MACON COUNTY 5 W MAIN ST FRANKLIN, NC Request for Proposal for Audit Services- DUE BY 5:00 PM ON JANUARY 28, 2019

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1 MACON COUNTY 5 W MAIN ST FRANKLIN, NC Request for Proposal for Audit Services- DUE BY 5:00 PM ON JANUARY 28, 2019 Macon County (hereinafter called County ) invites qualified independent auditors (hereinafter called Auditor ) having sufficient governmental accounting and auditing experience in performing an audit in accordance with the specifications outlined in this Request for Proposal (RFP) to submit a proposal. There is no expressed or implied obligation for the County to reimburse firms for any expenses incurred in preparing proposals in response to this request. The specific details shown herein shall be considered minimum unless otherwise shown. The specifications, terms, and conditions included with this RFP shall govern in any resulting contract(s) unless approved otherwise in writing by the County. The bidder consents to personal jurisdiction and venue in a state court of competent jurisdiction in Macon County, North Carolina. Type of Audit The audit will encompass a financial and compliance examination of the County s Comprehensive Annual Financial Report (CAFR) in accordance with the laws and/or regulations of the State of North Carolina, which include requirements for the minimum scope of the audit. The financial and compliance audit will cover federal, state, and local funding sources in accordance with generally accepted auditing standards; Government Auditing Standards, July 2011 revisions; the Single Audit Act of 1984; the Single Audit Act Amendments of 1996; the provisions of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance); the State Single Audit Implementation Act; and all other applicable laws and regulations. Period The County intends to continue the relationship with the auditor for three (3) years on the basis of annual negotiation after the completion of the first year contract. Each year after negotiation has taken place, an annual contract documenting the terms of the audit will be signed. Since one governing board may not obligate future governing boards, the remaining years of the agreement are subject to annual governing board approval. The County reserves the right to request proposals at any time following the first year of this contract. Thus, prepare proposals for the following years, with year one being the only obligated year: July 1, 2018 to June 30, 2019 July 1, 2019 to June 30, 2020 July 1, 2020 to June 30, 2021 Page 1

2 Requirements The audit must be conducted in accordance with generally accepted auditing standards; Government Auditing Standards, July 2011 revisions issued by the Comptroller General of the United States; Office of Management and Budget Uniform Guidance; the State Single Audit Implementation Act of 1996, and any other applicable procedures for the audit of a government s financial statements prepared in accordance with GAAP. The Auditor will prepare the entries to convert from fund to government-wide statements. The County will prepare other year-end adjusting journal entries. The auditor will be responsible for the preparation, typing, proofing, printing, and copying of the CAFR. The County Finance Director will be actively involved in the MD&A and will prepare the Agency Funds Schedule, Additional Financial Data, and Statistical Section. The auditor will submit a draft of the CAFR to be reviewed in detail by the Finance Director. This draft should be submitted to the County in time to allow for ample review and corrections. The timing of this should ensure final completion of the CAFR no later than the annual October 31 st deadline. The County prefers interim fieldwork be completed in March, April, or May and final fieldwork be completed in early September. The Finance Director will expect a listing of requested information needed for the audit at the preplanning conference, periodic conferences during the conduct of the audit, as well as an exit conference prior to the completion of fieldwork. The audit should be completed and reports rendered four (4) months following the fiscal year end (October 31) unless otherwise stated by the Local Government Commission. Twenty (20) copies and five (5) CDs or flash drives of each CAFR, compliance report, management letter, and other applicable reports must be supplied to the Finance Director within the time frame cited above. The financial audit opinion will cover the financial statements for the governmental activities, the business-type activities, each major fund, and the remaining fund information, which collectively constitutes the basic financial statements. The combining and individual financial statements, schedules, and related information are not necessary for fair presentation, but will be presented as additional analytical data. This supplemental information, as required by GASB 34, will be subjected to the tests and other auditing procedures applied in the audit of the basic financial statements, and an opinion will be given as to whether the supplemental information is fairly stated in all material respects in relation to the basic financial statements taken as a whole. The auditor shall also express an opinion on the budgetary comparison information for the general fund, the major funds, and any annually budgeted special revenue funds. An opinion will not be given on the Management Discussion and Analysis. The working papers shall be retained and made available upon request for no less than three years from the date of the audit report. Page 2

3 In the event that circumstances arise during the audit that require work to be performed in excess of the original estimates, any additional costs will be negotiated prior to commencement of the work and an amended contract will be approved by the governing board and forwarded to the staff of the LGC for approval. Audit Contract & Payment of Audit Fees The audit contract must be approved by the staff of the Local Government Commission. Invoices are subject to approval by the LGC staff. Interim or progress billings will be accepted up to 75% of the total fee prior to submission of the audited financial statements to the staff of the Local Government Commission and their approval of the audited financial statements. Description of Selection Process Proposals will be submitted in two sections. The first section will be comprised of the audit firm s prior experience and qualifications of its personnel in performing governmental audits. The County will evaluate the auditor/firm on experience, educational, and technical qualifications. The second section will be comprised of the firm s technical approach and cost. The firm best meeting the County s expectations for experience, audit approach, and cost requirements will be selected. PLEASE KEEP IN MIND THAT COST, WHILE AN IMPORTANT FACTOR, WILL NOT BE A SOLE DETERMINING FACTOR. THE LOWEST BID WILL NOT AUTOMATICALLY BE AWARDED PREFERENTIAL CONSIDERATION. The County requests that no Macon County officials be contacted during this process. The Finance Director may be contacted only to clarify questions concerning the RFP. The County reserves the right to reject any or all proposals, waive technicalities, and to be the sole judge of suitability of the services for its intended use and further specifically reserve the right to make the award in the best interest of Macon County. Failure to respond to any requirements outlined in the RFP, or failure to enclose copies of the required documents, may disqualify the bid. First Section Firm s Prior Experience and Qualifications of Personnel The first section should address the requested information below. The corresponding responses should begin with the number of the requested information. 1. Indicate the number of people (by level) located within the local office that will handle the audit. 2. Provide a list of the local office s current and prior government audit clients, indicating the type(s) of services performed and the number of years served for each. Page 3

4 3. Indicate the experience of the local office in providing additional services to government clients by listing the name of each government, the type(s) of service performed, and the year(s) of engagement. 4. Describe your audit organization s participation in AICPA-sponsored or comparable quality control programs (peer review). 5. Describe the professional experience in governmental audits of each senior and higher level person assigned to the audit, the years on each job, and his/her position while on each audit. Indicate the percentages of time each senior and higher-level personnel will be on site. 6. Describe the relevant educational background of each person assigned to the audit, senior level and higher. This should include seminars and courses attended within the past three years, especially those courses in governmental accounting and auditing. 7. Describe the professional experience of assigned individuals in auditing relevant government organizations, programs, activities, or functions (e.g., utilities, solid waste, transit, airports, etc.). 8. Describe any specialized skills, training, or background in public finance of assigned individuals. This may include participation in State or national professional organizations, speaker or instructor roles in conferences or seminars, or authorship of articles and books. 9. Provide names, addresses, telephone numbers, and addresses of personnel of current and prior governmental audit clients who may be contacted for a reference. 10. Describe how the firm meets professional independence standards. 11. Describe liability insurance coverage arrangements. 12. Describe any regulatory action taken by any oversight body against the proposing audit organization or local office. Second Section Firm s Technical Approach The second section should consist of the requested information below. The corresponding responses should begin with the number of the requested information. 1. Type of audit program used (tailor-made, standard government, or standard commercial). 2. Use of statistical sampling. 3. Use of computer audit specialists. 4. Organization of the audit team and the approximate percentage of time spent on the audit by each member. Page 4

5 5. Information that will be contained in the management letter. 6. Assistance expected from the government s staff, if other than outlined in the RFP. 7. Tentative schedule for completing the audit within the specified deadlines of the RFP. 8. Specify costs using the Summary of Audit Costs Sheet on page 8 for each of the three (3) audit years. Cost estimates must indicate the basis for the charges and whether the amount is a not-to-exceed amount. 9. Please list any other information the firm may wish to provide. 10. Please include the Summary of Audit Costs Sheet with your proposal. Time Schedule for Awarding the Contract Request for proposal packages will be available on December 19, 2018 and will be posted on the County s website as well as advertised in the Franklin Press. All firms who intend to submit a proposal should send an to lhall@maconnc.org including pertinent contact information by January 4, This will ensure that you receive all addenda issued for the RFP. Proposals signed by authorized officials will be received by Lori M. Hall, Finance Director, at 5 W Main St, Franklin, NC or via at lhall@maconnc.org until January 28, 2019 by 5:00 p.m. Envelopes containing proposals should be clearly identified on the front with the words RESPONSE TO RFP FOR AUDIT SERVICES. The Finance Department will review the proposals and make a recommendation to the Board of County Commissioners on February 12, 2019 at which time the contract will be awarded. All questions shall be in writing and directed to Lori M. Hall, Finance Director, at lhall@maconnc.org. COUNTY INFORMATION Link to Comprehensive Annual Financial Reports Accounting Records The County maintains all its accounting records at the Finance Office located at 5 W Main St, Franklin, NC The County s financial software system is MUNIS. Page 5

6 Funds The County maintains the following funds: Governmental Funds: General Fund, Debt Service Fund, Special Revenue Funds (4), Capital Project Funds (8) Proprietary Funds: Enterprise Funds Solid Waste Fund and Solid Waste Capital Project Fund, Internal Service Fund Self-insurance Fund Agency Funds (7) Budgets The County budgets all funds on the modified accrual basis of accounting as required by North Carolina law. Appropriations are made at the levels disclosed in the CAFR. The County also maintains an encumbrance system. Both the budgetary and encumbrance systems are integrated with the accounting system. Assistance Available to Auditor The County will make available to the auditor sufficient help to pull and re-file records, and prepare and mail all necessary confirmations. A trial balance and original/final budgeted amounts will be made available via Excel by August 31 st. In addition, the following accounting procedures will be completed and documents prepared by the unit s staff. The books of account will be fully balanced. All subsidiary ledgers will be reconciled to control accounts. All bank account reconciliations for each month will be completed. The County s personnel will prepare the following items: Year-end adjusting entries except entries to convert from fund to government-wide statements Working balance sheet for each fund Working statement of revenues, expenditures (expenses), and changes in fund balance (retained earnings) for each fund A copy of the original budget, all amendments, and the final budget as of June 30 All bank reconciliations for each month List of outstanding checks, showing check number, payee, date, and amount Schedule of all investments for all funds at the audit date Schedule of accounts, taxes, and miscellaneous receivables Schedule of capital asset acquisitions, disposals, and depreciation Schedule of accounts payable Computation of vested vacation payable as of the audit date Debt schedule for each debt issue and related payments Grant information as requested Allocation of depreciation among functional areas Computation of additions and retirements of compensated absences Page 6

7 SPECIAL CONDITIONS - Other Services In addition to performing an audit for Macon County, the auditor must also agree to perform an audit for Macon County Airport Authority ( Airport Authority ), a discretely presented component unit of Macon County. The Airport Authority operates as a singular enterprise fund. Macon County processes all financial transactions on behalf of the Airport Authority. The Airport Authority s 2018 Audited Financial Statements are attached to the end of this RFP. The Airport Authority will be subject to the same Requirements on page 2 of this RFP with a few exceptions: the Airport Authority doesn t prepare a CAFR and six (6) copies and one (1) CD or flash drive of each audit report, management letter, and other applicable reports must be supplied. The interim and final fieldwork for the Airport Authority will occur at the same time as the County s interim and final fieldwork. Also, only the Summary of Audit Costs Sheet for the Airport Authority on page 9 needs to be completed and returned. Page 7

8 MACON COUNTY SUMMARY OF AUDIT COSTS SHEET AUDIT FIRM NAME: FY Base Audit (Includes personnel costs, travel, and on-site work) $ 2. Financial Statement Preparation (Includes costs of printing & mailing required copies 20 copies & 5 CDs or flash drives) $ 3. Other (Explain) $ TOTAL $ FY Base Audit (Includes personnel costs, travel, and on-site work) $ 2. Financial Statement Preparation (Includes costs of printing & mailing required copies as listed in RFP) $ 3. Other (Explain) $ TOTAL $ FY Base Audit (Includes personnel costs, travel, and on-site work) $ 2. Financial Statement Preparation (Includes costs of printing & mailing required copies as listed in RFP) $ 3. Other (Explain) $ TOTAL $ Page 8

9 MACON COUNTY AIRPORT AUTHORITY SUMMARY OF AUDIT COSTS SHEET AUDIT FIRM NAME: FY Base Audit (Includes personnel costs, travel, and on-site work) $ 2. Financial Statement Preparation (Includes costs of printing & mailing required copies 6 copies & 1 CD or flash drive) $ 3. Other (Explain) $ TOTAL $ FY Base Audit (Includes personnel costs, travel, and on-site work) $ 2. Financial Statement Preparation (Includes costs of printing & mailing required copies as listed in RFP) $ 3. Other (Explain) $ TOTAL $ FY Base Audit (Includes personnel costs, travel, and on-site work) $ 2. Financial Statement Preparation (Includes costs of printing & mailing required copies as listed in RFP) $ 3. Other (Explain) $ TOTAL $ Page 9

10 MACON COUNTY AIRPORT AUTHORITY (A Component Unit of Macon County, North Carolina) AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018

11 MACON COUNTY AIRPORT AUTHORITY (A Component Unit of Macon County, North Carolina) AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018 TABLE OF CONTENTS Exhibit Page Independent Auditor's Report 1-2 Management's Discussion and Analysis 3-6 Financial Statements: A Statement of Net Position 7 B Statement of Revenues, Expenses, and Changes in Net Position 8 C Statement of Cash Flows 9 Notes to the Financial Statements Schedule Supplementary Information: 1 Schedule of Revenues and Expenditures Budget and Actual (Non-GAAP) 17

12 INDEPENDENT AUDITOR S REPORT To the Board of Directors Macon County Airport Authority Macon County, North Carolina Report on the Financial Statements We have audited the accompanying financial statements of the business-type activities of the Macon County Airport Authority (a component unit of Macon County, North Carolina) as of and for the year ended June 30, 2018, and the related notes to the financial statements, which collectively comprise the Macon County Airport Authority s basic financial statements as listed in the table of contents. 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 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 misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion 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. 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 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 purpose 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 opinion th Avenue Drive SE Hickory, NC Fax South Center Street Taylorsville, NC Fax PO Box 5729 Statesville, NC Wilkesboro Hwy Statesville, NC Fax

13 Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the business-type activities of the Macon County Airport Authority, as of June 30, 2018, and the respective changes in financial position, and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management s Discussion and Analysis 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 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 sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming an opinion on the financial statements that collectively comprise the Macon County Airport Authority s basic financial statements. The budget and actual schedule is presented for purposes of additional analysis and is not a required part of the basic financial statements. The budget and actual schedule is the responsibility of management and was derived from, and relates 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 information is fairly stated, in all material respects, in relation to the basic financial statements as a whole. Martin Starnes & Associates, CPAs, P.A. Hickory, North Carolina October 9,

14 Management s Discussion and Analysis As management of the Macon County Airport Authority (a component unit of Macon County, North Carolina), we offer readers of the Authority s financial statements this narrative overview and analysis of the financial activities of the Authority for the fiscal year ended June 30, We encourage readers to read the information presented here, in conjunction with additional information that we have furnished in the Authority s financial statements, which follow this narrative. Financial Highlights As of the close of the current fiscal year, the Macon County Airport Authority reported net position of $15,344,607. Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to the Macon County Airport Authority s basic financial statements. The Authority s financial statements consist of two components: 1) basic financial statements and 2) notes to the financial statements (see Figure 1). In addition to the basic financial statements, this report contains other supplemental information that will enhance the reader s understanding of the financial condition of the Macon County Airport Authority. Required Components of Annual Financial Report Figure 1 Management s Discussion and Analysis Basic Financial Statements Notes to the Financial Statements Summary Basic Financial Statements Detail The Macon County Airport Authority s basic financial statements are comprised of Exhibits A through C. The Macon County Airport Authority operates as a singular Enterprise Fund. All activities of the Authority are considered business-type activities. Business-type activities are those that the Authority charges customers to provide aviation related services. The next section of the basic financial statements is the Notes. The notes to the financial statements explain in detail some of the data contained in those statements. After the notes, Supplemental Information is provided. Budgetary information, required by the General Statutes, can be found in this part of the statements. Notes to the Financial Statements. The notes provide additional information that is essential to a full understanding of the data provided in the basic financial statements. The notes to the financial statements start after Exhibit C of this report. 3

15 Financial Analysis Macon County Airport Authority s Net Position Figure 2 Business-Type Activities Current and Other Assets: Cash and investments $ 81,832 $ 67,759 Capital assets 15,264,040 14,941,557 Total assets 15,345,872 15,009,316 Current Liabilities: Accounts payable 1,265 2,551 Net Position: Net investment in capital assets 15,264,040 14,941,557 Unrestricted 80,567 65,208 Total net position $ 15,344,607 $ 15,006,765 Net position may serve, over time, as one useful indicator of the Authority s financial condition. The assets of the Macon County Airport Authority exceeded liabilities by $15,344,607 (net position) as of June 30, One portion of net position reflects the Authority s investment in capital assets (e.g. buildings, land, fixtures, and equipment); less any related debt still outstanding that was issued to acquire those items. The Macon County Airport Authority uses these capital assets to provide services; consequently, these assets are not available for future spending. Although the Macon County Airport Authority s investment in its capital assets is reported net of the outstanding related debt, the resources needed to repay that debt must be provided by other sources since the capital assets cannot be used to liquidate these liabilities. The Authority does not have debt outstanding as of June 30, A particular aspect of the Authority s financial operations that influenced total net position was: Capital contributions from the primary government (Macon County). 4

16 Macon County Airport Authority s Changes in Net Position Figure 3 Business-Type Activities Operating Revenues: Macon County appropriation $ 53,800 $ 53,800 Services and fees 25,053 20,240 Total operating revenues 78,853 74,040 Operating Expenses: Airport operations 736, ,223 Operating income (loss) before capital contributions (657,545) (634,183) Capital contributions 995,387 1,370,809 Change in net position 337, ,626 Net Position: Beginning of year - July 1 15,006,765 14,270,139 Ending of year - June 30 $ 15,344,607 $ 15,006,765 Business-Type Activities. Business-type activities increased the Macon County Airport Authority s net position by $337,842. See Figure 3 above for the results of current year operations compared to the prior year. 5

17 Capital Asset and Debt Administration Capital Assets. The Macon County Airport Authority s capital assets as of June 30, 2018 totaled $15,264,040 (net of accumulated depreciation). These assets include land, land improvements, and construction in progress. Macon County Airport Authority s Capital Assets (Net of depreciation) Figure 4 Business-Type Activities Land $ 2,930,538 $ 2,930,538 Equipment 67,621 83,925 Construction in progress 2,443,433 1,448,046 Land improvements 9,822,448 10,479,048 Total $ 15,264,040 $ 14,941,557 Additional information on the Authority s capital assets can be found in Note 2 of the basic financial statements. Budget Highlights for the Fiscal Year Ending June 30, 2019 Business-Type Activities. The approximately $2.2 million parallel taxiway project will be completed in FY 19. Funding is provided by a grant that has already been awarded and match funds have been transferred to County Fund 53 for the project. Also, the Airport Layout Plan will be completed in FY 19. Requests for Information This report is designed to provide an overview of the Authority s finances for those with an interest in this area. Questions concerning any of the information found in this report, or requests for additional information, should be directed to the Macon County Airport Authority, 1231 Airport Road, Franklin, North Carolina

18 MACON COUNTY AIRPORT AUTHORITY (A COMPONENT UNIT OF MACON COUNTY, NORTH CAROLINA) Exhibit A STATEMENT OF NET POSITION JUNE 30, 2018 Assets: Current assets: Cash and investments $ 81,832 Non-current assets: Non-depreciable capital assets 5,373,971 Depreciable capital assets, net 9,890,069 Total non-current assets 15,264,040 Total assets 15,345,872 Liabilities and Net Position: Liabilities: Current liabilities: Accounts payable 1,265 Net Position: Net investment in capital assets 15,264,040 Unrestricted 80,567 Total net position $ 15,344,607 The accompanying notes are an integral part of the financial statements. 7

19 MACON COUNTY AIRPORT AUTHORITY (A COMPONENT UNIT OF MACON COUNTY, NORTH CAROLINA) Exhibit B STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION PROPRIETARY FUND FOR THE YEAR ENDED JUNE 30, 2018 Operating Revenues: Macon County appropriation $ 53,800 Services and fees 25,053 Total operating revenues 78,853 Operating Expenses: Depreciation expense 672,904 Professional services 11,625 Operating supplies 2,868 Repairs and maintenance 27,932 Telephone 1,518 Travel 1,031 Utilities 10,030 Insurance 6,836 Events 1,654 Total operating expenses 736,398 Operating income (loss) before capital contributions (657,545) Capital contributions from primary government 995,387 Change in net position 337,842 Net Position: Beginning of year - July 1 15,006,765 Ending of year - June 30 $ 15,344,607 The accompanying notes are an integral part of the financial statements. 8

20 MACON COUNTY AIRPORT AUTHORITY (A COMPONENT UNIT OF MACON COUNTY, NORTH CAROLINA) Exhibit C STATEMENT OF CASH FLOWS PROPRIETARY FUND FOR THE YEAR ENDED JUNE 30, 2018 Cash Flows from Operating Activities: Cash received from Macon County appropriations $ 53,800 Cash received from customers 25,053 Cash paid for goods and services (64,780) Net cash provided (used) by operating activities 14,073 Net increase (decrease) in cash and cash equivalents 14,073 Cash and Cash Equivalents: Beginning of year - July 1 67,759 End of year - June 30 $ 81,832 Reconciliation of Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities: Operating income (loss) $ (657,545) Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities: Depreciation expense 672,904 Changes in assets and liabilities: Increase (decrease) in accounts payable (1,286) Net cash provided (used) by operating activities $ 14,073 Non-Cash Transactions: The Airport recorded $995,387 in contributed capital assets from Macon County during the fiscal year ended June 30, The accompanying notes are an integral part of the financial statements. 9

21 MACON COUNTY AIRPORT AUTHORITY (A COMPONENT UNIT OF MACON COUNTY, NORTH CAROLINA) NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, Summary of Significant Accounting Policies The accounting policies of the Macon County Airport Authority (the Authority ) conform to generally accepted accounting principles as they apply to governments. The following is a summary of the more significant accounting policies: A. Reporting Entity The Macon County Airport Authority, a component unit of Macon County, North Carolina, is a corporate body with powers outlined by the North Carolina General Statutes. B. Component Unit of Macon County The Macon County Board of Commissioners appoints the Authority s Board. The Authority is fiscally dependent on the County due to the County providing the costs and services of administrative and finance functions of the Authority. Due to the ability of Macon County to exercise its will over the Authority s Board and the Authority s fiscal dependence on the County, the Macon County Airport Authority is reported as a discretely presented component unit in the County s financial statements. C. Organizational History The Authority was organized under the provisions of Senate Bill 618 of the North Carolina legislature, General Assembly of Macon County appoints five individuals to serve on the Authority s Board with staggered terms of six years. The Authority is authorized to purchase, acquire, and construct equipment to improve and maintain airports and landing fields within Macon County limits. D. Basis of Presentation The Authority s financial statements are presented on the full accrual basis, in accordance with accounting principles generally accepted in the United States of America. Business-type activities are financed, in whole or in part, by fees charged to external parties. All activities of the Authority are considered business-type activities. Fund Financial Statements. The fund financial statements provide information about the Authority s funds. Separate statements for each fund category governmental, proprietary, and fiduciary are presented, if applicable. The emphasis of fund financial statements is on major governmental and enterprise funds, each displayed in a separate column, if applicable. All remaining governmental and enterprise funds are aggregated and reported as nonmajor funds, when applicable. 10

22 MACON COUNTY AIRPORT AUTHORITY (A COMPONENT UNIT OF MACON COUNTY, NORTH CAROLINA) NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018 Proprietary fund operating revenues, such as charges for services, result from exchange transactions associated with the principal activity of the fund. Exchange transactions are those in which each party receives and gives up essentially equal values. Non-operating revenues, such as subsidies and investment earnings, result from non-exchange transactions or ancillary activities. The Authority reports the enterprise fund as a major fund and has one fund category proprietary funds. Proprietary Funds Enterprise Funds. The enterprise funds are used to account for those operations that (a) are financed and operated in a manner similar to private business enterprises, where the intent of the governing body is that the costs (expenses, including depreciation) of providing goods or services to the general public, on a continuing basis, be financed or recovered primarily through user charges; or (b) where the governing body has decided that the periodic determination of revenues earned, expenses incurred, and/or net income is appropriate for capital maintenance, public policy, management control, accountability, or other purposes. The Macon County Airport Authority operates as a singular enterprise fund. E. Measurement Focus, Basis of Accounting In accordance with North Carolina General Statutes, all funds of the Authority are maintained during the year using the modified accrual basis of accounting. Proprietary Fund Financial Statements. The proprietary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned, and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Non-exchange transactions, in which the Authority gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, grants, and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied. Proprietary funds distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund s principal ongoing operations. The principal operating revenues of the Authority s Enterprise Fund are charges to customers for sales and services. Operating expenses for enterprise funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses. 11

23 MACON COUNTY AIRPORT AUTHORITY (A COMPONENT UNIT OF MACON COUNTY, NORTH CAROLINA) NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018 Use of Estimates The preparation of financial statements, in conformity with generally accepted accounting principles, requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Significant areas where estimates are made are depreciation lives. F. Budgetary Data The Authority s budget is adopted as required by North Carolina General Statutes. An annual budget ordinance is adopted for the Enterprise Fund. All annual appropriations lapse at the fiscal year-end. The budget is prepared at the line item level using the modified accrual basis of accounting. Expenditures may not legally exceed appropriations at the departmental level for enterprise funds. During the year, several amendments to the original budget were necessary; the effects of which were not material. The budget ordinance must be adopted by July 1 of the fiscal year or the Governing Board must adopt an interim budget that covers that time until the annual ordinance can be adopted. G. Assets, Liabilities, and Fund Equity Deposits and Investments All deposits of the Authority are made in Board-designated official depositories and are collateralized as required by state law [G.S ]. The Authority may designate, as an official depository, any bank or savings association whose principal office is located in North Carolina. Also, the Authority may establish time deposit accounts such as NOW and SuperNow accounts, money market accounts, and certificates of deposit. State law [G.S (c)] authorizes the Authority to invest in obligations of the United States or obligations fully guaranteed both as to principal and interest by the United States; obligations of North Carolina; bonds and notes of any North Carolina local government or public authority; obligations of certain non-guaranteed federal agencies; certain high quality issues of commercial paper and bankers acceptances; and the North Carolina Capital Management Trust (NCCMT). The NCCMT Government portfolio, a SECregistered (2a-7) government money market fund, is measured at amortized cost, which is the NCCMT s share price. The NCCMT Term Portfolio securities are valued at fair value. 12

24 MACON COUNTY AIRPORT AUTHORITY (A COMPONENT UNIT OF MACON COUNTY, NORTH CAROLINA) NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018 Cash and Cash Equivalents The Authority considers demand deposits and investments with an original maturity of three months or less, which are not limited to use, to be cash and cash equivalents. H. Capital Assets Capital assets are defined by the Authority as assets with an initial, individual cost of more than a certain cost and an estimated useful life in excess of more than two years. Property and equipment with an initial, individual cost of more than $5,000 is recorded at original cost or at estimated fair market value at the time of acquisition or donation. Donated capital assets received prior to June 30, 2015 are recorded at their estimated fair value at the date of donation. Donated capital assets received after June 30, 2015 are recorded at acquisition value. All other purchased or constructed capital assets are reported at cost or estimated historical cost. When an asset is disposed of, the cost of the asset and the related accumulated depreciation are removed from the books. The cost of normal maintenance and repairs that do not add to the value of the asset or materially extend the assets life are not capitalized. Any gain or loss on disposition is reflected in the earnings for the period. Assets are depreciated using the straight-line method over the following years: Asset Land improvements Equipment Estimated Useful Lives years 7 years I. Net Position Net position in the proprietary fund financial statements is classified as net investment in capital assets; restricted and unrestricted. Restricted net position represent constraints on resources that are either externally imposed by creditors, grantors, contributors, laws or regulations of other governments, or imposed by law through state statute. The Macon County Airport Authority has a revenue spending policy that provides guidance for programs with multiple revenue sources. The Finance Officer will use resources in the following hierarchy: bond proceeds, federal funds, state funds, local funds. For purposes of fund balance classification expenditures are to be spent from restricted fund balance first, followed in order by committed fund balance, assigned fund balance and lastly unassigned fund balance. The Finance Officer has the authority to deviate from this policy if it is in the best interest of the Authority. 13

25 MACON COUNTY AIRPORT AUTHORITY (A COMPONENT UNIT OF MACON COUNTY, NORTH CAROLINA) NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, Detail Notes on All Funds A. Assets Deposits All deposits of the Authority are made in Authority-designated official depositories and are collateralized as required by G.S The Authority may designate as an official depository any bank or savings and loan association whose principal office is located in North Carolina. Also, the Board may establish time deposit accounts and certificates of deposit. All of the Authority s deposits are insured or collateralized by using one of two options. Under the Dedicated Method, all deposits over the federal depository insurance coverage are collateralized with securities held by the Authority s agent in the Authority s name. Under the Pooling Method, a collateral pool, all uninsured deposits are collateralized with securities held by the State Treasurer s agent in the name of the State Treasurer. Since the State Treasurer is acting in a fiduciary capacity for the Authority, these deposits are considered to be held by the Authority s agent in the Authority s name. The amount of the pledged collateral is based on an approved averaging method for noninterest-bearing deposits and the actual current balance for interest-bearing deposits. Depositories using the Pooling Method report to the State Treasurer the adequacy of their pooled collateral covering uninsured deposits. The State Treasurer does not confirm this information with the Authority or the escrow agent. Because of the inability to measure the exact amount of collateral pledged for the Authority under the Pooling Method, the potential exists for undercollateralization, and this risk may increase in periods of high cash flows. However, the State Treasurer of North Carolina enforces strict standards of financial stability for each Pooling Method depository. The Authority has no formal policy regarding custodial credit risks for deposits, but relies on the State Treasurer to ensure standards of minimum capitalization for all pooling method financial institutions and to monitor them for compliance. The Authority complies with provisions of G.S when designating official depositories and verifying that deposits are properly secured. At year-end, the Authority s deposits had a book balance of $81,832 and a bank balance of $81,832. Of the bank balance, $81,832 was covered by federal depository insurance. 14

26 MACON COUNTY AIRPORT AUTHORITY (A COMPONENT UNIT OF MACON COUNTY, NORTH CAROLINA) NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018 Summary of Enterprise Fund Capital Assets Capital asset activity for the Enterprise Fund for the year ended June 30, 2018 was as follows: July 1, 2017 Increases Decreases June 30, 2018 Non-Depreciable Capital Assets: Land $ 2,930,538 $ - $ - $ 2,930,538 Construction in progress 1,448, ,387-2,443,433 Total non-depreciable capital assets 4,378, ,387-5,373,971 Depreciable Capital Assets: Land improvements 13,124, ,124,744 Equipment 114, ,120 Total depreciable capital assets 13,238, ,238,864 Less Accumulated Depreciation: Land improvements 2,645, ,600-3,302,296 Equipment 30,195 16,304-46,499 Total accumulated depreciation 2,675, ,904-3,348,795 Total depreciable capital assets, net 10,562,973 9,890,069 Capital assets, net $ 14,941,557 $ 15,264,040 B. Liabilities Summary Disclosure of Significant Commitments At June 30, 2018, the Authority has commitments of approximately $255,447 in Airport improvements, which are 90% grant funded. Risk Management The Authority 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 Authority is covered under Macon County s policy with Tokio Marine HCC relative to property coverage. Macon County s property coverage through this insurance company is equal to the replacement cost of owned property subject to total insured values, with sub-limits on coverage for specified perils. The property coverage is subject to per occurrence deductibles. The insurance company is audited annually by certified public accountants, and the audited financial statements are available to the Authority upon request. 15

27 MACON COUNTY AIRPORT AUTHORITY (A COMPONENT UNIT OF MACON COUNTY, NORTH CAROLINA) NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018 Tokio Marine HCC is fully suited to pay claims without reinsurance support. It is also subject to the NC State Guarantee Fund should it ever become insolvent. Tokio Marine HCC has an A++ rating with assets greater than $2 billion. The Authority is also covered by an Airport Owners and Operators General Liability Policy issued by ACE Property and Casualty Insurance Company. This policy has a personal injury and advertising injury aggregate limit of $2,000,000; malpractice aggregate limit of $2,000,000; liability of $2,000,000 each occurrence; fire damage limit any one fire of $50,000; hangar keepers limit any one occurrence of $100,000; and hangar keepers limit any one aircraft of $100,000. The hangar keeper s limit any one occurrence deductible is $1,000 and the hangar keepers limit any one aircraft deductible is $1,000. There is no deductible for the other coverages. The Authority carries commercial coverage for all other risks of loss. There have been no significant reductions in insurance coverage from the previous year, and settled claims have not exceeded coverage in any of the past three fiscal years. In accordance with G.S , the Authority s employees that have access to $100 or more at any given time of the Authority s funds are performance bonded through commercial crime coverage with a $250,000 occurrence limit. Macon County Finance Department processes all financial transactions on behalf of the Authority. Individuals holding positions requiring statutory bonds are covered elsewhere. The Treasurer (Finance Officer) of the Authority is individually bonded for $50,000. The Authority, through the County, is a certified participant under the National Flood Insurance Program, applicable to FEMA flood zones A, AE, AH, and HO. Flood coverage of $5,000,000 is through Tokio Marine HCC and applies to zones A, A1-A30, A99, AE, AH, AO, AR, AR/AE, AR/AO, AR/A1-A-30, AR/A, V, V1-V30, and VE. Zones B and X are not covered. Deductibles are $50,000 per occurrence. Coverage limits are five million per occurrence. 16

28 MACON COUNTY AIRPORT AUTHORITY (A COMPONENT UNIT OF MACON COUNTY, NORTH CAROLINA) Schedule 1 SCHEDULE OF REVENUES AND EXPENDITURES BUDGET AND ACTUAL (NON-GAAP) FOR THE YEAR ENDED JUNE 30, 2018 Variance Budget Actual Over/Under Revenues: Operating revenues: Macon County appropriations $ 53,800 $ 53,800 $ - Services and fees 25,053 25,053 - Total operating revenues 78,853 78,853 - Total revenues 78,853 78,853 - Expenditures: Operating expenses: Professional services 14,500 11,625 2,875 Operating supplies 3,400 2, Repairs and maintenance 45,653 27,932 17,721 Telephone 1,200 1,518 (318) Travel 1,600 1, Utilities 11,500 10,030 1,470 Insurance 7,000 6, Events 2,000 1, Total expenses 86,853 63,494 23,359 Revenues over (under) expenditures (8,000) 15,359 23,359 Other Financing Sources (Uses): Appropriated fund balance 8,000 - (8,000) Revenues and other financing sources over (under) expenditures and other financing uses $ - 15,359 $ 15,359 Reconciliation From Budgetary Basis (Modified Accrual) to Full Accrual: Capital contribution 995,387 Depreciation (672,904) Change in net position $ 337,842 17