HomeMy WebLinkAboutNantucket County Financial Statements 2015 - FinalCOUNTY OF NANTUCKET, MASSACHUSETTS
Report on Examination of
Basic Financial Statements
and Additional Information
Year Ended June 30, 2015
Report on Internal Control
Over Financial Reporting and
On Compliance and Other Matters
Year Ended June 30, 2015
COUNTY OF NANTUCKET, MASSACHUSETTS
TABLE OF CONTENTS
YEAR ENDED JUNE 30, 2015
Page
INDEPENDENT AUDITORS' REPORT 1-2
MANAGEMENT’S DISCUSSION AND ANALYSIS 3-8
BASIC FINANCIAL STATEMENTS:
Government-Wide Financial Statements:
Statement of Net Position 9
Statement of Activities 10
Fund Financial Statements:
Balance Sheet – Governmental Funds 11
Reconciliation of the Governmental Funds Balance Sheet Total Fund Balances
to the Statement of Net Position 12
Statement of Revenues, Expenditures and Changes in Fund Balances –
Governmental Funds 13
Reconciliation of the Statement of Revenues, Expenditures and Changes in
Fund Balances of Governmental Funds to the Statement of Activities 14
Notes to Basic Financial Statements 15-31
REQUIRED SUPPLEMENTARY INFORMATION:
Schedule of the County’s Proportionate Share of the Net Pension Liability 32
Schedule of the County’s Contributions to Pension Plan 32
Schedule of Funding Progress and Contribution Funding –
Other postemployment benefits 33
OTHER REPORTS:
Independent Auditors’ Report on Internal Control Over Financial Reporting and on
Compliance and Other Matters Based on an Audit of Financial Statements
Performed in Accordance with Government Auditing Standards 34-35
INDEPENDENT AUDITORS' REPORT
County Commissioners
County of Nantucket, Massachusetts
Nantucket, Massachusetts
Report on the Financial Statements
We have audited the accompanying financial statements of the governmental activities, each major fund, and
the aggregate remaining fund information of the County of Nantucket, Massachusetts, (the County) as of and
for the year ended June 30, 2015, and the related notes to the financial statements, which collectively comprise
the County’s basic financial statements as listed in the table of contents.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance
with accounting principles generally accepted in the United States of America; this includes the design,
implementation, and maintenance of internal control relevant to the preparation and fair presentation of
financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express opinions on these financial statements based on our 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 from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of
the risks of material misstatement of the financial statements, whether due to fraud or error. In making those
risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation
of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we
express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and
the reasonableness of significant accounting estimates made by management, as well as evaluating the overall
presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinions.
Opinions
In our opinion, the financial statements referred to above present fairly, in all material respects, the respective
financial position of the governmental activities, each major fund and the aggregate remaining fund information
of the County as of June 30, 2015, and the respective changes in financial position for the year then ended in
conformity with accounting principles generally accepted in the United States of America.
County of Nantucket, Massachusetts Page 1 of 35 Basic Annual Financial Statements
County of Nantucket, Massachusetts
Page two
Restatement of Prior Year Ending Balances
As more fully described in Note IV, a restatement of prior year ending net position balance was made to record
the County’s net pension liability.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the management’s
discussion and analysis, the schedule of the County’s proportionate share of the net pension liability and
contributions to pension plan, and the funding progress and contribution funding for other postemployment
benefits be presented to supplement the basic financial statements. Such information, although not part of the
basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be
an essential part of financial reporting for placing the basic financial statements in an appropriate operational,
economic or historical context. We have applied certain limited procedures to the required supplementary
information in accordance with auditing standards generally accepted in the United States of America, which
consisted of inquiries of management about the methods of preparing the information and comparing the
information for consistency with management’s responses to our inquiries, the basic financial statements, and
other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion
or provide any assurance on the information because the limited procedures do not provide us with sufficient
evidence to express an opinion or provide any assurance.
Implementation of New Accounting Standards
As disclosed in the Note III to the financial statements, the County implemented GASB Statement No. 68,
Accounting and Financial Reporting for Pensions – an amendment of GASB Statement No. 27, and GASB
Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date – an
amendment of GASB Statement No. 68, during the fiscal year 2015. Our opinion was not modified with respect
to this matter.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated January 15, 2016 on
our consideration of the County’s internal control over financial reporting and on our tests of its compliance
with certain provisions of laws, regulations, contract, grant agreements and other matters. The purpose of that
report is to describe the scope of our testing of internal control over financial reporting and compliance and the
results of that testing, and not to provide an opinion on internal control over financial reporting or on
compliance. That report is an integral part of an audit performed in accordance with Government Auditing
Standards in considering the County’s internal control over financial reporting and compliance.
Roselli, Clark & Associates
Certified Public Accountants
Woburn, Massachusetts
January 15, 2016
County of Nantucket, Massachusetts Page 2 of 35 Basic Annual Financial Statements
Management’s Discussion and Analysis
As the management of the County of Nantucket, Massachusetts (the County) we offer readers of these
financial statements this narrative overview and analysis of the financial activities for the fiscal year
ended June 30, 2015. We encourage readers to consider the information presented here in conjunction
with their review of the basic financial statements, notes to the basic financial statements and required
supplementary information found in this report.
Financial Highlights
The County is a component unit of the Town of Nantucket. The Town’s financial statements include
the County as a discretely presented component unit.
The assets and deferred outflows of the County exceeded its liabilities and deferred inflows at the
close of the most recent fiscal year by approximately $6.6 million (total net position). Of this
amount, $0.4 million (unrestricted net positon) may be used to meet the government’s on-going
obligations to citizens and creditors.
The governmental net position increased approximately $0.4 million during the current fiscal year
due to revenues in excess of expenditures in the Deeds Excise Fund.
At the close of the current fiscal year, the County’s general fund reported unassigned fund balance
totaling $1.3 million, which was consistent with the prior year.
Overview of the Financial Statements
This discussion and analysis are intended to serve as an introduction to the County’s basic financial
statements. The basic financial statements comprise three components: 1) government-wide financial
statements, 2) fund financial statements, and 3) notes to the financial statements. The governmental-wide
financial statements provide both long-term and short-term information about the County as a whole. The
fund financial statements focus on the individual components of the County government, reporting the
County’s operations in more detail than the government-wide statements. Both presentations
(government-wide and fund) allow user to address relevant questions, broaden the basis of comparison
and enhance the County’s accountability. An additional part of the basic financial statements are the notes
to the financial statements. This report also contains other required supplementary information in addition
to the basic financial statements themselves.
Government-wide Financial Statements - The government-wide financial statements are designed to
provide readers with a broad overview of finances, in a manner similar to a private-sector business.
The statement of net position presents information on all of assets, liabilities, and deferred
inflows/outflows of resources, with the difference between the two reported as net position. Over time,
increases or decreases in net position may serve as a useful indicator of whether the financial position is
improving or deteriorating.
The statement of activities presents information showing how the government’s net position changed
during the most recent fiscal year. All changes in net position are reported as soon as the underlying
event giving rise to the change occurs, regardless of 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 taxes and earned but unused vacation leave).
County of Nantucket, Massachusetts Page 3 of 35 Basic Annual Financial Statements
Both of the government-wide financial statements distinguish functions that are principally supported by
taxes and intergovernmental revenue (governmental activities) from other functions that are intended to
recover all or a significant portion of their costs through user fees and charges. The governmental
activities include county administration, registry of deeds, corrections department, Cape Cod license
plates and Town assessments.
Fund Financial Statements - A fund is a grouping of related accounts that is used to maintain control
over resources that have been segregated for specific activities or objectives. Fund accounting is used to
ensure and demonstrate compliance with finance-related legal requirements. All of the County’s funds
are reported as a governmental fund type.
Governmental funds distinguish fund balance between amounts that are considered nonspendable, such as
fund balance associated with inventories, and other amounts that are classified based on the relative
strength of the constraints that control the purposes for which specific amounts can be spent. Beginning
with the most binding constraints, fund balance amounts are reported in the following classifications:
• Restricted – amounts constrained by external parties, constitutional provision, or enabling
legislation
• Committed – amounts constrained by a government using its highest level of decision-
making authority
• Assigned – amounts a government intends to use for a particular purpose
• Unassigned – amounts that are not constrained at all will be reported in the general fund.
Governmental Funds - Governmental funds are used to account for essentially the same functions
reported as governmental activities in the government-wide financial statements. However, unlike the
government-wide financial statements, governmental fund financial statements focus on near-term
inflows and outflows of spendable resources, as well as on balances of spendable resources available at
the end of the fiscal year. Such information may be useful in evaluating a government’s near-term
financing requirements.
Because the focus of governmental funds is narrower than that of the government-wide financial
statements, it is useful to compare the information presented for governmental funds with similar
information presented for governmental activities in the government-wide financial statements. By doing
so, readers may better understand the long-term impact of the government’s near-term financing
decisions.
Reconciliations are provided in the financial statements to facilitate this comparison.
The County maintains a number of individual governmental funds. Information is presented separately in
the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures,
and changes in fund balances for the general fund and deeds excise fund, which are considered to be
major funds. Data from the other governmental funds are combined into a single, aggregated
presentation.
Notes to the Financial Statements The notes provide additional information that is essential to a full
understanding of the data provided in the government-wide and fund financial statements.
County of Nantucket, Massachusetts Page 4 of 35 Basic Annual Financial Statements
New Significant Accounting Standards Implemented – In fiscal year 2015 the County adopted two new
statements of financial accounting standards issued by the Governmental Accounting Standards board
(GASB) that relate to pension activity:
- Statement No. 68, “Accounting and Financial Reporting for Pensions – an amendment of
GASB Statement No. 27,” and
- Statement No. 71, “Pension Transition for Contributions Made Subsequent to the
Measurement Date – an amendment of GASB Statement No. 68”
Statement No. 68 (Statement) establishes standards of accounting and financial reporting, but not funding
or budgetary standards, for the County’s defined benefit pension plan. This statement replaces the
requirements of prior GASB statements impacting account and disclosure of pensions.
The significant impact to the County of implementing Statement No. 68 is the reporting of the County’s
unfunded pension liability on the full accrual basis of accounting government-wide financial statements.
There are also new note disclosure requirements and supplementary schedules required by the Statement.
In order to implement the Statement, a prior period adjustment was made to the County’s July 1, 2014 net
position. This prior period adjustment decreased the County’s net position by $514,698 from $6,742,638
to $6,227,940 and reflects the reporting of net pension liabilities.
Government-wide Financial Analysis
The condensed statement of net position is as follows:
June 30, June 30,
2015 2014
Assets
Currrent and other assets 3,958,278$ 3,557,301$
Capital assets, net 3,310,433 3,326,425
Total assets 7,268,711 6,883,726
Deferred outflows of resources 888 -
Liabilities
Other liabilities 24,173 34,708
Long-term liabilities 644,262 106,380
Total liabilities 668,435 141,088
Deferred inflows of resources - -
Net Position
Net investment in capital assets 3,310,433 3,326,425
Restricted 2,912,552 2,121,457
Unrestricted 378,179 1,294,756
Net Position 6,601,164$ 6,742,638$
County of Nantucket, Massachusetts Page 5 of 35 Basic Annual Financial Statements
As noted earlier, net position may serve over time as a useful indicator of a government’s financial
position. The assets and deferred outflows of the County exceeded its liabilities and deferred inflows at
the close of the most recent fiscal year by approximately $6.6 million (total net position).
By far the largest portion, approximately $3.3 million (50.1%) of the County’s net position reflects its
investment in capital assets (e.g. land, buildings, machinery, and equipment) less any related debt used to
acquire those assets that is still outstanding. The County uses these capital assets to provide services to
citizens; consequently, these assets are not available for future spending. The County does not currently
carry any debt related to its capital assets.
An additional portion of the County’s net position, approximately $2.9 million (44.1%) represents
resources that are subject to external restrictions on how they may be used. The remaining balance,
approximately $0.4 million (5.7%) represents unrestricted net position, which the County may use to
meet current obligations.
The condensed statement of changes in net position is as follows:
June 30, June 30,
2015 2014
Revenues
Program revenues:
Charges for services 974,357$ 945,151$
Operating grants and contributions 170,201 170,201
General revenues:
Unrestricted investment income 11,159 8,413
Total revenues 1,155,717 1,123,765
Expenses
County administration 27,465 17,094
Registry of deeds 413,310 421,312
Cape Cod license plate 91,718 102,121
Town assessment 250,000 250,000
Total expenses 782,493 790,527
Change in net position 373,224 333,238
Net position, beginning of year 6,742,638 6,409,400
Restatement for net pension liability (514,698) -
Net position, beginning of year,
as restated 6,227,940 6,409,400
Net position, end of year 6,601,164$ 6,742,638$
County of Nantucket, Massachusetts Page 6 of 35 Basic Annual Financial Statements
Governmental Activities - The governmental net position increased approximately $0.4 million during
the current fiscal year due to revenues in excess of expenditures in the Deeds Excise Fund. The County
continues to see vibrant operations as deed excise taxes have been well above expenses due to the robust
high-end real estate market on the island.
The Town relies significantly on charges for services which are largely made up of receipts from the
Registry of Deeds. During 2015, charges for services made up 84.3% of total revenues which is fairly
consistent with 84.1% in the prior year. Additionally, operating grants and contributions comprised about
14.7% of total revenues, consistent with the 15.1% in the prior year. No other revenues were greater than
10% of the total revenues in fiscal year 2015 or 2014.
The majority of expenses were directed to benefit the operation of the Registry of Deeds. Approximately
52.8% percent of total disbursements related to Registry of Deeds services, down slightly from 53.3% in
the prior year. Town assessments comprised 31.9% of current year expenses, up slightly from the 31.6%
in 2014. Cape Cod license plate expenses represented nearly 11.7% of total expenses, down slightly
from 12.9% in the prior period. No other expenses represented greater than 10% of total expenses in the
current or prior periods.
Financial Analysis of the Government’s Funds
As noted earlier, the County uses fund accounting to ensure and demonstrate compliance with finance-
related legal requirements.
Governmental Funds - The focus of governmental funds is to provide information on near-term inflows,
outflows, and balances of spendable resources. Such information is useful in assessing financing
requirements. In particular, unassigned fund balance may serve as a useful measure of a government’s
net resources available for spending at the end of the fiscal year.
The general fund is the chief operating fund. At the end of the current fiscal year, unassigned fund
balance, which represented all of the general fund balance, was approximately $1.3 million. As a measure
of the general fund’s liquidity, it may be useful to compare fund balance to total fund expenditures.
Unassigned fund balance and total fund balances represents approximately 200% of total general fund
expenditures.
The County’s governmental funds balance sheet reported a combined ending fund balance surplus of
approximately $3.9 million. This represents an increase of approximately $0.4 million due to the excess
of revenues over expenditures and transfers in the Deeds Excise Fund previously discussed. The Deeds
Excise Fund is used to account for the proceeds from transactions at the Registry of Deeds. The fund is in
a surplus position of $2.2 million due to the robust high-end real estate market on the island.
The County’s General Fund reported an unassigned fund balance of approximately $1.3 million, which is
consistent with the prior year.
The County reported restricted fund balances of approximately $0.5 million in the combined nonmajor
governmental funds, which is consistent with the prior year.
County of Nantucket, Massachusetts Page 7 of 35 Basic Annual Financial Statements
Capital Asset and Debt Administration
Capital Assets - The County’s investment in capital assets for its governmental activities as of June 30,
2015, amounts to approximately $3.3 million (net of accumulated depreciation), which is consistent with
the prior year as annual depreciation is minimal.. This investment in capital assets includes land and
machinery and equipment.
Additional information on the County capital assets can be found in Note II, Section D. of this report.
Long-term Debt - At the end of the current fiscal year, the County had no long-term debt outstanding.
Requests for Information
This financial report is designed to provide a general overview of the County of Nantucket’s finances.
For all those with an interest in the government’s finances, questions concerning any of the information
provided in this report or request for additional financial information should be addressed to the Office of
the Finance Director, 37 Washington Street, Nantucket, Massachusetts 02554.
County of Nantucket, Massachusetts Page 8 of 35 Basic Annual Financial Statements
COUNTY OF NANTUCKET, MASSACHUSETTS
(A COMPONENT UNIT OF THE TOWN OF NANTUCKET, MASSACHUSETTS)
STATEMENT OF NET POSITION
JUNE 30, 2015
Governmental
Activities
Assets
Cash and cash equivalents 3,887,606$
Receivables, net of allowance for uncollectibles:
Intergovernmental 70,672
Capital assets, not being depreciated 3,283,842
Capital assets, net of depreciation 26,591
Total Assets 7,268,711
Deferred Outflows of Resources 888
Liabilities
Current liabilities:
Warrants and accounts payable 18,456
Accrued payroll and withholdings 5,717
Noncurrent liabilities:
Due in more than one year 644,262
Total Liabilities 668,435
Deferred Inflows of Resources -
Net Position
Net investment in capital assets 3,310,433
Restricted for:
Other purposes 2,912,552
Unrestricted 378,179
Total Net Position 6,601,164$
See accompanying notes to basic financial statements.
County of Nantucket, Massachusetts Page 9 of 35 Basic Annual Financial Statements
COUNTY OF NANTUCKET, MASSACHUSETTS
(A COMPONENT UNIT OF THE TOWN OF NANTUCKET, MASSACHUSETTS)
STATEMENT OF ACTIVITIES
YEAR ENDED JUNE 30, 2015
Net (Expenses)
Revenues and
Changes in
Program Revenues Net Position
Operating Capital Total
Charges for Grants and Grants and Governmental
Functions/Programs Expenses Services Contributions Contributions Activities
Governmental Activities:
County adminstration 27,465$ 280,704$ 170,201$ -$ 423,440$
Registry of Deeds 413,310 371,510 - - (41,800)
Cape Cod license plates 91,718 72,143 - - (19,575)
Town assessment 250,000 250,000 - - -
Total Governmental Activities 782,493 974,357 170,201 - 362,065
Total Primary Government 782,493$ 974,357$ 170,201$ -$ 362,065
General Revenues:
Unrestricted investment income 11,159
Total general revenues and transfers 11,159
Change in Net Position 373,224
Net Position - beginning, as restated (see Note IV)6,227,940
Net Position - Ending 6,601,164$
See accompanying notes to basic financial statements.
County of Nantucket, Massachusetts Page 10 of 35 Basic Annual Financial Statements
COUNTY OF NANTUCKET, MASSACHUSETTS
(A COMPONENT UNIT OF THE TOWN OF NANTUCKET, MASSACHUSETTS)
GOVERNMENTAL FUNDS
BALANCE SHEET
JUNE 30, 2015
Nonmajor Total
Deeds Excise Governmental Governmental
General Fund Funds Funds
Assets
Cash and cash equivalents 949,006$ 2,462,779$ 475,821$ 3,887,606$
Receivables, net of allowance
Due from other government 70,672 - - 70,672
Due from other funds 266,200 - - 266,200
Total Assets 1,285,878 2,462,779 475,821 4,224,478
Total Deferred Outflows of Resources - - - -
Total Assets and Deferred Outflows of Resources 1,285,878$ 2,462,779$ 475,821$ 4,224,478$
Liabilities
Warrants and accounts payable 8,608$ 280$ 9,568$ 18,456$
Accrued payroll 5,717 - - 5,717
Due to other funds - 266,200 - 266,200
Total Liabilities 14,325 266,480 9,568 290,373
Total Deferred Inflows of Resources - - - -
Fund Balances
Restricted - 2,196,299 466,253 2,662,552
Unassigned 1,271,553 - - 1,271,553
Total Fund Balances 1,271,553 2,196,299 466,253 3,934,105
Total Liabilities, Deferred Inflows of Resources,
and Fund Balances 1,285,878$ 2,462,779$ 475,821$ 4,224,478$
See accompanying notes to basic financial statements.
County of Nantucket, Massachusetts Page 11 of 35 Basic Annual Financial Statements
COUNTY OF NANTUCKET, MASSACHUSETTS
(A COMPONENT UNIT OF THE TOWN OF NANTUCKET, MASSACHUSETTS)
RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET
TOTAL FUND BALANCES TO THE STATEMENT OF NET POSITION
JUNE 30, 2015
Total Governmental Fund Balances 3,934,105$
Capital assets used in governmental activities are not financial resources and therefore are
not reported in the funds.3,310,433
Deferred outflows and inflows of resources to be recognized in future pension expense
are not available resources and, therefore, are not reported in the funds:
Net difference between projected and actual earnings on pension plan investments 888
Long-term liabilities are not due and payable in the current period and, therefore,
are not reported in the government funds:
Other postemployment benefits (125,688)
Net pension liability (518,574)
Net Position of Governmental Activities 6,601,164$
See accompanying notes to basic financial statements.
County of Nantucket, Massachusetts Page 12 of 35 Basic Annual Financial Statements
COUNTY OF NANTUCKET, MASSACHUSETTS
(A COMPONENT UNIT OF THE TOWN OF NANTUCKET, MASSACHUSETTS)
GOVERNMENTAL FUNDS
STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES
YEAR ENDED JUNE 30, 2015
Nonmajor Total
Deeds Excise Governmental Governmental
General Fund Funds Funds
Revenues:
Excise taxes -$ 717,840$ -$ 717,840$
Intergovernmental 170,201 - - 170,201
Departmental 184,374 - 72,143 256,517
Investment income 9,024 2,135 - 11,159
Total Revenues 363,599 719,975 72,143 1,155,717
Expenditures:
Current:
County adminstration 23,428 - - 23,428
Registry of Deeds 363,374 15,384 - 378,758
Cape Cod license plates - - 88,843 88,843
Gift fund - - 3,176 3,176
Town assessment 250,000 - - 250,000
Total Expenditures 636,802 15,384 92,019 744,205
Excess (Deficiency) of Revenues
Over (Under) Expenditures (273,203) 704,591 (19,876) 411,512
Other Financing Sources (Uses):
Transfers in 250,000 - - 250,000
Transfers out - (250,000) - (250,000)
Total Other Financing Sources (Uses)250,000 (250,000) - -
Net Change in Fund Balances (23,203) 454,591 (19,876) 411,512
Fund Balances - Beginning 1,294,756 1,741,708 486,129 3,522,593
Fund Balances - Ending 1,271,553$ 2,196,299$ 466,253$ 3,934,105$
See accompanying notes to basic financial statements.
County of Nantucket, Massachusetts Page 13 of 35 Basic Annual Financial Statements
COUNTY OF NANTUCKET, MASSACHUSETTS
(A COMPONENT UNIT OF THE TOWN OF NANTUCKET, MASSACHUSETTS)
NOTES TO BASIC FINANCIAL STATEMENTS
YEAR ENDED JUNE 30, 2015
I. Summary of Significant Accounting Policies
The basic financial statements of the County of Nantucket, Massachusetts (the County) have been
prepared in conformity with generally accepted accounting principles (GAAP) as applied to state and
local governments. GAAP is prescribed by the Governmental Accounting Standards Board (GASB),
which is the primary standard-setting body for state and local governmental entities. The following is
a summary of the more significant policies and practices used by the County:
A. Reporting Entity
The County of Nantucket adheres to the County Commissioner/County Manager form of
government created under MGL Chapter 34A Section 18 and as voted by the citizens of the Town
of Nantucket. The County is legally separate from the Town, but is included in the Town’s
financial statements as a discretely presented component unit because the Town is financially
accountable for, and can impose its will on, the County. The County shares the same geographical
boundaries as the Town, and the Town’s Selectman serve ex-officio as the County
Commissioners. The County operates a Registry of Deeds and Correction’s Office.
For financial reporting purposes, the County has included all funds, organizations, account
groups, agencies, boards, commissions and institutions. The County has also considered all
potential component units for which it is financially accountable as well as other organizations for
which the nature and significance of their relationship with the County are such that exclusion
would cause the basic financial statements to be misleading or incomplete. It has been determined
that there are no component units that meet the requirements for inclusion in the County’s
financial statements.
B. Government-Wide and Fund Financial Statements
The government-wide financial statements (i.e., the statement of net position and the statement of
activities) report information on all of the non-fiduciary activities of the County. These are
considered Governmental activities because they are supported by intergovernmental revenues
and departmental charges as opposed to business-type activities, which rely to a significant extent
on user fees and charges for support. The County does not report any business-type activities.
Separate financial statements are provided for governmental funds. Major individual government
funds are reported as separate columns in the fund financial statements. Nonmajor funds are
aggregated and presented in a single column.
Major Fund Criteria – Major funds must be reported if both of the following criteria are met:
1) Total assets and deferred outflow of resources, liabilities and deferred inflow of
resources, revenues, or expenditures/expenses of that individual governmental or
enterprise funds are at least 10 percent of the corresponding total for all funds of that
category or type, and
County of Nantucket, Massachusetts Page 14 of 35 Basic Annual Financial Statements
2) Total assets and deferred outflow of resources, liabilities and deferred inflow of
resources, revenues, or expenditures/expenses of the individual governmental fund or
enterprise fund are at least 5 percent of the corresponding total for all governmental and
enterprise funds combined.
Additionally, any other governmental fund that management believes is particularly significant to
the basic financial statements may be reported as a major fund.
C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation
The government-wide financial statements are reported using the economic resources
measurement focus and the accrual basis of accounting. Under this method, revenues are
recorded when earned and expenses are recorded when a liability is incurred, regardless of the
timing of related cash flows. Excise taxes are recognized as revenues in the fiscal year for which
they are levied. Grants and similar items are recognized as revenue as soon as all eligibility
requirements imposed by the provider are met.
The statement of activities demonstrates the degree to which the direct expenses of a given
function or segment is offset by program revenues. Direct expenses are those that are clearly
identifiable with a specific function or segment. Program revenues include: 1) charges to
customers or applicants who purchase, use, or directly benefit from goods, services, or privileges
provided by a given function or segment and 2) grants and contributions that are restricted to
meeting the operational or capital requirements of a particular function or segment. Other items
not properly included among program revenues are reported instead as general revenues. For the
most part, the effect of interfund activity has been removed from the government-wide financial
statements.
The governmental fund financial statements are reported using the current financial resources
measurement focus and the modified accrual basis of accounting. Revenues are recognized when
susceptible to accrual (i.e. measurable and available). Revenues are considered to be available
when they are collectible within the current period or soon enough thereafter to pay liabilities of
the current period. Expenditures are recorded when the related fund liability is incurred, except
for interest on general long-term debt which is recognized when payment is due, certain
compensated absences, claims and judgments which are recognized when the obligations are
expected to be liquidated with current expendable available resources.
The government reports the following major governmental funds:
General Fund – is the government’s primary operating fund. It accounts for all financial
resources of the general government except those required to be accounted for in another
fund.
Deeds Excise Fund – is used to account for the proceeds from transactions at the Registry of
Deeds.
Nonmajor Governmental Funds - consist of other special revenue and permanent funds that
are aggregated and presented in the Nonmajor Governmental Funds column on the
Governmental Funds financial statements. The following describes the general use of these
fund types:
County of Nantucket, Massachusetts Page 15 of 35 Basic Annual Financial Statements
Special Revenue Funds - are used to account for the proceeds of specific revenue sources
that are restricted or committed to expenditures for specified purposes other than debt
service or capital projects.
Capital Projects Funds - are used to account for financial resources that are restricted,
committed or assigned to expenditures for capital outlays.
Permanent Funds - are used to account for financial resources that are restricted to the
extent that only earnings, not principal, may be used for purposes that support the
governmental programs.
D. Assets, Liabilities, Deferred Outflows/Inflows of Resources and Net Position or Equity
Deposits and Investments – The County’s cash and cash equivalents are considered to be cash on
hand, demand deposits, and short-term investments with original maturities of three months or
less from the date of acquisition.
County investments are reported at fair value.
Receivables – The recognition of revenue related to accounts receivable reported in the
government-wide financial statements are reported under the accrual basis of accounting. The
recognition of revenue related to accounts receivable reported in the governmental funds financial
statements are reported under the modified accrual basis of accounting.
Departmental and other receivables consist of various departmental revenues earned at year-end
and received subsequent to year-end, net of allowance for uncollectible accounts. Allowance for
uncollectible accounts are estimated based upon historical trends and specific account analysis.
Intergovernmental receivables consist of various federal and state grants for operating and capital
purposes that are applied for and received annually. For non-expenditure driven grants,
receivables are recognized as soon as all eligibility requirements imposed by the provider have
been met. For expenditure driven grants, receivables are recorded when the qualifying
expenditures are incurred and all other grant applications are met. These receivables are
considered 100% collectible and therefore do not report an allowance for uncollectible accounts.
Inventories – Inventories, which are not material to the basic financial statements, are considered
to be expenditures at the time of purchase.
Capital Assets – Capital assets, which include land, buildings and improvements, machinery and
equipment, vehicles and infrastructure (e.g. roads, utility mains, and similar items), are reported
in the applicable governmental columns in the government-wide financial statements.
Capital assets are recorded at historical cost or estimated historical cost if purchased or
constructed. Donated capital assets are recorded at the estimated fair market value at the date of
donation.
All purchases and construction costs in excess of $10,000 whose expected lives are greater than
one year are capitalized at the date of acquisition or construction. The costs of normal
maintenance and repairs that do not add to the value of the asset or materially extend assets lives
are not capitalized.
County of Nantucket, Massachusetts Page 16 of 35 Basic Annual Financial Statements
Capital assets (excluding land) are depreciated using the straight line method over the following
estimated useful lives:
Machinery and equipment 5-7 years
Interfund Balances – Activity between funds that are representative of lending arrangements
outstanding at the end of the fiscal year are referred to as either due to/from other funds or
advances to/from other funds. All other outstanding balances between funds are reported as due
to/from other funds.
Interfund Transfers – During the course of its operations, resources are permanently reallocated
between and within funds. These transactions are reported as transfers in and transfers out in the
individual fund statements.
Investment Income – Investment income derived from major and nonmajor governmental funds is
legally assigned to the general fund unless otherwise directed by state law.
Long-term Obligations – Long-term debt is reported as liabilities in the government-wide
statement of net position. Bond premiums and discounts are amortized over the life of the bonds
using the effective interest method. Bond anticipation notes payable are reported net of the
applicable bond premium or discount.
In the governmental fund financial statements, the face amount of long-term debt issued is
reported as other financing sources. Premiums received on a debt issuance are reported as other
financing sources while discounts are reported as other financing uses. Issuance costs are
exclusively reported as general government expenditures regardless of whether they are withheld
from the actual proceeds.
Deferred Outflows/Inflows of Resources – In addition to assets, the statement of financial position
will sometimes report a separate section for deferred outflows of resources. This separate
financial statement element, deferred outflows of resources, represents a consumption of net
position that applies to a future period(s) and so will not be recognized as an outflow of resources
(expense/expenditure) until then. The County has one item that is reported on the government-
wide statement of net position which relate to outflows from changes in the net pension liability.
The deferred pensions will be recognized in pension expense in future years as more fully
described in Note III, subsection A.
In addition to liabilities, the statement of financial position will sometimes report a separate
section for deferred inflows of resources. This separate financial statement element, deferred
inflows of resources, represents an acquisition of net position that applies to a future period(s) and
so will not be recognized as an inflow of resources (revenue) until that time. The County does
not have any items that qualify for reporting as deferred inflows of resources.
Net Position – In the government-wide financial statements, net position reported as “net
investment in capital assets” 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 related debt.
Net position is reported as restricted when amounts are not available for appropriation or are
legally restricted by outside parties for a specific use. Net position has been restricted for the
following:
County of Nantucket, Massachusetts Page 17 of 35 Basic Annual Financial Statements
Other purposes represent assets that are restricted by donors for specific governmental
programs and uses.
Fund Equity – In the fund financial statements, fund balance for governmental funds is reported
in classifications that comprise a hierarchy based primarily on the extent in which the County is
required to honor constraints on the specific purpose for which amounts in the funds can be spent.
Fund balance is reported in five components – nonspendable, restricted, committed, assigned, and
unassigned as described below:
Nonspendable represents amounts that cannot be spent because they are either (a) not in
spendable form (i.e. inventory or prepaid) or (b) legally or contractually required to be
maintained intact as the corpus of the endowment.
Restricted represents amounts that have constraints placed either externally by third-parties
(creditors, grantors, contributors, or laws or regulations of other governments) or by law
through constitutional provisions or enabling legislation. Enabling legislation authorizes the
County to assess, levy, charge or otherwise mandate payment of resources (from external
resource providers) and includes a legally enforceable requirement (compelled by external
parties) that those resources be used only for the specific purposes stipulated in the
legislation.
Committed represents amounts that can only be used for specific purposes pursuant to
constraints imposed by formal action of the County’s highest level of decision making
authority, which consists of the County Commissioners. Those committed amounts cannot
be used for any other purpose unless the County Commissioners remove or change the
specified use by taking the same type of action it employed previously to commit those
amounts.
Assigned represents amounts that are constrained by the County’s intent to be used for
specific purposes, but are neither restricted nor committed.
Unassigned represents amounts that have not been restricted, committed or assigned to
specific purposes within the general fund. The general fund is the only fund that reports a
positive unassigned fund balance amount. Other governmental funds besides the general fund
can only report a negative unassigned fund balance amount.
When both restricted and unrestricted resources are available for use, it is the County’s policy to
use restricted resources first, then unrestricted resources (committed, assigned and unassigned) as
they are needed. When unrestricted resources (committed, assigned and unassigned) are available
for use it is the County’s policy to use committed resources first, then assigned, and then
unassigned as they are needed.
The County has not established financial policies with respect to maintaining minimum fund
balance amounts.
The County does not report encumbrances in any of its funds.
County of Nantucket, Massachusetts Page 18 of 35 Basic Annual Financial Statements
The following table reflects the County’s fund equity categorizations:
E. Deficits
During the fiscal year ended, the County did not report any fund deficits.
F. Use of Estimates
The preparation of basic 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 basic financial statements and the
reported amounts of the revenues and expenditures/expenses during the fiscal year. Actual results
could vary from estimates that were used.
II. Detailed Notes to All Funds
A. Deposits and Investments
A cash and investment pool is maintained that is available for use by all funds. Each fund type’s
portion of this pool is displayed on the balance sheet as “cash and cash equivalents”. The
deposits and investments of trust funds are held separately from those of other funds.
State laws and regulations require the County to invest funds only in pre-approved investment
instruments which include but are not necessarily limited to bank deposits, money markets,
certificates of deposit, U.S. obligations, repurchase agreements, and State Treasurer’s investment
pool (“the Pool”). In addition, the statutes impose various limitations on the amount and length
of investments and deposits. Repurchase agreements cannot be for a period of over ninety days,
and the underlying security must be a United States obligation. During the fiscal year, the County
did not enter into any repurchase agreements.
Custodial Credit Risk: Deposits- The County has adopted a deposit policy which requires that the
Treasurer review each bank doing business with the County on a quarterly basis. The policy does
not restrict the value of uninsured or uncollateralized investments held at any time.
At year-end, the carrying amount of the County's deposits was $3,887,606 and the bank balance
of $3,923,097 was covered by federal depository insurance or fully collateralized.
Nonmajor
General Deeds Excise Intergovernmental
Fund Fund Funds Total
Restricted:
County adminstration -$ 874,010$ -$ 874,010$
Registry of Deeds - 1,320,882 - 1,320,882
Corrections Department - 1,407 - 1,407
Cape Cod license plates - - 283,717 283,717
State and Federal grants - - 182,536 182,536
Unassigned 1,271,553 - - 1,271,553
1,271,553$ 2,196,299$ 466,253$ 3,934,105$
County of Nantucket, Massachusetts Page 19 of 35 Basic Annual Financial Statements
Custodial Credit Risk: Investments- The County has adopted an investment policy regarding
custodial credit risk that requires all securities not held directly by the Treasurer must be held by
a third party custodian approved by the Treasurer in the County’s name and tax identification
number
At year-end, the County’s investments consisted of certificates of deposit totaling $42,941 which
were covered by federal depository insurance and were not subject to custodial credit risk. These
have been classified as cash equivalents due to their maturities.
Interest Rate Risk - The County limits investment maturities as a means of managing its exposure
to fair value losses arising from increasing interest rates. The policy limits investments of
operating funds to one year or less and limits investment maturities of trust funds and other
special funds to periods no longer that seven years, maintaining an average maturity no greater
than three years for the investment portfolio
Credit Risk - The County restricts the investment of operating funds to U.S. Treasury or Agency
securities which carry “AAA” ratings. Trust and other special funds which are longer-term
investments may invest in fixed-income securities which are held principally for capital
preservation and income potential and corporate debt that carries a rating of “A” or better by
either Standard and Poor’s or Moody’s rating services. If a security falls below the “A” rating,
the security will be monitored by the Treasurer and advisor and will be noted as an exception to
the policy if held in the investment portfolio. The Treasurer will sell the securities if a decline in
value is expected
Concentration of Credit Risk – The County does not place a limit on the amount that may be
invested in any one issuer.
B. Receivables
Receivables as of year-end for the County’s individual major governmental funds in the
aggregate, including the applicable allowances for uncollectible accounts, are as follows:
C. Interfund Receivables, Payables and Transfers
The composition of interfund balances for the fiscal year ended June 30, 2015, is as follows:
Gross Allowance for Net
Amount Uncollectibles Amount
Receivables:
Intergovernmental 70,672$ - 70,672$
70,672$ -$ 70,672$
Amount
General Fund Deeds Excise Fund 266,200$
Total 266,200$
Receivable Fund Payable Fund
County of Nantucket, Massachusetts Page 20 of 35 Basic Annual Financial Statements
The outstanding balances between funds results mainly from the timing differences between the
dates that the transactions occur and the transfers of cash to the individual funds are made.
Interfund transfer for the fiscal year ended June 30, 2015, are summarized as follows:
D. Capital Assets
Capital asset activity for the year ended June 30, 2015 was as follows:
General
Fund
Deeds Excise Fund 250,000$ (1)
Total 250,000$
(1) Transfer to the general fund for Town assessments.
Transfers In
Transfers Out
Beginning Ending
Balance Increases Decreases Balance
Governmental Activities:
Capital assets not being depreciated:
Land 3,283,842$ -$ -$ 3,283,842$
Total capital assets not being depreciated 3,283,842 - - 3,283,842
Capital assets being depreciated:
Machinery and equipment 187,927 - - 187,927
Total capital assets being depreciated 187,927 - - 187,927
Less accumulated depreciation for:
Machinery and equipment (145,344) (15,992) - (161,336)
Total accumulated depreciation (145,344) (15,992) - (161,336)
Total capital assets being depreciated, net 42,583 (15,992) - 26,591
Governmental activities capital assets, net 3,326,425$ (15,992)$ -$ 3,310,433$
Depreciation expense was charged to functions/programs as follows:
Governmental Activities:
County adminstration 861$
Registry of Deeds 12,256
Cape Cod license plates 2,875
15,992$
County of Nantucket, Massachusetts Page 21 of 35 Basic Annual Financial Statements
E. Long–Term Obligations
The following reflects the current year activity in the long-term liability accounts:
The long-term obligations are expected to be liquidated from the general fund.
Annually, the County is assessed by the Town of Nantucket for debt the Town has in its’ name
relating to “Sheriff Space”. Since the debt is in the Town’s name it is shown as a town
assessment in the County’s financial statements. During the year ended June 30, 2015, the
assessment was $250,000.
III. Other Information
A. Retirement System
Pension Plan Description – The County of Nantucket contributes to the Barnstable County
Retirement System (Retirement System), a cost-sharing multiple-employer defined benefit
pension plan. The Retirement System was established under Chapter 32 of Massachusetts
General Laws. The Retirement System is administered by the County and is part of the reporting
entity. Stand-alone financial statements for the year ended December 31, 2014 were issued and
are available at the Retirement Office, 750 Attucks Lane, Hyannis, Massachusetts 02601.
Current membership in the Retirement System for all employers as of December 31, 2014 was as
follows:
Retirees and beneficiaries currently receiving benefits 2,729
Active plan members 4,696
Inactive plan members 651
Total 8,076
Benefit Terms – Membership in the Retirement System is mandatory for all full-time employees
and non-seasonal, part-time employees who, in general, regularly work more than twenty hours
per week. Teachers and certain administrative personnel employed by the school department
participate in a separate pension plan administered by the Massachusetts Teachers’ Retirement
System, which is the legal responsibility of the Commonwealth of Massachusetts. Members of
the Retirement System do not participate in the federal Social Security retirement system.
Massachusetts contributory retirement system benefits are uniform from retirement system to
retirement system. The Retirement System provides for retirement allowance benefits up to a
maximum of 80% of a participant’s highest three-year or five-year average annual rate of regular
Beginning Ending Due within
Balance Additions Deletions Balance one year
Governmental Activities:
Other postemployment benefits 106,380$ 27,847$ (8,539)$ 125,688$ -$
Net pension benefits *514,698 51,714 (47,838) 518,574 -
Total Governmental Activities 621,078$ 79,561$ (56,377)$ 644,262$ -$
* Restated due to GASB 68 implementation (See Note III subsection E for more details)
County of Nantucket, Massachusetts Page 22 of 35 Basic Annual Financial Statements
compensation, depending on the participant’s date of hire. Benefit payments are based upon a
participant’s age, length of creditable service, level of compensation and job classification.
The most common benefits paid by the Retirement System include normal retirement, disability
retirement and survivor benefits.
Normal retirement generally occurs at age 65. However, participants may retire after twenty
years of service or at any time after attaining age 55, if hired prior to April 2, 2012 or at any
time after attaining age 60 if hired on or after April 2, 2012. Participants with hire dates
subsequent to January 1, 1978 must have a minimum of ten years’ creditable service in order
to retire at age 55. Participants become vested after ten years of service. Benefits
commencing before age 65 are provided at a reduced rate. Members working in certain
occupations may retire with full benefits earlier than age 65.
Ordinary disability retirement is where a participant is permanently incapacitated from a
cause unrelated to employment. Accidental disability retirement is where the disability is the
result of an injury or illness received or aggravated in the performance of duty. The amount
of benefits to be received in such cases is dependent upon several factors, including the age at
which the disability retirement occurs, the years of service, average compensation and
veteran status.
Survivor benefits are extended to eligible beneficiaries of participants whose death occurs
prior to or following retirement.
Cost-of-living adjustments granted to members of Massachusetts retirement systems granted
between 1981 and 1997 and any increases in other benefits imposed by the Commonwealth
during those years have been the financial responsibility of the Commonwealth. Beginning in
1998, the funding of cost-of-living amounts became the responsibility of the participating units
like the Retirement System.
Contributions Requirements – The Retirement System has elected provisions of Chapter 32,
Section 22D (as amended) of Massachusetts General Laws, which require that a funding schedule
be established to fully fund the pension plan by June 30, 2040. Under provisions of this law,
participating employers are assessed their share of the total retirement cost based on the entry age,
normal actuarial cost method.
The County contributed $47,838 to the Retirement System in fiscal year 2015, which equaled the
actuarially-determined contribution requirement for the fiscal year. The County’s contributions
as a percentage of covered payroll was approximately 19.9% in fiscal year 2015.
Net Pension Liability – At June 30, 2015, the County reported a liability of $518,574 for its
proportionate share of the net pension liability. The net pension liability was measured as of
January 1, 2014 and the total pension liability used to calculate the net pension liability was
determined by an actuarial valuation as of that date. These figures were updated by the
independent actuary to December 31, 2014. There were no material changes made in this update
to the actuarial assumptions (see below) nor were there any material changes to the Retirement
System’s benefit terms since the actuarial valuation.
The County’s proportion of the net pension liability is based on a projection of the County’s long-
term share of contributions to the Retirement System relative to the projected contributions of all
employers. The County’s proportion was approximately 0.092% at December 31, 2014, which
was consistent with the proportion measured at January 1, 2014.
County of Nantucket, Massachusetts Page 23 of 35 Basic Annual Financial Statements
Pension Expense – The County recognized $50,825 in pension expense in the statement of
activities in fiscal year 2015.
Deferred Outflows of Resources and Deferred Inflows of Resources – At June 30, 2015, the
County reported deferred outflows of resources and deferred inflows of resources related to
pensions from the following sources:
Deferred Outflows
of Resources
Deferred Inflows
of Resources
Differences between expected and actual
Experience
$ —
$ —
Changes of assumptions — —
Net difference between projected and actual
earnings on pension plan investments
888
—
Changes in proportion and differences
between County contributions and
proportionate share of contributions
—
—
County contributions subsequent to the
measurement date
—
—
Total $ 888 $ —
The deferred outflows of resources and deferred inflows of resources are expected to be
recognized in the County’s pension expense as follows:
Year ended June 30,
2016 $ ( 222)
2017 ( 222)
2018 ( 222)
2019 ( 222)
Actuarial Valuation – The measurement of the Retirement System’s total pension liability is
developed by an independent actuary. The latest actuarial valuation was performed as of January
1, 2014. The significant actuarial assumptions used in the January 1, 2014 actuarial valuation
included:
Actuarial cost method: Entry Age Normal Cost Method
Amortization method: Payment increase at 4.0% except for 2010 Early
Retirement Incentive, which is a level payment
Remaining amortization period: 22 years from July 1, 2014 for 2002 and 2003 Early
Retirement Incentives, retiree sheriffs liability and
remaining unfunded liability, and 8 years from July 1,
2014 for Early Retirement Incentive.
County of Nantucket, Massachusetts Page 24 of 35 Basic Annual Financial Statements
Asset valuation method: Sum of actuarial value at beginning of the year,
contributions and investment earnings based on the
actuarial interest assumption less benefit payments
and operating expenses plus 20% of the market value
at the end of the year in excess of that sum, plus
additional adjustment toward market value as
necessary so that final actuarial value is within 20% of
market value.
Investment rate of return: 7.75%
Projected salary increases: Varies by length of service with ultimate rates of
4.25% for Group 1, 4.50% for Group 2, and 4.75% for
Group 4
Cost of living adjustments: 3% of first $15,000
Mortality rates: Pre-retirement rates reflect the RP-2000 Employees
table projected 12 years with Scale AA (gender
distinct). Post-retirement rates reflect the RP-2000
Healthy Annuitant table projected 12 years with Scale
AA (gender distinct).
Disabled life mortality: For disabled retirees, the table is set forward 3 years
for males. It is assumed that 55% of pre-retirement
deaths are job-related for group 1and 2 members and
90% are job-related for group 4 members. For
members retired under an Accidental Disability, 40%
of deaths are assumed to be from the same cause as
the disability.
The investment rate of return assumption is a long-term assumption and is based on capital
market expectations by asset class, historical returns and professional judgment. The market
expectations analysis used a building-block approach, which included expected returns by asset
class and the target asset allocation. The target allocation and best estimates of arithmetic real
returns for each major asset class are summarized in the following table:
Asset Class
Target
Allocation
Long-term Expected
Real Rate of Return
Domestic equity 20.0% 6.60%
International developed markets equity 16.0% 7.10%
International emerging markets equity 7.0% 9.40%
Core fixed income 13.0% 2.20%
High-yield fixed income 10.0% 4.70%
Real estate 10.0% 4.40%
Commodities 4.0% 4.40%
Hedge funds 10.0% 3.90%
Private equity 10.0% 11.70%
County of Nantucket, Massachusetts Page 25 of 35 Basic Annual Financial Statements
Discount Rate – The discount rate used to measure the total pension liability in the January 1,
2014 actuarial valuation report was 7.75%, which was a reduction from the previous discount rate
of 7.875%. The projection of cash flows used to determine the discount rate assumed plan
member contributions were made at the current contribution rate and that employer contributions
will be made at rates equal to the actuarially-determined contribution rates and the member rate.
Based on those assumptions, the Retirement System’s fiduciary net position was projected to be
available to make all projected future benefit payments of current plan members. Therefore, the
long-term expected rate of return on pension plan investments was applied to all periods of
projected benefit payments to determine the total pension liability.
Sensitivity Analysis – The following presents the County’s proportionate share of the net pension
liability calculated using the discount rate of 7.75% as well as the County’s proportionate share of
the net pension liability using a discount rate that is one percentage point lower (6.75%) or one
percentage point higher (8.75%) than the current rate:
1% Decrease
(6.75%)
Current
Discount
(7.75%)
1% Increase
(8.75%)
County’s proportionate share of
the net pension liability
$ 668,521
$ 518,574
$ 391,426
B. Other Postemployment Benefits (OPEB)
Plan Description – Nantucket County’s employees participate in the multiple-employer defined
benefit healthcare plan administered by the Town. The Plan provides health and life insurance
benefits to current and future retirees, their dependents and beneficiaries in accordance with
Massachusetts General Law Chapter 32B. Specific benefit provisions and contribution rates are
established by collective bargaining agreements, state law, and Town ordinance. All benefits are
provided through the Town’s self-funded insurance program described previously. The Plan does
not issue a stand–alone financial report. The number of participants in the Plan consists of 490
active employees and 311 retired employees for a total of 801.
Funding Policy – The contribution requirements of Plan members and the County are established
and may be amended by the Town, through negotiation with the County employee unions.
Retirees contribute 10 – 20 percent of the calculated contribution through pension benefit
deductions. The remainder of the cost is funded by the County. The County pays the remainder.
The County currently contributes enough money to the Plan to satisfy current obligations on a
pay-as-you-go basis. The costs of administering the Plan are paid by the Town.
Annual OPEB Cost and Net OPEB Obligation – The County's annual OPEB cost is calculated
based on the annual required contribution (ARC) of the employer, and actuarially determined
amount that is calculated in accordance with GASB Statement number 45. The ARC represents a
level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and
amortize any unfunded liabilities over a period not to exceed thirty years.
County of Nantucket, Massachusetts Page 26 of 35 Basic Annual Financial Statements
The following table reflects the activity regarding the County's OPEB obligation:
Trend information regarding County’s annual OPEB cost, the percentage of the annual OPEB
cost contributed and the net OPEB obligation is as follows:
Fiscal Year
Ending
Annual OPEB
Cost
(AOPEBC)
Percentage of
AOPEBC
Contributed
Net OPEB
Obligation
June 30, 2015 $ 27,847 31% $ 125,688
June 30, 2014 $ 28,435 38% $ 106,380
June 30, 2013 $ 24,071 41% $ 88,699
The Annual OPEB Cost at June 30, 2015 was charged to the Registry of Deeds functional
expense.
Funding Status and Funding Progress – The funded status of the Plan at June 30, 2015, based on
the most recent actuarial valuation performed as of June 30, 2014, was as follows (in millions):
Actuarial
Value of
Assets
(A)
Actuarial
Accrued
Liability
(AAL) Entry
Age Normal
Cost
(B)
Unfunded
AAL
(UAAL)
(B – A)
Funded
Ratio
(A/B)
Covered
Payroll
(C)
UAAL as a
Percentage
of Covered
Payroll
((B-A)/C)
$0.25 $88.8 $88.8 0.28% N/A N/A
Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and
assumptions about the probability of occurrence of events into the future. Amounts determined
regarding the funded status of the Plan and the ARC of the employer are subject to continual
revision as estimates are compared to actual results and past expectations. The schedules of
funding progress, presented as required supplementary information (RSI) following the notes to
the financial statements, present multi-year trend information about whether the actuarial values
of plan assets are increasing or decreasing over time relative to the AAL for benefits.
Annual required contribution (ARC)26,902$
Interest on net OPEB obligation 5,632
Adjustment to ARC (4,687)
Annual OPEB cost 27,847
Contributions made (8,539)
Increase in net OPEB obligation 19,308
Net OPEB obligation at beginning of year 106,380
Net OPEB obligation at end of year 125,688$
County of Nantucket, Massachusetts Page 27 of 35 Basic Annual Financial Statements
Methods and Assumptions – Projections of benefits for financial reporting purposes are based on
the substantive Plan 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 the Plan members to
that point. The actuarial methods and assumptions used include techniques that are designed to
reduce short-term volatility in actuarial accrued liabilities and the actuarial value of assets,
consistent with the long-term perspective of the calculations. The significant methods and
assumptions as of the latest valuation are as follows:
Valuation date: June 30, 2014
Actuarial cost method Projected Unit Credit
Amortization method 4.0 percent increasing
Remaining amortization period: 30 years (open)
Interest discount rate: 4.5 percent
Inflation rate: 4.0 percent
Healthcare/Medical cost trend rate: 10.0% decreasing by 0.5% for 10 years to an
ultimate level of 5.0% per year
C. Risk Financing
The County 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 County carries commercial
insurance. The amount of claim settlements has not exceeded insurance coverage in any of the
previous three years.
D. Commitments and Contingencies
The County is party to certain legal claims, which are subject to many uncertainties, and the
outcome of individual litigation matters in these situations cannot be reasonably estimated.
Although the amount of liability, if any, in these situations at June 30, 2015, cannot be
ascertained, management believes that the resulting liability, if any, should not materially affect
the basic financial statements of the County at June 30, 2015. Other amounts received or
receivable from grantor agencies are subject to audit and adjustment by grantor agencies,
principally the federal and state governments. Any disallowed claims, including amounts already
collected, may constitute a liability of the applicable funds. The amount, if any, of expenditures
which may be disallowed by the grantor cannot be determined at this time although the County
expects such amounts, if any, to be immaterial.
E. Implementation of New GASB Pronouncements
Current Year Implementation
In June 2012, the GASB issued GASB Statement No. 67, Financial Reporting for Pension Plans.
This Statement replaces the requirements of Statement No. 25, Financial Reporting for Defined
Benefit Pension Plans and Note Disclosures for Defined Contribution Plans and Statement 50 as
they relate to pension plans that are administered through trusts or similar arrangements meeting
certain criteria. This Statement builds upon the existing framework for financial reports of
defined benefit pension plans, which includes a statement of fiduciary net position (the amount
held in a trust for paying retirement benefits) and a statement of changes in fiduciary net position.
Statement 67 enhances note disclosures and RSI for both defined benefit and defined contribution
pension plans. Statement 67 also requires the presentation of new information about annual
money-weighted rates of return in the notes to the financial statements and in 10-year RSI
schedules. The provisions of this Statement became effective for financial statements for periods
County of Nantucket, Massachusetts Page 28 of 35 Basic Annual Financial Statements
beginning after June 15, 2013 and impact the financial reports of the pension systems that
communities participate in and not the financial statements of the communities themselves.
In June 2012, the GASB issued GASB Statement No. 68, Accounting and Financial Reporting
for Pensions — an amendment of GASB Statement No. 27. Statement 68 replaces the
requirements of Statement No. 27, Accounting for Pensions by State and Local Governmental
Employers and Statement No. 50, Pension Disclosures, as they relate to governments that provide
pensions through pension plans administered as trusts or similar arrangements that meet certain
criteria. Statement 68 requires governments providing defined benefit pensions to recognize their
long-term obligation for pension benefits as a liability for the first time, and to more
comprehensively and comparably measure the annual costs of pension benefits. The Statement
also enhances accountability and transparency through revised and new note disclosures and
required supplementary information. The provisions of GASB 68 became effective for the
County in fiscal year 2015 and had a material effect on its financial statements.
In January 2013, the GASB issued GASB Statement No. 69, Government Combinations and
Disposals of Government Operations. GASB 69 established accounting and financial reporting
standards to government combinations and disposals of government operations. The provisions
of GASB 69 became effective for the County in fiscal 2015 and did not have a material effect on
its financial statements.
In April 2013, the GASB issued GASB Statement No. 70, Accounting and Financial Reporting
for Nonexchange Financial Guarantees. The objective of GASB 70 is to improve accounting and
financial reporting by governments that extend and receive nonexchange financial guarantees.
The provisions of GASB 70 became effective for the County in fiscal year 2015 and did not have
a material effect on its financial statements.
In November 2013, the GASB issued GASB Statement No. 71, Pension Transition for
Contributions Made Subsequent to the Measurement Date—an amendment of GASB Statement
No. 68. The objective of GASB 71 is to address an issue regarding application of the transition
provisions of GASB 68. The issue relates to amounts associated with contributions, if any, made
by a state or local government employer or nonemployer contributing entity to a defined pension
plan after the measurement date of the government’s beginning net pension liability. The
provisions of GASB 71 became effective for the County in fiscal year 2015 and had a material
effect on its financial statements.
Future Year Implementation
In February 2015, the GASB issued GASB Statement No. 72, Fair Value Measurement and
Application. GASB 72 addresses accounting and financial reporting issues relating to fair value
measurements by providing guidance for determining a fair value measurement for financial
reporting purposes. The provisions of this Statement are effective for financial reporting periods
beginning after June 15, 2015 (fiscal year 2016). The County is currently evaluating whether
adoption will have a material impact on the financial statements.
In June 2015, the GASB issued GASB Statement No. 73, Accounting and Financial Reporting
for Pension and Related Assets That Are Not within the Scope of GASB Statement No. 68 and
Amendments to Certain Provision of GASB Statement No. 67 and No. 68. The objective of
GASB 73 is to improve the usefulness of information about pensions included in the general
purpose external financial reports of state and local governments for making decisions and
assessing accountability. This Statement establishes requirements for defined benefit pensions
that are not within the scope of Statement No. 68, Accounting and Financial Reporting for
County of Nantucket, Massachusetts Page 29 of 35 Basic Annual Financial Statements
Pensions, as well as for the assets accumulated for purposes of providing those pensions. In
addition, it establishes requirements for defined contribution pensions that are not within the
scope of Statement 68. The provisions of this Statement are effective for financial reporting
periods beginning after June 15, 2015 (fiscal year 2016) – except those provisions that address
employers and governmental nonemployer contributing entities for pensions that are not within
the scope of GASB Statement No. 68, which are effective for fiscal years beginning after June 15,
2016 (fiscal year 2017). The County is currently evaluating whether adoption will have a
material impact on the financial statements.
In June 2015, the GASB issued GASB Statement No. 74, Financial Reporting for
Postemployment Benefit Plans Other than Pension Plans. GASB 74’s objective is to improve the
usefulness of information about postemployment benefits other than pensions included in the
general purpose external financial reports of state and local governmental OPEB plans for making
decisions and assessing accountability. The provisions of this Statement are effective for financial
reporting periods beginning after June 15, 2016 (fiscal year 2017). The County is currently
evaluating whether adoption will have a material impact on the financial statements.
In June 2015, the GASB issued GASB Statement No. 75, Accounting and Financial Reporting
for Postemployment Benefits Other Than Pension Plans. GASB 75 established new accounting
and financial reporting requirements for governments whose employees are provided with OPEB,
as well as for certain nonemployer governments that have a legal obligation to provide financial
support for OPEB provided to the employees of other entities. The provisions of this Statement
are effective for financial reporting periods beginning after June 15, 2017 (fiscal year 2018). The
County is currently evaluating whether adoption will have a material impact on the financial
statements.
In June 2015, the GASB issued GASB Statement No. 76, The Hierarchy of Generally Accepted
Accounting Principles for State and Local Governments. The objective of GASB 76 is to identify
– in the context of the current governmental financial reporting environment – the hierarchy of
generally accepted principles (GAAP). This Statement reduces the GAAP hierarchy to two
categories of authoritative GAAP and addresses the use of authoritative and nonauthoritative
literature in the event that the accounting treatment for a transaction or other event is not specified
within a source of authoritative GAAP. The provisions of this Statement are effective for
financial reporting periods beginning after June 15, 2015 (fiscal year 2016). The County is
currently evaluating whether adoption will have a material impact on the financial statements.
IV. Prior Period Restatements
A prior period adjustment was made to decrease the County’s beginning net position to reflect the
net pension liability with the implementation of GASB 68. A summary of the restatements is as
follows:
* * * * * *
Prior year as presented 6,742,638$
Record net pension liability (514,698)
As restated 6,227,940$
County of Nantucket, Massachusetts Page 30 of 35 Basic Annual Financial Statements
COUNTY OF NANTUCKET, MASSACHUSETTS
(A COMPONENT UNIT OF THE TOWN OF NANTUCKET, MASSACHUSETTS)
RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES
IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES
JUNE 30, 2015
Net Change in Fund Balances - Total Governmental Fund Balances 411,512$
Governmental funds report capital outlays as expenditures. However, in
the Statement of Activities the cost of those assets is allocated over their
estimated useful lives and reported as depreciation expense. This amount
represents the net amount of depreciation expense in excess of capital
outlay. The amounts are represented here as reconciling items:
Depreciation expense (15,992)
Net effect of reporting capital assets (15,992)
Some expenses reported in the Statement of Activities do not require the
use of current financial resources and therefore are not reported as
expenditures in the governmental funds:
Other postemployment benefits (19,308)
Pension benefits (2,988)
Net effect of reporting long-term liabilities (22,296)
Change in Net Position of Governmental Activities 373,224$
See accompanying notes to basic financial statements.
County of Nantucket, Massachusetts Page 31 of 35 Basic Annual Financial Statements
COUNTY OF NANTUCKET, MASSACHUSETTS
REQUIRED SUPPLEMENTARY INFORMATION - PENSIONS
YEAR ENDED JUNE 30, 2015
SCHEDULE OF THE COUNTY'S PROPORTIONATE SHARE OF THE NET PENSION LIABILITY
Year Ended December 31,
2014
County's proportion of the net pension
liability (asset)0.09%
County's proportionate share of the net
pension liability (asset)518,581$
County's covered-employee payroll *240,934$
County's proportionate share of the net
pension liability (asset) as a percentage
of its covered-employee payroll 215.2%
Plan fiduciary net position as a percentage
of the total pension liability 65.5%
SCHEDULE OF THE COUNTY'S CONTRIBUTIONS TO PENSION PLAN
Year Ended December 31,
2014
Actuarially determined contribution 47,839$
Contributions in relation to the
actuarially determined contribution 47,839
Contribution deficiency (excess) -$
County's covered-employee payroll * 240,934$
Contributions as a percentage of
covered-employee payroll 19.9%
* Covered employee payroll as reported in the actuarial valuation report.
This schedule is presented to illustrate the requirement to show information for ten years.
However, until a full ten-year trend is compiled, information is presented for those years
in which information is available.
See accompanying independent auditor's report.
County of Nantucket, Massachusetts Page 32 of 35 Basic Annual Financial Statements
COUNTY OF NANTUCKET, MASSACHUSETTS
REQUIRED SUPPLEMENTARY INFORMATION
YEAR ENDED JUNE 30, 2015
SCHEDULE OF FUNDING PROGRESS
Other Postemployment Benefits
UAAL as a
Actuarial Actuarial Unfunded Percentage
Actuarial Value of Accrued AAL Funded Covered of Covered
Valuation Assets Liability (AAL)(UAAL)Ratio Payroll Payroll
Date (a)(b)(b-a)(a/b)(c)(b-a/c)
6/30/2014 -$ 416,517$ 416,517$ 0.0%N/A N/A
6/30/2012 - 272,602 272,602 0.0%N/A N/A
6/30/2010 - 83,358 83,358 0.0%N/A N/A
SCHEDULE OF CONTRIBUTION FUNDING
Other Postemployment Benefits
Annual
Year Ended Required Actual Percentage
June 30,Contributions Contributions Contributed
2015 27,847$ 8,539$ 30.7%
2014 28,435 10,754 37.8%
2013 24,071 9,789 40.7%
See accompanying independent auditor's report.
County of Nantucket, Massachusetts Page 33 of 35 Basic Annual Financial Statements
INDEPENDENT AUDITORS’ REPORT ON INTERNAL CONTROL OVER FINANCIAL
REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF
FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH
GOVERNMENT AUDITING STANDARDS
County Commissioners
County of Nantucket, Massachusetts
Nantucket, Massachusetts
We have audited, 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, the financial statements of the County of
Nantucket, Massachusetts (the “County”), as of and for the year ended June 30, 2015, and the related
notes to the financial statements, which collectively comprise the County’s basic financial statements and
have issued our report thereon dated January 15, 2016.
Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we considered the County’s internal
control over financial reporting (internal control) to determine the audit procedures that are appropriate in
the circumstances for the purpose of expressing our opinions on the financial statements, but not for the
purpose of expressing an opinion on the effectiveness of the County’s internal control. Accordingly, we
do not express an opinion on the effectiveness of the County’s internal control.
A deficiency in internal control exists when the design or operation of a control does not allow
management or employees, in the normal course of performing their assigned functions, to prevent, or
detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a
combination of deficiencies, in internal control, such that there is a reasonable possibility that a material
misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a
timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control
that is less severe than a material weakness, yet important enough to merit attention by those charged with
governance.
Our consideration of internal control was for the limited purpose described in the first paragraph of this
section and was not designed to identify all deficiencies in internal control that might be material
weaknesses or, significant deficiencies. Given these limitations, during our audit we did not identify any
deficiencies in internal control that we consider to be material weaknesses. However, material
weaknesses may exist that have not been identified.
County of Nantucket, Massachusetts Page 34 of 35 Basic Annual Financial Statements
County of Nantucket, Massachusetts
Page Two
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the County’s financial statements are free of
material misstatement, we performed tests of its compliance with certain provisions of laws, regulations,
contracts and grant agreements, noncompliance with which could have a direct and material effect on the
determination of financial statement amounts. However, providing an opinion on compliance with those
provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The
results of our tests disclosed no instances of noncompliance or other matters that are required to be
reported under Government Auditing Standards.
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance
and the results of that testing, and not to provide an opinion on the effectiveness of the entity’s internal
control or on compliance. This report is an integral part of an audit performed in accordance with
Government Auditing Standards in considering the entity’s internal control and compliance.
Accordingly, this communication is not suitable for any other purpose.
Roselli, Clark & Associates
Certified Public Accountants
Woburn, Massachusetts
January 15, 2016
County of Nantucket, Massachusetts Page 35 of 35 Basic Annual Financial Statements