TOWNSHIP OF FRANKLIN FIRE DISTRICT NO. 1 … With Government Auditing Standards ... CPA. RMA. PSA ROBERT S. MORRISON. CPA. RMA. PSA ... activities of the Township of Franklin Fire

TOWNSHIP OF FRANKLINFIRE DISTRICT NO. 1

SOMERSET COUNTY, NEW JERSEY

REPORT OF AUDITFOR THE YEAR ENDED

DECEMBER 31, 2010

HODULIK & MORRISON, P.A.CERTIFIED PUBLIC ACCOUNTANTS

REGISTERED MUNICIPAL ACCOUNTANTSHIGHLAND PARK, N.J.

TOWNSHIP OF FRANKLINFIRE DISTRICT NO.1

SOMERSET COUNTY, NEW JERSEY

TABLE OF CONTENTS

PAGE(S)

1-2Independent Auditor's ReportReport On Internal Control Over Financial Reporting and on Compliance andOther Matters Based on an Audit of Financial Statements Performed inAccordance With Government Auditing Standards 3-4

REQUIRED SUPPLEMENTARY INFORMATION - PART I 5

Management's Discussion and Analysis 6-8

FINANCIAL STATEMENTS

Exh. A-

Exh. B-

Exh. C-Exh. C-1 -

9

Governmental Funds Balance Sheet/Statement ofNet Assets - December 31, 2010

Statement of Governmental Fund Revenues, Expendituresand Changes in Fund Balances/Statement of Activitiesfor the Year Ended December 31, 2010

Fiduciary Funds - December 31, 2010Statement of Changes in Fiduciary Net Assets

for the Year Ended December 31, 2010

10

1112

13

Notes to Financial Statements 14 - 23

Sch. 1 -

REQUIRED SUPPLEMENTARY INFORMATION - PART II 24

Sch. 2-

Sch. 3 -Sch. 4-

General CommentsRecommendationsAcknowledgment

Supplemental Schedule of Revenues and Expenses Comparedto Budget - Budgetary Basis - for the Year EndedDecember 31, 2010

Supplemental Combining Schedule of Capital Projects FundRevenues, Expenditures and Change in Fund Balance -Year Ended December 31, 2010

Supplemental Schedule of Statistical InformationRoster of Officials

25 - 27

28 - 293031

32 - 343535

HODULIK & MORRISON, P.A.CERTIFIED PUBLIC ACCOUNTANTS

REGISTERED MUNICIPAL ACCOUNTANTS

PUBLIC SCHOOL ACCOUNTANTS

1102 RARITAN AVENUE, P.O. BOX 1450

HIGHLAND PARK, NJ 08904

(732) 393-1000(732) 393-1196 (FAX)

ANDREW G. HODULIK. CPA. RMA. PSAROBERT S. MORRISON. CPA. RMA. PSA MEMBERS OF:

AMERICAN INSTITUTE OF CPA'SNEW JERSEY SOCIETY OF CPA'S

REGISTERED MUNICIPAL ACCOUNTANTS OF NJO ANN BOOS. CPA. PSA

INDEPENDENT AUDITOR'S REPORT

Board of Fire Commissioners of theTownship of Franklin Fire District No.1

Somerset County, New Jersey

We have audited the accompanying financial statements of the governmental activities of theTownship of Franklin Fire District No.1, Somerset County, New Jersey, (the "District"), exclusive ofthe District's Length of Service Award Program included within the fiduciary fund, as of and for theyear ended December 31,2010, which collectively comprise the Township of Franklin Fire DistrictNo.1 's basic financial statements, as listed in the table of contents. These financial statements are theresponsibility of the Fire District's management. Our responsibility is to express an opinion on thesefinancial statements based on our audit.

Except as discussed in the following paragraph, we conducted our audit in accordance with auditingstandards generally accepted in the United States of America, the standards applicable to financialaudits contained in Government Auditing Standards issued by the Comptroller General of the UnitedStates, and the audit requirements prescribed by the Division of Local Government Services,Department of Community Affairs, State of New Jersey. Those standards require that we plan andperform the audit to obtain reasonable assurance about whether the financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidence supporting the amountsand disclosures in the financial statements. An audit also includes assessing the accounting principlesused and significant estimates made by management, as well as evaluating the overall financialstatement presentation. We believe that our audit provides a reasonable basis for our opinion.

The financial statements referred to in the first paragraph include the assets and reserves of theDistrict's Length of Service Award Program (LOSAP), which represent 100% of the District'sfiduciary fund. As set forth by N.J. State regulation, LOSAP is subject to an independent accountant'sreview only. Accordingly, the financial statements of the District's Length of Service Award Programare unaudited and we do not express an opinion on the accompanying LOSAP financial statementsincluded within the fiduciary fund.

In our opinion, exclusive of the District's Length of Service Award Program, the financial statementsreferred to above present fairly, in all material respects, the financial position of the governmentalactivities of the Township of Franklin Fire District No.1, Somerset County, New Jersey, as ofDecember 31, 2010, and the results of operations for the year then ended in conformity withaccounting principles generally accepted in the United States of America.

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In accordance with Government Auditing Standards, we have also issued a report dated June 17,2011on our consideration of the Township of Franklin Fire District No.1 's internal control over financialreporting and our tests of its compliance with certain provisions of laws, regulations, contracts andgrant agreements and other matters. The purpose of that report is to describe the scope of our testingof internal control over financial reporting and compliance and the results of that testing, and not toprovide an opinion on the internal control over financial reporting or on compliance. That report is anintegral part of an audit performed in accordance with Government Accounting Standards and shouldbe considered in assessing the results of our audit.

Accounting principles generally accepted in the United States of America require that themanagement's discussion and analysis and budgetary comparison information on pages 6 through 8and 25 through 27 be presented to supplement the basic financial statements. Such information,although not a part of the basic financial statements, is required by Governmental AccountingStandards Board, who considers it to be an essential part of financial reporting for placing the basicfinancial statements in an appropriate operational, economic, or historical context. We have appliedcertain limited procedures to the required supplementary information in accordance with auditingstandards generally accepted in the United States of America, which consisted of inquiries ofmanagement about the methods of preparing the information and comparing the information forconsistency with management's responses to our inquires, the basic financial statements, and otherknowledge we obtained during our audit of the basic financial statements. We do not express anopinion or provide any assurance on the information because the limited procedures do not provide uswith sufficient evidence to express an opinion or provide any assurance.

Our audit was conducted for the purpose of forming an opinion on the financial statements thatcollectively comprise the Township of Franklin Fire District No.1 's basic financial statements as awhole. The supplemental schedules, as listed in the table of contents, are presented for purposes ofadditional analysis and are not a required part of the basic financial statements of the Township ofFranklin Fire District No.1, Somerset County, New Jersey. Such information has been subjected toauditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairlystated in all material respects in relation to the basic financial statements taken as a whole.

HODULIK & MORRISON, P.A.Certified Public Accountants~zmntsRobert S. MorrisonRegistered Municipal AccountantNo.412

Highland Park, New JerseyJune 17,2011

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HODULIK & MORRISON,P.A.CERTIFIED PUBLIC ACCOUNTANTS

REGISTERED MUNICIPAL ACCOUNTANTS

PUBLIC SCHOOL ACCOUNTANTS1102 RARITAN AVENUE, P.O. BOX 1450

HIGHLAND PARK, NJ 08904

(732) 393-1000(732) 393-) 196 (FAX)

ANDREW G. HODULIK, CPA, RMA, PSAROBERT S. MORRISON, CPA, RMA, PSA MEMBERS OF:

AMERICAN INSTITUTE OF CPA'SNEW JERSEY SOCIETY OF CPA'S

REGISTERED MUNICIPAL ACCOUNTANTS OF NJO ANN BOOS, CPA, PSA

REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING ANDON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OFFINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH

GOVERNMENT AUDITING STANDARDS

Board of Fire Commissioners of theTownship of Franklin Fire District No. )

Somerset County, New Jersey

We have audited the financial statements of the governmental activities of the Township of FranklinFire District No. 1 (the "District"), exclusive of the District's Length of Service Award Program asset forth by NJ. State regulation and as noted in the Independent Auditor's Report, as of and for theyear ended December 31, 2010, which collectively comprise the Township of Franklin Fire DistrictNo. 1's basic financial statements and have issued our report thereon dated June 17, 2011. Weconducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica; the standards applicable to financial audits contained in Government Auditing Standards,issued by the Comptroller General of the United States and audit requirements as prescribed by theDivision of Local Government Services, Department of Community Affairs, State of New Jersey.

Internal Control Over Financial Reporting

In planning and performing our audit, we considered the Township of Franklin Fire District No. l'sinternal control over financial reporting as a basis for designing our auditing procedures for thepurpose of expressing our opinion on the financial statements, but not for the purpose of expressingan opinion on the effectiveness of the District's internal control over financial reporting.Accordingly, we do not express an opinion on the effectiveness of the District's internal control overfinancial reporting.

A deficiency in internal control exists when the design or operation of a control does not allowmanagement or employees, in the normal course of performing their assigned functions, to prevent ordetect and correct misstatements on a timely basis. A material weakness is a deficiency, orcombination of deficiencies, in internal control such that there is reasonable possibility that a materialmisstatement of the entity's financial statements will not be prevented, or detected and corrected on atimely basis

Our consideration of internal control over financial reporting was for the limited purpose described inthe first paragraph of this section and was not designed to identify all deficiencies in internal controlover financial reporting that might be deficiencies, significant deficiencies, or material weaknesses.We did not identify any deficiencies in internal control over financial reporting that we consider to bematerial weaknesses, as defined above.

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Compliance and Other Matters

As part of obtaining reasonable assurance about whether the Township of Franklin Fire District No.I's financial statements are free of material misstatement, we performed tests of its compliance withcertain provisions of laws, regulations, contracts and grant agreements, noncompliance with whichcould have a direct and material effect on the determination of financial statement amounts.However, providing an opinion on compliance with those provisions was not an objective of our auditand, accordingly, we do not express such an opinion. The results of our tests disclosed the followinginstance of noncompliance that is required to be reported under Government Auditing Standards andaudit requirements as prescribed by the Division of Local Government Services, Department ofCommunity Affairs, State of New Jersey: Although the District has established a fixed assetaccounting system, the District has not maintained its fixed asset accounting system in accordancewith New Jersey Administrative Code issued by the Division of Local Government Services,Department of Community Affairs, State of New Jersey.

We also noted other matters involving internal control over financial reporting that we have reportedto management of the Township of Franklin Fire District No. I in the General Comments section ofthis report.

This report is intended for the information and use of the Board of Fire Commissioners of FireDistrict No. 1 of the Township of Franklin, management, and the Division of Local GovernmentServices, Department of Community Affairs, State of New Jersey and is not intended to be andshould not be used by anyone other than these specified parties.

HODULIK & MORRISON, P.A.Certified Public AccountantsPublic School Accountants

Highland Park, New JerseyJune 17,20] 1

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REQUIRED SUPPLEMENTARY INFORMATION - PART I

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FRANKLIN TOWNSHIP FIRE DISTRICT #1SOMERSET COUNTY, NEW JERSEY

MANAGEMENT'S DISCUSSION AND ANALYSISDecember 31, 2010

The Franklin Township Fire District #1 (the "District") is not included in any other governmental"reporting entity" as defined by the GASB pronouncement, since fire commissioners are electedby the public and have decision-making capabilities within the District to levy taxes, the power todesignate management, the ability to significantly influence operations and primaryaccountability for fiscal matters. The District is not considered a component-unit of the Townshipof Franklin, Somerset County, New Jersey (the "Township"). The District does not have anycomponent-units. The following Management's Discussion and Analysis of the activities andfinancial performance of the District provide an introduction to the financial statements of theDistrict for the year ended December 31, 2010. Please read it in conjunction with the District'sfinancial statements and accompanying notes.

The Management's Discussion and Analysis is an element of the new reporting model adopted bythe Governmental Accounting Standards Board (GASB) in their Statement No.34, BasicFinancial Statements - and Management's Discussion and Analysis - for State and LocalGovernments, issued June 1999 and amended by GASB Statement No. 37. Certain comparativeinformation between the current year and the prior year is required to be presented in the MD&A.

FINANCIAL HIGHLIGHTS

Cash and investments increased by $398,528 (30.8%) to $1,690,526 in 2010 from $1,291,998 in2009.

Other liabilities increased by $184,415 (30.9%) to $781,878 in 2010 from $597,463 in 2009.

Revenues increased by $258,627 (9.57%) to $2,961,750 in 2010 from $2,703,123 in 2009.

Expenses increased by $254,294 (16.85%) to $1,763,810 in 2010 from $1,509,516 in 2009.

OVERVIEW OF THE FINANCIAL STATEMENTS

The District is a self-supporting entity and follows enterprise fund reporting. The District'sfinancial statements are presented using the economic resources measurement focus and theaccrual basis of accounting in accordance with generally accepted accounting principles by theGASB. Enterprise fund statements reflect short- and long-term financial information about theactivities and operations of the District. These statements are presented in a manner similar to aprivate business. While detailed sub-fund information is not presented, separate accounts aremaintained for each program and certain restricted funds or accounts have been established asrequired by bond resolutions and agreements. See the notes to the financial statements for asummary of the District's significant accounting policies.

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FINANCIAL ANALYSIS OF THE DISTRICT

Financial Position. The following table summarizes the changes in financial position andaccumulated deficit between December 31,2010 and 2009:

% Increase2010 2009 (Decrease)

Cash and Equiv. $1,690,526 $1,291,998 30.8%Total assets 1,690,526 1,291,998 30.8%

Current -liabilities 781,878 597,463 30 ..9%

Total liabilities 781,878 597,463 30.9%

Net Assets $908,648 $694,535 30.8%

Results of Operations. The following table summarizes the changes in results of operationsbetween fiscal years 2010 and 2009:

% Increase2010 2009 (Decrease)

Revenues $2,961,750 $2,703,123 9.57%

Expenditures (1,763,810) 0,509,516) 16.85%

Excess RevenuesOver Expend. 1,197,940 1,193,607 0.36%

Other FinancingSources/(Uses) (983,826) (871,180) 12.93%

Net income/(loss) $214,114 $322.427 (33.59)%

Revenues consist mainly of district taxes. Revenues remained relatively unchanged between 2009and 2010.

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DEBT ADMINISTRATION

The District has no debt as of the date of this report.

CONTACTING THE DISTRICT'S MANAGEMENT

This financial report is designed to provide Franklin Township residents and taxpayers, and theDistrict's customers, investors and creditors, with a general overview of the District's financesand to demonstrate the District's accountability for the money it receives. If you have questionsabout this report or need additional information, please contact the Administrative Aide, FranklinTownship Fire District #1, 370 Campus Drive, P.O. Box 5163, Somerset, New Jersey, 08875-5163.

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FINANCIAL STATEMENTS

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Exhibit -A

TOWNSHIP OF FRANKLIN FIRE DISTRICT NO. 1SOMERSET COUNTY, NEW JERSEY

GOVERNMENTAL FUNDS BALANCE SHEET/STATEMENT OF NET ASSETSDECEMBER 31,2010

CAPITALGENERAL PROJECTS STATEMENT OFASSETS FUND FUND TOTAL ADJUSTMENTS NET ASSETS

Cash and Cash Equivalents $ 1,690,526.21 $ $ 1,690,526.21 $ $ 1,690,526.21Interfund Accounts Receivable 778,055.91 778,055.91 (778,055.91)InventoryCapital Assets, net ofaccumulated depreciation 1,747,100.00 1,747 100.00

Total Assets $ 1,690,526.21 $ 778,055.91 $ 2:468,582.12 969,044.09 3:437,626.21

LIABILITIES AND NET ASSETS

Liabilities:Due to Township of Franklin $ 3,822.09 $ $ 3,822.09 3,822.09InterfundAccounts Payable 778,055.91 778,055.91 [778,055.912

Total Liabilities 781,878.00 781,878.00 {778,055.912 3,822.09

Fund BalanceslNet Assets:Fund Balances:Reserved:For Future Capital Outlays 250,000.00 250,000.00 (250,000.00)For Uniform Fire Safety Act Fees 5,100.00 5,100.00 (5,100.00)

Unreserved:Designated for SubsequentYear's Expenditures 250,000.00 778,055.91 1,028,055.91 (1,028,055.91)

Undesignated 403,548.21 403,548.21 [403,548.21}

Total Fund Balances 908,648.21 778,055.91 1,686,704.12 ~1,686,704·122

Total Liabilities and Fund Balances $ 1,690,526.21 $ 778,055.91 $ 2,468,582.12

Net AssetsInvested in Capital Assets,net of Related Debt 1,747,100.00 1,747,100.00

Restricted for Capital Projects 1,028,055.91 1,028,055.91Unrestricted 658,648.21 658648.21

Total Net Assets $ 3,433,804.12 $ 3,433,804.12

Note: See Notes to Financial Statements

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Exhibit -B

TOWNSHIP OF FRANKLIN FIRE DISTRICT NO. 1SOMERSET COUNTY NEW JERSEY

STATEMENT OF GOVERNMENTAL FUND REVENUES, EXPENDITURESAND CHANGES IN FUND BALANCES/STATEMENT OF ACTIVITIES

FOR THE YEAR ENDED DECEMBER 31 2010

CAPITALGENERAL PROJECTS STATEMENT OFFUND FUND TOTAL ADmSTMENTS ACTIVITIESRevenues:

District Taxes $ 2,916,461.00 $ $ 2,916,461.00 $ $ 2,916,461.00Millstone Borough Service Fee 30,975.00 30,975.00 30,975.00Interest on Investments on Deposits 187.38 187.38 187.38Supplemental Fire Services Act GrantFire Code PenaltySale of EquipmentMiscellaneous 14 126.46 14 126.46 14,126.46

Total Revenues 2,961,749.84 2,961,749.84 2961749.84

Expenditures:Operating Appropriations 1,763,810.48 1,763,810.48 723,410.73 2,487,221.21Depreciation 397,500.00 397,500.00Capital Appropriations 799410.73 799410.73 (799,410.731

Total Expenditures 1,763,810.48 799410.73 2,563,221.21 321 500.00 2,884,721.21

Excess (Deficiency) of RevenuesOver (Under) Expenditures 1,197,939.36 (799,410.73) 398,528.63 (321,500.00) 77,028.63

Other Financing Sources (Uses):Operating Transfers In 983,826.00 983,826.00Operating Transfers Out (983,826.001 {983,826.001

Total Other Financing Sources (Uses) {983,826.001 983,826.00

Excess (Deficiency) of Revenues and OtherFinancing Sources Over (Under)Expenditures and Other Financing Uses 214,113.36 184,415.27 398,528.63 (398,528.63)Change in Net Assets 77,028.63 77,028.63

Fund BalanceslNet Assets, January 1 694,534.85 593640.64 1,288,175.49 3,356,775.49

Fund BalanceslNet Assets, December 31 $ 908648.21 $ 778055.91 $ 1,686,704.12 $ $ 3,433,804.12


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Exhibit - C

TOWNSHIP OF FRANKLIN FIRE DISTRICT NO.1SOMERSET COUNTY, NEW JERSEY

FIDUCIARY FUNDS - (UNAUDITED)DECEMBER 31, 2010

ASSETS

Assets Held by Fiscal Agent - LOSAP $ 1,595,930.89

Total Assets $ 1,595,930.89

NET ASSETS

Restricted $ 1,595,930.89

Total Net Assets $ 1,595,930.89


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Exhibit - C-1

TOWNSHIP OF FRANKLIN FIRE DISTRICT NO.1LENGTH OF SERVICE AWARD PROGRAM (LOSAP) - (UNAUDITED)

STATEMENT OF CHANGES IN FIDUCIARY NET ASSETSFIDUCIARY FUNDS

FOR THE YEAR ENDED DECEMBER 31 2010

Restricted Net AssetsContributions $ 146,324.00Appreciation 174,345.19Withdrawls (82,242.83)Service Charges (4,686.51)

Increase in Net Assets 233,739.85

Net Assets - Beginning of the Year 1,362,191.04

Net Assets - End of the Year $ 1,595,930.89


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NOTES TO FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31,2010

Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. Reporting Entity

The District was organized under the laws of the State of New Jersey relating to Fire Districtsand established pursuant to N.J.S.A. 40A: 14-70, et seq. The District receives funding fromlocal and state government sources and must comply with the concomitant requirements ofthese funding source entities. However, the District is not included in any othergovernmental "reporting entity" as defined by the GASB pronouncement, since firecommissioners are elected by the public and have decision-making capabilities within theDistrict to levy taxes, the power to designate management, the ability to significantlyinfluence operations and primary accountability for fiscal matters. In addition, there are nocomponent units, as defined in Governmental Accounting Standards Board Statement 14,which are included in the District's reporting entity.

B. General

The financial statements of the Township of Franklin Fire District No.1 have been preparedin conformity with generally accepted accounting principles (GAAP) as applicable togovernmental units. The Governmental Accounting Standards Board (GASB) is the acceptedstandard-setting body for establishing governmental accounting and financial reportingprinciples. The more significant of the District's accounting policies are described below.

The accounting policies of the Township of Franklin Fire District No. l("the District")conform to the accounting principles applicable to special districts, which have beenprescribed by the Division of Local Government Services, Department of CommunityAffairs, State of New Jersey ("the Division"). The Division has determined that specialdistricts are separate entities for purposes of financial reporting. Accordingly, the Townshipof Franklin Fire District No.1 is not considered a component unit of any other governmentalunit for financial reporting purposes.

C. GASB Statement No. 34

The Fire District adopted the prOVISIOns of GASB Statement No. 34, Basic FinancialStatements - and Management's Discussion and Analysis - for State and Local Governmentsduring the fiscal year ended December 31, 2003. Statement 34 established standards forexternal financial reporting for all state and local governmental entities, which includes aManagement's Discussion and Analysis section, a Balance Sheet and a Statement ofRevenues, Expenses and Change in Net Assets. It requires the classification of Net Assetsinto three components - Invested in Capital Assets, net of related debt; Restricted for DebtService; and Unrestricted.

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NOTES TO FINANCIAL STATEMENTS

Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D.)

D. Basis of Presentation - Fund Accounting

The accounts of the District are organized on the basis of funds or account groups, each ofwhich is considered a separate accounting entity. The operations of each fund are accountedfor with a separate set of self-balancing accounts that comprise its assets, liabilities, reserves,fund balance, revenues and expenditures or expenses as appropriate. The various funds aresummarized by type in the financial statements. The District uses the following fund types:

Governmental Fund Types

General Fund - The General Fund is the general operating fund of the District and accountsfor all revenues and expenditures of the District not encompassed within other funds. Allgeneral tax revenues and other receipts that are not allocated by law or contractual agreementto some other fund are accounted for in this fund. General operating expenditures and thecapital improvement costs that are not paid through other funds are paid from the GeneralFund. The District budgets for capital appropriations, which includes reserves for futurecapital outlays. The amount raised in the budget for these items are included as reserves offund balance within the General Fund.

Capital Projects Fund - The Capital Projects Fund is used to account for all resources for theacquisition of capital facilities, including property, plant and equipment spanning more thanone budgetary accounting period, by the District.

E. Basis of Accounting

The accounting and financial reporting treatment applied to a fund is determined by itsmeasurement focus. All governmental fund types are accounted for using a current financialresources measurement focus. With this measurement focus, only current assets and currentliabilities generally are included on the balance sheet. Operating statements of these fundspresent increases (i.e., revenues and other financing sources) and decreases (i.e, expendituresand other financing uses) in net current assets.

The governmental fund types follow the modified accrual basis of accounting. Under themodified accrual basis of accounting, revenues are recorded when susceptible to accrual, i.e.,both measurable and available. Available means collectible within the current period or soonenough thereafter to be used to pay liabilities of the current period. Expenditures, other thaninterest on long-term debt, are recorded when the related fund liability is incurred, ifmeasurable.

Revenues from local sources consist primarily of property taxes. Property tax revenues andrevenues received from the state are recognized when susceptible to accrual. Miscellaneousrevenues are recorded as revenue when received in cash because they are generally notmeasurable until actually received. Investment earnings are recorded as earned since they aremeasurable and available.

F. BudgetslBudgetary Controls

The District is required by state law to adopt an annual budget for the General Fund. Formalbudgetary integration into the accounting system is employed as a management controldevice during the year. For governmental funds there are no substantial differences betweenthe budgetary basis of accounting and generally accepted accounting principles.Encumbrance accounting is also employed as an extension of formal budgetary integration inthe governmental fund types.

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G. Encumbrances

Encumbrances are not liabilities and, therefore, are not recorded as expenditures until receiptof material or service. Under encumbrance accounting, purchase orders, contracts and othercommitments for the expenditure of resources are recorded to reserve a portion of theapplicable appropriation. Open encumbrances in governmental funds are reported asreservations of fund balances at year-end as they do not constitute expenditures or liabilitiesbut rather commitments related to unperformed contracts for goods and services. Theencumbered appropriation the District carries over into the next year. For budgetarypurposes, an entry will be made at the beginning of the next year to increase theappropriation reflected in the certified budget by the outstanding encumbrance amount as ofthe current year-end.

H. Cash and Cash Equivalents

Cash and cash equivalents include interest bearing accounts and short-term investments witha maturity of three months or less carried at cost, which approximates market.

I. Interfund Receivables/Payables

Interfund receivables and payables arise from interfund transactions and are recorded by allfunds affected in the period in which transactions are executed. Interest is not accrued forthese receivables/payables.

I. Inventories of Supplies

Purchases of materials and supplies are recognized and recorded as expenditures when theyare acquired, regardless of when used. The cost of inventories included on the balance sheetis equally offset by a fund balance reserve account.

K. Prepaid Expenses

The cost of prepaid insurance and other similar items extending over more than oneaccounting period is accounted for as expenditures of the period of acquisition and notallocated between or among accounting periods. The amount of such prepayments recordedon the balance sheet is equally offset by a fund balance reserve account.

L. Employee Benefits

Vacation, sick pay and other employee benefits are recorded as expenditures when paid.

M. Capital Assets

Capital assets are capitalized at historical cost, or estimated historical cost for assets whereactual historical cost is not available. Donated assets are recorded as capital assets at theirestimated fair market value at the date of the donation. The district maintains a thresholdlevel of $2,000 or more for capitalizing capital assets. The system for accumulation of fixedassets cost data does not provide the means for determining the percentage of assets valued atactual and those valued at estimated cost.

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M. Capital Assets CCont'd.)

Capital assets are recorded in the District-wide financial statement, but are not reported in theFund financial statements. Capital assets are depreciated using the straight-line method overtheir estimated useful lives. Since surplus assets are sold for an immaterial amount whendeclared as no longer needed for public school purpose by the District, no salvage value istaken into consideration for depreciation purpose. Useful lives vary from 20 to 50 years forland improvements and buildings, and 5 to 15 years for equipment. Capital assets not beingdepreciated include land and construction in progress.

The District does not possess any material amounts of infrastructure capital assets such assidewalks and parking lots. Such items are considered to be part of the cost of building orother reportable improvable property.

N. Fund Equity

Reserves represent those portions of fund equity not appropriable for expenditures or legallysegregated for a specific future use. Designated fund balances represent plans for future useof financial resources.

O. Net Assets

Net assets represent the difference between the assets and liabilities in the District-widefinancial statements. Net assets invested in capital assets, net of related debt consists ofcapital assets, net of accumulated depreciation, reduced by outstanding balance of any long-term used to build or acquire the capital assets. Net assets are reported as restricted in theDistrict-wide financial statement when there are limitations imposed on their use throughexternal restrictions imposed by creditors, grantors, or laws or regulations of othergovernments.

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P. Reconciliation of Adjustments

The following adjustments/reclassifications were required for the combining of thegovernment-wide and fund financial statements in accordance with GASB:

Statement of Net Assets and Governmental Fund Balance Sheet:

From Adjustment ToInterfund Accounts Receivable $778,056 ($778,056) $0

Capital Assets, net of accum.depr. 0 1,747,100 1,747,100

Interfund Accounts Payable 778,056 (778,056) 0

Fund BalanceReserve for:Uniform Fire Safety Act

Fees 5,100 (5,100) 0Future Capital Outlays 250,000 (250,000) 0

Unreserved 1,431,604 (1,431,604) 0

Net AssetsInvested in Capital Assets,net of Related Debt 0 1,747,100 1,747,100

Restricted for Capital Projects 0 1,028,056 1,028,056Unrestricted 0 658,648 658,648

Statement of Activities and Governmental Revenues, EXQenditures, and Changes in FundBalance:

From Adjustment ToOperating Appropriation $1,763,810 $723,411 $2,487,221

Depreciation 0 397,500 397,500

Capital Appropriations 799,411 (799,411) 0

Excess/(Deficiency) of Revenuesover/(under) Expenditures 398,529 (321,500) 77,029

Excess/(Deficiency) of Revenuesand other financing sourcesover/(under) Expenditures andother financing uses 398,529 (398,529) 0

Change in Net Assets 0 77,029 77,029-18 -


Note 2: DEPOSITS AND INVESTMENTS

Deposits

New Jersey statutes permit the deposit of public funds in institutions located in New Jerseythat are insured by the Federal Deposit Insurance Corporation (FDIC), or by any otheragencies of the United States that insures deposits or the State of New Jersey CashManagement Fund.

New Jersey statutes require public depositories to maintain collateral for deposit of publicfunds that exceed insurance limits as follows:

The market value of the collateral must equal 5 percent of the average daily balance of publicfunds; or

If the public funds deposited exceed 75 percent of the capital funds of the depository, thedepository must provide collateral having a market value equal to 100 percent of the amountexceeding 75 percent.

All collateral must be deposited with the Federal Reserve Bank, the Federal Home LoanBank Board or a banking institution that is a member of the Federal Reserve System and hascapital funds of not less than $25,000,000. The State of New Jersey Cash Management Fundis authorized by statute and regulations of the State Investment Council to invest in fixedincome and debt securities that mature within one year. Collateralization of fund investmentsis generally not required.

At December 31, 2010 the book value of the District's cash and investments was$1,690,526.21 and the bank balances of the District's cash and deposits amounted to$1,929,476.73. Of the bank balance, $264,570.42 was FDIC insured and $1,664,906.31 wasGUDPA insured.

Custodial Credit Risk - Deposits - Custodial credit risk is the risk that in the event of a bankfailure, the County's deposits may not be returned to it. The government does not have adeposit policy for custodial credit risk. As of December 31, 2010, based upon the insuredbalances as provided by FDIC and NJGUDPA coverage, no amount of the District's bankbalance of$I,929,476.73 was considered exposed to custodial risk.

Investments

New Jersey statutes permit the District to purchase the following types of securities:

1. Bonds or other obligations of the United States of America or obligations guaranteed bythe United States;

2. Government money market mutual funds;

3. Any obligation that a federal agency or a federal instrumentality has issued in accordancewith an act of Congress, which security has a maturity date not greater than 397 days fromthe date of purchase, provided such obligation bear a fixed rate of interest not dependent onany index or other external factor;

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Note 2: DEPOSITS AND INVESTMENTS (CONT'D.)

Investments (Cont'd)

4. Bonds or other obligations of the local unit or bonds or other obligations of schooldistricts of which the local unit is a part or within which the school district is located;

5. Bonds or other obligations, having a maturity date of not more than 397 days from thedate of purchase, approved by the Division of Investment in the Department of the Treasuryfor investment by local units;

6. Local government investment pools;

7. Deposits with the State of New Jersey Cash Management Fund established pursuant tosection 1 ofP.L. 1997, c. 281 (C.52: 18A-90.4); or

8. Agreements for the repurchase of fully collateralized securities, if:

a. the underlying securities are permitted investments pursuant to paragraphs (1) and (3);

b. the custody of collateral is transferred to a third party;

c. the maturity of the agreement is not more than 30 days;

d. the underlying securities are purchased through a public depository as defined in section 1ofP.L. 1970, c. 236 (C.19:9-41) and for which a master repurchase agreement providing forthe custody and security of collateral is executed.

Note 3: CAPITAL ASSETS NOTE DISCLOSURE

The following is disclosure of information about capital assets. Capital asset activity for theyear ended December 31,2010 was as follows:

Beginning EndingBalance Additions Retirements Balance

Governmental Activities:Equipment $6,065,000.00 $ 76,000.00 $ 0.00 $6,141,000.00

Totals at Historical Cost 6,065,000.00 76,000.00 0.00 6,141,000.00

Less Accumulated Depreciation For:Equipment 3,996,400.00 397,500.00 0.00 4,393,900.00

Total Accumulated Depr. 3,996,400.00 397,500.00 0.00 4,393,900.00Total Capital Assets Being Depr.(Net of Accum. Depr.) 2,068,600.00 (321,500.00} 1,747,100.00

Government Activities CapitalAssets, Net $2,068,600.00 $(321,50Q.00)$ 0.00 $1,747,100.QO

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Note 4: PENSIONS

The Fire District has one eligible employee enrolled in the Public Employees RetirementSystem of New Jersey, which is administered by the Division of Pensions in the Departmentof the Treasury, State of New Jersey, through the Township of Franklin. The plan is fundedannually based on the projected benefit method with aggregate level normal cost and frozeninitial unfunded liability. The plan, which covers public employees throughout the state,does not maintain separate records for each reporting unit and, accordingly, the actuarial datafor members of the plan are not available. The contributions in 2010 and 2009 were$2,235.74 and $2,247.84, which represented employee contributions.

Note 5: INTERFUND RECEIVABLES AND PAYABLES

Interfund receivable and payable balances at December 31,2010, were as follows:

Interfund InterfundFund Receivable Payable

General Fund $ $ 778,055.91Capital Projects Fund 778,055.91

$ 778,055.91 $ 778,055.91

Note 6: INTERLOCAL SERVICES AGREEMENT

In June 1997, the Fire District entered into an Interlocal Service Agreement with Fire DistrictNo.'s 2 and 3 for the implementation of a fire service CAD (computer aided dispatching) andrecords management system. Pursuant to the Interlocal Services Act, N.J.S.A. 40:8A-l, etseq., Fire District No.1 shall coordinate the purchase of the system and Fire District No.'s 2and 3 shall forward a sum equal to their fire district's respective share of the systemimplementation and maintenance costs, based on the number of fire department's within eachfire district, to Fire District No.1, who shall hold all fees in a special account fordisbursement of authorized system purchases. Each fire district also agreed to budget annualfunds to maintain and support the system. All equipment purchased in accordance with thisinterlocal services agreement shall remain the joint property of the participating fire districts.

Note 7: LENGTH OF SERVICE AWARD PROGRAM (LOSAP)

The District has authorized the enactment of a Length of Service Award Program byResolution 98-30. The LOSAP program was placed on the ballot at the annual election andwas approved by the voters. For the years 2010 and 2009, a budget appropriation of$160,000.00 and $160,000.00 respectively was made.

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Note 7: LENGTH OF SERVICE AWARD PROGRAM (LOSAP) (CONT'D.)

The authorized LOSAP program has been established in accordance with New Jersey Statute,which can be found beginning at N.J.A.C. 5:30-14.1. The LOSAP program shall provide foran annual contribution to a tax deferred income account for each eligible volunteer memberthat satisfies the criteria as adopted by the District and certified by the fire chief. One year ofservice shall be credited under the program for each calendar year in which an activeemergency volunteer accumulates at least fifty (50) points. Points can be earned by attendingtraining courses, drills, meetings and work details, holding elected or appointed positions,participating in department responses and any other miscellaneous activities approved by thechief. For each of the above categories, maximums are established that require the volunteerto participate in multiple events in order to obtain the required points for attainment of theyear of service credit. The annual contribution amount for each year of active service shallbe $1,150.00. In 2008, the annual contribution was raised to $1,516.00 and in 2010 theannual contribution remained at $1,516.00.

All amounts awarded under the LOSAP program remain the asset of the District and theobligation of the District to participating volunteers shall be contractual only. All moneyshall be subject to the claims of the District's general creditors until distributed to any or allparticipants. Emergency volunteers are not able to receive a distribution of funds until thecompletion of a five-year vesting period. If a volunteer fails to vest or terminates associationwith the District prior to the completion of the five-year vesting period, the funds placed inthe LOSAP account on behalf of the volunteer shall revert to the District, not the volunteer.

On September 24, 2001 the Board accepted resolution 01-19 approving Lincoln FinancialGroup. The contractor shall post a bond of not less than 100 percent of the amount of fundsmanaged by the contractor and will provide evidence of appropriate liability insurance anderrors and omissions insurance. The District shall have a review of the contractoradministered LOSAP program as part of the annual audit. The review of the plan shall bemade in accordance with the Statement of Standards for Accounting and Review Servicesissue by the American Institute of Certified Public Accountants. Accordingly, the LOSAPProgram is unaudited.

Note 8: RELATED PARTY TRANSACTIONS

The Fire District leases the facilities used for the housing of its equipment. During 2010, atotal of $260,000.00 of rental payments were made to the volunteer fire companies within theFire District for such purposes.

Note 9: COMMITMENTS AND CONTINGENCIES

The District receives a substantial amount of its support from local and state governments.In the event of significant reductions in the levels of this support, the District's ability toprovide services at current levels may be adversely effected.

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Note 10: FUND BALANCE APPROPRIATED

General Fund - Of the $908,648.21 General Fund fund balance at December 31, 2010,$250,000.00 has been appropriated and included as anticipated revenue for the year 2011,$250,000.00 is for future capital outlays, $5,100.00 is for Uniform Fire Safety Act Fees and$403,548.21 is unreserved and undesignated.

Capital Projects Fund - Of the $778,055.91 Capital Projects Fund fund balance at December31,2010, $28,550.09 is designated for the purchase of traffic control devices, $12,810.00 isdesignated for the purchase of fire reporting software, $60,000.00 is designated for thepurchase of breathing air compressor, $45,350.63 is designated for the purchase of turnoutgear, $86,722.20 is designated for the purchase of GIS software, $152.35 is designated forthe purchase of a new deputy chief ICV, $10,953.54 is designated for the purchase of newtransport vans, $100,947.25 is designated for the purchase of various district equipment,$27,590.46 is designated for the purchase of truck improvements, $19,591.62 is designatedfor the purchase of computer hardware, $225,927.20 is designated for office improvement'sand relocation, $74,460.57 is designated for District Apparatus A-28 and $85,000.00 isdesignated for District Communication Infrastructure.

Note 11: PENDING LITIGATION

As at the date of this report, the Fire District's legal counsel is unaware of any litigationpending.

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REQUIRED SUPPLEMENTARY INFORMATION - PART II

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Schedule - 1Page 1 of3


SUPPLEMENTAL SCHEDULE OF REVENUES AND EXPENDITURES COMPARED TO BUDGET(BUDGETARY BASIS)

FOR THE YEAR ENDED DECEMBER 31, 2010

VARIANCE2010 2010 FAVORABLE

BUDGET ACTUAL (UNFAVORABLE}Revenues:Fund Balance Appropriated:Unreserved Fund Balance $ l33,625.00 $ l33,625.00 $

Total Fund Balance Anticipated l33,625.00 l33,625.00

Miscellaneous Anticipated Revenues:Millstone Borough Service Fee 30,975.00 30,975.00Sale of Retired Apparatus 5,000.00 (5,000.00)Interest on Investments and Deposits 1,000.00 187.38 (812.62)

Total Miscellaneous Anticipated Revenues 36,975.00 31,162.38 (5,812.62)

Operating Grant Revenue:Supplemental Fire Services Act (P.L. 1985, Ch. 295) 7,200.00 (7,200.00)Township of Franklin - Fire Code Penalties 3500.00 (3,500.00)

Total Operating Grant Revenue 10,700.00 (10,700.00)

Miscellaneous Revenues Not Anticipated:Prior Year Void Checks 14,126.46 14,126.46

Total Miscellaneous Revenues Not Anticipated: 14126.46 14 126.46

Amount to be Raised by Taxation:District Taxes 2,916,461.00 2,916,461.00

Total Amount to be Raised by Taxation 2,916,461.00 2,916,461.00

Total Revenues 3,097,761.00 3,095,374.84 (2,386.16)

Expenditures:Operating Appropriations:AdministrationSalaries and WagesCommissioners 25,000.00 25,000.00Administrative Aid 36,935.00 39772.16 (2,837.16)

Total Administration Salaries and Wages 61:935.00 64:772.16 (2:837.162

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Schedule - IPage 2 of3





BUDGET ACTUAL (UNFAVORABLE}Expenditures (Cont'd.):Operating Appropriations (Cont'd.):AdministrationOther ExpensesFringe Benefits $ 3,750.00 $ 3,352.93 $ 397.07Election 4,200.00 4,329.79 (129.79)Office Expenses 8,000.00 6,693.85 1,306.15Professional Services 16,000.00 16,560.00 (560.00)Data Entry 15,500.00 8,060.43 7,439.57Computer System Maintenance 15,000.00 12,695.71 2,304.29Training and Travel (NJSA 40A:14-81.5) 35,000.00 34,294.64 705.36Volunteer Reimb. Program 110,000.00 93,996.00 16,004.00Fire Prevention Bureau 3,000.00 1,000.00 2,000.00

Total Administration Other Expenses 210,450.00 180,983.35 29,466.65

Costs of Operations and MaintenanceOther ExpensesInsurance 238,400.00 215,984.30 22,415.70Radio Maintenance and Repair 15,000.00 10,903.17 4,096.83Office Rental and Equipment 25,000.00 28,426.13 (3,426.13)District Fuel 55,000.00 37,167.38 17,832.62Air and Generator Maintenance 8,000.00 9,965.11 (1,965.11)Contracted Services Provided by VolunteerFire Companies (NJSA 40A: 14-68) 783,550.00 732,581.87 50,968.13

Emergency Support Service (NJSA40A:14-85.1) 8,000.00 8,560.55 (560.55)Fire District Inspection 20,000.00 19,019.31 980.69Reimbursements for Expenses andLosses (NJSA 40A: 14-81.4) 1,000.00 1,000.00

Fire CAD Maintenance 4,000.00 4,156.76 (156.76)Weather Station Maintenance 4,000.00 3,499.28 500.72Medical, Physical, Contingency & Hepatitis 65,000.00 49,659.50 15,340.50District Cell Phones 25,000.00 30,280.23 (5,280.23)Pagers 70,000.00 71,146.00 (1,146.00)District Staffing! Apparatus Study 10,000.00 38,181.26 (28,181.26)District Recruitment! Retention Staffing 48,000.00 47,785.65 214.35Franklin Township Fire Prevention 60,000.00 37,893.00 22,107.00LOSAP 160,000.00 114,847.67 45,152.33Exhaust System Maintenance 20 Drops 9,600.00 3,408.21 6,191.79Gym Maintenance 2,000.00 2,000.00Knox Box Maintenance 2,000.00 2,000.00ISO Punp & Ladder Testing 8,000.00 8,332.50 (332.50)District Background Checks 5,000.00 522.00 4,478.00District Equipment and SCBA Maintenance 7,000.00 1,902.80 5,097.20District Fit-5 Devices for ICV's (6) 8,000.00 5,700.00 2,300.00Contingency 50,000.00 36,132.29 13,867.71

Total Costs of Operations and MaintenanceOther Expenses 1,691,550.00 1,518,054.97 173495.03

Total Operating Appropriations 1,963,935.00 1,763,810.48 200,124.52

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BUDGET ACTUAL (UNFAVORABLE)Expenditures (Cont'd.):Capital Appropriations:Capital Outlays (NJSA 40A:14-84)District Equipment $ 313,725.00 $ 313,725.00 $Truck Improvement 123,101.00 123,101.00New Member Turnout Gear 37,000.00 37,000.00Fire Reporting Software 5,000.00 5,000.00GIS Software, Equipment 125,000.00 125,000.00(3) Traffic Control Devices 30,000.00 30,000.00Computer Hardware 15,000.00 15,000.00District Apparatus A28 150,000.00 150,000.00Facility Improvements 100,000.00 100,000.00District Communications Infrastructure 85,000.00 85,000.00Reserve for Future Capital Outlays 150,000.00 150,000.00

Total Capital Outlays 1,133,826.00 983,826.00 150,000.00

Total Capital Appropriations 1,133,826.00 983,826.00 150,000.00

Total Expenditures $ 3,097,761.00 2,747,636.48 350,124.52

Budgetary Revenues Over Expenses $ 347,738.36 $ 347,738.36

Reconciliation of Budgetmy Basis to GAAP Reporting Basis:

Budgetary Revenues Over Expenses $ 347,738.36

(133,625.00)983,826.00

850,201.00

$ 1:197:939.36

Adjustments to Budgetary Basis:Fund Balance AppropriatedOperating Transfers - Capital Projects

Total Adjustments

Excess of Revenues Over Expenditures (Exhibit - B)

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Schedule 2Page 1 of2

TOWNSHIP OF FRANKLIN FIRE DISTRICT NO.1SOMERSET COUNTY NEW JERSEY

SUPPLEMENTAL COMBINING SCHEDULE OF CAPITAL PROJECTS FUNDREVENUES, EXPENDITURES AND CHANGE IN FUND BALANCE

YEAR ENDED DECEMBER 31. 2010

TRAFFIC FIRE BREATHING AIRCONTROL REPORTING COMPRESSOR TURNOUT GIS NEW DEPUTY SUBDEVICE SOFTWARE STA26 GEAR SOFTWARE CHIEF ICV (42 TOTAL

Expenditures:Capital Outlay $59,285.25 $2485.43 $35706.72 $70,523.14 $168,000.54

Total Expenditures 59,285.25 2485.43 35706.72 70523.14 168000.54

Excess of Revenues Over (Under) Expenditures (59,285.252 (2,485.432 (35,706.722 (70,523.142 (168,000.542

Other Financing Sources (Uses):Operating Transfers In 30,000.00 5,000.00 37,000.00 125,000.00 197,000.00Operating Transfers Out

Total Other Financing Sources (Uses) 30000.00 5000.00 37000.00 125000.00 197000.00

Excess of Revenues and Other Sources OverN (Under) Expenditures and Other Uses (29,285.25) 2,514.57 1,293.28 54,476.86 28,999.4600

Fund Balances at Beginning of Year 57835.34 10295.43 60000.00 44057.35 32245.34 152.35 204,585.81

Fund Balances at End of Year $28,550.09 $12810.00 $60000.00 $45,350.63 $86,722.20 $152.35 $233,585.27

Analysis ofExQenditures - Year Ended December 31, 2010:

Paid by General Fund 59,285.25 2,485.43 35,706.72 70,523.14 168,000.54Accounts Payable

Total Expenditures $59,285.25 $2485.43 $35,706.72 $70,523.14 $168000.54


TOWNSHIP OF FRANKLIN FIRE DISTRICT NO. ISOMERSET COUNTY NEW JERSEY

SUPPLEMENTAL COMBINING SCHEDULE OF CAPITAL PROJECTS FUNDREVENUES, EXPENDITURES AND CHANGE IN FUND BALANCE

YEAR ENDED DECEMBER 31, 2010

NEW VARIOUS OFFICE DISTRICTTRANSPORT DISTRICT TRUCK COMPUTER IMPROVEMENTS/ DISTRICT COMMUNICATIONSVANS (42 EQUIPMENT IMPROVEMENTS HARDWARE RELOCATION APPARATUS A-28 INFRASTRUCTURE TOTAL

Expenditures:Capital Outlay $528.85 $356933.18 $113 927.55 $10408.38 $74072.80 $75539.43 $799410.73

Total Expenditures 528.85 356933.18 113927.55 10408.38 74072.80 75539.43 799410.73

Excess of Revenues Over (Under) Expenditures (528.852 (356,933.182 ( 113,927.552 (10,408.382 (74,072.802 (75,539.432 (799,410.732

Other Financing Sources (Uses):Operating Transfers In 313,725.00 123,101.00 15,000.00 100,000.00 150,000.00 85,000.00 983,826.00Operating Transfers Out

Total Other Financing Sources (Uses) 313725.00 123 101.00 15000.00 100000.00 150000.00 85000.00 983826.00

Excess of Revenues and Other Sources Over(Under) Expenditures and Other Uses (528.85) (43,208.18) 9,173.45 4,591.62 25,927.20 74,460.57 85,000.00 184,415.27

N1.0 Fund Balances at Beginning of Year II 482.39 144155.43 18417.01 15000.00 200000.00 593640.64

Fund Balances at End of Year $10 953.54 $100947.25 $27590.46 $19591.62 $225927.20 $74460.57 $85000.00 $778055.91

Analysis of EXl2enditures - Year Ended December 31, 2010:

Paid by General Fund 528.85 356,933.18 113,927.55 10,408.38 74,072.80 75,539.43 799,410.73Accounts Payable

Total Expenditures $528.85 $356933.18 $113 927.55 $10408.38 $74072.80 $75539.43 $799410.73

Schedule - 3


SUPPLEMENTAL SCHEDULE OF STATISTICAL INFORMATION

Property Tax Levies

The following is a tabulation of District Assessed Valuations, Tax Levies and Property TaxRates Per $100 of Assessed Valuations for current and the preceding two years:

Year EndedAssessedValuations

Total TaxLevy

PropertyTax RatePer $100

Assessment

December 31,2010December 31, 2009December 31,2008

$5,015,884,748.005,226,262,037.004,642,201,276.00

$2,916,461.002,647,899.002,393,672.00

$0.0580.0510.052

Unreserved Fund Balance

The following is a tabulation of District Unreserved Fund Balance at year end and theamount included as anticipated revenue in the subsequent year budget for the current andpreceding two years:

Unreserved UtilizedGeneral Subsequent

Year Ended Fund Balance Budget

December 31,2010 $653,548.21 $250,000.00December 31,2009 589,434.85 133,625.00December 31,2008 367,008.10 86,654.00

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OFFICIALS IN OFFICE AND SURETY COVERAGEAS AT DECEMBER 31, 2010

The following officials were in office at December 31, 2010:

Board of Fire Commissioners:

Louis Hajdu-Nemeth Jr.Melissa KosenskyJames WickmanBernard PongrantzTim Szymborski

Other Officials:

William T. Cooper, Esq.Deborah L.Nelson

Surety Company:

ChairmanClerkTreasurerCommissionerCommissioner

AttorneyAdministrative Aide

American Alternative Insurance CorporationAll Officials and Employees

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Schedule - 4

Amount ofSurety

$ 1,500,000.00

TOWNSHIP OF FRANKLIN FIRE DISTRICT NO.1SOMERSET COUNTY, NEW JERSEYYEAR ENDED DECEMBER 31, 2010

GENERAL COMMENTS

An audit of the financial accounts and transactions of the Township of Franklin Fire DistrictNo.1, Somerset County, New Jersey, for the year ended December 31,2010 has been completed.The General Comments are herewith set forth:

Scope of Audit

The audit covered the financial transactions of the Township of Franklin Fire District No.1,Somerset County, New Jersey.

The audit did not and could not determine the character of services rendered for which paymenthas been made or for which reserves had been set up, nor could it determine the character, properprice or quantity of materials supplied for which claims had been passed. These details werenecessarily covered by the internal review and control before approval of such claims by theGoverning Body. Cash and investment balances were reconciled with independent certificationsobtained directly from the depositories. Revenues and receipts were established and verified as tosource and amount insofar as the records permitted.

REPORTABLE CONDITIONS

Segregation of Duties

Conditions exist whereby the same person may maintain the bookkeeping and cash managementfunction of the District.

This condition is the result of multiple tasks performed by the same individual within the District.

OTHER MATTERS

Contracts and Agreements Required tobe Advertised for NJ.S.A. 40A:11-4

N J.S.A. 40A: 11-4 states "Every contract or agreement for the performance of any work or thefurnishing or hiring of any materials or supplies, the cost of the contract price whereof is to bepaid with or out of public funds not included within the terms of Section 3 of this act, shall bemade or awarded only after public advertising for bids and bidding therefore, except as isprovided otherwise in this act or specifically by any other law. No work, materials or suppliesshall be undertaken, acquired or furnished for a sum exceeding in the aggregate of $21,000.00except by contract or agreement."

The Commissioners of the Township of Franklin Fire District No.1 have the responsibility ofdetermining whether the expenditures in any category will exceed $21,000.00 during the year.Where question arises as to whether any contract or agreement might result in violation of thisstatute, the District Counsel's opinion should be sought before a commitment is made.

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Contracts and Agreements Required tobe Advertised for N.J .S.A. 40A: 11-4 (Cont'd.)

The minutes indicate that bids were requested by public advertising for the following itemstested: District Equipment

Purchases were also made through state approved vendors for various items available which werepermitted under the status.

Inasmuch as the system of records did not provide for an accumulation of payments for categoriesfor the performance of any work or the furnishing or hiring of any materials or supplies, theresults of such an accumulation could not reasonably be ascertained. Disbursements werereviewed, however, to determine whether any clear cut violations existed.

Examination of expenditures revealed no individual payments in excess of $17,500.00 on orbefore June 30 and $21,000.00 thereafter "for the performance of any work or the furnishing orhiring of any materials or supplies", other than those where bids had been previously sought bypublic advertisement.

The minutes also indicated that resolutions were adopted and advertised authorizing the awardingof contracts or agreements for "Professional Services" per N .J.S.A. 40A: 11-5.

Any interpretation as to possible violation of N .J.S.A. 40A:11 and N.J.A.C. 5:30-14 would be inthe province of the General Counsel.

We suggest that the District review the amendments to the Local Public Contracts Law anddetermine the impact of the comprehensive amendments with regard to the District, including ananalysis of the effect of requiring the position of a "Qualified Purchasing Agent" on a cost benefitbasis or alternate approach.

Payment of Claims

Claims were examined on a test basis for the year under review and they were found to be ingood order. Compliance to certification of availability of funds was reviewed and found to begood condition for items tested.

Condition of Records - Treasurer

The financial records maintained by the Treasurer were found to be in good condition. During2010, a computerized Budget Revenue and Appropriation Ledger was maintained and was foundto be in good condition, with only minor adjustments necessary to reflect audited amounts at yearend. However, we noted several checks greater than one year old that remain outstanding at theend of the year.

We recommend that outstanding checks greater than one year old be investigated to determinetheir proper disposition.

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Insurance Coverage

Insurance policies in force are on file at the Fire District office. No attempt was made todetermine the adequacy of coverage as part of this report. Adequacy of coverage is theresponsibility of the District.

Compliance with New Jersey Administration Codes

The Local Finance Board, State of New Jersey, adopted the following requirements, previouslyidentified as "technical accounting directives", as codified in the New Jersey administrationCode, as follows:

N J.A.C. 5:30 - 5.2 - Encumbrance Accounting: This directive requires the development andimplementation of accounting systems, which can reflect the commitment of funds at the point ofcommitment. Our examination indicated that the encumbrance system utilized by the Districtwas operational to the extent necessary to assure effective budgetary control and accountability.

N J.A.C. 5:30 - 5.6 - Fixed Asset Accounting: This directive requires the development andimplementation of accounting systems which assign values to covered assets and can trackadditions, retirements and transfers of inventoried assets. As noted in previous reports, theDistrict is in partial compliance with this directive. Our examination indicated that the Districthas established a fixed asset inventory system and takes a physical inventory on an annual basis.However, the current system does not provide a detailed cost basis allocation for all inventorieditems. Subsequent to the balance sheet date, the district provided a detailed cost basis allocationfor all inventoried items and no recommendation is made. The information will be include in thesubsequent audit period.

NJA.C. 5:30 - 5.7 - General Ledger Accounting System: This directive requires theestablishment and maintenance of a general ledger for, at least, the General Fund. The District isin compliance with this directive.

Compliance with Local Finance Notices

Pursuant to Local Finance Notice (LFN) No. 92-15, the corrective action plan for the year 2009was adopted and filed.

Status of Prior Years' Findings

In accordance with government auditing standards, our procedures included a review of all prioryear findings which are repeated in this year's recommendations.

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RECOMMENDA TIONS

It is Recommended:

That outstanding checks greater than one year old be investigated to determine their properdisposition.

**********

ACKNOWLEDGMENT

During the course of our engagement we received the complete cooperation of the variousofficials and employees of the District, and the courtesies extended to us were greatlyappreciated.

Very truly yours,

Robert S. Morrison, CPA, RMANo.412

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TOWNSHIP OF FRANKLIN FIRE DISTRICT NO. 1 … With Government Auditing Standards ... CPA. RMA. PSA ROBERT S. MORRISON. CPA. RMA. PSA ... activities of the Township of Franklin Fire

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