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Home My WebLink About2013 Annual Town Report TOWN OF NORTH ANDOVER MASSACHUSETTS COMPREHENSIVE ANNUAL FINANCIAL REPORT For Fiscal Year Ended June 30, 2013 Board of Selectmen Town Manager Front row: Rosemary C. Smedile, Andrew Maylor (Town Mgr), Tracy M. Watson Back row: Richard M. Vaillancourt, William F. Gordon, Donald B. Stewart TOWN OF NORTH ANDOVER, MASSACHUSETTS COMPREHENSIVE ANNUAL FINANCIAL REPORT For the Fiscal Year Ended June 30, 2013 Prepared by: Lyne M. Savage, Finance Director/Town Accountant TOWN OF NORTH ANDOVER, MASSACHUSETTS COMPREHENSIVE ANNUAL FINANCIAL REPORT JUNE 30, 2013 TABLE OF CONTENTS Introductory Section .........................................................................................................................................................1 Letter of Transmittal .....................................................................................................................................................3 Organizational Chart ....................................................................................................................................................8 Principal Town Officials ................................................................................................................................................9 Certificate of Achievement for Excellence in Financial Reporting .............................................................................10 Financial Section ...........................................................................................................................................................11 Independent Auditor’s Report ....................................................................................................................................13 Management’s Discussion and Analysis ...................................................................................................................15 Basic Financial Statements ........................................................................................................................................ 23 Statement of Net Position ....................................................................................................................................... 25 Statement of Activities ............................................................................................................................................26 Governmental funds – balance sheet ....................................................................................................................28 Reconciliation of the governmental funds balance sheet total fund balances to the statement of net position ..... 29 Governmental funds – statement of revenues, expenditures and changes in fund balances ............................... 30 Reconciliation of the statement of revenues, expenditures, and changes in fund balances of governmental funds to the statement of activities .........................................................................................................................31 Proprietary funds – statement of net position .........................................................................................................32 Proprietary funds – statement of revenues, expenses and changes in net position ..............................................33 Proprietary funds – statement of cash flows ..........................................................................................................34 Fiduciary funds – statement of fiduciary net position .............................................................................................35 Fiduciary funds – statement of changes in fiduciary net position ...........................................................................36 Notes to basic financial statements ........................................................................................................................37 Required Supplementary Information ........................................................................................................................64 Schedule of revenues, expenditures and changes in fund balance – general fund – budget and actual.............. 66 Retirement System Schedules ...............................................................................................................................68 Retirement system schedule of funding progress ..............................................................................................69 Retirement system schedule of employer contributions .....................................................................................70 Other postemployment benefit plan schedules ......................................................................................................71 Other postemployment benefit plan schedule of funding progress and schedule of employer contributions .... 72 Other postemployment benefit plan actuarial methods and assumptions ..........................................................73 Notes to required supplementary information ........................................................................................................74 Combining Statements ...............................................................................................................................................77 Nonmajor Governmental Funds .............................................................................................................................78 Nonmajor governmental funds – combining balance sheet ...............................................................................80 Nonmajor governmental funds – combining statement of revenues, expenditures, and changes in fund balances .............................................................................................................................................................84 Agency Fund ..........................................................................................................................................................88 Agency fund – statement of changes in assets and liabilities ............................................................................89 Statistical Section ..........................................................................................................................................................91 Net position by component – last ten fiscal years ......................................................................................................92 Changes in net position – last ten fiscal years ...........................................................................................................93 Fund balances, governmental funds – last ten fiscal years .......................................................................................95 Changes in fund balances, governmental funds – last ten fiscal years .....................................................................96 Assessed value and actual value of taxable property by classification and tax rates – last ten fiscal years ............ 97 Principal taxpayers – current year and nine years ago .............................................................................................98 Property tax levies and collections – last ten fiscal years ..........................................................................................99 Ratios of outstanding debt and general bonded debt – last ten fiscal years ...........................................................100 Direct and overlapping governmental activities debt – as of June 30, 2013. ..........................................................101 Computation of legal debt margin – last ten fiscal years .........................................................................................102 Demographic and economic statistics – last ten fiscal years ..................................................................................103 Principal employers (excluding Town) – current year and nine years ago ..............................................................104 Full-time equivalent Town employees – last ten fiscal years ...................................................................................105 Operating indicators by function/program – last ten fiscal years .............................................................................106 Capital asset statistics by function/program – last ten fiscal years ..........................................................................108 Additional information ..................................................................................................................................................109 Enterprise funds – schedule of revenues, expenses and changes in net position – budgetary basis – budget and actual ....................................................................................................................................................110 Introductory Section North Andover Town Offices Introductory Section Town of North Andover, Massachusetts 1 Comprehensive Annual Financial Report This page 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Town of North Andover, Massachusetts 2 Comprehensive Annual Financial Report Town of North Andover 120 Main Street North Andover, Massachusetts 01845 (978) 688-9523 FAX (978) 688-9522 Letter of Transmittal December 4, 2013 To Members of the Board of Selectmen and Citizens of the Town of North Andover: At the close of each fiscal year, state law requires the Town of North Andover to publish a complete set of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP), and that are audited in accordance with generally accepted auditing standards by a firm of licensed certified public accountants. Pursuant to that requirement, we hereby issue the Comprehensive Annual Financial Report (CAFR) of the Town of North Andover, Massachusetts, for the fiscal year ending 2013 for your review. This report consists of management’s representations concerning the finances of the Town of North Andover. Consequently, management assumes full responsibility for the completeness and reliability of all the information presented in this report. To provide a reasonable basis for making these representations, management of the Town of North Andover has established a comprehensive internal control framework that is designed both to protect the government’s assets from loss, theft, or misuse and to compile sufficient reliable information for the preparation of the Town of North Andover’s financial statements in conformity with GAAP. Because the cost of internal controls should not outweigh their benefits, the Town of North Andover’s comprehensive framework of internal controls has been designed to provide reasonable rather than absolute assurance that the financial statements for the fiscal year ended June 30, 2013, are fairly presented in conformity with GAAP. The independent auditor’s report is presented as the first component of the financial section of this report. The Town of North Andover’s financial statements have been audited by Powers & Sullivan, LLC, a firm of licensed certified public accountants. The goal of the independent audit was to provide reasonable assurance that the financial statements of the Town of North Andover for the fiscal year ended June 30, 2013, are free of material misstatement. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management; and evaluating the overall financial statement presentation. The independent auditor concluded, based upon the audit, that there was a reasonable basis for rendering an unmodified opinion that the Town of North Andover’s financial statements for the fiscal year ended June 30, 2013, are fairly presented in conformity with GAAP. The independent auditor’s report is presented as the first component of the financial section of this report. The independent audit of the financial statements of the Town of North Andover was part of a broader, federally mandated “Single Audit” designed to meet the special needs of federal grantor agencies. The standards governing Single Audit engagements require the independent auditor to report not only on the fair presentation of the financial statements, but also on the audited government’s internal controls and compliance with legal Town of North Andover, Massachusetts 3 Comprehensive Annual Financial Report requirements, with special emphasis on internal controls and legal requirements involving the administration of federal awards. These reports are available in the Town of North Andover’s separately issued Single Audit Report. GAAP requires that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management’s Discussion and Analysis (MD&A). This letter of transmittal is designed to complement that analysis and should be read in conjunction with it. The Town of North Andover’s MD&A can be found immediately following the report of the independent auditors. Profile of the Town The Town of North Andover is located in Essex County, approximately 24 miles north of Boston. The Town is 26.63 square miles and lies along the banks of the Merrimack River and is surrounded by the Towns of Boxford, Andover, Middleton, North Reading, and the Cities of Lawrence, Methuen and Haverhill. The settlement of the Town began in 1640 and was incorporated as Andover in 1646. The community was split into the North Parish (now North Andover) and South Parish (now Andover) in 1709 and North Andover was incorporated as a separate entity in 1855. North Andover is governed by an open Town Meeting form of government, a five-member Board of Selectmen and a Town Manager pursuant to a Home Rule Charter that went into effect in 1986. Although North Andover contains several Commercial Office Parks, the Town has retained a rural character and contains over 3,000 acres of preserved open space. North Andover is served by the following interstates: Route 495, Route 125, Route 133 and Route 114. North Andover is a thriving community with an excellent school system, efficient services and a strong commitment to its citizens. As of the 2010 U.S Census the Town’s population is 28,352. The Town provides general governmental services for its citizens, including police and fire protection, collection and disposal of refuse, public education for pre-kindergarten through grade twelve, water and sewer services, parks and recreation, health and social services, libraries/culture as well as maintenance of streets and other infrastructures. The Merrimack Valley Transit Authority ("MVTA") provides bus coverage for certain routs around the Town with connections to the surrounding communities with the Merrimack Valley area. The Town is governed by a home rule charter that provides for an Open Town Meeting - Board of Selectmen - Town Manager form of town government; with Town Meeting defined as the Legislative body, Board of Selectmen as the Executive body and the Manager as the chief administrative officer. In accordance with Chapter 2 “the legislative powers of the town shall be exercised by a town meeting open to all registered voters of the town”. As defined in Chapter 3 “the Board of Selectmen shall serve as the chief goal-setting and policy-making agency of the town and, as such, shall not normally administer the day-to-day affairs of the town, but shall instead regularly direct the Town Manager to help it in carrying out its administrative duties, and make recommendations to the town meeting relating to actions required to be taken by that body.” As defined in Chapter 4 “the Town Manager shall be the chief administrative officer of the town and shall be responsible for administering and coordinating all employees, activities and departments placed by general law, this charter or by-law under the control of the Board of Selectmen and of the Town Manager.” The School Committee has general charge and superintendence of the public schools of the Town. The School Committee is comprised of five members elected at large. The School Committee has the power to select and terminate a superintendent of schools, establish educational goals and policies for the schools consistent with the requirements of the laws of the commonwealth and standards established by the Commonwealth. The School Committee also has all the power and duties given to school committees by the laws of the Commonwealth. In addition to being shaped and influenced by the Town’s elected officials and appointed staff, Town policy and programs are impacted by the actions of the Town’s Boards and Commissions. The size, responsibility and source of authority of the Town’s Boards and Commissions vary. With the exception of those members who Town of North Andover, Massachusetts 4 Comprehensive Annual Financial Report derive their appointments as a result of their position in Town government and the Town Charter mandating their membership, the Board of Selectmen and Town Manager appoint members in accordance with the Town Charter or Massachusetts General Law. The Town provides a full array of high quality services to the general public, including: full-time police and fire protection; schools for grades pre-kindergarten through 12, (one pre-school, five elementary, one middle, one senior high, and one regional vocational technical high school); solid waste disposal and recycling; street maintenance and snow removal; public health and natural resource protection; community development and planning; elder, youth and veteran services; a full service library; and various parks, playgrounds, conservation lands, and recreational programs. The Town also operates its own water supply, purification, and distribution system, and provides sanitary waste disposal via connections to a regional treatment facility (Greater Lawrence Sanitary District). During the summer months the Town operates Steven’s Pond, a family and youth oriented recreation area located off Pleasant Street, which includes recreational and instructional swimming, shaded picnic tables, volleyball, horseshoe pits and a children’s playground. The Town of North Andover is committed to a high degree of community responsiveness, providing high quality services to its citizens, and conducting all its affairs in a professional manner. Factors Affecting Economic Condition The information presented in the financial statements is perhaps best understood when it is considered from the broader perspective of the specific environment within which the Town of North Andover operates. Local Economy North Andover is a well-balanced mix of commercial development situated in three distinct areas throughout Town. Downtown North Andover serves the local community with small retail and office space as well as providing a mix of fast food and full service restaurants. The downtown is also home to a large mix-use mill complex that houses larger companies, rental housing, manufacturing, restaurants and offices. North Andover is bisected by two state highways that connect to an interstate highway. These two corridors, which comprise the other commercial districts, boast three industrial parks that serve larger national and international businesses. The state highways also provide a mix of regional commercial and retail businesses that serve residents and neighboring communities. Located at the intersection of the two state highways, on a 220- acre campus, is Merrimack College with over 2,300 students. The college was recently ranked as one of the nation’s best liberal arts colleges. Long-term Financial Planning The Town of North Andover has a proud history of maintaining a solid financial position in all economies, as indicated by its “AA/Stable” bond rating. The Town’s financial actions are generally guided by a number of formal financial policies including long range planning tools such as a five year Capital Improvement Program, prioritizing spending plans and identifying discretionary spending, pay-as-you go financing strategies, long-term planning for all liabilities including pension and insurance reserves, and municipal best practices, which are reviewed annually at the beginning of each budget development cycle. Given a number of years of reduced state aid, the Town has been able to minimize the impact to municipal and school services through a combination of prudent budgeting, user fee adjustments, strong tax collections, and continued property growth. The Town has also been able to continue to make transfers into their reserve funds during these challenging years. In June of 2013 the Town appropriated $625,000 of Free Cash into the Stabilization Fund, increasing its standing unassigned fund balance to $3,535,398 as well as $213,000 into a recently established Capital Stabilization Fund increasing the balance to $238,167. Town of North Andover, Massachusetts 5 Comprehensive Annual Financial Report The Town is currently managing approximately $52.6 million worth of long-term debt. This indebtedness consists of $29.5 million of governmental and $23.1 million of business-type general obligation bonds. Approximately $8.8 million or 17% of the $52.6 million is scheduled to be paid by the end of fiscal 2014 and the remaining $43.8 million by fiscal 2030. Approximately $23.1 million is self-supporting through enterprise fund revenues. The Town of North Andover has enhanced its revenue flexibility by establishing enterprise funds and many other user supported programs. This has allowed the Town to shift the operating costs to the users of certain services so that little or no tax support goes towards providing these services. By doing so, the Town is able to provide the maximum tax dollars available to all other services. The Town has several committees which assist the Town Manager on different levels. In May 2004 Town Meeting adopted the Revenue/Fixed Cost Committee whose main purpose is to advise the Town Manager and other Town officials on projected revenues, other financial sources and fixed cost to facilitate the annual budget development process. The Audit Committee assists with the selection of the independent auditor, oversight of the audit process, and resolution of audit findings. Cash Management Policies and Practices It is the policy of the Town of North Andover to comply with the laws of the Commonwealth of Massachusetts regarding the investment of public funds while achieving the highest return with the maximum security and meeting the daily cash flow demands of the Town. As of June 30, 2013, General Fund cash and cash equivalents totaled $12.1 million, while the balance of unrestricted cash and cash equivalents for all other government funds totaled $10 million. Risk Management The Town of North Andover manages its risk through a combination of self-insured programs and premium based coverage with commercial insurance carriers. Health care and workers compensation are a combination of self- insured and premium based plans. The Town is exposed to various risks of loss related to general liability, property and casualty, workers’ compensation and unemployment compensation claims. Buildings and property are fully insured against fire, theft and natural disaster to the extent that losses exceed the Town’s deductible per incident. These deductibles vary by type of incident, none of which exceed $25,000. Pension and Other Postemployment Benefits The Town of North Andover contributes to the Essex Regional Retirement System. The System recently reported that the total unfunded liability for the pension plan increased by $114 million from $143.8 million to $257.8 million, using an estimated 8.25% annual return on funds, or more than 79% from January 1, 2008 to December 31, 2010. North Andover’s share of this liability is determined annually based on payroll cost but has generally been approximately 14.6% which would extrapolate to an unfunded liability of $40 million. The Town of North Andover also provides postemployment health care benefits for certain retirees and their dependents. There were 425 retired employees receiving these benefits, which are financed on a pay-as-you-go basis. For Fiscal 2012, the Town conducted an actuarial valuation to determine the unfunded liability which totaled $100,068,844, a decrease of $18,526,533 from the previous actuarial done in 2010. The Town established an Other Postemployment Benefit Trust fund in 2010, to date it has not been funded. Additional information on the Town of North Andover’s pension and postemployment benefits can be found in the notes to the financial statements. Town of North Andover, Massachusetts 6 Comprehensive Annual Financial Report Annual Budget Process and Controls The Town Manager is responsible for preparing and presenting the budget to the Finance Committee and the Board of Selectmen. The Selectmen review all requests and Town wide issues and present a budget to Town Meeting for approval. A nine member Finance Committee reviews the budget and makes its independent recommendations to Town Meeting. The level of budgetary control is established by Town Meeting and this approval defines the level at which expenditures may not exceed appropriations. This level is typically at the functional level. The Town Accountant is responsible for ensuring all payroll and invoices are within the budgetary control level before authorizing payment. Additional appropriations may be approved at subsequent Town Meetings. These controls ensure compliance with the budget approved by Town Meeting. Awards and Acknowledgements The Town has received for FY13 the Distinguished Budget Presentation Award and for FY12 the Certificate of Achievement for Excellence in financial Reporting from the Government Finance Officers Association of the United States and Canada. North Andover’s Police Department has been a Massachusetts Accredited Police Department since May 2010. The Town received E-Government awards in FY08, FY09 and FY10 from Common Cause Massachusetts in recognition of its commitment to open government by posting all key government records on its website. The preparation of this report would not have been possible without the efficient and dedicated services of the Finance and Accounting department staffs. We would like to express our appreciation to all the members of the departments who assisted and contributed to the preparation of this report. Credit must also be given to the Town Selectmen, Finance Committee and Audit Committee for their unfailing support for maintaining the highest standards of professionalism in the management of the Town of North Andover’s finances. Respectfully submitted, Andrew W. Maylor Lyne M. Savage Town Manager Finance Director/Town Accountant Town of North Andover, Massachusetts 7 Comprehensive Annual Financial Report Comprehensive Annual Financial Report 8 Organizational Chart Town of North Andover, Massachusetts Principal Town Officials Elected Officials Board of Selectmen Rosemary Connelly Smedile, Chairman William F. Gordon Donald B. Stewart Richard M. Vaillancourt, Clerk Tracy M. Watson, Licensing Chairman Town Moderator Mark DiSalvo School Committee Stan Limpert, Chair Andrew McDevitt, Vice Chair Laurie Burzlaff, Member Brian Gross, Member Zora Warren, Clerk Appointed Officials – by Board of Selectmen Town Manager Andrew W. Maylor Town Accountant Lyne M. Savage Fire Chief Andrew Melnikas Police Chief Paul J. Gallagher Town Council Urbelis & Fieldsteel, LLP Appointed Officials – by School Committee Superintendent Kevin Hutchinson Appointed Officials – by Town Manager Finance Director Lyne M. Savage Assistant Town Manager/Purchasing Raymond Santilli Community Development Director Curt T. Bellavance Conservation Administrator Jennifer A. Hughes Director of Elder Services Irene M. O’Brien Human Resources Cathy J. Darby Inspector of Building Gerald A. Brown Library Director Mary Rose Quinn Public Works Director Bruce D. Thibodeau Public Health Director Susan Y. Sawyer Town Clerk Joyce A. Bradshaw Town Treasurer Jennifer A. Yarid Town Planner Judy Tymon Veterans Director Edward V. Mitchell Youth Services Director Richard Gorman Town of North Andover, Massachusetts 9 Comprehensive Annual Financial Report Certificate of Achievement for Excellence in Financial Reporting Town of North Andover, Massachusetts 10 Comprehensive Annual Financial Report Financial Section Financial Section Town of North Andover, Massachusetts 11 Comprehensive Annual Financial Report This page intentionally left blank. Town of North Andover, Massachusetts 12 Comprehensive Annual Financial Report Independent Auditor’s Report To the Honorable Board of Selectmen Town of North Andover, Massachusetts Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the Town of North Andover, Massachusetts, as of and for the year ended June 30, 2013, and the related notes to the financial statements, which collectively comprise the Town’s basic financial statements as listed in the table of contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the Town of North Andover, Massachusetts, 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. Town of North Andover, Massachusetts 13 Comprehensive Annual Financial Report Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis and required supplementary information, as listed in the table of contents, be presented to supplement the basic financial statements. Such information, although not a 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 of North Andover, Massachusetts’ basic financial statements. The introductory section and combining statements and statistical section are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining 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 statements are fairly stated, in all material respects, in relation to the basic financial statements as a whole. The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 4, 2013, on our consideration of the Town of North Andover, Massachusetts’ internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and 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 in considering the Town of North Andover, Massachusetts’ internal control over financial reporting and compliance. December 4, 2013 Town of North Andover, Massachusetts 14 Comprehensive Annual Financial Report Management’s Discussion and Analysis Management’s Discussion and Analysis Town of North Andover, Massachusetts 15 Comprehensive Annual Financial Report Management’s Discussion and Analysis As management of the Town of North Andover, we offer readers of these financial statements this narrative overview and analysis of the financial activities for the fiscal year ended June 30, 2013. We encourage readers to consider the information presented in this report. All amounts, unless otherwise indicated, are expressed in whole dollars. The Governmental Accounting Standards Board (GASB) is the authoritative standard setting body that provides guidance on how to prepare financial statements in conformity with generally accepted accounting principles (GAAP) for states and local governmental entities. Users of these financial statements (such as investors, rating agencies and management) rely on the GASB to establish consistent reporting standards for all governments in the United States. This consistent application is the only way users (including citizens, the media, legislators and others) can assess the financial condition of one government compared to others. Financial Overview Governmental net position decreased by $1.7 million in fiscal 2013. The major factor contributing to this decrease is the long-term amortization of the OPEB liability, which increased by $7.3 million in fiscal 2013 bringing the total recorded liability to $36.8 million at year end. The impact of this expense was offset by several positive factors that are more fully described later in this section on page 20. At the close of the current fiscal year, the Town’s general fund reported a fund balance of $7.7 million, an increase of $899,000 in comparison with the prior year. Total fund balance represents 9% of general fund expenditures. The Town’s governmental debt (short-term and long-term combined) decreased by $3.8 million during the current fiscal year. This was due to the net effect of $5.2 million in principal payments on long-term debt and the issuance of $1.3 million in short and long-term debt for building renovations, communication and computer equipment, and infrastructure. The Town’s business–type activities increased by $2.8 million during the current fiscal year. This was due to the fact that the water and sewer rates are designed to cover principal payments of long-term debt and the acquisition of capital assets from current revenues. Overview of the Financial Statements This discussion and analysis are intended to serve as an introduction to the Town of North Andover’s basic financial statements. These basic financial statements comprise of three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. Government-wide financial statements. The government-wide financial statements are designed to provide readers with a broad overview of finances, in a manner similar to private-sector business. Thestatement 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 whether the financial position is improving or deteriorating. Town of North Andover, Massachusetts 16 Comprehensive Annual Financial Report Thestatement 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). Both of the government-wide financial statements distinguish functions that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities include general government, public safety, education, public works, health and human services, culture and recreation, support services, and interest. The business-type activities include the activities of the water, sewer, and Osgood Hill Estate operations. Fund financial statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. Fund accounting is used to ensure and demonstrate compliance with finance-related legal requirements. All of the funds can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds. Governmental funds.Governmental funds are used to account for essentially the same functions reported as governmental activities in the governmental-wide financial statements. However, unlike the government-wide financial statements, governmental fund statements focus on near-term inflows 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. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The Town of North Andover adopts an annual appropriated budget for its general fund. A budget to actual 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 enterprise funds to account for its water, sewer, and Osgood Hill Estate operations, all of which are considered to be major funds. The Town of North Andover adopts annual appropriated budgets for each enterprise fund. A budget to actual schedule has been provided, as additional information, to demonstrate compliance with these budgets. TheInternal Service fund is used to account for the financing of services provided by one department to other departments or governmental units. This fund is used to account for risk-financing activities related to active employees’ and retirees’ health insurance. Town of North Andover, Massachusetts 17 Comprehensive Annual Financial Report 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 propriety funds. Private-purpose trust funds and agency funds are reported and combined into a single, aggregate presentation in the fiduciary fund financial statements under the captions “private purpose trust funds” and “agency funds,” respectively. Notes to the basic 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. Government-wide Financial Analysis As noted earlier, net position may serve over time as a useful indicator of a government’s financial position. North Andover’s assets exceeded liabilities by $139.0 million at the close of fiscal 2013. Net position includes $146.7 million as the net investment in capital assets (e.g., land, buildings and building improvements, machinery and equipment and infrastructure); less any related debt used to acquire those assets that are still outstanding. The Town uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the investment in its capital assets is reported net of its 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 of the net position, $8.2 million, represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net positionhas a year-end deficit balance of $15.9 million. The primary reason for this deficit balance is the recognition of the $38.4 million other postemployment benefits liability. At the end of the current fiscal year, the Town is able to report positive balances in two of the three categories of net position, for the Town as a whole and for its governmental activities. Its business-type activities report positive balances in all categories. The governmental activity and business-type activity components of the Town are presented on the following pages. Town of North Andover, Massachusetts 18 Comprehensive Annual Financial Report Governmental Activities. The Town of North Andover’s assets exceeded liabilities for governmental activities by $94.5 million at the close of fiscal 2013. FY 2013FY 2012 Assets: Current assets……………………………………………………$34,261,926 $31,543,640 Noncurrent assets (excluding capital)………………………… 399,232 784,791 Capital assets…………………………………………………… 134,528,958 134,216,792 Total assets…………………………………………………169,190,116166,545,223 Liabilities: Current liabilities (excluding debt)……………………………… 7,750,897 6,874,551 Noncurrent liabilities (excluding debt)………………………… 37,408,389 30,129,413 Current debt……………………………………………………… 5,609,547 5,082,747 Noncurrent debt………………………………………………… 23,891,491 28,215,337 Total liabilities……………………………………………… 70,302,04874,660,324 Net Position: Net investment in capital assets………………………………… 106,453,985 103,445,722 Restricted………………………………………………………… 8,207,148 8,225,177 Unrestricted……………………………………………………… (20,131,341) (15,427,724) Total net position……………………………………………$94,529,792$ 96,243,175 Program revenues: Charges for services……………………………………………$6,974,866 $7,169,899 Operating grants and contributions…………………………… 18,592,278 18,209,285 Capital grants and contributions………………………………… 2,556,861 1,540,050 General Revenues: Real estate and personal property taxes……………………… 60,284,114 60,060,304 Tax liens…………………………………………………………… 401,204 355,176 Motor vehicle and other excise taxes………………………… 4,462,710 3,923,189 … 316,019 258,471 Penalties and interest on taxes……………………………… Payments in lieu of taxes……………………………………… 1,974,424 1,903,510 Community preservation taxes……………………………..…… 1,390,831 1,363,553 Grants and contributions not restricted to specific programs…………………………………………… 2,338,662 2,133,066 Unrestricted investment income………………………………… 198,915 194,547 Total revenues……………………………………………… 97,111,05099,490,884 Expenses: General government…………………………………………… 3,665,170 3,794,618 Public safety……………………………………………………… 15,017,342 14,825,939 Education………………………………………………………… 70,340,318 69,540,668 Public works……………………………………………………… 6,963,935 5,715,405 Health and human services…………………………………… 2,162,118 2,146,195 Culture and recreation……………………………………… 1,679,351 2,015,651 Support services………………………………………………… 1,281,204 1,266,046 Interest…………………………………………………………… 1,192,955 1,354,251 Total expenses………………………………………………102,302,393100,658,773 Excess (deficiency) before contributions and transfers…… (3,547,723)(2,811,509) Special item - capital contributions…………………………… -(225,649) Transfers…………………………………………………………… 1,159,0451,323,775 Change in net position……………………………………………$(1,713,383) $(2,388,678) Town of North Andover, Massachusetts 19 Comprehensive Annual Financial Report The governmental expenses totaled $102.3 million of which $28.1 million (27%) was directly supported by program revenues consisting of charges for services, operating and capital grants and contributions. General revenues totaled $71.4 million, primarily coming from property taxes, motor vehicle excise, payments in lieu of taxes and non-restricted state aid. The governmental net position decreased by $1.7 million during the current fiscal year. This was due to a $7.3 million increase in the other postemployment benefits liability that was offset by positive budgetary results of $1.5 million in the general fund, the recognition of $2.6 million in capital grants, and an increase of $1.7 million in the internal service fund. Business-type Activities. For the Town’s business-type activities, assets exceeded liabilities by $44.5 million at the close of fiscal 2013. FY 2013FY 2012 Assets: Current assets………………………………………………………$12,358,806 $10,805,712 Noncurrent assets (excluding capital)…………………………… 678,103 777,790 Capital assets……………………………………………………… 56,499,301 56,756,744 Total assets…………………………………………………… 68,340,24669,536,210 Liabilities: Current liabilities (excluding debt)……………………………… 427,249 685,096 Noncurrent liabilities (excluding debt)…………………………… 1,691,859 1,476,968 … 3,366,337 3,535,647 Current debt……………………………………………………… Noncurrent debt…………………………………………………… 19,533,408 20,959,743 Total liabilities………………………………………………… 26,657,45425,018,853 Net Position: … 40,243,610 37,264,739 Net investment in capital assets……………………………… Unrestricted………………………………………………………… 4,273,747 4,418,053 Total net position………………………………………………$44,517,357$41,682,792 Program revenues: Charges for services………………………………………………$10,688,268 $10,732,749 … 127,545 234,388 Operating grants and contributions…………………………… Total revenues………………………………………………… 10,967,13710,815,813 Expenses: Water………………………………………………………………… 3,033,371 3,180,102 Sewer……………………………………………………………… 3,517,562 3,572,401 Osgood Hill ………………………………………………………… 332,189 295,606 … Total expenses……………………………………………… 7,048,1096,883,122 Excess (deficiency) before contributions and transfers……… 3,919,0283,932,691 Special item - capital contributions……………………………… -225,649 Transfers……………………………………………………………… (1,159,045)(1,323,775) … Change in net position……………………………………………$ 2,834,565$2,759,983 Town of North Andover, Massachusetts 20 Comprehensive Annual Financial Report Business-type net position of $40.2 million represents the net investment in capital assets and $4.3 million is unrestricted. The Town’s business-type activities net position increased by $2.8 million in the current fiscal year. The water enterprise fund net position increased by $1.6 million. This increase was due to debt service principal payments exceeding depreciation expense by $1.0 million, and also $697,000 of positive budgetary results. The sewer enterprise fund net position increased by $1.0 million. This increase was due to debt service principal payments exceeding depreciation expense by $756,000 and also $256,000 of positive budgetary results. The Osgood Hill enterprise fund net position increased by $183,000 which was due to receipts coming in higher than anticipated. Financial Analysis of the Governmental 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 of North Andover’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 of North Andover’s financing requirements. In particular, unassigned fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year. As of the end of the current fiscal year, governmental funds reported combined ending fund balances of $17.2 million, of which $7.7 million is for the general fund, $5.6 million is for the community preservation fund, and $3.9 million is for nonmajor governmental funds. Cumulatively there was a decrease of $1.3 million in fund balances from the prior year. The general fund is the chief operating fund. At the end of the current fiscal year, unassigned fund balance of the general fund totaled $6.6 million, while total fund balance was $7.7 million. $896,000 of fund balance was restricted for debt service. Fund balance has been assigned for encumbrances in the amount of $174,000. Total fund balance represents 9% of general fund expenditures. The Town’s general fund increased by $899,000 in fiscal 2013 which was due to $1.1 million of better than anticipated revenue collections, such as tax liens, motor vehicle and other excise taxes, and miscellaneous nonrecurring revenue. Also contributing to the increase were various underspent appropriations that included general government, public safety, and public works. These increases were offset by a $337,000 increase in tax refunds payable which is recorded in the fund based GAAP statements. The community preservation fund decreased by $211,000 in fiscal 2013, which is due to timing differences between the receipt and expenditure of surcharge and state grant revenues. The nonmajor governmental funds decreased by $2.0 million in fiscal 2013, which is due to timing differences between the receipt and expenditure of bond proceeds and grants. General Fund Budgetary Highlights The original fiscal year 2013 approved budget for the General Fund authorized $81.3 million in appropriations and other amounts to be raised. This includes $412,000 of encumbrances and continuing appropriations carried forward from the prior year. During fiscal year 2013 annual town meeting approved $880,000 in supplemental appropriations for transfers to the general and capital stabilization funds of $625,000 and $213,000, respectively, as well as $30,000 to fund a deficit in the highway chapter 90 fund. Town of North Andover, Massachusetts 21 Comprehensive Annual Financial Report Capital Asset and Debt Administration Capital Assets. In conjunction with the annual operating budget, the Town annually prepares a capital budget for the upcoming fiscal year and a five-year Capital Improvement Plan (CIP) that is used as a guide for future capital expenditures The Town’s investment in capital assets for its governmental and business-type activities as of June 30, 2013, amounts to $191 million(net of accumulated depreciation). This investment in capital assets includes land, construction in progress, land improvements, buildings and building improvements, machinery and equipment, library books, vehicles, treatment plants, pump stations, reservoirs, and infrastructure. The Town invested $7.7 million for capital asset additions in fiscal 2013. The major governmental capital asset events during the current fiscal year included the purchase of a new internet telephone system, a new HVAC system at the library, roof and window replacements at various schools, a new dump truck, as well as various sidewalk and roadway improvements. The major business-type capital asset events during the current fiscal year consisted of a new pickup truck, as well as various water and sewer main improvements. Debt Administration. Outstanding gross long-term governmental debt, as of June 30, 2013, totaled $29.5 million, a decrease of $4.3 million from the prior fiscal year. This was due to the issuance of $926,000 of general obligation bonds and principal payments totaling $5.2 million. Outstanding gross long-term debt of the water enterprise fund, as of June 30, 2013, totaled $10.5 million, a decrease of $1.1 million from the prior fiscal year. This was due to the issuance of $795,000 of general obligation bonds and principal payments totaling $1.9 million. Outstanding gross long-term debt of the sewer enterprise fund, as of June 30, 2013, totaled $12.6 million, a decrease of $564,000. This was due to the issuance of $1.1 million of general obligation refunding bonds and principal payments totaling $1.7 million. The $1,145,000 of General Obligation Refunding Bonds were issued in order to take advantage of favorable interest rates. The transaction involved $1,180,000 of general obligation bonds being advance refunded by placing the proceeds of the refunding bonds in an irrevocable trust to provide for all future debt service payments on the refunded bonds. The payment to the irrevocable trust was not made until subsequent to year and, as a result, the refunded bonds are not yet considered to be defeased at June 30, 2013 and the liability has not been removed from the statement of net position. This advance refunding was undertaken to reduce total debt service payments over the next five years by $69,680 and resulted in an economic gain of $67,701 Please refer to notes 4, 7 and 8 to the basic financial statements for further discussion of the major capital and debt activity. Requests for Information This financial report is designed to provide a general overview of the Town of North Andover’s finances for all those with an interest in the government’s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Finance Director, Town Hall, 120 Main Street, North Andover, Massachusetts 01845. Town of North Andover, Massachusetts 22 Comprehensive Annual Financial Report Basic Financial Statements Basic Financial Statements Town of North Andover, Massachusetts 23 Comprehensive Annual Financial Report This page intentionally left blank. Town of North Andover, Massachusetts 24 Comprehensive Annual Financial Report STATEMENT OF NET POSITION JUNE 30, 2013 Primary Government GovernmentalBusiness-type ActivitiesActivitiesTotal ASSETS CURRENT: Cash and cash equivalents……………………………$ 26,188,470 $ 8,111,402 $ 34,299,872 Restricted cash and cash equivalents………………… - 1,145,000 1,145,000 Investments…………………………………………… … 364,436 - 364,436 Receivables, net of allowance for uncollectibles: Real estate and personal property taxes………… 1,088,685 - 1,088,685 Tax and utility liens………………………………… … 1,992,276 142,961 2,135,237 Motor vehicle and other excise taxes……………… 471,499 - 471,499 User charges………………………………………… - 2,859,756 2,859,756 Community preservation…………………………… 23,481 - 23,481 Departmental and other……………………………… 669,671 - 669,671 Intergovernmental…………………………………… 2,808,380 99,687 2,908,067 Tax foreclosures………………………………………… 655,028 - 655,028 NONCURRENT: Receivables, net of allowance for uncollectibles: Intergovernmental…………………………………… 399,232 678,103 1,077,335 Capital assets, nondepreciable………………………… 26,822,870 6,331,946 33,154,816 Capital assets, net of accumulated depreciation…… 107,706,08850,167,355157,873,443 TOTAL ASSETS…………………………………………… 169,190,11669,536,210238,726,326 LIABILITIES CURRENT: Warrants payable………………………………………… 1,658,733 177,792 1,836,525 … 2,734,649 - 2,734,649 Accrued payroll………………………………………… Accrued health claims payable………………………… 686,000 - 686,000 Tax refunds payable…………………………………… 1,192,000 1,192,000- Accrued interest………………………………………… 367,263192,457559,720 Other liabilities…………………………………………… 81,092 - 81,092 Liabilities due depositors………………………………… 106,160 - 106,160 Compensated absences………………………………… 925,000 57,000 982,000 Notes payable…………………………………………… 359,500 - 359,500 Bonds payable…………………………………………… 5,250,047 3,366,337 8,616,384 NONCURRENT: Compensated absences………………………………… 651,000 34,000 685,000 Other postemployment benefits………………………… 36,757,389 1,657,859 38,415,248 Bonds payable…………………………………………… 23,891,491 19,533,408 43,424,899 TOTAL LIABILITIES………………………………………… 74,660,324 25,018,853 99,679,177 NET POSITION … 106,453,985 40,243,610 146,697,595 Net investment in capital assets………………………… Restricted for: Debt service……………………………………………… 896,040 - 896,040 Community preservation………………………………… 6,000,985 - 6,000,985 Permanent funds: Expendable……….…………………………………… 708,062 - 708,062 Nonexpendable……………………………………… 29,200 - 29,200 Gifts and grants………………………………………… 572,861-572,861 Unrestricted………………………………………………… (20,131,341)4,273,747(15,857,594) TOTAL NET POSITION……………………………………$ 94,529,792$ 44,517,357 $ 139,047,149 See notes to basic financial statements. Town of North Andover, Massachusetts25Comprehensive Annual Financial Report STATEMENT OF ACTIVITIES FISCAL YEAR ENDED JUNE 30, 2013 Program Revenues OperatingCapital Charges forGrants andGrants andNet (Expense) Functions/ProgramsExpensesServicesContributionsContributionsRevenue Primary Government: Governmental Activities: General government……………… $ 3,665,170 $ 550,400 $ 85,971 $ - $ (3,028,799) … 15,017,342 2,798,269 100,456 - (12,118,617) Public safety……………………… Education…………………………… 70,340,318 3,409,555 17,289,331 696,209 (48,945,223) … 6,963,935 64,194 344,650 1,449,134 (5,105,957) Public works……………………… Health and human services……… 2,162,118 150,258 378,916 - (1,632,944) Culture and recreation…………… 1,679,351 2,190 328,918 411,518 (936,725) Support Services…………………… 1,281,204 - - - (1,281,204) … 1,192,955 - 64,036 - (1,128,919) Interest…………………………… Total Governmental Activities… 102,302,393 6,974,866 18,592,278 2,556,861 (74,178,388) Business-Type Activities: Water………………………………… 3,033,371 5,387,685 12,639 - 2,366,953 Sewer……………………………… 3,517,562 4,964,813 114,906 - 1,562,157 Osgood Hill………………………… 332,189 335,770 - - 3,581 Total Business-Type Activities… 6,883,122 10,688,268 127,545 - 3,932,691 Total Primary Government……… $ 109,185,515 $ 17,663,134 $ 18,719,823 $ 2,556,861 $ (70,245,697) See notes to basic financial statements.(Continued) Town of North Andover, Massachusetts26Comprehensive Annual Financial Report STATEMENT OF ACTIVITIES FISCAL YEAR ENDED JUNE 30, 2013 Primary Government GovernmentalBusiness-Type ActivitiesActivitiesTotal Changes in net position: Net (expense) revenue from previous page……$ (74,178,388)$ 3,932,691 $ (70,245,697) General revenues: Real estate and personal property taxes, net of tax refunds payable………………… 60,284,114 - 60,284,114 Tax liens………………………………………… 401,204 - 401,204 Motor vehicle and other excise taxes……… 4,462,710 - 4,462,710 Penalties and interest………………………… 316,019 - 316,019 Payments in lieu of taxes…………………… 1,974,424 - 1,974,424 Community preservation taxes……………… 1,390,831 - 1,390,831 Grants and contributions not restricted to specific programs…………………………… 2,338,662 - 2,338,662 Unrestricted investment income……………… 198,915 - 198,915 Special item - capital contributions…………… (225,649) 225,649 - Transfers, net…………………………………… 1,323,775 (1,323,775) - Total general revenues, special items and transfers…………………………………… 72,465,005 (1,098,126) 71,366,879 Change in net position……………………… (1,713,383) 2,834,565 1,121,182 Net Position: Beginning of year……………………………… 96,243,175 41,682,792 137,925,967 End of year……………………………………$ 94,529,792 $ 44,517,357 $ 139,047,149 (Concluded) Town of North Andover, Massachusetts27Comprehensive Annual Financial Report GOVERNMENTAL FUNDS BALANCE SHEET JUNE 30, 2013 NonmajorTotal CommunityGovernmentalGovernmental ASSETSGeneralPreservationFundsFunds Cash and cash equivalents………………………………$ 12,133,398$ 5,695,979$ 4,286,605 $ 22,115,982 Investments………………………………………………… - - 364,436 364,436 Receivables, net of uncollectibles: Real estate and personal property taxes…………… -1,088,685 - 1,088,685 Tax liens………………………………………………… 1,992,276 - - 1,992,276 Motor vehicle and other excise taxes………………… 471,499 - - 471,499 Community preservation……………………………… - 23,481 - 23,481 Departmental and other………………………………… 614,926 - 54,745 669,671 Intergovernmental…………………………………… … 1,044,791 348,000 1,814,821 3,207,612 Tax foreclosures…………………………………………… 655,028 - - 655,028 Due from other funds……………………………………… 184,998 - - 184,998 TOTALASSETS……………………………………………$ 18,185,601$ 6,067,460 $ 6,520,607 $ 30,773,668 LIABILITIES AND FUND BALANCES LIABILITIES: Warrants payable………………………………………$ 1,100,465 $ 66,475 $ 491,686 $ 1,658,626 Accrued payroll………………………………………… 2,510,182 - 224,467 2,734,649 Tax refunds payable…………………………………… 1,192,000 - - 1,192,000 Liabilities due depositors……………………………… 106,160 - - 106,160 Other liabilities………………………………………… 81,092 - - 81,092 Deferred revenues……………………………………… 5,507,072 371,481 1,348,370 7,226,923 Due to other funds……………………………………… - - 184,998 184,998 Notes payable…………………………………………… - - 359,500 359,500 TOTAL LIABILITIES……………………………………… 437,95610,496,971 2,609,021 13,543,948 FUND BALANCES: Nonspendable…………………………………………… - - 29,200 29,200 Restricted……………………………………………… 896,0405,629,5044,076,31210,601,856 Assigned………………………………………………… 173,989 - - 173,989 Unassigned……………………………………………… 6,618,601 - (193,926) 6,424,675 TOTAL FUND BALANCES……………………………… 5,629,5047,688,630 3,911,586 17,229,720 TOTAL LIABILITIES AND FUND BALANCES…………$ 18,185,601$ 6,067,460 $ 6,520,607 $ 30,773,668 See notes to basic financial statements. Town of North Andover, Massachusetts28Comprehensive Annual Financial Report RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TOTAL FUND BALANCES TO THE STATEMENT OF NET POSITION JUNE 30, 2013 Total governmental fund balances…………………………………………………………… $ 17,229,720 Capital assets (net) used in governmental activities are not financial resources and, therefore, are not reported in the funds…………………………………………… 134,528,958 Accounts receivable are not available to pay for current-period expenditures and, therefore, are deferred in the funds……………………………… … 7,226,923 Internal service funds are used by management to account for unemployment, health insurance activities. The assets and liabilities of the internal service funds are included in the governmental activities in the statement of net position………… 3,386,381 In the statement of activities, interest is accrued on outstanding long-term debt, whereas in governmental funds interest is not reported until due…………………… (367,263) Long-term liabilities are not due and payable in the current period and, therefore, are not reported in the governmental funds. Bonds payable, net of unamortized premiums and deferred losses on refundings……..…………………………………………… (29,141,538) Other postemployment benefits………………………………………………………… (36,757,389) Compensated absences………………………………………………………………… (1,576,000) Net effect of reporting long-term liabilities……………………………………… (67,474,927) Net position of governmental activities…………………………………………………………$ 94,529,792 See notes to basic financial statements. Town of North Andover, Massachusetts29Comprehensive Annual Financial Report GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES FISCAL YEAR ENDED JUNE 30, 2013 NonmajorTotal Community GovernmentalGovernmental GeneralPreservationFundsFunds REVENUES: Real estate and personal property taxes, net of tax refunds………………………… …$ 60,311,614 $ - $ - $ 60,311,614 Tax and utility liens…………………………… 162,627 - - 162,627 Payments in lieu of taxes……………………… 1,836,102 - 138,322 1,974,424 Community preservation taxes……………… - 1,391,901 - 1,391,901 Motor vehicle and other excise taxes………… 4,260,419 - - 4,260,419 Charges for services…………………………… 957,149 - 3,569,692 4,526,841 Penalties and interest on taxes……………… 395,894 - - 395,894 Licenses and permits…………………………… 252,524 - 554,332 806,856 Fines and forfeitures………………………… … 115,103 - - 115,103 Intergovernmental……………………………… 17,392,413 404,528 4,677,303 22,474,244 Departmental and other……………………… 1,310,038 - 35,357 1,345,395 Contributions…………………………………… - - 781,414 781,414 Investment income …………………………… 137,700 36,887 24,328 198,915 TOTAL REVENUES…………………… 87,131,583 1,833,316 9,780,748 98,745,647 EXPENDITURES: Current: General government………………………… 2,214,064 - 103,110 2,317,174 Public safety………………………………… 9,125,404 - 989,627 10,115,031 Education…………………………………… 38,766,969 - 9,424,689 48,191,658 Public works………………………………… 4,629,200 - 1,395,283 6,024,483 Health and human services………………… 984,316 - 478,210 1,462,526 Culture and recreation……………………… 852,439 2,043,934 99,587 2,995,960 Support Services…………………………… 1,065,290 - 35,991 1,101,281 Pension benefits…………………………… 10,452,145 - - 10,452,145 Property and liability insurance…………… 290,896 - - 290,896 Employee benefits………………………… 11,250,204 - - 11,250,204 State and county charges……………………… 1,788,615 - - 1,788,615 Debt service: Principal……………………………………… 5,219,330 - - 5,219,330 Interest……………………………………… 1,114,259 - - 1,114,259 TOTAL EXPENDITURES……………… 87,753,131 2,043,934 12,526,497 102,323,562 EXCESS (DEFICIENCY) OF REVENUES … (621,548) (210,618) (2,745,749) (3,577,915) OVER (UNDER) EXPENDITURES………… OTHER FINANCING SOURCES (USES): Issuance of bonds and notes………………… - - 926,199 926,199 Premium from issuance of bonds…………… 24,215 - - 24,215 Transfers in……………………………………… 1,526,297 - 29,710 1,556,007 Transfers out…………………………………… (29,710) - (202,522) (232,232) TOTAL OTHER FINANCING SOURCES (USES)…………………… 1,520,802 - 753,387 2,274,189 NET CHANGE IN FUND BALANCES…………… 899,254 (210,618) (1,992,362) (1,303,726) FUND BALANCES AT BEGINNING OF YEAR………………………………………… 6,789,376 5,840,122 5,903,948 18,533,446 FUND BALANCES AT END OF YEAR…………$ 7,688,630 $ 5,629,504 $ 3,911,586 $ 17,229,720 See notes to basic financial statements. Town of North Andover, Massachusetts30Comprehensive Annual Financial Report 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 funds…………………………………………… $ (1,303,726) 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. …6,188,985 Capital outlay………………………………………………………………………………… Depreciation expense…………………………………………………………………………(5,876,819) Net effect of reporting capital assets………………………………………………… 312,166 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 (i.e., real estate and personal property, motor vehicle excise, etc.) differ between the two statements. This amount represents … 721,022 the net change in deferred revenue…………………………………………………………… The issuance of long-term debt (e.g., bonds and leases) 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 transaction, however, has any effect on net position. Also, governmental funds report the effect of premiums, discounts, and similar items when debt is first issued, whereas these amounts are deferred and amortized in the Statement of Activities. … (926,199) Issuance of bonds and notes……………………………………………………………… Debt service principal payments………………………………………………………………5,219,330 … (136,585) Amortization of deferred losses on refundings…………………………………………… … 4,156,546 Net effect of reporting long-term debt……………………………………………… 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. Net change in compensated absences accrual……………………………………………(101,000) Net change in accrued interest on long-term debt………………………………………… 57,889 …(7,283,976) Net change in other postemployment benefits…………………………………………… … (7,327,087) Net effect of recording long-term liabilities and amortizing deferred losses…… Internal service funds are used by management to account for health insurance and workers' compensation activities. The net activity of internal service funds is reported with Governmental Activities…… 1,727,696 Change in net position of governmental activities…………………………………………………… $ (1,713,383) See notes to basic financial statements. Town of North Andover, Massachusetts31Comprehensive Annual Financial Report PROPRIETARY FUNDS STATEMENT OF NET POSITION JUNE 30, 2013 Governmental Business-type Activities - Enterprise FundsActivities Health Insurance Osgood Internal Service WaterSewerHillTotalFund ASSETS CURRENT: Cash and cash equivalents………………………………$ 4,348,769 $ 3,675,474 $ 87,159 $ 8,111,402 $ 4,072,488 Restricted cash and cash equivalents…………………… - 1,145,000 - 1,145,000 - Receivables, net of allowance for uncollectibles: User fees……………………………………………… … 1,388,752 1,471,004 - 2,859,756 - Utilit y liens……………………………………………… 79,986 62,975 - 142,961 - Intergovernmental……………………………………… - 99,687 - 99,687 - Total current assets………………………………… 5,817,507 6,454,140 87,159 12,358,8064,072,488 NONCURRENT: Receivables, net of allowance for uncollectibles: Intergovernmental……………………………………… - 678,103 - 678,103 - Capital assets, nondepreciable…………………………… 1,982,535 123,762 4,225,6496,331,946- Capital assets, net of accumulated depreciation……… 27,098,28521,722,438 1,346,632 50,167,355- Total noncurrent assets…………………………… 29,080,82022,524,303 5,572,281 57,177,404- TOTAL ASSETS……………………………………………… 34,898,32728,978,443 5,659,440 69,536,2104,072,488 LIABILITIES CURRENT: Warrants payable…………………………………………… 135,503 28,105 14,184 177,792 107 Health claims payable……………………………………… - - - -686,000 Accrued interest…………………………………………… 55,206 137,251 - 192,457 - Compensated absences…………………………………… 25,000 29,000 3,000 57,000 - Bonds payable……………………………………………… 1,403,461 1,962,876 - 3,366,337 - Total current liabilities……………………………… 1,619,170 2,157,232 17,184 3,793,586 686,107 NONCURRENT: Compensated absences…………………………………… 15,000 18,000 1,000 34,000 - Other postemplo yment benefits…………………………… 1,011,045 646,814 - 1,657,859 - Bonds payable……………………………………………… 9,029,790 10,503,618 - 19,533,408 - Total noncurrent liabilities………………………… 10, 11,168,432055,835 1,000 21,225,267 - TOTAL LIABILITIES……………………………………………11,675,00513,325,664 18,184 25,018,853 686,107 NET POSITION Net investment in capital assets……………………………… 20,794,349 13,876,980 5,572,281 40,243,610- Unrestricted…………………………………………………… 2,428,9731,775,799 68,975 4,273,7473,386,381 TOTAL NET POSITION………………………………………$ 23,223,322$ 15,652,779 $ 5,641,256$ 44,517,357 $ 3,386,381 See notes to basic financial statements. Town of North Andover, Massachusetts32Comprehensive Annual Financial Report PROPRIETARY FUNDS STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION FISCAL YEAR ENDED JUNE 30, 2013 Governmental Business-type Activities - Enterprise FundsActivities Health Insurance Osgood Internal Service WaterSewerHillTotalFund OPERATING REVENUES: Employee contributions………………………………………… $ $ - $ - $ - $ 3,754,525- Employer contributions…………………………………………… - - - - 10,326,190 Charges for services……………………………………………… 5,365,0214,936,917335,77010,637,708- Penalties and interest…………………………………………… 22,664 27,896 - 50,560 - TOTAL OPERATING REVENUES …………………………… 5,387,685 335,7704,964,813 10,688,268 14,080,715 OPERATING EXPENSES: Cost of service and administration……………………………… 1,744,145 773,467 242,210 2,759,822 - GLSD assessment………………………………………………… - 1,325,429 - 1,325,429 - Repairs and maintenance……………………………………… 127,124 3,90482,364 213,392 - Depreciation……………………………………………………… 858,466 854,640 86,075 1,799,181 - Employee benefits………………………………………………… - - - - 12,356,298 TOTAL OPERATING EXPENSES …………………………… 2,729,735 3,035,900 332,189 6,097,824 12,356,298 OPERATING INCOME (LOSS)……………………………… 2,657,950 1,928,913 3,581 4,590,444 1,724,417 NONOPERATING REVENUES (EXPENSES): Investment income……………………………………………… 12,639 6,347 - 18,986 3,279 Interest expense………………………………………………… (303,636) (528,462) (832,098)- - Intergovernmental………………………………………………… - 108,559 - 108,559 - Premium from issuance of bonds and notes…………………… - 46,800 - 46,800 - TOTAL NONOPERATING REVENUES (EXPENSES), NET…………………………… (290,997) (366,756) - (657,753) 3,279 INCOME (LOSS) BEFORE TRANSFERS…………………… 2,366,953 1,562,157 3,581 3,932,691 1,727,696 CAPITAL CONTRIBUTIONS AND TRANSFERS: Capital Contributions……………………………………………… - 225,649- 225,649 - Transfers out……………………………………………………… (747,571) (529,744) (46,460) (1,323,775) - TOTAL OPERATING TRANSFERS………………………… (747,571) (529,744) 179,189 (1,098,126) - CHANGE IN NET POSITION………………………………… 1,619,382 1,032,413 182,770 2,834,565 1,727,696 NET POSITION AT BEGINNING OF YEAR…………………… 21,603,940 14,620,366 5,458,486 41,682,792 1,658,685 NET POSITION AT END OF YEAR……………………………… $ 23,223,322 $ 15,652,779 $ 5,641,256 $ 44,517,357 $ 3,386,381 See notes to basic financial statements. Town of North Andover, Massachusetts33Comprehensive Annual Financial Report PROPRIETARY FUNDS STATEMENT OF CASH FLOWS FISCAL YEAR ENDED JUNE 30, 2013 Business-type Activities - Enterprise FundsGovernmental Activities- Health Insurance OsgoodInternal Service WaterSewerHillTotalFund CASH FLOWS FROM OPERATING ACTIVITIES: Receipts from customers and users……………………………………………$ 5,454,880 $ 4,941,045 $ 335,770 $ 10,731,695 $ 3,754,525 Receipts from interfund services provided…………………………………… - - - 10,326,190- Payments to vendors…………………………………………………………… (1,355,572) (1,588,783) (140,288) (3,084,643)- … (642,275) (492,682) (106,871) (1,241,828) - Payments to employees……………………………………………………… Payments for interfund services used………………………………………… - - - (12,188,260)- NET CASH FROM OPERATING ACTIVITIES…………………………………… 3,457,033 2,859,580 88,611 6,405,224 1,892,455 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES: Transfers out……………………………………………………………………… (747,571) (529,744) (46,460) (1,323,775) - CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Proceeds from the issuance of bonds and notes……………………………… 795,000 1,145,000 - 1,940,000 - Premium from the issuance of bonds and notes……………………………… - 46,800 -46,800- Capital contributions……………………………………………………………… - - 225,649 225,649 - Acquisition and construction of capital assets………………………………… (1,045,354) (258,633) (237,751) (1,541,738) - Principal payments on bonds and notes……………………………………… (1 (1,610,953),888,578) - (3,499,531) - Interest expense………………………………………………………………… (389,247)(287,820) - (677,067) - NET CASH FROM CAPITAL AND RELATED FINANCING ACTIVITIES……… (2,426,752) (1,067,033) (12,102) (3,505,887) - CASH FLOWS FROM INVESTING ACTIVITIES: Investment income……………………………………………………………… 12,639 6,347 - 3,27918,986 NET CHANGE IN CASH AND CASH EQUIVALENTS………………………… 295,349 1,269,150 30,049 1,594,548 1,895,734 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR………………… 4,053,420 3,551,324 57,110 7,661,854 2,176,754 CASH AND CASH EQUIVALENTS AT END OF YEAR $ 4,348,769 $ 4,820,474 $ 87,159 $ 9,256,402 $ 4,072,488 RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH FROM OPERATING ACTIVITIES: Operating income (loss)………………………………………………………… $ 2,657,950 $ 1,928,913 $ 3,581 $ 4,590,444 $ 1,724,417 Adjustments to reconcile operating income (loss) to net cash from operating activities: Depreciation…………………………………………………………………… 858,466 854,640 86,075 1,799,181 - Changes in assets and liabilities: User fees…………………………………………………………………… 76,922 2,616 - -79,538 Utility liens………………………………………………………………… (9 (26,384),727) - (36,111) - Warrants payable………………………………………………………… 2,887(247,561) (2,045) (246,719) 38 Health claims payable…………………………………………………… - - - -168,000 Accrued compensated absences………………………………………… 1,000 5,000 1,000 7,000 - Other postemployment benefits………………………………………… 91,908119,983 - 211,891 - Total adjustments……………………………………………………… 799,083 930,667 85,030 1,814,780 168,038 …$ 3,457,033 $ 2,859,580 $ 88,611 $ 6,405,224 $ 1,892,455 NET CASH FROM OPERATING ACTIVITIES………………………………… NONCASH INVESTING, CAPITAL, AND FINANCING ACTIVITIES: Intergovernmental debt service subsidy (MWPAT)……………………………$ - $ 97,714 $ - $ $ 97,714- Net change in deferred charges………………………………………………… 27,241 34,359 -61,600- See notes to basic financial statements. Town of North Andover, Massachusetts34Comprehensive Annual Financial Report FIDUCIARY FUNDS STATEMENT OF FIDUCIARY NET POSITION JUNE 30, 2013 Private PurposeAgency Trust FundsFunds ASSETS CURRENT: Cash and cash equivalents………………………………… …$ 82,274 $ 4,178,183 LIABILITIES Warrants payable……………………………………………… - 21,514 Liabilities due depositors…………………………………… … - 4,156,669 TOTAL LIABILITIES……………………………………………… - 4,178,183 NET POSITION Held in trust for other purposes………………………………$ 82,274 $ - See notes to basic financial statements. Town of North Andover, Massachusetts35Comprehensive Annual Financial Report FIDUCIARY FUNDS STATEMENT OF CHANGES IN FIDUCIARY NET POSITION FISCAL YEAR ENDED JUNE 30, 2013 Private Purpose Trust Funds ADDITIONS: Contributions: Private donations………………………………………………$11,375 Net investment income: Interest………………………………………………………… 42 TOTAL ADDITIONS………………………………………… 11,417 CHANGE IN NET POSITION……………………………… 11,417 NET POSITION AT BEGINNING OF YEAR…………………… 70,857 NET POSITION AT END OF YEAR……………………………$ 82,274 See notes to basic financial statements. Town of North Andover, Massachusetts36Comprehensive Annual Financial Report Notes to Basic Financial Statements Fiscal Year Ended June 30, 2013 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Notes to basic financial statements The accompanying basic financial statements of the Town of North Andover, Massachusetts (the Town) have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The Governmental Accounting Standards Board (GASB) is the recognized standard-setting body for establishing governmental accounting and financial reporting principles. The significant accounting policies are described herein. A. Reporting Entity The Town is a municipal corporation that is governed by an elected Board of Selectmen (the “Board”). For financial reporting purposes, the Town has included all funds, organizations, account groups, agencies, boards, commissions and institutions. TheTown has also considered all potential component units for which it is financially accountable as well as other organizations for which the nature and significance of their relationship with the Town are such that exclusion would cause the basic financial statements to be misleading or incomplete. As required by GAAP, these basic financial statements present the Town (the primary government) and its component units. It has been determined that there are no component units that meet the requirements for inclusion in the Town’s financial statements. Joint Venture A joint venture is an organization (resulting from a contractual arrangement) that is owned, operated and governed by two or more participants as a separate and specific activity subject to joint control in which the participants retain an ongoing financial interest or ongoing financial responsibility. Joint control means that no single participant has the ability to unilaterally control the financial or operating policies of the joint venture. The Town participates in the following joint ventures with other municipalities to pool resources and share the costs, risks, and rewards of providing goods and services to venture participants directly, or for the benefit of the general public or specified recipients. Greater Lawrence Sanitary District (GLSD) GLSD operates a wastewater treatment plant for five member communities and is located within the Town. The GLSD is governed by a seven member board consisting of one appointed representative from the Town. The Town is indirectly liable for the GLSD’s debt and other expenditures and is assessed annually for its share of operating and capital costs. For the fiscal year ended June 30, 2013, the Town’s assessment totaled $1,615,000. Separate financial statements may be obtained by writing to the Treasurer of the GLSD at 240 Charles Street, North Andover, MA 01845. Greater Lawrence Regional Technical Vocational School (GLRTVS) The GLRTVS is governed by a seven member school committee consisting of one elected representative from the Town. The Town is indirectly liable for the GLRTVS’ debt and other expenditures and is assessed annually for its share of operating and capital costs. For the fiscal year ended June 30, 2013, the Town’s assessment totaled $251,748. Separate financial statements may be obtained by writing to the Treasurer of the GLRTVS at 57 River Road, Andover, MA 01810. Town of North Andover, Massachusetts 37 Comprehensive Annual Financial Report Notes to Basic Financial Statements Fiscal Year Ended June 30, 2013 B. Government-Wide and Fund Financial Statements Government-Wide Financial Statements The government-wide financial statements (i.e., statement of net position and the statement of changes in net position) report information on all of the non-fiduciary activities of the primary government and its component units. Governmental activities, which are primarily supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which are supported primarily by user fees and charges. Fund Financial Statements Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds, even though fiduciary funds are excluded from the government-wide financial statements. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. Nonmajor funds are aggregated and displayed in a single column. Major Fund Criteria Major funds must be reported if the following criteria are met: If the total assets, liabilities, revenues, or expenditures/expenses of an individual governmental or enterprise fund are at least 10 percent of the corresponding element (assets, liabilities, etc.) for all funds of that category or type (total governmental or total enterprise funds), and If the total assets, liabilities, revenues, or expenditures/expenses of the individual governmental fund or enterprise fund are at least 5 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. Fiduciary funds are reported by fund type. C. Measurement Focus, Basis of Accounting and Financial Statement Presentation Government-Wide Financial Statements 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 the liabilities are incurred. Real estate and personal 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 have been met. The statement of activities demonstrates the degree to which the direct expenses of a particular function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include the following: Charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment. Town of North Andover, Massachusetts 38 Comprehensive Annual Financial Report Notes to Basic Financial Statements Fiscal Year Ended June 30, 2013 Grants and contributions that are restricted to meeting the operational requirements of a particular function or segment. Grants and contributions that are restricted to meeting the capital requirements of a particular function or segment. Taxes and other items not identifiable as program revenues are reported as general revenues. For the most part, the effect of interfund activity has been removed from the government-wide financial statements. However, the effect of interfund services provided and used between functions is not eliminated as the elimination of these charges would distort the direct costs and program revenues reported for the functions affected. Fund Financial Statements Governmentalfund financial statements are reported using the flow of current financial resources measurement focus and the modified accrual basis of accounting. Under the modified accrual basis of accounting, revenues are recognized when susceptible to accrual (i.e., measurable and available). Measurable means the amount of the transaction can be determined and available means 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, and certain compensated absences, claims and judgments which are recognized when the obligations are expected to be liquidated with current expendable available resources. Real estate and personal property tax revenues are considered available if they are collected within 60 days after fiscal year-end. Investment income is susceptible to accrual. Other receipts and tax revenues become measurable and available when the cash is received and are recognized as revenue at that time. Entitlements and shared revenues are recorded at the time of receipt or earlier if the susceptible to accrual criteria is met. Expenditure driven grants recognize revenue when the qualifying expenditures are incurred and all other grant requirements are met. The following major governmental funds are reported: Thegeneral fund is the primary operating fund. It is used to account for all financial resources, except those that are required to be accounted for in another fund. Thecommunity preservation fund is a special revenue fund used to account for the 3% local real estate tax surcharge on nonexempt property (and matching state trust fund distribution) that can be used for open space, historic resource and affordable housing purposes. Property exempt from the surcharge consists of the first $100,000 of all residential property and also property owned by low income seniors with a low or moderate income as defined by Massachusetts Department of Revenue (DOR) guidelines. Disbursements from this fund must originate from the Community Preservation Committee and be approved by Town Meeting. The nonmajor governmental funds consist of other special revenue, capital projects 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: Thespecial revenue fund is used to account for and report the proceeds of specific revenue sources that are restricted or committed to expenditure for specified purposes other than permanent funds or capital projects. Town of North Andover, Massachusetts 39 Comprehensive Annual Financial Report Notes to Basic Financial Statements Fiscal Year Ended June 30, 2013 Thecapital projects fund is used to account for and report financial resources that are restricted, committed, or assigned to expenditure for capital outlays, including the acquisition or construction of capital facilities and other capital assets of the governmental funds. Thepermanent fund is used to account for and report financial resources that are legally restricted to the extent that only earnings, not principal, may be used for purposes that support the governmental programs. Proprietaryfund financial statements are reported using the flow of economic resources measurement focus and use the accrual basis of accounting. Under this method, revenues are recorded when earned and expenses are recorded when the liabilities are incurred. Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with the proprietary funds principle ongoing operations. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. The following major proprietary funds are reported: Thewater enterprise fund is used to account for the water activities. Thesewer enterprise fund is used to account for the sewer activities. TheOsgood Hill enterprise fund is used to account for the operation of Osgood Hill Estate activities. Additionally, the following proprietary fund type is reported: Theinternal service fund is used to account for the financing of services provided by one department to other departments or governmental units. This fund is used to account for risk financing activities related to employees’ health insurance. Fiduciary fund financial statements are reported using the flow of economic resources measurement focus and use the accrual basis of accounting, except for agency funds which have no measurement focus. Fiduciary funds are used to account for assets held in a trustee capacity for others that cannot be used to support the governmental programs. The following fiduciary fund types are reported: Theprivate-purpose trust fund is used to account for trust arrangements that exclusively benefit individuals, private organizations, or other governments. Some of these trusts have donor restrictions and trustee policies that do not allow the endowment portion and any unrealized appreciation to be spent. The donor restrictions and trustee policies only allows the trustees to authorize spending of the realized investment earnings. The Town’s educational scholarship trusts are accounted for in this fund. Theagency fund is used to account for assets held in a custodial capacity. Such assets consist primarily of performance bonds and bid deposits. Agency funds do not present the results of operations or have a measurement focus. Town of North Andover, Massachusetts 40 Comprehensive Annual Financial Report Notes to Basic Financial Statements Fiscal Year Ended June 30, 2013 D. Cash and Investments Government-Wide and Fund Financial Statements Cash and cash equivalents are considered to be cash on hand, demand deposits and short-term investments with an original maturity of three months or less from the date of acquisition. Investments are carried at fair value. E. Accounts Receivable Government-Wide and Fund Financial Statements The recognition of revenue related to accounts receivable reported in the government-wide financial statements and the proprietary funds and fiduciary funds financial statements are reported under the accrual basis of accounting. The recognition of revenue related to accounts receivable reported in the governmental funds financial statements are reported under the modified accrual basis of accounting. Real Estate, Personal Property Taxes and Tax Liens st Real estate and personal property taxes are levied and based on values assessed on January 1 of every year. Assessed values are established by the Board of Assessor’s for 100% of the estimated fair market value. Taxes stststst , November 1, February 1 and May 1 and are subject to penalties and interest if they are are due on August 1 not paid by the respective due date. Real estate tax liens are processed one year after the close of the valuation year on delinquent properties and are recorded as receivables in the fiscal year they are processed. Real estate receivables are secured via the tax lien process and are considered 100% collectible. Accordingly, an allowance for uncollectibles is not reported. Personal property taxes cannot be secured through the lien process. The allowance for uncollectibles is estimated based on historical trends and specific account analysis. Motor Vehicle Excise Motor vehicle excise taxes are assessed annually for each vehicle registered and are recorded as receivables in the fiscal year of the levy. The Commonwealth is responsible for reporting the number of vehicles registered and the fair values of those vehicles. The tax calculation is the fair value of the vehicle multiplied by $25 per $1,000 of value. The allowance for uncollectibles is estimated based on historical trends and specific account analysis. Community Preservation Surcharges Community preservation surcharges are levied annually at a rate of 3% of resident’s real estate tax bills with exemptions for the first $100,000 of residential property and property owned by qualified persons with low income and seniors (60+) with low or moderate income defined by DOR guidelines. The surcharge is due with the real estate tax on August 1st, November 1st, February 1st and May 1st and are subject to penalties and interest if they are not paid by the respective due date. Overdue surcharges are included on the tax liens processed on delinquent real estate taxes. Surcharges are recorded as receivables in the fiscal year of the levy. Since the receivables are secured via the lien process, these accounts are considered 100% collectible and therefore do not report an allowance for uncollectibles. Town of North Andover, Massachusetts 41 Comprehensive Annual Financial Report Notes to Basic Financial Statements Fiscal Year Ended June 30, 2013 Water and Sewer User Charges and Utility Liens User fees are levied monthly based on individual meter readings and are subject to penalties and interest if they are not paid by the respective due date. Water and sewer liens are processed approximately six months after the end of the fiscal year and are included as a lien on the property owner’s tax bill. Water and sewer charges and liens are recorded as receivables in the fiscal year of the levy. Since the receivables are secured via the lien process, these accounts are considered 100% collectible and therefore do not report an allowance for uncollectibles. Departmental and Other Departmental and other receivables consist primarily of amounts due from ambulance charges and police details. These receivables are recorded when the applicable service has been performed. The allowance for uncollectibles is estimated based on historical trends and specific account analysis. Intergovernmental Various federal and state grants for operating and capital purposes are applied for and received annually. For non-expenditure driven grants, receivables are recorded as soon as all eligibility requirements imposed by the provider have been met. For expenditure driven grants, receivables are recorded when the qualifying expenditures are incurred and all other grant requirements are met. These receivables are considered 100% collectible and therefore do not report an allowance for uncollectibles. F. Inventories Government-Wide and Fund Financial Statements Inventories are recorded as expenditures at the time of purchase. Such inventories are not material in total to the government-wide and fund financial statements, and therefore are not reported. G. Capital Assets Government-Wide and Proprietary Fund Financial Statements Capital assets, which include land, land improvements, buildings and improvements, machinery and equipment, library books, vehicles, infrastructure (e.g., roads, treatment plants, pump stations ,sewer mains and similar items) and construction-in-progress, are reported in the applicable governmental or business-type activity column of the government-wide financial statements and in the proprietary fund financial statements. Capital assets are recorded at historical cost, or at estimated historical cost, if actual historical cost is not available. Donated capital assets are recorded at the estimated fair market value at the date of donation. Except for the capital assets of the governmental activities column in the government-wide financial statements, construction period interest is capitalized on constructed capital assets. All purchases and construction costs in excess of $10,000 are capitalized at the date of acquisition or construction, respectively, with expected useful lives of greater than one year. Town of North Andover, Massachusetts 42 Comprehensive Annual Financial Report Notes to Basic Financial Statements Fiscal Year Ended June 30, 2013 Capital assets (excluding land) are depreciated on a straight-line basis. The estimated useful lives of capital assets are as follows: Estimated Useful Life Capital Asset Type (in years) Land improvements…………………………… 20-30 Buildings and improvements………………… 7-50 Machinery and equipment…………………… 3-20 Library books…………………………………… 10 Vehicles………………………………………… 5 Treatment plants……………………………… 10-40 Pump stations…………………………………… 20-40 Reservoirs……………………………………… 20-40 Infrastructure…………………………………… 20-60 The cost of normal maintenance and repairs that do not add to the value of the assets or materially extend asset lives are not capitalized and are treated as expenses when incurred. Improvements are capitalized. Governmental Fund Financial Statements Capital asset costs are recorded as expenditures in the acquiring fund in the fiscal year of the purchase. H. Deferred Outflows/Inflows of Resources Government-Wide Financial Statements (Net Position) 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 notbe recognized as an outflow of resources (expense/ expenditure) until then. The Town has no items that qualify for reporting in this category for fiscal year 2013. 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 notbe recognized as an inflow of resources (revenue) until that time. The Town has no items that would qualify for reporting in this category for fiscal year 2013. I. Interfund Receivables and Payables During the course of its operations, transactions occur between and within individual funds that may result in amounts owed between funds. Government-Wide Financial Statements Transactions of a buyer/seller nature between and within governmental funds are eliminated from the governmental activities in the statement of net position. Any residual balances outstanding between the governmental activities and business-type activities are reported in the statement of net position as “internal balances”. Town of North Andover, Massachusetts 43 Comprehensive Annual Financial Report Notes to Basic Financial Statements Fiscal Year Ended June 30, 2013 Fund Financial Statements Transactions of a buyer/seller nature between and within funds are not eliminated from the individual fund statements. Receivables and payables resulting from these transactions are classified as “Due from other funds” or “Due to other funds” on the balance sheet. J. 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. Government-Wide Financial Statements Transfers between and within governmental funds are eliminated from the governmental activities in the statement of net position. Any residual balances outstanding between the governmental activities and business- type activities are reported in the statement of activities as “Transfers, net”. Fund Financial Statements Transfers between and within funds are not eliminated from the individual fund statements and are reported as transfers in and transfers out. K. Deferred Revenue Deferred revenue at the governmental fund financial statement level represents billed receivables that do not meet the available criterion in accordance with the current financial resources measurement focus and the modified accrual basis of accounting. Deferred revenue is recognized as revenue in the conversion to the government-wide (full accrual) financial statements. L. Net Position and Fund Equity Government-Wide Financial Statements (Net Position) Net position reported as “net investment in capital assets” includes capital assets, net of accumulated depreciation, less the principal balance of outstanding debt used to acquire capital assets. Unspent proceeds of capital related debt are not considered to be capital assets. Net position is reported as restricted when amounts that are not available for appropriation or are legally restricted by outside parties for a specific future use. Net position has been “restricted for” the following: “Debt service” represents amounts accumulated from the Massachusetts School Building Authority (MSBA) to reduce school construction excluded debt service costs over the life of the loans. “Community preservation” represents amounts restricted for the purpose of acquiring land for conservation, recreational, and affordable housing purposes. Town of North Andover, Massachusetts 44 Comprehensive Annual Financial Report Notes to Basic Financial Statements Fiscal Year Ended June 30, 2013 “Permanent funds – expendable” represents the amount of realized and unrealized investment earnings of donor restricted trusts. The donor restrictions and trustee policies only allows the trustees to approve spending of the realized investment earnings that support governmental programs. “Permanent funds - nonexpendable” represents the endowment portion of donor restricted trusts that support governmental programs. “Gifts and grants” represents restrictions placed on assets from outside parties. Sometimes the Town will fund outlays for a particular purpose from both restricted (e.g., restricted bond or grant proceeds) and unrestricted resources. In order to calculate the amounts to report as restricted – net position and unrestricted – net position in the government-wide and proprietary fund financial statements, a flow assumption must be made about the order in which the resources are considered to be applied. It is the Town’s policy to consider restricted – net position to have been depleted before unrestricted – net position is applied. Fund Financial Statements (Fund Balances) Governmental fund balances are classified as nonspendable, restricted, committed, assigned, or unassigned based on the extent to which the government is bound to honor constraints on the specific purposes for which amounts in those funds can be spent. The governmental fund balance classifications are as follows: “Nonspendable” fund balance includes amounts that cannot be spent because they are either not in spendable form or they are legally or contractually required to be maintained intact. “Restricted” fund balance includes amounts subject to constraints placed on the use of resources that are either externally imposed by creditors, grantors, contributors, or laws or regulations of other governments; or that are imposed by law through constitutional provisions or enabling legislation. “Committed” fund balance includes amounts that can only be used for specific purposes pursuant to constraints imposed by formal action of the government’s highest level of decision-making authority. Town Meeting is the highest level of decision-making authority for the government that can, by adoption of an article prior to the end of the fiscal year, commit fund balance. Once adopted, the limitation imposed by the article remains in place until a similar action is taken to remove or revise the limitation. “Assigned” fund balance includes amounts that are constrained by the Town’s intent to be used for specific purposes, but are neither restricted nor committed. Town Meeting may 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. Unlike commitments, assignments generally only exist temporarily. In other words, an additional action does not normally have to be taken for the removal of an assignment. Conversely, as discussed above, an additional action is essential to either remove or revise a commitment. “Unassigned” fund balance includes the residual classification for the general fund. This classification represents fund balance that has not been assigned to other funds and that has not been restricted, committed, or assigned to specific purposes within the general fund. The Town’s spending policy is to spend restricted fund balance first, followed by committed, assigned and unassigned fund balance. Most governmental funds are designated for one purpose at the time of their creation. Therefore, any expenditure from the fund will be allocated to the applicable fund balance classifications in the order of the aforementioned spending policy. The general fund and certain other funds may have more than one purpose. Town of North Andover, Massachusetts 45 Comprehensive Annual Financial Report Notes to Basic Financial Statements Fiscal Year Ended June 30, 2013 M. Long-term debt Government-Wide and Proprietary Fund Financial Statements Long-term debt is reported as liabilities in the government-wide and proprietary fund statement of net position. Material bond premiums and discounts are deferred and amortized over the life of the bonds using the straight- line method. Bonds payable are reported net of the applicable bond premium or discount. Governmental Fund Financial Statements The face amount of governmental funds long-term debt is reported as other financing sources. Bond premiums and discounts, as well as issuance costs, are recognized in the current period. Bond premiums are reported as other financing sources and bond discounts are reported as other financing uses. Issuance costs, whether or not withheld from the actual bond proceeds received, are reported as general government expenditures. N. 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 Massachusetts General Law (MGL). O. Compensated Absences Employees are granted vacation and sick leave in varying amounts based on collective bargaining agreements, state laws and executive policies. Compensated absence liabilities related to both governmental and business- type activities are normally paid from the funds reporting payroll and related expenditures. Compensated absences are reported in governmental funds only if they have matured. Government-Wide and Proprietary Fund Financial Statements Vested or accumulated vacation and sick leave are reported as liabilities and expensed as incurred. Governmental Fund Financial Statements Vested or accumulated vacation and sick leave, which will be liquidated with expendable available financial resources, are reported as expenditures and fund liabilities upon maturity of the liability. P. Use of Estimates Government-Wide and Fund Financial Statements 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. Town of North Andover, Massachusetts 46 Comprehensive Annual Financial Report Notes to Basic Financial Statements Fiscal Year Ended June 30, 2013 Q Total Column Government-Wide Financial Statements The total column presented on the government-wide financial statements represents consolidated financial information. Fund Financial Statements The total column on the fund financial statements is presented only to facilitate financial analysis. Data in this column is not the equivalent of consolidated financial information. R. Appropriation Deficits There is an appropriation deficit in state and county charges. This is based on state assessments which are not required to be raised in the subsequent year tax levy. NOTE 2 - CASH 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 the trust funds are held separately from those of other funds. Statutes authorize the investment in obligations of the U.S. Treasury, agencies, and instrumentalities, certificates of deposit, repurchase agreements, money market accounts, bank deposits and the State Treasurer's Investment Pool (the Pool). The Treasurer may also invest trust funds in securities, other than mortgages or collateral loans, which are legal for the investment of funds of savings banks under the laws of the Commonwealth. In addition, there are various restrictions limiting the amount and length of deposits and investments. The Pool meets the criteria of an external investment pool. The Pool is administered by the Massachusetts Municipal Depository Trust (MMDT), which was established by the Treasurer of the Commonwealth who serves as Trustee. The fair value of the position in the Pool is the same as the value of the Pool shares. Custodial Credit Risk – Deposits In the case of deposits, this is the risk that in the event of a bank failure, the Town’s deposits may not be returned to it. The Town’s policy is to minimize custodial credit risk by only investing in highly rated banks, which is determined through the utilization of a bank rating service. At fiscal year-end, the carrying amount of deposits totaled $35,192,377 and the bank balance totaled $37,452,760. Of the bank balance, $2,832,856 was covered by Federal Depository Insurance, $27,457,982 was covered by the depositor’s insurance fund, and $7,161,922 was collateralized. Interest Rate Risk The Town’s investment policy limits investment maturities to one year as a means of managing its exposure to fair value losses arising from increasing interest rates. The Town participates in MMDT, which maintains a cash portfolio and a short-term bond fund with combined average maturities of approximately three months. Town of North Andover, Massachusetts 47 Comprehensive Annual Financial Report Notes to Basic Financial Statements Fiscal Year Ended June 30, 2013 As of June 30, 2013, the Town had the following investments and maturities: Maturities Investment TypeFair Value1-5 Years6-10 Years Debt Securities Bond Mutual Funds………………………………$96,516 $- $96,516 Repurchase Agreements………………………… 110,000 110,000 - Total Debt Securities......................................... $110,000206,516 $96,516 Other Investments Equity Mutual Funds......................................... 267,920 Money Market Mutual Funds………………… … 324,181 MMDT……………………………………………… 4,078,771 Total Investments..............................................$4,877,388 The Town participates in MMDT, which maintains a cash portfolio and a short-term bond fund with combined average maturities of approximately 3 months. Custodial Credit Risk – Investments For an investment, this is the risk that, in the event of a failure by the counterparty, the Town will not be able to recover the value of its investments or collateral security that are in the possession of an outside party. The Town did not have investments that were exposed to custodial credit risk. The Town’s policy to minimize custodial credit risk is to obtain from brokerage houses and broker/dealers 1) audited financial statements, 2) proof of National Association of Security Dealers certification, 3) a statement that the dealer has read the Town’s investment policy and will comply with it and 4) be in business for no less than five years and have a minimum capitalization of $10 million. Credit Risk Standard and Poor’s Investors Service rated the $96,516 of bond mutual funds AA. The $110,000 of repurchase agreements and $4,078,771 of MMDT deposits were unrated. The Town’s investment policy limits investments in debt securities to U.S. Treasuries and U.S. Agency Obligations, which are AAA rated, and like-kind investments that are fully collateralized. Concentration of Credit Risk The Town limits the amount the Town may invest in any one issuer to 10%. The Town does not have investments in corporate bonds or equity securities and therefore does not have exposure to concentration of credit risk. Town of North Andover, Massachusetts 48 Comprehensive Annual Financial Report Notes to Basic Financial Statements Fiscal Year Ended June 30, 2013 NOTE 3 - RECEIVABLES At June 30, 2013, receivables for the individual major and non-major governmental funds including the applicable allowances for uncollectible accounts are as follows: Allowance GrossforNet AmountUncollectiblesAmount Receivables: Real estate and personal property taxes………………………$1,208,685 $(120,000) $1,088,685 Tax liens………………………………………………………… 1,992,276 - 1,992,276 Motor vehicle and other excise taxes………………………… 851,499 (380,000) 471,499 Community preservation surcharges………………………… 23,481 - 23,481 Departmental and other………………………………………… 669,671 - 669,671 Intergovernmental……………………………………………… 3,207,612 - 3,207,612 Total………………………………………………………………$7,953,224 $(500,000) $7,453,224 At June 30, 2013, receivables for the water and sewer enterprise funds are as follows: Allowance GrossforNet AmountUncollectiblesAmount Receivables: User charges……………………………………………………$2,859,756 $- $2,859,756 Utility liens………………………………………………………… 142,961 - 142,961 … 777,790 - 777,790 Intergovernmental…………………………………………… $3,780,507$- $3,780,507 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. At the end of the current fiscal year, the various components of deferred revenue reported in the governmental funds were as follows: Other General Governmental FundFundsTotal Receivable and other asset type: Real estate and personal property taxes………………………$988,552 $- $988,552 Tax liens………………………………………………………… 1,992,276 - 1,992,276 Motor vehicle and other excise taxes………………………… 471,499 - 471,499 … - 23,481 23,481 Community preservation surcharges……………………… Departmental and other………………………………………… 614,926 54,745 669,671 Intergovernmental (highway construction assistance)……… - 1,293,625 1,293,625 Intergovernmental (school construction assistance)………… 784,791 - 784,791 Intergovernmental (CPA state match)………………………… - 348,000 348,000 … 655,028 - 655,028 Tax foreclosures……………………………………………… Total………………………………………………………………$5,507,072 $1,719,851 $7,226,923 Town of North Andover, Massachusetts 49 Comprehensive Annual Financial Report Notes to Basic Financial Statements Fiscal Year Ended June 30, 2013 NOTE 4 - CAPITAL ASSETS Capital asset activity for the fiscal year ended June 30, 2013, is as follows: BeginningEnding Governmental Activities:BalanceIncreasesDecreasesBalance Capital assets not being depreciated: Land…………………………………………………$20,787,405 $1,371,549 $- $22,158,954 Construction in progress…………………………… 1,900,224 2,763,692 - 4,663,916 Total capital assets not being depreciated… … 22,687,629 4,135,241 - 26,822,870 Capital assets being depreciated: Land improvements………………………………… 3,257,450 - - 3,257,450 Buildings and building improvements…………… 133,763,505 31,770 - 133,795,275 Machinery and equipment………………………… 9,291,179 413,446 (567,650) 9,136,975 Library books……………………………………… 4,218,286 101,166 - 4,319,452 Vehicles……………………………………………… 5,633,043 260,334 (164,047) 5,729,330 Infrastructure……………………………………… 37,537,148 1,247,028 - 38,784,176 Total capital assets being depreciated……… 193,700,611 2,053,744 (731,697) 195,022,658 Less accumulated depreciation for: Land improvements………………………………… (2,261,874) (99,261) - (2,361,135) Buildings and improvements.……………………… (48,880,173) (3,481,356) - (52,361,529) Machinery and equipment………………………… (5,536,253) (665,312) 567,650 (5,633,915) Library books……………………………………… (3,999,244) (45,733) - (4,044,977) Vehicles.…………………………………………… (3,465,652) (367,295) 164,047 (3,668,900) Infrastructure……………………………………… (18,028,252) (1,217,862) - (19,246,114) Total accumulated depreciation……………… (82,171,448) (5,876,819) 731,697 (87,316,570) Total capital assets being depreciated, net………… 111,529,163 (3,823,075) - 107,706,088 Total governmental activities capital assets, net……$134,216,792$312,166 $- $134,528,958 Town of North Andover, Massachusetts 50 Comprehensive Annual Financial Report Notes to Basic Financial Statements Fiscal Year Ended June 30, 2013 EndingEnding Business-Type Activities: BalanceIncreasesDecreasesBalance Capital assets not being depreciated: Land…………………………………………………$6,097,262 $- $- $6,097,262 … 9,035 225,649 - 234,684 Construction in progress………………………… … 6,106,297 225,649 - 6,331,946 Total capital assets not being depreciated… Capital assets being depreciated: Land improvements………………………………… 231,451 654 - 232,105 … 2,017,026 11,448 - 2,028,474 Buildings and improvements…………………… … 2,232,751 58,894 - 2,291,645 Machinery and equipment……………………… … 485,153 119,336 (38,403) 566,086 Vehicles…………………………………………… Treatment plants…………………………………… 16,573,234 - - 16,573,234 Pump stations……………………………………… 4,401,371 92,080 - 4,493,451 Reservoirs…………………………………………… 1,477,296 - - 1,477,296 Infrastructure……………………………………… 53,365,450 1,033,677 - 54,399,127 Total capital assets being depreciated……… 80,783,732 1,316,089 (38,403) 82,061,418 Less accumulated depreciation for: Land improvements………………………………… (109,001) (9,586) - (118,587) Buildings and improvements……………………… (804,358) (74,424) - (878,782) Machinery and equipment………………………… (1,168,920) (9,436) - (1,178,356) Vehicles.…………………………………………… (376,736) (34,702) 38,403 (373,035) Treatment plants…………………………………… (10,285,894) (437,036) - (10,722,930) Pump stations……………………………………… (2,220,741) (124,926) - (2,345,667) Reservoirs…………………………………………… (1,189,505) (52,321) - (1,241,826) Infrastructure……………………………………… (13,978,130) (1,056,750) - (15,034,880) Total accumulated depreciation……………… (30,133,285) (1,799,181) 38,403 (31,894,063) Total capital assets being depreciated, net………… 50,650,447 (483,092) - 50,167,355 Total business-type activities capital assets, net……$56,756,744 $(257,443) $- $56,499,301 Depreciation expense was charged to functions/programs of the primary government as follows: Governmental Activities: General government……………………………………………$322,494 Public safety…………………………………………………… 585,043 Education……………………………………………………… 3,218,936 Public works…………………………………………………… 1,437,953 Human services……………………………………………… 135,022 Culture and recreation………………………………………… 177,371 Total depreciation expense - governmental activities…………$5,876,819 Business-Type Activities: Water……………………………………………………………$858,466 … 854,640 Sewer………………………………………………………… Osgood Hill……………………………………………………… 86,075 Total depreciation expense - business-type activities…………$1,799,181 Town of North Andover, Massachusetts 51 Comprehensive Annual Financial Report Notes to Basic Financial Statements Fiscal Year Ended June 30, 2013 NOTE 5 - INTERFUND RECEIVABLES, PAYABLES AND TRANSFERS Interfund receivables and payables totaled $184,998 and consisted of an amount due to the general fund from the highway chapter 90 fund. The outstanding balances resulted from the time lag between the dates that reimbursable expenditures are incurred and reimbursements from the Massachusetts Highway Department are received. Interfund transfers for the fiscal year ended June 30, 2013, are summarized as follows: Operating Transfers In: Nonmajor GeneralGovernmental Operating Transfers Out:FundFundsTotal General Fund…………………………………$- $29,710 $29,710 (1) Nonmajor Governmental Funds…………… 202,522 - 202,522 (2) Water Enterprise Fund……………………… 747,571 - 747,571 (3) Sewer Enterprise Fund……………………… 529,744 - 529,744 (3) Osgood Hill Enterprise Fund………………… 46,460 - 46,460 (3) $1,526,297 $29,710 $1,556,007 (1) Represents a budgeted transfer to the Highway Chapter 90 fund to cover prior year deficits. (2) Represents budgeted transfers to the general fund from other available funds. (3) Represents budgeted transfers to the general fund for indirect costs. NOTE 6 – LEASES Operating Lease The Town entered into a commercial lease for office space for the Schools Business Office that expires May 31, 2015. The future minimum lease payments are as follows: Governmental Fiscal Years Ending June 30,Activities 2014………………………………………………$91,098 2015……………………………………………… 91,098 Total………………………………………………$182,196 Town of North Andover, Massachusetts 52 Comprehensive Annual Financial Report Notes to Basic Financial Statements Fiscal Year Ended June 30, 2013 NOTE 7 - SHORT-TERM FINANCING Short-term debt may be authorized and issued to fund the following: Current operating costs prior to the collection of revenues through issuance of revenue or tax anticipation notes (RANS or TANS). Capital project costs and other approved expenditures incurred prior to obtaining permanent financing through issuance of bond anticipation notes (BANS) or grant anticipation notes (GANS). Short-term loans are general obligations and carry maturity dates that are limited by statute. Interest expenditures and expenses for short-term borrowings are accounted for in the general fund and enterprise funds, respectively. Details related to the short-term debt activity for the fiscal year ended June 30, 2013, are as follows: RateBeginningEnding TypePurpose(%)Due DateBalanceAdditionsReductionsBalance … 0.556/27/2014$ $359,500- $ $359,500- BANSchool Design Services… NOTE 8 - LONG-TERM DEBT State law permits the Town, under the provisions of Chapter 44, Section 10, to authorize indebtedness up to a limit of 5% of its equalized valuation. Debt issued in accordance with this section of the law is designated as being "inside the debt limit". In addition, however, 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". In order to take advantage of favorable interest rates, the Town issued $1,145,000 of General Obligation Refunding Bonds on June 27, 2013, to advance refund $1,180,000 of general obligation bonds. These proceeds will be placed in an irrevocable trust to provide for all future debt service payments on the refunded bonds in Fiscal 2014 as the payment to the irrevocable trust was not made until subsequent to year-end. As a result, the refunded bonds are not yet considered to be defeased and the liability has not been removed from the statement of net position. This advance refunding was undertaken to reduce total debt service payments over the next five years by $69,680 and resulted in an economic gain of $67,701. The $1,145,000 is reported as restricted cash in the statement of net position. Town of North Andover, Massachusetts 53 Comprehensive Annual Financial Report Notes to Basic Financial Statements Fiscal Year Ended June 30, 2013 Details related to the outstanding indebtedness at June 30, 2013, and the debt service requirements are as follows: Bonds Payable – Governmental Funds OriginalInterest MaturitiesLoanRateBeginningEnding ProjectThroughAmount(%)BalanceAdditionsReductionsBalance Municipal Purpose Loan of 2003………………… 2013$895,813 2.30 - 4.00$92,000 $- $92,000 $- Municipal Purpose Loan of 2004………………… 201612,705,555 2.00 - 5.003,147,294 - 1,383,400 1,763,894 Municipal Purpose Loan of 2005………………… 20258,205,261 3.00 - 4.003,382,967 - 466,216 2,916,751 High School Construction………………………… 20263,000,000 3.30 - 5.002,100,000 - 150,000 1,950,000 Municipal Purpose Loan of 2007……………… … 2016406,805 3.60 - 4.50159,800 - 39,950 119,850 Municipal Purpose Loan of 2008………………… 20281,486,026 4.00 - 4.40853,254 - 124,443 728,811 Land Acquisition - Refunding…………………… 20182,960,000 3.00 - 4.001,875,000 - 285,000 1,590,000 Municipal Purpose Loan of 2008 - Refunding… 20199,540,000 3.00 - 4.006,150,000 - 895,000 5,255,000 Municipal Purpose Loan of 2009………………… 20297,122,134 2.75 - 5.005,390,172 - 580,975 4,809,197 Municipal Purpose Loan of 2010………………… 20294,171,222 2.25 - 4.003,513,600 - 326,800 3,186,800 Municipal Purpose Loan of 2011………………… 20214,365,353 2.00 - 3.753,862,500 - 502,500 3,360,000 Municipal Purpose Loan of 2012………………… 20293,255,348 2.00 - 2.503,255,348 - 373,046 2,882,302 Municipal Purpose Loan of 2013………………… 2022926,1992.00 - 3.00 926,199- 926,199- Sub-total…………………………………………… 33,781,935 926,199 5,219,330 29,488,804 Deferred loss on refundings……………………… (483,851) - (136,585) (347,266) Total governmental bonds payable……………… $33,298,084$926,199 $5,082,745 $29,141,538 Debt service requirements for principal and interest for Governmental bonds payable in future fiscal years are as follows: Fiscal YearPrincipalInterestTotal 2014…………$5,366,742 $971,744 $6,338,486 2015………… 4,041,044 812,894 4,853,938 … 3,685,435 678,714 4,364,149 2016……… 2017………… 3,525,158 559,506 4,084,664 2018………… 3,329,490 435,103 3,764,593 … 1,759,687 330,175 2,089,862 2019……… 2020………… 1,280,918 270,428 1,551,346 2021………… 1,235,918 227,586 1,463,504 … 883,418 189,968 1,073,386 2022……… 2023………… 830,400 158,618 989,018 2024………… 830,399 127,959 958,358 2025………… 830,399 95,961 926,360 2026………… 600,399 68,097 668,496 2027………… 450,399 48,186 498,585 2028………… 429,000 31,238 460,238 2029………… 409,998 15,213 425,211 Totals………$29,488,804 $5,021,390 $34,510,194 Town of North Andover, Massachusetts 54 Comprehensive Annual Financial Report Notes to Basic Financial Statements Fiscal Year Ended June 30, 2013 Bonds Payable – Water Enterprise Fund OriginalInterest MaturitiesLoanRateBeginningEnding ProjectThroughAmount(%)BalanceAdditionsReductionsBalance Municipal Purpose Loan of 2003………………… 2015$4,401,970 2.30 - 4.00$696,129 $- $420,324 $275,805 Municipal Purpose Loan of 2004 - Refunding … 2016985,438 2.00 - 4.20397,705 - 106,600 291,105 Municipal Purpose Loan of 2005………………… 20162,942,000 3.00 - 4.00969,318 - 303,129 666,189 Municipal Purpose Loan of 2007………………… 2016815,000 3.60 - 4.50326,000 - 81,500 244,500 MWPAT…………………………………………… 20285,532,288 2.004,602,264 - 246,525 4,355,739 Municipal Purpose Loan of 2008………………… 20181,000,000 3.70 - 5.0 0600,000 - 100,000 500,000 Municipal Purpose Loan of 2008 - Refunding… 20181,888,108 3.00 - 4.00517,300 - 317,300 200,000 Municipal Purpose Loan of 2009………………… 2019450,000 2.75 - 5.00315,000 - 45,000 270,000 Municipal Purpose Loan of 2010……………… … 20302,025,000 2.25 - 4.001,766,400 - 128,200 1,638,200 Municipal Purpose Loan of 2011………………… 2021225,000 2.00 - 3.75202,500 - 22,500 180,000 Municipal Purpose Loan of 2012……………… … 20221,175,000 2.00 - 2.501,175,000 - 117,500 1,057,500 Municipal Purpose Loan of 2013………………… 2022795,000 2.00 - 3.00 795,000- 795,000- Subtotal…………………………………………… 11,567,616 795,000 1,888,578 10,474,038 Deferred loss on refundings……………………… (68,028) - (27,241) (40,787) Total Water Enterprise bonds payable………… $11,499,588$795,000 $1,861,337 $10,433,251 Debt service requirements for principal and interest for Water Enterprise fund bonds and notes payable in future fiscal years are as follows: Fiscal YearPrincipalInterestTotal 2014…………$1,417,952 $273,344 $1,691,296 2015………… 1,433,663 231,1741,664,837 2016………… 1,059,239 186,8421,246,081 2017………… 828,599 157,573986,172 2018………… 828,994 134,698963,692 2019………… 689,635 112,053801,688 2020………… 605,255 95,251700,506 2021………… 585,983 81,823667,806 2022………… 569,328 69,293638,621 2023………… 366,108 56,873422,981 … 372,191 48,514420,705 2024……… 2025………… 378,397 39,708418,105 … 384,729 30,777415,506 2026……… 2027………… 391,188 21,717412,905 … 397,777 12,528410,305 2028……… 2029………… 65,000 6,600 71,600 … 100,000 4,000104,000 2030……… …$10,474,038 $1,562,768 $12,036,806 Totals…… Town of North Andover, Massachusetts 55 Comprehensive Annual Financial Report Notes to Basic Financial Statements Fiscal Year Ended June 30, 2013 Bonds Payable – Sewer Enterprise Fund OriginalInterest MaturitiesLoanRateBeginningEnding ProjectThroughAmount(%)BalanceAdditionsReductionsBalance MWPAT…………………………………………… 2021$7,356,555 3.70 - 5.40$3,554,567 $- $476,705 $3,077,862 Municipal Purpose Loan of 2003………………… 20184,091,216 2.30 - 3.701,531,869 - 282,676 1,249,193 Municipal Purpose Loan of 2005………………… 20161,979,739 3.00 - 4.00642,713 - 200,657 442,056 … 2016720,000 3.60 - 4.50379,200 - 98,550 280,650 Municipal Purpose Loan of 2007……………… … 20283,925,290 3.70 - 5.003,236,746 - 175,555 3,061,191 Municipal Purpose Loan of 2008……………… Municipal Purpose Loan of 2008 - Refunding… 20191,156,892 3.00 - 4.00697,526 126,725- 570,801 Municipal Purpose Loan of 2010………………… 20223,830,001 2.75 - 5.002,855,001 - 314,999 2,540,002 Municipal Purpose Loan of 2010 - Refunding… 2020250,000 2.25 - 3.50200,000 25,000- 175,000 Municipal Purpose Loan of 2012………………… 2022 2.00 - 2.5078,00078,000 - 7,800 70,200 Municipal Purpose Loan of 2013 - Refunding… 20181,145,000 2.00 - 3.00 1,145,000- 1,145,000- Subtotal…………………………………………… 13,175,622 1,145,000 1,708,667 12,611,955 Deferred loss on refundings……………………… (179,820) - (34,359) (145,461) Total Sewer Enterprise bonds payable………… $12,995,802$1,145,000 $1,674,308 $12,466,494 Debt service requirements for principal and interest for Sewer Enterprise fund bonds and notes payable in future fiscal years are as follows: Fiscal YearPrincipalInterestTotal 2014…………$1,993,590 $471,446 $2,465,036 2015………… 2,025,707 395,8352,421,542 2016………… 1,655,552 326,1551,981,707 2017………… 1,363,300 266,3351,629,635 2018………… 1,378,970 212,8321,591,802 2019………… 963,635 159,6171,123,252 2020………… 902,399 121,8881,024,287 2021………… 652,400 90,247742,647 2022………… 502,399 68,867571,266 2023………… 209,600 50,327259,927 2024………… 204,601 41,681246,282 2025………… 204,601 62,986267,587 2026………… 194,601 24,290218,891 2027………… 189,601 15,776205,377 2028………… 170,999 7,481178,480 Totals………$12,611,955 $2,315,763 $14,927,718 The Sewer Enterprise Fund is scheduled to be subsidized by the Massachusetts Water Pollution Abatement Trust (MWPAT) on a periodic basis for principal in the amount of $777,790 and interest costs of $418,037. Thus, net MWPAT loan repayments, including interest, are scheduled to be $2,423,419. The principal subsidies are guaranteed and therefore a $777,790 intergovernmental receivable has been reported in the proprietary fund financial statements. Since the Town is legally obligated for the total amount of the debt, such amounts have been recorded in the accompanying basic financial statements. The fiscal year 2013 principal and interest subsidies totaled $97,714 and $108,559, respectively. Town of North Andover, Massachusetts 56 Comprehensive Annual Financial Report Notes to Basic Financial Statements Fiscal Year Ended June 30, 2013 The Commonwealth has approved school construction assistance. The assistance program, which is administered by the Massachusetts School Building Authority, provides resources for future debt service of general obligation school bonds outstanding. During fiscal year 2013, $412,000 of such assistance was received. Approximately $824,000 will be received in future fiscal years. Of this amount, $39,000 represents reimbursement of long-term interest costs, and $785,000 represents reimbursement of approved construction costs. Accordingly, a $785,000 intergovernmental receivable and corresponding deferred revenue have been reported in the governmental fund financial statements. The deferred revenue has been recognized as revenue in the conversion to the government-wide financial statements. Beginning in fiscal year 2005, the Commonwealth changed the method for funding the school building assistance program. Under the new program, the assistance is paid to support construction costs and reduce the total debt service of the Town. Through the end of fiscal year 2013, the Town has recorded capital grant proceeds totaling $1,574,000, from the MSBA, which is equal to 49% of approved construction costs submitted for reimbursement. The Town anticipates receiving an additional $83,000 of grant proceeds in fiscal 2014. The Town is subject to various debt limits by statute and may issue additional general obligation debt under the normal debt limit. At June 30, 2013, the Town had the following authorized and unissued debt. PurposeAmount Revenue Billing System…………………………$75,000 Middle School Roof Replacements…………… 888,960 Sargent School Roof Replacement…………… 260,876 Atkinson School Window Replacement……… 745,732 Fire Alarm Boxes and Panels………………… 91 Roadways and Sidewalk Reconstruction……… 526,700 Building Maintenance…………………………… 50,000 Fire Chief Vehicle……………………………… 34,000 Mobile Data Terminals………………………… 90,258 School and General IT………………………… 205,098 … 359,500 School Design Work………………………… Water Main Replacement……………………… 573,000 … 60,000 Water Meter Replacement…………………… Flocculation & Sedimentation Building………… 65,000 … 97,000 Concrete Repairs and Coating……………… Total………………………………………………$4,031,215 Town of North Andover, Massachusetts 57 Comprehensive Annual Financial Report Notes to Basic Financial Statements Fiscal Year Ended June 30, 2013 Changes in Long-term Liabilities During the fiscal year ended June 30, 2013, the following changes occurred in long-term liabilities: BeginningEndingDue within BalanceAdditionsReductionsBalanceOne Year Governmental Activities: Long-term bonds………………………$33,781,935 $926,199 $(5,219,330) $29,488,804 $5,366,742 Unamortized deferred loss on refundings………………………… (483,851) 136,585-(347,266)(116,699) Bonds payable, net…………………… 33,298,084 926,199 (5,082,745)29,141,5385,250,043 Other postemployment benefits……… 29,473,41310,444,230 (3,160,254)36,757,389 - Compensated absences……………… 1,475,002 262,998 (162,000) 1,576,000 925,000 Total governmental……………………$64,246,499 $11,633,427 $(8,404,999) $67,474,927$6,175,043 BeginningEndingDue within BalanceAdditionsReductionsBalanceOne Year Business-Type Activities: Long-term bond………………………$24,743,238$1,940,000 $(3,597,245) $23,085,993$3,411,542 Unamortized deferred loss on refunding………………………… (247,848) 61,600- (186,248) (45,205) Bonds payable net…………………… 24,495,390 1,940,000 (3,535,645)22,899,7453,366,337 … 1,445,968 303,823 (91,932) 1,657,859 - Other postemployment benefits…… Compensated absences……………… 84,000 16,000 (9,000) 91,000 57,000 Total business-type……………………$26,025,358 $2,259,823 $(3,636,577) $24,648,604$3,423,337 The governmental activities long-term liabilities are generally liquidated by the general fund and the business-type activities long-term liabilities are generally liquidated by the applicable enterprise fund. NOTE 9 – GOVERNMENTAL FUND BALANCE CLASSIFICATIONS GASB 54 provides for two major types of fund balances, which are nonspendable and spendable. Nonspendable fund balances are balances that cannot be spent because they are not expected to be converted to cash or they are legally or contractually required to remain intact. Examples of this classification are prepaid items, inventories, and principal (corpus) of an endowment fund. The Town has reported principal portions of endowment funds as nonspendable. In addition to the nonspendable fund balance, GASB 54 has provided a hierarchy of spendable fund balances, based on a hierarchy of spending constraints. Restricted: fund balances that are constrained by external parties, constitutional provisions, or enabling legislation. Committed: fund balances that contain self-imposed constraints of the government from its highest level of decision making authority. Town of North Andover, Massachusetts 58 Comprehensive Annual Financial Report Notes to Basic Financial Statements Fiscal Year Ended June 30, 2013 Assigned: fund balances that contain self-imposed constraints of the government to be used for a particular purpose. Unassigned: fund balance of the general fund that is not constrained for any particular purpose Massachusetts General Law Ch.40 §5B allows for the establishment of stabilization funds for one or more different purposes. The creation of a fund requires a two-thirds vote of the legislative body and must clearly define the purpose of the fund. Any change to the purpose of the fund along with any additions to or appropriations from the fund requires a two-thirds vote of the legislative body. At year end the balance of the general stabilization fund and capital stabilization fund was $3,535,398 and $238,167, respectively. Both stabilization funds are reported as unassigned fund balance within the general fund. The Town has classified its fund balances with the following hierarchy. NonmajorTotal Community GovernmentalGovernmental GeneralPreservationFundsFunds FUND BALANCES Nonspendable: Permanent fund principal…………………….$- $- $29,200 $29,200 Restricted for: Municipal federal and state grants…………… - - 146,926 146,926 Education federal and state grants…………… - - 50,317 50,317 … - - 151,092 151,092 Receipts reserved for appropriations……… Municipal revolving funds……………………… - - 436,454 436,454 Education revolving funds…………………… - - 179,610 179,610 School lunch funds…………………………… - - 23,642 23,642 CPA fund………………………………………… - 5,629,504 - 5,629,504 Other special revenue funds………………… - - 703,779 703,779 Affordable housing trust fund………………… - - 1,057,308 1,057,308 Other trust funds……………………………… - - 60,604 60,604 Municipal capital projects……………………… - - 475,234 475,234 Education capital projects…………………… - - 83,284 83,284 Other permanent funds………………………… - - 708,062 708,062 Debt service…………………………………… 896,040 - - 896,040 Assigned to: Encumbrances: General government…………………………… 2,462 - - 2,462 … 26,461 - - 26,461 Public safety………………………………… Education……………………………………… 29,149 - - 29,149 Public works…………………………………… 67,423 - - 67,423 Human and human services………………… 4,962 - - 4,962 Culture and recreation………………………… 776 - - 776 Support services……………………………… 37,756 - - 37,756 Employee benefits……………………………… 5,000 - - 5,000 Unassigned……………………………………….. 6,618,601 - (193,926) 6,424,675 TOTAL FUND BALANCES…………………………….$7,688,630 $5,629,504 $3,911,586 $17,229,720 Town of North Andover, Massachusetts 59 Comprehensive Annual Financial Report Notes to Basic Financial Statements Fiscal Year Ended June 30, 2013 NOTE 10 - 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 Town participates in a premium-based workers’ compensation plan for its active and retired employees. The Town is self-insured for its health insurance activities. These activities are accounted for in the internal service fund where revenues are recorded when earned and expenses are recorded when incurred. Health Insurance Health insurance claims are administered by a third party administrator and are funded on an as needed basis from the Town’s internal service fund. The estimated “Incurred But Not Reported (IBNR)” claims are based on actual and historical lag claims. The Town purchases individual stop loss insurance for claims in excess of the coverage provided by the Town in the amount of $100,000 per claim. The amount of claim settlements has not exceeded the insurance coverage in any of the previous three fiscal years. The liability at June 30, 2013 totaled $686,000. Changes in the reported liability since July 1, 2011, are as follows: Current Year Balance atClaims andBalance at Beginning ofChanges inClaimsFiscal Fiscal YearEstimatePaymentsYear-End Fiscal Year 2012………..$768,000 $11,900,000 $(12,150,000) $518,000 Fiscal Year 2013……….. 518,000 12,356,000 (12,188,000) 686,000 NOTE 11 - PENSION PLAN Plan Description - The Town contributes to the Essex Regional Retirement System (the “System”), a cost sharing multiple-employer defined benefit pension plan administered by the Essex County Retirement Board. School teachers and certain administrators are members of the Commonwealth of Massachusetts’ Teachers Retirement System, to which the Town does not contribute. All pension benefits and expenses paid by the Teachers Retirement System are funded by the Commonwealth of Massachusetts (the “Commonwealth”). The amount of these on-behalf payments totaled approximately $7,265,155 for the fiscal year ended June 30, 2013, and accordingly are reported in the general fund as intergovernmental revenues and pension benefit expenditures. The System provides retirement, disability and death benefits to plan members and beneficiaries. Chapter 32 of the MGL assigns authority to establish and amend benefit provisions of the plan. Cost-of-living adjustments granted between 1981 and 1997 and any increase in other benefits imposed by the Commonwealth’s state law during those years are borne by the Commonwealth and are deposited into the pension fund. Cost-of-living adjustments granted after 1997 must be approved by the System and are borne by the System. The System issues a publicly available financial report in accordance with guidelines established by the Commonwealth’s Public Employee Retirement Administration Commission. That report may be obtained by contacting the System located at 36 Federal Street, Salem, Massachusetts, 01970. Funding Policy - Plan members are required to contribute to the System at rates ranging from 5% to 11% of annual covered compensation. The Town is required to pay into the System its share of the system-wide actuarial determined contribution, which is apportioned among the employers based on active current payroll. The Town of North Andover, Massachusetts 60 Comprehensive Annual Financial Report Notes to Basic Financial Statements Fiscal Year Ended June 30, 2013 contributions of plan members and the Town are governed by Chapter 32 of the MGL. The Town's contributions to the System for the fiscal years ended June 30, 2013, 2012, and 2011 totaled $3,186,990, $3,002,374, and $2,803,785, respectively, which equaled its required contribution for each fiscal year. The schedule of funding progress, presented as required supplementary information, following the notes to the basic financial statements, presents multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liability for benefits. Additionally, the schedule of employer contributions, presented as required supplementary information, following the notes to the basic financial statements, presents multiyear trend information for required and actual contributions relating to the cost- sharing plan as a whole, of which the Town is one participating employer, as well as the Town’s proportionate share of the plan’s annual contributions. This information is designed to be helpful for understanding the scale of the information presented relative to the Town. NOTE 12 – POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS Plan Description – The Town of North Andover administers a single-employer defined benefit healthcare plan (the “Retiree Health Plan”). The plan provides lifetime healthcare insurance for eligible retirees and their spouses through the Town’s group health insurance plan, which covers both active and retired members. Chapter 32B of the MGL assigns authority to establish and amend benefit provisions of the plan. Benefit provisions are negotiated between the Town and the unions representing Town employees and are renegotiated each bargaining period. The Retiree Health Plan does not issue a publicly available financial report. Funding Policy – Contribution requirements are also negotiated between the Town and union representatives. The required contribution is based on a pay-as-you-go financing requirement. The Town contributes a variable portion of the cost of current-year premiums, which varies by plan, for eligible retired plan members and their spouses. Plan members receiving benefits contribute the remaining portion of their premium costs. For fiscal year 2013, the Town contributed $3.3 million to the plan. Annual OPEB Cost and Net OPEB Obligation – The Town’s annual other postemployment benefit (OPEB) cost (expense) is calculated based on the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with the parameters of GASB Statement 45.The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover the normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years. The components of the Town’s annual OPEB cost for the year, the amount actually contributed to the plan, and changes in the Town’s net OPEB obligation are summarized in the following table: Annual required contribution……………………………………$10,674,564 Interest on net OPEB obligation……………………………… 1,391,372 Adjustment to annual required contribution………………… (1,317,884) Annual OPEB Cost (expense)………………………………… 10,748,052 Contributions made……………………………………………… (3,252,186) Increase in net OPEB obligation……………………………… 7,495,866 Net OPEB obligation - beginning of year……………………… 30,919,382 Net OPEB obligation - end of year……………………………$38,415,248 Town of North Andover, Massachusetts 61 Comprehensive Annual Financial Report Notes to Basic Financial Statements Fiscal Year Ended June 30, 2013 The Town’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for fiscal year 2013 and the two preceding years was as follows: Percentage of Fiscal YearAnnual Annual OPEBNet OPEB EndedOPEB CostCost ContributedObligation 6/30/2013$10,748,052 30%$38,415,248 6/30/201212,196,334 34%30,919,382 6/30/201112,475,335 31%22,908,004 Funded Status and Funding Progress – As of July 1, 2012 the actuarial accrued liability for benefits was $100.1 million, all of which was unfunded. The covered payroll (annual payroll of active employees covered by the plan) was $41.3 million, and the ratio of the UAAL to the covered payroll was 242.5 percent. Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, presents multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. Actuarial Methods and Assumptions – Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. In the July 1, 2012 actuarial valuation, actuarial liabilities were determined using the projected unit credit cost method. The actuarial assumptions included a 4.5% investment return assumption, which is based on the expected yield on the assets of the Town, calculated based on the funded level of the plan at the valuation date, a 3% inflation rate assumption, and an annual health care trend rate of 9% initially, graded to 5% over 8 years. The UAAL is being amortized with a level percentage of pay over a 30 year period on an open basis. The remaining amortization period at June 30, 2013 is 29 years. NOTE 13 – COMMITMENTS The Town has entered into, or is planning to enter into, contracts relating to various capital projects totaling approximately $4.0 million. NOTE 14 – CONTINGENCIES The Town participates in a number of Federal award programs. These programs are subject to financial and compliance audits. The amount, if any, of expenditures which may be disallowed by the granting agencies cannot be determined at this time, although the Town expects such amounts, if any, to be immaterial. Town of North Andover, Massachusetts 62 Comprehensive Annual Financial Report Notes to Basic Financial Statements Fiscal Year Ended June 30, 2013 Various legal actions and claims are pending against the Town. Litigation is subject to many uncertainties, and the outcome of individual litigated matters is not always predictable. Although the amount of liability, if any, at June 30, 2013, cannot be ascertained, management believes any resulting liability should not materially affect the financial position of the Town at June 30, 2013. NOTE 15 – IMPLEMENTATION OF NEW GASB PRONOUNCEMENTS During fiscal year 2013, the following GASB pronouncements were implemented: GASB Statement #60, Accounting and Financial Reporting for Service Concession Arrangements. The implementation of this pronouncement did not impact the basic financial statements. GASB Statement #61, The Financial Reporting Entity: Omnibus. The implementation of this pronouncement did not impact the basic financial statements. GASB Statement #63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position. Financial statement changes include net assets changing to net position and invested in capital assets, net of related debt changing to net investment in capital assets. Notes to the basic financial statements were changed to provide additional disclosure on deferred outflows of resources and deferred inflows of resources. GASB Statement #66, Technical Corrections – 2012, an amendment of GASB Statements No. 10 and No. 62. The implementation of this pronouncement did not impact the basic financial statements. The following GASB pronouncements will be implemented in future fiscal years. Management is currently assessing the impact the implementation of these pronouncements will have on the basic financial statements. The GASB issued Statement #65, Items Previously Reported as Assets and Liabilities, which is required to be implemented in fiscal year 2014. The GASB issued Statement #67, Financial Reporting for Pension Plans, which is required to be implemented in fiscal year 2014. The GASB issued Statement #68, Accounting and Financial Reporting for Pensions, which is required to be implemented in fiscal year 2015. The GASB issued Statement #69, Government Combinations and Disposals of Government Operations, which is required to be implemented in fiscal year 2015. The GASB issued Statement #70, Accounting and Financial Reporting for Nonexchange Financial Guarantees, which is required to be implemented in fiscal year 2014. Town of North Andover, Massachusetts 63 Comprehensive Annual Financial Report Required Supplementary Information Required Supplementary Information Town of North Andover, Massachusetts 64 Comprehensive Annual Financial Report This page intentionally left blank. Town of North Andover, Massachusetts 65 Comprehensive Annual Financial Report GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FISCAL YEAR ENDED JUNE 30, 2013 Budgeted Amounts AmountsCurrent Year Carried forwardInitialOriginalFinal From Prior YearBudgetBudgetBudget REVENUES: Real estate and personal property taxes, net of tax refunds……………………………………………$ - $ 60,804,872 $ 60,804,872 $ 60,804,872 Tax liens………………………………………………………… - - - - Motor vehicle and other excise taxes……………………… - 3,965,000 3,965,000 3,965,000 Charges for services………………………………………… - 900,000 900,000 900,000 Penalties and interest on taxes…………………………… … - 334,000 334,000 334,000 Pa yments in lieu of taxes…………………………………… 1,854,920- 1,854,920 1,854,920 Licenses and permits……………………………………… … - 223,375 223,375 223,375 Fines and forfeitures………………………………………… - 104,000 104,000 104,000 Intergovernmental……………………………………………… - 9,617,973 9,617,973 9,630,354 Departmental and other……………………………………… - 1,163,480 1,163,480 1,163,480 Investment income…………………………………………… - 100,000 100,000 100,000 TOTAL REVENUES…………………………………… - 79,067,620 79,067,620 79,080,001 EXPENDITURES: Current: Generalgovernment……………………………………… 33,193 2,236,879 2,270,072 2,234,522 Public safety………………………………………………… 15,610 9,260,299 9,275,909 9,258,048 Education…………………………………………………… 55,989 38,535,009 38,590,998 38,803,090 Public works………………………………………………… 241,570 4,020,818 4,262,388 4,776,893 Health and human services……………………………… 5,581 1,081,725 1,087,306 1,055,800 Culture and recreation…………………………………… 6,514 852,230 858,744 856,840 Support services…………………………………………… 49,266 1,135,841 1,185,107 1,164,958 Pension benefits…………………………………………… - 3,186,990 3,186,990 3,186,990 Property and liability insurance…………………………… - 337,154 337,154 291,154 Employee benefits………………………………………… 4,138 11,940,506 11,944,644 11,329,101 State and county charges…………………………………… - 1,754,226 1,754,226 1,766,607 Debt service: Principal…………………………………………………… - 5,214,330 5,214,330 5,219,330 Interest……………………………………………………… - 1,077,343 1,077,343 1,114,259 TOTAL EXPENDITURES……………………………… 411,861 80,633,350 81,045,211 81,057,592 EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES……………………………………… (411,861) (1,565,731) (1,977,592) (1,977,591) OTHER FINANCING SOURCES (USES): Premium from issuance of bonds…………………………… - - - - Transfers in…………………………………………………… - 1,525,864 1,525,864 1,525,864 Transfers out…………………………………………………… - (250,000) (250,000) (1,117,710) TOTAL OTHER FINANCING SOURCES (USES)… - 1,275,864 1,275,864 408,154 NET CHANGE IN FUND BALANCE…………………………… (411,861) (289,866) (701,727) (1,569,437) BUDGETARY FUND BALANCE, Beginning of year…………… - 4,881,851 4,881,851 4,881,851 BUDGETARY FUND BALANCE, End of year…………………$ (411,861) $ 4,591,985 $ 4,180,124 $ 3,312,414 See notes to required supplementary information. Town of North Andover, Massachusetts66Comprehensive Annual Financial Report ActualAmountsVariance BudgetaryCarried ForwardTo Final AmountsTo Next YearBudget $ 60,632,744 $ $ (172,128)- 162,627 162,627- 4,260,419 295,419- 957,149 - 57,149 395,894 - 61,894 1,836,102 - (18,818) 252,524 - 29,149 115,103 - 11,103 10,127,258 496,904- 1,310,038 146,558- 130,403 - 30,403 80,180,261 1,100,260- 2,214,064 2,462 17,996 9,125,404 26,461 106,183 38,766,969 29,149 6,972 4,629,200 67,423 80,270 984,316 4,962 66,522 852,439 776 3,625 1,065,290 37,756 61,912 3,186,990 - - 290,896 - 258 11,250,204 5,000 73,897 1,788,615 - (22,008) 5,219,330 - - 1,114,259 -- 80,487,976 173,989 395,627 (307,715) (173,989) 1,495,887 24,215 - 24,215 1,526,297 - 433 (1,117,710) - - 432,802 - 24,648 125,087 (173,989) 1,520,535 4,881,851 - - $ 5,006,938 $ (173,989) $ 1,520,535 Town of North Andover, Massachusetts67Comprehensive Annual Financial Report Retirement System Schedules of Funding Progress and Employer Contributions The Retirement System Schedule of Funding Progress presents multiyear trend information about whether the actuarial value of planned assets is increasing or decreasing over time relative to the actuarial accrued liability for benefits. The Retirement System Schedule of Employer Contributions presents multiyear trend information for required and actual contributions relating to the cost-sharing plan as a whole, of which the Town is one participating employer, as well as the Town’s proportionate share of the plan’s annual contributions. Retirement System Schedules Town of North Andover, Massachusetts 68 Comprehensive Annual Financial Report ESSEX REGIONAL RETIREMENT SYSTEM SCHEDULE OF FUNDING PROGRESS ActuarialUAAL as a ActuarialAccruedUnfundedPercentage ActuarialValue ofLiability (AAL)AALFundedCoveredof Covered ValuationAssetsEntry Age(UAAL)RatioPayrollPayroll Date(A)(B)(B-A)(A/B)(C)((B-A)/C) 01/01/11$278,332,006$536,115,536 $257,783,530 51.9%$119,707,156215.3% 01/01/08301,420,965 445,171,554 143,750,58967.7%111,726,856128.7% 01/01/06261,327,047 376,034,621 114,707,57469.5%98,641,094 116.3% 01/01/04229,852,971 333,396,222 103,543,25168.9%93,404,002 110.9% 01/01/02218,346,198 287,390,715 69,044,51776.0%85,005,338 81.2% 01/01/00190,363,700 253,847,100 63,483,40075.0%69,525,900 91.3% 01/01/99180,034,700 268,386,000 88,351,30067.1%89,645,300 98.6% The Town's share of the UAAL, as of January 1, 2011 is approximately 14%. See notes to required supplementary information. Town of North Andover, Massachusetts69Comprehensive Annual Financial Report ESSEX REGIONAL RETIREMENT SYSTEM SCHEDULE OF EMPLOYER CONTRIBUTIONS System WideTown of North Andover (B/A) Fiscal YearAnnual(A)(B)Town's Percentage EndedRequiredActualPercentageActualof System Wide June 30ContributionsContributionsContributedContributionsActual Contributions 2013$22,770,925 $22,770,925 100%$3,186,990 14.0% 201221,084,190 21,084,190 100%3,002,374 14.2% 201119,093,942 19,093,942 100%2,803,785 14.7% 201017,648,487 17,648,487 100%2,596,530 14.7% 200915,601,671 15,601,671 100%2,468,667 15.8% 200815,788,864 15,788,864 100%2,261,142 14.3% 200716,622,274 16,622,274 100%2,227,020 13.4% 200613,080,011 13,080,011 100%2,181,588 16.7% 200512,223,776 12,223,776 100%1,946,329 15.9% 200412,516,569 12,516,569 100%1,693,461 13.5% The Town's Actual Contributions equaled 100% of its Required Contributions for each year presented. See notes to required supplementary information. Town of North Andover, Massachusetts70Comprehensive Annual Financial Report Other Postemployment Benefit Plan Schedules Other postemployment benefit plan schedules The Schedule of Funding progress compares, over time, the actuarial accrued liability for benefits with the actuarial value of accumulated plan assets. The Schedule of Employer Contributions compares, overtime, the annual required contributions to the actual contributions made. The Schedule of Actuarial Methods and Assumptions presents factors that significantly affect the identification of trends in the amounts reported. Town of North Andover, Massachusetts 71 Comprehensive Annual Financial Report OTHER POSTEMPLOYMENT BENEFIT PLAN SCHEDULE OF FUNDING PROGRESS AND SCHEDULE OF EMPLOYER CONTRIBUTIONS Schedule of Funding Progress Actuarial AccruedUAAL as a ActuarialLiability (AAL)UnfundedPercentage ActuarialValue ofProjectedAALFundedCoveredof Covered ValuationAssetsUnit Credit(UAAL)RatioPayrollPayroll Date(A)(B)(B-A)(A/B)(C)((B-A)/C) 07/01/12$ $100,068,844-$100,068,8440.0%$41,272,093 242.5% 07/01/10 - 118,595,377 118,595,3770.0% 39,329,676 301.5% 07/01/08 125,963,157-125,963,1570.0% 39,189,469321.4% Schedule of Employer Contributions Annual Actual Fiscal YearRequiredContributionsPercentage EndedContributionMadeContributed 6/30/13$10,674,564 $3,252,186 30.5% 6/30/1212,141,886 4,184,95634.5% 6/30/1112,441,414 3,839,40830.9% 6/30/1011,241,110 4,346,87638.7% 6/30/0910,964,622 3,978,10936.3% The Town implemented GASB Statement No. 45 for the fiscal year ended June 30, 2009. Information for prior years is not available. See notes to required supplementary information. Town of North Andover, Massachusetts72Comprehensive Annual Financial Report OTHER POSTEMPLOYMENT BENEFIT PLAN ACTUARIAL METHODS AND ASSUMPTIONS Actuarial Methods: … July 1, 2012 Valuation date………………………………………… Actuarial cost method…………………………………… Projected Unit Credit Amortization method…………………………………… Level percentage of pay over thirty years based on an open group. … 30 years, open basis Remaining amortization period……………………… Actuarial Assumptions: … 4.5% Inflation rate assumption……………………………… Investment rate of return………………………………… 3.0% … 9.0% graded to 5.0% over 8 years Medical/drug cost trend rate………………………… Plan Membership: … 425 Current retirees, beneficiaries, and dependents…… Current active members………………………………… 1,082 Total………………………………………………………1,507 See notes to required supplementary information. Town of North Andover, Massachusetts73Comprehensive Annual Financial Report Notes to Required Supplementary Information Fiscal Year Ended June 30, 2013 NOTE A - STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY Notes to required supplementary information 1. Budgetary Information Municipal Law requires the Town to adopt a balanced budget that is approved by Town Meeting. The Finance Committee presents an annual budget to Town Meeting, which includes estimates of revenues and other financing sources and recommendations of expenditures and other financing uses. Town Meeting, which has full authority to amend and/or reject the budget or any individual line item, adopts the expenditure budget by majority vote. Increases or transfers between departments subsequent to the approval of the annual budget, requires majority Town Meeting approval via a supplemental appropriation. The majority of the Town’s appropriations are non-continuing which lapse at the end of each fiscal year. Others are continuing appropriations for which the governing body has authorized that an unspent balance from a prior fiscal year be carried forward and made available for spending in the current fiscal year. These carry forwards are included as part of the subsequent fiscal year’s original budget. Generally, expenditures may not exceed the legal level of spending authorized for an appropriation account. However, the Town is statutorily required to pay debt service, regardless of whether such amounts are appropriated. Additionally, expenditures for disasters, natural or otherwise, and final judgments may exceed the level of spending authorized by majority vote of the Town Meeting. The Town adopts an annual budget for the General Fund in conformity with the guidelines described above. The original fiscal year 2013 approved budget for the General Fund authorized $81.3 million in appropriations and other amounts to be raised. During fiscal year 2013 annual town meeting approved $880,000 in supplemental appropriations for transfers to the general and capital stabilization funds, as well as to fund a deficit in the highway chapter 90 fund. The Town Accountant’s office has the responsibility to ensure that budgetary control is maintained on an individual line item appropriation account basis. Budgetary control is exercised through the Town’s accounting system. 2. Budgetary - GAAP Reconciliation For budgetary financial reporting purposes, the Uniform Municipal Accounting System basis of accounting (established by the Commonwealth of Massachusetts) is followed, which differs from the GAAP basis of accounting. A reconciliation of budgetary-basis to GAAP-basis results for the General Fund for the fiscal year ended June 30, 2013, is presented below: Net change in fund balance - budgetary basis…………………………………………$125,087 Perspective difference: Activity of the stabilization funds recorded in the … 1,095,297 general fund for GAAP……………………………………………………………… Basis of accounting differences: Net change in recording 60 day receipts…………………………………………… 15,870 Net change in recording tax refunds payable……………………………………… (337,000) Recognition of revenue for on-behalf payments…………………………………… 7,265,155 Recognition of expenditures for on-behalf payments……………………………… (7,265,155) …$899,254 Net change in fund balance - GAAP basis………………………………………… Town of North Andover, Massachusetts 74 Comprehensive Annual Financial Report Notes to Required Supplementary Information Fiscal Year Ended June 30, 2013 NOTE B – PENSION PLAN The Town contributes to the System, a cost-sharing multiple-employer defined benefit pension plan administered by the Essex Regional Retirement System. Substantially all employees are members of the System, except for public school teachers and certain administrators who are members of the Massachusetts Teachers Retirement System, to which the Town does not contribute. Pension benefits and administrative expenses paid by the Teachers Retirement Board are the legal responsibility of the Commonwealth. The amount of these on-behalf payments totaled $7,265,000 for the fiscal year ended June 30, 2013, and, accordingly, are reported in the general fund as intergovernmental revenues and pension expenditures. The System provides retirement, disability and death benefits to plan members and beneficiaries. Chapter 32 of the MGL assigns authority to establish and amend benefit provisions of the plan. Cost-of-living adjustments granted between 1981 and 1997 and any increase in other benefits imposed by the Commonwealth’s state law during those years are borne by the Commonwealth and are deposited into the pension fund. Cost-of-living adjustments granted after 1997 must be approved by the Andover Contributory Retirement Board and are borne by the System. Plan members are required to contribute to the System at rates ranging from 5% to 11% of annual covered compensation. The Town is required to pay into the System its share of the system-wide actuarial determined contribution, which is apportioned among the employers based on active current payroll. The contributions of plan members and the Town are governed by Chapter 32 of the MGL. The Town's contributions to the System for the fiscal years ended June 30, 2013, 2012, and 2011 totaled $3,186,990, $3,002,374, and $2,803,785, respectively, which equaled its required contribution for each fiscal year. The following actuarial methods and assumptions were used in the Retirement System’s most recent actuarial valuation: Actuarial Methods and Assumptions: Valuation Date…………………………………January 1, 2011 Actuarial Cost Method………………………Entry Age Normal Cost Method Amortization Method…………………………Increasing at 4.5% per year, level dollar for ERI liability for certain units Remaining Amortization Period……………24 years remaining as of July 1, 2011 Asset Valuation Method………………………Sum of actuarial value at beginning of year and increase in cost value during year excluding realized appreciation or losses plus 20 percent of market value at end of year (as reported in the Annual Statement) in excess of the preliminary value, adjusted to be within 20 percent of their market value. Actuarial Assumptions: Investment rate of return……………………8.25% Projected salary increases…………………5.00% Cost of living adjustments…………………3.0% of first $12,000 of retirement income. Plan Membership: Retired participants and beneficiaries receiving benefits………………… 1,624 Inactive participants..............................................................................… 794 Disabled...............................................................................……………… 120 Active participants……………………………………………………………… 3,013 … 5,551 Total…………………………………………………………………………… Town of North Andover, Massachusetts 75 Comprehensive Annual Financial Report Notes to Required Supplementary Information Fiscal Year Ended June 30, 2013 The schedule of funding progress presents multiyear trend information relating to the cost-sharing plan as a whole, of which the Town is one participating employer, about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liability for benefits. Additionally, the schedule of employer contributions presents multiyear trend information for required and actual contributions relating to the cost-sharing plan as a whole, of which the Town is one participating employer, as well as the Town’s proportionate share of the plan’s annual contributions. This information is designed to be helpful for understanding the scale of the information presented relative to the Town. NOTE C – OTHER POSTEMPLOYMENT BENEFITS PLAN The Town administers a single-employer defined benefit healthcare plan (“The Retiree Health Plan”). The plan provides lifetime healthcare insurance for eligible retirees and their spouses through the Town’s group health insurance plan, which covers both active and retired members. Additionally, retired teachers and their spouses receive health insurance through the Group Insurance Commission of the Commonwealth of Massachusetts (GIC). Each participating municipality is assessed for the governmental share of health and life insurance premiums paid on behalf of its teacher retirees by the state. The Town currently finances its other postemployment benefits (OPEB) on a pay-as-you-go basis. As a result, the funded ratio (actuarial value of assets expressed as a percentage of the actuarial accrued liability) is 0%. In accordance with Governmental Accounting Standards, the Town has recorded its OPEB cost equal to the actuarially determined annual required contribution (ARC) which includes the normal cost of providing benefits for the year and a component for the amortization of the total unfunded actuarial accrued liability of the plan. The Schedule of Funding Progress presents multi-year trend information which compares, over time, the actuarial accrued liability for benefits with the actuarial value of accumulated plan assets. The Schedule of Employer Contributions compares, overtime, the annual required contributions to the actual contributions made. 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 plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. The Schedule of Actuarial Methods and Assumptions presents factors that significantly affect the identification of trends in the amounts reported. Town of North Andover, Massachusetts 76 Comprehensive Annual Financial Report Combining Statements Combining Statements Town of North Andover, Massachusetts 77 Comprehensive Annual Financial Report Nonmajor Governmental Funds Nonmajor Governmental Funds Special Revenue Funds Special revenue funds are used to account for specific revenues that are legally restricted to expenditure for particular purposes. Municipal Federal and State Grants – This fund is used to account for grant funds received from state and federal governments which are designated for specific non-school related programs. Education Federal and State Grants – This fund is used to account for grant funds received from state and federal governments which are designated for specific education related programs. Receipts Reserved for Appropriation – This fund is used to account for receipts from a specific revenue source that by law is accounted for separately from the general fund and must be spent by appropriation. Municipal Revolving Funds – This fund is used to account for various municipal department’s revolving funds established in accordance with MGL Chapter 44, Section 53E ½ and other applicable statutes. Education Revolving Funds – This fund is used to account for the school department’s revolving funds established in accordance with MGL Chapter 44, Section 53E ½ and Chapter 71. School Lunch Funds – This fund is used to account for all cafeteria activities and is funded by user charges, federal and state grants, and commodities received. Other Special Revenue Funds – This fund is used to account for the activity of donated funds, gifts, and public safety details. Affordable Housing Trust Fund – This fund is used to account for activities relating to the preservation and creation of affordable housing in the Town. Other Trust Funds – This fund is used to account for activities of conservation and public safety trust funds. Capital Projects Funds Capital projects funds are used to account for the acquisition and construction of major capital facilities other than those financed by proprietary funds and trust funds. Highway Chapter 90 Projects – This fund is used to account for construction and reconstruction of the Town’s roadways. These projects are funded by state grants from the Massachusetts Highway Department. Municipal Capital Projects – This fund is used to account for the acquisition of non-school related capital assets that are funded through both appropriations and borrowings. Education Capital Projects – This fund is used to account for the acquisition of school related capital assets that are funded through both appropriations and borrowings. Town of North Andover, Massachusetts 78 Comprehensive Annual Financial Report Permanent Funds Permanent funds are used to report resources that are legally restricted to the extent that only earnings, not principal, may be used for purposes that support governmental programs. Permanent Funds Principal – This fund is used to account for all non-library related gifts, bequests and contributions for which only earnings may be expended to benefit the Town. Library Permanent Funds – This fund is used to account for gifts, bequests and contributions held for which only earnings may be expended for purposes specified by the donor in relation to library activities. Town of North Andover, Massachusetts 79 Comprehensive Annual Financial Report NONMAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEET JUNE 30, 2013 Special Revenue Funds MunicipalEducationReceipts Municipal Federal andFederal andReserved forRevolving ASSETSState GrantsState GrantsAppropriationFunds Cash and cash equivalents………………..…………$150,034 $ 220,470$ 151,092$ 448,793 Investments…………………………………………… - - - - Receivables, net of uncollectibles: Departmental and other…………………………… ---54,745 Intergovernmental………………………………… - - - - TOTAL ASSETS………………………………………$150,034 $ 220,470$ 151,092$ 503,538 LIABILITIES AND FUND BALANCES LIABILITIES: Warrants payable……………………………………$3,108 $ 22,661$ -$ 12,339 Accrued payroll…………………………………… - 147,492 - - Deferred revenues………………………………… - - - 54,745 Due to other funds………………………………… - - - - Notes payable……………………………………… - - - - … 3,108 170,153 - 67,084 TOTAL LIABILITIES………………………………… FUND BALANCES: Nonspendable……………………………………… - - - - Restricted…………………………………………… 146,926 50,317 151,092 436,454 Unassigned………………………………………… - - - - TOTAL FUND BALANCES…………………………… 146,926 50,317 151,092 436,454 …$150,034 $ 220,470$ 151,092$ 503,538 TOTAL LIABILITIES AND FUND BALANCES…… Town of North Andover, Massachusetts80Comprehensive Annual Financial Report Special Revenue Funds EducationSchoolOtherAffordableOther RevolvingLunchSpecial RevenueHousingTrust FundsFundsFundsTrust FundFundsSubtotal $ 254,291$ $43,640 $1,057,308744,893$60,604 $3,131,125 - - - - - - ----- 54,745 - - - - - - $ 254,291$ $43,640 744,893$1,057,308$ 60,604$ 3,185,870 $ 8,914$ $8,790 $41,114 -$ -$ 96,926 65,767 11,208 - - - 224,467 - - - - - 54,745 - - - - - - - - - - - - 74,681 19,998 41,114 - - 376,138 - - - - - - 179,610 23,642 703,7791,057,308 60,604 2,809,732 - - - - - - 179,610 23,642 703,7791,057,308 60,604 2,809,732 $ 254,291$ $43,640 744,893$1,057,308$ 60,604$ 3,185,870 (Continued) Town of North Andover, Massachusetts81Comprehensive Annual Financial Report NONMAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEET JUNE 30, 2013 Capital Project Funds MunicipalEducation HighwayCapitalCapital ASSETSChapter 90ProjectsProjectsSubtotal Cash and cash equivalents………………..………$- $509,700 $ 272,954$ 782,654 Investments………………………………………… -- - - Receivables, net of uncollectibles: Departmental and other…………………………---- Intergovernmental……………………………… -82,8181,732,003 1,814,821 TOTAL ASSETS……………………………………$1,732,003$509,700 $ 355,772$2,597,475 LIABILITIES AND FUND BALANCES LIABILITIES: Warrants payable…………………………………$253,380 $34,466 $ 106,914$ 394,760 Accrued payroll…………………………………… -- - - Deferred revenues……………………………… 1,293,625 - - 1,293,625 Due to other funds……………………………… 184,998 - - 184,998 Notes payable………………………………………… - 359,500 359,500 … 1,732,003 34,466 466,414 2,232,883 TOTAL LIABILITIES……………………………… FUND BALANCES: Nonspendable…………………………………… - - - - Restricted………………………………………… - 475,234 83,284 558,518 Unassigned…………………………………………… (193,926)- (193,926) TOTAL FUND BALANCES………………………… - 475,234 (110,642) 364,592 …$1,732,003 $509,700 $ 355,772$2,597,475 TOTAL LIABILITIES AND FUND BALANCES… Town of North Andover, Massachusetts82Comprehensive Annual Financial Report Permanent Funds Total Permanent LibraryNonmajor FundsPermanentGovernmental PrincipalFundsSubtotalFunds $ 29,200$ 343,626$ 372,826$ 4,286,605 - 364,436 364,436 364,436 --- 54,745 - - - 1,814,821 $ 29,200$ 708,062$ 737,262$6,520,607 $- $ -$ -$ 491,686 - - - 224,467 - - - 1,348,370 - - - 184,998 - - - 359,500 - - - 2,609,021 29,200 - 29,200 29,200 - 708,062 708,062 4,076,312 - - - (193,926) 29,200 708,062 737,262 3,911,586 $ 29,200$ 708,062$ 737,262$6,520,607 (Concluded) Town of North Andover, Massachusetts83Comprehensive Annual Financial Report NONMAJOR GOVERNMENTAL FUNDS COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES FISCAL YEAR ENDED JUNE 30, 2013 Special Revenue Funds MunicipalEducationReceiptsMunicipal Federal andFederal andReserved forRevolving State GrantsState GrantsAppropriationFunds REVENUES: Payments in lieu of taxes………………………………………$- $ $- $-- Charges for services………………………………………………… -- - 561,315 Licenses and permits…………………………………………… - - 52,092 106,998 Intergovernmental……………………………………………… 192,510 2,861,647 - - Departmental and other………………………………………… - - - 7,661 Contributions…………………………………………………… - - - 323,767 Investment income……………………………………………… 39 - - - TOTAL REVENUES……………………………………… 192,549 2,861,647 52,092 999,741 EXPENDITURES: Current: General government………………………………………… 2,311 - 59,010 12,041 Public safety………………………………………………… 97,317 - - 565,556 Education……………………………………………………… - 2,880,923 - - Public works………………………………………………… 3,796 - - 12,089 Human services……………………………………………… 41,036 - - 377,026 Culture and recreation……………………………………… 10,092 - - - Support services…………………………………………… - - - - TOTAL EXPENDITURES……………………………… 154,552 2,880,923 59,010 966,712 EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES……………………………………… 37,997 (19,276) (6,918) 33,029 OTHER FINANCING SOURCES (USES): Issuance of bonds and notes………………………………… ---- … - - - 28,460 Transfers in…………………………………………………… Transfers out…………………………………………………… - - - - … - - - 28,460 TOTAL OTHER FINANCING SOURCES (USES)… … 37,997 (19,276) (6,918) 61,489 NET CHANGE IN FUND BALANCES………………………… … 108,929 69,593 158,010 374,965 FUND BALANCES AT BEGINNING OF YEAR……………… …$146,926 $50,317 $151,092 $436,454 FUND BALANCES AT END OF YEAR………………………… Town of North Andover, Massachusetts84Comprehensive Annual Financial Report Special Revenue Funds EducationSchoolOtherAffordableOther RevolvingLunchSpecial RevenueHousingTrust FundsFundsFundsTrust FundFundsSub-total $- $ $138,322- $ $- $138,322- 2,032,543959,15416,680- 3,569,692- 395,242--- 554,332- --40,128-5,4233,099,708 22,196--5,500-35,357 111,970-126,466- 562,203- -27-5,206815,353 2,561,951959,181321,59610,7065,5047,964,967 --13,3317,635-94,328 --12,800-3,666679,339 2,565,4171,205,52612,098- 6,663,964- --65,939--81,824 --60,148- 478,210- --29,651--39,743 ------ 2,565,4171,205,526193,9677,6353,6668,037,408 (3,466)(246,345)127,6293,0711,838(72,441) ------ -----28,460 (64,200) (138,322)-- (202,522)- (64,200) (138,322)-- (174,062)- (67,666)(246,345)(10,693)3,0711,838(246,503) 247,276269,987714,4721,054,23758,7663,056,235 $179,610 $23,642 $703,779 $1,057,308$60,604 $2,809,732 (Continued) Town of North Andover, Massachusetts85Comprehensive Annual Financial Report NONMAJOR GOVERNMENTAL FUNDS COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES FISCAL YEAR ENDED JUNE 30, 2013 Capital Project Funds MunicipalEducation HighwayCapitalCapital Chapter 90ProjectsProjectsSub-total REVENUES: Payments in lieu of taxes…………………………………………$- $ $- $-- Charges for services………………………………………………… ---- Licenses and permits…………………………………………… - --- Intergovernmental………………………………………………… 881,386 -696,2091,577,595 Departmental and other………………………………………… - --- Contributions……………………………………………………… - --- Investment income……………………………………………… - --- TOTAL REVENUES……………………………………… 881,386-696,2091,577,595 EXPENDITURES: Current: General government………………………………………… - 8,782 - 8,782 Public safety…………………………………………………… - 310,288-310,288 Education……………………………………………………… - 16,5992,744,1262,760,725 Public works…………………………………………………… 882,636 430,823 1,313,459- Human services……………………………………………… ---- Culture and recreation………………………………………… - 41,274-41,274 Support services……………………………………………… - 35,991-35,991 TOTAL EXPENDITURES………………………………… 882,636 843,7572,744,1264,470,519 EXCESS (DEFICIENCY) OF REVENUES … (1,250) (843,757)(2,047,917)(2,892,924) OVER EXPENDITURES……………………………………… OTHER FINANCING SOURCES (USES): Issuance of bonds and notes…………………………………… - 736,231189,968926,199 … 1,250 --1,250 Transfers in……………………………………………………… … - --- Transfers out…………………………………………………… … 1,250 736,231189,968927,449 TOTAL OTHER FINANCING SOURCES (USES)…… … - (107,526)(1,857,949)(1,965,475) NET CHANGE IN FUND BALANCES…………………………… … - 582,7601,747,3072,330,067 FUND BALANCES AT BEGINNING OF YEAR………………… FUND BALANCES AT END OF YEAR……………………………$- $475,234 $(110,642) $364,592 Town of North Andover, Massachusetts86Comprehensive Annual Financial Report Permanent Funds Total Permanent LibraryNonmajor FundsPermanentGovernmental PrincipalFundsSub-totalFunds $- $- $- $138,322 -- - 3,569,692 - - - 554,332 - - - 4,677,303 - - - 35,357 - 219,211 219,211 781,414 16 18,959 18,975 24,328 16 238,170 238,186 9,780,748 - - - 103,110 - - - 989,627 - - - 9,424,689 - - - 1,395,283 - - - 478,210 - 18,570 18,570 99,587 - - - 35,991 - 18,570 18,570 12,526,497 16 219,600 219,616 (2,745,749) - - - 926,199 - - - 29,710 --(202,522) - ---753,387 16219,600219,616(1,992,362) 29,184488,462517,6465,903,948 $29,200 $708,062 $737,262 $3,911,586 (Concluded) Town of North Andover, Massachusetts87Comprehensive Annual Financial Report Agency Fund Agency Fund This fund is used to account for assets held by the Town in a trustee capacity or as an agent for individuals, private organizations, and other governmental units. The majority of the assets in the agency fund relate to conservation, highway and planning board bid deposits as well as student activity deposits. Town of North Andover, Massachusetts 88 Comprehensive Annual Financial Report AGENCY FUND STATEMENT OF CHANGES IN ASSETS AND LIABILITIES FISCAL YEAR ENDED JUNE 30, 2013 BeginningEnd of YearAdditionsDeletionsof Year ASSETS CURRENT: Cash and cash equivalents…………………$4,069,008 $3,052,135 $(2,942,960)$4,178,183 LIABILITIES Guaranteed deposits………………………$3,519,246$1,693,431(1,600,487)$3,612,190 Other deposits……………………………… 357,210 203,658 359,357(201,511) Student Activities…………………………… 192,552 1,155,046 (1,140,962) 206,636 …$4,069,008 $3,052,135 $(2,942,960) $4,178,183 TOTAL LIABILITIES………………………… Town of North Andover, Massachusetts89Comprehensive Annual Financial Report This page intentionally left blank. Town of North Andover, Massachusetts 90 Comprehensive Annual Financial Report Statistical Section Merrimack College Statistical Section Statistical Section This part of the comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the Town’s overall financial health. Financial Trends These schedules contain trend information to help the reader understand how the Town’s financial performance and well-being have changed over time. Revenue Capacity These schedules contain information to help the reader assess the Town’s most significant local revenue source, the property tax. Debt Capacity These schedules present information to help the reader assess the affordability of the Town’s current levels of outstanding debt and the Town’s ability to issue additional debt in the future. Demographic and Economic Information These schedules offer demographic and economic indicators to help the reader understand the environment within which the Town’s financial activities take place. Operating Information These schedules contain service and infrastructure data to help the reader understand how the information in the Town’s financial report relates to the services the Town provides and the activities it performs. SOURCES: Unless otherwise noted, the information in these schedules is derived from the comprehensive annual financial reports for the relevant year. The Town implemented GASB Statement 34 in 2003; schedules presenting government-wide information include information beginning in that year. Town of North Andover, Massachusetts 91 Comprehensive Annual Financial Report Assessed Value and Actual Value of Taxable Property by Classification and Tax Rates Last Ten Fiscal Years Assessed and Actual Values and Tax Rates TotalTotalTotal FiscalResidentialResidentialCommercialIndustrialPersonalCommercialCommercialDirectTown YearValueTax RateValueValuePropertyValueTax RateRateValue 2004(1)3,244,746,811$ 11.76$ 240,998,289$ 184,695,300$ 56,331,150$ 482,024,739$ 14.28$ 12.09$ 3,726,771,550$ 20053,437,798,500$ 11.52$ 239,818,629$ 176,063,300$ 77,626,380$ 493,508,309$ 12.59$ 11.65$ 3,931,306,809$ 20063,743,701,112$ 11.14$ 240,357,988$ 175,698,300$ 81,016,630$ 497,072,918$ 13.47$ 11.41$ 4,240,774,030$ 2007(1)4,113,245,116$ 10.45$ 286,085,303$ 174,371,400$ 77,931,290$ 538,387,993$ 12.63$ 10.70$ 4,651,633,109$ 20084,001,584,703$ 11.40$ 283,789,944$ 167,088,600$ 82,002,220$ 532,880,764$ 13.78$ 11.68$ 4,534,465,467$ 20093,910,976,509$ 11.76$ 280,591,491$ 163,741,100$ 99,814,430$ 544,147,021$ 16.69$ 12.36$ 4,455,123,530$ 2010(1)3,670,178,348$ 12.74$ 286,494,949$ 168,247,500$ 108,138,260$ 562,880,709$ 17.69$ 13.40$ 4,233,059,057$ 20113,563,558,199$ 13.52$ 283,140,851$ 162,024,800$ 112,827,760$ 557,993,411$ 18.63$ 14.21$ 4,121,551,610$ 20123,586,332,274$ 13.92$ 278,839,111$ 158,456,800$ 121,400,010$ 558,695,921$ 19.16$ 14.63$ 4,145,028,195$ 2013(1)3,713,065,744$ 13.72$ 278,124,243$ 161,446,600$ 116,997,715$ 556,568,558$ 18.85$ 14.39$ 4,269,634,302$ Total Assessed Value by Classification Total Assessed Value by Classification Fiscal Year Ended June 30, 2012 Fiscal Year Ended June 30, 2013 3% 3% 4% 4% 6% 7% 86% 87% ResidentialCommercialIndustrialPersonal Property ResidentialCommercialIndustrialPersonal Property Commercial Value as % of Total Value 18.0% 16.0% 14.0% 12.0% 10.0% 2004200520062007200820092010201120122013 (1) Revaluation year. Source: Assessor's Department, Town of North Andover All property in the Commonwealth of Massachusetts is assessed at 100% of fair cash value. Note: Chapter 59, Section 21C of the Massachusetts General Laws, known as "Proposition 2 1/2", imposes 2 separate limits on the annual tax levy of the Town. The primary limitation is that the tax levy cannot exceed 2 1/2 percent of the full and fair cash value. The secondary limitation is that the tax levy cannot exceed the maximum levy limit for the preceding fiscal year as determined by the State Commissioner of Revenue by more than 2 1/2 percent, subject to an exception for property added to the tax rolls and for certain substantial valuation increases other than as part of a general revaluation. The secondary limit may be exceeded in any year by a majority vote of the voters, however it cannot exceed the primary limitation. Town of North Andover, Massachusetts97Comprehensive Annual Financial Report alue 0.00%0.00%0.00% 0.00%0.00%0.00%0.00%5.47% V Assessed Total Taxable Percentage of 2004 30.60%60.35%70.24%11.42%21.34%40.56%50.44%80.22%90.21% 100.09% ------- 4,033,7009,763,4009,294,300 Comprehensive Annual Financial Report 27,110,00015,640,70010,881,50063,891,50060,137,80025,207,80019,836,900 aluationRank V $$$$$$$$245,797,600 $ $ $ $ $ $ $ $ $ $ ------- alue 1.30%0.99%0.92%0.60%0.48%0.38%0.32%0.31%0.24%0.22%5.77% V AssessedAssessed Total Taxable Percentage of 123456789 10 2013 ------- 9,803,9009,234,200 53,771,45040,926,11037,835,81024,749,30019,754,35015,698,50013,249,14012,841,500 98 237,864,260 aluationRank V Assessed $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ Principal Taxpayers Totals Current Year and Nine Years Ago UtilityUtility Retail OfficeOfficeOfficeOffice Type Office Par Property Office Park ApartmentsApartments Shopping MallManufacturing Co-op Housing Office/ManufacturingOffice/Manufacturing Congregate Care/Nursing Home Name AIMCO (Royal Crest)National GridEdgewood Retirement CommunityMansur InvestmentDelta/Delta Realty TrustOzzy PropertiesWood Ridge HomesRCG North Andover MillsNorth Andover 2004Eaglewood PropertiesNAM Partners LimitedT.J. Flatley Co.Lucent TechnologiesMass ElectricJefferson Equity PartnersBF No, Andover Office ParkD & L Andover Prop. LLCSource: Official Statement for Sale of Bonds Town of North Andover, Massachusetts First Year Current Tax Collections Real Estate Tax Levy Last Ten Fiscal Years Real Estate Tax Levies vs. First Year Collections 2004200520062007200820092010201120122013 0 90,000,00080,000,00070,000,00060,000,00050,000,00040,000,00030,000,00020,000,00010,000,000 110,000,000100,000,000 Millions 13.82% 30,545,849 2013 $ $ $ 16.60% 35,050,079 2012 182,659 $ 4,446,186,000$ 222,309,300 $ 191,580,792 23.44% 45,590,789 2011 1,970,568 $ 4,460,344,100$ 223,017,205 $ 185,996,558 19.49% 44,477,844 2010 Comprehensive Annual Financial Report 6,688,916 $ 4,460,344,100$ 223,017,205 $ 170,737,500 22.76% 45,804,952 2009 3,391,000 $ 4,913,038,200$ 245,651,910$ 197,783,066 Fiscal Year 24.77% 44,809,719 2008 10,111,025 $ 4,913,038,200$ 245,651,910$ 189,735,933 24.23% 102 48,332,581 2007 Last Ten Fiscal Years 12,765,223 $ 4,648,968,500$ 232,448,425$ 174,873,483 Computation of Legal Debt Margin 28.59% 52,713,614 2006 7,993,738 $ 4,648,968,500$ 232,448,425$ 176,122,106 48.73% 56,138,372 2005 13,747,450 $ 4,648,968,500$ 232,448,425$ 165,987,361 55.09% 2004 41,577,757 $ 4,010,449,200$ 200,522,460$ 102,806,331 4,010,449,200 200,522,460 90,049,890 57,734,453 … … … … Equalized Valuation…………………………………Debt Limit -5% of Equalized Valuation……………Less: Outstanding debt applicable to limit……………… 52,738,117 Authorized and unissued debt……………………Legal debt margin……………………………………Total debt applicable to the limit as a percentage of debt limit……………………… Source: Official Statement for Sale of Bonds Town of North Andover, Massachusetts Demographic and Economic Statistics Last Ten Fiscal Years Per Capita FiscalPopulationPersonalPersonalMedianUnemployment YearEstimatesIncomeIncomeAgeRate 200427,0741,026,337,826$$ 37,909 374.5% 200527,0251,044,969,910$$ 38,667 374.2% 200627,3901,080,264,953$$ 39,440 374.1% 200727,4121,102,755,288$$ 40,229 373.9% 200827,5661,131,129,553$$ 41,034 374.6% 200927,7531,161,578,875$$ 41,854 377.7% 201028,3521,210,382,515$$ 42,691 377.3% 201128,3521,234,590,165$$ 43,545 375.9% 201228,3521,259,281,969$$ 44,416 375.2% 201328,3521,284,467,608$$ 45,304 375.2% Source:Commonwealth of Mass, Division of Local Services, Executive Office of Labor and Workforce Development. Median age is based on most recent census data. Town of North Andover, Massachusetts103Comprehensive Annual Financial Report t Total Town Employmen Percentage of k 2004 400231660325200 600402300250 1,175 n/an/an/an/an/an/an/an/an/an/an/an/an/an/an/an/an/an/a 14% 71% 81% 101% 51% 91% 22% 61% 32% 41% EmployeesRan t Comprehensive Annual Financial Report 2%1%1%1%1%1%1%1%1%1%n/an/an/an/an/an/a Total Town Employmen Percentage of k 2013 650400400350334265230193174156 n/an/a n/an/an/an/an/an/an/an/an/an/a 1 2 3 4 5 6 7 8 9 10 EmployeesRan 104 Current Year and Nine Years Ago Principal Employers (excluding Town) of Nature Business ManufacturingContractor Higher EducationGrocery StoreElectronic ControlsShoe ManufacturingHealthcareNewspaperManufacturingEducationHealthcareGrocery StoreManufacturingChemical ManufacturingUtility ServicesPlastics Manufacturing r Employe Merrimack CollegeDemoulas Supermarkets, Inc.A.E.G SchneiderConverseEdgewood Retirement CommunityLawrence Eagle TribuneWatts RegulatorsBrooks SchoolGenesis HealthcareStop & ShopLucent TechnologiesBorden ChemicalMass ElectricSweetheart PlasticsMorton International Inc.Solectron CorpSource: Massachusetts Department of Workforce Development Town of North Andover, Massachusetts 62334920 2142114 146 72334929 2142113 146 64134827 2152114 146 64934421 2142114 146 Comprehensive Annual Financial Report 53633427 2142113 146 53243424 2142113 Fiscal Year 146 52141317 2142112 146 105 63153221 2142113 146 Last Ten Fiscal Years 62363213 2142113 Full-Time Equivalent Town Employees 146 42763216 2142113 146 2004200520062007200820092010201120122013 … … … … … … … … … … … … … … … … … … … … … … … … … … … … s … e c …i yv t r e e f S a t S r o c i lp bp uu Town…………………………………………PSchool………………………………………Public works…………………………………Community services………………………SLibrary…………………….…………………Total …………………………………………Source: Annual Budget Report, School Dept Full-Time Equivalents Town of North Andover, Massachusetts - 289610200944649654217726203 598859952861488944124388 3522349532644374407 ,,,,,,,,, 882131234 21 (continued) - 273430431459883532519638846 506781820384348162912276 3321157421953563277 ,,,,,,,,, 882121224 21 - 265491165666357841719576758 5588769648985495407242273 322238732962344336 ,,,,,,,, 87221224 1 2 - 295564793098845667418032604 5689918971064298121371271 3122307143762963346 ,,,,,,,,, 882133224 21 Comprehensive Annual Financial Report - 39188602606220120671 8 636 344 5597691184034871507242110 70223167141762664326 ,,,,,,,, 78231224 21 - 670708963702903455910591466 6818108482039256884434154 573371419233 Fiscal Year3735845 ,,,,,,,,, 76214122 4 21 - 204488855305414741210017314 100874785518021420944882 4432377143082265336 ,,,,,,,, 76252224 21 106 --- 0870731410161556018167841 9281530899859935245147 31212018143901375176 ,,,,,,,,,, 7721412224 21 Last Ten Fiscal Years -- 53730757090811369717953971 24129408851953209134389 0031291376324723451644 ,,,,,,,, 77132224 Operating Indicators by Function/Program 21 ----- 43118212247560000919239 7520633292324125270 775 073123112034862922643 ,,,,,,,,, , 7611131224 2004200520062007200820092010201120122013 21 . ……. … … … … …… …… …… … … … … …… … … … … … … …… … …… … … … … …… … … … … … … … …… … …… … … … … …… … … … … … … … …… … …… … … … … …… … s t… … … … … … … … s n l i … … … … … … a …a l v … … p… … … … … o s t m i … … … …m … … o e m c … … … …r … … R l e …a … … … …k … t P s n m ln … i l … …e … a te n a tT …a … …a m … s l c l if d n …f … … i Io …o n t r d rru r … …n e… e eo e e r s n …b C … l … rg n s r o m u es es … e o csu B gin n d l h en l ao oi n c ii l i n s t ri t s a Fire and Rescue………………………………Ambulance Calls………………………………Smoke Detectors………………………………Carbon Monoxide Detectors…………………Fireworks Display Permits……………………Liquid Gas Storage Permits…………………Open Air Burning Permits……………………OSprinkler Inspections…………………………Underground Tank Installation………………U r g sa t a t l a c oi u o i ul Passport Applications……………………………Complaints Issued…………………………………Arrests………………………………………………TPermits issued…………………………………… Births………………………………………………MDeaths………………………………………………DBNew Voter Registrations…………………………Summons/Hearings………………………………CParking tickets issued……………………………IncidentsPermits/certificates issued pb ou PRegistered Voters, Annual Town Election…………Town ClerkPoliceFireBuilding DepartmentP Function/ProgramPublic Safety General GovernmentEducation Town of North Andover, Massachusetts 340113945428431298941 334441913978509750 532 212250648902097711 ,,,,,,,,,,, 2 78836491973. 111252 185,419 (concluded) 7526699526824258944848 2225669920691695912 889 222386751632356803 ,,,,,,,,,,,, 6 887144761963. 0 121252 2 5860221381599713764180 8456840287120651652 08 222527224752536891 ,,,,,,,,,,,, 0 586144631832. 11123 15 2 299743628147549362365 743580373661674947 67 12215092849006796 ,,,,,,,,,, 8 5479436842. 1122 5 Comprehensive Annual Financial Report 8 8076553039036821511 93557840768950137 17 12262903088736A3 ,,,,,,,,,/ 7 943838969. N 1222 4 212,970 283165728324549929 195347269840504336 112518596 Fiscal Year06923 ,,,,,,,,, 9 8323849. 32 112252 201,961 213,598 327340509145480156 196367011872898242 11265671236301 ,,,,,,,,, 8 743012733. 1222 15 107 675983991381394898 143546926107888799 111294890543396 ,,,,,,,,, 9 321012606. 1 2 2 2 14 206,606 Last Ten Fiscal Years 615910930049104610 153704262282002984 111281789094876 ,,,,,,,, 8 31112586. Operating Indicators by Function/Program 1212 14 220,477 - 45577165043323538 306961992888 43948 111632597448111 ,,,,,,,, 9 32121779. 2004200520062007200820092010201120122013 112132 218,117 … s … …… … … … …… … Food Est. (related permits& reviews) ………Septic (all related reviews/permits/inspection Plan reviews……………………………………… InspectionsOFFA Haulers/Trash Haulers & Placards………Commercial PermitsProfessional PermitsHome delivered meals served……………………Outreach Case ManagementCommunity EducationRecreationTransportation PlanningBoard of HealthCouncil on AgingProgram attendance…………………………………Number of Library Card Holders ……………………Circulation …………………………………………….210,314PC & Internet Use……………………………………Reference Questions…………………………………Inter-Library LoansMembershipsSummer ProgramsOverall ServicesService connections…………………………………Daily consumption (in million gallons)………………Source: Various Town Departments and Annual Town ReportN/A: Information not available Function/ProgramHuman Services LibrariesYouth & Recreation ServicesSewerWater Town of North Andover, Massachusetts 31251185097201196 141991913 15 , 1 31251185097201196 141991913 15 , 1 3125118097201196 14991913 1 3125118997201196 14891913 1 1,511 Comprehensive Annual Financial Report 31251187997201196 148891913 14 , 1 1,489 31251179897201196 7 14891913 4 1 , Fiscal Year 1 31251177897201196 147891913 14 , 1 108 31251175797201196 147891913 4 1 , 1 Last Ten Fiscal Years 31251160697201196 147891913 14 , 1 Capital Asset Statistics by Function/Program 12511216 13869917901139 2004200520062007200820092010201120122013 ……………… … …… … …… …… … … … … … … … … … … s e h c a e b c i l b u Number of Buildings…………………Number of Stations……………………Number of Stations……………………Number of elementary schools………Number of middle schools……………Number of high schools………………Water mains (miles)……………………146Fir e hydrants……………………………1,468Sanitary sewers (miles)………………Storm sewers (miles)…………………Playgrounds……………………………Parks……………………………………Playgrounds - Acreage………………Parks - Acreage………………………PBall fields………………………………T ennis courts…………………………Source: Various Town DepartmentsN/A: Information not available Function/ProgramGeneral GovernmentPoliceCulture and Recreation FireEducationPublic Works Town of North Andover, Massachusetts Additional Information Additional information Town of North Andover, Massachusetts 109 Comprehensive Annual Financial Report ENTERPRISE FUND SCHEDULE OF REVENUES, EXPENSES AND CHANGES IN NET POSITION BUDGETARY BASIS - BUDGET AND ACTUAL FISCAL YEAR ENDED JUNE 30, 2013 Water Fund Amounts ActualCarriedVariance Original FinalBudgetaryForward ToTo Final BudgetBudgetAmountsNext YearBudget OPERATING REVENUES: Charges for services ………………………………………………………………$ 5,092,516 $ 5,092,516 $ 5,432,214 $ - $ 339,698 Penalties and interest……………………………………………………………… 20,000 20,000 22,664 - 2,664 TOTAL OPERATING REVENUES …………………………………….……… 5,112,516 5,112,516 5,454,878 342,362- OPERATING EXPENSES: Cost of service and administration………………………………………………… 2,369,809 2,369,809 1,829,323 201,996 338,490 GLDS assessment……………………………………………………………..…… - - - - - TOTAL OPERATING EXPENSES …………………………………….……… 2,369,809 2,369,809 1,829,323 201,996 338,490 OPERATING INCOME (LOSS)…………………………………………..…… 2,742,707 2,742,707 3,625,555 (201,996) 680,852 NONOPERATING REVENUES (EXPENSES): Investment income………………………………………………………………… 7,000 7,000 12,639 - 5,639 Interest expense…………………………………………………………………… (309,745) (309,745) (287,820) 21,925- Capital outlay………………………………………………………………………… - - - - - Debt service - principal……………………………………………………………… (1,888,578) (1,888,578) (1,888,578) - - TOTAL NONOPERATING REVENUES (EXPENSES), NET………………………………………..…… (2,191,323) (2,191,323) (2,163,759) - 27,564 INCOME (LOSS) BEFORE TRANSFERS…………………..………………… 551,384 551,384 1,461,796 (201,996) 708,416 TRANSFERS: Transfers out………………………………………………………………………… (747,571) (747,571) (759,491) - (11,920) CHANGE IN NET POSITION…………………………………………………… (196,187) (196,187) 702,305 (201,996) 696,496 NET POSITION AT BEGINNING OF YEAR……………………………..………… 1,352,261 1,352,261 1,352,261 - - NET POSITION AT END OF YEAR……………………………………………………$ 1,156,074 $ 1,156,074 $ 2,054,566 $ (201,996) $ 696,496 Town of North Andover, Massachusetts110Comprehensive Annual Financial Report Sewer FundOsgood Hill Fund AmountsAmounts Actual CarriedVarianceActual CarriedVariance OriginalFinal BudgetaryForward ToTo Final Original Final BudgetaryForward ToTo Final BudgetBudgetAmountsNext YearBudgetBudgetBudgetAmountsNext YearBudget $ 4,847,403 $ 4,847,403 $ 4,913,149 $ $ 65,746- $ 2 66,928$ 2 66,928$ 335,770 $ -$ 68,842 22,000 22,000 27,896 - 5,896 - - - - - 4,869,403 4,869,403 4,941,045 71,642- 2 66,928 2 66,928 3 35,770 - 6 8,842 826,963 826,963 757,881 10,960 58,122 2 20,468 2 20,468 245,114 - (24,646) 1,541,247 1,541,247 1,325,429 215,818- - - - - - 2,368,210 2,368,210 2,083,310 10,960 273,940 2 20,468 2 20,468 2 45,114 - ( 24,646) 2,501,193 2,501,193 2,857,735 (10,960) 345,582 4 6,460 4 6,460 9 0,656 - 4 4,196 3,900 3,900 6,300 2,400- - - - - - (389,450) (389,450) (389,247) 203- - - - - - - (1,040)- (1,040)- - - - - - (1,610,955) (1,610,955) (1,610,953) - 2 - - - - - (1,996,505) (1,996,505) (1,994,940) 1,565- - - - - - 504,688 504,688 862,795 (10,960) 347,147 4 6,460 4 6,460 9 0,656 - 4 4,196 (529,744) (529,744) (621,181) (91,437)- (46,460) (46,460) (46,460) - - (25,056) (25,056) 241,614 (10,960) 255,710 - - 4 4,196 - 4 4,196 784,472 784,472 784,472 - - 27,039 27,039 27,039 - - $ 759,416 $ 759,416 $ 1,026,086 $ (10,960) $ 255,710 $ 2 7,039$ 2 7,039$ 7 1,235 $ - $ 4 4,196 Town of North Andover, Massachusetts111Comprehensive Annual Financial Report