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TOWN OF DRACUT, MASSACHUSETTS
Annual Financial Statements
For the Year Ended June 30, 2013
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TABLE OF CONTENTS
PAGE
INDEPENDENT AUDITORS’ REPORT 1
MANAGEMENT’S DISCUSSION AND ANALYSIS 3
BASIC FINANCIAL STATEMENTS:
Government-wide Financial Statements:
Statement of Net Position 12
Statement of Activities 13
Fund Financial Statements:
Governmental Funds:
Balance Sheet 14
Reconciliation of Total Governmental Fund Balances toNet Position of Governmental Activities in the Statementof Net Position 15
Statement of Revenues, Expenditures, and Changesin Fund Balances 16
Reconciliation of the Statement of Revenues, Expenditures,and Changes in Fund Balances of Governmental Funds tothe Statement of Activities 17
Schedule of Revenues and Other Sources, and Expendituresand Other Uses - Budget and Actual - General Fund 18
Proprietary Funds:
Statement of Net Position 19
Statement of Revenues, Expenses, and Changes in Fund
Net Position 20
Statement of Cash Flows 21
Fiduciary Funds:
Statement of Fiduciary Net Position 22
Statement of Changes in Fiduciary Net Position 23
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Notes to Financial Statements 24
REQUIRED SUPPLEMENTARY INFORMATION
Schedule of Funding Progress 50
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INDEPENDENT AUDITORS’ REPORT
To the Board of SelectmenTown of Dracut, Massachusetts
Report on the Financial Statements
We have audited the accompanying financial statements of the governmentalactivities, the business-type activities, each major fund, and the aggregate remaining
fund information of the Town of Dracut, Massachusetts, as of and for the year endedJune 30, 2013, and the related notes to the financial statements, which collectivelycomprise the Town of Dracut, Massachusetts’ basic financial statements as listed inthe Table of Contents.
Management’s Responsibili ty for the Financial Statements
The Town of Dracut, Massachusetts management is responsible for the preparationand fair presentation of these financial statements in accordance with accountingprinciples generally accepted in the United States of America; this includes the
design, implementation, and maintenance of internal control relevant to the prepara-tion and fair presentation of financial statements that are free from material misstate-ment, whether due to fraud or error.
Auditor’s Responsib il ity
Our responsibility is to express opinions on these financial statements based on ouraudit. We conducted our audit in accordance with auditing standards generallyaccepted in the United States of America and the standards applicable to financialaudits contained in Government Auditing Standards, issued by the Comptroller
General of the United States. Those standards require that we plan and perform theaudit to obtain reasonable assurance about whether the financial statements arefree from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amountsand disclosures in the financial statements. The procedures selected depend on theauditor’s judgment, including the assessment of the risks of material misstatement ofthe financial statements, whether due to fraud or error. In making those risk assess-ments, the auditor considers internal control relevant to the entity’s preparation and
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fair presentation of the financial statements in order to design audit procedures thatare appropriate in the circumstances, but not for the purpose of expressing an opin-ion on the effectiveness of the entity’s internal control. Accordingly, we express nosuch opinion. An audit also includes evaluating the appropriateness of accountingpolicies used and the reasonableness of significant accounting estimates made
by management, as well as evaluating the overall presentation of the financial state-ments.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinions.
Opinions
In our opinion, the financial statements referred to above present fairly, in all materialrespects, the respective financial position of the governmental activities, the business-
type activities, each major fund, and the aggregate remaining fund information of theTown of Dracut, Massachusetts, as of June 30, 2013, and the respective changes infinancial position and, where applicable, cash flows thereof and the respective budg-etary comparison for the general fund for the year then ended in accordance withaccounting principles generally accepted in the United States of America.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America requirethat Management’s Discussion and Analysis, and the Schedule of Funding Progressbe presented to supplement the basic financial statements. Such information,although not a part of the basic financial statements, is required by the Govern-mental Accounting Standards Board, who considers it to be an essential part offinancial reporting for placing the basic financial statements in an appropriate opera-tional, economic, or historical context. We have applied certain limited procedures tothe required supplementary information in accordance with auditing standardsgenerally accepted in the United States of America, which consisted of inquiries ofmanagement about the methods of preparing the information and comparing theinformation for consistency with management’s responses to our inquiries, the basicfinancial statements, and other knowledge we obtained during our audit of the basicfinancial statements. We do not express an opinion or provide any assurance on theinformation because the limited procedures do not provide us with evidence suffi-cient to express an opinion or provide any assurance.
Andover, MassachusettsNovember 8, 2013
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MANAGEMENT’S DISCUSSION AND ANALYSIS
As management of the Town of Dracut, we offer readers this narrative overviewand analysis of the financial activities of the Town of Dracut for the fiscal yearended June 30, 2013. Unless otherwise noted, all amounts are expressed in
thousands.
A. OVERVIEW OF THE FINANCIAL STATEMENTS
This discussion and analysis is intended to serve as an introduction to the basicfinancial statements. The basic financial statements are comprised of three com-ponents: (1) government-wide financial statements, (2) fund financial state-ments, and (3) notes to the financial statements. This report also contains othersupplementary information in addition to the basic financial statements them-selves.
Government-wide financial statements. The government-wide financial state-ments are designed to provide readers with a broad overview of our finances ina manner similar to a private-sector business.
The Statement of Net Position presents information on all assets and liabilities,with the difference between the two reported as net position. Over time,increases or decreases in net position may serve as a useful indicator of whetherthe financial position is improving or deteriorating.
The Statement of Activities presents information showing how the government’snet 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 changeoccurs, regardless of the timing of related cash flows. Thus, revenues andexpenses are reported in this statement for some items that will only result incash flows in future fiscal periods (e.g., uncollected taxes and earned but unusedvacation leave).
Both of the government-wide financial statements distinguish functions that areprincipally supported by taxes and intergovernmental revenues (governmentalactivities) from other functions that are intended to recover all or a significantportion of their costs through user fees and charges (business-type activities).The governmental activities include general government, public safety, educa-
tion, public works, health and human services, and culture and recreation. Thebusiness-type activities include water and sewer activities.
Fund financial s tatements. A fund is a grouping of related accounts that is usedto maintain control over resources that have been segregated for specific activi-ties or objectives. Fund accounting is used to ensure and demonstrate compli-ance with finance-related legal requirements. All of the funds can be divided intothree categories: governmental funds, proprietary funds and fiduciary funds.
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Notes to financial statements. The notes provide additional information that isessential to a full understanding of the data provided in the government-wide andfund financial statements.
Other information. In addition to the basic financial statements and accom-
panying notes, this report also presents certain required supplementary infor-mation which is required to be disclosed by accounting principles generallyaccepted in the United States of America.
B. FINANCIAL HIGHLIGHTS
As of the close of the current fiscal year, the total of assets exceeded liabili-ties by $94,754 (i.e., net position), a change of $9,204 in comparison to theprior year.
As of the close of the current fiscal year, governmental funds reported com-bined ending fund balances of $1,226, a change of $(12,571) in comparisonto the prior year.
At the end of the current fiscal year, unassigned fund balance for the generalfund was $3,515, a change of $245 in comparison to the prior year.
Total long-term debt (i.e., bonds payable) at the close of the current fiscalyear was $60,204, a change of $(6,304) in comparison to the prior year.
C. GOVERNMENT-WIDE FINANCIAL ANALYSIS
The following is a summary of condensed government-wide financial data for thecurrent and prior fiscal years.
2013 2012 2013 2012 2013 2012
Current and other assets $ 28,908 $ 32,893 $ 4,855 $ 8,077 $ 33,763 $ 40,970 Capital assets 113,448 91,222 74,569 71,909 188,017 163,131
Total assets 142,356 124,115 79,424 79,986 221,780 204,101
Long-term liabilities outstanding 50,639 49,191 41,012 43,667 91,651 92,858 Other liabilities 26,783 17,454 8,591 8,239 35,374 25,693
Total liabilities 77,422 66,645 49,603 51,906 127,025 118,551
Net position:Net investment in capital assets 81,448 67,751 26,793 25,105 108,241 92,856 Restricted 9,854 11,442 - - 9,854 11,442 Unrestricted (26,368) (21,723) 3,027 2,975 (23,341) (18,748)
Total net position $ 64,934 $ 57,470 $ 29,820 $ 28,080 $ 94,754 $ 85,550
NET POSITION
GovernmentalActivities
Business-TypeActivities Total
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2013 2012 2013 2012 2013 2012
Revenues:Program revenues:
Charges for services $ 2,269 $ 2,405 $ 7,158 $ 6,997 $ 9,427 $ 9,402 Operating grants and contributions 30,078 30,416 - - 30,078 30,416 Capital grants and
contributions 13,336 4,518 - - 13,336 4,518 General revenues:
Property taxes 38,999 37,222 - - 38,999 37,222
Excises 3,604 3,305 - - 3,604 3,305 Penalties and interest andother taxes 192 564 - - 192 564
Grants and contributionsnot restricted to specificprograms 3,329 3,353 - - 3,329 3,353
Investment income 56 379 11 49 67 428 Other 373 284 - - 373 284
Total revenues 92,236 82,446 7,169 7,046 99,405 89,492
Expenses:General government 2,775 2,319 - - 2,775 2,319 Public safety 7,328 7,009 - - 7,328 7,009 Education 44,583 45,445 - - 44,583 45,445
Public works 6,008 5,876 - - 6,008 5,876 Health and human services 797 771 - - 797 771 Culture and recreation 1,548 1,234 - - 1,548 1,234 Employee benefits 19,469 19,137 - - 19,469 19,137 Interest on long-term debt 1,249 1,216 - - 1,249 1,216 Intergovernmental 1,184 783 - - 1,184 783 Sewer services - - 4,165 3,916 4,165 3,916 Water services - - 1,095 1,113 1,095 1,113
Total expenses 84,941 83,790 5,260 5,029 90,201 88,819
Change in net positionbefore transfers 7,295 (1,344) 1,909 2,017 9,204 673
Transfers in (out) 169 150 (169) (150) - -
Change in net position 7,464 (1,194) 1,740 1,867 9,204 673
Net position - beginning of year 57,470 58,664 28,080 26,213 85,550 84,877
Net position - end of year $ 64,934 $ 57,470 $ 29,820 $ 28,080 $ 94,754 $ 85,550
CHANGES IN NET POSITION
GovernmentalActivities
Business-TypeActivities Total
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As noted earlier, net position may serve over time as a useful indicator of a gov-ernment’s financial position. At the close of the most recent fiscal year, total netposition was $94,754, a change of $9,204 from the prior year.
The largest portion of net position $108,241 reflects our investment in capital
assets (e.g., land, buildings, machinery, equipment, and infrastructure); less anyrelated debt used to acquire those assets that is still outstanding. These capitalassets are used to provide services to citizens; consequently, these assets arenot available for future spending. Although the investment in capital assets isreported net of related debt, it should be noted that the resources needed torepay this debt must be provided from other sources, since the capital assetsthemselves cannot be used to liquidate these liabilities.
An additional portion of net position $9,854 represents resources that are subjectto external restrictions on how they may be used. The remaining balance isunrestricted net position $(23,341).
Governmental activities. Governmental activities for the year resulted in achange in net position of $7,464. Key elements of this change are as follows:
MSBA High School funding $ 10,606 CPA funds used for land purchases 1,197 Other capital asset additions from revenue 1,469 Depreciation expense exceeding principal debt service (209) Increase in net OPEB obligation (5,231) Other (368)
Total $ 7,464
Business-type activities. Business-type activities for the year resulted in achange in net position of $1,740:
Sewer operations $ 1,962 Water operations (222)
Total $ 1,740
The Sewer fund increase primarily results from a 13% rate increase put in placein fiscal year 2013 on user fees. The rate increase will be used to fund the futuredebt service for the ongoing capital projects.
D. FINANCIAL ANALYSIS OF THE GOVERNMENT’S FUNDS
As noted earlier, fund accounting is used to ensure and demonstrate compliancewith finance-related legal requirements.
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F. CAPITAL ASSET AND DEBT ADMINISTRATION
Capital assets. Total investment in capital assets for governmental and business-type activities at year-end amounted to $188,017 (net of accumulated deprecia-tion), a change of $24,886 from the prior year. This investment in capital assets
includes land, buildings and improvements, machinery, equipment and furnishings,construction in progress, and infrastructure.
Major capital asset activity included:
Governmental:
22,344$ High school construction 666 Various road improvements 599 New roads accepted 1,198 Property acquisition for Town Hall construction
359 Town Hall design
Business-Type:
3,655$ Sewer Infrastructure
Long-term debt. At the end of the current fiscal year, total bonded debt out-standing was $60,204, all of which was backed by the full faith and credit of thegovernment.
The Town’s credit rating remained unchanged at A+.
Additional information on capital assets and long-term debt can be found in theNotes to Financial Statements.
G. ECONOMIC FACTORS AND NEXT YEAR’S BUDGETS AND RATES
Fiscal year 2013 was a year when the Town saw some improvements in revenueand signs of economic stability at both the State and Local level. Although we areseeing an improved trend with the state of the economy, we are still holding theline on expenditures and revenue expectations.
During FY13, Phase I of the High School Project was completed; the project contin-ues to move forward on schedule and on budget. Along with the High School, theTown Hall has broken ground; it is expected it will be completed during the summerof 2014.
Fiscal year 2014, the Town has successfully begun to implement some new pro-grams and initiatives that will have a positive impact on the overall budget. First,effective July 1st, all health insurance subscribers have been transferred to theGroup Insurance Commission (GIC). The GIC is a state controlled health
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insurance program that affords municipalities the opportunity to benefit from alarge membership pool, essentially resulting in lower costs. This change willprovide stability to the budget in forecasting yearly cost estimates, ultimatelysaving the Town in the long term. Another initiative that is in full-swing is theadoption of automated trash collection and single stream recycling. It is expected
that the Town will see a reduction in the total # of tons disposed, ultimatelyreducing the strain on the budget for trash collection/disposal.
The Town of Dracut continues to enjoy one of the lowest tax rates in the MerrimackValley. Dracut does not have an extensive business/industrial segment (only about9% of its assessable base); we are heavily reliant on the residential tax base.
Although this is the case, we have seen and continue to see activity in the busi-ness districts. As a whole we do not expect to see a large swing in assessedvalues for the FY14 actual billing cycle.
REQUESTS FOR INFORMATION
This financial report is designed to provide a general overview of the Town ofDracut’s finances for all those with an interest in the government’s finances.Questions concerning any of the information provided in this report or requestsfor additional financial information should be addressed to:
Office of Finance Director
Town of Dracut, Massachusetts
62 Arlington StreetDracut, Massachusetts 01826
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Governmental Business-TypeActivities Activities Total
ASSETS
Current:
Cash and short-term investments $ 22,921,258 $ 2,389,773 $ 25,311,031
Investments 3,193,867 - 3,193,867
Receivables, net of allowance for uncollectibles:Property taxes 472,963 - 472,963
Excises 369,621 - 369,621
User fees - 648,796 648,796
Intergovernmental 1,088,248 1,816,075 2,904,323
Departmental and other 447,925 - 447,925
Noncurrent:Receivables, net of allowance for uncollectibles:
Property taxes 414,483 - 414,483
Capital assets, being depreciated, net 71,571,592 67,860,166 139,431,758Capital assets, not being depreciated 41,876,182 6,708,447 48,584,629
142,356,139 79,423,257 221,779,396
LIABILITIES
Current:
Warrants payable 8,082,042 - 8,082,042
Accrued liabilities 3,743,378 824,315 4,567,693 Notes payable 14,950,000 7,764,568 22,714,568
Other current liabilities 7,918 1,975 9,893
Current portion of long-term liabilities:
Bonds payable 3,032,630 3,050,133 6,082,763
Other liabilities 166,080 - 166,080
Noncurrent:Bonds payable, net of current portion 16,283,152 37,837,752 54,120,904
Other liabilities, net of current portion 5,898,931 - 5,898,931
Net OPEB obligation 25,257,590 124,179 25,381,769
77,421,721 49,602,922 127,024,643
NET POSITION
Net investment in capital assets 81,448,291 26,792,899 108,241,190
Restricted for:
Grants and other statutory contributions 9,490,110 - 9,490,110
Permanent funds:Nonexpendable 214,882 - 214,882
Expendable 149,306 - 149,306
Unrestricted (26,368,171) 3,027,436 (23,340,735)
TOTAL NET POSITION $ 64,934,418 $ 29,820,335 $ 94,754,753
The accompanying notes are an integral part of these financial statements.
TOWN OF DRACUT, MASSACHUSETTS
STATEMENT OF NET POSITION
JUNE 30, 2013
TOTAL ASSETS
TOTAL LIAB ILITIES
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High School Community Nonmajor TotalConstruction Preservation Governmental
General Fund Fund Funds Funds
Cash and short-term investments $ 13,730,423 $ 183,844 $ 5,906,755 $ 2,951,205 $ 22,772,227 Investments 957,753 - 1,766,139 469,975 3,193,867
Receivables: -
Property taxes 1,008,436 - 9,927 - 1,018,363 Excises 592,398 - - - 592,398 Intergovernmental 179,901 - - 908,347 1,088,248 Departmental and other 447,925 - - - 447,925
$ 16,916,836 $ 183,844 $ 7,682,821 $ 4,329,527 $ 29,113,028
Liabilities:Warrants payable $ 8,082,042 $ - $ - $ - $ 8,082,042 Accrued liabilities 1,754,204 1,043,430 - - 2,797,634 Notes payable - 12,300,000 - 2,650,000 14,950,000 Other liabilities 7,918 - - - 7,918
TOTAL LIABILITIES 9,844,164 13,343,430 - 2,650,000 25,837,594
DEFERRED INFLOWS OF RESOURCES 2,039,933 - 9,926 - 2,049,859
Fund Balances:Nonspendable - - - 230,047 230,047 Restricted - - 7,672,895 2,192,744 9,865,639 Committed 1,340,638 - - - 1,340,638 Assigned 176,780 - - - 176,780 Unassigned 3,515,321 (13,159,586) - (743,264) (10,387,529)
TOTAL FUND BALANCES 5,032,739 (13,159,586) 7,672,895 1,679,527 1,225,575
$ 16,916,836 $ 183,844 $ 7,682,821 $ 4,329,527 $ 29,113,028
The accompanying notes are an integral part of these financial statements.
TOTAL LIABILITIES, DEFERRED INFLOWS
OF RESOURCES, AND FUND BALANCES
LIABILITIES AND FUND BALANCES
ASSETS
TOWN OF DRACUT, MASSACHUSETTS
BALANCE SHEET
GOVERNMENTAL FUNDS
JUNE 30, 2013
Governmental
TOTAL ASSETS
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Total governmental fund balances $ 1,225,575
Capital assets used in governmental activities are not financialresources and, therefore, are not reported in the funds. 113,447,774
Revenues are reported on the accrual basis of accountingand are not deferred until collection. 1,696,165
Internal service funds are used by management to account for health insurance and workers' compensation activities. Theassets and liabilities of the internal service funds are includedin the governmental activities in the Statement of Net Assets. (650,969)
In the Statement of Activities, interest is accrued on outstandinglong-term debt, whereas in governmental funds interest is not
reported until due. (145,744)
Long-term liabilities, including bonds payable and Net OPEBobligation, are not due and payable in the current period and, therefore, are not reported in the governmental funds. (50,638,383)
Net posi tion of governmental activiti es $ 64,934,418
The accompanying notes are an integral part of these financial statements.
TOWN OF DRACUT, MASSACHUSETTS
RECONCILIATION OF TOTAL GOVERNMENTAL FUND
JUNE 30, 2013
BALANCES TO NET ASSETS OF GOVERNMENTALACTIVITIES IN THE STATEMENT OF NET POSITION
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$ (12,571,393)
Governmental funds report capital outlays as expenditures. However,in the Statement of Activities the cost of those assets is allocatedover their estimated useful lives and reported as depreciation expense:
Capital outlay purchases, net of dispositions 25,529,291
Depreciation (3,303,270)
Revenues in the Statement of Activities that do not provide currentfinancial resources are fully deferred in the Statement of Revenues,Expenditures and Changes in Fund Balances. Therefore, therecognition of revenue for various types of accounts receivable(i.e., real estate and personal property, motor vehicle excise, etc.)differ between the two statements. This amount represents thenet change in deferred revenue. 67,457
The issuance of long-term debt (e.g., bonds and leases) providescurrent financial resources to governmental funds, while therepayment of the principal of long-term debt consumes the financialresources of governmental funds. Neither transaction, however,has any effect on net position:
Repayments of debt 3,094,630
In the Statement of Activities, interest is accrued on outstandinglong-term debt, whereas in governmental funds interest is notreported until due. (30,093)
Some expenses reported in the Statement of Activities do not requirethe use of current financial resources and therefore, are not reportedas expenditures in the governmental funds:
Change in compensated absences 122,483
Amortization of refunding (215,496)
Change in landfill liability 45,000
Change in OPEB liability (5,231,182)
Internal service funds are used by management to account for healthinsurance and workers' compensation activities. The net activity of internal service funds is reported with Governmental Activities. (43,224)
7,464,203
The accompanying notes are an integral part of these financial statements.
Change in net posit ion of go vernmental activities
TOWN OF DRACUT, MASSACHUSETTS
RECONCILIATION OF THE STATEMENT OF REVENUES
FOR THE YEAR ENDED JUNE 30, 2013
EXPENDITURES, AND CHANGES IN FUND BALANCES OFGOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES
Net change in fund balances - Total governmental funds
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Original Final ActualBudget Budget Amounts
Revenues and Other Sources:
Taxes $ 38,351,176 $ 38,351,176 $ 38,351,176Excise 3,353,800 3,353,800 3,460,227
Penalties, interest and other taxes 200,000 200,000 363,176 Charges for services 577,500 577,500 489,394
Intergovernmental 23,057,539 23,057,539 23,172,057Licenses and permits 319,500 319,500 340,350 Investment income 100,000 100,000 74,614
Miscellaneous 648,811 648,811 607,929 Transfers in 334,503 334,503 368,678
Total Revenues and Other Sources 66,942,829 66,942,829 67,227,601
Expenditures and Other Uses:
General government 2,483,528 2,394,460 2,376,616 Public safety 6,805,775 6,874,423 6,874,423 Education 31,776,513 31,801,432 31,785,970
Public works 4,881,975 4,512,833 4,624,290 Health and human services 679,300 666,776 666,776
Culture and recreation 947,578 842,602 842,295 Debt service 3,829,050 3,741,020 3,741,020 Intergovernmental 1,184,332 1,184,332 1,184,332
Employee benefits 13,702,278 14,272,451 14,168,534
Transfers out 652,500 652,500 652,500
Total Expenditures and Other Uses 66,942,829 66,942,829 66,916,756
Excess of revenues and other sourcesover expenditures and other uses $ - $ - $ 310,845
The accompanying notes are an integral part of these financial statements.
Budgeted Amounts
TOWN OF DRACUT, MASSACHUSETTS
GENERAL FUND
SCHEDULE OF REVENUES AND OTHER SOURCES, AND EXPENDITURES AND OTHER USES - BUDGET
FOR THE YEAR ENDED JUNE 30, 2013
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GovernmentalActivitiesInternal
Sewer Non-Major Service
Fund Fund Total Funds
Current:Cash and short-term investments $ 1,721,748 $ 668,025 $ 2,389,773 $ 149,031
User fees, net of allowance for uncollectibles 541,437 107,359 648,796 - Intergovernmental 1,816,075 - 1,816,075 -
Total current assets 4,079,260 775,384 4,854,644 149,031
Noncurrent:Capital assets, being depreciated, net 66,708,686 1,151,480 67,860,166 -
Capital assets, not being depreciated 6,708,447 - 6,708,447 -
Total noncurrent assets 73,417,133 1,151,480 74,568,613 -
77,496,393 1,926,864 79,423,257 149,031
Current:Accrued liabilities 824,315 - 824,315 800,000
Notes payable 7,764,568 - 7,764,568 - Other current liabilities 1,975 - 1,975 - Current portion of long-term liabilities:
Bonds payable 2,998,133 52,000 3,050,133 -
Total current liabilities 11,588,991 52,000 11,640,991 800,000
Noncurrent:
Bonds payable, net of current portion 37,576,752 261,000 37,837,752 - Net OPEB Obligation 115,029 9,150 124,179 -
49,280,772 322,150 49,602,922 800,000
Net investment in capital assets 25,954,419 838,480 26,792,899 -
Unrestricted 2,261,202 766,234 3,027,436 (650,969)
TOTAL NET POSITION $ 28,215,621 $ 1,604,714 $ 29,820,335 $ (650,969)
The accompanying notes are an integral part of these financial statements.
TOWN OF DRACUT, MASSACHUSETTS
PROPRIETARY FUNDS
STATEMENT OF NET POSITION
JUNE 30, 2013
ASSETS
LIABILITIES
Business-Type Activities Enterprise Funds
TOTAL ASSETS
TOTAL LIABILITIES
NET POSITION
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Governmental
Activities
InternalSewer Non-Major Service
Fund Fund Total Fund
Operating Revenues:
Charges for services $ 6,203,961 $ 953,779 $ 7,157,740 $ - Employee and employer contributions - - - 12,333,426
Total Operating Revenues 6,203,961 953,779 7,157,740 12,333,426
Operating Expenses:
Personnel services 343,715 39,063 382,778 -
Non-personnel services 1,705,613 970,934 2,676,547 -
Depreciation 922,816 72,760 995,576 -
Employee benefits - - - 12,377,530
Total Operating Expenses 2,972,144 1,082,757 4,054,901 12,377,530
Operating Income (Loss) 3,231,817 (128,978) 3,102,839 (44,104)
Nonoperating Revenues (Expenses):
Investment income 8,002 3,473 11,475 880
Interest expense (1,192,934) (12,015) (1,204,949) -
Total Nonoperating Revenues (Expenses), Net (1,184,932) (8,542) (1,193,474) 880
Income Before Transfers 2,046,885 (137,520) 1,909,365 (43,224)
Transfers
Transfers out (84,500) (84,500) (169,000) -
Change in Net Position 1,962,385 (222,020) 1,740,365 (43,224)
Net Position at Beginning of Year 26,253,236 1,826,734 28,079,970 (607,745)
Net Position at End of Year $ 28,215,621 $ 1,604,714 $ 29,820,335 $ (650,969)
The accompanying notes are an integral part of these financial statements.
Business-Type Activities Enterprise Funds
TOWN OF DRACUT, MASSACHUSETTS
PROPRIETARY FUNDS
STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET POSITION
FOR THE YEAR ENDED JUNE 30, 2013
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GovernmentalActivitiesInternal
Sewer Non-Major ServiceFund Fund Total Fund
Cash Flows From Operating Activities:
Receipts from customers and users $ 6,187,727 $ 946,148 $ 7,133,875 $ 12,333,426 Payments to vendors and employees (2,399,870) (1,006,970) (3,406,840) - Payments of employee benefits and expenses - - - (13,007,395)
Net Cash Provided By (Used For) Operating Activities 3,787,857 (60,822) 3,727,035 (673,969)
Cash Flows From Noncapital Financing Activities:
Transfers out (84,500) (84,500) (169,000) -
Net Cash (Used For) Noncapital Financing Activities (84,500) (84,500) (169,000) -
Cash Flows From Capital and Related Financing Activit ies:
Acquisition and construction of capital assets (3,655,156) - (3,655,156) - Payments on notes and bonds (3,636,348) (52,000) (3,688,348) - Proceeds from notes and bonds 4,177,752 - 4,177,752 - Interest expense (1,192,934) (12,015) (1,204,949) -
Net Cash (Used For) Capital and Related Financing Activities (4,306,686) (64,015) (4,370,701) -
Cash Flows From Investing Act ivities:
Disposition of investments - 536,156 536,156 - Investment income 8,002 3,473 11,475 880
Net Cash Provided By (Used For) Investing Activities 8,002 539,629 547,631 880
Net Change in Cash and Short-Term Investments (595,327) 330,292 (265,035) (673,089)
Cash and Short-Term Investments, Beginning of Year 2,317,075 337,733 2,654,808 822,120
Cash and Short-Term Investments, End of Year $ 1,721,748 $ 668,025 $ 2,389,773 $ 149,031
Reconciliation of Operating Income to Net Cash
Provided By Operating Activities:
Operating income (loss) $ 3,231,817 $ (128,978) $ 3,102,839 $ (44,104) Adjustments to reconcile operating income to netcash provided by operating activities:
Depreciation 922,816 72,760 995,576 - Changes in assets and liabilities:
User fees (16,234) (7,631) (23,865) - Accrued liabilities (381,426) - (381,426) (629,865) Other liabilities 30,884 3,027 33,911 -
Net Cash Provided By (Used For) Operating Activities $ 3,787,857 $ (60,822) $ 3,727,035 $ (673,969)
The accompanying notes are an integral part of these financial statements.
Business-Type Activities Enterprise Funds
TOWN OF DRACUT, MASSACHUSETTS
PROPRIETARY FUNDS
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 2013
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Private
Purpose
Trust Agency
Funds Funds
Cash and short-term investments $ 48,601 $ 3,168,956
Other assets - 59,829
Total Assets 48,601 3,228,785
Other liabilities - 3,228,785
Total Liabilities - 3,228,785
NET POSITION
Total net position held in trust $ 48,601 $ -
The accompanying notes are an integral part of these financial statements.
ASSETS
LIABILITIES AND NET POSITION
TOWN OF DRACUT, MASSACHUSETTS
FIDUCIARY FUNDS
STATEMENT OF FIDUCIARY NET POSITION
JUNE 30, 2013
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Private
Purpose
Trust Funds
Addi tions:
Investment Income $ 423
Total additions 423
Deductions:
Benefits 2,356
Total deductions 2,356
Net decrease (1,933)
Net position:
Beginning of year 50,534
End of year $ 48,601
The accompanying notes are an integral part of these financial statements.
TOWN OF DRACUT MASSACHUSETTS
FIDUCIARY FUNDS
STATEMENT OF CHANGES IN FIDUCIARY NET POSITION
FOR THE YEAR ENDED JUNE 30, 2013
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TOWN OF DRACUT, MASSACHUSETTS
Notes to Financial Statements
1. Summary of Significant Account ing Policies
The accounting policies of the Town of Dracut (the Town) conform to gener-ally accepted accounting principles (GAAP) as applicable to governmentalunits. The following is a summary of the more significant policies:
A. Reporting Entity
The government is a municipal corporation governed by an elected Boardof Selectmen. As required by generally accepted accounting principles,these financial statements present the government and applicable compo-
nent units for which the government is considered to be financially account-able.
B. Government-wide and Fund Financial Statements
Government-wide Financial StatementsThe government-wide financial statements (i.e., the Statement of NetPosition and the Statement of Activities) report information on all of thenonfiduciary activities of the primary government. 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-typeactivities, which rely to a significant extent on fees and charges forsupport.
The Statement of Activities demonstrates the degree to which the directexpenses of a given function or segment are offset by program revenues.Direct expenses are those that are clearly identifiable with a specific func-tion or segment. Program revenues include (1) charges to customersor applicants who purchase, use, or directly benefit from goods, services,or privileges provided by a given function or segment and (2) grants andcontributions that are restricted to meeting the operational or capital
requirements of a particular function or segment. Taxes and other itemsnot properly included among program revenues are reported instead asgeneral revenues.
Fund Financial StatementsSeparate financial statements are provided for governmental funds, pro-prietary funds and fiduciary funds, even though the latter are excludedfrom the government-wide financial statements. Major individual govern-
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mental funds and major individual enterprise funds are reported asseparate columns in the fund financial statements.
C. Measurement Focus, Basis of Accounting, and Financial StatementPresentation
Government-Wide Financial StatementsThe government-wide financial statements are reported using the eco-nomic resources measurement focus and the accrual basis of accounting,as is the proprietary fund and fiduciary fund financial statements. Reve-nues are recorded when earned and expenses are recorded when a lia-bility is incurred, regardless of the timing of related cash flows. Propertytaxes are recognized as revenues in the year for which they are levied.Grants and similar items are recognized as revenue as soon as all eligi-bility requirements imposed by the provider have been met. As a generalrule, the effect of interfund activity has been eliminated from the govern-ment-wide financial statements.
Amounts reported as program revenues include (1) charges to customersor applicants for goods, services, or privileges provided, (2) operatinggrants and contributions, and (3) capital grants and contributions, includ-ing special assessments. Internally dedicated resources are reported asgeneral revenues rather than as program revenues. Likewise, generalrevenues include all taxes and excises.
Fund Financial StatementsGovernmental fund financial statements are reported using the currentfinancial resources measurement focus and the modified accrual basis of
accounting. Revenues are recognized as soon as they are both measur-able and available. Revenues are considered to be available when theyare collectible within the current period or soon enough thereafter to payliabilities of the current period. For this purpose, the government considersproperty tax revenues to be available if they are collected within 60 daysof the end of the current fiscal period. All other revenue items are consid-ered to be measurable and available only when cash is received by thegovernment. Expenditures generally are recorded when a liability isincurred, as under accrual accounting. However, debt service expendi-tures, as well as expenditures related to compensated absences andclaims and judgments, are recorded only when payment is due.
The government reports the following major governmental funds:
The 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.
The High School Construction Fund is used to account for activityrelated to the construction of a new Dracut High School.
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The Community Preservation Fund was established by the Town forthe purpose of acquiring land for conservation purposes, developingmore affordable housing units in Town, and preserving andacquiring historical property.
Proprietary funds distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result fromproviding services and producing and delivering goods in connection witha proprietary fund’s principal ongoing operations. The principal operatingrevenues of the enterprise fund are charges to customers for sales andservices. Operating expenses for enterprise funds include the cost of salesand services, administrative expenses and depreciation on capital assets.
All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses.
Private-sector standards of accounting and financial reporting issued
prior to December 1, 1989 generally are followed in both the government-wide and proprietary fund financial statements to the extent that thosestandards do not conflict with or contradict guidance of the Governmental
Accounting Standards Board. Governments also have the option of fol-lowing subsequent private-sector guidance for their business-type activi-ties and enterprise funds, subject to this same limitation. The governmenthas elected not to follow subsequent private-sector guidance.
The Town reports the sewer operations as a major proprietary fund, whilewater operations are reported as a nonmajor enterprise fund.
The self-insured employee health program is reported as an internalservice fund in the accompanying financial statements.
The private-purpose trust fund is used to account for trust arrangements,other than those properly reported in the permanent fund, under whichprincipal and investment income exclusively benefit individuals, privateorganizations, or other governments.
The agency fund is custodial in nature and is used to account for fundsheld for others.
D. Cash and Short-Term Investments
Cash balances from all funds, except those required to be segregatedby law, are combined to form a consolidation of cash. Cash balancesare invested to the extent available, and interest earnings are recognizedin the General Fund. Certain special revenue, proprietary, and fiduciaryfunds segregate cash, and investment earnings become a part of thosefunds.
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Deposits with financial institutions consist primarily of demand deposits,certificates of deposits, and savings accounts. A cash and investment poolis maintained that is available for use by all funds. Each fund’s portion ofthis pool is reflected on the combined financial statements under thecaption “cash and short-term investments”. The interest earnings attribut-
able to each fund type are included under investment income.
For purpose of the statement of cash flows, the proprietary funds considerinvestments with original maturities of three months or less to be short-term investments.
E. Property Tax Limitations
Legislation known as “Proposition 2½” limits the amount of revenue thatcan be derived from property taxes. The prior fiscal year’s tax levy limit isused as a base and cannot increase by more than 2.5 percent (excludingnew growth); unless an override or debt exemption is voted. The actualfiscal year 2013 tax levy reflected an excess capacity of $25,936.
F. Capital Assets
Capital assets, which include property, plant, equipment, and infrastruc-ture assets (for enterprise funds only), are reported in the applicable gov-ernmental or business-type activities columns in the government-widefinancial statements. Capital assets are defined by the government asassets with an initial individual cost of more than $5,000 and an estimateduseful life in excess of two years. Such assets are recorded at historicalcost or estimated historical cost if purchased or constructed. Donated
capital assets are recorded at estimated fair market value at the date ofdonation.
The costs of normal maintenance and repairs that do not add to the valueof the asset or materially extend assets’ lives are not capitalized.
Major outlays for capital assets and improvements are capitalized asprojects are constructed. Interest incurred during the construction phase ofcapital assets of business-type activities is included as part of the capital-ized value of the assets constructed.
Property, plant and equipment of the primary government is depreciatedusing the straight-line method over the following estimated useful lives:
Assets Years
Buildings and improvements 20 - 40
Machinery, equipment, and furnishings 5 - 10
Infrastructure 30 - 75
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G. Compensated Absences
It is the government’s policy to permit employees to accumulate earnedbut unused vacation and sick pay benefits. All vested sick and vacationpay is accrued when incurred in the government-wide, proprietary, and
fiduciary fund financial statements. A liability for these amounts is reportedin governmental funds only if they have matured, for example, as a resultof employee resignations and retirements.
H. Long-Term Obligations
In the government-wide financial statements, and proprietary fund typesin the fund financial statements, long-term debt, and other long-term obli-gations are reported as liabilities in the applicable governmental activities,business-type activities, or proprietary fund type statement of Net Position.
I. Fund Equity
Fund equity at the governmental fund financial reporting level is classifiedas “fund balance”. Fund equity for all other reporting is classified as “NetPosition”.
Fund Balance - Generally, fund balance represents the differencebetween the current assets and current liabilities. The Town reservesthose portions of fund balance that are legally segregated for a specificfuture use or which do not represent available, spendable resourcesand therefore, are not available for appropriation or expenditure.Unassigned fund balance indicates that portion of fund balance that is
available for appropriation in future periods.
The Town’s fund balance classification policies and procedures are asfollows:
1) Nonspendable funds are either unspendable in the current form(i.e., inventory) or can never be spent (i.e., perpetual care).
2) Restricted funds are used solely for the purpose in which the fundwas established. In the case of special revenue funds, these fundsare created by statute or otherwise have external constraints onhow the funds can be expended.
3) Committed funds are reported and expended as a result of motionspassed by the highest decision making authority in the government(i.e., the Town Meeting).
4) Assigned funds are used for specific purposes as established bymanagement. These funds, which include encumbrances, havebeen assigned for specific goods and services ordered but not yetpaid for. This account also includes fund balance (free cash) votedto be used in the subsequent fiscal year.
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5) Unassigned funds are available to be spent in future periods.
When an expenditure is incurred that would qualify for payment from multi-ple fund balance types, the Town uses the following order to liquidate lia-bilities: restricted, committed, assigned and unassigned.
Net Position - Net position represents the difference between assets and lia-bilities. Net position invested in capital assets, net of related debt, consist ofcapital assets, net of accumulated depreciation, reduced by the outstandingbalances of any borrowing used for the acquisition, construction or improve-ment of those assets. Net position are reported as restricted when there arelimitations imposed on their use either through the enabling legislationadopted by the Town or through external restrictions imposed by creditors,grantors, or laws or regulations of other governments. All other net positionis reported as unrestricted.
J. Use of Estimates
The preparation of basic financial statements in conformity with generallyaccepted accounting principles requires management to make estimatesand assumptions that affect the reported amounts of assets and liabilitiesand disclosures for contingent assets and liabilities at the date of the basicfinancial statements, and the reported amounts of the revenues andexpenditures/expenses during the fiscal year. Actual results could varyfrom estimates that were used.
2. Stewardship, Compliance, and Accountability
A. Budgetary Information
At the annual town meeting, the Town Manager presents an operatingand capital budget for the proposed expenditures of the fiscal year com-mencing the following July 1. The budget, as enacted by town meeting,establishes the legal level of control and specifies that certain appropria-tions are to be funded by particular revenues. The original budget isamended during the fiscal year at special town meetings as required bychanging conditions. In cases of extraordinary or unforeseen expenses,
the Town Manager is empowered to transfer funds from the Reserve Fund(a contingency appropriation) to a departmental appropriation. “Extra-ordinary” includes expenses which are not in the usual line, or are great orexceptional. “Unforeseen” includes expenses which are not foreseen as ofthe time of the annual meeting when appropriations are voted.
Departments are limited to the line items as voted. Certain items mayexceed the line item budget as approved if it is for an emergency and for
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the safety of the general public. These items are limited by the Massa-chusetts General Laws and must be raised in the next year’s tax rate.
Formal budgetary integration is employed as a management controldevice during the year for the General Fund and Proprietary Funds.
Effective budgetary control is achieved for all other funds through pro-visions of the Massachusetts General Laws.
At year-end, appropriation balances lapse, except for certain unexpendedcapital items and encumbrances which will be honored during the subse-quent year.
B. Budgetary Basis
The General Fund final appropriation appearing on the “Budget and Actual” page of the fund financial statements represents the final amendedbudget after all reserve fund transfers and supplemental appropriations.
C. Budget/GAAP Reconciliation
The budgetary data for the general and proprietary funds is based uponaccounting principles that differ from generally accepted accounting prin-ciples (GAAP). Therefore, in addition to the GAAP basis financial state-ments, the results of operations of the general fund are presented inaccordance with budgetary accounting principles to provide a meaningfulcomparison to budgetary data.
The following is a summary of adjustments made to the actual revenues
and other sources, and expenditures and other uses, to conform to thebudgetary basis of accounting.
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General Fund
Revenues/Expenditures
(GAAP Basis) $ 74,511,659 $ 74,376,482 Other financing sources/uses(GAAP Basis, excluding refunding) 468,678 127,500
Subtotal (GAAP Basis) 74,980,337 74,503,982
Adjust tax revenue to accrual basis (288,280) -
Reverse beginning of year appropriation carryforwardsfrom expenditures - (158,375)
To book current year appropriation
carryforwards - 176,780 To reverse the effect of non-budgeted State contributionsfor teachers retirement (7,904,130) (7,904,130)
To eliminate non-budgeted activity 439,674 298,499
Budgetary Basis $ 67,227,601 $ 66,916,756
Revenues Expendituresand Other and Other
Financing Sources Financing Uses
D. Deficit Fund Equity
The Town reflects several special revenue fund and capital project funddeficits, primarily caused by grant expenses occurring in advance of grantreimbursements. The deficits in these funds will be eliminated throughfuture intergovernmental revenues, transfers from other funds, and bondproceeds. The Internal Service fund deficit will be funded by a budgetedtransfer from the General fund in fiscal year 2014.
3. Cash and Short-Term Investments
The carrying amount of the Town’s deposits with financial institutions atJune 30, 2013 was $29,167,348. The bank balances, which do not include
reconciling items such as deposits in transit and outstanding checks, arecategorized as follows (in thousands):
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Information about the sensitivity of the fair values of the Town’s invest-ments to market interest rate fluctuations is as follows:
Fair MoreInvestment Type Value 1-5 Than 5
Long-term C.D.'s $ 3,194 $ 3,119 $ 75
Investment
Maturities (in Years)
C. Foreign Currency Risk
Foreign currency risk is the risk that changes in foreign exchange rateswill adversely affect the fair value of an investment. The Town does nothave policies for foreign currency risk.
5. Taxes Receivable
Real estate and personal property taxes are levied and based on valuesassessed on January 1st of every year. Assessed values are established bythe Board of Assessor’s for 100% of the estimated fair market value. Taxesare due on a quarterly basis and are subject to penalties and interest if theyare not paid by the respective due date. Real estate and personal propertytaxes levied are recorded as receivables in the fiscal year they relate to.
Fourteen days after the due date for the final tax bill for real estate taxes, ademand notice may be sent to the delinquent taxpayer. Fourteen days afterthe demand notice has been sent, the tax collector may proceed to file a lienagainst the delinquent taxpayers’ property. The Town has an ultimate rightto foreclose on property for unpaid taxes. Personal property taxes cannotbe secured through the lien process.
Taxes receivable at June 30, 2013 consist of the following (in thousands):
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Real Estate
2013 $ 467 2012 93 2011 1
561 Personal Property
2013 11 2012 10 2011 5 Prior 8
34 Tax Liens 414 Community Preservation 9
Total $ 1,018
6. Allowance for Doubtful Accounts
The receivables reported in the accompanying entity-wide financial state-ments reflect the following estimated allowances for doubtful accounts (inthousands):
Property taxes $ 131 Excises 223
7. Intergovernmental Receivables
This balance represents reimbursements requested from Federal and Stateagencies for expenditures incurred in fiscal 2013.
8. Transfers In/Out
The Town’s routine transfers include transfers made to move (1) unrestricted
revenues or balances that have been collected or accumulated in the generalfund to other funds based on budgetary authorization, and (2) revenues froma fund that by statute or budgetary authority must collect them to funds thatare required by statute or budgetary authority to expend them. The transfersfrom the water and sewer funds to the general fund are made to cover indirectcosts of water and sewer funds incurred in the general fund.
The Town reports interfund transfers between many of its funds. The sum ofall transfers presented in the table agrees with the sum of interfund transfers
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presented in the governmental fund financial statements. The following is ananalysis of interfund transfers made in fiscal year 2013.
Fund
General fund $ 468,678 $ 127,500
Major Governmental Funds:Community Preservation Fund - 219,579
Nonmajor Governmental Funds:Special revenue funds 2,179 284,678 Capital project funds 332,079 - Trust funds - 2,179
Enterprise Funds:
Sewer fund - 84,500 Nonmajor fund (Water) - 84,500
Total $ 802,936 $ 802,936
Transfers In Transfers Out
9. Capital Assets
Capital asset activity for the year ended June 30, 2013 was as follows (inthousands):
Governmental Acti vities:
Capital assets, being depreciated:
Buildings and improvements $ 70,621 $ - $ - $ 70,621
Machinery, equipment, and furnishings 9,842 206 - 10,048
Infrastructure 39,869 1,264 (25) 41,108
Total capital assets, being depreciated 120,332 1,470 (25) 121,777
Less accumulated depreciation for:
Buildings and improvements (26,303) (1,598) - (27,901)
Machinery, equipment, and furnishings (8,224) (463) - (8,687)
Infrastructure (12,395) (1,242) 20 (13,617)
Total accumulated depreciation (46,922) (3,303) 20 (50,205)
Total capital assets, being depreciated, net 73,410 (1,833) (5) 71,572
Capital assets, not being depreciated:
Land 13,478 1,362 - 14,840
Construction in progress 4,334 22,702 - 27,036
Total capital assets, not being depreciated 17,812 24,064 - 41,876
Governmental activities capital assets, net $ 91,222 $ 22,231 $ (5) $ 113,448
Beginning
Balance Increases Decreases
Ending
Balance
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Business-Type Activities:
Capital assets, being depreciated:
Buildings and improvements $ 745 $ - $ - $ 745
Machinery, equipment, and furnishings 699 - - 699
Infrastructure 54,585 25,283 - 79,868
Total capital assets, being depreciated 56,029 25,283 - 81,312
Less accumulated depreciation for:
Buildings and improvements (431) (17) - (448)
Machinery, equipment, and furnishings (580) (7) - (587)
Infrastructure (11,444) (972) - (12,416)
Total accumulated depreciation (12,455) (996) - (13,451)
Total capital assets, being depreciated, net 43,574 24,287 - 67,861
Capital assets, not being depreciated:
Construction in progress 28,335 3,540 (25,167) 6,708 Total capital assets, not being depreciated 28,335 3,540 (25,167) 6,708
Business-type activities capital assets, net $ 71,909 $ 27,827 $ (25,167) $ 74,569
BeginningBalance Increases Decreases
EndingBalance
Depreciation expense was charged to functions of the Town as follows (inthousands):
Governmental Activities:General government $ 91 Public safety 460
Education 903 Public works 1,414 Health & Human Services 66 Culture and recreation 369
Total depreciation expense - governmental activities $ 3,303
Business-type Activities:Sewer $ 923 Nonmajor (Water) 73
Total depreciation expense - business-type activities $ 996
10. Warrants Payable
Warrants payable represent 2013 expenditures paid by July 15, 2013.
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11. Anticipation Notes Payable
The Town had the following notes outstanding at June 30, 2013:
Interest Date of Date of
Rate Issue MaturityGovernmental Activities:High School 1.50% 02/16/13 07/19/13 $ 7,000,000 Town Hall 1.50% 02/16/13 07/19/13 2,400,000 Salt Storage 1.50% 02/16/13 07/19/13 50,000 Salt Shed 1.50% 02/16/13 07/19/13 50,000 Canny Farm Development 1.50% 02/16/13 07/19/13 50,000 Salt Shed 0.65% 02/16/13 07/19/13 100,000 High School 0.55% 07/20/12 07/19/13 2,300,000 High School 0.55% 05/22/13 07/19/13 3,000,000
Total Governmental Activities $ 14,950,000
Business-Type Activities:Sewer notes 0.15% 01/01/12 N/A $ 4,714,475 Sewer notes 0.15% 06/30/12 N/A 1,600,093 Sewer notes 1.50% 02/22/12 07/19/13 1,450,000
Total Business-Type Activities $ 7,764,568
6/30/13
Balance at
The following summarizes activity in notes payable during fiscal year 2013 (in
thousands):
BalanceNew End of
Issues Maturities
Governmental notes $ 11,950 $ 14,950 $ (11,950) $ 14,950 Sewer notes 7,032 1,733 (1,000) 7,765
Total $ 18,982 $ 16,683 $ (12,950) $ 22,715
Year
BalanceBeginning
of Year
12. Long-Term Debt
A. General Obligation Bonds
The Town issues general obligation bonds to provide funds for the acqui-sition and construction of major capital facilities. General obligation bondshave been issued for both governmental and business-type activities.General obligation bonds currently outstanding are as follows:
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AmountSerial
Maturities Interest as of Governmental Activities: Through Rate(s) %
Title 5 MWPAT 08/01/18 0.00 $ 9,782 Police station construction 01/15/24 3.0 - 6.0 324,000 Library construction 01/15/24 3.0 - 6.0 2,001,000 Pension obligation 11/01/18 4.75 -5.50 980,000 Police station 06/15/26 4.0 - 6.5 4,897,000 Library 06/15/26 4.0 - 6.5 839,000 Robbins Road 06/15/26 4.0 - 6.5 493,000 Harmony Hall 06/15/26 4.0 - 6.5 280,000 Salt shed 06/15/26 4.0 - 6.5 24,000 CPA - Canney 12/15/15 2.0-4.0 1,080,000 School refunding 05/15/16 2.0-4.0 1,230,000 School refunding 05/15/20 2.0-4.0 5,780,000 Fire building construction 05/15/20 2.0-4.0 495,000 Fire building construction 08/15/17 2.0-4.0 211,000
School remodel 08/15/17 2.0-4.0 598,000 Outdoor recreational facility 08/15/15 2.0-4.0 74,000
Total Governmental Activities: $ 19,315,782
Outstanding
6/30/13
AmountSerial
Maturities Interest as of Business-Type Activities: Through Rate(s) %
Water 12/15/19 2.0-3.5 $ 313,000 MWPAT 08/01/13 0.00 10,647 2009 Refunding 02/01/19 2.0-3.5 890,000
MWPAT 07/25/20 2.00 1,212,001 Sewer 01/15/25 3.0 - 6.0 2,195,000 Sewer 01/15/25 3.0 - 6.0 3,935,000 Sewer 06/15/27 4.0 - 6.5 1,832,000 MWPAT - Kenwood 02/01/30 0.00 1,635,200 MWPAT - Long Pond 02/01/30 0.00 998,600 MWPAT 08/01/30 0.00 770,000 MWPAT 08/01/30 0.00 350,000 MWPAT 07/15/27 2.00 189,668 MWPAT 07/15/30 2.00 2,245,238 MWPAT 07/15/30 2.00 1,883,907 MWPAT 07/15/30 2.00 7,848,790
MWPAT 07/15/30 2.00 3,952,544 MWPAT 07/15/32 2.00 3,517,290 Sewer 12/15/30 3.50 - 4.38 2,532,000 Sewer 08/15/22 2.0-4.0 672,000 Sewer 08/15/22 2.0-4.0 493,000 Sewer 08/15/22 2.0-4.0 115,000 Sewer 08/15/22 2.0-4.0 2,502,000 Sewer 08/15/22 2.0-4.0 795,000
Total Business-Type Activities: $ 40,887,885
Outstanding
6/30/13
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B. Future Debt Service
The annual payments to retire all general obligation long-term debtoutstanding as of June 30, 2013 are as follows:
Governmental2014 $ 3,032,630 $ 765,070 $ 3,797,700 2015 2,909,630 651,167 3,560,797 2016 2,840,630 533,542 3,374,172 2017 2,019,630 427,575 2,447,205 2018 1,923,630 346,953 2,270,583
2019 - 2023 5,111,632 839,979 5,951,611 2024 - 2026 1,478,000 107,651 1,585,651
Total $ 19,315,782 $ 3,671,937 $ 22,987,719
TotalPrincipal Interest
The general fund has been designated as the sole source to repay thegovernmental-type general obligation long-term debt outstanding as ofJune 30, 2013:
Business-type
2014 $ 3,050,133 $ 1,214,618 $ 4,264,751 2015 3,069,965 1,044,505 4,114,470 2016 3,102,154 948,102 4,050,256 2017 3,120,161 861,585 3,981,746 2018 3,148,686 794,216 3,942,902
2019 - 2023 12,741,538 2,780,321 15,521,8592024 - 2028 8,410,981 1,133,871 9,544,852 2029 - 2033 4,244,267 173,288 4,417,555
Total $ 40,887,885 $ 8,950,506 $ 49,838,391
Principal Interest Total
C. Changes in General Long-Term Liabilities
During the year ended June 30, 2013, the following changes occurred inlong-term liabilities (in thousands):
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Governmental Activities
Bonds payable $ 22,932 $ 8,388 $ (12,004) $ 19,316 $ (3,033) $ 16,28 Other:
Landfill closure 2,074 - (45) 2,029 (45) 1,98 Accrued employee benefits 4,159 140 (263) 4,036 (121) 3,91
Net OPEB obligation 20,026 5,902 (670) 25,258 - 25,25
Total Governmental Activities $ 49,191 $ 14,430 $ (12,982) $ 50,639 $ (3,199) $ 47,44
Business-type Activities
Bonds payable $ 43,576 $ 4,577 $ (7,265) $ 40,888 $ (3,050) $ 37,83
Net OPEB obligation 91 59 (26) 124 - 12
Total Business-type Activities $ 43,667 $ 4,636 $ (7,291) $ 41,012 $ (3,050) $ 37,96
Balance Balance Current Portion
7/1/12 Additions Reductions 6/30/13 Portion 6/30/13
Equals
Total Total Less Long-Ter
D. Current Year Refundings
On July 10, 2012, the Town issued general obligation bonds in the amountof $5,460,000 with a variable interest rate ranging from 2.0% to 4.0% torefund $5,555,000 of term bonds with an interest rate of 4.0%.
On April 13, 2013, the Town issued general obligation bonds in the amountof $7,505,000 with a variable interest rate ranging from 2.0% to 4.0% torefund $8,010,000 of term bonds with an interest rate of 4.0%.
E. Prior Year Refundings
In prior years, the Town has defeased various bond issues by creatingseparate irrevocable trust funds. The proceeds from the new issuance of thegeneral obligation bonds were used to purchase U.S. government securi-ties, and those securities were deposited in an irrevocable trust with anescrow agent to provide debt service payments until the refunded bondsmature in 2020. For financial reporting purposes, the debt has been consid-ered defeased and therefore removed as a liability from the Town’s balancesheet. As of June 30, 2013, the amount of defeased debt outstanding butremoved from the governmental activities and business-type activities was$7,775,000.
13. Landfil l Closure and Postclosure Care Costs
State and Federal laws and regulations require the Town to place a finalcover on its landfill site and to perform certain maintenance and monitoringfunctions at the site for thirty years after closure.
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The Town reported $2,029,000 as landfill closure and postclosure care liabilityat June 30, 2013. These amounts are based on an estimate of what it wouldcost to perform all closure and postclosure care remaining on the landfill site,which closed in 2007. Actual costs may be higher due to inflation, changes intechnology, or changes in regulations.
14. Deferred Inflows of Resources
Deferred inflows of resources are the acquisition of net assets by the Townthat are applicable to future reporting periods. Deferred inflows of resourceshave a negative effect on fund balance, similar to liabilities.
The following is a summary of deferred inflow of resources balances as ofJune 30, 2013 (in thousands):
GeneralFunds
Unearned property tax revenues $ 2,040 $ 10 $ 2,050
Nonmajor Funds
Total
GovernmentalFunds
15. Restr icted Net Position
The accompanying entity-wide financial statements report restricted netposition when external constraints from grantors or contributors are placedon net position.
Permanent fund restricted net position are segregated between nonexpend-able and expendable. The nonexpendable portion represents the originalrestricted principal contribution, and the expendable represents accumulatedearnings which are available to be spent based on donor restrictions.
16. Governmental Funds - Balances
Fund balances are segregated to account for resources that are either notavailable for expenditure in the future or are legally set aside for a specificfuture use.
The Town implemented GASB Statement No. 54 (GASB 54), Fund BalanceReporting and Governmental Fund Type Definitions, which enhances theusefulness of fund balance information by providing clearer fund balanceclassifications that can be more consistently applied and by clarifying existinggovernmental fund type definitions.
The following types of fund balances are reported at June 30, 2013:
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Nonspendable - Represents amounts that cannot be spent because theyare either (a) not in spendable form or (b) legally or contractually required tobe maintained intact. This fund balance classification includes general fundreserves for prepaid expenditures and nonmajor governmental fund reservesfor the principal portion of permanent trust funds.
Restricted - Represents amounts that are restricted to specific purposes byconstraints imposed by creditors, grantors, contributors, or laws or regulationsof other governments, or constraints imposed by law through constitutionalprovisions or enabling legislation. This fund balance classification includesgeneral fund encumbrances funded by bond issuances, various special reve-nue funds, and the income portion of permanent trust funds.
Committed - Represents amounts that can only be used for specific purposespursuant to constraints imposed by formal action of the Town’s highest level ofdecision-making authority. This fund balance classification includes general
fund encumbrances for non-lapsing, special article appropriations approved atTown Meeting, certain stabilization funds set aside by Town Meeting vote (nowreported as part of the general fund per GASB 54), and various specialrevenue funds.
Assigned - Represents amounts that are constrained by the Town’s intent touse these resources for a specific purpose. This fund balance classificationincludes general fund encumbrances that have been established by variousTown departments for the expenditure of current year budgetary financialresources upon vendor performance in the subsequent budgetary period. TheTown follows an informal policy that permits management to assign fundbalance amounts to a specific purpose, although fund balance to be appliedagainst a subsequent year’s budget is voted by Town Meeting.
Unassigned - Represents amounts that are available to be spent in futureperiods.
Following is a breakdown of the Town's fund balances at June 30, 2013:
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High
School Community Nonmajor TotalGeneral Construction Preservation Governmental Government
Fund Fund Fund Funds Funds
NonspendableNonexpendable permanent funds $ - $ - $ - $ 230,047 $ 230,04
Total Nonspendable - - - 230,047 230,04
RestrictedCommunity preservation - - 7,672,895 - 7,672,89
Englesby school debt service - - - 482,718 482,71 School general purpose (School Choice) - - - 394,284 394,28 Gifts and donations - - - 281,205 281,20 Revolving funds - - - 138,742 138,74
Other receipts reserved for appropriation - - - 208,144 208,14
Other special revenue funds - - - 299,196 299,19 Capital project funds - - - 239,149 239,14 Expendable permanent funds - - - 149,306 149,30
Total Restricted - - 7,672,895 2,192,744 9,865,63
Committed
Town Hall stabilization 1,119,237 - - - 1,119,23 Other stabilization 221,401 - - - 221,40
Total Committed 1,340,638 - - - 1,340,63
AssignedFor encumbrances
General government 67,400 - - - 67,40
Public works 9,380 - - - 9,38 Employee benefits 100,000 - - - 100,00
Total Assigned 176,780 - - - 176,78
Unassigned (1) 3,515,321 (13,159,586) - (743,264) (10,387,52
Total Unassigned 3,515,321 (13,159,586) - (743,264) (10,387,52
Total Fund Balance $ 5,032,739 $ (13,159,586) $ 7,672,895 $ 1,679,527 $ 1,225,57
(1) Includes general stabilization accounts of $1,706 thousand.
17. Subsequent Events
Debt
Subsequent to June 30, 2013, the Town has incurred the following additionaldebt:
Interest Issue MaturityRate Date Date Amount
School bonds 2.00-5.00% 7/15/2013 7/15/2029 $ 23,000,000General obligation bonds 2.00-5.00% 7/15/2013 7/15/2029 8,250,000 Sewer bonds 2.00-5.00% 7/15/2013 7/15/2033 1,450,000
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18. Commitments and Contingencies
Outstanding Legal Issues - There are several pending legal issues in whichthe Town is involved. The Town’s management is of the opinion that thepotential future settlement of such claims would not materially affect its
financial statements taken as a whole.
Grants - Amounts received or receivable from grantor agencies are subjectto audit and adjustment by grantor agencies, principally the federal govern-ment. Any disallowed claims, including amounts already collected, mayconstitute a liability of the applicable funds. The amount of expenditures whichmay be disallowed by the grantor cannot be determined at this time, althoughthe Town expects such amounts, if any, to be immaterial.
Abatements - There are several cases pending before the Appellate TaxBoard in regard to alleged discrepancies in property assessments. According
to Town Counsel, the probable outcome of these cases at the present time isindeterminable, although the Town expects such amounts, if any, to beimmaterial.
19. Post-Employment Healthcare and Life Insurance Benefits
GASB Statement 45 requires governments to account for other post-employmentbenefits (OPEB), primarily healthcare, on an accrual basis rather than on a pay-as-you-go basis. The effect is the recognition of an actuarially required contribu-tion as an expense on the statement of revenues, expenses, and changes in netposition when a future retiree earns their post-employment benefits, rather than
when they use their post-employment benefit. To the extent that an entity doesnot fund their actuarially required contribution, a post-employment benefit liabilityis recognized on the Statement of Net Position over time.
A. Plan Description
In addition to providing the pension benefits described, the Town pro-vides post-employment healthcare and life insurance benefits for retiredemployees through the Town’s plan. The benefits, benefit levels,employee contributions and employer contributions are governed byChapter 32 of the Massachusetts General Laws. As of December 31,
2010, the actuarial valuation date, approximately 509 retirees and 536active employees meet the eligibility requirements. The plan does notissue a separate financial report.
B. Benefits Provided
The Town provides medical, dental, prescription drugs and life insuranceto retirees and their covered dependents. All active employees who retirefrom the Town and meet the eligibility criteria will receive these benefits.
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C. Funding Policy
Retirees contribute 20% of the cost of the health plan, as determined bythe Town. The Town contributes the remainder of the health plan costs ona pay-as-you-go basis.
D. Annual OPEB Costs and Net OPEB Obligation
The Town’s fiscal 2013 annual OPEB expense is calculated based on theannual required contribution of the employer (ARC), an amount actuariallydetermined in accordance with the parameters of GASB StatementNo. 45. The ARC represents a level of funding that, if paid on an ongoingbasis, is projected to cover the normal cost per year and amortize theunfunded actuarial liability over a period of thirty years. The following tableshows the components of the Town’s annual OPEB cost for the yearending June 30, 2013, the amount actually contributed to the plan, and thechange in the Town’s net OPEB obligation based on an actuarial valuation
as of December 31, 2010.
Annual Required Contribution (ARC) $ 9,231,297 Interest on net OPEB obligation 905,279 Adjustment to ARC (670,576)
Annual OPEB cost 9,466,000
Contributions made (4,201,532)
Increase in net OPEB obligation 5,264,468
Net OPEB obligation - beginning of year 20,117,301
Net OPEB obligation - end of year $ 25,381,769
The Town’s annual OPEB cost, the percentage of annual OPEB costcontributed to the plan, and the net OPEB obligation were as follows:
Fiscal year endedAnnual OPEB
Cost
Percentage ofOPEB
Cost ContributedNet OPEBObligation
2013 9,406,149$ 37.1% 25,381,769$
2012 8,976,982$ 35.4% 25,381,769$2011 8,670,668$ 58.2% 14,897,305$2010 8,670,668$ 82.1% 10,563,864$
The Town’s net OPEB obligation as of June 30, 2013 is recorded as acomponent of the “other long-term liabilities” line item.
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E. Funded Status and Funding Progress
The funded status of the plan as of December 31, 2010, the date of themost recent actuarial valuation was as follows:
Actuarial accrued liability (AAL) $ 141,452,538 Actuarial value of plan assets -
Unfunded actuarial accrued liability (UAAL) $ 141,452,538
Funded ratio (actuarial value of plan assets/AAL) 0%
Covered payroll (active plan members) N/A
UAAL as a percentage of covered payroll N/A
Actuarial valuations of an ongoing plan involve estimates of the value ofreported amount and assumptions about the probability of occurrence of
events far into the future. Examples included assumptions about futureemployment, mortality, and the healthcare cost trend. Amounts deter-mined regarding the funded status of the plan and the annual requiredcontributions of the employer are subject to continual revision as actualresults are compared with past expectations and new estimates are madeabout the future. The schedule of funding progress, presented as requiredsupplementary information following the notes to the financial statements,presents multiyear trend information that shows whether the actuarialvalue of plan assets is increasing or decreasing over time relative to theactuarial accrued liabilities for benefits.
F. Actuarial Methods and Assumptions
Projections of benefits for financial reporting purposes are based on theplan as understood by the Town and the plan members and include thetypes of benefits provided at the time of each valuation and the historicalpattern of sharing of benefit costs between the Town and plan membersto that point. The actuarial methods and assumptions used include tech-niques that are designed to reduce short-term volatility in actuarialaccrued liabilities and the actuarial value of assets, consistent with thelong-term perspective of the calculations.
In the December 31, 2010 actuarial valuation the projected unit credit costmethod was used. The actuarial value of assets was not determined asthe Town has not advance funded its obligation. The actuarial assump-tions included a 4.50% investment rate of return and an initial annualhealthcare cost trend rate of 9.00% which decreases to a 5.00% long-termrate for all healthcare benefits after seven years. The amortization costsfor the initial UAAL is a level percentage of payroll for a period of 30 years,on a closed basis. This has been calculated assuming the amortizationpayment increases at a rate of 4.50%.
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Before January 1, 1975 5%January 1, 1975 - December 31, 1983 7% *January 1, 1984 - June 30, 1996 8% *July 1, 1996 - June 30, 2001 9% *
Beginning July 1, 2001 11%
*Effective January 1, 1990, all participants hired after January 1, 1979,who have not elected to increase to 11%, contribute an additional 2%of salary in excess of $30,000. The Town’s current year covered payrollfor teachers and administrators was $16,652,956.
In fiscal year 2013, the Commonwealth of Massachusetts contributed$7,904.130 to the MTRS on behalf of the Town. This is included in theeducation expenditures and intergovernmental revenues in the generalfund.
21. Self-Insurance
The Town self-insures against claims for workers compensation, unemploy-ment and most employee health coverage. Annual estimated requirements forclaims are provided in the Town’s annual operating budget.
Health Insurance
The Town contracts with an insurance carrier for excess liability coverage
and an insurance consultant for claims processing. Under the terms of itsinsurance coverage, the Town is liable for claims up to $125,000. The claimsliability represents an estimate of claims incurred but unpaid at year-end,based on past historical costs and claims paid subsequent to year-end.Changes in the aggregate liability for claims for the year ended June 30, 2013are as follows:
Claims liability, beginning of year $ 1,429,865
Claims incurred/recognizedin fiscal year 2013 12,377,530
Claims paid in fiscal year 2013 (13,007,395)
Claims liability, end of year $ 800,000
HealthCoverage
The $800,000 estimated liability for claims incurred but not reported includes onlyan estimate for known loss events expected to later be presented as claims. The
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Town is unable to estimate the amount of unknown loss events expected tobecome claims and expected future developments on claims already reported.
22. Risk Management
The Town is exposed to various risks of loss related to torts; theft of, damageto and destruction of assets; errors and omissions; and natural disasters forwhich the government carries commercial insurance. There were no signifi-cant reductions in insurance coverage from the previous year and have beenno material settlements in excess of coverage in any of the past three fiscalyears.
23. Implementation of New GASB Standard
The GASB has issued Statement 68 Accounting and Financial Reporting for
Pensions, which is required to be implemented in fiscal year 2015. Manage-ment’s current assessment is that this pronouncement will have a significantimpact on the Town’s basic financial statements by recognizing as a liabilityand expense, the Town’s applicable portion of the Middlesex County Retire-ment System’s actuarially accrued liability.
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Actuarial UAAL as
Accrued a Percent-
Actuarial Liability Unfunded age of
Actuarial Value of (AAL) - AAL Funded Covered Covered
Valuation Assets Entry Age (UAAL) Ratio Payroll Payroll
Date (a) (b) (b-a) (a/b) (c) [(b-a)/c]
01/01/11 -$ 141,453$ 141,453$ 0.0% N/A N/A
01/01/09 -$ 137,717$ 137,717$ 0.0% N/A N/A
Actuarial UAAL as
Accrued a Percent-
Actuarial Liability Unfunded age of
Actuarial Value of (AAL) - AAL Funded Covered Covered
Valuation Assets Entry Age (UAAL) Ratio Payroll Payroll
Date (a) (b) (b-a) (a/b) (c) [(b-a)/c]
01/01/12 862,323$ 1,974,144$ 1,111,821$ 43.7% 393,100$ 282.8%
01/01/10 819,987 1,743,581 923,594 47.0% 384,933 239.9%01/01/08 774,863 1,529,806 754,943 50.7% 360,206 209.6%
01/01/06 653,156 1,223,828 570,672 53.4% 330,999 172.4%
01/01/04 599,699 1,020,828 421,129 58.7% 306,025 137.6%
Town
Contributions
Annual as a % of
Plan Required Actual Percent Actual Actual
Year-end Contributions Contributions Contributed Contributions Contributions
12/31/12 81,701$ 81,701$ 100% 3,406$ 4.2%
12/31/11 78,100 78,100 100% 3,297 4.2%
Other Post-Employment Benefits
TOWN OF DRACUT, MASSACHUSETTS
SCHEDULE OF FUNDING PROGRESS
REQUIRED SUPPLEMENTARY INFORMATION
June 30, 2013
(Unaudited)
(Amounts Expressed in thousands)
Employees' Retirement System
Schedule of Employer Contributions
System Wide Town of Dracut
MIDDLESEX COUNTY RETIREMENT SYSTEM
REQUIRED SUPPLEMENTARY INFORMATION
(Unaudited)
(Amounts Expressed in Thousands)
Employees' Retirement System
Schedule of Funding Progress