Loading...
HomeMy WebLinkAbout2025 I SOUTHOLD FIRE DISTRICT ' Financial Statements(Regulatory Basis) t s� with Independent Auditor's Reports December 31,2025 Southold Fire District Southold,New York SOUTHOLD FIRE DISTRICT Table of Contents December 31,2025 Page Independent Auditor's Report 1 Financial Statements(Regulatory Basis) Balance Sheet-Governmental Funds and Account Groups 4 Statement of Revenues,Expenditures,and Changes in Fund Balance-Governmental Funds 5 Notes to Financial Statements 6 Supplementary Information Schedule of Revenues,Expenditures,and Changes in Fund Balance -Budget and Actual-General Fund-Operating 27 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 28 CULLEN & DANOWSKI, LLP o - CERTIFIED PUBLIC ACCOUNTANTS INDEPENDENT AUDITOR'S REPORT To the Board of Fire Commissioners Southold Fire District Southold,New York Report on the Audit of the Financial Statements Opinions We have audited the accompanying financial statements (regulatory basis) of the Southold Fire District ("the District"), as of and for the year ended December 31, 2025, and the related notes to the financial statements, which collectively comprise the District's basic financial statements as listed in the table of contents. Unmodified Opinion on Regulatory Basis of Accounting In our opinion,the financial statements referred to above present fairly,in all material respects,the respective financial position of each fund and account group of the Southold Fire District, as of December 31, 2025,and the respective changes in financial position for the year then ended,in accordance with the financial reporting provisions of the New York State Office of the State Comptroller,as described in Note 1. 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" section of our report,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 Southold Fire District, as of December 31, 2025, and the respective changes in financial position for the year then ended. Basis for Opinions We conducted our audit in accordance with auditing standards generally accepted in the United States of America.Our responsibilities under those standards are further described in the"Auditor's Responsibilities for the Audit of the Financial Statements"section of our report.We are required to be independent of the District and to meet our other ethical responsibilities,in accordance with the relevant ethical requirements relating to our audit.We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. - 1- 1650 ROUTE 112,PORT JEFFERSON STATION,NEW YORK 11776-3060 - C PHONE:631-473-3400•FAX:631-473-4863•WWW.CDLLP.NET Basis for Adverse Opinion on US,Generally Accepted Accounting Principles As described in Note 1,"Summary of Significant Accounting Policies,"the financial statements are prepared by the Southold Fire District on the basis of the financial reporting provisions of the New York State Office of the State Comptroller, which is a basis of accounting other than accounting principles generally accepted in the United States of America,to meet the requirements of the New York State Office of the State Comptroller. 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 and pervasive. Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with the financial reporting provisions of the New York State Office of the State Comptroller, as described in Note 1,to meet the reporting requirements of New York State. 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 misstatement,whether due to fraud or error. In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the District's ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter. Auditor's Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,whether due to fraud or error,and to issue an auditor's report that includes our opinions.Reasonable assurance is a high level of assurance but is not absolute assurance and,therefore,is not a guarantee that an audit conducted in accordance with generally accepted auditing standards will always detect a material misstatement when it exists.The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error,as fraud may involve collusion,forgery,intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements. In performing an audit in accordance with generally accepted auditing standards,we: • Exercise professional judgment and maintain professional skepticism throughout the audit. • Identify and assess the risks of material misstatement of the financial statements,whether due to fraud or error,and design and perform audit procedures responsive to those risks.Such procedures include examining,on a test basis,evidence regarding the amounts and disclosures in the financial statements. • Obtain an understanding of internal control relevant to the audit 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 District's internal control.Accordingly,no such opinion is expressed. • Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management,as well as evaluate the overall presentation of the financial statements. -2 - • Conclude whether, in our judgment,there are conditions or events, considered in the aggregate, that raise substantial doubt about the District's ability to continue as a going concern for a reasonable period of time. We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit. Supplementary Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Southold Fire District's basic financial statements..The accompanying schedule of revenues, expenditures,and changes in fund balance-budget and actual-general fund-operating on page 27 is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information - is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements.The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion,the schedule of revenues,expenditures,and changes in fund balance-budget and actual-general fund -operating is fairly stated,in all material respects,in relation to the basic financial statements as a whole on the basis of accounting described in Note 1. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards,we have also issued our report dated July 8, 2026,on our consideration of the Southold Fire District's internal control over financial reporting and our tests of its compliance with certain provisions of laws,regulations,contracts,and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing,and not to provide an opinion on the effectiveness of the Southold - Fire District's internal control over financial reporting or on compliance. That report is an integral part of an - audit performed in accordance with Government Auditing Standards in considering Southold Fire District's internal control over financial reporting and compliance. Port Jefferson Station,New York July 8,2026 -3 - SOUTHOLD FIRE DISTRICT Balance Sheet-Governmental Funds and Account Groups December 31,2025 Governmental Funds Account Groups Non-Current Non-Current General Capital Governmental Governmental Fund Projects Assets Liabilities Total ASSETS Cash and cash equivalents Unrestricted $ 937,065 $ 5,365 $ $ $ 942,430 Restricted 2,737,605 42,895 2,780,500 Accounts receivable 4,714 4,714 Due from other funds 5,365 5,365 Lease receivable 150,193 150,193 Prepaids 77,484 77,484 Length of service award program 5,065,586 5,065,586 Land 722,972 722,972 Buildings and improvements 5,791,718 5,791,718 Equipment 5,473,440 5,473,440 Amount to be provided for retirement of long-term liabilities 6,205,106 6,205,106 Total Assets $ 8,978,012 $ 48,260 $11,988,130 $ 6,205,106 $27,219,508 LIABILITIES Accounts payable $ 105,135 $ $ $ $ 105,135 Accrued liabilities 3,044 3,044 Due to other funds 5,365 5,365 Bonds payable 875,000 875,000 Compensated absences payable 23,934 23,934, Net pension liability-proportionate share 78,406 78,406 Length of service award program 5,227,766 5,227,766 Total Liabilities 108,179 5,365 6,205,106 6,318,650 DEFERRED INFLOWS OF RESOURCES Lease related 150,193 150,193 FUND BALANCE Investment in non-current governmental assets 11,988,130 11,988,130 Nonspendable:prepaids 77,484 77,484 Restricted: Debt 5,266 5,266 Capital,equipment 2,693,787 2,693,787 Capital,building 38,552 38,552 Length of service award program 5,065,586 5,065,586 Unspent bond proceeds 42,895 42,895 Assigned:unappropriated 55,789 55,789 Unassigned 783,176 783,176 Total Fund Balance 8,719,640 42,895 11,988,130 - 20,750,665 Total Liabilities,Deferred Inflows of Resources,and Fund Balance $ 8,978,012 $ 48,260 $ 11,988,130 $ 6,205,106 $27,219,508 See Notes to Financial Statements -4- SOUTHOLD FIRE DISTRICT Statement of Revenues,Expenditures,and Changes in Fund Balance-Governmental Funds For the Year Ended December 31,2025 General Fund Length of Total Capital Service Award Capital Governmental Operating Reserves Program Total Projects Funds REVENUES Real property taxes $ 2,333,351 $ $ $ 2,333,351 $ $ 2,333,351 - Other tax items 22,047 22,047 22,047 Interest and investment gains 65,063 99,543 236,594 401,200 401,200 Lease payments collected 30,464 30,464 30,464 r Sale of equipment 25,000 25,000 25,000 Miscellaneous 1,208 1,208 1,208 Contributions 178,500 178,500 178,500 Total Revenues 2,477,133 99,543 415,094 2,991,770 2,991,770 EXPENDITURES Personal services 369,702 369,702 369,702 Equipment and capital outlay 202,139 575,000 777,139 777,139 Fire protection 715,610 715,610 715,610 State retirement system 30,663 30,663 30,663 Length of service award program 178,500 476,549 655,049 655,049 Social security 27,792 27,792 27,792 Workers'compensation 39,655 39,655 39,655 Life insurance 55,820 55,820 55,820 Medical and accident insurance 28,336 28,336 28,336 Debt service-principal 125,000 125,000 125,000 Debt service-interest 20,963 20,963 20,963 - Total Expenditures 1,794,180 575,000 476,549 2,845,729 2,845,729 Excess(Deficiency)of Revenues Over Expenditures 682,953 (475,457) (61,455) 146,041 146,041 OTHER FINANCING SOURCES(USES) Operating transfers in 6,618 480,000 486,618 486,618 Operating transfers(out) (480,000) (480,000) (6,618) (486,618) Total Other Financing Sources(Uses) (473,382) 480,000 6,618 (6,618) Net Change in Fund Balance 209,571 4,543 (61,455) 152,659 (6,618) 146,041 Fund Balance-Beginning of Year 712,144 2,727,796 5,127,041 8,566,981 49,513 8,616,494 Fund Balance-End of Year $ 921,715 $ 2,732,339 $ 5,065,586 $ 8,719,640 $ 42,895 $ 8,762,535 See Notes to Financial Statements -5- SOUTHOLD FIRE DISTRICT Notes to Financial Statements 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements of the Southold Fire District("the District")as of and for the year ended December 31,2025,have been prepared in accordance with the financial reporting provisions of the New York State Office of the State Comptroller(Regulatory Basis),which is a comprehensive basis of accounting other than accounting principles generally accepted in the United States of America (GAAP) for governmental units. The Governmental Accounting Standards Board (GASB) is the standard setting body for establishing GAAP for governmental units. The financial statements of the District have been prepared using only the current financial resources measurement focus and the modified accrual basis of accounting. This method differs from GAAP,which requires the preparation of additional financial statements using the economic resources measurement focus and the accrual basis of accounting. GAAP basis financial statements require the capitalization and depreciation of property and equipment and the recording of long-term liabilities.Under the regulatory basis of accounting, property and equipment are recorded as an expenditure when purchased,the proceeds of long-term debt are reported as other financing sources and the payment of long- term debt and other long-term liabilities are recognized to the extent that the liabilities mature during the year. In addition,GAAP requires the financial statements to be prepared in accordance with GASB Statement No. 34, Basic Financial Statements - and Management's Discussion and Analysis - for State and Local Governments. GASB Statement No. 34 financial statements require the presentation of government-wide financial statements,and management's discussion and analysis.The accounting practices used to prepare these financial statements do not require compliance with GASB Statement No.34. The significant accounting policies of the District are described below: A. Financial Reporting Entity The District is a district corporation and political subdivision of the state of New York,distinct from the municipalities in which it is located. In general, the District is governed by an elected board of fire commissioners ("the Board") consisting of five members and is required to have a treasurer and a secretary. The District has the legal authority to levy taxes on real property and to borrow in its own name.The District is governed by General Municipal Law(GML)and other laws of the state of New York and its subdivisions. The scope of activities included in the accompanying financial statements is the transactions that comprise the District's operations. The primary function of the District is to provide fire protection,rescue,and emergency services to the community. Services such as firefighting, fire prevention, and public education support the primary ,I function. -- The financial reporting entity includes all funds, functions, and organizations over which the District's Board exercises oversight responsibility. Oversight.responsibility is determined on the basis of financial interdependency, selection of governing authority, designation of management, ability to significantly influence operations, and accountability for fiscal matters. No other governmental organizations have been included or excluded from the reporting entity. B. Basis of Presentation Fund Financial Statements The District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to assist management by segregating transactions related to certain government functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts. -6- I SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) The District records its transactions in the fund types and account groups as described below: Governmental Funds - Governmental funds are those through which most governmental functions are financed. The acquisition, use, and balances of expendable financial resources and the related liabilities are accounted for through governmental funds. The measurement focus of the governmental funds is - based upon the determination of financial position and changes in financial position. The District utilizes the following governmental funds: General Fund - the general fund is the principal operating fund of the District. It is used to account for all financial resources except those required to be accounted for in another fund. Capital Projects Fund - is primarily used to account for the financial resources used for the acquisition,construction,renovation,or major repair of capital facilities and other capital assets. Account Groups Account groups are used to establish accounting control and accountability for the District's capital assets and general long-term liabilities.The two account groups are not"funds".They are accounting entities, not fiscal entities,and are concerned only with the measurement of financial position,and not with the results of operations. The District utilizes the following account groups: Non-Current Governmental Assets Account Group - the non-current governmental assets account group is used to account for land,buildings,improvements,and equipment owned by the District. Non-Current Governmental Liabilities Account Group - the non-current governmental liabilities account group is used to account for all long-term debt and other liabilities of the District,as well as the District's proportionate share of the New York State and Local Employees' Retirement System's (ERS)net pension liability. - C. Measurement Focus and Basis of Accounting - Measurement focus describes what type of information is reported,and is either the economic resources measurement focus, or the current financial resources measurement focus. The economic resources measurement focus reports all assets, liabilities, and deferred resources related to a given activity, as well as transactions of the period that affect net position.For example,all assets,whether financial(e.g., cash and receivables)or capital (e.g.,property and equipment),and liabilities (including long-term debt and long-term liabilities)are reported.The current financial resources measurement focus reports more narrowly on assets,liabilities,and deferred resources that are relevant to near-term liquidity,along with net changes resulting from transactions of the period. Consequently, capital assets and the unmatured portion of long-term debt and certain other liabilities,the District would not expect to liquidate currently with expendable available financial resources (e.g., compensated absences for employees still in active service would not be reported). Basis of accounting describes when changes are recognized,and is either the accrual basis of accounting or the modified accrual basis of accounting. The accrual basis of accounting recognizes changes in net position when the underlying event occurs,regardless of the timing of related cash flows.The modified accrual basis of accounting recognizes changes only at the point they affect near-term liquidity. -7- SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) The governmental funds financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized when measurable and available. The District considers all revenues reported in governmental funds to be available if the revenues are collected within 60 days after the end of the fiscal year. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long- term debt,compensated absences,and pension costs,which are recognized as expenditures to the extent they have matured. Capital assets acquisitions are reported as expenditures in governmental funds. -- Proceeds of general long-term debt and acquisitions are reported as other financing sources. D. Real Property Taxes Real property taxes are levied annually by the District no later than November 1st and become a lien on December 1st. The District's tax levy is collected by the Town of Southold and then remitted to the District from January to June. The County of Suffolk is responsible for all uncollected taxes. E. Payments in Lieu of Taxes(PILOT) The District reports PILOT revenues in the general fund as part of other tax items revenues.These PILOT revenues are often either the result of tax abatements granted by industrial development agencies of the Town and/or the County to help promote local economic development. Property owners make PILOT payments to the government agencies,which in turn remit the collected payments to the District. The District's PILOT revenues also include payments from the Long Island Power Authority (LIPA) remitted by the Suffolk County.In response to the New York State Public Authorities Law§1020-q("the LIPA Reform Act"),certain properties owned by LIPA were removed from the assessment and tax rolls and,instead,allowed LIPA to make payments instead of property taxes.These LIPA payments are not a result of tax abatement agreements as defined by GASB, but were designed to compensate local taxing jurisdictions for property tax revenues lost due to LIPA's tax-exempt status. F. Other Revenues Sale of equipment is recognized as revenue based upon the sales terms and agreement negotiated. Cell tower lease revenues are recognized based on the period in which access services were provided. Miscellaneous income is recognized based on contractual agreements or when services are provided. G. Interfund Transactions 1 The operations of the District include transactions between funds. These transactions may be temporary in nature, such as with interfund borrowings. The District typically loans resources between funds for the purpose of providing cash flow.These interfund receivables and payables are expected to be repaid within one year. Permanent transfers of funds include transfers to provide financing for the acquisition, construction,or renovation of major capital facilities or other capital assets. A detailed disclosure by individual fund for interfund receivables and payables, transfers in, and transfers out is provided subsequently in these Notes to Financial Statements. -8- SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) H. Use of Estimates The preparation of financial statements in conformity with a comprehensive basis of accounting other than GAAP requires management to make estimates and assumptions that affect the reported amount of assets,liabilities,deferred inflows of resources,and disclosure of contingencies at the date of the financial statements,and the reported revenues and expenditures during the reporting period.Accordingly,actual results could differ from those estimates. Estimates and assumptions are made in a variety of areas, including compensated absences and pension costs. I. Cash and Cash Equivalents Cash and cash equivalents consists of cash on hand,demand deposits,and short-term investments with original maturities of 90 days or less from date of acquisition. Certain cash balances are restricted by various legal and contractual obligations,such as legal reserves and debt agreements. Receivables Receivables are recorded when the transaction takes place and the respective revenues are recognized as earned when available.Receivables are shown net of an allowance for uncollectibles,if any.However, no allowance for uncollectibles has been provided since it is believed that such allowance would not be material. K Lease Receivable The District leases space for cellular antenna equipment to a third party. A lease receivable is measured and recorded at the present value of lease payments expected to be received by the District during the lease term using an implicit discount rate,net of any provision for estimated uncollectible amounts. As lease payments are received from the lessee,they are first allocated to the amortization of the discount on the lease receivable and recognized as interest revenue,and then to lease receivable. L. Prepaid Items Prepaid items represent payments made by the District for which benefits extend beyond year end. These payments to vendors reflect costs applicable to future accounting periods and are recorded as assets on the Balance Sheet using the consumption method. Under the consumption method,a current asset for the prepaid item is recorded at the time of receipt and/or purchase and an expenditure is reported in the year the goods or services are consumed. A portion of fund balance has been classified as nonspendable to indicate that prepaids do not constitute available spendable resources. M. Restricted Length of Service Award Program Investments The District sponsors the Southold Fire District Length of Service Award Program (LOSAP), a defined benefit pension plan, and has reported program assets. The underlying restricted assets are reported - based on values provided by the program trustee or insurance carriers. See "Length of Service Award Program (LOSAP)"Note for more information on the asset valuation methods. The LOSAP's assets are restricted for the purposes of providing benefits to the participants of the plan. -9- SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) N. Net Pension Asset/(Liability)Proportionate Share The District participates in the New York State and Local Employees'Retirement System (ERS),which is a cost-sharing multiple-employer, defined benefit, public employee pension plan. The ERS provides retirement,disability,withdrawal,and death benefits to plan members and beneficiaries related to years of service and final average salary.The District reports its proportionate share of the ERS' net pension asset or liability in either the non-current governmental assets group or the non-current governmental liabilities group.Net pension assets or liabilities of the ERS are determined based on an annual actuarial valuation at the measurement date. 0. Capital Assets Capital assets are reported in the non-current governmental assets account group at original cost,when the information is available,or estimated historical cost based on professional third-party information. Donated assets are reported at acquisition value at the date of donation.The capital threshold policy,the dollar value above which asset acquisitions are added to the capital assets accounts, is $2,500 for all assets. P. Employee Benefits—Compensated Absences Compensated absences consist of unpaid accumulated sick leave and vacation leave. Sick leave eligibility and accumulation is specified in District policy. Upon retirement, resignation, or death,employees may contractually receive a credit towards their health insurance obligation if over the age of 55 and 20 years of service to the District up to$6,000 per year,anything above and beyond this amount will be the responsibility of the employee. Vacation leave eligibility and accumulation is specified in District policy. Earned benefits are forfeited if not taken within varying time periods. In the non-current governmental liabilities account group, the District recognizes a liability for compensated absences including sick leave,when employees have earned the right to the leave and it is more likely than not that the leave will be used for time off or otherwise paid in cash,or settled through other means.The District utilizes historical data of past usage patterns to estimate the expected usage - and payment of compensated absences. The liability is measured at the employee's pay rate at the reporting date,including salary-related payments,such as Social Security and Medicare taxes. In the fund financial statements, a liability is reported only for payments due for unused compensated absences for those employees that have obligated themselves to separate from service with the District by December 31st. Q. Other Benefits Eligible District employees participate in the ERS and eligible volunteer firefighters participate in the District sponsored LOSAP. District employees may choose to participate in the District's elective deferral compensation plan established under Internal Revenue Code§457. - 10- SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) The District provides individual or family health insurance coverage for active employees pursuant to District policy. In addition to providing these benefits, the District provides individual, family, or surviving spouse postemployment health insurance coverage for eligible retired employees. District policy determines if District employees are eligible for these benefits if they reach normal retirement age while working for the District.Healthcare benefits are provided through an insurance company whose premiums are based on the benefits paid during the year.The cost of providing postemployment benefits is shared between the District and the retired employee. The District recognizes the cost of providing health insurance by recording its share of health insurance premiums as an expenditure in the general fund as the liabilities for premiums mature(come due for payment). R. Long-Term Debt i The District borrows money in order to acquire land or equipment, construct buildings, or make improvements. This enables the cost of these capital assets to be borne by the present and future taxpayers receiving the benefit of the capital assets.These long-term liabilities are full faith and credit debt of the local government..The repayment of principal and interest will be in the general fund. S. Deferred Inflows of Resources Deferred inflows of resources represents an acquisition of net assets that applies to a future period and so will not be recognized as an inflow of resources(revenue/expense credit)until that time.The District has one item that qualifies for reporting in this category, which is related to the long-term lease receivable of space for cellular tower equipment. Revenues will be recognized systematically over the term of the lease agreement. T. Fund Balance The governmental fund financial statements report fund balance classifications according to the relative strength of spending constraints placed on the purpose for which resources can be used,as follows: Nonspendable- Consists of amounts that are inherently nonspendable in the current period either because of their form or because they must be maintained intact.Nonspendable fund balance consists of prepaids,which are recorded in the general fund. Restricted-Consists of amounts that are subject to externally enforceable legal purpose restrictions imposed by creditors, grantors, contributors, or laws and regulations of other governments; or through constitutional provisions or enabling legislation.The District has established the following restricted fund balances: Restricted for Debt Unexpended balances of proceeds of borrowings for capital projects; interest and earnings from investing proceeds of obligations;and,premium and accrued interest are recorded and held until appropriated for debt payments.This reserve is accounted for in the general fund. - 11- SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) Capital Reserve A Capital Reserve (GML §6-g) is used to finance all or part of the costs of construction, reconstruction, or acquisition of "specific" or "type" capital improvements or equipment. The establishment of any capital reserve is subject to mandatory referendum (voter approval). Expenditures from a "specific" reserve require a resolution by the Board. Expenditures from a "type"reserve require a resolution by the Board,subject to permissive referendum.These reserves are accounted for in the general fund. Restricted for Length of Service Award Program The District sponsors a defined benefit length of service award program for its volunteer firefighters and is legally responsible for annual contributions to the program. The program is administered through a trust. Payments made from the program are made from general assets, which are subject to the claims of the District's creditors.The Trust does not meet the criteria set forth by GASB because the assets are not protected from the District's creditors. The District reports the assets and restricted fund balance in the general fund. Unspent Bond Proceeds Unspent bond proceeds are recorded as restricted fund balance because they are subject to external constraints contained in the bond agreement. In May 2021,the Board approved a bond reduction plan in which the District will utilize$6,618 of unspent bond proceeds each year through 2032 towards the repayment of the outstanding bonds.These restricted funds are accounted for in the capital projects fund. Assigned-Consists of amounts that are subject to a purpose constraint that represents an intended - use established by the District's Board. The purpose of the assignment must be narrower than the purpose of the general fund, and in funds other than the general fund, assigned fund balance represents the residual, positive amount of fund balance. Assigned fund balance includes encumbrances not classified as restricted at the end of the fiscal year. Unassigned-represents the residual classification for the District's general fund and could report a surplus or deficit.In funds other than the general fund,the unassigned classification should be used only to report a deficit fund balance resulting from overspending of available resources. Fund Balance Classification Any portion of fund balance may be applied or transferred for a specific purpose either by voter approval, if required by law, or by formal action of the Board if voter approval is not required. Amendments or modification to the applied or transferred fund balance must also be approved by formal action of the Board. The Board shall retain the authority to assign fund balance. In circumstances where an expenditure is incurred for a purpose for which amounts are available in multiple fund balance classifications (e.g., expenditures related to reserves) the expenditure is to be - spent first from the restricted fund balance to the extent that an approved permissive referendum is in place or to the extent appropriated by any Board approved budget revision, then from the assigned fund balance to the extent appropriated by the Board,and then from the unassigned fund balance. - 12- SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) 2. FUTURE ACCOUNTING STANDARDS The GASB Statements are issued to set GAAP for state and local governments.The following is not an all- inclusive list of GASB statements issued,but the statements that the District feels may have a future impact on these financial statements.The District will evaluate the impact of these pronouncements and implement them,as applicable,if material. Effective for the Year Ending Statement December 31,2026 GASB No. 103-Financial Reporting Model Improvements December 31,2026 GASB No.104-Disclosure of Certain Capital Assets December 31,2027 GASB No.105 -Subsequent Events GASB Statement No.103 was issued to improve key components of the financial reporting model to enhance its effectiveness in providing information that is essential for decision making and assessing a government's accountability.This Statement also addresses certain application issues. GASB Statement No. 104 requires certain types of capital assets to be disclosed separately in the capital assets note disclosure,such as leased assets,intangible right-to-use assets,and assets held for sale. GASB Statement No. 105 was issued to improve financial reporting related to subsequent events by clarifying the subsequent events time frame and the subsequent events that constitute recognized and nonrecognized events, and by specifying the information items that are required to be disclosed about subsequent events. 3. STEWARDSHIP,COMPLIANCE,AND ACCOUNTABILITY A. Budgets The District's administration prepares a proposed budget for approval by the Board for the general fund, the only fund with a legally adopted budget.Budgets are adopted annually on the modified accrual basis of accounting. Appropriations are established by the adoption of the budget,are recorded at the program line item level, and constitute a limitation on expenditures (and encumbrances) that may be incurred.Appropriations authorized for the year are increased by the amount of encumbrances carried forward from the prior year.Appropriations lapse at the end of the fiscal year unless expended or encumbered. Encumbrances will lapse if not expended in the subsequent year. Appropriations authorized for the current year can be funded by the planned use of specific reserves,and can be increased by budget amendments approved by the Board, as a result of selected new revenue sources not included in the original budget (when permitted by law), and appropriation of fund balances. These supplemental appropriations may occur subject to legal restrictions, if the Board approves them because of a need that exists, which was not determined at the time the budget was adopted. A summary of the general fund operating budget is as follows: Budget approved by the Board $ 2,413,344 Encumbrances from prior year 42,170 Debt service payments funded by operating transfer in 6,618 Insurance coverage increases funded by unassigned fund balance 25,000 Building improvements funded by unassigned fund balance 7,000 Radios and related"equipment funded by unassigned fund balance 11,850 Final Budget $ 2,505,982 - 13 - � I SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) Budgets are established and used for individual capital projects based on authorized funding. The maximum project amount authorized is based upon the estimated cost of the project.These budgets do not lapse and are carried over to subsequent fiscal years until the completion of the projects. B. Encumbrances Encumbrance accounting is used for budget control and monitoring purposes,and is reported as a part of the governmental funds.Under this method,purchase orders, contracts,and other commitments for the expenditure of monies are recorded to reserve applicable appropriations. Outstanding encumbrances as of year end are presented as part of assigned fund balance, unless classified as restricted, and do not represent expenditures or liabilities.These commitments will be honored in the subsequent period. Related expenditures are recognized at that time,as the liability is incurred,or the commitment is paid. C. Over Expenditure of Certain Appropriations The social security appropriation category of the budget was the only category that was over expended. The general fund budget in total was not over expended. 4. DEPOSITS WITH FINANCIAL INSTITUTIONS AND INVESTMENTS The District's investment policies are governed by state statutes and District policy. Resources must be deposited in Federal Deposit Insurance Corporation (FDIC) insured commercial banks or trust companies located within the state.Permissible investments include obligations of the U.S.Treasury and U.S.Agencies, repurchase agreements,and obligations of New York State or its localities.Collateral is required for demand and time deposits, and certificates of deposit not covered by FDIC insurance. Obligations that may be pledged as collateral are obligations of the United States and its Agencies,and obligations of New York State and its municipalities.Investments are stated at fair value. Custodial credit risk is the risk that in the event of a bank failure, the District may be unable to recover deposits or collateral securities that are in possession of an outside agency. GASB directs that deposits be disclosed as exposed to custodial credit risk if they are not covered by depository insurance.These deposits are as follows: A. Uncollateralized, B. Collateralized by securities held by the pledging financial institution,or C. Collateralized by securities held by the pledging financial institution's trust department or agent but not in the District's name. The District's aggregate bank balances were covered by FDIC insurance at year end. Excluding the investments held in connection with the LOSAP program and those discussed in the note below,the District did not have any investments at year end or during the year,except as discussed in the note below.The District was not exposed to any material interest rate risk or foreign currency risk. Investment pool: _ The District participates in the New York Cooperative Liquid Assets Securities System (NYCLASS), a multi-municipal cooperative investment pool agreement pursuant to GML Articles 3-A and 5-G,whereby it holds a portion of the investments in cooperation with other participants.NYCLASS is currently rated 'AAAm' by S&P Global Ratings. The investments are highly liquid and are considered to be cash equivalents.All NYCLASS investment and collateral policies are in accordance with GML§10. - 14- SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) The District's investments in NYCLASS consisted of repurchase agreements,U.S.Treasury Securities,and collateralized bank deposits,with various interest rates and due dates.The dollar weighted average days to maturity(WAM)of NYCLASS at December 31,2025,was 41 days and the weighted average life(WAL) was 80 days.These investments are included in cash and cash equivalents as follows: Carrying Fund Amount General fund $ 828,452 General fund-Capital reserves 2,732,086 $ 3,560,538 Securities,other than repurchase agreements,are valued at the most recent market bid price as obtained from one or more market makers for such securities.Repurchase agreements are recorded at cost,which approximates fair value. The lead participant of NYCLASS is the Village of Rhinebeck. Additional j information concerning NYCLASS, including the annual report, can be found on its website at www.newyorkclass.org. S. ACCOUNTS RECEIVABLE Accounts receivable at December 31,2025,consisted of$4,714 for rental fees.District management expects these amounts to be fully collectible. 6. CAPITAL ASSETS A. Changes Capital assets balances and activity for the year ended December 31,2025,were as follows: Balance Balance December 31, December 31, 2024 Additions Deletions 2025 Land $ 722,972 $ $ $ 722,972 Buildings and improvements 5,648,492 166,219 (22,993) 5,791,718 Equipment 4,897,666 650,770 (74,996) 5,473,440 $ 11,269,130 $ 816,989 $ (97,989) $ 11,988,130 B. Impairment Losses The District evaluates prominent events or changes in circumstances affecting capital assets to determine whether impairment of a capital asset has occurred. The District's policy is to record an impairment loss in the period when the District determines that the carrying amount of the asset will not be recoverable.At December 31,2025,the District has not recorded any such impairment losses. - 15 - SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) 7. LEASE RECEIVABLE Site Lease Agreement The District entered into a site lease agreement to utilize District property for cellular antenna equipment. Under the agreement,the District receives installments in each fiscal year covered by the agreement.The installments increase by 3% in the next fiscal year until the agreement's expiration date of May 1, 2030. During the year ended December 31, 2025,the District recognized lease revenue and lease interest in the amounts of$30,464 and$1,652,respectively. 8. CAPITAL RESERVES Activity for the capital reserves during the year is as follows: Building Equipment Reserve Reserve Total _- Reserve Balance-Beginning of Year $ 37,023 $ 2,690,773 $ 2,727,796 Additions to Reserve: Interest 1,529 98,014 99,543 Budgeted transfer to reserve 480,000 480,000 Use of Reserve: Capital outlay (575,000) (575,000) Reserve Balance-End of Year $ 38,552 $ 2,693,787 $ 2,732,339 9. INTERFUND TRANSACTIONS Interfund balances at December 31,2025,were as follows: Interfund Receivables Payable Transfers In Transfers Out General fund $ 5,365 $ $ 6,618 $ Capital projects fund 5,365 6,618 $ 5,365 $ 5,365 $ 6,618 $ 6,618 The balance payable from the capital projects fund to the general fund represents$5,265 of interest earned on bond proceeds that is now being accounted for in the debt reserve and$100 that was provided to initially fund the bank account.The transfer to the general fund from the capital projects fund represents unspent bond proceeds that were used towards the repayment of the bonds. - 16- SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) 10. LONG-TERM LIABILITIES A. Changes Long-term liability balances and activity for the year,excluding pensions,are summarized below: Balance Balance Amounts December 31, December 31, Due Within 2024 Additions Reductions 2025 One Year Long-term debt: Bonds payable $ 1,000,000 $ $ 125,000 $ 875,000 $ 125,000 Other long-term liabilities Compensated absences 20,640 3,294 23,934 $ 1,020,640 $ 3,294 $ 125,000 $ 898,934 $ 125,000 The general fund has typically been used to liquidate long-term liabilities. Additions and reductions to compensated absences are shown net. The maturity of compensated absences is not determinable. B. Bonds Payable Bonds payable is comprised of the following: Outstanding at Issue Final Interest December 31, Description Date Maturity Rate 2025 Serial bond-improvements to Fire District facilities 12/1/2017 6/1/2032 2.236% $ 875,000 The following is a summary of debt service requirements for bonds payable: Year Ending December 31, Principal Interest Total 2026 $ 125,000 $ 18,167 $ 143,167 2027 125,000 15,373 140,373 2028 125,000 12,578 137,578 2029 125,000 9,783 134,783 2030 125,000 6,988 131,988 2031-2032 250,000 5,589 255,589 Total $ 875,000 $ 68,478 $ 943,478 C. Interest Expense Interest on long-term debt for the year was$20,963. - 17- SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) D. Remedies Upon Default in Bond Payments The District's serial bonds are general obligations secured by the District's full faith and credit. For payment of principal and interest, the District has the power and statutory authorization to levy ad valorem taxes on all taxable real property within the District,without limitation as to rate or amount, subject to applicable law. Contract creditors,including bondholders,may enforce payment through court action if necessary. The applicable statutory provisions described in the bond documents limit interest on amounts adjudged due to creditors to 9%per annum from the due date to the date of payment. As a general rule,property and funds of a municipal corporation serving the public welfare are not subject to execution or attachment to satisfy a judgment; however, courts have issued judicial mandates requiring municipal officials to appropriate and pay judgments from current funds or from the proceeds of a tax levy. The remedies for enforcement of payment are not expressly included in the District's contract with holders of its bonds or notes, and no express acceleration remedy was identified in the remedies discussion in the bond documents. The District's continuing disclosure undertaking states that failure to comply with the continuing disclosure undertaking does not constitute a default with respect to the bonds. 11. PENSION PLAN-NEW YORK STATE A. New York State and Local Employees'Retirement System Plan Description The District participates in the ERS. This is a cost-sharing, multiple-employer, defined benefit, public employee,pension plan.The ERS provides retirement,disability,withdrawal,and death benefits to plan members and beneficiaries related to years of service and final average salary. Provisions and Administration Obligation of employers and employees to contribute and benefits to employees are governed by the New York State Retirement and Social Security Law (NYSRSSL).The net position of ERS is held in the New York State Common Retirement Fund ("the Fund"),which was established to hold all net assets and record changes in plan net position allocated to the ERS. As set forth in the NYSRSSL, the Comptroller of the State of New York ("the Comptroller") serves as the trustee of the Fund and is the administrative head of ERS. Once a public employer elects to participate in ERS, the election is irrevocable. The New York State Constitution provides that pension membership is a contractual relationship and plan benefits cannot be diminished or impaired. Benefits can be changed for future members only by enactment of a State statute.The District also participates in the Public Employees' Group Life Insurance Plan(GLIP),which provides death benefits in the form of life insurance.The ERS is included in the state's financial report as a pension trust fund. That report, including information with regard to benefits provided may be found at www.osc.state.ny.us/retire/publications/index.php or may be obtained by writing to:New York State and Local Employees'Retirement System, 110 State Street,Albany,NY 12244. -18- SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) Funding Policies Plan members who joined the system before July 27, 1976, are not required to make contributions. Those joining on or after July 27, 1976,and before January 1,2010,with less than ten years of credited services are required to contribute 3% of their salary. Those joining on or after January 1, 2010 and before April 1, 2012, are required to contribute 3% of their salary throughout active membership. Those joining on or after April 1, 2012,are required to contribute between 3%and 6% dependent on their salary throughout active membership. Employers are required to contribute at an actuarially determined rate based on covered salaries paid. For the ERS, the Comptroller annually certifies the actuarially determined rates expressly used in computing the employers' contributions for the ERS' fiscal year ended March 31st,and employer contributions are either paid by December 15th less a 1% discount or by February 1st.The District paid 100% of the required contributions as billed by the ERS for the current year.The District's average contribution rate was 14.04%of covered payroll for the ERS' fiscal year ended March 31,2025. The Comptroller annually certifies the actuarially determined rates expressly used in computing the employer's contributions based on salaries paid during the ERS' fiscal year ending March 31. The resulting contributions paid in the current year,and two preceding years,were equal to 100 percent of the contributions required,and were as follows: 2025 2024 2023 District contributions $ 30,663 $ 30,878 $ 26,183 B. Pension Asset/(Liability) At December 31, 2025,the District reported the following asset/(liability) for its proportionate share of the net pension asset/(liability) for ERS in the non-current governmental assets/(liabilities) account group.The net pension asset/(liability) was measured as of March 31, 2025.The total pension liability used to calculate the net pension asset/(liability) was determined by an actuarial valuation as of that date. The District's proportion of the net pension asset/(liability) was based-on a projection of the District's long-term share of contributions to the ERS relative to the projected contributions of all participating members, actuarially determined. This information was provided by the ERS in reports provided to the District. Measurement date March 31,2025 District's proportionate share of the net pension liability $ (78,406) District's portion of the Plan's total net pension liability 0.0004573% Change in proportion since the prior measurement date (0.0000690) Actuarial Assumptions The total pension liability as of the measurement date was determined by using an actuarial valuation as noted in the table below,with update procedures used to roll forward the total pension liability to the measurement date.The actuarial valuations used the following actuarial assumptions: - 19- SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) Measurement date March 31 2025 --i Actuarial valuation date Apri11,2024 Inflation 2.9% Salary increases 4.3% Investment rate of return(net of investment expense,including inflation) 5.9% Cost of living adjustments 1.5% Annuitant mortality rates are based on April 1, 2015 - March 31, 2020 system experience with adjustments for mortality improvements based on the Society of Actuaries' MP-2021. The actuarial assumptions were based on the results of an actuarial experience study for the period April 1, 2015 - March 31,2020. The long-term expected rate of return on pension plan investments was determined using a building- block method in which best-estimate ranges of expected future real rates of return(expected return,net of investment expenses and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target allocation and best estimates of the arithmetic real rates of return for each major asset class are summarized as follows: Long-term Target Expected Real Allocation Rate of Return Measurement date March 31,2025 Asset class Domestic equity 25.00 % 3.54 % International equity 14.00 % 6.57 % Real estate equity 12.00 % 4.95 % Private equity 15.00 % 7.25 % Alternative investments 11.00 % 5.25-5.55% Fixed income 22.00 % 2.00 % Cash 1.00 % 0.25 % 100.00 % Real rates of return are net of a long-term inflation assumption of 2.9%. Discount Rate - The discount rate used to calculate the total pension liability was 5.90%. The projection of cash flows used to determine the discount rate assumed that contributions from plan members would be made at. the current contribution rates and that contributions from employers would be made at statutorily required rates,actuarially determined.Based upon the assumptions,the ERS'fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore,the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. -20- SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) Sensitivity of the Proportionate Share of the Net Pension Asset/(Liability) to the Discount Rate Assumption The following presents the District's proportionate share of the net pension asset/(liability) calculated using the discount rate of 5.90%, as well as what the District's proportionate share of the net pension asset/(liability) would be if it were calculated using a discount rate that is 1 percentage point lower (4.90%)or 1 percentage point higher(6.90%)than the current rate: Current 1%Decrease Assumption 1%Increase 4.90% 5.90% 6.90% District's proportionate share of the net pension asset/(liability) $ (226,917) $ (78,406) $ 45,601 Pension Plan Fiduciary Net Position The components of the current-year net pension asset/(liability) of the employers, rounded to the nearest thousand,as of the measurement date were as follows: Measurement date March 31,2025 Employers'total pension liability $ (247,600,239) Plan fiduciary net position 230,454,512 Employers'net pension liability $ (17,145,727) Ratio of plan fiduciary net position to the employers'total pension liability 93.08% Prepayment to the Pension Plan Employer contributions are paid annually based on the ERS'fiscal year,which ends on March 31st.Annual - payments are due February 1st.An employer can elect to prepay the amount due by December 15th to receive a 1%discount.The District paid the annual invoice in December,which resulted in a prepayment of$7,766 for the period January 1,2026 through March 31,2026.Employee contributions are remitted monthly. 12. LENGTH OF SERVICE AWARD PROGRAM(LOSAP) A. General Information The District established a single employer defined benefit LOSAP for the active volunteer firefighters of the Southold Fire Department.The program took effect on January 1,1993. The program was established pursuant to Article 11-A of GML. The program provides municipally-funded pension-like benefits to facilitate the recruitment and retention of active volunteer firefighters.The District is the sponsor of the program.The information contained in this note is based on information for the LOSAP for the plan year ending on December 31,2025. -21 - SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) B. Program Description Participation, Vesting,and Service Credit Active volunteer firefighters who have reached the age of 18 and who have completed 1 year of firefighting service are eligible to participate in the program.Participants acquire a non-forfeitable right to a service award after being credited with 5 years of firefighting services or upon attaining the program's entitlement age.The program's entitlement age is age 62 and completion of 1 year of service. In general,an active volunteer firefighter is credited with a year of firefighting service for each calendar year after the establishment of the program in which he or she accumulates fifty points. Points are granted for the performance of certain activities in accordance with a system established by the sponsor on the basis of a statutory list of activities and point values.A participant may also receive credit for 5 years of firefighting service rendered prior to the establishment of the program.A participant becomes 100% vested upon earning 5 years of service credit, attaining the entitlement age while an active member, becoming totally or permanently disabled, or upon death. Benefits are forfeited when a participant's membership is terminated and the participant has less than 5 years of credited service. Benefits A participant's benefit under the program is life annuity with 10 years equal to $20 multiplied by the person's total number of years of firefighting service.The number of years of firefighting service used to compute the benefit cannot exceed 40,and except in the case of disability or death,benefits are payable when a participant reaches entitlement age. The program provides statutorily mandated death and disability benefits. Participants At the December 31, 2025 measurement date, the following participants were covered by the benefit terms: Inactive participants: Currently receiving benefits 99 Entitled to but not yet receiving benefits 29 Active participants 61 189 Contributions GML §219-d (1) requires the Board to contribute an actuarially determined contribution on an annual basis.The actuarially determined contribution shall be appropriated annually by the Board. - Trust Assets Although assets have been accumulated in an irrevocable trust such that assets are dedicated to providing pensions to plan members in accordance with benefit terms, the trust assets are not legally protected from creditors of the District. As such, the trust assets do not meet the criteria set forth by GASB. These investments are reported on the balance sheet in the general fund as part of the LOSAP program. -22 - - SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) The District measures and records the LOSAP assets using fair value measurement guidelines established by GAAP.These guidelines recognize a three-tiered fair value hierarchy as follows: • Level 1: Quoted prices for identical investments in active markets; • Level 2: observable inputs other than those in Level 1;and, • Level 3: unobservable inputs. The LOSAP investments measured at fair value as of December 31,2025,are presented in the following table by their respective hierarchy level: Fair Value @ December 31, Asset Type 2025 Level 1 Level 2 Cash and cash equivalents $ 149,357 $ 149,357 $ Fixed Income Annuities 3,088,048 3,088,048 Life insurance 1,828,181 1,828,181 $ 5,065,586 $ 149,357 $ 4,916,229 C. Fiduciary Investment and Control Service credit is determined by the governing board of the sponsor,based on information certified to the governing board by each fire company having members who participate in the program. Each fire company must maintain all required records on forms prescribed by the governing board. The governing board of the sponsor has retained and designated Hometown/Firefighters Services to assist in the administration of the program. The designated program administrator's primary responsibility is to administer the plan for the exclusive benefit of the participants and their beneficiaries. Such duties include,but are not limited to,determining eligibility of firefighters to participate in the plan, compute participant entitlement, authorize disbursements to participants, compute necessary contribution amounts,maintain all necessary records,and consult with the sponsor and the trustee on long-term investment plans. Disbursements of program assets for the payment of benefits or administrative expenses must be reviewed by the trustee, and the Board,and be signed by at least two board members prior to being disbursed by the administrator. Program assets are required to be held in trust by GML,for the exclusive purpose of providing benefits to participants and their beneficiaries, or for the purpose of defraying the reasonable.expenses of the operation and administration of the program. The trust agreement is dated February 8, 2005, and the trustee is the Board. Authority to invest program assets is vested in the administrator, with the Board's prior written approval. Subject to restrictions in the program document, program assets are invested in accordance with a statutory"prudent person" rule.The program document calls for all investment decisions to be chosen and approved by the trustee,prior to being invested by the administrator. The sponsor is required to retain an actuary to determine the amount of the sponsor's contributions to the plan.The actuary retained by the sponsor for this purpose is BPAS Actuarial and Pension Services, LLC. Portions of the following information are derived from a report prepared by the actuary dated March 2026 for the plan year ended December 31,2025. -23 - SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) D. Program Financial Condition Assets and Liabilities Actuarial Present Value of Benefits at December 31,2025 $ 5,227,766 Less: Assets Available for Benefits %of total Cash 2.95% $ 149,357 Fixed Income Annuities 60.96% 3,088,048 Insurance contracts 36.09% 1,828,181 Total Net Assets Available for Benefits 5,065,586 Total Unfunded Benefits 162,180 Less:Unfunded Liability for Prior Service (162,180) Unfunded Normal Benefits $ - Prior Service Costs Prior service costs are being amortized over 10 years at a discount rate of 5.00%. Receipts and Disbursements Plan Net Assets,Beginning of Year $ 5,127,041 Changes during the year +Plan contributions $ 178,500 +Investment income earned 236,594 -Plan benefit withdrawals (476,549) (61,455) Plan Net Assets,End of Year $ 5,065,586 Contributions Maximum amount of sponsor's contribution recommended by actuary: $ 152,778 Minimum amount of sponsor's actual contribution: 152,778 Amount of sponsor's actual contribution: 178,500 Sponsor's contribution recommended by actuary for the 2026 plan year Maximum amount $ 179,914 Minimum amount 179,914 -24- SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) Administration Fees Fees paid to designated program administrator $ 7,067 Normal Costs The actuarial valuation methodology used by the actuary to determine the sponsor's contribution is the unit credit cost method.The assumptions used by the actuary to determine the sponsor's contribution and the actuarial present value of benefits are: Assumed rate of return on investment 5.00% Mortality tables used for Withdrawal None Disability None Retirement RP-2000 Combined-Unisex Death(actives) None Death(inactives) None Other None The actuarial valuation methodology used by the actuary to determine the sponsor's accrued benefits liability is the unit credit cost method. The assumptions used by the actuary to determine the sponsor's accrued benefits liability and the actuarial present value of benefits are: Interest rate: 6.00%compounded annually Retirement: 1994 GAR-Male The assumed rate of return on investment used in determining the sponsor's contributions was 5%and the mortality table used was the RP2000 Combined-Unisex for the years ended December 31,2025 and 2024, respectively. The interest rate and the mortality tables used in determining the accrued benefit liability change was 6% and the 1994 GAR-Male, for the years ended December 31, 2025 and 2024, respectively. 13. DEFERRED COMPENSATION PLAN The District has established a deferred compensation plan in accordance with Internal Revenue Code§457 for all employees. The District makes no contributions in this Plan. The amount deferred by eligible employees for the year ended December 31,2025 totaled$17,029. 14. TAX ABATEMENTS As of December 31, 2025, the District did not have any tax abatements, however, the District recognized $22,047 in LIPA PILOT. These payments are not the result of a tax abatement. -25 - SOUTHOLD FIRE DISTRICT Notes to Financial Statements (Continued) 15. COMMITMENTS AND CONTINGENCIES A. Encumbrances All encumbrances are classified as either restricted or assigned fund balance. At December 31,2025,the District encumbered the following amounts: Assigned:Unappropriated General Fund Fire protection $ 55,789 B. Risk Management The District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; injuries to employees; errors and omissions; and natural disasters,etc. These risks are covered by commercial insurance purchased from independent third parties. There have been no significant reductions in insurance coverage as compared to the prior year,and settled claims from these risks have not exceeded commercial insurance coverage for the past three years. C. Litigation The District is not aware of any material,pending,or threatened litigation claims against the District.The District is also unaware of any unasserted claims or assessments that would require financial statement disclosure. 16. SPENDING LIMITATION The District did not exceed the statutory spending limitation imposed by New York State Law for the year ended December 31,2025,or the budget for the year ending December 31,2026. 17. SUBSEQUENT EVENT The District has evaluated subsequent events through the date of the auditor's report,which is the date the financial statements were available to be issued. No significant events were identified that would require adjustment of or disclosure in the financial statements,except for the following: LOSAP The LOSAP was amended effective January 1,2026 to increase the maximum years of service from 40 years to 50 years. The impact of this amendment was recognized in the LOSAP valuation. -26- SOUTHOLD FIRE DISTRICT Schedule of Revenues,Expenditures,and Changes in Fund Balance- Budget and Actual-General Fund-Operating For the Year Ended December 31,2025 Board- Final Budget Approved Final Variance with Budget Budget Actual Actual REVENUES Real property taxes $ 2,333,344 $ 2,333,34-4 $ 2,333,351 $ 7 Other tax items 22,047 22,047 Interest and earnings 65,000 65,000 65,063 63 Lease payments collected 15,000 15,000 30,464 15,464 Sale of equipment 25,000 25,000 Miscellaneous 1,208 1,208 Total Revenues 2,413,344 2,413,344 2,477,133 63,789 OTHER FINANCING SOURCES Operating transfers in 6,618 6,618 - Total Revenues and Other Sources 2,413,344 2,419,962 2,483,751 $ 63,789 APPROPRIATED FUND BALANCE Prior year's surplus 43,850 Prior year's encumbrances 42,170 Total Appropriated Fund Balance - 86,020 Total Revenues,Other Sources,and Appropriated Fund Balance $ 2,413,344 $ 2,505,982 Final Budget Variance with Year End Actual and Encumbrances Encumbrances EXPENDITURES Personal services $ 370,000 $ 370,000 369,702 $ $ 298 Equipment and capital outlay 255,840 267,689 202,139 65,550 Fire protection 758,160 815,830 715,610 55,789 44,431 State retirement system 35,000 35,000 30,663 4,337 Length of service award program 270,000 255,500 178,500 77,000 Social security 27,792 (27,792) Workers'compensation 50,000 50,000 39,655 10,345 - Life insurance 25,000 56,000 55,820 180 Medical and accident insurance 30,000 30,000 28,336 1,664 Debt service-principal 118,382 125,000 125,000 - Debt service-interest 20,962 20,963 20,963 - Total Expenditures 1,933,344 2,025,982 1,794,180 55,789 176,013 OTHER FINANCING USES Operating transfers out 480,000 480,000 480,000 - Total Expenditures and Other Financing Uses $ 2,413,344 $ 2,505,982 2,274,180 $ 55,789 $ 176,013 Net Change in Fund Balance 209,571 Fund Balance-Beginning of Year 712,144 Fund Balance-End of Year $ 921,715 Note to Supplementary Information Budget Basis of Accounting Budgets are adopted on the modified accrual basis of accounting. See Paragraph on Supplementary Information Included in Auditor's Report -27- 0 CULLEN & DANOWSKI, LLP CERTIFIED PUBLIC.ACCOUNTANTS INDEPENDENT AUDITORS REP 0 N INTERNAL CONTROL OVER FINANCIAL REPORTING REPORT AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS To the Board of Fire Commissioners Southold Fire District Southold,New York We have audited,in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States,the financial statements of the Southold Fire District("the District"),as of and for the year ended December 31, 2025,and the related notes to financial statements,which collectively comprise the District's basic financial statements, and have issued our report thereon dated July,8, 2026. As described more fully in Note 1,the Southold Fire District has prepared these financial statements in accordance with financial reporting provisions of the New York State Office of the State Comptroller, which is a comprehensive basis of accounting other than accounting principles generally accepted in the United States of America. Report on Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the Southold Fire District's internal control over financial reporting (internal control) as a basis for designing 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 Southold Fire District's internal control. Accordingly,we do not express an opinion on the effectiveness of the Southold Fire District's internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements,on a timely basis.A material weakness is a deficiency,or a combination of deficiencies,in internal control, such that there is a reasonable possibility that a material misstatement of the District's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency,or a combination of deficiencies,in internal control that is less severe than a material weakness,yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies.Given these limitations,during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses or significant deficiencies may exist that were not identified. 1650 ROUTE 112,PORT JEFFERSON STATION,NEW YORK 11776-3060 0 PHONE:631-473-3400•FAX:631-473-4863•WWW.CDLLP.NET -28 Report on Compliance and Other Matters As part of obtaining reasonable assurance about whether the Southold Fire District's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations,contracts,and grant agreements,noncompliance with which could have a direct and material effect on the financial statements. However, providing an opinion on compliance with those provisions was not an objective of our audit,and accordingly,we do not express such an opinion.The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Purpose of This Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing,and not to provide an opinion on the effectiveness of the District's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the District's internal control and compliance.Accordingly,this communication is not suitable for any other purpose. Port Jefferson Station,New York July 8,2026 -29-