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Fiscal Year 2018 Comprehensive Annual Financial Report
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Source page 41
Basic Financial Statements Town of Canton, Massachusetts Page 33 of 128 Comprehensive Annual Financial Report
Source page 42
TOWN OF CANTON, MASSACHUSETTS
STATEMENT OF NET POSITION
JUNE 30, 2018
Primary Government
Governmental Business-Type
Activities Activities Total
Assets
Cash and cash equivalents $ 32,953,370 $ 9,532,919 $ 42,486,289
Investments 12,864,099 - 12,864,099
Receivables, net:
Property taxes 353,772 - 353,772
Tax liens and foreclosures 1,315,092 51,377 1,366,469
User fees - 3,738,424 3,738,424
Departmental and other 1,097,650 - 1,097,650
Intergovernmental 2,889,730 - 2,889,730
Prepaid items 57,338 - 57,338
Deposit held by third party 61,800 - 61,800
Capital assets not being depreciated 11,263,835 710,787 11,974,622
Capital assets, net of accumulated depreciation 95,459,411 44,845,970 140,305,381
Total Assets 158,316,097 58,879,477 217,195,574
Deferred Outflows of Resources
Related to net pension liability 8,261,963 559,266 8,821,229
Related to net other postemployment benefits liability 3,806,844 32,506 3,839,350
Total Deferred Outflows of Resources 12,068,807 591,772 12,660,579
Liabilities Warrants
and accounts payable 1,661,186 112,353 1,773,539
Accrued payroll and withholdings 3,850,627 19,764 3,870,391
Tax refunds payable 470,796 - 470,796
Health claims incurred but not reported 878,641 - 878,641
Accrued interest 218,469 189,111 407,580
Other liabilities 44,589 8,597 53,186
Noncurrent liabilities:
Due within one year 4,557,740 2,725,272 7,283,012
Due in more than one year 146,883,727 27,974,324 174,858,051
Total Liabilities 158,565,775 31,029,421 189,595,196
Deferred Inflows of Resources
Related to net pension liability 5,769,639 390,557 6,160,196
Related to net other postemployment benefits liability 30,639 1,125 31,764
Total Deferred Inflows of Resources 5,800,278 391,682 6,191,960
Net Position
Net investment in capital assets 81,317,923 20,603,290 101,921,213
Restricted for:
Nonexpendable permanent funds 526,561 - 526,561
Expendable permanent funds 743,771 - 743,771
Debt service 1,341,647 - 1,341,647
Federal and State grants 1,424,390 - 1,424,390
Community preservation 2,420,189 - 2,420,189
Gift funds 2,347,412 - 2,347,412
Other specific purposes 2,076,951 - 2,076,951
Unrestricted (86,179,993) 7,446,856 (78,733,137)
Total Net Position $ 6,018,851 $ 28,050,146 $ 34,068,997
See accompanying notes to basic financial statements.
Town of Canton, Massachusetts Page 34 of 128 Comprehensive Annual Financial ReportSource page 43
TOWN OF CANTON, MASSACHUSETTS
STATEMENT OF ACTIVITIES
FISCAL YEAR ENDED JUNE 30, 2018
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 $ 5,578,489 $ 629,653 $ 191,369 $ - $ (4,757,467) $ (4,757,467)
Public safety 19,250,042 3,575,574 194,967 240,497 (15,239,004) (15,239,004)
Education 70,396,176 2,463,638 18,505,916 600,762 (48,825,860) (48,825,860)
Public works 7,911,117 308,449 22,000 857,196 (6,723,472) (6,723,472)
Health and human services 1,635,120 107,678 396,063 - (1,131,379) (1,131,379)
Culture and recreation 3,768,025 436,273 37,074 594,671 (2,700,007) (2,700,007)
Interest expense 659,834 - 57,836 - (601,998) (601,998)
Total governmental activities 109,198,803 7,521,265 19,405,225 2,293,126 (79,979,187) (79,979,187)
Business-type activities:
Water 7,105,456 7,186,664 - - $ 81,208 81,208
Sewer 6,275,549 7,143,471 - - 867,922 867,922
Rink 13,498 - - 5,625 (7,873) (7,873)
Total business-type activities 13,394,503 14,330,135 - 5,625 941,257 941,257
Total Primary Government $ 122,593,306 $ 21,851,400 $ 19,405,225 $ 2,298,751 (79,979,187) 941,257 (79,037,930)
General Revenues:
Property taxes 74,151,256 - 74,151,256
Tax liens 301,286 - 301,286
Motor vehicle and other excise 4,707,385 - 4,707,385
Hotel and meals taxes 603,821 - 603,821
Payments in lieu of taxes 236,816 - 236,816
Grants and contributions not restricted
to specific programs 2,180,123 - 2,180,123
Penalties and interest on taxes 364,795 - 364,795
Unrestricted investment income 521,199 98,038 619,237
Transfers (net) (500,000) 500,000 -
Total general revenues and transfers 82,566,681 598,038 83,164,719
Change in Net Position 2,587,494 1,539,295 4,126,789
Net Position:
Beginning of year, as restated (see Note IV) 3,431,357 26,510,851 29,942,208
End of year $ 6,018,851 $ 28,050,146 $ 34,068,997
See accompanying notes to basic financial statements.
Town of Canton, Massachusetts Page 35 of 128 Comprehensive Annual Financial ReportSource page 44
TOWN OF CANTON, MASSACHUSETTS
BALANCE SHEET
GOVERNMENTAL FUNDS
JUNE 30, 2018
Nonmajor Total
General Capital Governmental Governmental
Fund Projects Funds Funds
Assets
Cash and cash equivalents $ 17,212,144 $ 1,499,239 $ 11,424,733 $ 30,136,116
Investments 7,150,877 - 1,519,301 8,670,178
Receivables, net of allowance for uncollectibles:
Property taxes 350,494 - 3,278 353,772
Tax liens and foreclosures 1,311,710 - 3,382 1,315,092
Motor vehicle excise 379,470 - - 379,470
Intergovernmental 1,341,647 - 1,548,083 2,889,730
Departmental and other - - 490,286 490,286
Prepaid items 15,376 - - 15,376
Due from other funds 854,784 - - 854,784
Total Assets 28,616,502 1,499,239 14,989,063 45,104,804
Deferred Outflows of Resources - - - -
Total Assets and Deferred Outflows of Resources $ 28,616,502 $ 1,499,239 $ 14,989,063 $ 45,104,804
Liabilities
Warrants and accounts payable $ 1,334,850 $ - $ 178,902 $ 1,513,752
Accrued payroll and withholdings 3,709,311 - 141,316 3,850,627
Tax refunds payable 470,796 - - 470,796
Other liabilities 39,489 - 5,100 44,589
Due to other funds - - 854,784 854,784
Total Liabilities 5,554,446 - 1,180,102 6,734,548
Deferred Inflows of Resources
Unavailable revenues - property taxes 1,459,388 - 6,660 1,466,048
Unavailable revenues - excise taxes 379,470 - - 379,470
Unavailable revenues - intergovernmental 1,341,647 - - 1,341,647
Unavailable revenues - other - - 398,056 398,056
Total Deferred Inflows of Resources 3,180,505 - 404,716 3,585,221
Fund Balances
Nonspendable 15,376 - 511,185 526,561
Restricted 15,918 1,616,995 12,893,060 14,525,973
Committed 1,026,447 - - 1,026,447
Assigned 1,599,273 - - 1,599,273
Unassigned 17,224,537 (117,756) - 17,106,781
Total Fund Balances 19,881,551 1,499,239 13,404,245 34,785,035
Total Liabilities, Deferred Inflows of Resources,
and Fund Balances $ 28,616,502 $ 1,499,239 $ 14,989,063 $ 45,104,804
See accompanying notes to basic financial statements.
Town of Canton, Massachusetts Page 36 of 128 Comprehensive Annual Financial ReportSource page 45
TOWN OF CANTON, MASSACHUSETTS
RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET
TOTAL FUND BALANCES TO THE STATEMENT OF NET POSITION
JUNE 30, 2018
Total Governmental Fund Balances $ 34,785,035
Capital assets used in governmental activities are not financial resources and therefore are
not reported in the funds. 106,723,246
Other long-term assets are unavailable to pay current-period expenditures 3,585,221
Deferred outflows and inflows of resources to be recognized in future fiscal years
are not available resources and, therefore, are not reported in the funds:
Deferred outflows related to pensions 8,261,963
Deferred outflows related to other postemployment benefits 3,806,844
Deferred inflows related to pensions (5,769,639)
Deferred inflows related to other postemployment benefits (30,639)
Net effect of reporting deferred outflows and inflows of resources 6,268,529
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. 6,316,756
In the Statement of Activities, interest is accrued on outstanding long-term debt
whereas in the governmental funds interest is not reported until due. (218,469)
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 (25,114,243)
Unamortized premiums on bonds (1,046,816)
Capital leases payable (42,986)
Compensated absences (1,916,862)
Net pension liability (38,809,535)
Net other postemployment benefits liability (84,511,025)
Net effect of reporting long-term liabilities (151,441,467)
Net Position of Governmental Activities $ 6,018,851
See accompanying notes to basic financial statements.
Town of Canton, Massachusetts Page 37 of 128 Comprehensive Annual Financial ReportSource page 46
TOWN OF CANTON, MASSACHUSETTS
STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS
FISCAL YEAR ENDED JUNE 30, 2018
Nonmajor Total
General Capital Governmental Governmental
Fund Projects Funds Funds
Revenues:
Property taxes $ 73,672,276 $ - $ 583,486 $ 74,255,762
Tax liens 297,266 - - 297,266
Intergovernmental 18,164,492 600,762 4,528,779 23,294,033
Motor vehicle and other excises 4,703,198 - - 4,703,198
Hotel and meals taxes 603,821 - - 603,821
Licenses and permits 1,235,156 - - 1,235,156
Penalties and interest on taxes 364,795 - - 364,795
Payments in lieu of taxes 236,816 - - 236,816
Fines and forfeitures 114,905 - - 114,905
Charges for services - - 2,108,925 2,108,925
Departmental and other revenue 1,086,208 - 3,337,398 4,423,606
Investment income 402,448 - 53,754 456,202
Contributions and donations - - 482,910 482,910
Total Revenues 100,881,381 600,762 11,095,252 112,577,395
Expenditures:
Current:
General government 4,080,517 6,505 208,467 4,295,489
Public safety 11,446,294 172,709 1,270,513 12,889,516
Education 42,052,042 1,536,849 6,009,765 49,598,656
Public works 5,706,081 1,212,293 841,935 7,760,309
Health and human services 967,045 - 137,999 1,105,044
Culture and recreation 2,045,345 - 596,642 2,641,987
Pension benefits 13,538,094 - - 13,538,094
Employee benefits 12,964,428 - 97,410 13,061,838
State and county assessments 1,015,303 - - 1,015,303
Debt service:
Principal 3,871,933 - - 3,871,933
Interest 995,903 - - 995,903
Total Expenditures 98,682,985 2,928,356 9,162,731 110,774,072
Excess (Deficiency) of Revenues Over (Under) Expenditures 2,198,396 (2,327,594) 1,932,521 1,803,323
Other Financing Sources (Uses):
Issuance of bonds and notes - 1,792,000 - 1,792,000
Premiums from bonds and notes 38,192 145,000 63,679 246,871
Issuance of refunding bonds 414,000 - - 414,000
Payments on refunding bonds (446,000) - - (446,000)
Transfers in 1,285,690 553,042 991,146 2,829,878
Transfers out (1,544,188) - (1,785,690) (3,329,878)
Total Other Financing Sources (Uses) (252,306) 2,490,042 (730,865) 1,506,871
Net Change in Fund Balances 1,946,090 162,448 1,201,656 3,310,194
FUND BALANCES - Beginning of year 17,935,461 1,336,791 12,202,589 31,474,841
FUND BALANCES - End of year $ 19,881,551 $ 1,499,239 $ 13,404,245 $ 34,785,035
See acompanying notes to basic financial statements.
Town of Canton, Massachusetts Page 38 of 128 Comprehensive Annual Financial ReportSource page 47
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, 2018
Net Change in Fund Balances - Total Governmental Fund Balances $ 3,310,194
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 5,138,643
Disposal of capital assets (86,103)
Depreciation expense (5,177,406)
Net effect of reporting capital assets (124,866)
In the Statement of Activities, Internal Service Funds established to administer the Town's
health insurance and worker's compensation activities are included within the Statement of
activities whereas these activities are not presented in the Statement of Revenues,
Expenditures and Changes in Fund Balances. 1,203,099
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 (1,792,000)
Premiums from bonds and notes (246,871)
Issuance of refunding bonds (414,000)
Payments on refunding bonds 446,000
Amortization of premiums on bonds and notes payable 281,532
Payments on capital leases 20,841
Repayments of debt 3,871,933
Net effect of reporting long-term debt 2,167,435
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. (356,095)
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. 54,537
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 (212,844)
Pension benefits (616,157)
Other postemployment benefits (2,863,809)
Net effect of reporting long-term liabilities (3,666,810)
Change in Net Position of Governmental Activities $ 2,587,494
See accompanying notes to basic financial statements.
Town of Canton, Massachusetts Page 39 of 128 Comprehensive Annual Financial ReportSource page 48
TOWN OF CANTON, MASSACHUSETTS
STATEMENT OF NET POSITION
PROPRIETARY FUNDS
JUNE 30, 2018
Governmental
Business-Type Activities Activities
Total Internal
Enterprise Service
Water Sewer Rink Funds Funds
Assets
Current assets:
Cash and cash equivalents $ 3,239,375 $ 3,575,626 $ 2,717,918 $ 9,532,919 $ 2,817,254
Investments - - - - 4,193,921
Receivables (net):
User charges 1,982,920 1,755,504 - 3,738,424 -
Tax liens 25,078 26,299 - 51,377 -
Departmental and other - - - - 227,894
Prepaid items - - - - 41,962
Deposit held by third party - - - - 61,800
Total current assets 5,247,373 5,357,429 2,717,918 13,322,720 7,342,831
Noncurrent assets:
Nondepreciable capital assets 624,852 - 85,935 710,787 -
Capital assets (net of depreciation) 30,923,524 13,922,446 - 44,845,970 -
Total noncurrent assets 31,548,376 13,922,446 85,935 45,556,757 -
Total Assets 36,795,749 19,279,875 2,803,853 58,879,477 7,342,831
Deferred Outflows of Resources
Related to net pension liability 283,161 225,824 50,281 559,266 -
Related to net OPEB liability 19,921 11,035 1,550 32,506 -
Total Deferred Outflows of Resources 303,082 236,859 51,831 591,772 -
Liabilities
Current liabilities:
Warrants and accounts payable 51,978 3,985 56,390 112,353 147,434
Accrued payroll and withholdings 14,343 5,421 - 19,764 -
Health claims incurred but not reported - - - - 878,641
Accrued interest 134,967 54,144 - 189,111 -
Other liabilities 8,597 - - 8,597 -
Compensated absences 24,426 1,761 - 26,187 -
Bonds and notes payable 1,751,634 941,451 6,000 2,699,085 -
Total current liabilities 1,985,945 1,006,762 62,390 3,055,097 1,026,075
Noncurrent liabilities:
Compensated absences 73,279 5,283 - 78,562 -
Net OPEB liability 2,079,249 799,616 135,434 3,014,299 -
Net pension liability 1,330,115 1,060,777 236,189 2,627,081 -
Bonds and notes payable 17,021,246 5,233,136 - 22,254,382 -
Total noncurrent liabilities 20,503,889 7,098,812 371,623 27,974,324 -
Total Liabilities 22,489,834 8,105,574 434,013 31,029,421 1,026,075
Deferred Inflows of Resources
Related to net pension liability 197,742 157,702 35,113 390,557 -
Related to net OPEB liability 772 304 49 1,125 -
Total Deferred Outflows of Resources 198,514 158,006 35,162 391,682 -
Net Position
Net investment in capital assets 12,775,496 7,747,859 79,935 20,603,290 -
Unrestricted 1,634,987 3,505,295 2,306,574 7,446,856 6,316,756
Total Net Position $ 14,410,483 $ 11,253,154 $ 2,386,509 $ 28,050,146 $ 6,316,756
See accompanying notes to basic financial statements.
Town of Canton, Massachusetts Page 40 of 128 Comprehensive Annual Financial ReportSource page 49
TOWN OF CANTON, MASSACHUSETTS
STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION
PROPRIETARY FUNDS
FISCAL YEAR ENDED JUNE 30, 2018
Governmental
Business-Type Activities Activities
Total Internal
Enterprise Service
Water Sewer Rink Funds Funds
Operating Revenues:
Charges for services $ 7,186,664 $ 7,143,471 $ - $ 14,330,135 $ -
Employee contributions - - - - 4,099,038
Employer contributions - - - - 11,384,001
Stop loss reimbursements - - - - 530,671
Total Operating Revenues 7,186,664 7,143,471 - 14,330,135 16,013,710
Operating Expenses:
Operating costs 2,744,435 1,239,856 13,209 3,997,500 -
Massachusetts Water Resources Authority assessment 2,551,203 4,252,646 - 6,803,849 -
Depreciation 1,233,434 627,322 - 1,860,756 -
Employee benefits - - - - 14,875,608
Total Operating Expenses 6,529,072 6,119,824 13,209 12,662,105 14,875,608
Operating Income (Loss) 657,592 1,023,647 (13,209) 1,668,030 1,138,102
Nonoperating Revenues (Expenses):
Investment income 40,268 34,044 23,726 98,038 64,997
Interest expense (576,384) (155,725) (289) (732,398) -
Total Nonoperating Revenues (Expenses) (536,116) (121,681) 23,437 (634,360) 64,997
Income Before Capital Contributions
and Transfers 121,476 901,966 10,228 1,033,670 1,203,099
Capital contributions - - 5,625 5,625 -
Transfers in - - 500,000 500,000 -
Total Capital Contributions and Transfers - - 505,625 505,625 -
Change in Net Position 121,476 901,966 515,853 1,539,295 1,203,099
Total Net Position - Beginning of the Year,
as restated (see Note IV) 14,289,007 10,351,188 1,870,656 26,510,851 5,113,657
Total Net Position - End of the Year $ 14,410,483 $ 11,253,154 $ 2,386,509 $ 28,050,146 $ 6,316,756
See accompanying notes to basic financial statements.
Town of Canton, Massachusetts Page 41 of 128 Comprehensive Annual Financial ReportSource page 50
TOWN OF CANTON, MASSACHUSETTS
STATEMENT OF CASH FLOWS
PROPRIETARY FUNDS
FISCAL YEAR ENDED JUNE 30, 2018
Governmental
Business-Type Activities Activities
Total Internal
Enterprise Service
Water Sewer Rink Funds Funds
Cash Flows from Operating Activities:
Receipts from users $ 7,325,539 $ 7,389,895 $ - $ 14,715,434 $ -
Receipts from interfund services provided - - - - 15,848,242
Payments to employees (884,896) (309,042) - (1,193,938) -
Payments to vendors (4,334,089) (5,174,686) (4,786) (9,513,561) -
Payments for interfund services used - - - - (15,076,191)
Net Cash Provided by (Used in) Operating
Activities 2,106,554 1,906,167 (4,786) 4,007,935 772,051
Cash Flows from Noncapital Financing Activities:
Transfers in - - 500,000 500,000 -
Net Cash Provided by Noncapital
Financing Activities - - 500,000 500,000 -
Cash Flows from Capital and Related Financing Activities:
Proceeds from capital grants - - 5,625 5,625 -
Proceeds from the issuance of refunding bonds 2,504,000 - - 2,504,000 -
Premiums from the issuance of bonds and notes 231,000 - - 231,000 -
Payments of refunded bonds (2,694,000) - - (2,694,000) -
Acquisition and construction of capital assets (355,565) (347,845) (30,608) (734,018) -
Principal payments on bonds and notes (1,704,800) (942,367) (7,000) (2,654,167) -
Interest payments on bonds and notes (647,419) (184,291) (289) (831,999) -
Net Cash Used in Capital and Related
Financing Activities (2,666,784) (1,474,503) (32,272) (4,173,559) -
Cash Flows from Investing Activities:
Investment income 40,268 34,044 23,726 98,038 64,997
Investment of operating cash - - - - (91,887)
Net Cash Provided by (Used in) Investing Activities 40,268 34,044 23,726 98,038 (26,890)
Net Change in Cash and Cash Equivalents (519,962) 465,708 486,668 432,414 745,161
Cash and Cash Equivalents:
Beginning of the year 3,759,337 3,109,918 2,231,250 9,100,505 2,072,093
End of the year $ 3,239,375 $ 3,575,626 $ 2,717,918 $ 9,532,919 $ 2,817,254
Reconciliation of Operating Income (Loss) to Net Cash
Provided by (Used in) Operating Activities:
Operating Income (Loss) $ 657,592 $ 1,023,647 $ (13,209) $ 1,668,030 $ 1,138,102
Adjustments to reconcile operating income (loss) to net
cash provided by (used in) operating activities:
Depreciation 1,233,434 627,322 - 1,860,756 -
Changes in assets, deferred outflows of resources,
liabilities and deferred inflows of
resources: Receivables 138,875 246,424 - 385,299 (165,468)
Prepaid items - - - - (41,962)
Deferred outflows of resources (140,627) (114,953) (25,016) (280,596) -
Accounts payable and accrued expenses 278 (6,874) 83 (6,513) (158,621)
Other liabilities 75 - - 75 -
Net Other postemployment liability 56,171 2,707 4,899 63,777 -
Net pension liability 48,026 38,301 8,528 94,855 -
Deferred inflows of resources 112,730 89,593 19,929 222,252 -
Net Cash Provided by (Used in) Operating
Activities $ 2,106,554 $ 1,906,167 $ (4,786) $ 4,007,935 $ 772,051
Noncash capital and related financing activities:
Amortization of bond premium $ 55,641 $ 22,219 $ - $ 77,860 $ -
See accompanying notes to basic financial statements.
Town of Canton, Massachusetts Page 42 of 128 Comprehensive Annual Financial ReportSource page 51
TOWN OF CANTON, MASSACHUSETTS
STATEMENT OF FIDUCIARY NET POSITION
JUNE 30, 2018
Other Private
Postemployment Purpose Agency
Benefits Trust Fund Trust Funds Funds
Assets
Cash and cash equivalents $ 14,430 $ 95,352 $ 1,279,708
Investments:
Equity mutual funds 2,612,170 - -
Bond mutual funds 1,529,194 - -
Total Assets 4,155,794 95,352 1,279,708
Liabilities
Warrants payable - 10,000 11,853
Agency liabilities - - 1,267,855
Total Liabilities - 10,000 1,279,708
Net Position
Restricted for other postemployment benefits 4,155,794 - -
Held in trust for private purposes - 85,352 -
Total Net Position $ 4,155,794 $ 85,352 $ -
See accompanying notes to basic financial statements.
Town of Canton, Massachusetts Page 43 of 128 Comprehensive Annual Financial ReportSource page 52
TOWN OF CANTON, MASSACHUSETTS
STATEMENT OF CHANGES IN FIDUCIARY NET POSITION
FISCAL YEAR ENDED JUNE 30, 2018
Other Private
Postemployment Purpose
Benefits Trust Fund Trust Funds
Additions
Contributions:
Employer $ 4,179,556 $ -
Other - 9,250
Total contributions 4,179,556 9,250
Investment income:
Interest and dividends 164,113 1,530
Net appreciation in fair value of investments 22,041 -
Less - investment management fees (10,731) -
Net investment earnings 175,423 1,530
Other income - -
Total Additions 4,354,979 10,780
Deductions
Education - scholarships - 20,700
Retiree benefits 3,179,556 -
Total Deductions 3,179,556 20,700
CHANGE IN NET POSITION 1,175,423 (9,920)
NET POSITION AT BEGINNING OF YEAR 2,980,371 95,272
NET POSITION AT END OF YEAR $ 4,155,794 $ 85,352
See accompanying notes to basic financial statements.
Town of Canton, Massachusetts Page 44 of 128 Comprehensive Annual Financial ReportSource page 53
TOWN OF CANTON, MASSACHUSETTS
NOTES TO BASIC FINANCIAL STATEMENTS
YEAR ENDED JUNE 30, 2018
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 2018, the Town’s share of the operating and debt service expenses was $1,160,586.
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 45 of 128 Comprehensive Annual Financial ReportSource page 54
Major Fund Criteria – Major funds must be reported if both of the following criteria are met:
1) The total assets and deferred outflows, liabilities and deferred inflows, revenues, or
expenditures/expenses of an individual governmental or enterprise fund are at least ten
percent of the corresponding element (assets and deferred outflows, liabilities and
deferred inflows, etc.) for all funds of that category or type (total governmental or total
enterprise funds), and
2) The total assets and deferred outflows, liabilities and deferred inflows, revenues, or
expenditures/expenses of the individual governmental fund or enterprise fund are at least
five percent of the corresponding element for all governmental and enterprise funds
combined.
Additionally, any other governmental or enterprise fund that management believes is particularly
significant to the basic financial statements may be reported as a major fund.
C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation
The government-wide financial statements are reported using the economic resources
measurement focus and the accrual basis of accounting. Under this method, revenues are
recorded when earned and expenses are recorded when a liability is incurred. Property taxes are
recognized as revenues in the fiscal year for which they are levied. Grants and similar items are
recognized as revenue as soon as all eligibility requirements imposed by the provider are met.
The statement of activities demonstrates the degree to which the direct expenses of a given
function or segment is offset by program revenues. Direct expenses are those that are clearly
identifiable with a specific function or segment. Program revenues include: 1) charges to
customers or applicants who purchase, use, or directly benefit from goods, services, or privileges
provided by a given function or segment and 2) grants and contributions that are restricted to
meeting the operational or capital requirements of a particular function or segment. Taxes and
other items not properly included among program revenues are reported instead as general
revenues.
The governmental fund financial statements are reported using the current financial resources
measurement focus and the modified accrual basis of accounting. Revenues are recognized when
susceptible to accrual (i.e. measurable and available). Revenues are considered to be available
when they are collectible within the current period or soon enough thereafter to pay liabilities of
the current period. Expenditures are recorded when the related fund liability is incurred, except
for unmatured interest on general long-term debt which is recognized when due, certain
compensated absences, claims and judgments which are recognized when the obligations are
expected to be liquidated with current expendable available resources.
The Town considers property tax revenues to be available if they are material and collected
within 60 days after the end of the fiscal year. Investment income associated with the current
fiscal period is susceptible to accrual and has been recognized as revenue of the current fiscal
period. All other revenue items are considered to be measurable and available only when the
cash is received and are recognized as revenue at that time.
Town of Canton, Massachusetts Page 46 of 128 Comprehensive Annual Financial ReportSource page 55
The government reports the following major Governmental Funds:
General Fund – is the government’s primary operating fund. It accounts for all financial
resources of the general government except those required to be accounted for in another
fund.
Capital Projects Fund – is used to account for financial resources that are restricted,
committed or assigned to expenditures for capital outlays.
Nonmajor Governmental Funds – consist of special revenue, capital projects and permanent
funds that are aggregated and presented in the Nonmajor Governmental Funds column on the
Governmental Funds financial statements. The following describes the general use of these
fund types:
The Special Revenue Funds are used to account for the proceeds of specific revenue sources
that are restricted or committed to expenditures for specified purposes other than debt service
or capital projects.
The Permanent Funds are used to account for financial resources that are restricted to the
extent that only earnings, not principal, may be used for purposes that support the
governmental programs.
The proprietary fund financial statements are reported using the economic resources
measurement focus and the accrual basis of accounting. Under this method, revenues are
recognized when earned and expenses are recorded when the liabilities are incurred.
Proprietary funds distinguish operating revenues and expenses from non-operating items.
Operating revenues and expenses generally result from providing services and producing and
delivering goods in connection with a proprietary fund’s principal ongoing operations. The
principal operating revenues are user charges and fees, while operating expenses consist of
salaries, ordinary maintenance, assessments, indirect costs and depreciation. All revenues and
expenses not meeting this definition are reported as non-operating revenues and expenses.
The government reports the following major proprietary funds:
Water Enterprise Fund – is used to account for the operation of the Town’s water activities.
Costs associated with maintaining the related infrastructure and providing services to the
general public on a continuing basis, including depreciation, are financed or recovered
primarily through user charges.
Sewer Enterprise Fund – is used to account for the operation of the Town’s sewer activities.
Costs associated with maintaining the related infrastructure and providing services to the
general public on a continuing basis, including depreciation, are financed or recovered
primarily through user charges.
Rink Enterprise Fund – is used to account for the operation of the Town’s ice skating rink
activities.
Town of Canton, Massachusetts Page 47 of 128 Comprehensive Annual Financial ReportSource page 56
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 48 of 128 Comprehensive Annual Financial ReportSource page 57
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 49 of 128 Comprehensive Annual Financial ReportSource page 58
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 two types of items that are reported on the
government-wide statement of net position which relate to outflows from changes in the net
pension liability and the other postemployment benefit liability. The deferred pensions will be
recognized in pension expense in future years as more fully described in Note III, subsection A.
The deferred other postemployment benefits will be recognized in employee benefits expense in
future years as more fully described in Note III, subsection C.
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 three
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 other items are reported on the government-wide statement of net position and
relate to outflows from changes in the net pension liability and the other postemployment benefit
liability. The deferred pensions will be recognized in pension expense in future years as more
fully described in Note III, subsection A. The deferred other postemployment benefits will be
recognized in employee benefits expense in future years as more fully described in Note III,
subsection C.
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:
Town of Canton, Massachusetts Page 50 of 128 Comprehensive Annual Financial ReportSource page 59
Nonexpendable permanent funds represent the endowment portion of donor restricted trusts
that support governmental programs.
Expendable permanent funds represent the spendable portion of donor restricted trusts that
support governmental programs.
Debt service represents a grant to fund a portion of the debt service on outstanding school
construction debt that will be amortized over the life of the bonds in accordance with state
law.
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
Town of Canton, Massachusetts Page 51 of 128 Comprehensive Annual Financial ReportSource page 60
also assign fund balance as it does when appropriating fund balance to cover a gap between
estimated revenue and appropriations in the subsequent year’s appropriated budget.
Unassigned represents amounts that have not been restricted, committed or assigned to
specific purposes within the general fund. The general fund is the only fund that reports a
positive unassigned fund balance amount. Other governmental funds besides the general
fund can only report a negative unassigned fund balance amount.
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
$7,692,837 at June 30, 2018 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 $445,273 of encumbrances from normal purchasing
activity in the general fund as assigned and $1,026,447 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 52 of 128 Comprehensive Annual Financial ReportSource page 61
The following table reflects the Town’s fund equity categorizations:
Capital Nonmajor
General Projects Governmental Total
Nonspendable:
Nonexpendable trust funds $ - $ - $ 511,185 $ 511,185
Prepaid items 15,376 - - 15,376
Restricted:
Recreation revolving - - 286,525 286,525
Parking revolving - - 216,015 216,015
Animal control revolving - - 94,429 94,429
Other Town revolving - - 346,279 346,279
School revolving - - 1,997,965 1,997,965
General municipal private grants - - 914,409 914,409
Ambulance receipts reserved - - 1,862,791 1,862,791
Community preservation - - 2,413,529 2,413,529
Police grants - - 541,380 541,380
Other Town grants - - 80,842 80,842
School grants - - 740,468 740,468
General municipal donations - - 1,771,460 1,771,460
School donations - - 238,114 238,114
Insurance recoveries - - 118,193 118,193
Roadway improvements - 818,273 - 818,273
Building improvements - 43,935 - 43,935
Fire equipment - 754,787 - 754,787
Other capital outlay - - 159,163 159,163
Library trust funds - - 556,841 556,841
Conservation trust funds - - 153,235 153,235
Other trust funds - - 33,695 33,695
Other purposes 15,918 - 367,727 383,645
Committed:
Police 132,315 - - 132,315
Education 207,781 - - 207,781
Infrastructure 400,783 - - 400,783
Planning 141,761 - - 141,761
Other purposes 143,807 - - 143,807
Assigned:
Purchase orders 445,273 - - 445,273
Subsequent years' budget 1,154,000 - - 1,154,000
Unassigned 17,224,537 (117,756) - 17,106,781
$19,881,551 $ 1,499,239 $13,404,245 $34,785,035
E. Excess of Expenditures Over Appropriations and Deficits
During fiscal year 2018, no expenditures exceeded appropriations in the General Fund.
Town of Canton, Massachusetts Page 53 of 128 Comprehensive Annual Financial ReportSource page 62
The Town incurred individual fund deficits totaling $117,756 in Capital Project Major Fund.
These deficits will be funded through bond proceeds during fiscal year 2019.
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 $36,388,578 and the bank balance was $37,341,996. Of the Town's bank
balance, $34,531,675 was covered by federal depository insurance or the Depositor’s Insurance
Fund; $2,616,948 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
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
Town of Canton, Massachusetts Page 54 of 128 Comprehensive Annual Financial ReportSource page 63
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, 2018:
Fair Value Measurements Using
6/30/18 Level 1 Level 2 Level 3
Investments by fair value level
Debt securities:
U.S. government obligations $ 6,999,408 $ 2,455,929 $ 4,543,479 $ -
Corporate fixed income securities 2,225,792 - 2,225,792 -
Negotiable certificates of deposit 1,454,900 - 1,454,900 -
Bond mutual funds 1,685,181 - 1,685,181 -
Repurchase agreements 1,050,000 - 1,050,000 -
Total debt securities 13,415,281 2,455,929 10,959,352 -
Equity securities:
Common stock 2,028,012 2,028,012 - -
Equity mutual funds 2,612,170 - 2,612,170 -
Total equity securities 4,640,182 2,028,012 2,612,170 -
Total investments by fair value level 18,055,463 $ 4,483,941 $ 13,571,522 $ -
Investments measured at amortized cost
State investment pool 6,437,201
Total investments measured at fair value $ 24,492,664
Debt and equity securities classified in Level 1 are valued using prices quoted in active markets
for those securities. Corporate fixed income securities, U.S. governmental obligations, negotiable
certificates of deposit, bond mutual funds and repurchase agreements classified in Level 2 are
Town of Canton, Massachusetts Page 55 of 128 Comprehensive Annual Financial ReportSource page 64
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, 2018, the Town had the following investments with maturities:
Maturities in Years
Investments 6/30/18 Less than 1 1-5 6 - 10
Corporate fixed income securities $ 2,225,792 $ 459,117 $ 1,501,080 $ 265,595
U.S. government obligations 6,999,408 1,405,290 4,768,479 825,639
Negotiable certificates of deposit 1,454,900 - 1,454,900 -
Repurchase agreements 1,050,000 1,050,000 - -
State investment pool 6,437,201 6,437,201 - -
Total investments with maturities $ 18,167,301 $ 9,351,608 $ 7,724,459 $ 1,091,234
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, 2018, Town has 29% of its investments in U.S. government
obligations and 26% 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, 2018 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 $ - $ 6,999,408 $ - $ - $ - $ 6,999,408
A 206,160 - - - - 206,160
A1 - - - - - -
A2 107,861 - - - - 107,861
A3 357,894 - - - - 357,894
BAA 366,317 - - - - 366,317
BAA1 374,110 - - - - 374,110
BAA2 813,450 - - - - 813,450
Not rated - - 1,454,900 1,050,000 6,437,201 8,942,101
Totals - All $ 2,225,792 $ 6,999,408 $ 1,454,900 $ 1,050,000 $ 6,437,201 $ 18,167,301
Town of Canton, Massachusetts Page 56 of 128 Comprehensive Annual Financial ReportSource page 65
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 $ 360,875 $ (10,381) $ 350,494
Tax liens and foreclosures 1,315,092 - 1,315,092
Community preservation surcharges 3,278 - 3,278
Motor vehicle and other excise taxes 661,322 (281,852) 379,470
Ambulance fees 828,770 (430,714) 398,056
Public safety details 92,230 - 92,230
Intergovernmental 2,889,730 - 2,889,730
Total $ 6,151,297 $ (722,947) $ 5,428,350
Receivables as of year-end for Town's proprietary funds are as follows:
Gross Allowance for Net
Amount Uncollectibles Amount
Receivables:
Water user charges $ 1,982,920 $ - $ 1,982,920
Water liens 25,078 - 25,078
Sewer user charges 1,755,504 - 1,755,504
Sewer liens 26,299 - 26,299
Rink user charges 19,710 (19,710) -
Stop loss receivables 227,894 - 227,894
Total $ 4,037,405 $ (19,710) $ 4,017,695
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 $ 147,678 $ - $ 147,678
Tax liens and foreclosures 1,311,710 3,382 1,315,092
Motor vehicle and other excise taxes 379,470 - 379,470
Community preservation surcharges - 3,278 3,278
Ambulance fees - 398,056 398,056
Intergovernmental 1,341,647 - 1,341,647
Total $ 3,180,505 $ 404,716 $ 3,585,221
Town of Canton, Massachusetts Page 57 of 128 Comprehensive Annual Financial ReportSource page 66
School Building Assistance Reimbursement – As of June 30, 2018, the Town expects to receive
the balance of grants from the Commonwealth of Massachusetts under various construction
reimbursement regulations totaling approximately $1.4 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 $1.3
million under the caption Intergovernmental has been recorded for the reimbursable portion of the
principal balance as of June 30, 2018.
C. Interfund Receivables, Payables and Transfers
The composition of interfund balances at June 30, 2018 is as follows:
Receivable Fund Payable Fund Amount
General Fund Nonmajor Governmental Funds - $ 854,784
Roadway Improvements
$ 854,784
The outstanding balances between funds result mainly from the timing difference between the
dates that (1) reimburseable expenditures occur, (2) the intergovernmental reimbursements are
received and (3) the payments to the general fund are made.
The composition of interfund transfers for the fiscal year ended June 30, 2018 is as follows:
Transfers In
Capital Nonmajor Rink
General Projects Governmental Enterprise
Transfers Out Fund Fund Funds Fund Total
General Fund $ - $ 553,042 $ 991,146 $ - $ 1,544,188 (1)
Nonmajor Governmental Funds 1,285,690 - - 500,000 1,785,690 (2)
Total $ 1,285,690 $ 553,042 $ 991,146 $ 500,000 $ 3,329,878
(1) Transfers to capital projects fund for various capital purposes, transfers to nonmajor governmental funds for
retirement buyback reserves, recreation project and special education purposes.
(2) Transfers to general fund to supplement operating budgets, transfer to rink enterprise fund for insurance
recoveries.
Town of Canton, Massachusetts Page 58 of 128 Comprehensive Annual Financial ReportSource page 67
D. Capital Assets
Capital asset activity for the year ended June 30, 2018, 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 4,285,098 104,967 (4,285,098) 104,967
Total capital assets not being depreciated 15,443,966 104,967 (4,285,098) 11,263,835
Capital assets being depreciated:
Land improvements 2,765,111 624,850 - 3,389,961
Buildings 79,996,182 - - 79,996,182
Building improvements 27,492,318 5,680,786 - 33,173,104
Machinery and equipment 9,379,257 901,822 - 10,281,079
Vehicles 6,270,210 436,711 (164,287) 6,542,634
Infrastructure 26,011,784 1,674,605 - 27,686,389
Total capital assets being depreciated 151,914,862 9,318,774 (164,287) 161,069,349
Less accumulated depreciation for:
Land improvements (1,819,828) (181,660) - (2,001,488)
Buildings (28,401,164) (1,806,948) - (30,208,112)
Building improvements (13,939,506) (1,235,461) - (15,174,967)
Machinery and equipment (5,384,648) (613,669) - (5,998,317)
Vehicles (4,454,635) (640,070) 78,184 (5,016,521)
Infrastructure (6,510,935) (699,598) - (7,210,533)
Total accumulated depreciation (60,510,716) (5,177,406) 78,184 (65,609,938)
Total capital assets being depreciated, net 91,404,146 4,141,368 (86,103) 95,459,411
Total governmental activities capital assets, net $ 106,848,112 $ 4,246,335 $ (4,371,201) $ 106,723,246
Beginning Ending
Balance Increases Decreases Balance
Business-Type Activities:
Capital assets not being depreciated:
Land $ 624,852 $ - $ - $ 624,852
Construction in process - 85,935 - 85,935
Total capital assets not being depreciated 624,852 85,935 - 710,787
Capital assets being depreciated:
Buildings 18,758,743 - - 18,758,743
Building improvements 205,950 135,477 - 341,427
Machinery and equipment 2,729,273 225,553 - 2,954,826
Vehicles 1,161,120 - - 1,161,120
Infrastructure 58,976,957 342,380 - 59,319,337
Total capital assets being depreciated 81,832,043 703,410 - 82,535,453
Less accumulated depreciation for:
Buildings (4,780,022) (438,653) - (5,218,675)
Building improvements (20,940) (13,684) - (34,624)
Machinery and equipment (1,506,367) (254,547) - (1,760,914)
Vehicles (890,967) (72,185) - (963,152)
Infrastructure (28,630,431) (1,081,687) - (29,712,118)
Total accumulated depreciation (35,828,727) (1,860,756) - (37,689,483)
Total capital assets being depreciated, net 46,003,316 (1,157,346) - 44,845,970
Total business-type activities capital assets, net $ 46,628,168 $ (1,071,411) $ - $ 45,556,757
Town of Canton, Massachusetts Page 59 of 128 Comprehensive Annual Financial ReportSource page 68
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 35,792 - 241,742
Machinery and equipment 2,086,282 142,053 - 2,228,335
Vehicles 804,504 - - 804,504
Infrastructure 28,686,641 177,720 - 28,864,361
Total capital assets being depreciated 49,278,516 355,565 - 49,634,081
Less accumulated depreciation for:
Buildings (4,343,547) (408,530) - (4,752,077)
Building improvements (20,940) (11,192) - (32,132)
Machinery and equipment (1,148,972) (186,072) - (1,335,044)
Vehicles (557,301) (63,005) - (620,306)
Infrastructure (11,406,363) (564,635) - (11,970,998)
Total accumulated depreciation (17,477,123) (1,233,434) - (18,710,557)
Total capital assets being depreciated, net 31,801,393 (877,869) - 30,923,524
Total Water capital assets, net $ 32,426,245 $ (877,869) $ - $ 31,548,376
Business-type Activities: Sewer
Capital assets being depreciated:
Buildings $ 1,263,604 $ - $ - $ 1,263,604
Buildings and improvements - 99,685 - 99,685
Machinery and equipment 642,991 83,500 - 726,491
Vehicles 356,616 - - 356,616
Infrastructure 30,290,316 164,660 - 30,454,976
Total capital assets being depreciated 32,553,527 347,845 - 32,901,372
Less accumulated depreciation for:
Buildings (436,475) (30,123) - (466,598)
Buildings and improvements - (2,492) - (2,492)
Machinery and equipment (357,395) (68,475) - (425,870)
Vehicles (333,666) (9,180) - (342,846)
Infrastructure (17,224,068) (517,052) - (17,741,120)
Total accumulated depreciation (18,351,604) (627,322) - (18,978,926)
Total capital assets being depreciated, net 14,201,923 (279,477) - 13,922,446
Total Sewer capital assets, net $ 14,201,923 $ (279,477) $ - $ 13,922,446
Town of Canton, Massachusetts Page 60 of 128 Comprehensive Annual Financial ReportSource page 69
Beginning Ending
Balance Increases Decreases Balance
Business-type Activities: Rink
Capital assets not being depreciated:
Land $ - $ - $ - $ -
Construction in process - 85,935 - 85,935
Total capital assets not being depreciated - 85,935 - 85,935
Total capital assets being depreciated, net - - - -
Total Rink capital assets, net $ - $ 85,935 $ - $ 85,935
Depreciation expense was charged to functions/programs as follows:
Governmental Activities: Business-Type Activities:
General government $ 211,751 Water $ 1,233,434
Public safety 784,306 Sewer 627,322
Education 2,683,753 $ 1,860,756
Public works 1,079,958
Health and human services 71,030
Culture and recreation 346,608
$ 5,177,406
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 plans to rebuild the rink with available insurance
recoveries, federal disaster reimbursements 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 (62,550)
Total $ 41,700
Town of Canton, Massachusetts Page 61 of 128 Comprehensive Annual Financial ReportSource page 70
The future minimum lease payments and the present value of the minimum lease payments at
June 30, 2018, are as follows:
Fiscal Year Ended June 30, Amount
2019 21,713
2020 21,713
Total minimum lease payments 43,426
Less: amounts representing interest (440)
Present value of minimum lease payments $ 42,986
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.
There were no temporary notes outstanding as of June 30, 2018.
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”.
Town of Canton, Massachusetts Page 62 of 128 Comprehensive Annual Financial ReportSource page 71
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 $ 27,226,176 $ 2,206,000 $ (4,317,933) $ 25,114,243 $ 3,786,421
Unamortized bond premium 1,081,477 246,871 (281,532) 1,046,816 270,830
Capital leases 63,827 - (20,841) 42,986 21,273
Landfill closure 26,000 - (26,000) - -
Compensated absences 1,704,018 638,849 (426,005) 1,916,862 479,216
Net pension liability 37,408,247 5,108,321 (3,707,033) 38,809,535 -
Net OPEB liability * 81,454,177 7,714,705 (4,657,857) 84,511,025 -
Total Governmental Activities $ 148,963,922 $ 15,914,746 $ (13,437,201) $ 151,441,467 $ 4,557,740
Business-Type Activities - Water:
Bond and note debt $ 20,180,900 $ 2,504,000 $ (4,398,800) $ 18,286,100 $ 1,661,700
Unamortized bond premium 311,421 231,000 (55,641) 486,780 89,934
Compensated absences 93,802 27,354 (23,451) 97,705 24,426
Net pension liability 1,282,089 175,077 (127,051) 1,330,115 -
Net OPEB liability * 2,023,078 155,065 (98,894) 2,079,249 -
Total Water 23,891,290 3,092,496 (4,703,837) 22,279,949 1,776,060
Business-Type Activities - Sewer:
Bond and note debt 7,065,393 - (942,367) 6,123,026 925,771
Unamortized bond premium 73,780 - (22,219) 51,561 15,680
Compensated absences 13,358 3,825 (10,139) 7,044 1,761
Net pension liability 1,022,476 139,626 (101,325) 1,060,777 -
Net OPEB liability * 796,909 54,136 (51,429) 799,616 -
Total Sewer 8,971,916 197,587 (1,127,479) 8,042,024 943,212
Business-Type Activities - Rink:
Bond and note debt 13,000 - (7,000) 6,000 6,000
Net pension liability 227,661 31,088 (22,560) 236,189 -
Net OPEB liability * 130,535 12,363 (7,464) 135,434 -
Total Rink 371,196 43,451 (37,024) 377,623 6,000
Total Business-Type Activities $ 33,234,402 $ 3,333,534 $ (5,868,340) $ 30,699,596 $ 2,725,272
* As restated (See Note III. Subsection C.)
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 63 of 128 Comprehensive Annual Financial ReportSource page 72
The following is a summary of outstanding long-term debt obligations as of June 30, 2018:
Interest Beginning Ending
Description of Issue Rate Balance Additions Maturities Balance
Governmental Activities:
General Obligation Bonds 2.00 - 5.00% $ 14,138,176 $ 1,792,000 $ (1,843,333) $ 14,086,843
Refunding Bonds 2.00 - 4.00% 13,088,000 414,000 (2,474,600) 11,027,400
Total Governmental Activities 27,226,176 2,206,000 (4,317,933) 25,114,243
Add: Unamortized bond premium 1,081,477 246,871 (281,532) 1,046,816
Total Governmental Activities, net $ 28,307,653 $ 2,452,871 $ (4,599,465) $ 26,161,059
Business-Type Activities - Water:
General Obligation Bonds 2.00 - 5.00% $ 16,508,000 $ - $ (3,908,000) $ 12,600,000
Refunding Bonds 3.25 - 4.00% 2,495,900 2,504,000 (290,800) 4,709,100
Massachusetts Water Resource Authority 0.00% 1,177,000 - (200,000) 977,000
Total Water 20,180,900 2,504,000 (4,398,800) 18,286,100
Add: Unamortized bond premium 311,421 231,000 (55,641) 486,780
Total Water, net 20,492,321 2,735,000 (4,454,441) 18,772,880
Business-Type Activities - Sewer:
General Obligation Bonds 2.00 - 5.00% 2,652,000 - (286,000) 2,366,000
Refunding Bonds 3.25 - 4.00% 1,412,100 - (369,600) 1,042,500
Massachusetts Water Resource Authority 0.00% 226,600 - (113,300) 113,300
Massachusetts Clean Water Trust 2.00% 2,774,693 - (173,467) 2,601,226
Total Sewer 7,065,393 - (942,367) 6,123,026
Add: Unamortized bond premium 73,780 - (22,219) 51,561
Total Sewer, net 7,139,173 - (964,586) 6,174,587
Business-Type Activities - Rink:
Refunding Bonds 2.00% 13,000 - (7,000) 6,000
Total Rink 13,000 - (7,000) 6,000
Total Business-Type Activities, net $ 27,644,494 $ 2,735,000 $ (5,426,027) $ 24,953,467
The following represents authorized and unissued debt as of June 30, 2018:
Project Amount
Governmental:
Infrastructure $ 11,007,000
School building improvements 3,119,000
Land purchase 2,065,500
Other capital projects 576,000
Business-type:
Water projects 2,440,000
Sewer projects 864,790
Total Authorized and Unissued $ 20,072,290
Town of Canton, Massachusetts Page 64 of 128 Comprehensive Annual Financial ReportSource page 73
Payments on outstanding bond balances due in future years consist of the following:
Governmental Activities
Year Ending Principal Interest
June 30, Balance Balance Total
2019 $ 3,786,421 $ 895,177 $ 4,681,598
2020 3,584,516 735,105 4,319,621
2021 3,523,415 604,162 4,127,577
2022 2,936,621 468,942 3,405,563
2023 2,557,233 354,008 2,911,241
2024-2028 6,111,366 864,941 6,976,307
2029-2033 1,854,861 256,674 2,111,535
2034-2037 759,810 55,000 814,810
Total $ 25,114,243 $ 4,234,009 $ 29,348,252
Business-Type Activities: Water
Year Ending Principal Interest
June 30, Balance Balance Total
2019 $ 1,661,700 $ 603,232 $ 2,264,932
2020 1,674,200 530,770 2,204,970
2021 1,621,400 479,992 2,101,392
2022 1,580,900 430,225 2,011,125
2023 1,528,100 377,068 1,905,168
2024 - 2028 6,171,800 1,229,937 7,401,737
2029 - 2033 3,528,000 354,798 3,882,798
2034 - 2037 520,000 39,000 559,000
Total $ 18,286,100 $ 4,045,022 $ 22,331,122
Business-Type Activities: Sewer
Year Ending Principal Interest
June 30, Balance Balance Total
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 481,211 81,050 562,261
2024 - 2028 1,878,138 241,609 2,119,747
2029 - 2032 1,061,651 52,901 1,114,552
Total $ 6,123,026 $ 863,240 $ 6,986,266
Business-Type Activities: Rink
Year Ending Principal Interest
June 30, Balance Balance Total
2019 $ 6,000 $ 120 $ 6,120
Total $ 6,000 $ 120 $ 6,120
Town of Canton, Massachusetts Page 65 of 128 Comprehensive Annual Financial ReportSource page 74
On March 15, 2018, the Town issued general obligation bonds of $1,792,000 paying interest at
3% - 5% per annum. The issuance was utilized for school buildings ($744,000), fire vehicles and
equipment ($839,000) and public works equipment ($209,000).
Current Refunding – On March 15, 2018, the Town issued general obligation refunding bonds of
$2,918,000, paying interest at rates of 3% - 5% per annum. The proceeds, along with $269,192
of premiums, were used to retire $3,140,000 of callable general obligation bonds. As a result of
the current refunding, the Town reduced its total debt service requirements by $205,475, which
resulted in an economic gain (difference between the present value of the debt service payments
on the old and new debt) of $175,112.
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, 2017 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 $4,796,247 to the System in fiscal year 2018, which
equaled the actuarially-determined contribution requirement for the fiscal year.
Net Pension Liability – At June 30, 2018, the Town reported a liability of $41,436,616 for its
proportionate share of the net pension liability. The net pension liability was measured as of
December 31, 2017 and the total pension liability used to calculate the net pension liability was
determined by an actuarial valuation as of December 31, 2017. 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 7.49% at December 31, 2017, which was consistent
with the proportion measured at December 31, 2017.
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
Town of Canton, Massachusetts Page 66 of 128 Comprehensive Annual Financial ReportSource page 75
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 $5,748,849 in pension expense in the statement of
activities in fiscal year 2018; which was allocated to all functional expenses that applied.
Deferred Outflows of Resources and Deferred Inflows of Resources – At June 30, 2018, 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 $ 2,574,444 $ 3,854,371
Differences between expected and
actual experience 3,950,166 -
Changes in assumptions 2,077,642 1,671,179
Changes in proportion and differences
between Town contributions and
proportionate share of contributions 218,977 634,646
Total $ 8,821,229 $ 6,160,196
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,
2019 $ 1,389,953
2020 1,135,813
2021 602,805
2022 (467,538)
Total $ 2,661,033
Town of Canton, Massachusetts Page 67 of 128 Comprehensive Annual Financial ReportSource page 76
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 December 31, 2017.
The significant actuarial assumptions used in the actuarial valuation included:
Actuarial cost method: Individual entry age normal
Amortization method: 4.0% increasing payments
Remaining amortization period: 11 years
Investment rate of return: 7.75%
Projected salary increases: 3.5% - 5.5%
Asset valuation method: Market value
Cost of living adjustments: 3.0% on the first $17,000 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% 8.8%
International Equity 17.5% 8.8%
19.0% 3.6%
Fixed Income Real 7.4%
9.0%
Estate Private Equity 8.5% 13.3%
Hedge Fund 9.0% 7.4%
Real Assets 5.0% 10.4%
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 December
31, 2017 actuarial valuation report was 7.75%. This represents a reduction from the 8.0%
discount rate used in the previous actuarial valuation. 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 68 of 128 Comprehensive Annual Financial ReportSource page 77
Sensitivity Analysis – The following presents the Town’s proportionate share of the net pension
liability calculated using the discount rate of 7.75% as well as the Town’s proportionate share of
the net pension liability using a discount rate that is one percentage point lower (6.75%) or one
percentage point higher (8.75%) than the current rate (dollar amounts are in thousands):
Current
1% Decrease Discount 1% Increase
(6.75%) (7.75%) (8.75%)
Town’s proportionate share of
the net pension liability $ 53,623 $ 41,437 $ 31,084
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, 2018, the Commonwealth contributed $4,621,053 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 0.374018%, 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 $ 85,595,564 $ (85,595,564) $ —
Pension expense 8,933,858 (8,933,858) —
In addition to the pension expense recorded as previously discussed, the Town has recognized
intergovernmental revenue and pension expense of $8,933,858 associated with this arrangement.
C. Other Postemployment Benefits (OPEB)
The Town administers a single-employer defined benefit healthcare plan (the “OPEB Plan”). The
OPEB Plan provides health, dental and life insurance benefits (other postemployment benefits) to
current and future retirees, their dependents and beneficiaries in accordance with Section 20 of
Massachusetts General Law Chapter 32B.
Town of Canton, Massachusetts Page 69 of 128 Comprehensive Annual Financial ReportSource page 78
Specific benefit provisions and contribution rates are established by collective bargaining
agreements, state law and Town ordinance. All benefits are provided through the Town’s
premium-based insurance program. The OPEB Plan does not issue a stand-alone financial report
and is presented as a fiduciary fund in the Town’s financial statements.
With respect to OPEB plan reporting, GASB issued GASB Statement No.’s 74, Financial
Reporting for Postemployment Benefit Plans Other Than Pensions, and Statement No, 75,
Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions.
Reporting requirements for governments who administer an OPEB plan as defined under the
accounting standard are required to present disclosures under both GASB 74 and GASB 75.
GASB 74 requires specific disclosures and required supplementary information that relate
directly to the fiduciary fund in which the OPEB Plan is recorded. GASB 75 address disclosures
related to the net OPEB liability required to be recorded by the government in its applicable
financial statements. A number of these disclosures are identical, especially if the measurement
date under GASB 75 is the same as the Plan year-end date under GASB 74. When a year earlier
measurement date is used, differences in assumptions and calculations will result.
This footnote disclosure separately presents the required disclosures into two sections as as the
Town used a year earlier measurement date under GASB 75 in its fiscal year 2018 reporting.
GASB Statement No. 75
OPEB Plan disclosures that impact the Town’s net OPEB liability using a measurement date of
July 1, 2017 are summarized as follows:
Employees Covered by Benefit Terms – The following employees were covered by the benefit
terms as of June 30, 2018:
Active employees 706
Inactive employees 579
Total 1,285
Contributions – The contribution requirements of OPEB Plan members and the Town are
established and may be amended by the Town. Retirees contribute 75% of the set premium for
medical, dental and life insurance plans. The remainder of the cost is funded by general revenues
of the Town. The Town currently contributes enough money to the Plan to satisfy current
obligations on a pay-as-you-go basis. The costs of administering the OPEB Plan are paid by the
Town. For the year ended June 30, 2018, the Town’s average contribution rate was less than 9.2%
of covered payroll.
Town of Canton, Massachusetts Page 70 of 128 Comprehensive Annual Financial ReportSource page 79
Net OPEB Liability – The Town’s net OPEB liability was measured as of July 1, 2017 using an
actuarial valuation as of July 1, 2016. The components of the net OPEB liability of the Town at
June 30, 2018 were as follows:
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 percentage of the total
OPEB liability 3.3%
The total OPEB liability in the most recent actuarial valuation was determined using the
following key actuarial assumptions applied to all periods included in the measurement, unless
otherwise specified:
Investment rate of return 6.8%, net of OPEB plan investment expense,
including inflation.
Muncipal bond rate 3.13% as of July 1, 2017
Discount Rate 5.25%, net of OPEB plan investment
expense including inflation. Using a blend of the
Municipal Bond Index Rate for unfunded
periods and the Investment Rate of Return.
Inflation 2.75% annually as of July 1, 2017 and for future periods
Health Care Trend Rate 5%
Salary Increases 3.00% annually as of July 1, 2017 and for future periods
Cost of Living Adjustment Not applicable.
Pre-Retirement Mortality RP-2000 Employees Mortality Table projected generationally
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
Actuarial Cost Method Individual entry age normal
Town of Canton, Massachusetts Page 71 of 128 Comprehensive Annual Financial ReportSource page 80
There were no material changes in assumptions from the prior year.
Discount Rate – The discount rate used to measure the total OPEB liability was 5.25%.
Long Term Expected 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 OPEB Plan investment expense and
inflation) are developed for each major asset class.
These ranges are combined to produce the long-term expected rate of return by weighting the
expected future real rates of return by the target asset allocation percentage and by adding
expected inflation.
The target allocation and best estimates of arithmetic real rates of return were as reflected in the
following table:
Expected
Target Investment Rate
Asset Class Allocation of Return
Domestic Equity - Large Cap 20.00% 4.00%
Domestic Equity - Small/Mid Cap 10.00% 6.00%
Interntional Equity - Developed Market 10.00% 4.50%
Interntional Equity - Emerging Market 5.00% 7.00%
Domestic Fixed Income 25.00% 2.00%
International Fixed Income 10.00% 3.00%
Alternatives 20.00% 6.50%
Cash 0.00% 0.00%
100.00%
Real rate of return 4.30%
Inflation assumption 2.75%
Total nominal rate of return 7.05%
Investment expense -0.25%
Net investment return 6.80%
Sensitivity Analyses – The following presents the Town’s net OPEB liability as well as what the
Town’s net OPEB liability would be if it were calculated using a discount rate that is 1% lower or
1% higher than the current discount rate as well as if the healthcare cost trend rates are 1% lower
or higher than the current healthcare cost trend rates:
Discount Rate
1% Decrease (4.25%) Trend Rate (5.25%) 1% Increase (6.25%)
Net OPEB Liability $ 101,874,138 $ 87,525,324 $ 75,960,220
Service Cost 3,298,091 2,515,860 1,941,460
Health Care Rate
1% Decrease (4%) Current (5%) 1% Increase (6%)
Net OPEB Liability $ 71,037,812 $ 87,525,324 $ 108,537,127
Service Cost 1,769,288 2,515,860 3,553,725
Town of Canton, Massachusetts Page 72 of 128 Comprehensive Annual Financial Report