CITY OF SOMERVILLE

CITY OF SOMERVILLE

MASSACHUSETTS COMPREHENSIVE ANNUAL FINANCIAL REPORT

For the Year Ended June 30, 2020

Joseph A. Curtatone, Mayor Edward Bean, Finance Director

Prepared by the City of Somerville Finance Department

On the Cover ? Somerville Vietnam War Memorial

Photo by Felibrilu is licensed under CC BY-NC 2.0 Flickr.

CITY OF SOMERVILLE, MASSACHUSETTS COMPREHENSIVE ANNUAL FINANCIAL REPORT

For the Year Ended June 30, 2020

Prepared by the City of Somerville Finance Department

CITY OF SOMERVILLE, MASSACHUSETTS

COMPREHENSIVE ANNUAL FINANCIAL REPORT

JUNE 30, 2020

TABLE OF CONTENTS

Introductory Section.........................................................................................................................................................1 Letter of Transmittal .....................................................................................................................................................2 Certificate of Achievement for Excellence in Financial Reporting..............................................................................14 Organizational Chart ..................................................................................................................................................15 Principal Officials ........................................................................................................................................................16

Financial Section ...........................................................................................................................................................18 Independent Auditor's Report.....................................................................................................................................19 Management's Discussion and Analysis....................................................................................................................21 Basic Financial Statements ........................................................................................................................................32 Statement of Net Position.......................................................................................................................................33 Statement of Activities............................................................................................................................................34 Governmental Funds ? Balance Sheet ..................................................................................................................36 Reconciliation of the Governmental Funds Balance Sheet Total Fund Balances to the Statement of Net Position..................................................................................................................................37 Governmental Funds ? Statement of Revenues, Expenditures and Changes in Fund Balances .........................38 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of the Governmental Funds to the Statement of Activities ..........................................................................................39 Proprietary Funds ? Statement of Net Position......................................................................................................40 Proprietary Funds ? Statement of Revenues, Expenses and Changes in Net Position ........................................41 Proprietary Funds ? Statement of Cash Flows ......................................................................................................42 Fiduciary Funds ? Statement of Fiduciary Net Position .........................................................................................43 Fiduciary Funds ? Statement of Changes in Fiduciary Net Position......................................................................44 Notes to Basic Financial Statements .....................................................................................................................45 Required Supplementary Information ........................................................................................................................87 Schedule of Revenues, Expenditures and Changes in Fund Balance ? General Fund ? Budget and Actual ......88 Pension Plan Schedules ? Retirement System..........................................................................................................92 Schedule of Changes in the Net Pension Liability and Related Ratios .................................................................93 Schedule of Contributions ......................................................................................................................................94

Schedule of Investment Returns ............................................................................................................................95 Pension Plan Schedules - City ...................................................................................................................................96

Schedule of the City's Proportionate Share of the Net Pension Liability ...............................................................97 Schedule of the City's Contributions ......................................................................................................................98 Schedule of the Special Funding Amounts of the Net Pension Liability ................................................................99 Other Postemployment Benefits Plan Schedules ....................................................................................................100 Schedule of Changes in the City's Net Other Postemployment Benefit Liability and Related Ratios .................101 Schedule of the City's Contributions ....................................................................................................................102 Schedule of Investment Returns ..........................................................................................................................103 Notes to Required Supplementary Information ........................................................................................................104 Combining and Individual Fund Statements ........................................................................................................109

Nonmajor Governmental Funds .......................................................................................................................110 Nonmajor Governmental Funds ? Combining Balance Sheet......................................................................112 Nonmajor Governmental Funds ? Combining Statement of Revenues, Expenditures, and Changes in Fund Balances .........................................................................................................................................116

Agency Fund.....................................................................................................................................................119 Agency Fund ? Statement of Changes in Assets and Liabilities ..................................................................120

Statistical Section .....................................................................................................................................................121 Net Position by Component ? Last Ten Years .....................................................................................................122 Changes in Net Position ? Last Ten Years ..........................................................................................................123 Fund Balances, Governmental Funds ? Last Ten Years .....................................................................................124 Changes in Fund Balances, Governmental Funds ? Last Ten Years..................................................................125 Assessed Value and Actual Value of Taxable Property by Classification and Tax Rates ? Last Ten Years ................................................................................................................................................126 Principal Taxpayers ? Current Year and Nine Years Ago....................................................................................127 Property Tax Levies and Collections ? Last Ten Years .......................................................................................128 Ratios of Outstanding Debt and General Bonded Debt ? Last Ten Years ..........................................................129 Computation of Legal Debt Margin ? Last Ten Years..........................................................................................130 Direct and Overlapping Governmental Activities Debt.........................................................................................131 Demographic and Economic Statistics ? Last Ten Years ....................................................................................132 Principal Employers (Excluding City) ? Current Year and Nine Years Ago .........................................................133 Full-Time Equivalent City Employees ? Last Ten Years......................................................................................134 Operating Indicators by Function/Program ? Last Ten Years..............................................................................135 Capital Asset Statistics by Function/Program ? Last Ten Years..........................................................................136

Introductory Section

Prospect Hill Monument Photo by Eric Kilby is licensed under CC BY-SA 2.0 Flickr.

Introductory Section

City of Somerville, Massachusetts

1

Comprehensive Annual Financial Report

City of Somerville, Massachusetts Joseph A. Curtatone MAYOR

February 20, 2021 Letter of Transmittal To Members of the City Council and Citizens of the City of Somerville:

We are pleased to submit to you the Comprehensive Annual Financial Report (CAFR) of the City of Somerville (City) for the year ended June 30, 2020. The CAFR is prepared by the City's Finance Department, and is intended to provide information regarding the financial position of the City. This report is prepared in accordance with U.S. generally accepted accounting principles (GAAP) and meets all requirements of state finance law of the Commonwealth of Massachusetts.

The responsibility for the accuracy, completeness, and fairness of the data presented, including disclosures, rests with the City. City management believes this report is accurate in all material respects and is presented in a manner which impartially sets forth the financial position and results of operations of the City. Management is also responsible for establishing and maintaining internal accounting controls designed to provide reasonable, but not absolute, assurance that these financial statements are complete and accurate in their presentation.

The Commonwealth of Massachusetts, through Chapter 190 of the Acts of 1982, requires that the City undergo an annual audit performed by a firm of independent public accountants. The City has selected Powers & Sullivan, LLC, to perform the June 30, 2020, audit. The goal of the independent audit was to provide reasonable assurance that the financial statements of the City of Somerville for the year ended June 30, 2020, are free of material misstatements.

The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management; and evaluating the overall financial statement presentation. The independent auditor concluded, based upon the audit, that there was a reasonable basis for rendering an unmodified opinion that the City of Somerville's financial statements for the year ended June 30, 2020, are fairly presented in conformity with GAAP. The independent auditor's report is presented as the first component of the financial section of this report.

The independent audit of the financial statements of the City of Somerville was part of a broader, federally mandated "Single Audit" designed to meet the special needs of federal grantor agencies. The standards governing Single Audit engagements require the independent auditor to report not only on the fair presentation of the financial statements, but also on the audited government's internal controls and compliance with legal requirements, with special emphasis on internal controls and legal requirements involving the administration of federal awards. These reports are available in the City of Somerville's separately issued Single Audit Report.

The City's Single Audit report for the year ended June 30, 2020, included no instances of significant violations of the applicable laws and regulations reported. Generally accepted accounting principles require that management provide a narrative introduction, overview and analysis to accompany the basic financial statements in the form of an MD&A. This letter of transmittal is designed to complement the MD&A where the financial analysis is now

City of Somerville, Massachusetts

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Comprehensive Annual Financial Report

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