Bernards Township Sewerageauthoritycountyofsomerset

BERNARDS TOWNSHIP SEWERAGEAUTHORITYCOUNTYOFSOMERSET

FINANCIAL STATEMENTSYEARENDEDNOVEMBER 30,2016

BERNARDSTOWNSHIPSEWERAGEAUTHORITYTABLEOFCONTENTS

YEARENDEDNOVEMBER30,2016

INTRODUCTORYSECTION(UNAUDITED)

LetterofTransmittalRosterofOfficials

1-3

FINANCIALSECTION

IndependentAuditors'Report

Management'sDiscussionandAnalysis(Unaudited)

5-7

8-11

FinancialStatements

StatementofNetPosition12

StatementofRevenue,ExpensesandChangesinNetPosition14

StatementofCashFlows15

NotestoFinancialStatements16-31

REQUIREDSUPPLEMENTARYINFORMATION

SchedulesRelatedtoAccountingandReportingforPensions(GASB68)(Unaudited)ScheduleofAuthority'sProportionateShareoftheNetPensionLiability-

PublicEmployees RetirementSystem32

ScheduleofAuthorityContributions-PublicEmployeesRetirementSystem33

NotestoRequiredSupplementaryInformation34

SUPPLEMENTARYINFORMATION

Schedule1-StatementofRevenue,ExpensesandChangesinNetPosition35

Schedule2-ScheduleofRevenueandExpensesComparedtoBudget36

GOVERNMENTAUDITINGSTANDARDSSECTION

ReportonInternalControlOverFinancialReportingand onCompliance

andOtherMattersBasedonanAuditofFinancialStatementsPerformed inAccordanceWithGovernmentAuditingStandards

ScheduleofFindingsandResponses SummaryScheduleofPriorAuditFindings

37-38

COMMENTSANDRECOMMENDATIONS

CommentsandRecommendationsSummaryofRecommendations

41-42

INTRODUCTORY SECTION

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TheHonorableChairmanandMembers

oftheBernardsTownshipSewerageAuthorityBaskingRidge,NJ

DearAuthorityMembers:

TheannualfinancialreportoftheBernardsTownship SewerageAuthority (the"Authority")fortheyearendedNovember30,2016,isherebysubmitted.Responsibilityforboththeaccuracyofthedataandcompletenessandfairnessofthepresentation,includingalldisclosures,restswiththemanagementoftheAuthority.Tothebestofourknowledgeandbelief,thedatapresentedinthisreportisaccurateinallmaterialrespectsandisreportedinamannerdesignedtopresentfairlythefinancialpositionandresultsofoperationsoftheAuthority.AlldisclosuresnecessarytoenablethereadertogainanunderstandingoftheAuthority'sfinancial activitieshavebeenincluded.

Theannualfinancialreportispresentedin foursections:introductory,financial,GovernmentAuditingStandardsandcommentsandrecommendations.Theintroductorysectionincludesthistransmittalletter,theAuthority'sorganizationalchartandalistofprincipalofficials.Thefinancialsectionincludesthefinancialstatementsaswellastheauditors'reportthereon.Theauditors'report oninternalcontrol andcompliancewithapplicablelawsandregulationsand findings,areincludedintheGovernmentAuditingStandardssectionofthisreport.

REPORTING ENTITYANDITSSERVICES:

TheAuthoritywascreatedinaccordancewiththeStateMunicipalUtilitiesAuthoritiesLaw(P.L.1957,Chap.183),byordinanceoftheTownshipofBernardsonMay22,1956.

Pursuanttotheprovisionsofthelaw,theAuthorityisauthorizedtoacquire,construct,maintain,operateorimproveworksforthecollection,treatment,purificationordisposalofsewerageorotherwastes.

Asapublic body,underexistingstatute,theAuthorityisexemptfrombothfederalandstatetaxes.

TheHonorableChairmanandMembers

oftheBernardsTownshipSewerageAuthorityPage2

February24,2017

GENERALTRENDSANDSIGNIFICANTEVENTS

During2016,theAuthorityexperiencedthefollowing:

•SecurityUpgrades-In2014,asecurityconsultantwasretainedtodesignacybersecurityprojectfortheHarrisonBrookTreatmentPlantSCADAsystem.PhaseIwascompletedin2014andthePhaseIIcontractwasawardedandinstallationofsecuritycamerasatthepumpstationsbeganin2015.PhaseIIconstructionwascompletedin2016.

•PumpStationsandCollectionSystem-TheMonarchCirclePumpStationprojectwasunderconstruction.

•Variousmanholesandsewermainsthatwereinneedofimprovementwereidentified.Aprojectwasbidandconstructionwasundertakenincludingexcavatedrepairs,groutinjectionandpipelining.

•TheLagoonValveReplacementProjectandtheOxidationDitchAeratorsReplacementProjectwereunderconstruction.

•TheFloodProneManholesProjectreplacedanother15manholeframeswithwaterproofframesandcoversin floodareas.

•Ahydraulicstudyoftheplant,includingafeasibilitystudyoflagoonconversiontoanoverflowbasin,analysisofprocessexpansion,andUVdisinfectionattherequestoftheDEP,wasconductedin2014.Thefirstphaseofimprovements,flowmetersidentifiedinthe study,was funded,designedandbid.Highbidswererejectedandtheplansrevisedforasecondbid.Theprojectwasawardedandconstructioncommencedin2016.Aconsultantwasretainedforthechlorinecontactphaseanddesignbegan.

•TheAuthoritycompletedtheemergencyrepairoftheNorthMapleAvenuegravitymainin2014.Asewermainreplacementprojectwasfunded,designed,bidandawardedin2015.The contractordidnotstartthe projectandtheAuthoritypursuedcompensationfromthebondingcompany.Theprojectwasrebid,awarded,andconstructedin2016.

•Aconstructioncontractwasawardedforthedesignoftherehabilitationofthegritfacilities.

•Thebeltpressrehabilitationprojectwasbid andrejectedduetoonlyonehighbid.

•Thetreatmentplantroadpavingprojectwasbid,awardedandconstructedandmostofthe roadsatthetreatmentplantwerepaved. Somesectionswereskipped duetoconstructionatthefacility.

CASHMANAGEMENT:TheinvestmentpolicyoftheAuthorityisguidedinlargepartbystatestatuteasdetailedin"NotestotheFinancialStatements",Note6.TheAuthorityhasadoptedacashmanagementplanwhichrequiresittodepositpublicfundsinpublicdepositoriesprotectedfromlossundertheprovisionsoftheGovernmentalUnitDepositProtectionAct("GUDPA").GUDPAwasenactedin1970toprotectGovernmentalUnitsfromalossoffundson depositwithafailedbankinginstitutioninNewJersey.ThelawrequiresgovernmentalunitstodepositpublicfundsonlyinpublicdepositorieslocatedinNewJersey,wherethefundsaresecured inaccordancewiththeAct.

RISKMANAGEMENT:TheAuthoritycarriesvariousformsofinsurance,includingbutnotlimitedtogeneralliability,excessliability,publicofficialsliability,automobileliabilityandcomprehensive/collision,hazardandtheftinsuranceonproperty,contents,andfidelitybonds.

OTHERINFORMATION:

IndependentAudit-Statestatutesrequireanannualauditbyindependentcertifiedpublicaccountantsorregisteredmunicipalaccountants.TheaccountingfirmofNisivocciaLLP.,wasselectedbytheAuthority.Theauditors'reportonthefinancialstatementsisincludedinthefinancialsectionofthisreport.Theauditors'reportrelatedspecificallytoGovernmentAuditingStandardsisincludedinthe GovernmentAuditingStandardssectionofthisreport.

TheHonorableChairmanandMembers

oftheBernardsTownshipSewerageAuthorityPage3

February24,2017ACKNOWLEDGEMENTS:

WewouldliketoexpressourappreciationtothemembersoftheBernardsTownshipSewerageAuthorityfortheirconcerninprovidingfiscalaccountabilitytothecitizensofBernardsTownshipandtherebycontributingtheirfullsupporttothedevelopmentandmaintenanceofourfinancialoperation.Thepreparationofthisreportcouldnothavebeenaccomplishedwithouttheefficientanddedicatedservicesofourfinancialandaccounting staff

Respectfully submitted,

ThomasTimkoAuthorityDirector

BERNARDS TOWNSHIPSEWERAGEAUTHORITYROSTEROFOFFICIALS

NOVEMBER30,2016

BoardMembers

CarolBianchiChairman

JohnMalayViceChairman

CarolynGazianoBoardMember

MaryPavliniBoardMember

JohnCarpenterBoardMember

CONSULTANTS ANDADVISORSAUDITFIRM

NisivocciaLLP

200ValleyRoad,Suite300 Mt.Arlington, NJ07856

ATTORNEY

JohnP.Belardo,Esq.

McElroy,Deutsch,Mulvaney Carpenter,LLP1300Mt.KembleAvenue

Morristown,NJ07962-2075

ENGINEER

MottMacDonald

111SouthWoodAvenueIselin,NJ08830

FINANCIAL SECTION

LLP

CertifiedPublicAccountants Advisors

IndependentAuditors'Report

TheHonorableChairmanandMembersoftheBernardsTownship

SewerageAuthorityBaskingRidge,NewJersey

ReportontheFinancialStatements

MountArlingtonCorporateCenter 200 ValleyRoad,Suite300Mt.Arlington,NJ07856

973-328-1825 1 973-328-0507 Fax

LawrenceBusinessCenter

11LawrenceRoad

Newton,NJ07860

973-383-6699 1973-383-6555 Fax

WehaveauditedtheaccompanyingfinancialstatementsoftheBernardsTownshipSewerageAuthority,(the"Authority"),acomponentunitofthe TownshipofBernardsasofandfortheyearendedNovember30,2016,andthe relatednotestothefinancialstatements,aslistedintheforegoing tableofcontents.

Management'sResponsibilityfortheFinancialStatements

ManagementisresponsibleforthepreparationandfairpresentationofthesefinancialstatementsinaccordancewithaccountingprinciplesgenerallyacceptedintheUnitedStatesofAmerica; thisincludesthedesign, implementation,andmaintenanceofinternalcontrolrelevanttothepreparationandfairpresentationoffinancialstatementsthatarefreefrommaterialmisstatement,whetherduetofraudorerror.

Auditors'Responsibility

Our responsibilityistoexpressopinionsonthesefinancialstatementsbasedonouraudit.Weconductedourauditin accordancewithauditingstandards generallyacceptedintheUnitedStatesofAmerica,auditrequirementsprescribedbytheDivisionofLocalGovernmentServices,DepartmentofCommunityAffairs,StateofNewJersey (the"Division"),andthestandardsapplicabletofinancialauditscontainedinGovernmentAuditingStandards,issuedbytheComptrollerGeneraloftheUnitedStates.Thosestandardsrequirethatweplanandperformtheaudittoobtainreasonableassuranceaboutwhetherthefinancial statementsarefreefrommaterialmisstatement.

Anauditinvolvesperformingprocedurestoobtainauditevidenceabouttheamountsanddisclosuresinthefinancialstatements. Theproceduresselecteddependontheauditor'sjudgment,includingtheassessmentoftherisksof materialmisstatementofthefinancialstatements,whetherduetofraudorerror.Inmakingthoserisk assessments,theauditorconsidersinternalcontrolrelevanttotheAuthority'spreparationand fairpresentationofthefinancialstatementsinordertodesignauditproceduresthatareappropriateinthecircumstances,butnotforthepurposeofexpressinganopinionontheeffectivenessoftheAuthority'sinternalcontrol.Accordingly,weexpressnosuchopinion.Anauditalsoincludesevaluatingtheappropriatenessofaccountingpoliciesusedandthereasonablenessof significantaccountingestimatesmadebymanagement,aswellasevaluatingtheoverall presentationofthefinancialstatements.

Webelievethattheauditevidencewehaveobtainedissufficientandappropriatetoprovideabasisforourauditopinions.

TheHonorableChairmanandMembersoftheBernardsTownshipSewerageAuthority

Page2

Opinions

Inouropinion,thecomponentunitfinancialstatementsreferredtoabove,presentfairly,inallmaterialrespects,thefinancialpositionoftheAuthorityasofNovember30,2016andtherespectivechangesinfinancialpositionandcashflowsthereoffortheyearthenendedinaccordance withaccountingprinciplesgenerallyacceptedintheUnitedStatesofAmerica.

EmphasisofMatter

AsdiscussedinNote6tothefinancialstatements,theAuthorityimplementedGovernmentalAccountingStandardsBoard("GASB")StatementNo.72,FairValueMeasurementandApplication,duringtheyearendedNovember30,2016.Ouropinionsarenotmodifiedwithrespecttothismatter.TheimplementationresultedinarestatementofcertainbalancesontheStatementofNetPositionandtheendingNetPositionasofNovember30,2015asdetailedinNote13.

OtherMatters

RequiredSupplementaryInformation

Accountingprinciplesgenerallyacceptedin theUnitedStatesofAmericarequirethatthemanagement'sdiscussionandanalysisandtherequiredsupplementaryinformationpensionschedulesandtherelatednotesbepresentedto supplement thefinancialstatements.Suchinformation,althoughnotapartofthefinancialstatements,isrequiredbytheGovernmentalAccountingStandardsBoardwhoconsidersittobeanessentialpartoffinancialreportingforplacingthefinancialstatementsinanappropriateoperational,economic,orhistoricalcontext.WehaveappliedcertainlimitedprocedurestotherequiredsupplementaryinformationinaccordancewithauditingstandardsgenerallyacceptedintheUnitedStatesofAmerica,whichconsistedofinquiriesofmanagementaboutthemethodsofpreparingtheinformationandcomparingtheinformationforconsistencywithmanagement'sresponsestoourinquiries,thefinancialstatements,andotherknowledgeweobtainedduringourauditofthefinancialstatements.Wedonotexpressanopinionorprovideanyassuranceontheinformationbecausethelimitedproceduresdonotprovideuswithsufficientevidencetoexpressanopinionorprovideanyassurance.

SupplementaryandOtherInformation

OurauditwasconductedforthepurposeofformingopinionsonthefinancialstatementsthatcollectivelycomprisetheAuthority'sfinancialstatements.Thesupplementarydatascheduleslistedinthetableofcontentsandtheotherinformationintheintroductorysection arepresentedforpurposesofadditionalanalysisandarenotarequiredpartofthefinancialstatements.

Thesupplementaryinformationschedulesaretheresponsibilityofmanagementandwerederivedfromandrelatedirectlytotheunderlyingaccountingandotherrecordsusedtopreparethefinancialstatements.Suchinformationhasbeensubjectedtotheauditingproceduresappliedintheauditofthefinancialstatementsandcertainadditionalprocedures,includingcomparingandreconcilingsuchinformationdirectlytotheunderlyingaccountingandotherrecordsusedtopreparethefinancialstatementsortothefinancialstatementsthemselves,andotheradditionalproceduresinaccordancewithauditingstandardsgenerallyacceptedintheUnitedStatesofAmerica.Inouropinion,thesupplementaryinformationschedulesarefairlystated,inallmaterialrespects,inrelationtothefinancialstatementsasawhole.

Theintroductorysectionhasnotbeensubjectedtotheauditingproceduresappliedintheauditofthefinancialstatements,andaccordingly,wedonotexpressanopinionorprovideanyassuranceonit.

TheHonorableChairmanandMembersoftheBernardsTownship

SewerageAuthorityPage3

OtherReportingRequiredbyGovernmentAuditingStandards

InaccordancewithGovernmentAuditingStandards,wehavealsoissuedourreportdatedFebruary24,2017onourconsiderationoftheAuthority'sinternalcontroloverfinancialreportingandonourtestsofitscompliancewithcertainprovisionsoflaws,regulations,contracts,andgrantagreementsandothermatters.Thepurposeofthatreportistodescribethe scopeofourtestingofinternalcontroloverfinancial reportingandcomplianceandtheresultsofthattesting,andnottoprovideanopiniononinternalcontroloverfinancialreportingoron compliance.Thatreportis anintegralpartofanauditperformedinaccordancewithGovernmentAuditingStandardsinconsideringtheAuthority's internalcontroloverfinancialreportingandcompliance.

MountArlington,NewJerseyFebruary24,2017

WilliamF.SchroederCertifiedPublicAccountant

RegisteredMunicipalAccountant#452

MANAGEMENTDISCUSSIONANDANALYSIS(Unaudited)

Thissectionpresentsmanagement'sanalysisoftheAuthority'sfinancialconditionandactivitiesfortheyear.Thisinformationshouldbereadinconjunctionwiththefinancialstatements.

FinancialHighlights

ManagementbelievestheAuthority'sfinancialpositionisstrong.TheAuthorityiswell withinitsstringentfinancialpoliciesandguidelinessetbytheBoardandmanagement. Thefollowingarekeyhighlights:

•TheAuthorityhasnooutstandingdebt.

•Operatingrevenueswere$5,196,506,anincreaseof$363,339comparedto2015mainlyduetoanincreaseinsewerchargesandconnectionfees.

•Non-operatingrevenueswere$91,124,adecreaseof$102,940comparedto 2015primarilyduetoanincreaseininterestincomeandadecreaseininvestmentincome.

OverviewoftheFinancialStatements

TheManagement'sDiscussionandAnalysis(MD&A)servesasanintroductionto, andshouldbereadinconjunctionwith,theauditedfinancialstatementsandsupplementaryinformation.TheManagement'sDiscussionandAnalysisrepresentsmanagement'sexaminationandanalysisoftheAuthority'sfinancialconditionandperformance.Summaryfinancialstatementdata,keyfinancialandoperationalindicatorsusedintheAuthority'sstrategicplan,budget,andothermanagementtoolswereusedforthisanalysis.

ThefinancialstatementsreportinformationabouttheAuthorityusingfullaccrualaccountingasutilizedbysimilargovernmentactivities.The financialstatementsincludeastatementofnetposition;astatementofrevenue,expenses,andchangesinnetposition;astatement ofcashflowsandnotestothefinancialstatements.

ThestatementofnetpositionpresentsthefinancialpositionoftheAuthorityonafullaccrualhistoricalcostbasis.ThestatementofnetpositionpresentsinformationonalloftheAuthority'sassetsandliabilities,aswellasdeferredinflowsandoutflows,withthedifferencereportedasnetposition.Overtime,increasesanddecreasesinnet positionisoneindicatorofwhetherthefinancialpositionoftheAuthorityisimprovingordeteriorating.

Whilethestatementofnetpositionprovidesinformationaboutthenatureandamountofresourcesandobligationsatyear-end,thestatementofrevenue,expenses,andchangesinnetpositionpresentstheresultsofthebusinessactivitiesoverthecourseofthefiscalyearandinformationas tohowthenetpositionchangedduringtheyear.Allchangesinnetpositionarereportedassoonastheunderlyingeventgivingrisetothechangeoccurs,regardlessofthetimingoftherelatedcashflows.ThisstatementalsoprovidescertaininformationabouttheAuthority'srecoveryofitscosts.Ratesettingpoliciesusedifferentmethodsofcostrecoverynotfullyprovidedforbygenerallyacceptedaccountingprinciples.Theprimaryobjectivesoftheratemodelaretoimproveequityamongcustomerclassesandensurethatcapitalcostsareallocated onthebasisoflong-termrequirements.

Thestatementofcashflowspresentschangesincashandcashequivalents, resultingfromoperational,financing,andinvestingactivities.Thisstatement presentscashreceiptsandcashdisbursementinformation,withoutconsiderationoftheearningsevent,whenanobligationarises,ordepreciationofcapitalassets.

Thenotestothefinancialstatementsproviderequireddisclosuresandotherinformationthatareessentialtoafullunderstandingofmaterialdataprovidedinthestatements.Thenotes presentinformationconcerningtheAuthority's accountingpolicies,significant accountbalancesandactivities,materialrisks,obligations,commitments,contingencies andsubsequentevents,ifany.

FinancialConditions

TheAuthority's financialconditionremainedstrongatyear-endwithadequateliquidassets,reliableplantsandsystemstomeetdemand, andareasonablelevel ofunrestrictednetposition.Thecurrentfinancialcondition,technicalsupportstaffcapabilities,andoperatingandexpansionplanstomeetanticipated customerneedsarewellbalancedandundercontrol.

TheAuthority'stotalnetpositionincreasedfromtheprioryearby$920,791.TheanalysisbelowfocusesontheAuthority'snetposition(Table I)andchangesinnetposition(TableII)duringtheyear.

TableI

CondensedStatementofNetPosition

November30, / Increase/ / Percentageof
(Restated) / (Decrease) / Increase/
20162015 / From2015 / (Decrease)
Current andOtherAssets / $ 14,506,308 / $ 14,622,759 / $(116,451) / (0.80)%
Noncurrent Assets / 25,411,305 / 23,657,051 / 1,754,254 / 7.42
TotalAssets / 39,917,613 / 38,279,810 / 1,637,803 / 4.28

DeferredOutflowsof

Resources518,443129,182389,261301.33

CurrentLiabilities / 3,693,353 / 2,968,341 / 725,012 / 24.42
Long-TermLiabilities / 2,533,390 / 2,074,485 / 458,905 / 22.12
TotalLiabilities / 6,226,743 / 5,042,826 / 1,183,917 / 23.48

DeferredInflowsof

Resources38,970116,614(77,644)(66.58)

NetInvestmentinCapitalAssets / 25,411,305 / 23,657,051 / 1,754,254 / 7.42
Unrestricted / 8,759,038 / 9,592,501 / (833,463) / (8.69)

TotalNet Position$ 34,170,343$ 33,249,552$920,7912.77 %

Totalnetpositionincreased2.77%.Thiswasprimarilyaresultofanincrease incapitalassets.

ChangesintheAuthority'snetposition canbedeterminedbyreviewingthefollowingcondensed Statementof Revenue,ExpensesandChangesinNetPositionfortheyear.

Revenue

Table II

CondensedStatementofRevenue,ExEensesandChanesinNetPosition

November30,Increase/Percentageof

(Restated)(Decrease)Increase/

20162015From2015(Decrease)

OperatingRevenue$5,196,506$4,833,167$363,3397.52 %

NonoperatingRevenue91,124194,064(102,940)(53.04)

TotalRevenue5,287,6305,027,231260,3995.18

Exgenses

Operating Appropriations3,406,4372,910,873495,56417.02

Depreciation960,402966,575(6,173)(0.64)TotalExpenses 4,366,839 3,877,448 489,391 12.62

SpecialItem-LossonDisposalof

Equipment / (7,250) / 7,250 / 100.00
IncreaseinNetPosition / 920,791 / 1,142,533 / (221,742) / (19.41)
BeginningNetPosition / 33,249,552 / 32,107,019 / 1,142,533 / 3.56
EndingNetPosition / $ 34,170,343 / $ 33,249,552 / $920,791 / 2.77 %
ResultsofOperations

OperatingRevenue:Revenuefromoperationsfallsintotwocategories:sewerservicefeesandsewerconnectionfees.Seweroperatingrevenueincreased7.52%comparedto2015.

BudgetaryHighlights: NobudgetamendmentsweremadetotheAuthority's2016originaladoptedbudget.NonoperatingRevenue: TheAuthority'snonoperatingrevenuedecreased53.04%from2015.

Expenses:Operatingexpensesforthesewersystemincreased$495,564or17.02%from2015anddepreciationexpensedecreased$6,173or0.64%.

CapitalAssets:AsofNovember30,2016,theAuthorityhad$25.41millioninvestedincapitalassets,includingland,constructioninprogressandsewagecollectionsystemsincluding pumpingstations.Theamountrepresentsanincreaseof$1,754,254overtheprioryear.TheAuthorityhasawardedcontractsforplanthydraulicimprovements,theconstructionofMadisonvillepumpstation,HarrisonBrookrehabdesignandconstructionandvariousotherimprovements,whicharescheduledtobecompletedoverthenextfewyears.

ThefollowingtablesummarizestheAuthority'scapitalassets,netofaccumulateddepreciationandchangestherein,fortheyearendedNovember30,2016.ThesechangesarepresentedindetailinNote3tothefinancialstatements.

TableIII

Ca.eitalAssets,NetofAccumulatedDepreciation

Increase/Percentageof

November30,(Decrease)Increase/

20162015From2015(Decrease)

Land / $44,000 / $44,000
ConstructioninProgress / 8,079,049 / 5,415,270 / $2,663,779 / 49.19 %
LandImprovements / 367,005 / 361,265 / 5,740 / 0.00
Buildings/TreatmentPlant / 18,296,968 / 18,296,968
TransmissionFacilities / 10,188,492 / 10,188,492 / 0.00
Equipment/Vehicles / 5,288,395 / 5,247,963 / 40,432 / 0.77
Total / 42,263,909 / 39,553,958 / 2,709,951 / 6.85
Less:
AccumulatedDepreciation / 16,852,604 / 15,896,907 / 955,697 / 6.01
CapitalAssets, Netof
Depreciation / $25,411,305 / $ 23,657,051 / $1,754,254 / 7.42 %

CashFlowActivity: Cashandcashequivalentsdecreasedby$168,602,or1.17%fromthepreviousyear. TheAuthoritymaintainsahealthycashbalancetomeetfutureemergenciesandcapitalrequirements.

Long-TermDebt:Atyearend,theAuthoritycontinuedtobe debt free.

FinalComments:Infrastructure improvements, aswellasvehicleandequipmentreplacement continuetobeapriorityoftheAuthority.Upgradestotheseweragesystemareplannedasthe systemages.

BERNARDS TOWNSHIP SEWERAGEAUTHORITYSTATEMENTOFNETPOSITION

NOVEMBER 30,2016

1of2

ASSETS

CurrentAssets:UnrestrictedAssets:

CashandCashEquivalents / $14,162,418
SewerChargesReceivable / 60,804
Investments / 226,445
TotalUnrestrictedAssets / 14,449,667

RestrictedAssets:DevelopersEscrow:

CashandCashEquivalents / 56,641
TotalRestrictedAssets / 56,641
TotalCurrentAssets / 14,506,308

NoncurrentAssets:CapitalAssets,Net:

Sites(Land)andConstructioninProgress
Depreciable SiteImprovements, Buildings,TreatmentPlant,Transmission Facilities andEquipment/Vehicles / 8,123,049
17,288,256
TotalNoncurrent Assets / 25,411,305
TOTALASSETS / 39,917,613
DEFERREDOUTFLOWSOFRESOURCES
ChangesinAssumptions-Pensions / 260,295
ChangesinProportion-Pensions / 110,160
DifferenceBetweenExpectedandActual Experience -PensionsContributionSubsequenttotheMeasurementDate-Pensions / 57,823
90,t65
TotalDeferredOutflowsofResources / 518,443

BERNARDS TOWNSHIP SEWERAGEAUTHORITYSTATEMENTOFNETPOSITION

NOVEMBER 30,2016

(Continued)

2of 2

LIABILITIES

CurrentLiabilitiesPayablefromUnrestrictedAssets:

AccountsPayable / $650,095
ContractsPayable / 2,976,716
Prepaid ServiceCharges / 9,901
TotalCurrentLiabilitiesPayablefromUnrestrictedAssets / 3,636,712

CurrentLiabilitiesPayablefromRestrictedAssets:

EscrowDepositsPayable / 56,641
TotalCurrentLiabilitiesPayablefromRestrictedAssets / 56,641
TotalCurrentLiabilities / 3,693,353

Long-TermLiabilities:

NetPensionLiability / 2,423,782
CompensatedAbsencesPayable / 109,608
TotalLong-TermLiabilities / 2,533,390
TotalLiabilities / 6,226,743
DEFERREDINFLOWSOFRESOURCES:
InvestmentGains-Pensions / 38,970
TotalDeferredInflowsofResources / 38,970
NETPOSITION
NetInvestmentinCapitalAssets / 25,411,305
Unrestricted / 8,759,038
TotalNetPosition / $34,170,343

THEACCOMPANYING NOTESTOFINANCIAL STATEMENTSAREANINTEGRALPARTTOTHISSTATEMENT

BERNARDS TOWNSHIPSEWERAGEAUTHORITYSTATEMENTOFREVENUE,EXPENSES,ANDCHANGESINNETPOSITION

FORTHEYEARENDEDNOVEMBER30,2016

OperatingRevenue:SewerCharges / $4,648,750
ConnectionFees / 114,552
OtherFeesandIncome / 433,204
TotalOperatingRevenue / 5,196,506
OperatingExpenses:OperatingAppropriations / 3,406,437
Depreciation / 960,402
TotalOperatingExpenses / 4,366,839
OperatingIncome / 829,667
NonoperatingRevenue:InterestIncome / 39,839
InvestmentIncome / 51,285
TotalNonoperatingRevenue / 91,124
IncreaseinNetPosition / 920,791
Net Position, Beginning ofYear(Restated) / 33,249,552
NetPosition, EndofYear / $34,170,343

THEACCOMPANYINGNOTESTOFINANCIALSTATEMENTSAREANINTEGRALPARTTOTHISSTATEMENT

BERNARDSTOWNSHIPSEWERAGEAUTHORITYSTATEMENTOFCASHFLOWS

FORTHEYEARENDEDNOVEMBER30.2016

CASHFLOWSFROMOPERATINGACTIVITIES

CashReceivedfromCustomers

CashPaidtoSuppliersandEmployees

NetCashProvidedbyOperatingActivities

CASHFLOWSFROMCAPITALANDRELATEDFINANCINGACTIVITIES

PurchaseofCapitalAssets

NetCashUsed forCapitalandRelatedFinancingActivitiesCASHFLOWSFROMINVESTINGACTIVITIES

$5,199,176

(2,069,959)

3,129,217

(3,337,658)

NetCashProvidedbyOperatingActivities

THEACCOMPANYINGNOTESTOFINANCIALSTATEMENTSAREANINTEGRALPARTTOTHIS STATEMENT

$3,129,217

BERNARDSTOWNSHIPSEWERAGEAUTHORITYNOTESTOFINANCIALSTATEMENTS

YEARENDEDNOVEMBER30,2016

Note1-NatureofAuthority

TheAuthoritywascreated inaccordancewith theStateMunicipalUtilitiesAuthoritiesLaw(P.L.1957,Chap.183),byordinanceoftheTownshipofBernardsonMay22,1956.

Pursuanttotheprovisionsofthelaw,theAuthorityisauthorizedtoacquire,construct,maintain,operateorimproveworksforthecollection,treatment,purificationordisposalofsewerageorotherwastes.

Asapublicbody,under existingstatute,theAuthorityisexemptfrombothfederalandstatetaxes.

Note2:SummaryofSignificantAccountingPolicies

A.BasisofPresentationandAccounting

TheAuthorityutilizestheaccrualbasisofaccountingwherebyrevenueisrecordedas earnedandexpensesarereflectedastheliabilityisincurred.Operatingrevenue,suchaschargesforservicesresultfromexchangetransactionsassociatedwiththeprincipalactivityoftheAuthority.Exchangetransactionsarethoseinwhicheachpartyreceivesandgivesupessentiallyequalvalue.Nonoperatingrevenue,suchassubsidiesandinvestmentearnings,results fromnonexchangetransactionsorancillaryactivities.Nonexchangetransactions,inwhichtheAuthoritygivesorreceivesvaluewithoutdirectlyreceivingorgivingequalvalueinexchange,generallydonotoccur,withtheexceptionofinvestmentearningsandinterestexpense.

AllactivitiesoftheAuthorityareaccountedforwithinasingleproprietary(enterprise)fund.Proprietaryfundsareusedtoaccountforoperationsthatare(a)financedandoperatedinamannersimilartoprivatebusinessenterpriseswheretheintentofthegoverningbodyisthatthecosts(expenses,includingdepreciation)ofprovidinggoodsorservicestothegeneralpubliconacontinuingbasisbe financedorrecoveredprimarilythroughuser changes;or(b)wherethegoverningbodyhasdecidedthatperiodicdeterminationofrevenueearned,expensesincurred,and/ornetincomeisappropriateforcapitalmaintenance,publicpolicy,managementcontrol,accountability,orotherpurposes.

TheaccountingandfinancialreportingtreatmentappliedtotheAuthorityisdeterminedbyitsmeasurementfocus.ThetransactionsoftheAuthorityareaccountedforonaflowofeconomicresourcesmeasurementfocus.Withthismeasurementfocus,allassetsandallliabilitiesassociatedwiththeoperationsareincludedon theStatementofNetPosition.Netposition(i.e.,totalsassetsnetoftotalliabilities)aresegregatedinto"Netinvestmentincapitalassets"and"unrestricted"components.

ReportingEntity

GovernmentalAccountingStandardsBoardpublicationCodificationofGovernmentalAccountingand Financial Reporting Standards section 2100, "Defining the Financial Reporting Entity",establishesstandardstodeterminewhetheragovernmentalcomponentunitshouldbeincludedinthefinancialreportingentity. Thebasiccriterionforinclusionorexclusionfrom thefinancialreportingentityis theexerciseofoversightresponsibilityoveragencies,boardsandcommissionsby the primary government. The exercise of oversight responsibility includesfinancialinterdependencyandaresultingfinancialbenefitorburdenrelationship, selectionofgoverningauthority, designation of management, ability to significantly influence operations, andaccountabilityforfiscalmatters.

BERNARDSTOWNSHIPSEWERAGEAUTHORITYNOTESTOTHEFINANCIAL STATEMENTS

YEARENDEDNOVEMBER30,2016

(Continued)Note2:SummaryofSignificantAccountingPolicies(Cont'd)

ReportingEntity(Cont'd)

Inaddition,certainlegallyseparatetax-exemptentitiesthatmeetspecificcriteria(i.e.,benefitofeconomicresources, access/entitlementtoeconomicresources,andsignificances)shouldbeincludedinthefinancialreportingentity.TheAuthorityisalegallyseparateorganization,whosemembersareappointedbytheCommitteeoftheTownshipofBernards.FinancialtransactionsareprocessedandaccountedforbytheTownship'sfinancialadministration.Accordingly,theAuthorityisconsideredtobeacomponentunitoftheTownshipofBernardsundertheprovisionsofGovernmentalAccountingStandardsBoards,CodificationSection2100.Therewerenoadditionalentitiesrequiredtobeincludedinthereportingentityunderthecriteriaasdescribedabove.

B.Grants

Recognitionofrevenuefromgrantsisbasedontheaccrualbasisofaccounting.Grantfundsreceivedbeforecostsareincurredareunearned.

Grantrelatedexpendituresincurredinadvanceofreceiptofgrantfundsresultintherecordingofreceivablesandrevenue.Grantsnotexternallyrestrictedandutilizedtofinanceoperationsareidentifiedasnonoperatingrevenue.TheAuthoritydidnotreceiveanygrantawardsduringthecurrentfiscalyear.

C.Inventories

Thecostofinventoriesofsuppliesisrecordedasexpensesatthetimeindividualitemsarepurchased,sincetheyareimmaterialtothefinancialpositionandresultsofoperations.

D.CashandCashEquivalents

Amountsincludepettycash,changefunds,oramountsondeposit,andshort-terminvestmentswithoriginalmaturitiesofthreemonthsorless.

E.Investments

Investmentsarestatedatcostwhichapproximatesmarket.TheAuthorityclassifiescertificatesofdepositwhichhaveoriginalmaturitydatesofmorethanthreemonthsbutlessthantwelvemonthsfromthedateofpurchase,asinvestments.

F.UseofEstimates

Thepreparationoffinancialstatementsinconformitywithgenerallyacceptedaccountingprinciplesrequiresmanagementtomakeestimatesandassumptionsthataffectthereportedamountsofassetsandliabilitiesanddisclosure ofcontingentassetsandliabilitiesatthedateofthefinancialstatementsandthereportedamountsofrevenueandexpensesduringthereportingperiod. Actualresultscoulddifferfromtheestimates.

BERNARDS TOWNSHIP SEWERAGEAUTHORITYNOTESTOFINANCIAL STATEMENTS

YEARENDEDNOVEMBER30,2016

(Continued)Note2:SummaryofSignificantAccountingPolicies(Cont'd)

G.CompensatedAbsences

TheAuthorityaccountsforcompensatedabsences(e.g.,unusedvacation,sickleave)asdirectedbyGovernmentalAccountingStandardsBoardStatementNo.16(GASB16),AccountingforCompensatedAbsences.Aliabilityforcompensatedabsencesattributabletoservicesalreadyrenderedandnotcontingentona specificeventthatis outsidethecontroloftheemployerandemployeeisaccruedasemployeesearnedtherightstothebenefits.

TheAuthority'spoliciesregardingsicktimepermitemployeestoaccumulateearnedbutunusedsickleave.Theliabilityforthesecompensatedabsencesisrecordedasalong-termliability. Thebalance asofNovember30,2016is$109,608.

IntheStatementofNetPosition,theliabilities,whoseaveragematuritiesaregreaterthanoneyear,shouldbereportedintwocomponents-theamountduewithinoneyearandtheamountdueinmorethanoneyear.

H.NetPosition

NetPositionisthedifferencebetween(a)assetsanddeferredoutflowsofresourcesand(b)liabilitiesanddeferredinflowsofresources.

AdeferredoutflowofresourcesisaconsumptionofnetpositionbytheAuthoritythatisapplicable toafuturereportingperiod.TheAuthorityhaddeferredoutflows ofresourcesatNovember30,2016,forthechangesinassumptionsinpensions, changesinproportioninpension,thedifference betweenexpectedandactualpensionexperienceandtheAuthoritycontributionsubsequenttothemeasurementdaterelatedtopensionsatNovember,30,2016.

AdeferredinflowofresourcesisanacquisitionofnetpositionbytheAuthoritythatisapplicabletoafuturereportingperiod. TheAuthorityhadadeferredinflowofresourcesatNovember30,2016,forthenetdifferencebetweenprojectedandactualinvestmentearningsonpensionplaninvestments.

Netpositionis displayedinthreecomponents-netinvestmentincapitalassets;restrictedandunrestricted.

Thenetinvestmentincapitalassetscomponentofnetpositionconsistsofcapitalassets,netofaccumulateddepreciation,reducedbytheoutstandingbalancesofborrowingsthatareattributabletotheacquisition,construction,orimprovementofthoseassets.Deferred outflowsofresourcesanddeferredinflowsofresourcesthatareattributabletotheacquisition,construction,orimprovementofthoseassetsorrelateddebtalsowouldbeincludedinthiscomponentofnetposition.

Therestrictedcomponentofnetpositionconsistsofrestrictedassetsreducedbyliabilitiesanddeferredinflowsofresourcesrelatedtothoseassets.

Theunrestrictedcomponentofnetpositionisthenetamountoftheassets,deferredoutflowsofresources,liabilities,anddeferredinflowsofresourcesthatarenotincludedinthedeterminationofnetinvestmentincapitalassetsortherestrictedcomponentofnetposition.

BERNARDSTOWNSHIPSEWERAGEAUTHORITYNOTES TOFINANCIALSTATEMENTS

YEARENDEDNOVEMBER30,2016

(Continued) Note2:SummaryofSignificantAccountingPolicies(Cont'd)

I.DesignatedAmounts

AsofNovember30,2016,theAuthorityhadnotinternallydesignatedanyfunds.

J.RestrictedCashAccount

TheAuthorityhasestablishedarestrictedescrowaccounttoholdthecashportionofperformancebondsrequiredtobepostedbydeveloperswhoseworkaffectstheAuthority.Thesecurityportionofsuchdeposits,togetherwithinterestearnedonthatportion,isrefundedtothedeveloper,oncetheworkhasbeensatisfactorilycompleted.AtNovember30,2016,$56,641wasrestrictedforthispurpose.

K.RevenueRecognition

ThemajorityoftheAuthority'scustomersareresidential.However,thereareseveralcommercialcustomerswhoarechargedadifferentusagerate.Allcustomersarebilledquarterlybasedonactual usagereadings.Estimatesbasedonpriorusageareutilizedwhereactual readingscannotbeobtained.Adjustmentsforactualusageareappliedtothefollowingquarter'sbillortothefirstquarterforwhichanactualreadingcanbeobtained.Revenueisrecordednetofanydiscounts,assessmentsorabatements,ifapplicable.

L.AllowanceforUncollectibleAccounts

Allreceivablesarereported attheirgrossvaluesand,whereappropriate,arereducedbytheestimatedportionthatisexpectedtobe uncollectible.TheallowanceisestablishedatthediscretionofmanagementoftheAuthorityasdeemednecessarybasedonpriorcollectionhistory.

M.Pensions

Forpurposesofmeasuringthenetpensionliability,deferredoutflowsofresourcesanddeferredinflowsofresourcesrelatedtopensions,andpensionexpense,informationabout thefiduciarynetpositionoftheStateofNewJerseyPublicEmployees'RetirementSystem(PERS)andadditionsto/deductionsfromthePERS'snetpositionhavebeendeterminedonthesamebasisastheyarereportedbythePERS.Forthis purpose,benefitpayments(includingrefundsofemployeecontributions)arerecognizedwhendueandpayableinaccordancewiththebenefitterms.PensionPlaninvestmentsarereportedat fairvalue.

BERNARDSTOWNSHIPSEWERAGEAUTHORITYNOTESTOFINANCIALSTATEMENTS

YEARENDEDNOVEMBER30,2016

(Continued)

Note3:CapitalAssets

Capital assets,balancesandactivityfortheyearendedNovember30,2016wereasfollows:

(Decrease)/

2015AdditionsAdjustment2016

Land / $44,000 / $44,000
ConstructioninProgress / 5,415,270 / $3,286,781 / $(623,002) / 8,079,049
LandImprovements / 361,265 / 10,445 / (4,705) / 367,005
Buildings/TreatmentPlant / 18,296,968 / 18,296,968
TransmissionFacilities / 10,188,492 / 10,188,492

Equipment/Vehicles5,247,96340,4325,288,395 Total 39,553,958 3,337,658 (627,707) 42,263,909

AccumulatedDepreciation(15,896,907)(960,402)4,705(16,852,604)

$23,657,051$2,377,256$(623,0022$25,411,305

Propertyandequipmentarerecordedatcost.Depreciationisprovidedonthestraight-linemethodovertheestimatedusefullivesoftherespectiveassets.Maintenanceandrepairsarechargedtoexpenseasincurred;majorrenewalsandbettermentsarecapitalized.Capitalassetswerereviewed forimpairment.

TheAuthoritytransferred$-0-ofcompletedcapitalprojectstodepreciablecapitalassetsduringtheyear.AsofNovember30,2016,theAuthorityhas $8,079,049inactiveconstructionprojects.

Majorclassesofproperty, plantandequipmentandtheirestimatedusefullivesaresummarizedbelow:

Building-AdministrationTreatmentPlantTransmissionFacilities Equipment/Vehicles

Estimated

UsefulLife

40Years

5Years

Note4:Long-TermDebt

AsofNovember30,2016,theAuthorityhadnooutstandingbondsornotesissuedorauthorizedbutnotissueddebt.

NetPensionLiability

ThePublicEmployee'sRetirementSystem(PERS)netpensionliabilityisrecordedinthecurrentandlong-termliabilities.ThecurrentportionofthenetpensionliabilityatNovember30,2015is$-0-andthelongtermportionis$2,423,782.SeeNote5forfurtherinformationonthePERS.

BERNARDSTOWNSHIPSEWERAGEAUTHORITYNOTESTOFINANCIALSTATEMENTS

YEARENDEDNOVEMBER30,2016

(Continued)

Note5:Pension

SubstantiallyalloftheAuthority'semployeesparticipateintheStateofNewJerseyPublicEmployee's RetirementSystem(PERS).

Public Employees'RetirementSystem(PERS)PlanDescription

TheStateofNewJersey,PublicEmployees'RetirementSystem(PERS)isacost-sharingmultipleemployerdefinedbenefit pensionplanadministeredby theStateofNewJersey,DivisionofPensionsandBenefits(theDivision).ForadditionalinformationaboutthePERS,pleaserefertotheDivision'sComprehensiveAnnualFinancialReport(CAFR)which canbefoundat

BenefitsProvided

ThevestingandbenefitprovisionsaresetbyN.J.S.A.43:15A.PERSprovidesretirement,deathanddisabilitybenefits.Allbenefitsvestaftertenyearsofservice,exceptformedicalbenefits,whichvestafter2.5yearsofserviceorunderthedisabilityprovisionsofPERS.ThefollowingrepresentsthemembershiptiersforPERS:

TierDefinition

1Memberswhowereenrolled priortoJuly1,2007

2MemberswhowereeligibletoenrollonorafterJuly1,2007andpriortoNovember2,2008

3Memberswhowereeligibletoenrollonor afterNovember2,2008andpriortoMay22,2010

4Memberswhowereeligibleto enrollonorafterMay22,2010andpriortoJune28.2011

5Memberswhowereeligibleto enrollonor afterJune28,2011

Serviceretirementbenefitsof1/55thoffinalaveragesalaryforeachyearof servicecreditisavailabletoTiers1and2membersuponreachingage60andtoTier3membersuponreachingage62.Serviceretirementbenefitsof1/60thoffinalaveragesalaryforeachyearofservicecreditisavailabletoTier4 membersuponreachingage62andtoTier5membersuponreachingage65.EarlyretirementbenefitsareavailabletoTiers1and2membersbeforereachingage60,toTiers3and4beforeage62with25ormoreyearsofservicecreditandTier5with30ormoreyearsofservicecreditbeforeage65.Benefitsarereducedbyafractionofapercentforeachmonththatamemberretirespriortotheageatwhichamembercanreceivefullearlyretirementbenefitsinaccordancewiththeirrespectivetier.Tier1memberscanreceiveanunreducedbenefitfromage50toage60ifthey haveatleast25yearsof service.Deferredretirementisavailabletomemberswhohaveatleast10yearsofservicecreditandhavenotreachedtheserviceretirementagefortherespectivetier.

Contributions

ThecontributionpolicyforPERSissetbyN.J.S.A.15Aandrequirescontributionsbyactivemembersandcontributingmembers.Thelocalemployers'contributionamountsarebasedonanactuariallydeterminedratewhichincludesthenormalcostandunfundedaccruedliability.Chapter19,P.L.2009providedanoptionforlocalemployersofPERStocontribute50%ofthenormalandaccruedliabilitycontributionamountscertifiedforpaymentsdueinStatefiscalyear2009.Suchemployerswillbecreditedwiththefullpaymentandanysuchamountswillnotbeincludedintheirunfundedliability.

BERNARDSTOWNSHIP SEWERAGEAUTHORITYNOTESTOFINANCIAL STATEMENTS

YEARENDEDNOVEMBER 30,2016

(Continued)

Note5:Pension(Cont'd)

PublicEmployees'RetirementSystem(PERS)(Cont'd)Contributions(Cont'd)

Theactuaries willdeterminethe unfundedliabilityofthoseretirementsystems,byemployer,forthe reducednormalandaccruedliabilitycontributionsprovidedunderthislaw.Thisunfundedliabilitywillbepaidbytheemployerinlevelannualpaymentsoveraperiodof15yearsbeginningwiththepaymentsdueinthefiscalyearendedJune30,2012andwillbeadjustedbytherateofretumontheactuarialvalueofassets. AuthoritycontributionstoPERSamountedto$92,828for2016.

Theemployeecontributionratewas7.06%effectiveJuly1,2015andincreasedto7.34%effectiveJuly1,2016.SubsequentincreasesafterOctober1,2011arebeingphasedinover7yearseffectiveoneachJuly1sttobringthetotalpensioncontributionrateto7.5%ofbasesalaryasofJuly1,2018.

Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows ofResourcesRelatedtoPensions

AtNovember30,2015,theAuthority'sliabilitywas$2,423,782foritsproportionateshareofthenetpensionliability.The netpensionliabilitywasmeasuredasofJune30,2015,andthetotal pension liabilityusedtocalculatethenetpensionliabilitywasdeterminedbyanactuarialvaluationasofJuly1,2014whichwasrolledforwardtoJune30,2015.TheAuthority'sproportionofthenetpensionliabilitywasbasedonaprojectionoftheAuthority'slong-termshareofcontributionstothepensionplanrelativetotheprojectedcontributionsofallparticipatingmembers,actuariallydetermined.AtJune30,2015,theAuthority'sproportionwas0.011%,whichwasanincreaseof0.0003%fromitsproportionmeasuredasofJune30,2014.TheAuthorityhasrolledforwardthenetpensionliabilitytoNovember30,2015with noadjustments. TheStateofNewJerseyPublicEmployee'sRetirementSystem(PERS)'valuationcycleisJuly 1insteadofNovember30.Therollforwardmethodologyputsthemayearinarrearsintermsofvaluation.

FortheyearendedNovember30,2016,theAuthorityrecognizedactualpensionexpenseintheamountof

$183,324.AtNovember30,2015,theAuthorityreporteddeferredoutflowsofresourcesanddeferredinflowsofresourcesrelatedtopensionsfromthefollowingsources:

BERNARDSTOWNSHIPSEWERAGEAUTHORITYNOTESTOFINANCIALSTATEMENTS

YEARENDEDNOVEMBER30,2016

(Continued)

Note5:Pension(Cont'd)

PublicEmployees'RetirementSystem(PERS)(Cont'd)

Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows ofResourcesRelatedtoPensions(Cont'd)

Deferral / AmortizationPeriod / DeferredOutflowsof / DeferredInflowsof
YearinYearsResourcesResources
ChangesinAssumptions / 2014 / 6.44 / $51,883
2015 / 5.72 / 208,412
DifferenceBetweenExpectedandActualExperience / 2015 / 5.72 / 57,823
ChangesinProportion / 2014 / 6.44 / 55,216
2015 / 5.72 / 54,944
NetDifference BetweenProjectedandActual / 2014 / 5.00 / $90,355
InvestmentEarningsonPensionPlanInvestments / 2015 / 5.00 / (51,385)

ContributionMadeSubsequenttothe

MeasurementDate20151.0090,165

$518,443$38,970

Amountsreportedasdeferredoutflowsofresourcesanddeferredinflowsofresources(excludingemployerspecificamountsincludingchangesinproportionandtheAuthoritycontributionsubsequent to themeasurementdate)relatedtopensionswillberecognizedinpensionexpenseasfollows:

YearEnding

November30,Total

2016$50,819

201750,819

201850,819

201980,937

202045,754

$279,148

Actuarial Assumptions

ThetotalpensionliabilityfortheJune30,2015measurementdatewasdeterminedbyanactuarialvaluationasofJuly1,2014which wasrolledforwardtoJune30,2015.This actuarialvaluationusedthefollowingactuarialassumptions:

InflationRateSalaryIncreases:

2012-2021

ThereafterInvestmentRateofReturn

3.04%

2.15-4.40%basedonage

3.15-5.40%basedonage7.90%

BERNARDS TOWNSHIP SEWERAGEAUTHORITYNOTESTOFINANCIALSTATEMENTS

YEARENDEDNOVEMBER30,2016

(Continued)

Note5:Pension(Cont'd)

PublicEmployees'RetirementSystem(PERS)(Cont'd)ActuarialAssumptions(Cont'd)

Mortalityrateswerebased ontheRP-2000CombinedHealthyMaleandFemaleMortality Tables

(setback1year forfemales)forserviceretirementandbeneficiariesofformermemberswithadjustmentsformortalityimprovementsfromthebaseyearof2012basedonProjectionScaleAA.TheRP-2000DisabledMortalityTables(setback3yearsformalesand setbackoneyearforfemales)areusedtovaluedisabledretirees.

TheactuarialassumptionsusedintheJuly1, 2014valuationwerebasedontheresultsofanactuarialexperiencestudyfortheperiodJuly1,2008toJune30, 2011.Itislikelythatfutureexperiencewillnotexactlyconformtotheseassumptions.Totheextentthatactualexperiencedeviatesfromtheseassumptions,theemergingliabilitiesmaybehigherorlowerthananticipated.Themore theexperiencedeviates,thelargertheimpactonfuturefinancialstatements.

LongTermExpectedRateofReturn

InaccordancewithStatestatute,thelong-termexpectedrateofreturnonpensionplaninvestments(7.90% atJune30,2015)isdeterminedbytheStateTreasurer,after consultationwiththeDirectorsoftheDivisionofInvestmentsandDivisionofPensionsand Benefits,theBoardofTrusteesandtheactuaries.Thelong-termexpectedrateofreturnwasdeterminedusingabuildingblockinwhichbest-estimaterangesofexpectedfuturerealratesofreturn(expected_returns,netofpensionplaninvestmentexpenseandinflation)aredevelopedforeachmajorassetclass.Theserangesarecombinedtoproducethelongtermexpectedrateofreturnbyweightingtheexpectedfuturerealratesofreturnbythetargetassetallocationpercentageand byaddingexpectedinflation.Bestestimatesof arithmeticrealratesofreturnforeachmajorassetclassincludedinPERS'targetassetallocationasofJune30,2015aresummarizedinthefollowingtable:

Long-TermExpectedReal

TargetRateof

AssetClassAllocationReturn

Cash / 5.00% / 1.04%
U.S.Treasuries / 1.75% / 1.64%
InvestmentGradeCredit / 10.00% / 1.79%
Mortgages / 2.10% / 1.62%
HighYieldBonds / 2.00% / 4.03%
Inflation-Indexed Bonds / 1.50% / 3.25%
BroadU.S.Equities / 27.25% / 8.52%
DevelopedForeignEquities / 12.00% / 6.88%
EmergingMarketEquities / 6.40% / 10.00%
PrivateEquity / 9.25% / 12.41%
HedgeFunds/AbsoluteReturn / 12.00% / 4.72%
RealEstate(Property) / 2.00% / 6.83%
Commodities / 1.00% / 5.32%
GlobalDebtex.U.S. / 3.50% / -0.40%
REIT / 4.25% / 5.12%

BERNARDSTOWNSHIPSEWERAGEAUTHORITYNOTESTOFINANCIALSTATEMENTS

YEARENDEDNOVEMBER30,20I6

(Continued)

Note5:Pension(Cont'd)

PublicEmployees'RetirementSystem(PERS)(Cont'd)DiscountRate

Thediscountrateusedtomeasurethetotalpensionliabilitywas4.90%asofJune30,20I5.Thissingleblendeddiscountratewasbasedonthelong-termexpectedrateofreturnonpensionplaninvestmentsof 7.9%andamunicipalbondrateof3.80%asofJune30,20I5basedontheBondBuyerGo20BondMunicipalBondIndexwhichincludestax-exemptgeneralobligationmunicipalbondswithanaverageratingofAA/Aaorhigher.Theprojectionofcashflowsusedtodeterminethediscountrateassumedthatcontributionsfrom planmemberswillbemadeatthecurrentmembercontributionratesandthatcontributionsfromemployerswillbemadebasedupontheaverageofthelastfiveyearsofcontributionsmadeinrelationtothelastfiveyearsofactuariallydeterminedcontributions.Basedonthoseassumptions,theplan'sfiduciarynetpositionwasprojectedtobeavailabletomakeprojectedfuturebenefitpaymentsof currentplanmembersthrough2033.Therefore,thelong-termexpectedrateofreturnonplaninvestmentswasappliedtoprojectedbenefitpaymentsthrough2033,andthemunicipalbond ratewasappliedtoprojectedbenefitpaymentsafterthatdateindeterminingthetotalpensionliability.

SensitivityoftheAuthority'sProportionate ShareoftheNetPensionLiabilitytoChangesintheDiscountRate

ThefollowingpresentstheAuthority'sproportionateshareofthecollectivenetpensionliabilityasof November30,20I5calculatedusingthediscountrateas disclosedbelow,aswellaswhattheAuthority'sproportionateshareofthenetpensionliabilitywouldbeifitwerecalculatedusingadiscountratethatisI-percentage-pointlowerorI-percentage-pointhigherthanthecurrentrate:

YearEndedNovember30,20I5

Decrease(3.90%)

CurrentDiscountRate (4.90%)

Increase(5.90%)

Authority'sproportionateshare

oftheNetPensionLiability$3,0I2,465$2,423,782$I,930,235 PensionPlanFiduciary NetPosition

Detailedinformationaboutthepensionplan'sfiduciarynetpositionisavailableintheseparatelyissuedPERSfinancialstatements.

Note6:CashandCashEquivalents

Cashandcashequivalentsincludepettycash,changefunds,amountsindeposits,money marketaccounts,andshort-terminvestments withoriginalmaturitiesofthreemonths orless.

Investmentsarestatedatcost,whichapproximates market.TheAuthorityclassifiescertificatesofdepositwhichhaveoriginalmaturitydatesofmorethanthreemonthsbutlessthantwelvemonthsfromthedateofpurchase,asinvestments.

BERNARDSTOWNSHIPSEWERAGEAUTHORITYNOTESTOFINANCIALSTATEMENTS

YEARENDEDNOVEMBER30,2016

(Continued)

Note6:CashandCashEquivalents(Cont'd)

GASBStatementNo.40,GovernmentalAccountingStandardsBoardDepositandInvestmentRiskDisclosures,requiresdisclosureofthelevelofcustodialcreditriskassumedbytheAuthorityinitscash,cashequivalentsandinvestments,if thoseitemsareuninsuredorunregistered.Custodialriskistheriskthatintheeventofbankfailure,thegovernment'sdepositsmaynotbereturned.

InterestRateRisk-Inaccordancewithitscashmanagementplan,theAuthorityensuresthatanydepositorinvestmentmatureswithinthetimeperiodthatapproximatestheprospectiveneedforthefunds,depositedorinvested,sothatthereisnotarisktothemarketvalueofsuchdepositsorinvestment.

CreditRisk-TheAuthoritylimitsitsinvestmentstothoseauthorizedinitscashmanagementplanwhicharethosepermittedunderstatestatueasdetailedbelowandonthefollowingpage.

CustodialCreditRisk-TheAuthority'spolicywithrespecttocustodialcreditriskrequiresthatthe AuthorityensuresthatAuthorityfundsareonlydepositedinfinancialinstitutionsinwhichNJmunicipalitiesarepermittedtoinvesttheirfunds.

Deposits:

NewJerseystatutespermitthedepositofpublicfundsininstitutionslocatedinNewJerseywhichareinsuredbytheFederalDepositInsuranceCorporation,orbyanyotheragencyoftheUnitedStatesthatinsuresdepositsmadeinpublicdepositories. Authoritiesarealsopermittedtodepositpublicfundsinthe StateofNewJerseyCashManagementFund.

NewJerseystatutesrequirepublicdepositoriestomaintaincollateralfordepositsofpublicfundsthatexceedinsurancelimitsasfollows:

Themarketvalueofthecollateralmustequal5%oftheaveragedailybalanceofpublicfunds;andinaddition

Ifthepublicfundsdepositedexceed75%ofthecapitalfundsofthedepository,thedepositorymustprovidecollateralhavingamarketvalueequalto100%oftheamountexceeding75%.

Allcollateral mustbedeposited withtheFederalReserveBank,theFederalHomeLoan BankBoardorabankinginstitutionthatisamemberoftheFederalReserveSystemandhascapitalfundsofnotlessthan

$25,000,000.

Investments:

NewJerseystatutespermittheAuthoritytopurchase thefollowingtypesofsecurities:

(1)BondsorotherobligationsoftheUnitedStatesofAmericaorobligationsguaranteedbythe UnitedStatesofAmerica;

(2)Governmentmoneymarketmutualfunds;

(3)Anyobligationthatafederalagencyorafederalinstrumentalityhasissuedinaccordancewithanact ofCongress,whichsecurityhasamaturitydatenotgreater than397daysfromthedate ofpurchase,providedthatsuchobligationbearsafixedrateofinterestnotdependent onanyindexorotherexternalfactor;

(4)Bondsorotherobligationsofthelocalunitorbondsorotherobligationsofauthoritiesofwhichthelocalunitisapartorwithinwhich theauthorityislocated;

BERNARDS TOWNSHIPSEWERAGEAUTHORITYNOTESTOFINANCIALSTATEMENTS

YEARENDEDNOVEMBER30,2016

(Continued)

Note6:CashandCashEquivalents(Cont'd)Investments(Cont'd)

(5)Bondsorotherobligations,havingamaturitydatenotmorethan397daysfromthedateof

purchase,approvedbytheDivisionofInvestmentoftheDepartmentoftheTreasuryforinvestmentbylocalunits;

(6)Localgovernmentinvestmentpools;

(7)DepositswiththeStateofNewJerseyCashManagementFund;or

(8)Agreementsfortherepurchaseoffullycollateralizedsecuritiesif:

(a)theunderlyingsecuritiesarepermittedinvestmentspursuanttoparagraphs(1)and

(3)above;

(b)thecustodyofcollateralistransferredtoathirdparty;

(c)thematurity oftheagreementisnotmorethan30days;

(d)theunderlyingsecuritiesarepurchasedthroughapublicdepositoryasdefinedinstatute;and

(e)amasterrepurchaseagreementprovidingforthecustodyand securityofcollateralisexecuted.

AsofNovember30,2016,cashandcashequivalentsoftheBernardsTownshipSewerageAuthorityconsistedofthefollowing:

NewJerseyCash / Money
Checking
Accounts / Petty
Cash / Management
Fund / Market
Fund / Total
UnrestrictedRestricted-Escrow
Deposit / $1,853,894 / $300 / $7,285,073
56,641 / $5,023,151 / $ 14,162,418
56,641
$1,853,894 / $300 / $7,341,714 / $5,023,151 / $ 14,219,059

ThecarryingamountoftheBernardsTownshipSewerageAuthority'scashandcashequivalentsatyearendwas$14,219,059andthebankbalancewas$14,282,644.The$7,341,714intheNJCashManagementFundisuninsuredandunregistered.

FairValueMeasurementandApplication

TheAuthorityimplementedGovernmentalAccountingStandardsBoard(GASB)No.72,FairValueMeasurementandApplication,duringtheyearendedNovember30,2016.Thisstandardaddressesaccountingandfinancialreportingissuesrelatedtofairvaluemeasurement.

BERNARDSTOWNSHIPSEWERAGEAUTHORITYNOTESTOFINANCIALSTATEMENTS

YEARENDEDNOVEMBER30,2016

(Continued)

Note6:Cash andCashEquivalents(Cont'd)

FairValueMeasurementandApplication(Cont'd)

TheAuthorityholdsinvestmentsthataremeasuredatfairvalueonarecurring basis.BecauseinvestingisnotacorepartoftheAuthority'smission,theAuthoritydeterminesthatthedisclosuresrelatedtotheseinvestmentsonlyneedtobedisaggregatedbymajortype.TheAuthoritychoosesanarrativeformatforthefairvaluedisclosures.

TheAuthoritycategorizesitsfairvaluemeasurementswithinthefairvaluehierarchyestablishedbygenerallyacceptedaccounting principles.Thehierarchyisbasedonthe valuationinputsusedtomeasurethefairvalueoftheasset.Level1inputsarequotedpricesinactivemarketsforidenticalassets;Level2inputsaresignificantotherobservableinputs;Level3inputsaresignificantunobservable inputs.

TheAuthorityhasthefollowingrecurringfairvaluemeasurementasofNovember30,2016:

SolarRenewableEnergyCertificatesof$226,445arevaluedusingquoted marketprices(Level1inputs).

Thequotedmarketpriceswereobtainedfrom Year2016atthemonthlyweightedaveragepriceperSREC.

Note7:RiskManagement

TheAuthorityisexposedtovariousrisksoflossrelatedtorts,theftof,damagetoanddestructionofassets,errorsandomissions,injuriestoemployees,andnaturaldisasters.HealthbenefitsareprovidedtoemployeesthroughtheStateofNewJerseyhealthbenefitplan.

TheAuthorityiscurrentlyamemberoftheNewJerseyUtilitiesAuthoritiesJointInsuranceFund(the"Fund").TheFundprovidestheirmemberswithLiability,PropertyandWorkers'CompensationInsurance.TheFundisarisk-sharingpublicentityriskpoolthatisbothaninsuredandselfadministeredgroupofgovernmentalentitiesestablishedforthepurposeofprovidinglow-costinsurancecoveragefortheirrespectivemembersinordertokeepexpensesataminimum.EachmemberappointsanofficialtorepresenttheirrespectiveentityforthepurposeofcreatingagoverningbodyfromwhichofficersfortheFundsareelected.

ThefollowingcoveragesareofferedbytheFundtoitsmembers:

a)Workers'CompensationandEmployersLiability

b)LiabilityOtherThanMotorVehicles

c)PropertyDamageOtherThanMotorVehicles

d)MotorVehicle

e)Environmental

AsamemberoftheFund,theAuthoritycouldbesubjecttosupplementalassessmentsintheeventofdeficiencies.Iftheassetsofthe Fundwere tobeexhausted,memberswouldbecomeresponsiblefortheirrespectivesharesoftheFund'sliabilities.

TheFundcandeclareanddistributedividendstomembersuponapprovaloftheStateofNewJerseyDepartmentofBankingandInsurance.Thesedistributionsaredividedamongstthemembersinthesameratioastheirindividualassessmentrelatestothetotalassessmentofthemembershipbody.

BERNARDSTOWNSHIPSEWERAGEAUTHORITYNOTESTOFINANCIAL STATEMENTS

YEARENDEDNOVEMBER30,2016

(Continued)

Note7:RiskManagement(Cont'd)

TheDecember 31,2016audited financial statementswerenotavailableatthedateofthisreport.Selected,summarizedfinancialinformationfortheFundasofDecember31,2015isasfollows:

NewJerseyUtilityAuthoritiesJointInsuranceFund

Dec.31,2015

TotalAssets / $13,714,458
NetPosition / $6,155,468
TotalRevenue / $10,284,194
TotalExpenses / $9,176,934
ChangeinNetPosition / $1,107,260
MembersDividend / $1,500,000

FinancialstatementsfortheFundareavailableatthe officeoftheFund'sExecutive Director:

NewJerseyUtilityAuthoritiesJointInsuranceFund PERMARiskManagementServices

9CampusDrive,Suite216 Parsippany,NewJersey07054(201)881-7632

NewJerseyUnemploymentCompensationInsurance

TheAuthorityhaselectedtofunditsNewJerseyUnemploymentCompensationInsuranceunderthe"BenefitReimbursementMethod".Underthisplan,theAuthorityisrequiredtoreimbursetheNewJerseyUnemploymentTrustFundforbenefitspaidto itsformeremployeesandchargedtoitsaccountwiththeState.TheAuthorityisbilledquarterlyforamountsduetotheState.DuetothesharedservicearrangementwiththeTownshipofBernardsrelativetotheprovisionof accountingservices,theAuthority'sshareofwithholdingsismaintainedintheTownship'sUnemploymenttrustaccount.Authoritycontributionsfortheyears2016,2015and2014were$0,$744and $0.TheAuthorityhashadnoclaimsinthepastthreeyears.

Note8:Deferred Compensation

TheAuthorityoffersitsemployeesadeferredcompensationplancreatedinaccordancewithInternalRevenueServiceCodeSection457.Theplan,whichisadministeredbyICMARetirementCorporation,permitsparticipantstodeferaportionoftheirsalaryuntilfutureyears.Amountsdeferredundertheplanarenotavailabletoemployeesuntiltermination,retirement,deathorunforeseeableemergency.

BERNARDSTOWNSHIPSEWERAGEAUTHORITYNOTESTOFINANCIALSTATEMENTS

YEARENDEDNOVEMBER30,2016

(Continued)

Note 9:AccountsPayable

Accountspayablewereasfollows:

Operating

ContributionsTotalSubsequenttotheGovernmental

FundMeasurementDate FundActivities

DuetoStateofNewJersey / $90,165 / $90,165
Vendors / $559,930 / 559,930

ContractsPayable2,976,7162,976,716

Note10:RelatedPartvTransactions

$ 3,536,646$

90,165$3,626,811

======

TheTownshipofBernardsprovidescertainadministrativeandaccountingservicestotheAuthoritybymeansofasharedservicesagreement.DuringtheyearendedNovember30,2016,theAuthoritybudgetedandpaid $445,786totheTownshipofBernards.

Note11:Environmental Matters

TheAuthority'spastandpresentdailyoperationsincludeactivitieswhicharesubjecttoextensivefederalandstateenvironmentalregulations.Compliancewiththeseregulationshasnothad,nordoestheAuthority expectsuchcompliancetohave,anymaterialeffectuponexpectedcapitalexpenditures,operations,financialconditionorcompetitive positionoftheAuthority.TheAuthoritybelievesthattheircurrentpracticesandprocedurescomplywithapplicableregulations.The Authority'spolicyistoaccrueenvironmentalandrelatedcostsofanoncapitalnaturewhenitis bothprobablethataliabilityhasbeenincurredandthattheamountcanbereasonablyestimated.Nosuchamountshavebeenaccruedinthesestatements.

Note12:Contingencies

TheAuthorityisperiodicallyinvolvedinvariouslawsuitsinthenormalcoursebusiness,includingclaimsforpropertydamage,personalinjury,andvariouscontractdisputes.TheAuthorityvigorouslyconteststheselawsuitsandbelievestheultimateresolutionwouldnothaveanadverseeffectontheirfinancialposition.

BERNARDS TOWNSHIP SEWERAGEAUTHORITYNOTES TOFINANCIAL STATEMENTS

YEARENDEDNOVEMBER30,2016

(Continued)

Note13:PriorPeriodAdjustments

TheAuthoritymadeaprioryearadjustmentintheAuthority'sFinancialStatementstorecordthevalueofthesolarrenewableenergycertificatesatNovember30,2015asaresultofimplementingGovernmental AccountingStandardsBoard("GASB")Statementno.72,Fair Value Measurement andApplication.

Balance 11/30/15

asPreviously / Retroactive / Balance 11/30/15
Reported / Adjustments / asRestated

StatementofNetPosition:CurrentAssets:

UnrestrictedAssets:

Investments / $175,160 / $175,160
TotalUnrestrictedAssets / $14,396,547 / 175,160 / 14,571,707
TotalAssets / 38,104,650 / 175,160 / 38,279,810

NetPosition:

Unrestricted / 9,417,341 / 175,160 / 9,592,501
TotalNetPosition / 33,074,392 / 175,160 / 33,249,552

BERNARDS TOWNSHIPSEWERAGE AUTHORITY

REQUIRED SUPPLEMENTARY INFORMATION

BERNARDS TOWNSHIP SEWERAGEAUTHORITYREQUIRED SUPPLEMENTARY INFORMATION SCHEDULES

SCHEDULEOFAUTHORITY'SPROPORTIONATESHAREOFTHENETPENSIONLIABILITYPUBLICEMPLOYEESRETIREMENTSYSTEM

LASTTWOYEARSUNAUDITED

YearEndingNovember30,

2015 / 2016
Authority'sproportionofthenetpensionliability / 0.0104514201% / 0.0107973207%
Authority'sproportionateshareofthenetpensionliability / $1,956,792 / $2,423,782
Authority'scoveredemployeepayroll / $753,377 / $748,128
Authority'sproportionateshareofthenetpensionliabilityasapercentageofitscovered employeepayroll / 259.74% / 323.98%

Planfiduciarynetpositionasapercentageofthetotalpension

liability52.08%47.93%

BERNARDSTOWNSHIP SEWERAGEAUTHORITYREQUIRED SUPPLEMENTARYINFORMATION SCHEDULESSCHEDULEOFAUTHORITY CONTRIBUTIONS

PUBLICEMPLOYEES RETIREMENT SYSTEMLASTTWOYEARS

UNAUDITED

YearEndingNovember30,20152016

Contractuallyrequiredcontribution$

ContributionsinrelationtothecontractuallyrequiredcontributionContributiondeficiency/(excess)$

District'scoveredemployeepayroll$

Contributionsasapercentageofcoveredemployeepayroll

86,160$92,828

(86,160)(92,828)

-0-$-0-

748,128$759,454

11.52%12.22%

BERNARDS TOWNSHIPSEWERAGEAUTHORITYNOTESTOREQUIRED SUPPLEMENTARY INFORMATION

FORTHEYEARENDEDNOVEMBER30,2016

A.PUBLICEMPLOYEES'RETIREMENTSYSTEMBenefitChanges

Therewerenone.ChangesofAssumptions

Thediscountratechangedfrom5.39%asofJune 30,2014to4.90%asofJune 30,2015. Theinflationratechangedfrom3.01% asofJune30,2014to3.04%asofJune30,2015.

BERNARDSTOWNSHIPSEWERAGE AUTHORITYSUPPLEMENTARY INFORMATION

BERNARDSTOWNSHIPSEWERAGEAUTHORITY

SCHEDULEOFREVENUE,EXPENSESANDCHANGESINNETPOSITIONRESTRICTEDANDUNRESTRICTEDFUNDS

YEARENDEDNOVEMBER30,2016

SCHEDULEI

Investment / MemoTotal
Unrestricted / inCapitalAssets / 2016

OperatingRevenue:

SewerCharges / $4,648,750 / $4,648,750
ConnectionFees / 114,552 / 114,552
OtherIncome / 433,204 / 433,204
TotalOperatingRevenue / 5,196,506 / 5,196,506

Operating Expenses:

Operating Appropriations / 3,406,437 / 3,406,437
Depreciation / 960,402 / 960,402
TotalOperatingExpenses / 4,366,839 / 4,366,839
OperatingIncome / 829,667 / 829,667
NonoperatingRevenue:
InterestEarnedonInvestments / 39,839 / 39,839
Investment Income / 51,285 / 51,285
TotalNonoperatingRevenue / 91,124 / 91,124
Increase(Decrease)inNetPosition(BeforeTransfersandAdjustments) / 920,791 / 920,791
TransfersandAdjustments:
CapitalAcquisitions / (3,337,658) / $3,337,658
PriorYearContractsPayableCanceled / 623,002 / (623,002)
Depreciation / 960,402 / (960,402)
Increase/(Decrease)inNetPosition(AfterTransfersandAdjustments) / (833,463) / 1,754,254 / 920,791
NetPosition,December1(Restated) / 9,592,501 / 23,657,051 / 33,249,552
NetPosition,November30 / $8,759,038 / $25,411,305 / $34,170,343
"'dPl (Jq
(l)
(.;.)
Vi

SCHEDULEII

BERNARDSTOWNSHIP SEWERAGEAUTHORITYSCHEDULEOFREVENUEANDEXPENSESCOMPAREDTOBUDGET

YEARENDEDNOVEMBER30,2016

(WITHCOMPARATIVEACTUALAMOUNTSFORTHE YEARENDEDNOVEMBER30,2015)

2016
Original / (Restated)
andFinal / 2016 / Excessor / 2015
Budget / Actual / (Deficit) / Actual

Revenue:

FundBalanceAnticipated$1,455,430$1,455,430$1,703,881OperatingRevenues:

ServiceFees4,656,2004,648,750$(7,450)4,437,691

ConnectionFees63,640114,55250,91224,892

OtherNon-OperatingRevenue200,000433,204233,204370,584

TotalOperatingRevenues4,919,8405,196,506276,6664,833,167Non-OperatingRevenues:

TotalRevenue$6,388,270$6,743,060$354,790$6,731,112

BudgetedAppropriations:Administration:

OtherExpenses$827,786$779,009$48,777$782,378

TotalAdministration827,786779,00948,777782,378

CostofProvidingService:
Salaries &Wages / 851,029 / 840,592 / 10,437 / 819,157
FringeBenefits / 428,955 / 464,399 / (35,444) / 379,410
OtherExpenses / 1,179,500 / 1,322,437 / (142,937) / 929,928
CapitalOutlay / 3,101,000 / 3,101,000
TotalCostof ProvidingService / 5,560,484 / 2,627,428 / 2,933,056 / 2,128,495

TotalAppropriations$6,388,270$3,406,437$2,981,833$2,910,873

BERNARDS TOWNSHIPSEWERAGE AUTHORITY

GOVERNMENTAUDITINGSTANDARDSSECTIONYEARENDEDNOVEMBER 30,2016

CertifiedPublic Accountants Advisors

MountArlingtonCorporateCenter200ValleyRoad,Suite300 Mt.Arlington,NJ07856

973-328-1825 I973-328-0507 Fax

LawrenceBusinessCenter

11LawrenceRoad

Newton,NJ07860

973-383-6699 I973-383-6555 Fax

ReportonInternalControlOverFinancialReporting

andonComplianceandOtherMattersBased onanAuditofFinancialStatementsPerformedinAccordancewithGovernmentAuditing Standards

IndependentAuditors'Report

TheHonorableChairmanandMembersoftheBernardsTownshipSewerageAuthority

BaskingRidge,NewJersey

Wehaveaudited,inaccordancewithauditingstandardsgenerallyacceptedintheUnitedStatesofAmerica,auditrequirementsprescribedbytheDivisionofLocalGovernmentServices,Departmentof CommunityAffairs,StateofNewJersey("theDivision"),andthestandardsapplicabletofinancialauditscontainedinGovernmentAuditingStandardsissuedbytheComptrollerGeneralofthe UnitedStates,thefinancialstatementsofthe BernardsTownshipSewerageAuthority(the"Authority"),acomponentunitoftheTownshipofBenards,asofandfortheyearendedNovember30,2016,andtherelatednotestothefinancialstatements,whichcomprisetheAuthority'sfinancialstatements,andhaveissuedourreportthereon datedFebruary24,2017.

InternalControlOverFinancialReporting

Inplanningandperformingourauditofthefinancialstatements,weconsideredtheAuthority'sinternalcontroloverfinancialreporting(internalcontrol)todeterminetheauditproceduresthatareappropriateinthecircumstancesforthepurposeofexpressingouropinionsonthefinancialstatements,butnotforthepurposeofexpressinganopinionontheeffectivenessoftheAuthority'sinternalcontrol.Accordingly,wedo notexpressanopinionontheeffectivenessoftheAuthority'sinternalcontrol.

Adeficiencyininternalcontrolexistswhenthedesignoroperationofacontroldoesnotallowmanagementoremployees,inthenormalcourseofperformingtheirassignedfunctions,toprevent,ordetectandcorrect,misstatementsonatimelybasis.Amaterialweaknessisadeficiency,oracombinationofdeficiencies,ininternalcontrolsuchthatthereisareasonablepossibilitythatamaterialmisstatementoftheAuthority'sfinancialstatementswillnotbeprevented,ordetectedandcorrectedonatimelybasis.Asignificantdeficiencyisadeficiency,oracombinationofdeficiencies,ininternalcontrolthatislessseverethanamaterialweakness,yetimportantenough tomeritattentionbythosechargedwithgovernance.

Ourconsiderationoftheinternalcontrolwasforthelimitedpurposedescribedinthefirstparagraphofthissectionandwasnotdesignedtoidentifyalldeficienciesininternalcontrolthatmightbematerialweaknessesorsignificantdeficiencies.Giventheselimitations,duringourauditwedidnotidentifyanydeficienciesininternalcontrolthatweconsidertobematerialweaknesses.However,material weaknessesmayexistthathavenotbeenidentified.

IndependentMemberofBKRInternational

TheHonorableChairmanandMembersoftheBernardsTownshipSewerageAuthority

Page2

ComplianceandOtherMatters

AspartofobtainingreasonableassuranceaboutwhethertheAuthority'sfinancialstatementsarefreeofmaterialmisstatement,weperformedtestsofitscompliancewithcertainprovisionsoflaws,regulations,contracts,andgrantagreements,noncompliancewithwhichcouldhaveadirectandmaterialeffectonthe determinationoffinancialstatementamounts.However,providinganopiniononcompliancewiththoseprovisionswasnotanobjectiveofouraudit,and,accordingly,wedonotexpresssuchanopinion.Theresultsofourtestsdisclosednoinstancesofnoncomplianceorothermattersthatarerequiredtobe reportedunderGovernmentAuditingStandards.

PurposeofthisReport

Thepurposeofthisreportissolelytodescribethescopeofourtestingofinternalcontrolandcomplianceandtheresultofthattesting,andnottoprovideanopinionontheeffectivenessoftheAuthority'sinternalcontroloroncompliance.ThisreportisanintegralpartofanauditperformedinaccordancewithGovernmentAuditingStandardsin consideringtheAuthority'sinternalcontrolandcompliance.Accordingly,thiscommunicationisnotsuitableforanyotherpurpose.

MountArlington,NewJerseyFebruary24,2017

NISIVOCCIALLP

WilliamF.SchroederCertifiedPublicAccountant

RegisteredMunicipalAccountant#452

BERNARDSTOWNSHIPSEWERAGEAUTHORITYSCHEDULEOFFINDINGSANDRESPONSES

YEARENDEDNOVEMBER30,2016

SummaryofAuditors'Results:

TheIndependentAuditors'Reportexpressesanunmodifiedopiniononthefinancialstatementsofthe Authority.

TherewerenomaterialweaknessesorsignificantdeficienciesdisclosedduringtheauditofthefinancialstatementsasreportedintheIndependentAuditors'ReportonInternalControlOverFinancialReportingand onComplianceandOtherMattersBasedonanAuditofFinancialStatementsPerformedinAccordancewithGovernmentAuditing Standards.

-NoinstancesofnoncompliancematerialtothefinancialstatementsoftheAuthoritywhichwouldberequiredtobereportedinaccordancewithGovernmentAuditingStandards,weredisclosedduringtheaudit.

Findings Relating to the Financial Statements which are required to be Reported in Accordance withGenerallyAcceptedGovernmentAuditingStandards:

-TheauditdidnotdiscloseanyfindingsrequiredtobereportedunderGenerallyAcceptedGovernmentAuditingStandards.

BERNARDSTOWNSHIPSEWERAGEAUTHORITYSUMMARYSCHEDULEOFPRIORAUDITFINDINGSFORTHEYEARENDEDNOVEMBER30,2016

StatusofPriorYear AuditFindings:Therewerenoprioryearauditfindings.

COMMENTS ANDRECOMMENDATIONS

BERNARDSTOWNSHIPSEWERAGEAUTHORITYCOMMENTSANDRECOMMENDATIONS

ContractsandAgreementsRequiredAdvertisementforBids

N.J.S.A.40A:ll-3states:

a."Whenthecostorpriceofanycontractawardedbythecontractingagentinthe aggregate doesnotexceedinacontractyearthetotalsumof$17,500,thecontractmaybeawardedbyapurchasingagentwhensoauthorizedbyordinanceorresolution,asappropriatetothecontractingunit,ofthegoverningbodyofthecontractingunitwithoutpublic advertisingforbids,exceptthatthegoverningbodyofanycontractingunitmayadoptanordinanceorresolutiontosetalowerthresholdforthereceiptofpublicbidsorthesolicitationofcompetitivequotations.IfthepurchasingagentisqualifiedpursuanttoSubsectionb.ofSection9ofP.L.1971,C.198(N.J.S.A.40A:ll-9),thegoverningbodyofthecontractingunitmayestablishthatthe bidthresholdmaybeupto$25,000.Suchauthorizationmaybegrantedforeach contract orby ageneraldelegationofthepowertonegotiateandawardsuchcontractspursuanttothissection.

b.Anycontractmadepursuanttothissectionmaybeawardedforaperiodof24consecutivemonths,exceptthatcontractsforprofessionalservicespursuanttosubparagraph(i)ofparagraph(a)ofsubsection(1)of section5ofP.L.1971,C.198(N.J.S.A.40A:ll-5)maybeawardedforaperiodnotexceeding12consecutivemonths.TheDivisionofLocalGovernmentServicesshalladoptandpromulgaterulesandregulationsconcerningthemethodsofaccountingforallcontractsthatdonotcoincidewiththecontractingunit'sfiscalyear.

c.TheGovernor,inconsultationwiththeDepartmentoftheTreasury,shall,nolaterthanMarch1ofeveryfifthyearbeginninginthefifthyearaftertheyearinwhichP.L.1999,C.440takeseffect,adjustthethresholdamountandthehigherthresholdamountwhichthegoverningbodyispermittedtoestablish,assetforthin subsectiona.ofthissection,orthethresholdamountresultingfromany adjustmentunderthissubsection,in directproportiontotheriseorfalloftheindexrateasthattermisdefinedinsection2of P.L.1971,C.198(N.J.S.A.40A:l1-2),and shallroundtheadjustmenttothenearest$1,000.TheGovernorshall, nolaterthanJune1ofeveryfifthyear,notifyeachgoverningbodyoftheadjustment.TheadjustmentshallbecomeeffectiveonJuly1oftheyearinwhichitismade."

N.J.S.A.40A:11-4states:"Everycontractawardedbythecontractingagentfor theprov1s1onorperformanceof anygoodsorservices,thecostofwhichintheaggregateexceeds thebidthreshold,shallbeawardedonlybyresolutionofthegoverningbodyofthecontractingunittothelowestresponsiblebidderafterpublicadvertisingforbidsandbiddingtherefore,exceptasisprovidedotherwiseinthisact orspecificallybyanyotherlaw.Thegoverningbodyofacontractingunitmay,byresolutionapprovedbyamajorityofthegoverningbodyandsubjecttosubsectionsb.andc.ofthissection,disqualifyabidderwhowouldotherwisebedeterminedtobethelowestresponsiblebidder,ifthegoverningbodyfindsthatithashadpriornegativeexperiencewiththebidder."

EffectiveJuly1,2015the bidthresholdinaccordancewithN.J.S.A40A:l1-3and40A:l1-4(asamended)is

$17,500andwithaqualifiedpurchasingagentthethresholdmay beupto$40,000.

ThegoverningbodyoftheAuthorityhastheresponsibilityofdeterminingwhethertheexpendituresinanycategorywillexceedthebidthresholdwithinthefiscalyear.Wherequestionsariseastowhetheranycontractoragreementmightresultinviolationofthestatute,theAuthorityAttorney'sopinionshouldbesoughtbeforeacommitmentismade.

BERNARDSTOWNSHIPSEWERAGEAUTHORITYCOMMENTS AND RECOMMENDATIONS

(Continued)ContractsandAgreementsRequiredAdvertisementforBids(Cont'd)

Inasmuchasthesystemofrecordsdidnotprovideforanaccumulationofpaymentsforcategoriesfortheperformanceofanyworkorthefurnishingorhiringofanymaterialsorsupplies,theresultsofsuchanaccumulationcouldnotreasonablybeascertained.Disbursementswerereviewed,however,todeterminewhetheranyclear-cutviolationsexisted.Nonewerenoted.

Over-expenditures

During ourtesting,itwas notedthatcertainlineitemaccountswereover-expendedduringtheyear.ThelineitemaccountCostofProvidingService-FringeBenefitswasoverexpendedby$35,444.ThiswasduetotheaccrualoftheAuthority'spensioncontributionsubsequenttothemeasurementdaterecordedasaccountspayableatyearendwhichwasnotrecordedintheAuthority'saccountingrecords.Additionally,thelineitemaccountCostofProvidingService-Other Expenseswasover-expendedby$142,937.Thiswasduetothereallocationofseveralpurchaseordersbetweenoperatingaccounts payableandconstruction-in-progresscontractspayable.Therefore,norecommendationforthisover-expenditureisdeemednecessary.

StatusofPriorYear'sFindings/RecommendationsTherewerenoprioryear auditrecommendations.

BERNARDS TOWNSHIP SEWERAGEAUTHORITYSUMMARY OFRECOMMENDATIONS

Therearenorecommendations.

********