Canton, Massachusetts · Saved source text
FY 2015 Comprehensive Annual Financial Report
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Source page 43
Basic Financial Statements Town of Canton, Massachusetts Page 33 of 118 Comprehensive Annual Financial Report
Source page 44
TOWN OF CANTON, MASSACHUSETTS
STATEMENT OF NET POSITION
JUNE 30, 2015
Primary Government
Governmental Business-Type
Activities Activities Total
Assets
Cash and cash equivalents $ 28,966,626 $ 6,539,892 $ 35,506,518
Investments 6,217,821 - 6,217,821
Receivables, net:
Property taxes 544,527 - 544,527
Tax liens and foreclosures 1,205,218 40,990 1,246,208
User fees - 3,906,808 3,906,808
Departmental and other 1,145,243 - 1,145,243
Intergovernmental 3,315,807 - 3,315,807
Prepaid items 1,213,076 - 1,213,076
Deposit held by third party 58,400 - 58,400
Capital assets not being depreciated 11,158,868 624,852 11,783,720
Capital assets, net of accumulated depreciation 93,293,027 45,757,950 139,050,977
Total Assets 147,118,613 56,870,492 203,989,105
Deferred Outflows of Resources
Net difference between projected and actual
earnings on pension plan investments 1,517,174 102,700 1,619,874
Total Deferred Outflows of Resources 1,517,174 102,700 1,619,874
Liabilities
Warrants and accounts payable 1,973,562 89,097 2,062,659
Accrued payroll and withholdings 4,057,754 32,753 4,090,507
Tax refunds payable 1,925,000 - 1,925,000
Health claims incurred but not reported 496,023 - 496,023
Accrued interest 285,292 220,752 506,044
Other liabilities 42,595 10,000 52,595
Bond anticipation notes payable 797,786 - 797,786
Noncurrent liabilities:
Due within one year 4,727,441 2,740,031 7,467,472
Due in more than one year 106,335,287 31,151,262 137,486,549
Total Liabilities 120,640,740 34,243,895 154,884,635
Deferred Inflows of Resources - - -
Net Position
Net investment in capital assets 76,109,604 16,386,618 92,496,222
Restricted for:
Nonexpendable permanent funds 445,985 - 445,985
Expendable permanent funds 342,562 - 342,562
Debt service 2,499,064 - 2,499,064
Federal and State grants 1,979,810 - 1,979,810
Community preservation 1,070,045 - 1,070,045
Gift funds 1,942,301 - 1,942,301
Other specific purposes 913,749 - 913,749
Unrestricted (57,308,073) 6,342,679 (50,965,394)
Total Net Position $ 27,995,047 $ 22,729,297 $ 50,724,344
See accompanying notes to basic financial statements.
Town of Canton, Massachusetts Page 34 of 118 Comprehensive Annual Financial ReportSource page 45
TOWN OF CANTON, MASSACHUSETTS
STATEMENT OF ACTIVITIES
FISCAL YEAR ENDED JUNE 30, 2015
Program Revenues Net (Expenses) Revenues and Changes in Net Position
Operating Capital
Charges for Grants and Grants and Governmental Business-Type
Functions/Programs Expenses Services Contributions Contributions Activities Activities Total
Primary government:
Governmental activities:
General government $ 5,683,805 $ 881,979 $ 763,428 $ - $ (4,038,398) $ (4,038,398)
Public safety 15,312,760 2,908,421 260,572 - (12,143,767) (12,143,767)
Education 54,772,830 2,640,969 11,965,095 541,545 (39,625,221) (39,625,221)
Public works 7,227,459 281,025 201,533 2,136,702 (4,608,199) (4,608,199)
Health and human services 1,609,060 151,953 288,922 - (1,168,185) (1,168,185)
Culture and recreation 3,006,143 399,396 35,410 153,822 (2,417,515) (2,417,515)
Interest expense 722,667 - 95,016 - (627,651) (627,651)
Total governmental activities 88,334,724 7,263,743 13,609,976 2,832,069 (64,628,936) (64,628,936)
Business-type activities:
Water 5,253,139 7,011,223 37,338 - $ 1,795,422 1,795,422
Sewer 5,416,303 6,559,894 - - 1,143,591 1,143,591
Rink 405,752 367,098 - - (38,654) (38,654)
Total business-type activities 11,075,194 13,938,215 37,338 - 2,900,359 2,900,359
Total Primary Government $ 99,409,918 $ 21,201,958 $ 13,647,314 $ 2,832,069 (64,628,936) 2,900,359 (61,728,577)
General Revenues:
Property taxes 63,720,607 - 63,720,607
Tax liens 213,952 - 213,952
Motor vehicle and other excise 4,385,878 - 4,385,878
Hotel and meals taxes 581,621 - 581,621
Payments in lieu of taxes 222,149 - 222,149
Grants and contributions not restricted
to specific programs 2,213,169 - 2,213,169
Penalties and interest on taxes 310,740 - 310,740
Unrestricted investment income 218,877 27,019 245,896
Total general revenues 71,866,993 27,019 71,894,012
Change in Net Position 7,238,057 2,927,378 10,165,435
Net Position:
Beginning of year, as restated (See Note IV) 20,756,990 19,801,919 40,558,909
End of year $ 27,995,047 $ 22,729,297 $ 50,724,344
See accompanying notes to basic financial statements.
Town of Canton, Massachusetts Page 35 of 118 Comprehensive Annual Financial ReportSource page 46
TOWN OF CANTON, MASSACHUSETTS
BALANCE SHEET
GOVERNMENTAL FUNDS
JUNE 30, 2015
Nonmajor Total
General Capital Governmental Governmental
Fund Projects Funds Funds
Assets
Cash and cash equivalents $ 14,516,851 $ 1,189,216 $ 10,092,522 $ 25,798,589
Investments 2,960,871 - 551,656 3,512,527
Receivables, net of allowance for uncollectibles:
Property taxes 541,545 - 2,982 544,527
Tax liens and foreclosures 1,203,433 - 1,785 1,205,218
Motor vehicle excise 478,923 - - 478,923
Intergovernmental 2,499,064 122,279 694,464 3,315,807
Departmental and other - - 346,442 346,442
Prepaid items 1,213,076 - - 1,213,076
Due from other funds 293,589 - - 293,589
Total Assets 23,707,352 1,311,495 11,689,851 36,708,698
Deferred Outflows of Resources - - - -
Total Assets and Deferred Outflows of Resources $ 23,707,352 $ 1,311,495 $ 11,689,851 $ 36,708,698
Liabilities
Warrants and accounts payable $ 957,884 $ 404,619 $ 192,577 $ 1,555,080
Accrued payroll and withholdings 3,849,178 - 208,576 4,057,754
Tax refunds payable 1,925,000 - - 1,925,000
Other liabilities 41,894 - - 41,894
Due to other funds - - 293,589 293,589
Bond anticipation notes payable - 797,786 - 797,786
Total Liabilities 6,773,956 1,202,405 694,742 8,671,103
Deferred Inflows of Resources
Unavailable revenues - property taxes 1,366,880 - 4,767 1,371,647
Unavailable revenues - motor vehicle excise 478,923 - - 478,923
Unavailable revenues - intergovernmental 2,499,064 - - 2,499,064
Unavailable revenues - other - - 346,442 346,442
Total Deferred Inflows of Resources 4,344,867 - 351,209 4,696,076
Fund Balances
Nonspendable - - 445,985 445,985
Restricted - 413,646 10,525,669 10,939,315
Committed 364,246 - - 364,246
Assigned 793,408 - - 793,408
Unassigned 11,430,875 (304,556) (327,754) 10,798,565
Total Fund Balances 12,588,529 109,090 10,643,900 23,341,519
Total Liabilities, Deferred Inflows of Resources,
and Fund Balances $ 23,707,352 $ 1,311,495 $ 11,689,851 $ 36,708,698
See accompanying notes to basic financial statements.
Town of Canton, Massachusetts Page 36 of 118 Comprehensive Annual Financial ReportSource page 47
TOWN OF CANTON, MASSACHUSETTS
RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET
TOTAL FUND BALANCES TO THE STATEMENT OF NET POSITION
JUNE 30, 2015
Total Governmental Fund Balances $ 23,341,519
Capital assets used in governmental activities are not financial resources and therefore are
not reported in the funds. 104,451,895
Other long-term assets are unavailable to pay current-period expenditures 4,696,076
Deferred outflows and inflows of resources to be recognized in future pension expense
are not available resources and, therefore, are not reported in the funds:
Net difference between projected and actual earnings on pension plan investments 1,517,174
Assets, deferred outflows of resources and liabilities and deferred inflows of resources of the
Town's internal service funds are included in the Statement of Net Position, but are not
reported in the governmental funds. 5,336,403
In the Statement of Activities, interest is accrued on outstanding long-term debt
whereas in the governmental funds interest is not reported until due. (285,292)
Long-term liabilities are not due and payable in the current period and therefore are not
reported in the government funds:
Bonds and notes payable (28,180,650)
Unamortized premiums on bonds (1,485,677)
Capital leases payable (104,250)
Landfill closure (78,000)
Compensated absences (1,584,469)
Net pension liability (36,739,917)
Other postemployment benefits (42,889,765)
Net effect of reporting long-term liabilities (111,062,728)
Net Position of Governmental Activities $ 27,995,047
See accompanying notes to basic financial statements.
Town of Canton, Massachusetts Page 37 of 118 Comprehensive Annual Financial ReportSource page 48
TOWN OF CANTON, MASSACHUSETTS
STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS
FISCAL YEAR ENDED JUNE 30, 2015
Nonmajor Total
General Capital Governmental Governmental
Fund Projects Funds Funds
Revenues:
Property taxes $ 63,274,078 $ - $ 493,510 $ 63,767,588
Tax liens 351,721 - - 351,721
Intergovernmental 11,910,279 1,206,545 4,654,269 17,771,093
Motor vehicle and other excises 4,119,643 - - 4,119,643
Hotel and meals taxes 581,621 - - 581,621
Licenses and permits 1,282,441 - - 1,282,441
Penalties and interest on taxes 310,740 - - 310,740
Payments in lieu of taxes 222,149 - - 222,149
Fines and forfeitures 113,467 - - 113,467
Charges for services - - 1,627,494 1,627,494
Departmental and other revenue 1,102,209 - 3,017,540 4,119,749
Investment income 142,310 - 28,870 171,180
Contributions and donations - 17,000 1,228,410 1,245,410
Total Revenues 83,410,658 1,223,545 11,050,093 95,684,296
Expenditures:
Current:
General government 3,805,782 17,668 186,341 4,009,791
Public safety 10,037,984 1,036,442 1,037,543 12,111,969
Education 36,051,564 1,643,654 4,800,836 42,496,054
Public works 5,024,286 2,385,965 2,059,709 9,469,960
Health and human services 825,985 1,256,883 115,116 2,197,984
Culture and recreation 1,697,749 - 407,503 2,105,252
Pension benefits 7,321,245 - - 7,321,245
Employee benefits 11,499,848 - 175,479 11,675,327
State and county assessments 944,583 - - 944,583
Debt service:
Principal 3,819,900 - - 3,819,900
Interest 1,166,454 - - 1,166,454
Total Expenditures 82,195,380 6,340,612 8,782,527 97,318,519
Excess (Deficiency) of Revenues Over (Under) Expenditures 1,215,278 (5,117,067) 2,267,566 (1,634,223)
Other Financing Sources (Uses):
Issuance of bonds and notes - 2,861,150 - 2,861,150
Premiums from bonds and notes 109,077 - 43,965 153,042
Capital lease financing - 104,250 - 104,250
Transfers in 1,026,376 750,000 80,000 1,856,376
Transfers out (830,000) (27,752) (998,624) (1,856,376)
Total Other Financing Sources (Uses) 305,453 3,687,648 (874,659) 3,118,442
Net Change in Fund Balances 1,520,731 (1,429,419) 1,392,907 1,484,219
FUND BALANCES - Beginning of year, as restated (See Note IV) 11,067,798 1,538,509 9,250,993 21,857,300
FUND BALANCES - End of year $ 12,588,529 $ 109,090 $ 10,643,900 $ 23,341,519
See acompanying notes to basic financial statements.
Town of Canton, Massachusetts Page 38 of 118 Comprehensive Annual Financial ReportSource page 49
TOWN OF CANTON, MASSACHUSETTS
RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES
IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES
FISCAL YEAR ENDED JUNE 30, 2015
Net Change in Fund Balances - Total Governmental Fund Balances $ 1,484,219
Governmental funds report capital outlays as expenditures. However, in the Statement of
Activities the cost of those assets is allocated over their estimated useful lives and
reported as depreciation expense. The net amounts are reflected here as reconciling items:
Capital outlays 8,445,932
Disposal of assets (7,500)
Depreciation expense (4,394,072)
Net effect of reporting capital assets 4,044,360
In the Statement of Activities, Internal Service Funds established to administer the Town's
health insurance and worker's compensation activities are included within the Statement of
activities whereas these activities are not presented in the Statement of Revenues,
Expenditures and Changes in Fund Balances. 1,870,398
The issuance of long-term debt provides current financial resources to governmental funds,
while the repayment of the principal of long-term debt consumes the financial resources of
governmental funds. Neither has any effect on net position. Also governmental funds report
the effect of issuance costs, premiums, discounts, and similar items when debt is first issued,
whereas these amounts are amortized in the Statement of Activities. The net amounts are
reflected here as reconciling items:
Issuance of general obligation bonds and notes (2,861,150)
Capital lease obligations (104,250)
Amortization of premiums on bonds and notes payable 414,813
Payments on capital leases 13,022
Repayments of debt 3,819,900
Net effect of reporting long-term debt 1,282,335
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 differ between
the two statements. The amount presented represents the difference in unavailable revenue. (312,254)
In the Statement of Activities, interest is accrued on outstanding long-term debt;
whereas in governmental funds interest is not reported until due. The net
amount presented here as a reconciling item represents the difference in
accruals between this year and the prior year. 28,974
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:
Landfill closure 26,000
Compensated absences (2,201)
Pension benefits (633,262)
Other postemployment benefits (550,512)
Net effect of reporting long-term liabilities (1,159,975)
Change in Net Position of Governmental Activities $ 7,238,057
See accompanying notes to basic financial statements.
Town of Canton, Massachusetts Page 39 of 118 Comprehensive Annual Financial ReportSource page 50
TOWN OF CANTON, MASSACHUSETTS
STATEMENT OF NET POSITION
PROPRIETARY FUNDS
JUNE 30, 2015
Governmental
Business-Type Activities Activities
Total Internal
Enterprise Service
Water Sewer Rink Funds Funds
Assets
Current assets:
Cash and cash equivalents $ 3,792,862 $ 2,710,646 $ 36,384 $ 6,539,892 $ 3,168,037
Investments - - - - 2,705,294
Receivables (net):
User charges 2,077,979 1,789,119 39,710 3,906,808 -
Tax liens 20,381 20,609 - 40,990 -
Departmental and other - - - - 319,878
Deposit held by third party - - - - 58,400
Total current assets 5,891,222 4,520,374 76,094 10,487,690 6,251,609
Noncurrent assets:
Nondepreciable capital assets 624,852 - - 624,852 -
Capital assets (net of depreciation) 30,540,945 15,091,741 125,264 45,757,950 -
Total noncurrent assets 31,165,797 15,091,741 125,264 46,382,802 -
Total Assets 37,057,019 19,612,115 201,358 56,870,492 6,251,609
Deferred Outflows of Resources
Net difference between projected and actual
earnings on pension plan investments 51,998 41,469 9,233 102,700 -
Total Deferred Outflows of Resources 51,998 41,469 9,233 102,700 -
Liabilities
Current liabilities:
Warrants and accounts payable 80,875 4,627 3,595 89,097 419,183
Accrued payroll and withholdings 23,856 8,354 543 32,753 -
Health claims incurred but not reported - - - - 496,023
Accrued interest 153,987 66,765 - 220,752 -
Other liabilities 10,000 - - 10,000 -
Compensated absences 27,586 3,351 4,396 35,333 -
Bonds and notes payable 1,762,059 934,639 8,000 2,704,698 -
Total current liabilities 2,058,363 1,017,736 16,534 3,092,633 915,206
Noncurrent liabilities:
Compensated absences 82,758 10,053 13,189 106,000 -
Other postemployment benefits 862,376 390,866 234,300 1,487,542 -
Net pension liability 1,259,184 1,004,209 223,593 2,486,986 -
Bonds and notes payable 19,490,442 7,562,292 18,000 27,070,734 -
Total noncurrent liabilities 21,694,760 8,967,420 489,082 31,151,262 -
Total Liabilities 23,753,123 9,985,156 505,616 34,243,895 915,206
Deferred Inflows of Resources - - - - -
Net Position
Net investment in capital assets 9,759,309 6,528,045 99,264 16,386,618 -
Unrestricted 3,596,585 3,140,383 (394,289) 6,342,679 5,336,403
Total Net Position $ 13,355,894 $ 9,668,428 $ (295,025) $ 22,729,297 $ 5,336,403
See accompanying notes to basic financial statements.
Town of Canton, Massachusetts Page 40 of 118 Comprehensive Annual Financial ReportSource page 51
TOWN OF CANTON, MASSACHUSETTS
STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION
PROPRIETARY FUNDS
FISCAL YEAR ENDED JUNE 30, 2015
Governmental
Business-Type Activities Activities
Total Internal
Enterprise Service
Water Sewer Rink Funds Funds
Operating Revenues:
Charges for services $ 7,011,223 $ 6,559,894 $ 367,098 $ 13,938,215 $ -
Employee contributions - - - - 3,578,511
Employer contributions - - - - 10,597,701
Stop loss reimbursements - - - - 618,860
Total Operating Revenues 7,011,223 6,559,894 367,098 13,938,215 14,795,072
Operating Expenses:
Operating costs 2,496,630 968,690 379,360 3,844,680 -
Massachusetts Water Resources Authority assessment 1,004,356 3,584,952 - 4,589,308 -
Depreciation 1,113,005 669,965 25,412 1,808,382 -
Employee benefits - - - - 12,972,371
Total Operating Expenses 4,613,991 5,223,607 404,772 10,242,370 12,972,371
Operating Income (Loss) 2,397,232 1,336,287 (37,674) 3,695,845 1,822,701
Nonoperating Revenues (Expenses):
Intergovernmental 37,338 - - 37,338 -
Investment income 17,065 9,768 186 27,019 47,697
Interest expense (639,148) (192,696) (980) (832,824) -
Total Nonoperating Revenues (Expenses) (584,745) (182,928) (794) (768,467) 47,697
Change in Net Position 1,812,487 1,153,359 (38,468) 2,927,378 1,870,398
Total Net Position - Beginning of the Year, as
restated (See Note IV) 11,543,407 8,515,069 (256,557) 19,801,919 3,466,005
Total Net Position - End of the Year $ 13,355,894 $ 9,668,428 $ (295,025) $ 22,729,297 $ 5,336,403
See accompanying notes to basic financial statements.
Town of Canton, Massachusetts Page 41 of 118 Comprehensive Annual Financial ReportSource page 52
TOWN OF CANTON, MASSACHUSETTS
STATEMENT OF CASH FLOWS
PROPRIETARY FUNDS
FISCAL YEAR ENDED JUNE 30, 2015
Governmental
Business-Type Activities Activities
Total Internal
Enterprise Service
Water Sewer Rink Funds Funds
Cash Flows from Operating Activities:
Receipts from users $ 6,766,055 $ 6,420,883 $ 330,585 $ 13,517,523 $ -
Receipts from interfund services provided - - - - 14,540,079
Payments to employees (804,344) (318,726) (123,233) (1,246,303) -
Payments to vendors (2,649,008) (4,334,117) (239,452) (7,222,577) -
Payments for interfund services used - - - - (13,300,996)
Net Cash Provided by (Used in) Operating
Activities 3,312,703 1,768,040 (32,100) 5,048,643 1,239,083
Cash Flows from Noncapital Financing Activities:
Intergovernmental operating grants 37,338 - - 37,338 -
Net Cash Provided by (Used in) Noncapital
Financing Activities 37,338 - - 37,338 -
Cash Flows from Capital and Related Financing Activities:
Proceeds from the issuance of bonds and notes 631,250 531,750 - 1,163,000 -
Acquisition and construction of capital assets (658,699) (209,933) - (868,632) -
Principal payments on bonds and notes (2,172,500) (1,216,265) (8,000) (3,396,765) -
Interest payments on bonds and notes (708,570) (236,810) (980) (946,360) -
Net Cash Used in Capital and Related
Financing Activities (2,908,519) (1,131,258) (8,980) (4,048,757) -
Cash Flows from Investing Activities:
Investment income 17,065 9,768 186 27,019 47,697
Investment of operating cash - - - - (143,720)
Net Cash Provided by (Used in) Investing Activities 17,065 9,768 186 27,019 (96,023)
Net Change in Cash and Cash Equivalents 458,587 646,550 (40,894) 1,064,243 1,143,060
Cash and Cash Equivalents:
Beginning of the year 3,334,275 2,064,096 77,278 5,475,649 2,024,977
End of the year $ 3,792,862 $ 2,710,646 $ 36,384 $ 6,539,892 $ 3,168,037
Reconciliation of Operating Income (Loss) to Net Cash
Provided by (Used in) Operating Activities:
Operating Income (Loss) $ 2,397,232 $ 1,336,287 $ (37,674) $ 3,695,845 $ 1,822,701
Adjustments to reconcile operating income (loss) to net
cash provided by (used in) operating activities:
Depreciation 1,113,005 669,965 25,412 1,808,382 -
Changes in assets and liabilities:
Receivables (245,168) (139,011) (36,513) (420,692) (254,993)
Accounts payable and accrued expenses 25,931 (116,510) 12,821 (77,758) 113,938
Health claims incurred but not reported - - - - (442,563)
Net pension liability 21,703 17,309 3,854 42,866 -
Net Cash Provided by (Used in) Operating
Activities $ 3,312,703 $ 1,768,040 $ (32,100) $ 5,048,643 $ 1,239,083
Noncash capital and related financing activities:
Amortization of bond premium $ 59,949 $ 41,548 $ - $ 101,497 $ -
See accompanying notes to basic financial statements.
Town of Canton, Massachusetts Page 42 of 118 Comprehensive Annual Financial ReportSource page 53
TOWN OF CANTON, MASSACHUSETTS
STATEMENT OF FIDUCIARY NET POSITION
JUNE 30, 2015
Other Private
Postemployment Purpose Agency
Benefits Trust Fund Trust Funds Funds
Assets
Cash and cash equivalents $ 5,683 $ 112,092 $ 1,322,170
Investments 1,185,110 - -
Total Assets 1,190,793 112,092 1,322,170
Liabilities
Warrants payable - - 30,013
Agency liabilities - - 1,292,157
Total Liabilities - - 1,322,170
Net Position
Held in trust for other postemployment benefits 1,190,793 - -
Held in trust for private purposes - 112,092 -
Total Net Position $ 1,190,793 $ 112,092 $ -
See accompanying notes to basic financial statements.
Town of Canton, Massachusetts Page 43 of 118 Comprehensive Annual Financial ReportSource page 54
TOWN OF CANTON, MASSACHUSETTS
STATEMENT OF CHANGES IN FIDUCIARY NET POSITION
YEAR ENDED JUNE 30, 2015
Other Private
Postemployment Purpose
Benefits Trust Fund Trust Funds
Additions
Contributions:
Employee $ 497,177 $ -
Employer 2,127,256 -
Other - 1,000
Total contributions 2,624,433 1,000
Investment income:
Interest and dividends 17,964 1,186
Total Additions 2,642,397 2,186
Deductions
Education - scholarships - 6,000
Retiree benefits 2,073,433 -
Total Deductions 2,073,433 6,000
CHANGE IN NET POSITION 568,964 (3,814)
NET POSITION AT BEGINNING OF YEAR 621,829 115,906
NET POSITION AT END OF YEAR $ 1,190,793 $ 112,092
See accompanying notes to basic financial statements.
Town of Canton, Massachusetts Page 44 of 118 Comprehensive Annual Financial ReportSource page 55
TOWN OF CANTON, MASSACHUSETTS
NOTES TO BASIC FINANCIAL STATEMENTS
YEAR ENDED JUNE 30, 2015
I. Summary of Significant Accounting Policies
The accompanying basic financial statements of the Town have been prepared in conformity with
generally accepted accounting principles (GAAP) as applied to state and local governments. GAAP
is prescribed by the Governmental Accounting Standards Board (GASB), which is the primary
standard-setting body for state and local government entities. The following is a summary of the more
significant policies and practices used by the Town:
A. Reporting Entity
The Town is located in Norfolk County, fifteen miles southwest of Boston and was incorporated
as a Town in 1797. An elected five member Board of Selectmen (“Selectmen”) governs the
Town and an appointed Town Administrator oversees the Town’s daily executive and
administrative duties. The Town follows the open town meeting form of government. The Town
provides governmental services for the territory within its boundaries, including police and fire
protection, disposal of garbage and rubbish, public education in grades K-12, water and sewer
services, street maintenance, parks and recreational facilities.
Component units, while separate entities, are in substance part of the governmental operations if
the significance of their operations and/or financial relationship with the Town meet certain
criteria. Pursuant to these criteria there are no component units required to be included in the
financial statements.
The Town is a member community of the Blue Hills Regional Technical School that provides
educational services to nine area communities. This joint venture assesses each community its
share of operational and debt service costs based on student population and other factors. In
fiscal year 2015, the Town’s share of the operating and debt service expenses was $1,098,642.
There is no equity interest reported in these financial statements. Complete audited financial
statements can be obtained directly from the District’s administrative office located at 800
Randolph Street, Canton, Massachusetts 02021.
B. Government-Wide and Fund Financial Statements
The government-wide financial statements (i.e., the statement of net position and the statement of
activities) report information on all of the non-fiduciary activities of the primary government and
its component units. For the most part, the effect of interfund activity has been removed from
these statements. Governmental activities, which normally are supported by taxes and
intergovernmental revenues, are reported separately from business-type activities, which
primariliy on fees and charges for support.
Separate financial statements are provided for governmental funds, proprietary funds and
fiduciary funds, even though the fiduciary funds are excluded from the government-wide
financial statements. Major individual government funds and major individual enterprise funds
are reported as separate columns in the fund financial statements. Nonmajor funds are aggregated
and presented in a single column.
Town of Canton, Massachusetts Page 45 of 118 Comprehensive Annual Financial ReportSource page 56
Major Fund Criteria – Major funds must be reported if both of the following criteria are met:
1) The total assets and deferred outflows, liabilities and deferred inflows, revenues, or
expenditures/expenses of an individual governmental or enterprise fund are at least ten
percent of the corresponding element (assets and deferred outflows, liabilities and
deferred inflows, etc.) for all funds of that category or type (total governmental or total
enterprise funds), and
2) The total assets and deferred outflows, liabilities and deferred inflows, revenues, or
expenditures/expenses of the individual governmental fund or enterprise fund are at least
five percent of the corresponding element for all governmental and enterprise funds
combined.
Additionally, any other governmental or enterprise fund that management believes is particularly
significant to the basic financial statements may be reported as a major fund.
C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation
The government-wide financial statements are reported using the economic resources
measurement focus and the accrual basis of accounting. Under this method, revenues are
recorded when earned and expenses are recorded when a liability is incurred. Property taxes are
recognized as revenues in the fiscal year for which they are levied. Grants and similar items are
recognized as revenue as soon as all eligibility requirements imposed by the provider are met.
The statement of activities demonstrates the degree to which the direct expenses of a given
function or segment is offset by program revenues. Direct expenses are those that are clearly
identifiable with a specific function or segment. Program revenues include: 1) charges to
customers or applicants who purchase, use, or directly benefit from goods, services, or privileges
provided by a given function or segment and 2) grants and contributions that are restricted to
meeting the operational or capital requirements of a particular function or segment. Taxes and
other items not properly included among program revenues are reported instead as general
revenues.
The governmental fund financial statements are reported using the current financial resources
measurement focus and the modified accrual basis of accounting. Revenues are recognized when
susceptible to accrual (i.e. measurable and available). Revenues are considered to be available
when they are collectible within the current period or soon enough thereafter to pay liabilities of
the current period. Expenditures are recorded when the related fund liability is incurred, except
for unmatured interest on general long-term debt which is recognized when due, certain
compensated absences, claims and judgments which are recognized when the obligations are
expected to be liquidated with current expendable available resources.
The Town considers property tax revenues to be available if they are material and collected
within 60 days after the end of the fiscal year. Investment income associated with the current
fiscal period is susceptible to accrual and has been recognized as revenue of the current fiscal
period. All other revenue items are considered to be measurable and available only when the
cash is received and are recognized as revenue at that time.
Town of Canton, Massachusetts Page 46 of 118 Comprehensive Annual Financial ReportSource page 57
The government reports the following major Governmental Funds:
General Fund – is the government’s primary operating fund. It accounts for all financial
resources of the general government except those required to be accounted for in another
fund.
Capital Projects Fund – is used to account for financial resources that are restricted,
committed or assigned to expenditures for capital outlays.
Nonmajor Governmental Funds – consist of special revenue, capital projects and permanent
funds that are aggregated and presented in the Nonmajor Governmental Funds column on the
Governmental Funds financial statements. The following describes the general use of these
fund types:
The Special Revenue Funds are used to account for the proceeds of specific revenue sources
that are restricted or committed to expenditures for specified purposes other than debt service
or capital projects.
The Permanent Funds are used to account for financial resources that are restricted to the
extent that only earnings, not principal, may be used for purposes that support the
governmental programs.
The proprietary fund financial statements are reported using the economic resources
measurement focus and the accrual basis of accounting. Under this method, revenues are
recognized when earned and expenses are recorded when the liabilities are incurred.
Proprietary funds distinguish operating revenues and expenses from non-operating items.
Operating revenues and expenses generally result from providing services and producing and
delivering goods in connection with a proprietary fund’s principal ongoing operations. The
principal operating revenues are user charges and fees, while operating expenses consist of
salaries, ordinary maintenance, assessments, indirect costs and depreciation. All revenues and
expenses not meeting this definition are reported as non-operating revenues and expenses.
The government reports the following major proprietary funds:
Water Enterprise Fund – is used to account for the operation of the Town’s water activities.
Costs associated with maintaining the related infrastructure and providing services to the
general public on a continuing basis, including depreciation, are financed or recovered
primarily through user charges.
Sewer Enterprise Fund – is used to account for the operation of the Town’s sewer activities.
Costs associated with maintaining the related infrastructure and providing services to the
general public on a continuing basis, including depreciation, are financed or recovered
primarily through user charges.
Rink Enterprise Fund – is used to account for the operation of the Town’s ice skating rink
activities.
Town of Canton, Massachusetts Page 47 of 118 Comprehensive Annual Financial ReportSource page 58
Additionally, the following proprietary fund type is reported:
Internal Service Fund – is used to account for the Town’s self-insured health insurance,
workers’ compensation, unemployment claims and building insurance activities. Because
these services primarily benefit governmental rather than business-type activities, they have
been included within governmental activities in the government-wide financial statements.
Fiduciary fund financial statements are reported using the economic resources measurement focus
and use the accrual basis of accounting. Fiduciary funds are used to account for assets held in a
trustee capacity and cannot be used to support the governmental programs.
The government reports the following fiduciary funds:
Other Postemployment Benefits Trust Fund – is used to accumulate funds for future payments
of other post-employment benefits for retirees such as health and life insurance.
Private-Purpose Trust Fund – is used to account for trust arrangements under which principal
and income benefit individuals, private organizations or other governments. This fund is
used for educational scholarships.
Agency Fund – is used to account for assets held in a purely custodial capacity. The Town’s
agency funds consist primarily of student activities and escrow and other deposits. Agency
funds apply the accrual basis of accounting but do not have a measurement focus.
D. Assets, Liabilities, Deferred Outflows/Inflows of Resources, and Net Position/Fund Equity
Deposits and Investments – The Town’s cash and cash equivalents are considered to be cash on
hand, demand deposits, and short-term investments with original maturities of three months or
less from the date of acquisition.
Investments for the Town are reported at fair value.
Receivables – Real estate and personal property taxes are assessed on January 1 every year. Bills
are sent quarterly and are due on August 1, November 1, February 1, and May 1, or thirty days
subsequent to the mailing date. Interest accrues on delinquent taxes at the rate of 14% per
annum. Motor vehicle excise are billed annually for each vehicle registered in the Town based on
vehicles reported to the Town by the Commonwealth of Massachusetts. Water and sewer user
fees are billed quarterly based on individual meter readings and are subject to interest and
penalties if not paid by the respective due dates. Property taxes, motor vehicle excise taxes and
water and sewer user fees are recorded as receivables in the fiscal year of the levy.
Real estate taxes and water and sewer user fees are secured through a lien process within 60 days
after the due date and are considered 100% collectible. Accordingly, an allowance for
uncollectible balances for these receivables is not reported. All personal property tax and excise
tax receivables are shown net of an allowance for uncollectible balances comprised of those
outstanding amounts greater than five years old. Other departmental receivables are shown net of
an allowance for uncollectible balances based on historical trends and specific account analysis.
Inventories – Inventories, which are not material to the basic financial statements, are considered
to be expenditures at the time of purchase.
Town of Canton, Massachusetts Page 48 of 118 Comprehensive Annual Financial ReportSource page 59
Capital Assets – Capital assets, which include land, land improvements, buildings and
improvements, machinery and equipment, vehicles and infrastructure (e.g. roads, water and sewer
mains, and similar items), are reported in the applicable governmental or business-type activities
columns in the government-wide financial statements. Capital assets are recorded at historical
cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded
at the estimated fair market value at the date of donation. Interest incurred during the
construction phase of capital assets of business-type activities is included as part of the
capitalized value of the assets constructed.
All purchases and construction costs in excess of $25,000 are capitalized at the date of acquisition
or construction, respectively, with expected lives of greater than one year. The costs of normal
maintenance and repairs that do not add to the value of the asset or materially extend assets lives
are not capitalized.
Capital assets (excluding land and construction-in-process) are depreciated by the Town on a
straight-line-basis over the following estimated useful lives:
Land improvements 20-50 years
Buildings and improvements 20-50 years
Machinery and equipment 3-20 years
Vehicles 5 years
Infrastructure 40-50 years
Interfund Balances – Activity between funds that are representative of lending arrangements
outstanding at the end of the fiscal year are referred to as either due to/from other funds or
advances to/from other funds. All other outstanding balances between funds are reported as due
to/from other funds.
Any residual balances outstanding between the governmental activities and business-type
activities are reported in the government-wide financial statements as internal balances.
Interfund Transfers – During the course of its operations, resources are permanently reallocated
between and within funds. These transactions are reported as transfers in and transfers out in the
individual fund statements. Transfers between and within governmental and fiduciary funds are
eliminated from the governmental activities in the statement of activities. Any residual balances
outstanding between the governmental activities and the business–type activities are reported in
the statement of activities as transfers, net.
Investment Income – Excluding the permanent funds, investment income derived from major and
nonmajor governmental funds is legally assigned to the general fund unless otherwise directed by
state law. Investment income of the proprietary funds is voluntarily assigned to the general fund.
Compensated Absences – It is the Town’s policy to permit employees to accumulate earned but
unused vacation and sick-pay benefits. Compensated absence liabilities related to both
governmental and business-type activities are normally paid from the funds reporting payroll and
related expenditures. Amounts related to these benefits are accrued when incurred in the
government-wide and proprietary fund financial statements. A liability for these amounts is
reported in Governmental Funds only if they have matured.
Town of Canton, Massachusetts Page 49 of 118 Comprehensive Annual Financial ReportSource page 60
Long-term Obligations – Long-term debt is reported as liabilities in the government-wide and
proprietary fund statement of net position. Bond premiums and discounts are amortized over the
life of the bonds using the effective interest method. Bond anticipation notes payable are reported
net of the applicable bond premium or discount.
In the governmental fund financial statements, the face amount of long-term debt issued is
reported as other financing sources. Premiums received on a debt issuance are reported as other
financing sources while discounts are reported as other financing uses. Issuance costs are
exclusively reported as general government expenditures regardless of whether they are withheld
from the actual proceeds.
Deferred Outflows/Inflows of Resources – In addition to assets, the statement of financial position
will sometimes report a separate section for deferred outflows of resources. This separate
financial statement element, deferred outflows of resources, represents a consumption of net
position that applies to a future period(s) and so will not be recognized as an outflow of resources
(expense/expenditure) until then. The government only has one item that qualifies for reporting
in this category. The Town has one item that is reported on the government-wide statement of
net position which relate to outflows from changes in the net pension liability. This will be
recognized in pension expense in future years as more fully described in Note III, subsection A.
In addition to liabilities, the statement of financial position will sometimes report a separate
section for deferred inflows of resources. This separate financial statement element, deferred
inflows of resources, represents an acquisition of net position that applies to a future period(s) and
so will not be recognized as an inflow of resources (revenue) until that time. The Town has only
one type of item, which arises only under a modified accrual basis of accounting, which qualifies
for reporting in this category. Accordingly, the item unavailable revenue is reported only in the
governmental funds balance sheet. The governmental funds report unavailable revenues from
four sources: property taxes, excise taxes, intergovernmental and other. These amounts are
deferred and recognized as an inflow of resources in the period that the amounts become
available.
Net Position – In the government-wide financial statements, net position reported as “net
investment in capital assets” includes capital assets, net of accumulated depreciation, less the
principal balance of outstanding debt used to acquire capital assets. Unspent proceeds of capital
related debt are not considered to be capital related debt.
Net position is reported as restricted when amounts are not available for appropriation or are
legally restricted by outside parties for a specific use. Net position has been restricted for the
following:
Nonexpendable permanent funds represent the endowment portion of donor restricted trusts
that support governmental programs.
Expendable permanent funds represent the spendable portion of donor restricted trusts that
support governmental programs.
Debt service represents a grant to fund a portion of the debt service on outstanding school
construction debt that will be amortized over the life of the bonds in accordance with state
law.
Town of Canton, Massachusetts Page 50 of 118 Comprehensive Annual Financial ReportSource page 61
Federal and State grants represent assets that have restrictions placed on them from federal
and state granting agencies.
Community preservation represents assets that are restricted by state law for the purposes of
acquiring or developing open space and recreational facilities, historic resources and
affordable housing.
Gift funds represent assets that are restricted by donors for specific governmental programs
and uses.
Other specific purposes represent assets that are restricted by third parties for specific
governmental programs and uses.
Fund Equity – In the fund financial statements, fund balance for governmental funds is reported
in classifications that comprise a hierarchy based primarily to the extent in which the Town is
required to honor constraints on the specific purpose for which amounts in the funds can be spent.
Fund balance is reported in five components – non-spendable, restricted, committed, assigned,
and unassigned as described below:
Non-spendable represents amounts that cannot be spent because they are either (a) not in
spendable form (i.e. inventory or prepaid) or (b) legally or contractually required to be
maintained intact such as the corpus of an endowment.
Restricted represents amounts that have constraints placed either externally by third-parties
(creditors, grantors, contributors, or laws or regulations of other governments) or by law
through constitutional provisions or enabling legislation. Enabling legislation authorizes the
Town to assess, levy, charge or otherwise mandate payment of resources (from external
resource providers) and includes a legally enforceable requirement (compelled by external
parties) that those resources be used only for the specific purposes stipulated in the
legislation.
Committed represents amounts that can only be used for specific purposes pursuant to
formal action of the Town Meeting through Town Meeting Articles, which represent the
most binding constraint that give rise to committed fund balance. Those committed amounts
cannot be used for any other purpose unless the Town Meeting removes or changes the
specified use by taking the same type of action (through Town Meeting Articles) it
employed previously to commit those amounts.
Assigned represents amounts that are constrained by the Town’s intent to be used for
specific purposes, but are neither restricted nor committed. The Board of Selectmen has by
ordinance authorized the Finance Director to assign fund balance. The Town Meeting may
also assign fund balance as it does when appropriating fund balance to cover a gap between
estimated revenue and appropriations in the subsequent year’s appropriated budget.
Unassigned represents amounts that have not been restricted, committed or assigned to
specific purposes within the general fund. The general fund is the only fund that reports a
positive unassigned fund balance amount. Other governmental funds besides the general
fund can only report a negative unassigned fund balance amount.
Town of Canton, Massachusetts Page 51 of 118 Comprehensive Annual Financial ReportSource page 62
When both restricted and unrestricted resources are available for use, it is the Town’s policy to
use restricted resources first, then unrestricted resources (committed, assigned and unassigned) as
they are needed. When unrestricted resources (committed, assigned and unassigned) are available
for use it is the Town’s policy to use committed resources first, then assigned, and then
unassigned as they are needed.
The Town has not established financial policies with respect to maintaining minimum fund
balance amounts.
Stabilization Funds – The Town maintains a general stabilization fund which may be used for any
municipal purpose upon a two-thirds vote of the Town Meeting. The balance of the fund totals
$5,754,735 at June 30, 2015 and is reported as unassigned fund balance in the General Fund.
Encumbrances – The Town’s encumbrance policy regarding the general fund is to (1) classify
encumbrances that arise from the issuance of purchase orders resulting from normal purchasing
activity approved by the Finance Department as assigned, and (2) classify encumbrances that
result from an action of the Town Meeting as committed. Encumbrances of funds already
restricted, or committed are included within the classification of those fund balances and not
reported separately. The Town reports $288,408 of encumbrances from normal purchasing
activity in the general fund as assigned and $364,246 of encumbrances from Town Meeting
Articles in the general fund as committed. There are no encumbrances reported in any other fund.
The following table reflects the Town’s fund equity categorizations:
Nonmajor
Capital Governmental
General Projects Funds Total
Nonspendable:
Nonexpendable trust funds $ - $ - $ 445,985 $ 445,985
Restricted:
Town revolving - - 634,647 634,647
School revolving - - 1,749,749 1,749,749
Private grants - - 1,368,169 1,368,169
Ambulance receipts reserved - - 1,254,639 1,254,639
Community preservation - - 1,065,278 1,065,278
Town grants - - 1,037,803 1,037,803
School grants - - 764,013 764,013
Town donations - - 1,810,982 1,810,982
Capital outlay - 413,646 - 413,646
Cemetery trust funds - - 23,614 23,614
Library trust funds - - 164,704 164,704
Other trust funds - - 154,244 154,244
Other purposes - - 497,827 497,827
Committed:
General government 104,257 - - 104,257
Public works 76,999 - - 76,999
Culture and recreation 102,143 - - 102,143
Other purposes 80,847 - - 80,847
Assigned:
Purchase orders 288,408 - - 288,408
Subsequent years' budget 505,000 - - 505,000
Unassigned 11,430,875 (304,556) (327,754) 10,798,565
$ 12,588,529 $ 109,090 $ 10,643,900 $ 23,341,519
Town of Canton, Massachusetts Page 52 of 118 Comprehensive Annual Financial ReportSource page 63
E. Excess of Expenditures Over Appropriations and Deficits
During fiscal year 2015, no expenditures exceeded appropriations in the General Fund.
The Town incurred individual fund deficits totaling $304,556 in the Capital Projects major fund.
The Town also incurred individual fund deficits totaling $327,754 in two special revenue funds
that are reported in the non-major governmental funds. These deficits will be funded through
grant revenues and bond proceeds during fiscal year 2016.
F. Use of Estimates
The preparation of basic financial statements in conformity with GAAP requires management to
make estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosure for contingent assets and liabilities at the date of the basic financial statements and the
reported amounts of the revenues and expenditures/expenses during the fiscal year. Actual results
could vary from estimates that were used.
II. Detailed Notes to All Funds
A. Deposits and Investments
A cash and investment pool is maintained that is available for use by all funds. Each fund type’s
portion of this pool is displayed on the balance sheet as “cash and cash equivalents”. The
deposits and investments of trust funds are held separately from those of other funds.
State laws and regulations require the Town to invest funds only in pre-approved investment
instruments which include but are not necessarily limited to bank deposits, money markets,
certificates of deposit, U.S. obligations, repurchase agreements, and the State Treasurer’s
investment pool (the Pool). In addition, the statutes impose various limitations on the amount and
length of investments and deposits. Repurchase agreements cannot be for a period of over ninety
days, and the underlying security must be a United States obligation.
The Pool meets the criteria of an external investment pool. The Pool is administered by the
Massachusetts Municipal Depository Trust (the MMDT), which was established by the Treasurer
of the Commonwealth who serves as Trustee. The fair value of the position in the Pool is the
same as the value of the Pool shares.
Custodial Credit Risk: Deposits - In the case of deposits, this is the risk that in the event of a bank
failure, the government’s deposits may not be returned to it. The Town has adopted a policy that
no more than 25% of the Town’s cash may be comprised of unsecured bank deposits, except for a
30 day reprieve during times of heavy collections. The credit worthiness of banks will be tracked
by Veribanc, or other bank credit worthiness reporting systems, and the Treasurer will move or
collateralize deposits as a result of negative reports. At year-end, the carrying amount of the
Town's deposits was $33,684,849 and the bank balance was $34,223,867. Of the Town's bank
balance, $33,559,175 was covered by federal depository insurance or the Depositor’s Insurance
Fund; $462,705 was collateralized and the remainder was exposed to custodial credit risk because
it was uninsured and uncollateralized.
Town of Canton, Massachusetts Page 53 of 118 Comprehensive Annual Financial ReportSource page 64
Custodial Credit Risk: Investments – In the case of investments, this is the risk that in the event of
the invested party not being able to provide required payments to investors, ceasing to exist, or
filing of bankruptcy, the Town may not be able to recover the full amount of its principal
investment and/or investment earnings. The Town has adopted a policy to review the financial
institutions financial statements and the background of each advisor. All securities not held
directly by the Town will be held in the Town’s name and tax identification number by a third
party custodian and evidenced by safekeeping receipts showing individual CUSIP numbers for
each security. The investments in the MMDT are not exposed to custodial credit risk as their
existence is not evidenced by securities that exist in physical or book form. The Town’s
$1,710,000 investment in a repurchase agreement is held by a counterparty, but not in the Town’s
name. The repurchase agreement is fully collateralized with U.S. government securities.
Interest Rate Risk – The Town limits investment maturities as a means of managing its exposure
to fair value losses arising from increasing interest rates. The Town’s policy limits investments
of operating funds to one year or less.
Concentration of Credit Risk – The Town has adopted a policy to limit the amount of investments
that may be invested in a single issuer to 10% of the Town’s investments, except for U.S
government obligations, investments fully collateralized with U.S. government obligations and
the Pool (MMDT). At June 30, 2015, Town has 22% of its investments in U.S. government
obligations, 11% of its investments in repurchase agreements collateralized with United States
government backed securities and 10% in the MMDT.
Credit Risk – The Town has adopted a policy to only purchase investment grade securities with a
high concentration in securities rated ‘A’ or better.
At June 30, 2015 the credit quality ratings of investments were as follows:
Corporate U.S. Government State
Quality Ratings Fixed Agencies & Certificates Investment
(Moody's) Income Treasuries of Deposit Pool Totals
AAA $ - $ 3,315,075 $ - $ - $ 3,315,075
AA2 50,616 - - - 50,616
A1 160,000 - - - 160,000
A2 269,530 - - - 269,530
BAA1 458,912 - - - 458,912
BAA2 103,425 - - - 103,425
Not rated - - 4,462,551 1,551,614 6,014,165
Totals - All $ 1,042,483 $ 3,315,075 $ 4,462,551 $ 1,551,614 $ 10,371,723
Town of Canton, Massachusetts Page 54 of 118 Comprehensive Annual Financial ReportSource page 65
At June 30, 2015 the Town had the following investments and maturities:
Time Until Maturity (Years)
Fair Less More
Investment Type Value Than 1 1-5 6-10 Than 10
Corporate fixed income securities $ 1,042,483 $ 51,043 $ 991,440 $ - $ -
U.S. government obligations 3,315,075 356,615 2,703,464 254,996 -
Certificates of deposit 4,462,551 2,619,272 1,843,279 - -
State investment pool 1,551,614 1,551,614 - - -
Total Town investments with maturities 10,371,723 $ 4,578,544 $ 5,538,183 $ 254,996 $ -
Other Investments:
Equities 1,297,782
Mutual funds 1,747,591
Repurchase agreements 1,710,000
Total Town investments $ 15,127,096
B. Receivables
Receivables as of year-end for the Town’s individual and non-major governmental funds in the
aggregate, including the applicable allowances for uncollectible accounts, are as follows:
Gross Allowance for Net
Amount Uncollectibles Amount
Receivables:
Real estate and personal property taxes $ 590,451 $ (48,906) $ 541,545
Tax liens and foreclosures 1,205,218 - 1,205,218
Community preservation surcharges 2,982 - 2,982
Motor vehicle and other excise taxes 733,605 (254,682) 478,923
Ambulance fees 557,894 (304,585) 253,309
Public safety details 93,133 - 93,133
Intergovernmental 3,315,807 - 3,315,807
Total $ 6,499,090 $ (608,173) $ 5,890,917
Town of Canton, Massachusetts Page 55 of 118 Comprehensive Annual Financial ReportSource page 66
Receivables as of year-end for the Town’s proprietary funds are as follows:
Gross Allowance for Net
Amount Uncollectibles Amount
Receivables:
Water user charges $ 2,077,979 $ - $ 2,077,979
Water liens 20,381 - 20,381
Sewer user charges 1,789,119 - 1,789,119
Sewer liens 20,609 - 20,609
Rink user charges 39,710 - 39,710
Stop loss receivables 319,878 - 319,878
Total $ 4,267,676 $ - $ 4,267,676
Governmental funds report deferred inflows of resources in connection with receivables for
revenues that are not considered to be available to liquidate liabilities of the current period. The
following identifies the components of deferred inflows of resources in the governmental funds:
Other
General Governmental
Fund Funds Total
Receivable type:
Real estate and personal property taxes $ 163,447 $ - $ 163,447
Tax liens and foreclosures 1,203,433 1,785 1,205,218
Motor vehicle and other excise taxes 478,923 - 478,923
Community preservation surcharges - 2,982 2,982
Ambulance fees - 253,309 253,309
Public safety details - 93,133 93,133
Intergovernmental 2,499,064 - 2,499,064
Total $ 4,344,867 $ 351,209 $ 4,696,076
School Building Assistance Reimbursement – As of June 30, 2015, the Town expects to receive
the balance of grants from the Commonwealth of Massachusetts under various construction
reimbursement regulations totaling approximately $2.9 million applicable to approved school
construction costs which includes both principal and interest. Approximately $2.5 million of
such costs are reimbursed to the Town in equal installments over the life of the related bond
issues and are subject to appropriation only by the State Legislature. Approximately $0.1 million
is due in a lump sum during fiscal year 2016. In the Governmental funds, a receivable of
approximately $2.6 million under the caption Intergovernmental has been recorded. This includes
the reimbursable portion of the principal balance and the lump sum payout as of June 30,
2015.
Town of Canton, Massachusetts Page 56 of 118 Comprehensive Annual Financial ReportSource page 67
C. Interfund Receivables, Payables and Transfers
The composition of interfund balances at June 30, 2015 is as follows:
Receivable Fund Payable Fund Amount
General Fund Nonmajor Governmental Funds - $ 293,589
Roadway Improvements
The outstanding balances between funds result mainly from the timing difference between the
dates that reimbursable expenditures occur, the intergovernmental reimbursements are received
and the payments to the general fund are made.
The composition of interfund transfers for the fiscal year ended June 30, 2015 is as follows:
Transfers In
Capital Nonmajor
General Projects Governmental
Transfers Out Fund Fund Funds Total
General Fund $ - $ 750,000 $ 80,000 $ 830,000 (1)
Capital Projects Fund 27,752 - - 27,752 (2)
Nonmajor Governmental Funds 998,624 - - 998,624 (2)
Total $ 1,026,376 $ 750,000 $ 80,000 $ 1,856,376
(1) Transfers to capital projects fund for various capital purposes and transfers to nonmajor
governmental funds for retirement buyback reserves ($80,000).
(2) Transfers to general fund to supplement operating budgets
Town of Canton, Massachusetts Page 57 of 118 Comprehensive Annual Financial ReportSource page 68
D. Capital Assets
Capital asset activity for governmental activities for the year ended June 30, 2015, was as follows:
Beginning Ending
Balance Increases Decreases Balance
Governmental Activities:
Capital assets not being depreciated:
Land $ 11,158,868 $ - $ - $ 11,158,868
Construction in process 1,005,731 - (1,005,731) -
Total capital assets not being depreciated 12,164,599 - (1,005,731) 11,158,868
Capital assets being depreciated:
Land improvements 2,765,111 - - 2,765,111
Buildings 77,555,239 2,020,940 - 79,576,179
Building improvements 24,505,868 1,799,279 - 26,305,147
Machinery and equipment 6,863,310 1,424,994 (590,399) 7,697,905
Vehicles 5,070,197 569,230 - 5,639,427
Infrastructure 19,573,633 3,637,220 - 23,210,853
Total capital assets being depreciated 136,333,358 9,451,663 (590,399) 145,194,622
Less accumulated depreciation for:
Land improvements (1,321,711) (166,039) - (1,487,750)
Buildings (22,992,563) (1,799,954) - (24,792,517)
Building improvements (10,821,457) (989,100) - (11,810,557)
Machinery and equipment (3,910,552) (553,037) - (4,463,589)
Vehicles (4,316,991) (351,135) 582,899 (4,085,227)
Infrastructure (4,727,148) (534,807) - (5,261,955)
Total accumulated depreciation (48,090,422) (4,394,072) 582,899 (51,901,595)
Total capital assets being depreciated, net 88,242,936 5,057,591 (7,500) 93,293,027
Total governmental activities capital assets, net $ 100,407,535 $ 5,057,591 $ (1,013,231) $ 104,451,895
Capital asset activity for business-type activities for the year ended June 30, 2015, was as follows:
Beginning Ending
Balance Increases Decreases Balance
Business-Type Activities:
Capital assets not being depreciated:
Land $ 624,852 $ - $ - $ 624,852
Capital assets being depreciated:
Buildings 18,758,743 - - 18,758,743
Building improvements 167,425 - - 167,425
Machinery and equipment 2,333,762 544,077 - 2,877,839
Vehicles 881,240 45,900 (35,000) 892,140
Infrastructure 55,198,818 278,655 - 55,477,473
Total capital assets being depreciated 77,339,988 868,632 (35,000) 78,173,620
Less accumulated depreciation for:
Buildings (3,464,064) (438,653) - (3,902,717)
Building improvements (70,914) (8,621) - (79,535)
Machinery and equipment (910,774) (252,964) - (1,163,738)
Vehicles (765,144) (48,598) 35,000 (778,742)
Infrastructure (25,431,392) (1,059,546) - (26,490,938)
Total accumulated depreciation (30,642,288) (1,808,382) 35,000 (32,415,670)
Total capital assets being depreciated, net 46,697,700 (939,750) - 45,757,950
Total business-type activities capital assets, net $ 47,322,552 $ (939,750) $ - $ 46,382,802
Town of Canton, Massachusetts Page 58 of 118 Comprehensive Annual Financial ReportSource page 69
Beginning Ending
Balance Increases Decreases Balance
Business-type Activities: Water
Capital assets not being depreciated:
Land $ 624,852 $ - $ - $ 624,852
Capital assets being depreciated:
Buildings 17,495,139 - - 17,495,139
Building improvements 27,465 - - 27,465
Machinery and equipment 1,432,974 544,077 - 1,977,051
Vehicles 541,364 - (35,000) 506,364
Infrastructure 25,475,648 114,622 - 25,590,270
Total capital assets being depreciated 44,972,590 658,699 (35,000) 45,596,289
Less accumulated depreciation for:
Buildings (3,117,957) (408,530) - (3,526,487)
Building improvements (3,433) (1,373) - (4,806)
Machinery and equipment (566,676) (170,501) - (737,177)
Vehicles (438,845) (34,957) 35,000 (438,802)
Infrastructure (9,850,428) (497,644) - (10,348,072)
Total accumulated depreciation (13,977,339) (1,113,005) 35,000 (15,055,344)
Total capital assets being depreciated, net 30,995,251 (454,306) - 30,540,945
Total Water capital assets, net $ 31,620,103 $ (454,306) $ - $ 31,165,797
Business-type Activities: Sewer
Capital assets being depreciated:
Buildings $ 1,263,604 $ - $ - $ 1,263,604
Machinery and equipment 642,991 - - 642,991
Vehicles 310,716 45,900 - 356,616
Infrastructure 29,723,170 164,033 - 29,887,203
Total capital assets being depreciated 31,940,481 209,933 - 32,150,414
Less accumulated depreciation for:
Buildings (346,107) (30,123) - (376,230)
Machinery and equipment (164,498) (64,299) - (228,797)
Vehicles (297,139) (13,641) - (310,780)
Infrastructure (15,580,964) (561,902) - (16,142,866)
Total accumulated depreciation (16,388,708) (669,965) - (17,058,673)
Total capital assets being depreciated, net 15,551,773 (460,032) - 15,091,741
Total Sewer capital assets, net $ 15,551,773 $ (460,032) $ - $ 15,091,741
Town of Canton, Massachusetts Page 59 of 118 Comprehensive Annual Financial ReportSource page 70
Beginning Ending
Balance Increases Decreases Balance
Business-type Activities: Rink
Capital assets being depreciated:
Building improvements $ 139,960 $ - $ - $ 139,960
Machinery and equipment 257,797 - - 257,797
Vehicles 29,160 - - 29,160
Total capital assets being depreciated 426,917 - - 426,917
Less accumulated depreciation for:
Building improvements (67,481) (7,248) - (74,729)
Machinery and equipment (179,600) (18,164) - (197,764)
Vehicles (29,160) - - (29,160)
Total accumulated depreciation (276,241) (25,412) - (301,653)
Total capital assets being depreciated, net 150,676 (25,412) - 125,264
Total Rink capital assets, net $ 150,676 $ (25,412) $ - $ 125,264
Depreciation expense was charged to functions/programs as follows:
Governmental Activities: Business-Type Activities:
General government $ 166,170 Water $ 1,113,005
Public safety 599,182 Sewer 669,965
Education 2,370,510 Rink 25,412
Public works 842,096 $ 1,808,382
Health and human services 68,958
Culture and recreation 347,156
$ 4,394,072
Capital Asset Impairment – During the fiscal year, a portion of the roof of the ice rink used in the
Rink Enterprise Fund operations collapsed due to the significant snowfall in the area. The ice
rink is leased from the Commonwealth and, therefore, the building is not a capital asset of the
Rink Enterprise Fund. Capital assets of the Rink Enterprise Fund with a carrying value of
$125,264 were idle at year-end and are considered temporarily impaired due to the ice rink being
closed until repairs can be completed. The Rink Enterprise Fund has not recognized a provision
for this damage as all repairs from this event are expected to be funded by the Commonwealth
and Federal disaster assistance. The rink is expected to be operational during fiscal year 2017.
E. Leases
The Town entered into a non-cancelable lease for the purchase of a school bus. This lease
qualifies as a capital lease for accounting purposes and, therefore, has been recorded at the
present value of the future minimum lease payments as of the inception date.
Assets acquired through capital leases are as follows:
Amount
Asset:
School bus $ 104,250
Less: accumulated depreciation -
Total $ 104,250
Town of Canton, Massachusetts Page 60 of 118 Comprehensive Annual Financial ReportSource page 71
The future minimum lease payments and the present value of the minimum lease payments at
June 30, 2015, are as follows:
Fiscal Year Ended June 30, Amount
2016 $ 21,713
2017 21,713
2018 21,713
2019 21,713
2020 21,713
Total minimum lease payments 108,565
Less: amounts representing interest (4,315)
Present value of minimum lease payments $ 104,250
`
F. Temporary Debt
The Town is authorized to borrow on a temporary basis to fund the following:
Current Operating Costs – Prior to collection of revenues, expenditures may be financed through
the issuance of revenue or tax anticipation notes (RANS or TANS).
Capital Projects and Other Approved Costs – Projects may be temporarily funded through the
issuance of bond anticipation notes (BANS) or grant anticipation notes (GANS). In certain cases,
prior to the issuance of these temporary notes, the governing body must take the necessary legal
steps to authorize the issuance of the general obligation bonds. Temporary notes may not exceed
the aggregate amount of bonds authorized or the grant award amount.
Temporary notes are general obligations of the Town and carry maturity dates that are limited by
state law. Interest expenditures and expenses for temporary borrowings are accounted for in the
general fund and enterprise funds, respectively.
Temporary notes outstanding at June 30, 2015, are payable as follows:
Interest Maturity July 1, June 30,
Type Rate Date 2014 Additions Retirements 2015
BAN 1.50% Matured $ 1,985,950 $ - $ (1,985,950) $ -
BAN 0.50% 03/27/16 - 797,786 - 797,786
Total Governmental Notes 1,985,950 797,786 (1,985,950) 797,786
BAN 1.50% Matured 930,000 (930,000) -
Total Business-Type Notes 930,000 - (930,000) -
Total Notes Payable $ 2,915,950 $ 797,786 $ (2,915,950) $ 797,786
Town of Canton, Massachusetts Page 61 of 118 Comprehensive Annual Financial ReportSource page 72
Short-term (BANs) issued for nonmajor governmental funds were issued for a fire truck
($150,000), fire station repairs ($107,786), departmental equipment ($145,000) and school
building improvements ($395,000).
G. Long–Term Obligations
The Town issues general obligation bonds and notes to provide funds for the acquisition and
construction of major capital facilities. General obligation bonds and notes have been issued for
both governmental and business-type activities. Additionally, the Town incurs various other
long-term obligations relative to associated personnel costs.
State law permits the Town, under the provisions of Chapter 44, Section 10, to authorize
indebtedness up to a limit of 5.0 percent of its equalized valuation. Debt issued in accordance
with this section of the law is designated as being “inside the debt limit.” In addition, the Town
may authorize debt in excess of that limit for specific purposes. Such debt, when issued, is
designated as being “outside the debt limit”.
The following reflects the current year activity in the long-term liability accounts:
Beginning Ending Due within
Balance Additions Deletions Balance one year
Governmental Activities:
Bond and note indebtedness $ 29,139,400 $ 2,861,150 $ (3,819,900) $ 28,180,650 $ 3,931,624
Unamortized bond premium 1,900,490 - (414,813) 1,485,677 353,696
Capital leases 13,022 104,250 (13,022) 104,250 20,004
Landfill closure 104,000 - (26,000) 78,000 26,000
Compensated absences 1,582,268 397,768 (395,567) 1,584,469 396,117
Net pension liability * 34,589,481 5,494,785 (3,344,349) 36,739,917 -
Other postemployment benefits 42,339,253 4,876,229 (4,325,717) 42,889,765 -
Total Governmental Activities $ 109,667,914 $ 13,734,182 $ (12,339,368) $ 111,062,728 $ 4,727,441
Business-Type Activities - Water:
Bond and note debt $ 21,971,300 $ 631,250 $ (1,642,500) $ 20,960,050 $ 1,708,750
Unamortized bond premium 352,400 - (59,949) 292,451 53,309
Compensated absences 124,290 17,127 (31,073) 110,344 27,586
Net pension liability * 1,185,483 188,322 (114,621) 1,259,184 -
Other postemployment benefits 812,497 60,569 (10,690) 862,376 -
Total Water 24,445,970 897,268 (1,858,833) 23,484,405 1,789,645
Business-Type Activities - Sewer:
Bond and note debt 8,643,555 531,750 (816,265) 8,359,040 899,515
Unamortized bond premium 179,439 - (41,548) 137,891 35,124
Compensated absences 71,806 10,771 (69,173) 13,404 3,351
Net pension liability * 945,431 150,189 (91,411) 1,004,209 -
Other postemployment benefits 371,978 27,537 (8,650) 390,865 -
Total Sewer 10,212,209 720,247 (1,027,047) 9,905,409 937,990
Business-Type Activities - Rink:
Bond and note debt 34,000 - (8,000) 26,000 8,000
Compensated absences 16,002 5,585 (4,001) 17,586 4,396
Net pension liability * 210,506 33,440 (20,353) 223,593 -
Other postemployment benefits 224,841 10,689 (1,230) 234,300 -
Total Rink 485,349 49,714 (33,584) 501,479 12,396
Total Business-Type Activities $ 35,143,528 $ 1,667,229 $ (2,919,464) $ 33,891,293 $ 2,740,031
* = Restated due to GASB 68 implementation (See Note III, Subsection H)
Town of Canton, Massachusetts Page 62 of 118 Comprehensive Annual Financial ReportSource page 73
The governmental activities liabilities will be liquidated by the general fund. The business-type
liabilities will be liquidated by the enterprise fund reporting the liabilities.
The following is a summary of outstanding long-term debt obligations as of June 30, 2015:
Interest Beginning Ending
Description of Issue Rate Balance Additions Maturities Balance
Governmental Activities:
General Obligation Bonds 2.00 - 5.00% $10,123,000 $ 2,861,150 $ (1,078,000) $11,906,150
Refunding Bonds 2.00 - 4.00% 19,016,400 - (2,741,900) 16,274,500
Total Governmental Activities 29,139,400 2,861,150 (3,819,900) 28,180,650
Add: Unamortized bond premium 1,900,490 - (414,813) 1,485,677
Total Governmental Activities, net $ 31,039,890 $ 2,861,150 $ (4,234,713) $ 29,666,327
Business-Type Activities - Water:
General Obligation Bonds 2.00 - 5.00% $18,709,000 $ 631,250 $ (1,247,000) $18,093,250
Refunding Bonds 3.25 - 4.00% 1,485,300 - (195,500) 1,289,800
Massachusetts Water Resource Authority 0.00% 1,777,000 - (200,000) 1,577,000
Total Water 21,971,300 631,250 (1,642,500) 20,960,050
Add: Unamortized bond premium 352,400 - (59,949) 292,451
Total Water, net 22,323,700 631,250 (1,702,449) 21,252,501
Business-Type Activities - Sewer:
General Obligation Bonds 2.00 - 5.00% 2,419,000 531,750 (180,000) 2,770,750
Refunding Bonds 3.25 - 4.00% 2,383,300 - (359,600) 2,023,700
Massachusetts Water Resource Authority 0.00% 566,500 - (113,300) 453,200
Massachusetts Clean Water Trust 2.00% 3,274,755 - (163,365) 3,111,390
Total Sewer 8,643,555 531,750 (816,265) 8,359,040
Add: Unamortized bond premium 179,439 - (41,548) 137,891
Total Sewer, net 8,822,994 531,750 (857,813) 8,496,931
Business-Type Activities - Rink:
General Obligation Bonds 2.00 - 4.25% 34,000 - (8,000) 26,000
Total Rink 34,000 - (8,000) 26,000
Total Business-Type Activities, net $ 31,180,694 $ 1,163,000 $ (2,568,262) $ 29,775,432
The following represents authorized and unissued debt as of June 30, 2015:
Project Amount
Governmental:
Infrastructure $ 8,597,000
School building improvements 5,596,458
Land purchase 1,740,000
Other capital projects 1,102,000
Business-type:
Water projects 2,920,000
Sewer projects 2,680,095
Rink compressor 245,000
Total Authorized and Unissued $ 22,880,553
Town of Canton, Massachusetts Page 63 of 118 Comprehensive Annual Financial ReportSource page 74
Payments on outstanding bond balances due in future years consist of the following:
Governmental Activities
Year Ending Principal Interest
June 30, Balance Balance Total
2016 $ 3,931,624 $ 1,051,609 $ 4,983,233
2017 3,635,850 910,540 4,546,390
2018 3,266,933 777,386 4,044,319
2019 3,011,421 650,822 3,662,243
2020 2,821,516 530,268 3,351,784
2021 - 2025 9,043,196 1,194,221 10,237,417
2026 - 2030 2,075,479 228,679 2,304,158
2031 - 2035 394,631 19,404 414,035
Total $ 28,180,650 $ 5,362,929 $ 33,543,579
Business-Type Activities: Water
Year Ending Principal Interest
June 30, Balance Balance Total
2016 $ 1,708,750 $ 666,299 $ 2,375,049
2017 1,663,400 616,268 2,279,668
2018 1,571,800 550,278 2,122,078
2019 1,566,700 503,948 2,070,648
2020 1,558,200 456,460 2,014,660
2021 - 2025 6,892,200 1,632,872 8,525,072
2026 - 2030 4,912,000 696,075 5,608,075
2031 - 2035 1,087,000 56,926 1,143,926
Total $ 20,960,050 $ 5,179,126 $ 26,139,176
Business-Type Activities: Sewer
Year Ending Principal Interest
June 30, Balance Balance Total
2016 $ 899,515 $ 218,420 $ 1,117,935
2017 892,132 195,095 1,087,227
2018 881,367 171,518 1,052,885
2019 870,771 146,674 1,017,445
2020 675,746 121,346 797,092
2021 - 2025 2,149,739 391,358 2,541,097
2026 - 2030 1,564,794 156,410 1,721,204
2031 - 2035 424,976 12,250 437,226
Total $ 8,359,040 $ 1,413,071 $ 9,772,111
Business-Type Activities: Rink
Year Ending Principal Interest
June 30, Balance Balance Total
2016 $ 8,000 $ 780 $ 8,780
2017 6,000 540 6,540
2018 6,000 360 6,360
2019 6,000 180 6,180
Total $ 26,000 $ 1,860 $ 27,860
Town of Canton, Massachusetts Page 64 of 118 Comprehensive Annual Financial ReportSource page 75
III. Other Information
A. Retirement System
Retirement System Description – The Town contributes to the Norfolk County Retirement System
(the “System”), a cost-sharing multiple-employer defined benefit pension plan. The System was
established under Chapter 32 of the Commonwealth of Massachusetts General Laws (MGL) and
is administered by Norfolk County Retirement Board (the “Board”). Standalone financial
statements for the year ended December 31, 2014 were issued and are available at the Norfolk
County Retirement System, 480 Neponset Street, Canton, MA 02021.
The System provides retirement, disability and death benefits to plan members and beneficiaries.
Chapter 32 of the MGL assigns authority to establish and amend benefit provisions of the plan.
Cost-of-living adjustments granted between 1981 and 1997 and any increase in other benefits
imposed by the Commonwealth’s state law during those years are borne by the Commonwealth
and are deposited into the pension fund directly. Cost-of-living adjustments granted after 1997
must be approved by the Board and are borne by the System.
Contributions Requirements – The System has elected provisions of Chapter 32, Section 22D (as
amended) of Massachusetts General Laws, which require that a funding schedule be established
to fully fund the pension plan by June 30, 2040. Under provisions of this law, participating
employers are assessed their share of the total retirement cost based on the entry age, normal
actuarial cost method. The Town contributed $3,570,734 to the System in fiscal year 2015,
which equaled the actuarially-determined contribution requirement for the fiscal year.
Net Pension Liability – At June 30, 2015, the Town reported a liability of $39,226,903 for its
proportionate share of the net pension liability. The net pension liability was measured as of
January 1, 2014 and the total pension liability used to calculate the net pension liability was
determined by an actuarial valuation as of that date. These figures were updated by the
independent actuary to December 31, 2014. There were no material changes made in this update
to the actuarial assumptions (see below) nor were there any material changes to the System’s
benefit terms since the actuarial valuation.
The Town’s proportion of the net pension liability is based on a projection of the Town’s long-
term share of contributions to the System relative to the projected contributions of all employers.
The Town’s proportion was approximately 7.56% at December 31, 2014, which was consistent
with the proportion measured at January 1, 2014.
Fiduciary Net Position –The System’s fiduciary net position was determined using the accrual
basis of accounting. The System’s accounting records are maintained on a calendar-year basis in
accordance with the standards and procedures established by PERAC. Contributions from
employers and employees are recognized in the period in which they become due pursuant to
formal commitments, statutory or contractual requirements. Benefit payments (including refunds
of employee contributions) are recorded when incurred, regardless of the timing of payment.
Investments are reported at fair value; fair value is determined as the price one would receive in
an orderly transaction between market participants at a measurement date.
Pension Expense – The Town recognized $4,246,862 in pension expense in the statement
of activities in fiscal year 2015; which was allocated to all functional expenses that applied.
Town of Canton, Massachusetts Page 65 of 118 Comprehensive Annual Financial ReportSource page 76
Deferred Outflows of Resources and Deferred Inflows of Resources – At June 30, 2015, the
Town reported deferred outflows of resources and deferred inflows of resources related to
pensions from the following sources (dollar amounts are in thousands):
Deferred Outflows Deferred Inflows
of Resources of Resources
Differences between expected and actual
Experience $ — $ —
Changes of assumptions — —
Net difference between projected and actual
earnings on pension plan investments 1,620 —
Changes in proportion and differences
between Town contributions and
proportionate share of contributions — —
Town contributions subsequent to the
measurement date — —
Total $ 1,620 $ —
The deferred outflows of resources and deferred inflows of resources are expected to be
recognized in the Town’s pension expense as follows (dollar amounts are in thousands):
Year ended June 30,
2016 $ ( 405)
2017 ( 405)
2018 ( 405)
2019 ( 405)
Actuarial Valuation – The measurement of the System’s total pension liability is developed by an
independent actuary. The latest actuarial valuation was performed as of January 1, 2014. The
significant actuarial assumptions used in the January 1, 2014 actuarial valuation included:
Actuarial cost method: Individual entry age normal
Amortization method: 5.0% increasing appropriation through fiscal year
2019; 2.3% increasing of unfunded actuarial liability
Remaining amortization period: 16 years
Asset valuation method: Actuarial value, 5-year smoothing
Investment rate of return: 8.25%
Projected salary increases: 4.0%
Cost of living adjustments: 3.0% on the first $15,000 of benefits
Inflation rate: 4.5%
Mortality rates: Pre-retirement and post-retirement rates reflect the
RP-2000 Employees table with Scale AA (gender
distinct).
Disabled life mortality: For disabled retirees, the table is set forward 2 years
for all members. It is assumed that 55% of pre-
retirement deaths are job-related for group 1and 2
members and 90% are job-related for group 4
members.
Town of Canton, Massachusetts Page 66 of 118 Comprehensive Annual Financial ReportSource page 77
The investment rate of return assumption is a long-term assumption and is based on capital
market expectations by asset class, historical returns and professional judgment. The market
expectations analysis used a building-block approach, which included expected returns by asset
class and the target asset allocation. The target allocation and best estimates of arithmetic real
returns for each major asset class are summarized in the following table:
Long-Term
Target Expected Real
Asset Class Allocation Rate of Return
Domestic Equity 32.0% 7.7%
International Equity 17.5% 6.4%
Fixed Income 19.0% 1.9%
Real Estate 9.0% 5.2%
Private Equity 8.5% 11.9%
Hedge Fund 9.0% 5.5%
Real Assets 5.0% 5.5%
Total 100.0%
The System’s investment policy’s total, blended expected rate of return seeks to meet or exceed
the assumed actuarial rate of return, which is currently 8.25%.
Discount Rate – The discount rate used to measure the total pension liability in the January 1,
2014 actuarial valuation report was 8.25%. The projection of cash flows used to determine the
discount rate assumed plan member contributions were made at the current contribution rate and
that employer contributions will be made at rates equal to the actuarially-determined contribution
rates and the member rate. Based on those assumptions, the System’s fiduciary net position was
projected to be available to make all projected future benefit payments of current plan members.
Therefore, the long-term expected rate of return on pension plan investments was applied to all
periods of projected benefit payments to determine the total pension liability.
Sensitivity Analysis – The following presents the Town’s proportionate share of the net pension
liability calculated using the discount rate of 8.25% as well as the Town’s proportionate share of
the net pension liability using a discount rate that is one percentage point lower (7.25%) or one
percentage point higher (9.25%) than the current rate (dollar amounts are in thousands):
Current
1% Decrease Discount 1% Increase
(7.25%) (8.25%) (9.25%)
Town’s proportionate share of
the net pension liability $ 49,228 $ 39,227 $ 30,631
B. Massachusetts Teachers’ Retirement System
Teachers and certain administrative employees of the School Department participate in the
Massachusetts Teachers’ Retirement System (“MTRS”), a cost-sharing multiple employer
defined benefit pension plan. The MTRS is managed by the Commonwealth on behalf of
municipal teachers and municipal teacher retirees. Like the System, MTRS was established
under Chapter 32 of Massachusetts General Laws. The Commonwealth’s legislature has the
authority to amend or modify the MTRS’s funding policies.
Town of Canton, Massachusetts Page 67 of 118 Comprehensive Annual Financial ReportSource page 78
The Commonwealth is a nonemployer contributor to the MTRS and is legally responsible by
statute for all actuarially determined employer contributions and future benefit requirements of
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.
For the year ended June 30, 2015, the Commonwealth contributed $3,354,159 to the MTRS on
behalf of the Town. The Town’s proportionate share of the collective MTRS net pension liability
at this reporting date was 0.357823%, which was based on the actual, actuarially determined
contribution made by the Commonwealth on behalf of the Town as a percentage of the total
annual contribution made by the Commonwealth on behalf of all employers.
The table below presents the Town’s proportionate share of the following:
Paid (or assumed)
Commonwealth On Behalf Town
Portion of the Town Portion
Net pension liability $ 56,880,811 $ (56,880,811) $ —
Pension expense 3,951,783 (3,951,783) —
The Town has recognized intergovernmental revenue and pension expense of $3,951,783
associated with this arrangement.
C. Other Postemployment Benefits (OPEB)
Plan Description – The Town administers a single-employer defined benefit healthcare plan (the
“Plan”). The Plan provides health and life insurance benefits to current and future retirees, their
dependents and beneficiaries in accordance with Massachusetts General Law Chapter 32B.
Specific benefit provisions and contribution rates are established by collective bargaining
agreements, state law, and Town ordinance. All benefits are provided through the Town’s self-
funded insurance program described previously. The Plan does not issue a stand–alone
financial report. The number of participants in the Plan consists of 671 active employees and
453 retired employees for a total of 1,124.
Funding Policy – The contribution requirements of Plan members and the Town are established
and may be amended by the Town, through negotiation with the Town employee unions.
Retirees contribute 25 percent of the calculated contribution through pension benefit deductions.
The remainder of the cost is funded by the Town. The Town currently contributes enough money
to the Plan to satisfy current obligations on a pay-as-you-go basis. The costs of administering the
Plan are paid by the Town.
Annual OPEB Cost and Net OPEB Obligation – The Town’s annual OPEB cost is calculated
based on the annual required contribution “ARC” of the employer, an actuarially determined
amount that is calculated in accordance with GASB Statement 45. The ARC represents a level of
funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize
any unfunded liabilities over a period not to exceed thirty years.
Town of Canton, Massachusetts Page 68 of 118 Comprehensive Annual Financial ReportSource page 79
The following table reflects the activity regarding the Town’s OPEB obligation:
Annual required contribution (ARC) $ 8,189,328
Interest on net OPEB obligation 1,837,440
Adjustment to ARC (5,051,744)
Annual OPEB cost 4,975,024
Contributions made $ (4,346,287)
Increase in net OPEB obligation 628,737
Net OPEB obligation at beginning of year 43,748,569
Net OPEB obligation at end of year $ 44,377,306
Trend information regarding annual OPEB cost, the percentage of the annual OPEB cost
contributed and the net OPEB obligation is as follows:
Annual OPEB Percentage of
Fiscal Year Cost AOPEBC Net OPEB
Ending (AOPEBC) Contributed Obligation
June 30, 2013 $ 12,195,272 37% $ 35,992,480
June 30, 2014 $ 12,935,961 40% $ 43,748,569
June 30, 2015 $ 4,975,024* 87% $ 44,377,306
* Reflected in the Statement of Activities as follows:
The AOPEBC at June 30, 2015 was charged to the following functional programs: General
Government $204,091; Public Safety $998,035; Education $3,243,449; Public Works $218,068;
Health and Human Services $63,539; Culture and Recreation $149,047; Water $60,569; Sewer
$27,537; and Rink $10,689.
Funding Status and Funding Progress – The funded status of the Plan at June 30, 2015, based on
the most recent actuarial valuation performed as of July 1, 2014, was as follows (in millions):
Actuarial
Accrued
Liability UAAL as a
Actuarial (AAL) Entry Unfunded Percentage
Value of Age Normal AAL Funded Covered of Covered
Assets Cost (UAAL) Ratio Payroll Payroll
(A) (B) (B – A) (A/B) (C) ((B-A)/C)
$ 0.6 $ 90.2 $ 89.6 0.64% N/A N/A
Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and
assumptions about the probability of occurrence of events into the future. Amounts determined
regarding the funded status of the Plan and the ARC of the employer are subject to continual
revision as estimates are compared to actual results and past expectations. The schedules of
funding progress, presented as required supplementary information (RSI) following the notes to
Town of Canton, Massachusetts Page 69 of 118 Comprehensive Annual Financial ReportSource page 80
the financial statements, present multi-year trend information about whether the actuarial values
of plan assets are increasing or decreasing over time relative to the AAL for benefits.
Methods and Assumptions – Projections of benefits for financial reporting purposes are based on
the substantive Plan and include the types of benefits provided at the time of each valuation and
the historical pattern of sharing of benefit costs between the employer and the Plan members to
that point. The actuarial methods and assumptions used include techniques that are designed to
reduce short-term volatility in actuarial accrued liabilities and the actuarial value of assets,
consistent with the long-term perspective of the calculations. The significant methods and
assumptions as of the latest valuation are as follows:
Valuation date: July 1, 2014
Actuarial cost method Projected Unit Credit
Amortization method Level dollar
Remaining amortization period: 30 years as of July 1, 2014 (open)
Interest discount rate: 4.2 percent
Inflation rate: Not disclosed by actuary
Healthcare/Medical cost trend rate: 9 percent grading down to 5 percent in year 2025 and
thereafter
D. Risk Financing
The Town is exposed to various risks of loss related to torts: theft of, damage to and destruction
of assets; errors and omissions; and natural disasters for which the Town carries commercial
insurance. The amount of claim settlements has not exceeded insurance coverage in any of the
previous three years.
Group Health Insurance Plan – The Town maintains a "reinsured cost reimbursement program"
which covers the group health and dental insurance requirements of the Town employees. The
Plan is essentially a self-insurance program and employee claims in excess of $125,000 are
reinsured by the Plan. The Plan allows employees to participate in a Health Maintenance
Organization (HMO) or Preferred Provider Organization (PPO). The Town reimburses the costs
of the HMO and PPO 75 percent. The Town accrues an amount representing claims incurred but
not reported (IBNR), which is based on historical claims paid averages for the twelve months
prior to fiscal year end. At June 30, 2015, the amount of the liability for incurred but not reported
(IBNR) health insurance claims totaled $496,023. This liability is the best estimate based on
available information. In the fund-wide financial statements, the Town reports the activities of
the Group Insurance Health Plan in the Internal Service Fund where revenues are recorded when
earned and expenses are recorded when the liability is incurred. Changes in the reported liability
since July 1, 2013, are as follows:
Balance at Claims and
Beginning Changes in Claims Balance at Current
of Year Estimates Payments End of Year Portion
Fiscal Year 2015 $ 938,586 $ 12,846,357 $(13,289,677) $ 496,023 $ 496,023
Fiscal Year 2014 912,916 14,753,120 (14,727,450) 938,586 938,586
Town of Canton, Massachusetts Page 70 of 118 Comprehensive Annual Financial ReportSource page 81
Workers’ Compensation – The Town is also self-insured for their workers’ compensation
activities which are accounted for in the Internal Service Fund. Workers’ compensation claims
are administered by a third-party and are funded on a pay-as-you-go basis from annual
appropriations. The Town is premium based for all claims after July 1, 2008. The Town
purchases individual stop loss insurance in excess of the coverage provided in the amount of
$300,000. The estimated future workers’ compensation liability is not material at June 30, 2015,
and is therefore not reported.
E. Commitments
The Town has entered or is planning to enter into contracts for various projects for which it has
authorized approximately $23.0 million in debt.
F. Contingencies
The Town is party to other certain legal claims, which are subject to many uncertainties, and the
outcome of individual litigation matters in these situations cannot be reasonably estimated.
Although the amount of liability, if any, in these situations at June 30, 2015, cannot be
ascertained, management believes that the resulting liability, if any, should not materially affect
the basic financial statements of the Town at June 30, 2015. Other amounts received or
receivable from grantor agencies are subject to audit and adjustment by grantor agencies,
principally the federal and state governments. Any disallowed claims, including amounts already
collected, may constitute a liability of the applicable funds. The amount, if any, of expenditures
which may be disallowed by the grantor cannot be determined at this time although the Town
expects such amounts, if any, to be immaterial.
The Town is subject to certain Federal arbitrage laws in accordance with long-term borrowing
agreements. Failure to comply with the rules could result in the payment of penalties. The Town
does not believe it has failed to comply with any of these agreements.
G. Landfill Closure and Post-Closure Care Costs
The Town’s landfill is closed and a final cover has been installed in accordance with Federal and
State laws and regulations. Those laws and regulations also require the Town to perform certain
maintenance and monitoring functions (“post-closure care”) at the site for 30 years after the
landfill cover is installed. In accordance with generally accepted accounting principles, the
estimated remaining cost of monitoring; $78,000 has been recorded as a governmental activities
liability; actual costs may be higher due to inflation, changes in technology, or changes in
regulations.
H. Implementation of GASB pronouncements
Current Year Implementations –
In June 2012, the GASB issued GASB Statement No. 67, Financial Reporting for Pension Plans.
This Statement replaces the requirements of Statement No. 25, Financial Reporting for Defined
Benefit Pension Plans and Note Disclosures for Defined Contribution Plans and Statement 50 as
they relate to pension plans that are administered through trusts or similar arrangements meeting
certain criteria. This Statement builds upon the existing framework for financial reports of
defined benefit pension plans, which includes a statement of fiduciary net position (the amount
Town of Canton, Massachusetts Page 71 of 118 Comprehensive Annual Financial ReportSource page 82
held in a trust for paying retirement benefits) and a statement of changes in fiduciary net position.
Statement 67 enhances note disclosures and RSI for both defined benefit and defined contribution
pension plans. Statement 67 also requires the presentation of new information about annual
money-weighted rates of return in the notes to the financial statements and in 10-year RSI
schedules. The provisions of this Statement became effective for financial statements for periods
beginning after June 15, 2013 and impact the financial reports of the pension systems that
communities participate in and not the financial statements of the communities themselves.
In June 2012, the GASB issued GASB Statement No. 68, Accounting and Financial Reporting
for Pensions — an amendment of GASB Statement No. 27. Statement 68 replaces the
requirements of Statement No. 27, Accounting for Pensions by State and Local Governmental
Employers and Statement No. 50, Pension Disclosures, as they relate to governments that provide
pensions through pension plans administered as trusts or similar arrangements that meet certain
criteria. Statement 68 requires governments providing defined benefit pensions to recognize their
long-term obligation for pension benefits as a liability for the first time, and to more
comprehensively and comparably measure the annual costs of pension benefits. The Statement
also enhances accountability and transparency through revised and new note disclosures and
required supplementary information. The provisions of GASB 68 became effective for the Town
in fiscal year 2015 and had a material effect on its financial statements.
In January 2013, the GASB issued GASB Statement No. 69, Government Combinations and
Disposals of Government Operations. GASB 69 established accounting and financial reporting
standards to government combinations and disposals of government operations. The provisions
of GASB 69 became effective for the Town in fiscal 2015 and did not have a material effect on
its financial statements.
In April 2013, the GASB issued GASB Statement No. 70, Accounting and Financial Reporting
for Nonexchange Financial Guarantees. The objective of GASB 70 is to improve accounting and
financial reporting by governments that extend and receive nonexchange financial guarantees.
The provisions of GASB 70 became effective for the Town in fiscal year 2015 and did not have a
material effect on its financial statements.
In November 2013, the GASB issued GASB Statement No. 71, Pension Transition for
Contributions Made Subsequent to the Measurement Date—an amendment of GASB Statement
No. 68. The objective of GASB 71 is to address an issue regarding application of the transition
provisions of GASB 68. The issue relates to amounts associated with contributions, if any, made
by a state or local government employer or nonemployer contributing entity to a defined pension
plan after the measurement date of the government’s beginning net pension liability. The
provisions of GASB 71 became effective for the Town in fiscal year 2015 and had a material
effect on its financial statements.
Future Implementations –
In February 2015, the GASB issued GASB Statement No. 72, Fair Value Measurement and
Application. GASB 72 addresses accounting and financial reporting issues relating to fair value
measurements by providing guidance for determining a fair value measurement for financial
reporting purposes. The provisions of this Statement are effective for financial reporting periods
beginning after June 15, 2015 (fiscal year 2016). The Town is currently evaluating whether
adoption will have a material impact on the financial statements.
Town of Canton, Massachusetts Page 72 of 118 Comprehensive Annual Financial Report