New Jersey OCBOA ITS NOT GAAP

Cash is King Our system is designed to ensure cash is available to meet debt obligations Around since the Great Depression and largely unchanged This system has protected bond owners for over 80 years

Budget Drives Finances The State limits “bad practices” You may not anticipate more in a revenue than was collected in cash in the prior year Pension payment must be made in full Debt Service must be fully budgeted The use of Fund Balance is restricted to Cash State approves the budget

Material departures from GAAP All receivables are 100% reserved – in GAAP terms a 100% allowance for doubtful accounts Even transactions between funds even when the cash exists! Excess budget funds sit in a reserve for one more year – just in case (Appropriation Reserves)

Material Departure from GAAP We are not allowed to reserve for lifetime health benefits – not all towns participate Accumulated time is just a disclosure its not expensed No Depreciation

Municipal Utilities Follow the same rules – except interest is accrued

Capital 5% down payment on new ordinances Except self liquating utilities Term of bond can not be longer than the useful life of underlying assets Bond payments are included in the budget Acts like depreciation

Pension Situation Local units have made all of their ARCs for years Our portion of the pension is well funded liquid and available to meet the needs of retirees State of New Jersey continues to look for ways to have the Counties, Municipalities, Schools, Authorities, etc., bail them out of the situation that they have created

You Called it What? Deferred Charges to Future Taxation Deficit in Operations Emergencies Over-expenditure of an Appropriation Accounts receivable for future budgets to fund through taxes Consider making a negative adjustment to Fund Balance

You Called it What? Reserves Spending Reserves (Cash Liabilities) Tax Appeals Accumulated Absences Non Spending Reserves Reserve for Receivables

You Called it What? Accounts Receivable: Taxes Receivable Fully Reserved State of New Jersey Not Reserved Interfunds: Requirement to negatively impact Fund Balance by establishing a Reserve

It’s Not Straight Forward OCBOA to GAAP It’s Not Straight Forward

Decoding New Jersey Municipal Accounting1 Understating Fund Balance (Surplus) Under reporting assets Over reporting liabilities 4 Step Method: Receivables Appropriation Reserves Deferred Charges Other Reserves 1Moody's Investors Service, Sector In-Depth, March 25, 2015, Decoding New Jersey Municipal Accounting

OCBOA to GAAP Making the Move 2 Counties & 2 Towns

Haddonfield Fund Balance (Original) 6,170,144 Reserve for Receivables 1,042,144 Appropriation Reserves (31%) 379,214 Other Reserves 7,930,160 Fund Balance (Revised) 15,521,662 2018 Budget 18,289,411 Fund Balance as % of Budget 85% Note: The Proceeds from the Sale of the Utility are statutorily required to be used for payment of Debt Service. Removing this from the Revised Fund Balance would then reduce the % to 45%

Haddonfield Deferred School Taxes Reserve for Sale of Utility Should be reflected as a Restricted Fund Balance

Morris County Fund Balance (Original) 52,736,663 Reserve for Receivables 2,877,716 Appropriation Reserves (31%) 12,130,239 Other Reserves 7,000,000 Fund Balance (Revised) 74,744,618 2018 Budget 305,823,695 Fund Balance as % of Budget 24% Note: The County maintains reserves in various other Funds totaling $24 million. (General Capital Fund Balance, Motor Vehicle Fines, Accumulated Absence Trust, Snow Reserve). Adding these would move the % to over 32%

Morris County Statement of Operations Fund Balance (Original) 52,736,663 Misc Revenues Anticipated (Rev Accts Rec’l, Rev Fund) 694,712 Receipts from Current Taxes 583,004 Interfunds Returned 1,600,000 Budget Appropriations 19,130,239 Fund Balance (Revised) 74,744,618

Morris County Solar Municipal Court Complex

Mercer County Fund Balance (Original) 26,134,472 Reserve for Receivables 6,655,398 Appropriation Reserves (31%) 10,321,323 Other Reserves 953,306 Fund Balance (Revised) 44,064,499 2018 Budget 328,924,222 Fund Balance as % of Budget 13% Note: If you remove the grants from the budget total, then the % becomes 14%.

Mercer County Open Space Reserves

Wharton Fund Balance (Original) 2,375,471 Reserve for Receivables 262,800 Appropriation Reserves (31%) 815,583 Other Reserves 2,491,304 Fund Balance (Revised) 5,945,157 2018 Budget 9,635,674 Fund Balance as % of Budget 62% Note: The Borough maintains reserves in various other Funds totaling $771k. Capital Fund Balance, Accumulated Absence Trust, Snow Reserve, etc. Adding these would move the % to almost 70%. This does not take into consideration the Utility Fund Balances.

Wharton Utilized $2,127,294 of Cash Fund Balance in the 2018 Budget The Fully Funded Capital Program makes up 19% of the Total Budget

Statement of Operations Audit Schedule A-1 AFS Sheet 19 Historical approach to predicting the future regeneration of Fund Balance

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