Borough of Metuchen and Financial...account group of theBorough of Metuchen, as of and for the year...

Report of Audit

on the

Financial Statements

of the

Borough of Metuchen

in the

County of Middlesex New Jersey

for the

Year Ended

December 31, 2017

BOROUGH OF METUCHEN

INDEX PAGES PART I Independent Auditor’s Report 1-3 Independent Auditor’s Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 4-5 EXHIBITS

Financial Statements - Regulatory Basis Current Fund: Balance Sheets - Regulatory Basis “A” Statements of Operations and Changes in Fund Balance - Regulatory Basis “A-1” Statement of Revenues - Regulatory Basis - Year Ended December 31, 2017 “A-2” Statement of Expenditures - Regulatory Basis - Year Ended December 31, 2017 “A-3” Trust Fund: Balance Sheets - Regulatory Basis “B” Statements of Change in Fund Balance - Regulatory Basis - Assessment Trust Fund for the Years Ended December 31, 2017 and 2016 “B-1” General Capital Fund: Balance Sheets - Regulatory Basis “C” Statement of Change in Fund Balance - Regulatory Basis “C-1” Swimming Pool Utility Fund: Balance Sheets - Regulatory Basis “D” Statement of Changes in Fund Balance - Regulatory for the Years Ended December 31, 2017 and 2016 “D-1” Statements of Operations and Change in Fund Balance - Regulatory Basis for the Years Ended December 31, 2017 and 2016 “D-2” Statement of Revenues - Regulatory Basis - Year Ended December 31, 2017 “D-3” Statement of Expenditures - Regulatory Basis - Year Ended December 31, 2017 “D-4” Public Assistance Trust Fund: Balance Sheets - Regulatory Basis “E” General Fixed Assets Account Group: Balance Sheets - Regulatory Basis “F” PAGES Notes to Financial Statements 6-35

BOROUGH OF METUCHEN

INDEX (CONTINUED)

EXHIBITS

Supplementary Schedules - All Funds Current Fund: Schedule of Cash - Treasurer “A-4” Schedule of Petty Cash “A-5” Schedule of Taxes Receivable and Analysis of Property Tax Levy “A-6” Schedule of Due State of New Jersey - Chapter 73 P.L. 1976 “A-7” Schedule of Revenue Accounts Receivable “A-8” Schedule of 2016 Appropriation Reserves “A-9” Schedule of Prepaid Taxes “A-10” Schedule of Tax Title Liens “A-11” Schedule of County Taxes Payable “A-12” Schedule of Local District School Taxes Payable “A-13” Schedule of Foreclosed Property “A-14” Schedule of Reserve for Tax Overpayments “A-15” Schedule of Reserve for Grants Unappropriated “A-16” Schedule of Reserve for Grants Appropriated “A-17” Schedule of Grants Receivable “A-18” Schedule of Accounts Payable “A-19” Schedule of Various Reserves “A-20” Schedule of Deferred Charges “A-21” Schedule of Interfunds “A-22” Schedule of Special Improvement District Taxes Payable “A-23” Trust Fund: Schedule of Trust Cash “B-2” Analysis of Assessment Fund Cash “B-3” Schedule of Reserve for Accounts Payable “B-4” Schedule of Reserve for Animal Control Fund Expenditures “B-5” Schedule of Reserve for Election “B-6” Schedule of Miscellaneous Reserves and Deposits “B-7” Schedule of Due State of New Jersey - Animal Control Fund “B-8” Schedule of Reserve for Unemployment Compensation Insurance “B-9” Schedule of Community Development Block Grants Receivable “B-10” Schedule of Reserve for COAH “B-11” Schedule of Escrow Deposits “B-12” Schedule of Reserve for Police Outside Overtime “B-13” Schedule of Reserve for Payroll Deductions Payable “B-14” Schedule of Reserve for Recreation “B-15” Schedule of Reserve for Law Enforcement “B-16” Schedule of Reserve for Forfeiture “B-17” Schedule of Reserve for Fire Penalties “B-18” Schedule of Reserve for Equitable Sharing Forfeiture “B-19” Schedule of Reserve for Due Current Fund “B-20” Schedule of Reserve for Accounts Payable - Animal Control “B-21”

BOROUGH OF METUCHEN

INDEX (CONTINUED)

EXHIBITS General Capital Fund: Schedule of Cash - Treasurer “C-2” Analysis of Cash “C-3” Schedule of Deferred Charges to Future Taxation - Funded “C-4” Schedule of Deferred Charges to Future Taxation - Unfunded “C-5” Schedule of Reserve for Capital Improvements “C-6” Schedule of Contracts Payable “C-7” Schedule of Capital Improvement Fund “C-8” Schedule of Accounts Receivable “C-9” Schedule of Improvement Authorizations “C-10” Schedule of General Serial Bonds “C-11” Schedule of Bonds and Notes Authorized But Not Issued “C-12” Schedule of Bond Anticipation Notes Payable “C-13” Swimming Pool Utility Fund: Schedule of Swimming Pool Utility Cash “D-5” Schedule of Fixed Capital Authorized But Uncompleted “D-6” Schedule of 2016 Appropriation Reserves “D-7” Schedule of Improvement Authorizations “D-8” Schedule of Capital Improvement Fund “D-9” Schedule of Accounts Payable “D-10” Schedule of Accrued Interest Payable “D-11” Schedule of Reserve for Amortization “D-12” Schedule of Fixed Capital “D-13” Schedule of General Serial Bonds Payable “D-14” Schedule of Bonds Authorized But Not Issued “D-15” Schedule of Deferred Reserve for Amortization “D-16” Schedule of Bond Anticipation Notes Payable “D-17” Public Assistance Trust Fund: Schedule of Public Assistance Cash “E-1” Schedule of Reserve for Public Assistance “E-2” PAGES PART II Statistical Data 36-39 Officials in Office and Surety Bonds 40 Comments and Recommendations 41-44

BOROUGH OF METUCHEN

PART I

INDEPENDENT AUDITOR’S REPORT ON AUDIT OF FINANCIAL STATEMENTS

AND SUPPLEMENTARY SCHEDULES AND DATA

REPORTS ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS

BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS

FINANCIAL STATEMENTS - REGULATORY BASIS - ALL FUNDS

NOTES TO FINANCIAL STATEMENTS - REGULATORY BASIS

SUPPLEMENTARY SCHEDULES - ALL FUNDS

YEAR ENDED DECEMBER 31, 2017 AND 2016

INDEPENDENT AUDITOR'S REPORT

The Honorable Mayor and Members of the Borough Council Borough of Metuchen County of Middlesex Metuchen, New Jersey 08840 Report on the Financial Statements

We have audited the accompanying balance sheets - regulatory basis of the various individual funds and account group of the Borough of Metuchen, as of December 31, 2017 and 2016, the related statement of operations and changes in fund balance - regulatory basis for the years then ended, and the related statement of revenues - regulatory basis and the statement of expenditures - regulatory basis of the various individual funds for the year ended December 31, 2017, and the related notes to the financial statements, which collectively comprise the Borough’s regulatory financial statements as listed in the table of contents. Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with the regulatory basis of accounting prescribed by the Division of Local Government Services, Department of Community Affairs, State of New Jersey. Management is also responsible for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatements, whether due to fraud or error. Auditor’s Responsibility

Our responsibility is to express an opinion on these regulatory financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America, the audit requirements prescribed by the Division of Local Government Services, Department of Community Affairs, State of New Jersey (the “Division”), and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.

SCC SUP LEE, CLOONE Y & COMP A NY C E R T I F I E D P U B L I C A C C O U N T A N T S 308 East Broad Street, Westf ield, New Jersey 07090-2122 Telephone 908-789-9300 Fax 908-789-8535 E-mai l in fo@scnco . com

1

SUPLEE, CLOONEY & COMPANY

An audit involves performing procedures to obtain audit evidence about the amounts and

disclosures in the regulatory financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Borough’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Borough’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the regulatory financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Basis for Adverse Opinion on U.S Generally Accepted Accounting Principles.

As described in Note 1 of the regulatory financial statements, the regulatory financial statements are prepared by the Borough of Metuchen on the basis of the financial reporting provisions prescribed by the Division of Local Government Services, Department of Community Affairs, State of New Jersey, which is a basis of accounting other than accounting principles generally accepted in the United States of America, to meet the requirements of New Jersey.

The effects on the financial statements of the variances between the regulatory basis of accounting described in Note 1 and accounting principles generally accepted in the United States of America, although not reasonably determinable, are presumed to be material. Adverse Opinion on U.S. Generally Accepted Accounting Principles

In our opinion, because of the significance of the matter discussed in the “Basis for Adverse Opinion on U.S Generally Accepted Accounting Principles” paragraph, the financial statements referred to above do not present fairly, in accordance with accounting principles generally accepted in the United States of America, the financial position of the various individual funds and account group of the Borough of Metuchen as of December 31, 2017 and 2016, or the results of its operations and changes in fund balance for the years then ended or the revenues or expenditures for the year ended December 31, 2017. Opinion on Regulatory Basis of Accounting

In our opinion, the regulatory financial statements referred to above present fairly, in all material respects, the regulatory basis balances sheets of the various individual funds and account group as of December 31, 2017 and 2016, the regulatory basis statement of operations and changes in fund balance for the years then ended and the regulatory basis statement of revenues and expenditures and changes in fund balance for the year ended December 31, 2017 in accordance with the basis of financial reporting prescribed by the Division of Local Government Services, Department of Community Affairs, State of New Jersey as described in Note 1.

2

INDEPENDENT AUDITOR’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS

BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS

The Honorable Mayor and Members of the Borough Council Borough of Metuchen County of Middlesex Metuchen, New Jersey 07080

We have audited, in accordance with the auditing standards generally accepted in the

United States of America, the audit requirements prescribed by the Division of Local Government Services, Department of Community Affairs, State of New Jersey and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the regulatory financial statements of the various individual funds and the account group of the Borough of Metuchen, as of and for the year ended December 31, 2017, and the related notes to the financial statements, which collectively comprise the Borough’s regulatory financial statements, and have issued our report thereon dated October 29, 2018. Our report disclosed that, as described in Note 1 to the financial statements, the Borough of Metuchen prepares its financial statements on a basis of accounting prescribed by the Division of Local Government Services, Department of Community Affairs, State of New Jersey, that demonstrates compliance with a modified accrual basis and the budget laws of the State of New Jersey, which is a comprehensive basis of accounting other than U.S. generally accepted accounting principles. Internal Control Over Financial Reporting

In planning and performing our audit of the regulatory financial statements, we considered the Borough’s control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements but not for the purpose of expressing an opinion on the effectiveness of the Borough’s internal control. Accordingly, we do not express an opinion on the effectiveness of Borough’s internal control.

SCC SUP LEE, CLOONE Y & COMP A NY C E R T I F I E D P U B L I C A C C O U N T A N T S 308 East Broad Street, Westf ield, New Jersey 07090-2122 Telephone 908-789-9300 Fax 908-789-8535 E-mail in [email protected]

4

CURRENT FUND

"A"

BOROUGH OF METUCHEN

CURRENT FUND

BALANCE SHEETS-REGULATORY BASIS

BALANCE BALANCEDECEMBER DECEMBER

REF. 31, 2017 31, 2016

A S S E T S

Cash A-4 $ 9,678,859.06 $ 8,495,525.50Petty Cash A-5 1,200.00 1,200.00Due State of NJ - Senior Citizens and Veterans A-7 35,565.01 35,065.01Grants Receivable A-18 532,968.18 227,014.05

$ 10,248,592.25 $ 8,758,804.56

Receivables with Full Reserves: Delinquent Property Taxes Receivable A-6 $ 681,262.34 $ 755,298.22 Tax Title Liens A-11 152,899.66 143,619.47 Foreclosed Property A-14 350,300.00 350,300.00 Revenue Accounts Receivable A-8 25,116.16 26,942.53

A $ 1,209,578.16 $ 1,276,160.22

Deferred Charges A-21 $ 39,600.00 $ 49,500.00$ 39,600.00 $ 49,500.00

$ 11,497,770.41 $ 10,084,464.78

LIABILITIES, RESERVES AND FUND BALANCE

Liabilities: Appropriation Reserves A-3:A-9 $ 694,293.44 $ 735,553.79 Tax Overpayments A-15 83,354.67 149,665.34 Grants Appropriated A-17 526,809.80 426,513.31 Prepaid Taxes A-10 4,058,681.12 318,177.02 Grants Unappropriated A-16 15,801.81 3,404.00 Interfunds A-22 31,999.68 Accounts Payable A-19 821,479.40 637,948.92 Various Reserves A-20 76,802.79 30,041.88 School Taxes Payable A-13 3,037,848.85 Special Improvement District Taxes Payable A-23 2,504.24

$ 6,311,726.95 $ 5,339,153.11Reserve for Receivables A 1,209,578.16 1,276,160.22Fund Balance A-1 3,976,465.30 3,469,151.45

$ 11,497,770.41 $ 10,084,464.78

The accompanying Notes to the Financial Statements are an integral part of this statement.

"A-1"

BOROUGH OF METUCHEN

CURRENT FUND

STATEMENTS OF OPERATIONSAND CHANGE IN FUND BALANCE-REGULATORY BASIS

YEAR ENDED YEAR ENDEDDECEMBER DECEMBER

REF. 31, 2017 31, 2016

REVENUE AND OTHER INCOME

Fund Balance Utilized A-1:A-2 $ 1,500,000.00 $ 1,355,076.00Miscellaneous Revenue Anticipated A-2 4,600,588.57 5,318,233.02Receipts from Delinquent Taxes A-2 750,371.63 859,538.87Receipts from Current Taxes A-2 59,303,721.65 56,746,894.52Non-Budget Revenues A-2 480,007.81 287,595.59Other Credits to Income: Tax Overpayments Canceled A-15 104,441.36 87,949.06 Unexpended Balance of Appropriation Reserves A-9 616,331.33 623,444.38

TOTAL INCOME $ 67,355,462.35 $ 65,278,731.44

EXPENDITURES

Budget Appropriations: Operations Within CAPS A-3 $ 11,933,234.55 $ 11,473,130.00 Deferred Charges & Statutory Expenditures Within CAPS A-3 1,338,978.16 1,325,419.00 Operations Excluded from CAPS A-3 2,476,683.25 2,216,932.86 Capital Improvements A-3 25,000.00 104,076.00 Debt Service A-3 2,912,186.68 2,610,676.50 Deferred Charges & Statutory Expenditures Outside CAPS A-3 9,900.00 140,000.00Local District School Tax A-13 36,974,063.00 35,831,211.00County Tax A-12 9,415,840.03 8,988,272.25Special Improvement District Tax A-23 110,641.73Other Expenditures: Grants Canceled (Net) 466.00 Senior/Veteran Deductions Disallowed By State A-7 4,550.00 Budget Operations A-4 147,071.10 74,942.61

TOTAL EXPENDITURES $ 65,348,148.50 $ 62,765,126.22

Excess in Revenue $ 2,007,313.85 $ 2,513,605.22

Adjustments to Income Before Fund Balance: Expenditures Included Above Which are by Statute Deferred Charges to Budget of Succeeding Year 49,500.00

Statutory Excess to Fund Balance $ 2,007,313.85 $ 2,563,105.22

Fund Balance, January 1 A:A-1 3,469,151.45 2,261,122.23$ 5,476,465.30 $ 4,824,227.45

Decreased by: Utilized as Anticipated Revenue A-1:A-2 1,500,000.00 1,355,076.00

Fund Balance, December 31 A:A-1 $ 3,976,465.30 $ 3,469,151.45


"A-2"SHEET #1

BOROUGH OF METUCHEN

CURRENT FUND

STATEMENT OF REVENUES - REGULATORY BASISYEAR ENDED DECEMBER 31, 2017

EXCESSANTICIPATED OR

REF. BUDGET NJSA 40A: 4-87 REALIZED (DEFICIT)

Fund Balance Anticipated A-1 $ 1,500,000.00 $ 1,500,000.00

Miscellaneous Revenues: ABC Licenses A-8 $ 18,000.00 $ $ 18,613.10 $ 613.10 Other Licenses A-2 3,600.00 13,091.00 9,491.00 Fees and Permits A-2 100,000.00 105,777.50 5,777.50 Municipal Court A-8 320,000.00 330,500.37 10,500.37 Interest and Costs on Taxes A-8 160,000.00 174,669.97 14,669.97 Parking Meters A-8 68,000.00 87,832.19 19,832.19 Interest on Investments and Deposits A-8 12,000.00 52,045.55 40,045.55 Metuchen Senior Housing Service Charge A-8 7,300.00 19,000.00 11,700.00 Cable TV Franchise Fee A-8 61,994.00 61,994.00 Alarm System Fee A-8 11,000.00 11,389.00 389.00 Consolidated Municipal Property Tax Relief Aid A-8 84,411.00 84,411.00 Energy Receipts Taxes A-8 1,364,544.00 1,364,544.00 Uniform Construction Code A-8 600,000.00 589,342.00 (10,658.00) Uniform Fire Safety Act A-8 33,481.55 41,249.65 7,768.10 Metuchen Parking Authority A-8 1,200,000.00 1,200,000.00 Sewer Service Charge A-8 29,000.00 28,686.12 (313.88) NJ Clean Communities A-18 26,243.02 26,243.02 Municipal Alliance Youth Services Board A-18 20,965.00 20,965.00 Municipal Alliance Municipal Match A-18 5,241.25 5,241.25 Middlesex County Cultural Arts Program A-18 6,104.00 6,104.00 Middlesex City Open Space Oakland Park A-18 225,493.00 225,493.00 NJ Adult Literacy/Library Grant A-18 31,825.00 31,825.00 Body Armor Grant A-18 2,749.66 2,749.66 Recycling Tonnage Grant A-18 19,146.29 19,146.29 Cops in Shops A-18 1,800.00 1,800.00 Distracted Driving A-18 5,500.00 5,500.00 Click it or Ticket A-18 5,197.50 5,197.50 Safe Routes to School Design A-18 58,402.36 58,402.36 Drive Sober A-18 3,383.48 3,592.56 6,976.04 Pedestrian Safety A-18 1,800.00 1,800.00

A-1 $ 4,341,817.28 $ 148,956.39 $ 4,600,588.57 $ 109,814.90

Receipts from Delinquent Taxes A-1:A-6 $ 650,000.00 $ $ 750,371.63 $ 100,371.63

Amount to be Raised by Taxes for Support of Municipal Budget: Local Tax for Municipal Purposes A-2:A-6 $ 12,348,167.50 $ $ 13,096,074.10 $ 747,906.60 Municipal Library Tax A-2:A-6 767,951.31 767,951.31

Budget Totals $ 19,607,936.09 $ 148,956.39 $ 20,714,985.61 $ 1,107,049.52

Non-Budget Revenue A-2 480,007.81 480,007.81

$ 19,607,936.09 $ 148,956.39 $ 21,194,993.42 $ 1,587,057.33

REF. A-3 A-3


"A-2"SHEET #2

BOROUGH OF METUCHEN

CURRENT FUND


ANALYSIS OF REALIZED REVENUES REF.

Allocation of Current Tax Collections: Revenue From Collections A-1:A-6 $ 59,303,721.65

Allocated to: Local District School Tax $ 36,974,063.00 County Taxes 9,415,840.03 Special Improvement District Tax 110,641.73 Municipal Library Tax A-2 767,951.31

47,268,496.07Balance for Support of Municipal Budget Appropriations $ 12,035,225.58

Add: Appropriation "Reserve for Uncollected Taxes" A-3 1,060,848.52

Amount of Support for Municipal Budget Appropriations A-2 $ 13,096,074.10

OTHER LICENSES

Board of Health A-8 $ 9,555.00Clerk A-8 3,536.00

A-2 $ 13,091.00

FEES AND PERMITS

Police A-8 $ 1,116.00Engineering A-8 417.50Planning/Zoning A-8 29,355.00Sidewalk Inspections A-8 4,050.00Clerk/Other A-8 70,839.00

A-2 $ 105,777.50

ANALYSIS OF NON-BUDGET REVENUE

Miscellaneous Revenue Not Anticipated: Police Outside Overtime Admin Fee $ 125,783.50 Other Fees-Developers 113,498.00 PERS Reimbursements 68,132.56 MDA Reimbursement 63,000.00 Cell Tower Rent 28,712.45 DMV Inspection Fines 25,413.00 Other Miscellaneous Revenue 23,855.86 Abandoned Property 21,583.24 Sale of Recycled Materials 8,508.30 Senior Citizen and Veterans' Admin Fee 1,520.90

A-1:A-2:A-4 $ 480,007.81


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"B"

BOROUGH OF METUCHEN

TRUST FUND

BALANCE SHEETS - REGULATORY BASIS


REF. 31, 2017 31, 2016

A S S E T S

Assessment Fund: Cash $ $ 953.21

B:B-2 $ $ 953.21

Animal Control Fund: Cash $ 8,229.33 $ 3,966.68

B:B-2 $ 8,229.33 $ 3,966.68Other Funds: Cash B-2 $ 3,801,390.12 $ 3,643,066.19 Due Current Fund B-20 31,999.68 Community Development Block Grants Receivable B-10 76,758.91 37,823.25

B $ 3,910,148.71 $ 3,680,889.44

TOTAL ASSETS B $ 3,918,378.04 $ 3,685,809.33

Assessment Fund: Fund Balance $ $ 953.21

B:B-1:B-3 $ $ 953.21

Animal Control Fund: Reserve for Animal Control Expenditures B-5 $ 7,622.73 $ 3,958.88 Reserve for Accounts Payable B-21 600.00 Due State of New Jersey B-8 6.60 7.80

B $ 8,229.33 $ 3,966.68

Other Funds: Reserve for: Trust Other B-7 $ 2,011,601.37 $ 1,559,468.02 Payroll Deductions Payable B-14 67,617.33 41,568.71 COAH B-11 382,531.04 346,698.77 Recreation B-15 120,174.29 114,462.76 Unemployment B-9 37,022.68 37,093.87 Police Outside Overtime B-13 99,390.63 12,512.16 Law Enforcement B-16 1,781.59 1,773.40 Developers Escrow B-12 936,616.43 1,396,609.01 Forfeiture B-17 40,526.23 34,769.41 Equitable Sharing Forfeiture B-19 32,409.48 41,584.92 Election B-6 1,768.47 1,559.00 Fire Penalties B-18 1,601.54 2,093.80Accounts Payable B-4 177,107.63 90,695.61

B $ 3,910,148.71 $ 3,680,889.44

TOTAL LIABILITIES, RESERVES AND FUND BALANCE B $ 3,918,378.04 $ 3,685,809.33


"B-1"

REF. YEAR 2017 YEAR 2016

Balance, January 1 B:B-3 $ 953.21 $ 953.21

Decreased by: Disbursements B-2:B-3 $ 953.21 $

Balance, December 31 B:B-3 $ - 0 - $ 953.21

FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016


BOROUGH OF METUCHEN

TRUST FUND

STATEMENTS OF CHANGE IN FUND BALANCE - REGULATORY BASIS - ASSESSMENT FUND

GENERAL CAPITAL FUND

"C"

BOROUGH OF METUCHEN




REF. 31, 2017 31, 2016

A S S E T S

Cash C-2:C-3 $ 1,746,880.85 $ 2,634,464.19Deferred Charges to Future Taxation: Funded C-4 14,247,000.00 16,612,000.00 Unfunded C-5 2,602,650.00 2,305,005.00Accounts Receivable C-9 1,784,024.55 1,634,024.55

$ 20,380,555.40 $ 23,185,493.74


General Serial Bonds Payable C-11 $ 14,247,000.00 $ 16,612,000.00Bond Anticipation Notes Payable C-13 2,301,850.00 2,301,850.00Contracts Payable C-7 808,503.08 851,764.45Capital Improvement Fund C-8 15,095.00 5,550.00Reserve for Capital Improvements C-6 16,045.50 16,045.50Improvement Authorizations: Funded C-10 323,520.00 1,085,956.65 Unfunded C-10 2,618,542.46 2,285,709.78Fund Balance C-1 49,999.36 26,617.36

$ 20,380,555.40 $ 23,185,493.74

The accompanying Notes to Financial Statements are an integral part of this statement.

"C-1"

BOROUGH OF METUCHEN


STATEMENT OF CHANGE IN FUND BALANCE - REGULATORY BASIS


Balance, January 1 C $ 26,617.36 $ 26,617.36

Increased by: Funded Improvement Authorizations Canceled 200,000.00 Premium on Sale of B.A.N. C-2 23,382.00

$ 49,999.36 $ 226,617.36

Decreased by: Current Fund M.R.A. 200,000.00

Balance, December 31 C $ 49,999.36 $ 26,617.36


SWIMMING POOL UTILITY FUND

"D"

BOROUGH OF METUCHEN




REF. 31, 2017 31, 2016

A S S E T S

Operating Fund: Cash D-5 $ 165,738.49 $ 132,668.28

$ 165,738.49 $ 132,668.28

Capital Fund: Cash D-5 $ 133,981.12 $ 133,981.12 Fixed Capital D-13 1,095,731.00 1,095,731.00 Fixed Capital Authorized and Uncompleted D-6 411,000.00 411,000.00

$ 1,640,712.12 $ 1,640,712.12

$ 1,806,450.61 $ 1,773,380.40


Operating Fund: Liabilities: Appropriation Reserves D-4:D-7 $ 61,753.80 $ 24,193.38 Accounts Payable D-10 23,795.76 18,294.22 Accrued Interest Payable D-11 1,249.61 1,318.61 Fund Balance D-2 78,939.32 88,862.07

$ 165,738.49 $ 132,668.28

Capital Fund: Improvement Authorizations: Funded D-8 $ 14,406.66 $ 14,406.66 Unfunded D-8 111,400.00 111,400.00 Bonds Payable D-14 200,000.00 220,000.00 Bond Anticipation Notes Payable D-17 111,000.00 111,000.00 Reserve for Amortization D-12 1,095,531.00 1,095,531.00 Deferred Reserve for Amortization D-16 99,600.00 79,600.00 Capital Improvement Fund D-9 8,338.46 8,338.46 Fund Balance D-1 436.00 436.00

$ 1,640,712.12 $ 1,640,712.12

$ 1,806,450.61 $ 1,773,380.40


"D-1"


Balance, January 1 D $ 436.00 $ 436.00

Balance, December 31 D $ 436.00 $ 436.00

BOROUGH OF METUCHEN

SWIMMING POOL CAPITAL UTILITY FUND

STATEMENT OF CHANGES IN FUND BALANCE - REGULATORY BASISFOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016


"D-2"


REVENUE AND OTHER INCOME REALIZED

Fund Balance D-2: D-3 $ 80,000.00 $ 90,000.00Membership and Guest Fees D-3 343,107.00 340,067.00Non-budget Revenue D-3 34,225.07 29,937.73Other Credits to Income: Unexpended Balance of Appropriation Reserves D-7 24,745.18 31,342.98

TOTAL INCOME $ 482,077.25 $ 491,347.71

EXPENDITURES

Operating D-4 $ 371,493.00 $ 372,224.00Debt Service D-4 26,307.00 25,576.00Deferred Charges and Statutory Expenditures D-4 14,200.00 14,200.00

TOTAL EXPENDITURES $ 412,000.00 $ 412,000.00

Excess in Revenue $ 70,077.25 $ 79,347.71

Fund Balance Balance, January 1 D 88,862.07 99,514.36

$ 158,939.32 $ 178,862.07Less: Fund Balance Utilized D-2 80,000.00 90,000.00

Balance, December 31 D $ 78,939.32 $ 88,862.07

BOROUGH OF METUCHEN


STATEMENTS OF OPERATIONS AND CHANGE IN OPERATING FUND BALANCE -REGULATORY BASIS

FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016


"D-3"

BOROUGH OF METUCHEN

SWIMMING POOL UTILITY OPERATING FUND


ANTICIPATED EXCESS/REF. BUDGET REALIZED (DEFICIT)

Fund Balance Utilized D-2 $ 80,000.00 $ 80,000.00 $

Membership and Guest Fees D-2:D-5 332,000.00 343,107.00 11,107.00

$ 412,000.00 $ 423,107.00 $ 11,107.00

REF. D-4

Non-Budget Revenue D-2:D-5 $ 34,225.07

$ 457,332.07


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"E"

BOROUGH OF METUCHEN




REF. 31, 2017 31, 2016

A S S E T S

Cash: Public Assistance Trust Fund I E-1 $ 0.00 $ 565.67

$ 0.00 $ 565.67

LIABILITIES

Reserve for Public Assistance Trust Fund I E-2 $ 0.00 $ 565.67

$ 0.00 $ 565.67


GENERAL FIXED ASSETS ACCOUNT GROUP

"F"


31, 2017 31, 2016

Fixed Assets: Land $ 11,895,500.00 $ 11,895,500.00 Buildings and Improvements 6,131,600.00 6,131,600.00 Machinery and Equipment 8,512,061.79 8,850,798.13

TOTAL FIXED ASSETS $ 26,539,161.79 $ 26,877,898.13

Reserve: Investments in General Fixed Assets $ 26,539,161.79 $ 26,877,898.13

BOROUGH OF METUCHEN

STATEMENT OF GENERAL FIXED ASSETS



NOTES TO FINANCIAL STATEMENTS

BOROUGH OF METUCHEN

NOTES TO FINANCIAL STATEMENTS YEAR ENDED DECEMBER 31, 2017 AND 2016

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Reporting Entity

The Borough of Metuchen is an instrumentality of the State of New Jersey, established to function as a municipality. The Borough council consists of elected officials and is responsible for the fiscal control of the Borough.

Except as noted below, the financial statements of the Borough of

Metuchen include every board, body, officer or commission supported and maintained wholly or in part by funds appropriated by the Borough of Metuchen, as required by N.J.S.A. 40A:5-5. Accordingly, the financial statements of the Borough of Metuchen do not include the operations of the municipal library or regional and local boards of education, inasmuch as their activities are administered by separate boards.

B. Description of Funds

The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. GASB Codification establishes three fund types and two account groups to be used by general purpose governmen-tal units when reporting financial position and results of operations in accordance with U.S. Generally Accepted Accounting Principles (GAAP).

The accounting policies of the Borough of Metuchen conform to the accounting principles applicable to municipalities which have been prescribed by the Division of Local Government Services, Department of Community Affairs, State of New Jersey. Such principles and practices are designed primarily for determining compliance with legal provisions and budgetary restrictions and as a means of reporting on the stewardship of public officials with respect to public funds. Under this method of accounting, the financial transactions and accounts of the Borough of Metuchen are organized on the basis of funds and an account group which is different from the fund structure required by GAAP. A fund or account group is an accounting entity with a separate set of self-balancing accounts established to record the financial position and results of operation of a specific government activity. As required by the Division of Local Government Services the Borough accounts for its financial transactions through the following individual funds and account groups:

6

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) B. Description of Funds (Continued)

Current Fund - resources and expenditures for governmental operations of a general nature, including grant funds.

Trust Fund - receipts, custodianship and disbursement of funds in accordance with the purpose for which each reserve was created.

General Capital Fund - receipts and disbursement of funds for the acquisition of general capital facilities, other than those acquired in the Current Fund.

Swimming Pool Operating and Capital Funds - account for the operations and acquisition of capital facilities of the municipally-owned swimming pool. Public Assistance Fund - receipt and disbursement of funds that provide assistance to certain residents of the Borough pursuant to Title 44 of New Jersey statutes.

General Fixed Assets Account Group - utilized to account for property, land, buildings and equipment that have been acquired by other governmental funds.

C. Basis of Accounting

The accounting principles and practices prescribed for municipalities by the State of New Jersey differ in certain respects from generally accepted accounting principles applicable to local government units. The more significant accounting policies and differences in the State of New Jersey are as follows: A modified accrual basis of accounting is followed with minor exceptions.

Revenues - are recorded when received in cash except for certain amounts which are due from other governmental units. Federal and State grants are realized as revenue when anticipated in the Borough's budget. Receivables for property taxes are recorded with offsetting reserves on the balance sheet of the Borough's Current Fund; accordingly, such amounts are not recorded as revenue until collected. Other amount that are due the Borough, which are susceptible to accrual, are also recorded as receivables with offsetting reserves and recorded as revenue when received. GAAP requires revenues to be recognized in the accounting period when they become susceptible to accrual, reduced by an allowance for doubtful accounts.

7

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

C. Basis of Accounting (Continued)

Expenditures - are recorded on the "budgetary" basis of accounting. General expenditures are recorded when an amount is encumbered for goods or services through the issuances of a purchase order in conjunction with the Encumbrance Accounting System. Outstanding encumbrances, at December 31, are reported as a cash liability in the financial statements and constitute part of the Borough's regulatory Appropriation Reserve balance. Appropriation reserves covering unexpended appropriation balances are automatically created at December 31st of each year and recorded as liabilities, except for amounts which may be canceled by the governing body. Appropriation reserves are available, until lapsed at the close of the succeeding year, to meet specific claims, commitments or contracts incurred during the preceding fiscal year. Lapsed appropriation reserves are recorded as income. Appropriations for principal payments on outstanding general capital and utility bonds and notes are provided on the cash basis; interest on general capital indebtedness is on the cash basis, whereas interest on utility indebtedness is on the accrual basis. Encumbrances - Contractual orders, at December 31, are reported as expenditures through the establishment of encumbrances payable. Under GAAP, encumbrances outstanding at year end are reported as reservations of fund balance because they do not constitute expenditures or liabilities.

Foreclosed Property - is recorded in the Current Fund at the assessed valuation when such property was acquired and is fully reserved. GAAP requires such property to be recorded in the General Fixed Assets Account Group at its market value.

Sale of Municipal Assets - The proceeds from the sale of municipal assets can be held in a reserve until anticipated as a revenue in a future budget. GAAP requires such proceeds to be recorded as a revenue in the year of sale.

Interfunds - Interfund receivables in the Current Fund are recorded with offsetting reserves which are created by charges to operations. Income is recognized in the year the receivables are liquidated. Interfund receivables in the other funds are not offset by reserves. GAAP does not require the establishment of an offsetting reserve.

General Fixed Assets - N.J.A.C. 5:30-5.6 Accounting for Governmental Fixed Assets, which differs in certain respects from generally accepted accounting principles, requires the inclusion of a statement of general fixed assets of the Borough as part of its basic financial statements. General fixed assets are defined as non-expendable personal property having a physical existence, a useful life of more than one year and an acquisition cost of $500.00 or more per unit. Public domain ("infrastructure") general fixed assets consisting of certain improvements other than buildings, such as roads, bridges, curbs and gutters, streets and sidewalks and drainage system are not capitalized.

8



General Fixed Assets (Continued) - Property and equipment acquired by the Current and General Capital Funds are recorded as expenditures at the time of the purchase and are not capitalized in their own respective funds. The Borough has valued its land and buildings at assessed values. GAAP requires capital assets to be recorded at their historical cost or estimated historical cost. Additionally, GAAP requires depreciation to be calculated on capital assets, with the exception of land. General Fixed Assets that have been acquired and that are utilized in the Current and General Capital Funds are instead accounted for in the General Fixed Asset Account Group. No depreciation has been provided on general fixed assets or reported in the financial statements. Fixed assets acquired through grants in aid or contributed capital have not been accounted for separately. Inventories of Supplies - The costs of inventories of supplies for all funds are recorded as expenditures at the time individual items are purchased. The costs of inventories are not included on the various balance sheets. GAAP requires the cost of inventories to be reported as a current asset and equally offset by a fund balance reserve. Fixed Capital - Swim Pool Utility - Accounting for utility fund “fixed capital” is done in compliance with N.J.A.C. 5:30-5.6. Property and equipment purchased by the Swim Pool Utility Fund are recorded in the capital account at cost and are adjusted for disposition and abandonment. The amounts shown do not purport to represent reproduction costs or current value. The fixed capital reported is as taken from the municipal records and does not necessarily reflect the true condition of such fixed capital. Contributions in aid of construction are not capitalized.

The balance in the Reserve for Amortization account in the utility capital fund represents changes to operations for the cost of acquisitions of property, equipment, and improvements. The utility does not record depreciation on fixed assets.

9



Accounting and Financial Reporting for Pensions - In June 2012, the Governmental Accounting Standards Board (GASB) approved Statement No. 68 Accounting and financial reporting for pensions administered by state and local government employers. This Statement improves accounting and financial reporting by state and local governments for pensions. It also improves information provided by state and local government employers about financial support for pensions that is provided by other entities. This Statement results from a comprehensive review of the effectiveness of existing standards of accounting and financial reporting for pensions with regard to providing decision useful information, supporting assessments of accountability and interperiod equity, and creating additional transparency. This Statement replaces the requirement of Statement No. 27, Accounting for Pension by State and Local Governmental Employers, as well as the requirements of Statement No. 50, Pension Disclosures, as they relate to pensions that are provided through pension plans administered as trusts or equivalent arrangements that meet certain criteria. The requirements of Statements 27 and 50 remain applicable for pensions that are not covered by the scope of this Statement. This statement is effective for periods beginning after June 15, 2014.

GASB approved Statement 71, Pension Transition for Contributions made Subsequent to the Measurement Date-an amendment to GASB No. 68. The objective of this Statement is to address an issue regarding application of the transition provisions of Statement No. 68, Accounting and Financial Reporting for Pensions. The issue relates to amounts associated with contributions, if any, made by a state or local government employer or non-employer contributing entity to a defined benefit pension plan after the measurement date of the government's beginning net pension liability.

Statement 68 requires a state or local government employer (or non-employer contributing entity in a special funding situation) to recognize a net pension liability measured as of a date (the measurement date) no earlier than the end of its prior fiscal year. If a state or local government employer or non-employer contributing entity makes a contribution to a defined benefit pension plan between the measurement date of the reported net pension liability and the end of the government's reporting period, Statement 68 requires that the government recognize its contribution as a deferred outflow of resources. In addition, Statement 68 requires recognition of deferred outflows of resources and deferred inflows of resources for changes in the net pension liability of a state or local government employer or nonemployer contributing entity that arise from other types of events.

10

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) C. Basis of Accounting (Continued)

Accounting and Financial Reporting for Pensions (Continued) - At transition to Statement 68, if it is not practical for an employer or nonemployer contributing entity to determine the amounts of all deferred outflows of resources and deferred inflows of resources related to pensions, paragraph 137 of Statement 68 required that beginning balances for deferred outflows of resources and deferred inflows of resources not be reported. Consequently, if it is not practical to determine the amounts of all deferred outflows of resources and deferred inflows of resources related to pensions, contributions made after the measurement date of the beginning net pension liability could not have been reported as deferred outflows of resources at transition. This could have resulted in a significant understatement of an employer or nonemployer contributing entity's beginning net position and expense in the initial period of implementation.

This Statement amends paragraph 137 of Statement 68 to require that, at transition, a government recognize a beginning deferred outflow of resources for its pension contributions, if any, made subsequent to the measurement date of the beginning net pension liability. Statement 68, as amended, continues to require that beginning balances for other deferred outflows of resources and deferred inflows of resources related to pensions be reported at transition only if it is practical to determine all such amounts.

Under GAAP, municipalities are required to recognize the pension liability in Statements of Revenues, Expenses, Changes in Net Assets (balance sheets) and Notes to the Financial Statements in accordance with GASB 68. The liability required to be displayed by GASB 68 is displayed as a separate line item in the Unrestricted Net Assets area of the balance sheet.

New Jersey’s municipalities and counties do not follow GAAP accounting principles and, as such, do not follow GASB requirements with respect to recording the net pension liability as a liability on their balance sheets. However, N.J.A.C. 5:30 6.1(c)(2) requires municipalities to disclose GASB 68 information in the Notes to the Financial Statements. The disclosure must meet the requirements of GASB 68.

D. Basic Financial Statements

The GASB codification also defines the financial statements of a governmental unit to be presented in the general purpose financial statements to be in accordance with GAAP. The Borough presents the financial statements listed in the table of contents of the "Requirements of Audit and Accounting Revision of 1987" as prescribed by the Division of Local Government Services, Department of Community Affairs, State of New Jersey and which differ from financial statements required by GAAP.

11

NOTE 2: CASH AND CASH EQUIVALENTS

The Borough considers petty cash, change funds, and cash in banks, deposits in the New Jersey Cash Management Fund and certificates of deposit as cash and cash equivalents.

A. Deposits

New Jersey statutes permit the deposit of public funds in institutions which are located in New Jersey and which meet the requirements of the Governmental Unit Deposit Protection Act (GUDPA) or the State of New Jersey Cash Management Fund. GUDPA requires a bank that accepts public funds to be a public depository. A public depository is defined as a state bank, a national bank, or a savings bank, which is located in the State of New Jersey, the deposits of which are insured by the Federal Deposit Insurance Corporation. The statutes also require public depositories to maintain collateral for deposits of public funds that exceed certain insurance limits. All collateral must be deposited with the Federal Reserve Bank or a banking institution that is a member of the Federal Reserve System and has capital funds of not less than $25,000,000.00.

Under GUDPA, if a public depository fails, the collateral it has pledged, plus the collateral of all other public depositories, is available to pay the full amount of the deposits to the governmental unit.

The Borough of Metuchen had the following cash and cash equivalents at December 31, 2017:

Fund

Cash In Bank

Reconciling Items

Total

Current Fund $ 11,513,156.66 $ (1,834,297.60) $ 9,678,859.06 Animal Control Trust Fund

11,207.73 (2,978.40) 8,229.33

Trust Other Fund

3,627,523.28 173,866.84 3,801,390.12 General Capital Fund

1,857,880.85 (111,000.00) 1,746,880.85

Swim Pool Utility Operating Fund 193,497.78 (27,759.29) 165,738.49 Swim Pool Utility Capital Fund 23,492.78 110,488.34 133,981.12

Total $ 17,226,759.08 $ (1,691,680.11) $ 15,535,078.97

Custodial Credit Risk - Deposits - Custodial credit risk is the risk that in the event of a bank failure, the deposits may not be returned. The Borough does not have a specific deposit policy for custodial credit risk other than those policies that adhere to the requirements of statute. As of December 31, 2017, based upon the coverage provided by FDIC and NJGUDPA, no amount of the bank balance in the bank was exposed to custodial credit risk. Of the cash balance in the bank, $500,000.00 was covered by Federal Depository Insurance and $16,726,723.20 was covered by NJGUDPA. The New Jersey Cash Management Fund is an investment pool and is not insured by either FDIC or GUDPA. The Borough has $35.88 in the New Jersey Cash Management Fund.

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NOTE 2: CASH AND CASH EQUIVALENTS B. Investments

The purchase of investments by the Borough is strictly limited by the express authority of the New Jersey Local Fiscal Affairs Law, N.J.S.A. 40A:5-15.1. Permitted investments include any of the following type of securities:

1. Bonds or other obligations of the United States of America or

obligations guaranteed by the United States of America; 2. Government money market mutual funds which are purchased

from an investment company or investment trust which is registered with the Securities and Exchange Commission under the “Investment Company Act of 1940,” 15 U.S.C. 80a-1 et seq., and operated in accordance with 17 C.F.R. § 270.2a-7 and which portfolio is limited to U.S. Government securities that meet the definition of an eligible security pursuant to 17 C.F.R. § 270.2a-7 and repurchase agreements that are collateralized by such U.S. Government securities in which direct investment may be made pursuant to paragraphs (1) and (3) of N.J.S.A. 5-15.1. These funds are also required to be rated by a nationally recognized statistical rating organization.

3. Any obligation that a federal agency or a federal instrumentality

has issued in accordance with an act of Congress, which security has a maturity date not greater than 397 days from the date of purchase, provided that such obligation bears a fixed rate of interest not dependent on any index or other external factor.

4. Bonds or other obligations of the Local Unit or bonds or other

obligations of school districts 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 not more than

397 days from date of purchase, approved by the Division of Local Government Services of the Department of Community Affairs for investment by local units.

6. Local government investment pools that are fully invested in U.S.

Government securities that meet the definition of eligible security pursuant to 17 C.F.R. § 270a-7 and repurchase agreements that are collateralized by such U.S. Government securities in which direct investment may be made pursuant to paragraphs (1) and (3) of N.J.S.A. 5-15.1. This type of investment is also required to be rated in the highest category by a nationally recognized statistical rating organization.

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NOTE 2: CASH AND CASH EQUIVALENT (CONTINUED) B. Investments (Continued) 7. Deposits with the State of New Jersey Cash Management Fund

established pursuant to section 1 of P.L. 1977, 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) of this subsection; 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 1 of P.L. 1970, c. 236 (C. 17:19-41); and

e. a master repurchase agreement providing for the custody

and security of collateral is executed.

The Borough of Metuchen’s investment activities during the year were in accordance with the above New Jersey Statute.

As of December 31, 2017, the Borough has $35.88 on deposit with the New Jersey Cash Management Fund. Based upon the limitations set forth by New Jersey Statutes 40A:5-15.1 and existing investment practices, the Borough is generally not exposed to credit risks, custodial credit risks, concentration of credit risks and interest rate risk for its investments nor is it exposed to foreign currency risk for its deposits and investments.

NOTE 3: MUNICIPAL DEBT

The Local Bond Law, Chapter 40A:2, governs the issuance of bonds to finance general municipal capital expenditures. All bonds are retired in annual installments within the statutory period of usefulness. All bonds issued by the Borough are general obligation bonds, backed by the full faith and credit of the Borough. Bond Anticipation Notes, which are issued to temporarily finance capital projects, are included in the below ‘Summary of Municipal Debt’ and ‘Summary of Statutory Debt Condition Annual Debt Statement’.

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NOTE 3: MUNICIPAL DEBT (CONTINUED)

Year 2017

Year 2015

Year 2015 Issued:

General:

Bonds and Notes

$ 16,548,850.00 $ 18,913,850.00 $ 18,642,000.00

Swim Pool:

Bonds and Notes

311,000.00

331,000.00

240,000.00

Debt Issued

$ 16,859,850.00 $ 19,244,850.00 $ 18,882,000.00

Authorized But Not Issued:

General:

Bonds and Notes

$ 300,800.00 $ 3,155.00 $ 3,155.00 Swim Pool

Bonds and Notes

600.00 600.00

600.00

Total Authorized But Not Issued

$ 301,400.00 $ 3,755.00 $ 3,755.00

Total Bonds and Notes Issued

and Authorized But Not Issued $ 17,161,250.00 $ 19,248,605.00 $ 20,443,755.00

SUMMARY OF STATUTORY DEBT CONDITION ANNUAL DEBT STATEMENT

The summarized statement of debt condition which follows is prepared in accordance with the required method of setting up the Annual Debt Statement and indicates a statutory net debt of 0.738%

Gross Debt

Deductions

Net Debt

Local School District Debt

$ 17,735,000.00 $ 17,735,000.00 $ Swim Pool Utility Debt

311,600.00

311,600.00

General Debt

16,849,650.00

16,849,650.00

$ 34,896,250.00 $ 18,046,600.00 $ 16,849,650.00

Net debt $16,849,650.00 divided by equalized valuation basis per N.J.S. 40A:2-2, $2,283,177,975.67 equals 0.738%.

15


Borrowing Power Under N.J.S.A. 40A:2-6 as Amended

Equalized Valuation Basis - December 31, 2017

$ 2,283,177,975.67

3 1/2% of Equalized Valuation Basis

$ 79,911,229.15

Net Debt

16,849,650.00

Remaining Borrowing Power

$ 63,061,579.15

Equalized Valuation Basis is the average of the equalized valuation of real estate, including improvements and the assessed valuation of Class II railroad property of the Borough of Metuchen for the last three (3) preceding years.

LONG-TERM DEBT

General Serial Bonds:

$10,830,000.00 General Improvement Refunding Bonds of 2014 due in annual installments of $150,000.00 to $2,510,000 with interest from 3% to 5% $ 7,180,000.00 $8,402,000.00 General Improvement Bonds of 2014 due in Annual installments of $440,000.00 to $880,000.00 with Interest from 2% to 3% 7,067,000.00 $258,000.00 Pool Utility Bonds of 2014 due in annual Installments of $18,000.00 to $20,000.00 with interest from 2% To 3% 220,000.00

$ 14,467,000.00

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BONDS AND NOTES AUTHORIZED BUT NOT ISSUED

At December 31, 2017, the Borough has authorized but not issued bonds and notes as follows:

General Capital Fund

$ 300,800.00

Swim Pool Capital Fund

600.00

Total

$ 3,755.00

CALCULATION OF "SELF-LIQUIDATING PURPOSE" SWIMMING POOL UTILITY PER N.J.S.A. 40A:2-45

Cash Receipts from Fees, Rents or Other

Charges for Year and Anticipated Surplus

$ 457,332.07 Deductions:

Operation and Maintenance

$ 371,493.00 Debt Service

26,307.00

Total Deductions

397,800.00

Excess in Revenue - Self-Liquidating

$ 59,532.07

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NOTE 3: MUNICIPAL DEBT (CONTINUED) SCHEDULE OF ANNUAL DEBT SERVICE FOR PRINCIPAL AND INTEREST FOR BONDED DEBT ISSUED AND OUTSTANDING

Year Principal Interest Principal Interest Total

2018 2,690,000.00$ 465,777.50$ 20,000.00$ 4,875.00$ 3,180,652.50$ 2019 2,895,000.00 367,277.50 20,000.00 4,475.00 3,286,752.50 2020 2,967,000.00 285,027.50 20,000.00 4,075.00 3,276,102.50 2021 755,000.00 150,387.50 20,000.00 3,675.00 929,062.50 2022 775,000.00 133,400.00 20,000.00 3,225.00 931,625.00 2023 790,000.00 115,962.50 20,000.00 2,775.00 928,737.50 2024 810,000.00 97,200.00 20,000.00 2,300.00 929,500.00 2025 830,000.00 76,950.00 20,000.00 1,800.00 928,750.00 2026 855,000.00 52,050.00 20,000.00 1,200.00 928,250.00 2027 880,000.00 26,400.00 20,000.00 600.00 927,000.00

Total $14,247,000.00 $1,770,432.50 $200,000.00 $29,000.00 $16,246,432.50

Swim Pool Utility CapitalGeneral Capital

In accordance with NJSA 40A:2-8.1, a local unit may, in anticipation of the issuance of bonds, borrow money and issue notes if the bond ordinance or subsequent resolution so provides. Any such note shall be designated as a "bond anticipation note" and shall be subject to the following provisions:

(1) every note shall contain a recital that it is issued for a period not exceeding one year and may be renewed from time to time for additional periods, none of which shall exceed one year;

(2) all such notes, including renewals, shall mature and be paid not later than the first day of the fifth month following the close of the tenth fiscal year next following the date of the original notes; and

(3) no such notes shall be renewed beyond the third anniversary date of the

original notes unless an amount of such notes, at least equal to the first legally payable installment of the bonds in anticipation of which those notes are issued, is paid and retired on or before each subsequent anniversary date beyond which such notes are renewed from funds other than the proceeds of obligations.

The Borough had the following outstanding bond anticipation note(s) at year end:

Interest Rate Maturity Date Amount

General Capital 2.25% 10/3/2018 $ 2,301,850.00Swim Pool Capital 2.25% 10/3/2018 111,000.00

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NOTE 4: FUND BALANCES APPROPRIATED

Fund balance, at December 31, 2017, which was appropriated and included as anticipated revenue in its own respective fund for the year ending December 31, 2018, was $1,350,000.00 for the Current Fund and $65,000.00 for the Swim Pool Utility Operating Fund.

NOTE 5: PROPERTY TAXES

Property Taxes attach as an enforceable lien on property as of January 1. Taxes are levied based on the final adoption of the current year municipal budget, and payable in four installments on February 1, May 1, August 1 and November 1. The Borough bills and collects its own property taxes and also the taxes for the County and the Local High School District. The collections and remittance of county and school taxes are accounted for in the Current Fund. Borough property tax revenues are recognized when collected in cash and any receivables are recorded with offsetting reserves on the balance sheet of the Borough's Current Fund.

Taxes Collected in Advance - Taxes collected in advance and recorded as cash liabilities in the financial statements are as follows:

Balance

Balance

December 31, 2017

December 31, 2016

Prepaid Taxes $ 4,058,681.12 $ 318,177.02

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NOTE 6: PENSION PLANS

Substantially all eligible employees participate in the Public Employees' Retirement System (PERS), or the Police, Firemen's Retirement System (PFRS) or the Defined Contribution Retirement System (DCRP), which have been established by state statute and are administered by the New Jersey Division of Pensions and Benefits. The Division issues a publicly available financial report that includes the financial statements and required supplementary information for the Public Employees Retirement System, Police and Fireman's Retirement System and Consolidated Police and Firemen’s Pension Fund. These reports may be obtained by writing to the Division of Pensions and Benefits, P.O. Box 295, Trenton, New Jersey, 08625 or are available online at www.nj.gov/treasury/pensions/annrprts.shtml. Public Employees' Retirement System (PERS) - The Public Employees' Retirement System (PERS) was established as of January 1, 1955, under the provisions of N.J.S.A. 43:15A, to provide retirement, death, disability and medical benefits to certain qualified members. The PERS is a cost-sharing multiple employer plan. Membership is mandatory for substantially, all full-time employees of the State of New Jersey or any county, municipality, school district or public agency, provided the employee is not required to be a member of another state-administered retirement system or other state pension fund or local jurisdiction's pension fund. Police and Fireman's Retirement System (PFRS) - The Police and Fireman's Retirement System (PFRS) was established as of July 1, 1944, under the provisions of N.J.S.A. 43:16A. to provide retirement, death, and disability benefits to its members. The PFRS is a cost-sharing multiple-employer plan. Membership is mandatory for substantially, all full-time county and municipal police or firemen or officer employees with police powers appointed after June 30, 1944. Defined Contribution Retirement Program (DCRP) - The Defined Contribution Retirement Program (DCRP) was established July 1, 2007, under the provisions of Chapter 92, P.L. 2007 and Chapter 103, P.L 2007, and was expanded under the provisions of Chapter 89, P.L. 2009. The DCRP provides eligible employees and their beneficiaries with a tax-sheltered, defined contribution retirement benefit, along with life insurance coverage and disability coverage. Vesting and Benefit Provisions The vesting and benefit provisions for PERS are set by N.J.S.A. 43:15A and 43:36. All benefits vest after ten years of service, except for medical benefits, which vest after 25 years of service. Members may seek early retirement after achieving 25 years of service credit or they may elect deferred retirement after achieving ten years of service credit, In which case, benefits would begin the first day of the month after the member attains normal retirement age.

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NOTE 6: PENSION PLANS (CONTINUED) Vesting and Benefit Provisions (Continued) The vesting and benefit provisions for PFRS are set by N.J.S.A. 43:16A and 43:36. All benefits vest after ten years of service, except for disability benefits, which vest alter four years of service. Retirement benefits for age and service are available at age 55. Members may seek special retirement after achieving 25 years of creditable service or they may elect deferred retirement after achieving ten years of service. Newly elected or appointed officials that have an existing DCRP account, or are a member of another State-administered retirement system are immediately invested in the DCRP. For newly elected or appointed officials that do not qualify for immediate vesting in the DCRP. Employee and employer contributions are held during the initial year of membership. Upon commencing the second year of DCRP membership, the member is fully invested. However, if a member is not eligible to continue in the DCRP for a second year of membership, the member may apply for a refund of the employee contributions from the DCRP, while the employer contributions will revert back to the employer. Employees are required to contribute 5.5% of their base salary and employers contribute 3.0%. Funding Policy The contribution policy is set by New Jersey State Statutes and contributions are required by active members and contributing employers. Plan members and employer contributions may be amended by State of New Jersey legislation. Effective 2017 PERS provides for employee contributions of 7.35% of employees' annual compensation. Employers are required to contribute at an actuarially determined rate. The actuarially determined contribution includes funding for cost-of-living adjustments, noncontributory death benefits, and post-retirement medical premiums. The contribution policy for PFRS is set by N.J.S.A. 43: 16A and requires contributions by active members and contributing employers. Plan member and employer contributions may be amended by Slate of New Jersey legislation. Employers are required to contribute at an actuarially determined rate. The annual employer contribution includes funding for basic retirement allowances, cost-of-living adjustments and noncontributory death benefits. During 2017, members contributed at a uniform rate of 10.00% of base salary. All contributions were equal to the required contributions for each of the three years, respectively.

Certain Borough employees are also covered by the Federal Insurance Contribution Act. The Borough's share of pension, which is based upon the annual billings received from the State, amounted to $1,032,478.16 for 2017, $1,024,419.00 for 2016, and $918,531.04 for 2015.

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NOTE 6: PENSION PLANS (CONTINUED)

Accounting and Financial Reporting for Pensions – GASB #68 The Governmental Accounting Standards Board (GASB) has issued Statement No. 68 “Accounting and Financial Reporting for Public Employees Pensions” which requires the State of New Jersey to calculate and allocate, for note disclosure purposes only, the unfunded net pension liability of Public Employees Retirement System (PERS) and the Police and Firemen’s Retirement System (PFRS) of the participating municipality as of December 31, 2017. The statement does not alter the amounts of funds that must be budgeted for pension payments under existing state law. Under accounting principles and practices prescribed by the Division of Local Government Services, Department of Community Affairs, State of New Jersey, any unfunded net pension liability of the municipality, allocated by the State of New Jersey, is not required to be reported in the financial statements as presented and any pension contributions required to be paid are raised in that year’s budget and no liability is accrued at December 31, 2017.

Public Employees Retirement System (PERS)

At June 30, 2017, the State reported a net pension liability of $11,515,429.00 for the Borough of Metuchen’s proportionate share of the total net pension liability. The total pension liability for the June 30, 2017 measurement date was determined by an actuarial valuation as of July 1, 2016, which was rolled forward to June 30, 2017. The Borough's proportion of the net pension liability was based on a projection of the Borough’s long-term share of contributions to the pension plan relative to the projected contributions of all participating employers, actuarially determined. At June 30, 2017, the Borough’s proportion was 0.0391665223 percent, which was an increase of 0.0002855504 percent from its proportion measured as of June 30, 2016. For the year ended June 30, 2017, the State recognized an actuarially determined pension expense of $624,560.00 for the Borough of Metuchen’s proportionate share of the total pension expense. The pension expense recognized in the Borough’s financial statement based on the April 1, 2017 billing was $345,413.00.

22

NOTE 6: PENSION PLANS (CONTINUED) Accounting and Financial Reporting for Pensions - GASB 68 (Continued) Public Employees Retirement System (PERS) (Continued) At June 30, 2017, the State reported deferred outflows of resources and deferred inflows of resources related to PERS from the following sources:

Deferred

Deferred

Inflow of

Outflow of

Resources

Resources

Differences between expected and actual experience -

$214,682.00

Changes of assumptions

$1,830,096.00

1,836,830.00

Net difference between projected and actual earnings on pension plan investments

62,083.00

Changes in proportion and differences between Borough contributions and proportionate share of contributions 169,078.00

50,895.00

$1,999,174.00

$2,164,490.00

Other local amounts reported by the State as the Borough’s proportionate share of deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in the State’s actuarially calculated pension expense as follows:

Year Ended

June 30, Amount

2018 $165,742.00 2019 277,205.00 2020 164,783.00 2021 (259,249.00) 2022 (183,165.00)

$165,316.00

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NOTE 6: PENSION PLANS (CONTINUED) Accounting and Financial Reporting for Pensions - GASB 68 (Continued) Public Employees Retirement System (PERS) (Continued)

Actuarial Assumptions The total pension liability for the June 30, 2017 measurement date was determined by an actuarial valuation as of July 1, 2016, which rolled forward to June 30, 2017. These actuarial valuations used the following assumptions: June 30, 2017 June 30, 2016 Inflation 2.25 Percent 3.08 Percent Salary Increases (based on age) Though 2026 1.65-4.15 Percent 1.65-4.15 Percent

Thereafter 2.65-5.15 Percent 2.65-5.15 Percent

Investment Rate of Return 7.00 Percent 7.65 percent Preretirement mortality rates were based on the RP-2000 Employee Preretirement Mortality Table for male and female active participants. For State employees, mortality tables are set back 4 years for males and females. For local employees, mortality tables are set back 2 years for males and 7 years for females. In addition, the tables provide for future improvements in mortality from the base year of 2013 using a generational approach based on the plan actuary's modified MP-2014 projection scale. Postretirement morality rates were based on the RP-2000 Combined Healthy Male and Female Mortality Tables (set back 1 year for males and females) for service retirements and beneficiaries of former members and a one-year static projection based on mortality improvement Scale AA. In addition, the tables for service retirements and beneficiaries of former members provide for future improvements in mortality from the base year of 2013 using a generational approach based on the plan actuary's modified MP-2014 projection scale. Disability retirement rates used to value disabled retirees were based on the RP-2000 Disabled Mortality Table (set back 3 years for males and set forward 1 year for females).

The actuarial assumptions used in the July 1, 2016 valuation were based on the results of an actuarial experience study for the period July 1, 2011 to June 30, 2014. It is likely that future experience will not exactly conform to these assumptions. To the extent that actual experience deviates from these assumptions, the emerging liabilities may be higher or lower than anticipated. The more the experience deviates, the larger the impact on future financial statements.

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NOTE 6: PENSION PLANS (CONTINUED) Accounting and Financial Reporting for Pensions - GASB 68 (Continued) Public Employees Retirement System (PERS) (Continued) Long-Term Rate of Return In accordance with State statute, the long-term expected rate of return on plan investments (7.00% at June 30, 2017 and 7.65 at June 30, 2016) is determined by the State Treasurer, after consultation with the Directors of the Division of Investment and Division of Pensions and Benefits, the board of trustees and the actuaries. The long-term expected rate of return was determined using a building block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. Best estimates of arithmetic rates of return for each major asset class included in PERS's target asset allocation as of June 30, 2017 are summarized in the following table:

June 30, 2017

Long-Term

Target

Expected Real Asset Class

Allocation

Rate of Return

Absolute return/risk mitigation

5.00%

5.51% Cash

5.50%

1.00%

US Treasuries

3.00%

1.87% Investment Grade Credit

10.00%

3.78%

Public High Yield

2.50%

6.82% Global Diversified Credit

5.00%

7.10%

Credit oriented hedge funds

1.00%

6.60% Debt related private equity

2.00%

10.63%

Debt related real estate

1.00%

6.61% Private Real Estate

2.50%

11.83%

Equity related real estate

6.25%

9.23% U.S. Equity

30.00%

8.19%

Non-U.S. developed market equity 11.50%

9.00% Emerging markets equity

6.50%

11.64%

Buyouts venture capital

8.25%

13.08%

100.00%

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NOTE 6: PENSION PLANS (CONTINUED) Accounting and Financial Reporting for Pensions - GASB 68 (Continued) Public Employees Retirement System (PERS) (Continued) Discount Rate The discount rate used to measure the total pension liability was 5.00% and 3.98% as of June 30, 2017 and 2016, respectively. This single blended discount rate was based on the long-term expected rate of return on pension plan investments of 7.00% and 7.65%, and a municipal bond rate of 3.58% and 2.85% as of June 30, 2017 and 2016, respectively, based on the Bond Buyer Go 20-Bond Municipal Bond Index which includes tax-exempt general obligation municipal bonds with an average rating of AA/Aa or higher. The projection of cash flows used to determine the discount rate assumed that contributions from plan members will be made at the current member contribution rates and that contributions from employers will be made based on the contribution rate in the most recent fiscal year. The State employer contributed 40% of the actuarially determined contributions and the local employers contributed 100% of their actuarially determined contributions. Based on those assumptions, the plan's fiduciary net position was projected to be available to make projected future benefit payments of current plan members through 2040. Therefore, the long-term expected rate of return on plan investments was applied to projected benefit payments through 2040 and the municipal bond rate was applied to projected benefit payments after that date in determining the total pension liability. Sensitivity of the collective net pension liability to changes in the discount rate The following presents the collective net pension liability of the participating employers as of June 30, 2017 respectively, calculated using the discount rate as disclosed above as well as what the collective net pension liability would be if it was calculated using a discount rate that is 1-percentage point lower or 1- percentage point higher than the current rate:

June 30, 2017

1%

At Current

1%

Decrease

Discount Rate

Increase

4.00%

5.00%

6.00%

Borough's proportionate share of the pension liability $11,310,679.00

$9,117,340.00

$7,290,017.00

Pension plan fiduciary net position Detailed information about the pension plan’s fiduciary net position is available in the separately issued Financial Report for the State of New Jersey Public Employees Retirement System (PERS). The report may be obtained at State of New Jersey Division of Pensions and Benefits P.O. Box 295 Trenton, New Jersey 08625-0295 http://www.state.nj.us/treasury/pensions.

26

http://www.state.nj.us/treasury/pensions

NOTE 6: PENSION PLANS (CONTINUED) Accounting and Financial Reporting for Pensions - GASB 68 (Continued) Police and Firemen’s Retirement System (PFRS)

At June 30, 2017, the State reported a net pension liability of $12,044,057 for the Borough of Metuchen’s proportionate share of the total PFRS net pension liability. The total pension liability for the June 30, 2017 measurement date was determined by an actuarial valuation as of July 1, 2016, which was rolled forward to June 30, 2017. The Borough's proportion of the net pension liability was based on a projection of the Borough's long-term share of contributions to the pension plan relative to the projected contributions of all participating employers, actuarially determined. At June 30, 2017, the Borough’s proportion was 0.0780153220 percent, which was an increase of 0.0055809302 percent from its proportion measured as of June 30, 2016. For the year ended June 30, 2017, the State recognized an actuarially determined pension expense of $1,375,196.00. The pension expense recognized in the Borough’s financial statement based on the April 1, 2017 billing was $590,587.00. At June 30, 2017, the State reported deferred outflows of resources and deferred inflows of resources related to PFRS from the following sources:

Deferred

Deferred

Inflow of

Outflow of

Resources

Resources

Differences between expected and actual experience $70,689.00

$78,135.00

Changes of assumptions 1,972,464.00

1,485,166.00

Net difference between projected and actual earnings on pension plan investments

229,829.00

Changes in proportion and differences between the Borough's contributions and proportionate share of contributions 496,903.00

1,294,589.00

$2,540,056.00

$3,087,719.00

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NOTE 6: PENSION PLANS (CONTINUED) Accounting and Financial Reporting for Pensions - GASB 68 (Continued) Police and Firemen’s Retirement System (PFRS) (Continued) Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows:

Actuarial Assumptions The total pension liability for the June 30, 2017 measurement date was determined by an actuarial valuation as of July 1, 2016, which rolled forward to June 30, 2017. This actuarial valuation used the following assumptions: 2016 2017 Inflation 3.08 Percent 2.25 Percent Salary Increases (based on age) Through 2026 2.10-8.98 Percent 2.10-8.98 Percent Based on Age Based on Age Thereafter 3.10-9.98 Percent 3.10-9.98 Percent

Based on Age Based on Age Investment Rate of Return 7.65 Percent 7.00 Percent Pre-retirement mortality rates were based on the RP-2000 Pre-Retirement mortality tables projected thirteen years using Projection Scale BB and then projected on a generational basis using the plan actuary's modified 2014 projection scales. Post-retirement mortality rates for male service retirements and beneficiaries are based the RP-2000 Combined Healthy Mortality Tables projected one year using Projection Scale AA and two years using the plan actuary's modified 2014 projection scales, which was further projected on a generational basis using the plan actuary's modified 2014 projection scales. Post- retirement mortality rates for female service retirements and beneficiaries were based the RP-2000 Combined Healthy Mortality Tables projected thirteen years using Projection Scale BB and then two years using the plan actuary's modified 2014 projection scales, which was further projected on a generational basis using the plan actuary's modified 2014 projection scales. Disability mortality rates were based on special mortality tables used for the period after disability retirement. The actuarial assumptions used in the July 1, 2016 valuation were based on the results of an actuarial experience study for the period July 1, 2010 to June 30, 2013.

Year Ended June 30 Amount

2018 $398,475.00 2019 621,062.00 2020 123,988.00 2021 (456,180.00) 2022 (139,681.00)

$547,664.00

28

NOTE 6: PENSION PLANS (CONTINUED) Accounting and Financial Reporting for Pensions - GASB 68 (Continued) Police and Firemen’s Retirement System (PFRS) (Continued) Long-Term Rate of Return In accordance with State statute, the long-term expected rate of return on plan investments (7.00 percent at June 30, 2017 and 7.65% at June 30, 2016) is determined by the State Treasurer, after consultation with the Directors of the Division of Investment and Division of Pensions and Benefits, the board of trustees and the actuaries. The long-term expected rate of return was determined using a building block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. Best estimates of arithmetic rates of return for each major asset class included in PFRS’s target asset allocation as of June 30, 2017 are summarized in the following table:

June 30,2017

Long-Term

Target

Expected Real Asset Class Allocation

Rate of Return

Absolute return/risk mitigation 5.00%

5.51% Cash 5.50%

1.00%

US Treasuries 3.00%

1.87% Investment Grade Credit 10.00%

3.78%

Public High Yield 2.50%

6.82% Global Diversified Credit 5.00%

7.10%

Credit oriented hedge funds 1.00%

6.60% Debt related private equity 2.00%

10.63%

Debt related real estate 1.00%

6.61% Private Real Estate 2.50%

11.83%

Equity related real estate 6.25%

9.23% U.S. Equity 30.00%

8.19%

Non-U.S. developed market equity 11.50%

9.00% Emerging markets equity 6.50%

11.64%

Buyouts venture capital 8.25%

13.08%

100.00%

29

NOTE 6: PENSION PLANS (CONTINUED) Accounting and Financial Reporting for Pensions - GASB 68 (Continued) Police and Firemen’s Retirement System (PFRS) (Continued) Discount Rate The discount rate used to measure the total pension liability was 6.14% and 5.55% as of June 30, 2017 and June 30, 2016 respectively. This single blended discount rate was based on the long-term expected rate of return on pension plan investments of 7.00 and 7.65% and a municipal bond rate of 3.58% and 2.85% as of June 30, 2017 and June 30, 2016 respectively based on the Bond Buyer Go 20-Bond Municipal Bond Index, which includes tax-exempt general obligation municipal bonds with an average rating of AA/Aa or higher. The projection of cash flows used to determine the discount rate assumed that contributions from plan members will be made at the current member contribution rates and that contributions from employers and the nonemployer contributing entity will be made based on the contribution rate in the most recent fiscal year. The State employer contributed 40% of the actuarially determined contributions and the local employers contributed 100% of their actuarially determined contributions. Based on those assumptions, the plan's fiduciary net position was projected to be available to make projected future benefit payments of current plan members through 2057. Therefore, the long-term expected rate of return on plan investments was applied to projected benefit payments through 2057, and the municipal bond rate was applied to projected benefit payments after that date in determining the total pension liability. Sensitivity of the collective net pension liability to changes in the discount rate The following presents the collective net pension liability of the participating employers as of June 30, 2017 respectively, calculated using the discount rate as disclosed above as well as what the collective net pension liability would be if it was calculated using a discount rate that is 1-percentage point lower or 1- percentage point higher than the current rate:

June 30, 2017

1%

At Current

1%

Decrease

Discount Rate

Increase

5.14%

6.14%

7.14%

Borough's proportionate share of the PFRS pension liability $15,869,038.00

$12,044,057.00

$8,901,401.00

30

NOTE 6: PENSION PLANS (CONTINUED) Accounting and Financial Reporting for Pensions - GASB 68 (Continued) Police and Firemen’s Retirement System (PFRS) (Continued)

Special Funding Situation In accordance with N.J.S.A. 43:16A-15, local participating employers are responsible for their own contributions based on actuarially determined amounts, except where legislation was passed which legally obligated the State if certain circumstances occurred. The legislation which legally obligates the State is as follows: Chapter 8, P.L. 2000, Chapter 318, P.c. 2001, Chapter 86, P.L. 2001, Chapter 511, P.L. 1991, Chapter 109, P.c. 1979, Chapter 247, P.L. 1993 and Chapter 201, P.L. 2001. The amounts contributed by the State on behalf of the Borough under this legislation is considered to be a special funding situation as defined by GASB Statement No. 68, and the State is treated as a nonemployer contributing entity. Since the Borough does not contribute under this legislation directly to the plan (except for employer specific financed amounts), there is no net pension liability or deferred outflows or inflows to disclose in the notes to the financial statements of the Borough related to this legislation. At June 30, 2017 and 2016, the State's proportionate share of the net pension liability attributable to the Borough for the PFRS special funding situation is $1,349,036.00 and $1,161,950.00 respectively. At June 30, 2017, the Borough's and State of New Jersey's proportionate share of the PFRS net pension liability were as follows:

Borough's Proportionate Share of Net Pension Liability $12,044,057.00

State of New Jersey Proportionate Share of Net Pension Liability Associated with the Borough 1,349,036.00

$13,393,093.00

Pension plan fiduciary net position Detailed information about the pension plan’s fiduciary net position is available in the separately issued Financial Report for the State of New Jersey Police and Firemen’s Retirement System (PFRS). The report may be obtained at State of New Jersey Division of Pensions and Benefits P.O. Box 295 Trenton, New Jersey 08625-0295 http://www.state.nj.us/treasury/pensions.

31

http://www.state.nj.us/treasury/pensions

NOTE 7: COMPENSATED ABSENCES

Under the terms of various contracts, employees are compensated for unused sick and vacation time. The accumulated cost of such unpaid compensation is not required to be reported in the financial statements. The Borough appropriates annually the amount required to be paid in that year’s budget, if applicable, and no liability is accrued at December 31, 2017.

NOTE 8: DEFERRED COMPENSATION PLAN

The Borough offers its employees a deferred compensation plan created in accordance with Internal Revenue Code Section 457. The plan, available to all Borough employees, permits them to defer a portion of their salaries until future years. The Borough does not make any contribution to the plan. The deferred compensation is not available to employees until retirement, death, disability, termination or financial hardships.

In accordance with the requirements of the Small Business Job Protection Act of

1996 and the funding requirements of Internal Revenue Code Section 457(g), the Borough’s Plan was amended to require that all amounts of compensation deferred under the Plan are held for the exclusive benefits of plan participants and beneficiaries. All assets and income under the Plan are held in trust, in annuity contracts or custodial accounts.

All assets of the Plan are held by an independent administrator, the Equitable Life Assurance Society of the United States (the "Equitable").

The accompanying financial statements do not include the Borough's Deferred Compensation Plan activities. The Borough's Deferred Compensation Plan is fully contributory and the Borough has no liabilities in conjunction with the plan.

NOTE 9: LITIGATION

The Borough’s Attorney's letters did not indicate any litigation, claims or contingent liabilities which would materially affect the financial statements of the Borough.

NOTE 10: TAX APPEALS

There are tax appeals filed with the State Tax Court of New Jersey requesting a reduction of assessments for 2017. Any reduction in assessed valuation will result in a refund of prior year’s taxes in the year of settlement, which may be funded from current tax revenues, through the establishment of a reserve, or by the issuance of refunding bonds per N.J.S.A. 40A:2-51. The Borough has a reserve of $57,811.67 at December 31, 2017.

32

NOTE 11: CONTINGENT LIABILITIES

The Borough participated in several federal and state financial assistance grant programs. Entitlement to the funds is generally conditional upon compliance with terms and conditions of the grant agreements and applicable regulations, including the expenditure of funds for eligible purposes. These programs are also subject to compliance and financial audits by the grantors or their representatives. As of December 31, 2017, the Borough does not believe that any material liabilities will result from such audits.

NOTE 12: RISK MANAGEMENT

The Borough is exposed to various risks of loss related to torts; theft of; damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The Borough maintains insurance coverage through the Middlesex County Joint Insurance Fund (JIF) covering each of those risks of loss. Management believes such coverage is sufficient to preclude any significant uninsured losses to the Borough. Settled claims have not exceeded this commercial coverage in any of the past three fiscal years. New Jersey Unemployment Compensation Insurance - The Borough has elected to fund its New Jersey Unemployment Compensation Insurance under the “Benefit Reimbursement Method”. Under this plan, the Borough is required to reimburse the New Jersey Unemployment Trust Fund for benefits paid to its former employees and charged to its account with the State. The Borough is billed quarterly for amounts due to the State. Below is a summary of Borough’s contributions, employee contributions, reimbursements to the State for benefits paid, and the ending balance of the Borough’s expendable trust fund for the current and previous two years:

Municipal and

Interest on

Employee

Amount

Ending Year

Deposits

Contributions

Reimbursed

Balance

2017 $ 166.94 $ 27,118.85 $ 27,356.98 $ 37,022.68 2016

71.17

25,404.47

19,323.19

37,093.87

2015

31.68

24,197.38

21,526.08

30,941.42

33

NOTE 13: GASB 45: OTHER POST-EMPLOYMENT BENEFITS The Governmental Accounting Standards Board (GASB) has issued Statement

No. 45, “Accounting and Financial Reporting by Employers for Post Employment Benefits Other Than Pension.” This statement requires the municipality to disclose in the notes to the financial statements the present value of the estimated future cost of the other post employment benefits (OPEB). OPEB obligations are non-pension benefits that the municipality has contractually or otherwise agreed to provide employees once they have retired and in most instances, will be for retirement health, prescription and dental insurance coverage.

Under current New Jersey budget and financial reporting requirements, the

municipality is not required to fund any amounts in excess of their current costs on a pay-as-you-go basis or required to accrue funds, create a trust or issue debt to finance their other post-employment benefit liability. Additionally, the municipality is not required to recognize any long-term obligations resulting from OPEB on their balance sheets; however, OPEB obligations are required to be disclosed in the notes, commencing with the 2008 fiscal year.

Plan Description

The Borough of Metuchen provides Post-Retirement Benefits to eligible employees. Members of the PBA that retire from active service with at least 25 years of service receive free of charge medical and prescription drug benefits plan for life, as do spouses. Dependent children are covered free of charge under the same terms for active employees.

Actual Cost As the Borough is self-insured, there is no premium cost. The actual costs

disbursed by the Borough include an administrative fee totaling approximately $214,912.12 for 2017. The claims billings do not specifically differentiate between active employees retired status, therefore we are unable to present the actual post-retirement expense for claims, however based on COBRA maximum cost estimates, the Borough estimates the post-retirement portion of claims to be approximately $609,210.02 for 2017.

34

NOTE 14: DEFERRED CHARGES

Certain expenditures are required to be deferred to budgets of succeeding years. At December 31, 2017, the following deferred charges are shown: Balance Balance to December 31, 2018 Succeeding 2017 Budget Budget

Current Fund $39,600.00 $ 9,900.00 $29,700.00 NOTE 15: SUBSEQUENT EVENTS

The Borough has evaluated subsequent events occurring after the financial statement date through October 29, 2018 which is the date the financial statements were available to be issued. Based upon this evaluation, the Borough has determined that there are no subsequent events needed to be disclosed.

NOTE 16: INTERFUND RECEIVABLES AND PAYABLES

The following interfund balances remained on the balance sheet at December 31, 2017:

Interfund Interfund Fund Receivable Payable

Current Fund $ $ 31,999.68 Trust Other Fund 31,999.68 $ 31,999.68 $ 31,999.68

35

BOROUGH OF METUCHEN

SUPPLEMENTARY SCHEDULES – ALL FUNDS

YEAR ENDED DECEMBER 31, 2017

"A-4"

BOROUGH OF METUCHEN

CURRENT FUND

SCHEDULE OF CASH-TREASURER

REF.

Balance, December 31, 2016 A $ 8,495,525.50

Increased by Receipts: Taxes Receivable A-6 $ 59,647,873.09 Tax Title Liens Receivable A-11 1,619.86 Petty Cash A-5 1,200.00 Tax Overpayments A-15 78,843.27 Prepaid Taxes A-10 4,058,681.12 State of New Jersey-Senior Citizens Deductions A-7 71,495.21 Interfunds A-22 31,999.68 Miscellaneous Revenue Not Anticipated A-2 480,007.81 Various Reserves A-20 46,760.91 Grants Unappropriated A-16 15,801.81 Grants Receivable A-18 108,084.99 Revenue Accounts Receivable A-8 4,183,145.45

68,725,513.20$ 77,221,038.70

Decreased by Disbursements: Appropriations A-3 $ 16,910,850.19 Appropriation Reserves A-9 574,070.43 Accounts Payable A-19 25,117.44 Local District School Taxes A-13 40,011,911.85 County Taxes A-12 9,415,840.03 Special Improvement District Taxes A-23 108,137.49 Budget Operations A-1 147,071.10 Tax Overpayments A-15 30,834.48 Petty Cash A-5 1,200.00 Grants Appropriated A-17 317,146.63

67,542,179.64


"A-5"

BOROUGH OF METUCHEN

CURRENT FUND

SCHEDULE OF PETTY CASH

REF.

Balance, December 31, 2016 A $ 1,200.00

Increased by: Receipts A-4 1,200.00

$ 2,400.00

Decreased by: Disbursements A-4 1,200.00


ANALYSIS OF BALANCE:

Finance $ 300.00 Police 450.00 Public Works 300.00 Library 150.00

$ 1,200.00

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"A-7"

BOROUGH OF METUCHEN

CURRENT FUND

SCHEDULE OF DUE STATE OF NEW JERSEYCHAPTER 73, P.L. 1976

REF.

Balance, December 31, 2016 (Due From) A $ 35,065.01

Increased by: Deductions Per Tax Billings A-7 $ 77,500.00 Deductions Allowed By Collector A-7 1,000.00

78,500.00$ 113,565.01

Decreased by: Received in Cash From State A-4 $ 71,495.21 Senior Citizens Deductions Disallowed By Collector A-7 1,954.79 Senior Citizens Deductions Disallowed By State A-1 4,550.00

78,000.00

Balance, December 31, 2017 (Due From) A $ 35,565.01

ANALYSIS OF STATE SHARE OF 2017 SENIORCITIZENS AND VETERANS DEDUCTIONS

Deductions Per Tax Billing A-7 $ 77,500.00Deductions Allowed By Collector A-7 1,000.00

$ 78,500.00

Less: Senior Citizens Deductions Disallowed A-7 1,954.79

A-6 $ 76,545.21

"A-8"

BOROUGH OF METUCHEN

CURRENT FUND

SCHEDULE OF REVENUE ACCOUNTS RECEIVABLE

BALANCE BALANCEDECEMBER 31, ACCRUED COLLECTED BY DECEMBER 31,

REF. 2016 IN 2017 TREASURER 2017Clerk: Licenses: $ $ $ $ Alcoholic Beverages A-2 18,613.10 18,613.10 Other A-2 3,536.00 3,536.00 Fees and Permits A-2 70,839.00 70,839.00Interest and Costs on Taxes A-2 174,669.97 174,669.97Interest on Investments and Deposits A-2 52,045.55 52,045.55Construction Code Official A-2 589,342.00 589,342.00Planning and Zoning: Fees and Permits A-2 29,355.00 29,355.00Sidewalk Inspections: Fees and Permits A-2 4,050.00 4,050.00Engineering: Fees and Permits A-2 417.50 417.50Board of Health: Other Licenses A-2 9,555.00 9,555.00Municipal Court: Fines and Costs A-2 26,942.53 328,674.00 330,500.37 25,116.16Police: Fees and Permits A-2 1,116.00 1,116.00Parking Meters A-2 87,832.19 87,832.19Cable TV Franchise Fees A-2 61,994.00 61,994.00Alarm System Fees A-2 11,389.00 11,389.00Consolidated Municipal Property Tax Relief Aid A-2 84,411.00 84,411.00Energy Receipts Tax A-2 1,364,544.00 1,364,544.00Uniform Fire Safety A-2 41,249.65 41,249.65Senior Housing Authority A-2 19,000.00 19,000.00Parking Authority A-2 1,200,000.00 1,200,000.00Sewer Service Charge A-2 28,686.12 28,686.12

$ 26,942.53 $ 4,181,319.08 $ 4,183,145.45 $ 25,116.16

REF. A A-4 A

"A-9"SHEET #1

BALANCE TRANSFERS ANDDECEMBER PRIOR ACCOUNTS ADJUSTED PAID OR BALANCE

31, 2016 PAYABLE BALANCE CHARGED LAPSEDSALARIES AND WAGES:Administrative and Executive $ 2,500.00 $ $ 2,500.00 $ $ 2,500.00Mayor and Council 1,380.08 1,380.08 1,380.08Clerk 0.32 0.32 0.32Financial Administration 22,744.39 22,744.39 22,744.39Assessment of Taxes 11.14 11.14 11.14Public Works Administration 2,727.15 2,727.15 325.00 2,402.15Forestry 11,335.19 11,335.19 3,302.80 8,032.39Public Buildings and Grounds 6,748.69 6,748.69 1,178.19 5,570.50Planning Board 22,055.37 22,055.37 22,055.37Zoning Board of Adjustments 33.75 33.75 33.75Fire Department 3,968.30 3,968.30 190.58 3,777.72Police 32,930.59 32,930.59 2,084.66 30,845.93Auxiliary Police Department 0.02 0.02 0.02Court 22,787.15 22,787.15 281.43 22,505.72Streets & Roads 7,700.92 7,700.92 6,534.17 1,166.75Sewers 8,623.25 8,623.25 2,240.12 6,383.13Garbage & Trash 28,663.86 28,663.86 7,488.04 21,175.82Recycling 657.16 657.16 657.16Health 6,186.93 6,186.93 6,186.93Recreation 4,032.15 4,032.15 4,032.15Parks & Playgrounds 2,890.94 2,890.94 2,140.80 750.14Senior Bus 2,472.47 2,472.47 2,472.47Senior Center 795.20 795.20 795.00 0.20METV 2,435.68 2,435.68 912.45 1,523.23Construction 46,033.18 46,033.18 270.00 45,763.18

OTHER EXPENSES:Administrative and Executive 13,098.62 163,236.99 176,335.61 170,133.28 6,202.33Mayor and Council 970.05 13.95 984.00 488.95 495.05Municipal Clerk 2.91 2.91 2.91Election 2,848.25 3,100.00 5,948.25 5,889.78 58.47Collection of Taxes 16.35 1,187.12 1,203.47 413.00 790.47Financial Administration 15,771.16 2,376.42 18,147.58 417.86 17,729.72Assessment of Taxes 1,824.81 973.03 2,797.84 1,000.00 1,797.84Legal Services and Costs 19,288.55 38,127.63 57,416.18 42,317.72 15,098.46Prosecutor 5,000.04 0.02 5,000.06 4,999.98 0.08Public Works 5.89 324.30 330.19 268.57 61.62Forestry 3,043.50 613.80 3,657.30 561.00 3,096.30Public Buildings and Grounds 8,343.78 23,705.30 32,049.08 29,297.50 2,751.58Planning Board 6,969.46 6,969.46 800.00 6,169.46Zoning Board of Adjustment 1,254.12 400.00 1,654.12 800.00 854.12Fire Hydrant Service 26,532.68 26,532.68 25,906.12 626.56Fire Department - Miscellaneous 1,021.02 73,166.30 74,187.32 72,267.81 1,919.51Police 10,743.69 85,645.34 96,389.03 86,294.55 10,094.48Auxiliary Police Department 6,462.50 6,462.50 6,462.45 0.05Emergency Management Services 3,743.05 3,743.05 3,743.05Municipal Court 11,920.71 639.81 12,560.52 835.20 11,725.32Streets and Road Maintenance 2,850.33 50,810.46 53,660.79 34,159.42 19,501.37Sewer System 3,944.50 9,846.03 13,790.53 10,340.03 3,450.50Garbage and Trash Removal 528.84 3,125.42 3,654.26 2,525.89 1,128.37Recycling 20.00 5,227.47 5,247.47 5,227.47 20.00Solid Waste Collection 28,896.50 22,210.56 51,107.06 28,055.02 23,052.04Shade Tree 1,490.00 1,490.00 1,490.00Board of Health 958.00 958.00 958.00Recreation Services and Programs 345.05 245.00 590.05 245.00 345.05Parks and Playgrounds 5,497.32 120.95 5,618.27 96.72 5,521.55Senior Citizen Center 3,821.75 146.00 3,967.75 3,967.75METV Cable 1,143.84 4,244.96 5,388.80 3,882.45 1,506.35Group Insurance 22,240.94 22,240.94 22,240.94

SCHEDULE OF 2016 APPROPRIATION RESERVES

CURRENT FUND

BOROUGH OF METUCHEN

"A-9"SHEET #2

BALANCE TRANSFERS ANDDECEMBER PRIOR ACCOUNTS ADJUSTED PAID OR BALANCE

31, 2016 PAYABLE BALANCE CHARGED LAPSEDOTHER EXPENSES (CONTINUED):Gasoline and Fuel $ 1,717.34 $ 70,339.80 $ 72,057.14 $ 26,847.40 $ 45,209.74Other Insurance 3,086.00 3,086.00 3,086.00Utilities 70,877.34 0.39 70,877.73 0.39 70,877.34Municipal Portion Defined Contribution Plan 668.99 668.99 668.99Social Security System 6,931.06 6,931.06 6,931.06Maintenance of Free Public Library 14,124.81 17,713.35 31,838.16 31,838.16MCUA - Contractual Sewer Charges 107,856.52 107,856.52 30,248.41 77,608.11Animal Control 4,260.00 4,260.00 4,260.00Library Consortium 61.96 61.96 61.96Tax Appeals 48,600.00 1,400.00 50,000.00 50,000.00Construction 6,662.11 74.32 6,736.43 44.01 6,692.42Telephone 14,554.86 381.88 14,936.74 4,677.09 10,259.65Street Lighting 16,566.12 16,566.12 16,566.12

TOTAL $ 735,553.79 $ 590,122.01 $ 1,325,675.80 $ 709,344.47 $ 616,331.33

REF. A A-19 A-1

Disbursements A-4 $ 574,070.43Accounts Payable A-19 135,274.04

$ 709,344.47

BOROUGH OF METUCHEN

CURRENT FUND

SCHEDULE OF 2016 APPROPRIATION RESERVES

"A-10"

BOROUGH OF METUCHEN

CURRENT FUND

SCHEDULE OF PREPAID TAXES

REF.


Increased by: Receipts A-4 4,058,681.12

$ 4,376,858.14

Decreased by: Applied to Taxes Receivable A-6 318,177.02


"A-11"

SCHEDULE OF TAX TITLE LIENS


Increased by: Transferred From Taxes Receivable A-6 10,758.45

$ 154,519.52

Decreased by: Receipts A-4 1,619.86


"A-12"

BOROUGH OF METUCHEN

CURRENT FUND

SCHEDULE OF COUNTY TAXES PAYABLE

REF.

Increased by: Tax Levy A-1:A-6 $ 9,415,840.03

Decreased by: Payments A-4 $ 9,415,840.03

"A-13"

SCHEDULE OF LOCAL DISTRICT SCHOOL TAXES PAYABLE


Increased by: Levy-Calendar Year A-1:A-6 36,974,063.00

$ 40,011,911.85

Decreased by: Payments A-4 $ 40,011,911.85

"A-14"

BOROUGH OF METUCHEN

CURRENT FUND

SCHEDULE OF FORECLOSED PROPERTY

REF.

Balance, December 31, 2016 and December 31, 2017 A $ 350,300.00

"A-15"

SCHEDULE OF RESERVE FOR TAX OVERPAYMENTS



$ 228,508.61

Decreased by: Refunds A-4 $ 30,834.48 Applied To Taxes Receivable A-6 9,878.10 Canceled A-1 104,441.36

145,153.94


"A-16"

BOROUGH OF METUCHEN

CURRENT FUND

SCHEDULE OF RESERVE FOR GRANTS UNAPPROPRIATED

BALANCE BALANCEDECEMBER 31, APPLIED TO DECEMBER 31,

2016 RECEIPTS RECEIVABLE 2017

Middlesex County History Grant $ 1,604.00 $ $ 1,604.00 $Pedestrian Safety Grant 1,800.00 1,950.00 1,800.00 1,950.00Alcohol Education Rehabilitation 386.04 386.04Recycling Tonnage 13,465.77 13,465.77

$ 3,404.00 $ 15,801.81 $ 3,404.00 $ 15,801.81

REF. A A-4 A-18 A

"A-17"

BOROUGH OF METUCHEN

CURRENT FUND

SCHEDULE OF RESERVE FOR GRANTS APPROPRIATED


31, 2016 APPROPRIATION EXPENDED 31, 2017

Municipal Alliance $ 11,334.40 $ $ $ 11,334.40County Open Space Myrtle/ Charles 51,138.57 51,138.572011 Recycling Tonnage 7,351.29 7,351.292012 Recycling Tonnage 15,380.19 14,070.41 1,309.782012 Recycling Enhancement 192.01 192.012013 Recycling Tonnage 15,212.15 15,212.152014 Municipal Alliance 690.58 690.582014 NJ DEP State Forestry Services 3,000.00 3,000.002014 Alcohol Education and Rehabilitation Fund 827.12 827.122014 Body Armor Grant 1,825.11 1,825.112014 Federal Bulletproof Vest Partnership 1,208.70 1,208.702015 Clean Communities 13,951.28 7,090.55 6,860.732015 Recycling Tonnage 20,532.22 20,532.222015 Click It or Ticket 1,300.00 1,300.002015 DDEF 15,239.63 3,414.51 11,825.122015 Middlesex County History Grant 1,356.23 1,356.232015 Safe Routes to School 192,000.00 192,000.002015 Body Armor 2,773.24 2,394.09 379.152015 DHTS Drive Sober Pulled Over Y/E Holiday Crackdown 2,600.00 2,600.002015 Alcohol Education and Rehab Fund 1,060.80 1,060.802016 Recycling Tonnage 13,784.15 13,784.152016 Municipal Alliance 12,728.80 12,728.802016 Youth Service Board Match 3,991.25 3,991.252016 DHTS Drive Sober Pulled Over Y/E Holiday Crackdown 3,400.00 750.00 2,650.002016 Body Armor 2,745.56 2,745.562016 Clean Communities 30,890.03 6,045.00 24,845.032017 Municipal Alliance 20,965.00 5,966.50 14,998.502017 Youth Services Board Match 5,241.25 5,241.252017 Middlesex County Cultural Arts 4,500.00 4,400.00 100.002017 Drunk Driving Enforcement Fund 6,976.04 6,976.042017 Cops In Shops 1,800.00 1,200.00 600.002017 Pedestrian Safety 1,800.00 1,680.00 120.002017 Middlesex County History 1,604.00 1,604.002017 Middlesex County Open Space Oakland Park 225,493.00 183,240.93 42,252.072017 Distracted Driving 5,500.00 4,633.75 866.252017 Clean Communities 26,243.02 26,243.022017 Safe Routes to School Design 58,402.36 50,237.93 8,164.432017 Body Armor 2,749.66 2,749.662017 Click It or Ticket 5,197.50 4,977.50 220.002017 Recycling Tonnage 19,146.29 19,146.292017 Adult Literacy and Community Library Partnership 31,825.00 7,291.60 24,533.40

$ 426,513.31 $ 417,443.12 $ 317,146.63 $ 526,809.80

REF. A A-3:A-18 A-4 A

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A-2:

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A-16

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"A-19"

CURRENT FUND

SCHEDULE OF ACCOUNTS PAYABLE

REF.


Increased by: 2017 Appropriations A-3 $ 663,495.89 2016 Appropriation Reserves A-9 135,274.04

798,769.93$ 1,436,718.85

Decreased by: Transferred to 2016 Appropriation Reserves A-9 $ 590,122.01 Disbursements A-4 25,117.44

615,239.45


"A-20"

Balance, December 31 2016 A $ 30,041.88



Analysis of Balance:

Reserve for Redevelopment $ 10,830.21Reserve for Due to Parking Authority 8,160.91Reserve for Tax Appeals 57,811.67

$ 76,802.79

BOROUGH OF METUCHEN

SCHEDULE OF VARIOUS RESERVES

"A-21"

BOROUGH OF METUCHEN

CURRENT FUND

SCHEDULE OF DEFERRED CHARGES

REF.


Decreased by: Appropriated A-3 9,900.00


"A-22"

SCHEDULE OF INTERFUNDS

Increased by: Receipts A-4 $ 31,999.68

Balance, December 31, 2017 (Due To) A $ 31,999.68


Due to Trust Other Fund - Police Outside Overtime $ 31,999.68

$ 31,999.68

"A-23"

SCHEDULE OF SPECIAL IMPROVEMENT DISTRICT TAXES PAYABLE

Increased by: Levy A-1:A-6 $ 110,641.73

Decreased by: Disbursements A-4 108,137.49


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"B-3"

BOROUGH OF METUCHEN

TRUST FUND

ANALYSIS OF ASSESSMENT FUND CASH

BALANCEDECEMBER 31,

2016 DISBURSEMENTS

Fund Balance $ 953.21 $ 953.21

REF. B:B-1 B-2

"B-4"

BOROUGH OF METUCHEN

OTHER TRUST FUND

SCHEDULE OF RESERVE FOR ACCOUNTS PAYABLE

REF.

Balance, December 31, 2016 B $ 90,695.61

Increased by: Trust Other B-7 $ 11,018.19 COAH B-11 150,000.00 Recreation B-15 16,089.44

177,107.63$ 267,803.24

Decreased by: Trust Other B-7 $ 22,915.60 Forfeiture B-17 500.00 COAH B-11 50,000.00 Recreation B-15 17,280.01

90,695.61


ANALYSIS OF BALANCE

Trust Other $ 11,018.19COAH 150,000.00Recreation 16,089.44

$ 177,107.63

"B-5"

BOROUGH OF METUCHEN

TRUST FUND

SCHEDULE OF RESERVE FOR ANIMAL CONTROL FUND EXPENDITURES

REF.


Increased by: Dog and Cat License Fees B-2 4,641.20

$ 8,600.08

Decreased by: Disbursements B-2 $ 377.35 Accounts Payable B-21 600.00

977.35


LICENSE FEES COLLECTED

YEAR AMOUNT

2015 $ 3,773.202016 3,905.40

$ 7,678.60

"B-6"

SCHEDULE OF RESERVE FOR ELECTION


Increased by: Receipts B-2 21,259.47

$ 22,818.47

Decreased by: Disbursements B-2 21,050.00


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"B-8"

BOROUGH OF METUCHEN

ANIMAL CONTROL FUND

SCHEDULE OF DUE STATE OF NEW JERSEY

REF.

Balance, December 31, 2016 B $ 7.80

Increased by: License Fees Due to the State B-2 517.20

$ 525.00

Decreased by: Payments B-2 518.40


"B-9"

SCHEDULE OF RESERVE FORUNEMPLOYMENT COMPENSATION INSURANCE



$ 64,379.66

Decreased by: Disbursement B-2 27,356.98


"B-10"

REF.


Increased by: New Accounts Receivable B-7 47,542.00

$ 85,365.25

Decreased by: Receipts B-2 8,606.34


"B-11"


Increased by: Receipts B-2 $ 138,553.33 Prior Year Accounts Payable B-4 50,000.00

188,553.33$ 535,252.10

Decreased by: Disbursements B-2 $ 2,721.06 Accounts Payable B-4 150,000.00

152,721.06


SCHEDULE OF RESERVE FOR COAH

BOROUGH OF METUCHEN

TRUST FUND

SCHEDULE OF COMMUNITY DEVELOPMENT BLOCK GRANTS RECEIVABLE

"B-12"

BOROUGH OF METUCHEN

TRUST FUND

SCHEDULE OF ESCROW DEPOSITS

REF.

Balance, December 31, 2016 B $ 1,396,609.01


$ 1,972,963.67

Decreased by: Disbursements B-2 1,036,347.24


"B-13"

SCHEDULE OF RESERVE FORPOLICE OUTSIDE OVERTIME



$ 853,269.13



"B-14"

SCHEDULE OF RESERVE FORPAYROLL DEDUCTIONS PAYABLE


Increased by: Deposits-Payroll Deductions B-2 3,005,616.12

$ 3,047,184.83

Decreased by: Payments B-2 2,979,567.50


"B-15"

BOROUGH OF METUCHEN

TRUST FUND

SCHEDULE OF RESERVE FOR RECREATION

REF.


Increased by: Receipts B-2 $ 119,500.41 Prior Year Accounts Payable B-4 17,280.01

136,780.42$ 251,243.18

Decreased by: Disbursements B-2 $ 114,979.45 Accounts Payable B-4 16,089.44

131,068.89


"B-16"

SCHEDULE OF RESERVE FOR LAW ENFORCEMENT


Increased by: Interest B-2 8.19


"B-17"

BOROUGH OF METUCHEN

TRUST FUND

SCHEDULE OF RESERVE FOR FORFEITURE

REF.


Increased by: Receipts B-2 $ 6,073.24 Accounts Payable B-4 500.00

6,573.24$ 41,342.65

Decreased by: Disbursements B-2 816.42


"B-18"


Increased by: Receipts B-2 7.74

$ 2,101.54

Decreased by: Disbursements B-2 500.00


SCHEDULE OF RESERVE FOR FIRE PENALTIES

"B-19"

BOROUGH OF METUCHEN

OTHER TRUST FUND

SCHEDULE OF RESERVE FOR EQUITABLE SHARING FORFEITURE

REF.


Increased by: Receipts B-2 162.31

$ 41,747.23



"B-20"

Increased by: Disbursements B-2 $ 31,999.68


"B-21"

Increased by: Accounts Payable B-5 $ 600.00


SCHEDULE OF RESERVE FOR DUE CURRENT FUND

SCHEDULE OF RESERVE FOR ACCOUNTS PAYABLE - ANIMAL CONTROL FUND

"C-2"

BOROUGH OF METUCHEN


SCHEDULE OF CASH - TREASURER

REF.

Balance, December 31, 2016 C $ 2,634,464.19

Increased by Receipts: Accounts Receivable C-9 $ 750,000.00 Bond Anticipation Notes C-13 2,301,850.00 Fund Balance C-1 23,382.00 Capital Improvement Fund C-8 25,000.00

3,100,232.00$ 5,734,696.19

Decreased by Disbursements: Contracts Payable C-7 $ 1,685,965.34 Bond Anticipation Notes C-13 2,301,850.00

3,987,815.34


"C-3"

BOROUGH OF METUCHEN


ANALYSIS OF CASH

BALANCEDECEMBER

REF. 31, 2017

Fund Balance $ 49,999.36Capital Improvement Fund 15,095.00Improvement Authorizations-Funded 323,520.00Contracts Payable 808,503.08Unexpended Proceeds of Bond Anticipation Notes - Listed on "C-5" 2,317,742.46Accounts Receivable (1,784,024.55)Reserve for Capital Improvements 16,045.50

C $ 1,746,880.85

"C-4"

SCHEDULE OF DEFERRED CHARGES TOFUTURE TAXATION - FUNDED


Decreased by: Bonds Paid C-11 2,365,000.00


"C-5

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BO

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"C-6"

BOROUGH OF METUCHEN


SCHEDULE OF RESERVE FOR CAPITAL IMPROVEMENTS

REF.

Balance, December 31, 2016 and December 31, 2017 C $ 16,045.50

"C-7"

SCHEDULE OF CONTRACTS PAYABLE

Balance, December 31, 2016 C $ 851,764.45

Increased by: Improvement Authorizations C-10 1,688,706.92

$ 2,540,471.37

Decreased by: Disbursements C-2 $ 1,685,965.34 Canceled C-10 46,002.95

1,731,968.29


"C-8"

BOROUGH OF METUCHEN


SCHEDULE OF CAPITAL IMPROVEMENT FUND

REF.


Increased by: 2017 Budget Appropriation C-2 25,000.00

$ 30,550.00

Decreased by: New Improvement Authorization Funding C-10 15,455.00


"C-9"

SCHEDULE OF ACCOUNTS RECEIVABLE


Increased by: New Authorizations Funded by Grants C-10 900,000.00

$ 2,534,024.55

Decreased by: Receipts C-2 750,000.00


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"C-12"

BOROUGH OF METUCHEN


SCHEDULE OF BONDS AND NOTES AUTHORIZED BUT NOT ISSUED

BALANCEORDINANCE DECEMBER

NUMBER IMPROVEMENT DESCRIPTION 31, 2017

00-07 Various Improvements $ 2,680.0008-7/13-11 Various Improvements 475.00

2017-17 Various Improvements 297,645.00

$ 300,800.00

"C-1

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BOROUGH OF METUCHEN

SWIM POOL UTILITY CAPITAL FUND

SCHEDULE OF FIXED CAPITAL AUTHORIZED AND UNCOMPLETED

REF.

Balance, December 31, 2016 and December 31, 2017 D $ 411,000.00


Number Description Date

08-08 Improvements to Swimming Pool 04/21/08 $ 300,000.0016-16 Improvements to Swimming Pool 07/18/16 111,000.00

$ 411,000.00

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D

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"D-9"

BOROUGH OF METUCHEN


SCHEDULE OF CAPITAL IMPROVEMENT FUND

REF.

Balance, December 31, 2016 and December 31, 2017 D $ 8,338.46

"D-10"

SCHEDULE OF ACCOUNTS PAYABLE

Balance, December 31, 2016 D $ 18,294.22

Increased by: Appropriations D-4 $ 12,681.54 Appropriation Reserves D-7 11,114.22

23,795.76$ 42,089.98

Decreased by: Transferred to Appropriation Reserve D-7 18,294.22


"D-11"

BOROUGH OF METUCHEN

SWIMMING POOL UTILITY CAPITAL FUND

SCHEDULE OF ACCRUED INTEREST PAYABLE

REF.


Increased by: Budget Appropriation D-4 6,307.00

$ 7,625.61

Decreased by: Disbursements D-5 6,376.00


"D-12"

SCHEDULE OF RESERVE FOR AMORTIZATION

Balance, December 31, 2016 and December 31, 2017 D $ 1,095,531.00

"D-13"

BOROUGH OF METUCHEN

SWIMMING POOL UTILITY CAPITAL FUND

SCHEDULE OF FIXED CAPITAL

REF.

Balance, December 31, 2016 and December 31, 2017 D $ 1,095,731.00

ANALYSIS OF BALANCE:

Swimming Pool and Bathhouse $ 344,027.00Cover for Swimming Pool 6,449.00Landscape 2,598.00Improvements to Swimming Pool 524,577.00Improvements to Wading Pool 8,365.00Improvements to Swimming Pool 200,000.00Improvements to Swimming Pool 9,715.00

$ 1,095,731.00

"D-1

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RO

UG

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F M

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CH

EN

SW

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L U

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14$

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18-2

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1/21

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00.0

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1/23

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00.0

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00

RE

F.D

D-1

6D

"D-15"

BOROUGH OF METUCHEN

SWIM POOL UTILITY CAPITAL FUND

SCHEDULE OF BONDS AUTHORIZED BUT NOT ISSUED

ORDINANCE AMOUNT

93-14 $ 200.0008-8 400.0016-16 111,000.00

$ 111,600.00

"D-16"

REF.


Increased by: Bonds Paid D-14 20,000.00


SCHEDULE OF DEFERRED RESERVE FOR AMORTIZATION

Improvement to Swimming Pool

DESCRIPTION

Improvement to Swimming PoolImprovement to Swimming Pool

"D-1

7"

BOR

OU

GH

OF

MET

UC

HEN

SWIM

PO

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UTI

LITY

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31, 2

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DEC

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2016

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000.

00$

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111,

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1,00

0.00

$11

1,00

0.00

$11

1,00

0.00

$11

1,00

0.00

REF

.D

D-5

D-5

D

"E-1"

BOROUGH OF METUCHEN


SCHEDULE OF PUBLIC ASSISTANCE CASH

REF.

Balance, December 31, 2016 E $ 565.67

Decreased by: Disbursements E-2 $ 565.67

"E-2"

SCHEDULE OF RESERVE FOR PUBLIC ASSISTANCE

Balance, December 31, 2016 E $ 565.67

Decreased by: Disbursements E-1 $ 565.67

BOROUGH OF METUCHEN

PART II

STATISTICAL DATA

LIST OF OFFICIALS

COMMENTS AND RECOMMENDATIONS

YEAR ENDED DECEMBER 31, 2017

COMPARATIVE STATEMENT OF OPERATIONS AND CHANGE IN FUND BALANCE - CURRENT FUND

YEAR 2017 YEAR 2016AMOUNT % AMOUNT %


Fund Balance Utilized $ 1,500,000.00 2.23% $ 1,355,076.00 2.08%Miscellaneous - From Other Than Local Property Tax Levies 5,801,369.07 8.61% 6,317,222.05 9.68%Collection of Delinquent Taxes and Tax Title Liens 750,371.63 1.11% 859,538.87 1.32%Collections of Current Tax Levy 59,303,721.65 88.05% 56,746,894.52 86.92%

Total Revenue $ 67,355,462.35 100.00% $ 65,278,731.44 100.00%

EXPENDITURES

Budget Expenditures: Municipal Purposes $ 18,695,982.64 28.61% $ 17,870,234.36 28.47%County Taxes 9,415,840.03 14.41% 8,988,272.25 14.32%Local School District Taxes 36,974,063.00 56.58% 35,831,211.00 57.09%Special Improvement District Taxes 110,641.73 0.17%Other Expenditures 151,621.10 0.23% 75,408.61 0.12%

Total Expenditures $ 65,348,148.50 100.00% $ 62,765,126.22 100.00%

Excess in Revenue $ 2,007,313.85 $ 2,513,605.22

Adjustments to Income Before Fund Balance: Expenditures Included Above Which are by Statute Deferred Charges to Budget of Succeeding Year 49,500.00

Statutory Excess to Fund Balance $ 2,007,313.85 $ 2,563,105.22

Fund Balance - January 1 3,469,151.45 2,261,122.23$ 5,476,465.30 $ 4,824,227.45

Less: Utilization as Anticipated Revenue 1,500,000.00 1,355,076.00

Fund Balance, December 31 $ 3,976,465.30 $ 3,469,151.45

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COMPARATIVE STATEMENT OF OPERATIONS AND CHANGE IN FUND BALANCE - SWIM POOL UTILITY OPERATING FUND

YEAR 2017 YEAR 2016AMOUNT % AMOUNT %


Fund Balance Utilized $ 80,000.00 16.59% $ 90,000.00 18.32%Collection of Pool Membership & Guest Fees 343,107.00 71.18% 340,067.00 69.21%Miscellaneous 58,970.25 12.23% 61,280.71 12.47%

Total Revenue $ 482,077.25 100.00% $ 491,347.71 100.00%

EXPENDITURES

Budget Expenditures: Operating $ 371,493.00 90.16% $ 372,224.00 90.34% Capital Improvements 26,307.00 6.39% 25,576.00 6.21% Statutory Expenditures 14,200.00 3.45% 14,200.00 3.45%

Total Expenditures $ 412,000.00 100.00% $ 412,000.00 100.00%

Excess in Revenue $ 70,077.25 $ 79,347.71

Fund Balance - January 1 88,862.07 99,514.36$ 158,939.32 $ 178,862.07

Less: Utilization as Anticipated Revenue 80,000.00 90,000.00

Fund Balance, December 31 $ 78,939.32 $ 88,862.07

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COMPARATIVE SCHEDULE OF TAX RATE INFORMATION

2017 2016 2015

Tax Rate $ 5.921 $ 5.770 $ 5.642

Municipal $ 1.230 $ 1.181 $ 1.132

Municipal Library 0.076 0.075 0.073

County 0.862 0.833 0.816

County Open Space 0.070 0.069 0.067

Local School 3.683 3.612 3.554

Assessed Valuations:

2017 $1,003,840,800.002016 $992,040,500.002015 $980,572,100.00

COMPARISON OF TAX LEVIES AND COLLECTION CURRENTLY A study of the tabulation will indicate a possible trend in future tax levies. A decrease in the percentage of current collection could be an indication of a probable increase in future tax levies.

Cash Percentage ofYear Tax Levy Collections Collection

2017 60,007,462.12$ 59,303,721.65$ 98.83%2016 57,568,781.08$ 56,746,894.52$ 98.57%2015 55,605,178.77$ 54,704,083.52$ 98.38%

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DELINQUENT TAXES AND TAX TITLE LIENS This tabulation includes a comparison, expressed in percentage of the total of delinquent taxes and tax title liens, in relation to the tax levies of the last three years.

Amount of Amount of Total Percentage ofYear Tax Title Liens Delinquent Taxes Delinquent Tax Levy

2017 $152,899.66 $681,262.34 $834,162.00 1.39%2016 143,619.47 755,298.22 898,917.69 1.56%2015 131,531.00 843,982.61 975,513.61 1.75%

PROPERTY ACQUIRED BY TAX LIEN LIQUIDATION This value of property acquired by liquidation of tax title liens, on December 31, on the basis of the last assessed valuation of such properties, was as follows:

Year Amount

2017 $350,300.002016 350,300.002015 350,300.00

COMPARATIVE SCHEDULE OF FUND BALANCES

Balance Utilized in BudgetYear Current Fund of Succeeding Year

2017 $3,976,465.30 $1,350,000.002016 3,469,151.45 1,500,000.002015 2,261,122.23 1,355,076.002014 2,274,920.10 1,276,000.002013 2,030,534.82 776,000.00

Balance Swim Utilized in BudgetYear Pool Utility Fund of Succeeding Year

2017 $78,939.32 $65,000.002016 88,862.07 80,000.002015 99,514.36 90,000.002014 102,188.04 90,000.002013 94,029.09 84,000.00

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OFFICIALS IN OFFICE AND SURETY BONDS The following officials were in office during the period under audit: Name Title Amount of Bond Jonathan Busch Mayor *

Ronald Grayzel Council President *

Dorothy Rasmussen Council Member *

Todd Pagel Council Member *

Linda Koskoski Council Member *

Reed Leibfried Council Member *

Allison Inserro Council Member *

Jay Muldoon Borough Administrator *

Susan Jackson Borough Clerk *

Rebecca Cuthbert Chief Financial Officer / Tax Collector *

James Graziano Magistrate *

Wahjira Williams-Fisher Court Administrator *

Donovan Bezer Prosecutor *

Denis G. Murphy Borough Attorney *

John Soltesz Construction Code Official *

Anand Verma Tax Assessor *

David Irizarry Police Chief *

Rob Donnan Fire Chief *

Officials and employees handling and collecting funds are covered by the Middlesex County JIF blanket coverage up to $1,000,000.00.

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COMMENTS AND RECOMMENDATIONS

GENERAL COMMENTS CONTRACTS AND AGREEMENTS REQUIRED TO BE ADVERTISED FOR (N.J.S.A.40A:11-4) Every contract or agreement for the performance of any work or the furnishing or hiring of any materials or supplies, the cost or the contract price whereof is to be paid with or out of public funds, not included within the terms of Section 3 of this act, shall be made or awarded only by the governing body of the contracting unit after public advertising for bids and bidding therefore, except as is provided otherwise in this act or specifically by any other law. No work, materials or supplies shall be undertaken, acquired or furnished for a sum exceeding in the aggregate the amount set forth in or the amount calculated by the Governor pursuant to Section 3 of P.L. 1971 c. 198 (C.40A:11-3), except by contract or agreement. Effective July 1, 2015, the bid threshold in accordance with N.J.S.A. 40A:11-4 is $17,500.00. Effective August 17, 2015, the Borough’s bid threshold was increased to $40,000 with the appointment of a Qualified Purchasing Agent and approval to utilize the statutory maximum bid threshold. The governing body of the Municipality has the responsibility of determining whether the expenditures in any category will exceed $40,000.00 within the fiscal year. Effective August 21, 2017, the Borough’s bid threshold reverted to $17,500 with the resignation of the Qualified Purchasing Agent. Where question arises as to whether any contract or agreement might result in violation of the statute, the Borough Attorney's opinion should be sought before a commitment is made. The minutes indicate that bids were requested by public advertising for the following items in 2017: Senior Bus Oakland Park Construction Olmezer Park Handicapped Parking Project I.T. Support & Consulting Oakland Park Handicapped Parking Project Durham Avenue Improvements Inasmuch as the system of records did not provide for an accumulation of payments for categories for the performance of any work or the furnishing or hiring or any materials or supplies, the results of such an accumulation could not reasonably be ascertained. Disbursements were reviewed, however, to determine whether any clear cut violations existed.

Our audit of expenditures did not reveal any individual payments, contracts or agreements in excess of $40,000.00 "for the performance of any work or the furnishing or hiring of any materials or supplies, other than those where bids had been previously sought by public advertisement or where a resolution had been previously adopted under the provisions of N.J.S.A. 40A:11-6." The minutes indicate that resolutions were adopted and advertised authorizing the awarding of contracts or agreements for "Professional Services" per N.J.S.A. 40A:11-5 for the following services: Borough Attorney Bond Counsel Borough Engineer Labor Counsel Borough Prosecutor Borough Planner Borough Auditor Other Consulting Services

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COLLECTION OF INTEREST ON DELINQUENT TAXES AND ASSESSMENTS The statute provides the method for authorizing interest and the maximum rates to be charged for the nonpayment of taxes or assessments on or before the date when they would become delinquent. The governing body, on January 1, 2017, adopted the following resolutions authorizing interest to be charged on delinquent taxes:

“WHEREAS, under N.J.S.A. 54:4-67 the Governing Body may fix the rate of interest to be charged for the nonpayment of taxes or assessments;

NOW, THEREFORE, BE IT RESOLVED by the Mayor and Council of the Borough of Metuchen that the interest rate to be charged by the Borough of Metuchen on delinquent taxes, assessment and other municipal liens, is hereby fixed at 8% per annum on the first $1,500 on the delinquency and 18% on any amount in excess of $1,500, to be calculated from the date the tax was payable until the date of actual payment, effective immediately”

It appears from an examination of the Tax Collector’s records that interest was collected in accordance with the foregoing resolution. DELINQUENT TAXES AND TAX TITLE LIENS The last tax sale was held on December 7, 2017 and was complete. The following comparison is made up of the number of tax title liens receivable on December 31 of the last three years:

Year

Number of Liens

2017

5 2016

5

2015

4 It is essential to good management that all means provided by statute be utilized to liquidate tax title liens in order to get such properties back on a tax paying basis. VERIFICATION OF DELINQUENT TAXES AND OTHER CHARGES A test verification of delinquent charges and current payments was made in accordance with the regulations of the Division of Local Government Services, including the mailing of verification notices as follows:

Type

Information Tax Positive Confirmation 50 Delinquent Tax Positive Confirmation 25

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RECOMMENDATIONS

*That all bank reconciling items be resolved and that applicable transactions between the Borough’s funds be properly recorded as interfunds. That all general ledgers be maintained and bank reconciliations prepared in a timely fashion to preserve the effectiveness of internal controls. That an accurate detailed analysis of tax sale premiums and outside liens redeemed be maintained and unidentified items be resolved in a timely fashion.

*That the Borough proactively collect all funds for police outside overtime duty prior to the services being rendered and the officers being paid.

*That the Borough maintain an accurate ongoing monthly analysis of the payroll agency account and correct discrepancies as they occur, also that the Borough charge budget operations and transfer funding to compensate for the existing deficit.

*Unresolved Prior Year Recommendations

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Borough of Metuchen and Financial...account group of theBorough of Metuchen, as of and for the year...

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