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Home My WebLink About2017-02-27 Board of Selectmen Minutes BOARD OF SELECTMEN MINUTES February 27, 2017 CALL TO ORDER: ChairmanRichard Vaillancourt called the meeting to order at 6:30PM in the Town Hall Meeting Room. The meeting was recorded. ATTENDANCE: The following were present: Chairman Richard Vaillancourt, Clerk Rosemary Smedile, Licensing Commissioner, Phil DeCologero, Donald Stewart, Town Manager Andrew Maylor, Assistant Town Manager Ray Santilli, Town Counsel, Suzanne Egan and Executive Assistant, Laurie Burzlaff. EXECUTIVE SESSION : Phil DeCologero made a MOTION, seconded by Rosemary Smedile, that the Board of Selectmen enter into executive session for reason No. 2 under MGL Chapter 30A, Section 21(a) to conduct contract negotiations with nonunion personnel. Roll call vote: Stewart- yes, DeCologero-yes, Smedile-yes, Vaillancourt-yes. Chairman Vaillancourt announced the Board will reconvene in open session at the conclusion of executive session. The Board returned to open session at 7:05PM PLEDGE OF ALLEGIANCE APPROVAL OF MINUTES: Phil DeCologero made a MOTION, seconded by Rosemary Smedile, to approve the Open Session Minutes of February 13, 2017. Vote approved 3-0-1. Mr. Stewart abstained. COMMUNICATIONS AND ANNOUNCEMENTS: Presentation of annual audit report Representatives from Powers and Sullivan, LLC gave an overview of the annual audit report. CONSENT ITEMS: Donations (taken out of order) The town has received a donation from the North Ando Department will use the donation to purchase 3 flat screen television monitors to be used for training and presentations. Phil DeCologero made a MOTION seconded by Donald Stewart, that that Board of Selectmen a Department. Vote approved 4-0. Accept donation in the amount of $100 from Philip Beninato to Veterans Services Phil DeCologero made a MOTION seconded by Rosemary Smedile that that Board of Selectmen accept the donation in the amount of $100 from the Philip Beninato to Veterans Services. Vote approved 4-0. Accept donation of an industrial size refrigerator valued at $3450 from the Friends of the North Andover Senior Center to the Senior Center Phil DeCologero made a MOTION seconded by Rosemary Smedile that that Board of Selectmen accept the donation of an industrial size refrigerator valued at $3450 from the Friends of the North Andover Senior Center to be used at the Senior Center. Vote approved 4-0. Appointment of Ryan Schruender to the Old Center Historic District Commission The appointment subcommittee recommended Ryan Schruender be appointed to the Old Center Historic District Commission through June 30, 2018. Donald Stewart made a MOTION, seconded by Rosemary Smedile, that the Board of Selectmen appoint Ryan Schruender to the Old Center Historic District Commission through June 30, 2018. Vote approved 4-0. Board of Selectmen Minutes February 27, 2017 2 Vote to authorize Town Manager to execute a trash contract in excess of three years Included in the packets were the materials to authorize him to execute a contract in excess of 3 years so he may enter into a 10 year contract with JRM. Phil DeCologero made a MOTION, seconded by Donald Stewart that the Board of Selectmen authorize the Town Manager to execute a contract in excess of 3 years for the purpose of entering into new solid waste contract. Vote approved 4-0. Request from North Andover Farmers Market Planning Committee to close First Street from Main Street to entrance at 15 First Street every Sunday beginning June 25, 2017 through October 8, 2017 from 8:30AM to 3:30PM Mr. DeCologero recused himself from this matter. Chris Allen and Michael Smolak of the North Andover Farmers Market Planning Committee were present to request permission to close First Street from Main Street to the entrance at 15 First Street. The market will be every Sunday from June 25, 2017 through October 8, 2017 from 8:30am to 3:30pm. All relevant departments have reviewed and had no issues. Rosemary Smedile made a MOTION seconded by Donald Stewart that the Board of Selectmen approve the request of the North Andover Farmers Market Planning Committee to close First Street from Main Street to the entrance at 15 First Street every Sunday beginning June 25, 2017 through October 8, 2017 from 8:30am to 3:30pm. Vote approved 3-0. Mr. DeCologero returned to his seat. Columbia Gas requests permission to excavate for the purpose of extending or replacing its gas mains. Eric Schlitt from Columbia Gas presented the requests to excavate at Water Street (from Elm to Second), Main Street, Merrimack Street (from Water to Main), Second Street (from Main to Maple), Brown Court, Church Street, Peters Street, Water Street from Elm to Clarendon Street, Wiley Court, Bixby Avenue and Saunders Street from Main to Cleveland Street. Phil DeCologero made a MOTION, seconded by Donald Stewart that the Board of Selectmen approve the request of Columbia Gas to excavate at Water Street, Merrimack Street, Second Street, Brown Court, Church Street, Peters Street, Wiley Court, Bixby Avenue and Saunders Street, all as presented, for the purpose of extending or replacing the gas mains. Vote approved 3- 0-1. Ms. Smedile abstained. Amendment/extension Phil DeCologero made a MOTION, seconded by Donald Stewart, that the Board of Selectmen approve the amendments to t as presented. Vote approved 4-0. LICENSING COMMISSIONERS: Donald Stewart made a MOTION, seconded by Rosemary Smedile, to open a meeting of the North Andover Licensing Commission. Vote approved 4-0. Jon Betty d/b/a Auto Express request for a Class II license at 800 Turnpike Street, Suite 300 Jon Betty was present to answer any questions from the Commissioners. Richard Vaillancourt made a MOTION seconded by Rosemary Smedile, that the Board of Selectmen, acting as Licensing Commissioners, approve the request of Jon Betty d/b/a Auto Express for a Class II license at 800 Turnpike Street, Suite 300. Vote approved 4-0. Paul Gallant of Merrimack College request for one day wine and malt licenses at the Rogers Center for Performing Arts Lobby for the following performances: -11:30pm -6:30pm -11:30pm -11:30pm Richard Vaillancourt made a MOTION, seconded by Donald Stewart that the Board of Selectmen, acting as Licensing Commissioners, approve the four one day wine and malt licenses for thththrd Merrimack College for performances on March 4, March 5, March 17 and March 23, as presented. Vote approved 4-0. Donald Stewart made a MOTION, seconded by Rosemary Smedile to close a meeting of the North Andover Licensing Commission. Vote approved 4-0. Board of Selectmen Minutes February 27, 2017 3 OLD BUSINESS: None NEW BUSINESS: None PUBLIC COMMENT: Gerald B and suggested taxes be reduced. Town Manager, Andrew Maylor, thanked the Board for their feedback on the trash contract and his employment contract. The Board was provided with copies of the departmental monthly reports. ADJOURNMENT: Phil DeColoero made a MOTION, seconded by Rosemary Smedile to adjourn the meeting at 8:24p.m. Vote approved 4-0. Laurie A. Burzlaff Executive Assistant _______________________________ Rosemary Connelly Smedile, Clerk of the Board Documents used at meeting: Minutes of February 13, 2017 Comprehensive Annual Financial Report Management Letter Reports on Federal Award Programs Appointment memo Trash contract memo Request for Farmers Market Donation memo Columbia Gas requests Class II request Merrimack College request Monthly reports TOWN OFNORTHANDOVER BOARD OF SELECTMEN 120 MAIN STREET NORTH ANDOVER, MASSACHUSETTS 01845 Richard M. Vaillancourt, Chairman TEL. (978) 688-9510 Rosemary Connelly Smedile, Clerk FAX (978) 688-9556 Phil DeCologero Donald B. Stewart Tracy M. Watson BOARD OF SELECTMEN & LICENSING COMMISSIONERS AGENDA MONDAY, FEBRUARY 27, 2017 6:30PM EXECUTIVE SESSION 7:00 PM OPEN SESSION TOWN HALL MEETING ROOM 120 Main Street I. CALL TO ORDER II. EXECUTIVE SESSION A. M.G.L. Chapter 30A, §32(a)-Reason #2- To conduct contract negotiations with non-union personnel III. PLEDGE OF ALLEGIANCE IV. APPROVAL OF MINUTES A. February 13, 2017 Open Session Minutes, as written V. COMMUNICATIONS AND ANNOUNCEMENTS A. Presentation of annual audit report VI. CONSENT ITEMS A. Appointment of Ryan Schruender to the Old Center Historic District Commission B. Vote to authorize Town Manager to execute a trash contract in excess of three years C. Request from North Andover Farmers Market Planning Committee to close First Street from Main Street to entrance at 15 First Street every Sunday beginning June 25, 2017 through October 8, 2017 from 8:30AM to 3:30PM D. Donations: 1. Accept donation in the amount of $1,000 from the North Andover Club to the Fire Department 2. Accept donation in the amount of $100 from Philip Beninato to Veterans Services 3. Accept donation of industrial size refrigerator valued at $3450 from the Friends of the North Andover Senior Center to the Senior Center E. Columbia Gas requests permission to excavate for the purpose of extending or replacing its gas mains: 1. Water Street (from Elm to Second), Main Street, Merrimack Street (from Water to Main) and Second Street (from Main to Maple), Brown Court and Church Street 2. Peters Street 3. Water Street from Elm to Clarendon Street, Wiley Court and Bixby Avenue 4. Saunders Street from Main to Cleveland Street F. Amendment/extension to Town contract VII. LICENSING COMMISSIONERS A. Jon Betty d/b/a Auto Express request for a Class II license at 800 Turnpike Street, Suite 300 B. Paul Gallant of Merrimack College request for one day wine and malt licenses at the Rogers Center for Performing Arts Lobby for the following performances: 1. Cappella on March 4, 2017 from 6:30pm-11:30pm 2. Zeleski on March 5, 2017 from 1:30pm-6:30pm 3. on March 17, 2017 from 6:30pm-11:30pm 4. on March 23, 2017 from 6:30pm-11:30pm VIII. OLD BUSINESS IX. NEW BUSINESS X. PUBLIC COMMENT XI. TOWN REPORT A. the B. Departmental Monthly Reports 1. Fire Department 2. Opiate Overdose Report 3. Police Department 4. Job posting/vacancy log 5. Capital Projects 6. Legal 7. Library 8. Senior Center 9. Report It 10. Building Department XII. NEXT MEETING DATE March 6, 2017 XIII. ADJOURNMENT BOARD OF SELECTMEN MINUTES February 13, 2017 CALL TO ORDER: Chairman Richard Vaillancourt called the meeting to order at 7:00PM in the Town Hall Meeting Room. The meeting was recorded. ATTENDANCE: The following were present: Chairman Richard Vaillancourt, Clerk Rosemary Smedile, Licensing Commissioner, Phil DeCologero, Tracy Watson, Town Manager Andrew Maylor, Assistant Town Manager Ray Santilli and Executive Assistant, Laurie Burzlaff. Approximately 13 members of the public were in attendance. PLEDGE OF ALLEGIANCE APPROVAL OF MINUTES: Rosemary Smedile made a MOTION, seconded by Phil DeCologero, to approve the Open Session Minutes of January 23, 2017. Vote approved 4-0. COMMUNICATIONS AND ANNOUNCEMENTS: Council on Aging video presentation Joe Ser video produced by NACAM about respect. Jeff Goldstein-cannabis cultivation facility Tom Lee of 451 Marketing spoke on behalf of Ozzy Properties, Inc. Ozzy Properties will be submitting a their proposal to open a cannabis cultivation facility at Osgood Landing. Mr. Lee provided the Board with a draft of the warrant article. The Board raised questions about water usage, operation procedures for the business, security and long term vision for property. Watershed informational postcard The Board was provided with a copy of an informational postcard from the Planning Board that will be mailed to residents that live on the shoreline or are direct abutters to major tributaries. It will also be mailed to local landscapers CONSENT ITEMS (taken out of order): Request of North Andover Little League to use streets in North Andover for the 5th Annual Opening Day Parade on Saturday, May 6, 2017 from 8:15AM to 10:00AM The North Andover Little League requested approval to hold an Opening Day Parade on Saturday, May 6, 2017 starting at 8:15AM. The parade will start on Water Street, travel onto Main Street, to Waverly Road, to Dana Street, and end at the Carl Thomas baseball field at approximately 10:00AM. Marc Cooperstein, NALL Parade Organizer, was present to answer any questions. All relevant Town Departments recommended approval. Tracy Watson made a MOTION, seconded by Phil DeCologero, that the Board of Selectmen approve the request of the North Andover Little League to hold an Opening Day Parade on Saturday, May 6, 2017 from 8:15AM to 10:00AM, as presented. Vote approved 4-0. Appointment of Elaine F. Almquist to the Sustainability Committee The appointment subcommittee recommended Elaine Almquist be appointed to the Sustainability Committee. Phil DeCologero made a MOTION, seconded by Rosemary Smedile, that the Board of Selectmen appoint Elaine Almquist to the Sustainability Committee through June 30, 2019. Vote approved 4- 0. Donations (taken out of order): Donation in the amount of $1,000 from Helen Kondra to Veterans Services Phil DeCologero made a MOTION, seconded by Rosemary Smedile, that the Board of Selectmen accept the donation in the amount of $1,000 from Helen Kondra to Veterans Services. Vote approved 4-0. Board of Selectmen Minutes February 13, 2017 2 Donation of a carved oak table from the American Textile History Museum to the Stevens Estate The American Textile History Museum in Lowell donated a carved oak table to the Stevens Estate that originally belonged to the Stevens family. Phil DeCologero made a MOTION, seconded by Rosemary Smedile that the Board of Selectmen accept the donation of a carved oak table from the American Textile History Museum to the Stevens Estate. Vote approved 4-0. Donation of a Chippendale block front secretary from the North Andover Historical Society to the Stevens Estate The North Andover Historical Society donated a secretary to the Stevens Estate that originally belonged to the Stevens Family. Phil DeCologero made a MOTION, seconded by Rosemary Smedile that the Board of Selectmen accept the donation of a Chippendale block front secretary from the North Andover Historical Society to the Stevens Estate. Vote approved 4-0. Donation of a 20x20 tent from Linda and Larry McHugh to the Stevens Estate Rosemary Smedile made a MOTION, seconded by Phil DeCologero that the Board of Selectmen accept the donation of a 20x20 tent from Linda and Larry McHugh to the Stevens Estate. Vote approved 4-0. Request to surplus equipment-Youth & Recreation Services (taken out of order) The Board was provided with a memorandum from Rick Gorman, NAYRS Director, requesting permission to surplus equipment from the skateboard park at the Youth Center which will be donated to the Andover skateboard park. Tracy Watson made a MOTION, seconded by Rosemary Smedile, that that Board of Selectmen approve the request of Rick Gorman to surplus skateboard park equipment per his memorandum dated January 25, 2017. Vote approved 4-0. Vote to authorize Town Manager to execute a trash contract in excess of three years Included in the packet was a memorandum from the Town Manager requesting the Board authorize him to execute a contract in excess of 3 years so he may enter into a 10 year contract with a new solid waste contractor. Tracy Watson made a MOTION, seconded by Phil DeCologero that the Board of Selectmen authorize the Town Manager to execute a contract in excess of 3 years for the purpose of entering into new solid waste contract. Per Article 3 of the 2016 Annual Town Meeting, at least 4 members of the Board of Selectmen must vote to approve. After discussion, Tracy Watson withdrew the motion. Vote to accept M.G.L. Chapter 166, §32A-Inspector of Wires Working as Electrician In order for our Inspector of Wires to work as an electrician, the must Board accept M.G.L. Chapter 166, Section 32A. Tracy Watson made a MOTION, seconded by Phil DeCologero, that the Board of Selectmen accept the provisions of Massachusetts General Law Chapter 166, Section 32A-Inspector of Wires Working as Electrician. Vote 4-0. PUBLIC HEARING National Grid and Verizon New England Joint Pole Petition-Salem Street Phil DeCologero made a MOTION, seconded by Tracy Watson to open the public hearing to receive comments on proposed National Grid and Verizon New England Joint Pole Petition for Salem Street. Vote approved 4-0. Board of Selectmen Minutes February 13, 2017 3 Ken Dobey of National Grid was present to answer any questions regarding the petition. Chairman Vaillancourt indicated that the poles have already been installed and National Grid did so without the Tracy Watson made a MOTION, seconded by Phil DeCologero, to close the public hearing to receive comments on proposed National Grid and Verizon New England Joint Pole Petition for Salem Street. Vote approved 4-0. Phil DeCologero made a MOTION, seconded by Tracy Watson that the Board of Selectmen approve National Grid and Verizon New England Joint Pole Petition #17745776-Salem Street as presented. Vote approved 4-0. LICENSING COMMISSIONERS: Tracy Watson made a MOTION, seconded by Rosemary Smedile to open a meeting of the North Andover Licensing Commission. Vote approved 4-0. Paul Gallant of Merrimack College requests one day wine and malt licenses for: Performance concessions at the Rogers Center for Performing Arts on Thursday, February 23, 2017 from 6:30pm-11:30pm Performance concessions at the Rogers Center for Performing Arts on Friday, February 24, 2017 from 6:30pm-11:30pm Performance concessions at the Rogers Center for Performing Arts on Saturday, February 25, 2017 from 6:30pm-11:30pm Tracy Watson made a MOTION, seconded by Rosemary Smedile, that the Board of Selectmen, acting as Licensing Commissioners, approve the three one day wine and malt licenses for Merrimack College for Performance concessions on February 23, 24 and 25, 2017, as presented. Vote approved 4-0. Request of 99 Restaurants of Boston, LLC for change of manager from Leonard Caffrey to Gary Spinale Tracy Watson made a MOTION, seconded by Rosemary Smedile, that the Board of Selectmen, acting as Licensing Commissioners, approve the request from the 99 Restaurants of Boston, LLC for a change of manager from Leonard Caffrey to Gary Spinale. Vote approved 4-0. Rosemary Smedile made a MOTION, seconded by Richard Vaillancourt to close the meeting of the North Andover Licensing Commission. Vote approved 4-0. OLD BUSINESS: NONE NEW BUSINESS: Town Managers FY18 Recommended Budget The Town Manager presented his FY18 Recommended Budget. Rosemary Smedile made a MOTION, seconded by Tracy Watson, that the Board of Selectmen amendments as additional information comes forward and to forward the budget to the Finance Committee. Vote approved 4-0. PUBLIC COMMENT: Stan Limpert of 43 Stonecleave Road thanked the Town Manager for the supportive budgeting process. The Town Manager reported that Rosemary Smedile and a couple of volunteer residents are working on getting Town Hall ready for an open house to be scheduled sometime in the future. Mr. Maylor also reported that the DPW will be removing snow from Main Street and Water Street on Tuesday and Wednesday evening. Board of Selectmen Minutes February 13, 2017 4 ADJOURNMENT: Phil DeCologero made a MOTION, seconded by Tracy Watson to adjourn the meeting at 8:55pm. Vote approved 4-0. Laurie A. Burzlaff Executive Assistant _______________________________ Rosemary Connelly Smedile, Clerk of the Board Documents used at meeting: Presentation from Ozzy Properties Watershed informational postcard National Grid pole petition Request of NALL Appointment memo Solid waste contract memo Text of Chapter 166, Section 32A Donation memo Request to surplus equipment Merrimack College request 99 Restaurant request Job posting/vacancy log TOWN OF NORTH ANDOVER MASSACHUSETTS COMPREHENSIVE ANNUAL FINANCIAL REPORT For the Year Ended June 30, 2016 Merrimack College Campus Board of Selectmen Town Manager Front row: Rosemary C. Smedile, Andrew Maylor (), Tracy M. Watson Town Mgr Back row: Richard M. Vaillancourt, Phil DeCologero, Donald B. Stewart TOWN OF NORTH ANDOVER, MASSACHUSETTS COMPREHENSIVE ANNUAL FINANCIAL REPORT For the Year Ended June 30, 2016 Prepared by: Lyne M. Savage, Finance Director/Town Accountant TOWN OF NORTH ANDOVER, MASSACHUSETTS COMPREHENSIVE ANNUAL FINANCIAL REPORT JUNE 30, 2016 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 Distinguished budget presentation award ..................................................................................................................11 Financial Section ...........................................................................................................................................................13 Independent auditor’s report ......................................................................................................................................15 Management’s discussion and analysis ....................................................................................................................17 Basic financial statements .........................................................................................................................................26 Statement of net position ........................................................................................................................................27 Statement of activities ............................................................................................................................................28 Governmental funds – balance sheet ....................................................................................................................30 Reconciliation of the governmental funds balance sheet total fund balances to the statement of net position ..... 31 Governmental funds – statement of revenues, expenditures and changes in fund balances ............................... 32 Reconciliation of the statement of revenues, expenditures, and changes in fund balances of governmental funds to the statement of activities .........................................................................................................................33 Proprietary funds – statement of net position .........................................................................................................34 Proprietary funds – statement of revenues, expenses and changes in net position ..............................................35 Proprietary funds – statement of cash flows ..........................................................................................................36 Fiduciary funds – statement of fiduciary net position .............................................................................................37 Fiduciary funds – statement of changes in fiduciary net position ...........................................................................38 Notes to basic financial statements ........................................................................................................................39 Required supplementary information .........................................................................................................................71 General fund budgetary comparison schedule ......................................................................................................72 Schedule of revenues, expenditures and changes in fund balance – general fund – budget and actual .......... 74 Pension plan schedules .........................................................................................................................................76 Schedule of the Town’s proportionate share of the net pension liability ............................................................77 Schedule of Town contributions .........................................................................................................................78 Schedule of the special funding amounts of the net pension liability .................................................................79 Other postemployment benefit plan schedules ......................................................................................................81 Other postemployment benefit plan schedule of funding progress and schedule of employer contributions .... 82 Other postemployment benefit plan actuarial methods and assumptions ..........................................................83 Notes to required supplementary information ........................................................................................................84 Combining and individual fund statements ................................................................................................................87 Nonmajor governmental funds ...............................................................................................................................88 Nonmajor governmental funds – combining balance sheet ...............................................................................90 Nonmajor governmental funds – combining statement of revenues, expenditures, and changes in fund balances .............................................................................................................................................................94 Agency fund ...........................................................................................................................................................97 Agency fund – statement of changes in assets and liabilities ............................................................................98 Statistical Section ..........................................................................................................................................................99 Net position by component – last ten years .............................................................................................................100 Changes in net position – last ten years ..................................................................................................................101 Fund balances, governmental funds – last ten years ..............................................................................................103 Changes in fund balances, governmental funds – last ten years ............................................................................104 Assessed value and actual value of taxable property by classification and tax rates – last ten years ....................105 Principal taxpayers – current year and nine years ago ...........................................................................................106 Property tax levies and collections – last ten years .................................................................................................107 Ratios of outstanding debt and general bonded debt – last ten years ....................................................................108 Direct and overlapping governmental activities debt – as of June 30, 2016. ..........................................................109 Computation of legal debt margin – last ten years ..................................................................................................110 Demographic and economic statistics – last ten years ............................................................................................111 Principal employers (excluding Town) – current year and nine years ago ..............................................................112 Full-time equivalent Town employees – last ten years ............................................................................................113 Operating indicators by function/program – last ten years ......................................................................................114 Capital asset statistics by function/program – last ten years ...................................................................................117 Additional Information ..................................................................................................................................................119 Enterprise funds – schedule of revenues, expenses and changes in net position – budgetary basis – budget and actual ....................................................................................................................................................120 Introductory Section LakeCochichewick Introductory Section Town of North Andover, Massachusetts 1 Comprehensive Annual Financial Report This page intentionally left blank. 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 Letter of transmittal November 22, 2016 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 June 30, 2016 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, 2016, are fairly presented in conformity with GAAP. The Town of North Andover’s financial statements have been audited by Powers & Sullivan, 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, 2016 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 unqualified opinion that the Town of North Andover’s financial statements for the fiscal year ended June 30, 2016, 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 Town of North Andover, Massachusetts 3 Comprehensive Annual Financial Report the financial statements, but also on the audited government’s internal controls and compliance with legal 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. 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 and farmland. 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 28,382. 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. 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. Town Meeting is defined as the Legislative body, Board of Selectmen as the Executive body and the Town Manager as the chief administrative officer. In accordance with Chapter 2 of the Town Charter “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, along with all the powers and duties given to school committees by the laws of the Commonwealth. The School Committee is responsible for establishing educational goals and policies for the schools consistent with the laws of the Commonwealth and standards established by 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 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. Town of North Andover, Massachusetts 4 Comprehensive Annual Financial Report 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-kindergarten, 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). Thirty percent of the Town’s land area is designated conservation land and/or open space. The Town has more than seventy miles of recreational trails. 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 Merrimack Valley Regional Transit Authority (“MVRTA”) provides bus coverage for certain routes around the Town with connections to the surrounding communities within the Merrimack Valley area. The MVRTA also provides a commuter bus service directly to and from the Town and Boston. 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 most well-known for its residential friendly neighborhoods and rich natural beauty however, the Town also has a well-balanced mix of commercial development situated in three distinct areas. The Downtown/Historic Mill district is centered on Main and High Streets and serves the local community with small retail and office space as well as providing a mix of fast food and full service restaurants. This district 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 3,000 undergraduate students and 450 graduate students. The college has recently embarked on a major infrastructure improvement campaign and was ranked as one of the nation’s best regional liberal arts colleges. Long-term financial planning The Town of North Andover is committed to maintaining a solid financial position in all economies and has steadily improved its financial position during the past five years. As a result, in FY16 the Town received an “AAA” bond rating from Standard and Poor’s for the first time in its history. The Town’s financial actions are generally guided by a number of formal financial policies and strengthened by long range planning tools such as a five year Capital Improvement Program, Five Year Financial Forecast, pay-as-you go financing strategies, Facilities Master Plan, and long-term planning for all liabilities including pension and health insurance reserves. Using the lessons learned during the difficult times of the first decade of this century, the Town has been able to maximize municipal and school services through a combination of prudent budgeting, user fee adjustments, strong tax collections, modification of employee health benefits and continued property growth. Over the last few Town of North Andover, Massachusetts 5 Comprehensive Annual Financial Report years the Town has been able to make transfers from Free Cash into existing reserves as well as establish and fund new reserve accounts such as the Capital Stabilization Fund, OPEB Trust Fund, OPEB Stabilization Fund, and the Special Education Stabilization Fund. As of June 2016, the Stabilization Fund undesignated fund balance is $4,301,116, the Capital Stabilization Fund balance is $672,682, the OPEB Stabilization Trust Fund undesignated fund balance is $1,016,557, the OPEB Trust Fund undesignated fund balance is $518,110, and the Special Education Stabilization undesignated fund balance is $602,931. The Town is currently managing approximately $51.7 million worth of long debt. This indebtedness consists of approximately $37.6 million of general obligation bonds. Approximately $7.2 million or 13.9% of the $51.7 million is scheduled to be paid by the end of fiscal 2017 and the remaining $44.5 million by fiscal 2036. Approximately $14.1 million is self-supported 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. In May 2004, Town Meeting adopted an article which established the Revenue/Fixed Cost Review Committee whose main purpose is to advise the Town Manager and other Town officials on projected revenues, other financial sources and fixed costs to facilitate the annual budget development process. 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, 2016, General Fund cash and cash equivalents totaled $25.4 million, while the balance of unrestricted cash and cash equivalents for all government funds totaled $57.3 million. Risk management The Town of North Andover manages its risk through premium based coverage with commercial insurance carriers. With the move from the Town’s self-insured health plan to the Group Insurance Commission (GIC) the Town has further reduced their risk related to health insurance claims. 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 post-employment benefits The Town of North Andover contributes to the Essex Regional Retirement System (ERRS) who manages retirement benefits for all employees other than those covered by the Massachusetts Teachers’ Retirement System. ERRS recently reported that the Net Pension Liability (NPL) for the pension plan increased from $339.3 million as of December 31, 2014 to $363.3 million as of December 31, 2015, using an estimated 8% annual return on funds. This follows a $9.5 million decrease in NPL from December 31, 2013 to December 31, 2014 and a 35% increase from January 1, 2011 to December 31, 2013. North Andover’s share of this liability is determined annually based on payroll cost and as of December 31, 2015 was approximately 14.8% which extrapolates to an unfunded liability of $53.8 million. Town of North Andover, Massachusetts 6 Comprehensive Annual Financial Report The Town of North Andover also provides postemployment health care benefits for certain retirees and their dependents. There were 402 retired employees receiving these benefits, which are financed on a pay-as-you-go basis for its unfunded liability. For Fiscal 2016, the Town conducted an actuarial valuation to determine the unfunded liability of $107,321,707 which is an increase of $20,653,967 from the previous actuarial done in 2015. $14.4 million of this increase was attributable to a reporting change required by the Actuarial Standards of Practice (ASOP) number 6 to include the “implicit subsidy”. Additionally, updated mortality tables and trend rates added more than $6 million to the unfunded liability since Fiscal 2015. On a positive note, the rates negotiated with the Public Employee Committee and the January 2014 migration to the Group Insurance Commission (GIC) health insurance plans decreased the Town’s liability by $3.2 million in Fiscal 2016. The Town established an Other Postemployment Benefit Stabilization (OPEB) fund in 2014, which to date has been funded with $1 million. In addition, in May 2015 the Town Meeting approved an OPEB Trust Fund and funded that account with $500,000 with a transfer in Fiscal 2016 from the internal service Health Insurance Trust Fund. The Town added to the OPEB Trust Fund in Fiscal 2017 with an additional transfer of $250,000 approved in May 2016 and at the same time the Town Meeting approved a Fiscal 2017 operating budget appropriation of $25,000 for the same fund. The Town will continue to contribute to these funds based on the Financial Reserve Policy as last amended in February 2015. Additional information on the Town of North Andover’s pension and post-employment benefits can be found in the notes to the financial statements. Annual budget process and controls The Town Manager is responsible for preparing and presenting the budget to the Board of Selectmen and the Finance Committee. 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. 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 residents at Town Meeting. Awards and Acknowledgements The Town is committed to reporting information in a transparent and professional manner following accepted best practices. As evidence of this the Town has complied with the standards set forth by the Government Finance Officers Association of the United States and Canada and been awarded both the Distinguished Budget Presentation Award and Comprehensive Annual Financial Report Award for the past four consecutive years beginning with FY12. 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 Board of 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 Organizational Chart 8 Town of North Andover, Massachusetts Organizational chart Principal Town Officials Principal town officials Elected Officials Board of Selectmen Tracy M. Watson, Chairman Phil DeCologero, Clerk Rosemary Connelly Smedile Donald B. Stewart Richard M. Vaillancourt, Licensing Chairman Town Moderator Mark DiSalvo School Committee Brian Gross, Chair Andrew McDevitt, Vice Chair Stan Limpert, Clerk David Torrisi, Member Zora Warren, Member Appointed Officials – by School Committee Superintendent Jennifer Price Appointed Officials – by Board of Selectmen Town Manager Andrew W. Maylor Town Accountant Lyne M. Savage Fire Chief William McCarthy Police Chief Paul J. Gallagher Town Counsel Urbelis & Fieldsteel, LLP Appointed Officials – by Town Manager Assistant Town Manager/Purchasing Raymond Santilli Community Development Director Eric Kfoury Conservation Administrator Jennifer A Hughes Director of Elder Services Irene M. O’Brien Finance Director Lyne M. Savage Facilities Director Steve Foster Human Resources Cathy J. Darby Inspector of Building Gerald A. Brown Library Director Kathleen Keenan Public Works Director Bruce D. Thibodeau Public Health Director Susan Y. Sawyer Town Clerk Joyce A. Bradshaw Town Treasurer Gail Tierney Town Planner Vacant Veterans Director Gerry McGuire 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 Distinguished budget presentation award 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 CźƓğƓĭźğƌ{ĻĭƷźƚƓ NorthAndoverCentralFireStation Financial Section Town of North Andover, Massachusetts 13 Comprehensive Annual Financial Report This page intentionally left blank. Town of North Andover, Massachusetts 14 Comprehensive Annual Financial Report Independent Auditor’s 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, 2016, 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, 2016, 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 15 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, combining and individual fund statements, statistical section, and additional information are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual fund statements are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual fund statements are fairly stated, in all material respects, in relation to the basic financial statements as a whole. The introductory section, statistical section and additional information section 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 November 22, 2016, 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 complianceThat 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. November 22, 2016 Town of North Andover, Massachusetts 16 Comprehensive Annual Financial Report Management’s Discussion and Analysis Management’s discussion and analysis Town of North Andover, Massachusetts17 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 year ended June 30, 2016. 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 The assets and deferred outflows of resources of the Town of North Andover exceeded the liabilities at the close of the most recent year by $95.2 million (net position). At the close of the current year, the Town’s general fund reported a fund balance of $19.8 million, an increase of $5.8 million in comparison with the prior year. Total fund balance represents 21% of general fund expenditures. The Town’s governmental debt (short-term and long-term combined) increased by $1.1 million during the current year. This change was due to the issuance of $7.5 million of long-term debt, the payment of $4.8 million in principal payments on long-term debt and the defeasance of $1.6 of existing debt. The Town’s business-type debt (short-term and long-term combined) decreased by $1.7 million during the current year. This change was due to the issuance of $871,000 of long-term debt, offset by $2.5 million in principal payments. In order to take advantage of favorable interest rates, the Town issued $1.7 million of general obligation refunding bonds on June 2, 2016. The transaction resulted in an economic gain of $191,000 and a reduction of $212,000 in future debt service payments. The Town made an initial contribution to the OPEB trust fund in 2016, which totaled $500,000 and was funded by the health insurance internal service fund. Town of North Andover, Massachusetts18 Comprehensive Annual Financial Report 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, deferred outflows of resources, liabilities, and deferred inflows of resources, with the difference 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. Thestatement of activities presents information showing how the government’s net position changed during the most recent 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 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 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. Town of North Andover, Massachusetts19 Comprehensive Annual Financial Report 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; however in 2013 the Town joined the Commonwealth of Massachusetts’ group insurance plan which is a premium based health insurance plan. Since that time, the internal service fund has accounted for residual health insurance claims and assisted in the funding of the OPEB Trust. 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 and deferred outflows of resources exceeded liabilities by $95.2 million at the close of 2016. Net position includes $151.8 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, $8.7 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 $65.3 million. The primary reason for this deficit balance is the recognition of the $56.2 million OPEB liability and the $53.8 million net pension liability. At the end of the current 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, Massachusetts20 Comprehensive Annual Financial Report Governmental Activities. The Town of North Andover’s assets and deferred outflows of resources exceeded liabilities for governmental activities by $43.1 million at the close of 2016. 20162015 Assets: Current assets……………………………………………………$50,942,668 $46,373,719 Capital assets…………………………………………………… 141,768,885 139,763,991 Total assets…………………………………………………… 186,137,710192,711,553 Deferred Outflows of Resources: Deferred charges on refunding……………………………… 158,936 135,258 … Deferred outflows of resources related to pensions………… 2,933,212 - Total deferred outflows of resources…………………… 135,2583,092,148 Liabilities: Current liabilities (excluding debt)…………………………… 8,501,405 8,384,461 … Noncurrent liabilities (excluding debt)………………………… 106,565,273 96,109,682 Current debt……………………………………………………… 5,141,262 4,857,786 Noncurrent debt………………………………………………… 32,445,864 31,674,706 … Total liabilities……………………………………………… 141,026,635152,653,804 Deferred Inflows of Resources: Deferred inflows of resources related to pensions………… … 209,218- Net Position: Net investment in capital assets……………………………… 107,911,523 108,245,924 … Restricted……………………………………………………… 8,704,385 8,473,982 … Unrestricted……………………………………………………… (73,466,011) (71,682,791) $$ Total net position…………………………………………43,149,897 45,037,115 … Program Revenues: Charges for services……………………………………………$7,870,840 $7,071,850 … Operating grants and contributions…………………………… 20,331,273 16,630,896 Capital grants and contributions………………………………… 1,537,180 1,080,649 General Revenues: Real estate and personal property taxes…………………… 66,710,623 63,877,139 … Tax liens………………………………………………………… 206,966 698,405 … Motor vehicle and other excise taxes………………………… 5,174,947 4,957,476 Penalties and interest on taxes………………………………… 517,616 390,837 Payments in lieu of taxes……………………………………… 2,012,598 1,975,835 … Community preservation taxes……………………………..… 1,532,548 1,466,141 … Grants and contributions not restricted to specific programs…………………………………………… 2,351,147 2,368,601 … Unrestricted investment income………………………………… 251,408 206,490 Gain on sale of capital assets………………………………… - 175,692 … Total revenues……………………………………………… 100,900,011108,497,146 Expenses: General government……………………………………………… 4,239,113 3,682,360 Public safety…………………………………………………… 16,423,843 15,498,592 … Education………………………………………………………… 74,777,232 69,182,129 Public works…………………………………………………… 8,202,158 7,659,238 … Health and human services…………………………………… 2,706,412 2,420,603 … Culture and recreation……………………………………… 2,636,723 2,530,792 Support services……………………………………………… 1,834,555 1,914,306 … Interest…………………………………………………………… 970,827 1,004,030 Total expenses…………………………………………… 103,892,050111,790,863 … Excess (deficiency) before transfers…………………………… (2,992,039)(3,293,717) Transfers……………………………………………………………… 1,345,9451,406,499 Change in net position………………………………………… (1,646,094)(1,887,218) Net position, beginning of year…………………………………45,037,11546,683,209 Net position, end of year…………………………………………$ 43,149,897$ 45,037,115 Town of North Andover, Massachusetts21 Comprehensive Annual Financial Report The governmental expenses totaled $111.8 million of which $29.7 million (27%) was directly supported by program revenues consisting of charges for services, operating and capital grants and contributions. General revenues totaled $78.8 million, primarily coming from property taxes, motor vehicle excise, payments in lieu of taxes, community preservation taxes and non-restricted state aid. The governmental net position decreased by $1.9 million during the current year. This decrease was due to several offsetting factors including a $6.7 million increase in the other postemployment benefits liability, a $4.0 million increase in the net pension liability and a $678,000 decrease in the health insurance internal service fund. These decreases were offset by a $3.1 million increase in deferred outflows of resources related to pensions, positive general fund operating results totaling $5.1 million and the recognition of $1.5 million in capital grants. Business-type Activities. The Town of North Andover’s assets and deferred outflows of resources exceeded liabilities for business-type activities by $52.0 million at the close of 2016. 20162015 Assets: Current assets………………………………………………………$13,219,844 $11,333,438 Noncurrent assets (excluding capital)…………………………… 374,679 476,636 Capital assets……………………………………………………… 56,816,096 56,349,158 Total assets…………………………………………………… 68,159,23270,410,619 Deferred Outflows of Resources: Deferred charges on refunding…………………………………… 71,641 102,663 Deferred outflows of resources related to pensions…………… 98,570 - Total deferred outflows of resources…………………… 102,663170,211 … Liabilities: Current liabilities (excluding debt)………………………………… 462,546 413,186 Noncurrent liabilities (excluding debt)…………………………… 3,939,008 3,619,158 Current debt………………………………………………………… 2,098,202 2,529,601 Noncurrent debt…………………………………………………… 12,050,115 13,277,633 Total liabilities………………………………………………… 19,839,57818,549,871 Deferred Inflows of Resources: 7,031- Deferred inflows of resources related to pensions…………… Net Position: Net investment in capital assets………………………………… 43,893,005 43,397,442 Unrestricted………………………………………………………… 8,137,954 5,017,844 Total net position……………………………………………52,030,959 48,415,286 …$$ Town of North Andover, Massachusetts22 Comprehensive Annual Financial Report 20152015 Program Revenues: Charges for services………………………………………………$11,770,044 $11,048,263 Operating grants and contributions……………………………… 37,003 112,149 Capital grants and contributions………………………………… 121,434 - Total revenues………………………………………………… 11,160,41211,928,481 Expenses: Water………………………………………………………………… 3,236,724 3,463,307 Sewer………………………………………………………………… 3,286,077 3,481,106 Osgood Hill ………………………………………………………… 383,508 386,961 Total expenses……………………………………………… 7,331,3746,906,309 … Excess (deficiency) before transfers……………………………… 3,829,0385,022,172 Transfers…………………………………………………………… (1,345,945)(1,406,499) … Change in net position…………………………………………… 2,483,0933,615,673 Net position, beginning of year…………………………………48,415,28645,932,193 … Net position, end of year…………………………………………52,030,959 48,415,286 …$$ Business-type net position of $43.9 million represents the net investment in capital assets and $8.1 million is unrestricted. The Town’s business-type activities net position increased by $3.6 million in the current year. The water enterprise fund net position increased by $1.8 million. This increase was due to $948,000 of positive budgetary results, debt service principal payments exceeding depreciation expense by $231,000 and $635,000 of capital appropriations that were raised in the rates. The sewer enterprise fund net position increased by $1.6 million. This increase was due to $985,000 of positive budgetary results and debt service principal payments exceeding depreciation expense by $576,000. The Osgood Hill enterprise fund net position increased by $146,000 which was due to positive budgetary results totaling $227,000 and a capital contribution from the CPA fund totaling $50,000. These increases were offset by $128,000 of depreciation expense. 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 year. As of the end of the current year, governmental funds reported combined ending fund balances of $34.6 million, of which $19.8 million is for the general fund, $6.9 million is for the community preservation fund, $3.3 million is for municipal capital projects fund, and $4.6 million is for nonmajor governmental funds. Cumulatively there was an increase of $5.4 million in fund balances from the prior year. Town of North Andover, Massachusetts23 Comprehensive Annual Financial Report The general fund is the chief operating fund. At the end of the current year, unassigned fund balance of the general fund totaled $18 million, while total fund balance was $19.8 million. $624,000 of fund balance was restricted for debt service while $596,000 has been assigned for encumbrances and $525,000 has been assigned for subsequent years’ expenditures. Total fund balance represents 21% of general fund expenditures. The Town’s general fund increased by $5.8 million in 2016. This was due to $3.6 million of better than anticipated revenue collections, such as property taxes, tax liens, motor vehicle and other excise taxes, penalties and interest on taxes, intergovernmental revenues, and departmental receipts. Also contributing to the increase was various underspent appropriations totaling $2.4 million of which $1.7 million relates to employee benefits. The community preservation fund increased by $433,000 in 2016, which is due to timing differences between the receipt and expenditure of surcharge and state grant revenues. The highway chapter 90 fund recognized revenues and expenditures totaling $1.1 million and accordingly did not reflect a net change in fund balance at year-end. The municipal capital project fund decreased by $1.1 million in 2016, which is due to a timing difference between the receipt and expenditure of bond proceeds. The nonmajor governmental funds increased by $242,000 in 2016, which is due to a timing difference between the receipt and expenditure of bond proceeds, as well as state and federal grant funds. General Fund Budgetary Highlights The original 2016 approved budget for the General Fund authorized $89.1 million in appropriations and other amounts to be raised. This includes $293,000 of encumbrances and continuing appropriations carried forward from the prior year. Capital Asset and Debt Administration Capital Assets. In conjunction with the annual operating budget, the Town annually prepares a capital budget for the upcoming 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, 2016, amounts to $198.6 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, a water treatment plant, pump stations, and other infrastructure. The Town invested $2.5 million for capital asset additions in 2016. The major governmental capital asset events during the current year include various improvements to Town buildings in connection with the facilities master plan, the purchase of vehicles, as well as various sidewalk and roadway improvements. The major business-type capital asset events during the current year consisted of improvements to water and sewer pump stations, other infrastructure and technology improvements as well as bathroom and carriage house improvements at the Stevens Estate. Town of North Andover, Massachusetts24 Comprehensive Annual Financial Report Debt Administration. Outstanding gross long-term governmental debt, as of June 30, 2016, totaled $37.6 million, a decrease of $1.1 million from the prior year. This was due to the issuance of general obligation bonds and premiums totaling $5.8 million, refunding bonds totaling $1.7 million, principal payments totaling $4.8 million and defeased debt totaling $1.6 million. There was no outstanding governmental short-term debt as of year-end. Outstanding gross long-term debt of the water enterprise fund, as of June 30, 2016, totaled $6.8 million, a decrease of $1.1 million from the prior year. This was due to principal payments totaling $1.1 million. Outstanding gross long-term debt of the sewer enterprise fund, as of June 30, 2016, totaled $7.4 million, a decrease of $569,000. This was due to principal payments totaling $1.4 million and $871,000 of proceeds from general obligation bonds. In order to take advantage of favorable interest rates, the Town issued $1,695,000 of general obligation refunding bonds on June 2, 2016. $1,615,000 of general obligation bonds were advance refunded by placing the proceeds of the refunding bonds in an irrevocable trust to provide for all future debt service payments of the refunded bonds. This advance refunding was undertaken to reduce total debt service payments over the next 13 years by $211,538. 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, Massachusetts25 Comprehensive Annual Financial Report Basic Financial Statements Basic financial statements Town of North Andover, Massachusetts26 Comprehensive Annual Financial Report STATEMENT OF NET POSITION JUNE 30, 2016 Primary Government GovernmentalBusiness-type ActivitiesActivitiesTotal ASSETS CURRENT: …$ 43,274,579 $ 9,934,839 $ 53,209,418 Cash and cash equivalents……………………………… Investments…………………………………………………… 738,615 - 738,615 Receivables, net of allowance for uncollectibles: … 1,095,167 - 1,095,167 Real estate and personal property taxes…………… Tax and utility liens……………………………………… 49,6822,090,248 2,139,930 … 371,734 - 371,734 Motor vehicle and other excise taxes………………… User charges……………………………………………… - 3,133,366 3,133,366 … 17,971 - 17,971 Community preservation……………………………… Departmental and other………………………………… 666,553 - 666,553 … 2,032,773 101,957 2,134,730 Intergovernmental……………………………………… Tax foreclosures……………………………………………… 655,028 - 655,028 Total current assets…………………………………… 50,942,668 13,219,844 64,162,512 NONCURRENT: Receivables, net of allowance for uncollectibles: Intergovernmental………………………………………… - 374,679 374,679 Capital assets, nondepreciable……………………………… 25,205,804 6,366,466 31,572,270 Capital assets, net of accumulated depreciation………… 50,449,630116,563,081 167,012,711 … 141,768,885 57,190,775 198,959,660 Total noncurrent assets…………………………… TOTAL ASSETS………………………………………………… 192,711,553 70,410,619 263,122,172 DEFERRED OUTFLOWS OF RESOURCES … 158,936 71,641 230,577 Deferred charges on refunding…………………………… … 2,933,212 98,570 3,031,782 Deferred outflows of resources related to pensions…… TOTAL DEFERRED OUTFLOWS OF RESOURCES……… 3,092,148 170,211 3,262,359 LIABILITIES CURRENT: Warrants payable…………………………………………… 311,8322,005,494 2,317,326 Accrued payroll……………………………………………… 3, -169,943 3,169,943 Tax refunds payable………………………………………… 2,282,000 - 2,282,000 Accrued interest……………………………………………… 223,159 112,714 335,873 … 82,649 - 82,649 Other liabilities……………………………………………… Liabilities due depositors…………………………………… 106,160 - 106,160 Compensated absences…………………………………… 38,000632,000 670,000 Bonds payable………………………………………………… 5,141,262 2,098,202 7,239,464 … 13,642,667 2,560,748 16,203,415 Total current liabilities……………………………… NONCURRENT: Compensated absences…………………………………… 29,000473,000 502,000 Other postemployment benefits…………………………… 2,159,37353,997,473 56,156,846 Net pension liability…………………………………………… 52,094,800 1,750,635 53,845,435 Bonds payable………………………………………………… 32,445,864 12,050,115 44,495,979 Total noncurrent liabilities…………………………… 139,011,137 15,989,123 155,000,260 TOTAL LIABILITIES……………………………………………… 152,653,804 18,549,871 171,203,675 NET POSITION Net investment in capital assets……………………………… 43,893,005107,911,523 151,804,528 Restricted for: Debt service…………………………………………………… 624,472 - 624,472 Community preservation…………………………………… 7,395,806 - 7,395,806 Gifts and grants……………………………………………… 684,107 - 684,107 … (73,466,011) 8,137,954 (65,328,057) Unrestricted…………………………………………………… TOTAL NET POSITION…………………………………………$ 43,149,897 $ 52,030,959 $ 95,180,856 See notes to basic financial statements. Town of North Andover, Massachusetts27Comprehensive Annual Financial Report STATEMENT OF ACTIVITIES YEAR ENDED JUNE 30, 2016 Program Revenues OperatingCapital Charges forGrants andGrants andNet (Expense) ExpensesServicesContributionsContributionsRevenue Functions/Programs Primary Government: Governmental Activities: General government……………… $ 4,239,113 $ 608,276 $ 55,511 $ - $ (3,575,326) Public safety……………………… 16,423,843 3,548,098 110,470 - (12,765,275) … Education………………………… 74,777,232 3,482,776 18,949,612 - (52,344,844) … Public works……………………… 8,202,158 104,212 439,112 1,064,924 (6,593,910) … Health and human services……… 2,706,412 117,826 736,196 - (1,852,390) Culture and recreation…………… 2,636,723 9,652 40,372 472,256 (2,114,443) … Support services………………… 1,834,555 - - - (1,834,555) … Interest…………………………… 970,827 - - - (970,827) … Total Governmental Activities… 111,790,863 7,870,840 20,331,273 1,537,180 (82,051,570) Business-Type Activities: Water……………………………… 3,236,724 5,977,800 19,327 - 2,760,403 … Sewer……………………………… 3,286,077 5,265,490 15,735 71,502 2,066,650 … Osgood Hill……………………… 383,508 526,754 1,941 49,932 195,119 … Total Business-Type Activities 6,906,309 11,770,044 37,003 121,434 5,022,172 … Total Primary Government…… $ 118,697,172 $ 19,640,884 $ 20,368,276 $ 1,658,614 $ (77,029,398) … See notes to basic financial statements.(Continued) Town of North Andover, Massachusetts28Comprehensive Annual Financial Report STATEMENT OF ACTIVITIES YEAR ENDED JUNE 30, 2016 Primary Government GovernmentalBusiness-Type ActivitiesActivitiesTotal Changes in net position: Net (expense) revenue from previous page…$ (82,051,570)$ 5,022,172 $ (77,029,398) … General revenues: Real estate and personal property taxes, net of tax refunds payable……………… 66,710,623 - 66,710,623 … Tax liens……………………………………… 206,966 - 206,966 … Motor vehicle and other excise taxes……… 5,174,947 - 5,174,947 Penalties and interest……………………… 517,616 - 517,616 … Payments in lieu of taxes…………………… 2,012,598 - 2,012,598 Community preservation taxes…………… 1,532,548 - 1,532,548 … Grants and contributions not restricted to specific programs………………………… 2,351,147 - 2,351,147 … Unrestricted investment income…………… 251,408 - 251,408 … 1,406,499 (1,406,499) - Transfers, net…………………………………… Total general revenues and transfers………… 80,164,352 (1,406,499) 78,757,853 Change in net position…………………… (1,887,218) 3,615,673 1,728,455 … Net Position: Beginning of year………………………..… 45,037,115 48,415,286 93,452,401 … End of year……………………………………$ 43,149,897 $ 52,030,959 $ 95,180,856 (Concluded) Town of North Andover, Massachusetts29Comprehensive Annual Financial Report GOVERNMENTAL FUNDS BALANCE SHEET JUNE 30, 2016 MunicipalNonmajorTotal CommunityHighwayCapitalGovernmentalGovernmental GeneralPreservationChapter 90ProjectsFundsFunds ASSETS Cash and cash equivalents……………………………… $ 25,425,032 $ 7,035,904 $ - $ 4,027,891 $ 3,882,787 $ 40,371,614 … Investments……………………………………………… - - - - 738,615 738,615 … Receivables, net of uncollectibles: Real estate and personal property taxes…………… 1,095,167 - - - - 1,095,167 … Tax liens……………………………………………… 2,090,248 - - - - 2,090,248 … Motor vehicle and other excise taxes……………… 371,734 - - - - 371,734 … Community preservation……………………………… - 17,971 - - - 17,971 Departmental and other……………………………… 546,015 - --120,538 666,553 … Intergovernmental…………………………………… - 441,000 1,477,052 -114,721 2,032,773 … Tax foreclosures………………………………………… 655,028 - - - - 655,028 … Due from other funds……………………………………… 858,927 - - - - 858,927 TOTAL ASSETS………………………………………… $ 31,042,151 $ 7,494,875 $ 1,477,052 $ 4,027,891 $ 4,856,661 $ 48,898,630 … LIABILITIES Warrants payable……………………………………… $ 1,076,565 $ 99,069 $ 1,714 $ 723,953 $ 104,193 $ 2,005,494 ccrued payroll………………………………………… 3,169,943 - - - - 3,169,943 A Tax refunds payable………………………………… 2,282,000 - - - - 2,282,000 … Liabilities due depositors…………………………… 106,160 - - - - 106,160 … Other liabilities………………………………………… 82,649 - - - - 82,649 … Due to other funds…………………………………… - - 780,640 - 78,287 858,927 … TOTAL LIABILITIES……………………………………… 6,717,317 99,069 782,354 723,953 182,480 8,505,173 … DEFERRED INFLOWS OF RESOURCES Unavailable revenues………………………………… 4,550,355 458,970 694,698 - 120,538 5,824,561 … FUND BALANCES Restricted……………………………………………… 624,472 6,936,836 - 3,303,938 4,553,643 15,418,889 … ssigned……………………………………………… 1,120,696 - - - - 1,120,696 A… Unassigned…………………………………………… 18,029,311 - - - - 18,029,311 … TOTAL FUND BALANCES……………………………… 19,774,479 6,936,836 - 3,303,938 4,553,643 34,568,896 … TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES…………… $ 31,042,151 $ 7,494,875 $ 1,477,052 $ 4,027,891 $ 4,856,661 $ 48,898,630 … See notes to basic financial statements. Town of North Andover, Massachusetts30Comprehensive Annual Financial Report RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TOTAL FUND BALANCES TO THE STATEMENT OF NET POSITION JUNE 30, 2016 Total governmental fund balances………………………………………………………………………… $ 34,568,896 Capital assets (net) used in governmental activities are not financial resources 141,768,885 and, therefore, are not reported in the funds……………………………………………………… Accounts receivable are not available to pay for current-period expenditures and, therefore, are unavailable in the funds………………………………………… 5,824,561 Certain changes in the net pension liability are required to be included in pension expense over future periods. These changes are reported as deferred outflows of resources or (deferred inflows of resources) related to pensions……………………………… 2,933,212 … The internal service fund is used by management to account for health insurance activities. The assets and liabilities of the internal service fund are included in the governmental activities in the statement of net position…………………… 2,902,965 In the statement of activities, interest is accrued on outstanding long-term debt, whereas in governmental funds interest is not reported until due……………………………… (223,159) Long-term liabilities are not due and payable in the current period and, therefore, are not reported in the governmental funds. Bonds payable……..……………………………………………………………………………… (37,587,126) Deferred charges on refunding……..…………………………………………………………… 158,936 Other postemployment benefits…………………………………………………………………… (53,997,473) (52,094,800) Net pension liability………………………………………………………………………………… Compensated absences…………………………………………………………………………… (1,105,000) Net effect of reporting long-term liabilities………………………………………………… (144,625,463) Net position of governmental activities…………………………………………………………………… $ 43,149,897 See notes to basic financial statements. Town of North Andover, Massachusetts31Comprehensive Annual Financial Report GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES YEAR ENDED JUNE 30, 2016 MunicipalNonmajorTotal CommunityHighwayCapitalGovernmentalGovernmental GeneralPreservationChapter 90ProjectsFundsFunds REVENUES: Real estate and personal property taxes, net of tax refunds…………………………… $ 66,508,637 $ - $ - $ - $ - $ 66,508,637 Tax and utility liens……………………………… 746,632 - - - - 746,632 Payments in lieu of taxes……………………… 1,868,503 - - - 144,095 2,012,598 Community preservation taxes………………… - 1,535,312 - - - 1,535,312 Motor vehicle and other excise taxes………… 5,412,047 - - - - 5,412,047 Charges for services…………………………… 959,662 - - - 4,139,633 5,099,295 Penalties and interest on taxes……………… 517,616 - - - - 517,616 Licenses and permits…………………………… 179,217 - - - 136,290 315,507 Fines and forfeitures…………………………… 59,352 - - - - 59,352 Intergovernmental……………………………… 17,837,862 485,256 1,104,899 - 4,053,942 23,481,959 Departmental and other………………………… 2,276,434 - - - 179,594 2,456,028 Contributions…………………………………… - - - - 699,321 699,321 Investment income …………………………… 137,942 42,145 - - 76,442 256,529 TOTAL REVENUES…………………… 96,503,904 2,062,713 1,104,899 - 9,429,317 109,100,833 EXPENDITURES: Current: General government………………………… 2,342,228 - - 2,032,469 169,779 4,544,476 Public safety………………………………… 10,223,053 - - 3,284,399 979,392 14,486,844 Education…………………………………… 43,925,696 - - 132,445 7,239,218 51,297,359 Public works………………………………… 4,316,626 - 1,104,899 1,078,642 52,924 6,553,091 Health and human services………………… 1,135,702 - - - 815,057 1,950,759 Culture and recreation……………………… 938,853 1,629,927 - - 90,895 2,659,675 Support Services…………………………… 1,577,395 - - 18,998 - 1,596,393 Pension benefits…………………………… 11,068,695 - - - - 11,068,695 Property and liability insurance…………… 443,580 - - - - 443,580 Employee benefits…………………………… 10,079,081 - - - - 10,079,081 State and county charges……………………… 397,195 - - - - 397,195 Debt service: Principal……………………………………… 4,785,624 - - - - 4,785,624 Interest……………………………………… 1,031,689 - - - - 1,031,689 TOTAL EXPENDITURES……………… 92,265,417 1,629,927 1,104,899 6,546,953 9,347,265 110,894,461 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES…………… 4,238,487 432,786 - (6,546,953) 82,052 (1,793,628) OTHER FINANCING SOURCES (USES): Issuance of bonds……………………………… - - - 5,454,484 304,881 5,759,365 Issuance of refunding bonds…………………… 1,695,000 - - - - 1,695,000 Premium from issuance of bonds…………… 73,055 - - - - 73,055 Payments to refunded bond escrow agent…… (1,723,863) - - - - (1,723,863) Transfers in……………………………………… 1,551,391 - - - - 1,551,391 Transfers out…………………………………… - - - - (144,892) (144,892) TOTAL OTHER FINANCING SOURCES (USES)…………………… 1,595,583 - - 5,454,484 159,989 7,210,056 NET CHANGE IN FUND BALANCES…………… 5,834,070 432,786 - (1,092,469) 242,041 5,416,428 FUND BALANCES AT BEGINNING OF YEAR………………………………………… 13,940,409 6,504,050 - 4,396,407 4,311,602 29,152,468 FUND BALANCES AT END OF YEAR………… $ 19,774,479 $ 6,936,836 $ - $ 3,303,938 $ 4,553,643 $ 34,568,896 See notes to basic financial statements. Town of North Andover, Massachusetts32Comprehensive Annual Financial Report RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES YEAR ENDED JUNE 30, 2016 Net change in fund balances - total governmental funds…………………………………………… $ 5,416,428 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. Capital outlay……………………………………………………………………………………8,612,014 Depreciation expense…………………………………………………………………………(6,607,120) Net effect of reporting capital assets………………………………………………… 2,004,894 Revenues in the Statement of Activities that do not provide current financial resources are unavailable 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 the net change in unavailable revenue………………………………………………………… (603,687) 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. Issuanceof bonds………………………………………………………………………………(5,759,365) Issuance of refunding bonds…………………………………………………………………(1,695,000) Premium from issuance of bonds……………………………………………………………(73,055) Amortization of premium from issuance of bonds…………………………………………72,161 Payments to refunded bond escrow agent…………………………………………………1,723,863 Debt service principal payments………………………………………………………………4,785,624 Net effect of reporting long-term debt………………………………………………… (945,772) 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……………………………………………438,000 Net change in accrued interest on long-term debt…………………………………………73,886 Net change in other postemployment benefits………………………………………………(6,658,427) Net change in deferred outflow/(inflow) of resources related to pensions………………3,142,430 Net change in net pension liability……………………………………………………………(3,992,164) Amortization of deferred charges on refunding………………………………………………(85,184) Net effect of recording long-term liabilities………………………………………….. (7,081,459) The internal service funds are used by management to account for health insurance activities. The net activity of internal service fund is reported with governmental activities……… (677,622) Change in net position of governmental activities…………………………………………………… $ (1,887,218) See notes to basic financial statements. Town of North Andover, Massachusetts33Comprehensive Annual Financial Report PROPRIETARY FUNDS STATEMENT OF NET POSITION JUNE 30, 2016 Governmental pe Activities - Enterprise Fundsctivities Business-ty A Health Insurance Osgood Internal Service WaterSewerHillTotalFund ASSETS CURRENT: Cash and cash equivalents……………………………………$ 5,408,524 $ 4,055,203 $ 471,112 $ 9,934,839 $ 2,902,965 Receivables, net of allowance for uncollectibles: … 1,608,060 1,525,306 - 3,133,366 - User fees…………………………………………………… Utility liens…………………………………………………… 35,240 14,442 - 49,682 - Intergovernmental…………………………………………… - 101,957 - 101,957 - … 7,051,824 5,696,908 471,112 13,219,844 2,902,965 Total current assets…………………………………… NONCURRENT: Receivables, net of allowance for uncollectibles: governmental…………………………………………… - 374,679 - 374,679 - Inter … 2,100,305 266,161 4,000,000 6,366,466 - Capital assets, nondepreciable……………………………… Capital assets, net of accumulated depreciation…………… 26,529,517 22,067,496 1,852,617 50,449,630 - … 28,629,822 22,708,336 5,852,617 57,190,775 - Total noncurrent assets……………………………… … 35,681,646 28,405,244 6,323,729 70,410,619 2,902,965 TOTALASSETS………………………………………………… DEFERRED OUTFLOWS OF RESOURCES ges on refunding………………………………… 6,533 65,108 - 71,641 - Deferred char Deferred outflows of resources related to pensions………… 70,217 28,353 - 98,570 - TOTAL DEFERRED OUTFLOWS OF RESOURCES………… 76,750 93,461 - 170,211 - LIABILITIES CURRENT: yable……………………………………………… 95,818 210,836 5,178 311,832 - Warrants pa Accrued interest………………………………………………… 32,492 80,222 - 112,714 - … 21,000 16,000 1,000 38,000 - Compensated absences……………………………………… Bonds payable…………………………………………………… 860,037 1,238,165 - 2,098,202 - … 1,009,347 1,545,223 6,178 2,560,748 - Total current liabilities………………………………… NONCURRENT: Compensated absences………………………………………… 12,000 16,000 1,000 29,000 - yment benefits………………………………… 1,295,027 864,346 - 2,159,373 - Other postemplo y……………………………………………… 1,247,071 503,564 - 1,750,635 - Net pension liabilit Bonds payable…………………………………………………… 5,907,466 6,142,649 - 12,050,115 - Total noncurrent liabilities……………………………… 8, 7,526,559461,564 1,000 15,989,123 - TOTAL LIABILITIES………………………………………………… 9,470,911 9,071,782 7,178 18,549,871 - NET POSITION Net investment in capital assets…………………………………… 21,868,852 16,171,536 5,852,617 43,893,005 - Unrestricted………………………………………………………… 4, 3,255,720418,300 463,934 8,137,954 2,902,965 TOTAL NET POSITION……………………………………………$ 26,287,152$ 19,427,256$ 6,316,551 $ 52,030,959 $ 2,902,965 See notes to basic financial statements. Town of North Andover, Massachusetts34Comprehensive Annual Financial Report PROPRIETARY FUNDS STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION YEAR ENDED JUNE 30, 2016 Governmental ctivities Business-type Activities - Enterprise Funds A Health Insurance Osgood Internal Service WaterSewerHillTotalFund OPERATING REVENUES: Charges for services……………………………………………$ 5,956,818 $ 5,245,640 $ 526,754 $ 11,729,212 $ - Penalties and interest…………………………………………… 20,982 19,850 - 40,832 - TOTAL OPERATING REVENUES ………………………… 5,977,800 526,7545,265,490 11,770,044 - OPERATING EXPENSES: Cost of service and administration……………………………… 2,134,363 559,609 255,245 2,949,217 - GLSD assessment……………………………………………… - 1,490,042 - 1,490,042 - Repairs and maintenance……………………………………… 52,110 93,056 - 145,166 - Depreciation…………………………………………………… … 859,315 863,487 128,263 1,851,065 - Employee benefits……………………………………………… - - - - 688,225 TOTAL OPERATING EXPENSES ………………………… 3,045,788 3,006,194 383,508 6,435,490 688,225 OPERATING INCOME (LOSS)……………………………… 2,932,012 2,259,296 143,246 5,334,554 (688,225) NONOPERATING REVENUES (EXPENSES): Investment income……………………………………………… 19,327 15,735 1,941 37,003 10,603 Interest expense………………………………………………… (190,936) (279,883) - (470,819) - TOTAL NONOPERATING REVENUES (EXPENSES), NET…………………………… (171,609) (264,148) 1,941 (433,816) 10,603 INCOME (LOSS) BEFORE CONTRIBUTIONS AND TRANSFERS………………………………………… 2,760,403 1,995,148 145,187 4,900,738 (677,622) CAPITAL CONTRIBUTIONS AND TRANSFERS: Capital contributions……………………………………………… - 71,502 49,932 121,434 - Transfers out……………………………………………………… (923,227) (434,460) (48,812) (1,406,499) - TOTAL CAPITAL CONTRIBUTIONS AND TRANSFERS… (923,227) (362,958) 1,120 (1,285,065) - CHANGE IN NET POSITION………………………………… 1,837,176 1,632,190 146,307 3,615,673 (677,622) NET POSITION AT BEGINNING OF YEAR…………………… 24,449,976 17,795,066 6,170,244 48,415,286 3,580,587 NET POSITION AT END OF YEAR………………………………$ 26,287,152 $ 19,427,256 $ 6,316,551 $ 52,030,959 $ 2,902,965 See notes to basic financial statements. Town of North Andover, Massachusetts35Comprehensive Annual Financial Report PROPRIETARY FUNDS STATEMENT OF CASH FLOWS YEAR ENDED JUNE 30, 2016 Business-type Activities - Enterprise FundsGovernmental Activities- Health Insurance OsgoodInternal Service WaterSewerHillTotalFund CASH FLOWS FROM OPERATING ACTIVITIES: Receipts from customers and users………………………………………………$ 5,858,427 $ 5,143,692 $ 526,754 $ 11,528,873 $ - Payments to vendors……………………………………………………………… (1,296,162) (1,500,715) (135,556) (2,932,433) - … (882,528) (368,065) (118,962) (1,369,555) - Payments to employees………………………………………………………… … - - - - (197,600) Payments for interfund services used………………………………………… … 3,679,737 3,274,912 272,236 7,226,885 (197,600) NET CASH FROM OPERATING ACTIVITIES…………………………………… CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES: Transfers out………………………………………………………………………… (923,227) (434,460) (48,812) (1,406,499) - CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Proceeds from the issuance of bonds…………………………………………… - 870,683 - 870,683 - Acquisition and construction of capital assets…………………………………… (619,553) (1,648,518) - (2,268,071) - … (1,090,275) (1,338,477) - (2,428,752) - Principal payments on bonds…………………………………………………… Interest expense…………………………………………………………………… (197,131)(189,992) - (387,123) - … (1,899,820) (2,313,443) - (4,213,263) - NET CASH FROM CAPITAL AND RELATED FINANCING ACTIVITIES……… CASH FLOWS FROM INVESTING ACTIVITIES: Investment income………………………………………………………………… 19,327 15,735 1,941 37,003 10,603 NET CHANGE IN CASH AND CASH EQUIVALENTS…………………………… 876,017 542,744 225,365 1,644,126 (186,997) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR………………… 3,512,4594,532,507 245,747 8,290,713 3,089,962 CASH AND CASH EQUIVALENTS AT END OF YEAR…………………………… $ 5,408,524 $ 4,055,203 $ 471,112 $ 9,934,839 $ 2,902,965 RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH FROM OPERATING ACTIVITIES: Operating income (loss)…………………………………………………………… $ 2,932,012 $ 2,259,296 $ 143,246 $ 5,334,554 $ (688,225) Adjustments to reconcile operating income (loss) to net cash from operating activities: … 859,315 863,487 128,263 1,851,065 - Depreciation…………………………………………………………………… … (75,225) (30,376) - (105,601) - Deferred (outflows)/inflows related to pensions…………………………… Changes in assets and liabilities: User fees……………………………………………………………………… (137,319) (126,035) - (263,354) - Utility liens…………………………………………………………………… 17,613 4,570 - 22,183 - … - - - - 492,202 Working capital deposit…………………………………………………… … (99,237) 187,698 (1,273) 87,188 (1,577) Warrants payable………………………………………………………… Unavailable revenues……………………………………………………… 333 (333) - - - Accrued compensated absences………………………………………… ( (6,000)23,000) 2,000 (27,000) - … 109,679 84,015 - 193,694 - Other postemployment benefits………………………………………… Net pension liability………………………………………………………… 95,566 38,590 - 134,156 - … 747,725 1,015,616 128,990 1,892,331 490,625 Total adjustments……………………………………………………… NET CASH FROM OPERATING ACTIVITIES………………………………………$ 3,679,737 $ 3,274,912 $ 272,236 $ 7,226,885 $ (197,600) NONCASH INVESTING, CAPITAL, AND FINANCING ACTIVITIES: Intergovernmental debt service subsidy (MCWT)………………………………$ - $ 100,848 $ - $ 100,848 $ - Net change in deferred charges…………………………………………………. 22,7888,234 - 31,022 - See notes to basic financial statements. Town of North Andover, Massachusetts36Comprehensive Annual Financial Report FIDUCIARY FUNDS STATEMENT OF FIDUCIARY NET POSITION JUNE 30, 2016 Private OPEBPurposeAgency Trust FundTrust FundsFunds ASSETS CURRENT: Cash and cash equivalents…………………………………$ - $ 112,172 $ 3,971,509 … PRIT…………………………………………………………… 518,110 - - TOTAL ASSETS………………………………………………… 518,110 112,172 3,971,509 … LIABILITIES Liabilities due depositors…………………………………… - - 3,971,509 … NET POSITION Held in trust for OPEB benefits…………………………… -518,110 - … Held in trust for other purposes…………………………… 112,172- - … $ 518,110 $ 112,172 $ - See notes to basic financial statements. Town of North Andover, Massachusetts37Comprehensive Annual Financial Report FIDUCIARY FUNDS STATEMENT OF CHANGES IN FIDUCIARY NET POSITION YEAR ENDED JUNE 30, 2016 Private OPEBPurpose Trust FundTrust Funds ADDITIONS: Contributions: Employer…………………………………………………………$500,000 $- Net investment income: Net change in fair value of investments…………………… 6,170 - … Interest and dividends……………………………………… 13,396 7,914 … Total investment income (loss)…………………………… 19,566 7,914 Less: investment expense…………………………………… (1,456) - Net investment income (loss)………………………………… 18,110 7,914 CHANGE IN NET POSITION……………………………… 518,110 7,914 NET POSITION AT BEGINNING OF YEAR…………………… - 104,258 NET POSITION AT END OF YEAR……………………………$518,110 $ 112,172 See notes to basic financial statements. Town of North Andover, Massachusetts38Comprehensive Annual Financial Report Notes to Basic Financial Statements Year Ended June 30, 2016 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Notes to basic financial statements The accompanying basic financial statements of the Town of North Andover, Massachusetts (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 (Board). For financial reporting purposes, the Town has included all funds, organizations, 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 year ended June 30, 2016, the Town’s assessment totaled $1,490,042. 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 Town is a member of the GLRTVS that serves the members’ students seeking an education in academic and technical. 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 year ended June 30, 2016, the Town’s assessment totaled $347,896. 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, Massachusetts39 Comprehensive Annual Financial Report Notes to Basic Financial Statements Year Ended June 30, 2016 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, deferred outflows of resources, liabilities, deferred inflows of resources, revenues, or expenditures/expenses of an individual governmental or enterprise fund are at least 10 percent of the corresponding element (assets, deferred outflows of resources, liabilities, deferred inflows of resources, etc.) for all funds of that category or type (total governmental or total enterprise funds), and If the total assets, deferred outflows of resources, liabilities, deferred inflows of resources, 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 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, Massachusetts40 Comprehensive Annual Financial Report Notes to Basic Financial Statements Year Ended June 30, 2016 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 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. Thehighway chapter 90 fund is a capital projects fund used to account for activities reimbursed through the State’s Chapter 90 highway improvement program. Themunicipal capital projects fund is used to account for the acquisition of non-school related capital assets that are funded through both appropriations and borrowings. Town of North Andover, Massachusetts41 Comprehensive Annual Financial Report Notes to Basic Financial Statements Year Ended June 30, 2016 The nonmajor governmental funds consist of other special revenue and capital project 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 capital projects. 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. 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 active employees’ and retirees’ health insurance; however in 2013 the Town joined the Commonwealth of Massachusetts’ group insurance plan which is a premium based health insurance plan. Since that time, the internal service fund has accounted for residual health insurance claims and assisted in the funding of the OPEB Trust. 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: Theother postemployment benefit trust fund accumulates resources to provide funding for future OPEB (other postemployment benefits) liabilities. 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. Town of North Andover, Massachusetts42 Comprehensive Annual Financial Report Notes to Basic Financial Statements Year Ended June 30, 2016 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. 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. Fair Value Measurements The Town reports required types of financial instruments in accordance with the fair value standards. These standards require an entity to maximize the use of observable inputs (such as quoted prices in active markets) and minimize the use of unobservable inputs (such as appraisals or valuation techniques) to determine fair value. Fair value standards also require the government to classify these financial instruments into a three-level hierarchy, based on the priority of inputs to the valuation technique or in accordance with net asset value practical expedient rules, which allow for either Level 2 or Level 3 depending on lock up and notice periods associated with the underlying funds. Instruments measured and reported at fair value are classified and disclosed in one of the following categories: Level 1 – Quoted prices are available in active markets for identical instruments as of the reporting date. Instruments, which are generally included in this category, include actively traded equity and debt securities, U.S. government obligations, and mutual funds with quoted market prices in active markets. Level 2 – Pricing inputs are other than quoted in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of models or other valuation methodologies. Certain fixed income securities, primarily corporate bonds, are classified as Level 2 because fair values are estimated using pricing models, matrix pricing, or discounted cash flows. Level 3 – Pricing inputs are unobservable for the instrument and include situations where there is little, if any, market activity for the instrument. The inputs into the determination of fair value require significant management judgment or estimation. In some instances the inputs used to measure fair value may fall into different levels of the fair value hierarchy and is based on the lowest level of input that is significant to the fair value measurement. Market price is affected by a number of factors, including the type of instrument and the characteristics specific to the instrument. Instruments with readily available active quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value. It is reasonably possible that change in values of these instruments will occur in the near term and that such changes could materially affect amounts reported in these financial statements. For more information on the fair value of the Town’s financial instruments, see Note 2 Cash and Investments – Fair Value Measurements. Town of North Andover, Massachusetts43 Comprehensive Annual Financial Report Notes to Basic Financial Statements Year Ended June 30, 2016 F. 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 are due on August 1, November 1, February 1 and May 1 and are subject to penalties and interest if they are 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 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 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 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. 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 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 year of the levy. Town of North Andover, Massachusetts44 Comprehensive Annual Financial Report Notes to Basic Financial Statements Year Ended June 30, 2016 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. G. 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. H. 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, Massachusetts45 Comprehensive Annual Financial Report Notes to Basic Financial Statements Year Ended June 30, 2016 Capital assets (excluding land) are depreciated on a straight-line basis. The estimated useful lives of capital assets are as follows: Estimated Useful Capital Asset TypeLife (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 year of the purchase. I. 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 reported deferred charges on refunding and deferred inflows of resources related to pensions in this category. 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 currently has no elements that qualify for reporting in this category. Governmental Fund Financial Statements In addition to liabilities, the governmental funds balance sheet will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents assets that have been recorded in the governmental fund financial statements but the revenue is not available and so will not be recognized as an inflow of resources (revenue) until it becomes available. The Town has reported unavailable revenues from property taxes in this category. Town of North Andover, Massachusetts46 Comprehensive Annual Financial Report Notes to Basic Financial Statements Year Ended June 30, 2016 J. 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”. 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. K. 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. 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 ongoing community preservation activities. Town of North Andover, Massachusetts47 Comprehensive Annual Financial Report Notes to Basic Financial Statements Year Ended June 30, 2016 “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 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, Massachusetts48 Comprehensive Annual Financial Report Notes to Basic Financial Statements Year Ended June 30, 2016 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. Pensions For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the Essex Regional Retirement System and the Massachusetts Teachers Retirement System and additions to/deductions from the Systems fiduciary net position have been determined on the same basis as they are reported by the Systems. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. O. Investment Income Investment income derived from major and nonmajor governmental funds is legally assigned to the general fund unless otherwise directed by Massachusetts General Law (MGL). P. 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. Q. 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 Town of North Andover, Massachusetts49 Comprehensive Annual Financial Report Notes to Basic Financial Statements Year Ended June 30, 2016 and liabilities at the date of the basic financial statements and the reported amounts of the revenues and expenditures/expenses during the year. Actual results could vary from estimates that were used. R. 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. 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 (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. The Town participates in the Pension Reserve Investment Trust (PRIT), which meets the criteria of an external investment pool. PRIT is administered by the Pension Reserves Investment Management Board, which was established by the Treasurer of the Commonwealth of Massachusetts who serves as Trustee. The fair value of the position in the PRIT is the same as the value of the PRIT 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 year-end, the carrying amount of deposits totaled $51,363,658 and the bank balance totaled $54,370,166. Of the bank balance, $2,401,541 was covered by Federal Depository Insurance, $35,768,005 was covered by the Depositor’s Insurance Fund, $15,518,649 was collateralized and $681,971 was exposed to custodial credit risk because it was uninsured and uncollateralized. Town of North Andover, Massachusetts50 Comprehensive Annual Financial Report Notes to Basic Financial Statements Year Ended June 30, 2016 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. The Town participates in PRIT. The effective weighted duration rate for PRIT investments ranged from .14 to 24.23 years. As of June 30, 2016, the Town had the following investments and maturities: Maturities Investment TypeFair Value1-5 Years6-10 Years Debt Securities Bond mutual funds………………………$68,886 $- $68,886 Other Investments Equity mutual funds............................... 669,729 Money market mutual funds…………… 33,981 Repurchase agreements………………… 1,400,000 MMDT……………………………………… 4,495,460 PRIT……………………………………… 518,110 Total investments...................................$7,186,166 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 $68,886 of bond mutual funds AA. The $1,400,000 of repurchase agreements, $4,495,460 of MMDT deposits and $33,981 of money market mutual funds are unrated. The Town’s investment policy limits investments in debt securities to U.S. Treasuries and U.S. Agency Obligations, which are AA 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, Massachusetts51 Comprehensive Annual Financial Report Notes to Basic Financial Statements Year Ended June 30, 2016 Fair Market Value of Investments The Town holds investments that are measured at fair value on a recurring basis. Because investing is not a core part of the Town’s mission, the Town determines that the disclosures related to these investments only need to be disaggregated by major type. The Town chooses a tabular format for disclosing the levels within the fair value hierarchy. The Town categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the asset. Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; Level 3 inputs are significant unobservable inputs. The Town has the following recurring fair value measurements as of June 30, 2016: Fair Value Measurements Using Quoted Prices in ActiveSignificant Markets forOtherSignificant IdenticalObservableUnobservable AssetsInputsInputs Investment Type6/30/16(Level 1)(Level 2)(Level 3) Investments by Fair Value Level Debt Securities: Bond mutual funds………………………………………………$68,886 $- $68,886 $- Other investments: Equity mutual funds……………………………………………… 669,729 669,729 - - Money market mutual funds…………………………………… 33,981 33,981 - - 1,400,000 1,400,000 - - Repurchase agreements………………………………………… Total other investments………………………..……………… 2,103,710 2,103,710 - - Total investments by fair value level……………………… $2,103,7102,172,596 $68,886 $- … Investments Measured at the Net Asset Value (NAV) PRIT……………………………………………………………… 518,110 Investments Measured at Amortized Cost MMDT……………………………………………………………… 4,495,460 Total investments………………………………..……………$7,186,166 Repurchase agreements, equity mutual funds and money market mutual funds classified in Level 1 of the fair value hierarchy are valued using prices quoted in active markets for those securities. Bond mutual funds classified in Level 2 of the hierarchy are valued using a matrix pricing technique. Matrix pricing is used to value securities based on the securities’ relationship to benchmark quoted prices. PRIT investments are valued using the net asset value. This investment pool was established by the Treasurer of the Commonwealth of Massachusetts, who serves as Trustee. PRIT is administered by the Pension Reserves Investment Management Board (PRIM). The fair values of the positions in each investment Pool are the same as the value of each Pool’s shares. The Town does not have the ability to control any of the investment decisions relative to its funds in PRIT. Town of North Andover, Massachusetts52 Comprehensive Annual Financial Report Notes to Basic Financial Statements Year Ended June 30, 2016 MMDT investments are valued at amortized cost. Under the amortized cost method, an investment is valued initially at its cost and adjusted for the amount of interest income accrued each day over the term of the investment to account for any difference between the initial cost and the amount payable at its maturity. If amortized cost is determined not to approximate fair value, the value of the portfolio securities will be determined under procedures established by the Advisor. NOTE 3 - RECEIVABLES At June 30, 2016, 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………………………$1,233,167 $(138,000) $1,095,167 Tax liens………………………………………………………… 2,090,248 - 2,090,248 Motor vehicle and other excise taxes………………………… 770,734 (399,000) 371,734 Community preservation surcharges………………………… 17,971 - 17,971 Departmental and other………………………………………… 1,105,038 (438,485) 666,553 Intergovernmental……………………………………………… 2,032,773 - 2,032,773 Total………………………………………………………………$7,249,931 $(975,485) $6,274,446 At June 30, 2016, receivables for the water and sewer enterprise funds are as follows: Allowance GrossforNet AmountUncollectiblesAmount Receivables: User charges………………………………………………………$3,133,366 $- $3,133,366 Utility liens………………………………………………………… 49,682 - 49,682 Intergovernmental……………………………………………… 476,636 - 476,636 $3,659,684 $- $3,659,684 Governmental funds report unavailable 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 year, the various components of unavailable revenue reported in the governmental funds were as follows: Other General Governmental FundFundsTotal Receivable and other asset type: Real estate and personal property taxes………………………$887,330 $- $887,330 Tax liens………………………………………………………… 2,090,248 - 2,090,248 Motor vehicle and other excise taxes………………………… 371,734 - 371,734 Community preservation surcharges………………………… - 17,971 17,971 Departmental and other………………………………………… 546,015 120,538 666,553 Intergovernmental (highway construction assistance)……… - 694,697 694,697 Intergovernmental (CPA state match)………………………… - 441,000 441,000 Tax foreclosures………………………………………………… 655,028 - 655,028 Total………………………………………………………………$4,550,355 $1,274,206 $5,824,561 Town of North Andover, Massachusetts53 Comprehensive Annual Financial Report Notes to Basic Financial Statements Year Ended June 30, 2016 NOTE 4 - CAPITAL ASSETS Capital asset activity for the year ended June 30, 2016, is as follows: BeginningEnding Governmental Activities: BalanceIncreasesDecreasesBalance Capital assets not being depreciated: Land…………………………………………………$22,145,413 $- $- $22,145,413 … 3,615,272 2,692,055 (3,246,936) 3,060,391 Construction in progress………………………… Total capital assets not being depreciated…… 25,760,685 2,692,055 (3,246,936) 25,205,804 Capital assets being depreciated: Land improvements………………………………… 4,942,232 197,431 - 5,139,663 … 145,053,950 6,748,603 - 151,802,553 Buildings and building improvements………… Machinery and equipment………………………… 9,673,464 308,541 (47,476) 9,934,529 Library books……………………………………… 4,517,199 98,061 - 4,615,260 … 6,239,457 426,249 (165,614) 6,500,092 Vehicles…………………………………………… Infrastructure………………………………………… 41,708,987 1,388,010 - 43,096,997 Total capital assets being depreciated……… 212,135,289 9,166,895 (213,090) 221,089,094 Less accumulated depreciation for: … (2,593,957) (175,150) - (2,769,107) Land improvements……………………………… Buildings and improvements.……………………… (58,975,223) (3,090,805) - (62,066,028) Machinery and equipment………………………… (6,815,459) (686,348) 47,476 (7,454,331) Library books……………………………………… (4,141,725) (55,158) - (4,196,883) Vehicles.…………………………………………… (3,788,306) (533,223) 165,614 (4,155,915) Infrastructure………………………………………… (21,817,313) (2,066,436) - (23,883,749) Total accumulated depreciation……………… (98,131,983) (6,607,120) 213,090 (104,526,013) … 114,003,306 2,559,775 - 116,563,081 Total capital assets being depreciated, net……… …$139,763,991$5,251,830 $(3,246,936) $141,768,885 Total governmental activities capital assets, net… Town of North Andover, Massachusetts54 Comprehensive Annual Financial Report Notes to Basic Financial Statements Year Ended June 30, 2016 EndingEnding Business-Type Activities: BalanceIncreasesDecreasesBalance Capital assets not being depreciated: Land…………………………………………………$6,097,262 $- $- $6,097,262 Construction in progress…………………………… 741,120 269,204 (741,120) 269,204 Total capital assets not being depreciated…… 6,838,382 269,204 (741,120) 6,366,466 Capital assets being depreciated: Land improvements………………………………… 232,105 - - 232,105 Buildings and improvements……………………… 2,887,501 846,422 - 3,733,923 Machinery and equipment………………………… 2,704,288 113,638 - 2,817,926 Vehicles……………………………………………… 593,023 39,142 - 632,165 Treatment plants…………………………………… 16,573,234 - - 16,573,234 Pump stations……………………………………… 5,021,633 1,703,841 - 6,725,474 Reservoirs…………………………………………… 1,477,296 - - 1,477,296 Infrastructure………………………………………… 55,450,120 86,876 - 55,536,996 Total capital assets being depreciated……… 84,939,200 2,789,919 - 87,729,119 Less accumulated depreciation for: Land improvements………………………………… (137,825) (8,369) - (146,194) Buildings and improvements……………………… (1,069,817) (163,826) - (1,233,643) Machinery and equipment………………………… (1,477,984) (525,389) - (2,003,373) Vehicles.…………………………………………… (389,164) (50,153) - (439,317) Treatment plants…………………………………… (11,576,424) (409,621) - (11,986,045) Pump stations……………………………………… (2,574,708) (120,550) - (2,695,258) Reservoirs…………………………………………… (1,298,693) (20,472) - (1,319,165) Infrastructure………………………………………… (16,903,809) (552,685) - (17,456,494) Total accumulated depreciation……………… (35,428,424) (1,851,065) - (37,279,489) Total capital assets being depreciated, net………… 49,510,776 938,854 - 50,449,630 Total business-type activities capital assets, net……$56,349,158 $1,208,058 $(741,120) $56,816,096 Depreciation expense was charged to functions/programs of the primary government as follows: Governmental Activities: General government……………………………………………$310,088 Public safety…………………………………………………… 651,349 Education……………………………………………………… 2,550,126 2,744,809 Public works…………………………………………………… Human services………………………………………………… 150,922 Culture and recreation………………………………………… 199,826 Total depreciation expense - governmental activities…………$6,607,120 Business-Type Activities: Water……………………………………………………………$859,315 Sewer…………………………………………………………… 863,487 Osgood Hill……………………………………………………… 128,263 $1,851,065 Total depreciation expense - business-type activities……… … Town of North Andover, Massachusetts55 Comprehensive Annual Financial Report Notes to Basic Financial Statements Year Ended June 30, 2016 NOTE 5 - INTERFUND RECEIVABLES, PAYABLES AND TRANSFERS Interfund receivables and payables totaled $858,927 as of June 30, 2016 and consisted of amounts due to the general fund from the highway chapter 90 fund and the education federal and state grants fund totaling $780,640 and $78,287, respectively. The outstanding balance resulted from the time lag between the dates that reimbursable expenditures are incurred and reimbursements are received. Interfund transfers for the year ended June 30, 2016, are summarized as follows: Operating Transfers In: General Operating Transfers Out:Fund Nonmajor Governmental Funds……………$144,892 (1) Water Enterprise Fund……………………… 923,227 (2) Sewer Enterprise Fund……………………… 434,460 (2) Osgood Hill Enterprise Fund………………… 48,812 (2) Total…………………………………………$1,551,391 … (1) Budgeted transfers to the general fund from available funds. (2) Budgeted transfers to the general fund for indirect costs. NOTE 6 – LEASES Operating Lease The Town entered into a commercial lease for temporary office space due to the renovation of Town Hall. The remaining lease payments total $40,564 as of June 30, 2016 and the lease expires on October 31, 2016. 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. The Town did not have any short-term debt outstanding as of June 30, 2016. Town of North Andover, Massachusetts56 Comprehensive Annual Financial Report Notes to Basic Financial Statements Year Ended June 30, 2016 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 $1,695,000 of general obligation refunding bonds on June 2, 2016. $1,615,000 of general obligation bonds were advance refunded by placing the proceeds of the refunding bonds in an irrevocable trust to provide for all future debt service payments of the refunded bonds. As a result, the refunded bonds are considered to be defeased and the liability has been removed from the statement of net position. The reacquisition price exceeded the net carrying amount of the old debt by $108,863. This amount is being amortized over the life of the refunding debt, which is the same as the remaining life of the refunded debt. This advance refunding was undertaken to reduce total debt service payments over the next 13 years by $211,538 and resulted in an economic gain of $190,743. At June 30, 2016, $1,615,000 of bonds outstanding from the advance refunding is considered defeased. Details related to the outstanding indebtedness at June 30, 2016, and the debt service requirements are as follows: Bonds Payable – Governmental Funds OriginalInterest MaturitiesLoanRateBeginningEnding ProjectThroughAmount(%)BalanceAdditionsReductionsBalance Municipal Purpose Loan of 2004……………… 2016$12,705,555 2.00 - 5.00$40,498 $- $40,498 $- … Municipal Purpose Loan of 2007……………… 2016406,805 3.60 - 4.5039,950 - 39,950 - … Municipal Purpose Loan of 2008……………… 20281,486,026 4.00 - 4.40414,330 - 124,443 289,887 … Land Acquisition - Refunding………………… 20182,960,000 3.00 - 4.00990,000 - 315,000 675,000 … Municipal Purpose Loan of 2008 - Refunding 20199,540,000 3.00 - 4.003,365,000 - 1,010,000 2,355,000 … Municipal Purpose Loan of 2009……………… 20297,122,134 2.75 - 5.003,679,765 - 2,165,554 1,514,211 … Municipal Purpose Loan of 2010……………… 20294,171,222 2.25 - 4.002,610,000 - 190,000 2,420,000 … Municipal Purpose Loan of 2011……………… 20214,365,353 2.00 - 3.752,355,000 - 502,500 1,852,500 … 20293,255,348 2.00 - 2.502,152,901 - 364,700 1,788,201 Municipal Purpose Loan of 2012………………… 2022926,199 2.00 - 3.00568,650 - 178,460 390,190 Municipal Purpose Loan of 2013………………… 20264,010,000 2.00 - 3.253,630,000 - 375,000 3,255,000 Municipal Purpose Loan of 2014 - Refunding… Municipal Purpose Loan of 2014……………… 20348,181,497 2.00 - 3.257,649,248 - 528,564 7,120,684 … Municipal Purpose Loan of 2015 - Refunding 202868,526 2.00 - 4.0068,526 - 955 67,571 … Municipal Purpose Loan of 2015……………… 20358,365,000 2.00 - 4.008,365,000 - 565,000 7,800,000 … Municipal Purpose Loan of 2016 - Refunding 20291,695,000 2.00 - 3.00- 1,695,000 - 1,695,000 … Municipal Purpose Loan of 2016……………… 20365,759,364 2.00 - 3.00- 5,759,364 - 5,759,364 … Sub-total……………………………………………………………………………………………… 35,928,868 7,454,364 6,400,624 36,982,608 … Unamortized premium……………………………………………………………………………… 603,624 73,055 72,161 604,518 … Total governmental bonds payable…………………………………………………………………$36,532,492$7,527,419 $6,472,785 $37,587,126 … Town of North Andover, Massachusetts57 Comprehensive Annual Financial Report Notes to Basic Financial Statements Year Ended June 30, 2016 Debt service requirements for principal and interest for Governmental bonds payable in future years are as follows: YearPrincipalInterestTotal 2017…………$5,063,902 $880,711 $5,944,613 2018………… 4,853,870 804,056 5,657,926 2019………… 3,279,067 677,755 3,956,822 2020………… 2,654,736 588,434 3,243,170 2021………… 2,514,736 520,305 3,035,041 2022………… 1,997,236 460,466 2,457,702 2023………… 1,939,218 410,043 2,349,261 2024………… 1,934,249 360,684 2,294,933 2025………… 1,840,899 320,111 2,161,010 2026………… 1,500,899 282,444 1,783,343 … 1,345,025 248,249 1,593,274 2027……… … 1,323,773 216,723 1,540,496 2028……… … 1,304,998 186,430 1,491,428 2029……… … 915,000 155,845 1,070,845 2030……… … 920,000 131,902 1,051,902 2031……… … 930,000 106,331 1,036,331 2032……… … 935,000 79,281 1,014,281 2033……… … 935,000 52,070 987,070 2034……… … 560,000 23,668 583,668 2035……… … 235,000 7,050 242,050 2036……… $36,982,608 $6,512,558 $43,495,166 Totals……… Bonds Payable – Water Enterprise Fund OriginalInterest MaturitiesLoanRateBeginningEnding ProjectThroughAmount(%)BalanceAdditionsReductionsBalance Municipal Purpose Loan of 2004 - Refunding… 2016$985,438 2.00 - 4.20$94,499 $- $94,499 $- Municipal Purpose Loan of 2007………………… 2016815,000 3.60 - 4.5081,500 - 81,500 - MCWT……………………………………………… 20285,532,288 2.003,847,649 - 261,770 3,585,879 20181,000,000 3.70 - 5.0 0300,000 - 100,000 200,000 Municipal Purpose Loan of 2008………………… Municipal Purpose Loan of 2008 - Refunding… 20181,888,108 3.00 - 4.00120,000 - 40,000 80,000 2019450,000 2.75 - 5.00180,000 - 45,000 135,000 Municipal Purpose Loan of 2009………………… Municipal Purpose Loan of 2010………………… 20302,025,000 2.25 - 4.001,360,000 - 150,000 1,210,000 Municipal Purpose Loan of 2011………………… 2021225,000 2.00 - 3.75135,000 - 22,500 112,500 Municipal Purpose Loan of 2012………………… 20221,175,000 2.00 - 2.50822,500 - 117,500 705,000 Municipal Purpose Loan of 2013………………… 2022795,000 2.00 - 3.00621,350 - 86,540 534,810 2016119,056 2.00 - 3.2559,528 - 59,528 - Municipal Purpose Loan of 2014 - Refunding… Municipal Purpose Loan of 2014………………… 2024267,191 2.00 - 3.25235,752 - 31,438 204,314 Total Water Enterprise bonds payable……………………………………………………………$7,857,778 $- $1,090,275 $6,767,503 … Town of North Andover, Massachusetts58 Comprehensive Annual Financial Report Notes to Basic Financial Statements Year Ended June 30, 2016 Debt service requirements for principal and interest for Water Enterprise fund bonds and notes payable in future years are as follows: YearPrincipalInterestTotal 2017…………$860,037 $162,634 $1,022,671 2018………… 860,432 139,129 999,561 2019………… 721,077 115,857 836,934 2020………… 627,255 98,111 725,366 2021………… 607,983 84,023 692,006 2022………… 591,328 70,943 662,271 2023………… 388,108 57,973 446,081 2024………… 394,191 49,064 443,255 2025………… 378,397 39,708 418,105 2026………… 384,730 30,777 415,507 2027………… 391,188 21,717 412,905 2028………… 397,777 12,528 410,305 2029………… 65,000 6,600 71,600 2030………… 100,000 4,000 104,000 Totals……$6,767,503 $893,063 $7,660,566 … Bonds Payable – Sewer Enterprise Fund OriginalInterest MaturitiesLoanRateBeginningEnding ProjectThroughAmount(%)BalanceAdditionsReductionsBalance 2021$7,356,555 3.70 - 5.40$2,053,454 $- $378,455 $1,674,999 MCWT……………………………………………… Municipal Purpose Loan of 2007……………… 2016720,000 3.60 - 4.5093,550 - 93,550 - … Municipal Purpose Loan of 2008……………… 20283,925,290 3.70 - 5.001,685,673 - 205,557 1,480,116 … Municipal Purpose Loan of 2008 - Refunding… 20191,156,892 3.00 - 4.00350,233 - 109,446 240,787 … Municipal Purpose Loan of 2010……………… 20223,830,001 2.75 - 5.001,890,001 - 340,000 1,550,001 … Municipal Purpose Loan of 2010 - Refunding… 2020250,000 2.25 - 3.50125,000 - 25,000 100,000 … Municipal Purpose Loan of 2012……………… 202278,000 2.00 - 2.5054,600 - 7,800 46,800 … Municipal Purpose Loan of 2013 - Refunding… 20181,145,000 2.00 - 3.00654,999 - 225,000 429,999 … Municipal Purpose Loan of 2014 - Refunding… 201680,944 2.00 - 3.2540,472 - 40,472 - … 20281,001,474 2.00 - 4.001,001,474 - 14,045 987,429 Municipal Purpose Loan of 2015 - Refunding…… 2026870,683 2.00 - 3.00- 870,683 - 870,683 Municipal Purpose Loan of 2016………………… $7,949,456 $870,683 $1,439,325 $7,380,814 Total Sewer Enterprise bonds payable…………………………………………………………… … Town of North Andover, Massachusetts59 Comprehensive Annual Financial Report Notes to Basic Financial Statements Year Ended June 30, 2016 Debt service requirements for principal and interest for Sewer Enterprise fund bonds and notes payable in future years are as follows: YearPrincipalInterestTotal 2017…………$1,238,165 $243,745 $1,481,910 2018………… 1,253,152 203,553 1,456,705 2019………… 1,062,813 156,586 1,219,399 2020………… 1,001,581 116,780 1,118,361 2021………… 751,582 83,109 834,691 2022………… 586,581 59,651 646,232 2023………… 293,782 39,333 333,115 2024………… 288,751 28,911 317,662 2025………… 284,101 23,136 307,237 2026………… 274,101 17,250 291,351 2027………… 184,977 9,822 194,799 2028………… 161,228 4,272 165,500 Totals………$7,380,814 $986,148 $8,366,962 The Sewer Enterprise Fund is scheduled to be subsidized by the Massachusetts Clean Water Trust (MCWT) on a periodic basis for principal in the amount of $476,636 and interest costs of $165,971. Thus, net MCWT loan repayments, including interest, are scheduled to be $1,317,195. The principal subsidies are guaranteed and therefore a $476,636 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 2016 principal and interest subsidies totaled $100,848 and $70,392, respectively. 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, 2016, the Town had the following authorized and unissued debt. PurposeAmount Fire chief vehicle……………………………………………$4,727 Energy efficiency improvements to buildings…………… 775,598 Municipal information technology………………………… 50,000 Building maintenance……………………………………… 225,000 School information technology…………………………… 100,000 Roadway improvements…………………………………… 410,000 Sidewalk reconstruction…………………………………… 75,000 Sweeper……………………………………………………… 185,000 Water and High Street intersection and streetscape…… 325,000 6 Wheel dump truck………………………………………… 180,000 Facilities master plan implementation…………………… 4,620,885 Playground improvements………………………………… 50,000 Integrated public safety reporting system……………… 208,875 Replace ambulance………………………………………… 268,197 Total………………………………………………………$7,478,282 … Town of North Andover, Massachusetts60 Comprehensive Annual Financial Report Notes to Basic Financial Statements Year Ended June 30, 2016 Changes in Long-term Liabilities During the year ended June 30, 2016, the following changes occurred in long-term liabilities: BeginningEndingDue within BalanceAdditionsReductionsBalanceOne Year Governmental Activities: Long-term bonds………………………$35,928,868 $7,454,364 $(6,400,624) $36,982,608 $5,063,902 Unamortized premium………………… 603,624 73,055 (72,161) 604,518 77,360 Bonds payable, net…………………… 36,532,492 7,527,419 (6,472,785) 37,587,126 5,141,262 Other postemployment benefits……… 47,339,046 10,296,624 (3,638,197) 53,997,473 - Compensated absences……………… 1,543,000 437,000 (875,000) 1,105,000 632,000 Net Pension Liability………………… 48,102,636 10,437,718 (6,445,554) 52,094,800 - Total governmental……………………$133,517,174 $28,698,761 $(17,431,536)$144,784,399 $5,773,262 BeginningEndingDue within BalanceAdditionsReductionsBalanceOne Year Business-Type Activities: Long-term bonds………………………$15,807,234 $870,683 $(2,529,600) $14,148,317 $2,098,202 Other postemployment benefits……… 1,965,679 299,529 (105,835) 2,159,373 - Compensated absences……………… 94,000 30,000 (57,000) 67,000 38,000 Net Pension Liability………………… 1,616,479 350,621 (216,465) 1,750,635 - Total business-type…………………$19,483,392 $1,550,833 $(2,908,900) $18,125,325 $2,136,202 … 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. 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 Town of North Andover, Massachusetts61 Comprehensive Annual Financial Report Notes to Basic Financial Statements Year Ended June 30, 2016 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, capital stabilization fund, OPEB stabilization fund and special education stabilization fund was $4,301,116, $672,682, $1,016,557 and $602,931, respectively. All of which are reported as unassigned fund balance within the general fund. The Town has classified its fund balances with the following hierarchy. MunicipalNonmajorTotal Community CapitalGovernmentalGovernmental GeneralPreservationProjectsFundsFunds FUND BALANCES Restricted for: Municipal federal and state grants…………$- $- $- $121,545 $121,545 … Education federal and state grants………… - - - 10,263 10,263 … Receipts reserved for appropriations……… - - - 149,799 149,799 … Municipal revolving funds…………………… - - - 548,781 548,781 … Education revolving funds…………………… - - - 660,306 660,306 … School lunch funds…………………………… - - - 342 342 … Other special revenue funds………………… - - - 1,181,403 1,181,403 Affordable housing trust fund……………… - - - 897,686 897,686 … Other trust funds……………………………… - - - 933,544 933,544 … Education capital projects…………………… - - - 49,974 49,974 … Other permanent funds……………………… - - - - - … Debt service…………………………………… 624,472 - - - 624,472 CPA fund……………………………………… - 6,936,836 - - 6,936,836 … Municipal capital projects…………………… - - 3,303,938 - 3,303,938 … Assigned to: Encumbrances: General government………………………… 9,970 - - - 9,970 … Public safety…………………………………… 40,750 - - - 40,750 Education……………………………………… 379,517 - - - 379,517 … Public works…………………………………… 151,380 - - - 151,380 Human and human services………………… 408 - - - 408 Culture and recreation……………………… 1,325 - - - 1,325 … Support services……………………………… 10,617 - - - 10,617 … Property and liability insurance……………… 1,912 - - - 1,912 Free cash used for subsequent years' expenditures………………………… 524,817 - - - 524,817 … Unassigned………………………………………… 18,029,311 - - - 18,029,311 … TOTAL FUND BALANCES…………………………….$19,774,479 $6,936,836 $3,303,938 $4,553,643 $34,568,896 . Town of North Andover, Massachusetts62 Comprehensive Annual Financial Report Notes to Basic Financial Statements Year Ended June 30, 2016 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 employees. Health Insurance In 2013, the Town joined the Commonwealth of Massachusetts’ group insurance plan which is a premium based health insurance plan. Since that time the internal service fund has accounted for residual health insurance claims. As of June 30, 2016, there was no remaining liability for incurred but not reported claims. The amount of claim settlements has not exceeded insurance coverage in any of the three preceding years. NOTE 11 - PENSION PLAN The Town is a member of the Essex Regional Retirement System (ERRS), a cost-sharing multiple-employer defined benefit pension plan covering eligible employees of the 47 member units. The system is administered by five board members (Board) on behalf of all current employees and retirees except for current teachers and retired teachers. Chapter 32 of the MGL assigns authority to establish and amend benefit provisions of the plan. The audited financial report may be obtained by visiting http://www.essexregional.com. The Town is a member of the Massachusetts Teachers’ Retirement System (MTRS), a cost-sharing multi- employer defined benefit plan. MTRS is managed by the Commonwealth of Massachusetts (Commonwealth) on behalf of municipal teachers and municipal teacher retirees. The Commonwealth is a nonemployer contributor and is responsible for 100% of the contributions and future benefit requirements of the MTRS. The MTRS covers certified teachers in cities (except Boston), towns, regional school districts, charter schools, educational collaboratives and Quincy College. The MTRS is part of the Commonwealth’s reporting entity and the audited financial report may be obtained by visiting http://www.mass.gov/osc/publications-and-reports/financial-reports/. Special Funding Situation The Commonwealth is a nonemployer contributor and is required by statute to make 100% of all actuarially determined employer contributions on behalf of the Town to the MTRS. Therefore, the Town is considered to be in a special funding situation as defined by GASB Statement No. 68, Accounting and Financial Reporting for Pensions and the Commonwealth is a nonemployer contributor in MTRS. Since the Town does not contribute directly to MTRS, there is no net pension liability to recognize. The total of the Commonwealth provided contributions have been allocated based on each employer’s covered payroll to the total covered payroll of employers in MTRS as of the measurement date of June 30, 2015. The Town’s portion of the collective pension expense, contributed by the Commonwealth, of $6,997,282 is reported in the general fund as intergovernmental revenue and pension expense in the current fiscal year. The portion of the Commonwealth’s collective net pension liability associated with the Town is $86,270,207 as of the measurement date. Town of North Andover, Massachusetts63 Comprehensive Annual Financial Report Notes to Basic Financial Statements Year Ended June 30, 2016 Benefits Provided Both Systems provide retirement, disability, survivor and death benefits to plan members and beneficiaries. Massachusetts Contributory Retirement System benefits are, with certain minor exceptions, uniform from system to system. The System provides for retirement allowance benefits up to a maximum of 80% of a member's highest three-year average annual rate of regular compensation. For persons who became members on or after April 2, 2012, average salary is the average annual rate of regular compensation received during the five consecutive years that produce the highest average, or, if greater, during the last five years (whether or not consecutive) preceding retirement. Benefit payments are based upon a member's age, length of creditable service, level of compensation, and group classification. Members become vested after ten years of creditable service. There were no changes in benefit terms that affected the measurement of the total pension liability at December 31, 2015. Employees who resign from service and who are not eligible to receive a retirement allowance or are under the age of 55 are entitled to request a refund of their accumulated total deductions. Survivor benefits are extended to eligible beneficiaries of members whose death occurs prior to or following retirement. 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 Board and are borne by the System. Contributions Chapter 32 of the MGL governs the contributions of plan members and member units. Active plan members are required to contribute to the System at rates ranging from 5% to 9% of gross regular compensation with an additional 2% contribution required for compensation exceeding $30,000. The percentage rate is keyed to the date upon which an employee's membership commences. The member units are required to pay into the ERRS a legislatively mandated actuarial determined contribution that is apportioned among the employers based on active current payroll. The Town’s proportionate share of the required contribution was $29,104 less than its actual contribution for the year ended December 31, 2015 which was $4,100,517, 20.94% of covered payroll, actuarially determined as an amount that, when combined with plan member contributions, is expected to finance the costs of benefits earned by plan members during the year, with an additional amount to finance any unfunded accrued liability. Pension Liabilities At June 30, 2016, the Town reported a liability of $53,845,435 for its proportionate share of the net pension liability. The net pension liability was measured as of December 31, 2015, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of January 1, 2014. Accordingly, update procedures were used to roll forward the total pension liability to the measurement date. The Town’s proportion of the net pension liability was based on a projection of the Town’s long-term share of contributions to the pension plan relative to the projected contributions of all participating members. At December 31, 2015, the Town’s proportion was 14.8%, which was an increase of 0.1% from its proportion measured at December 31, 2014. Pension Expense For the year ended June 30, 2016, the Town recognized pension expense of $4,978,806. At June 30, 2016, the Town reported deferred outflows of resources related to pensions of $3,031,782, from the net difference between projected and actual investment earnings on pension plan investments and changes in proportions and Town of North Andover, Massachusetts64 Comprehensive Annual Financial Report Notes to Basic Financial Statements Year Ended June 30, 2016 differences between employer contributions and proportionate share of contributions. Since the System performs an actuarial valuation bi-annually, there are no reported differences between expected and actual experience or a change of assumptions as of December 31, 2015. Actuarial Assumptions The total pension liability in the January 1, 2014 actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement that was updated to December 31, 2015: Valuation date………………………………… January 1, 2014 … Actuarial cost method………………………… Entry Age Normal Cost Method. … Amortization method…………………………… Closed - Approximate level percent of payroll. Remaining amortization period……………… 20 years for the fresh start base … Asset valuation method……………………… Market value adjusted by accounts payable and receivables … adjusted to phase in over 5 years investment gains or losses above or below the expected rate of investment return. The actuarial value of assets must be no less than 90% of the adjusted market value nor more than 110% of the adjusted market value. Projected salary increases…………………… Select and Ultimate. 7.5% year one, 6.5% year two, 6% … year three, 5.5% year four, 5% year five, 3.75% ultimate rate. Cost of living adjustments…………………… 3.0% of the first $13,000 of a member's retirement allowance … is assumed to be granted every year. Rates of retirement…………………………… Varies based upon age for general employees, police … and fire employees. Rates of disability……………………………… Disability is assumed to be 45% ordinary and 55% accidental … for Group 1 and 2 and 10% ordinary and 90% accidental for Group 4. Mortality Rates: Pre-Retirement…………………… The RP-2000 mortality table (sex-distinct) projected with scale … BB and Generational Mortality. During employment the healthy employee mortality table is used. Post-employment the healthy annuitant table is used. Disabled Retiree………………… The RP-2000 mortality table for healthy annuitants (sex-distinct) … projected with scale BB and Generational Mortality set-forward by 2 years. Death is assumed to be due to the same cause as the disability 40% of the time. Investment rate of return/Discount rate……… 8.00% per year The balances of deferred outflows at June 30, 2016 consist of the following: Deferred Outflows Deferred Categoryof Resources $2,880,892 Difference between projected and actual earnings……………… Changes in proportionate share of contributions……………… 150,890 … $3,031,782 Total deferred outflows of resources…………………………… … Town of North Andover, Massachusetts65 Comprehensive Annual Financial Report Notes to Basic Financial Statements Year Ended June 30, 2016 The Town’s net deferred outflows of resources related to pensions will be recognized in pension expense as follows: Year ended June 30: 2017………………………………………………$742,516 2018……………………………………………… 742,516 2019……………………………………………… 742,516 2020……………………………………………… 797,047 2021……………………………………………… 7,187 Total………………………………………………$3,031,782 Investment policy The pension plan’s policy in regard to the allocation of invested assets is established by PRIT and the Board. Plan assets are managed on a total return basis with a long-term objective of achieving a fully funded status for the benefits provided through the pension plan. The long-term expected rate of return on pension plan investments was determined using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. Best estimates of arithmetic real rates of return for each major asset class included in the pension plan’s target asset allocation as of January 1, 2014 are summarized in the following table: Long-Term ExpectedTarget Asset ClassReal Rate of ReturnAllocation Core Bonds…………………………… 0.97%13.00% Value-Added Bonds………………… 3.80%10.00% Large Cap Equities………………… 4.61%14.50% Mid/ Small Cap Equities…………… 4.85%3.50% International Equities………………… 5.10%16.00% Emerging Markets Equities………… 6.31%6.00% Private Equity………………………… 6.55%10.00% Real Estate…………………………… 3.40%10.00% Timber/ Natural Resources………… 3.64%4.00% Hedge Funds………………………… 3.64%9.00% Cash/ Portfolio Completion………… 0.00%4.00% Rate of return For the year ended December 31, 2015, the annual money-weighted rate of return on pension plan investments, net of pension plan investment expense, was 1.04%. The money-weighted rate of return expresses investment performance, net of investment expense, adjusted for the changing amounts actually invested. Discount rate The discount rate used to measure the total pension liability was 8.00%. The projection of cash flows used to determine the discount rate assumed plan member contributions will be made at the current contribution rate and that contributions will be made at rates equal to the actuarially determined contribution rated. Based on those assumptions, the pension plan’s fiduciary net position was projected to be available to make all projected future Town of North Andover, Massachusetts66 Comprehensive Annual Financial Report Notes to Basic Financial Statements Year Ended June 30, 2016 benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. Sensitivity of the net pension liability to changes in the discount rate The following presents the net pension liability, calculated using the discount rate of 8.00%, as well as what the net pension liability would be if it were calculated using a discount rate that is 1-percentage-point lower (7.00%) or 1-percentage-point higher (9.00%) than the current rate: Current 1% DecreaseDiscount1% Increase (7.00%)(8.00%)(9.00%) The Town's proportionate share of the net pension liability……$66,196,746 $53,845,435 $44,299,393 … 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 2016, the Town contributed $3.7 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……………………………………$10,478,966 Interest on net OPEB obligation……………………………… 2,218,713 Adjustment to annual required contribution…………………… (2,101,526) … 10,596,153 Annual OPEB Cost (expense)……………………………… Contributions made……………………………………………… (3,744,032) Increase in net OPEB obligation……………………………… 6,852,121 Net OPEB obligation - beginning of year……………………… 49,304,725 Net OPEB obligation - end of year……………………………$56,156,846 Town of North Andover, Massachusetts67 Comprehensive Annual Financial Report Notes to Basic Financial Statements Year Ended June 30, 2016 The Town’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for 2016 and the two preceding years was as follows: Percentage of YearAnnual Annual OPEBNet OPEB EndedOPEB CostCost ContributedObligation 6/30/2016$10,596,153 35%$56,156,846 6/30/20158,078,253 36%49,304,725 6/30/20148,433,756 32%44,144,715 At June 30, 2016, the Plan’s membership consisted of the following: Current retirees, beneficiaries, and dependents…………… 402 Current active members………………………………………… 757 Total……………………………………………………………1159 Funded Status and Funding Progress – As of July 1, 2015, the actuarial accrued liability for benefits was $107.3 million, all of which was unfunded. The covered payroll (annual payroll of active employees covered by the plan) was $52.8 million, and the ratio of the UAAL to the covered payroll was 203.1 percent. The Town contributed $500,000 to the OPEB trust fund in 2016 and the net position totaled $518,110 at June 30, 2016. 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, 2015, 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 9 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, 2016, is 30 years on an open basis. NOTE 13 – COMMITMENTS The Town has entered into, or is planning to enter into, contracts totaling approximately $4.6 million for implementation of the facilities master plan. Town of North Andover, Massachusetts68 Comprehensive Annual Financial Report Notes to Basic Financial Statements Year Ended June 30, 2016 The Town has entered into, or is planning to enter into, contracts totaling approximately $2.9 million for various other Town and School projects. NOTE 14 – CONTINGENCIES The Town participates in a number of federal award programs. Although the grant programs have been audited in accordance with the provisions of the Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, these programs are still subject to financial and compliance audits. The amount, if any, of expenditures which may be disallowed by the granting agencies cannot be determined at this time, although it is expected such amounts, if any, to be immaterial. Various legal actions and claims are pending 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, 2016, cannot be ascertained, management believes any resulting liability should not materially affect the financial position of the Town at June 30, 2016. NOTE 15 – SUBSEQUENT EVENTS Management has evaluated subsequent events through November 22, 2016, which is the date the financial statements were available to be issued. NOTE 16 – IMPLEMENTATION OF NEW GASB PRONOUNCEMENTS During 2016, the following GASB pronouncements were implemented: GASB Statement #72, Fair Value Measurement and Application. Notes to the basic financial statements were changed to provide additional disclosure on fair value measurement. The GASB issued Statement #73, Accounting and Financial Reporting for Pensions and Related Assets That Are Not within the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASB Statements 67 and 68. The provisions of this Statement are effective for 2016—except those provisions that address employers and governmental non-employer contributing entities for pensions that are not within the scope of Statement 68, which is required to be implemented in 2017. This pronouncement did not impact the basic financial statements. GASB Statement #76, The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments. This pronouncement did not impact the basic financial statements. The GASB issued Statement #79, Certain External Investment Pools and Pool Participants. The basic financial statements and related notes were updated to be in compliance with this pronouncement. The following GASB pronouncements will be implemented in the future: The GASB issued Statement #74, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans, which is required to be implemented in 2017. Town of North Andover, Massachusetts69 Comprehensive Annual Financial Report Notes to Basic Financial Statements Year Ended June 30, 2016 The GASB issued Statement #75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions, which is required to be implemented in 2018. The GASB issued Statement #77, Tax Abatement Disclosures, which is required to be implemented in 2017. The GASB issued Statement #78, Pensions Provided through Certain Multiple-Employer Defined Benefit Pension Plans, which is required to be implemented in 2017. The GASB issued Statement #80, Blending Requirements for Certain Component Units – an amendment of GASB Statement #14, which is required to be implemented in 2017. TheGASB issued Statement #81, Irrevocable Split-Interest Agreements, which is required to be implemented in 2018. The GASB issued Statement #82, Pension Issues – an amendment of GASB Statements #67, #68, and #73,which is required to be implemented in 2018. Management is currently assessing the impact the implementation of these pronouncements will have on the basic financial statements. Town of North Andover, Massachusetts70 Comprehensive Annual Financial Report Required Supplementary Information Required supplementary information Town of North Andover, Massachusetts71 Comprehensive Annual Financial Report General Fund Budgetary Comparison Schedule The General Fund is the general operating fund of the Town. It is used to account for all the financial resources, except those required to be accounted for in another fund. General fund budgetary comparison schedule Town of North Andover, Massachusetts72 Comprehensive Annual Financial Report This page intentionally left blank. Town of North Andover, Massachusetts73 Comprehensive Annual Financial Report GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL YEAR ENDED JUNE 30, 2016 Budgeted Amounts AmountsCurrent Year Carried forwardInitialOriginalFinal From Prior YearBudgetBudgetBudget REVENUES: Real estate and personal property taxes, net of tax refunds……………………………………………………$ - $ 66,553,734 $ 66,553,734 $ 66,553,734 Tax liens………………………………………………………………… - - - - Payments in lieu of taxes……………………………………………… - 1,894,004 1,894,004 1,894,004 Motor vehicle and other excise taxes………………………………… - 4,195,000 4,195,000 4,195,000 Charges for services…………………………………………………… - 880,000 880,000 880,000 Penalties and interest on taxes……………………………………… - 318,000 318,000 318,000 Licenses and permits………………………………………………… - 270,200 270,200 270,200 … - 102,900 102,900 102,900 Fines and forfeitures………………………………………………… Intergovernmental……………………………………………………… - 10,479,129 10,479,129 10,479,129 Departmental and other……………………………………………… - 1,137,230 1,137,230 1,137,230 Investment income…………………………………………………… - 121,000 121,000 121,000 … - 85,951,197 85,951,197 85,951,197 TOTAL REVENUES………………………………………… EXPENDITURES: Current: government……………………………………………… 30,433 2,355,457 2,385,890 2,385,890 General y………………………………………………………… 52,287 10,432,514 10,484,801 10,484,801 Public safet … 64,968 44,070,277 44,135,245 44,311,625 Education………………………………………………………… Public works………………………………………………………… 99,169 4,482,958 4,582,127 4,582,127 Health and human services……………………………………… - 1,220,533 1,220,533 1,220,533 … - 974,850 974,850 974,850 Culture and recreation…………………………………………… … 43,664 1,564,360 1,608,024 1,608,024 Support services………………………………………………… Pension benefits…………………………………………………… - 4,071,413 4,071,413 4,071,413 y and liability insurance…………………………………… - 567,571 567,571 476,686 Propert yee benefits………………………………………………… 2,889 11,712,246 11,715,135 11,779,640 Emplo y charges…………………………………………… - 431,900 431,900 431,900 State and count Debt service: … - 4,786,240 4,786,240 4,786,240 Principal…………………………………………………………… … - 1,072,278 1,072,278 1,072,278 Interest…………………………………………………………… … 293,410 87,742,597 88,036,007 88,186,007 TOTAL EXPENDITURES…………………………………… EXCESS (DEFICIENCY) OF REVENUES … (293,410) (1,791,400) (2,084,810) (2,234,810) OVER EXPENDITURES…………………………………………… OTHER FINANCING SOURCES (USES): Premium from issuance of bonds…………………………………… - - - - Transfers in…………………………………………………………… - 1,551,391 1,551,391 1,701,391 Transfers out…………………………………………………………… - (1,027,412) (1,027,412) (1,027,412) TOTAL OTHER FINANCING SOURCES (USES)………… - 523,979 523,979 673,979 NET CHANGE IN FUND BALANCE……………………………………… (293,410) (1,267,421) (1,560,831) (1,560,831) BUDGETARY FUND BALANCE, Beginning of year…………………… - 10,178,307 10,178,307 10,178,307 BUDGETARY FUND BALANCE, End of year……………………………$ (293,410) $ 8,910,886 $ 8,617,476 $ 8,617,476 See notes to required supplementary information. Town of North Andover, Massachusetts74Comprehensive Annual Financial Report ActualAmountsVariance BudgetaryCarried ForwardTo Final AmountsTo Next YearBudget $ 66,673,798 $ - $ 120,064 -746,632 746,632 -1,868,503 (25,501) -5,412,047 1,217,047 -959,662 79,662 -517,616 199,616 -179,217 (90,983) -59,352 (43,548) -10,840,580 361,451 -2,217,551 1,080,321 -93,173 (27,827) -89,568,131 3,616,934 9,9702,312,208 63,712 40,75010,223,053 220,998 379,51743,925,696 6,412 151,3804,316,626 114,121 4081,135,702 84,423 1,325938,853 34,672 10,6171,577,395 20,012 -4,071,413 - 1,912443,580 31,194 -10,079,081 1,700,559 -397,195 34,705 -4,785,624 616 40,589 -1,031,689 595,87985,238,115 2,352,013 (595,879)4,330,016 5,968,947 -73,055 73,055 -1,701,391 - -(1,027,412) - -747,034 73,055 (595,879)5,077,050 6,042,002 -10,178,307 - $ 15,255,357 $ (595,879) $ 6,042,002 Town of North Andover, Massachusetts75Comprehensive Annual Financial Report Pension Plan Schedules The Schedule of the Town’s Proportionate Share of the Net Pension Liability presents multi-year trend information on the Town’s net pension liability and related ratios. The Schedule of Contributions presents multi-year trend information on the Town’s required and actual contributions to the pension plan and related ratios. The Schedule of the Special Funding Amounts of the Net Pension Liability for the Massachusetts Teachers Contributory Retirement System presents multi-year trend information on the liability and expense assumed by the Commonwealth of Massachusetts on behalf of the City along with related ratios. These schedules are intended to present information for ten years. Until a ten year trend is compiled, information is presented for those years for which information is available. Pension plan schedules Town of North Andover, Massachusetts76 Comprehensive Annual Financial Report SCHEDULE OF THE TOWN'S PROPORTIONATE SHARE OF THE NET PENSION LIABILITY ESSEX REGIONAL RETIREMENT SYSTEM December 31, December 31, 20142015 Town's proportion of the net pension liability (asset)………………… 14.655% 14.820% … Town's proportionate share of the net pension liability (asset)………$49,719,115 $53,845,435 Town's covered employee payroll (*)…………………………………$18,809,056 $19,581,065 … Net pension liability as a percentage of covered-employee 264.34% 274.99% payroll……………………………………………………………………… Plan fiduciary net position as a percentage of the total pension liability……………………………………………………… 52.27% 51.01% Note: this schedule is intended to present information for 10 years. Until a 10-year trend is compiled, information is presented for those years for which information is available. See notes to required supplementary information. Town of North Andover, Massachusetts77Comprehensive Annual Financial Report SCHEDULE OF TOWN CONTRIBUTIONS ESSEX REGIONAL RETIREMENT SYSTEM December 31, December 31, 20142015 ctuarially determined contribution………………………………$3,759,115 $4,071,413 A Contributions in relation to the actuarially determined contribution………………………………………… 3,759,115 4,100,517 Contribution deficiency (excess)……………………………$- $(29,104) … Covered-employee payroll………………………………………$18,809,056 $19,581,065 … Contributions as a percentage of covered- employee payroll……………………………………………… 19.99% 20.94% … Note: this schedule is intended to present information for 10 years. Until a 10-year trend is compiled, information is presented for those years for which information is available. See notes to required supplementary information. Town of North Andover, Massachusetts78Comprehensive Annual Financial Report SCHEDULE OF THE SPECIAL FUNDING AMOUNTS OF THE NET PENSION LIABILITY MASSACHUSETTS TEACHERS' RETIREMENT SYSTEM The Commonwealth of Massachusetts is a nonemployer contributor and is required by statute to make all actuarially determined employer contributions on behalf of the member employers which creates a special funding situation. Since the Town does not contribute directly to MTRS, there is no net pension liability to recognize. This schedule discloses the Commonwealth's 100% share of the collective net pension liability that is associated with the Town; the portion of the collective pension expense as both a revenue and pension expense recognized by the Town; and the Plan's fiduciarynet position as a percentage of the total liability. Commonwealth's Town's Expense 100% Share of the and Revenue Net Pension Recognized for Plan Fiduciary Net Liability thePosition as a Associated with Commonwealth's Percentage of the the TownSupportTotal Liability Fiscal Year 2015…………………………………$65,734,720 $4,566,906 61.64% 86,270,207 6,997,282 55.38% 2016………………………………… Note: this schedule is intended to present information for 10 years. Until a 10-year trend is compiled, information is presented for those years for which information is available. See notes to required supplementary information. Town of North Andover, Massachusetts79Required Supplementary Information This page intentionally left blank. Town of North Andover, Massachusetts80 Comprehensive 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, Massachusetts81 Comprehensive Annual Financial Report OTHER POSTEMPLOYMENT BENEFIT PLAN SCHEDULE OF FUNDING PROGRESS AND SCHEDULE OF EMPLOYER CONTRIBUTION S 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) 07/01/15$- $107,321,707 $107,321,707 0.0%$52,830,686 203.1% 07/01/13- 86,605,373 86,605,373 0.0%43,951,748 197.0% 07/01/12 - 100,068,844 100,068,844 0.0% 41,265,503 242.5% Schedule of Employer Contributions Annual Actual YearRequiredContributionsPercentage EndedContributionMadeContributed 6/30/16$10,478,966 $3,744,032 35.7% 6/30/157,973,330 2,918,243 36.6% 6/30/148,342,451 2,704,289 32.4% 6/30/13 10,674,564 3,252,186 30.5% 6/30/1212,141,886 4,184,956 34.5% 6/30/1112,441,414 3,839,408 30.9% See notes to required supplementary information. Town of North Andover, Massachusetts82Comprehensive Annual Financial Report OTHER POSTEMPLOYMENT BENEFIT PLAN CTUARIAL METHODS AND ASSUMPTIONS A Actuarial Methods: 7/1/15 Valuation date…………………………………………… ctuarial cost method………………………………… Projected Unit Credit A… Amortization method…………………………………… Level percentage of pay over thirty years based on an open group. 30 years, open basis Remaining amortization period………………………… Actuarial Assumptions: Investment rate of return……………………………… 4.5% … Inflation rate assumption……………………………… 3.0% … 9.0% graded to 5.0% over 9 years Medical/drug cost trend rate…………………………… Plan Membership: Current retirees, beneficiaries, and dependents…… 402 … Current active members………………………………… 757 Total………………………………………………………1,159 See notes to required supplementary information. Town of North Andover, Massachusetts83Comprehensive Annual Financial Report Notes to Required Supplementary Information Year Ended June 30, 2016 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 year. Others are continuing appropriations for which the governing body has authorized that an unspent balance from a prior year be carried forward and made available for spending in the current year. These carry forwards are included as part of the subsequent 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 2016 approved budget for the general fund authorized $89.1 million in appropriations and other amounts to be raised. During the year, the Town approved supplemental appropriations totaling $150,000 for educational costs. 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 year ended June 30, 2016, is presented below: Net change in fund balance - budgetary basis…………………………………………$5,077,050 Perspective difference: Activity of the stabilization funds recorded in the general fund for GAAP………………………………………………………………… 922,181 Basis of accounting differences: Net change in recording 60 day receipts……………………………………………… 96,839 Net change in recording tax refunds payable………………………………………… (262,000) Recognition of revenue for on-behalf payments…………………………………… 6,997,282 Recognition of expenditures for on-behalf payments……………………………… (6,997,282) Net change in fund balance - GAAP basis……………………………………………$5,834,070 Town of North Andover, Massachusetts84 Comprehensive Annual Financial Report Notes to Required Supplementary Information Year Ended June 30, 2016 NOTE B – PENSION PLAN A. Schedule of the Town’s Proportionate Share of the Net Pension Liability The Schedule of the Town’s Proportionate Share of the Net Pension Liability details the Town’s allocated percentage of the net pension liability (asset), the Town’s proportionate share of the net pension liability, and the Town’s covered employee payroll. It also demonstrates the Town’s net position as a percentage of the Town’s pension liability and the Town’s net pension liability as a percentage of the Town’s covered payroll. B. Schedule of Town’s Contributions Governmental employers are required to pay an annual appropriation as established by PERAC. The Town’s appropriation includes the amounts to pay the pension portion of each member’s retirement allowance, an amount to amortize the actuarially determined unfunded liability to zero in accordance with the system’s funding schedule, and additional appropriations in accordance with adopted early retirement incentive programs. The Town’s appropriations are payable on July 1 and January 1. The Town may choose to pay the entire appropriation in July at a discounted rate. Accordingly, actual Town contributions may be less than the “total appropriation”. The pension fund appropriation is allocated to the Town based on covered payroll. C. Schedule of the Special Funding Amounts of the Net Pension Liabilities The Commonwealth of Massachusetts is a nonemployer contributor and is required by statute to make all actuarially determined employer contributions on behalf of the member employers which creates a special funding situation. Since the Town does not contribute directly to MTRS, there is no net pension liability to recognize. This schedule discloses the Commonwealth's 100% share of the collective net pension liability that is associated with the Town; the portion of the collective pension expense as both revenue and pension expense recognized by the Town; and the Plan's fiduciary net position as a percentage of the total liability. D. Changes of Assumptions - None E. Changes of Plan Provisions - None 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. Town of North Andover, Massachusetts85 Comprehensive Annual Financial Report Notes to Required Supplementary Information Year Ended June 30, 2016 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, Massachusetts86 Comprehensive Annual Financial Report Combining and Individual Fund Statements Combining and individual fund statements Town of North Andover, Massachusetts87 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. 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, Massachusetts88 Comprehensive Annual Financial Report This page intentionally left blank. Town of North Andover, Massachusetts89 Comprehensive Annual Financial Report NONMAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEET JUNE 30, 2016 Special Revenue Funds MunicipalEducationReceipts Municipal Federal andFederal andReserved forRevolving State GrantsState GrantsAppropriationFunds ASSETS Cash and cash equivalents………………..…………$121,714 $- $149,799 $559,265 Investments…………………………………………… - - - - … ---120,538 Departmental and other…………………………… Intergovernmental………………………………… - 114,721 - - … TOTAL ASSETS………………………………………$121,714 $114,721 $149,799 $679,803 LIABILITIES $169 $26,171 $- $10,484 Warrants payable…………………………………… Due to other funds………………………………… - 78,287 - - 169 104,458 - 10,484 TOTAL LIABILITIES…………………………………… DEFERRED INFLOWS OF RESOURCES Unavailable revenues…………………………… - - - 120,538 … FUND BALANCES Restricted………………………………………… 121,545 10,263 149,799 548,781 … TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES………$121,714 $114,721 $149,799 $679,803 … Town of North Andover, Massachusetts90Comprehensive Annual Financial Report Special Revenue Funds EducationSchoolOtherAffordableOther RevolvingLunchSpecial RevenueHousingTrust FundsFundsFundsTrust FundFundsSubtotal $684,779 $6,027 $1,218,614 $897,686 $194,929 $3,832,813 -- - - 738,615 738,615 -----120,538 -- - - - 114,721 $684,779 $6,027 $1,218,614 $897,686 $933,544 $4,806,687 $24,473 $5,685 $37,211 $- $- $104,193 -- - - - 78,287 5,68524,473 37,211 - - 182,480 -- - - - 120,538 342660,306 1,181,403 897,686 933,544 4,503,669 $684,779 $6,027 $1,218,614 $897,686 $933,544 $4,806,687 (Continued) Town of North Andover, Massachusetts91Comprehensive Annual Financial Report NONMAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEET JUNE 30, 2016 Capital Project Funds Total EducationNonmajor CapitalGovernmental ProjectsFunds ASSETS Cash and cash equivalents………………..…………………………$49,974 $3,882,787 … Investments…………………………………………………………… 738,615- … -120,538 Departmental and other…………………………………………… Intergovernmental………………………………………………… 114,721- … $49,974 $4,856,661 TOTAL ASSETS………………………………………………………… LIABILITIES $- $104,193 Warrants payable…………………………………………………… Due to other funds………………………………………………… - 78,287 … - 182,480 TOTAL LIABILITIES…………………………………………………… DEFERRED INFLOWS OF RESOURCES Unavailable revenues…………………………………………… - 120,538 … FUND BALANCES Restricted………………………………………………………… 49,974 4,553,643 … TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES………………………$49,974 $4,856,661 … (Concluded) Town of North Andover, Massachusetts92Comprehensive Annual Financial Report This page intentionally left blank. Town of North Andover, Massachusetts93 Comprehensive Annual Financial Report NONMAJOR GOVERNMENTAL FUNDS COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES YEAR ENDED JUNE 30, 2016 Special Revenue Funds MunicipalEducationReceiptsMunicipal Federal andFederal andReserved forRevolving State GrantsState GrantsAppropriationFunds REVENUES: Payments in lieu of taxes………………………………………$- $- $- $- Charges for services…………………………………………… -- - 666,944 Licenses and permits…………………………………………… - - 46,032 90,258 Intergovernmental……………………………………………… 192,860 3,461,333 - - Departmental and other………………………………………… - - - 18,499 - - - 409,372 Contributions…………………………………………………… Investment income……………………………………………… 67 - - - TOTAL REVENUES……………………………………… 192,927 3,461,333 46,032 1,185,073 EXPENDITURES: Current: General government………………………………………… - - 42,714 19,862 … 105,962 - - 758,937 Public safety……………………………………………… Education…………………………………………………… - 3,451,070 - - Public works………………………………………………… - - - 15,591 Human services……………………………………………… 46,892 - - 404,380 … 24,388 - - - Culture and recreation…………………………………… TOTAL EXPENDITURES……………………………… 177,242 3,451,070 42,714 1,198,770 EXCESS (DEFICIENCY) OF REVENUES … 15,685 10,263 3,318 (13,697) OVER (UNDER) EXPENDITURES………………………… OTHER FINANCING SOURCES (USES): Issuance of bonds and notes………………………………… - - - - … - - - - Transfers out………………………………………………… TOTAL OTHER FINANCING SOURCES (USES)…… - - - - … 15,685 10,263 3,318 (13,697) NET CHANGE IN FUND BALANCES………………………… FUND BALANCES AT BEGINNING OF YEAR………………… 105,860 - 146,481 562,478 FUND BALANCES AT END OF YEAR…………………………$121,545 $10,263 $149,799 $548,781 Town of North Andover, Massachusetts94Comprehensive Annual Financial Report Special Revenue Funds EducationSchoolOtherAffordableOther RevolvingLunchSpecial RevenueHousingTrust FundsFundsFundsTrust FundFundsSub-total $- $- $144,095 $- $- $144,095 1,117,9672,354,722 - - - 4,139,633 - - - - - 136,290 -8,213 291,536 100,000 - 4,053,942 55,122 - 6,973 99,000 - 179,594 161,456 - 128,493 - - 699,321 - - - 5,121 71,254 76,442 2,579,513 1,117,967 571,097 204,121 71,254 9,429,317 - - 107,203 - - 169,779 - - 13,435 - 101,058 979,392 2,217,789 1,152,739 124,465 - - 6,946,063 - - 37,333 - - 52,924 - - 25,701 338,084 - 815,057 - - 27,078 - 39,429 90,895 2,217,789 1,152,739 335,215 338,084 140,487 9,054,110 361,724 (34,772) 235,882 (133,963) (69,233) 375,207 - - - - - - - - (144,892) - - (144,892) - - (144,892) - - (144,892) 361,724 (34,772) 90,990 (133,963) (69,233) 230,315 298,582 35,114 1,090,413 1,031,649 1,002,777 4,273,354 $660,306 $342 $1,181,403 $897,686 $933,544 $4,503,669 (Continued) Town of North Andover, Massachusetts95Comprehensive Annual Financial Report NONMAJOR GOVERNMENTAL FUNDS COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES YEAR ENDED JUNE 30, 2016 Capital Project Funds Total EducationNonmajor CapitalGovernmental ProjectsFunds REVENUES: Payments in lieu of taxes……………………………………………………………$- $144,095 Charges for services………………………………………………………………… 4,139,633- Licenses and permits………………………………………………………………… - 136,290 Intergovernmental…………………………………………………………………… - 4,053,942 Departmental and other……………………………………………………………… - 179,594 - 699,321 Contributions………………………………………………………………………… Investment income…………………………………………………………………… - 76,442 TOTAL REVENUES…………………………………………………………… - 9,429,317 EXPENDITURES: Current: General government……………………………………………………………… - 169,779 … - 979,392 Public safety…………………………………………………………………… Education………………………………………………………………………… 293,155 7,239,218 Public works……………………………………………………………………… - 52,924 Human services…………………………………………………………………… - 815,057 … - 90,895 Culture and recreation………………………………………………………… TOTAL EXPENDITURES…………………………………………………… 293,155 9,347,265 EXCESS (DEFICIENCY) OF REVENUES … (293,155) 82,052 OVER (UNDER) EXPENDITURES……………………………………………… OTHER FINANCING SOURCES (USES): Issuance of bonds and notes……………………………………………………… 304,881 304,881 … - (144,892) Transfers out……………………………………………………………………… TOTAL OTHER FINANCING SOURCES (USES)………………………… 304,881 159,989 … 11,726 242,041 NET CHANGE IN FUND BALANCES……………………………………………… FUND BALANCES AT BEGINNING OF YEAR……………………………………… 38,248 4,311,602 FUND BALANCES AT END OF YEAR………………………………………………$49,974 $4,553,643 (Concluded) Town of North Andover, Massachusetts96Comprehensive 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, Massachusetts97 Comprehensive Annual Financial Report AGENCY FUND STATEMENT OF CHANGES IN ASSETS AND LIABILITIES YEAR ENDED JUNE 30, 2016 BeginningEnd of YearAdditionsDeletionsof Year ASSETS CURRENT: Cash and cash equivalents………………$3,773,141 $6,258,275 $(6,059,907) $3,971,509 … LIABILITIES Warrants payable…………………………$822 $- $(822) $- … Guaranteed deposits……………………… 3,285,889 3,817,783 (3,730,957) 3,372,715 Other deposits……………………………… 236,612 397,522 (394,486) 239,648 Student activities………………………… 249,818 2,042,970 (1,933,642) 359,146 … $3,773,141 $6,258,275 $(6,059,907) $3,971,509 TOTAL LIABILITIES…………………………… Town of North Andover, Massachusetts98Comprehensive Annual Financial Report Statistics Section StevensMemorialLibrary 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. Town of North Andover, Massachusetts99 Comprehensive Annual Financial Report Assessed Value and Actual Value of Taxable Property by Classification and Tax Rates Last Ten Years Assessed and Actual Values and Tax Rates TotalTotalTotal ResidentialResidentialCommercialIndustrialPersonalCommercialCommercialDirectTown YeaalueTax RatealuealuePropertyalueTax RateRatealue rVVVVV 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$ 20143,652,658,906$ 14.41$ 276,804,384$ 155,524,200$ 123,301,890$ 555,630,474$ 19.45$ 15.08$ 4,208,289,380$ 20153,745,570,341$ 14.39$ 277,858,269$ 147,834,600$ 123,012,880$ 548,705,749$ 20.29$ 15.14$ 4,294,276,090$ 20163,897,630,578$ 14.27$ 292,994,947$ 147,568,900$ 120,842,040$ 561,405,887$ 20.47$ 15.05$ 4,459,036,465$ Total Assessed Value by Classification Total Assessed Value by Classification Year Ended June 30, 2015 Year Ended June 30, 2016 3% 3%3% 3% 7% 7% 87% 87% ResidentialCommercialIndustrialPersonal Property ResidentialCommercialIndustrialPersonal Property Commercial Value as % of Total Value 18.0% 16.0% 14.0% 12.0% 10.0% 2007200820092010201120122013201420152016 (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 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, Massachusetts105Comprehensive Annual Financial Report Comprehensive Annual Financial Report Percentage ofPercentage of Total TaxableTotal Taxable PropertyAssessedAssessedAssessedAssessed NameTypeValuationRankValueValuationRankValue $ 21.33%$ 0.00%$ 40.61%$ 0.00%$ 60.35%$ 50.46%$ 70.24%$ 0.00%$ 0.00%$ 0.00%$ 11.36%$ 30.61%$ 80.22%$ 90.22%$ 100.16%$256,088,8906.21%$250,355,0805.57% 20162007 $ 21.10%-$ 80.30%-$ 40.68%-$ 90.27%-$ 100.23%- $ 11.38%59,984,180 $ 30.99%27,399,980$ 50.50%15,811,930$ 60.43%20,742,200$ 70.33%10,958,890$ -61,272,900$ -27,542,180$ -9,835,020$ -9,763,400$ -7,044,400 Current Year and Nine Years Ago Principal Taxpayers BF No, Andover Office ParkOffice- NAM Partners LimitedOffice/Manufacturing-Mass ElectricUtility-Jefferson Equity PartnersOffice Par-D & L Andover Prop. LLCOffice Park- AIMCO (Royal Crest)Apartments56,770,150 National GridUtility45,428,040Edgewood Retirement CommunityCongregate Care/Nursing Home40,876,250SHP IV North AndoverAssisted Living12,546,200Delta/Delta Realty TrustShopping Mall20,519,640Ozzy PropertiesOffice17,681,600Wood Ridge HomesCo-op Housing13,613,910RCG North Andover MillsOffice28,091,600Eaglewood PropertiesRetail11,232,700700 Chickering RoadAssisted Living9,328,800 106 Totals Town of North Andover, Massachusetts Source: Official Statement for Sale of Bonds 2007200820092010201120122013201420152016 First Year Current Tax Collections Real Estate Tax Levies vs. First Year Collections Last Ten Years Real Estate Tax Levy 110,000,000100,000,00090,000,00080,000,00070,000,00060,000,00050,000,00040,000,00030,000,00020,000,00010,000,0000 Millions Comprehensive Annual Financial Report $ 4,337,534,000$ 216,876,700 38,444,272 7,478,282 24.23%24.77%22.76%19.49%23.44%16.60%13.82%15.40%17.37%21.17% $ 170,954,14 6 2007200820092010201120122013201420152016 $ $$ $ 4,337,534,000$ 216,876,700 36,746,119 931,008 $ 179,199,57 3 $ 4,446,186,000$ 222,309,300 33,116,011 1,124,027 $ 188,069,26 2 $ 4,446,186,000$ 222,309,300 30,545,849 182,659 $ 191,580,79 2 $ 4,460,344,100$ 223,017,205 35,050,079 1,970,568 $ 185,996,55 8 $ 4,460,344,100$ 223,017,205 45,590,789 6,688,916 $ 170,737,50 Computation of Legal Debt Margin 0 Last Ten Years 110 $ 4,913,038,200$ 245,651,910 44,477,844 3,391,000 $ 197,783,06 6 $ 4,913,038,200$ 245,651,910 45,804,952 10,111,025 $ 189,735,93 3 $ 4,648,968,500$ 232,448,425 44,809,719 12,765,223 $ 174,873,48 3 Town of North Andover, Massachusetts 4,648,968,500Debt Limit -5% of Equalized Valuation……… 232,448,425 48,332,581 7,993,738 176,122,10 6 Source: Official Statement for Sale of Bonds Outstanding debt applicable to limit……… as a percentage of debt limit……………… Authorized and unissued debt…………… Legal debt margin…………………………… Equalized Valuation………………………… …………… Total debt applicable to the limit Less: Demographic and Economic Statistics Last Ten Years Per Capita PopulationPersonalPersonalMedianUnemployment YearEstimatesIncomeIncomeAgeRate 200727,4121,102,755,288$ 40,229$ 37 3.8% 200827,5661,131,129,553$ 41,034$ 37 5.5% 200927,7531,161,578,875$ 41,854$ 37 7.7% 201028,3521,210,382,515$ 42,691$ 40 7.2% 201128,3521,234,590,165$ 43,545$ 40 7.0% 201228,3521,259,281,969$ 44,416$ 40 5.7% 201328,3521,284,467,608$ 45,304$ 40 5.7% 201428,4221,313,380,620$ 46,210$ 40 4.7% 201528,5101,343,818,850$ 47,135$ 40 4.1% 201629,2171,404,686,161$ 48,078$ 40 4.1% 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, Massachusetts111Comprehensive Annual Financial Report Comprehensive Annual Financial Report NaturePercentage ofPercentage of Employmen ofTotal TownTotal Town t Edgewood Retirement CommunityHeathcare36031%n/an/an/aWatts RegulatorsManufacturing25041%n/an/an/aBrooks SchoolEducation20071%n/an/an/aOphir OpticsManufacturing16081%n/an/an/aGenesis HealthcareHealthcare15091%n/an/an/aStop & ShopGrocery Store150101%n/an/an/a Merrimack CollegeHigher Education67512%50032%Demoulas Supermarkets, Inc.Grocery Store40021%23081%National Grid (formely Mass Electic)Utility Services22551%30051%Lawrence Eagle TribuneNewspaper20561%3 7541%Lucent TechnoligiesManufacturingn/an/an/a62512%A.E.G SchneiderElectronic Controlsn/an/an/a54022%Sweetheart PlasticsPlastics Manufacturingn/an/an/a30061%Morton International IncManufacturingn/an/ an/a25071%Solectron CorpContractorn/an/an/a20091% 20162007 EmployeesRan k Employmen t BusinessEmployeesRan k Principal Employers (excluding Town) Current Year and Nine Years Ago 112 Source: Massachusetts Department of Workforce Development Town of North Andover, Massachusetts Employe r Comprehensive Annual Financial Report 26 114 481 24 15 12 15 687 2007200820092010201120122013201420152016 27 113 479 23 15 10 14 675681 26 112 479 23 14 9 12 26 112 479 23 14 9 12 675 27 112 443 23 14 9 12 639 26 114 451 23 14 8 12 647 Full-Time Equivalent Town Employee s 114 449 23 4 26 14 12 641 Last Ten Years 113 113 446 23 25 13 4 12 637 113 442 24 4 25 13 12 634 25112441Public works…………………………………2411311627 Source: Annual Budget Report, School Dept Total ………………………………………… Town………………………………………… ……………Library…………………….……………………… Town of North Andover, Massachusetts School……………………………………… Community services……………………… Support Services ………………………… Public Safety……………………………… Full-Time Equivalents Comprehensive Annual Financial Report (continued) 302 83 330 92 798 29 408 47 52 429 33 511 82 830 7 142 7 421 4 6 635 323 290 504 467 29,217 18,968 2,907 1,171 6,274 2,084 2,283 1,755 2,460 2007200820092010201120122013201420152016 280 83 298 95 875 29 414 45 52 432 34 508 83 902 7 137 7 471 4 6 291 329 28,510 17,050 2,101 1,251 6,258 2,059 654 2,278 504 467 1,383 2,500 289 115 250 87 797 885 29 417 44 52 441 35 494 83 881 7 137 7 468 4 6 729 312 303 496 623 28,422 18,247 2,132 6,239 2,028 2,707 1,283 2,379 289 86 251 92 920 30 421 43 51 462 36 491 8 906 7 137 7 464 4 6 589 364 214 484 489 28,352 18,598 2,390 1,450 6,217 1,985 3,646 1,396 2,745 263 74 183 84 701 31 419 44 50 489 37 492 84 882 7 137 7 460 4 6 434 285 149 548 383 28,352 18,307 2,110 1,523 6,198 1,951 2,938 1,515 2,663 285 84 279 91 866 745 30 420 44 50 468 36 491 84 847 7 139 8 452 4 5 86 396 286 645 297 28,352 17,256 2,361 6,181 1,929 2,953 1,358 2,444 Operating Indicators by Function/Program 285 95 296 87 773 28 423 43 48 492 38 490 84 818 7 145 9 436 4 5 110 409 368 624 295 28,352 18,169 2,314 1,099 6,173 1,915 3,748 3,986 2,616 Last Ten Years 114 291 78 268 110 612 786Misc Rec……………………………………………………n/an/a27Two Family…………………………………………………n/an/a426n/an/a43n/an/a48n/an/a512n/an/a37n/an/a435n/an/a82n/an/a844 n/an/a7n/an/a143n/an/a9n/an/a438Public Utilities………………………………………………n/an/a4n/an/a6 140 406 132 680 271 27,753 18,059 2,396Single Family………………………………………………n/an/a6,164n/an/a1,898 3,742 1,612 2,650 400 27,566 16,787 310 87 310 2,308 89 783 127 132 920 253 2,885 1,746 4,399 1,564 Births………………………………………………………30484Deaths………………………………………………………27878785755153385821Total number of animal complaints…………………….214 27,41216,4002,348rrests………………………………………………………410Citations ……………………………………………………5,004Fire and Rescue……………………………………..2,2472,624 mbulance Calls……………………………………… Chapter 61A - Farm Property…………………………… Three Family……………………………………………… New Voter Registrations…………………………………Four-eight Family…………………………………………Summons/Hearings……………………………………… Registered Voters, Annual Town Election………………… Exempt buildings and land……………………………… Condominiums……………………………………………Commerical buildings and land…………………………Parking tickets issued…………………………………… Passport Applications……………………………………Chapter 61B - Recreational Land……………………… ……………………………Residential/Commercial……………………………………………Chapter 61 - Forestry Property………………………………………………… Marriages………………………………………………… Industrial buildings and land……………………………Personal Property Accounts……………………………Utilities valued by State………………………………… Business Certificates…………………………………… Dogs licensed……………………………………………Vacant land……………………………………………… Population…………………………………………………… Complaints Issued……………………………………… Town of North Andover, Massachusetts General Government Function/Program Incidents Town Clerk Assessors Public Safety A Police A Fire Comprehensive Annual Financial Report (continued) 629 595 1 54 321 16 19 23 1 16 258 213 226 260 62 3,583 4,788 20,294 7,384 7,496 12,162 4,614 8,358 20,418 193,799 1,186 29,848 59,416 2007200820092010201120122013201420152016 - 543 520 1 67 321 20 30 21 19 319 115 263 250 66 3,583 4,839 17,001 9,828 8,458 20,524 6,472 8,358 20,418 193,799 1,186 29,848 59,416 613 587 1 65 345 26 35 27 5 18 352 202 273 295 101 3,207 4,801 16,230 9,981 8,417 18,005 6,377 6,631 20,143 176,385 1,281 30,744 60,559 - 444 412 1 27 47 32 6 2 33 234 140 241 241 53 3,080 4,783 17,519 8,094 8,635 13,414 6,822 4,938 19,094 185,419 1,273 29,081 57,952 - 322 295 1 19 26 23 8 8 27 225 22 256 266 89 2,774 4,766 18,369 8,895 7,682 21,796 4,598 4,122 17,604 206,362 1,295 29,318 56,569 - 401 377 1 29 45 27 26 7 5 288 46 250 262 82 2,375 4,638 15,541 8,203 6,708 11,221 4,285 4,489 16,779 213,517 1,221 28,503 53,367 Operating Indicators by Function/Program - 327 314 1 38 70 13 22 6 2 179 49 237 254 83 914 2,470 4,614 15,106 4,532 7,078 9,961 4,234 3,867 16,465 212,970 28,069 54,073 Last Ten Years 115 - 406 377 1 28 46 23 6 13 8 198 30 257 256 75 896 2,214 4,604 19,685 4,243 3,900 8,013 3,379 8,060 29,883 213,598 26,758 49,302 - 385 349 1 40 35 49 11 4 2,456 4,546 12 198 53 131 246 75 18,527 3,062 3,698 12,983 2,242 3,304 201,961 804 24,549 59,939 28,155 - 3924040817313192OFFA Haulers/Trash Haulers & Placards………………133Commercial Permits………………………………………264Professional Permits………………………………………70698 Smoke Detectors………………………………………501Fireworks Display Permits……………………………12,3814,624Septic (all related reviews/permits/inspections)……6717,6054,5103,61910,7811,1742,225Number of Library Card Holders …………………………..27,384206,60623,38053,021 Reference Questions…………………………………………Inter-Library Loans…………………………………………… Carbon Monoxide Detectors…………………………Food Est. (related permits& reviews) ……………… Underground Tank Installation………………………Outreach Case Management……………………………Recreation………………………………………………… Open Air Burning Permits……………………………Community Education…………………………………… Sprinkler Inspections………………………………… Liquid Gas Storage Permits…………………………Plan reviews……………………………………………… Program attendance…………………………………………PC & Internet Use…………………………………………… …………………Permits issued………………………………………………………………………………… Circulation …………………………………………………… Oil Burner Install Permits……………………………Underground Tank Removals……………………… Transportation…………………………………………… Public school enrollment…………………………………… Home delivered meals served………………………… Town of North Andover, Massachusetts Permits/certificates issued Building Department Council on Aging Board of Health Function/Program Inspections Human Services Planning Education Libraries Comprehensive Annual Financial Report (concluded) 672 971 32 3,410 3.2500 2007200820092010201120122013201420152016 684 876 34 3,263 3.3100 691 832 43 3,215 3.0600 709 798 54 3,179 2.2101 694 854 3,098 14 2.6328 656 814 58 2,961 3.0120 Operating Indicators by Function/Program 646 792 n/an/an/a2,973 46 2.8675 Last Ten Years 116 n/an/a611 31 Summer Programs………………………………………… n/an/a75 2.7371 32 2.9669 45 Daily consumption (in million gallons)………………………2.8126 Source: Various Town Departments and Annual Town Report Service connections…………………………………….…… … Overall Services…………………………………………… Memberships……………………………………………… …… Town of North Andover, Massachusetts N/A: Information not available Youth & Recreation Services Function/Program Sewer Water Comprehensive Annual Financial Report 148 1,515 13 1 2 1 5 1 1 90 99 17 2 90 11 1 39 6 20062007200820092010201120122013201420152016 148 1,515 13 1 2n/an/an/an/an/an/an/an/an/a1 5 1 1 90 99 17 2 90 11 1 39 6 148 1,515 13 1 2 5 1 1 90 99 17 2 90 11 1 39 6 148 1,515 13 1 2 5 1 1 90 99 17 2 90 11 1 39 6 148 1,515 13 1 2 5 1 1 90 99 17 2 90 11 1 39 6 m Capital Asset Statistics by Function/Progra 148 1,511 13 1 2 5 1 1 90 99 17 2 90 11 1 39 6 148 1,489 13 1 2 5 1 1 89 99 17 2 90 11 1 39 6 Last Ten Years 117 148 1,487 13 1 2 5 1 1 89 99 17 2 90 11 1 39 6 147 1,479 13 1 2 5 1 1 88 99 17 2 90 11 1 39 6 147 1,477 13 1 2 5 1 1 88 99 17 2 90 11 1 39 6 1,475 13Number of Stations…………………1Number of Stations…………………2Number of elementary schools……5Number of middle schools…………1Number of high schools……………11478799Playgrounds…………………………17Parks…………………………………290111396 Town of North Andover, Massachusetts Source: Various Town Departments Sanitary sewers (miles)……………Storm sewers (miles)……………… …………………………… School administration building……Ball fields…………………………… Playgrounds - Acreage……………Parks - Acreage…………………… Number of Buildings………………Tennis courts……………………… Water mains (miles)……………… Fire hydrants……………………… Public beaches…………………… N/A: Information not available Culture and Recreation General Government Function/Program Public Works Education Police Fire This page intentionally left blank. Town of North Andover, Massachusetts118 Comprehensive Annual Financial Report Additional Information Additional Iinformation Town of North Andover, Massachusetts119 Comprehensive Annual Financial Report ENTERPRISE FUND SCHEDULE OF REVENUES, EXPENSES AND CHANGES IN NET POSITION BUDGETARY BASIS - BUDGET AND ACTUAL YEAR ENDED JUNE 30, 2016 Water Fund Amounts ActualCarriedVariance Original FinalBudgetaryForward ToTo Final BudgetBudgetAmountsNext YearBudget OPERATING REVENUES: Charges for services ………………………………………………………………$ 5,286,324 $ 5,286,324 $ 5,837,447 $ - $ 551,123 Penalties and interest……………………………………………………………… 22,444 22,444 20,982 - (1,462) TOTAL OPERATING REVENUES …………………………………….……… 5,308,768 5,308,768 5,858,429 - 549,661 OPERATING EXPENSES: Cost of service and administration………………………………………………… 2,519,653 2,519,653 2,089,183 9,300 421,170 GLSD assessment……………………………………………………………..…… - - - - - TOTAL OPERATING EXPENSES …………………………………….……… 2,519,653 2,519,653 2,089,183 9,300 421,170 OPERATING INCOME (LOSS)…………………………………………..…… 2,789,115 2,789,115 3,769,246 (9,300) 970,831 NONOPERATING REVENUES (EXPENSES): Investment income………………………………………………………………… 13,500 13,500 19,327 - 5,827 Debt service - principal……………………………………………………………… (1,090,276) (1,092,284) (1,092,284) - - Debt service - interest expense…………………………………………………… (192,000) (189,992) (189,992) - - TOTAL NONOPERATING REVENUES (EXPENSES), NET………………………………………..…… (1,268,776) (1,268,776) (1,262,949) - 5,827 INCOME (LOSS) BEFORE TRANSFERS…………………..………………… 1,520,339 1,520,339 2,506,297 (9,300) 976,658 TRANSFERS: Transfers out………………………………………………………………………… (1,558,227) (1,558,227) (1,558,227) - - CHANGE IN NET POSITION…………………………………………………… (37,888) (37,888) 948,070 (9,300) 976,658 NET POSITION AT BEGINNING OF YEAR……………………………..………… 2,827,818 2,827,818 2,827,818 - - NET POSITION AT END OF YEAR……………………………………………………$ 2,789,930 $ 2,789,930 $ 3,775,888 $ (9,300) $ 976,658 Town of North Andover, Massachusetts120Comprehensive Annual Financial Report Sewer FundOsgood Hill Fund AmountsAmounts Actual CarriedVarianceActual CarriedVariance OriginalFinal BudgetaryForward ToTo Final Original Final BudgetaryForward ToTo Final BudgetBudgetAmountsNext YearBudgetBudgetBudgetAmountsNext YearBudget $ 4,480,381 $ 4,480,381 $ 5,123,844 $ - $ 643,463 $ 322,682 $ 322,682 $ 526,754 $ - $ 204,072 24,55524,555 19,850 - (4,705) - - - - - 4,504,936 4,504,936 -5,143,694 638,758 322,682 322,682 526,754 - 204,072 902,540 902,540 657,338 134,775 110,427 274,887 274,887 253,245 4,065 17,577 1,561,2001,561,200 1,490,042 - 71,158 - - - - - 2,463,740 2,463,740 2,147,380 134,775 181,585 274,887 274,887 253,245 4,065 17,577 2,041,196 2,041,196 2,996,314 (134,775) 820,343 47,795 47,795 273,509 (4,065) 221,649 10,000 10,000 15,581 - 5,581 - - 1,941 - 1,941 (1,315,022) (1,315,022) (1,315,022) - - - - - - - (234,825) (234,825) (197,131) - 37,694 - - - - - (1,539,847) (1,539,847) (1,496,572) - 43,275 - - 1,941 - 1,941 501,349 501,349 1,499,742 (134,775) 863,618 47,795 47,795 275,450 (4,065) 223,590 (514,460) (514,460) (514,460) - - (48,812) (48,812) (48,812) - - (13,111) (13,111) 985,282 (134,775) 863,618 (1,017) (1,017) 226,638 (4,065) 223,590 2,306,055 2,306,055 2,306,055 - - 237,556 237,556 237,556 - - $ 2,292,944 $ 2,292,944 $ 3,291,337 $ (134,775) $ 863,618 $ 236,539 $ 236,539 $ 464,194 $ (4,065) $ 223,590 Town of North Andover, Massachusetts121Comprehensive Annual Financial Report TOWN OF NORTH ANDOVER, MASSACHUSETTS MANAGEMENT LETTER JUNE 30, 2016 To the Honorable Board of Selectmen Town of North Andover, Massachusetts: In planning and performing our audit of the 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’ (the “Town”) as of and for the year ended June 30, 2016, in accordance with auditing standards generally accepted in the United States of America, we considered the Town’s internal control over financial reporting (internal control) as a basis for designing our auditing procedures for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Town’s internal control. Accordingly, we do not express an opinion on the effectiveness of the Town’s internal control. However, during our audit we became aware of matters that are opportunities for strengthening internal controls and enhancing operating efficiency. The memorandum that accompanies this letter summarizes our comments and suggestions concerning those matters. We will review the status of these comments during our next audit engagement. We have already discussed these comments and suggestions with various Town personnel, and will be pleased to discuss them in further detail at your convenience, to perform any additional study of these matters, or to assist you in implementing the recommendations. This communication is intended solely for the information and use of management of the Town of North Andover, Massachusetts, and is not intended to be and should not be used by anyone other than these specified parties. The Town of North Andover’s written response to the matters identified in our audit has not been subjected to the audit procedures applied in the audit of the financial statements and, accordingly, we express no opinion on it. November 22, 2016 TOWN OF NORTH ANDOVER, MASSACHUSETTS MANAGEMENT LETTER JUNE 30, 2016 TABLE OF CONTENTS PAGE Implement a Point-of-Sale (POS) System at Osgood Estates ........................................................................ 1 Strengthen Internal Controls at the Stevens Estate ......................................................................................... 1 Improve Timeliness of Cash Reconciliation Procedures ................................................................................. 2 Documentation of Internal Controls ................................................................................................................. 2 Government Accounting Standards Board (GASB) Statements ..................................................................... 4 This page intentionally left blank. Implement a Point-of-Sale (POS) System at the Stevens Estate Implement a Point-of-Sale (POS) System at the Stevens Estate Prior Year Comment In the prior year, we indicated that the Town could enhance internal controls over the receipt collection process at the Stevens Estate by utilizing a point of sale (POS) system similar to the systems utilized by private wedding venues, restaurants, and other organizations. A POS system would allow the Stevens Estate to collect, record, and monitor both cash and credit card receipts during hosted events in real time. A POS system can also enhance control over different areas of event operations such as inventory control, event scheduling, reporting, and analysis. For example, a POS system would enable tracking of inventory quantities on-hand, enable cashiers to process transactions quickly and efficiently, allow managers to maintain tight controls over transactions by providing a structured reconciliation process, as well as generate sales reports by register, batch, and receipt number. We recommended that the Town implement a POS system to improve internal controls over the receipt collection process and the overall control environment. We also recommended that procedures be implemented to improve controls over liquor inventory either through the use of a POS System or another process that would track quantities on hand and perform periodic spot checks to actual quantities on-hand. Current Status It is our understanding that a POS system was purchased in July 2016 and is anticipated to be implemented in the fall of 2016. No procedures have implemented to track liquor inventory and reconcile to actual quantities on- hand. Strengthen Internal Controls at the Stevens Estate Strengthen Internal Controls at the Stevens Estate Comment The Town contracted with a consultant to review the internal controls of the Stevens Estate cash receipts process in June of 2015. As a result of that engagement, several recommendations were made to strengthen internal controls. Based on our review of the status of these recommendations, the following matters were noted that had not been addressed by Management as of September 2016. 1. A police escort was recommended for night deposits at the bank after an event. It is our understanding that police escorts are not being utilized for night deposits. 2. Implementation of a standardized form was recommended for cash bar activities that would include a beginning and ending cash drawer balance to facilitate reconciliation to the cash register tape. The form should be signed by management and the bartender. This process was not implemented at the time of our review. 3. It was recommended that payment for the variable open bar be in the form of cash or credit card and that no personal checks be accepted to prevent an insufficient funds check. Based on discussion with the Director, the Stevens Estate had a personal check recently denied for insufficient funds. Since that time, a new procedure has been put in place requiring that a credit card be put on file to protect against an insufficient funds check. In addition, based on our review of the booking report, it did not clearly show that a balance was due from the customer. We recommend that the format of the report be reviewed to ensure that it indicates total amount due from customer, total amount paid, and any residual unpaid balance if applicable. 1 4. A standardized form was recommended to document the cash count at the end of an event including the signature of the individual completing the count. This process was not implemented at the time of our review. 5. Upon completion of an event, it was recommended that a reconciliation of the Booking Report receipt activity be reconciled to the event folder. This reconciliation should be documented and signed by the preparer and reviewer. This process was not implemented at the time of our review. Recommendation We recommend that the Stevens Estate implement procedures to address the recommendations noted above. Improve Timeliness of Cash Reconciliation Procedures Improve Timeliness of Cash Reconciliation Procedures Comment Due to turnover in the Treasurer/Collector position in 2016, we noted that cash was not reconciled on a timely basis throughout the year and at year-end. However, all of the cash accounts were reconciled between the bank and the general ledger balances subsequent to year-end. In conjunction with the hiring of a new Treasurer/Collector procedures are being established to ensure that monthly reconciliations are completed between the bank and the general ledger balances. A lack of timely reconciliation procedures increases the likelihood that material errors may occur and not be detected and corrected on a timely basis. During 2016, along with the implementation of the new accounting system the Town implemented a cash reconciliation module available in the new accounting system. Similar to the previous accounting system, this module offers an integrated approach to cash management where the Treasurer’s utilizes the general ledger balances as the Treasurer’s book balances. We believe that this approach to cash management is a best practice and will facilitate an accurate and efficient cash reconciliation process. Recommendation We recommend that the Treasurer/Collector implement procedures to ensure that all bank accounts are reconciled to the applicable general ledger balances on a monthly basis Documentation of Internal Controls Documentation of Internal Controls Comment In December 2013, the U.S. Office of Management and Budget (OMB) issued Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) in an effort to (1) streamline guidance for federal awards while easing the administrative burden and (2) to strengthen oversight over the expenditure of federal funds and to reduce the risks of waste, fraud and abuse. The Uniform Guidance supersedes and streamlines requirements from eight different federal grant circulars (including OMB Circular A-133) into one set of guidance. Local governments are required to implement the new administrative requirements and cost principles for all new federal awards and to additional funding to existing awards made after December 26, 2014 (fiscal year 2016). In conformance with Uniform Guidance, the non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal 2 award. These internal controls should be in compliance with guidance in ‘‘Standards for Internal Control in the Federal Government’’ issued by the Comptroller General of the United States (the Green Book) and the ‘‘Internal Control Integrated Framework’’, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The COSO internal control framework is generally accepted as a best practice within the industry including the best practices prescribed by the Government Finance Officers Association (GFOA). COSO is a joint initiative of 5 private sector organizations dedicated to providing thought leadership through the development of frameworks and guidance on enterprise risk management, internal control and fraud deterrence. The original COSO framework was published in 1992 and has been revised several times for changes in operations, technology, and audit risk. The most recent updates to the COSO Internal Control - Integrated Framework were issued in 2013 and are available at www.coso.org. Management is responsible for internal control and to see that the entity is doing what needs to be done to meet its objectives. Governments have limited resources and constraints on how much can be spent on designing, implementing, and conducting systems of internal control. The COSO Framework can help management consider alternative approaches and decide what action it needs to take to meet its objectives. Depending on circumstances, these approaches and decisions can contribute to efficiencies in the design, implementation, and conduct of internal control. With the COSO Framework, management can more successfully diagnose issues and assert effectiveness regarding their internal controls and, for external financial reporting, help avoid material weaknesses or significant deficiencies. The COSO internal control framework incorporates 5 major components of internal control, which are supported by 17 principles of internal control as follows: 1. CONTROL ENVIRONMENT 1) Demonstrates commitment to integrity and ethical values 2) Exercises oversight responsibility 3) Establishes structure, authority, and responsibility 4) Demonstrates commitment to competence 5) Enforces accountability 2. RISK ASSESSMENT 6) Specifies suitable objectives 7) Identifies and analyzes risk 8) Assesses fraud risk 9) Identifies and analyzes significant change 3. CONTROL ACTIVITIES 10) Selects and develops control activities 11) Selects and develops general controls over technology 12) Deploys through policies and procedures 4. INFORMATION & COMMUNICATION 13) Uses relevant information 14) Communicates internally 3 15) Communicates externally 5. MONITORING 16) Conducts ongoing and/or separate evaluations 17) Evaluates and communicates deficiencies Management should evaluate and assess the government’s internal control system to determine whether: each of the five essential elements of a comprehensive framework of internal control is present throughout the organization; whether each element addresses all of the associated principles; and whether all five elements effectively function together. Recommendation We recommend management follow the best practice for establishing and documenting their internal control system using the COSO Internal Control Framework. Government Accounting Standards Board (GASB) Statements Government Accounting Standards Board (GASB) Statements Comment The GASB has issued new pronouncements that will significantly affect the accounting and reporting requirements for Other Postemployment Benefits (OPEB). These new standards will start to phase in during 2017 and will substantially impact the Town’s financial statements and will also affect the requirements for accumulating the necessary data to meet the reporting requirements. The new standards that have been issued and their effective dates are as follows: The GASB issued Statement #74, Financial Reporting for Postemployment Benefit Plans Other Than Pensions, which is required to be implemented in 2017. The GASB issued Statement #75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions, which is required to be implemented in 2018. See below for a brief summary of these new standards: GASB #74 and #75 will substantially change the reporting for other postemployment benefit liabilities and expenses. Changes in the other postemployment benefits liability will be immediately recognized as other postemployment benefits expense or reported as deferred outflows/inflows of resources depending on the nature of the changes. Substantial changes to methods and assumptions used to determine actuarial information for GAAP reporting purposes will be required. Employers will report in their financial statements a net other postemployment benefit liability (asset) determined annually as of the measurement date. Net other postemployment benefit liability (asset) equals the total other postemployment benefit liability for the plan net of the plan net position. The other postemployment benefit liability is the actuarial present value of projected benefits attributed to past service. The plan net position is the accumulated plan assets net of any financial statement liabilities of the plan. The Town should expect to record significant OPEB liabilities in the future. While these GASB’s do not go into effect until 2017 and 2018, we wanted to make the Town aware of the impact that these new standards will have on financial statement reporting and disclosures. 4 TOWN OF NORTH ANDOVER, MASSACHUSETTS REPORTS ON FEDERAL AWARD PROGRAMS YEAR ENDED JUNE 30, 2016 TOWN OF NORTH ANDOVER, MASSACHUSETTS REPORTS ON FEDERAL AWARD PROGRAMS YEAR ENDED JUNE 30, 2016 TABLE OF CONTENTS PAGE Report on internal control over financial reporting and on compliance and other matters based on an audit of financial statements performed in accordance with Government Auditing Standards ........... 1 Report on compliance for each major federal program; report on internal control over compliance; and report on schedule of expenditures of federal awards required by The Uniform Guidance ............. 3 Schedule of expenditures of federal awards ................................................................................................. 5 Notes to schedule of expenditures of Federal awards .................................................................................. 6 Schedule of findings and questioned costs ................................................................................................... 7 REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Report on internal control over financial reporting and on compliance and other matters based on an audit of financial statements performed in accordance with Government Auditing Standards Independent Auditor’s Report To the Honorable Board of Selectmen Town of North Andover, Massachusetts We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the 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, 2016, and the related notes to the financial statements, which collectively comprise the Town of North Andover, Massachusetts’ basic financial statements, and have issued our report thereon dated November 22, 2016. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the Town of North Andover, Massachusetts’ internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Town of North Andover, Massachusetts’ internal control. Accordingly, we do not express an opinion on the effectiveness of the Town of North Andover, Massachusetts’ internal control. Adeficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or, significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. Compliance and Other Matters As part of obtaining reasonable assurance about whether the Town of North Andover, Massachusetts’ financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported underGovernment Auditing Standards. 1 Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. November 22, 2016 2 REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM; REPORT ON INTERNAL CONTROL OVER COMPLIANCE; AND REPORT ON SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS REQUIRED BY THE UNIFORM GUIDANCE Report on compliance for each major federal program; report on internal control over compliance; and report on schedule of expenditures of federal awards required by The Uniform Guidance Independent Auditor’s Report To the Honorable Board of Selectmen Town of North Andover, Massachusetts Report on Compliance for Each Major Federal Program We have audited the Town of North Andover, Massachusetts’ compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on each of the Town of North Andover, Massachusetts’ major federal programs for the year ended June 30, 2016. The Town of North Andover, Massachusetts’ major federal programs are identified in the summary of auditor’s results section of the accompanying schedule of findings and questioned costs. Management’s Responsibility Management is responsible for compliance with the requirements of laws, regulations, contracts and grants applicable to its federal programs. Auditor’s Responsibility Our responsibility is to express an opinion on compliance for each of the Town of North Andover, Massachusetts’ major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the Town of North Andover, Massachusetts’ compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of the Town of North Andover, Massachusetts’ compliance. Opinion on Each Major Federal Program In our opinion, the Town of North Andover, Massachusetts complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended June 30, 2016. Report on Internal Control Over Compliance Management of the Town of North Andover, Massachusetts, is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the Town of North Andover, Massachusetts’ 3 internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the Town of North Andover, Massachusetts’ internal control over compliance. Adeficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose. Report on Schedule of Expenditures of Federal Awards Required by the Uniform Guidance We have audited the 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 the year ended June 30, 2016, and the related notes to the financial statements, which collectively comprise the Town of North Andover, Massachusetts’s basic financial statements. We issued our report thereon dated November 22, 2016 which contained unmodified opinions on those financial statements. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the basic financial statements. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by the Uniform Guidance and is not required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the 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 schedule of expenditures of federal awards is fairly stated in all material respects in relation to the basic financial statements as a whole. November 22, 2016 4 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE 30, 2016 Federal Pass-ThroughAmount Passed CFDAEntity IdentifyingThrough to Federal Grantor/Program TitleNumberNumberSub-RecipientsExpenditures CHILD NUTRITION CLUSTER: U.S. DEPARTMENT OF AGRICULTURE: Passed through Massachusetts Department of Elementary and Secondary Education: Non-Cash Assistance (Commodities): National School Lunch Program……………………… 10.55505-211$- $97,446 Cash Assistance: School Breakfast Program……………………………… 10.55305-211- 25,578 National School Lunch Program……………………… 10.55505-211- 322,292 TOTAL CHILD NUTRITION CLUSTER…………… - 445,316 SPECIAL EDUCATION CLUSTER: U.S. DEPARTMENT OF EDUCATION: Passed through Massachusetts Department of Elementary and Secondary Education: Special Education Grants to States (IDEA, Part B) …… 84.027240-323-6-0211- 978,785 Special Education Grants to States (IDEA, Part B) …… 84.027274-024-6-0211- 33,419 Special Education Grants to States (IDEA, Part B) …… 84.027240-206-5-0211- 46,846 Special Education Grants to States (IDEA, Part B) …… 84.027274-037-5-0211- 8,617 Passed through Massachusetts Department of Early Education and Care: Special Education - Preschool Grants…………………… 84.17326216NORTHANDOV- 25,290 TOTAL SPECIAL EDUCATIONCLUSTER……… - 1,092,957 PASS-THROUGH PROGRAMS: U.S. DEPARTMENT OF TRANSPORTATION: Passed through the Massachusetts Executive Office of Public Safety and Security: State and Community Highway Safety…………………… 20.60018X920405DMA16- 4,990 U.S. DEPARTMENT OF EDUCATION: Passed through Massachusetts Department of Elementary and Secondary Education: Title I Grants to Local Educational Agencies…………… 84.010305-078064-2016-0211- 313,969 Title I Grants to Local Educational Agencies…………… 84.010305-048110-2015-0211- 14,943 Title I Grants to Local Educational Agencies…………… 84.010305-018120-2014-0211- 7,858 g Teacher Quality State Grants………………… 84.367140-092825-2016-0211- 50,807 Improvin Preschool Development Grants………………………… 84.419701-165-4-0211-0- 105,610 TOTAL EDUCATION……………………………… - 493,187 U.S. DEPARTMENT OF HOMELAND SECURITY: Passed through Massachusetts Emergency Management Agency: Disaster Grants - Public Assistance (Presidentially Declared Disasters)…………………… 97.036CTFEMA4214NANDO00292- 384,532 TOTAL…………………………………………………$- $2,420,982 See notes to schedule of expenditures of federal awards. Town of North Andover, Massachusetts5Reports on Federal Award Programs Schedule of Findings and Questioned Costs Year Ended June 30, 2015 Note 1 - Definition of Reporting Entity Notes to schedule of expenditures of Federal awards The accompanying Schedule of Expenditures of Federal Awards (Schedule) includes the federal award activity of the Town of North Andover, Massachusetts under programs of the federal government for the year ended June 30, 2016. The information in this Schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Because the Schedule presents only a selected portion of the operations of the Town of North Andover, Massachusetts, it is not intended to and does not present the financial position, changes in net position, or cash flows of the Town of North Andover, Massachusetts. Note 2 - Significant Accounting Policies The accounting and reporting policies of the Town of North Andover, Massachusetts are set forth below: (a) Basis of Presentation – The accompanying Schedule of Expenditures of Federal Awards is presented on the modified accrual basis of accounting. Accordingly, expenditures are recognized when the liability is incurred. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. (b) Cash Assistance – National School Lunch Program and School Breakfast Program – Program expenditures represent federal reimbursement for meals provided during the fiscal year. (c) Non-Cash Assistance (Commodities) – National School Lunch Program – Program expenditures represent the value of donated foods received during the fiscal year. (d) Disaster Grants have been recorded in the year the grant was approved. (e) The Town of North Andover, Massachusetts has not elected to use the 10-percent de minimis indirect cost rate as allowed under the Uniform Guidance. 6 Schedule of Findings and Questioned Costs Year Ended June 30, 2015 A. Summary of Auditor’s Results Schedule of findings and questioned costs 1. The auditor’s report expresses an unmodified opinion on the financial statements of the Town of North Andover, Massachusetts. 2. No significant deficiencies relating to the audit of the basic financial statements are reported in the Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards. 3. No instances of noncompliance material to the financial statements of the Town of North Andover, Massachusetts, were disclosed during the audit. 4. No significant deficiencies relating to the audit of the major federal award programs are reported in the Report On Compliance For Each Major Federal Program; Report On Internal Control Over Compliance; And Report On Schedule Of Expenditures Of Federal Rewards Required By The Uniform Guidance. 5. The auditor’s report on compliance for the major federal award programs for the Town of North Andover, Massachusetts, expresses an unmodified opinion on all major federal award programs. 6. There were no audit findings relative to the major federal award programs for the Town of North Andover, Massachusetts. 7. The program tested as a major grant is the Special Education cluster. 8. The threshold for distinguishing Types A and B programs was $750,000. 9. The Town of North Andover, Massachusetts was determined to be a low-risk auditee. B. Findings-Financial Statements Audit None. C. Finding and Questioned Costs – Major Federal Award Programs None. D. Prior Year Audit Findings and Questioned Costs None. 7 $679.40$1,818.00$2,682.00$3,672.00$1,571.00$0.00$0.00$0.00$189.00$10,611.40$0.00$0.00$0.00$0.00$0.00$0.00$0.00$0.00$913.75$0.00$0.00$913.75$55.50$2,532.44$6,083.00$0.00$1,336.50$113.45$0.00$10,120.89 $0.00$0.00$44,000.00$61,667.79$61,667.79$1,818.0059,849.7936.27%$100,925.18$513.00100,412.1866.06% Total $ $ $0.00$0.00$0.00$0.00$513.00 $5,500.00$5,500.00$61,667.79$1,818.00$100,925.18 36.27%66.06% 59,849.79100,412.18 June $ $ $0.00$0.00$0.00$0.00$5,500.00$5,500.00$56,167.79$96,988.87 $1,818.0054,349.7932.94%$351.0096,637.8763.58% May $ $ $0.00$0.00$0.00$0.00$5,500.00$5,500.00$50,667.79$1,818.00$91,596.47$36.00 48,849.7929.61%91,560.4760.24% Apr $ $ $0.00$0.00$0.00$0.00$5,500.00$5,500.00$45,167.79$81,788.84 $1,818.0043,349.7926.27%$36.0081,752.8453.78% Mar $ $ $0.00$0.00$0.00$0.00$5,500.00$5,500.00$39,667.79$1,818.00$67,674.31$36.00 37,849.7922.94%67,638.3144.50% Feb $ $ $0.00$0.00$0.00$0.00$5,500.00$5,500.00$34,167.79$62,958.15 $1,818.0032,349.7919.61%$36.0062,922.1541.40% Jan $ $ $0.00$0.00$129.50$129.50$0.00$5,500.00$5,629.50$28,667.79$1,818.00$51,941.15$36.00 26,849.7916.27%51,905.1534.15% Dec $ $ $108.00$108.00$913.75$913.75$210.44$210.44-$5,000.00-$3,767.81$0.00$5,500.00$2,753.94$23,038.29$45,074.15 $1,818.0021,220.2912.86%$36.0045,038.1529.63% Town of North Andover Nov Legal Summary Fiscal 2017 $ $ $252.00$252.00$0.00$55.50$198.00$2,029.50$328.50$83.25$2,694.75$0.00$2,946.75$20,284.35$1,710.00$38,828.15$36.00 18,574.3511.26%38,792.1525.52% Oct $ $ $180.00$252.00$144.00$576.00$0.00$900.00$3,870.00$864.00$30.20$5,664.20$0.00$6,240.20$17,337.60$31,208.15 $1,458.0015,879.609.62%$36.0031,172.1520.51% Sept $ $ $405.00$882.00$1,206.00$2,043.00$45.00$4,581.00$0.00$1,224.00$54.00$1,278.00$0.00$5,859.00$11,097.40$20,931.78 $1,206.009,891.405.99%$0.0020,931.7813.77% Aug $ $ $94.40$324.00$1,476.00$1,629.00$1,427.00$144.00$5,094.40$0.00$144.00$144.00$0.00$5,238.40$5,238.40$6,921.64 $324.004,914.402.98%6,921.644.55% July $ $ $165,000.00$152,000.00 GF, Gen. 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Gov't.Legal Legal Services -ZBA In House Counsel Total Consultants Account Total Kopelman CPA Account* Town Unions Total Urbelis Total Collins Credit for solar project legal fees FY 17 Budget/Running TotalFY 16 Budget/Running Total Edith M Netter & Associates Historic District Commission American Arbitration Association Human Resources Related August/Cable TV Contract Promotion Bypass - Police Affordable Housing Trust Community Preservation Promotion Bypass - Fire Town Meeting/ElectionsWater/Sewer Enterprise General Labor Services General Legal ServicesGeneral Legal ServicesGeneral Legal Services Safe Routes to School Documents & postage Description Negotiations - Police Negotiations - Other Discipline- Dispatch Document Request Records Requests Negotiations - FireDiscipline - Other Discipline - Police Other Land Use Discipline - Fire Planning Board Zoning Board ProcurementSolar Project Public Safety % of Budget% of Budget FY17 NetFY16 Net CPA CPA Cost Allocations Urbelis, et. al. Collins, et. al. ConsultantsConsultants Arbitration Law Firm KP Law TOTAL PotholeTrash&RecyclingSnowIssuesDPW-CatchBasinStreetLightOutage InProcessResolvedResolvedResolvedResolvedResolvedResolvedResolvedResolvedResolvedResolved 464597.82609 PercentResolved: TotalResolved: TotalReports: NorthAndover|January2017 CountofReportType NotListed-OtherPolice-Traffic/Other (non-emergency ReportIt! only) 143332317631 CountofReportType DPW-OtherDPW-TreeHealthIssues/ Concerns InProcess ResolvedResolvedResolvedResolvedResolvedResolvedResolvedResolvedResolvedResolved Status Police-Traffic/Other(non-emergencyonly) BuildingandZoningIssues/Concerns Status HealthIssues/Concerns BuildingandZoning Issues/Concerns CountofReportType StreetLightOutage DPW-CatchBasin NotListed-Other Trash&Recycling ReportType DPW-Other SnowIssues DPW-Tree ReportType Pothole 86420 1816141210 LL O G O p v N 10 v N v v i p m v oyD v a c > h in c Y v p in °- ❑� a v a v m v v m `w � a c vv v E- C, N L iUO m m m m m "a o tD O o 'D �'�- m d' Ol lD N N ut = O i� t0 O l0 O t0 10 tD Dl O m M m to .--i H m m O O N H p M H W M `o M N W D) M M M N O N N N N N l0 M z W tD .-I m tD m N W W d' O d' d' 7 d' d' N W ++ ul In ON i.17 tf1 W oo v1 N u1 d' r d' d' - d' d' [P V1 N I� lD N W N N- by N N N O m o o o o o l N m io cr m T f � m m �D iD �t m a n c r, oo Co n W oo .-i oS .� m co m v lD m rn lD m lD m n rn lD io rn c � V � UI t U s c s stiL s t S 0 t6 C bA O b0 b`0 �A iM n v�� v V O v "L' E Q C a01 N C N L p 2 2 2 N d .00 b9 G L N C C C bD L p0 bA bq bA bo C Z cn v in ti v N in in -o v -a 'a p M 0 0 0 0 0 w .a a a a a a , ❑❑❑ z2i m z z z z z m o u i V ti M Y vi T v O O J J J i ` N i N N W o L U = C U Q z a m p m O m O In O z N � m a v Z Z Z O p O M v d' V N O m N L d v = t `o L 3 c > G c °a 3° u° o o o j V U U m �- ¢❑ v� z� m` 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 m m oo m m O O O�; O M I, c-0— e-1 O O f O t0 I- ti O N Lr vt D1 a n C C! 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