FYE 06.30.03

Annual General-Purpose Financial Statements

TOWN OF EXETER, RHODE ISLAND

Fiscal Year Ended June 30, 2003

Table of Contents

Page

INDEPENDENT AUDITORS= REPORT..................................................................................................................................... 1

GENERAL-PURPOSE FINANCIAL STATEMENTS

Combined Balance Sheet ‑ All Fund Types and Account Groups................................................................................... 3

Combined Statements of Revenues, Expenditures and Changes in Fund Balances ‑

All Governmental Fund Types and Expendable Trust Funds.................................................................................. 4

Statement of Revenues and Expenditures - Budget (GAAP Basis) and Actual - General Fund................................. 5

Combined Statements of Revenues, Expenditures and Changes in Fund Balances ‑

Nonexpendable Trust Funds.......................................................................................................................................... 6

Combined Statement of Cash Flows - Nonexpendable Trust Funds............................................................................... 7

Notes to Financial Statements................................................................................................................................................ 8

COMBINING STATEMENTS, ACCOUNT GROUPS, AND SUPPLEMENTAL SCHEDULES

Special Revenue Funds

Combining Balance Sheet...................................................................................................................................................... 17

Combining Statements of Revenues, Expenditures, and Changes in Fund Balances.................................................. 18

Capital Projects Fund

Combining Balance Sheet...................................................................................................................................................... 19

Combining Statements of Revenues, Expenditures and Changes in Fund Balances................................................... 20

Fiduciary Trust Funds

Combining Balance Sheet...................................................................................................................................................... 21

Combining Statements of Revenues, Expenditures, and Changes

in Fund Balances - Expendable Trust Funds.............................................................................................................. 22

Combining Statements of Revenues, Expenditures and Changes

in Fund Balances - Nonexpendable Trust Funds..................................................................................................... 23

Schedule of Cash Receipts and Disbursements - Agency Funds................................................................................. 24

Account Group

Statement of General Long-Term Debt................................................................................................................................ 25

Schedule of Changes in General Long-Term Debt............................................................................................................ 26

Supplemental Schedules

Schedule of Revenues and Expenditures - Budget to Actual - General Fund............................................................... 27

Schedule of Property Taxes Receivable.............................................................................................................................. 30

INDEPENDENT AUDITORS' REPORT ON COMPLIANCE AND ON INTERNAL CONTROL

OVER FINANCIAL REPORTING BASED ON AN AUDIT OF GENERAL-PURPOSE

FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH

GOVERNMENT AUDITING STANDARDS.................................................................................................................... 31

INDEPENDENT AUDITORS' REPORT

The Honorable Members of the Town Council

Exeter, Rhode Island

We have audited the accompanying general-purpose financial statements of the Town of Exeter, Rhode Island as of and for the year ended June 30, 2003 as listed in the table of contents. These general-purpose financial statements are the responsibility of the Town=s management. Our responsibility is to express an opinion on these general-purpose 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. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the general-purpose financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the general-purpose financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall general-purpose financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

The general-purpose financial statements referred to above do not include financial data of the Exeter Fire Company No. 1, Exeter Fire Company No. 2, Exeter Emergency Dispatch, nor the Exeter Rescue Corps, which should be included as component units in order to conform with accounting principles generally accepted in the United States of America. The amounts that should be reported for these component units have not been determined by management.

Additionally, the general-purpose financial statements referred to above do not include a general fixed asset account group for the primary government which should be included in order to conform with accounting principles generally accepted in the United States of America. The amount that should be recorded in the general fixed assets account group is not known.

In our opinion, based on our audit, except for the effects on the financial statements by the omissions described in the preceding paragraphs, the general-purpose financial statements present fairly, in all material respects, the financial position of the Town of Exeter, Rhode Island as of June 30, 2003, and the results of its operations and cash flows of its nonexpendable trust funds for the year then ended in conformity with accounting principles generally accepted in the United States of America.

TOWN OF EXETER, RHODE ISLAND

COMBINED BALANCE SHEET - ALL FUND TYPES AND ACCOUNT GROUPS

June 30, 2003

Fiduciary Account

Governmental Fund Types Fund Groups

General Totals

Special Capital Trust and Long-Term (Memorandum

General Revenue Projects Agency Debt Only)

ASSETS

Cash and cash equivalents $ 1,044,861 $ 110,238 $ C $ 85,983 $ C $ 1,241,082

Accounts receivable:

Property taxes 407,574 C C C C 407,574

Tax title property 14,469 C C C C 14,469

Other 25,000 C C C C 25,000

Investments C C C 985,394 C 985,394

Due from other funds 5,000 30,200 338,964 37,325 C 411,489

Amount to be provided for the

payment of long-term debt C C C C 1,198,413 1,198,413

TOTAL ASSETS $ 1,496,904 $ 140,438 $ 338,964 $ 1,108,702 $ 1,198,413 $ 4,283,421

LIABILITIES AND

FUND BALANCES

LIABILITIES

Accounts payable $ 74,398 $ C $ C $ C $ C $ 74,398

Due to other funds 406,164 5,000 C 325 C 411,489

Deposits held in custody

for others C C C 76,278 C 76,278

Accrued compensated

absences 22,475 C C C 19,413 41,888

Deferred revenue 346,575 C C C C 346,575

Landfill postclosure

care costs C C C C 900,000 900,000

Land acquisition costs C C C C 175,000 175,000

Capital lease C C C C 104,000 104,000

TOTAL LIABILITIES 849,612 5,000 C 76,603 1,198,413 2,129,628

FUND BALANCES

Reserved 400,000 135,438 338,964 1,032,099 C 1,906,501

Unreserved

Undesignated 247,292 C C C C 247,292

TOTAL FUND BALANCES 647,292 135,438 338,964 1,032,099 C 2,153,793

TOTAL LIABILITIES AND

FUND BALANCES $ 1,496,904 $ 140,438 $ 338,964 $ 1,108,702 $ 1,198,413 $ 4,283,421

TOWN OF EXETER, RHODE ISLAND

COMBINED STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES

ALL GOVERNMENTAL FUND TYPES AND EXPENDABLE TRUST FUNDS

Year Ended June 30, 2003

Fiduciary

Governmental Fund Types Fund

Expendable Totals

Special Capital Trust (Memorandum

General Revenue Projects Funds Only)

REVENUES

Property taxes $ 8,282,086 $ C $ C $ C $ 8,282,086

State and federal aid and grants 1,257,996 54,681 85,480 C 1,398,167

Departmental revenues 132,842 C C C 132,842

Licenses, fees and permits 150,967 C C C 150,967

Fines and interest on late payments 76,446 C C C 76,446

Interest and other investment income 23,659 C C 24,444 48,103

Other revenues 6,180 78,721 54,359 2,503 141,763

TOTAL REVENUES 9,930,176 133,402 139,849 26,947 10,230,374

EXPENDITURES

Salaries and wages 650,549 C C C 650,549

Public works 381,666 356,075 C C 737,741

Public safety 591,118 C C C 591,118

Public health and welfare 19,952 C C C 19,952

Community services 31,767 C C C 31,767

General government 511,603 5,065 C C 516,668

Education 7,062,696 C C C 7,062,696

Other 2,488 134,006 240,514 25,195 402,203

TOTAL EXPENDITURES 9,251,839 495,146 240,514 25,195 10,012,694

EXCESS OF REVENUES

OVER (UNDER) EXPENDITURES 678,337 (361,744) (100,665) 1,752 217,680

OTHER FINANCING SOURCES (USES)

Operating transfers in C 35,000 77,492 C 112,492

Operating transfers out (112,492) C C C (112,492)

EXCESS OF REVENUES AND OTHER

FINANCING SOURCES OVER (UNDER)

EXPENDITURES AND OTHER USES 565,845 (326,744) (23,173) 1,752 217,680

Fund balances - July 1, 2002 81,447 462,182 362,137 890,857 1,796,623

FUND BALANCES - JUNE 30, 2003 $ 647,292 $ 135,438 $ 338,964 $ 892,609 $ 2,014,303

See accompanying notes.

TOWN OF EXETER, RHODE ISLAND

STATEMENT OF REVENUES AND EXPENDITURES B

BUDGET (GAAP BASIS) AND ACTUAL - GENERAL FUND

Year Ended June 30, 2003

Favorable

Budget Actual (Unfavorable)

REVENUES

Property taxes current year $ 8,315,958 $ 8,094,884 $ (221,074)

Property taxes prior years C 187,202 187,202

State aid 854,978 1,257,996 403,018

Departmental revenues 82,000 132,842 50,842

Transfer station fees 23,350 26,926 3,576

License and permits 105,500 124,041 18,541

Fines and interest on late payments 45,000 76,446 31,446

Interest and other investment income 20,000 23,659 3,659

Nonbudgeted revenue C 6,180 6,180

TOTAL REVENUES 9,446,786 9,930,176 483,390

EXPENDITURES

Salaries and wages 660,962 650,549 10,413

Public works 390,314 381,666 8,648

Public safety 591,118 591,118 C

Public health and welfare 20,600 19,952 648

Community services 30,950 31,767 (817)

General government 572,654 511,603 61,051

Education 7,062,696 7,062,696 C

Nonbudgeted expenditures C 2,488 (2,488)

TOTAL EXPENDITURES 9,329,294 9,251,839 77,455

EXCESS OF REVENUES

OVER EXPENDITURES 117,492 678,337 560,845

Other financing sources (uses)

Transfers to other funds (117,492) (112,492) 5,000

EXCESS OF REVENUES OVER

EXPENDITURES AND OTHER USES $ C $ 565,845 $ 565,845

See accompanying notes.

TOWN OF EXETER, RHODE ISLAND

COMBINED STATEMENTS OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES ‑ NONEXPENDABLE TRUST FUNDS

Year Ended June 30, 2003

REVENUES

Interest income $ 68

Other investment income 2,744

TOTAL REVENUES 2,812

EXPENDITURES

Investment expenses 4,126

Contributions and expenses 2,150

TOTAL EXPENDITURES 6,276

NET LOSS (3,464)

Fund balances at July 1, 2002 142,954

FUND BALANCES - JUNE 30, 2003 $ 139,490

See accompanying notes.

TOWN OF EXETER, RHODE ISLAND

COMBINED STATEMENT OF CASH FLOWS ‑ NONEXPENDABLE TRUST FUNDS

Year Ended June 30, 2003

OPERATING ACTIVITIES

Investment income $ 2,812

Cash payments for goods and services (6,276)

NET CASH USED IN

OPERATING ACTIVITIES (3,464)

INVESTING ACTIVITIES

Proceeds on sale of investments 29,544

NET INCREASE IN CASH

AND CASH EQUIVALENTS 26,080

CASH AND CASH EQUIVALENTS AT JULY 1, 2002 11,097

CASH AND CASH EQUIVALENTS

AT JUNE 30, 2003 $ 37,177

OTHER INFORMATION

Net loss equals net cash used in operating activities $ (3,464)

See accompanying notes.

TOWN OF EXETER, RHODE ISLAND

NOTES TO FINANCIAL STATEMENTS

June 30, 2003

NOTE A‑‑SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Town of Exeter, Rhode Island (Town) was founded in 1742. The Town is governed largely under the 1742 Legislative Charter. In some matters, including the issuance of short and long-term debt, the Town is governed by the general laws of the State of Rhode Island. The Town operates under a Town Council form of government. The Town provides various services including education, libraries, public fire and rescue service, public works, social services, and general administrative services.

The financial statements of the Town have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP) as applicable to governmental units. The accounting methods and procedures adopted by the Town conform to GAAP as applied to governmental entities except for the omission of the primary government=s General Fixed Assets Account Group and certain component unit=s financial statements. The more significant of the Town=s accounting policies are described below.

Financial Reporting Entity: The accompanying financial statements present the Town=s primary government and certain component units which are financially dependent on the Town. The Town=s component units are as follows:

Blended component units: The Manton Library is governed by a board of trustees appointed by the Town Council. The library=s trustees govern the library in accordance with applicable state laws. For financial statement purposes, the Manton Library is reported as if it were part of the Town=s operations because its purpose is to provide library services to the citizens of the Town and is dependent upon the Town for its financial resources.

Discrete component units: Component units (entities) which are legally separate from the Town, but are financially dependent on the Town and their exclusion could cause the Town=s financial statements to be misleading or incomplete include:

$ Exeter Volunteer Fire Department No. 1

$ Exeter Volunteer Fire Department No. 2

$ Exeter Emergency Dispatch

$ Exeter Rescue Corps

The discrete component units listed above were not included as part of the financial reporting entity.

Basis of Presentation ‑ Fund Accounting: The accounts of the Town are organized on the basis of funds or account groups, each of which is considered a separate accounting entity. The operations of each fund are accounted for with a separate set of self‑balancing accounts that comprise its assets, liabilities, fund balance, revenues and expenditures. Government resources are allocated to and for individual funds based upon the purpose for which they are to be spent and the means by which spending activities are controlled

Amounts in the ATotals (Memorandum Only)@ columns in the preceding financial statements represent a summation of the combined financial statement line items of the fund types and are presented for analytical purposes only. The summation includes fund types that use different methods of accounting and include interfund transactions that have not been eliminated. Consequently, amounts shown in the ATotals (Memorandum Only)@ columns are not comparable to a consolidation and do not represent the total resources available or total revenues and expenditures/expenses of the Town.

TOWN OF EXETER, RHODE ISLAND

NOTES TO FINANCIAL STATEMENTS

June 30, 2003

The following fund types are used by the Town:

[COMMENT1]

Governmental Fund Types: Governmental Funds are those through which most governmental functions of the Town are financed. The acquisition, use, and balances of the Town's expendable financial resources and the related liabilities are accounted for through governmental funds. The measurement focus is upon determination of changes in financial position, rather than upon net income determination. The following are the Town's governmental fund types.

General Fund - is the general operating fund of the Town. It is used to account for all financial resources except those required to be accounted for in another fund. This is a budgeted fund, and any fund balances are considered resources available for general Town use.

Special Revenue Funds - are used to account for revenues that are legally restricted to expenditures for specific purposes.

Capital Projects Fund - These funds are established to account for financial resources to be used for the acquisition or construction of major capital facilities (other than those financed by trust funds).

Fiduciary Fund Types: Fiduciary Funds are used to account for assets held by the Town in a trustee capacity or as an agent for individuals, private organization, other governmental units, and/or other funds. They include expendable, non-expendable trust funds, and agency funds.

Expendable trust funds - are accounted for in the same manner as the Governmental Funds.

Non-expendable trust funds - are reported in a manner similar to entities found in the private sector. The measurement focus is upon the determination of net income and capital maintenance.

Agency funds - are accounted for using the modified accrual basis of accounting.

Account Groups: General fixed assets and long‑term liabilities expected to be financed from governmental funds are accounted for in this group of accounts. This group is concerned only with the measurement of financial position; it is not involved with measurement of results of operations. Because of their spending measurement focus, expenditure recognition for governmental fund types is limited to exclude amounts represented by accounting for general fixed assets and noncurrent liabilities, such as long‑term liabilities relating to bond issuance. Since they do not affect net current assets, such long‑term amounts are not recognized as governmental fund type expenditures or fund liabilities. They are instead reported as in the following account groups:

General Long-Term Debt Account Group - This account group is used to record the principle balances of general obligation bonds, deferred compensatory costs, unfunded pension liabilities, and other long-term debt obligations not reported elsewhere.

General Fixed Assets Account Group - This account group is used to maintain control and cost information for all fixed assets.

TOWN OF EXETER, RHODE ISLAND

NOTES TO FINANCIAL STATEMENTS

June 30, 2003

Basis of Accounting: All governmental and expendable trust funds use the flow of current financial resources measurement focus and the modified accrual basis of accounting. Under the modified accrual basis of accounting, revenues are recorded when susceptible to accrual, i.e., both measurable and available. Available means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period (see Note D for property tax revenue policy). Expenditures, other than interest on long‑term debt, are recorded when the liability is incurred. Interest on long-term debt is recorded when the liability is paid. Under this basis, revenues other than property taxes are recorded as revenues when received in cash because they are generally not measurable until actually received.

The accrual basis of accounting is utilized by the non-expendable trust funds. Under this method, revenues are recorded when earned and expenses are recorded at the time liabilities are incurred.

Encumbrances: Encumbrance accounting, under which purchase orders, contracts, and other commitments for the expenditure of funds are recorded in order to reserve that portion of the applicable appropriation, is employed in the governmental funds. Open encumbrances are reported as reservations of fund balances since the commitments will be honored through subsequent year=s expenditures. Encumbrances do not constitute expenditures or liabilities. (See Note B for budgetary reporting of encumbrances.)

Risk Management: The Town is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The Town maintains insurance covering each of those risks of loss.

The Town is insured under a statewide municipal risk management pool. Rhode Island Inter-Local Risk Management Trust, Inc. (the Trust) requires annual premiums based on the pool's experience. The Trust offers to Rhode Island cities and towns general liability and workers compensation insurance which is self-sustaining through member premiums and is reinsured through commercial companies to reduce its exposure to large losses. The agreement with the Trust states that for premiums paid by members, the Trust will assume financial responsibility for members losses up to the maximum amount of insurance purchased, less deductible amounts. If a single loss is above the Trust's retention and reinsurance coverage the excess liability reverts to the member organization against which the claim was originally made

Management believes such coverage is sufficient to preclude any significant uninsured losses to the Town. Settled claims have not exceeded insurance coverage in any of the past three fiscal years.

Cash and Cash Equivalents: For the purposes of cash flows, the nonexpendable trust funds consider all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. The Town has included a statement of cash flows with its nonexpendable trust funds. Cash and cash equivalents includes $1,279,000 invested in highly liquid interest bearing accounts at June 30, 2003.

Investments: Investments are carried at fair value, except for investments meeting the requirements of the Aone year option@ and nonparticipating interest earning investment contracts (i.e. certificates of deposit) which are recorded at amortized cost. Under the Aone year option@, certain investments (i.e. U.S. Treasury and agency obligations) that have a remaining maturity at the time of purchase of one year or less may be recorded at amortized cost.

Property and Equipment: All government funds treat the acquisition of property and equipment as current expenditures. The Town does not report property and equipment in a General Fixed Assets Account Group or keep detailed fixed asset records, as required by GAAP.

TOWN OF EXETER, RHODE ISLAND

NOTES TO FINANCIAL STATEMENTS

June 30, 2003

Long-term debt: Long-term debt obligations of the Town are reported in the General Long-Term Debt Account Group, which, represent landfill postclosure care costs, land acquisition costs, and certain deferred compensatory costs,

Fund balances: The unreserved fund balances for governmental funds represent the amount available for budgeting future operations. The reserved fund balances for governmental funds represent the amount that has been legally restricted for specific purposes.

Vacation and Sick leave: Costs of accumulated vacation and personal leave are recorded as expenditures when incurred. The liability arising from unused sick leave benefits and accrued vacation has been recognized in the General Fund and General Long-Term Debt Account groups.

Interfund transactions: All transactions between the Town and certain discrete component units are considered quasi-external transactions and are accounted for as fund revenues, expenditures or expenses (as appropriate). Transactions between the general fund and other funds which constitute reimbursements of a fund for expenditures or expenses initially made from it which are properly applicable to another fund are recorded as expenditures or expenses (as appropriate) in the reimbursing fund and as reductions of the expenditure or expense in the fund that is reimbursed.

All interfund transactions except advances, quasi-external transactions and reimbursements are accounted for as transfers. Nonrecurring or non-routine transfers of equity between funds are considered equity transfers. All other interfund transactions are treated as operating transfers.

Amounts to be Provided: Amounts to be provided represent monies to be raised from future tax levies to retire general long-term obligations and the liability for compensated absences.

NOTE BBBUDGETARY PROCESS

Budgetary adoption: It is the responsibility of the Town Council to advertise a proposed budget for the Town for the following fiscal year no later than 10 days prior to the Financial Town Meeting held to adopt such budget. Public hearings are conducted on the recommended budget and the final recommended budget is legally enacted through an ordinance at the Financial Town Meeting. All budget appropriations, except an appropriation for capital expenditures, lapse at the end of the fiscal year. An appropriation for a capital expenditure shall continue in force until the purpose for which it was made has been accomplished or abandoned; an appropriation is considered abandoned if two fiscal years following the date of appropriation pass without any disbursement from or encumbrance of the appropriation.

Budgetary control: The level of budgetary control for the General Fund (that is, the level at which expenditures cannot legally exceed appropriations) is fixed by resolution of the Annual Financial Town Meeting. The resolution authorized the Town Council to spend within the total sum appropriated for municipal purposes. While this restriction prohibits spending in excess of the authorized budget, the policy enables the Town Council to use the Fund Balance within the overall appropriations budget to offset over expenditures that may arise within a specific budget account.

TOWN OF EXETER, RHODE ISLAND

NOTES TO FINANCIAL STATEMENTS

June 30, 2003

NOTE C--CASH DEPOSITS AND INVESTMENTS

Cash: Cash deposits are in various Rhode Island financial institutions and are carried at cost.

The composition of the cash deposits and investments fluctuates depending primarily on the timing of state and local receipts and operating outlays throughout the year.

Carrying Bank

Amount Balance

Insured (FDIC) $ 163,763 $ 360,983

Uninsured or uncollateralized 1,077,319 1,446,004

Total Deposits $ 1,241,082 $ 1,806,987

Investments: Investments consist primarily of common stocks, mutual funds, repurchase agreements, and U.S. Government Securities.

Certain investments are categorized to give an indication of the level of risk assumed at year-end.

Category 1 includes insured or registered, or securities held by the government or its agent in the government=s name.

Category 2 includes uninsured and unregistered, with securities held by the counterparty=s trust department or agent in the government=s name.

Category 3 includes uninsured and unregistered with securities held by the counterparty or by its trust department or agent, but not in the government=s name.

The mutual funds and the municipal plus trust are not subject to risk categorization.

Carrying

Category 1 Category 2 Category 3 Value

U.S. Government Obligations $ C $ C $ 154,693 $ 154,693

Common stocks C C 349,560 349,560

Mutual funds C C C 481,141

$ C $ C $ 504,253 $ 985,394

NOTE DBPROPERTY TAXES

The Town=s property tax is levied each June 30, for its next fiscal year on the assessed valued listed as of the prior December 31, for all real property, tangible property, and motor vehicles located in the Town. Assessed values of real property and tangible personal property were established by the Town Assessor=s office at 60% of appraised market value as of December 31, 1992. The Town completed a revaluation of real property and tangible personal property as of December 31, 1992. The assessed values were effective for the property tax levy beginning with fiscal year 1993-1994. The assessed value of motor vehicles is determined annually at 100% of retail market value.

The Town entered into a contractual relationship with a law firm to act as a collection agency to pursue delinquent tangible and personal property accounts. The Town has forwarded past due accounts for collection. At June 30, 2003, no reserve has been established for the property taxes considered delinquent. The property tax revenue associated with the delinquent taxes has been deferred.

TOWN OF EXETER, RHODE ISLAND

NOTES TO FINANCIAL STATEMENTS

June 30, 2003

An automatic lien is placed on the taxpayer=s property if payment has not been received by the due date. Interest is charged on past due accounts at a rate of 12% per annum calculated on the unpaid portion of the total tax.

The Town recognizes property tax revenues in accordance with Codification of Governmental Accounting and Financial Reporting Standards. Unpaid property taxes at year end are recorded as property taxes receivable and those property taxes receivable which were not collected within 60 days immediately following year end are recorded as deferred revenue. Deferred revenue at June 30, 2003 consists of $346,575 of property taxes not collected within 60 days following year end.

Net property taxes levied for the fiscal year 2003 were based on an assessed value of approximately $230,973,302 at December 31, 2001 and amount to $8,316,813 plus addendum billings of $34,868. Total property tax recognized for the fiscal year, including $61,000 collected within 60 days following year end, amounted to $8,282,086 which represents 99% of the total 2003 tax levy. Tax abatements for the year ended June 30, 2003 totaled $133,251.

Taxes are due in equal quarterly installments on September 1-15, December 1-15, March 1-15, and June 1-15 during the fiscal year.

NOTE EBINTERFUND RECEIVABLES AND PAYABLES

Individual fund interfund receivable and payable balances at June 30, 2003 are as follows:

Interfund Interfund

Receivable Payables

General fund $ 5,000 $ 406,164

Special revenue fund:

CDBG C 5,000

RI EMA/FEMA Grant 3,928 C

Planning board project review fees 6,825 C

Revaluation 19,447 C

Fiduciary trust funds:

Cemetery fund 325 C

Reynolds fund C 325

Agency funds 37,000 C

Capital projects fund:

Old Town hall renovation 25,949 C

Vehicle replacement 12,016 C

New library 199,339 C

Public works/roads 101,613 C

Computerized upgrade 47 C

$ 411,489 $ 411,489

TOWN OF EXETER, RHODE ISLAND

NOTES TO FINANCIAL STATEMENTS

June 30, 2003

NOTE FBEXETER-WEST GREENWICH REGIONAL SCHOOL DISTRICT

The Exeter-West Greenwich Regional School District (School District), a legal entity that is separate from the Town of Exeter, was formed by the Towns of Exeter and West Greenwich through an agreement dated July 1, 1965. The School District consists of grades Kindergarten through grade 12. The junior/senior high school and all other school buildings are owned by the School District.

In accordance with the founding agreement, three members of the six member governing board of the School District are elected by the voters of each of the Towns of Exeter and West Greenwich. The Towns are annually assessed an apportionment of operating and capital expenses based on student enrollment. The assessment to the Town of Exeter for fiscal year 2003 was $7,062,696.

The Town of Exeter is legally obligated to fund their share of the School District=s budgets as voted. The Town of Exeter is also contingently liable for their proportional share of the School District=s bonded debt approved at a joint School District meeting.

Long-term debt of the Exeter-West Greenwich Regional School District which the Town is contingently liable for their proportional share, is as follows at June 30, 2003:

Unaudited

General obligation bonds $ 10,635,000

Bond anticipation note 1,600,000

Certain accrued compensated absences 471,278

Total Long-Term Debt $ 12,706,278

A complete financial statement of the School District may be obtained through the Superintendent=s office.

NOTE G--LONG-TERM DEBT

The following schedule reflects the changes in the Town=s long-term debt as shown in the general long-term debt account group during fiscal 2003:

July 1, 2002 Additions Retirements June 30, 2003

Landfill postclosure care costs (Note J) $ 900,000 $ C $ C $ 900,000

Land acquisition costs 200,000 C 25,000 175,000

Compensated absences 18,264 1,149 C 19,413

Capital lease C 130,000 26,000 104,000

Total general and long-term debt $ 1,118,264 $ 131,149 $ 51,000 $ 1,198,414

On March 12, 2001, the Town purchased land for $250,000 through a noninterest bearing note due in annual installments of $25,000 through 2010.

On April 1, 2002 the Town Council approved the resolution authorizing the Town to finance the construction of the

Town library by the issuance of not more than $500,000 in bonds. To date no bonds have been issued.

TOWN OF EXETER, RHODE ISLAND

NOTES TO FINANCIAL STATEMENTS

June 30, 2003

NOTE H--CAPITAL LEASE

The Town has entered into a lease agreement as lessee for financing the acquisition of a TYMCO Model 500 regenerative air street sweeper with a down payment of $28,234. This lease agreement qualifies as a capital lease for accounting purposes and, therefore, has been recorded at the present value of the future minimum lease payments.

The future minimum lease obligation and the net present value of these minimum lease payments as of June 30, 2003 are as follows:

Year ending June 30

2004 $ 28,234

2005 28,234

2006 28,234

2007 28,234

Total minimum lease payments 112,936

Less: Amount representing interest (8,936)

Present value of minimum lease payments $ 104,000

NOTE IBLANDFILL POSTCLOSURE CARE COSTS

GASB 18, Accounting for Municipal Solid Waste Landfill Closure and Postclosure Care Costs. requires the recognition of closure and postclosure costs of landfills as long-term liabilities. State and federal laws and regulations require that the Town perform certain maintenance and monitoring functions for 30 years after its landfill has been closed. The Town is designing a landfill closure plan estimated at $900,000, which liability is reported in the Town=s financial statements as a long-term debt of $900,000. The estimated liability for landfill postclosure care costs as of June 30, 2003 which is based on a total cost of $90,000 per acre. Additional costs that might arise from changes in postclosure requirements (due to changes in technology or more rigorous environmental regulations, for example) may need to be covered by additional charges to taxpayer in future years.

NOTE JBCOMMITMENTS AND CONTINGENCIES

At June 30, 2003, the Town had several lawsuits pending and had been placed on written notice of potential claims. The Town intends to vigorously pursue its claims and/or defend its position with respect to each matter. In the opinion of the Town=s legal counsel, the Town=s liability with respect to these cases, if any, was not determinable. It is the opinion of Town management, based in part on the advice of legal counsel, that settlement on the above lawsuits will not materially affect the Town=s financial position.

NOTE KBSTEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY

Compliance: The Town has no material violations of finance-related legal and contractual provisions.

Deposits with financial institutions: RIGL 35-10.1, the ARhode Island Collateralization of Public Deposits Act@ requires that time deposits with maturities exceeding 60 days held in institutions holding public deposits be 100% collateralized by insurance or eligible collateral. During the year, there were no violations of the law noted.

TOWN OF EXETER, RHODE ISLAND

NOTES TO FINANCIAL STATEMENTS

June 30, 2003

NOTE LBPENSION PLAN

Plan Description and Funding: The Town maintains a defined contribution plan, the Town of Exeter Money Purchase Pension Plan, for retirement benefits for all eligible full-time employees. The plan was established by the Town Council effective January 1, 1985. The plan provides for employer only contributions with benefits beginning at normal retirement age. The plan is administered by Thomas B. Fecteau Associates, Inc. Contributions were at the rate of 5% of base compensation. Eligibility requirements call for employees to be 21 years of age and have completed 1 year (12 month period and 1,000 hours) of service. Contributions made by the Town on behalf of eligible employees vest in accordance with a vesting schedule documented within the retirement plan. The Town expense for to the plan for the year was $32,926. The unpaid balance due was $28,805 at June 30, 2003.

TOWN OF EXETER, RHODE ISLAND

COMBINING BALANCE SHEET - SPECIAL REVENUE FUNDS

June 30, 2003

RIEMA Planning

FEMA Board Project Library

Grant Review Fees CDBG Revaluation Funds Total

ASSETS

Cash and cash equivalents $ C $ C $ 12,065 $ C $ 98,173 $ 110,238

Due from other funds 3,928 6,825 C 19,447 C 30,200

TOTAL ASSETS $ 3,928 $ 6,825 $ 12,065 $ 19,447 $ 98,173 $ 140,438

LIABILITIES AND

FUND BALANCE

LIABILITIES

Due to other funds $ C $ C $ 5,000 $ C $ C $ 5,000

TOTAL LIABILITIES C C 5,000 C C 5,000

FUND BALANCE

Reserved 3,928 6,825 7,065 19,447 98,173 135,438

TOTAL FUND BALANCE 3,928 6,825 7,065 19,447 98,173 135,438

TOTAL LIABILITIES AND

FUND BALANCE $ 3,928 $ 6,825 $ 12,065 $ 19,447 $ 98,173 $ 140,438

TOWN OF EXETER, RHODE ISLAND

COMBINING STATEMENTS OF REVENUES, EXPENDITURES,

AND CHANGES IN FUND BALANCES - SPECIAL REVENUE FUNDS

Year Ended June 30, 2003

RIEMA Planning

FEMA Board Project Wolf Rock Library Library

Grant Review Fees Road Project CDBG Revaluation Funds Total

REVENUES

Grant revenues $ 3,928 $ C $ 48,003 $ 2,750 $ C $ C $ 54,681

Other revenues C 17,149 14,862 1,400 C 45,310 78,721

TOTAL REVENUES 3,928 17,149 62,865 4,150 C 45,310 133,402

EXPENDITURES

Program expense C 10,324 356,075 5,065 119,103 4,579 495,146

TOTAL EXPENDITURES C 10,324 356,075 5,065 119,103 4,579 495,146

EXCESS OF REVENUES

OVER (UNDER)

EXPENDITURES BEFORE

OTHER FINANCING SOURCES 3,928 6,825 (293,210) (915) (119,103) 40,731 (361,744)

Transfers from other financing sources C C C C 35,000 C 35,000

EXCESS OF REVENUES AND

OTHER FINANCING SOURCES

OVER (UNDER) EXPENDITURES 3,928 6,825 (293,210) (915) (84,103) 40,731 (326,744)

FUND BALANCE -

RESERVED JULY 1, 2002 C C 293,210 7,980 103,550 57,442 462,182

FUND BALANCE -

JUNE 30, 2003 $ 3,928 $ 6,825 $ C $ 7,065 $ 19,447 $ 98,173 $ 135,438

TOWN OF EXETER, RHODE ISLAND

COMBINING BALANCE SHEET - CAPITAL PROJECTS FUND

June 30, 2003

Old Vehicle Public

Town Hall Replacement New Works/ Computerized Renovation Fund Library Roads Upgrade Total

ASSETS

Due from other funds $ 25,949 $ 12,016 $ 199,339 $ 101,613 $ 47 $ 338,964

TOTAL ASSETS $ 25,949 $ 12,016 $ 199,339 $ 101,613 $ 47 $ 338,964

FUND BALANCE

Designated for future capital

project requirements $ 25,949 $ 12,016 $ 199,339 $ 101,613 $ 47 $ 338,964

TOTAL FUND BALANCE $ 25,949 $ 12,016 $ 199,339 $ 101,613 $ 47 $ 338,964

TOWN OF EXETER, RHODE ISLAND

COMBINING STATEMENTS OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - CAPITAL PROJECTS FUND

Year Ended June 30, 2003

Old Vehicle

Town Hall Replacement Chelsea Park New Land Public Computerized Street

Renovation Fund Playground Library Acquisition Works/roads Upgrade Sweeper Total

REVENUES $ C $ 4,359 $ 50,000 $ C $ C $ 85,490 $ C $ C $ 139,849

TOTAL REVENUES C 4,359 50,000 C C 85,490 C C 139,849

EXPENDITURES C 2,115 50,000 14,584 25,000 96,065 24,516 28,234 240,514

TOTAL EXPENDITURES C 2,115 50,000 14,584 25,000 96,065 24,516 28,234 240,514

EXCESS OF REVENUES OVER

(UNDER) EXPENDITURES C 2,244 C (14,584) (25,000) (10,575) (24,516) (28,234) (100,665)

OTHER FINANCING SOURCES (USES)

Transfers from (to) other funds C 1,000 C C 25,000 C 23,258 28,234 77,492

EXCESS OF REVENUES AND

OTHER SOURCES OVER (UNDER)

EXPENDITURES AND OTHER USES C 3,244 C (14,584) C (10,575) (1,253) C (23,173)

Fund balance - unreserved for

capital projects July 1, 2002 25,949 8,772 C 213,923 C 112,188 1,305 C 362,137

FUND BALANCE - UNRESERVED

FOR CAPITAL PROJECTS

JUNE 30, 2003 $ 25,949 $ 12,016 $ C $ 199,339 $ C $ 101,613 $ 47 $ C $ 338,964

TOWN OF EXETER, RHODE ISLAND

COMBINING BALANCE SHEET - FIDUCIARY TRUST FUNDS

June 30, 2003

Expendable Trust Funds Nonexpendable Trust Funds

Manton Emily J.

Reynolds= Free Historical Cemetery Arnold Anthony Agency

Fund Library Records Fund Fund Fund Funds Total

ASSETS

Cash $ C $ 2,274 $ 6,754 $ 27,916 $ 3,860 $ 5,401 $ 39,278 $ 85,983

Investments 883,406 C C C C 101,988 C 985,394

Due from other funds C C C 325 C C 37,000 37,325

TOTAL ASSETS $ 883,406 $ 2,774 $ 6,754 $ 28,241 $ 3,860 $ 107,389 $ 76,278 $ 1,108,702

LIABILITIES AND

FUND BALANCES

LIABILITIES

Amounts held for others $ C $ C $ C $ C $ C $ C $ 76,278 $ 76,278

Due to other funds 325 C C C C C C 325 325 C C C C C 76,278 76,603

FUND BALANCES

Fund balances - reserved 883,081 2,774 6,754 28,241 3,860 107,389 C 1,032,099

TOTAL LIABILITIES

AND FUND BALANCES $ 883,406 $ 2,774 $ 6,754 $ 28,241 $ 3,860 $ 107,389 $ 76,278 $ 1,108,702

TOWN OF EXETER, RHODE ISLAND

COMBINING STATEMENTS OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES -

EXPENDABLE TRUST FUNDS

Year Ended June 30, 2003

Reynolds= Historic Manton Free

Fund Records Library Total

REVENUES

Interest income $ 10,282 $ 55 $ C $ 10,337

Other investment income 14,107 C C 14,107

Other revenues C 2,503 C 2,503

TOTAL REVENUES 24,389 2,558 C 26,947

EXPENDITURES

Investment expenses 23,571 C 1,624 25,195

TOTAL EXPENDITURES 23,571 C 1,624 25,195

EXCESS OF REVENUES

OVER (UNDER) EXPENDITURES 818 2,558 (1,624) 1,752

Fund balance - July 1, 2002 882,263 4,196 4,398 890,857

FUND BALANCE JUNE 30, 2003 $ 883,081 $ 6,754 $ 2,774 $ 892,609

TOWN OF EXETER, RHODE ISLAND

COMBINING STATEMENTS OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES

NONEXPENDABLE TRUST FUNDS

Year Ended June 30, 2003

Emily J.

Cemetery Arnold Anthony

Fund Fund Fund Total

REVENUES

Interest income $ 6 $ 28 $ 34 $ 68

Other investment income 279 C 2,465 2,744

TOTAL REVENUES 285 28 2,499 2,812

EXPENDITURES

Investment expenses 2,414 C 1,712 4,126

Contributions and expenses 250 C 1,900 2,150

TOTAL EXPENDITURES 2,664 C 3,612 6,276

NET INCOME (LOSS) (2,379) 28 (1,113) (3,464)

Fund balance at July 1, 2002 30,620 3,832 108,502 142,954

FUND BALANCE JUNE 30, 2003 $ 28,241 $ 3,860 $ 107,389 $ 139,490

TOWN OF EXETER, RHODE ISLAND

STATEMENT OF GENERAL LONG-TERM DEBT

June 30, 2003

AMOUNT TO BE PROVIDED

Retirement of general long-term debt $ 1,198,413

TOTAL AMOUNT TO BE PROVIDED $ 1,198,413

GENERAL LONG-TERM DEBT OBLIGATIONS

Landfill postclosure care costs $ 900,000

Accrued compensated absences 19,413

Land acquisition costs 175,000

Capital lease 104,000

TOTAL GENERAL LONG-TERM DEBT OBLIGATIONS $ 1,198,413

TOWN OF EXETER, RHODE ISLAND

SCHEDULE OF CHANGES IN GENERAL LONG-TERM DEBT

Year Ended June 30, 2003

Balance Balance

July 1, 2002 Additions Retirements June 30, 2003

AMOUNT TO BE PROVIDED

Retirement of general long-term debt $ 1,118,264 $ 131,149 $ 51,000 $ 1,198,413

TOTAL AMOUNT TO BE PROVIDED $ 1,118,264 $ 131,149 $ 51,000 $ 1,198,413

GENERAL LONG-TERM DEBT

OBLIGATIONS

Landfill postclosure care costs $ 900,000 $ C $ C $ 900,000

Accrued compensated absences 18,264 1,149 C 19,413

Land acquisition costs 200,000 C 25,000 175,000

Capital lease C 130,000 26,000 104,000

TOTAL GENERAL

LONG-TERM DEBT OBLIGATION $ 1,118,264 $ 131,149 $ 51,000 $ 1,198,413

TOWN OF EXETER, RHODE ISLAND

SCHEDULE OF REVENUES AND EXPENDITURES - BUDGET TO ACTUALBGENERAL FUND

Year Ended June 30, 2003

Favorable

Budget Actual (Unfavorable)

REVENUES

Property taxes current year $ 8,315,958 $ 8,094,884 $ (221,074)

Property taxes prior years C 187,202 187,202

State MV tax phase out program 637,503 1,046,495 408,992

Tax interest collected 45,000 76,446 31,446

Tax certification fees C 4,051 4,051

Town clerk collections 80,000 130,236 50,236

Transfer station fees 23,350 26,926 3,576

Transfer station stickers 25,000 25,248 248

Permits 45,000 62,428 17,428

Telephone tax collected 97,300 103,915 6,615

General state aid 120,175 107,586 (12,589)

Savings interest earned 20,000 23,659 3,659

Probate court fees C 2,129 2,129

Miscellaneous receipts 2,000 2,606 606

Dog fines & licenses 3,000 3,485 485

Animal shelter fees 21,000 14,548 (6,452)

Zoning fees 3,500 10,732 7,232

Planning board fees 8,000 7,600 (400)

TOTAL REVENUES $ 9,446,786 $ 9,930,176 $ 483,390

EXPENDITURES

Salaries and Wages

Town Council $ 16,320 $ 16,321 $ (1)

Council Assistant 37,260 37,260 C

Town Clerk 31,487 31,487 C

Deputy Town Clerk 24,587 24,555 32

Clerical assistant - Town Clerk 19,197 19,197 C

Town Treasurer 15,996 15,996 C

Tax Collector 29,008 29,008 C

Board of Assessors 16,667 12,122 4,545

Assessors= Clerk 20,760 20,872 (172)

Welfare Director 4,147 4,147 C

Town Moderator 354 354 C

Town Sergeant 6,210 6,210 C

Town Constable 2,070 2,070 C

Zoning Inspector 8,822 8,822 C

Board of Canvassers 6,812 6,812 C

Planning board 10,961 10,316 645

Zoning board 10,962 10,694 268

Animal control 24,529 23,973 556

Animal control assistant 9,360 8,890 470

Planner 25,875 25,875 C

Canvassers clerk 7,206 5,292 1,914

Planning clerk 9,957 8,901 1,056

911 Coordinator 5,000 5,000 C

Tax assessor 14,583 15,545 (962)

TOWN OF EXETER, RHODE ISLAND

SCHEDULE OF REVENUES AND EXPENDITURES - BUDGET TO ACTUALBGENERAL FUND

Year Ended June 30, 2003

Favorable

Budget Actual (Unfavorable)

EXPENDITURESBContinued

Tax Collector=s clerk 14,312 12,720 1,592

Zoning board clerk 4,305 6,913 (2,608)

Zoning Inspector clerk 1,024 192 832

Librarian 3,078 3,078 C

Highway Workers 202,099 168,530 33,569

Highway Supervisor 40,293 40,294 (1)

Transfer station 37,781 38,238 (457)

Building Inspector C 12,382 (12,382)

Electrical Inspector C 9,250 (9,250)

Plumbing Inspector C 9,233 (9,230)

Total Salaries and Wages 660,962 650,549 10,413

Public Works

Highway department 269,040 263,513 5,527

Transfer station 121,274 118,153 3,121

Total Public Works 390,314 381,666 8,648

Public Safety

Exeter Fire Co. No. 1 101,754 101,754 C

Exeter Fire Co. No. 2 112,000 112,000 C

Exeter Emergency Dispatch 190,751 190,751 C

Exeter Rescue Corps 186,613 186,613 C

Total Public Safety 591,118 591,118 C

Public Health & Welfare 20,600 19,952 648

Community services 30,950 31,767 (817)

General Government

RI League of Cities 2,173 2,407 (234)

Town Council expense 2,000 1,739 261

Town Council Assistant expense 1,500 1,500 C

Town Clerk expense 74,500 78,768 (4,268)

Treasurer=s expense 6,100 5,730 370

Tax Collector=s expense 6,000 5,317 683

Board of Assessor expense 19,582 11,925 7,657

Town Sergeant expense 4,200 4,454 (254)

Building department expense 3,500 3,627 (127)

Board of Canvassers 7,170 6,509 661

Planning board expense 3,500 3,032 468

Tax Board of Assessment expense 500 C 500

Zoning board expense 6,000 3,212 2,788

Postage 12,000 10,905 1,095

Animal shelter expense 26,150 13,667 12,483

Advertising expense 13,500 19,249 (5,749)

TOWN OF EXETER, RHODE ISLAND

SCHEDULE OF REVENUES AND EXPENDITURES - BUDGET TO ACTUAL - GENERAL FUND

Year Ended June 30, 2003

Favorable

Budget Actual (Unfavorable)

General GovernmentBContinued

Legal fees 60,000 71,180 (11,180)

FICA expense 50,563 50,200 363

Blue Cross expense 95,022 94,538 484

Town retirement expense 20,358 32,926 (12,568)

Insurance expense 42,336 41,272 1,064

Audit Town=s books 9,500 9,200 300

Economic Development Commission 500 375 125

Central R.I. Development 5,000 5,000 C

Civil Defense Preparedness Agency 1,000 C 1,000

Contingency fund 30,000 20,021 9,979

Planning office expense 500 498 2

Planner expense 500 625 (125)

Exeter Free Library 55,000 C 55,500

Computer support 12,000 12,258 (258)

Website 1,500 1,469 31

General Government 572,654 511,603 61,051

Education - Regional School 7,062,696 7,062,696 C

Nonbudgeted Expenditures

Probate court/clerk expenses C 2,488 (2,488)

Total Nonbudgeted Expenditures C 2,488 (2,488)

TOTAL EXPENDITURES $ 9,329,294 $ 9,251,839 $ 77,455

TOWN OF EXETER, RHODE ISLAND

SCHEDULE OF PROPERTY TAXES RECEIVABLE

Year Ended June 30, 2003

Assessment Amount

Year

2002 $ 189,797

2001 31,983

2000 26,730

1999 22,761

1998 16,602

1997 22,494

1996 23,338

1995 25,676

1994 30,646

1993 16,256

1992 241

1991 313

1990 148

1989 359

1988 230

Total Property Taxes Receivable $ 407,574

INDEPENDENT AUDITORS' REPORT ON COMPLIANCE AND ON INTERNAL CONTROL

OVER FINANCIAL REPORTING BASED ON AN AUDIT OF

GENERAL-PURPOSE FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS

The Honorable Members of the Town Council

Town of Exeter, Rhode Island

We have audited the general-purpose financial statements of the Town of Exeter, Rhode Island, as of and for the year ended June 30, 2003, and have issued our report thereon dated November 7, 2003, which was qualified because of the omission of financial data on certain component units and certain general fixed asset account group. 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.

Compliance

As part of obtaining reasonable assurance about whether the Town of Exeter's general-purpose financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grants, 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 no instances of noncompliance that are required to be reported under Government Auditing Standards.

Internal Control Over Financial Reporting

In planning and performing our audit, we considered the Town of Exeter's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the general-purpose financial statements and not to provide assurance on the internal control over financial reporting. However, we did note a matter involving the internal control over financial reporting and its operations that we consider to be reportable conditions. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation of the internal control over financial reporting that, in our judgment, could adversely affect the Town of Exeter, Rhode Island=s ability to record, process, summarize and report financial data consistent with the assertion of management in the general-purpose financial statements.

The reportable condition we noted is the Town of Exeter, Rhode Island does not maintain comprehensive accounting records for recording property, plant and equipment which would include a detail listing of each asset.