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Government Finance Officers Association

Certificate of
Achievement
for Excellence
in Financial
Reporting

Presented to

City of Nashua
New Hampshire

For its Annual Comprehensive
Financial Report
For the Fiscal Year Ended

June 30, 2020

PRustophe. P- Mor

Executive Director/CEO

© MELANSON

INDEPENDENT AUDITORS’ REPORT

To the Honorable Mayor and Board of Aldermen
City of Nashua, New Hampshire

Report on the Financial Statements

We have audited the accompanying financial statements of the governmental activities, the
business-type activities, the aggregate discretely presented component units (except Nashua
Airport Authority), each major fund, and the aggregate remaining fund information of the City of
Nashua, New Hampshire, as of and for the year ended June 30, 2021 (except for Pennichuck
Corporation which is as of and for the year ended December 31, 2020), and the related notes to
the financial statements, which collectively comprise the City’s basic financial statements as listed
in the Table of Contents.

Management's Responsibility for the Financial Statements

The City’s management is responsible for the preparation and fair presentation of these financial
statements in accordance with accounting principles generally accepted in the United States of
America; this includes the design, implementation, and maintenance of internal control relevant to
the preparation and fair presentation of financial statements that are free from material mis-
statement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express opinions on these financial statements based on our audit. We did
not audit the financial statements of Nashua Airport Authority, which represents 7.5 percent,
98.4 percent, and 5.4 percent, respectively, of the assets and deferred outflows of resources, net
position and revenues of the aggregate discretely presented component units. Those financial
statements were audited by other auditors whose report thereon has been furnished to us, and
our opinion, insofar as it relates to the amounts included for Nashua Airport Authority is based
solely on the report of other auditors. 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 financial statements are free from material
misstatement.

Merrimack, New Hampshire

Andover, Massachusetts

Greenfield, Massachusetts

Ellsworth, Maine 800.282.2440 | melansoncpas.com
16

Gg MELANSON

An audit involves performing procedures to obtain audit evidence about the amounts and dis-
closures in the financial statements. The procedures selected depend on the auditors’ judgment,
including the assessment of the risks of material misstatement of the financial statements,
whether due to fraud or error. In making these risk assessments, the auditor considers internal
control relevant to the entity’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 pur-
pose of expressing an opinion on the effectiveness of the entity’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.

Opinions

In our opinion, based on our audit and the report of other auditors, the financial statements
referred to above present fairly, in all material respects, the respective financial position of the
governmental activities, the business-type activities, the aggregate discretely presented compo-
nent units, each major fund, and the aggregate remaining fund information of the City of Nashua,
New Hampshire, as of June 30, 2021 (except for Pennichuck Corporation which is as of and for
the year ended December 31, 2020), and the respective changes in financial position and, where
applicable, cash flows thereof and the respective budgetary comparison for the General Fund for the
year then ended in accordance with accounting principles generally accepted in the United States
of America.

Emphasis of Matters

As discussed in Note 23 to the financial statements, in fiscal year 2021 the City adopted
Governmental Accounting Standards Board (GASB) Statement No. 84, Fiduciary Activities. Gur
opinion is not modified with respect to this matter.

Other Matters

Required Supplementary Information

Accounting principles generally accepted in the United States of America require that Manage-
ment’s Discussion and Analysis, and certain Pension and OPEB schedules be presented to supplement
the basic financial statements. Such information, although not a part of the basic financial
statements, is required by the Governmental Accounting Standards Board, who considers it to be
an essential part of financial reporting for placing the basic financial statements in an appropriate
operational, economic, or historical context. We have applied certain limited procedures to the
required supplementary information in accordance with auditing standards generally accepted in
the United States of America, which consisted of inquiries of management about the methods of
preparing the information and comparing the information for consistency with management’s

800.282.2440 | melansoncpas.com

Gs MELANSON

responses to our inquiries, the basic financial statements, and other knowledge we obtained
during our audit of the basic financial statements. We do not express an opinion or provide any
assurance on the information because the limited procedures do not provide us with evidence
sufficient to express an opinion or provide any assurance.

Other Information

Our audit was conducted for the purpose of forming opinions on the financial statements that
collectively comprise City’s basic financial statements. The introductory section, combining and
individual fund financial statements and schedules, and statistical section are presented for
purposes of additional analysis and are not a required part of the basic financial statements.

The combining and individual fund financial statements and schedules appearing on pages 165
through 185 are the responsibility of management and were derived from and relate directly to
the underlying accounting and other records used to prepare the basic financial statements. Such
information has been subjected to the auditing procedures applied in the audit of the basic
financial statements and certain additional procedures, including comparing and reconciling such
information directly to the underlying accounting and other records used to prepare the basic
financial statements or to the basic financial statements themselves, and other additional
procedures in accordance with auditing standards generally accepted in the United States of
America. In our opinion, the combining and individual fund financial statements and schedules
are fairly stated, in all material respects, in relation to the basic financial statements as a whole.

The introductory and statistical sections appearing on pages 1 through 15, and 187 through 208, have
not been subjected to the auditing procedures applied in the audit of the basic financial
statements, and accordingly, we do not express an opinion or provide any assurance on it.

Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated April
14, 2022 on our consideration of the City’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 purpese of that report is solely to describe the scope of our
testing of internal control over financial reporting and compliance and the results of that testing,
and not to provide an opinion on the effectiveness of the City’s internal control over financial
reporting or on compliance. That report is an integral part of an audit performed in accordance
with Government Auditing Standards in considering City’s internal control over financial reporting
and compliance.

Melanson

Merrimack, New Hampshire
April 14, 2022

800.282.2440 | melansoncpas.com

MANAGEMENT?’S DISCUSSION AND ANALYSIS

As management of the City of Nashua, New Hampshire (the City), we offer readers of the City of
Nashua’s financial statements this narrative overview and analysis of the financial activities of the
City for the fiscal year ended June 30, 2021.

Overview of the Financial Statements

This discussion and analysis is intended to serve as an explanation of the basic financial statements.
The basic financial statements comprise three components: (1) government-wide financial
statements, (2) fund financial statements, and (3) notes to financial statements. This report contains
supplementary information in addition to the basic financial statements.

Government-Wide Financial Statements
The government-wide financial statements are designed to provide readers with a broad overview
of the City’s finances in a manner similar to a private-sector business.

The Statement of Net Position presents information on all assets, liabilities, and deferred
outflows/inflows of resources, with the difference reported as net position. Over time, increases or
decreases in net position may serve as a useful indicator of whether the financial position is
improving or deteriorating.

The Statement of Activities presents information showing how the City’s net position changed during
the most recent fiscal year. All changes in net position are reported as soon as the underlying event
giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and
expenses are reported in this statement for some items that will only result in cash flows in future
fiscal periods (e.g., uncollected taxes and earned but unused vacation leave).

Both government-wide financial statements distinguish functions of the City that are principally
supported by taxes and intergovernmental revenues (governmental activities) from other functions
that are intended to recover all or a significant portion of their costs through user fees and charges
(business-type activities). The governmental activities of the City include general government,
public safety, public works, education, health and human services, culture and recreation, community
development, communications, and hydroelectric operations. The business-type activities of the City
include Wastewater and Solid Waste activities.

The government-wide financial statements include not only the City itself (known as the primary
government), but also legally separate entities for which the primary government is financially
accountable (known as component units). Pennichuck Corporation and the Nashua Airport
Authority are reported as a discretely presented governmental component units. Financial
information for Pennichuck Corporation and the Nashua Airport Authority is reported separately
from the financial information presented for the primary government.

Fund Financial Statements

A fund is a grouping of related accounts that is used to maintain control over resources that have
been segregated for specific activities or objectives. The City, like other state and local governments,
uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements.

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All of the funds of the City can be divided into three categories: governmental funds, proprietary
funds, and fiduciary funds.

Governmental Funds

Governmental funds are used to account for essentially the same functions reported as
governmental activities in the government-wide financial statements. However, unlike the
government-wide financial statements, governmental fund financial statements focus on near-term
inflows and outflows of spendable resources, as well as balances of spendable resources available
at the end of the fiscal year. Such information may be useful in evaluating a government’s near-
term financing requirements.

Because the focus of governmental funds is narrower than that of the government-wide financial
statements, it is useful to compare the information presented for governmental funds with similar
information presented for governmental activities in the government-wide financial statements.
By doing so, readers may better understand the long-term impact of the City’s near-term financing
decisions. Both the governmental fund balance sheet and the governmental fund statement of
revenues, expenditures and changes in fund balances provide a reconciliation to facilitate this
comparison between governmental funds and governmental activities.

The City maintains 29 individual governmental funds. Information is presented separately in the
governmental fund balance sheet and in the governmental fund statement of revenues,
expenditures and changes in fund balances for the General Fund and Debt Service Fund. Data from
all the other governmental funds are combined into a single aggregated presentation. Individual
fund data for each of these nonmajor governmental funds is provided in the form of combining
statements elsewhere in this report.

The City adopts an annual appropriated budget for its general fund. A budgetary comparison
statement has been provided for the General Fund to demonstrate compliance with this budget.

Proprietary Funds

Proprietary fund reporting focuses on the determination of operating income, changes in net
position (or cost recovery), financial position, and cash flows. The proprietary fund category
includes enterprise and internal service funds.

The City maintains two different types of proprietary funds. Enterprise funds are used to report the
same functions presented as business-type activities in the government-wide financial statements.
The City uses enterprise funds to account for its Wastewater and Solid Waste operations. Internal
service funds are an accounting device used to accumulate and allocate costs internally among the
City’s various functions. The City uses an internal service fund to account for its self-insured
programs. Because this service predominantly benefits governmental rather than business-type
functions, it has been included within governmental activities in the government-wide financial
statements.

Proprietary funds provide the same type of information as the government-wide financial
statements, only in more detail. The proprietary fund financial statements provide separate

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information for the Wastewater and Solid Waste operations, both of which are considered to be
major funds of the City.

Fiduciary Funds

Fiduciary funds are used to account for resources held for the benefit of parties outside the
government (i.¢e., Public Works Pension Funds, Scholarship Funds, etc.). Fiduciary funds are not
reflected in the government-wide financial statements because the resources of those funds are not
available to support the City’s own programs. The accounting used for fiduciary funds is much
like that used for proprietary funds.

Notes to Financial Statements
The notes provide additional information that is essential to a full understanding of the data
provided in the government-wide and fund financial statements.

Required/Other Supplementary Information

In addition to the basic financial statements and accompanying notes, this report also presents
certain required/other supplementary information concerning the City’s progress in funding its
obligation to provide pension and other post-employment (OPEB) benefits to its employees.

Financial Highlights

e The assets and deferred outflows of resources of the City exceeded its liabilities and deferred
inflows of resources at the close of fiscal year 2021 by $120.9 million, a decrease of $17.0
million or 12.3% as compared to the prior year. Net position of the City’s governmental activities
decreased by $19.9 million, which represents a decrease of 68.7% while the City’s business-type
activities net position increased by $2.9 million, or 2.7%.

e Asof the close of the current fiscal year, the City’s governmental funds reported combined ending
fund balances of $123.3 million, an increase of $10.9 million over the prior year.

¢ The City’s general fund revenue and other financing sources (uses) exceeded expenditures by $7.2
million. This is primarily due to motor vehicle permit revenues and intergovernmental revenues

exceeding revenue estimates for the year.

e At the end of the current fiscal year, unassigned fund balance for the general fund was $31.7
million, an increase of $1.0 million in comparison with the prior year.

e During fiscal year 2021, the City issued $47.8 million of new general obligation debt and direct
borrowings (including bond premiums).

pa

Government-Wide Financial Analysis

The following is a summary of condensed government-wide financial data for the current and prior
fiscal year (in thousands):

Govemmental Business-Type
Activities Activities Total
2021 2020 2021 2020 2021 2020

Current assets $ 304923 $ 278443 § 23,030 §$ 24,054 $ 327953 $ 302,497
Capital assets 362,520 333,460 178,108 W777 $40,628 310,577
Other noncurrent assets 119,745 123,435 — - 119,745 123,435

Total assets 787,188 735,338 201,138 201,17) 988,326 936,509
Deferred outflows of resources 97,681 45,103 953 348 98,634 45,451
Long-term liabilities 669,677 $84,361 67,608 80,835 737,285 665,196
Other liabilities 69.937 38,983 18,967 11,064 88,904 $0,047

Total liabilities 739,614 623,344 86,575 91,899 826,189 715,243
Deferred inflows of resources 136,191 128,112 3,634 660 139,825 428,772
Net investment in capital assets 235,154 224,166 106,737 102,882 341,891 327,048
Restricted 49.918 41,309 7,428 6,561 57,346 47,870
Unrestricted (276,008) (236,490) {2,283) (483) (278,291) (236,973)

Total net position $ 9064 § 28.985 $$ 111,882 $ 108960 $ 120946 $§ 137,945

As depicted in the table above, the largest portion of the City’s net position, $341.9 million, reflects
its investment in capital assets (e.g., land, buildings, machinery, and equipment) less any related
outstanding debt used to acquire those assets. The City uses its capital assets to provide services
to citizens; consequently, these assets are not available for future spending. Although the City’s
investment in its capital assets is reported net of related debt, it should be noted that the resources
needed to repay this debt must be provided from other sources, since the capital assets themselves
cannot be used to liquidate these liabilities.

An additional portion of the City’s net position, $57.3 million, represents resources that are subject
to external restrictions on how they may be used (i.e., grants, capital projects, contributions, etc.).
The remaining balance of net position ($278.3 million) is considered unrestricted and represents
the City's ongoing obligations to citizens and creditors.

At the end of the current fiscal year, while the City’s unrestricted net position reflects a negative
balance due to the impact of GASB 68 - Accounting and Financial Reporting for Pensions and
GASB 75 - Accounting and Financial Reporting for Postemployment Benefits Other Than Pension
(OPEB). The City is able to report a positive net position for the government as a whole, as well as
for its separate Wastewater and Solid Waste activities. The same situation held true for the prior fiscal
year.

The restricted portion of net position $7.4 million reported within the City’s business-type

activities, primarily represents the regulatory funds set-aside for the closure of the Nashua Four
Hills Lined Landfill.

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The following table indicates the changes in net position for governmental and business-type
activities (in thousands):

CHANGES IN NET POSITION

Governmental Business-Ty pe
Activities Activities Total
2021 2020 2021 2020 2021 2020
Revenues:
Program revenues:
Charges for services $ 13,566 $ 10,218 § 18.683 § 17,264 $ 32,249 § 27,482
Operating grants and
contributions 78,522 68.808 - - 78,522 68,808
Capital grants and
contributions 10,832 9,767 888 532 11,720 10,299
General revenues: -
Property taxes 216,376 220,850 - - 216,376 220,850
Aulo pennits 16.916 16,073 - - 16,916 16.073
Penalties and interest on
taxes 1,240 1,264 - - 1,240 1,264
Grants and contributions
not restricted te specific
programs 9,217 9.112 1515 1,379 10,732 10,491
Investment income 1,890 2,865 37 44i 1,927 3,306
Other 952 $21 : - 952 §21
Total revenues 349,511 339,478 21,123 19,616 370,634 359,094
Expenses:
General government 19,911 31,380 - . 19.911 31,380
Police 42,242 38,628 - - 42,242 38,628
Fire 33,207 28,323 . - 33,207 28,323
Water fire protection services 3,173 3,053 . - 3,173 3,053
Education 190.034 177,229 . - 190.034 177,229
Public works 14.347 14,058 - - 14.347 14,058
Health and human services 4,074 3,596 - - 4,074 3,596
Culture and recreation 6,570 7,602 : - 6,570 7,602
Community development 35,386 10,907 - - 35,386 16,907
Communications 1,271 1117 - - 1,27] LI?
Hydroelectric 729 828 - - 729 828
Interesi and costs 12,513 12,429 S . 12,513 12,429
Wastewater services - . 15,589 14,738 15,589 14,738
Solid waste services - . 8.697 8.858 8.697 8.858
Total expenses 363,457 329,150 24,286 23,596 387,743 352,746
Change in net position
before permanent fund
contributions and transfers (13,946) 10.328 (3.163) (3.980) (17.109) 6,348
Permanent fund contributions 110 87 - - 110 87
Transfers in (out) (6.085) (5,346) 6,085 5,346 : :
Change in net position (19,921) 5,069 2,922 1,366 (16,999) 6,435
Net position - beginning of year 28,985 23,916 108,960 107,594 137,945 131,510
Net position - end of year $ 9.064 § 28.985 $ IL1882 $$ 108.960 $ 120.946 § 137.945

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Governmental Activities

Governmental activities for the year resulted in a decrease in net position of $19.9 million or 68.7%.
Key elements of this change include favorable auto permits and intergovernmental revenues and
substantial unspent appropriations, increased funding levels in the internal service fund, softened
by approximately $23.3 million increase to pension expense from GASB 68 and spending
approximately $21.0 million for the downtown performing arts center.

The chart below identifies revenues by source for governmental activities:

GOVERNMENTAL ACTIVITIES - REVENUES BY SOURCE
Fiscal Year Ended June 30, 2021

Non Program
Penalties & Interest on Grants &
Taxes Kootributi Other Income
0.4%

Investment
Income

Program Revenues -
Charges for Services
3.9%

Program Revenues -

Operating Grants &

Contributions
22.5%

Motor Vehicle Permits
4.8%

Program Revenues -
Capital Grants &
Contributions
3.1%

Property Taxes _ cea
61.9%

As reflected in the above chart, the City’s largest sources of revenue are from property taxes
(61.9%) and operating grants and contributions (22.5%). The cost of all governmental activities
this year was $363.4 million. This reflects a $34.3 million increase over the fiscal year 2020 total
of $329.1 million. However, as shown in the Statement of Activities on pages 33 - 34, the amount
that our taxpayers ultimately financed for these activities through City property taxes was $216.3
million because some of the cost was paid by those who directly benefited from the programs
through charges for services or by other governments and organizations that subsidized certain
programs with capital and operating grants and contributions. The City supports the remaining
portion of the governmental activities with other general revenues such as motor vehicle
registrations, investment income, unrestricted grants and contributions, and miscellaneous other
revenues.

The table below presents the cost of each of the City’s programs as well as each program’s net cost

{total cost less revenues generated by the activities). The net cost shows the amount that must be
supported by property taxes and other general revenues.

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