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Nantucket FS 2013 TOWN OF NANTUCKET, MASSACHUSETTS Report on Examination of Basic Financial Statements and Additional Information Year Ended June 30, 2013 TOWN OF NANTUCKET, MASSACHUSETTS TABLE OF CONTENTS YEAR ENDED JUNE 30, 2013 Page INDEPENDENT AUDITORS' REPORT 1-3 MANAGEMENT’S DISCUSSION AND ANALYSIS 4-15 BASIC FINANCIAL STATEMENTS: Government-Wide Financial Statements: Statement of Net Position 17 Statement of Activities 18 Fund Financial Statements: Balance Sheet – Governmental Funds 19 Reconciliation of the Governmental Funds Balance Sheet Total Fund Balances to the Statement of Net Position 20 Statement of Revenues, Expenditures and Changes in Fund Balances – Governmental Funds 21 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities 22 Statement of Net Position – Proprietary Funds 23 Statement of Revenues, Expenses, and Changes in Fund Net Position – Proprietary Funds 24 Statement of Cash Flows – Proprietary Funds 25 Statement of Fiduciary Net Position – Fiduciary Funds 26 Statement of Changes in Fiduciary Net Position – Fiduciary Funds 27 Notes to Basic Financial Statements 28-60 REQUIRED SUPPLEMENTARY INFORMATION: Schedules of Funding Progress – Pension System and Other Post-Employment Benefits 62 Schedule of Contribution Funding – Pension System and Other Post-Employment Benefits 62 Schedule of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual – General Fund 63 Notes to Required Supplementary Information 64 SUPPLEMENTARY SCHEDULES – DISCRETELY PRESENTED COMPONENT UNIT: Nantucket County – Balance Sheet 67 Nantucket County – Schedule of Revenues, Expenditures and Changes in Fund Balances 68 ADDITIONAL INFORMATION: Nantucket Planning and Economic Development Commission – Schedule of Indirect Cost Rate 70 Nantucket Planning and Economic Development Commission – Schedule of Public Support 71 INDEPENDENT AUDITOR’S REPORT Honorable Board of Selectmen Town of Nantucket, Massachusetts Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business-type activities, the discretely presented component units, each major fund and the aggregate remaining fund information of the Town of Nantucket, Massachusetts, (the “Town”) as of and for the year ended June 30, 2013 which collectively comprise the Town’s basic financial statements as listed in the table of contents. We did not audit the financial statements of the Nantucket Islands Land Bank, a discretely presented component unit. Those financial statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for this discretely presented component unit, is based solely on the report of the other auditors. 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 of material misstatement. An audit includes 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 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 out audit opinions. Town of Nantucket, Massachusetts Page 1 of 71 Basic Annual Financial Statements Town of Nantucket Page Two Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, the discretely presented component units, each major fund and the aggregate remaining fund information of the Town, as of June 30, 2013, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Change in Accounting Principle As described in Note B, the Town implemented Governmental Accounting Standards Board (GASB) Statement No. 63, Financial Reporting of Deferred Outflow of Resources, Deferred Inflow of Resources and Net Position. Our opinion was not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that management’s discussion and analysis, the funding and contribution progress for pension benefits and other post- employment benefits information and budgetary comparison information as listed in the table of contents, 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. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Town’s basic financial statements. The combining and individual fund financial statements are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual fund financial statements are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual fund financial statements are fairly stated, in all material respects, in relation to the financial statements taken as a whole. Town of Nantucket, Massachusetts Page 2 of 71 Basic Annual Financial Statements Town of Nantucket Page Three Other Reporting Required By Government Auditing Standards In accordance with Government Auditing Standards, we have also issued a report dated December 5, 2013, 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. 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 considered in assessing the results of our audit. Roselli, Clark and Associates Certified Public Accountants Woburn, Massachusetts 01801 December 5, 2013 Town of Nantucket, Massachusetts Page 3 of 71 Basic Annual Financial Statements Management’s Discussion and Analysis Town of Nantucket, Massachusetts Page 4 of 71 Basic Annual Financial Statements MANAGEMENT’S DISCUSSION AND ANALYSIS As the management of the Town, we offer readers of the accompanying financial statements this narrative overview and analysis of the financial activities of the Town and its component units for the fiscal year ended June 30, 2013. Financial Highlights  The assets of the Town exceeded its liabilities at the close of the most recent fiscal year by approximately $320.4 million (total net position).  The government’s total net position increased by approximately $7.3 million (2.3%). This consisted of an increase in governmental activities’ net position by approximately $ 8.6 million (4.7% of total governmental activities’ net position) offset by a decrease in business - type activities’ net position of approximately $1.3 million (1.0% of business-type activities’ net position).  The Town’s Unassigned Fund Balance reported in the General Fund was approximately $13.9 million (21.4% of General Fund expenditures). Total Fund Balance in the General Fund was approximately $22.7 million (35.0% of General Fund expenditures). The Town reported a Restricted Fund Balance of $1.3 million in its High School Renovation Fund and reported Total Fund Balances of approximately $16.1 million in the Combined Nonmajor Governmental Funds.  The Town’s total debt decreased by approximately $8.9 million during the fiscal year. Detail of this net decrease is illustrated as follows: Overview of the Financial Statements This discussion and analysis are intended to serve as an introduction to the Town’s basic financial statements. The Town’s basic financial statements comprise three components: 1) government-wide financial statements, 2) fund financial statements, 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. Government-wide Financial Statements – The government-wide financial statements are designed to provide readers with a broad overview of the Town’s finances, in a manner similar to a private-sector business. The statement of position presents information on all of the Town’s assets and liabilities, with Regular scheduled maturities: Governmental Activities (5,711,332)$ Business-Type Activities (7,117,015) Amortization of bond premium: Governmental Activities (26,882) Business-Type Activities (135,295) Issuance of debt Governmental Activities 478,449 Business-Type Activities 3,640,000 (8,872,075)$ Town of Nantucket, Massachusetts Page 5 of 71 Basic Annual Financial Statements 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 of the Town 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.) The government-wide financial statements consist of three classifications; (1) those whose activities are principally supported by taxes and intergovernmental revenue (governmental activities); (2) those whose activities are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities), and (3) component units. The Town’s governmental activities consist of: 1. General government; 2. Public safety; 3. Education; 4. Public works; 5. Health and human services; 6. Culture and recreation; and, 7. Interest expense. The Town’s business-type activities consist of: 1. Siasconset Water District; 2. Wannacomet Water District; 3. Sewer; 4. Nantucket Memorial Airport; 5. Our Island Home; and 6. Solid waste. The Town’s component units consist of: 1. Nantucket County; and 2. Nantucket Islands Land Bank. 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. The Town, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the Town can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds. Accounting guidelines 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 will be reported in the following classifications: Town of Nantucket, Massachusetts Page 6 of 71 Basic Annual Financial Statements • 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 or in other major funds if negative 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. The Town maintains numerous 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 Capital Projects Fund which are considered to be major funds. Data from the other governmental funds are combined into a single, aggregated presentation. The Town adopts an annual appropriated budget for its general fund and its enterprise funds. A budgetary comparison schedule has been provided for the general fund to demonstrate compliance with this budget. Proprietary funds – The Town maintains two types of proprietary funds. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The Town uses an enterprise fund to account for all the business-type activities previously discussed. Internal service funds are used to report activities that service all other Town Departments. The Town uses an internal service fund to account for self-insured health insurance claims. Fiduciary funds – Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statement because the resources of those funds are not available to support the Town’s own programs. The accounting used for fiduciary funds is much like that used for proprietary funds. 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. Other Information - In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the Town’s progress in funding its Town of Nantucket, Massachusetts Page 7 of 71 Basic Annual Financial Statements obligation to provide pension benefits and other post-employment benefits to its employees as well as the Schedule of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual – General Fund. Government-wide Financial Analysis As noted earlier, net position may serve over time as a useful indicator of a government’s financial position. In the case of the Town, assets exceeded liabilities by approximately $320.5 million at the close of the most recent fiscal year. Condensed net asset data is presented as follows: Net Position By far, the largest portion (approximately $295.1 million) of the Town’s net position reflects its investment in capital assets (e.g. land, buildings, infrastructure, machinery, and equipment) less any related debt used to acquire those assets that is still outstanding. The Town uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the Town’s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. An additional portion, approximately $15.8 million, of the Town’s net position represents resources that are subject to external restrictions on how they may be used. The final portion, approximately $9.5 million is unrestricted and may be used to meet the Town’s current obligations and commitments. Governmental Activities Business-Type Activities Total June 30,June 30,June 30,June 30,June 30,June 30, 2013 2012 2013 2012 2013 2012 Assets Currrent and other assets 55,207,342$ 50,849,322$ 33,632,184$ 38,878,951$ 88,839,526$ 89,728,273$ Capital assets, net 231,330,728 227,503,133 199,504,003 198,089,279 430,834,731 425,592,412 Total assets 286,538,070 278,352,455 233,136,187 236,968,230 519,674,257 515,320,685 Liabilities Long-term liabilities 79,160,096 80,466,796 91,572,974 90,248,081 170,733,070 170,714,877 Other liabilities 14,053,131 13,212,006 14,514,004 18,332,055 28,567,135 31,544,061 Total liabilities 93,213,227 93,678,802 106,086,978 108,580,136 199,300,205 202,258,938 Net Position Invested in capital assets, net of related debt 179,338,227 180,920,463 115,761,910 118,522,202 295,100,137 299,442,665 Restricted 15,818,386 7,698,361 - - 15,818,386 7,698,361 Unrestricted (1,831,770) (3,945,171) 11,287,299 9,865,892 9,455,529 5,920,721 Total Net Position 193,324,843$ 184,673,653$ 127,049,209$ 128,388,094$ 320,374,052$ 313,061,747$ Town of Nantucket, Massachusetts Page 8 of 71 Basic Annual Financial Statements Condensed changes in net position data is presented as follows: Governmental Activities Business-Type Activities Total June 30,June 30,June 30,June 30,June 30,June 30, 2013 2012 2013 2012 2013 2012 Revenues Program revenues: Charges for services 5,562,748$ 4,044,598$ 31,799,794$ 32,847,185$ 37,362,542$ 36,891,783$ Operating grants and contributions 6,022,440 5,212,063 85,992 746,499 6,108,432 5,958,562 Capital grants and contributions 1,874,830 1,019,472 1,989,292 4,041,191 3,864,122 5,060,663 General revenues: Property taxes 63,594,267 61,863,287 - - 63,594,267 61,863,287 Hotel and meals excise 3,092,446 2,745,571 - - 3,092,446 2,745,571 Intergovernmental 737,402 307,901 - - 737,402 307,901 Other 6,169,618 5,875,687 55,748 40,348 6,225,366 5,916,035 Total Revenues 87,053,751 81,068,579 33,930,826 37,675,223 120,984,577 118,743,802 Expenses General government 9,765,641 8,067,153 - - 9,765,641 8,067,153 Public safety 14,042,554 14,027,728 - - 14,042,554 14,027,728 Education 35,190,752 30,155,166 - - 35,190,752 30,155,166 Public works 4,171,361 4,808,564 - - 4,171,361 4,808,564 Health and human services 2,301,279 4,430,896 - - 2,301,279 4,430,896 Culture and recreation 2,327,315 3,782,155 - - 2,327,315 3,782,155 Debt service 2,368,538 2,082,337 - - 2,368,538 2,082,337 Siasconset water - - 712,820 682,682 712,820 682,682 Wannacomet water - - 3,785,742 3,674,493 3,785,742 3,674,493 Sewer - - 6,149,616 5,760,776 6,149,616 5,760,776 Nantucket Memorial Airport - - 14,523,220 15,331,231 14,523,220 15,331,231 Our Island Home - - 7,079,676 6,923,716 7,079,676 6,923,716 Solid Waste - - 11,302,336 8,851,378 11,302,336 8,851,378 Total Expenses 70,167,440 67,353,999 43,553,410 41,224,276 113,720,850 108,578,275 Change in net position before transfers 16,886,311 13,714,580 (9,622,584) (3,549,053) 7,263,727 10,165,527 Transfers (8,303,291) (11,203,631) 8,303,291 11,203,631 - - Change in net position 8,583,020 2,510,949 (1,319,293) 7,654,578 7,263,727 10,165,527 Net position, beginning of year, as restated 184,673,653 182,162,704 128,388,094 120,733,516 313,061,747 302,896,220 Net position, end of year 193,256,673$ 184,673,653$ 127,068,801$ 128,388,094$ 320,325,474$ 313,061,747$ Town of Nantucket, Massachusetts Page 9 of 71 Basic Annual Financial Statements Governmental Activities – The governmental activities experienced a net increase in net position by approximately $ 8.6 million (4.7% of governmental activities’ net position). The following are the primary causes for the net increase in governmental activities: Net position of the business-type activities decreased by approximately $1.3 million (1.0% of business-type activities’ net position) from the prior year balances. The following is the breakdown by activity of the change in net position: Solid waste experienced a significant loss due to the increase in the provision to estimated landfill costs. Engineering studies determined that previous estimates were not sufficient. The Nantucket Memorial Airport overall loss was primarily due to an operating loss of approximately $2.5 million. This was consistent with expectations and the prior year operating loss of $2.1 million. These negative results were offset by favorable operations in the other business-type funds. Expenses: Provision for other post employment benefits (5,926,200)$ Provision for compensated absences (237,680) Provision for workmen's compensation (161,236) Expenses less than budget 2,459,444 Depreciation (3,191,816) Other miscellaneous items (220,671) (7,278,159)$ Revenues: Receipts exceeding forecast 2,462,350 Gain on sale of capital assets 736,256 3,198,606$ Other Items: Forecasted revenue surplus to fund capital additions 6,951,241$ Forecasted revenue surplus to fund principal payback 5,711,332 12,662,573$ Total Change 8,583,020$ Siasconset Water District 518,416$ Wannacomet Water District 536,360 Sewer 1,264,174 Nantucket Memorial Airport (946,506) Our Island Home (12,959) Solid Waste (2,678,778) Total Change (1,319,293)$ Town of Nantucket, Massachusetts Page 10 of 71 Basic Annual Financial Statements Fiscal Year 2013 Expenses and Program Revenues – governmental activities are graphically presented as follows: Major revenue sources of governmental activities consist of revenue from; Property taxes which represented 73.1% of total revenues, down from 76.3% in the prior year. Although the percentage of overall revenue was lower, the property tax amount increased in accordance with proposition 2 1/2, which caps property tax increases at 2 1/2% of the prior year levy plus new growth. No other revenue sources exceeded 10% of total revenues in either fiscal 2013 or 2012. $0 $5,000,000 $10,000,000 $15,000,000 $20,000,000 $25,000,000 $30,000,000 $35,000,000 $40,000,000 $45,000,000 $50,000,000 Functional expenses Program Revenues 73% 7% 2% 6%7% 4%1% Revenues Property taxes Operating grants and contributions Capital grants and contributions Charges for services Other Hotel and meals excise Intergovernmental (unrestricted) Town of Nantucket, Massachusetts Page 11 of 71 Basic Annual Financial Statements Educational expenses continues to be an area in which the Town devotes substantial resources. Education costs represented the area of largest disbursement for the Town as approximately 50.3% of total disbursements related to education up from 44.8% in the prior year. The increase, representing approximately $5.0 million was primarily due to an increase in health insurance benefits, post- employment benefits, salaries and general inflation. The Town is required under State law to fund a net school spending calculation. The Town funds well in excess of the minimum requirements. Public Safety expenses represented 20.1% of total expenses, down slightly from 20.8% in the prior year as operations were consistent from year to year. General Government expenses represented approximately 14% of total expenses up from 12% in the previous year. This was due to increases in general costs primarily a result of inflation and increased administration. No other expenses represented greater than 10.0% of total expenses in either fiscal 2013 and 2012. Fund-wide Financial Analysis of the Government’s Funds As noted earlier, the Town uses fund accounting to ensure and demonstrate compliance with finance- related legal requirements. Governmental funds – The focus of the Town’s governmental funds is to provide information on near- term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the Town’s financing requirements. In particular, unrestricted fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year. As of the close of the current fiscal year, the Town’s governmental funds balance sheet reported a combined ending fund balance of approximately $40.0 million, an increase of approximately $1.1 million over the prior year. Decreases of $4.1 million in the Capital Projects Fund were offset by increases in the General Fund of $2.7 due to favorable operating results and increases in the aggregate Nonmajor Funds of $2.5 million due to proceeds from sale of assets, and excess grant revenue received over expenditures. 14% 20% 50% 6% 3%3% 4% Expenses General government Public safety Education Public works Health and human services Culture and recreation Interest expense Town of Nantucket, Massachusetts Page 12 of 71 Basic Annual Financial Statements Unassigned fund balance in the general fund was approximately $13.9 million or 21.4% of general fund expenditures. This is available for spending at the government’s discretion. Assigned fund balance of $5.1 million; committed fund balance of approximately $2.1 million and restricted fund balance of $1.6 million bring total general fund balance to $22.7 million or 35% of general fund expenditures. The remainder of governmental fund balances are included as Combined Nonmajor Fund Balances and are classified as either (1) non-spendable, due to being the corpus of an endowment in the amount of approximately $44,000; or (2) restricted due to constraints placed externally by third-parties in the amount of approximately $16.0 million. Proprietary funds – The Town’s proprietary funds are made up of the same type of information found in the government-wide financial statements under business-type activities, but in more detail; and (2) the Town’s Internal Service Fund which accounts for the Town’s Health Claims Fund. The Health Claims Fund has a Net Asset balance of approximately $0.3 million. This represents an increase of approximately $0.8 million over the prior year. A positive amount from contributions combined with lower claim activity contributed to operating revenues exceeding operating expenses. Fiduciary Fund – The Town’s fiduciary fund is comprised primarily of the Town’s Private Purpose Trust Funds whose net assets are approximately $2.6 million. These assets are used strictly for purposes outside of the public domain such as scholarships and public assistance and increased by about $126,000 over the prior year due to positive contribution activity. In addition, the Town has elected to establish a trust under Chapter 32B Section 20 of the MGL whose sole purpose will be to accumulate funds to reduce the Town’s unfunded Post-Employment Benefits. In 2013 the Town elected to transfer seed money of $250,000 to establish the first contribution to the fund. 5 7 9 11 13 15 Revenues Expenses Health Claims Fund Town of Nantucket, Massachusetts Page 13 of 71 Basic Annual Financial Statements General Fund Budgetary Highlights Differences between the original budget and the final amended were for the most part not significant (less than 1%) except for pensions and other employee benefits which increased by about $0.9 million Further detail of budget to actual comparisons may be reviewed as part of the Required Supplementary Information following the footnotes to the report. Capital Asset and Debt Administration Capital Assets – The Town’s investment in capital assets for its governmental and business type activities as of June 30, 2013 amounts to approximately $431.0 million (net of accumulated depreciation) an increase from the previous year’s balance of approximately $5.4 million. This investment in capital assets includes land, buildings and improvements, infrastructure, machinery, equipment, and software. The total increase is due to capital investments exceeding depreciation for the year. Additional information on the Town’s capital assets can be found in Note II subsection D. Long-term Debt – At the end of the current fiscal year, the Town had total debt outstanding of approximately $144.2 million. The entire amount comprises debt backed by the full faith and credit of the government. The Town’s total debt decreased by approximately $8.9 million during the fiscal year due to: The Town’s most recent credit evaluation resulted in an “Aa2” rating from Moody’s Investment Services for general obligation debt. State statutes limit the amount of general obligation debt a governmental entity may issue to 5.0 % of its total assessed valuation. The current debt limitation for the Town is approximately $855 million, which is significantly in excess of the Town’s outstanding general obligation debt classified as inside the debt limit. Bond anticipation note payable balances outstanding at year-end amount to approximately $8.3 million.. Additional information on the Town’s short-term and long-term debt can be found in Note II under subsections F and G. Regular scheduled maturities: Governmental Activities (5,711,332)$ Business-Type Activities (7,117,015) Amortization of bond premium: Governmental Activities (26,882) Business-Type Activities (135,295) Issuance of debt Governmental Activities 478,449 Business-Type Activities 3,640,000 (8,872,075)$ Town of Nantucket, Massachusetts Page 14 of 71 Basic Annual Financial Statements Economic Factors and Next Year’s Budgets and Rates  Consistent with both State and National work force trends, the Town’s unemployment rates have improved over the last 12 months but still remain at historic highs. While this trend is expected to continue, the extent, timing or certainty of any full economic rebound cannot be reasonably estimated at this time.  The Town’s real estate tax base is made up predominantly of residential taxes, which comprise nearly 87.8% of the Town’s real estate tax base. The Town also relies heavily on its commercial and industrial real estate tax base, which in aggregate comprise 10.2 % of the Town’s real estate tax base. In addition, Chapter 580 of the Acts of 1980, more commonly referred to as Proposition 2 ½, limits the Town’s ability to increase taxes in any one year by more than two and one-half percent (2 ½%) of the previous year tax levy plus new growth.  The Town’s housing market continues to be vibrant and consistently outpaces the state and national indexes. Average home prices approximate $1.5 million and the average residential tax rate is 3.67 per $1,000.  The Town has responded well to the recent economic challenges. Reductions in local revenue, primarily interest income and other reductions in revenue have caused the Town to aggressively seek other revenue producing initiatives in order to maintain appropriations in ways that preserved local service levels.  All of the above items were considered when the Town developed its budget for fiscal year 2014. The budget was adopted in May 2013 and the Town expects its tax rate to be certified in December 2013. Requests for Information This financial report is designed to provide a general overview of the Town’s finances for all those with an interest in the government’s finances. Questions concerning any of the information provided in this report or request for additional financial information should be addressed to the Office of the Finance Director, 37 Washington Street, Nantucket, Massachusetts 02554. Complete stand-alone financial statements for Nantucket County were not prepared and thus are not available. Complete stand-alone financial statements for Nantucket Islands Land Bank may be obtained by contacting Nantucket Islands Land Bank, 22 Broad Street, Nantucket, Massachusetts 02554. Complete stand-alone financial statements for Nantucket Memorial Airport may be obtained from the Office of the Director of Finance 37 Washington Street, Nantucket, Massachusetts 02554. Town of Nantucket, Massachusetts Page 15 of 71 Basic Annual Financial Statements Basic Financial Statements Town of Nantucket, Massachusetts Page 16 of 71 Basic Annual Financial Statements Nantucket Governmental Business-Type Nantucket Islands Activities Activities Total County Land Bank Assets Cash and cash equivalents 41,500,923$ 26,958,239$ 68,459,162$ 3,120,979$ 4,166,122$ Investments 2,127,300 - 2,127,300 - 1,178,612 Investments, designated - - - - 4,684,029 Receivables, net: Property taxes 3,133,855 - 3,133,855 - - User fees - 3,662,914 3,662,914 - - Privilege fees - 273,870 273,870 - - Departmental and other 3,491,808 - 3,491,808 - 197,400 Intergovernmental 3,369,992 2,024,182 5,394,174 82,321 - Inventory - 466,443 466,443 - 294,660 Deposit held by third party 1,830,000 - 1,830,000 - - Other assets - - - - 552,202 Internal balances (246,536) 246,536 - - - Restricted cash and cash equivalents - - - - 1,769,693 Restricted investments - - - - 2,846,750 Cash surrender value of life insurance - - - - 718,096 Land conservation rights - - - - 30,000 Capital assets not being depreciated 183,934,349 27,393,089 211,327,438 3,283,842 251,723,240 Capital assets, net of accumulated depreciation 47,396,379 172,110,914 219,507,293 51,420 16,400,742 Total Assets 286,538,070 233,136,187 519,674,257 6,538,562 284,561,546 Liabilities Warrants and accounts payable 2,819,273 1,380,078 4,199,351 16,200 290,024 Accrued payroll and withholdings 1,753,301 254,421 2,007,722 24,263 - Accrued expenses - - - - 424,195 Health claims incurred but not reported 667,271 - 667,271 - - Accrued interest 717,275 1,038,114 1,755,389 - - Other liabilities 132,815 357,078 489,893 - - Bond anticipation notes payable 2,255,034 6,060,895 8,315,929 - - Noncurrent liabilities: Due within one year 5,708,162 5,423,418 11,131,580 - 4,078,611 Due in more than one year 79,160,096 91,572,974 170,733,070 88,699 27,802,752 Total Liabilities 93,213,227 106,086,978 199,300,205 129,162 32,595,582 Net Position Invested in capital assets, net of related debt 179,338,227 115,761,910 295,100,137 3,335,262 236,810,768 Restricted for: Nonexpendable permanent funds 44,305 - 44,305 - - Federal and State grants 3,744,513 - 3,744,513 - - Community preservation 6,416,704 - 6,416,704 - - Other purposes 5,612,864 - 5,612,864 1,768,963 4,616,443 Unrestricted (1,831,770) 11,287,299 9,455,529 1,305,175 10,538,753 Total Net Position 193,324,843$ 127,049,209$ 320,374,052$ 6,409,400$ 251,965,964$ TOWN OF NANTUCKET, MASSACHUSETTS STATEMENT OF NET POSITION JUNE 30, 2013 See accompanying notes to basic financial statements. Primary Government Component Units Town of Nantucket, Massachusetts Page 17 of 71 Basic Annual Financial Statements Program Revenues Net (Expenses) Revenues and Changes in Net Assets Operating Capital Nantucket Charges for Grants and Grants and Governmental Business-Type Nantucket Islands Functions/Programs Expenses Services Contributions Contributions Activities Activities Total County Land Bank Primary government: Governmental activities: General government 9,765,641$ 622,049$ 670,412$ 74,000$ (8,399,180)$ (8,399,180)$ Public safety 14,042,554 2,771,517 111,942 1,000 (11,158,095) (11,158,095) Education 35,190,752 1,488,121 5,138,993 - (28,563,638) (28,563,638) Public works 4,171,361 300,317 11,270 1,302,740 (2,557,034) (2,557,034) Health and human services 2,301,279 132,655 70,712 - (2,097,912) (2,097,912) Culture and recreation 2,327,315 248,089 19,111 497,090 (1,563,025) (1,563,025) Interest expense 2,368,538 - - - (2,368,538) (2,368,538) Total governmental activities 70,167,440 5,562,748 6,022,440 1,874,830 (56,707,422) (56,707,422) Business-type activities: Siasconset water 712,820 969,148 - - 256,328$ 256,328 Wannacomet water 3,785,742 4,395,389 609,647 609,647 Sewer 6,149,616 6,401,034 - 1,082,574 1,333,992 1,333,992 Nantucket Memorial Airport 14,523,220 11,595,061 85,992 906,718 (1,935,449) (1,935,449) Our Island Home 7,079,676 4,900,186 - - (2,179,490) (2,179,490) Solid waste 11,302,336 3,538,976 - - (7,763,360) (7,763,360) Total business-type activities 43,553,410 31,799,794 85,992 1,989,292 (9,678,332) (9,678,332) Total Primary Government 113,720,850$ 37,362,542$ 6,108,432$ 3,864,122$ (56,707,422) (9,678,332) (66,385,754) Component units: Nantucket County 828,001$ 925,233$ 166,050$ -$ 263,282 Nantucket Islands Land Bank 6,364,132 19,310,842 2,550,854 - 15,497,564 Total Component units 7,192,133$ 20,236,075$ 2,716,904$ -$ 263,282 15,497,564 General Revenues: Property taxes 63,594,267 - 63,594,267 - - Motor vehicle and other excise 2,338,423 - 2,338,423 - - Hotel and meals taxes 3,092,446 - 3,092,446 - - Community Preservation Fund surcharges 1,745,927 - 1,745,927 - - Grants and contributions not restricted to specific programs 737,402 - 737,402 - - Penalties and interest on taxes 677,906 - 677,906 - - Unrestricted investment income 66,235 55,748 121,983 - 79,753 Gain on sale of capital assets 736,256 - 736,256 - (730,387) Miscellaneous 604,871 - 604,871 - - Transfers (net)(8,303,291) 8,303,291 - - - Total general revenues and transfers 65,290,442 8,359,039 73,649,481 - (650,634) Change in Net Position 8,583,020 (1,319,293) 7,263,727 263,282 14,846,930 Net Position: Beginning of year, as restated (see Note I)184,741,823 128,368,502 313,110,325 6,146,118 237,119,034 End of year 193,324,843$ 127,049,209$ 320,374,052$ 6,409,400$ 251,965,964$ See accompanying notes to basic financial statements. TOWN OF NANTUCKET, MASSACHUSETTS STATEMENT OF ACTIVITIES FISCAL YEAR ENDED JUNE 30, 2013 Component Units Town of Nantucket, Massachusetts Page 18 of 71 Basic Annual Financial Statements TOWN OF NANTUCKET, MASSACHUSETTS BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2013 Town Nonmajor Total General Capital Governmental Governmental Fund Projects Funds Funds Assets Cash and cash equivalents 21,716,310$ 1,253,482$ 17,648,340$ 40,618,132$ Investments 1,839,531 - 113,682 1,953,213 Receivables, net of allowance for uncollectibles: Property taxes 2,986,274 - 147,581 3,133,855 Departmental and other 3,361,063 - 130,745 3,491,808 Intergovernmental 728,709 - 2,641,283 3,369,992 Due from other funds 31,464 - - 31,464 Total Assets 30,663,351$ 1,253,482$ 20,681,631$ 52,598,464$ Liabilities and Fund Balances Liabilities: Warrants and accounts payable 625,601$ -$ 195,902$ 821,503$ Accrued payroll and withholdings 1,685,999 - 67,302 1,753,301 Deferred revenues 5,156,974 - 1,972,526 7,129,500 Other liabilities - - 132,815 132,815 Due to other funds 475,000 - - 475,000 Bond anticipation notes payable - - 2,255,034 2,255,034 Total Liabilities 7,943,574 - 4,623,579 12,567,153 Fund Balances: Nonspendable - - 44,305 44,305 Restricted 1,577,323 1,253,482 16,013,747 18,844,552 Committed 2,114,218 - - 2,114,218 Assigned 5,146,635 - - 5,146,635 Unassigned 13,881,601 - - 13,881,601 Total Fund Balances 22,719,777 1,253,482 16,058,052 40,031,311 Total Liabilities and Fund Balances 30,663,351$ 1,253,482$ 20,681,631$ 52,598,464$ See accompanying notes to basic financial statements. Town of Nantucket, Massachusetts Page 19 of 71 Basic Annual Financial Statements TOWN OF NANTUCKET, MASSACHUSETTS RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TOTAL FUND BALANCES TO THE STATEMENT OF NET POSITION JUNE 30, 2013 Total Governmental Fund Balances 40,031,311$ Capital assets used in governmental activities are not financial resources and therefore are not reported in the funds.231,330,728 Other assets are not available to pay for current-period expenditures and are therfore deferred in the funds.7,129,500 Assets and liabilities of the Town's internal service funds are included in the Statement of Net Position, but are not reported in the governmental funds.257,601 In the Statement of Activities, interest is accrued on outstanding long-term debt whereas in governmental fund interest is not reported until due.(717,275) Long-term liabilities are not due and payable in the current period and therefore are not reported in the government funds: Unamortized premiums on bonds (62,909) Bonds and notes payable (60,236,633) Compensated absences (1,184,370) Other post employment benefits (23,223,110) Net Position of Governmental Activities 193,324,843$ See accompanying notes to basic financial statements. Town of Nantucket, Massachusetts Page 20 of 71 Basic Annual Financial Statements TOWN OF NANTUCKET, MASSACHUSETTS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS FISCAL YEAR ENDED JUNE 30, 2013 Town Nonmajor Total General Capital Governmental Governmental Fund Projects Funds Funds Revenues: Property taxes 63,517,709$ -$ -$ 63,517,709$ Intergovernmental 4,276,032 - 2,872,691 7,148,723 Motor vehicle and other excises 1,880,619 - 33,170 1,913,789 Hotel and meals taxes 3,092,446 - - 3,092,446 Community preservation surcharges - - 1,739,157 1,739,157 Licenses and permits 1,075,074 - - 1,075,074 Penalties and interest on taxes 677,906 - - 677,906 Fines and forfeitures 208,503 - - 208,503 Investment income 64,122 - (371) 63,751 Departmental and other revenue 2,110,226 - 2,799,756 4,909,982 Contributions and donations - 1,000 257,425 258,425 Total Revenues 76,902,637 1,000 7,701,828 84,605,465 Expenditures: Current: General government 7,452,340 120,423 579,948 8,152,711 Public safety 8,571,708 818,044 978,921 10,368,673 Education 21,473,502 121 2,761,744 24,235,367 Public works 2,723,317 60,179 261,083 3,044,579 Health and human services 989,186 - 910,263 1,899,449 Culture and recreation 1,155,888 3,083,348 798,316 5,037,552 Pension and fringe benefits 14,831,570 - - 14,831,570 State and county assessments 546,250 - - 546,250 Debt service: Principal 5,031,332 - 465,000 5,496,332 Interest 2,136,485 - 123,667 2,260,152 Total Expenditures 64,911,578 4,082,115 6,878,942 75,872,635 Excess (Deficiency) of Revenues Over (Under) Expenditures 11,991,059 (4,081,115) 822,886 8,732,830 Other Financing Sources (Uses): Proceeds from bonds and notes - - 478,449 478,449 Proceeds from refunding bonds 8,685,000 - - 8,685,000 Premiums from refunding bonds 808,509 - - 808,509 Sale of capital assets - - 865,210 865,210 Payments to refunding escrow agent (9,505,125) - - (9,505,125) Transfers in 600,428 - 318,895 919,323 Transfers out (9,843,342) (20,981) - (9,864,323) Total Other Financing Sources (Uses)(9,254,530) (20,981) 1,662,554 (7,612,957) Net Change in Fund Balances 2,736,529 (4,102,096) 2,485,440 1,119,873 FUND BALANCES - Beginning of year, as restated (See Note I)19,983,248 5,355,578 13,572,612 38,911,438 FUND BALANCES - End of year 22,719,777$ 1,253,482$ 16,058,052$ 40,031,311$ See acompanying notes to basic financial statements. Town of Nantucket, Massachusetts Page 21 of 71 Basic Annual Financial Statements TOWN OF NANTUCKET, MASSACHUSETTS RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES FISCAL YEAR ENDED JUNE 30, 2013 Net Change in Fund Balances - Total Governmental Fund Balances 1,119,873$ 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. The net amounts are reflected here as reconciling items: Capital outlays 6,951,241 Depreciation expense (3,191,816) Net effect of reporting capital assets 3,759,425 In the Statement of Activities, Internal Service Funds established to administer the Town's health insurance and worker's compensation activities are included within the activity, whereas these activities are not presented in the Statement of Revenues, Expenditures and Changes in Fund Balances.813,146 The issuance of long-term debt provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the financial resources of governmental funds. Neither has any effect on net assets. Also governmental funds report the effect of issuance costs, premiums, discounts, and similar items when debt is first issued, whereas these amounts are deferred and amortized in the Statement of Activities. The net amounts are reflected here as reconciling items: Proceeds from bonds and notes (478,449) Proceeds from refunding bonds (8,685,000) Premiums from refunding bonds (808,509) Payments to refunding escrow agent 9,505,125 Repayments of debt 5,496,332 Net effect of reporting long-term debt 5,029,499 Revenues in the Statement of Activities that do not provide current financial resources are fully deferred in the Statement of Revenues, Expenditures and Changes in Fund Balances. Therefore, the recognition of revenue for various types of accounts receivable differ between the two statements. The amount presented represents the difference in deferred revenue.1,506,162 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: Accrued interest 92,383 Compensated absences (1,008) Amortization of deferred charges on refunding (24,267) Amortization of premiums on bonds and notes payable 26,882 Other post employment benefits (3,739,075) Net effect of reporting long-term liabilities (3,645,085) Change in Net Position of Governmental Activities 8,583,020$ See accompanying notes to basic financial statements. Town of Nantucket, Massachusetts Page 22 of 71 Basic Annual Financial Statements TOWN OF NANTUCKET, MASSACHUSETTS STATEMENT OF NET POSITION PROPRIETARY FUNDS JUNE 30, 2013 Governmental Activities Nantucket Our Internal Siasconset Wannacomet Memorial Island Solid Service Water Water Sewer Airport Home Waste Total Fund Assets Current assets: Cash and cash equivalents 1,189,217$ 5,342,193$ 6,285,346$ 7,645,000$ 3,738,240$ 2,758,243$ 26,958,239$ 882,791$ Investments - - - - - - - 174,087 Receivables (net): User charges 105,359 476,654 768,390 670,650 1,136,274 505,587 3,662,914 - Privilege fees - - 273,870 - - - 273,870 - Intergovernmental - - 145,485 15,713 - - 161,198 - Inventory - 21,614 - 444,829 - - 466,443 - Due from other funds 412,362 - 526,304 - - - 938,666 197,000 Total current assets 1,706,938 5,840,461 7,999,395 8,776,192 4,874,514 3,263,830 32,461,330 1,253,878 Noncurrent assets: Receivables (net): Intergovernmental - - 1,862,984 - - - 1,862,984 - Deposit held by third party - - - - - - - 1,830,000 Nondepreciable capital assets 2,812,067 3,388,367 8,895,207 9,610,325 35,717 2,651,406 27,393,089 - Capital assets (net of depreciation)9,129,197 29,546,404 73,886,461 52,992,408 577,568 5,978,876 172,110,914 - Total noncurrent assets 11,941,264 32,934,771 84,644,652 62,602,733 613,285 8,630,282 201,366,987 1,830,000 Total Assets 13,648,202 38,775,232 92,644,047 71,378,925 5,487,799 11,894,112 233,828,317 3,083,878 Liabilities Current liabilities: Warrants and accounts payable 77,020 24,348 222,445 550,001 117,568 388,696 1,380,078 1,997,770 Accrued payroll and withholdings 574 22,375 28,099 71,137 131,862 374 254,421 - Health claims incurred but not reported - - - - - - - 667,271 Accrued interest 96,808 253,878 584,667 95,330 - 7,431 1,038,114 - Other liabilities - - - 357,078 - - 357,078 - Due to other funds - 669,008 - 23,122 - - 692,130 - Bond anticipation notes payable 500,000 800,000 97,000 4,663,895 - - 6,060,895 - Unamortized premiums on bonds 5,048 65,148 33,005 29,496 - - 132,697 - Compensated absences - 13,323 4,309 30,303 18,767 - 66,702 - Workers' compensation claims - - - - - - - 161,236 Bonds and notes payable 590,000 1,545,000 2,284,019 765,000 - 40,000 5,224,019 - Total current liabilities 1,269,450 3,393,080 3,253,544 6,585,362 268,197 436,501 15,206,134 2,826,277 Noncurrent liabilities: Unamortized premiums on bonds 75,720 562,528 232,755 241,607 - - 1,112,610 - Compensated absences - 119,903 38,784 272,723 168,899 - 600,309 - Landfill closure - - - - - 6,924,750 6,924,750 - Other post employment benefits 92,379 458,999 341,375 1,854,402 2,756,191 - 5,503,346 - Bonds and notes payable 6,785,000 19,710,000 41,971,959 8,470,000 - 495,000 77,431,959 - Total noncurrent liabilities 6,953,099 20,851,430 42,584,873 10,838,732 2,925,090 7,419,750 91,572,974 - Total Liabilities 8,222,549 24,244,510 45,838,417 17,424,094 3,193,287 7,856,251 106,779,108 2,826,277 Net Position Invested in capital assets, net of related debt 4,571,149 13,562,723 40,486,736 48,432,735 613,285 8,095,282 115,761,910 - Unrestricted 854,504 967,999 6,318,894 5,522,096 1,681,227 (4,057,421) 11,287,299 257,601 Total Net Position 5,425,653$ 14,530,722$ 46,805,630$ 53,954,831$ 2,294,512$ 4,037,861$ 127,049,209$ 257,601$ See accompanying notes to basic financial statements. Business-Type Activities Town of Nantucket, Massachusetts Page 23 of 71 Basic Annual Financial Statements TOWN OF NANTUCKET, MASSACHUSETTS STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION PROPRIETARY FUNDS FISCAL YEAR ENDED JUNE 30, 2013 Governmental Activities Nantucket Our Internal Siasconset Wannacomet Memorial Island Solid Service Water Water Sewer Airport Home Waste Total Fund Operating Revenues: Charges for services 966,059$ 4,156,950$ 6,396,715$ 11,674,061$ 4,890,168$ 3,538,520$ 31,622,473$ -$ Contributions - - - - - - - 11,441,754 Other 3,089 238,439 4,319 150,911 10,018 456 407,232 - Total Operating Revenues 969,148 4,395,389 6,401,034 11,824,972 4,900,186 3,538,976 32,029,705 11,441,754 Operating Expenses: Operating costs 213,444 2,269,898 2,667,292 11,769,432 7,018,610 10,889,490 34,828,166 - Depreciation 198,769 774,522 2,124,472 2,337,481 61,066 391,072 5,887,382 - Provision for bad debts - - - 230,890 - - 230,890 - Employee benefits - - - - - - - 11,272,801 Total Operating Expenses 412,213 3,044,420 4,791,764 14,337,803 7,079,676 11,280,562 40,946,438 11,272,801 Operating Income (Loss)556,935 1,350,969 1,609,270 (2,512,831) (2,179,490) (7,741,586) (8,916,733) 168,953 Nonoperating Revenues (Expenses): Intergovernmental - - 443,646 993,688 - - 1,437,334 - Investment income 851 13,933 9,417 34,277 (2,729) - 55,749 2,484 Interest expense (300,607) (741,322) (1,357,852) (416,307) - (21,774) (2,837,862) - Total Nonoperating Revenues (Expenses)(299,756) (727,389) (904,789) 611,658 (2,729) (21,774) (1,344,779) 2,484 Income (Loss) Before Transfers and Capital Contributions 257,179 623,580 704,481 (1,901,173) (2,182,219) (7,763,360) (10,261,512) 171,437 Privilege fees - - 638,928 - - - 638,928 - Transfers in 278,000 - - 1,150,728 2,261,560 5,192,450 8,882,738 641,709 Transfers out (16,763) (87,220) (79,235) (196,061) (92,300) (107,868) (579,447) - Change in Net Position 518,416 536,360 1,264,174 (946,506) (12,959) (2,678,778) (1,319,293) 813,146 Total Net Position - Beginning of the Year, as restated (see Note I)4,907,237 13,994,362 45,541,456 54,901,337 2,307,471 6,716,639 128,368,502 (555,545) Total Net Position - End of the Year 5,425,653$ 14,530,722$ 46,805,630$ 53,954,831$ 2,294,512$ 4,037,861$ 127,049,209$ 257,601$ See accompanying notes to basic financial statements. Business-Type Activities Town of Nantucket, Massachusetts Page 24 of 71 Basic Annual Financial Statements TOWN OF NANTUCKET, MASSACHUSETTS STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FISCAL YEAR ENDED JUNE 30, 2013 Governmental Activities Nantucket Our Internal Siasconset Wannacomet Memorial Island Solid Service Water Water Sewer Airport Home Waste Total Fund Cash Flows from Operating Activities: Receipts from users 1,086,439$ 4,201,694$ 6,539,899$ 11,800,010$ 4,519,660$ 3,428,472$ 31,576,174$ -$ Employee and employer contributions - - - - - - - 11,441,754 Receipts from other operating revenues 3,089 238,439 4,319 150,911 10,018 456 407,232 - Payments to employees - (1,003,915) (851,302) (2,904,209) (3,955,305) (19,526) (8,734,257) - Payments to vendors (149,425) (1,117,577) (1,584,171) (9,084,379) (2,496,278) (7,751,563) (22,183,393) - Payments for interfund services used - - - - - - - (11,182,793) Net Cash Provided by (Used in) Operating Activities 940,103 2,318,641 4,108,745 (37,667) (1,921,905) (4,342,161) 1,065,756 258,961 Cash Flows from Noncapital Financing Activities: Operating grants - - - 72,727 - - 72,727 - Advances (to) from other funds (334,341) 129,343 (64,660) 41,897 - - (227,761) (120,016) Transfers in 278,000 - - 1,150,728 2,261,560 5,192,450 8,882,738 641,709 Transfers out (16,763) (87,220) (79,235) (196,061) (92,300) (107,868) (579,447) - Net Cash Provided by (Used in) Noncapital Financing Activities (73,104) 42,123 (143,895) 1,069,291 2,169,260 5,084,582 8,148,257 521,693 Cash Flows from Capital and Related Financing Activities: Proceeds from the issuance of bonds and notes - - 275,000 1,325,000 - - 1,600,000 - Sewer privilege fees - - 458,108 - - - 458,108 - Proceeds from capital grants - - - 1,528,087 - - 1,528,087 - Acquisition and construction of capital assets (201,792) (1,776,070) (2,785,072) (2,437,965) (120,789) - (7,321,688) - Proceeds from bond anticipation notes 500,000 800,000 97,000 4,663,895 - - 6,060,895 - Repayments of bond anticipation notes - - - (8,968,090) - - (8,968,090) - Principal payments on bonds and notes (575,000) (1,555,000) (2,081,802) (619,000) - (110,000) (4,940,802) - Interest payments on bonds and notes (317,238) (838,250) (1,052,313) (445,968) - (21,774) (2,675,543) - Net Cash Used in Capital and Related Financing Activities (594,030) (3,369,320) (5,089,079) (4,954,041) (120,789) (131,774) (14,259,033) - Cash Flows from Investing Activities: Investment income 851 13,933 9,417 34,277 (2,729) - 55,749 2,484 Investment of operating cash - - - - 309,929 - 309,929 99,653 Net Cash Provided by Investing Activities 851 13,933 9,417 34,277 307,200 - 365,678 102,137 Net Change in Cash and Cash Equivalents 273,820 (994,623) (1,114,812) (3,888,140) 433,766 610,647 (4,679,342) 882,791 Cash and Cash Equivalents: Beginning of the year 915,397 6,336,816 7,400,158 11,533,140 3,304,474 2,147,596 31,637,581 - End of the year 1,189,217$ 5,342,193$ 6,285,346$ 7,645,000$ 3,738,240$ 2,758,243$ 26,958,239$ 882,791$ Reconciliation of Operating Income (Loss) to Net Cash Provided by (Used in) Operating Activities: Operating Income (Loss)556,935$ 1,350,969$ 1,609,270$ (2,512,831)$ (2,179,490)$ (7,741,586)$ (8,916,733)$ 168,953$ Adjustments to reconcile operating income (loss) to net cash provided by (used in) operating activities: Depreciation 198,769 774,522 2,124,472 2,337,481 61,066 391,072 5,887,382 - Provision for bad debt expense - - - 230,890 - - 230,890 - Changes in assets and liabilities: Receivables 120,380 44,744 143,184 100,799 (370,508) (110,048) (71,449) - Inventory - 108,409 - (217,616) - - (109,207) - Working capital deposit - - - - - - - (19,400) Accounts payable and accrued expenses 64,019 39,997 231,819 49,760 567,027 222,651 1,175,273 109,408 Landfill closure - - - - - 2,895,750 2,895,750 - Other liabilities - - - (26,150) - - (26,150) - Net Cash Provided by (Used in) Operating Activities 940,103$ 2,318,641$ 4,108,745$ (37,667)$ (1,921,905)$ (4,342,161)$ 1,065,756$ 258,961$ Noncash investing capital and financing activities: Intergovernmental subsidies of debt service -$ -$ 452,363$ -$ -$ -$ 452,363$ -$ Amortization of bond premiums 5,052 66,160 34,222 29,861 - - 135,295 - See accompanying notes to basic financial statements. Business-Type Activities Town of Nantucket, Massachusetts Page 25 of 71 Basic Annual Financial Statements TOWN OF NANUCKET, MASSACHUSETTS STATEMENT OF FIDUCIARY NET POSITION JUNE 30, 2013 Other Post Private Employment Purpose Agency Benefits Trust Fund Trust Funds Funds Assets Cash and cash equivalents 250,111$ 226,629$ 299,625$ Investments - 2,397,951 - Receivables, net of allowance for uncollectibles - - 99,046 Total Assets 250,111 2,624,580 398,671 Liabilities Warrants payable - 225 - Accrued payroll and withholdings - - 8,281 Agency liabilities - - 390,390 Total Liabilities - 225 398,671 Net Position Held in trust for other post employment benefits 250,111 - - Held in trust for private purposes - 2,624,355 - Total Net Position 250,111$ 2,624,355$ -$ See accompanying notes to basic financial statements. Town of Nantucket, Massachusetts Page 26 of 71 Basic Annual Financial Statements TOWN OF NANTUCKET, MASSACHUSETTS STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS YEAR ENDED JUNE 30, 2013 Other Post Private Employment Purpose Benefits Trust Fund Trust Funds Additions Contributions: Employer 250,000$ -$ Other - 400,702 Total contributions 250,000 400,702 Investment income: Interest and dividends 111 - Net appreciation in fair value of investments - (16,239) Less - investment management fees - - Net investment earnings 111 (16,239) Other income - 11,400 Total Additions 250,111 395,863 Deductions Life and health insurance premiums paid for retirees - - Education - scholarships - 130,850 Health and human services - public assistance - 138,190 Total Deductions - 269,040 CHANGE IN NET POSITION 250,111 126,823 NET POSITION AT BEGINNING OF YEAR - 2,497,532 NET POSITION AT END OF YEAR 250,111$ 2,624,355$ See accompanying notes to basic financial statements. Town of Nantucket, Massachusetts Page 27 of 71 Basic Annual Financial Statements TOWN OF NANTUCKET, MASSACHUSETTS NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2013 I. Summary of Significant Accounting Policies The accompanying basic financial statements of the Town 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 government entities. The following is a summary of the more significant policies and practices used by the Town: A. Reporting Entity The Town is located in Nantucket County, thirty miles south of Cape Cod and was incorporated as a Town in 1671. An elected five member Board of Selectmen (“Selectmen”) governs the Town and an appointed Town Manager oversees the Town’s daily executive and administrative duties. The Town provides governmental services for the territory within its boundaries, including police and fire protection, public education in grades K-12, water and sewer services, solid waste disposal, street maintenance, elderly housing, parks and recreational facilities and an airport. Discretely Presented Component Units – The Town includes two entities as component units in the Town's reporting entity because of the significance of their operations or financial relationships with the Town are such that exclusion would cause the basic financial statements to be misleading. Unless otherwise indicated, the notes to the basic financial statements pertain only to the primary government. A description of the discretely presented component units and their relationships with the Town follows: Nantucket County – The County of Nantucket (“the County”) is presented in a separate column to emphasize that it is legally separate from the Town but included because the Town is financially accountable for, and can impose its will on, the organization. The County shares the same geographical boundaries as the Town, and the Town’s Selectmen serve ex-officio as the County Commissioners. The County operates a Registry of Deeds and a Corrections Office. The County does not issue complete financial statements at June 30, 2013. Nantucket Islands Land Bank – The Nantucket Islands Land Bank (“the Land Bank”) was created by Chapter 669 of the Acts of 1983 of the Commonwealth of Massachusetts to acquire and manage open space and protect natural resources in Nantucket County. The Land Bank is administered by the Nantucket Islands Land Bank Commission, which is comprised of five elected members. It is legally separate from the Town but presented as a discrete component unit as the Land Bank’s bonds payable are guaranteed by the full faith and credit of the Town. The Land Bank issued complete financial statements at June 30, 2013 which may be obtained by contacting Nantucket Islands Land Bank, 22 Broad Street, Nantucket, Massachusetts 02554. Availability of Financial Information of Certain Town Enterprise Funds – The Nantucket Memorial Airport issues separate audited financial statements which may be obtained by contacting them at 14 Airport Road, Nantucket, MA 02554. Town of Nantucket, Massachusetts Page 28 of 71 Basic Annual Financial Statements B. Government-Wide and Fund Financial Statements In 2013, the Town implemented GASB Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position. As a result of the implementation, the basic financial statements were renamed to the statement of net position and statement of revenues, expenses and changes in net position. These statements were formerly referred to as the statement of net assets and statement of revenues, expenses and changes in net assets. All previous references to net assets have been replaced with the concept of net position in accordance with GASB 63. The Town did not have any assets or liabilities that were required to be reported as deferred outflows of resources and deferred inflows of resources in these 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 primary government and its component units. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. Likewise the primary government is reported separately from the legally separate component units. Separate financial statements are provided for governmental funds, proprietary funds and fiduciary funds, even though the fiduciary funds are excluded from the government-wide financial statements. Major individual government funds and major individual enterprise 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) The total assets, liabilities, revenues, or expenditures/expenses of an individual governmental or enterprise fund are at least ten percent of the corresponding element (assets, liabilities, etc.) for all funds of that category or type (total governmental or total enterprise funds), and 2) The total assets, liabilities, revenues, or expenditures/expenses of the individual governmental fund or enterprise fund are at least five percent of the corresponding element for all governmental and enterprise funds combined. Additionally, any other governmental or enterprise 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. Property 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. Town of Nantucket, Massachusetts Page 29 of 71 Basic Annual Financial Statements 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. Taxes and other items not properly included among program revenues are reported instead as general revenues. 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 unmatured interest on general long-term debt which is recognized when due, certain compensated absences, claims and judgments which are recognized when the obligations are expected to be liquidated with current expendable available resources. The Town considers property tax revenues to be available if they are collected within 60 days after the end of the fiscal year. Investment income associated with the current fiscal period is susceptible to accrual and has been recognized as revenue of the current fiscal period. All other revenue items are considered to be measurable and available only when the cash is received and are recognized as revenue at that time. 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. Town Capital Projects Fund – is used to account for all financial resources that are restricted, committed or assigned for the acquisition or construction of capital facilities and other capital assets of the governmental funds. 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: The 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. The 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. The proprietary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Under this method, revenues are recognized when earned and expenses are recorded when the liabilities are incurred. Town of Nantucket, Massachusetts Page 30 of 71 Basic Annual Financial Statements Proprietary funds distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. The principal operating revenues are user charges and fees, while operating expenses consist of salaries, ordinary maintenance, assessments and depreciation. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses. The government reports the following major proprietary funds: Siasconset Water Enterprise Fund – is used to account for the operations of the Town’s water activities in the Siasconset service area of the Town. Wannacomet Water Enterprise Fund – is used to account for the operations of the Town’s water activities in the remaining service areas of the Town. Sewer Enterprise Fund – is used to account for the operations of the Town’s sewer activities. Nantucket Memorial Airport Enterprise Fund – is used to account for the operations of the Town’s airport. Our Island Home Enterprise Fund – is used to account for the operations of Town’s nursing home activities. Solid Waste Enterprise Fund – is used to account for the operations of the Town’s landfill activities. Additionally, the following proprietary fund type is reported: Internal Service Fund – is used to account for the Town’s self-insured health insurance and workers’ compensation activities. Because these services primarily benefit governmental rather than business-type activities, they have been included within governmental activities in the government-wide financial statements. Fiduciary fund financial statements are reported using the economic resources measurement focus and use the accrual basis of accounting. Fiduciary funds are used to account for assets held in a trustee capacity and cannot be used to support the governmental programs. The government reports the following fiduciary funds: Other Post-Employment Benefits Trust Fund – is used to accumulate funds for future payments of other post-employment benefits for retirees, such as health and life insurance. Private Purpose Trust Fund – is used to account for trust arrangements under which the principal and income benefit individuals, private organizations or other governments. This fund is used for scholarships and affordable housing programs. Agency Fund – is used to account for assets held in a purely custodial capacity. The Town’s agency funds consist primarily of student activities, off-duty work details and escrow and other deposits. Town of Nantucket, Massachusetts Page 31 of 71 Basic Annual Financial Statements When both restricted and unrestricted resources are available for use, it is the Town’s policy to use restricted resources first, then unrestricted resources, as they are needed. D. Assets, Liabilities, Deferred Outflows/Inflows of Resources, and Net Position/Fund Equity Deposits and Investments – The Town’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. Investments for the Town and its component units are reported at fair value. Receivables – Real estate and personal property taxes are assessed on January 1 every year. Bills are sent quarterly and are due on August 1, November 1, February 1, and May 1, or thirty days subsequent to the mailing date. Interest accrues on delinquent taxes at the rate of 14% per annum. Property taxes levied are recorded as receivables in the fiscal year of the levy. The Town is allowed to take delinquent taxes into tax title fourteen days subsequent to the mailing of a demand for payment of the delinquent taxes. User charges receivables represent amounts billed for water, sewer, monthly landfill tipping fees, annual commercial landfill user fees, airport fuel sales and nursing home fees. Water and sewer charges are billed monthly and are subject to penalties and interest if not paid by the respective due date. The Town is authorized to take water and sewer fees into tax title fourteen days subsequent to the mailing of a demand for payment of the delinquent taxes. Real estate taxes, water user fees and sewer user fees that are secured through a lien process are considered 100% collectible. Accordingly, an allowance for uncollectible balances for these receivables is not reported. All personal property tax and excise tax receivables are shown net of an allowance for uncollectible balances comprised of those outstanding amounts greater than five years old. Departmental, landfill, airport and nursing home receivables are shown net of an allowance for uncollectible balances based on historical trends and specific account analysis. Sewer privilege fees represent betterments assessed to property owners related to upgrades to the Surfside Wastewater Treatment Plant. These are considered 100% collectible since they are secured through a lien on the owner’s property. Inventories and Prepaid Items – Inventories of the Wannacomet Water Enterprise Fund and Nantucket Memorial Enterprise Fund are valued at the lower of cost or market, with cost determined on a first-in, first out basis. Certain supplies and small tools are expensed when purchased. All other inventories, which are not material to the basic financial statements, are considered to be expenditures at the time of purchase. Restricted Assets – Certain assets of the component units are classified as restricted because their use is restricted by contract covenants. Capital Assets – Capital assets, which include land, land improvements, buildings and improvements, machinery and equipment, vehicles and infrastructure (e.g. roads, water and sewer mains, and similar items), are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. Town of Nantucket, Massachusetts Page 32 of 71 Basic Annual 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. Interest incurred during the construction phase of capital assets of business-type activities is included as part of the capitalized value of the assets constructed. All purchases and construction costs in excess of $10,000 are capitalized at the date of acquisition or construction, respectively, with expected lives of greater than one year. 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. Capital assets (excluding land and construction-in-process) are depreciated on a straight-line- basis. The estimated useful lives of capital assets being depreciated are as follows: Buildings and improvements 33-50 years Machinery and equipment 5-7 years Vehicles 5-10 years Infrastructure 40-70 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. Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as internal balances. 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. Transfers between and within governmental and fiduciary funds are eliminated from the governmental activities in the statement of activities. Any residual balances outstanding between the governmental activities and the business –type activities are reported in the statement of activities as transfers, net. Investment Income – Excluding the permanent funds, investment income derived from major and nonmajor governmental funds is legally assigned to the general fund unless otherwise directed by state law. Investment income of the proprietary funds is voluntarily assigned to the general fund. Compensated Absences – It is the Town’s policy to permit employees to accumulate earned but unused sick pay benefits. Vacation time may be carried for a period of 6 months subsequent to year-end and if not used during this period is lost. Compensated absence liabilities related to both governmental and business-type activities are normally paid from the funds reporting payroll and related expenditures. Amounts related to these benefits are accrued when incurred in the government-wide and proprietary fund financial statements. A liability for these amounts is reported in Governmental Funds only if they have matured. Long-term Obligations – Long-term debt is reported as a liability in the government-wide and proprietary fund statement of net position. Bond premiums and discounts are deferred and 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. Town of Nantucket, Massachusetts Page 33 of 71 Basic Annual Financial Statements 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 Town does not have any items that qualify for reporting as a deferred outflow. 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 Town does not have any items that qualify for reporting as a deferred inflow. Net Position – In the government-wide financial statements, net position reported as “invested in capital assets, net of related debt” includes capital assets, net of accumulated depreciation, less the principal balance of outstanding debt used to acquire capital assets. Unspent proceeds of capital related debt are not considered to be capital 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: Nonexpendable permanent funds represent the endowment portion of donor restricted trusts that support governmental programs. Federal and State grants represent assets that have restrictions placed on them from federal and state granting agencies. Community preservation represents assets that are restricted by state law for the purposes of acquiring or developing open space and recreational facilities, historic resources and affordable housing. 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 Town 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 – non-spendable, restricted, committed, assigned, and unassigned as described below: Non-spendable 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 such as the corpus of an endowment. Town of Nantucket, Massachusetts Page 34 of 71 Basic Annual Financial Statements 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 Town 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 formal action of the Town Meeting through Town Meeting Articles, which represent the most binding constraint that give rise to committed fund balance. Those committed amounts cannot be used for any other purpose unless the Town Meeting removes or changes the specified use by taking the same type of action (through Town Meeting Articles) it employed previously to commit those amounts. Assigned represents amounts that are constrained by the Town’s intent to be used for specific purposes, but are neither restricted nor committed. The Town has by ordinance authorized the Town Accountant to assign fund balance. The Town Meeting may also assign fund balance as it does when appropriating fund balance to cover a gap between estimated revenue and appropriations in the subsequent year’s appropriated budget. 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 Town’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 Town’s policy to use committed resources first, then assigned, and then unassigned as they are needed. The Town has not established financial policies with respect to maintaining minimum fund balance amounts. Stabilization Fund – The Town maintains a general stabilization fund which may be used for any municipal purpose upon a two-thirds vote of the Town Meeting. The balance of the fund totals $3,740,988 at June 30, 2013 and is reported as unassigned fund balance in the General Fund. Encumbrances – The Town’s encumbrance policy regarding the general fund is to (1) classify encumbrances that arise from the issuance of purchase orders resulting from normal purchasing activity approved by the Town Accountant as assigned, and (2) classify encumbrances that result from an action of the Town Meeting as committed. Encumbrances of funds already restricted, or committed are included within the classification of those fund balances and not reported separately. The Town reports $2,547,551 of encumbrances from normal purchasing activity in the general fund as assigned. There are no encumbrances reported in any other fund. Town of Nantucket, Massachusetts Page 35 of 71 Basic Annual Financial Statements The following table reflects the Town’s fund equity categorizations: E. Excess of Expenditures Over Appropriations During the fiscal year ended, expenditures did not exceed appropriations for the legally adopted budget. F. Use of Estimates The preparation of basic financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure for contingent assets and liabilities at the date of the basic financial statements and the reported amounts of the revenues and expenditures/expenses during the fiscal year. Actual results could vary from estimates that were used. II. Detailed Notes to All Funds A. Deposits and Investments A cash and investment pool is maintained that is available for use by all funds. Each fund type’s portion of this pool is displayed on the balance sheet as “cash and cash equivalents”. The deposits and investments of trust funds are held separately from those of other funds. Town Nonmajor Capital Governmental General Projects Funds Total Nonspendable: Nonexpendable trust funds -$ -$ 44,305$ 44,305$ Restricted: General government - - 906,402 906,402 Public safety - - 5,127,986 5,127,986 Education - - 1,858,929 1,858,929 Public works - - 602,513 602,513 Health and human services - - 684,920 684,920 Culture and recreation - - 416,293 416,293 Community preservation - - 6,416,704 6,416,704 Capital outlay - 1,253,482 - 1,253,482 Debt service 1,577,323 - - 1,577,323 Committed: General government 1,105,828 - - 1,105,828 Education 826,592 - - 826,592 Other purposes 181,798 - - 181,798 Assigned: Purchase orders 2,547,551 - - 2,547,551 Subsequent years' budget 2,599,084 - - 2,599,084 Unassigned 13,881,601 - - 13,881,601 22,719,777$ 1,253,482$ 16,058,052$ 40,031,311$ Town of Nantucket, Massachusetts Page 36 of 71 Basic Annual Financial Statements State laws and regulations require the Town 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. The Pool meets the criteria of an external investment pool. The Pool is administered by the Massachusetts Municipal Depository Trust (the 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 - In the case of deposits, this is the risk that in the event of a bank failure, the government’s deposits may not be returned to it. The Town and the County have adopted a deposit policy which requires that the Treasurer review each bank doing business with the Town on a quarterly basis. The policy does not restrict the value of uninsured or uncollateralized investments held at any time. The Land Bank does not have a policy regarding custodial credit risk for deposits. Primary Government At year-end, the carrying amount of the Town's deposits was $66,116,985 and the bank balance was $67,878,910. Of the Town's bank balance, $19,342,549 was covered by federal depository insurance or the Depositors Insurance Fund (“DIF”), and $48,536,361 was fully collateralized. Discretely Presented Component Unit – Nantucket County At year-end, the carrying amount of the County's deposits was $3,120,879 and the bank balance of $3,120,480 was covered by federal depository insurance or fully collateralized. Discretely Presented Component Unit – Nantucket Islands Land Bank At year-end, the carrying amount of the Land Bank’s deposits was $5,935,805, of which $300,945 was exposed to custodial credit risk. The Land Bank is required to hold monies in reserve in accordance with certain land acquisitions and debt service requirements of bond issuances. These reserve funds are included as restricted cash in the financial statements. Custodial Credit Risk: Investments – In the case of investments, this is the risk that in the event of the invested party not being able to provide required payments to investors, ceasing to exist, or filing of bankruptcy, the Town may not be able to recover the full amount of its principal investment and/or investment earnings. The Town and the County have 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 Town/County’s name and tax identification number. The Land Bank does not have a policy regarding custodial credit risk for investments. Town of Nantucket, Massachusetts Page 37 of 71 Basic Annual Financial Statements Primary Government The Town’s investments of $4,428,851 in U.S. government obligations and $96,400 in corporate debt securities are held by a broker-dealer where the Town’s assets are segregated from the broker-dealer firm assets and are protected up to $500,000 under coverage through the Securities Investor Protection Corporation (“SIPC”). Additionally, the broker-dealer carries excess insurance to cover claims over the SIPC limit through Lloyd’s with a firm cap of $1 billion with no individual client limit. The repurchase agreements consist of overnight sweep agreements which are invested in U.S. Treasury notes. Discretely Presented Component Unit – Nantucket County At year-end, the County’s investments consisted of Certificates of Deposit totaling $42,886 which were covered by federal depository insurance and were not subject to custodial credit risk. Discretely Presented Component Unit – Nantucket Islands Land Bank At year-end, the Land Bank’s investments consisted of Certificates of Deposit totaling $8,709,391 which were covered by federal depository insurance or DIF and were not subject to custodial credit risk. The Land Bank has entered into an agreement with the Town, which requires the Land Bank to establish a working capital reserve fund. This fund, along with the guarantee of the Town of its full faith and credit, secures the Series 2007A, Series 2009A and Series 2012A bonds outstanding as of June 30, 2013. In addition, the Land Bank is prohibited from acquiring additional real estate at any time that an amount equal to one year’s debt service relating to the bonds in the reserve fund is not on deposit. Interest Rate Risk – The Town 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. The Land Bank does not have a formal policy regarding interest rate risk. Credit Risk – The Town and 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. The Town’s investments of $4,428,851 in U.S. government obligations are rated “AAA’ and the $96,400 in corporate debt is rated “BAA3” by Moody’s. Concentration of Credit Risk – The Town does not place a limit on the amount that may be invested in any one issuer. The Town has 51% of its investments in United States government backed securities and 16% in MMDT. Town of Nantucket, Massachusetts Page 38 of 71 Basic Annual Financial Statements At June 30, 2013 the Town had the following investments and maturities: Time Until Maturity (Years) Fair Less More Investment Type Value Than 1 1-5 6-10 Than 10 Corporate fixed income securities 96,400$ -$ -$ -$ 96,400$ U.S. government obligations 4,428,851 1,012,319 3,416,532 - - Total Town investments with maturities 4,525,251 1,012,319$ 3,416,532$ -$ 96,400$ Other Investments: Repurchase agreements 1,351,547 External investment pool (MMDT)1,766,996 Total Town investments 7,643,794$ B.Receivables Receivables as of year-end for the Town's individual major and non-major governmental funds in the aggregate, including the applicable allowances for uncollectible accounts, are as follows: Gross Allowance for Net Amount Uncollectibles Amount Receivables: Real estate and personal property taxes 3,356,341$ (222,486)$ 3,133,855$ Tax liens 2,744,183 - 2,744,183 Motor vehicle and other excise taxes 1,100,183 (501,539) 598,644 Departmental and other 280,981 (132,000) 148,981 Intergovernmental 3,369,992 - 3,369,992 Total 10,851,680$ (856,025)$ 9,995,655$ Receivables as of year-end for Town's proprietary funds are as follows: Gross Allowance for Net Amount Uncollectibles Amount Receivables: Water user charges 582,013$ -$ 582,013$ Sewer user charges 768,390 - 768,390 Sewer privilege fees 273,870 - 273,870 Airport user charges 937,750 (267,100) 670,650 Our Island Home user charges 1,136,274 - 1,136,274 Solid waste user charges 674,116 (168,529) 505,587 Intergovernmental 2,024,182 - 2,024,182 Total 6,396,595$ (435,629)$ 5,960,966$ Town of Nantucket, Massachusetts Page 39 of 71 Basic Annual Financial Statements Massachusetts Water Pollution Abatement Trust – The Town has entered into numerous loan agreements with the Massachusetts Water Pollution Abatement Trust (“MWPAT”). It is expected that the Town will be subsidized by MWPAT on a periodic basis for principal in the amount of $2,008,469 and interest in the amount of $1,669,700 until the maturity of these agreements. GAAP requires the recognition of gross debt relative to these agreements; therefore, a receivable totaling $2,008,469 has been reported in the Sewer Enterprise Fund. Also, as of June 30, 2013 the Town had yet to receive, from undrawn loan proceeds an amount of $521,551; however, since the Town is legally obligated for the total amount of the debt, the gross total amount to be received has been recorded as temporary debt in the accompanying basic financial statements and the amount not yet received has been recorded as a receivable in the accompanying basic financial statements within the governmental activities. Governmental funds report deferred revenue in connection with receivables for revenues that are not considered to be available to liquidate liabilities of the current period. The following identifies the components of deferred revenues in the governmental funds: Other General Governmental Fund Funds Total Receivable type: Real estate and personal property taxes 1,795,911$ 147,581$ 1,943,492$ Tax liens 2,744,183 - 2,744,183 Motor vehicle and other excise taxes 598,644 - 598,644 Departmental and other 18,236 130,745 148,981 Intergovernmental - 1,694,200 1,694,200 Total 5,156,974$ 1,972,526$ 7,129,500$ C. Interfund Receivables, Payables and Transfers The composition of interfund balances at June 30, 2013 is as follows: Internal General Siasconset Service Fund Water Sewer Fund Total General Fund -$ 278,000$ -$ 197,000$ 475,000$ Wannacomet Water 8,342 134,362 526,304 - 669,008 Nantucket Memorial Airport 23,122 - - - 23,122 Total 31,464$ 412,362$ 526,304$ 197,000$ 1,167,130$ The outstanding balances between funds result mainly from the timing differences between the dates that transactions occur and the transfers of cash to the individual funds are made. Payable Fund Receivable Fund Town of Nantucket, Massachusetts Page 40 of 71 Basic Annual Financial Statements The composition of interfund transfers for the fiscal year ended June 30, 2013, is as follows: (1) Transfer to nonmajor funds to fund community school program and waterways. Transfers to enterprise funds to subsidize operations and capital. (2) Transfers to general fund to close out unspent capital funds. (3) Transfers to general fund for indirect costs. Nonmajor Nantucket Old Internal General Governmental Siasconset Memorial Island Solid Service Fund Funds Water Airport Home Waste Fund Total General Fund -$ 318,895$ 278,000$ 1,150,728$ 2,261,560$ 5,192,450$ 641,709$ 9,843,342$ (1) Town Capital Projects 20,981 - - - - - - 20,981 (2) Siasconset Water 16,763 - - - - - - 16,763 (3) Wannacomet Water 87,220 - - - - - - 87,220 (3) Sewer 79,235 - - - - - - 79,235 (3) Nantucket Memorial Airport 196,061 - - - - - - 196,061 (3) Old Island Home 92,300 - - - - - - 92,300 (3) Solid Waste 107,868 - - - - - - 107,868 (3) Total 600,428$ 318,895$ 278,000$ 1,150,728$ 2,261,560$ 5,192,450$ 641,709$ 10,443,770$ Transfers In Transfers Out D. Capital Assets Capital asset activity for governmental activities for the year ended June 30, 2013, was as follows: Beginning Ending Balance Increases Decreases Balance Governmental Activities: Capital assets not being depreciated: Land 170,414,375$ -$ (104,200)$ 170,310,175$ Construction in process 9,185,447 4,865,158 (426,431) 13,624,174 Total capital assets not being depreciated 179,599,822 4,865,158 (530,631) 183,934,349 Capital assets being depreciated: Buildings and improvements 52,506,267 825,236 - 53,331,503 Infrastructure 27,692,822 310,979 - 28,003,801 Machinery and equipment 4,228,980 1,040,354 - 5,269,334 Vehicles 8,416,503 440,145 - 8,856,648 Total capital assets being depreciated 92,844,572 2,616,714 - 95,461,286 6,951,241 Less accumulated depreciation for: Buildings and improvements (17,766,839) (1,306,131) - (19,072,970) Infrastructure (18,553,787) (827,852) - (19,381,639) Machinery and equipment (2,403,818) (587,101) - (2,990,919) Vehicles (6,148,647) (470,732) - (6,619,379) Total accumulated depreciation (44,873,091) (3,191,816) - (48,064,907) Total capital assets being depreciated, net 47,971,481 (575,102) - 47,396,379 Total governmental activities capital assets, net 227,571,303$ 4,290,056$ (530,631)$ 231,330,728$ Town of Nantucket, Massachusetts Page 41 of 71 Basic Annual Financial Statements An overstatement of the capital assets of governmental activities as of June 30, 2012, netting $2,220,697 was discovered by management during the current year. Accordingly, an adjustment has been made in these financial statements to restate the net position of governmental activities as described in Section III, Note I. An overstatement of the capital assets of business-type activities as of June 30, 2012, netting to $1,447,762, was discovered by management during the current year. The capital assets of the Siasconset Water Fund, Wannacomet Water Fund, Sewer Fund and Our Island Home Fund were overstated by $77,017, $1,012,711, $333,977, and $24,057, respectively. Accordingly, an adjustment has been made in these financial statements to restate the net position of the business- type activities activities as described in Section III, Note I. Capital asset activity for business-type activities for the year ended June 30, 2013, was as follows: Beginning Ending Balance Increases Decreases Balance Business-Type Activities: Capital assets not being depreciated: Land 17,833,070$ -$ -$ 17,833,070$ Construction in process 17,087,237 4,815,286 (12,342,504) 9,560,019 Total capital assets not being depreciated 34,920,307 4,815,286 (12,342,504) 27,393,089 Capital assets being depreciated: Buildings and improvements 13,192,953 85,734 - 13,278,687 Infrastructure 189,600,810 14,129,777 - 203,730,587 Machinery and equipment 22,302,219 137,401 - 22,439,620 Vehicles 4,853,123 274,863 - 5,127,986 Total capital assets being depreciated 229,949,105 14,627,775 - 244,576,880 Less accumulated depreciation for: Buildings and improvements (4,959,023) (339,594) - (5,298,617) Infrastructure (41,736,585) (4,610,720) - (46,347,305) Machinery and equipment (15,596,844) (746,295) - (16,343,139) Vehicles (4,286,132) (190,773) - (4,476,905) Total accumulated depreciation (66,578,584) (5,887,382) - (72,465,966) Total capital assets being depreciated, net 163,370,521 8,740,393 - 172,110,914 Total business-type activities capital assets, net 198,290,828$ 13,555,679$ (12,342,504)$ 199,504,003$ Town of Nantucket, Massachusetts Page 42 of 71 Basic Annual Financial Statements Beginning Ending Balance Increases Decreases Balance Business-type Activities: Siasconset Water Capital assets not being depreciated: Land 2,681,127$ -$ -$ 2,681,127$ Construction in process 817,196 130,940 (817,196) 130,940 Total capital assets not being depreciated 3,498,323 130,940 (817,196) 2,812,067 Capital assets being depreciated: Buildings and improvements 364,855$ -$ -$ 364,855$ Infrastructure 9,002,119 888,048 - 9,890,167 Machinery and equipment 76,796 - - 76,796 Total capital assets being depreciated 9,443,770 888,048 - 10,331,818 Less accumulated depreciation for: Buildings and improvements (201,407) (9,121) - (210,528) Infrastructure (755,476) (185,952) - (941,428) Machinery and equipment (46,969) (3,696) - (50,665) Total accumulated depreciation (1,003,852) (198,769) - (1,202,621) Total capital assets being depreciated, net 8,439,918 689,279 - 9,129,197 Total Siasconset Water capital assets, net 11,938,241$ 820,219$ (817,196)$ 11,941,264$ Business-type Activities: Wannacomet Water Capital assets not being depreciated: Land 3,388,367$ -$ -$ 3,388,367$ Capital assets being depreciated: Buildings and improvements 1,792,458 - - 1,792,458 Infrastructure 31,110,093 1,716,421 - 32,826,514 Machinery and equipment 3,691,633 59,649 - 3,751,282 Vehicles 267,998 - - 267,998 Total capital assets being depreciated 36,862,182 1,776,070 - 38,638,252 Less accumulated depreciation for: Buildings and improvements (339,547) (45,179) - (384,726) Infrastructure (4,891,343) (640,471) - (5,531,814) Machinery and equipment (2,831,571) (77,126) - (2,908,697) Vehicles (254,865) (11,746) - (266,611) Total accumulated depreciation (8,317,326) (774,522) - (9,091,848) Total capital assets being depreciated, net 28,544,856 1,001,548 - 29,546,404 Total Wannacomet Water capital assets, net 31,933,223$ 1,001,548$ -$ 32,934,771$ Business-type Activities: Sewer Capital assets not being depreciated: Land 6,375,583$ -$ -$ 6,375,583$ Construction in process 7,501,712 2,246,381 (7,228,469) 2,519,624 Total capital assets not being depreciated 13,877,295 2,246,381 (7,228,469) 8,895,207 Capital assets being depreciated: Buildings and improvements 259,201 12,500 - 271,701 Infrastructure 75,734,522 7,228,469 - 82,962,991 Machinery and equipment 15,500,048 30,197 - 15,530,245 Vehicles 753,357 274,863 - 1,028,220 Total capital assets being depreciated 92,247,128 7,546,029 - 99,793,157 Less accumulated depreciation for: Buildings and improvements (136,403) (6,552) - (142,955) Infrastructure (12,529,664) (1,628,826) - (14,158,490) Machinery and equipment (10,572,777) (441,248) - (11,014,025) Vehicles (543,380) (47,846) - (591,226) Total accumulated depreciation (23,782,224) (2,124,472) - (25,906,696) Total capital assets being depreciated, net 68,464,904 5,421,557 - 73,886,461 Total Sewer capital assets, net 82,342,199$ 7,667,938$ (7,228,469)$ 82,781,668$ Town of Nantucket, Massachusetts Page 43 of 71 Basic Annual Financial Statements Beginning Ending Balance Increases Decreases Balance Capital assets not being depreciated: Land 2,736,587$ -$ -$ 2,736,587$ Construction in process 8,732,612 2,437,965 (4,296,839) 6,873,738 Total capital assets not being depreciated 11,469,199 2,437,965 (4,296,839) 9,610,325 Capital assets being depreciated: Infrastructure 72,976,593 4,296,839 - 77,273,432 Machinery and equipment 1,594,537 - - 1,594,537 Vehicles 3,741,004 - - 3,741,004 Total capital assets being depreciated 78,312,134 4,296,839 - 82,608,973 Less accumulated depreciation for: Infrastructure (22,860,368) (2,077,723) - (24,938,091) Machinery and equipment (1,021,593) (128,577) - (1,150,170) Vehicles (3,397,123) (131,181) - (3,528,304) Total accumulated depreciation (27,279,084) (2,337,481) - (29,616,565) Total capital assets being depreciated, net 51,033,050 1,959,358 - 52,992,408 Total Nantucket Memorial Airport capital assets, net 62,502,249$ 4,397,323$ (4,296,839)$ 62,602,733$ Business-type Activities: Our Island Home Capital assets not being depreciated: Construction in process 35,717$ -$ -$ 35,717$ Capital assets being depreciated: Buildings and improvements 1,347,083 73,234 - 1,420,317 Machinery and equipment 138,269 47,555 - 185,824 Vehicles 90,764 - - 90,764 Total capital assets being depreciated 1,576,116 120,789 - 1,696,905 Less accumulated depreciation for: Buildings and improvements (907,241) (43,008) - (950,249) Machinery and equipment (60,266) (18,058) - (78,324) Vehicles (90,764) - - (90,764) Total accumulated depreciation (1,058,271) (61,066) - (1,119,337) Total capital assets being depreciated, net 517,845 59,723 - 577,568 Total Our Island Home capital assets, net 553,562$ 59,723$ -$ 613,285$ Business-type Activities: Solid Waste Capital assets not being depreciated: Land 2,651,406$ -$ -$ 2,651,406$ Capital assets being depreciated: Buildings and improvements 9,429,356 - - 9,429,356 Infrastructure 777,483 - - 777,483 Machinery and equipment 1,300,936 - - 1,300,936 Total capital assets being depreciated 11,507,775 - - 11,507,775 Less accumulated depreciation for: Buildings and improvements (3,374,425) (235,734) - (3,610,159) Infrastructure (699,734) (77,748) - (777,482) Machinery and equipment (1,063,668) (77,590) - (1,141,258) Total accumulated depreciation (5,137,827) (391,072) - (5,528,899) Total capital assets being depreciated, net 6,369,948 (391,072) - 5,978,876 Total Solid Waste capital assets, net 9,021,354$ (391,072)$ -$ 8,630,282$ Business-type Activities: Nantucket Memorial Airport Town of Nantucket, Massachusetts Page 44 of 71 Basic Annual Financial Statements An understatement of the capital assets of the Nantucket County Discretely Presented Component Unit as of June 30, 2012, netting to $3,255,383, was discovered by management during the current year. Accordingly, an adjustment has been made in these financial statements to restate the net position of Nantucket County as described in Section III, Note I. Depreciation expense was charged to functions/programs as follows: Governmental Activities:Business-Type Activities: General government 131,180$ Water 973,291$ Public safety 1,104,094 Sewer 2,124,472 Education 907,671 Airport 2,337,481 Public works 757,573 Our Island Home 61,066 Health and human services 11,123 Solid waste 391,072 Culture and recreation 280,175 5,887,382$ 3,191,816$ Discretely Presented Component Unit - Nantucket County Beginning Ending Balance Increases Decreases Balance Capital assets not being depreciated: Land 3,283,842$ -$ -$ 3,283,842$ Capital assets being depreciated: Machinery and equipment 211,012 - - 211,012 Less accumulated depreciation for: Machinery and equipment (144,059) (15,533) - (159,592) Total capital assets being depreciated, net 66,953 (15,533) - 51,420 Total Nantucket County capital assets, net 3,350,795$ (15,533)$ -$ 3,335,262$ Discretely Presented Component Unit - Nantucket Islands Land Bank Beginning Ending Balance Increases Decreases Balance Capital assets not being depreciated: Land 240,424,440$ 12,270,500$ (971,700)$ 251,723,240$ Capital assets being depreciated: Buildings, improvements and equipment 23,139,620 1,465,794 (636,535) 23,968,879 Less: accumulated depreciation (6,638,688) (1,001,297) 71,848 (7,568,137) Total capital assets being depreciated, net 16,500,932 464,497 (564,687) 16,400,742 Total Nantucket Islands Land Bank capital assets, net 256,925,372$ 12,734,997$ (1,536,387)$ 268,123,982$ Town of Nantucket, Massachusetts Page 45 of 71 Basic Annual Financial Statements E. Temporary Debt The Town is authorized to borrow on a temporary basis to fund the following: Current Operating Costs – Prior to collection of revenues, expenditures may be financed through the issuance of revenue or tax anticipation notes (RANS or TANS). Capital Projects and Other Approved Costs – Projects may be temporarily funded through the issuance of bond anticipation notes (BANS) or grant anticipation notes (GANS). In certain cases, prior to the issuance of these temporary notes, the governing body must take the necessary legal steps to authorize the issuance of the general obligation bonds. Temporary notes may not exceed the aggregate amount of bonds authorized or the grant award amount. Temporary notes are general obligations of the Town and carry maturity dates that are limited by state law. Interest expenditures and expenses for temporary borrowings are accounted for in the general fund and enterprise funds, respectively. Temporary notes outstanding at June 30, 2013, are payable as follows: Short-term (BANs) issued for nonmajor governmental funds were used for septic betterments ($521,551), highway projects ($633,483), and recreational fields ($1,100,000). Those issued for business-type funds were issued for water projects ($1,300,000), sewer projects ($97,000) and airport projects ($4,663,895). The Town has entered into a $1,000,000 no-interest loan agreement with the MWPAT, with proceeds used to fund the Town’s septic management program. A portion of the loan was permanently financed during the fiscal year ($478,449), while the remainder ($521,551) will be recorded as short-term debt until permanently financed. F. Long–Term Obligations The Town issues general obligation bonds and notes to provide funds for the acquisition and construction of major capital facilities. General obligation bonds and notes have been issued for Interest Maturity July 1,June 30, Type Rate Date 2012 Additions Retirements 2013 BAN 0.00%N/A 1,000,000$ -$ (478,449)$ 521,551$ BAN 1.25%6/6/14 - 1,100,000 - 1,100,000 BAN 0.70%6/6/14 - 633,483 - 633,483 Total Governmental Notes 1,000,000 1,733,483 (478,449) 2,255,034 BAN 1.25%Matured 8,968,090 - (8,968,090) - BAN 0.60%Matured - 372,000 (372,000) - BAN 1.25%6/6/14 - 6,060,895 - 6,060,895 Total Business-Type Notes 8,968,090 6,432,895 (9,340,090) 6,060,895 Total Notes Payable 9,968,090$ 8,166,378$ (9,818,539)$ 8,315,929$ Town of Nantucket, Massachusetts Page 46 of 71 Basic Annual Financial Statements both governmental and business-type activities. Additionally, the Town incurs various other long-term obligations relative to associated personnel costs. State law permits a Town, under the provisions of Chapter 44, Section 10, to authorize indebtedness up to a limit of 5.0 percent of its equalized valuation. Debt issued in accordance with this section of the law is designated as being “inside the debt limit.” In addition, a Town may authorize debt in excess of that limit for specific purposes. Such debt, when issued, is designated as being “outside the debt limit”. The following reflects the current year activity in the long-term liability accounts: Beginning Ending Due within Balance Additions Deletions Balance one year Governmental Activities: Bond and note indebtedness 65,469,516$ 9,163,449$ (14,396,332)$ 60,236,633$ 5,405,946$ Unamortized bond premium 89,791 - (26,882) 62,909 22,543 Workers' compensation 89,510 161,236 (89,510) 161,236 161,236 Compensated absences 1,183,362 237,680 (236,672) 1,184,370 118,437 Other post employment benefits 19,484,035 5,926,200 (2,187,125) 23,223,110 - Total Governmental Activities 86,316,214$ 15,488,565$ (16,936,521)$ 84,868,258$ 5,708,162$ Business-Type Activities - Siasconset Water: Bond and note debt 7,950,000$ -$ (575,000)$ 7,375,000$ 590,000$ Unamortized bond premium 85,820 - (5,052) 80,768 5,048 Other post employment benefits 96,944 36,436 (41,001) 92,379 - Total Siasconset Water 8,132,764 36,436 (621,053) 7,548,147 595,048 Business-Type Activities - Wannacomet Water: Bond and note debt 22,810,000 1,990,000 (3,545,000) 21,255,000 1,545,000 Unamortized bond premium 693,836 - (66,160) 627,676 65,148 Compensated absences 128,241 30,633 (25,648) 133,226 13,323 Other post employment benefits 387,776 94,085 (22,862) 458,999 - Total Wannacomet Water 24,019,853 2,114,718 (3,659,670) 22,474,901 1,623,471 Business-Type Activities - Sewer: Bond and note debt 46,198,993 275,000 (2,218,015) 44,255,978 2,284,019 Unamortized bond premium 299,982 - (34,222) 265,760 33,005 Compensated absences 36,977 13,511 (7,395) 43,093 4,309 Other post employment benefits 266,596 74,843 (64) 341,375 - Total Sewer 46,802,548 363,354 (2,259,696) 44,906,206 2,321,333 Business-Type Activities - Nantucket Memorial Airport: Bond and note debt 8,529,000 1,325,000 (619,000) 9,235,000 765,000 Unamortized bond premium 300,964 - (29,861) 271,103 29,496 Compensated absences 270,476 86,645 (54,095) 303,026 30,303 Other post employment benefits 1,599,576 387,675 (132,849) 1,854,402 - Total Nantucket Memorial Airport 10,700,016 1,799,320 (835,805) 11,663,531 824,799 Business-Type Activities - Our Island Home: Compensated absences 158,749 60,667 (31,750) 187,666 18,767 Other post employment benefits 2,302,420 657,877 (204,106) 2,756,191 - Total Our Island Home 2,461,169 718,544 (235,856) 2,943,857 18,767 Business-Type Activities - Solid Waste: Bond and note debt 645,000 50,000 (160,000) 535,000 40,000 Other post employment benefits 24,236 - (24,236) - - Landfill closure 4,029,000 2,895,750 - 6,924,750 - Total Solid Waste 4,698,236 2,945,750 (184,236) 7,459,750 40,000 Total Business-Type Activities 96,814,586$ 7,978,122$ (7,796,316)$ 96,996,392$ 5,423,418$ Town of Nantucket, Massachusetts Page 47 of 71 Basic Annual Financial Statements The governmental activities liabilities will be liquidated by the general fund. The business-type liabilities will be liquidated by the respective business-type funds. The following is a summary of outstanding long-term debt obligations as of June 30, 2013: Interest Beginning Ending Description of Issue Rate Balance Additions Maturities Balance Governmental Activities: General Obligation Bonds 2.25 - 5.00%34,853,800$ -$ (12,031,800)$ 22,822,000$ Refunding Bonds 1.50 - 5.00%12,754,900 8,685,000 (1,771,000) 19,668,900 USDA Notes 4.13%1,276,500 - (34,500) 1,242,000 Massachusetts Water Pollution Abatement Trust 0.00 - 2.42%16,584,316 478,449 (559,032) 16,503,733 Total Governmental Activities 65,469,516 9,163,449 (14,396,332) 60,236,633 Add: Unamortized bond premium 89,791 - (26,882) 62,909 Total Governmental Activities, net 65,559,307$ 9,163,449$ (14,423,214)$ 60,299,542$ Business-Type Activities - Siasconset Water: General Obligation Bonds 2.00 - 5.00%7,950,000$ -$ (575,000)$ 7,375,000$ Total Siasconset Water 7,950,000 - (575,000) 7,375,000 Business-Type Activities - Wannacomet Water: General Obligation Bonds 2.00 - 5.00%22,350,000 - (3,490,000) 18,860,000 Refunding Bonds 1.50 - 5.00%460,000 1,990,000 (55,000) 2,395,000 Total Wannacomet Water 22,810,000 1,990,000 (3,545,000) 21,255,000 Business-Type Activities - Sewer: General Obligation Bonds 2.00 - 5.00%5,186,200 275,000 (518,200) 4,943,000 Refunding Bonds 2.00 - 5.00%916,100 - (45,000) 871,100 Massachusetts Water Pollution Abatement Trust 0.00 - 5.50%40,096,693 - (1,654,815) 38,441,878 Total Sewer 46,198,993 275,000 (2,218,015) 44,255,978 Business-Type Activities - Nantucket Memorial Airport: General Obligation Bonds 2.00 - 5.00%8,529,000 1,325,000 (619,000) 9,235,000 Total Nantucket Memorial Airport 8,529,000 1,325,000 (619,000) 9,235,000 Business-Type Activities - Solid Waste: General Obligation Bonds 2.50 - 5.00%645,000 - (160,000) 485,000 Refunding Bonds 1.50 - 4.00%- 50,000 - 50,000 Total Solid Waste 645,000 50,000 (160,000) 535,000 Total Business-Type Activities 86,132,993 3,640,000 (7,117,015) 82,655,978 Add: Unamortized bond premium 1,380,602 - (135,295) 1,245,307 Total Business-Type Activities, net 87,513,595$ 3,640,000$ (7,252,310)$ 83,901,285$ Town of Nantucket, Massachusetts Page 48 of 71 Basic Annual Financial Statements Payments on general long-term debt obligation bonds and notes due in future years consist of the following: Year Ending Principal Interest June 30 Balance Subsidy Net of Subsidy Balance Subsidy Net of Subsidy Total Governmental Activities 2014 5,405,946$ -$ 5,405,946$ 1,942,707$ (418)$ 1,942,289$ 7,348,235$ 2015 5,478,306 - 5,478,306 1,724,082 (354) 1,723,728 7,202,034 2016 5,498,941 - 5,498,941 1,533,653 (292) 1,533,361 7,032,302 2017 5,583,010 - 5,583,010 1,335,113 (228) 1,334,885 6,917,895 2018 5,099,993 - 5,099,993 1,146,236 (162) 1,146,074 6,246,067 2019 - 2023 15,454,848 - 15,454,848 4,066,367 (128) 4,066,239 19,521,087 2024 - 2028 9,938,131 - 9,938,131 1,866,306 - 1,866,306 11,804,437 2029 - 2033 4,147,038 - 4,147,038 731,510 - 731,510 4,878,548 2034 - 2038 3,250,920 - 3,250,920 288,991 - 288,991 3,539,911 2039 - 2043 172,500 - 172,500 64,040 - 64,040 236,540 2044 - 2048 172,500 - 172,500 28,461 - 28,461 200,961 2049 34,500 - 34,500 1,423 - 1,423 35,923 Total 60,236,633$ -$ 60,236,633$ 14,728,889$ (1,582)$ 14,727,307$ 74,963,940$ Business-Type Activities: Siasconset Water 2014 590,000$ -$ 590,000$ 298,150$ -$ 298,150$ 888,150$ 2015 605,000 - 605,000 273,125 - 273,125 878,125 2016 620,000 - 620,000 245,875 - 245,875 865,875 2017 350,000 - 350,000 228,300 - 228,300 578,300 2018 355,000 - 355,000 217,100 - 217,100 572,100 2019 - 2023 1,955,000 - 1,955,000 860,426 - 860,426 2,815,426 2024 - 2028 2,310,000 - 2,310,000 435,436 - 435,436 2,745,436 2029 - 2030 590,000 - 590,000 28,650 - 28,650 618,650 7,375,000$ -$ 7,375,000$ 2,587,062$ -$ 2,587,062$ 9,962,062$ Business-Type Activities: Wannacomet Water 2014 1,545,000$ -$ 1,545,000$ 815,398$ -$ 815,398$ 2,360,398$ 2015 1,560,000 - 1,560,000 750,120 - 750,120 2,310,120 2016 1,598,000 - 1,598,000 695,890 - 695,890 2,293,890 2017 1,523,000 - 1,523,000 640,497 - 640,497 2,163,497 2018 1,500,000 - 1,500,000 585,002 - 585,002 2,085,002 2019 - 2023 7,053,000 - 7,053,000 2,066,605 - 2,066,605 9,119,605 2024 - 2028 5,541,000 - 5,541,000 743,730 - 743,730 6,284,730 2029 - 2032 935,000 - 935,000 57,176 - 57,176 992,176 21,255,000$ -$ 21,255,000$ 6,354,418$ -$ 6,354,418$ 27,609,418$ Business-Type Activities: Sewer 2014 2,284,019$ (145,485)$ 2,138,534$ 1,286,000$ (277,430)$ 1,008,570$ 3,147,104$ 2015 2,295,524 (155,356) 2,140,168 1,206,074 (252,251) 953,823 3,093,991 2016 2,315,733 (164,747) 2,150,986 1,129,926 (228,350) 901,576 3,052,562 2017 2,363,417 (176,386) 2,187,031 1,046,021 (200,123) 845,898 3,032,929 2018 2,256,131 (184,053) 2,072,078 968,639 (179,364) 789,275 2,861,353 2019 - 2023 11,420,492 (998,574) 10,421,918 3,699,967 (508,605) 3,191,362 13,613,280 2024 - 2028 8,940,992 (183,868) 8,757,124 2,021,936 (21,995) 1,999,941 10,757,065 2029 - 2033 6,403,914 - 6,403,914 1,094,992 - 1,094,992 7,498,906 2034 - 2038 5,975,756 - 5,975,756 367,600 - 367,600 6,343,356 44,255,978$ (2,008,469)$ 42,247,509$ 12,821,155$ (1,668,118)$ 11,153,037$ 53,400,546$ Town of Nantucket, Massachusetts Page 49 of 71 Basic Annual Financial Statements MWPAT Loan Subsidies – As previously noted in Note I. B., the Town has entered into loan agreements with the MWPAT. It is expected that the Town will be subsidized by MWPAT on a periodic basis for principal in the amount of $2,008,469 and interest in the amount of $1,669,700 until the maturity of these agreements. Refunding Transaction – On March 5, 2013, the Town issued general obligation refunding bonds of $10,725,000 (par value) with variable interest rates of between 1.5% - 4.0% to advance refund term bonds with variable interest rates between 2.50% - 4.125% and total values of $10,950,000. The original bonds had an original maturity date of June 15, 2023 and are callable through October 1, 2014. General obligation bonds were issued at par value with a reoffering premium of $998,406; and after issuance costs of $152,732, the net proceeds were $11,570,674. The net proceeds from the issuance of the general obligation refunding bonds, and $166,946 of available Town funds, were used to purchase U.S. government securities and those securities were deposited into an irrevocable trust with an escrow agent to provide debt service payments until the term bonds are fully callable through October 15, 2014. This advance refunding met the requirements of an in- substance defeasance, and the term bonds were removed from the Town’s government-wide financial statements. As a result of this refunding, the Town reduced its total debt service requirements by $948,708. This defeasance resulted in an economic gain (difference between the present value of the debt service payments on the old and new debt) of $874,857. Year Ending Principal Interest June 30 Balance Subsidy Net of Subsidy Balance Subsidy Net of Subsidy Total Business-Type Activities: Nantucket Memorial Airport 2014 765,000$ -$ 765,000$ 340,712$ -$ 340,712$ 1,105,712$ 2015 540,000 - 540,000 321,106 - 321,106 861,106 2016 535,000 - 535,000 306,543 - 306,543 841,543 2017 515,000 - 515,000 290,498 - 290,498 805,498 2018 440,000 - 440,000 273,362 - 273,362 713,362 2019 - 2023 2,250,000 - 2,250,000 1,130,062 - 1,130,062 3,380,062 2024 - 2028 1,715,000 - 1,715,000 728,062 - 728,062 2,443,062 2029 - 2033 1,655,000 - 1,655,000 394,046 - 394,046 2,049,046 2034 - 2036 820,000 - 820,000 80,156 - 80,156 900,156 9,235,000$ -$ 9,235,000$ 3,864,547$ -$ 3,864,547$ 13,099,547$ Business-Type Activities: Solid Waste 2014 40,000$ -$ 40,000$ 20,283$ -$ 20,283$ 60,283$ 2015 40,000 - 40,000 18,232 - 18,232 58,232 2016 40,000 - 40,000 17,032 - 17,032 57,032 2017 40,000 - 40,000 15,812 - 15,812 55,812 2018 40,000 - 40,000 14,563 - 14,563 54,563 2019 - 2023 175,000 - 175,000 53,210 - 53,210 228,210 2024 - 2028 160,000 - 160,000 19,412 - 19,412 179,412 535,000$ -$ 535,000$ 158,544$ -$ 158,544$ 693,544$ Town of Nantucket, Massachusetts Page 50 of 71 Basic Annual Financial Statements In prior years, the Town refunded various bond issues. The Town issued new bonds and the proceeds were used to purchase U.S. government securities that are held in an irrevocable trust. The investments are sufficient to fully service the refunded debt until the debt fully matures. For financial reporting purposes the debt has been considered defeased and has been removed as a liability from the government-wide financial statements. At June 30, 2013, $1,970,000 of bonds outstanding from the advanced refunding are considered defeased. The following represents authorized and unissued debt as of June 30, 2013: Discretely Presented Component Unit – Nantucket Islands Land Bank The general obligation bonds are secured by a second priority security interest in the Land Bank’s present and future transfer fees and unrestricted revenue. The bonds are additionally secured by a guarantee of the Town. Project Amount Governmental: Title V Septic 1,521,551$ Recreational playing fields 1,100,000 Business-type: Siasconset water 500,000 Wannacomet water 1,650,000 Sewer 6,402,613 Nantucket Memorial Airport 12,669,414 Solid waste - landfill 1,133,000 Total Authorized and Unissued 24,976,578$ The following reflects the activity in the long-term liability accounts for the Land Bank for the year ended June 30, 2013: Beginning Ending Due within Balance Additions Deletions Balance one year Bond and note indebtedness 34,617,866$ -$ (3,085,403)$ 31,532,463$ 4,078,611$ Other post employment benefits 348,900 - - 348,900 - Total Land Bank 34,966,766$ -$ (3,085,403)$ 31,881,363$ 4,078,611$ The following is a summary of outstanding long-term debt obligations as of June 30, 2013: Interest Beginning Ending Description of Issue Rate Balance Additions Maturities Balance Notes payable 3.00 - 6.06%4,295,343$ -$ (1,189,125)$ 3,106,218$ General Obligation Bonds 2.00 - 5.00%30,322,523 - (1,896,278) 28,426,245 Total Land Bank 34,617,866$ -$ (3,085,403)$ 31,532,463$ Town of Nantucket, Massachusetts Page 51 of 71 Basic Annual Financial Statements Payments on general long-term debt obligation bonds and notes due in future years consist of the following: III. Other Information A. Retirement System Plan Description - The Town and the Nantucket County discretely presented component unit contribute to the Barnstable County Retirement System (BCRS), a multiple-employer defined benefit pension plan established under MGL Chapter 32 and is administered by the Barnstable County Retirement Board (BCRB). The BCRS 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 directly. Cost-of-living adjustments granted after 1997 must be approved by the BCRB and are borne by the BCRS. The BCRS issues a publicly available unaudited financial report in accordance with guidelines established by the Commonwealth of Massachusetts’ Public Employee Retirement Administration Commission (PERAC) that includes financial statements and required supplementary information. The report may be obtained by writing to the Barnstable County Retirement System, 750 Attucks Lane, Hyannis, Massachusetts 02601. Funding Policy – Plan members are required to contribute to the BCRS at rates ranging from 5% to 11% of annual covered compensation. The Town and County are required to pay into the BCRS for its share of the system-wide actuarial determined contribution that is apportioned among the employers based on active current payroll. The contributions of plan members, the Town, and the County are governed by Chapter 32 of the MGL. The Town’s contributions to the BCRS for the fiscal years ended June 30, 2013, 2012, and 2011 were $4,543,194, $4,372,452, and $4,263,340 respectively, which equaled its required contribution for each year. The County’s contributions to the BCRS for the fiscal years ended June 30, 2013, 2012, and 2011 were $40,348, $41,544, and $39,710 respectively, which equaled its required contribution for each year. Year Ending June 30 Principal Interest Total 2014 4,100,315$ 1,083,925$ 5,184,240$ 2015 2,475,279 902,651 3,377,930 2016 2,570,736 821,949 3,392,685 2017 2,151,704 738,204 2,889,908 2018 2,226,704 640,167 2,866,871 2019 - 2023 9,308,520 2,166,700 11,475,220 2024 - 2028 7,056,064 865,787 7,921,851 2029 - 2033 1,643,141 104,780 1,747,921 Total 31,532,463$ 7,324,163$ 38,856,626$ Town of Nantucket, Massachusetts Page 52 of 71 Basic Annual Financial Statements 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 actuarial accrued liability for benefits. B. Massachusetts Teachers’ Retirement System Teachers and certain administrative employees of the School Department participate in a contributory retirement system administered by the Massachusetts Teachers Retirement Board. Contributions to that system totaled $2,597,468 for the fiscal year and were made entirely by the Commonwealth of Massachusetts, on behalf of the Town, which does not contribute directly to this system. C. Other Post-Employment Benefits (OPEB) Plan Description – The Town administers a multiple-employer defined benefit healthcare plan (the “Plan”). The Plan provides health and life insurance benefits to current and future retirees, their dependents and beneficiaries in accordance with Massachusetts General Law Chapter 32B. Specific benefit provisions and contribution rates are established by collective bargaining agreements, state law, and Town ordinance. All benefits are provided through the Town’s self- funded insurance program described previously. The Plan does not issue a stand–alone financial report. The number of participants in the Plan consists of 463 active employees and 307 retired employees for a total of 770. Funding Policy – The contribution requirements of Plan members and the Town are established and may be amended by the Town, through negotiation with the Town employee unions. Retirees contribute 10 – 20 percent of the calculated contribution through pension benefit deductions. The remainder of the cost is funded by the Town. The Town pays the remainder. The Town currently contributes enough money to the Plan to satisfy current obligations on a pay- as-you-go basis. The costs of administering the Plan are paid by the Town. Annual OPEB Cost and Net OPEB Obligation – The Town’s annual OPEB cost is calculated based on the annual required contribution “ARC” of the employer, an actuarially determined amount that is calculated in accordance with GASB Statement #45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded liabilities over a period not to exceed thirty years. The following table reflects the activity regarding the Town’s OPEB obligation: Annual required contribution (ARC)6,971,692$ Interest on net OPEB obligation 1,086,966 Adjustment to ARC (881,542) Annual OPEB cost 7,177,116 Contributions made (2,612,243)$ Increase in net OPEB obligation 4,564,873 Net OPEB obligation at beginning of year 24,161,583 Net OPEB obligation at end of year 28,726,456$ Town of Nantucket, Massachusetts Page 53 of 71 Basic Annual Financial Statements An understatement of the Town’s OPEB liability at June 30, 2012 totaling $95,235 was discovered by management during the current year. Accordingly, an adjustment has been made in these financial statements to restate the net position of governmental activities as described in Section III, Note I. Trend information regarding 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, 2011 $ 5,905,000 37.3% $ 20,513,000 June 30, 2012 $ 6,257,000 40.5% $ 24,161,583 June 30, 2013 $ 7,177,116* 36.4% $ 28,726,456 * Reflected in the Statement of Activities as follows: The AOPEBC at June 30, 2013 was charged to the following functional programs: General Government $600,355; Public Safety $1,280,394; Education $3,517,603; Public Works $334,682; Health and Human Services $116,473; Culture and Recreation $76,693; Siasconset water $36,436; Wannacomet water $94,085; Sewer $74,843; Airport $387,675; and Old Island Home $657,877. Funding Status and Funding Progress – The funded status of the Plan at June 30, 2013, based on the most recent actuarial valuation performed as of June 30, 2012, 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) $ - $88.6 $88.6 0.0% 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. 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: Town of Nantucket, Massachusetts Page 54 of 71 Basic Annual Financial Statements Valuation date: June 30, 2012 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: 8.0% decreasing by 0.5% for 6 years to an ultimate level of 5.0% per year Discretely Presented Component Unit – Nantucket County Plan Description – Nantucket County’s employees participate in the multiple-employer defined benefit healthcare plan administered by the Town which was described previously. 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 #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. The following table reflects the activity regarding the County's OPEB obligation: An overstatement of the County’s OPEB liability at June 30, 2012 totaling $95,235 was discovered by management during the current year. Accordingly, an adjustment has been made in these financial statements to restate the net position of governmental activities as described in Section III, Note I. Annual required contribution (ARC)23,433$ Interest on net OPEB obligation 3,654 Adjustment to ARC (3,016) Annual OPEB cost 24,071 Contributions made (9,789)$ Increase in net OPEB obligation 14,282 Net OPEB obligation at beginning of year 74,417 Net OPEB obligation at end of year 88,699$ Town of Nantucket, Massachusetts Page 55 of 71 Basic Annual Financial Statements D. Risk Financing The Town 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 three years. Health Insurance – The Town maintains a "reinsured cost reimbursement program" which covers the group health insurance requirements of a majority of Town employees. The Plan is essentially a self-insurance program and employee claims in excess of $150,000 are reinsured by the Plan. The Town accrues an amount representing claims incurred but not reported (IBNR), which is based on a one month claims paid average. At June 30, 2013, the amount of the liability for IBNR health insurance claims totaled $667,271. This liability is the best estimate based on available information. In the fund-wide financial statements, the Town reports these self-insured activities in the Internal Service Fund where revenues are recorded when earned and expenses are recorded when the liability is incurred. Changes in the reported liability since July 1, 2011, are as follows: Balance at Beginning of Year Claims and Changes in Estimates Claims Payments Balance at End of Year Current Portion Fiscal Year 2013 $ 778,820 $ 12,022,770 $(12,134,319) $ 667,271 $ 667,271 Fiscal Year 2012 729,885 11,207,253 (11,158,288) 778,820 778,820 Workers’ Compensation – The Town is also self-insured for their workers’ compensation activities. Workers’ compensation claims are administered by a third-party and are funded on a pay-as-you-go basis from an Internal Service Fund, with annual appropriations being made to the fund. The estimated future workers’ compensation liability is based on history and injury type. At June 30, 2013, the amount of the liability for workers’ compensation claims totaled $161,236. This liability is the best estimate based on available information. Changes in the reported liability since July 1, 2011: Balance at Beginning of Year Claims and Changes in Estimates Claims Payments Balance at End of Year Current Portion Fiscal Year 2013 $ 89,510 $ 234,186 $( 162,460) $ 161,236 $ 161,236 Fiscal Year 2012 176,650 102,269 ( 262,133) 89,510 89,510 E. Commitments The Town is in the process of completing sewer system and Nantucket Memorial Airport improvements. The Town has entered into contracts to expend approximately $1,700,000 and $800,000, respectively to complete the projects. Town of Nantucket, Massachusetts Page 56 of 71 Basic Annual Financial Statements F. Contingencies The Town is party to other 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, 2013, cannot be ascertained, management believes that the resulting liability, if any, should not materially affect the basic financial statements of the Town at June 30, 2013. 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 Town expects such amounts, if any, to be immaterial. The Town is subject to certain Federal arbitrage laws in accordance with long-term borrowing agreements. Failure to comply with the rules could result in the payment of penalties. The Town does not believe it has failed to comply with any of these agreements. The Town is contingently liable for 35% of any deficit, including operating and debt service costs, which may be incurred by the Woods Hole, Martha’s Vineyard and Nantucket Steamship Authority (the “Authority”). As of December 31, 2012, the Authority’s reserve fund balance totaled $2,906,251 and bonds outstanding totaled $59,603,922, net of unamortized premiums of $1,598,069 and a deferred loss on refunding of $119,147. For the fiscal year ended December 31, 2012, the Authority’s revenues exceeded its cost of services by $3,815,195. The Town is not required to make payments to the Authority unless the amount in the Authority’s reserve fund is insufficient. Since 1962, the Town has not made any payments to the Authority. G. Landfill Closure and Post-Closure Care Costs The Town operates a landfill under an Administrative Consent Order (ACO) with the Massachusetts Department of Environmental Protection (DEP). The current ACO allows the Town to mine the current landfill for useable materials through fiscal year 2014. The landfill consists of five cells, three lined and two unlined. The largest cell is unlined and has been closed for several years with sections scheduled for excavation under the mining program in fiscal year 2014. Two cells, which are no longer accepting waste, are uncapped and unlined and have been previously excavated under the mining program. Another cell is inactive, lined but uncapped. There is one lined cell that is currently accepting waste. The final capping and closure of the unclosed cells are dependent on construction of new cells and DEP approval of the continuation of the mining program. The Town has recognized a closure liability of $6,924,750 in the Solid Waste Enterprise fund. This liability is based on estimates of the cost of all closure and post- closure care for 30 years. Actual costs may change due to inflation, changes in technology, or changes in regulations. H. Implementation of GASB pronouncements Current Year Implementations – In November 2010, the GASB issued GASB Statement No. 60, Accounting and Financial Reporting for Service Concession Arrangements. The objective of this Statement was to improve financial reporting by addressing issues related to service concession arrangements. The provisions of GASB 60 became effective for the Town in fiscal year 2013 and did not have a material effect on its financial statements. Town of Nantucket, Massachusetts Page 57 of 71 Basic Annual Financial Statements In November 2010, the GASB issued GASB Statement No. 61, The Financial Reporting Entity: Omnibus—an amendment of GASB Statements No. 14 and No. 34. The objective of this Statement was to improve financial reporting for a governmental financial reporting entity. The requirements of Statement No. 14, The Financial Reporting Entity, and the related financial reporting requirements of Statement No. 34, Basic Financial Statements—and Management’s Discussion and Analysis—for State and Local Governments, were amended to better meet user needs and to address reporting entity issues that have arisen since the issuance of those Statements. The provisions of GASB 61 became effective for the Town in fiscal year 2013 and did not have a material effect on its financial statements. In December 2010, the GASB issued GASB Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncement. The Statement was intended to enhance the usefulness of its Codification by incorporating guidance that previously could only be found in certain Financial Accounting Standards Board (“FASB”) and American Institute of Certified Public Accountants (“AICPA”) pronouncements. The provisions of GASB 62 became effective for the Town in fiscal year 2013 and did not have a material effect on its financial statements. In June 2011, the GASB issued GASB Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position. The objective of this Statement was to provide financial reporting guidance for deferred outflows of resources and deferred inflows of resources. Concepts Statement No. 4, Elements of Financial Statements, introduced and defined those elements as a consumption of net assets by the government that is applicable to a future reporting period, and an acquisition of net assets by the government that is applicable to a future reporting period, respectively. The provisions of GASB 63 became effective for the Town in fiscal year 2013 and did not have a material effect on its financial statements. In June 2011, the GASB issued GASB Statement No. 64, Derivative Instruments: Application of Hedge Accounting Termination Provisions—an amendment of GASB Statement No. 53. The objective of this Statement was to clarify whether an effective hedging relationship continues after the replacement of a swap-counterparty or a swap-counterparty’s credit support provider. The provisions of GASB 64 became effective for the Town in fiscal year 2013 and did not have a material effect on its financial statements. Future Implementations – In March 2012, the GASB issued GASB Statement No. 65, Items Previously Reported as Assets and Liabilities. This Statement establishes accounting and financial reporting standards that reclassify, as deferred outflows of resources or deferred inflows of resources, certain items that were previously reported as assets and liabilities and recognizes, as outflows of resources or inflows of resources, certain items that were previously reported as assets and liabilities. This Statement also provides other financial reporting guidance related to the impact of the financial statement elements deferred outflows of resources and deferred inflows of resources, such as changes in the determination of the major fund calculations and limiting the use of the term deferred in financial statement presentations. The provisions of this Statement are effective for financial statements for periods beginning after December 15, 2012 (fiscal year 2014). The Town is currently evaluating whether adoption will have a material impact on the financial statements. Town of Nantucket, Massachusetts Page 58 of 71 Basic Annual Financial Statements In March 2012, the GASB issued GASB Statement No. 66, an amendment of GASB Statements No. 10 and No. 62. The objective of this Statement is to improve accounting and financial reporting for a governmental financial reporting entity by resolving conflicting guidance that resulted from the issuance of two pronouncements, Statements No. 54, Fund Balance Reporting and Governmental Fund Type Definitions, and No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements. The provisions of this Statement are effective for financial statements for periods beginning after December 15, 2012 (fiscal year 2014). The Town is currently evaluating whether adoption will have a material impact on the financial statements. 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 are effective for financial statements for periods beginning after June 15, 2013 (fiscal year 2014). The Town is currently evaluating whether adoption will have a material impact on the financial statements. 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 this Statement are effective for financial statements for periods beginning after June 15, 2013 (fiscal year 2014). The Town believes the adoption of this statement will have a material impact on the 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 this Statement are effective for financial reporting periods beginning after December 15, 2013 (fiscal year 2015). The Town is currently evaluating whether adoption will have a material impact on the 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 this Statement are effective for financial reporting periods beginning after June 15, 2013 (fiscal year 2014). The Town is currently evaluating whether adoption will have a material impact on the financial statements. Town of Nantucket, Massachusetts Page 59 of 71 Basic Annual Financial Statements I. Restatement of Prior Year Balances Governmental Business-type Siasconset Wannacomet Our Island Activities Activities Water Water Sewer Home Prior year as presented 187,822,790$ 129,816,264$ 4,984,254$ 15,007,073$ 45,875,433$ 2,331,528$ Restate capital assets (2,220,697) (1,447,762) (77,017) (1,012,711) (333,977) (24,057) Reclassify debt premiums 1,485,417 - - - - - Reclassify funds to Agency (179,955) - - - - - Adjust intergovernmental receivables (496,920) - - - - - Accrue health insurance costs (1,842,430) - - - - - Adjust OPEB liability (95,235) - - - - - As restated 184,472,970$ 128,368,502$ 4,907,237$ 13,994,362$ 45,541,456$ 2,307,471$ General Non-major Internal Fund Governmental Service Prior year as presented 18,497,831$ 14,897,323$ 1,376,395$ Reclassify debt premiums 1,485,417 - Reclassify funds to Agency - (179,955) Adjust to defer receivables - (647,836) Adjust intergovernmental receivables (496,920) Accrue health insurance costs (1,842,430) Accrue workers' compensation claims as a fund liability (89,510) As restated 19,983,248$ 13,572,612$ (555,545)$ Discretely Presented Component Unit - Nantucket County Nantucket County Prior year as presented 2,943,279$ Restate capital assets 3,255,383 Reclasify other liabilities (147,779) Adjust OPEB liability 95,235 As restated 6,146,118$ Town of Nantucket, Massachusetts Page 60 of 71 Basic Annual Financial Statements Required Supplementary Information Town of Nantucket, Massachusetts Page 61 of 71 Basic Annual Financial Statements TOWN OF NANTUCKET, MASSACHUSETTS REQUIRED SUPPLEMENTARY INFORMATION YEAR ENDED JUNE 30, 2013 BARNSTABLE COUNTY CONTRIBUTORY RETIREMENT SYSTEM SCHEDULES OF FUNDING PROGRESS Retirement System 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) 1/1/2012 651,063,981$ 1,173,483,848$ 522,419,867$ 55.5%239,437,303$ 218.2% 1/1/2010 554,876,554 1,030,210,321 475,333,767 53.9%234,374,075 202.8% 1/1/2009 520,089,855 966,564,614 446,474,759 53.8%249,971,296 178.6% 1/1/2007 517,396,087 825,863,068 308,466,981 62.6%226,391,633 136.3% 1/1/2006 465,637,984 765,747,723 300,109,739 60.8%215,474,180 139.3% 1/1/2004 378,317,300 647,655,411 269,338,111 58.4%190,614,004 141.3% Other Post Employment 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) 7/1/2012 -$ 88,559,116$ 88,559,116$ 0%N/A N/A 7/1/2010 - 82,253,000 82,253,000 0%N/A N/A 7/1/2009 - 127,923,000 127,923,000 0%N/A N/A 7/1/2007 - 104,980,000 104,980,000 0%N/A N/A BARNSTABLE COUNTY CONTRIBUTORY RETIREMENT SYSTEM Total Retirement System (B / A)(B / A) Annual (A)(B)Town's Percentage (B)County's Percentage Year Ended Required Actual Percentage Actual of System-Wide Actual of System-Wide December 31,Contributions Contributions Contributed Contribution Actual Contributions Contribution Actual Contributions 2012 46,702,087$ 46,702,087$ 100%4,543,194$ 9.7%40,348$ 0.1% 2011 43,807,158 43,807,158 100%4,372,452 10.0%41,544 0.1% 2010 41,327,508 41,327,508 100%4,263,340 10.3%39,710 0.1% Other Post Employment Benefits Annual (A) Year Ended Required Actual Percentage June 30,Contributions Contributions Contributed 2013 6,995,125$ 2,622,032$ 37.5% 2012 5,982,000 2,534,000 42.4% 2011 5,680,000 2,200,000 38.7% 2010 10,647,000 2,587,000 24.3% 2009 10,745,000 2,534,000 23.6% The Town implemented GASB Statement No. 45 for the fiscal year ending June 30, 2009. See accompanying independent auditors' report. SCHEDULES OF CONTRIBUTION FUNDING Retirement System Town County Town of Nantucket, Massachusetts Page 62 of 71 Basic Annual Financial Statements TOWN OF NANTUCKET, MASSACHUSETTS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL - GENERAL FUND YEAR ENDED JUNE 30, 2013 Budgeted Amounts Actual Actual Variance Original Final Budgetary Budgetary Positive Budget Budget Amounts Encumbrances Adjusted (Negative) REVENUES Real estate and personal property taxes, net 61,733,345$ 62,181,301$ 63,737,465$ -$ 63,737,465$ 1,556,164$ Intergovernmental 1,664,712 1,664,712 1,678,564 - 1,678,564 13,852 Motor vehicle and other excises 1,909,535 1,909,535 1,880,619 - 1,880,619 (28,916) Hotel and meals taxes 2,749,955 2,749,955 3,129,679 - 3,129,679 379,724 License and permits 1,013,896 1,013,896 1,075,074 - 1,075,074 61,178 Departmental and other revenue 1,643,860 1,643,860 2,098,610 - 2,098,610 454,750 Penalties and interest on taxes 681,150 681,150 677,906 - 677,906 (3,244) Fines and forfeitures 223,055 223,055 208,503 - 208,503 (14,552) Investment income 47,509 47,509 90,903 - 90,903 43,394 Total Revenues 71,667,017 72,114,973 74,577,323 - 74,577,323 2,462,350 EXPENDITURES General government 10,679,423 10,462,637 7,452,340 1,804,052 9,256,392 1,206,245 Public safety 8,975,301 8,936,117 8,571,708 198,742 8,770,450 165,667 Education 23,741,367 23,741,367 21,473,502 2,033,195 23,506,697 234,670 Public works 3,093,094 3,179,114 2,723,317 275,109 2,998,426 180,688 Health and human services 1,058,483 1,037,462 989,186 1,146 990,332 47,130 Culture and recreation 1,139,914 1,171,915 1,155,888 4,052 1,159,940 11,975 State and county tax assessments 546,250 546,250 546,250 - 546,250 - Pension and other fringe Benefits 11,333,127 12,262,617 12,234,102 - 12,234,102 28,515 Debt service 7,613,980 7,752,371 7,167,817 - 7,167,817 584,554 Total Expenditures 68,180,939 69,089,850 62,314,110 4,316,296$ 66,630,406 2,459,444 OTHER FINANCING SOURCES (USES) Transfers in 580,919 580,919 600,428 600,428 19,509 Transfers out (8,405,450) (9,201,633) (9,201,633) (9,201,633) - Total Other Financing Sources (Uses)(7,824,531) (8,620,714) (8,601,205) (8,601,205) 19,509 EXCESS (DEFICIENCY) OF REVENUES AND OTHER FINANCING SOURCES OVER EXPENDITURES/USE OF PRIOR YEAR BUDGETARY FUND BALANCE (4,338,453) (5,595,591) 3,662,008$ (654,288)$ 4,941,303$ Other budget items: Undesignated surplus (free cash)607,264 1,864,402 Overlay deficits (4,756) (4,756) Prior year encumbrances and carryovers 3,695,945 3,695,945 Other 40,000 40,000 Net budget -$ -$ See accompanying notes to financial statements. Town of Nantucket, Massachusetts Page 63 of 71 Basic Annual Financial Statements TOWN OF NANTUCKET, MASSACHUSETTS NOTES TO REQUIRED SUPPLEMENTARY INFORMATION YEAR ENDED JUNE 30, 2013 I. Budgetary Basis of Accounting Budgetary Information – An annual budget is legally adopted for the General Fund and the Enterprise Funds. The annual budgets are prepared by Town Administration, reviewed and approved by the Board of Selectmen, recommended by the Finance Committee and voted by citizens at the Annual Town Meeting. Expenditures may not legally exceed appropriations at the department level, or in the categories of personnel and non-personnel expenses. Transfers between and within departments require approval at a Special Town Meeting, unless allowed under Massachusetts General Law. At the close of each fiscal year, unencumbered appropriation balances lapse and revert to unassigned fund balance. The Town Meeting adopts an annual budget for the general fund in conformity with the guidelines described above. During fiscal year 2013, Town Meeting approved various supplemental budgetary appropriations which resulted in a net increase of approximately $1,700,000 from the original voted budget. The appropriations were funded primarily from free cash (unassigned fund balance) for additional enterprise fund subsidies and contributions for health insurance and other post- employment benefits trust funds. The Town Accountant’s Office has the responsibility to ensure that budgetary control is maintained in the manner in which the appropriations were voted by Town Meeting. Budgetary control is exercised through the Town’s accounting system. Budgetary-to-GAAP Reconciliation – The Town’s general fund is prepared on a basis of accounting other than GAAP to conform to the Uniform Municipal Accounting System basis of accounting as prescribed by the Massachusetts Department of Revenue. A reconciliation of the budgetary-basis to GAAP-basis results for the General Fund for the fiscal year ended June 30, 2013, is as follows: Basis of Accounting Fund Perspective Differences Differences Total Revenues on a budgetary basis 74,577,323$ Stabilization revenue -$ (26,781)$ (26,781) Change in accruing revenues to GAAP basis (245,373) - (245,373) On behalf payments 2,597,468 - 2,597,468 Revenues on a GAAP basis 2,597,468$ -$ 76,902,637$ Expenditures on a budgetary basis 62,314,110$ On behalf payments 2,597,468$ -$ 2,597,468 Expenditures on a GAAP basis 2,597,468$ -$ 64,911,578$ Other financing sources (uses) on a budgetary basis (8,601,205)$ Prior year budgetary transfer in current year (641,709)$ -$ (641,709) Effect of refunding transaction (11,616) - (11,616) Other financing sources (uses) on a GAAP basis (653,325)$ -$ (9,254,530)$ Town of Nantucket, Massachusetts Page 64 of 71 Basic Annual Financial Statements Discretely Presented Component Unit - Nantucket County Supplementary Schedules Town of Nantucket, Massachusetts Page 65 of 71 Basic Annual Financial Statements Discretely Presented Component Unit – Nantucket County Supplementary Schedules Narrative County General Fund - This fund is the primary operating fund for Nantucket County. It accounts for all financial resources of the County except those required to be accounted for in another fund. County Deeds Excise Special Revenue Fund - This fund accounts for deeds excise tax revenues received by the County and used for the specific purposes outlined below. County Administration – accounts for 15% of the deeds excise tax revenue that is required to be designated for County administration. Corrections Department – accounts for 75% of the deeds excise tax revenue that is required to be designated for the County Corrections Department. Registry of Deeds – accounts for 10% of the deeds excise tax revenue that is required to be designated for the operations of the Registry of Deeds. County Other Special Revenue Funds This fund accounts for the proceeds of specific revenue sources that are restricted for specific purposes by law or third party grantors and donors. This fund is used to account for sheriff funds, state and federal grants, license plate funds, escrow funds and donations. This supplementary information is presented on the modified accrual basis of accounting, which is used by the County for budgetary and operational purposes. This schedule is not a part of the basic financial statements but is provided for additional analysis only. Town of Nantucket, Massachusetts Page 66 of 71 Basic Annual Financial Statements NANTUCKET COUNTY BALANCE SHEET JUNE 30, 2013 Total Other Total General County Registry of Corrections Deeds Excise Special Nantucket Fund Administration Deeds Department Fund Revenue Funds County Assets Cash and cash equivalents 1,247,117$ 335,237$ 1,017,873$ 1,407$ 1,354,517$ 519,345$ 3,120,979$ Receivables, net: Intergovernmental 82,321 - - - - - 82,321 Due from other funds 16,200 - - - - - 16,200 Total Assets 1,345,638$ 335,237$ 1,017,873$ 1,407$ 1,354,517$ 519,345$ 3,219,500$ Liabilities and Fund Balances Liabilities: Warrants and accounts payable 16,200$ -$ -$ -$ -$ -$ 16,200$ Accrued payroll and withholdings 24,263 - - - - - 24,263 Due to other funds - - 16,200 - 16,200 - 16,200 Total Liabilities 40,463 - 16,200 - 16,200 - 56,663 Fund Balances: Restricted - 335,237 1,001,673 1,407 1,338,317 519,345 1,857,662 Unassigned 1,305,175 - - - - - 1,305,175 Total Fund Balances 1,305,175 335,237 1,001,673 1,407 1,338,317 519,345 3,162,837 Total Liabilities and Fund Balances 1,345,638$ 335,237$ 1,017,873$ 1,407$ 1,354,517$ 519,345$ 3,219,500$ Deeds Excise Special Revenue Fund Town of Nantucket, Massachusetts Page 67 of 71 Basic Annual Financial Statements NANTUCKET COUNTY SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES FISCAL YEAR ENDED JUNE 30, 2013 Total Other Total General County Registry of Corrections Deeds Excise Special Nantucket Fund Administration Deeds Department Fund Revenue Funds County Revenues: Intergovernmental 166,050$ -$ -$ -$ -$ -$ 166,050$ Excise taxes - 212,936 141,957 250,000 604,893 - 604,893 Departmental and other revenue 239,131 - - - - 73,569 312,700 Investment income 5,934 - 1,706 - 1,706 - 7,640 Total Revenues 411,115 212,936 143,663 250,000 606,599 73,569 1,091,283 Expenditures: Current: County administration 278,099 - - - - - 278,099 Registry of Deeds 356,118 - 11,018 - 11,018 12,307 379,443 Special projects - - - - - 140,644 140,644 Total Expenditures 634,217 - 11,018 - 11,018 152,951 798,186 Excess (Deficiency) of Revenues Over (Under) Expenditures (223,102) 212,936 132,645 250,000 595,581 (79,382) 293,097 Other Financing Sources (Uses): Transfers in 306,279 - - - - - 306,279 Transfers out - (28,099) (28,180) (250,000) (306,279) - (306,279) Total Other Financing Sources (Uses)306,279 (28,099) (28,180) (250,000) (306,279) - - Net Change in Fund Balances 83,177 184,837 104,465 - 289,302 (79,382) 293,097 FUND BALANCES - Beginning of year, as restated 1,221,998 150,400 897,208 1,407 1,049,015 598,727 2,869,740 FUND BALANCES - End of year 1,305,175$ 335,237$ 1,001,673$ 1,407$ 1,338,317$ 519,345$ 3,162,837$ Deeds Excise Special Revenue Fund Town of Nantucket, Massachusetts Page 68 of 71 Basic Annual Financial Statements Additional Information Town of Nantucket, Massachusetts Page 69 of 71 Basic Annual Financial Statements Reimbursed Reimbursed Other Direct Direct Direct Indirect Direct Direct Indirect Total Labor Costs Costs Costs Labor Costs Costs Expenditures Expenditures: Direct Salaries 98,887$ -$ 3,773$ -$ 1,767$ -$ -$ 104,427$ Indirect Salaries - - - 32,797 - - 565 33,362 Payroll taxes 1,655 - - 448 - 36 2,139 Consultants and professional fees - - 9,496 - - 163 - 9,659 Travel - 3,884 877 - - 82 - 4,843 Equipment - 592 - - - 10 - 602 Supplies - - 5,193 - - 89 - 5,282 Advertising - - 2,819 - - 49 - 2,868 Postage - - 778 - - 13 - 791 Printing - 197 82 - - 5 - 284 Conference - 45 333 - - 7 - 385 Dues and subscriptions - - 752 - - 13 - 765 Repairs and maintenance - - 1,186 - - 20 - 1,206 General governance - - 25,857 - 603 - 26,460 Finance and treasurer's office - - - 1,583 - - - 1,583 Information Technology - - - 1,013 - - - 1,013 Utilities - - - 6,578 - - - 6,578 Health insurance 8,037 - - 6,721 - 254 - 15,012 Total expenditures 108,579$ 4,718$ 25,289$ 74,997$ 1,767$ 1,344$ 565$ 217,259$ (a)(a)(b)(b)(b) (a) =Direct and indirect grant costs reimbursed through grant overhead. (b) =Direct and indirect grant costs not reimbursed. Indirect Cost Rate = All related costs not paid by grant/Direct labor paid by grant 103,963 108,578 NANTUCKET PLANNING AND ECONOMIC DEVELOPMENT COMMISSION 95.750%= SCHEDULE OF INDIRECT COST RATE FISCAL YEAR ENDED JUNE 30, 2013 Highway Planning and Construction Grant Amounts allocable to 3C Grant General Fund Unreimbursed Town of Nantucket, Massachusetts Page 70 of 71 Basic Annual Financial Statements Highway Planning and General Construction Fund Grant Total REVENUES: Federal and State grants -$ 213,582$ 213,582$ General Fund Subsidy 3,677 - 3,677 Total revenues 3,677 213,582 217,259 EXPENDITURES: Salaries, Direct 1,767 102,660 104,427 Salaries, Indirect 565 32,797 33,361 Payroll taxes 36 2,102 2,139 Consultants and professional fees 163 9,496 9,660 Travel 82 4,761 4,843 Equipment 10 592 602 Supplies 89 5,193 5,282 Advertising 49 2,819 2,868 Postage.13 778 792 Printing 5 280 285 Conferences 7 378 385 Dues and subscriptions.13 752 765 Repairs and maintenance 20 1,186 1,206 Health insurance 254 14,758 15,012 Indirect costs 604 35,030 35,634 Total expenditures 3,677 213,582 217,259 EXCESS OF REVENUES OVER (UNDER) EXPENDITURES -$ -$ -$ NANTUCKET PLANNING AND ECONOMIC DEVELOPMENT COMMISSION SCHEDULE OF PUBLIC SUPPORT FISCAL YEAR ENDED JUNE 30, 2013 Town of Nantucket, Massachusetts Page 71 of 71 Basic Annual Financial Statements