Canton, Massachusetts · Saved source text
FY17 Comprehensive Annual Financial Report
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Source page 43
TOWN OF CANTON, MASSACHUSETTS
STATEMENT OF NET POSITION
JUNE 30, 2017
Primary Government
Governmental Business-Type
Activities Activities Total
Assets
Cash and cash equivalents $ 32,474,926 $ 9,100,505 $ 41,575,431
Investments 11,616,982 - 11,616,982
Receivables, net:
Property taxes 505,826 - 505,826
Tax liens and foreclosures 1,310,421 39,060 1,349,481
User fees - 4,136,040 4,136,040
Departmental and other 693,692 - 693,692
Intergovernmental 1,859,008 - 1,859,008
Prepaid items 7,252 - 7,252
Deposit held by third party 61,800 - 61,800
Capital assets not being depreciated 15,443,966 624,852 16,068,818
Capital assets, net of accumulated depreciation 91,404,146 46,003,316 137,407,462
Total Assets 155,378,019 59,903,773 215,281,792
Deferred Outflows of Resources
Deferred pensions 4,210,154 284,992 4,495,146
Total Deferred Outflows of Resources 4,210,154 284,992 4,495,146
Liabilities
Warrants and accounts payable 2,081,058 59,785 2,140,843
Accrued payroll and withholdings 3,804,773 21,107 3,825,880
Retainage payable 22,101 - 22,101
Tax refunds payable 1,170,000 - 1,170,000
Health claims incurred but not reported 878,641 - 878,641
Accrued interest 273,006 210,852 483,858
Other liabilities 43,520 8,522 52,042
Noncurrent liabilities:
Due within one year 4,626,312 2,758,818 7,385,130
Due in more than one year 111,846,584 29,269,298 141,115,882
Total Liabilities 124,745,995 32,328,382 157,074,377
Deferred Inflows of Resources
Deferred pensions 2,502,961 169,430 2,672,391
Total Deferred Inflows of Resources 2,502,961 169,430 2,672,391
Net Position
Net investment in capital assets 78,738,423 18,785,822 97,524,245
Restricted for:
Nonexpendable permanent funds 489,185 - 489,185
Expendable permanent funds 730,086 - 730,086
Debt service 1,740,116 - 1,740,116
Federal and State grants 1,442,536 - 1,442,536
Community preservation 1,929,909 - 1,929,909
Gift funds 2,093,740 - 2,093,740
Other specific purposes 2,216,976 - 2,216,976
Unrestricted (57,041,754) 8,905,131 (48,136,623)
Total Net Position $ 32,339,217 $ 27,690,953 $ 60,030,170
See accompanying notes to basic financial statements.
Town of Canton, Massachusetts Page 33 of 125 Comprehensive Annual Financial ReportSource page 44
TOWN OF CANTON, MASSACHUSETTS
STATEMENT OF ACTIVITIES
FISCAL YEAR ENDED JUNE 30, 2017
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 $ 5,965,196 $ 563,303 $ 82,136 $ - $ (5,319,757) $ (5,319,757)
Public safety 17,532,705 2,778,390 95,054 - (14,659,261) (14,659,261)
Education 68,325,037 2,328,949 17,133,263 - (48,862,825) (48,862,825)
Public works 7,658,668 267,218 33,225 814,821 (6,543,404) (6,543,404)
Health and human services 1,684,833 101,977 393,142 - (1,189,714) (1,189,714)
Culture and recreation 3,683,115 460,175 445,798 108,001 (2,669,141) (2,669,141)
Interest expense 636,035 - 70,636 - (565,399) (565,399)
Total governmental activities 105,485,589 6,500,012 18,253,254 922,822 (79,809,501) (79,809,501)
Business-type activities:
Water 6,141,278 6,929,539 57,500 - $ 845,761 845,761
Sewer 6,191,663 6,560,287 23,460 - 392,084 392,084
Rink 61,792 - - - (61,792) (61,792)
Total business-type activities 12,394,733 13,489,826 80,960 - 1,176,053 1,176,053
Total Primary Government $ 117,880,322 $ 19,989,838 $ 18,334,214 $ 922,822 (79,809,501) 1,176,053 (78,633,448)
General Revenues:
Property taxes 72,087,049 - 72,087,049
Tax liens 220,189 - 220,189
Motor vehicle and other excise 4,581,480 - 4,581,480
Hotel and meals taxes 593,076 - 593,076
Payments in lieu of taxes 231,040 - 231,040
Grants and contributions not restricted
to specific programs 2,099,870 - 2,099,870
Penalties and interest on taxes 314,625 - 314,625
Unrestricted investment income 359,644 50,296 409,940
Transfers (net) 34,042 (34,042) -
Total general revenues and transfers 80,521,015 16,254 80,537,269
Change in Net Position 711,514 1,192,307 1,903,821
Net Position:
Beginning of year 31,627,703 26,498,646 58,126,349
End of year $ 32,339,217 $ 27,690,953 $ 60,030,170
See accompanying notes to basic financial statements.
Town of Canton, Massachusetts Page 34 of 125 Comprehensive Annual Financial ReportSource page 45
TOWN OF CANTON, MASSACHUSETTS
BALANCE SHEET
GOVERNMENTAL FUNDS
JUNE 30, 2017
Nonmajor Total
General Capital Governmental Governmental
Fund Projects Funds Funds
Assets
Cash and cash equivalents $ 17,575,183 $ 1,466,656 $ 11,360,994 $ 30,402,833
Investments 6,402,782 - 1,112,166 7,514,948
Receivables, net of allowance for uncollectibles:
Property taxes 498,497 - 7,329 505,826
Tax liens and foreclosures 1,307,690 - 2,731 1,310,421
Motor vehicle excise 375,283 - - 375,283
Intergovernmental 1,740,116 - 118,892 1,859,008
Departmental and other - - 255,983 255,983
Prepaid items 7,252 - - 7,252
Total Assets 27,906,803 1,466,656 12,858,095 42,231,554
Deferred Outflows of Resources - - - -
Total Assets and Deferred Outflows of Resources $ 27,906,803 $ 1,466,656 $ 12,858,095 $ 42,231,554
Liabilities
Warrants and accounts payable $ 1,384,589 $ 107,646 $ 282,768 $ 1,775,003
Accrued payroll and withholdings 3,701,991 118 102,664 3,804,773
Retainage payable - 22,101 - 22,101
Tax refunds payable 1,170,000 - - 1,170,000
Other liabilities 39,489 - 4,031 43,520
Total Liabilities 6,296,069 129,865 389,463 6,815,397
Deferred Inflows of Resources
Unavailable revenues - property taxes 1,559,874 - 10,060 1,569,934
Unavailable revenues - motor vehicle excise 375,283 - - 375,283
Unavailable revenues - intergovernmental 1,740,116 - - 1,740,116
Unavailable revenues - other - - 255,983 255,983
Total Deferred Inflows of Resources 3,675,273 - 266,043 3,941,316
Fund Balances
Nonspendable 7,252 - 489,185 496,437
Restricted - 1,336,791 11,869,527 13,206,318
Committed 923,152 - - 923,152
Assigned 876,862 - - 876,862
Unassigned 16,128,195 - (156,123) 15,972,072
Total Fund Balances 17,935,461 1,336,791 12,202,589 31,474,841
Total Liabilities, Deferred Inflows of Resources,
and Fund Balances $ 27,906,803 $ 1,466,656 $ 12,858,095 $ 42,231,554
See accompanying notes to basic financial statements.
Town of Canton, Massachusetts Page 35 of 125 Comprehensive Annual Financial ReportSource page 46
TOWN OF CANTON, MASSACHUSETTS
RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET
TOTAL FUND BALANCES TO THE STATEMENT OF NET POSITION
JUNE 30, 2017
Total Governmental Fund Balances $ 31,474,841
Capital assets used in governmental activities are not financial resources and therefore are
not reported in the funds. 106,848,112
Other long-term assets are unavailable to pay current-period expenditures 3,941,316
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 3,418,564
Differences between expected and actual experience 586,496
Changes in assumptions (2,439,438)
Changes in proportion and differences between Town contributions and
proportionate share of contributions 141,571
Net effect of reporting deferred outflows and inflows of resources from pensions 1,707,193
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. 5,113,657
In the Statement of Activities, interest is accrued on outstanding long-term debt
whereas in the governmental funds interest is not reported until due. (273,006)
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 (27,226,176)
Unamortized premiums on bonds (1,081,477)
Capital leases payable (63,827)
Landfill closure (26,000)
Compensated absences (1,704,018)
Net pension liability (37,408,247)
Other postemployment benefits (48,963,151)
Net effect of reporting long-term liabilities (116,472,896)
Net Position of Governmental Activities $ 32,339,217
See accompanying notes to basic financial statements.
Town of Canton, Massachusetts Page 36 of 125 Comprehensive Annual Financial ReportSource page 47
TOWN OF CANTON, MASSACHUSETTS
STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS
FISCAL YEAR ENDED JUNE 30, 2017
Nonmajor Total
General Capital Governmental Governmental
Fund Projects Funds Funds
Revenues:
Property taxes $ 71,396,805 $ - $ 546,766 $ 71,943,571
Tax liens 172,988 - - 172,988
Intergovernmental 16,703,291 - 4,082,654 20,785,945
Motor vehicle and other excises 4,505,384 - - 4,505,384
Hotel and meals taxes 593,076 - - 593,076
Licenses and permits 1,142,116 - - 1,142,116
Penalties and interest on taxes 314,625 - - 314,625
Payments in lieu of taxes 231,040 - - 231,040
Fines and forfeitures 92,821 - - 92,821
Charges for services - - 2,028,754 2,028,754
Departmental and other revenue 973,075 18,400 2,548,178 3,539,653
Investment income 268,280 - 33,076 301,356
Contributions and donations - - 857,270 857,270
Total Revenues 96,393,501 18,400 10,096,698 106,508,599
Expenditures:
Current:
General government 3,831,728 - 184,736 4,016,464
Public safety 10,798,668 985,868 867,212 12,651,748
Education 40,294,347 1,977,616 5,036,528 47,308,491
Public works 5,964,554 89,872 685,555 6,739,981
Health and human services 1,146,260 - 147,154 1,293,414
Culture and recreation 1,986,896 - 534,850 2,521,746
Pension benefits 12,480,279 - - 12,480,279
Employee benefits 12,017,203 - 65,846 12,083,049
State and county assessments 995,573 - - 995,573
Debt service:
Principal 3,821,850 - - 3,821,850
Interest 970,237 - - 970,237
Total Expenditures 94,307,595 3,053,356 7,521,881 104,882,832
Excess (Deficiency) of Revenues Over (Under) Expenditures 2,085,906 (3,034,956) 2,574,817 1,625,767
Other Financing Sources (Uses):
Issuance of bonds and notes - 5,455,000 - 5,455,000
Premiums from bonds and notes 44,404 - 261,586 305,990
Issuance of refunding bonds 1,596,000 - - 1,596,000
Payments on refunding bonds (1,619,000) - - (1,619,000)
Transfers in 1,076,977 1,260,000 84,265 2,421,242
Transfers out (944,265) (65,700) (1,377,235) (2,387,200)
Total Other Financing Sources (Uses) 154,116 6,649,300 (1,031,384) 5,772,032
Net Change in Fund Balances 2,240,022 3,614,344 1,543,433 7,397,799
FUND BALANCES - Beginning of year 15,695,439 (2,277,553) 10,659,156 24,077,042
FUND BALANCES - End of year $ 17,935,461 $ 1,336,791 $ 12,202,589 $ 31,474,841
See acompanying notes to basic financial statements.
Town of Canton, Massachusetts Page 37 of 125 Comprehensive Annual Financial ReportSource page 48
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, 2017
Net Change in Fund Balances - Total Governmental Fund Balances $ 7,397,799
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 5,203,195
Depreciation expense (4,873,263)
Net effect of reporting capital assets 329,932
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. (288,828)
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 (5,455,000)
Premiums from bonds and notes (305,990)
Issuance of refunding bonds (1,596,000)
Payments on refunding bonds 1,619,000
Amortization of premiums on bonds and notes payable 356,493
Payments on capital leases 20,419
Repayments of debt 3,821,850
Net effect of reporting long-term debt (1,539,228)
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. (403,826)
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. (22,291)
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 (170,177)
Pension benefits 221,050
Other postemployment benefits (4,838,917)
Net effect of reporting long-term liabilities (4,762,044)
Change in Net Position of Governmental Activities $ 711,514
See accompanying notes to basic financial statements.
Town of Canton, Massachusetts Page 38 of 125 Comprehensive Annual Financial ReportSource page 49
TOWN OF CANTON, MASSACHUSETTS
STATEMENT OF NET POSITION
PROPRIETARY FUNDS
JUNE 30, 2017
Governmental
Business-Type Activities Activities
Total Internal
Enterprise Service
Water Sewer Rink Funds Funds
Assets
Current assets:
Cash and cash equivalents $ 3,759,337 $ 3,109,918 $ 2,231,250 $ 9,100,505 $ 2,072,093
Investments - - - - 4,102,034
Receivables (net):
User charges 2,127,860 2,008,180 - 4,136,040 -
Tax liens 19,013 20,047 - 39,060 -
Departmental and other - - - - 62,426
Deposit held by third party - - - - 61,800
Total current assets 5,906,210 5,138,145 2,231,250 13,275,605 6,298,353
Noncurrent assets:
Nondepreciable capital assets 624,852 - - 624,852 -
Capital assets (net of depreciation) 31,801,393 14,201,923 - 46,003,316 -
Total noncurrent assets 32,426,245 14,201,923 - 46,628,168 -
Total Assets 38,332,455 19,340,068 2,231,250 59,903,773 6,298,353
Deferred Outflows of Resources
Deferred pensions 144,294 115,075 25,623 284,992 -
Total Deferred Outflows of Resources 144,294 115,075 25,623 284,992 -
Liabilities
Current liabilities:
Warrants and accounts payable 54,199 5,406 180 59,785 306,055
Accrued payroll and withholdings 15,747 4,560 800 21,107 -
Health claims incurred but not reported - - - - 878,641
Accrued interest 150,361 60,491 - 210,852 -
Other liabilities 8,522 - - 8,522 -
Compensated absences 23,451 3,340 - 26,791 -
Bonds and notes payable 1,760,441 964,586 7,000 2,732,027 -
Total current liabilities 2,012,721 1,038,383 7,980 3,059,084 1,184,696
Noncurrent liabilities:
Compensated absences 70,351 10,018 - 80,369 -
Other postemployment benefits 1,016,195 456,947 271,094 1,744,236 -
Net pension liability 1,282,089 1,022,476 227,661 2,532,226 -
Bonds and notes payable 18,731,880 6,174,587 6,000 24,912,467 -
Total noncurrent liabilities 21,100,515 7,664,028 504,755 29,269,298 -
Total Liabilities 23,113,236 8,702,411 512,735 32,328,382 1,184,696
Deferred Inflows of Resources
Deferred pensions 85,784 68,413 15,233 169,430 -
Total Deferred Outflows of Resources 85,784 68,413 15,233 169,430 -
Net Position
Net investment in capital assets 11,783,563 7,002,259 - 18,785,822 -
Unrestricted 3,494,166 3,682,060 1,728,905 8,905,131 5,113,657
Total Net Position $ 15,277,729 $ 10,684,319 $ 1,728,905 $ 27,690,953 $ 5,113,657
See accompanying notes to basic financial statements.
Town of Canton, Massachusetts Page 39 of 125 Comprehensive Annual Financial ReportSource page 50
TOWN OF CANTON, MASSACHUSETTS
STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION
PROPRIETARY FUNDS
FISCAL YEAR ENDED JUNE 30, 2017
Governmental
Business-Type Activities Activities
Total Internal
Enterprise Service
Water Sewer Rink Funds Funds
Operating Revenues:
Charges for services $ 6,929,539 $ 6,560,287 $ - $ 13,489,826 $ -
Employee contributions - - - - 3,584,560
Employer contributions - - - - 10,712,761
Stop loss reimbursements - - - - 632,353
Total Operating Revenues 6,929,539 6,560,287 - 13,489,826 14,929,674
Operating Expenses:
Operating costs 2,616,014 1,242,473 20,400 3,878,887 -
Massachusetts Water Resources Authority assessment 1,731,331 4,137,162 - 5,868,493 -
Depreciation 1,225,378 632,903 - 1,858,281 -
Employee benefits - - - - 15,276,790
Total Operating Expenses 5,572,723 6,012,538 20,400 11,605,661 15,276,790
Operating Income (Loss) 1,356,816 547,749 (20,400) 1,884,165 (347,116)
Nonoperating Revenues (Expenses):
Intergovernmental 57,500 23,460 - 80,960 -
Investment income 22,794 16,947 10,555 50,296 58,288
Loss on sale of assets - - (39,852) (39,852) -
Interest expense (568,555) (179,125) (1,540) (749,220) -
Total Nonoperating Revenues (Expenses) (488,261) (138,718) (30,837) (657,816) 58,288
Income (Loss) Before Transfers 868,555 409,031 (51,237) 1,226,349 (288,828)
Transfers in - - 365,958 365,958 -
Transfers out (400,000) - - (400,000) -
Total Transfers (400,000) - 365,958 (34,042) -
Change in Net Position 468,555 409,031 314,721 1,192,307 (288,828)
Total Net Position - Beginning of the Year 14,809,174 10,275,288 1,414,184 26,498,646 5,402,485
Total Net Position - End of the Year $ 15,277,729 $ 10,684,319 $ 1,728,905 $ 27,690,953 $ 5,113,657
See accompanying notes to basic financial statements.
Town of Canton, Massachusetts Page 40 of 125 Comprehensive Annual Financial ReportSource page 51
TOWN OF CANTON, MASSACHUSETTS
STATEMENT OF CASH FLOWS
PROPRIETARY FUNDS
FISCAL YEAR ENDED JUNE 30, 2017
Governmental
Business-Type Activities Activities
Total Internal
Enterprise Service
Water Sewer Rink Funds Funds
Cash Flows from Operating Activities:
Receipts from users $ 7,003,742 $ 6,390,840 $ - $ 13,394,582 $ -
Receipts from interfund services provided - - - - 15,058,623
Payments to employees (791,147) (281,913) (5,488) (1,078,548) -
Payments to vendors (3,914,019) (5,055,653) (4,647) (8,974,319) -
Payments for interfund services used - - - - (14,939,528)
Net Cash Provided by (Used in) Operating
Activities 2,298,576 1,053,274 (10,135) 3,341,715 119,095
Cash Flows from Noncapital Financing Activities:
Intergovernmental operating grants 57,500 23,460 - 80,960 -
Net Cash Provided by (Used in) Noncapital
Financing Activities (342,500) 23,460 365,958 46,918 -
Cash Flows from Capital and Related Financing Activities:
Proceeds from the issuance of bonds and notes 2,630,000 - - 2,630,000 -
Proceeds from the issuance of refunding bonds 1,109,000 52,000 13,000 1,174,000 -
Premiums from the issuance of bonds and notes 119,872 - - 119,872 -
Payments of refunded bonds (1,138,000) (51,000) (12,000) (1,201,000) -
Acquisition and construction of capital assets (2,000,807) - - (2,000,807) -
Proceeds from the sale of assets - - 60,000 60,000 -
Principal payments on bonds and notes (2,971,400) (956,132) (6,000) (3,933,532) -
Interest payments on bonds and notes (600,860) (208,600) (1,540) (811,000) -
Net Cash Provided by (Used in) Capital and Related
Financing Activities (2,852,195) (1,163,732) 53,460 (3,962,467) -
Cash Flows from Investing Activities:
Investment income 22,794 16,947 10,555 50,296 58,288
Investment of operating cash - - - - (555,264)
Net Cash Provided by (Used in) Investing Activities 22,794 16,947 10,555 50,296 (496,976)
Net Change in Cash and Cash Equivalents (873,325) (70,051) 419,838 (523,538) (377,881)
Cash and Cash Equivalents:
Beginning of the year 4,632,662 3,179,969 1,811,412 9,624,043 2,449,974
End of the year $ 3,759,337 $ 3,109,918 $ 2,231,250 $ 9,100,505 $ 2,072,093
Reconciliation of Operating Income (Loss) to Net Cash
Provided by (Used in) Operating Activities:
Operating Income (Loss) $ 1,356,816 $ 547,749 $ (20,400) $ 1,884,165 $ (347,116)
Adjustments to reconcile operating income (loss) to net
cash provided by (used in) operating activities:
Depreciation 1,225,378 632,903 - 1,858,281 -
Changes in assets, deferred outflows of resources,
liabilities and deferred inflows of resources:
Receivables 74,203 (169,447) - (95,244) 128,949
Amounts held by insurance carrier - - - - 61,121
Deferred outflows of resources 71,117 56,716 12,627 140,460 -
Accounts payable and accrued expenses (449,195) 2,952 (15,182) (461,425) 138,488
Other liabilities (1,478) - - (1,478) -
Health claims incurred but not reported - - - - 137,653
Other postemployment benefits 100,428 45,159 26,792 172,379 -
Net pension liability (52,041) (41,502) (9,240) (102,783) -
Deferred inflows of resources (26,652) (21,256) (4,732) (52,640) -
Net Cash Provided by (Used in) Operating
Activities $ 2,298,576 $ 1,053,274 $ (10,135) $ 3,341,715 $ 119,095
Noncash capital and related financing activities:
Amortization of bond premium $ 47,592 $ 28,988 $ - $ 76,580 $ -
Disposal of capital assets - - 39,852 39,852 -
See accompanying notes to basic financial statements.
Town of Canton, Massachusetts Page 41 of 125 Comprehensive Annual Financial ReportSource page 52
TOWN OF CANTON, MASSACHUSETTS
STATEMENT OF FIDUCIARY NET POSITION
JUNE 30, 2017
Other Private
Postemployment Purpose Agency
Benefits Trust Fund Trust Funds Funds
Assets
Cash and cash equivalents $ 7,551 $ 95,272 $ 1,309,785
Investments:
Equity mutual funds 1,900,282 - -
Bond mutual funds 1,072,538 - -
Total Assets 2,980,371 95,272 1,309,785
Liabilities
Warrants payable - - 27,177
Agency liabilities - - 1,282,608
Total Liabilities - - 1,309,785
Net Position
Held in trust for other postemployment benefits 2,980,371 - -
Held in trust for private purposes - 95,272 -
Total Net Position $ 2,980,371 $ 95,272 $ -
See accompanying notes to basic financial statements.
Town of Canton, Massachusetts Page 42 of 125 Comprehensive Annual Financial ReportSource page 53
TOWN OF CANTON, MASSACHUSETTS
STATEMENT OF CHANGES IN FIDUCIARY NET POSITION
FISCAL YEAR ENDED JUNE 30, 2017
Other Private
Postemployment Purpose
Benefits Trust Fund Trust Funds
Additions
Contributions:
Employee $ 407,666 $ -
Employer 2,031,576 -
Other - 1,500
Total contributions 2,439,242 1,500
Investment income:
Interest and dividends 57,542 962
Net appreciation in fair value of investments 172,880 -
Less - investment management fees (8,592) -
Net investment earnings 221,830 962
Other income - -
Total Additions 2,661,072 2,462
Deductions
Education - scholarships - 7,600
Retiree benefits 1,669,242 -
Total Deductions 1,669,242 7,600
CHANGE IN NET POSITION 991,830 (5,138)
NET POSITION AT BEGINNING OF YEAR 1,988,541 100,410
NET POSITION AT END OF YEAR $ 2,980,371 $ 95,272
See accompanying notes to basic financial statements.
Town of Canton, Massachusetts Page 43 of 125 Comprehensive Annual Financial ReportSource page 54
TOWN OF CANTON, MASSACHUSETTS
NOTES TO BASIC FINANCIAL STATEMENTS
YEAR ENDED JUNE 30, 2017
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 2017, the Town’s share of the operating and debt service expenses was $1,180,767.
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 rely
primarily 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 44 of 125 Comprehensive Annual Financial ReportSource page 55
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 45 of 125 Comprehensive Annual Financial ReportSource page 56
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 46 of 125 Comprehensive Annual Financial ReportSource page 57
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 of the Town are recorded at fair value in accordance with GASB Statement No. 72,
Fair Value Measurement and Application. Accordingly, the change in fair value of investments
is recognized as an increase or decrease to investment assets and investment income.
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.
Town of Canton, Massachusetts Page 47 of 125 Comprehensive Annual Financial ReportSource page 58
Inventories – Inventories, which are not material to the basic financial statements, are considered
to be expenditures at the time of purchase.
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, donated
works of art and similar items, and capital assets received in a service concession arrangement are
reported at acquisition value rather than fair value. 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
Town of Canton, Massachusetts Page 48 of 125 Comprehensive Annual Financial ReportSource page 59
government-wide and proprietary fund financial statements. A liability for these amounts is
reported in Governmental Funds only if they have matured.
Long-term Obligations – Long-term debt is reported as 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 Town has one item that is reported on the government-
wide statement of net position which relates 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 two
items that are reported as deferred inflows of resources. The first arises only under a modified
accrual basis of accounting and, 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. The second item is reported on the government-wide statement of net position which
relates 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.
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.
Town of Canton, Massachusetts Page 49 of 125 Comprehensive Annual Financial ReportSource page 60
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.
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 – nonspendable, restricted, committed, assigned, and
unassigned as described below:
Nonspendable 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
Town of Canton, Massachusetts Page 50 of 125 Comprehensive Annual Financial ReportSource page 61
positive unassigned fund balance amount. Other governmental funds besides the general
fund can only report a negative unassigned fund balance amount.
When both restricted and unrestricted resources are available for use, it is the Town’s policy to
use restricted resources first, then unrestricted resources (committed, assigned and unassigned) as
they are needed. When unrestricted resources (committed, assigned and unassigned) are available
for use it is the Town’s policy to use committed resources first, then assigned, and then
unassigned as they are needed.
The Town has not established financial policies with respect to maintaining minimum fund
balance amounts.
Stabilization 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
$7,067,308 at June 30, 2017 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 $421,862 of encumbrances from normal purchasing
activity in the general fund as assigned and $923,152 of encumbrances from Town Meeting
Articles in the general fund as committed. There are no encumbrances reported in any other fund.
Town of Canton, Massachusetts Page 51 of 125 Comprehensive Annual Financial ReportSource page 62
The following table reflects the Town’s fund equity categorizations:
Capital Nonmajor
General Projects Governmental Total
Nonspendable:
Nonexpendable trust funds $ - $ - $ 489,185 $ 489,185
Prepaid items 7,252 - - 7,252
Restricted:
Recreation revolving - - 242,551 242,551
Parking revolving - - 167,113 167,113
Animal control revolving - - 88,038 88,038
Other Town revolving - - 311,992 311,992
School revolving - - 1,937,041 1,937,041
General municipal private grants - - 736,434 736,434
Ambulance receipts reserved - - 1,629,701 1,629,701
Community preservation - - 1,919,849 1,919,849
Police grants - - 654,540 654,540
Other Town grants - - 94,725 94,725
School grants - - 693,271 693,271
General municipal donations - - 1,723,968 1,723,968
School donations - - 241,486 241,486
Police donations - - 62,275 62,275
Insurance recoveries - - 119,550 119,550
Roadway improvements - 1,169,430 - 1,169,430
School buildings - 123,850 - 123,850
Other capital outlay - 43,511 162,919 206,430
Library trust funds - - 546,701 546,701
Conservation trust funds - - 151,103 151,103
Other trust funds - - 32,282 32,282
Other purposes - - 353,988 353,988
Committed:
Police 70,621 - - 70,621
Education 138,524 - - 138,524
Infrastructure 334,364 - - 334,364
Public buildings 209,936 - - 209,936
Other purposes 169,707 - - 169,707
Assigned:
Purchase orders 421,862 - - 421,862
Subsequent years' budget 455,000 - - 455,000
Unassigned 16,128,195 - (156,123) 15,972,072
$ 17,935,461 $ 1,336,791 $ 12,202,589 $ 31,474,841
Town of Canton, Massachusetts Page 52 of 125 Comprehensive Annual Financial ReportSource page 63
E. Excess of Expenditures Over Appropriations and Deficits
During fiscal year 2017, no expenditures exceeded appropriations in the General Fund.
The Town incurred individual fund deficits totaling $156,123 in three special revenue funds that
are reported in the non-major governmental funds. These deficits will be funded through grant
revenues and departmental revenues during fiscal year 2018.
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 $39,133,296 and the bank balance was $40,518,679. Of the Town's bank
balance, $38,882,886 was covered by federal depository insurance or the Depositor’s Insurance
Fund; $1,399,996 was collateralized and the remainder was exposed to custodial credit risk
because it was uninsured and uncollateralized.
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
Town of Canton, Massachusetts Page 53 of 125 Comprehensive Annual Financial ReportSource page 64
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
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. The Town’s
investments in negotiable certificates of deposit are fully covered by federal depository insurance.
Fair Value of Investments – The Town reports its investments at fair value. The Town
categorizes its fair value measurements within the fair value hierarchy established by GAAP.
This hierarchy is based on valuation inputs used to measure the fair value of the asset or liability.
The three levels of the hierarchy are as follows:
Level 1 – Inputs are quoted prices in active markets for identical investments at the
measurement date.
Level 2 – Inputs (other than quoted prices included in Level 1) are either directly or
indirectly observable for the investment through correlation with market data at the
measurement date and for the duration of the instrument’s anticipated life.
Level 3 – Inputs reflect the Town’s best estimate of what market participants would use
in pricing the investment at the measurement date.
The following table presents the Town’s investments carried at fair value on a recurring basis in
the statement of net position at June 30, 2017:
Fair Value Measurements Using
6/30/17 Level 1 Level 2 Level 3
Investments by fair value level
Debt securities:
Corporate fixed income securities $ 1,371,976 - 1,371,976 -
U.S. government obligations 6,647,610 6,647,610 - -
Negotiable certificates of deposit 1,454,900 - 1,454,900 -
Bond mutual funds 1,477,360 1,477,360 - -
Repurchase agreements 480,000 480,000 - -
Total debt securities 11,431,846 8,604,970 2,826,876 -
Equity securities:
Common stock 1,737,674 1,737,674 - -
Equity mutual funds 1,900,282 1,900,282 - -
Total equity securities 3,637,956 3,637,956 - -
Total investments by fair value level $ 15,069,802 $ 12,242,926 $ 2,826,876 $ -
Investments measured at amortized cost
State investment pool 3,374,743
Total investments measured at fair value $ 18,444,545
Town of Canton, Massachusetts Page 54 of 125 Comprehensive Annual Financial ReportSource page 65
Debt and equity securities classified in Level 1 are valued using prices quoted in active markets
for those securities. Corporate fixed income securities and negotiable certificates of deposit are
valued using matrix pricing based on the securities’ relationship to benchmark quoted prices.
The State Treasurer’s investment pool (MMDT) is valued at amortized cost. The MMDT’s
investment advisor may value the pool using an alternative valuation method that more accurately
reflects the fair value in accordance with the pools fair value pricing policies should amortized
cost not approximate the fair value of the pool.
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.
At June 30, 2017, the Town had the following investments with maturities:
Maturities in Years
Investments 6/30/17 Less than 1 1-5 6 - 10
Corporate fixed income securities $ 1,371,976 $ 399,700 $ 778,473 $ 193,803
U.S. government obligations 6,647,610 102,323 3,551,890 2,993,397
Negotiable certificates of deposit 1,454,900 - 1,454,900 -
Repurchase agreements 480,000 480,000 - -
State investment pool 3,374,743 3,374,743 - -
Total investments with maturities $ 13,329,229 $ 4,356,766 $ 5,785,263 $ 3,187,200
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, 2017, Town has 36% of its investments in U.S. government
obligations and 18% of its investments 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, 2017 the credit quality ratings of investments were as follows:
Corporate U.S. Government Negotiable State
Quality Ratings Fixed Agencies & Certificates Repurchase Investment
(Moody's) Income Treasuries of Deposit Agreements Pool Totals
AAA $ - $ 6,647,610 $ - $ - $ - $ 6,647,610
A 257,120 - - - - 257,120
A1 160,000 - - - - 160,000
A2 89,775 - - - - 89,775
BAA 196,584 - - - - 196,584
BAA1 485,069 - - - - 485,069
BAA2 183,428 - - - - 183,428
Not rated - - 1,454,900 480,000 3,374,743 5,309,643
Totals - All $ 1,371,976 $ 6,647,610 $ 1,454,900 $ 480,000 $ 3,374,743 $ 13,329,229
Town of Canton, Massachusetts Page 55 of 125 Comprehensive Annual Financial ReportSource page 66
B. Receivables
Receivables as of year-end for the Town's individual major and non-major governmental funds
in the aggregate, including the applicable allowances for uncollectible accounts, are as follows:
Gross Allowance for Net
Amount Uncollectibles Amount
Receivables:
Real estate and personal property taxes $ 550,795 $ (52,298) $ 498,497
Tax liens and foreclosures 1,310,421 - 1,310,421
Community preservation surcharges 7,329 - 7,329
Motor vehicle and other excise taxes 648,482 (273,199) 375,283
Ambulance fees 613,963 (449,307) 164,656
Public safety details 91,327 - 91,327
Intergovernmental 1,859,008 - 1,859,008
Total $ 5,081,325 $ (774,804) $ 4,306,521
Receivables as of year-end for Town's proprietary funds are as follows:
Gross Allowance for Net
Amount Uncollectibles Amount
Receivables:
Water user charges $ 2,127,860 $ - $ 2,127,860
Water liens 19,013 - 19,013
Sewer user charges 2,008,180 - 2,008,180
Sewer liens 20,047 - 20,047
Rink user charges 19,710 (19,710) -
Stop loss receivables 62,426 - 62,426
Total $ 4,257,236 $ (19,710) $ 4,237,526
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 $ 252,184 $ - $ 252,184
Tax liens and foreclosures 1,307,690 2,731 1,310,421
Motor vehicle and other excise taxes 375,283 - 375,283
Community preservation surcharges - 7,329 7,329
Ambulance fees - 164,656 164,656
Public safety details - 91,327 91,327
Intergovernmental 1,740,116 - 1,740,116
Total $ 3,675,273 $ 266,043 $ 3,941,316
Town of Canton, Massachusetts Page 56 of 125 Comprehensive Annual Financial ReportSource page 67
School Building Assistance Reimbursement – As of June 30, 2017, the Town expects to receive
the balance of grants from the Commonwealth of Massachusetts under various construction
reimbursement regulations totaling approximately $1.8 million applicable to approved school
construction costs which includes both principal and interest. These 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. In the Governmental funds, a receivable of approximately $1.7
million under the caption Intergovernmental has been recorded for the reimbursable portion of the
principal balance as of June 30, 2017.
C. Interfund Receivables, Payables and Transfers
The composition of interfund transfers for the fiscal year ended June 30, 2017 is as follows:
Transfers In
Capital Nonmajor Rink
General Projects Governmental Enterprise
Transfers Out Fund Fund Funds Fund Total
General Fund $ - $ 860,000 $ 84,265 $ - $ 944,265 (1)
Capital Projects Fund 65,700 - - - 65,700 (2)
Nonmajor Governmental Funds 1,011,277 - - 365,958 1,377,235 (3)
Water Enterprise Fund - 400,000 - - 400,000 (4)
Total $ 1,076,977 $ 1,260,000 $ 84,265 $ 365,958 $ 2,787,200
(1) Transfers to capital projects fund for various capital purposes, transfers to nonmajor governmental funds for
retirement buyback reserves and grant deficit.
(2) Transfers to general fund to supplement paving project.
(3) Transfers to general fund to supplement operating budgets, transfer to rink enterprise fund for insurance
recoveries.
(4) Transfer to capital projects fund for roadway repairs.
Town of Canton, Massachusetts Page 57 of 125 Comprehensive Annual Financial ReportSource page 68
D. Capital Assets
Capital asset activity for governmental activities for the year ended June 30, 2017, 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 2,579,774 1,705,324 - 4,285,098
Total capital assets not being depreciated 13,738,642 1,705,324 - 15,443,966
Capital assets being depreciated:
Land improvements 2,765,111 - - 2,765,111
Buildings 79,996,182 - - 79,996,182
Building improvements 26,927,247 565,071 - 27,492,318
Machinery and equipment 8,309,516 1,069,741 - 9,379,257
Vehicles 5,638,448 631,762 - 6,270,210
Infrastructure 24,780,487 1,231,297 - 26,011,784
Total capital assets being depreciated 148,416,991 3,497,871 - 151,914,862
Less accumulated depreciation for:
Land improvements (1,653,789) (166,039) - (1,819,828)
Buildings (26,594,215) (1,806,949) - (28,401,164)
Building improvements (12,860,192) (1,079,314) - (13,939,506)
Machinery and equipment (4,813,696) (570,952) - (5,384,648)
Vehicles (3,853,715) (600,920) - (4,454,635)
Infrastructure (5,861,846) (649,089) - (6,510,935)
Total accumulated depreciation (55,637,453) (4,873,263) - (60,510,716)
Total capital assets being depreciated, net 92,779,538 (1,375,392) - 91,404,146
Total governmental activities capital assets, net $ 106,518,180 $ 329,932 $ - $ 106,848,112
Capital asset activity for business-type activities for the year ended June 30, 2017, 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 345,910 - (139,960) 205,950
Machinery and equipment 2,987,070 - (257,797) 2,729,273
Vehicles 927,140 263,140 (29,160) 1,161,120
Infrastructure 57,239,290 1,737,667 - 58,976,957
Total capital assets being depreciated 80,258,153 2,000,807 (426,917) 81,832,043
Less accumulated depreciation for:
Buildings (4,341,369) (438,653) - (4,780,022)
Building improvements (92,619) (10,298) 81,977 (20,940)
Machinery and equipment (1,449,368) (272,927) 215,928 (1,506,367)
Vehicles (858,654) (61,473) 29,160 (890,967)
Infrastructure (27,555,501) (1,074,930) - (28,630,431)
Total accumulated depreciation (34,297,511) (1,858,281) 327,065 (35,828,727)
Total capital assets being depreciated, net 45,960,642 142,526 (99,852) 46,003,316
Total business-type activities capital assets, net $ 46,585,494 $ 142,526 $ (99,852) $ 46,628,168
Town of Canton, Massachusetts Page 58 of 125 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 205,950 - - 205,950
Machinery and equipment 2,086,282 - - 2,086,282
Vehicles 541,364 263,140 - 804,504
Infrastructure 26,948,974 1,737,667 - 28,686,641
Total capital assets being depreciated 47,277,709 2,000,807 - 49,278,516
Less accumulated depreciation for:
Buildings (3,935,017) (408,530) - (4,343,547)
Building improvements (10,642) (10,298) - (20,940)
Machinery and equipment (940,344) (208,628) - (1,148,972)
Vehicles (505,008) (52,293) - (557,301)
Infrastructure (10,860,734) (545,629) - (11,406,363)
Total accumulated depreciation (16,251,745) (1,225,378) - (17,477,123)
Total capital assets being depreciated, net 31,025,964 775,429 - 31,801,393
Total Water capital assets, net $ 31,650,816 $ 775,429 $ - $ 32,426,245
Business-type Activities: Sewer
Capital assets being depreciated:
Buildings $ 1,263,604 $ - $ - $ 1,263,604
Machinery and equipment 642,991 - - 642,991
Vehicles 356,616 - - 356,616
Infrastructure 30,290,316 - - 30,290,316
Total capital assets being depreciated 32,553,527 - - 32,553,527
Less accumulated depreciation for:
Buildings (406,352) (30,123) - (436,475)
Machinery and equipment (293,096) (64,299) - (357,395)
Vehicles (324,486) (9,180) - (333,666)
Infrastructure (16,694,767) (529,301) - (17,224,068)
Total accumulated depreciation (17,718,701) (632,903) - (18,351,604)
Total capital assets being depreciated, net 14,834,826 (632,903) - 14,201,923
Total Sewer capital assets, net $ 14,834,826 $ (632,903) $ - $ 14,201,923
Town of Canton, Massachusetts Page 59 of 125 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 (81,977) - 81,977 -
Machinery and equipment (215,928) - 215,928 -
Vehicles (29,160) - 29,160 -
Total accumulated depreciation (327,065) - 327,065 -
Total capital assets being depreciated, net 99,852 - (99,852) -
Total Rink capital assets, net $ 99,852 $ - $ (99,852) $ -
Depreciation expense was charged to functions/programs as follows:
Governmental Activities: Business-Type Activities:
General government $ 179,306 Water $ 1,225,378
Public safety 759,747 Sewer 632,903
Education 2,493,656 Rink -
Public works 1,018,720 $ 1,858,281
Health and human services 74,069
Culture and recreation 347,765
$ 4,873,263
Rink Capital Assets – During a prior 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. The remaining capital assets of the Rink Enterprise Fund were sold or
disposed during fiscal year 2017. The Town is assessing the feasibility of constructing its own
rink with available insurance recoveries and other local funds.
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 (41,700)
Total $ 62,550
Town of Canton, Massachusetts Page 60 of 125 Comprehensive Annual Financial ReportSource page 71
The future minimum lease payments and the present value of the minimum lease payments at
June 30, 2017, are as follows:
Fiscal Year Ended June 30, Amount
2018 $ 21,713
2019 21,713
2020 21,713
Total minimum lease payments 65,139
Less: amounts representing interest (1,312)
Present value of minimum lease payments $ 63,827
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, 2017, are payable as follows:
Interest Maturity July 1, June 30,
Type Rate Date 2016 Additions Retirements 2017
BAN 2.00% Matured $ 2,385,000 $ - $ (2,385,000) $ -
Total Governmental Notes 2,385,000 - (2,385,000) -
BAN 2.00% Matured 1,300,000 - (1,300,000) -
Total Business-Type Notes 1,300,000 - (1,300,000) -
Total Notes Payable $ 3,685,000 $ - $ (3,685,000) $ -
Town of Canton, Massachusetts Page 61 of 125 Comprehensive Annual Financial ReportSource page 72
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 $ 25,616,026 $ 7,051,000 $ (5,440,850) $ 27,226,176 $ 3,871,933
Unamortized bond premium 1,131,980 305,990 (356,493) 1,081,477 281,533
Capital leases 84,246 - (20,419) 63,827 20,841
Landfill closure 52,000 - (26,000) 26,000 26,000
Compensated absences 1,533,841 553,637 (383,460) 1,704,018 426,005
Net pension liability 38,926,647 3,894,016 (5,412,416) 37,408,247 -
Other postemployment benefits 44,124,234 8,492,639 (3,653,722) 48,963,151 -
Total Governmental Activities $ 111,468,974 $ 20,297,282 $ (15,293,360) $ 116,472,896 $ 4,626,312
Business-Type Activities - Water:
Bond and note debt $ 19,251,300 $ 3,739,000 $ (2,809,400) $ 20,180,900 $ 1,704,800
Unamortized bond premium 239,141 119,872 (47,592) 311,421 55,641
Compensated absences 89,111 26,969 (22,278) 93,802 23,451
Net pension liability 1,334,130 133,459 (185,500) 1,282,089 -
Other postemployment benefits 915,767 176,259 (75,831) 1,016,195 -
Total Water 21,829,449 4,195,559 (3,140,601) 22,884,407 1,783,892
Business-Type Activities - Sewer:
Bond and note debt 8,020,525 52,000 (1,007,132) 7,065,393 942,367
Unamortized bond premium 102,768 - (28,988) 73,780 22,219
Compensated absences 14,935 2,157 (3,734) 13,358 3,340
Net pension liability 1,063,978 106,435 (147,937) 1,022,476 -
Other postemployment benefits 411,788 79,257 (34,098) 456,947 -
Total Sewer 9,613,994 239,849 (1,221,889) 8,631,954 967,926
Business-Type Activities - Rink:
Bond and note debt 18,000 13,000 (18,000) 13,000 7,000
Compensated absences 15,657 - (15,657) - -
Net pension liability 236,901 23,699 (32,939) 227,661 -
Other postemployment benefits 244,302 47,021 (20,229) 271,094 -
Total Rink 514,860 83,720 (86,825) 511,755 7,000
Total Business-Type Activities $ 31,958,303 $ 4,519,128 $ (4,449,315) $ 32,028,116 $ 2,758,818
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.
Town of Canton, Massachusetts Page 62 of 125 Comprehensive Annual Financial ReportSource page 73
The following is a summary of outstanding long-term debt obligations as of June 30, 2017:
Interest Beginning Ending
Description of Issue Rate Balance Additions Maturities Balance
Governmental Activities:
General Obligation Bonds 2.00 - 5.00% $11,507,226 $ 5,455,000 $ (2,824,050) $14,138,176
Refunding Bonds 2.00 - 4.00% 14,108,800 1,596,000 (2,616,800) 13,088,000
Total Governmental Activities 25,616,026 7,051,000 (5,440,850) 27,226,176
Add: Unamortized bond premium 1,131,980 305,990 (356,493) 1,081,477
Total Governmental Activities, net $ 26,748,006 $ 7,356,990 $ (5,797,343) $ 28,307,653
Business-Type Activities - Water:
General Obligation Bonds 2.00 - 5.00% $16,192,000 $ 2,630,000 $ (2,314,000) $16,508,000
Refunding Bonds 3.25 - 4.00% 1,682,300 1,109,000 (295,400) 2,495,900
Massachusetts Water Resource Authority 0.00% 1,377,000 - (200,000) 1,177,000
Total Water 19,251,300 3,739,000 (2,809,400) 20,180,900
Add: Unamortized bond premium 239,141 119,872 (47,592) 311,421
Total Water, net 19,490,441 3,858,872 (2,856,992) 20,492,321
Business-Type Activities - Sewer:
General Obligation Bonds 2.00 - 5.00% 3,021,000 - (369,000) 2,652,000
Refunding Bonds 3.25 - 4.00% 1,714,900 52,000 (354,800) 1,412,100
Massachusetts Water Resource Authority 0.00% 339,900 - (113,300) 226,600
Massachusetts Clean Water Trust 2.00% 2,944,725 - (170,032) 2,774,693
Total Sewer 8,020,525 52,000 (1,007,132) 7,065,393
Add: Unamortized bond premium 102,768 - (28,988) 73,780
Total Sewer, net 8,123,293 52,000 (1,036,120) 7,139,173
Business-Type Activities - Rink:
General Obligation Bonds 2.00 - 4.25% 18,000 - (18,000) -
Refunding Bonds 2.00% - 13,000 - 13,000
Total Rink 18,000 13,000 (18,000) 13,000
Total Business-Type Activities, net $ 27,631,734 $ 3,923,872 $ (3,911,112) $ 27,644,494
The following represents authorized and unissued debt as of June 30, 2017:
Project Amount
Governmental:
Infrastructure $ 9,797,000
School building improvements 2,237,388
Land purchase 1,740,000
Fire equipment and vehicles 926,000
Other capital projects 427,000
Business-type:
Sewer projects 864,790
Total Authorized and Unissued $ 15,992,178
Town of Canton, Massachusetts Page 63 of 125 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
2018 $ 3,871,933 $ 931,803 $ 4,803,736
2019 3,611,421 756,327 4,367,748
2020 3,407,516 626,326 4,033,842
2021 3,343,415 508,704 3,852,119
2022 2,758,621 385,055 3,143,676
2023 - 2027 7,118,110 902,930 8,021,040
2028 - 2032 2,156,032 312,327 2,468,359
2033 - 2037 959,128 83,086 1,042,214
Total $ 27,226,176 $ 4,506,558 $ 31,732,734
Business-Type Activities: Water
Year Ending Principal Interest
June 30, Balance Balance Total
2018 $ 1,704,800 $ 690,845 $ 2,395,645
2019 1,706,700 614,723 2,321,423
2020 1,696,200 560,105 2,256,305
2021 1,641,400 510,153 2,151,553
2022 1,598,900 456,185 2,055,085
2023 - 2027 6,627,900 1,557,689 8,185,589
2028 - 2032 4,405,000 525,878 4,930,878
2033 - 2037 800,000 63,000 863,000
Total $ 20,180,900 $ 4,978,578 $ 25,159,478
Business-Type Activities: Sewer
Year Ending Principal Interest
June 30, Balance Balance Total
2018 $ 942,367 $ 180,259 $ 1,122,626
2019 925,771 154,416 1,080,187
2020 731,746 128,319 860,065
2021 549,594 110,493 660,087
2022 494,915 94,452 589,367
2023 - 2027 2,047,475 291,307 2,338,782
2028 - 2032 1,373,525 84,253 1,457,778
Total $ 7,065,393 $ 1,043,499 $ 8,108,892
Business-Type Activities: Rink
Year Ending Principal Interest
June 30, Balance Balance Total
2018 $ 7,000 $ 289 $ 7,289
2019 6,000 120 6,120
Total $ 13,000 $ 409 $ 13,409
Town of Canton, Massachusetts Page 64 of 125 Comprehensive Annual Financial ReportSource page 75
On March 19, 2017, the Town issued general obligation bonds of $8,085,000 paying interest at
3% per annum. $3,500,000 of the proceeds, along with $185,000 of available funds, were used to
retire $3,685,000 of BANS maturing on March 24, 2017 with the remainder used for additional
capital purposes. The issuance was utilized for school buildings ($4,471,000), fire vehicles and
equipment ($984,000) and water mains ($2,630,000).
Current Refunding – On April 5, 2017, the Town issued general obligation refunding bonds of
$2,770,000, paying interest at rates of 2.0% - 4.0% per annum. The proceeds, along with $99,552
of premiums, were used to retire $2,820,000 of callable general obligation bonds. As a result of
the current refunding, the Town reduced its total debt service requirements by $275,933, which
resulted in an economic gain (difference between the present value of the debt service payments
on the old and new debt) of $239,997.
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 audited financial
statements for the year ended December 31, 2016 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 $4,393,622 to the System in fiscal year 2017,
which equaled the actuarially-determined contribution requirement for the fiscal year.
Net Pension Liability – At June 30, 2017, the Town reported a liability of $39,940,473 for its
proportionate share of the net pension liability. The net pension liability was measured as of
December 31, 2016 and the total pension liability used to calculate the net pension liability was
determined by an actuarial valuation as of January 1, 2016. There were no material changes to
the System’s benefit terms since the previous 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 7.65% at December 31, 2016, which was consistent
with the proportion measured at January 1, 2016.
Town of Canton, Massachusetts Page 65 of 125 Comprehensive Annual Financial ReportSource page 76
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 $4,157,609 in pension expense in the statement of
activities in fiscal year 2017; which was allocated to all functional expenses that applied.
Deferred Outflows of Resources and Deferred Inflows of Resources – At June 30, 2017, the
Town reported deferred outflows of resources and deferred inflows of resources related to
pensions from the following sources:
Deferred Outflows Deferred Inflows
of Resources of Resources
Net differences between projected and
actual earnings on pension plan investments $ 3,649,972 $ -
Differences between expected and
actual experience 626,197 -
Changes in assumptions - 2,604,568
Changes in proportion and differences
between Town contributions and
proportionate share of contributions 218,977 67,823
Total $ 4,495,146 $ 2,672,391
The deferred outflows of resources and deferred inflows of resources are expected to be
recognized in the Town’s pension expense as follows:
Year ended June 30,
2018 $ 739,906
2019 739,906
2020 472,852
2021 (129,909)
Total $ 1,822,755
Town of Canton, Massachusetts Page 66 of 125 Comprehensive Annual Financial ReportSource page 77
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, 2016. The
significant actuarial assumptions used in the January 1, 2016 actuarial valuation included:
Actuarial cost method: Individual entry age normal
Amortization method: 4.0% increasing payments
Remaining amortization period: 13 years
Investment rate of return: 8.0%
Projected salary increases: Year 1 - 5.5%, Year 2 - 5.0%, Years 3 & 4 - 4.5%,
Year 5 - 4.0%, Thereafter - 3.5%
Asset valuation method: Market value
Cost of living adjustments: 3.0% on the first $15,000 of benefits
Inflation rate: 4.0%
Mortality rates: Pre-retirement and post-retirement rates reflect the
RP-2014 Blue Collar Mortality with Scale MP-2014,
fully generational
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% 8.6%
International Equity 17.5% 8.6%
Fixed Income 19.0% 4.5%
Real Estate 9.0% 5.1%
Private Equity 8.5% 10.3%
Hedge Fund 9.0% 13.1%
Real Assets 5.0% 7.5%
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.
Discount Rate – The discount rate used to measure the total pension liability in the January 1,
2016 actuarial valuation report was 8.0%. 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.
Town of Canton, Massachusetts Page 67 of 125 Comprehensive Annual Financial ReportSource page 78
Sensitivity Analysis – The following presents the Town’s proportionate share of the net pension
liability calculated using the discount rate of 8.0% as well as the Town’s proportionate share of
the net pension liability using a discount rate that is one percentage point lower (7.0%) or one
percentage point higher (9.0%) than the current rate (dollar amounts are in thousands):
Current
1% Decrease Discount 1% Increase
(7.0%) (8.0%) (9.0%)
Town’s proportionate share of
the net pension liability $ 50,535 $ 39,940 $ 30,859
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.
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, 2017, the Commonwealth contributed $4,082,182 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 0.362995%, 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 $ 81,158,195 $ (81,158,195) $ —
Pension expense 8,278,668 (8,278,668) —
The Town has recognized intergovernmental revenue and pension expense of $8,278,668
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 (other postemployment benefits) to
current and future retirees, their dependents and beneficiaries in accordance with Massachusetts
General Law Chapter 32B Section 20. Specific benefit provisions and contribution rates are
Town of Canton, Massachusetts Page 68 of 125 Comprehensive Annual Financial ReportSource page 79
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 and is presented as a fiduciary fund in the Town’s
financial statements.
Under Chapter 32B Section 20 the Town Treasurer is the custodian of the Plan and since the
Town has not designated a Board of Trustees the Town Treasurer under this general law is also
the Trustee and as such, is responsible for the general supervision of the management, investment
and reinvestment of the Plan assets. Plan assets may be invested and reinvested by the custodian
consistent with the prudent investor rule established in Chapter 203C and may, with the approval
of the State Retiree Benefits Trust Fund Board of Trustees, be invested in the State Retiree
Benefits Trust Fund established in Section 24 of Chapter 32A. Plan assets shall be segregated
from other funds and shall not be subject to the claims of any general creditor of the Town.
For the year ended June 30, 2017 the Town records its net OPEB obligation under GASB 45,
however note disclosures are also presented for the Town’s OPEB Plan since those note
disclosures are required under GASB 74. All GASB 45 references will be removed in the fiscal
year ended June 30, 2018 as they will no longer be applicable.
Plan Membership - At June 30, 2017, membership in the Plan consisted of:
Inactive employees or beneficiaries
currently receiving benefits 579
Active employees 706
Total 1,285
Contributions – 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 plus additional contributions,
currently budgeted at $800,000 annually. The costs of administering the Plan are paid by the
Town.
Investments – The investment policy for Plan assets is that used for all the Town’s other trust
funds; this requires the Town Treasurer to invest in instruments included on the State legal list.
Investment Concentration - The Plan did not maintain investments in any one organization that
represented more than 5% of the Fiduciary Net Position of the Plan.
Rate of Return - For the year ended June 30, 2017, the annual money-weighted rate of return on
investments, net of investment expense, was 8.23 percent. The money-weighted rate of return
expresses investment performance, net of investment expense, adjusted for the changing amounts
actually invested.
Town of Canton, Massachusetts Page 69 of 125 Comprehensive Annual Financial ReportSource page 80
The following was the adopted asset allocation policy as of June 30, 2017:
Target
Asset Class Allocation
Domestic Equity - Large Cap 22.50%
Domestic Equity - Small/Mid Cap 7.50%
International Equity - Developed Market 11.25%
International Equity - Emerging Market 3.75%
Domestic Fixed Income 25.00%
International Fixed Income 10.00%
Alternative Investments 20.00%
Real Estate 0.00%
Cash 0.00%
100.00%
Net OPEB Liability – The components of the Net OPEB Liability of the Town are as follows as
calculated using the methodology highlighted in GASB 74:
Total OPEB liability $ 90,505,695
Plan Fiduciary Net Position (2,980,371)
Net OPEB liability $ 87,525,324
Plan Fiduciary Net Position as
a percentatge of total liability 3.3%
Actuarial assumptions - The total OPEB liability was determined by an actuarial valuation as of
July 1, 2016, using the following actuarial assumptions, applied to all periods included in the
measurement, unless otherwise specified:
Investment rate of return 6.97%, net of OPEB plan investment expense,
including inflation.
Municipal Bond Index Rate 3.13%, as of June 30, 2017
Single Equivalent Discount Rate 5.25%, net of OPEB plan investment expense
including inflation.
Inflation 2.75% annually as of June 30, 2017 and for future
periods.
Salary Increases 3.00% annually as of June 30, 2017 and for future
periods.
Town of Canton, Massachusetts Page 70 of 125 Comprehensive Annual Financial ReportSource page 81
Cost of Living Adjustment Not applicable.
Pre-Retirement Mortality RP-2000 Employees Mortality Table projected with
scale BB and a base year 2009 for males and females
Post-Retirement Mortality RP-2000 Healthy Annuitant Table projected generationally
with scale BB and a base year 2009 for males and females
Disabled Mortality RP-2000 Healthy Annuitant Table projected generationally
with scale BB and a base year 2012 for males and females
Changes in Assumptions: Effective June 30, 2017- The following changes in assumptions were
made as compared to the actuarial valuation used in prior years:
The discount rate was increased to 5.25% from 4.20%.
The Pre-Retirement Mortality: RP-2000 Employees Mortality Table projected
generationally with scale BB and a base year 2009 for males and females. Previously the
RP-2000 Mortality Table projected to 2017.
The Post Retirement Mortality: RP-2000 Healthy Annuitant Mortality Table projected
generationally with scale BB and a base year 2009 for males and females. Previously the
RP-2000 Mortality Table projected to 2017.
Actuarial Cost Method Entry Age Normal – Previously Projected Unit Credit.
Investment Rate of Return - The long-term expected rate of return on OPEB plan investments was
determined using a building-block method in which best-estimate ranges of expected future real
rates of return (expected returns, net of investment expense and inflation) are developed for each
major asset class. These ranges are combined to produce the long-term expected rate of return by
weighting the expected future real rates of return by the target asset allocation percentage and by
adding expected inflation.
Best estimates of arithmetic real rates of return for each major asset class included in the target
asset allocation as of June 30, 2017 (see the discussion of investment policy) are summarized in
the following table:
Town of Canton, Massachusetts Page 71 of 125 Comprehensive Annual Financial ReportSource page 82
Expected
Investment Rate
Asset Class of Return
Domestic Equity - Large Cap 4.00%
Domestic Equity - Small/Mid Cap 6.00%
International Equity - Developed Market 4.50%
International Equity - Emerging Market 7.00%
Domestic Fixed Income 2.00%
International Fixed Income 3.00%
Alternative Investments 6.50%
Real Estate 6.25%
Cash 0.00%
Real rate of return 4.22%
Inflation assumption 2.75%
Total nominal rate of return 6.97%
Investment expense -
Net investment return 6.97%
Discount rate - The discount rate used to measure the total OPEB liability was 5.25 percent. This
was a blended rate of (1) the long-term expected rate of return on OPEB plan investments that are
expected to be used to finance the payment of benefits, to the extent that the Plan’s fiduciary net
position is projected to be sufficient to make projected benefit payments and are invested using a
strategy to achieve that return and; (2) a yield rate for a 20 year, tax exempt general obligation
municipal bond with an average rating of AA/Aa or higher when the conditions in (1) are not met.
Sensitivity of the net OPEB liability to changes in the discount rate - The following presents the
net OPEB liability of the Town, as well as what the Town’s net OPEB liability would be if it
were calculated using a discount rate that is one percentage point lower or one percentage-point
higher than the current discount rate:
Current
1% Decrease (4.25%) Discount Rate (5.25%) 1% Increase (6.25%)
Net OPEB Liability $ 101,874,138 $ 87,525,324 $ 75,960,220
Service Cost 3,507,682 2,675,741 2,064,839
Sensitivity of the net OPEB liability to changes in the healthcare cost trend rates - The following
presents the net OPEB liability of the Town, as well as what the Town’s net OPEB liability would
be if it were calculated using healthcare cost trend rates that are one percentage-point lower or
one percentage-point higher than the current healthcare cost trend rates:
Town of Canton, Massachusetts Page 72 of 125 Comprehensive Annual Financial Report