Loading...
Fiscal Years 2010 and 2009 Single Audit Wannacomet Water WANNACOMET WATER COMPANY REPORT ON EXAMINATION OF FINANCIAL STATEMENTS FISCAL YEARS ENDED JUNE 30, 2010 AND 2009 WANNACOMET WATER COMPANY REPORT ON EXAMINATION OF FINANCIAL STATEMENTS JUNE 30, 2010 AND 2009 TABLE OF CONTENTS Page Independent Auditors’ Report..........................................................................................................................................1 Management’s Discussion and Analysis.........................................................................................................................3 Financial Statements.......................................................................................................................................................8 Statement of Net Assets..............................................................................................................................................9 Statement of Revenues, Expenses and Changes in Fund Net Assets .....................................................................10 Statement of Cash Flows...........................................................................................................................................11 Notes to Financial Statements...................................................................................................................................12 Required Supplementary Information............................................................................................................................28 Retirement System Schedules...................................................................................................................................29 Retirement System Schedule of Funding Progress...............................................................................................30 Retirement System Schedule of Employer Contributions......................................................................................31 Other Postemployment Schedules ............................................................................................................................32 Other Postemployment Benefit Plan Funding Progress and Employer Contributions...........................................33 Other Postemployment Benefit Plan Actuarial Methods and Assumptions...........................................................34 Notes to Required Supplementary Information..........................................................................................................35 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, 2010 and 2009, as listed in the table of contents. These financial statements are the responsibility of 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 noted 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, 2010 and 2009, 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, 2010 and 2009, 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 February 28, 2011 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. Management’s discussion and analysis, located on the following pages, retirement system schedule of funding progress, retirement system schedule of employer contributions, other postemployment benefit plan schedule of funding progress and employer contributions and other postemployment benefit plan actuarial methods and 2 assumptions located after the notes to the financial statements, are not a required part of the financial statements but are supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it. February 28, 2011 Wannacomet Water Company 3 Basic Financial Statements Management’s Discussion and Analysis Wannacomet Water Company 4 Basic 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 financial activities for the fiscal years ended June 30, 2010 and 2009. 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 financial position is improving or deteriorating. The Statement of Revenue, Expense and Change in Fund Net Assets presents 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 2010 and 2009 • The total of assets exceeded liabilities (i.e., net assets) by $14.6 million and $14.5 million respectively. • Undesignated net assets for Wannacomet Water fund totaled $3 million and ($1.2) million respectively.. • Total debt totaled $21 million and $22 million respectively. Wannacomet Water Company 5 Basic Financial Statements Financial Analysis The following chart provides a summary of the Water Company’s financial data for fiscal year 2010, with comparative fiscal 2009 information. 2010 2009 Assets: Current assets……………………………………………$ 7,703,659 $ 11,849,744 Capital assets, not being depreciated………………… 12,034,616 9,355,935 Capital assets, net of accumulated depreciation…… 17,392,177 17,977,395 Total assets………………………………………… 37,130,452 39,183,074 Liabilities: Current liabilities (excluding debt)……………………… 880,938 2,193,098 Noncurrent liabilities (excluding debt)………………… 390,457 260,413 Current debt……………………………………………… 1,623,779 3,015,000 Noncurrent debt………………………………………… 19,640,000 19,220,000 Total liabilities……………………………………… 22,535,174 24,688,511 Net Assets: Invested in capital assets net of related debt………… 11,570,419 11,726,133 Undesignated…………………………………………… 3,024,859 2,768,430 Total net assets……………………………………$14,595,278 $14,494,563 Program revenues: Charges for services……………………………………$ 3,529,897 $ 4,087,641 Operating grants and contributions…………………… 173,706 365,736 Total revenues……………………………………… 3,703,603 4,453,377 Expenses: Depreciation……………………………………………… 699,894 710,027 Supply and pumping…………………………………… 157,533 576,929 Water treatment………………………………………… 32,958 25,274 Distribution……………………………………………… 138,952 127,715 Meter reading…………………………………………… 14,051 13,369 Maintenance……………………………………………… 152,628 229,095 Insurance………………………………………………… 56,820 60,172 Administrative and general…………………………… 1,199,359 1,209,586 Pension benefits………………………………………… 173,899 146,051 Interest expense………………………………………… 826,680 775,136 Employee benefits……………………………………… 129,323 149,109 Total expenses…………………………………… 3,582,097 4,022,463 Transfers…………………………………………………… (20,791) - Change in net assets…………………………………… $ 100,715 $ 430,914 There was a net increase of $101,000 in net assets related with the Wannacomet Water Company’s activities. Noncurrent liabilities include an accrued liability for other postemployment benefits in the amount of $267,000 in fiscal year 2010. The Water Company initially implemented GASB Statement No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pension (OPEB) in fiscal year 2009. Wannacomet Water Company 6 Basic Financial Statements Capital Asset and Debt Administration Capital Assets Wannacomet Water Company’s year end capital assets totaled $29.4 million which represents a net increase of $2.1 million from the prior year. Major current additions included various building and improvement projects, infrastructure additions, and furniture and fixtures all totaling approximately $2.8 million. Depreciation of approximately $699,900 was recorded in fiscal year 2010. Long-term Debt At the end of the fiscal years 2010 and 2009, the Wannacomet Water Company had total bonded debt outstanding of $21 million and $22 million, respectively. Of this amount, $21 million and $20.4 million are outstanding long-term debt. During fiscal year 2009 Wannacomet Water had $1.8 million in short-term notes which were paid off in fiscal year 2010. Wannacomet Water did not issue any short-term notes in during fiscal year 2010. This amount is fully supported by the revenue of the Wannacomet Water Company, and does not rely upon a general fund subsidy. 2010 2009 Current portion of long-term…………$ 1,380,000 $ 1,215,000 Noncurrent portion of long-term…… 19,640,000 19,220,000 Total…………………………………$ 21,020,000 $ 20,435,000 Please refer to the notes to the financial statements for further discussion of the major capital assets and debt activity. 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 7 Basic Financial Statements This page intentionally left blank. Wannacomet Water Company 8 Basic Financial Statements Financial Statements 2010 2009 ASSETS CURRENT: Cash and cash equivalents………………………………$ 6,558,082 $ 11,239,545 Receivables, net of allowance for uncollectibles: User fees……………………………………………… 732,486 509,962 Inventory…………………………………………………… 99,965 99,819 Other assets……………………………………………… 5,273 - Due from other funds……………………………………… 307,853 418 Total current assets……………………………… 7,703,659 11,849,744 NONCURRENT: Capital assets, not being depreciated…………………… 12,034,616 9,355,935 Capital assets, net of accumulated depreciation……… 17,392,177 17,977,395 Total noncurrent assets…………………………… 29,426,793 27,333,330 TOTAL ASSETS……………………………………………… 37,130,452 39,183,074 LIABILITIES CURRENT: Warrants payable………………………………………… 411,284 1,678,479 Accrued liabilities………………………………………… 10,996 9,609 Accrued payroll…………………………………………… 30,096 25,191 Accrued interest…………………………………………… 302,805 293,628 Due to other funds………………………………………… 94,893 153,679 Compensated absences………………………………… 30,864 32,512 Notes payable……………………………………………… - 1,800,000 Bonds payable……………………………………………… 1,623,779 1,215,000 Total current liabilities……………………………… 2,504,717 5,208,098 NONCURRENT: Compensated absences………………………………… 123,455 130,047 Other postemployment benefit…………………………… 267,002 130,366 Bonds payable……………………………………………… 19,640,000 19,220,000 Total noncurrent liabilities………………………… 20,030,457 19,480,413 TOTAL LIABILITIES…………………………………………… 22,535,174 24,688,511 NET ASSETS Invested in capital assets, net of related debt……………… 11,570,419 11,726,133 Unrestricted: Undesignated……………………………………………… 3,024,859 2,768,430 TOTAL NET ASSETS…………………………………………$ 14,595,278 $ 14,494,563 See notes to financial statements. JUNE 30, 2010 AND 2009 STATEMENT OF NET ASSETS WANNACOMET WATER COMPANY Wannacomet Water Company 9 Basic Financial Statements 2010 2009 OPERATING REVENUES: Sales of water…………………………………………………$ 3,371,877 $ 3,876,403 Reconnection fees…………………………………………… 14,906 12,000 Other………………………………………………………… 278,753 405,901 TOTAL OPERATING REVENUES …………………… 3,665,536 4,294,304 OPERATING EXPENSES: Depreciation………………………………………………… 699,894 710,027 Supply and pumping………………………………………… 157,533 576,929 Water treatment……………………………………………… 32,958 25,274 Distribution…………………………………………………… 138,952 127,715 Meter reading………………………………………………… 14,051 13,369 Maintenance………………………………………………… 152,628 229,095 Insurance……………………………………………………… 56,820 60,172 Administrative and general………………………………… 1,199,359 1,209,586 Pension benefits……………………………………………… 173,899 146,051 Employee benefits…………………………………………… 129,323 149,109 TOTAL OPERATING EXPENSES……………………… 2,755,417 3,247,327 OPERATING INCOME (LOSS)………………………… 910,119 1,046,977 NONOPERATING REVENUES (EXPENSES): Investment income…………………………………………… 38,067 159,073 Interest expense……………………………………………… (826,680) (775,136) TOTAL NONOPERATING REVENUES (EXPENSES), NET……………………… (788,613) (616,063) INCOME (LOSS) BEFORE TRANSFERS AND CAPITAL CONTRIBUTIONS………………...……… 121,506 430,914 Transfers in……………………………………………………… 64,074 - Transfers out…………………………………………………… (84,865) - TOTAL TRANSFERS……………………………………… (20,791) - CHANGE IN NET ASSETS………………………………… 100,715 430,914 NET ASSETS AT BEGINNING OF YEAR…………………… 14,494,563 14,063,649 NET ASSETS AT END OF YEAR…………………………… $ 14,595,278 $ 14,494,563 See notes to financial statements. FISCAL YEAR ENDED JUNE 30, 2010 AND 2009 STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS WANNACOMET WATER COMPANY Wannacomet Water Company 10 Basic Financial Statements 2010 2009 CASH FLOWS FROM OPERATING ACTIVITIES: Receipts from customers and users………………………………………………………… $ 3,443,012 $ 4,219,370 Payments to vendors…………………………………………………………………………… (709,168) (1,101,656) Payments to employees………………………………………………………………………… (1,155,027) (1,088,117) Payments for interfund services used………………………………………………………… (129,323) (149,109) NET CASH FROM OPERATING ACTIVITIES………………………………………………… 1,449,494 1,880,488 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES: Transfers in……………………………………………………………………………………… 64,074 - Transfers out…………………………………………………………………………………… (84,865) - Advances to other funds……………………………………………………………………… (366,221) (1,030,308) NET CASH FROM NONCAPITAL FINANCING ACTIVITIES………………………………… (387,012) (1,030,308) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Proceeds from the issuance of bonds and notes…………………………………………… 1,800,000 4,615,000 Premium from the issuance of bonds and notes…………………………………………… 243,779 - Acquisition and construction of capital assets……………………………………………… (3,993,288) (2,782,514) Principal payments on bonds and notes……………………………………………………… (3,015,000) (1,255,000) Interest expense………………………………………………………………………………… (817,503) (742,430) NET CASH FROM CAPITAL AND RELATED FINANCING ACTIVITIES…………………… (5,782,012) (164,944) CASH FLOWS FROM INVESTING ACTIVITIES: Investment income……………………………………………………………………………… 38,067 159,073 NET CASH FROM INVESTING ACTIVITIES…………………………………………………… 38,067 159,073 NET CHANGE IN CASH AND CASH EQUIVALENTS………………………………………… (4,681,463) 844,309 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR……………………………… 11,239,545 10,395,236 CASH AND CASH EQUIVALENTS AT END OF YEAR……………………………………… $ 6,558,082 $ 11,239,545 RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH FROM OPERATING ACTIVITIES: Operating income (loss)…………………………………………………………………………$ 910,119 $ 1,046,977 Adjustments to reconcile operating income (loss) to net cash from operating activities: Depreciation………………………………………………………………………………… 699,894 710,027 User fees………………………………………………………………………………… (222,524) (74,934) Inventory………………………………………………………………………………… (146) 15,696 Other assets……………………………………………………………………………… (5,273) - Warrants payable………………………………………………………………………… (67,264) 37,029 Accrued liabilities………………………………………………………………………… 1,387 294 Accrued payroll…………………………………………………………………………… 4,905 5,274 Accrued compensated absences……………………………………………………… (8,240) 9,759 Other postemployment benefit………………………………………………………… 136,636 130,366 Total adjustments…………………………………………………………………… 539,375 833,511 NET CASH FROM OPERATING ACTIVITIES………………………………………………… $ 1,449,494 $ 1,880,488 See notes to financial statements. FISCAL YEAR ENDED JUNE 30, 2010 AND 2009 STATEMENT OF CASH FLOWS WANNACOMET WATER COMPANY Wannacomet Water Company 11 Basic Financial Statements Notes to Financial Statements Fiscal Years Ended June 30, 2010 and 2009 Wannacomet Water Company 12 Basic 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 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. For enterprise fund accounts, all applicable Financial Accounting Standards Board (FASB) pronouncements issued on or prior to November 30, 1989, are applied, unless those pronouncements conflict with or contradict GASB pronouncements. 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. Notes to Financial Statements Fiscal Years Ended June 30, 2010 and 2009 Wannacomet Water Company 13 Basic Financial Statements 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. 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., roads, water mains, sewer mains, 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 Machinary 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. Notes to Financial Statements Fiscal Years Ended June 30, 2010 and 2009 Wannacomet Water Company 14 Basic Financial Statements H. Net 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. 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, 2010 and 2009 was $3,933 and $17,693, 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. Notes to Financial Statements Fiscal Years Ended June 30, 2010 and 2009 Wannacomet Water Company 15 Basic Financial Statements 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, 2010 and 2009, the carrying amount of deposits totaled $5,700,287 and $8,853,855 and the bank balance totaled $5,620,208 and $11,279,315 respectively. Of the bank balance, $318,149 and $533,400 were covered by the Federal Depositors Insurance Company (“FDIC”), $5,302,059 and $10,745,915 were collateralized, therefore Wannacomet Water Company did not have funds that were exposed to custodial credit risk because of being uninsured or uncollateralized. Investments As of June 30, 2010, the Wannacomet Water Company had the following investments: Fair Value Other Investments: MMDT…………………………………………………………$ 857,795 As of June 30, 2009, the Wannacomet Water Company had the following investments: Maturity Under Fair Value 1 Year Investment Type: Repurchase Agreements………………………………… $ 1,531,643 $ 1,531,643 Other Investments: MMDT………………………………………………………… 854,047 Total Investments.......................................................... $ 2,385,690 The Wannacomet Water Company participates in MMDT, which maintains a cash portfolio and a short-term bond fund with combined average maturities of approximately 3 months. Credit ratings associated with the Water Company’s investment in MMDT ranged from A1/P1 to unrated; with approximately 98% rated A1/P1 and approximately 2% rated A2/P2. 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. 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. Notes to Financial Statements Fiscal Years Ended June 30, 2010 and 2009 Wannacomet Water Company 16 Basic Financial Statements Concentration of Credit Risk There are no limits on the amount the Water Company may invest in any one issuer. 100% of the Water Company’s investments in fiscal year 2010 were in MMDT. More than 5% of the Water Company’s investments are in the following securities for 2009: Percentage of Issuer Repurchase Agreements…………………………………… 64% MMDT………………………………………………………… 36% Total Investments NOTE 3 – RECEIVABLES At June 30, 2010 and 2009, receivables for the Water Company consist of the following: 2010 Receivables: Allowance Gross for Net Amount Uncollectibles Amount Receivables: Charges for services……………………………………$742,486 $ (10,000) $ 732,486 2009 Receivables: Allowance Gross for Net Amount Uncollectibles Amount Receivables: Charges for services……………………………………$519,962 $ (10,000) $ 509,962 Notes to Financial Statements Fiscal Years Ended June 30, 2010 and 2009 Wannacomet Water Company 17 Basic Financial Statements NOTE 4 – CAPITAL ASSETS Capital asset activity for the Wannacomet Water Company for the fiscal year ended June 30, 2010, was as follows: 2009 2010 Beginning Ending Balance Increases Decreases Balance Capital assets not being depreciated: Land…………………………………………………………$ 3,000,000 $ - $ - $ 3,000,000 Construction in progress………………………………… 6,355,935 2,703,231 (24,638) 9,034,528 Total capital assets not being depreciated………… 9,355,935 2,703,231 (24,638) 12,034,528 Capital assets being depreciated: Infrastructure……………………………………………… 22,128,968 112,971 (1,656) 22,240,283 Buildings…………………………………………………… 846,186 - - 846,186 Vehicles…………………………………………………… 291,145 - (23,148) 267,997 Machinery and equipment………………………………… 332,967 - - 332,967 Furniture, fixtures and computer equipment…………… 422,002 1,793 - 423,795 Total capital assets being depreciated……………… 24,021,268 114,764 (24,804) 24,111,228 Less accumulated depreciation……………………………… (6,043,873) (699,894) 24,804 (6,718,963) Total capital assets being depreciated, net………………… 17,977,395 (585,130) - 17,392,265 Total business-type activities, capital assets…………………$ 27,333,330 $ 2,118,101 $ (24,638) $ 29,426,793 Notes to Financial Statements Fiscal Years Ended June 30, 2010 and 2009 Wannacomet Water Company 18 Basic Financial Statements Capital asset activity for the Wannacomet Water Company for the fiscal year ended June 30, 2009, was as follows: 2008 2009 Beginning Ending Balance Increases Decreases Balance Capital assets not being depreciated: Land…………………………………………………………$ 3,000,000 $ - $ - $ 3,000,000 Construction in progress………………………………… 2,303,935 4,113,687 (61,687) 6,355,935 Total capital assets not being depreciated………… 5,303,935 4,113,687 (61,687) 9,355,935 Capital assets being depreciated: Infrastructure……………………………………………… 21,979,905 149,063 - 22,128,968 Buildings…………………………………………………… 800,278 45,908 - 846,186 Vehicles…………………………………………………… 277,281 13,864 - 291,145 Machinery and equipment………………………………… 331,188 1,779 - 332,967 Furniture, fixtures and computer equipment…………… 391,223 30,779 - 422,002 Total capital assets being depreciated……………… 23,779,875 241,393 - 24,021,268 Less accumulated depreciation……………………………… (5,333,846) (710,027) - (6,043,873) Total capital assets being depreciated, net………………… 18,446,029 (468,634) - 17,977,395 Total business-type activities, capital assets…………………$ 23,749,964 $ 3,645,053 $ (61,687) $ 27,333,330 NOTE 5 – INTERFUND RECEIVABLES, PAYABLES AND TRANSFERS Interfund receivables and payables at June 30, 2010 are summarized as follows: Siasconset Sewer Wannacomet Water Enterprise Water Internal Service Company Fund Company Fund Total Town General Fund……………… $ - $ - $ 307,853 $ - $ 307,853 Wannacomet Water Company…… 410 88,316 - 6,167 94,893 Total……………………………$ 410 $ 88,316 $ 307,853 $ 6,167 $ 402,746 Due To: Due From: Notes to Financial Statements Fiscal Years Ended June 30, 2010 and 2009 Wannacomet Water Company 19 Basic Financial Statements Interfund receivables and payables at June 30, 2009 are summarized as follows: Siasconset Sewer Wannacomet Water Enterprise Water Internal Service Company Fund Company Fund Total Town General Fund……………… $ - $ - $ 418 $ - $ 418 Wannacomet Water Company………8,826 138,685 - 6,167 153,678 Total……………………………$ 8,826 $ 138,685 $ 418 $ 6,167 $ 154,096 Due To: Due From: Interfund transfers for the fiscal year ended June 20, 2010 are summarized as follows: Wannacomet General Water Fund Company Total General Fund…………………………$- $ 64,074 $ 64,074 (1) Wannacomet Water Company……… 84,865 - 84,865 (2) Total……………………………………$ 84,865 $ 64,074 $ 148,939 (1) A reserve fund transfer from the Town's General Fund to the Water Company. (2) Transfer of indirect costs to the Town's General Fund. Transfers In: 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 or tax anticipation notes (RANS or TANS). • 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, 2010, are as follows: Balance at Balance at Rate June 30, Renewed/ Retired/ June 30, Type Purpose (%) Due Date 2009 Issued Redeemed 2010 BAN Water……………………………………………… 1.50 2/26/2010 $ 1,800,000 $ - $ 1,800,000 $ - Notes to Financial Statements Fiscal Years Ended June 30, 2010 and 2009 Wannacomet Water Company 20 Basic Financial Statements Details related to the short-term debt activity for the fiscal year ended June 30, 2009, are as follows: Balance at Balance at Rate June 30, Renewed/ Retired/ June 30, Type Purpose (%) Due Date 2008 Issued Redeemed 2009 BAN Water……………………………………………… 1.50 2/26/2010 $ - $ 1,800,000 $ - $ 1,800,000 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, 2010, and the debt service requirements are as follows: Interest Outstanding Outstanding Rate at June 30, at June 30, Project (%) 2009 Issued Redeemed 2010 Water Projects…………………………………………… 4.00 - 5.00 $ 685,000 $ - $ 60,000 $ 625,000 Water Meters………………………………………………4.00 - 4.25 300,000 - 150,000 150,000 Water……...……………………………………………… 2.50 - 4.13 400,000 - 25,000 375,000 Water………………………………………………………2.50 - 4.13 400,000 - 25,000 375,000 Land Acquisition……………………………………………2.50 - 4.13 2,400,000 - 150,000 2,250,000 Water………………………………………………………3.75 - 5.00 2,685,000 - 105,000 2,580,000 Water………………………………………………………3.75 - 5.00 560,000 - 70,000 490,000 Water………………………………………………………3.75 - 5.00 455,000 - 20,000 435,000 Garage and Maintenance Facility………………………3.75 - 5.00 810,000 - 30,000 780,000 Rehab and Administration Building………………………3.00-5.00 710,000 - 40,000 670,000 Source Well and Pump……………………………………3.00-5.00 1,235,000 - 65,000 1,170,000 Water Storage Tank………………………………………3.00-5.00 4,750,000 - 250,000 4,500,000 Water Mains……………………………………………… 3.00-5.00 1,185,000 - 65,000 1,120,000 Water System Distribution Improvements………………3.00-5.00 950,000 - 50,000 900,000 Water Mains……………..…………………………………3.00-5.00 95,000 - 5,000 90,000 Water Tank…………………………………………………3.00-5.00 2,815,000 - 105,000 2,710,000 Water Meter Battery and Distribution System…………2.50-4.00 - 1,800,000 - 1,800,000 Total Bonds Payable…………………………………… $ 20,435,000 $ 1,800,000 $ 1,215,000 $ 21,020,000 Unamortized Premiums on Bonds and Notes………… - 243,779 - 243,779 Total……………………………………………………… 20,435,000 2,043,779 1,215,000 21,263,779 Notes to Financial Statements Fiscal Years Ended June 30, 2010 and 2009 Wannacomet Water Company 21 Basic Financial Statements Debt service requirements for principal and interest for Water Company bonds payable in future fiscal years as of June 30, 2010 are as follows: Fiscal Year Principal Interest Total 2011………………$ 1,380,000 $ 824,001 $ 2,204,001 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………………$ 21,020,000 $ 7,741,418 $ 28,761,418 Details related to the outstanding indebtedness at June 30, 2009, and the debt service requirements are as follows: Interest Outstanding Outstanding Rate at June 30, at June 30, Project (%) 2008 Issued Redeemed 2009 Water Projects…………………………………………… 4.00 - 5.00 $ 745,000 $ - $ 60,000 $ 685,000 Water Meters………………………………………………4.00 - 4.25 450,000 - 150,000 300,000 Current Refunding of Dec. 1991 Water…………………2.25 - 5.00 150,000 - 150,000 - Water……...……………………………………………… 2.50 - 4.13 425,000 - 25,000 400,000 Water……...……………………………………………… 2.50 - 4.13 425,000 - 25,000 400,000 Land Acquisition……………………………………………2.50 - 4.13 2,550,000 - 150,000 2,400,000 Water……...……………………………………………… 3.75 - 5.00 2,795,000 - 110,000 2,685,000 Water……...……………………………………………… 3.75 - 5.00 625,000 - 65,000 560,000 Water……...……………………………………………… 3.75 - 5.00 470,000 - 15,000 455,000 Garage and Maintenance Facility………………………3.75 - 5.00 840,000 - 30,000 810,000 Rehab and Administration Building………………………3.00-5.00 750,000 - 40,000 710,000 Source Well and Pump……………………………………3.00-5.00 1,300,000 - 65,000 1,235,000 Water Storage Tank………………………………………3.00-5.00 5,000,000 - 250,000 4,750,000 Water Mains……………………………………………… 3.00-5.00 1,250,000 - 65,000 1,185,000 Water System Distribution Improvements………………3.00-5.00 1,000,000 - 50,000 950,000 Water Mains………………….……………………………3.00-5.00 100,000 - 5,000 95,000 Water Tank…………………………………………………3.00-5.00 - 2,815,000 - 2,815,000 Total Bonds Payable…………………………………… $ 18,875,000 $ 2,815,000 $ 1,255,000 $ 20,435,000 Notes to Financial Statements Fiscal Years Ended June 30, 2010 and 2009 Wannacomet Water Company 22 Basic Financial Statements Debt service requirements for principal and interest for Water Company bonds and notes payable in future fiscal years as of June 30, 2009 are as follows: Fiscal Year Principal Interest Total 2010………………$ 1,215,000 $ 799,279 $ 2,014,279 2011……………… 1,240,000 748,495 1,988,495 2012……………… 1,095,000 704,676 1,799,676 2013……………… 1,115,000 665,686 1,780,686 2014……………… 1,115,000 626,686 1,741,686 2015……………… 1,130,000 575,512 1,705,512 2016……………… 1,160,000 531,925 1,691,925 2017……………… 1,085,000 491,617 1,576,617 2018……………… 1,070,000 453,850 1,523,850 2019……………… 1,085,000 413,877 1,498,877 2020……………… 1,090,000 370,796 1,460,796 2021……………… 1,145,000 325,702 1,470,702 2022……………… 1,080,000 279,561 1,359,561 2023……………… 1,110,000 235,453 1,345,453 2024……………… 1,135,000 189,910 1,324,910 2025……………… 1,150,000 142,327 1,292,327 2026……………… 955,000 97,545 1,052,545 2027……………… 645,000 63,238 708,238 2028……………… 620,000 35,602 655,602 2029……………… 195,000 8,776 203,776 Total………………$ 20,435,000 $ 7,760,513 $ 28,195,513 At June 30, 2010 and 2009, the Water Company had the following authorized and unissued debt: Purpose Amount Wannacomet Water Company………………………… $ 2,300,000 Notes to Financial Statements Fiscal Years Ended June 30, 2010 and 2009 Wannacomet Water Company 23 Basic Financial Statements Changes in Long-term Liabilities During the fiscal year ended June 30, 2010, the following changes occurred in long-term liabilities: Balance at Balance at June 30, June 30, Current 2009 Additions Reductions 2010 Portion Long-Term Bonds and Notes………… $ 20,435,000 $ 1,800,000 $ (1,215,000) $ 21,020,000 $ 1,380,000 Compensated Absences……………… 162,559 24,272 (32,512) 154,319 30,864 Other Postemployment Benefits……… 130,366 177,662 (41,026) 267,002 - Total Long Term Liabilities…………… $ 20,727,925 $ 2,001,934 $ (1,288,538) $ 21,441,321 $ 1,410,864 During the fiscal year ended June 30, 2009, the following changes occurred in long-term liabilities: Balance at Balance at June 30, June 30, Current 2008 Additions Reductions 2009 Portion Long-Term Bonds and Notes………… $ 18,875,000 $ 2,815,000 $ (1,255,000) $ 20,435,000 $ 1,215,000 Compensated Absences……………… 115,053 150,992 (103,486) 162,559 32,512 Other Postemployment Benefits……… - 130,366 - 130,366 - Total Long Term Liabilities…………… $ 18,990,053 $ 3,096,358 $ (1,358,486) $ 20,727,925 $ 1,247,512 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, 2010 and 2009 Wannacomet Water Company 24 Basic 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, 2008, 2009 and 2010 totaled $118,681, $146,052, 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 Fiscal year 2009 was the initial year that the Wannacomet Water Company has implemented GASB Statement 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions (GASB 45). As allowed by GASB 45, the Water Company has established the net Other Postemployment Benefits (OPEB) obligation at zero at the beginning of the transition year and has applied the measurement and recognition requirements of GASB 45 on a prospective basis plan, which covers both active and retired members. 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 Retiree Health 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 2010, the Water Company contributed approximately $41,133 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, 2010 and 2009 Wannacomet Water Company 25 Basic Financial Statements Annual Required Contribution $ 169,231 Interest on net OPEB obligation……………………………… 8,538 Annual OPEB cost (expense)……………………………… 177,769 Contributions made……………………………………………… (41,133) Increase in net OPEB obligation……………………………… 136,636 Net OPEB obligation - beginning of year……………………… 130,366 Net OPEB obligation - end of year…………………………… $ 267,002 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 2010 was as follows: Fiscal Year Annual Annual OPEB Net OPEB Ended OPEB Cost Cost Contributed Obligation 6/30/2009 $ 170,657 24% $ 130,366 6/30/2010 177,769 23% 267,002 Funded Status and Funding Progress – As of July 1, 2009, the most recent actuarial valuation date, the actuarial accrued liability for benefits totaled approximately $2,032,000, 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, 2009, actuarial valuation, actuarial liabilities were determined using the projected unit credit cost method. The actuarial assumptions included a 4% 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 5-9%. 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, 2010 is 28 years. Notes to Financial Statements Fiscal Years Ended June 30, 2010 and 2009 Wannacomet Water Company 26 Basic Financial Statements NOTE 11 – COMMITMENTS   The Wannacomet Water Company has contracts with C.B. &I. for the North Pasture Water Tank, and Siasconset Water Tank. As of June 30, 2010, the open contract totaled approximately $621,480. NOTE 12 – CONTINGENCIES The Wannacomet Water Company participates in a number of federal award programs. Although the grant programs have been audited in accordance with the provisions of the Single Audit Act Amendments of 1996 through June 30, 2010 and 2009, these programs are still subject to financial and compliance audits. The amount, if any, of expenditures which may be disallowed by the granting agencies cannot be determined at this time, although it is expected such amounts, if any, to be immaterial. 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, 2010 and 2009, cannot be ascertained, management believes any resulting liability should not materially affect the Water Company’s financial position at June 30, 2010 and 2009. NOTE 13 – IMPLEMENTATION OF NEW GASB PRONOUNCEMENTS During fiscal year 2010, the Water Company has implemented the following GASB pronouncements: • The GASB issued Statement #57, OPEB Measurements by Agent Employers and Agent Multiple- Employer Plans. The standards in this statement permits an agent employer that has an individual employer OPEB plan with fewer than 100 members to use an alternative measurement method to produce actuarially based information for purposes of financial reporting, regardless of the number of total plan members in the agent multiple-employer OPEB plan in which it participates. Management elected to implement this standard early and this standard did not impact the basic financial statements. • The GASB issued Statement #58, Accounting and Financial Reporting for Chapter 9 Bankruptcies. The standards in this statement provide guidance for bankrupt state and local governments by establishing requirements for recognizing and measuring the effects of the bankruptcy process on assets and liabilities and for classifying changes in those items and related costs. Management elected to implement this standard early and this standard did not impact the basic financial statements. Future Implementation of GASB Pronouncements • The GASB issued Statement #54, Fund Balance Reporting and Governmental Fund Type Definitions, which is required to be implemented in fiscal year 2011. The implementation of this GASB will impact Nantucket Memorial Airport’s financial statements, as it changes fund balance components into Nonspendable; Restricted; Committed; Assigned; and Unassigned. • The GASB issued Statement #59, Financial Instruments Omnibus, which is required to be implemented in fiscal year 2011. Management is assessing the impact this pronouncement will have on the basic financial statements. • The GASB issued Statement #60, Accounting and Financial Reporting for Service Concession Arrangements, which is required to be implemented in fiscal year 2013. Management is assessing the impact this pronouncement will have on the basic financial statements. Notes to Financial Statements Fiscal Years Ended June 30, 2010 and 2009 Wannacomet Water Company 27 Basic Financial Statements • The GASB issued Statement #61, The Financial Reporting Entity: Omnibus, which is required to be implemented in fiscal year 2013. Management is assessing the impact this pronouncement will have on the basic financial statements. • The GASB issued Statement #62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements, which is required to be implemented in fiscal year 2013. Management is assessing the impact this pronouncement will have on the basic financial statements. Wannacomet Water Company 28 Basic Financial Statements Required Supplementary Information Wannacomet Water Company 29 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) 1/1/1993 $ 97,194,645 $ 226,430,792 $ 129,236,147 42.9% $ 97,074,725 133.1% 1/1/1996 157,044,089 276,107,221 119,063,132 56.9% 108,456,079 109.8% 1/1/1998 235,247,660 404,215,695 168,968,035 58.2% 121,161,677 139.5% 1/1/2000 300,396,700 462,462,500 162,065,800 65.0% 152,293,100 106.4% 1/1/2002 362,911,896 553,531,966 190,620,070 65.6% 173,610,557 109.8% 1/1/2004 378,317,300 647,655,411 269,338,111 58.4% 190,614,004 141.3% 1/2/2006 465,637,984 765,747,723 300,109,739 60.8% 215,474,180 139.3% 1/1/2007 517,396,087 825,863,068 308,466,981 62.6% 226,391,633 136.3% 1/1/2009 520,089,855 966,564,614 446,474,759 53.8% 249,971,296 178.6% The Water Company's share of the UAAL, as of January 1, 2009, is approximately 1.02%. See notes to required supplementary information. BARNSTABLE COUNTY CONTRIBUTORY RETIREMENT SYSTEM SCHEDULE OF FUNDING PROGRESS Wannacomet Water Company 30 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 2005 $ 27,846,430 $ 27,846,430 100% $ 121,102 0.43% 2006 31,044,132 31,044,132 100% 109,122 0.35% 2007 34,360,812 34,360,812 100% 115,903 0.34% 2008 39,899,322 39,899,322 100% 118,681 0.30% 2009 43,893,051 43,893,051 100% 146,052 0.33% 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 31 Required Supplementary Information Wannacomet Water Company 32 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 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) 7/1/2007 $ - $ 823,700 $ 823,700 0% $ N/A N/A 7/1/2009 - 2,032,106 2,032,106 0% N/A N/A Annual Actual Year Required Contributions Percentage Ended Contribution Made Contributed 6/30/2009 $ 170,657 $ 40,291 $ 24% 6/30/2010 169,231 41,133 23% OTHER POSTEMPLOYMENT BENEFIT PLAN Schedule of Funding Progress Schedule of Employer Contributions Wannacomet Water Company 33 Required Supplementary Information ACTUARIAL METHODS AND ASSUMPTIONS Actuarial Methods: Valuation date…………………………………………… July 1, 2009 Actuarial cost method…………………………………… Projected Unit Credit Cost Method Amortization method……………………………………… Amortization payments increasing at 4.50% Remaining amortization period………………………… 28 years as of July 1, 2009, closed. Actuarial Assumptions: Investment rate of return………………………………… 4.00%, pay-as-you-go scenario Medical/drug cost trend rate…………………………… 5-9% Plan Membership, Town Wide: Current retirees, beneficiaries, and dependents……… 228 Current active members………………………………… 682 Total 910 See notes to required supplementary information. OTHER POSTEMPLOYMENT BENEFIT PLAN Wannacomet Water Company 34 Required Supplementary Information Notes to Required Supplementary Information Fiscal Years Ended June 30, 2010 and 2009 Wannacomet Water Company 35 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, 2009 Actuarial Cost Method…………………………………………Entry Age Normal Cost Method Amortization Method…………………………………………Increasing at 4.50% per year after fiscal 2013. 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……………………………………4%, pay-as-you-go scenario Projected salary increases…………………………………5.00% Cost of living adjustments………………………………… 3.0% for the first $12,000 of retirement income Plan Membership: Retired participants and beneficiaries receiving benefits…………………………………… 2,368 Terminated participants entitled to a return of their employee contributions……………… 635 Terminated participants with a vested right to a deferred or immediate benefit………… 113 Active participants……………………………………………………………………………… 5,290 Total……………………………………………………………………………………………… 8,406 Remaining Amortization Period………………………………19 years from July 1, 2009 for 2002 and 2003 Notes to Required Supplementary Information Fiscal Years Ended June 30, 2010 and 2009 Wannacomet Water Company 36 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 Town 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 Town 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.