town has an ultimate right to foreclosure on property for unpaid taxes. Property taxes are recorded as revenue in the fiscal accounting period that they become both measurable and available. "Available" means expected to be collected within 60 days after the year end of the fiscal year, except under unusual circumstances. -15- TOWN OF MANSFIELD, MASSACHUSETTS NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS JUNE 30, 1995 Note 1. Summary of Significant Accounting Policies, continued Other Accounts Receivable. Accounts receivable, other than real and personal property taxes, are recorded when billed. Allowances for bad debts, abatements and exemptions are estimated based on historical collections. H. Inventories Inventories of governmental funds are recorded as expenditures when purchased. Inventories of proprietary funds are valued at cost, which approximates market, using the first-in/first-out(FIFO) method. Currently the Town does not have any proprietary funds that would use inventoried items in the normal course of their operation. I. Compensated Absences Employees are granted sick and vacation leave in varying amounts based on tenure and in accordance with individual union contracts. Upon termination, retirement, or death of an employee, all unused accumulated sick leave is canceled. Vacation pay does not accumulate from year to year, but may be taken as a payment with the approval of the Town Manager and the Board of Selectmen. Upon termination, retirement, or death of an employee, an amount equivalent to his or her unused vacation for the year would be paid. Therefore, all amounts of sick leave and vacation costs are due and payable in the current fiscal year. J. Long -Term Obligations Long-term debt is recognized as a liability of a governmental fund when due. For other long-term obligations, only that portion expected to be financed from expendable available financial resources is reported as a fund liability of a governmental fund. The remaining portion of such obligations is reported in the general long-term debt account group. Long-term liabilities expected to be financed from proprietary fund operations are accounted for in those funds. K. Deferred Revenue In Governmental Funds, receivables that are not considered available are deferred until collected. Under the modified accrual basis of accounting, such amounts are measurable but not available. L. Fund Equity Encumbrance accounting, under which purchase orders, contracts and other commitments for the expenditure of monies are recorded in order to reserve that portion of the applicable appropriation, is employed as an extension of formal budgeting integration in the General Fund. Encumbrances outstanding at year end are reported as reservation of fund balances since they do not constitute expenditures or liabilities at that date. -16- TOWN OF MANSFIELD, MASSACHUSETTS NOTES TO THE GENERAL PURPOSE FINANCIAL ST JUNE 30, 1995 Note 1. Summary of Significant Accounting Policies, continued M. Interfund Transactions All interfund transactions are reported as transfers. Nonrecurring or nonroutine permanent transfers of equity are reported as residual equity transfers. All other interfund transfers are reported as operating transfers. N. Memorandum Only - Total Columns Total columns on the general purpose financial statements are captioned "Memorandum Only" to indicate that they are presented only for informational purposes. Note 2. Budgets Legal Compliance. Budgets are initially prepared by department heads. The budgets are then reviewed with and finalized by the Town Manager. The budget is then submitted to Town Meeting for approval. The finance committee also reviews the budget and makes a recommendation to the Town Meeting. Supplemental appropriations may be made from available funds after the setting of the tax rate. The Town must establish its property tax each year so that the property tax rate levy will comply with the limits established by Proposition 2-1/2, Chapter 580 of the Acts of 1980 of the Commonwealth of Massachusetts, as amended, and also equal the sum (a) the aggregate of all annual appropriations, plus (b) the provision for prior year deficits, if any, less (c) the aggregate all non -property tax revenues estimated to be received, including available funds. Supplemental appropriations may be made from available funds after the setting of the tax rate. Appropriations may be transferred between departments with Town Meeting approval. All fiscal year appropriations except appropriations for special articles lapse at year end. of of -17- TOWN OF MANSFIELD, MASSACHUSETTS NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS JUNE 30, 1995 Note 2. Budgets, continued Budgetary Data. Budgetary data is based upon accounting principles that differ from generally accepted accounting principles. Therefore, in addition to the GAAP basis financial statements, the results of the General Fund and the Water and Sewer Special Revenue Funds are presented in accordance with budgetary accounting principles to provide a meaningful comparison with the budget. The following reconciliation summarizes the differences between GAAP and budgetary basis accounting principles for the General Fund and the Water and Sewer Special Revenue Funds for the year ended June 30, 1995: As reported on a budgetary basis Adjustment of Revenue to the modified accrual basis To record fiscal year 1995 expenditures from prior year encumbrances and special articles To eliminate fiscal year 1995 encumbrances and articles As reported on GAAP basis Note 3. Deposits and Investments Excess (Deficiency) of Revenues and Other Financing Sources Over Expenditures and Other Uses Special General Revenue Fund Fund 517,774 (83,945) (552,020) 818,727 $ (6,264) (55,863) 130,764 $ 700,536 $ 68,637 ------------------- ------------------- The Town maintains a cash pool that is available for use by all funds, except trust funds. Each fund types' portion of this pool is reflected on the general purpose financial statements under the caption "Cash" and the interest earnings attributable to each fund type are included under "Investment Income". State and local statutes place certain limitations on the nature of deposits and investments available to the Town. Deposits (including demand deposits, term deposits and certificates of deposit) in any one financial institution may not exceed certain levels within collateralization by the financial institutions involved. sit-11 TOWN OF MANSFIELD, MASSACHUSETTS NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS JUNE 30, 1995 Note 3. Deposits and Investments, continued Investments can also be made in securities issued by or unconditionally guaranteed by the U.S. Government or Agencies that have a maturity of less than one year from the date of purchase, repurchase agreements guaranteed by such securities with maturity dates of no more than 90 days from the date of purchase and units in the Massachusetts Municipal Depository Trust. DEPOSITS At year end, the carrying amount of the Town's deposits was $16,051,179 and the bank balance was $16,753,528. The insurance coverage for the bank balance is listed below. Insured Balances Federal Deposit Insurance Corporation (FDIC) $ 2,107,799 Depositor's Insurance Fund of Massachusetts (DIFM) 7,160,485 Share Insurance Fund (SIF) 88,282 Total Balances Insured 9,356,566 Balances Uninsured & Uncollateralized 7,396,962 Total Balances Per Bank $ 16,753,528 It is the Town's policy to transfer all deposited funds to a collateralized account after the funds have cleared. Any uninsured or uncollateralized balances represent recent deposits that were transferred to a collateralized account on the next business day. INVESTMENTS State statutes authorize the Town to invest in term deposits or certificates of deposit, in trust companies, national banks, savings banks or banking companies, and in obligations issued or unconditionally guaranteed by the United States Government or an agency thereof. The Town is also authorized to invest in repurchase agreements. Funds that are the result of a grant, gift or trust must be invested in accordance with the terms of such grant, gift or trust. Trust funds can be placed at interest in savings, trust or FDIC banking companies which are incorporated under the laws of the Commonwealth or national banks. The Town is also authorized to invest in participation units in a combined investment fund, and bonds, notes, or securities which are legal investments for savings banks. The Town's investments are categorized below to give an indication of the level of risk assumed by the entity at year end. Category 1 includes investments that are insured or registered or for which the securities held by the Town or its agent are in the Town's name. Category 2 includes uninsured and unregistered investments for which the securities are held by the broker's or dealer's trust department or agent in the Town's name. Category 3 includes uninsured and unregistered investments for which the securities are held by the broker or dealer, or by its trust department or agent, but not in the Town's name. -19- TOWN OF MANSFIELD, MASSACHUSETTS NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS JUNE 30, 1995 Note 3. Deposits and Investments, continued Investment Category Carrying Market 1 2 3 Amount Value Term Deposits $ 254,971 $ - $ - $ 254,971 $ 254,971 Certificates of Deposit 7,550,000 - - 7,550,000 7,550,000 Total $ 7,804,971 $ - $ - ----------- ---- ---- ----------- ---- ---- Investment in Deferred Compensation Plan 762,075 762,075 Mutual Funds 14,502 14,502 State Treasurer's Investment Pool 9,952 9,952 $ 8,591,500 $ 8,591,500 ---------------------- ---------------------- The composition of the Town's deposits and investments fluctuates depending primarily on the timing of real estate tax receipts and operating and capital outlays throughout the year. Cash per financial statements $ 7,004,115 Less: Light Plant Enterprise cash @ 12/31/94 (2,592,520) Add : Light Plant Enterprise cash @ 06/30/95 3,835,013 Less: Petty cash on hand (400) Deposits @ 06/30/95 (carrying amount) $ 8,246,208 The following is a reconciliation of deposits and investments to the balance sheet categorization of "Cash" and "Investments". Balance as reflected above Certificates of Deposit Term Deposits Investment in deferred compensation plan - separately classified Cash Investments Deposits Investments $ 16,051,179 $ 8,591,500 (7,550,000) (254,971) $ 8,246,208 (762,075) $ 7,829,425 -20- TOWN OF MANSFIELD, MASSACHUSETTS NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS JUNE 30, 1995 Note 4. Property, Plant, and Equipment A summary of proprietary fund type property, plant and equipment, is as follows: Land Utility plant and equipment General plant and equipment Less accumulated depreciation Total Utility Plant Note 5. Fixed Assets Light Department $ 50,831 8,692,761 1,010,594 9,754,186 (5,908,087) $ 3,846,099 The Town does not capitalize the cost of general fixed assets as required by generally accepted accounting principles (GAAP). The effects on financial position, results of operations and changes in financial position due to this departure from GAAP is not reasonably determinable. Note 6. Temporary Borrowings Under state law, and with the appropriate local authorization, the Town is authorized to borrow funds on a temporary basis as follows: To fund current operations prior to the collection of revenues by issuing revenue anticipation notes (RANS). To fund grants prior to reimbursement by issuing grant anticipation notes (GANS). To fund Capital project costs incurred prior to selling permanent debt by issuing bond anticipation notes (BANS). Temporary loans are general obligations of the Town and maturity dates are governed by statute. Note 7. Joint Venture - School District The Town is a member of the Southeast Regional Vocational Technical School District for educational services to the children of the Town of Mansfield and other member Town's. The Town elects 1 member to the 10 member school board. Complete separate financial statements for the school district may be obtained at the Southeast Regional Vocational Technical School District. -21- TOWN OF MANSFIELD, MASSACHUSETTS NOTES TO THE GENERAL PURPOSE FINANCIAL ST JUNE 30, 1995 Note 8. Capital Lease The Town has entered into a lease agreement as lessee for financing the acquisition of airpacks. The lease agreement qualifies as a capital lease for accounting purposes (title transfer at the end of the lease term). The Town has expensed the lease payment in the fiscal year that the payment is due. The Town has not recorded the lease as a Capital Asset and therefore is not in conformance with generally accepted accounting principles. As explained in Note 5 the Town does not maintain a Fixed Assets Account Group. The following is a schedule of the future minimum lease payments for the capital lease, and the present value of the net minimum lease payments as of June 30, 1995: Fiscal year General ending June 30 Fund 1996 $ 29,999 Less: amount representing interest (1,897) Present value of future minimum lease payments $ 28,102 Note 9. Self-insurance Program The Town is a member of the Southeastern Massachusetts Health Group (SMHG) which is a self insured health insurance group of nineteen governmental units. Both employees and the Town contribute based on 25% (employee) and 7526 (town). In addition, the Town has established a workmen's compensation self-insurance program for the police and fire departments which is accounted for in the general fund. Note 10. Landfill Closure and Postclosure Care Cost The Town's landfill was closed in 1990 by order of the Department of Environmental Protection (DEP). The DEP approved the capping construction of the landfill in April 1994. The Town is responsible for postclosure monitoring of the site for thirty years and the estimated liability has been recorded in the General Long -Term Debt Account Group. W*X TOWN OF MANSFIELD, MASSACHUSETTS NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS JUNE 30, 1995 Note 11. Long Term Debt Changes in Long -Term Liabilities. During the year ended June 30, 1995, the following changes occurred in liabilities reported in the general long-term debt account group: AMOUNT AMOUNT ORIGINAL OUTSTANDING OUTSTANDING DATE OF DATE OF INTEREST PRINCIPAL AT JUNE 30, AT JUNE 30, DESCRIPTION ISSUE MATURITY RATE AMOUNT 1994 ADDITIONS RETIREMENTS 1995 BONDS: GENERAL OBLIGATION 11/15/82 11/15/21 5.00% $500,000 $ 358,100 $ GENERAL OBLIGATION 07/01/82 07/01/22 5.00% $500,000 358,100 GENERAL OBLIGATION O1/20/82 01/20/21 5.00% $500,000 345,600 GENERAL OBLIGATION 06/08/83 06/08/23 5.00% $331,200 236,500 GENERAL OBLIGATION 07/01/86 06/01/96 6.60% $585,000 165,000 GENERAL OBLIGATION 06/01/83 06/01/98 8.75% $2,000,000 520,000 GENERAL OBLIGATION 07/01/86 07/01/96 6.60% $1,340,000 395,000 GENERAL OBLIGATION 09/15/89 09/15/07 VAR.% $5,425,000 3,705,000 GENERAL OBLIGATION 11/01/91 01/15/11 6.501, $20,450,000 19,030,000 GENERAL OBLIGATION O1/15/94 01/15/13 5.00% $1,200,000 1,200,000 _ 26,313,300 BOND ANTICIPATION NOTES: GENERAL OBLIGATION 06/15/95 12/14/95 3.93% OTHER LONG-TERM LIABILITIES: LANDFILL POSTCLOSURE CARE COSTS - $ 12,900 $ 345,200 - 12,900 345,200 12,800 332,800 - 8,500 228,000 - 55,000 110,000 - 130,000 390,000 - 135,000 260,000 - 280,000 3,425,000 - 755,000 18,275,000 70,000 1,130,000 1,472,100 24,841,200 - 1,750,000 - 1,750,000 616,000 22,000 594,000 $ 26,929,300 $ 1,750,000 $ 1,494,100 $ 27,185,200 -23- TOWN OF MANSFIELD, MASSACHUSETTS NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS JUNE 30, 1995 Note 11. Long-term Debt, continued General Obligations Bonds The annual requirements to amortize all outstanding bonds, including interest, as of June 30, 1995 are as follows: Year Ended June 30, 1996 1997 1998 1999 2000 thereafter Principal Interest Total $ 1,507,100 1,552,100 1,412,100 1,312,100 1,347,100 17,710,700 $ 24,841,200 $ 1,558,395 1,453,566 1,360,090 1,275,126 1,199 615 7.458,691 $ 14,305,483 $ 3,065,495 3,005,666 2,772,190 2,587,22G 2,546,715 25,169,391 $ 39,146,683 The Town also has $1,750,000 in bond anticipation notes outstanding in the General Long -Term Obligations Account Group and $100,000 in grant anticipation notes outstanding in the Capital Projects Fund as of June 30, 1995. Legal Debt Margin The following is a computation of the legal debt margin as of June 30, 1995: Equalized Valuation (January 1, 1994) Personal Property and Real Estate $1,211,500,300 Debt Limit - 5.0% of Equalized Valuation $ 60,575,015 Long-term bonds & notes outstanding $ 24,841,200 Loans authorized & unissued 32,860,000 Less: Authorized & unissued - outside debt limit (21,227,200) Less: Debt issued - outside debt limit $(29,440,000) 7,034,000 Legal Debt Margin - inside debt limit $ 53,541,015 Equalized Valuation (January 1, 1994) Personal Property and Real Estate $1,211,500,300 Debt Limit - 10.0t of Equalized Valuation $ 121,150,030 Long-term bonds & notes outstanding $ 24,841,200 Loans authorized & unissued $ 32,860,000 57,701,200 Legal Debt Margin - all debt $ 63,448,830 -------------- -------------- -24- TOWN OF MANSFIELD, MASSACHUSETTS NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS JUNE 30, 1995 Note 11. Long-term Debt, continued Overlapping Debt The Town pays assessments under formulas which include debt service payments to other governmental agencies providing services to the Town, (commonly referred to as overlapping debt). The following summary sets forth the long-term debt of such governmental agencies and the estimated share being financed by the Town as of June 30, 1995: Total Long- Town's Town's Term Debt Estimated Indirect AGENCY Outstanding Share Debt Bristol County $ 4,235,000 5.071 $ 214,715 -------------------- -------------------- Note 12. Undesignated Fund Balance - General Fund In order to prepare the accompanying financial statements in accordance with generally accepted accounting principles, certain budgetary surpluses and deficits, which would otherwise be reflected on the balance sheet under the Massachusetts Statutory System, have been included in undesignated fund balances as follows: Undesignated $ 2,535,626 Reserve for Abatements Deficit (79,964) State and County Assessments, Net (23,249) $ 2,432,413 Note 13. Designated Fund Balance - General Fund The composition of designated fund balance is as follows: Reserved for capital improvements $ 6,033 -25- TOWN OF MANSFIELD, MASSACHUSETTS NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS JUNE 30, 1995 Note 14. Contingent Liabilities There are several pending lawsuits in which the Town is involved. The Town Attorney estimates that the potential claims against the Town not covered by insurance resulting from such litigation would not materially affect the financial statements of the Town. As of June 30, 1995, the Town has loans authorized but unissued as follows: Schools $ 22,910,000 Municipal buildings 3,900,000 Roads 2,000,000 Well site 1,465,000 Water mains 1,105,000 Water main/Well site 610,000 Fire station 530,000 Sewer 115,000 Well site 125,000 Computer 100,000 $ 32,860,000 Note 15. Deferred Compensation Plan The Town offers its employees a deferred compensation plan created in accordance with Internal Revenue Service Code Section 457. The plan, available to all government employees, permits them to defer a portion of their salary until future years. Participation in the plan is optional. The deferred compensation is not available to employees until termination, retirement, death or unforeseeable emergency. All amounts of compensation deferred under the plan, all property and rights purchased with those amounts, and all income attributable to those amounts, property or rights are (until paid or made available to the employee or other beneficiary) solely the property and rights of the Town subject only to the claims of the Town's general creditors. Participants' rights under the plan are equal to those of a general creditor of the Town in an amount equal to the fair market value of the deferred account for each participant. It is the opinion of the Town's management that the Town has no liability for losses under the plan but does have the duty of due care that would be required of an ordinary prudent investor. The Town believes that it is unlikely that it will use the assets to satisfy the claims of general creditors in the future. -26- TOWN OF MANSFIELD, MASSACHUSETTS NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS JUNE 30, 1995 Note 16. Post -Employment Health Care Benefits In addition to providing pension benefits, the Town provides certain health care and life insurance benefits for retired employees (other than teachers). Substantially all the Town's employees may become eligible for those benefits if they reach normal retirement age while working for the Town. The cost of retiree health care and life insurance benefits is recognized as an expenditure as claims are paid. For fiscal year 1995, those costs total approximately $320,653. Note 17. Employee Retirement System Plan Description The Town provides retirement benefits to employees (other than certain school department employees) through a contributory retirement system administered by the Bristol County Contributory Retirement System (the "System"). The System is a cost -sharing multiple -employer public employee retirement system. Contributions to provide benefits under the System are made by the Town under an actuarially determined schedule accepted by the State Division of Public Employee Retirement Administration (PERA). The total annual contribution is determined on the basis of active payroll. The Town's total payroll was for the year ended June 30, 1995 was $20,105,027. The portion of the payroll for employees covered by the System was $7,269,033, which represented 36.16% of the total payroll. Employee contributions to the System for the year ended June 30, 1995 was $534,856. Public school teachers, certain administrative personnel and other professional employees of the Town's School department individually participate in a contributory retirement plan administered by the Massachusetts Teachers' Retirement Board. The Town does not contribute to this plan. The System is a member of the Massachusetts Contributory Retirement System and is governed by Chapter 32 of the Massachusetts General Laws. Membership in the System is mandatory immediately upon the commencement of employment for all permanent, full-time employees. The System provides for retirement allowance benefits up to a maximum of 80% of a member's highest three consecutive year average annual rate of regular compensation. Benefit payments are based upon a member's age, length of creditable service, level of compensation and group classification. Members of the System become vested after 10 years of creditable service. A retirement allowance may be received upon reaching age 65 or upon attaining twenty years of service. The Plan also provides for early retirement at age 55 if the Participant (1) has a record of 10 years of creditable service, (2) was on the Town payroll on January 1, 1978, (3) voluntarily left town employment on or after that date, and (4) left accumulated annuity deductions in the Fund. Active members contribute either 5, 7, or 8% of their gross regular compensation depending on the date upon which their membership began. -27- TOWN OF MANSFIELD, MASSACHUSETTS NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS JUNE 30, 1995 Note 17. Employee Retirement System, continued The System also provides death and disability benefits. The accounting records of the System are maintained on a calender year basis in accordance with the standards and procedures established by the Commissioner of the Public Employee Retirement Administration. Funding Status and Progress The amount shown below as the "Pension Benefit Obligation" is a standardized disclosure measure of the present value of pension benefits, adjusted for the effects of projected salary increases and step -rate benefits, estimated to be payable in the future as a result of employee service to date. The measure is intended to help users assess the funding status of the System on a going -concern basis, assess progress made in accumulating sufficient assets to pay benefits when due, and make comparisons among employers. The measure is the actuarial present value of credited projected benefits and is independent of the funding method used to determine contributions to the System. The Pension Benefit Obligation was computed as part of an actuarial valuation performed as of January 1, 1993. Significant actuarial assumptions used in the valuation include (a) a rate of return on the investment of present and future assets of 8.5% per year compounded annually, and (b) projected salary increases of 6.01- per year compounded annually. The total unfunded pension benefit obligation applicable to the System was $68,465,000 at January 1, 1993, as follows: Pension benefit obligation: Retirees and beneficiaries currently receiving benefits and terminated employees not yet receiving benefits $ 66,988,000 Current Employees: Accumulated employee contributions, including allocated investment earnings 85,431,000 Total pension benefit obligation 152,419,000 Net assets available for benefits, at market value 83,954,000 Unfunded Pension Benefit Obligation $ 68,465,000 Contribution Requirements and Contributions Made The system's funding policy is governed by Section 22D of Chapter 32. Accordingly, contributions to provide benefits under the System are annually determined by the State Division of Public Employee Retirement Administration (PERA). The current funding schedule requires the Town to pay the employer normal cost (in addition to member contributions) plus the amortization of the original unfunded actuarial accrued liability by June 30, 2028. offs TOWN OF MANSFIELD, MASSACHUSETTS NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS JUNE 30, 1995 Note 17. Employee Retirement System, continued The Town's contribution to the System for the year ended June 30, 1995 was $937,300 and represents approximately 9.27% of the System -wide employer contributions. Trend Information Ten year historical trend information showing the System's progress in accumulating sufficient assets to pay benefits when due is required by GAAP to be included in the System's annual financial report. It is not known whether this report will contain the required historical trend data. Note 18. Fiscal Year 1996 Budget The Town has authorized a fiscal 1996 operating and capital budget totaling $37,513,452 which will be financed from the following sources: Real Estate & Personal $ 20,289,655 Property Taxes State Revenue 6,129,119 Local Revenue 8,342,101 General Fund 2,041,269 Special Revenue Funds 240,630 Capital Projects 24,872 Trust Funds 550,000 Prior years deficits raised (104,194) $ 37,513,452 In addition, the Town has carried forward appropriations and encumbrances totaling $841,682 from 1995 and prior years for projects authorized by Town Meeting but not yet completed. Note 19. Prior period Adjustment - Change in Accounting Principles The General Long -Term Debt Account Group account balance for Landfill Closure and Postclosure Care Costs has been restated due to the adoption of Government Accounting Standards Board Statement #18. Landfill closure and postclosure care costs must now be recorded in the General Long -Term Debt Account Group. As a result the following beginning account balance has been restated; Restated Balance 6/30/94 General Long -Term Debt Account Group Original Balance Net 6/30/94 Change Landfill postclosure costs $ 616,000 $ - $ 616,000 -------------------------- -------------------------- -29- TOWN OF MANSFIELD, MASSACHUSETTS NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS JUNE 30, 1995 Note 20. Power Sales Agreement The Town of Mansfield acting through its Electric Department is a Participant in certain Projects of the Massachusetts Municipal Wholesale Electric Company (MMWEC). MMWEC is a public corporation and a political subdivision of the Commonwealth of Massachusetts created as a means to develop a bulk power supply for its Members and Project Participants. MMWEC is authorized to construct, own or purchase ownership interests in and to issue revenue bonds to finance electric facilities (Projects). MMWEC has acquired ownership interests in electric facilities operated by other utilities and owns electric facilities operated by it. MMWEC sells all of the capability of each of its Projects to its Members and other utilities (Project Participants) under Power Sales Agreements (PSAs). Among other things, the PSA for each Project requires each Project Participant to pay its pro rata share of MMWEC's costs related to the Project, which costs include debt service on bonds issued by MMWEC to finance the Project, plus 101; of MMWEC's debt service to be paid into a Reserve and Contingency Fund. In addition, should any Project Participant fail to make any payment, other Project participants may be required to increase their payments to an amount equal to 25% of their original Participants' share of the Project. PSA Participants have covenanted to fix, revise, and collect rates at least sufficient to meet their obligations under a PSA. MMWEC also obtains power by entering into contracts to purchase power from third parties which is resold to Members and other utilities under agreements known as Power Purchase Agreements (PPAs). The commitments made by participants in both the PSAs and the PPAs are payable solely from their electric system revenues. Under the PSA, each Participant is unconditionally obligated to make payments due to MMWEC whether or not the Project is completed or operating and notwithstanding the suspension or interruption of the output of the Project. MMWEC operates the Stony Brook Intermediate Project and Stony Brook Peaking Project fossil -fueled power plants. In addition, MMWEC has a 22.7 MW interest in the Wyman #4 plant, operated by Central Maine Power Company. MMWEC's 11.60-. ownership interest in the Seabrook Station nuclear generating unit, which has been in operation since June 1990, represents a substantial portion of its plant investment and financing program. In addition, MMWEC has a 4.80- ownership in the Millstone 3 nuclear unit. The MMWEC Seabrook and Millstone Project Participants, per the PSA's, are liable for their proportionate share of the cost of a nuclear incident at those nuclear power plants as outlined in the Price -Anderson Act. The Participants are also liable for the decommissioning expenses being funded through monthly Project billings. -30- TOWN OF MANSFIELD, MASSACHUSETTS NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS JUNE 30, 1995 Note 20. Power Sales Agreement, continued Seabrook Station experienced persistent and substantial cost increases and significant schedule delays during its construction. In 1988, PSNH, then the lead Seabrook owner, filed for Chapter 11 bankruptcy. In 1991, Northeast Utilities (NU) acquired PSNH and placed Seabrook Station in a separate single asset subsidiary corporation. In 1991, New Hampshire Electric Cooperative (NHEC), a 2% owner of Seabrook, and EUA Power Corp., a 120- joint owner, filed Chapter 11 bankruptcy. NHEC emerged from bankruptcy in 1993 under a plan of reorganization in which it continues to own its Seabrook share. EUA Power Corp. changed its name to Great Bay Power Corporation and through a recallability emerged from bankruptcy in 1994 owning its Seabrook share and funding its obligations from the related sale of energy capacity. In 1985, the validity of MMWEC's Project No. 6 Vermont PSA's was challenged in court by a Vermont state entity and certain Vermont Project Participants. In 1988 the Vermont Supreme Court ruled that the Project No. 6 Vermont PSAs were void since inception. The Vermont Supreme Court decision resulted in a default by the Vermont Project No. 6 Participants. Consequently, pursuant to the PSA, MMWEC increased the remaining Project No. 6 Participants pro rata shares of Project Capability to cover the shortfall (step-up). That action was challenged by certain Massachusetts Participants. The Supreme Judicial Court for the Commonwealth of Massachusetts issued its opinion in MMWEC et. al., v. Town of Danvers et. al. noting that "the Project 6 PSAs executed by the defendants are valid and that the step-up provisions therein have been properly invoked". Inasmuch as the Stony Brook Intermediate Project has approximately 8.2% of its Project Capability under PSA's with Vermont entities, which PSA's are virtually identical to the Project No. 6 PSA, MMWEC sought a court declaratory judgment and received a Vermont Supreme Court opinion which upheld the validity of the Intermediate Unit Project PSA's. Consolidated with the Danvers case noted above, certain Massachusetts systems also sued MMWEC over MMWEC's termination of a sellback agreement MMWEC had with PSNH (Sellback Damages Claims). The Massachusetts Appeals Court affirmed MMWEC's summary judgment granted by the Superior Court on five of seven counts related to the Sellback Damages Claims. MMWEC sought and received further appellate review and the Massachusetts Supreme Judicial Court is scheduled to hear argument in April 1995 on whether the Appeals Court erred in reversing the Superior Court on (1) whether MMWEC made certain representations to two Project Participants regarding the Sellback Agreement and (2) whether those two Project Participants reasonably relied on such representations in entering into the Project No. 6 PSA's. -31- TOWN OF MANSFIELD, MASSACHUSETTS NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS JUNE 30, 1995 Note 20. Power Sales Agreement, continued Commencing in 1989, the former Vermont Project No. 6 Participants, through various court actions, sought restitution of $6.2 million paid to MMWEC prior to their PSA's being declared void. In response, MMWEC and the Massachusetts Project No. 6 Participants filed counterclaims and other actions against various entities and individuals seeking recovery of the amounts paid by Massachusetts Project Participants related to the Project No. 6 Vermont -caused step-up. In 1994, a Vermont Superior Court entered judgment for certain of the Vermont entities in the amount of $3.4 million, without interest, which MMWEC has satisfied. The remaining $2.8 million is pending in the Federal district court in Vermont. MMWEC's authority to bill out the judgments to the Project No. 6 Participants is being questioned by two of the Project Participants. One of the challenging Participants has paid its monthly billings in full and is seeking arbitration of the issue, as provided for within the PSA. The other challenging Participant is withholding approximately $65,000 of each monthly billing, said amount being one twelfth of its share of the Vermont Superior Court judgment, and has filed for arbitration. MMWEC is seeking a contempt of court order, to enforce a prior court injunction, which ordered said Project Participant to make its Project payments when due. As of December 31, 1994, total capital expenditures amounted to $1,472,396,000 of which $93,487,000 represents the amount associated with the Department's Project Capability. MMWEC's debt outstanding for the Projects included Power Supply System Revenue bonds totaling $1,377,635,000 of which $83,171,000 is associated with the Department's share of Project Capability. As of December 31, 1994, MMWEC's total future debt service requirement on outstanding Bonds issued for Projects under construction is $2,359,304,000 of which $144,007,000 will be billed to the Department. Town of Mansfield Electric Department has entered into power purchase contracts or Power Sales Agreements with MMWEC. Under these agreements, the Department is required to make capacity or debt service payments to MMWEC. The aggregate amount of such required payments, exclusive of Reserve and Contingency Fund billings, on Bonds outstanding and significant power purchase contracts through MMWEC at December 31, 1994, is shown below. Annual Cost For the years ended December 31, 1995 $ 6,866,000 1996 6,850,000 1997 6,849,000 1998 6,861,000 1999 6,882,000 Later fiscal years 109,699,000 Total $144,007,000 In addition, the Department is required to pay its share of the operation and maintenance costs of the units in which it participates. The Department's total O&M costs including debt service under the agreement were $11,496,000 for the year ended December 31, 1994. -32- TOWN OF MANSFIELD, MASSACHUSETTS GENERAL FUND SCHEDULE OF TAXES RECEIVABLE YEAR ENDED JUNE 30, 1995 ABATEMENTS TRANSFERS BALANCE AND TO TAX NET BALANCE 7/1/94 COMMITMENTS ADJUSTMENTS LIENS COLLECTIONS 6/30/95 REAL ESTATE TAX 1992 & PRIOR $ 179,957 $ - $ 86,479 $ 44,236 $ 38,647 $ 10,595 1993 405,748 - 238,250 50,525 76,930 40,043 1994 1,085,297 - 244,795 382,669 195,650 262,183 1995 - 19,245,066 437,289 1,628 17,947,848 858,301 1,671,002 19,245,066 1,006,813 479,058 18,259,075 1,171,122 PERSONAL PROPERTY TAX 1992 & PRIOR 15,110 - 2,897 - 189 12,024 1993 18,381 - 4,832 - 3,779 9,770 1994 17,878 - 1,895 - 1,074 14,909 1995 - 352,544 2,150 336,124 14,270 51,369 352,544 11,774 - _. 341,166 50,973 $ 1,722,371 $ 19,597,610 $ 1,018,587 $ 479,058 $ 18,600,241 $ 1,222,095 MOTOR VEHICLE EXCISE TAX 1991 & PRIOR $ 24,142 $ - $ 229 $ - $ 2,402 $ 21,511 1992 22,425 - 472 - 4,040 17,913 1993 26,312 925 696 - 12,536 14,005 1994 120,988 343,766 28,940 - 399,837 35,977 1995 - 1,304,038 43,807 1,053,842 206,389 $ 193,867 $ 1,648,729 $ 74,144 $ - $ 1,472,657 $ 295,795 -33- *ao 6 a c6A�,;�i I BROWN & BARRETT Certified Public Accountants 25 Cemetery Street - P.O. Box 230 Mendon, Massachusetts 01756 (508) 478-3941 Robert E. Brown II, C.P.A. FAX: (508) 478-1779 Stephen G. Barrett, C.P.A. July 5, 1996 Board of Selectmen Mansfield Town Hall 50 West Street Mansfield, MA 02048 Honorable Board of Selectmen; We would like at this time to offer the Town a proposal for the extension of our audit agreement. We propose to extend the term of our agreement to include fiscal years 1997 and 1998 at $18,000 and $18,750 per year respectively. Our firm offers all of our clients proposals to extend the audit agreement after the completion of the second year of our three year contracts. Audit services are specifically exempt from Chapter 30B bidding requirements. As part of a services extension we fully expect that future services will continue to be provided by highly experienced staff. As you are aware, our current audit team that would serve Mansfield includes three CPA's with 18, 12 and 8 years experience in the auditing of Massachusetts local governments. We look forward to serving the Town of Mansfield. If you should have any questions regarding this proposal please contact our office at (508) 478-3941. Please indicate your acceptance of these terms by signing below and returning it to our office. Very truly yours, - Brown & Barrett Certified Public Accountants Accepted By: enl��t Date: