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Fiscal Year 2012 Single Audit Wannacomet Water WANNACOMET WATER COMPANY REPORT ON EXAMINATION OF FINANCIAL STATEMENTS FISCAL YEARS ENDED JUNE 30, 2012 AND 2011 WANNACOMET WATER COMPANY REPORT ON EXAMINATION OF FINANCIAL STATEMENTS JUNE 30, 2012 AND 2011 TABLE OF CONTENTS Page Independent Auditors’ Report..........................................................................................................................................1  Management’s Discussion and Analysis.........................................................................................................................3  Financial Statements.......................................................................................................................................................9  Statement of Net Assets............................................................................................................................................10  Statement of Revenues, Expenses and Changes in Fund Net Assets .....................................................................11  Statement of Cash Flows...........................................................................................................................................12  Notes to Financial Statements...................................................................................................................................13  Required Supplementary Information............................................................................................................................27  Retirement System Schedules...................................................................................................................................28  Retirement System Schedule of Funding Progress...............................................................................................29  Retirement System Schedule of Employer Contributions......................................................................................30  Other Postemployment Schedules ............................................................................................................................31  Other Postemployment Benefit Plan Funding Progress and Employer Contributions...........................................32  Other Postemployment Benefit Plan Actuarial Methods and Assumptions...........................................................33  Notes to Required Supplementary Information..........................................................................................................34  1 Independent Auditors’ Report Board of Water Commissioners Wannacomet Water Company Nantucket, Massachusetts We have audited the accompanying financial statements of the Wannacomet Water Company, an enterprise fund of the Town of Nantucket, Massachusetts, as of and for the fiscal years ended June 30, 2012 and 2011, as listed in the table of contents. These financial statements are the responsibility of the Wannacomet Water Company and the Town of Nantucket, Massachusetts’ management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits 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 of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the 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. These financial statements, as described in note 1, present only the Wannacomet Water Company and do not purport to, and do not present fairly the financial position of the Town of Nantucket, Massachusetts, as of June 30, 2012 and 2011, and the changes in its financial position or, where applicable, its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. In our opinion, based on our audit, the financial statements referred to above present fairly, in all material respects, the respective financial position of the Wannacomet Water Company of the Town of Nantucket, Massachusetts, as of June 30, 2012 and 2011, and the respective changes in financial position and cash flows, thereof for the fiscal years then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued our report dated October 31, 2012 on our consideration of the Town of Nantucket, Massachusetts’ internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts, grant agreements and other matters. That report was issued in conjunction with our audit of the Wannacomet Water Company, which is an enterprise fund of the Town of Nantucket, Massachusetts. 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 the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis, and required supplementary information, as listed in the table of contents, be presented to supplement the financial statements. Such information, although not a part of the financial statements, is 2 required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the 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 financial statements, and other knowledge we obtained during our audit of the 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. October 31, 2012 Wannacomet Water Company 3 Financial Statements Management’s Discussion and Analysis Wannacomet Water Company 4 Financial Statements Management’s Discussion and Analysis As management of the Wannacomet Water Company (the Water Company), we offer readers of these financial statements this narrative overview and analysis of the Water Company’s financial activities for the fiscal years ended June 30, 2012 and 2011. The Water Company complies with financial reporting requirements issued by the Governmental Accounting Standards Board (GASB), and Management’s Discussion and Analysis are part of these requirements. The GASB is the authoritative standards-setting body that provides guidance on the preparation of financial statements in conformity with Generally Accepted Accounting Principles (GAAP). The Water Company’s performance is discussed and analyzed within the context of the accompanying financial statements and disclosures following this section. Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to the Wannacomet Water Company’s financial statements. The financial statements include the Statement of Net Assets, the Statement of Revenue, Expenses and Change in Fund Net Assets, the Statement of Cash Flows, and notes to the financial statements. The Statement of Net Assets presents information on all assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the Water Company’s financial position is improving or deteriorating. The Statement of Revenues, Expenses and Changes in Fund Net Assets present information showing how the Water Company’s net assets changed during the most recent fiscal years. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected fees and earned but unused vacation leave). The Statement of Cashflows presents information showing the cash inflows and outflows for the Water Company. Notes to the financial statements. The notes provide additional information that is essential to a full understanding of the data provided in the financial statements. Financial Highlights as of the Close of Fiscal 2012 and 2011 • The total of assets exceeded liabilities (i.e., net assets) by $15 million and $14.8 million respectively. • Unrestricted net assets for Wannacomet Water fund totaled $1.7 million and $1.1 million respectively. • Outstanding debt totaled $23.5 million and $21.9 million respectively. Wannacomet Water Company 5 Financial Statements Financial Analysis The following chart provides a summary of the Water Company’s financial data for fiscal year 2012, with comparative fiscal 2011 information: 2012 2011 Assets: Current assets……………………………………………$ 6,988,237 $ 6,334,093 Capital assets, not being depreciated………………… 4,207,359 14,439,418 Capital assets, net of accumulated depreciation…… 28,738,575 17,683,225 Total assets………………………………………… 39,934,171 38,456,736 Liabilities: Current liabilities (excluding debt)……………………… 932,893 1,282,774 Noncurrent liabilities (excluding debt)………………… 490,369 445,679 Current debt……………………………………………… 2,238,836 3,515,949 Noncurrent debt………………………………………… 21,265,000 18,405,000 Total liabilities……………………………………… 24,927,098 23,649,402 Net Assets: Invested in capital assets net of related debt………… 13,312,567 13,718,662 Unrestricted……………………………………………… 1,694,506 1,088,672 Total net assets……………………………………$15,007,073 $14,807,334 Business-Type Activities June 30, June 30, 2012 2011 Program revenues: Charges for services……………………………………$ 3,700,432 $ 3,384,309 Operating grants and contributions…………………… 434,766 489,393 Total revenues……………………………………… 4,135,198 3,873,702 Expenses: Depreciation……………………………………………… 791,001 691,779 Supply and pumping…………………………………… 256,741 212,898 Water treatment………………………………………… 51,731 35,527 Distribution……………………………………………… 127,822 130,100 Meter reading…………………………………………… 1,416 8,717 Maintenance……………………………………………… 95,070 214,565 Insurance………………………………………………… 72,855 52,179 Administrative and general……………………………… 1,309,612 1,198,063 Pension benefits………………………………………… 174,532 189,676 Interest expense………………………………………… 752,743 783,769 Employee benefits……………………………………… 40,970 53,726 Total expenses……………………………………… 3,674,493 3,570,999 Transfers…………………………………………………… (260,966) (90,647) Change in net assets………………………………………$ 199,739 $ 212,056 Wannacomet Water Company 6 Financial Statements There was a net increase of $199,700 in net assets related with the Wannacomet Water Company’s activities. This relatively small increase is consistent with prior years. Approximately $11 million in capital assets were transferred from construction in progress to infrastructure and the Water Company began depreciating these assets during fiscal year 2012. Noncurrent liabilities include an accrued liability for other postemployment benefits in the amount of $388,000 as of June 30, 2012. The Water Company will continue to amortize this unfunded liability on an annual basis to the extent that the net cost, including the amortization of the unfunded liability exceeds contributions. This liability is based on an actuarially determined calculation of the cost of providing benefits, other than pension costs, to retirees and their spouses. The Town of Nantucket obtained an updated actuarial valuation report for fiscal year 2011 and 2012, which showed a significant decrease in the Town’s unfunded liability from prior valuations. Correspondingly, the portion of the unfunded liability attributable to the Water Company also decreased. The Water Company’s OPEB liability, based on the most recent actuarial valuation, increased by approximately $61,000 in fiscal year 2011 and $60,000 in fiscal year 2012. The Water Company transferred $261,000 to Capital Project Funds to fund a prior year deficit created by Water Company related capital acquisitions. Capital Asset and Debt Administration Capital Assets Wannacomet Water Company’s year end capital assets totaled $32.9 million which represents a net increase of $823,000 from the prior year. Some of the Water Company’s larger projects were completed and transferred from construction in progress to infrastructure during fiscal year 2012, including the Madaket Road water main project and the North Pasture well/tank. Projects remaining in construction in progress as of June 30, 2012 include a new meter system and the Washing Pond Road water tower. Depreciation of approximately $791,000 was recorded in fiscal year 2012. Long-term Debt At the end of the fiscal years 2012 and 2011, the Wannacomet Water Company had total bonded debt outstanding of $22.8 million and $19.6 million, respectively. Wannacomet Water issued long-term debt totaling $4.45 million during fiscal year 2012 related to the Madaket Road water main, New Street tank rehabilitation, administration building upgrades, and a meter system upgrade . This amount is fully supported by the revenue of the Wannacomet Water Company, and does not rely upon a general fund subsidy. 2012 2011 Current portion of long-term…………$ 1,545,000 $ 1,235,000 Noncurrent portion of long-term…… 21,265,000 18,405,000 Total…………………………………$ 22,810,000 $ 19,640,000 Please refer to the notes to the financial statements for further discussion of the major capital assets and debt activity. Wannacomet Water Company 7 Financial Statements Requests for Information This financial report is designed to provide a general overview of the Wannacomet Water Company’s finances for all those with an interest in the Water Company’s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Wannacomet Water Company, 1 Milestone Road, Nantucket, Massachusetts 02554, or to the Finance Department of the Town of Nantucket, 16 Broad Street, Nantucket, Massachusetts 02554. Wannacomet Water Company 8 Financial Statements This page intentionally left blank. Wannacomet Water Company 9 Financial Statements Financial Statements 2012 2011 ASSETS CURRENT: Cash and cash equivalents……………………………….$ 6,336,816 $ 5,714,243 Receivables, net of allowance for uncollectibles: User fees………………………………………………… 521,398 503,468 Inventory…………………………………………………… 130,023 116,382 Total current assets………………………………… 6,988,237 6,334,093 NONCURRENT: Capital assets, not being depreciated…………………… 4,207,359 14,439,418 Capital assets, net of accumulated depreciation………… 28,738,575 17,683,225 Total noncurrent assets…………………………… 32,945,934 32,122,643 TOTAL ASSETS………………………………………………… 39,934,171 38,456,736 LIABILITIES CURRENT: Warrants payable…………………………………………… 56,875 389,384 Accrued liabilities…………………………………………… 7,773 16,586 Accrued payroll……………………………………………… 18,286 12,037 Accrued interest…………………………………………… 284,646 291,829 Due to other funds………………………………………… 539,665 543,570 Compensated absences…………………………………… 25,648 29,368 Notes payable……………………………………………… - 2,050,000 Bonds payable……………………………………………… 2,238,836 1,465,949 Total current liabilities……………………………… 3,171,729 4,798,723 NONCURRENT: Compensated absences…………………………………… 102,593 117,471 Other postemployment benefit…………………………… 387,776 328,208 Bonds payable……………………………………………… 21,265,000 18,405,000 Total noncurrent liabilities………………………… 21,755,369 18,850,679 TOTAL LIABILITIES…………………………………………… 24,927,098 23,649,402 NET ASSETS Invested in capital assets, net of related debt……………… 13,312,567 13,718,662 Unrestricted……………………………………………………… 1,694,506 1,088,672 TOTAL NET ASSETS…………………………………………$ 15,007,073 $ 14,807,334 See notes to financial statements. JUNE 30, 2012 AND 2011 STATEMENT OF NET ASSETS WANNACOMET WATER COMPANY Wannacomet Water Company 10 Financial Statements 2012 2011 OPERATING REVENUES: Sales of water……………………………………………… $ 3,671,207 $ 3,363,847 Connection fees……………………………………………… 29,225 20,462 Other………………………………………………………… 422,010 470,984 TOTAL OPERATING REVENUES …………………… 4,122,442 3,855,293 OPERATING EXPENSES: Depreciation………………………………………………… 791,001 691,779 Supply and pumping………………………………………… 256,741 212,898 Water treatment……………………………………………… 51,731 35,527 Distribution…………………………………………………… 127,822 130,100 Meter reading………………………………………………… 1,416 8,717 Maintenance………………………………………………… 95,070 214,565 Insurance…………………………………………………… 72,855 52,179 Administrative and general………………………………… 1,309,612 1,288,710 Pension benefits…………………………………………… 174,532 189,676 Employee benefits…………………………………………… 40,970 53,726 TOTAL OPERATING EXPENSES…………………… 2,921,750 2,877,877 OPERATING INCOME (LOSS)………………………… 1,200,692 977,416 NONOPERATING REVENUES (EXPENSES): Investment income………………………………………… 12,756 18,409 Interest expense…………………………………………… (752,743) (783,769) TOTAL NONOPERATING REVENUES (EXPENSES), NET…………………… (739,987) (765,360) INCOME (LOSS) BEFORE TRANSFERS…………… 460,705 212,056 Transfers out…………………………………………………… (260,966) - CHANGE IN NET ASSETS………………………………… 199,739 212,056 NET ASSETS AT BEGINNING OF YEAR…………………… 14,807,334 14,595,278 NET ASSETS AT END OF YEAR…………………………… $ 15,007,073 $ 14,807,334 See notes to financial statements. FISCAL YEAR ENDED JUNE 30, 2012 AND 2011 STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS WANNACOMET WATER COMPANY Wannacomet Water Company 11 Financial Statements 2012 2011 CASH FLOWS FROM OPERATING ACTIVITIES: Receipts from customers and users……………………………………………………………$ 4,104,512 $ 4,084,311 Payments to vendors…………………………………………………………………………… (1,061,711) (686,527) Payments to employees………………………………………………………………………… (1,335,812) (1,346,985) Payments for interfund services used………………………………………………………… (40,970) (53,726) NET CASH FROM OPERATING ACTIVITIES………………………………………………… 1,666,019 1,997,073 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES: Transfers out…………………………………………………………………………………… (260,966) (90,647) Advances to other funds………………………………………………………………………… (3,905) 756,530 NET CASH FROM NONCAPITAL FINANCING ACTIVITIES………………………………… (264,871) 665,883 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Proceeds from the issuance of bonds and notes…………………………………………… 6,960,000 2,050,000 Acquisition and construction of capital assets……………………………………………… (1,614,292) (3,387,629) Principal payments on bonds and notes……………………………………………………… (5,840,000) (1,380,000) Interest expense………………………………………………………………………………… (297,039) (807,575) NET CASH FROM CAPITAL AND RELATED FINANCING ACTIVITIES…………………… (791,331) (3,525,204) CASH FLOWS FROM INVESTING ACTIVITIES: Investment income……………………………………………………………………………… 12,756 18,409 NET CASH FROM INVESTING ACTIVITIES…………………………………………………… 12,756 18,409 NET CHANGE IN CASH AND CASH EQUIVALENTS………………………………………… 622,573 (843,839) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR……………………………… 5,714,243 6,558,082 CASH AND CASH EQUIVALENTS AT END OF YEAR…………………………………………$ 6,336,816 $ 5,714,243 RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH FROM OPERATING ACTIVITIES: Operating income (loss)…………………………………………………………………………$ 1,200,692 $ 1,068,063 Adjustments to reconcile operating income (loss) to net cash from operating activities: Depreciation………………………………………………………………………………… 791,001 691,779 User fees………………………………………………………………………………… (17,930) 229,018 Inventory…………………………………………………………………………………… (13,641) (16,417) Other assets……………………………………………………………………………… - 5,273 Warrants payable………………………………………………………………………… (332,509) (21,900) Accrued liabilities………………………………………………………………………… (8,813) 5,590 Accrued payroll…………………………………………………………………………… 6,249 (18,059) Accrued compensated absences……………………………………………………… (18,598) (7,480) Other postemployment benefit………………………………………………………… 59,568 61,206 Total adjustments…………………………………………………………………… 465,327 929,010 NET CASH FROM OPERATING ACTIVITIES………………………………………………… $ 1,666,019 $ 1,997,073 NONCASH INVESTING, CAPITAL, AND FINANCING ACTIVITIES: Bond premium amortization……………………………………………………………………$ (12,830) $ (12,830) See notes to financial statements. FISCAL YEAR ENDED JUNE 30, 2012 AND 2011 STATEMENT OF CASH FLOWS WANNACOMET WATER COMPANY Wannacomet Water Company 12 Financial Statements Notes to Financial Statements Fiscal Years Ended June 30, 2012 and 2011 Wannacomet Water Company 13 Financial Statements NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Notes to Financial Statements The accompanying financial statements present the Wannacomet Water Company (the Water Company) an enterprise fund of the Town of Nantucket, Massachusetts. These statements are not intended to and do not present fairly the financial position of the Town of Nantucket, Massachusetts. These statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The Governmental Accounting Standards Board (GASB) is the recognized standard-setting body for establishing governmental accounting and financial reporting principles. The significant accounting policies are described herein. A. Reporting Entity The Wannacomet Water Company is an enterprise fund of the Town of Nantucket. Its operation is governed by the Board of Water Commissioners. The Water Company sells water to customers within its service area through its wholly-owned distribution system. The Water Company was formerly a private corporation whose assets, primarily the water distribution system, were purchased by the Town of Nantucket in 1998. Under the provisions of the agreement, the Town agreed to accept and abide by certain operating practices of the former enterprise, particularly in the area of employee contracts and benefits. Water Company employees are not covered by the Town’s personnel by-laws. B. Measurement Focus. Basis of Accounting and Financial Statement Presentation The Wannacomet Water Company’s financial statements reported using the flow of economic resources measurement focus and the accrual basis of accounting. Under this method, revenues are recognized when earned and expenditures are recorded when the liabilities are incurred. The operation of the Water Company is accounted for as an enterprise fund, which is a proprietary fund type. Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with the proprietary funds principal ongoing operations. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. C. Cash and Investments Cash and cash equivalents are considered to be cash on hand, demand deposits and short-term investments with an original maturity of three months or less from the date of acquisition. Investments are carried at fair value. D. Accounts Receivable The recognition of revenue related to accounts receivable reported are reported under the accrual basis of accounting. User Fees User Fees for Wannacomet Water Company are levied monthly based on individual meter readings and average bills. All water fees are subject to penalties and interest if they are not paid by the respective due date. Unbilled water fees at year-end are accrued and are recorded as revenue in the current period. Notes to Financial Statements Fiscal Years Ended June 30, 2012 and 2011 Wannacomet Water Company 14 Financial Statements E. Inventories Inventories of the Wannacomet Water Company are priced at the lower of cost or market, with cost being determined on the first-in, first-out method basis. Expendable supplies and small tools are not inventoried but rather expensed when purchased. F. Restricted Assets Certain assets of the Wannacomet Water Company are classified as restricted because their use is restricted by contract covenants. G. Capital Assets Capital assets, which include land, land improvements, buildings, machinery and equipment, and infrastructure (e.g., water mains, hydrants, meter services, and similar items), are reported in the statements. Capital assets are recorded at historical cost or at estimated historical cost when actual historical cost could not be determined. Donated capital assets are recorded at the estimated fair market value at the date of donation. Construction period interest is capitalized on constructed capital assets. All purchases and construction costs in excess of $10,000 are capitalized at the date of acquisition or construction, respectively, with expected useful lives of greater than one year. Capital assets (excluding land) are depreciated on a straight-line basis. The estimated useful lives of capital assets are as follows: Estimated Useful Life (in years) Vehicles………………………………………… 5 Furniture, fixtures, computer equipment……… 5-10 Machinery and equipment……………………… 10-15 Water infrastructure…………………………… 40-70 Buildings and improvements…………………… 33-50 Capital Asset Type The cost of normal maintenance and repairs that do not add to the value of the assets or materially extend asset lives are not capitalized and are treated as expenses when incurred. Improvements are capitalized. H. Net Assets Net assets reported as “invested in capital assets, net of related debt” includes capital assets, net of accumulated depreciation, less the principal balance of outstanding debt used to acquire capital assets. Unspent proceeds of capital related debt are not considered to be capital assets. Net assets are reported as restricted when amounts are not available for appropriation or are legally restricted by outside parties for a specific future use. I. Long-term debt Long-term debt is reported as liabilities in the statement of net assets. Material bond premiums and discounts are deferred and amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of the applicable bond premium or discount. Notes to Financial Statements Fiscal Years Ended June 30, 2012 and 2011 Wannacomet Water Company 15 Financial Statements J. Advertising The Water Company’s policy is to expense advertising costs the first time the advertising takes place. Advertising expense for the years ended June 30, 2012 and 2011 were $16,704 and $9,933 respectively. K. Compensated Absences Employees are granted vacation and sick leave in varying amounts based on collective bargaining agreements, state laws and executive policies. Vested or accumulated vacation and sick leave, which will be liquidated with expendable available financial resources, are reported as expenditures and fund liabilities. L. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure for contingent assets and liabilities at the date of the financial statements and the reported amounts of the revenues and expenses during the fiscal year. Actual results could vary from estimates that were used. NOTE 2 – CASH AND INVESTMENTS Cash of the Wannacomet Water Company is in control of the Town Treasurer as required by state law. Statutes authorize the investment in obligations of the U.S. Treasury, agencies, and instrumentalities, certificates of deposit, repurchase agreements, money market accounts, bank deposits and the State Treasurer's Investment Pool (the Pool). The Pool meets the criteria of an external investment pool. The Pool is administered by the Massachusetts Municipal Depository Trust (MMDT), which was established by the Treasurer of the Commonwealth who serves as Trustee. The fair value of the position in the Pool is the same as the value of the Pool shares. Custodial Credit Risk – Deposits The Town Treasurer, at times, commingles other Town cash accounts with those specifically related to the Wannacomet Water Company. The Water Company portion of these funds is reported on the Statement of Net Assets as cash and cash equivalents. In the case of deposits, this is the risk that in the event of a bank failure, the Wannacomet Water Company’s deposits may not be returned to it. The Wannacomet Water Company does not have a deposit policy for custodial credit risk. At fiscal year-end June 30, 2012 and 2011, the carrying amount of deposits totaled $5,204,259 and $4,135,483 and the bank balance totaled $5,292,258 and $4,132,110 respectively. Of the bank balance, $281,919 and $282,824 were covered by the Federal Depositors Insurance Company (“FDIC”), $5,010,339 and $3,849,286 were collateralized, therefore Wannacomet Water Company did not have funds that were exposed to custodial credit risk because of being uninsured or uncollateralized. Notes to Financial Statements Fiscal Years Ended June 30, 2012 and 2011 Wannacomet Water Company 16 Financial Statements Investments As of June 30, 2012, the Wannacomet Water Company had the following investments: Maturity Under Fair Value 1 Year Investment Type: Repurchase Agreements……………………………………$269,772 $ 269,772 Other Investments: MMDT………………………………………………………… 862,785 Total Investments........................................................... $ 1,132,557 As of June 30, 2011, the Wannacomet Water Company had the following investments: Maturity Under Fair Value 1 Year Investment Type: Repurchase Agreements……………………………………$ 718,346 $ 718,346 Other Investments: MMDT………………………………………………………… 860,414 Total Investments........................................................... $ 1,578,760 The Wannacomet Water Company participates in MMDT. Investments in MMDT are unrated. Custodial Credit Risk – Investments For an investment, this is the risk that, in the event of a failure by the counterparty, the Water Company will not be able to recover the value of its investments or collateral security that are in the possession of an outside party. The Water Company does not have an investment policy for custodial credit risk. The repurchase agreement consists of an overnight sweep agreement which is invested in U.S. Treasury Notes. Interest Rate Risk The Water Company does not have a formal investment policy that limits investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates. Credit Risk The Water Company has not adopted a formal policy related to Credit Risk. Concentration of Credit Risk There are no limits on the amount the Water Company may invest in any one issuer. Notes to Financial Statements Fiscal Years Ended June 30, 2012 and 2011 Wannacomet Water Company 17 Financial Statements 100% of the Water Company’s investments in fiscal year 2012 were in MMDT and repurchase agreements. NOTE 3 – RECEIVABLES At June 30, 2012 and 2011, receivables for the Water Company consist of the following: 2012 Receivables: Allowance Gross for Net Amount Uncollectibles Amount Receivables: Charges for services……………………………………$ 531,398 $ (10,000) $ 521,398 2011 Receivables: Allowance Gross for Net Amount Uncollectibles Amount Receivables: Charges for services……………………………………$ 513,468 $ (10,000) $ 503,468 NOTE 4 – CAPITAL ASSETS Capital asset activity for the Wannacomet Water Company for the fiscal year ended June 30, 2012, was as follows: 2011 2012 Beginning Ending Balance Increases Decreases Balance Capital assets not being depreciated: Land………………………………………………………… $ 3,000,000 $ - $ - $ 3,000,000 Construction in progress…………………………………… 11,439,418 895,196 (11,127,255) 1,207,359 Total capital assets not being depreciated………… 14,439,418 895,196 (11,127,255) 4,207,359 Capital assets being depreciated: Infrastructure………………………………………………… 22,297,657 11,846,351 - 34,144,008 Buildings……………………………………………………… 1,768,585 - - 1,768,585 Vehicles……………………………………………………… 267,997 - - 267,997 Machinery and equipment………………………………… 335,933 - - 335,933 Furniture, fixtures and computer equipment……………… 423,795 - - 423,795 Total capital assets being depreciated……………… 25,093,967 11,846,351 - 36,940,318 Less accumulated depreciation………………………………… (7,410,742) (791,001) - (8,201,743) Total capital assets being depreciated, net…………………… 17,683,225 11,055,350 - 28,738,575 Total business-type activities, capital assets…………………$ 32,122,643 $ 11,950,546 $ (11,127,255) $ 32,945,934 Notes to Financial Statements Fiscal Years Ended June 30, 2012 and 2011 Wannacomet Water Company 18 Financial Statements Capital asset activity for the Wannacomet Water Company for the fiscal year ended June 30, 2011, was as follows: 2010 2011 Beginning Ending Balance Increases Decreases Balance Capital assets not being depreciated: Land………………………………………………………… $ 3,000,000 $ - $ - $ 3,000,000 Construction in progress…………………………………… 9,034,528 3,341,365 (936,475) 11,439,418 Total capital assets not being depreciated………… 12,034,528 3,341,365 (936,475) 14,439,418 Capital assets being depreciated: Infrastructure………………………………………………… 22,240,283 57,374 - 22,297,657 Buildings……………………………………………………… 846,186 922,399 - 1,768,585 Vehicles……………………………………………………… 267,997 - - 267,997 Machinery and equipment………………………………… 332,967 2,966 - 335,933 Furniture, fixtures and computer equipment……………… 423,795 - - 423,795 Total capital assets being depreciated……………… 24,111,228 982,739 - 25,093,967 Less accumulated depreciation………………………………… (6,718,963) (691,779) - (7,410,742) Total capital assets being depreciated, net…………………… 17,392,265 290,960 - 17,683,225 Total business-type activities, capital assets…………………$ 29,426,793 $ 3,632,325 $ (936,475) $ 32,122,643 NOTE 5 – INTERFUND RECEIVABLES, PAYABLES AND TRANSFERS Interfund receivables and payables at June 30, 2012 are summarized as follows: Siasconset Sewer Water Enterprise Company Fund Total Wannacomet Water Company………… $ 78,021 $ 461,644 $ 539,665 Due From: Due to: Interfund receivables and payables at June 30, 2011 are summarized as follows: Siasconset Sewer General Water Enterprise Fund Company Fund Total Wannacomet Water Company………… $ 90,647 $ 71,715 $ 381,208 $ 543,570 Due From: Due to: Notes to Financial Statements Fiscal Years Ended June 30, 2012 and 2011 Wannacomet Water Company 19 Financial Statements Interfund transfers for the fiscal year ended June 30, 2012 are summarized as follows: Transfers In: Capital Project Fund Wannacomet Water Company………$ 260,996 (1) (1) Transfer to Capital Projects Fund to fund prior year deficit. Transfers Out: Interfund transfers for the fiscal year ended June 30, 2011 are summarized as follows: Transfers In: General Fund Wannacomet Water Company………$ 90,647 (1) (1) Transfer of indirect costs to the Town's General Fund. Transfers Out: NOTE 6 – SHORT-TERM FINANCING Short-term debt may be authorized and issued to fund the following: • Current operating costs prior to the collection of revenues through issuance of revenue anticipation notes (RANS). • Capital project costs and other approved expenditures incurred prior to obtaining permanent financing through issuance of bond anticipation notes (BANS) or grant anticipation notes (GANS). Short-term loans are general obligations and carry maturity dates that are limited by statute. Details related to the short-term debt activity for the fiscal year ended June 30, 2012, are as follows: Balance at Balance at Rate June 30, Renewed/ Retired/ June 30, Type Purpose (%) Due Date 2011 Issued Redeemed 2012 BAN Bond Anticipation Note…………………… 1.50 02/24/12 $ 1,200,000 $- $ 1,200,000 $- BAN Bond Anticipation Note…………………… 1.50 02/24/12 850,000 - 850,000 - BAN Bond Anticipation Note…………………… 1.00 06/08/12 - 2,050,000 2,050,000 - Total………………………………………………………………………$ 2,050,000 $ 2,050,000 $ 4,100,000 $ - Notes to Financial Statements Fiscal Years Ended June 30, 2012 and 2011 Wannacomet Water Company 20 Financial Statements Details related to the short-term debt activity for the fiscal year ended June 30, 2011, are as follows: Balance at Balance at Rate June 30, Renewed/ Retired/ June 30, Type Purpose (%) Due Date 2010 Issued Redeemed 2011 BAN Bond Anticipation Note…………………… 1.50 02/24/12 $ - $ 1,200,000 $ - $ 1,200,000 BAN Bond Anticipation Note…………………… 1.50 02/24/12 - 850,000 - 850,000 Total………………………………………………………………………$- $ 2,050,000 $ - $ 2,050,000 NOTE 7 – LONG-TERM DEBT Under the provisions of Chapter 44, Section 10, Municipal Law authorizes the Town of Nantucket indebtedness up to a limit of 5% of the Town’s equalized valuation. Debt issued in accordance with this section of the law is designated as being "inside the debt limit". In addition, however, debt may be authorized in excess of that limit for specific purposes. Such debt, when issued, is designated as being "outside the debt limit". Details related to the Water Company’s outstanding indebtedness at June 30, 2012, and the debt service requirements are as follows: Original Interest Outstanding Outstanding Maturities Loan Rate at June 30, at June 30, Project Through Amount (%) 2011 Issued Redeemed 2012 Municipal Purpose Bonds 2001………………………… 2021 $ 1,168,000 4.00 - 5.00 $ 565,000 $ - $ 565,000 $ - Municipal Purpose Bonds 2005………………………… 2024 4,000,000 2.50 - 4.13 2,800,000 - 200,000 2,600,000 Municipal Purpose Bonds 2008………………………… 2030 9,400,000 3.00 - 5.00 7,975,000 - 475,000 7,500,000 Municipal Purpose Bonds 2009………………………… 2029 2,815,000 3.00 - 5.00 2,600,000 - 110,000 2,490,000 Municipal Purpose Bonds 2010………………………… 2030 1,800,000 2.50 - 4.00 1,660,000 - 140,000 1,520,000 Municipal Purpose Bonds 2012………………………… 2032 4,450,000 2.00 - 5.00 - 4,450,000 - 4,450,000 Municipal Purpose Refunding Bonds of 2012………… 2021 460,000 2.00 - 5.00 - 460,000 - 460,000 Total Bonds Payable………………………………………………………………...………………………………… 19,640,000 4,910,000 1,740,000 22,810,000 Unamortized Premiums on Bonds and Notes………………………………………………………………………… 230,949 475,717 12,830 693,836 Total………………………………………………………………………………………………………………………$ 19,870,949 $ 5,385,717 $ 1,752,830 $ 23,503,836 Notes to Financial Statements Fiscal Years Ended June 30, 2012 and 2011 Wannacomet Water Company 21 Financial Statements Debt service requirements for principal and interest for Water Company bonds payable in future fiscal years as of June 30, 2012 are as follows: Fiscal Year Principal Interest Total 2013………………$ 1,545,000 $ 888,980 $ 2,433,980 2014……………… 1,545,000 844,588 2,389,588 2015……………… 1,560,000 783,315 2,343,315 2016……………… 1,590,000 727,790 2,317,790 2017……………… 1,515,000 670,722 2,185,722 2018……………… 1,495,000 612,785 2,107,785 2019……………… 1,510,000 552,858 2,062,858 2020……………… 1,430,000 491,602 1,921,602 2021……………… 1,480,000 432,358 1,912,358 2022……………… 1,330,000 373,467 1,703,467 2023……………… 1,320,000 318,859 1,638,859 2024……………… 1,345,000 263,316 1,608,316 2025……………… 1,360,000 206,107 1,566,107 2026……………… 1,165,000 152,925 1,317,925 2027……………… 855,000 111,818 966,818 2028……………… 830,000 77,632 907,632 2029……………… 405,000 43,907 448,907 2030……………… 210,000 15,301 225,301 2031……………… 160,000 8,101 168,101 2032……………… 160,000 2,710 162,710 Total………………$ 22,810,000 $ 7,579,141 $ 30,389,141 Details related to the outstanding indebtedness at June 30, 2011, and the debt service requirements are as follows: Original Interest Outstanding Outstanding Maturities Loan Rate at June 30, at June 30, Project Through Amount (%) 2010 Issued Redeemed 2011 Municipal Purpose Bonds 2001………………………… 2021 $ 1,168,000 4.00 - 5.00 $ 625,000 $ - $ 60,000 $ 565,000 Municipal Purpose Bonds 2005………………………… 2024 4,000,000 2.50 - 4.13 3,000,000 - 200,000 2,800,000 Municipal Purpose Bonds 2006………………………… 2025 5,150,000 3.75 - 5.00 4,285,000 - 245,000 4,040,000 Municipal Purpose Bonds 2008………………………… 2030 9,400,000 3.00 - 5.00 8,450,000 - 475,000 7,975,000 Municipal Purpose Bonds 2009………………………… 2029 2,815,000 3.00 - 5.00 2,710,000 - 110,000 2,600,000 Municipal Purpose Bonds 2010………………………… 2030 1,800,000 2.50 - 4.00 1,800,000 - 140,000 1,660,000 Total Bonds Payable…………………………………………………………………………………………………… 28,783,000 - 20,872,010 19,640,000 Unamortized Premiums on Bonds and Notes………………………………………………………………………… 243,779 - 12,830 230,949 Total………………………………………………………………………………………………………………………$ 29,026,779 $ - $ 20,884,840 $ 19,870,949 Notes to Financial Statements Fiscal Years Ended June 30, 2012 and 2011 Wannacomet Water Company 22 Financial Statements Debt service requirements for principal and interest for Water Company bonds and notes payable in future fiscal years as of June 30, 2011 are as follows: Fiscal Year Principal Interest Total 2012………………$ 1,235,000 $ 776,682 $ 2,011,682 2013……………… 1,255,000 733,492 1,988,492 2014……………… 1,255,000 690,292 1,945,292 2015……………… 1,270,000 634,918 1,904,918 2016……………… 1,300,000 587,131 1,887,131 2017……………… 1,225,000 541,223 1,766,223 2018……………… 1,205,000 497,856 1,702,856 2019……………… 1,220,000 452,483 1,672,483 2020……………… 1,140,000 404,002 1,544,002 2021……………… 1,195,000 357,408 1,552,408 2022……………… 1,130,000 309,267 1,439,267 2023……………… 1,160,000 263,659 1,423,659 2024……………… 1,185,000 216,116 1,401,116 2025……………… 1,200,000 166,907 1,366,907 2026……………… 1,005,000 120,125 1,125,125 2027……………… 695,000 83,818 778,818 2028……………… 670,000 54,432 724,432 2029……………… 245,000 25,606 270,606 2030……………… 50,000 2,000 52,000 Total………………$ 19,640,000 $ 6,917,417 $ 26,557,417 At June 30, 2012, the Water Company had the following authorized and unissued debt: Purpose Amount Wannacomet Water Company……………………………$ 1,100,000 At June 30, 2011, the Water Company had the following authorized and unissued debt: Purpose Amount Wannacomet Water Company……………………………$ 250,000 Notes to Financial Statements Fiscal Years Ended June 30, 2012 and 2011 Wannacomet Water Company 23 Financial Statements Changes in Long-term Liabilities During the fiscal year ended June 30, 2012, the following changes occurred in long-term liabilities: Balance at Balance at June 30, June 30, Current 2011 Additions Reductions 2012 Portion Long-Term Bonds and Notes……………$ 19,640,000 $ 4,910,000 $ (1,740,000) $ 22,810,000 $ 1,545,000 Compensated Absences………………… 146,839 10,770 (29,368) 128,241 25,648 Other Postemployment Benefits……… 327,400 100,920 (40,544) 387,776 - Total Long Term Liabilities………………$ 20,114,239 $ 5,021,690 $ (1,809,912) $ 23,326,017 $ 1,570,648 During the fiscal year ended June 30, 2011, the following changes occurred in long-term liabilities: Balance at Balance at June 30, June 30, Current 2010 Additions Reductions 2011 Portion Long-Term Bonds and Notes……………$ 21,020,000 $ - $ (1,380,000) $ 19,640,000 $ 1,235,000 Compensated Absences………………… 154,319 23,384 (30,864) 146,839 29,368 Other Postemployment Benefits……… 267,002 94,257 (33,859) 327,400 - Total Long Term Liabilities………………$ 21,441,321 $ 117,641 $ (1,444,723) $ 20,114,239 $ 1,264,368 NOTE 8 – RISK FINANCING The Wannacomet Water Company is exposed to various risks of loss related to torts; theft of, damage to and destruction of assets; errors and omissions; and natural disasters for which the Town carries commercial insurance. The amount of claim settlements has not exceeded insurance coverage in any of the previous four fiscal years. The Town of Nantucket is self-insured for its health insurance and workers’ compensation activities, the Wannacomet Water Company is included in the Town insurance plan. The Wannacomet Water Company pays the Town’s health insurance fund for its proportionate share of coverage. NOTE 9 – PENSION PLAN Plan Description - The Wannacomet Water Company contributes to the Barnstable County Contributory Retirement System (the System), a cost-sharing multiple-employer defined benefit pension plan administered by the Barnstable County Retirement Board. Substantially all employees of the Water Company are members of the System. The System provides retirement, disability and death benefits to plan members and beneficiaries. Chapter 32 of the MGL assigns authority to establish and amend benefit provisions of the plan. Cost-of-living adjustments granted between 1981 and 1997 and any increase in other benefits imposed by the Commonwealth’s state law during those years are borne by the Commonwealth and are deposited into the pension fund. Cost-of-living adjustments granted after 1997 must be approved by the Barnstable County Retirement Board and are borne by Notes to Financial Statements Fiscal Years Ended June 30, 2012 and 2011 Wannacomet Water Company 24 Financial Statements the System. The System issues a publicly available, unaudited, financial report in accordance with guidelines established by the Commonwealth of Massachusetts’ Public Employee Retirement Administration Commission (PERAC). That report may be obtained by contacting the System located at 99 Willow Street, Yarmouthport, Massachusetts, 02675. Funding Policy - Plan members are required to contribute to the System at rates ranging from 5% to 11% of annual covered compensation. The Water Company is required to pay into the System their share of the system- wide actuarial determined contribution that is apportioned among the employers based on active current payroll. Administrative expenses are funded through investment earnings. Chapter 32 of the MGL governs the contributions of plan members and the Water Company. The Water Company’s contributions to the System for the fiscal year ended June 30, 2012, 2011 and 2010 totaled $174,532 $189,676, and $173,899, respectively, which equaled its required contributions for each fiscal year. The schedule of funding progress, presented as required supplementary information, following the notes to the financial statements, presents multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liability for benefits. Additionally, the schedule of employer contributions, presented as required supplementary information, following the notes to the financial statements, presents multiyear trend information for required and actual contributions relating to the cost-sharing plan as a whole, of which the Water Company is one participating employer, as well as the Water Company’s proportionate share of the plan’s annual contributions. This information is designed to be helpful for understanding the scale of the information presented relative to the Water Company. NOTE 10 – POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS Plan Description – The Town of Nantucket administers a single-employer defined benefit healthcare plan (the plan), in which the Water Company participates. The plan provides lifetime healthcare for eligible retirees and their spouses through the Town’s health insurance plan, which covers both active and retired members, including the Town’s school teachers. Chapter 32B of the MGL assigns authority to establish and amend benefit provisions of the plan. Benefit provisions are negotiated between the Water Company and the unions representing the Water Company employees and are renegotiated each bargaining period. The plan does not issue a publicly available financial report. Funding Policy – Contribution requirements are also negotiated between the Water Company and union representatives. The required contribution is based on a pay-as-you-go financing requirement. The Water Company contributes 80% of the cost of current-year premiums for eligible retired plan members and their spouses. Plan members receiving benefits contribute the remaining 20% of their premium costs. For fiscal year 2012, the Water Company contributed approximately $41,000 to the plan. Annual OPEB Cost and Net OPEB Obligation – The Water Company’s annual other postemployment benefit (OPEB) cost (expense) is calculated based on the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with the parameters of GASB Statement 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 (or funding excess) over a period not to exceed thirty years. Notes to Financial Statements Fiscal Years Ended June 30, 2012 and 2011 Wannacomet Water Company 25 Financial Statements Annual Required Contribution………………………………… $ 95,712 Interest on net OPEB obligation……………………………… 16,400 Adjustment to the ARC………………………………………… (12,000) Annual OPEB cost (expense)……………………………… 100,112 Contributions made……………………………………………… (40,544) Increase in net OPEB obligation……………………………… 59,568 Net OPEB obligation - beginning of year……………………… 328,208 Net OPEB obligation - end of year…………………………… $ 387,776 The Water Company’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for fiscal year 2012 was as follows: Fiscal Year Annual Annual OPEB Net OPEB Ended OPEB Cost Cost Contributed Obligation 6/30/2012 $ 100,112 40% $ 387,776 6/30/2011 96,415 42% 328,208 6/30/2010 177,769 23% 267,002 Funded Status and Funding Progress – As of July 1, 2010, the most recent actuarial valuation date, the actuarial accrued liability for benefits totaled approximately $1,312,813, all of which was unfunded. Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, presents multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. Actuarial Methods and Assumptions – Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. In the July 1, 2010, actuarial valuation, actuarial liabilities were determined using the projected unit credit cost method. The actuarial assumptions included a 5% investment return assumption, which is based on the expected yield on the assets of the Water Company, calculated based on the funded level of the plan at the valuation date, and an annual medical/drug cost trend rate of 10% decreasing by .75% for 6 years and by .50% for 1 year to an ultimate level of 5% per year. The UAAL is being amortized over a 30 year period, with amortization payments increasing at 4.50% per year. The remaining amortization period at June 30, 2012 is 26 years. Notes to Financial Statements Fiscal Years Ended June 30, 2012 and 2011 Wannacomet Water Company 26 Financial Statements NOTE 11 – COMMITMENTS   As of June 30, 2012 the Wannacomet Water Company has various contracts open for the North Pasture Water Tank and various other maintenance and rehabilitation projects totaling approximately $1.5 million NOTE 12 – CONTINGENCIES Various legal actions and claims are pending. Litigation is subject to many uncertainties, and the outcome of individual litigated matters is not always predictable. Although the amount of liability, if any, at June 30, 2012 and 2011, cannot be ascertained, management believes any resulting liability should not materially affect the Water Company’s financial position at June 30, 2012 and 2011. NOTE 13 – IMPLEMENTATION OF NEW GASB PRONOUNCEMENTS During fiscal year 2012, the Water Company has implemented the following GASB pronouncements: • GASB Statement #62, Codification of Accounting and Financial Reporting Guidance Contained in Pre- November 30, 1989 FASB and AICPA Pronouncements. The implementation of this pronouncement did not impact the financial statements. • GASB Statement #64, Derivative Instruments: Application of Hedge Accounting Termination Provisions, an amendment of GASB Statement No. 53. The implementation of this pronouncement did not impact the financial statements. Future Implementation of GASB Pronouncements: • The GASB issued Statement #60, Accounting and Financial Reporting for Service Concession Arrangements, which is required to be implemented in fiscal year 2013. • The GASB issued Statement #61, The Financial Reporting Entity: Omnibus, which is required to be implemented in fiscal year 2013. • The GASB issued Statement #63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position, which is required to be implemented in fiscal year 2013. • The GASB issued Statement #65, Items Previously Reported as Assets and Liabilities, which is required to be implemented in fiscal year 2013. • The GASB issued Statement #66, Technical Corrections – 2012, an amendment of GASB Statements No. 10 and No. 62, which is required to be implemented in fiscal year 2013. • The GASB issued Statement #67, Financial Reporting for Pension Plans – an amendment of GASB Statement No. 25, which is required to be implemented in fiscal year 2014. • The GASB issued Statement #68, Accounting and Financial Reporting for Pensions – an amendment of GASB Statement No. 27, which is required to be implemented in fiscal year 2015. Management is currently assessing the impact that the implementation of these pronouncements will have on the basic financial statements. Wannacomet Water Company 27 Financial Statements Required Supplementary Information Wannacomet Water Company 28 Required Supplementary Information Retirement System Schedules of Funding Progress and Employer Contributions The Retirement System Schedule of Funding Progress presents multiyear trend information about whether the actuarial value of planned assets is increasing or decreasing over time relative to the actuarial accrued liability for benefits. The Retirement System Schedule of Employer Contributions presents multiyear trend information for required and actual contributions relating to the cost-sharing plan as a whole, of which the Wannacomet Water Company is one participating employer, as well as the Water Company’s proportionate share of the plan’s annual contributions. Retirement System Schedules Actuarial UAAL as a Actuarial Accrued Unfunded Percentage Actuarial Value of Liability (AAL) AAL Funded Covered of Covered Valuation Assets Entry Age (UAAL) Ratio Payroll Payroll Date (A) (B) (B-A) (A/B) (C) ((B-A)/C) 1/1/2011 $ 651,063,981 $ 1,173,483,848 $ 522,419,867 55.5% $ 239,437,303 218.2% 1/1/2010 554,876,554 1,030,210,321 475,333,767 53.9% 234,374,075 202.8% 1/1/2009 520,089,855 966,564,614 446,474,759 53.8% 249,971,296 178.6% 1/1/2007 517,396,087 825,863,068 308,466,981 62.6% 226,391,633 136.3% 1/2/2006 465,637,984 765,747,723 300,109,739 60.8% 215,474,180 139.3% 1/1/2004 378,317,300 647,655,411 269,338,111 58.4% 190,614,004 141.3% 1/1/2002 362,911,896 553,531,966 190,620,070 65.6% 173,610,557 109.8% 1/1/2000 300,396,700 462,462,500 162,065,800 65.0% 152,293,100 106.4% 1/1/1998 235,247,660 404,215,695 168,968,035 58.2% 121,161,677 139.5% 1/1/1996 157,044,089 276,107,221 119,063,132 56.9% 108,456,079 109.8% 1/1/1993 97,194,645 226,430,792 129,236,147 42.9% 97,074,725 133.1% The Water Company's share of the UAAL, as of January 1, 2011, is approximately .40%. See notes to required supplementary information. BARNSTABLE COUNTY CONTRIBUTORY RETIREMENT SYSTEM SCHEDULE OF FUNDING PROGRESS Wannacomet Water Company 29 Required Supplementary Information (B/A) Plan Year Annual (A) (B) Water Company's Ended Required Actual Percentage Actual Percentage of System Wide December 31 Contributions Contributions Contributed Contributions Actual Contributions 2011 $ 43,807,158 $ 43,807,158 100% $ 174,532 0.40% 2010 41,327,508 41,327,508 100% 189,676 0.46% 2009 36,943,817 36,943,817 100% 173,899 0.47% 2008 34,360,912 34,360,912 100% 146,052 0.43% 2007 32,038,146 32,038,146 100% 118,681 0.37% 2006 31,044,132 31,044,132 100% 115,903 0.37% 2005 27,846,430 27,846,430 100% 109,122 0.39% The Company's Actual Contributions equaled 100% of its Required Contributions for each year presented. See notes to required supplementary information. BARNSTABLE COUNTY CONTRIBUTORY RETIREMENT SYSTEM SCHEDULE OF EMPLOYER CONTRIBUTIONS System Wide Wannacomet Water Company Wannacomet Water Company 30 Required Supplementary Information Wannacomet Water Company 31 Required Supplementary Information Other Postemployment Benefits Plan Schedules The Schedule of Funding progress compares, over time, the actuarial accrued liability for benefits with the actuarial value of accumulated plan assets. The Schedule of Employer Contributions presents multiyear trend information for required and actual contributions relating to the plan. The Schedule of Actuarial Methods and Assumptions presents factors that significantly affect the identification of trends in the amounts reported. Other Postemployment Schedules SCHEDULE OF FUNDING PROGRESS AND EMPLOYER CONTRIBUTIONS Actuarial UAAL as a Actuarial Accrued Unfunded Percentage Actuarial Value of Liability (AAL) AAL Funded Covered of Covered Valuation Assets Projected Unit Credit (UAAL) Ratio Payroll Payroll Date (A) (B) (B-A) (A/B) (C) ((B-A)/C) 7/1/2010 $ - $ 1,316,054 $ 1,316,054 0% $ N/A N/A 7/1/2009 - 2,032,106 2,032,106 0% N/A N/A 7/1/2007 - 823,700 823,700 0% N/A N/A Annual Actual Year Required Contributions Percentage Ended Contribution Made Contributed 6/30/2012 $ 95,712 $ 40,544 42% 6/30/2011 96,415 35,209 37% 6/30/2010 177,769 41,133 23% 6/30/2009 170,657 40,291 24% OTHER POSTEMPLOYMENT BENEFIT PLAN Schedule of Funding Progress Schedule of Employer Contributions Wannacomet Water Company 32 Required Supplementary Information ACTUARIAL METHODS AND ASSUMPTIONS Actuarial Methods: Valuation date…………………………………………… July 1, 2010 Actuarial cost method…………………………………… Projected Unit Credit Cost Method Amortization method……………………………………… Amortization payments increasing at 4.50% Remaining amortization period………………………… 30 years, open Actuarial Assumptions: Investment rate of return………………………………… 5.00%, pay-as-you-go scenario Medical/drug cost trend rate…………………………… 10% decreasing by .75% for 6 years and by .50% for 1 year to an ultimate level of 5% per year. Plan Membership, Town Wide: Current retirees, beneficiaries, and dependents……… 213 Current active members………………………………… 474 Total 687 See notes to required supplementary information. OTHER POSTEMPLOYMENT BENEFIT PLAN Wannacomet Water Company 33 Required Supplementary Information Notes to Required Supplementary Information Fiscal Years Ended June 30, 2012 and 2011 Wannacomet Water Company 34 Required Supplementary Information NOTE A – PENSION PLAN Notes to Required Supplementary Information The Wannacomet Water Company contributes to the Barnstable County Contributory Retirement System (“Retirement System”), a cost-sharing, multiple-employer defined benefit pension plan (“Plan”) administered by the Barnstable County Retirement Board. The Retirement System provides retirement, disability, and death benefits to members and beneficiaries. Chapter 32 of the MGL assigns authority to establish and amend benefit provisions of the Plan. Plan members are required to contribute to the Retirement System at rates ranging from 5% to 11% of annual covered compensation. The Water Company is required to pay into the Retirement System its share of the systemwide actuarially determined contribution which is apportioned among the employers based on active covered payroll. The schedule of funding progress, presented as required supplementary information, following the notes to the financial statements, presents multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liability for benefits. Additionally, the schedule of employer contributions, presented as required supplementary information, following the notes to the financial statements, presents multiyear trend information for required and actual contributions relating to the cost-sharing plan as a whole, of which the Water Company is one participating employer, as well as the Water Company’s proportionate share of the plans annual contributions. This information is designed to be helpful for understanding the scale of the information presented relative to the Water Company. The following actuarial methods and assumptions were used in the Retirement System’s most recent actuarial valuation: Actuarial Methods and Assumptions: Valuation Date…………………………………………………January 1, 2010 Actuarial Cost Method…………………………………………Entry Age Normal Cost Method Amortization Method…………………………………………Increasing at 4.0% per year after fiscal 2015. Early Retirement Incentives and remaining unfunded liability Asset Valuation Method………………………………………5-year smoothing of investment returns greater (less) than expected. Actuarial Assumptions: Investment rate of return……………………………………8.00% Projected salary increases…………………………………Varies by length of service with ultimate rates of 4.75% and 5.25% for Groups 1 and 4, respectively Cost of living adjustments………………………………… 3.0% for the first $12,000 of retirement income, increasing to $13,000 in fiscal 2012. Plan Membership: Retired participants and beneficiaries receiving benefits…………………………………… 2,422 Terminated participants entitled to a return of their employee contributions……………… 649 Terminated participants with a vested right to a deferred or immediate benefit………… 123 Active participants……………………………………………………………………………… 4,786 Total……………………………………………………………………………………………… 7,980 Remaining Amortization Period………………………………28 years from July 1, 2010 for 2002 and 2003 Notes to Required Supplementary Information Fiscal Years Ended June 30, 2012 and 2011 Wannacomet Water Company 35 Required Supplementary Information NOTE B – OTHER POSTEMPLOYMENT BENEFITS The Wannacomet Water Company participates in the Town’s healthcare plan. The Town administers a single- employer defined benefit healthcare plan (“the Retiree Health plan”). The plan provides lifetime healthcare for eligible retirees and their spouses through the Town’s health insurance plan, which covers both active and retired members, including teachers. The Water Company currently finances its other postemployment benefits (OPEB) on a pay-as-you-go basis. As a result, the funded ratio (actual value of assets expressed as a percentage of the actuarial accrued liability) is 0%. In accordance with Governmental Accounting Standards, the Water Company has recorded its OPEB cost equal to the actuarial determined annual required contribution (ARC) which includes the normal cost of providing benefits for the year and a component for the amortization of the total unfunded actuarial accrued liability of the plan. The Schedule of Funding Progress presents multiyear trend information which compares, over time, the actuarial accrued liability for benefits with the actuarial value of accumulated plan assets Projections of benefits for financial reporting purposes are based on the substantive plan and included the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit cost between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. The Schedule of Actuarial Methods and Assumptions presents factors that significantly affect the identification of trends in the amounts reported.