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TOWNSHIP OF JACKSON

AUDIT REPORT FOR THE YEAR ENDED DECEMBER 31, 2013

TOWNSHIP OF JACKSON COUNTY OF OCEAN

TABLE OF CONTENTS

EXHIBIT PAGE

PART I

• Independent Auditor’s Report
• Government Auditing Standards

Financial Statements – Regulatory Basis:

• Comparative Statements of Assets, Liabilities, Reserves & Fund Balance – Regulatory Basis A
• Comparative Statement of Operations and Changes in Fund Balance – Regulatory Basis A-1
• Statement of Revenues – Regulatory Basis A-2
• Statement of Expenditures – Regulatory Basis A-3
• Comparative Statements of Assets, Liabilities, Reserves & Fund Balance – Regulatory Basis B
• Comparative Statements of Assets, Liabilities, Reserves & Fund Balance – Regulatory Basis C
• Comparative Statements of Assets, Liabilities, Reserves & Fund Balance – Regulatory Basis D
• Comparative Statement of Fixed Assets & Fund Balance - Regulatory Basis E
• Comparative Statement of Assets & Liabilities - Regulatory Basis F
• Notes to Financial Statements

Supplemental Exhibits:

• Schedule of Cash & Cash Equivalents A-4
• Schedule of Change Funds A-5
• Schedule of Taxes Receivable & Analysis of Property Tax Levy A-6
• Schedule of Tax Title Liens A-7
• Schedule of Property Acquired for Taxes A-8
• Schedule of Revenue Accounts Receivable A-9
• Schedule of 2012 Appropriations Reserves A-10
• Schedule of Accounts Payable A-11
• Schedule of Reserve for Encumbrances A-12
• Schedule of Prepaid Taxes A-13
• Schedule of Tax Overpayments A-14
• Schedule of County Taxes Payable A-15
• Schedule of Local School District Tax Payable A-16

TOWNSHIP OF JACKSON COUNTY OF OCEAN

TABLE OF CONTENTS

• Schedule of Special District Taxes Payable A-17
• Schedule of Due to State of New Jersey – Construction Fees A-18
• Schedule of Due to State of New Jersey – Marriage Licenses A-19
• Schedule of Reserve for Revaluation Program A-20
• Schedule of Due to Municipal Open Space Trust Fund A-21
• Schedule of Reserve for Garden State Trust Fund A-22
• Schedule of Reserve for State Board of Taxation Appeals A-23
• Schedule of Reserve for Master Plan A-24
• Schedule of Reserve for Skate Park A-25
• Schedule of Reserve for COAH State Plan A-26
• Schedule of Reserve for FEMA Reimbursement A-27
• Schedule of Reserve for Hurricane Sandy A-28
• Schedule of Reserve for Scibal Reimbursement - Hurricane Sandy - DPW A-29
• Schedule of Reserve for Scibal Reimbursement - Hurricane Sandy - Police A-30
• Schedule of Reserve for Police Cars A-31
• Schedule of Interfunds – Other Funds A-32
• Schedule of Deferred Charges A-33
• Schedule of Federal & State Grant Fund Due from Current A-34
• Schedule of State & Federal Grants Receivable A-35
• Schedule of State & Federal Grants Appropriated A-36
• Schedule of State & Federal Grants Unappropriated A-37
• Schedule of Reserve for Encumbrances A-38
• Schedule of Cash - Treasurer B-1
• Schedule of Due to State of New Jersey – Animal Control B-2
• Schedule of Reserve for Animal Control Expenditures B-3
• Schedule of Interfund – Current Fund B-4
• Schedule of Due from County of Ocean – Community Development Block Grant B-5
• Schedule of Reserve for Community Development Block Grant B-6
• Schedule of Various Reserves B-7
• Schedule of Reserve for Open Space B-8
• Schedule of Funds Held by Trustee - LOSAP B-9
• Schedule of Reserve for Length of Service Award Program B-10
• Schedule of Fund Balance C-1
• Schedule of Cash & Cash Equivalents C-2
• Analysis of Cash & Cash Investments C-3
• Schedule of Due from State of New Jersey Department Of Transportation C-4
• Schedule of Due from State of New Jersey Department of Environmental Protection C-5
• Schedule of Due from Current Fund C-6
• Schedule of Due from MUA Shared Services Agreement C-7
• Schedule of Deferred Charges to Future Taxation – Funded C-8

TOWNSHIP OF JACKSON COUNTY OF OCEAN

TABLE OF CONTENTS

• Schedule of Deferred Charges to Future Taxation – Unfunded C-9
• Schedule of General Serial Bonds C-10
• Schedule of Improvement Authorizations C-11
• Schedule of Reserve for Encumbrances C-12
• Statement of Capital Improvement Fund C-13
• Statement of Reserve for Debt Service – Open Space C-14
• Statement of Reserve for Debt Service – Other C-15
• Statement of Reserve for Fire Damage – Annex Building C-16
• Schedule of Bond Anticipation Notes C-17
• Statement of Bonds & Notes Authorized but not Issued C-18
• Schedule of Investment in Bond Anticipation Notes C-19
• Schedule of Cash D-1
• Schedule of Reserve for Public Assistance D-2
• Schedule of Investment in Fixed Assets E-1
• Control Over Compliance Required by OMB Circular A-133 and Circular 04-04
• Schedule of Expenditures of Federal Awards
• Notes to Schedules of Federal Awards
• Schedule of Findings & Questioned Costs

PART II

• Scope of Audit
• General Comments Findings
• Officials in Office
• Acknowledgment

TOWNSHIP OF JACKSON COUNTY OF OCEAN

PART I

INDEPENDENT AUDITOR'S REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2013

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INDEPENDENT AUDITOR'S REPORT

The Honorable Mayor and Members of the Township Council Township of Jackson County of Ocean Jackson, New Jersey 08527

Report on the Financial Statements

We have audited the accompanying comparative statements of assets, liabilities, reserves and fund balance--regulatory basis of the various funds and account group of the Township of Jackson, County of Ocean, State of New Jersey as of December 31, 2013 and 2012 and the related comparative statement of operations and changes in fund balance--regulatory basis for the years then ended, the related statement of revenues--regulatory basis, statement of expenditures--regulatory basis, and the related notes to the financial statements for the year ended December 31, 2013.

Management's Responsibility for the Financial Statements

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

Auditor's Responsibility

Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit 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; and in compliance with audit requirements prescribed by the Division of Local Government Services, Department of Community Affairs, State of New Jersey. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

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

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

Basis for Adverse Opinion on U.S. Generally Accepted Accounting Principles

As discussed in Note 1 to the financial statements, the Township of Jackson prepares its financial statements using accounting practices that demonstrate compliance with regulatory basis of accounting and budget laws of the Division of Local Government Services, Department of Community Affairs, State of New Jersey, which is a basis of accounting other than accounting principles generally accepted in the United States of America, to meet the requirements of the State of New Jersey.

The effects on the financial statements of the variances between these regulatory basis of accounting described in Note 1 and accounting principles generally accepted in the United States of America, although not reasonably determinable, are presumed to be material.

Adverse Opinion on U.S. Generally Accepted Accounting Principles

In our opinion, because of the significance of the matter discussed in the “Basis for Adverse Opinion on U.S. Generally Accepted Accounting Principles” paragraph, the financial statements referred to above do not present fairly, in accordance with accounting principles generally accepted in the United States of America, the financial position of the Township of Jackson, County of Ocean, State of New Jersey, as of December 31, 2013 and 2012, or the results of its operations and changes in fund balance for the years then ended.

Basis for Qualified Opinion on Regulatory Basis of Accounting

As discussed in Note 1, the financial statements of the Length of Service Award Program Fund (“LOSAP”) Trust Fund have not been audited, and we were not required by the Division of Local Government Services, Department of Community Affairs, State of New Jersey, to audit nor were we engaged to audit the LOSAP Trust Fund financial statements as part of our audit of the Township’s financial statements as of and for the years ended December 31, 2013 and 2012. The LOSAP Trust Fund financial activities are included in the Township’s Trust Fund, and represent .73% and .58% of the assets and liabilities, respectively, of the Township’s Trust Funds as of December 31, 2013 and 2012.

Qualified Opinion on Regulatory Basis of Accounting

In our opinion, except for the effects of such adjustments, if any, as might have been determined to be necessary had the LOSAP Trust Fund financial statements been audited as described in the “Basis for Qualified Opinion on Regulatory Basis of Accounting” paragraph, the financial statements referred to above present fairly, in all material respects, the assets, liabilities, reserves and fund balance--regulatory basis of the various funds and account group of the Township of Jackson, County of Ocean, State of New Jersey, as of December 31, 2013 and 2012, and the results of its operations and changes in fund balance--regulatory basis of such funds for the years then ended, and the related statement of revenues--regulatory basis, statement of expenditures--regulatory basis of the various funds, and the related notes to financial statements, for the year ended December 31, 2013 in conformity with accounting principles and practices prescribed by the Division of Local Government Services, Department of Community Affairs, State of New Jersey as described in Note 1.

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Other Matters

Report on Supplementary Information

Our audit was made for the purpose of forming an opinion on the financial statements referred to in the first paragraph as a whole. The supplemental financial statements presented for the various funds are presented for purposes of additional analysis as required by the Division of Local Government Services, Department of Community Affairs, State of New Jersey and is not a required part of the above financial statements. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by the U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, and is also not a required part of the above 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 financial statements. Such information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements of each of the respective individual funds and account group taken as a whole.

Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated May 07, 2014, on our consideration of the Township of Jackson's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is 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 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 the Township of Jackson's internal control over financial reporting and compliance.

Respectfully submitted,

HOLMAN FRENIA ALLISON, P. C.

Medford, New Jersey May 07, 2014

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INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS

The Honorable Mayor and Members of the Township Council Township of Jackson County of Ocean Jackson, New Jersey 08527

We have audited, in accordance with the auditing standards generally accepted in the United States of America, the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States and audit requirements as prescribed by the Division of Local Government Services, Department of Community Affairs, State of New Jersey, the financial statements of the Township of Jackson (herein referred to as “the Township”), as of and for the year ended December 31, 2013, and the related notes to the financial statements, which collectively comprise the Township’s basic financial statements, and have issued our report thereon dated May 07, 2014 in which we expressed an adverse opinion on the conformity of the statements with accounting principles generally accepted in the United States of America due to the differences between those principles and the accounting practices prescribed by the Division of Local Government Services.

Internal Control Over Financial Reporting

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

Compliance and Other Matters

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As part of obtaining reasonable assurance about whether the Township'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 determination of financial statement amounts. 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 one instance of noncompliance or other matters that are required to be reported under Government Auditing Standards or audit requirements as prescribed by the Division of Local Government Services, Department of Community Affairs, State of New Jersey, and which are described in the accompanying Schedule of Findings & Questioned Costs as Finding 2013-01.

Response to Findings

Township of Jackson’s response to the findings identified in our audit is described in the accompanying Schedule of Findings & Questioned Costs section. Township of Jackson’s response was not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on it.

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 Township’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards and audit requirements as prescribed by the Division of Local Government Services, Department of Community Affairs, State of New Jersey in considering the Township’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

Respectfully submitted,

HOLMAN FRENIA ALLISON, P. C.

Certified Public Accountant

Registered Municipal Accountant

RMA #498

Medford, New Jersey May 07, 2014

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BASIC FINANCIAL STATEMENTS

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TOWNSHIP OF JACKSON CURRENT FUND COMPARATIVE STATEMENT OF ASSETS, LIABILITIES, RESERVES AND FUND BALANCE - REGULATORY BASIS DECEMBER 31, 2013 AND 2012

The Accompanying Notes to the Financial Statements are an integral part of this Statement.

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TOWNSHIP OF JACKSON CURRENT FUND COMPARATIVE STATEMENT OF ASSETS, LIABILITIES, RESERVES AND FUND BALANCE - REGULATORY BASIS DECEMBER 31, 2013 AND 2012

REFERENCE 2013 2012

The Accompanying Notes to the Financial Statements are an integral part of this Statement.

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TOWNSHIP OF JACKSON CURRENT FUND COMPARATIVE STATEMENT OF OPERATIONS AND CHANGES IN FUND BALANCE FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012

The Accompanying Notes to the Financial Statements are an integral part of this Statement.

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TOWNSHIP OF JACKSON CURRENT FUND STATEMENT OF REVENUES FOR THE YEAR ENDED DECEMBER 31, 2013

The Accompanying Notes to the Financial Statements are an integral part of this Statement.

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TOWNSHIP OF JACKSON CURRENT FUND STATEMENT OF REVENUES FOR THE YEAR ENDED DECEMBER 31, 2013

ANALYSIS OF REALIZED REVENUES

The Accompanying Notes to the Financial Statements are an integral part of this Statement.

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TOWNSHIP OF JACKSON CURRENT FUND STATEMENT OF REVENUES FOR THE YEAR ENDED DECEMBER 31, 2013

ANALYSIS OF NONBUDGET REVENUE

The Accompanying Notes to the Financial Statements are an integral part of this Statement.

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The Accompanying Notes to the Financial Statements are an integral part of this Statement.

TOWNSHIP OF JACKSON CURRENT FUND STATEMENT OF EXPENDITURES FOR THE YEAR ENDED DECEMBER 31, 2013

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The Accompanying Notes to the Financial Statements are an integral part of this Statement.

APPROPRIATIONS EXPENDED

BUDGET BUDGET AFTER MODIFICATION PAID OR CHARGED ENCUMBERS RESERVED

Salaries and Wages 59,183 80,783 79,575 - 1,208

Other Expenses 7,788 7,788 4,454 3,234 100

Legal Services & Costs:

Other Expenses 450,000 443,000 380,067 - 62,933

Engineering Services & Costs:

Salaries and Wages 153,363 163,363 161,825 - 1,538

Other Expenses 139,215 139,215 72,908 64,322 1,985

Historical Commission:

Other Expenses 125 125 - - 125

Community Alliance-Alcoholism & Drugs:

Salaries and Wages 1,140 1,140 95 - 1,045

Other Expenses 100 100 - - 100

Mayor's Community Advisory Board:

Other Expenses 50 50 - - 50

Economic Development Advisory Board:

Other Expenses 1,175 1,175 - - 1,175

Land Use Administration:

Planning/Zoning Boards:

Salaries and Wages 195,949 204,549 203,379 - 1,170

Other Expenses 54,390 47,390 29,211 720 17,459

Maintenance of Tax Maps: -

Other Expenses 15,100 15,100 7,934 4,742 2,424

Code Enforcement - Other:

Rent Leveling Board:

Salaries and Wages 3,145 3,145 1,375 - 1,770

Other Expenses 33,100 40,100 33,025 - 7,075

Code Enforcement - Other:

Salaries and Wages 224,740 212,740 200,787 - 11,953

Other Expenses 6,795 6,795 3,445 1,762 1,588

Community Development & Enforcement:

Salaries and Wages 24,500 24,500 24,356 - 144

Other Expenses 12,000 12,000 9,929 2,050 21

Commercial Building Standards:

Salaries and Wages 12,000 12,000 7,000 - 5,000

Other Expenses 750 750 500 - 250

TOWNSHIP OF JACKSON CURRENT FUND STATEMENT OF EXPENDITURES FOR THE YEAR ENDED DECEMBER 31, 2013

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The Accompanying Notes to the Financial Statements are an integral part of this Statement.

TOWNSHIP OF JACKSON CURRENT FUND STATEMENT OF EXPENDITURES FOR THE YEAR ENDED DECEMBER 31, 2013

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The Accompanying Notes to the Financial Statements are an integral part of this Statement.

TOWNSHIP OF JACKSON CURRENT FUND STATEMENT OF EXPENDITURES FOR THE YEAR ENDED DECEMBER 31, 2013

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The Accompanying Notes to the Financial Statements are an integral part of this Statement.

TOWNSHIP OF JACKSON CURRENT FUND STATEMENT OF EXPENDITURES FOR THE YEAR ENDED DECEMBER 31, 2013

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The Accompanying Notes to the Financial Statements are an integral part of this Statement.

TOWNSHIP OF JACKSON CURRENT FUND STATEMENT OF EXPENDITURES FOR THE YEAR ENDED DECEMBER 31, 2013

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The Accompanying Notes to the Financial Statements are an integral part of this Statement.

TOWNSHIP OF JACKSON CURRENT FUND STATEMENT OF EXPENDITURES FOR THE YEAR ENDED DECEMBER 31, 2013

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The Accompanying Notes to the Financial Statements are an integral part of this Statement.

TOWNSHIP OF JACKSON CURRENT FUND STATEMENT OF EXPENDITURES FOR THE YEAR ENDED DECEMBER 31, 2013

TOWNSHIP OF JACKSON TRUST FUND COMPARATIVE STATEMENT OF ASSETS, LIABILITIES, RESERVES AND FUND BALANCE - REGULATORY BASIS DECEMBER 31, 2013 AND 2012

The Accompanying Notes to the Financial Statements are an integral part of this Statement.

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TOWNSHIP OF JACKSON TRUST FUND COMPARATIVE STATEMENT OF ASSETS, LIABILITIES, RESERVES AND FUND BALANCE - REGULATORY BASIS DECEMBER 31, 2013 AND 2012

REFERENCE 2013 2012

The Accompanying Notes to the Financial Statements are an integral part of this Statement.

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TOWNSHIP OF JACKSON GENERAL CAPITAL FUND COMPARATIVE STATEMENT OF ASSETS, LIABILITIES, RESERVES AND FUND BALANCE - REGULATORY BASIS DECEMBER 31, 2013 AND 2012

There were bonds and notes authorized but not issued on December 31, 2013 of $1,891,241. (Exhibit C-18)

The Accompanying Notes to the Financial Statements are an integral part of this Statement.

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TOWNSHIP OF JACKSON PUBLIC ASSISTANCE FUND COMPARATIVE STATEMENT OF ASSETS AND RESERVES - REGULATORY BASIS DECEMBER 31, 2013 AND 2012

The Accompanying Notes to the Financial Statements are an integral part of this Statement.

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TOWNSHIP OF JACKSON GENERAL FIXED ASSETS ACCOUNT GROUP COMPARATIVE STATEMENT OF GENERAL FIXED ASSETS AND FUND BALANCE - REGULATORY BASIS DECEMBER 31, 2013 AND 2012

The Accompanying Notes to the Financial Statements are an integral part of this Statement.

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TOWNSHIP OF JACKSON PAYROLL FUND COMPARATIVE STATEMENT OF ASSETS AND LIABILITIES - REGULATORY BASIS DECEMBER 31, 2013 AND 2012

The Accompanying Notes to the Financial Statements are an integral part of this Statement.

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TOWNSHIP OF JACKSON COUNTY OF OCEAN

NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2013

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TOWNSHIP OF JACKSON NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2013

Note 1. Summary of Significant Accounting Policies

A. Description of the Financial Reporting Entity

This report includes the financial statements of the Township of Jackson (the “Township”), within the County of Ocean, in the State of New Jersey and reflects the activities of the municipality which is under the control of the Mayor and Township Council. The financial statements of the Board of Education, First Aid Organization and Fire Districts are reported separately since their activities are administered by separate boards.

The Township’s governing body is also responsible for appointing the board members of the Jackson Municipal Utilities Authority but the Township’s accountability for this organization does not extend beyond making the appointments.

B. Description of Funds

The accounting policies of the Township of Jackson conform to the accounting principles applicable to municipalities, which have been prescribed by the Division of Local Government Services, Department of Community Affairs, State of New Jersey. Such principles and practices are designed primarily for determining compliance with legal provisions and budgetary restrictions and as a means of reporting on the stewardship of public officials with respect to public funds. Under this method of accounting, the Township of Jackson accounts for its financial transactions through the following separate funds:

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

Trust Fund - receipts, custodianship and disbursement of funds in accordance with the purpose for which each reserve was created, including dog license revenue and expenditures and sundry deposits held for satisfactory completion of specific work.

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

Public Assistance Fund – receipt and disbursement of funds that provide assistance to certain residents of the Township.

General Fixed Asset Account Group – used to account for fixed assets used in general government operations.

Payroll Fund – is used for the receipt and disbursements of funds used to meet obligations to employees and payroll tax liability.

C. Basis of Accounting, Measurement Focus and Basis of Presentation

The accounting principles and practices prescribed for municipalities by the State of New Jersey differ in certain respects from generally accepted accounting principles applicable to local governmental units. The more significant policies in New Jersey follow.

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TOWNSHIP OF JACKSON NOTES TO FINANCIAL STATEMENTS (continued): FOR THE YEAR ENDED DECEMBER 31, 2013

Note 1. Summary of Significant Accounting Policies (continued):

C. Basis of Accounting, Measurement Focus and Basis of Presentation (continued):

A modified accrual basis of accounting is followed, with minor exceptions:

Revenues

Revenues are recorded as received in cash except for certain amounts, which may be due from the State of New Jersey or the Federal Government as grants. The amounts recorded as property taxes receivable and consumer accounts receivable have not been included in revenue. Amounts that are due to the Municipality which are susceptible of accrual are recorded as receivables with offsetting reserves.

Expenditures

Expenditures are recorded on the "budgetary" basis of accounting. Generally expenditures are recorded when an amount is encumbered for goods or services through the issuance of a purchase order in conjunction with the Encumbrance Accounting System. Outstanding encumbrances at December 31 are reported as a liability in the financial statements and constitute part of the Township's statutory Appropriation Reserve balance. Appropriation reserves covering unexpended appropriation balance are automatically created on December 31st of each year and recorded as Liabilities, except for amounts which may be cancelled by the governing body. Appropriation reserves are available, until lapsed at the close of the succeeding year, to meet specific claims, commitments or contracts incurred during the preceding fiscal year. Lapsed appropriation reserves are recorded as income. Appropriations for principal payments on outstanding general capital and utility bonds and notes are provided on the cash basis; interest on general capital indebtedness is on the cash basis, whereas interest on utility indebtedness is on the accrual basis.

Foreclosed Property

Foreclosed property is recorded in the Current Fund at the assessed valuation when such property was acquired and is fully reserved.

Interfunds

Interfund receivables in the Current Fund are recorded with offsetting reserves, which are created by charges to operations. Income is recognized in the year the receivables are liquidated. Interfund receivables in the other funds are not offset by reserves.

Insurance

Costs of insurance for all funds are recorded as expenditures at the time of payment. Insurance costs chargeable to future periods are not carried as prepayments.

Inventories of Supplies

The cost of inventories of supplies for all funds is recorded as expenditures at the time individual items are purchased. The cost of inventories is not included on the various balance sheets.

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TOWNSHIP OF JACKSON NOTES TO FINANCIAL STATEMENTS (continued): FOR THE YEAR ENDED DECEMBER 31, 2013

Note 1. Summary of Significant Accounting Policies (continued):

C. Basis of Accounting, Measurement Focus and Basis of Presentation (continued):

General Fixed Assets

Property and equipment purchased by the Current and General Capital Funds are recorded as expenditures at the time of purchase and are not capitalized. No depreciation has been recorded. Fixed Assets acquired through grants in and/or contributed capital has not been accounted for separately.

Compensated Absences

Expenditures relating to obligations for unused vested accumulated vacation, sick pay and compensation time are not recorded until paid. GAAP requires that the amount that would normally be liquidated with expendable available financial resources be recorded as expenditure in the operating funds and the remaining obligations be recorded as a long-term obligation.

Property Taxes

Property taxes are an enforceable lien on property as of January 1. Taxes are levied annually and are payable in quarterly installments on February 1, May 1, August 1 and November 1 of each year.

Grants

Current Fund - State and federal grants and assistance awards made on the basis of entitlement periods are recorded as revenues when entitlement occurs.

Trust Fund - State and federal grants and assistance awards are dedicated by rider in the Trust Fund. A receivable and corresponding spending reserve are recorded when the grant is awarded.

Capital Fund - State and federal grants and assistance awards are recorded as a funding source for improvement authorizations or are established as receivables with an offsetting reserve.

Deferred Charges To Future Taxation Funded and Unfunded

Upon the authorization of capital projects, the Township establishes deferred charges for the costs of the capital projects to be raised by future taxation. Funded deferred charges relate to permanent debt issued, whereas unfunded deferred charges relate to temporary or non-funding of the authorized cost of capital projects. According to N.J.S.A. 40A:2-4, the Township may levy taxes on all taxable property within the local unit to repay the debt. Annually, the Township raises the debt requirements for that particular year in the Current Fund budget. As funds are raised, the deferred charges are reduced.

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TOWNSHIP OF JACKSON NOTES TO FINANCIAL STATEMENTS (continued): FOR THE YEAR ENDED DECEMBER 31, 2013

Note 1. Summary of Significant Accounting Policies (continued):

C. Basis of Accounting, Measurement Focus and Basis of Presentation (continued):

Investments

Investments are stated at actual cost.

Subsequent Events

The Township has evaluated subsequent events occurring after December 31, 2013 through the date of May 07, 2014, which is the date the financial statements were available to be issued.

Budgets

The Township is required by state law to adopt an annual budget for the Current Fund. Each budget is presented in accordance with accounting principles prescribed by the Division of Local Government Services, Department of Community Affairs, State of New Jersey.

The following steps are taken in establishing the budgetary data reflected in the financial statements:

1. Prior to February 10th of the budget year the Township introduces a budget, which includes proposed expenditures and financing methods.
2. A public hearing is held 28 days after introduction, after a public hearing the budget may be adopted by the governing body.

Once a budget is approved it may be amended after November 1, by a resolution adopted by the governing body.

Length of Service Award Program ("LOSAP")

The Township has established a Volunteer Length of Service Award Plan (“LOSAP”) (“Plan”) to ensure retention of the Township’s volunteer First Aid Squad members. The Plan shall be construed under the laws of the State of New Jersey and is established with the intent that it meets the requirements of a “Length of Service Award Plan under Section 457(e)11 of the Internal Revenue Code”.

LOSAP Trust Fund have not been audited, and we were not required by the Division of Local Government Services, Department of Community Affairs, State of New Jersey, to audit nor were we engaged to audit the LOSAP Trust Fund financial statements as part of our audit of the Township's financial statements.

N.J.A.C.5:30-14.49 requires that the Township perform a separate review report of the Plan in accordance with the American Institute of Certified Public Accounts Statements for Accounting and Auditing Review Services.

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TOWNSHIP OF JACKSON NOTES TO FINANCIAL STATEMENTS (continued): FOR THE YEAR ENDED DECEMBER 31, 2013

Note 2. Cash and Cash Equivalents:

The Township is governed by the deposit and investment limitations of New Jersey state law. The Deposits and investments held at December 31, 2013, and reported at fair value are as follows:

Custodial Credit Risk Related to Deposits - Custodial credit risk is the risk that, in the event of a bank failure, the Township's deposits might not be recovered. Although the Township does not have a formal policy regarding custodial credit risk, N.J.S.A. 17:9-41 et seq. requires that governmental units shall deposit public funds in public depositories protected from loss under the provisions of the Governmental Unit

Deposit Protection Act (GUDPA). Under the Act, the first $250,000 of governmental deposits in each insured depository is protected by the Federal Deposit Insurance Corporation (FDIC). Public funds owned by the Township in excess of FDIC insured amounts are protected by GUDPA. However, GUDPA does not protect intermingled trust funds such as salary withholdings, bail funds, or funds that may pass to the Township relative to the happening of a future condition. Such funds are shown as uninsured and uncollateralized in the schedule that follows.

As of December 31, 2013, the Township's bank balances of $29,678,133 were exposed to custodial credit risk as follows:

Uninsured & Uncollateralized Insured Under F.D.I.C. Collateralized Under GUDPA $15,269,784 250,000 14,158,349

Total $29,678,133

35

TOWNSHIP OF JACKSON NOTES TO FINANCIAL STATEMENTS (continued): FOR THE YEAR ENDED DECEMBER 31, 2013

Note 3. Investments

A. Custodial Credit Risk

For an investment, custodial credit risk is a risk that, in the event of the failure of the counterparty, the Township will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. Investment securities are exposed to custodial credit risk if the securities are uninsured, are not registered in the name of the Township and are held by either the counterparty or the counterparty's trust department or the agent but not in the Township's name. All of the Township's investments are held in the name of the Township and are collateralized by GUDPA.

B. Investment Interest Rate Risk

Interest rate risk is the risk that changes in interest rates that will adversely affect the fire value of an investment. The Township has no formal investment policy that limits investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates. Maturities of investments held at December 31, 2013, are provided in the above schedule.

C. Investment Credit Risk

The Township has no investment policy that limits its investment choices other than the limitation of state law as follows:

• Bonds or other obligations of the United States of America or obligations guaranteed by the United States of America;
• Government money market mutual funds;
• Any obligation that a federal agency or federal instrumentality has issued in accordance with an act of Congress, which security has a maturity date not greater than 397 days from the date of purchase, provided that such obligations bear a fixed rate of interest not dependent on any index or other external factor;
• Bonds or other obligations of the Township or bonds or other obligations of the local unit or units within which the Township is located;
• Bonds or other obligations, having a maturity date of not more than 397 days from the date of purchase, approved by the Division of Investment in the Department of Treasury for investment by the Township;
• Local Government investment pools;
• Deposits with the State of New Jersey Cash Management Fund established pursuant to section 1 of P.L. 1977, c.281; or
• Agreements for the repurchase of fully collateralized securities.

36

TOWNSHIP OF JACKSON

NOTES TO FINANCIAL STATEMENTS (continued): FOR THE YEAR ENDED DECEMBER 31, 2013

Note 3. Investments (continued):

As of December 31, 2013, the Township had the following investments and maturities:

Note 4. Pension

A. Plan Description

The Township of Jackson contributes to a cost-sharing multiple-employer defined benefit pension plan, Public Employees' Retirement System (P.E.R.S.) and Police and Fireman's Retirement System (P.F.R.S.), administered by the State of New Jersey, Division of Pensions and Benefits. It provides retirement, disability, medical and death benefits to plan members and beneficiaries. The State of New Jersey P.E.R.S. and P.F.R.S. programs were established as of January 1, 1955 and July 1, 1944, respectively. The programs were established under the provisions of N.J.S.A.43:15A and N.J.S.A.43:16A which assigns authority to establish and amend benefit provisions to the plan's board of trustees. P.E.R.S. and P.F.R.S. issues a publicly available financial report that includes financial statements and required supplementary information. That report may be obtained by writing to: State of New Jersey, Department of the Treasury, Division of Pensions and Benefits, P.O. Box 295, Trenton, NJ 08625, or calling (609) 984-1684.

B. Funding Policy

The System’s designated purpose is to provide retirement, death, disability and medical benefits to certain qualified members. Membership in the System is mandatory for substantially all full-time employees of the State of New Jersey or any county, municipality, school district or public agency, provided the employee is not required to be a member of another state-administered retirement system or other state or local jurisdiction. The System’s Board of Trustees is primarily responsible for the administration of the System.

According to the State of New Jersey administrative code, all obligations of the System will be assumed by the State of New Jersey should the System terminate.

37

TOWNSHIP OF JACKSON NOTES TO FINANCIAL STATEMENTS (continued): FOR THE YEAR ENDED DECEMBER 31, 2013

Note 4. Pension (continued):

B. Funding Policy (continued):

Plan members are required to contribute 6.5%, effective October 1, 2011, of their annual covered salary for P.E.R.S, 10%, effective October 1, 2011, of their annual covered salary for P.F.R.S. and the Township is required to contribute at an actuarially determined rate. The contribution requirements of plan members and the Township are established and may be amended by the plan's Board of Trustees.

The Township’s contributions to P.E.R.S. for the years ending December 31, 2013, 2012 and 2011 were $759,294, $823,495 and $824,322, respectively, equal to the required contributions for each year, and to P.F.R.S. for the years ending December 31, 2013, 2012 and 2011 were $2,137,931, $2,169,961 and $2,442,131, respectively, equal to the required contributions for each year.

C. Post-Employment Benefits

Chapter 384 of Public Laws 1987 and Chapter 6 of Public Laws 1990 requires the PERS to fund post-retirement medical benefits for those employees covered by the State Plan, who retire after reaching age 60 and accumulating 25 years of credited services. The cost of these benefits is actuarially determined and funded through contributions by the State in accordance with Chapter 62, P.L. 1994. Funding of the post-retirement medical premiums changed from a prefunding basis to a pay-as-you-go basis beginning in 1996, which increased the medical reserve by one-half of 1% of payroll.

Note 5. Property Taxes

Property taxes are an enforceable lien on the assessed property. Taxes are due on a quarterly basis on February 1, May 1, August 1 and November 1. All unpaid taxes become delinquent 8 days after the above due dates. The Township bills and collects its own property taxes as well as the taxes levied by the other taxing bodies within the municipality. Property tax revenues are recognized when collected. A reserve for uncollected taxes is established in the current operating budget to the extent that their collectability is improbable.

The following is a three-year comparison of certain statistical information relative to property taxes and property tax collections for the current and previous two years.

38

TOWNSHIP OF JACKSON

NOTES TO FINANCIAL STATEMENTS (continued): FOR THE YEAR ENDED DECEMBER 31, 2013

Note 5. Property Taxes (continued):

Comparison of Tax Rate Information:

Net Valuation Taxable:

2013; 6,663,145,020; 2012; 6,710,626,337; 2011; 6,746,824,494

Comparison of Tax Levies and Collection Currently:

Delinquent Taxes and Tax Title Liens:

39

TOWNSHIP OF JACKSON

NOTES TO FINANCIAL STATEMENTS (continued): FOR THE YEAR ENDED DECEMBER 31, 2013

Note: 6: Property Acquired By Tax Title Lien Liquidation

The value of property acquired by liquidation of tax title liens on December 31, on the basis of the last assessed valuation of such properties, for the current and previous two years was as follows:

Note: 7: Fund Balance Appropriated

The following schedule details the amount of fund balance available at the end of the current year and four previous years and the amounts utilized in the subsequent year's budgets.

YEAR BALANCE DECEMBER 31, UTILIZED IN BUDGET OF SUCCEEDING YEAR PERCENTAGE OF FUND BALANCE USED

CURRENT FUND:

2013 $ 2,873,067 * *

2012 2,549,911 1,900,000 74.51%

2011 2,350,087 1,900,000 80.85%

2010 2,770,286 2,400,000 86.63%

2009 3,990,487 3,800,000 95.23%

*2014 budget not introduced at date of audit

Note 8. Interfunds, Receivables and Payables

The composition of interfund balances as of December 31, 2013 is a follows:

The purpose of these interfunds is short-term borrowing.

40

TOWNSHIP OF JACKSON NOTES TO FINANCIAL STATEMENTS (continued): FOR THE YEAR ENDED DECEMBER 31, 2013

Note 9. Long-Term Debt

The Local Bond Law governs the issuance of bonds and notes to finance general municipal capital expenditures. Bonds are retired in serial installments with the statutory period of usefulness. Bonds issued by the Township are general obligations bonds backed by the full faith and credit of the Township. Bond anticipation notes are issued to temporarily finance capital projects prior to the issuance of serial bonds. The terms of the notes cannot exceed one year but the notes may be renewed from time to time for a period not exceeding one year. All such notes must be paid no later than the tenth anniversary of the date of the original note. The State of New Jersey also prescribes that on or before the third anniversary date of the original note a payment of at least equal to the first legally payable installment of the bonds in anticipation of which such notes were issued be paid. A second legal installment must be paid if the notes are to be renewed beyond the fourth anniversary date of the original issuance and so on. Tax anticipation notes are issued if the cash on hand is not sufficient to carry on normal operations of the municipality at any time during the year. Such notes are authorized by a resolution adopted by the governing body.

Summary of Township Debt – Annual Debt Statement:

41

TOWNSHIP OF JACKSON

NOTES TO FINANCIAL STATEMENTS (continued): FOR THE YEAR ENDED DECEMBER 31, 2013

Note 9. Long-Term Debt (continued):

Summary of Statutory Debt Condition – Annual Debt Statement:

The summarized statement of debt condition which follows is prepared in accordance with the required method of setting up the Annual Debt Statement and indicates a statutory net debt of 0.334%

Net Debt, $22,198,048 divided by Equalized Valuation Basis per N.J.S.A.40A:2-2, as amended, $6,653,462,303 equals 0.334%.

Borrowing Power Under 40A:2-6:

During the year ended December 31, 2013, the following changes occurred in issued Bonds, Loans and Notes:

42

TOWNSHIP OF JACKSON NOTES TO FINANCIAL STATEMENTS (continued): FOR THE YEAR ENDED DECEMBER 31, 2013

Note 9. Long-Term Debt (continued):

As of December 31, 2013, the Township’s Long-Term Debt is as follows:

General Serial Bonds:

Total $ 22,492,000 $ 4,189,162 $ 26,681,162

2024-2028 1,534,000 1,757,475

2019-2023 5,397,000 6,178,271

2018 2,715,000 3,117,154

2017 2,650,000 3,152,779

2016 3,395,000 4,028,266

2015 3,300,000 4,058,241

2014 $ 3,501,000 $ 887,976 $ 4,388,976

2013 $ 3,501,000 $ 887,976 $ 4,388,976

2012 $ 3,501,000 $ 887,976 $ 4,388,976

2011 $ 3,501,000 $ 887,976 $ 4,388,976

2010 $ 3,501,000 $ 887,976 $ 4,388,976

2009 $ 3,501,000 $ 887,976 $ 4,388,976

2008 $ 3,501,000 $ 887,976 $ 4,388,976

2007 $ 3,501,000 $ 887,976 $ 4,388,976

2006 $ 3,501,000 $ 887,976 $ 4,388,976

2005 $ 3,501,000 $ 887,976 $ 4,388,976

2004 $ 3,501,000 $ 887,976 $ 4,388,976

2003 $ 3,501,000 $ 887,976 $ 4,388,976

2002 $ 3,501,000 $ 887,976 $ 4,388,976

2001 $ 3,501,000 $ 887,976 $ 4,388,976

2000 $ 3,501,000 $ 887,976 $ 4,388,976

2019-2020 2,715,000 402,154 3,117,154

2018 2,715,000 402,154 3,117,154

2017 2,650,000 502,779 3,152,779

2016 3,395,000 633,266 4,028,266

2015 3,300,000 633,266 4,058,241

2014 $ 3,501,000 $ 4,189,162 $ 2,305,000

2013 $ 3,501,000 $ 4,189,162 $ 2,305,000

2012 $ 3,501,000 $ 4,189,162 $ 2,305,000

2011 $ 3,501,000 $ 4,189,162 $ 2,305,000

2009 $ 3,501,000 $ 4,189,162 $ 2,305,000

2008 $ 3,501,000 $ 4,189,162 $ 2,305,000

2007 $ 3,501,000 $ 4,189,162 $ 2,305,000

2006 $ 3,501,000 $ 4,189,162 $ 2,305,000

2005 $ 3,501,000 $ 4,189,162 $ 2,305,000

2004 $ 3,501,000 $ 4,189,162 $ 2,305,000

2003 $ 3,501,000 $ 4,189,162 $ 2,305,000

2002 $ 3,501,000 $ 4,189,162 $ 2,305,000

2001 $ 3,501,000 $ 4,189,162 $ 2,305,000

2000 $ 3,501,000 $ 4,189,162 $ 2,305,000

1999 $ 3,501,000 $ 4,189,162 $ 2,305,000

1998 $ 3,501,000 $ 4,189,162 $ 2,305,000

1997 $ 3,501,000 $ 4,189,162 $ 2,305,000

1996 $ 3,501,000 $ 4,189,162 $ 2,305,000

1995 $ 3,501,000 $ 4,189,162 $ 2,305,000

1994 $ 3,501,000 $ 4,189,162 $ 2,305,000

1993 $ 3,501,000 $ 4,189,162 $ 2,305,000

1992 $ 3,501,000 $ 4,189,162 $ 2,305,000

1991 $ 3,501,000 $ 4,189,162 $ 2,305,000

1990 $ 3,501,000 $ 4,189,162 $ 2,305,000

1989 $ 3,501,000 $ 4,189,162 $ 2,305,000

1988 $ 3,501,000 $ 4,189,162 $ 2,305,000

1987 $ 3,501,000 $ 4,189,162 $ 2,305,000

1986 $ 3,501,000 $ 4,189,162 $ 2,305,000

1985 $ 3,501,000 $ 4,189,162 $ 2,305,000

1984 $ 3,501,000 $ 4,189,162 $ 2,305,000

1983 $ 3,501,000 $ 4,189,162 $ 2,305,000

1982 $ 3,501,000 $ 4,189,162 $ 2,305,000

1981 $ 3,501,000 $ 4,189,162 $ 2,305,000

1980 $ 3,501,000 $ 4,189,162 $ 2,305,000

1979 $ 3,501,000 $ 4,189,162 $ 2,305,000

1978 $ 3,501,000 $ 4,189,162 $ 2,305,000

1977 $ 3,501,000 $ 4,189,162 $ 2,305,000

1976 $ 3,501,000 $ 4,189,162 $ 2,305,000

1975 $ 3,501,000 $ 4,189,162 $ 2,305,000

1974 $ 3,501,000 $ 4,189,162 $ 2,305,000

1973 $ 3,501,000 $ 4,189,162 $ 2,305,000

1972 $ 3,501,000 $ 4,189,162 $ 2,305,000

1971 $ 3,501,000 $ 4,189,162 $ 2,305,000

1970 $ 3,501,000 $ 4,189,162 $ 2,305,000

1969 $ 3,501,000 $ 4,189,162 $ 2,305,000

1968 $ 3,501,000 $ 4,189,162 $ 2,305,000

1967 $ 3,501,000 $ 4,189,162 $ 2,305,000

1966 $ 3,501,000 $ 4,189,162 $ 2,305,000

1965 $ 3,501,000 $ 4,189,162 $ 2,305,000

1964 $ 3,501,000 $ 4,189,162 $ 2,305,000

1963 $ 3,501,000 $ 4,189,162 $ 2,305,000

1962 $ 3,501,000 $ 4,189,162 $ 2,305,000

1961 $ 3,501,000 $ 4,189,162 $ 2,305,000

1960 $ 3,501,000 $ 4,189,162 $ 2,305,000

1959 $ 3,501,000 $ 4,189,162 $ 2,305,000

1958 $ 3,501,000 $ 4,189,162 $ 2,305,000

1957 $ 3,501,000 $ 4,189,162 $ 2,305,000

1956 $ 3,501,000 $ 4,189,162 $ 2,305,000

1955 $ 3,501,000 $ 4,189,162 $ 2,305,000

1954 $ 3,501,000 $ 4,189,162 $ 2,305,000

1953 $ 3,501,000 $ 4,189,162 $ 2,305,000

1952 $ 3,501,000 $ 4,189,162 $ 2,305,000

1951 $ 3,501,000 $ 4,189,162 $ 2,305,000

1950 $ 3,501,000 $ 4,189,162 $ 2,305,000

1949 $ 3,501,000 $ 4,189,162 $ 2,305,000

1948 $ 3,501,000 $ 4,189,162 $ 2,305,000

1947 $ 3,501,000 $ 4,189,162 $ 2,305,000

1946 $ 3,501,000 $ 4,189,162 $ 2,305,000

1945 $ 3,501,000 $ 4,189,162 $ 2,305,000

1944 $ 3,501,000 $ 4,189,162 $ 2,305,000

1943 $ 3,501,000 $ 4,189,162 $ 2,305,000

1942 $ 3,501,000 $ 4,189,162 $ 2,305,000

1941 $ 3,501,000 $ 4,189,162 $ 2,305,000

1940 $ 3,501,000 $ 4,189,162 $ 2,305,000

Refunding Bonds and Deferred Bonds Outstanding

The Township, during 2009, issued $8,010,000 in General Obligation Bonds, Series, 2009 (the “Refunding Bonds”). The Bonds were issued in accordance with the Township’s refunding plan. The Refunding Plan calls for the current refunding and redemption of the Township’s Series 1996 Bonds on June 11, 2009 (the “1996 Redemption Date”) at par and for advance refunding the Township’s Series 2001 Bonds and redeeming the Series 2001 bonds on December 31, 2010 (the 2001 “Redemption Date” and together with the 1996 Redemption Date, the “Redemption Dates”) at par, the earliest dates set for optional redemption of the Refunded Bonds, plus accrued interest to the Redemption Dates.

43

TOWNSHIP OF JACKSON NOTES TO FINANCIAL STATEMENTS (continued): FOR THE YEAR ENDED DECEMBER 31, 2013

Note 9. Long-Term Debt (continued):

Refunding Bonds and Deferred Bonds Outstanding (continued):

The proceeds of the Refunding Bonds were applied to the purchase of direct noncallable obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (State and Local Government Securities) the ("Government Obligations") with any investments earnings thereon, together with any cash remaining after the purchase of the Government Obligations, will be sufficient to make payments when due of principal of, interest on and redemption premium, if any, payable with respect to the Refunded Bonds. The Government Obligations (together with any cash remaining in after the purchase of the Government Obligations) are required to be held in an escrow fund by the escrow agent for the Refunded Bonds pursuant to the terms of an escrow deposit agreement.

The Refunding Plan calls for the escrow agent, pursuant to the escrow deposit agreement, to pay, from the escrow fund, when due, interest on and principal of the Refunded Bonds and in accordance with the terms of the Refunded Bonds to call the Refunded Bonds for early redemption on their respective Redemption Dates.

The 1996 Bonds were refunded in their entirety by the 2009 Bonds.

At December 31, 2009, $760,000 of the Series 2001 Bonds outstanding is considered defeated.

The escrow assets and the liability for the Refunded Bonds are not included in the Township's financial statements.

Debt Service payments were reduced by $272,691.22 as a result of the refunding.

The net present value benefit of the transactions was $263,945.62.

Note 10. Short-Term Debt

Bond Anticipation Notes

The Township issues Bond Anticipation Notes to temporarily fund various capital projects prior to the issuing of serial bonds. The term of the notes cannot exceed one year but the notes may be renewed from time to time for a period not exceeding one year. All such notes must be paid not later than the tenth anniversary of the date of the original note. The original notes are dated August 8, 2012 and bear an interest rate of 1.25% with a maturity date of one year from date of issue. The purpose of the Bond Anticipation Notes are to fund the acquisition, construction, repair and installation of various capital improvements authorized by the Township.

44

TOWNSHIP OF JACKSON NOTES TO FINANCIAL STATEMENTS (continued): FOR THE YEAR ENDED DECEMBER 31, 2013

Note 10. Short-Term Debt (continued):

Special Emergency Note Payable

The Township is indebted to itself through excess cash available in the General Capital Fund as of December 31, 2013 and is classified as an asset “Investment in Special Emergency Notes”. The note is issued in anticipation of the collection of taxes and revenues, including proceeds from FEMA and insurance proceeds, of the Township of the budget years 2013 through 2017 (20% of the original appropriation to be paid in each year) to finance special emergency appropriations to meet certain expenses incurred as a result of the extraordinary damage to the streets, roads, and other public property caused by Hurricane Sandy, authorized by Township resolution.

Note 11. Bonds and Notes Authorized But Not Issued

At December 31, 2013 the Township has authorized but not issued bonds and notes as follows:

General Capital Fund - Bonds and Notes $1,891,241

Note 12. Deferred Charges to be Raised in Succeeding Budgets

Certain expenditures are required to be deferred to budgets of succeeding years. At December 31, 2013, the following deferred charges are shown on the balance sheets of the various funds:

45

TOWNSHIP OF JACKSON NOTES TO FINANCIAL STATEMENTS (continued): FOR THE YEAR ENDED DECEMBER 31, 2013

Note 14. General Fixed Assets

The following schedule is a summarization of the changes in General Fixed Assets for the fiscal year ended December 31, 2013:

All additions are recorded at cost.

Note 15. Risk Management

The Township of Jackson is exposed to various risks of loss related to torts; theft of, damage to and destruction of assets; errors and omissions and natural disasters. The Township is a member of the Ocean County Municipal Joint Insurance Fund (JIF). This public entity risk pool is both an insured and self-administered group of 29 municipalities established for the purpose of insuring against property damage, general liability, motor vehicles and equipment liability and workmen's compensation. The JIF will be self-sustaining through member premiums. The JIF participates in the Municipal Excess Liability Insurance Program.

Note 16. Deferred Compensation Salary Account

The Township offers it employees a Deferred Compensation Plan in accordance with Internal Revenue Code Section 457, which has been approved by the Director of Local Government Services. The Plan, available to all full time employees at their option, permits employees to defer a portion of their salary to future years. The deferred compensation is not available to participants until termination, retirement, death or unforeseeable emergency.

Amounts deferred under Section 457 plans must be held in trust for the exclusive benefit of participating employees and not be accessible by the Township or its creditors.

46

TOWNSHIP OF JACKSON NOTES TO FINANCIAL STATEMENTS (continued): FOR THE YEAR ENDED DECEMBER 31, 2013

Note 17. Contingencies

A. Accrued Sick, Vacation and Compensation Time

As discussed in Note 1 and in accordance with accounting principles prescribed by the State of New Jersey, the cash basis of accounting is followed for recording the Township’s liability related to unused vacation, sick pay and compensation time. The Township permits certain employees within limits to accumulate unused vacation, sick pay and compensation time, which may be taken as time off or paid at a later date at an agreed upon rate.

The accumulated cost of unused sick and vacation time has not been recorded in the financial statements as presented, however at December 31, 2013 it is calculated that accrued unused sick and vacation time payable are valued at $2,490,844. The likelihood that this liability would be due and payable all at once is remote since the Township’s employees’ ages and anticipated retirement dates vary.

The Township has established a Compensated Absences Trust Fund to set aside funds for future payments of compensated absences. At December 31, 2013, the balance of the fund was $256,794.

B. Unemployment Compensation Insurance

Effective January 1, 1978, most municipal employees were eligible for unemployment compensation insurance (N.J.S.A.43:21-3 et. seq.). The Township has elected to provide a self-insured plan whereby the municipal cost and employee contributions are deposited in a trust fund from which claims, if any, will be paid. The reserve for unemployment compensation insurance at December 31, 2013 was $264,794.

C. Litigation

The Township is involved in legal and administrative proceedings and claims of various types. While any litigation contains an element of uncertainty, Township Officials, based upon the opinion of the Township’s Counsel, presently believe that the outcome of each such proceeding or claim which is pending or know to be threatened, or all of them combined, will not have a material adverse effect on the

Township’s financial position or adversely affect the Township’s ability to levy, collect and enforce the collection of taxes or other revenue for the payment of its bonds or other obligations.

D. Federal and State Grants

The Township receives financial assistance from the U.S. Government and the State of New Jersey in the form of grants. Entitlement to the funds is generally conditional upon compliance with terms and conditions of the grant agreements and applicable regulations, including the expenditure of the funds for eligible purposes. Substantially all grants, entitlements and cost reimbursements are subject to financial and compliance audits by grantors. As a result of these audits, costs previously reimbursed could be disallowed and require payment to the grantor agency. As of December 31, 2013 the Township estimates that no material liabilities will result from such audits.

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48

SUPPLEMENTAL EXHIBITS

49

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50

CURRENT FUND

51

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52

TOWNSHIP OF JACKSON CURRENT FUND SCHEDULE OF CASH AND CASH EQUIVALENTS FOR THE YEAR ENDED DECEMBER 31, 2013

53

TOWNSHIP OF JACKSON CURRENT FUND SCHEDULE OF DUE FROM STATE - P.L. 1971, C.20 FOR THE YEAR ENDED DECEMBER 31, 2013

54

55

ANALYSIS OF 2013 PROPERTY TAX LEVY

TOWNSHIP OF JACKSON CURRENT FUND SCHEDULE OF TAXES RECEIVABLE AND ANALYSIS OF PROPERTY TAX LEVY FOR THE YEAR ENDED DECEMBER 31, 2013

TOWNSHIP OF JACKSON CURRENT FUND SCHEDULE OF TAX TITLE LIENS FOR THE YEAR ENDED DECEMBER 31, 2013

SCHEDULE OF PROPERTY ACQUIRED FOR TAXES FOR THE YEAR ENDED DECEMBER 31, 2013 EXHIBIT A-8

Balance December 31, 2013 & 2012 $ 6,318,700

56

TOWNSHIP OF JACKSON CURRENT FUND SCHEDULE OF REVENUE ACCOUNTS RECEIVABLE FOR THE YEAR ENDED DECEMBER 31, 2013

57

58

TOWNSHIP OF JACKSON CURRENT FUND SCHEDULE OF 2012 APPROPRIATION RESERVES FOR THE YEAR ENDED DECEMBER 31, 2013

59

TOWNSHIP OF JACKSON CURRENT FUND SCHEDULE OF 2012 APPROPRIATION RESERVES FOR THE YEAR ENDED DECEMBER 31, 2013

09

TOWNSHIP OF JACKSON CURRENT FUND SCHEDULE OF 2012 APPROPRIATION RESERVES FOR THE YEAR ENDED DECEMBER 31, 2013

61

TOWNSHIP OF JACKSON CURRENT FUND SCHEDULE OF 2012 APPROPRIATION RESERVES FOR THE YEAR ENDED DECEMBER 31, 2013

62

Total 1,122,004

Accounts Payable 230,349

Cash Disbursements $ 891,655

TOWNSHIP OF JACKSON CURRENT FUND SCHEDULE OF 2012 APPROPRIATION RESERVES FOR THE YEAR ENDED DECEMBER 31, 2013

TOWNSHIP OF JACKSON CURRENT FUND SCHEDULE OF ACCOUNTS PAYABLE FOR THE YEAR ENDED DECEMBER 31, 2013

EXHIBIT A-12

SCHEDULE OF RESERVE FOR ENCUMBRANCES FOR THE YEAR ENDED DECEMBER 31, 2013

63

TOWNSHIP OF JACKSON CURRENT FUND SCHEDULE OF PREPAID TAXES FOR THE YEAR ENDED DECEMBER 31, 2013

64

TOWNSHIP OF JACKSON CURRENT FUND SCHEDULE OF COUNTY TAXES PAYABLE FOR THE YEAR ENDED DECEMBER 31, 2013

EXHIBIT A-16

SCHEDULE OF LOCAL DISTRICT SCHOOL TAX PAYABLE FOR THE YEAR ENDED DECEMBER 31, 2013

65

TOWNSHIP OF JACKSON CURRENT FUND SCHEDULE OF SPECIAL DISTRICT TAXES PAYABLE FOR THE YEAR ENDED DECEMBER 31, 2013

Balance December 31, 2012

Balance December 31, 2012

Increased by:

EXHIBIT A-18 SCHEDULE OF DUE TO STATE OF NEW JERSEY - CONSTRUCTION FEES FOR THE YEAR ENDED DECEMBER 31, 2013

SCHEDULE OF DUE TO STATE OF NEW JERSEY - MARRIAGE LICENSE FEES FOR THE YEAR ENDED DECEMBER 31, 2013

66

TOWNSHIP OF JACKSON CURRENT FUND SCHEDULE OF RESERVE FOR REVALUATION PROGRAM FOR THE YEAR ENDED DECEMBER 31, 2013

Balance December 31, 2013 & 2012

$5,743

SCHEDULE OF DUE TO MUNICIPAL OPEN SPACE TRUST FUND FOR THE YEAR ENDED DECEMBER 31, 2013

EXHIBIT A-21

67

TOWNSHIP OF JACKSON CURRENT FUND SCHEDULE OF RESERVE FOR STATE BOARD OF TAXATION APPEALS FOR THE YEAR ENDED DECEMBER 31, 2013

EXHIBIT A-26

TOWNSHIP OF JACKSON CURRENT FUND SCHEDULE OF RESERVE FOR COAH STATE PLAN FOR THE YEAR ENDED DECEMBER 31, 2013

Balance December 31, 2013 & 2012 $ 915,250

SCHEDULE OF RESERVE FOR FEMA REIMBURSEMENTS FOR THE YEAR ENDED DECEMBER 31, 2013

EXHIBIT A-27

69

TOWNSHIP OF JACKSON CURRENT FUND SCHEDULE OF RESERVE FOR SCIBAL REIMBURSEMENTS - HURRICANE SANDY - DPW FOR THE YEAR ENDED DECEMBER 31, 2013

EXHIBIT A-30 SCHEDULE OF RESERVE FOR SCIBAL REIMBURSEMENTS - HURRICANE SANDY - POLICE FOR THE YEAR ENDED DECEMBER 31, 2013

70

TOWNSHIP OF JACKSON CURRENT FUND SCHEDULE OF INTERFUNDS - OTHER FUNDS FOR THE YEAR ENDED DECEMBER 31, 2013

71

72

TOWNSHIP OF JACKSON CURRENT FUND SCHEDULE OF DEFERRED CHARGES FOR THE YEAR ENDED DECEMBER 31, 2013

TOWNSHIP OF JACKSON FEDERAL AND STATE GRANT FUND SCHEDULE OF DUE FROM CURRENT FUND FOR THE YEAR ENDED DECEMBER 31, 2013

73

74

TOWNSHIP OF JACKSON FEDERAL AND STATE GRANT FUND SCHEDULE OF STATE AND FEDERAL GRANTS RECEIVABLE FOR THE YEAR ENDED DECEMBER 31, 2013

75

TOWNSHIP OF JACKSON FEDERAL AND STATE GRANT FUND SCHEDULE OF STATE AND FEDERAL GRANTS - APPROPRIATED FOR THE YEAR ENDED DECEMBER 31, 2013