ANNUAL AUDIT REPORT FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2007 ESCAMBIA COUNTY, FLORIDA COUNTY-WIDE FINANCIAL STATEMENTS AND NOTES

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2 ANNUAL AUDIT REPORT FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2007 COUNTY-WIDE FINANCIAL STATEMENTS AND NOTES BOARD OF COUNTY COMMISSIONERS CONSTITUTIONAL OFFICERS

3 ANNUAL AUDIT REPORT FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2006 COUNTY-WIDE FINANCIAL STATEMENTS AND NOTES BOARD OF COUNTY COMMISSIONERS CONSTITUTIONAL OFFICERS CONTENTS County-Wide Financial Statements and Notes Board of County Commissioners Clerk of the Circuit Court Sheriff Tax Collector Property Appraiser Supervisor of Elections Single Audit Report and Schedule of State Financial Assistance

4 ANNUAL AUDIT REPORT COUNTY-WIDE FINANCIAL STATEMENTS AND NOTES SEPTEMBER 30, 2007

5 ANNUAL AUDIT REPORT COUNTY-WIDE FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2007 TABLE OF CONTENTS Page REPORT OF INDEPENDENT AUDITORS MANAGEMENTS DISCUSSION AND ANALYSIS (REQUIRED SUPPLEMENTARY INFORMATION) BASIC FINANCIAL STATEMENTS Government-Wide Financial Statements Statement of Net Assets Statement of Activities FUND FINANCIAL STATEMENTS Balance Sheet Governmental Funds Reconciliation of the Balance Sheet to the Statement of Net Assets Statement of Revenues, Expenditures, and Changes in Fund Balances Reconciliation of the Statement of Revenues Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities Statement of Revenues, Expenditures, and Changes in Fund Balances Budget and Actual General Fund, Disaster Recovery Fund, HHRP Fund, Community Redevelopment Agency Fund, and Transportation and Drainage Fund Statement of Net Assets Proprietary Funds Statement of Revenues, Expenses, and Changes in Net Assets Proprietary Funds Statement of Cash Flows Proprietary Funds Statement of Fiduciary Net Assets Fiduciary Funds Component Units Financial Statements Statement of Net Assets Statement of Activities Notes to Financial Statements Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards Management Letter County s Response to Management Letter... 73

6 FINANCIAL SECTION This section contains the following subsections: REPORT OF INDEPENDENT AUDITORS MANAGEMENT S DISCUSSION AND ANALYSIS BASIC FINANCIAL STATEMENTS

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9 Management s Discussion and Analysis As fiscal managers of Escambia County, we offer readers of Escambia County s financial statements this narrative overview and analysis of the financial activities of Escambia County for the fiscal year ended September 30, We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal, which can be found within this report. Financial Highlights The assets of Escambia County exceeded its liabilities (net assets) as of September 30 th, by $533,330,974 for fiscal year Of this amount, $84,344,640 (unrestricted net assets) may be used to meet the government s ongoing obligations to citizens and creditors. Unrestricted net assets decreased $13,116,190 from the previous year primarily due to a reclassification of capital assets and other amounts previously reported as restricted. The County s total net assets this fiscal year increased $28,986,829 from the previous year with an increase of $31,680,227 resulting from governmental activities and a decrease of $2,693,398 resulting from business-type activities. At September 30, Escambia County s governmental funds reported combined ending fund balances of $128,421,357 a decrease of $11,997,645 in comparison with the prior year. Of this amount, $86,065,214 remains in the various fund types of the County as unreserved. The General Fund reported an unreserved fund balance of $32,714,019; a decrease from last fiscal year of $3,832,465. Escambia County s total bonded debt, leases and loans decreased $14,717,928 from the previous fiscal year. No new notes, leases or bonds were entered into, therefore principal repayments account for the decrease. The General Fund s revenues increased $22,504,551 or 13.8% over the prior fiscal year. The main reason for the increase was a result of the increased assessed value of taxable property which correlated to an increase in property taxes. Closure estimates of the County s Perdido Landfill approved by the Florida Department of Environmental Protection resulted in decrease to the cash closure escrow account of $917,561. The county now holds $6,107,121 in escrow for closure purposes. Interest rates rose over the last fiscal year, resulting in increased interest earnings for the County. The County s average investment portfolio yield rose from 4.69% in 2006 to 5.42% in Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to Escambia County s basic financial statements. Escambia County s basic financial statements comprise three components: 1) governmentwide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. 3

10 Government-Wide Financial Statements Government-wide financial statements are designed to provide a broad overview of the financial position of Escambia County and are similar to private-sector financial statements. They include a statement of net assets and a statement of activities. The Statement of Net Assets shows the County s assets less its liabilities as of September 30, The difference between these assets and liabilities is reported as net assets. Changes in net assets over time may be helpful in indicating an improving or deteriorating financial position. The Statement of Activities presents information showing how the net assets changed during the most recent fiscal year. The statement presents all underlying events giving rise to the change, regardless of the timing of the related cash flows. Some included items, such as accounts payable or earned but unused vacation leave, will produce changes in cash in a future fiscal period. Both government-wide statements distinguish functions of Escambia County 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 (businesstype activities). Governmental activities reported in the statements include general government, public safety, physical environment, transportation, economic environment, human services, culture and recreation, and court related functions. Major business activities in Escambia County include landfill operations and civic center operations. Other business activities include inspections and emergency medical services (ambulance services). The government-wide financial statements include not only Escambia County itself (known as the primary government), but also the Santa Rosa Island Authority, the Housing Finance Authority, and the Escambia County Law Library, all legally separate entities for which Escambia County is financially accountable or with which the County is financially integrated. Financial information for these component units is reported separately from the financial information for the primary government itself. 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. Like other state and local governments, Escambia County uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All funds of Escambia County government can be divided into three categories: governmental, proprietary and fiduciary funds. Governmental Funds. Governmental funds are used to account for essentially the same functions as those reported in the government-wide statement of net assets and statement of activities. However, unlike the government-wide financial statements, governmental fund financial statements focus on events that produce near-term inflows and outflows of spendable resources as well as on the balances of spendable resources available at the end of the fiscal year and is a narrower focus than the governmentwide financial statements. Such information may be useful in evaluating Escambia County s near-term financing requirements and available resources. By comparing functions between the two sets of statements for governmental funds and governmental activities, readers may better understand the long-term impact of the government 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. Governmental funds individually presented in Escambia County s statements include six major funds, the General Fund, the Disaster Recovery Fund, the Hurricane Housing Recovery Program (HHRP) Fund, the Community Redevelopment Agency Fund, the Transportation and Drainage Fund, and the Local Option Sales Tax Fund. Although there are many smaller governmental funds in Escambia County s government, they have been presented in a total column termed as other governmental funds. 4

11 Combining statements for these other governmental funds have been presented in the Combining Statements and Schedules section of this report. Escambia County adopts an annual appropriated budget for all its governmental funds. Budgetary comparison statements and schedules have been provided for these funds to demonstrate budgetary compliance. Proprietary Funds. Escambia County maintains and presents two different types of proprietary funds-- enterprise and internal service. Enterprise funds report, in detail, the same information presented as business-type activities in the government-wide financial statements for landfill operations, inspections, ambulance and emergency medical services, and civic center. Inspections and ambulance are presented in one total column but may be separately reviewed in the combining statements elsewhere in the report. The internal service fund is an accounting mechanism to accumulate and allocate costs internally for Escambia County s government. The County uses several internal service funds to account for the risk financing activities for the County s insurance program. The risk management program is established to retain some risk of certain claims including worker s compensation and casualty and property insurance. Garage and fuel activities provided to other County departments and the administration of employee benefits are also included in the internal service fund. The Sheriff and Clerk each use an Internal Service Fund to account for the annual costs related to the Compensated Absences Policy activities provided for by each respective office, as well as to accumulate certain compensated absences liabilities. The internal service fund is presented in one total column in the Proprietary Funds financial statements but may be separately reviewed in the combining statements elsewhere in the report. Fiduciary Funds. Escambia County uses fiduciary agency funds to account for resources held for the benefit of parties outside of county government. Although these funds are presented in the fund financial statements, they do not appear in the government-wide financial statements because the resources of these agency funds are not available to support Escambia County s own programs. Agency funds are unlike all other fund types in that agency funds report only assets and liabilities. They do however, use the accrual basis of accounting to recognize receivables and payables. Notes to the Financial Statements. The notes provide additional information that is essential to a full understanding of the data provided in both the government-wide and fund financial statements. Other Information. Combining and individual statements and schedules referred to earlier, which present more detailed views of nonmajor funds used in governmental and proprietary funds, includes schedules for nonmajor special revenue funds, capital project funds, enterprise funds, internal service funds, and agency funds. Additional information about the County is found under the Statistical and Continuing Disclosure sections of this report. Government-Wide Financial Analysis This is the sixth fiscal year that the County has reported under the total approach to governmental accounting, promulgated by the GASB with its Statement No. 34 model. Comparative data for fiscal years ending September 30, 2007 and 2006 are included in the analysis. 5

12 Escambia County, Florida Net Assets (in thousands) Governmental Business-type Activities Activities Total Current and other assets $191,614 $208,940 $41,604 $30,066 $233,218 $239,006 Capital assets 506, ,504 23,774 44, , ,342 Total assets 698, ,444 65,378 74, , ,348 Long-term liabilities 172, ,428 16,302 15, , ,827 Other liabilities 38,749 46,882 3,154 4,295 41,903 51,177 Total liabilities 211, ,310 19,456 19, , ,004 Net assets: Invested in capital assets net of related debt 406, ,455 41,604 43, , ,793 Restricted 747 7, ,090 Unrestricted 80,027 85,589 4,318 11,872 84,345 97,461 $487,409 $449,134 $45,922 $55,210 $533,331 $504,344 The overall financial position of the County improved in both fiscal years 2007 and As noted earlier, changes in net assets over time can be one of the best and most useful indicators of the County s financial position. Escambia County s increase in net assets for the fiscal years ending September 30, 2007 and 2006 amounted to $28,986,829 and $51,527,279, respectively. Overall, the County experienced an increase in net assets of 5.7%. Escambia County s growth rate continued during fiscal year 2007; the County s unemployment rate remained steady and continues to remain below the national and state average. This trend supports a positive fiscal outlook for Escambia County. As in the prior year, at the end of the fiscal year 2007, the County as a whole, is able to report positive balances in all three categories of net assets. The County s unrestricted net assets at September 30, 2007 decreased $13,116,190 from This decrease is primarily attributable to the County s continued commitment to achieve a successful recovery from the recent hurricanes as well as to continue to manage the basic needs of our community. The services that are provided on a regular basis to the community require the use of resources, which translates to costs. The County s restricted net assets decreased from 2006 by $6,342,443. This decrease is due to the early pay off of two bond issues which will allow for reduced burden on the General Fund revenue that was pledged toward the bonds going forward. Unrestricted net assets are County resources that may be used to meet the County s ongoing obligations to citizens and creditors while restricted net assets are resources subject to external restriction. Escambia County s investment in capital assets such as land, roads, parks, buildings, machinery and equipment, as a percentage of net assets, amounts to 84% and 79% at September 2007, and 2006, respectively. These asset values are presented less any outstanding debt related to the acquisition and accumulated depreciation of those assets. The County uses capital assets to provide services to the citizens and consequently these assets are not available for future spending. Although our investment in 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. 6

13 Net Assets (in thousands) 500, , , , , , , , , , , , , , , , ,000 75,000 50,000 25,000 0 Net Capital Assets Restricted Net Assets Unrestricted Net Assets 2007 Governmental Activities Business-Type Activities 2006 Cash and investment accounts of the County s funds decreased a total of $30,012,431 from the previous year, decreasing $29,409,672 of that amount in the current asset category and decreasing $602,759 in the restricted asset category. Increased expenditures on code enforcement activities, grant related activities, road construction and transportation and drainage were the major uses of cash resources. A comparison of current unrestricted assets as compared to current unrestricted liabilities for both governmental and business-type activities can be a good indication of the County s ability to meet its current and existing operational responsibilities. The ratios for both years are as follows: 7

14 Escambia County, Florida Comparison of Current Unrestricted Assets and Liabilities (in thousands) Fiscal year ending September 30, 2007: Governmental Activities Business-type Activities Current unrestricted assets $189,841 $17,292 Current unrestricted liabilities $38,701 $2,779 Ratio of current assets to current liabilities Fiscal year ending September 30, 2006: Current unrestricted assets $207,087 $22,981 Current unrestricted liabilities $46,835 $4,295 Ratio of current assets to current liabilities The main factor for the decrease in both governmental-type and business-type liabilities is due to the completion of several large contracts associated with clean-up efforts due to Hurricanes Ivan and Dennis that were outstanding at the end of fiscal The County continues to maintain healthy ratios as noted above which indicates more than adequate cash flows of Escambia County. 8

15 Escambia County, Florida Changes In Net Assets Year Ended September 30, 2007 (in thousands) Governmental Business-type Activities Activities Totals Revenues: Program Revenues: Charges for Services $58,050 $58,695 $30,172 $31,752 $88,222 $90,447 Operating Grants and Contributions 20,137 46, ,167 46,501 Capital Grants and Contributions 42,096 23, ,719 24,039 General Revenues: Property Taxes 125,233 98, ,233 98,875 Other Taxes 85,741 79, ,741 79,508 Other 14,747 28, ,086 15,698 30,647 Total Revenues 346, ,113 31,776 33, , ,017 Expenses: General Government/Court Related 31,491 26, ,491 26,590 Public Safety 142, , , ,533 Physical Environment 13,576 4, ,576 4,159 Transportation 80,398 66, ,398 66,373 Economic Environment 22,639 22, ,639 22,081 Human Services 5,299 4, ,299 4,966 Culture/Recreation 11,311 8, ,311 8,610 Interest on Long-Term Debt 7,245 8, ,245 8,066 Solid Waste 0 0 9,164 8,336 9,164 8,336 Building Inspections 0 0 3,871 3,487 3,871 3,487 Ambulance Service ,760 13,868 14,760 13,868 Civic Center 0 0 6,415 5,876 6,415 5,876 Industrial Parks 0 0 NA 545 NA 545 Total Expenses 314, ,378 34,210 32, , ,490 Increase in Net Assets before Transfers 31,421 49,735 (2,434) 1,792 28,987 51,527 Transfers 259 (88) (259) Increase in Net Assets 31,680 49,647 (2,693) 1,880 28,987 51,527 Net Assets, beginning 455, ,487 48,615 53, , ,817 Net Assets, ending $487,409 $449,134 $45,922 $55,210 $533,331 $504,344 Note: As discussed in Note 8, on page 66, the October 1, 2006 net assets of the Economic Development and Industrial Fund, originally established as a proprietary fund, were reclassified into a Special Revenue Fund. An amount of $6,595,000 previously reported in fiscal year 2006 as part of the business-type net assets were reclassed to the governmental net assets category. 9

16 Governmental Activities Overall, increased revenues and increased expenses in fiscal year 2007 can be noted in the governmental activity in fiscal year Fiscal year 2007 shows a 2% decrease in public safety related expenses, 70% increase in the general government category, 31% increase in the culture and recreation category, a 226% increase in the physical environment category, a 21% increase in the transportation category, a 2.5% increase in the economic environment category, and a 6.7% increase in the human services category. These increased costs reflects the County s continuing commitment to achieve a successful recovery from the recent hurricanes as well as continue to manage the basic needs of our growing population. As in fiscal year 2006, the increase in economic environment category is a direct result of the continued State-led initiative to provide funding for hurricane housing recovery initiatives through grant dollars allocated among Florida Counties. Further description of the program can be found on page 13 under the discussion of the HHRP Fund. In the general government category, insurance costs increased approximately $1 million, a 33% increase. Additionally, software was purchased for a land management records system. A $4,000,000 payment was made by the County to the Emerald Coast Utilities Authority to help defray the cost of moving the Authority s wastewater treatment plant, and a $4,000,000 payment was made to the State of Alabama Department of Transportation to help with the cost of widening Highway 113, a major evacuation route for Escambia County, Florida. In the physical environment category, the increased cost is attributable to continued and increased code enforcement efforts that enforce the County s ordinances to enhance the quality of life and restore pride in neighborhoods. Additionally, various grant projects were awarded to the County for stormwater management, watershed protection, Perdido Key dunes restoration and CDBG Disaster Recovery efforts. In the culture and recreation category, overall maintenance costs increased due to the rising price of fuel and personal services costs. Overall, most categories experienced an increase in personal services costs due to the implementation of salary survey that was conducted during fiscal year The County s population increased less than 1% in this fiscal year; similar to the increase experienced in fiscal year Population is projected to be 317,262 in the year 2010 as the County continues to grow and expand. This combination of increases and decreases in various functional areas described above resulted in an increase in governmental net assets of $31,680,227 which is $17,967,138 less than last year s net assets increase of $49,647,

17 Governmental Activities - Expenses and Program Revenues For the Fiscal Year 2007 $150,000,000 $100,000,000 $50,000,000 $0 General government Public safety Physical environment Transportation Economic environment Human services Culture and recreation Court related Interest on long term debt Dollars Expenses Program Revenues Governmental Activities - Revenue by Source For the Fiscal Year 2007 Unr estr icted inter est 3% Sale of assets 0% Mi scel l aneous r evenues 1% Sal es t axes 17% Gas taxes 4% Charges f or Services 17% Oper ating gr ants and contr i butions 6% State shar ed r evenue 3% Tourist development taxes 2% Capital gr ants and contr ibutions 12% Pr oper ty taxes 35% 11

18 Business-type Activities Business-type activities decreased the County s net assets modestly by $2,693,398 for the fiscal year 2007 as compared to a modest increase of $1,879,884 for fiscal year While revenues in most funds remained fairly stable, key elements of decreased revenues and expenses between the years can be explained as follows: During fiscal year 2007, the BCC made the decision to segregate the Code Enforcement activities from the Solid Waste Fund into a stand-alone fund. The Fines and Forfeitures Revenue associated with Code Enforcement liens was designated to be a dedicated revenue source and the activities were placed in a special revenue fund. The loss of that revenue to the Solid Waste Fund was approximately $1.6 million. Additionally, charges for services revenue experienced a decrease of approximately $550,000 due to less than anticipated tonnage being disposed at the County s Landfill. The Inspections Fund continues to experience a decline in the number of permits issued. Fiscal year 2007 licenses and permits revenues decreased 23% which is reflective of the trend of reduced activity in the real estate market not only locally, but nationally as well. Business-type Activities Expenses and Program Revenues For the Fiscal Year 2007 $15,000,000 $14,000,000 $13,000,000 $12,000,000 $11,000,000 $10,000,000 $9,000,000 $8,000,000 $7,000,000 $6,000,000 $5,000,000 $4,000,000 $3,000,000 $2,000,000 $1,000,000 $0 Solid Waste Civic Center Inspections Ambulance Expenses Program Revenues 12

19 Business-type Activities Revenues by Source For the Fiscal Year 2007 Operating grants and contributions 0% Licenses and permits 11% Capital grants and contributions 2% Interest revenues 4% Franchise fees 0% Other 0% Charges for services 83% Financial Analysis of Escambia County s Funds As noted earlier, Escambia County employs fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental Funds. Governmental funds focus on providing information on near-term inflows, outflows, and balances of spendable resources. In assessing Escambia County s financing requirements, unreserved fund balance is a particularly useful measure of net resources available for spending at the end of the fiscal year. The governmental fund types include the general fund, special revenue, debt service, and capital projects funds. As of September 30, 2007, Escambia County governmental funds reported combined fund balances of $128,421,357, a decrease of $11,997,645 compared to prior year balances. Governmental funds reserved $19,163,091 of fund balance to meet current commitments in the next fiscal year, $1,021,972 for inventory, $21,423,789 for advances made to other funds, and $747,291 to meet debt service requirements next fiscal year. 13

20 The General Fund is the chief operating fund of the County. At September 30, 2007, total fund balance in the general fund was $33,779,829 of which $32,714,019 was unreserved. As a measure of the general fund s liquidity, a comparison of both total and unreserved fund balances compared to total fund expenditures shows percentages of 20.8% and 20.1%, respectively. The fund balances of the County s General Fund decreased by $4,344,801 during the current fiscal year. Key factors in this decrease are as follows: Total revenues increased 13.8% from fiscal year 2006 while expenditures also increased 18% from fiscal year Transfer activity from the general fund overall decreased 2.5%, with decreased transfers going to the Debt Service Fund. However, increased transfer amounts were needed for the Mass Transit Fund and the Transportation and Drainage Fund due to increased costs in these funds. As stated previously, the General Fund experienced increased insurance costs of approximately $1 million, a 33% increase. Additionally, software was purchased for a land management records system. A $4,000,000 payment was made by the County to the Emerald Coast Utilities Authority to help defray the cost of moving the Authority s wastewater treatment plant, and a $4,000,000 payment was made to the State of Alabama Department of Transportation to help with the cost of widening Highway 113, a major evacuation route for Escambia County, Florida. The Other Major Governmental Funds include the Disaster Recovery Fund, HHRP Fund, Community Redevelopment Agency Fund, Transportation and Drainage Fund, and the Local Option Sales Tax (LOST) Fund. The Disaster Recovery Fund was established to account for all the financing provided from various State and Federal grants, such as the Federal Emergency Management Agency (FEMA). The County also receives various insurance reimbursements through this fund. Escambia County was struck by Hurricane Ivan (a Category 3 hurricane) in September 2004 and Hurricane Dennis in July Both hurricanes caused major and widespread destruction across Escambia County. The County s recovery efforts and FEMA reimbursements are tracked in this fund. At September 30, 2007, there were reimbursable expenditures of over $7 million due from Federal and State sources. The HHRP Fund accounts for the revenues and expenditures of grant funds designed to provide adequate funding for housing so that Public-Private partnerships can efficiently build, rehabilitate and preserve affordable housing. In fiscal year 2006, the Board approved a resolution adopting the Escambia/Pensacola Hurricane Housing Recovery Assistance Plan outlining the utilization of $23,816,315 in Hurricane Housing Recovery (HHR) Program Funds awarded by the State. The program provides funds for eligible affordable housing strategies, specifying eligibility and beneficiary definitions and establishing annual program service delivery goals. Through this program, the County is partnering with local non-profit agencies to develop and build affordable housing in the community to replace and supplement the housing that was lost as a result of Hurricane Ivan. Fiscal year 2007 has been the second year of activity and the County expects it to continue for several years. The Community Redevelopment Agency (CRA) Fund accounts for the revenues and expenditures for the redevelopment areas established in the County. There are currently five established redevelopment areas included under the CRA jurisdiction. The CRA is funded through transfers from the General Fund of tax increment (TIF) portions of property taxes for each respective district. The TIF portions for the CRA districts enjoyed a 112% increase in fiscal year 2007 over fiscal year 2006 primarily due to the increase in the assessed value of the property in those areas. Expenditures in those districts increased by 92% as a result of the increase in available resources. The CRA enjoys a healthy fund balance at the end of fiscal year 2007 of $4,804,290. Taxes are a major source of revenue for both the Transportation and Drainage Fund and the LOST Fund. Gas taxes are used by the Transportation Fund for the construction and maintenance of roads in the County. Gas taxes increased in fiscal year 2007 $730,836 (10.4%) due to the increasing costs of gasoline. Revenues and expenditures in the Transportation and Drainage Fund reflect the continuation of multiple road improvement projects in which the County is engaged. 14

21 The Local Option Sales Tax (LOST) imposed on Escambia County is used by the LOST Fund to acquire and construct capital projects within the County. Sales tax revenues decreased 5.3% over fiscal year Interlocal agreements with the City of Pensacola and Emerald Coast Utilities Authority help the County complete several major road and building projects. Expenditures increased 13.5% over fiscal year 2006 due to the County s commitment to help fund a multi-use Public Safety Training Facility in conjunction with Pensacola Junior College, as well as helping to fund the relocation of the Emerald Coast Utilities Authority (ECUA) wastewater treatment plant. The LOST fund contributed $3,000,000 of the total $7 million toward the ECUA wastewater treatment plant (with the general fund providing the remainder) and the LOST fund contributed $5 million of the $11 million cost (with the remainder coming from the general fund) to the Public Safety Training Facility. Proprietary Funds. Proprietary fund statements provide the same information as in the business activities column of the government-wide statements, but in greater detail, and on a fund basis for enterprise funds and the internal service fund. The major enterprise funds reported are the Solid Waste Fund and the Civic Center Fund. Enterprise Funds. At September 30, 2007, total net assets amounted to $45,921,886 for enterprise funds, as compared to $48,615,284 at September 30, Changes to net assets are a result of operations, other non-operating revenues and expenses, capital contributions and grants. The decrease in net assets for enterprise funds was $2,693,398 compared to an increase of $1,879,884 for fiscal year Operating income is the result of operating revenues less operating expenses. The chart below compares operating income or loss for all enterprise funds. Operating revenues in the Solid Waste Fund decreased 19% while operating expenses increased 10%. As mentioned before, part of the reason for the decreased revenues was the separation of code enforcement activities and its related revenue into a special revenue fund. Additionally, the Perdido Landfill experienced a 6% decrease in charges for services as a result of less tonnage disposed of during fiscal year Despite reduced volume at the landfill, operating costs remained steady, exclusive of any charges for the landfill closure costs. Engineering estimates of future landfill maintenance and closure costs resulted in an additional $760,880 change in fiscal year As a result of initiatives started during fiscal year 2007, the Landfill expects to have new cells open during fiscal year In addition to the new cells, the new technologies in landfill mining and extraction should allow for expanded capacity in the current cells. There was also a decrease in the area of advertising, promotion, and travel. The Civic Center saw an increase in operating revenues of $342,096 or 8.6%. Escambia County continues to experience increased contractual services costs associated with the operation and maintenance of the Civic Center, as well as increases in the cost of property insurance. The cost for contractual services during fiscal year 2007 increased 10.8% over costs in The Inspection Fund experienced a 22.6% decrease in charges for services revenues this year as compared to fiscal year 2006 directly attributable to diminished activity in the housing and commercial real estate market in general. While most expenses were maintained at a steady level for both fiscal year 2007 and 2006, increases were noted in the areas of maintenance, miscellaneous, and insurance. The Ambulance Fund experienced an 8.9% increase in their charges for services revenue during fiscal year While the Ambulance Fund experienced a 24% increase in salary and benefits costs, it achieved a better collection rate and was able to reduce its bad debt expense by 10%. The Ambulance Fund ended the fiscal year with a net operating loss of $1,334,473 compared to the operating loss in fiscal year 2006 of $1,541,

22 Business-type Activities Operating Income (Loss) $3,000,000 $2,000,000 $1,000,000 $0 ($1,000,000) ($2,000,000) ($3,000,000) Solid Waste Fund Civic Center Fund Inspection Fund Ambulance Fund Major enterprise funds are shown in the Financial Statements Section and the Non-Major enterprise funds are shown in the Combining Statements section of the annual report. Other factors concerning the finances of these funds have been addressed in the discussion of the County s business-type activities. Internal Service Funds. The Internal Service Fund as presented, is a combination of the internal service fund of the Board of County Commissioners, and the internal service funds for both the Sheriff and the Clerk of the Circuit Court. The combining statements for the three internal service funds can be found in the Combining Statements section of the annual report. The Internal Service Funds are designed to recover the internal costs of general services provided to the other fund groups and to accumulate amounts required to fund the compensated absences liability of the Sheriff s and the Clerk of Court s employees. The Sheriff and Clerk continue to methodically fund the compensated absences liability of $17,170,831 and $1,693,533, respectively. The Board s Internal Service Fund experienced an operating income of $2,073,020. The net asset totals for the combined internal service funds are ($7,916,569) and ($9,669,024) for the fiscal years 2007 and 2006, respectively. General Fund Budgetary Highlights Operating a government the size of Escambia County is a dynamic business and budget amendments are approved throughout the year. When comparing the original revenue budget to the final revenue budget, minor budget adjustments occurred in intergovernmental revenue, charges for services revenue, and miscellaneous income. The changes are related to amounts received by other governmental agencies in the form of grants, court-related services, recreational park fees and various reimbursements. Ad valorem taxes collected in fiscal year 2007 were 27% greater than in fiscal year A comparison of final budget to actual general fund revenues shows a difference for taxes that is attributable to lower than anticipated ad valorem collections. The difference in intergovernmental reflects a decrease in the County s pro-rata share of State revenues. The increase in charges for services reflects increased usage activity of several of the County s park facilities, and fees collected by the Supervisor of Elections during the election year. The favorable variance in investment income is due to the steady rise in interest rates during the year that produced a 15.5% increase in the average yield on the County s investment portfolio for the year. 16

23 Differences between the original budgeted expenditures and the final amended budget were relatively minor with an increase of $4,924,428 (2.6%) in appropriations, and can be briefly summarized as follows: Increase in general government activities of $1,033,180 Increase in public safety activities of $3,459,923 Increase in physical environment of $68,256 Increase in transportation of $14,539 Increase in economic environment of $41,441 Increase in human services of $117,175 Increase in culture and recreation of $189,914 The favorable difference between the final amended budget for total expenditures and the actual total expenditures is chiefly due to the reserves of $20,741,304 that are budgeted as part of the general government category. Additionally, a difference of approximately $8.7 million in general government is mainly attributable to less than anticipated costs for professional services, contractual services, utilities, repair and maintenance, and the County s share of costs related to State mandated medical assistance costs. While actual revenues fell below the budgeted expectations, expenditures were also below the budgeted amounts. Therefore, the General Fund did not need to draw upon either existing fund balance or reserves. Capital Asset and Debt Administration Capital Assets. The financial statements present capital assets in two groups: those assets subject to depreciation, such as equipment or operational facilities and those assets not subject to depreciation such as land and construction-in-progress. Escambia County s investment in capital assets for both governmental and business-type activities, net of accumulated depreciation totaled $548,551,158 and $515,342,190 for fiscal years 2007 and 2006, respectively. This investment in capital assets, both purchased and donated, includes land, buildings, improvements, machinery and equipment, parks, roads, bridges and other major infrastructure. The total increase in Escambia County s investment in capital assets for the current fiscal year was 6.4% (a 7.75% increase for governmental activities and a 7.2% decrease for business-type activities). Major capital asset events during the current fiscal year include the following: Donated general government assets consist of developer funded road and drainage infrastructure and sidewalks in new planned developments and subdivisions. Donated infrastructure in fiscal year 2007 amounted to $4,347,505 as compared to $3,873,497 last fiscal year. Construction continued on many of the County s capital projects including: Road improvements $25.2 million Drainage improvements in excess of $620,000 Lexington Terrace Park $1.2 million Various other parks $3.3 million Perdido Key improvements $2.26 million Renovations and improvements were made on the Jail HVAC and elevator system totaling approximately $1.5 million. Continued renovations and improvements to various county facilities, including the Juvenile Justice Centers, the Public Safety Building, the Century Branch Library, various park facilities and community centers, and the Master Governmental Complex totaled approximately $3.4 million. John R. Jones Sports Complex $2.4 million. Renovations at the Sheriff s Garage Facility $1.5 million. Reconstruction of the Bob Sikes Toll Bridge $1.6 million. 17

24 Approximately $1.3 million of general computer equipment and upgrades were purchased by and for various departments. The Roads and Bridges Department purchased approximately $5.88 million of heavy equipment for use at the Road Department, and various other light equipment to be used for road operations. The Fire Department purchased approximately $1.3 million of fire fighting and rescue equipment as well as three tanker trucks. The Mass Transit Fund purchased six new buses for $1,882,476. Computer equipment and upgrades of $413,744 were purchased for court-related functions. Governmental Activities Escambia County, Florida Capital Assets (net of depreciation) as of 09/30/07 Equipment 6% Construction in Progress 6% Land 6% Buildings and Improvements 24% Infrastructure 58% Business-type Activites Escambia County, Florida Capital Assets (net of accumulated depreciation) as of 09/30/07 Equipment 9% Land 8% Infrastructure 47% Buildings and Improvements 36% 18

25 Sources of donated assets each year stem from new subdivisions in the County. New subdivisions are required to meet the County s comprehensive planning requirements and, in doing so, provide additions to the County s infrastructure for roads, sidewalks, stormwater drainage, and in some cases parks and recreational facilities. Additional information on Escambia County s capital assets can be found on page 50 in the Notes of this report. Long-Term Debt. At the end of the fiscal year 2007, the County had total bonded debt of $118,390,000, or $ per capita, which is secured solely by specified revenue sources (e.g., toll bridge revenues, tourist development taxes, and half-cent sales taxes). The County has no general obligation debt. The County s outstanding notes, leases, and bonded debt decreased by $14,717,928 during fiscal year No additional notes and leases were entered into during fiscal year Escambia County, Florida Long-Term Debt Governmental Activities Revenue Bonds: Sales tax revenue bonds $84,580,000 $86,335,000 Tourist development bonds 13,235,000 14,125,000 Capital improvement bonds 20,575,000 21,025,000 Total revenue bonds 118,390, ,485,000 Notes and loans: Capital improvement notes 10,370,000 21,236,000 State of Florida Toll Fac. Note 135, ,168 Capital Leases 2,737,266 3,410,861 Total notes/loans/leases 13,243,101 24,866,029 Total Long-Term Debt $131,633,101 $146,351,029 Escambia County currently holds a bond rating from Standard & Poor s of AA- with a stable rating. The stable rating indicates that a rating is not likely to change. The County has met and complied with all technical and financial covenants in the bond contracts. No legal debt limit is set by the Constitution of the State of Florida or Escambia County. Additional information on Escambia County s long-term debt can be found in the Notes section of this report. Economic Factors and Year 2008 Budgets and Rates The fiscal 2008 budget was balanced with a decrease in both the County-wide millage rate and the Law Enforcement MSTU rate declining from to and from.747 to.685 mills, respectively. The County remains committed to responsible levels of taxation. Factors considered in preparing Escambia County s budget for the 2008 fiscal year included: During fiscal year 2007, the Florida Legislature imposed significant restrictions on the local government s ability to increase ad valorem millage rates for fiscal year 2008 which also included a cap on future millage rates increases. 19

26 An extension of the Local Option Sales Tax (LOST) was approved by voter referendum and commenced on June 1, 2007 for 11 years. The extension of the Local Option Sales Tax will enable the County to continue with its road paving and drainage projects well into the future. Through the use of sales tax revenues, the County can provide the infrastructure necessary for economic development and growth in this area. The County will continue its efforts in the neighborhood code enforcement activities by committing $800,000 of funding for additional neighborhood clean-up efforts. The proceeds of the extended Local Option Sales Tax are earmarked for the construction of new libraries, natural resource conservation, new recreation facilities, road reconstruction, and dirt road paving. There was no increase in the fire assessment fee, nor was there any decrease in the level of service. The funding of Mass Transit is a consideration as the City of Pensacola and Escambia County work out an equitable agreement on a dedicated funding source. Until such time as one is identified, the General Fund will continue to fund the majority of costs associated with Mass Transit Service. During the current fiscal year, unreserved fund balance in the general fund decreased to $32,714,019. An amount of $27,314,195 has been appropriated for spending in the 2008 fiscal year budget. Our healthy fund balance allowed for a decrease in the ad valorem tax rates in Escambia County Government for fiscal year Escambia County continues to review various service fees and charges to meet the ongoing needs of infrastructure and services for County residents. The County also continues to review the economy and efficiency of programs and is committed to providing efficient, responsive services that enhance the quality of life, meet common needs and promote a safe and healthy community. Requests for Information. This financial report is designed to provide a general overview of Escambia County Government s finances. Questions concerning any of the information provided in this report or requests for additional financial information may be addressed to the Clerk of the Circuit Court & Comptroller, Finance Department, 221 Palafox Place, Suite 140, Pensacola, Florida The Clerk s office may also be contacted through the Website address: 20

27 STATEMENT OF NET ASSETS AS OF SEPTEMBER 30, 2007 Primary Government Component Units Governmental Business-type Total Activities Activities Primary Government Total ASSETS Cash and cash equivalents $16,389,843 $446,977 $16,836,820 $3,316,948 Equity in pooled cash and investments 135,845,390 13,031, ,876,675 0 Investments ,775,695 Receivables (net of allowance for uncollectibles) 13,334,889 3,770,996 17,105, ,138 Internal balances 230,108 (230,108) 0 0 Due from other governmental units 22,597, ,597, ,516 Inventory 1,400, ,434 1,596,997 0 Other current assets 42,656 76, , ,868 Restricted assets 47,529 6,481,731 6,529,260 5,046,752 Bank participation agreements ,071 Unamortized bond issuance costs 1,725, ,725,945 0 Other assets ,432,014 Capital assets: Land and construction in progress non-depreciable 57,086,801 3,428,614 60,515,415 0 Depreciable (net) 449,859,938 38,175, ,035,743 35,680,768 Total assets 698,560,862 65,377, ,938,786 52,833,770 LIABILITIES Vouchers payable 12,704,954 1,545,679 14,250,633 3,059,393 Contracts payable 3,292, ,581 3,806,760 0 Salaries and benefits payable 6,980, ,601 7,403,371 82,914 Due to other governmental units 2,687,939 13,965 2,701, ,191 Other current liabilities 13,035, ,441 13,317, ,888 Payable from restricted assets 47, , ,139 0 Non-current liabilities: Due within one year: Notes and bonds payable 4,593, ,593,333 0 Capital leases 696, ,587 6,683 Compensated absences 5,940,073 58,577 5,998,650 0 Landfill closure and postclosure care payable 0 100, ,811 0 Claims liabilities 3,787, ,787,264 0 Due in more than one year: Compensated absences 22,230,308 1,697,774 23,928, ,929 Notes and bonds payable 124,302, ,302,502 0 Unearned revenues ,827 Capital leases 2,040, ,040,679 6,539 Unamortized bond premium 898, ,182 0 Landfill closure and postclosure care payable 0 14,444,999 14,444,999 0 Claims liabilities 7,914, ,914,001 0 Total liabilities 211,151,774 19,456, ,607,812 4,510,364 NET ASSETS Invested in capital assets (net of related debt) 406,634,624 41,604, ,239,043 35,667,546 Restricted: Bond covenants 747, ,291 3,900,261 Unrestricted 80,027,173 4,317,467 84,344,640 8,755,599 Total net assets $487,409,088 $45,921,886 $533,330,974 $48,323,406 The accompanying notes are an integral part of the financial statements. 21

28 STATEMENT OF ACTIVITIES FOR THE YEAR ENDED SEPTEMBER 30, 2007 Program Revenues Operating Capital Charges for Grants and Grants and Expenses Services Contributions Contributions Function/Program Activities Governmental activities: General government $21,405,454 $25,537,814 $829,227 $1,734,365 Public safety 142,624,108 17,022,643 9,127,762 12,303,549 Physical environment 13,576,240 3,131, ,843,279 Transportation 80,397,974 1,534,244 5,137,119 8,986,743 Economic environment 22,638, ,351 3,813,914 14,073,445 Human services 5,298, ,165 0 Culture and recreation 11,311, ,441 15, ,077 Court related 10,085,671 10,369, ,426 0 Interest on long term debt 7,244, Total governmental activities 314,583,032 58,049,882 20,136,789 42,096,458 Business-type activities: Solid waste 9,164,005 8,961, ,529 Inspection fund 3,870,601 3,507, Ambulance 14,760,180 13,395,094 29, ,331 Civic center 6,414,776 4,307, Total business-type activities 34,209,562 30,171,533 29, ,860 Total primary government $348,792,594 $88,221,415 $20,166,644 $42,719,318 Component units: Law Library Board $106,757 $104,317 $0 $0 Santa Rosa Island Authority 6,915,798 6,133, ,351,105 Housing Finance Authority 1,280,702 2,711, Total component units $8,303,257 $8,949,084 $0 $3,351,105 The accompanying notes are an integral part of the financial statements General Revenues: Property taxes Tourist development taxes Intergovernmental, unrestricted Sales taxes Gas taxes Unrestricted interest Gain on sale of assets Miscellaneous revenues Transfers - internal activities Total general revenues, special items, and transfers Change in net assets Net assets - beginning (restated) Net assets - ending 22

29 Net (Expense) Revenue and Changes in Net Assets Primary Government Governmental Business-type Component Activities Activities Total Units $6,695,952 $0 $6,695,952 $0 (104,170,154) 0 (104,170,154) 0 (5,600,999) 0 (5,600,999) 0 (64,739,868) 0 (64,739,868) 0 (4,556,999) 0 (4,556,999) 0 (4,582,401) 0 (4,582,401) 0 (10,881,839) 0 (10,881,839) 0 781, ,182 0 (7,244,777) 0 (7,244,777) 0 (194,299,903) 0 (194,299,903) 0 0 (197,537) (197,537) 0 0 (363,520) (363,520) 0 0 (716,900) (716,900) 0 0 (2,107,357) (2,107,357) 0 0 (3,385,314) (3,385,314) 0 (194,299,903) (3,385,314) (197,685,217) 0 $0 $0 $0 ($2,440) ,569, ,430, ,996, ,233, ,233, ,260, ,260, ,729, ,729, ,120, ,120, ,631, ,631, ,664,719 1,201,668 12,866, , ,203 (299,488) 66, ,716,422 48,385 2,764, , ,649 (258,649) ,980, , ,672,046 1,065,697 31,680,227 (2,693,398) 28,986,829 5,062, ,728,861 48,615, ,344,145 43,260,777 $487,409,088 $45,921,886 $533,330,974 $48,323,406 23

30 BALANCE SHEET GOVERNMENTAL FUNDS Community SEPTEMBER 30, 2007 Redevelopment Transportation Other Total Disaster Agency and Governmental Governmental General Recovery HHRP Fund Drainage LOST Funds Funds ASSETS Cash and cash equivalents $6,686,996 $0 $0 $0 $120 $0 $7,231,918 $13,919,034 Equity in pooled cash and investments 34,046,338 2,361,477 6,537,736 4,881,890 7,392,719 36,193,582 27,545, ,958,819 Receivables (net of allowance for uncollectibles) 2,330,998 7,746,990 35, , ,768 10,667,390 Due from other funds 916, ,000, ,716 3,432,013 Due from other governmental units 3,057,469 7,719, ,098,158 4,154,694 6,321,445 22,351,569 Inventory 497, , ,666 1,021,972 Other current assets 38, ,171 Advance to other funds ,423, ,423,789 Other assets ,485 4,485 Total assets $47,573,594 $17,828,270 $6,573,336 $4,881,890 $8,729,012 $63,772,065 $42,459,075 $191,817,242 LIABILITIES Vouchers payable $2,801,199 $908,727 $202,803 $40,491 $1,079,869 $3,559,457 3,521,557 $12,114,103 Contracts payable 47, , ,421 30,694 1,823, ,190 3,292,179 Salaries payable 5,745,560 1, , ,463 38, ,743 6,960,281 Due to other funds 32, , ,157,309 3,202,216 Due to other governmental units 466, , , ,110,115 2,687,754 Other current liabilities 4,700,996 1,150,768 5,580, , ,387,374 12,965,929 Long-term liabilities: Advance from other funds 0 17,682, ,741, ,634 22,173,423 Total liabilities 13,793,765 20,307,584 5,902,037 77,600 1,766,396 9,162,581 12,385,922 63,395,885 FUND BALANCES Reserved for encumbrances 568,485 7,989, ,955 27,409 9,276,392 1,260,872 19,163,091 Reserved for advances to other funds ,423, ,423,789 Reserved for debt service , ,291 Reserved for inventory 497, , ,666 1,021,972 Unreserved, reported in: General fund 32,714, ,714,019 Special revenue funds 0 (10,469,292) 671,299 4,764,335 6,705, ,730,610 26,402,178 Capital projects ,909,303 3,039,714 26,949,017 Total fund balances 33,779,829 (2,479,314) 671,299 4,804,290 6,962,616 54,609,484 30,073, ,421,357 Total liabilities and fund balances $47,573,594 $17,828,270 $6,573,336 $4,881,890 $8,729,012 $63,772,065 $42,459,075 $191,817,242 The accompanying notes are an integral part of the financial statements 24

31 RECONCILIATION OF THE BALANCE SHEET TO THE STATEMENT OF NET ASSETS GOVERNMENTAL FUNDS AS OF SEPTEMBER 30, 2007 Fund balances - total governmental funds $128,421,357 Amounts reported for governmental activities in the statement of net assets are different because: Capital assets used in governmental activities are not financial resources and therefore are not reported in the governmental funds. The cost of the assets is $878,551,056 and the accumulated 506,883,727 depreciation is $371,667,329 Long-term liabilities, including bonds payable are not due and payable in the current period and therefore are not reported in the governmental funds. Governmental bonds, notes and loans payable ($128,895,835) Compensated absences (9,174,089) Leases (2,737,266) Unamortized bond issuance costs 1,725,945 Unamortized original issue bond premium (898,182) (139,979,427) Internal service funds are used by management to charge the costs of certain activities to individual funds. The assets and liabilities of the internal service fund are reported with governmental activities. (7,916,569) Net assets of governmental activities $487,409,088 The accompanying notes are an integral part of the financial statements 25

32 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2007 Community Transportation Other Total Disaster Redevelopment and Governmental Governmental General Recovery HHRP Fund Drainage LOST Funds Funds Revenues: Taxes $140,057,664 $0 $0 $0 $7,775,561 $35,977,091 $8,707,849 $192,518,165 Licenses and permits 576, ,153 Intergovernmental 29,874,441 6,291,861 11,224, ,028,836 3,892,677 28,323,077 84,635,384 Charges for services 7,552, , ,293,345 22,514,228 Fines and forfeitures 123, ,169,928 4,293,471 Investment income 3,543, , , , ,091 3,315,544 2,790,274 10,721,800 Special assessments 764, , ,442,115 12,138,354 Miscellaneous 2,812, ,988 67, ,590,127 93,435 2,133,663 9,859,269 Total revenues 185,304,619 6,593,717 11,659, ,819 19,333,187 43,278,777 70,860, ,256,824 Expenditures: Current: General government 71,077, ,305, ,709,570 86,092,236 Public safety 83,672,231 8,275, ,222, ,627, ,798,929 Physical environment 715, , ,584,962 12,636,588 Transportation 247, ,840, ,827,746 38,916,114 Economic environment 470, ,224, ,932,485 21,627,469 Human services 3,727, ,032,199 4,759,335 Culture and recreation 2,831, ,579 2,984,793 Capital improvements ,785, ,785,706 Debt service Principal retirement ,717,928 14,717,928 Interest and fiscal charges 0 940, ,420,714 7,361,222 Total expenditures 162,742,007 9,216,338 11,224,492 1,305,389 29,399,206 53,785,706 89,007, ,680,320 Excess (deficiency) of revenue over (under) expenditures 22,562,612 (2,622,621) 434,962 (1,078,570) (10,066,019) (10,506,929) (18,146,931) (19,423,496) Other financing sources (uses): Transfers to State Clerk of Court Trust Fund (161,262) (161,262) Insurance reimbursements 0 7,764, ,296 7,778,464 Transfers in 2,079,578 3,369, ,050,294 11,807,318 1,785,343 18,048,863 40,140,803 Transfers out (28,986,991) (1,418,095) 0 0 (27,000) (4,797,616) (5,102,452) (40,332,154) Total other financing sources (uses) (26,907,413) 9,715, ,050,294 11,780,318 (3,012,273) 12,799,445 7,425,851 Net change in fund balances (4,344,801) 7,092, ,962 1,971,724 1,714,299 (13,519,202) (5,347,486) (11,997,645) Fund balances at beginning of year 38,124,630 (9,572,173) 236,337 2,832,566 5,248,317 68,128,686 35,420, ,419,002 Fund balances (deficit) at end of year $33,779,829 ($2,479,314) $671,299 $4,804,290 $6,962,616 $54,609,484 $30,073,153 $128,421,357 The accompanying notes are an integral part of the financial statements 26

33 RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENT FUNDS TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED SEPTEMBER 30, 2007 Net change in fund balances - total governmental funds ($11,997,645) Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlays as expenditures. However, in the statement of activities, the cost of those assets is depreciated over their estimated useful lives: Expenditures for capital assets $66,662,124 Less current year depreciation (37,704,455) 28,957,669 Repayment of borrowed funds - principal is an expenditure in governmental funds, but the repayment reduces long-term liabilities in the statement of net assets: Principal payments 14,717,928 Expenses and revenues related to the issuance of bonds is amortized over the life of the bonds: Bond issuance costs (79,649) Original issue premium/discount 42,882 (36,767) Some expenses reported in the statement of activities do not require the use of current financial resources and therefore are not reported as expenditures in governmental funds: Interest expense 116,445 Salary expense associated with compensated absences (1,688,089) Internal service funds are used by management to charge the costs of certain activities to individual funds. The net (expenses) revenue of the internal service fund is reported with governmental activities 1,726,306 Losses on disposal of capital assets do not reduce financial resources of governmental funds. (4,489,274) Donations of capital items increase financial resources of governmental funds. 4,373,654 Change in net assets of governmental activities $31,680,227 The accompanying notes are an integral part of the financial statements 27

34 GENERAL FUND STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL FOR THE YEAR ENDED SEPTEMBER 30, 2007 Variance with Final Budget Original Final Positive Budget Budget Actual (Negative) Revenues: Taxes $149,220,589 $149,220,589 $140,057,664 ($9,162,925) Licenses and permits 488, , ,153 87,838 Intergovernmental 30,725,151 30,872,634 29,874,441 (998,193) Charges for services 6,974,275 7,191,262 7,552, ,251 Fines and forfeitures 61,620 61, ,543 61,923 Investment income 415, ,810 3,543,424 3,127,614 Special assessments 825, , ,007 (60,993) Miscellaneous 5,755,248 5,866,277 2,812,874 (3,053,403) Total revenues 194,466, ,941, ,304,619 (9,636,888) Expenditures: Current: General government 99,504, ,537,710 71,077,277 29,460,433 Public safety 81,941,171 85,401,094 83,672,231 1,728,863 Physical environment 644, , ,758 (2,625) Transportation 220, , ,899 (12,404) Economic environment 504, , ,492 74,986 Human services 3,803,152 3,920,327 3,727, ,191 Culture and recreation 3,030,359 3,220,273 2,831, ,059 Total expenditures 189,649, ,573, ,742,007 31,831,503 Excess (deficiency) of revenue over (under) expenditures 4,816, ,997 22,562,612 22,194,615 Other financing sources (uses): Transfers in 1,311,050 1,226,963 2,079, ,615 Transfers out (21,453,554) (29,665,482) (28,986,991) 678,491 Total other financing sources (uses) (20,142,504) (28,438,519) (26,907,413) 1,531,106 Net change in fund balances (15,325,578) (28,070,522) (4,344,801) 23,725,721 Fund balances at beginning of year 15,325,578 28,070,522 38,124,630 10,054,108 Fund balances (deficit) at end of year $0 $0 $33,779,829 $33,779,829 The accompanying notes are an integral part of the financial statements 28

35 DISASTER RECOVERY STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL FOR THE YEAR ENDED SEPTEMBER 30, 2007 Variance with Final Budget Original Final Positive Budget Budget Actual (Negative) Revenues: Intergovernmental $0 $7,307,000 $6,291,861 ($1,015,139) Investment income , ,868 Miscellaneous , ,988 Total revenues 0 7,307,000 6,593,717 (713,283) Expenditures: Current: Public safety 57,607 27,649,112 8,275,830 19,373,282 Debt service Principal retirement 2,880,183 2,880, ,880,183 Interest and fiscal charges 489, , ,508 (451,284) Total expenditures 3,427,014 31,018,519 9,216,338 21,802,181 Excess (deficiency) of revenue over (under) expenditures (3,427,014) (23,711,519) (2,622,621) 21,088,898 Other financing sources (uses): Insurance reimbursement 0 0 7,764,168 7,764,168 Transfers in 3,369,407 3,369,407 3,369,407 0 Transfers out 0 (1,418,095) (1,418,095) 0 Total other financing sources (uses) 3,369,407 1,951,312 9,715,480 7,764,168 Net change in fund balances (57,607) (21,760,207) 7,092,859 28,853,066 Fund balances at beginning of year 57,607 21,760,207 (9,572,173) (31,332,380) Fund balances (deficit) at end of year $0 $0 ($2,479,314) ($2,479,314) The accompanying notes are an integral part of the financial statements 29

36 HHRP STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL FOR THE YEAR ENDED SEPTEMBER 30, 2007 Variance with Final Budget Original Final Positive Budget Budget Actual (Negative) Revenues: Intergovernmental $20,890,145 $20,890,145 $11,224,492 ($9,665,653) Investment income , ,780 Miscellaneous ,182 67,182 Total revenues 20,890,145 20,890,145 11,659,454 (9,230,691) Expenditures: Current: Economic environment 20,890,145 20,890,145 11,224,492 9,665,653 Total expenditures 20,890,145 20,890,145 11,224,492 9,665,653 Excess (deficiency) of revenue over (under) expenditures , ,962 Fund balances at beginning of year , ,337 Fund balances (deficit) at end of year $0 $0 $671,299 $671,299 The accompanying notes are an integral part of the financial statements 30

37 COMMUNITY REDEVELOPMENT AGENCY STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL FOR THE YEAR ENDED SEPTEMBER 30, 2007 Variance with Final Budget Original Final Positive Budget Budget Actual (Negative) Revenues: Investment income $0 $0 $226,819 $226,819 Miscellaneous 1,300 1,300 0 (1,300) Total revenues 1,300 1, , ,519 Expenditures: Current: General government 2,359,201 5,884,161 1,305,389 4,578,772 Total expenditures 2,359,201 5,884,161 1,305,389 4,578,772 Excess (deficiency) of revenue over (under) expenditures (2,357,901) (5,882,861) (1,078,570) 4,804,291 Other financing sources (uses): Transfers in 2,357,901 3,762,368 3,050,294 (712,074) Transfers out (620,351) (712,074) 0 712,074 Total other financing sources (uses) 1,737,550 3,050,294 3,050,294 0 Net change in fund balances (620,351) (2,832,567) 1,971,724 4,804,291 Fund balances at beginning of year 620,351 2,832,567 2,832,566 (1) Fund balances (deficit) at end of year $0 $0 $4,804,290 $4,804,290 The accompanying notes are an integral part of the financial statements 31

38 TRANSPORTATION AND DRAINAGE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL FOR THE YEAR ENDED SEPTEMBER 30, 2007 Variance with Final Budget Original Final Positive Budget Budget Actual (Negative) Revenues: Taxes $7,578,656 $7,578,656 $7,775,561 $196,905 Intergovernmental 4,946,852 4,946,852 5,028,836 81,984 Charges for services 496, , , ,340 Investment income , ,091 Special assessments 665, , , ,137 Miscellaneous 279,442 4,518,599 4,590,127 71,528 Total revenues 13,966,045 18,205,202 19,333,187 1,127,985 Expenditures: Current: General government 973,359 32, ,525 Public safety 4,829,403 5,265,026 5,222,869 42,157 Physical environment 408, , ,868 59,807 Transportation 15,688,841 28,938,752 23,840,469 5,098,283 Total expenditures 21,899,939 34,631,978 29,399,206 5,232,772 Excess (deficiency) of revenue over (under) expenditures (7,933,894) (16,426,776) (10,066,019) 6,360,757 Other financing sources (uses): Transfers in 8,599,698 13,334,756 11,807,318 (1,527,438) Transfers out 0 (1,554,438) (27,000) 1,527,438 Total other financing sources (uses) 8,599,698 11,780,318 11,780,318 0 Net change in fund balances 665,804 (4,646,458) 1,714,299 6,360,757 Fund balances at beginning of year (665,804) 4,646,458 5,248, ,859 Fund balances (deficit) at end of year $0 $0 $6,962,616 $6,962,616 The accompanying notes are an integral part of the financial statements 32

39 STATEMENT OF NET ASSETS PROPRIETARY FUNDS SEPTEMBER 30, 2007 Business-type Activities Governmental Activities ASSETS Solid Waste Civic Center Other Non-major Total Internal Service Fund Current assets: Cash and cash equivalents $2,625 $443,352 $1,000 $446,977 $2,470,809 Equity in pooled cash and investments 6,047, ,601 6,701,423 13,031,285 16,886,571 Receivables (net of allowance for uncollectibles) 678, ,100 2,966,512 3,770,996 2,637,146 Due from other funds 1, ,099 30,664 Due from other governmental units ,631 Inventory 0 54, , , ,591 Restricted cash and cash equivalents 89, , ,610 47,529 Other current assets 0 76, ,190 0 Total current assets 6,818, ,620 10,095,979 17,897,591 22,696,941 Noncurrent assets: Restricted assets Cash and cash equivalents 6,107, ,107,121 0 Capital assets: Land and other non-depreciable assets 3,422, ,442 3,428,614 0 Capital assets (net of depreciation) 24,315,232 11,907,793 1,952,780 38,175,805 63,012 Advance to other funds ,634 Total noncurrent assets 33,844,525 11,907,793 1,959,222 47,711, ,646 Total assets 40,663,517 12,890,413 12,055,201 65,609,131 23,509,587 LIABILITIES Current liabilities: Vouchers payable 1,097, ,844 76,185 1,545, ,851 Contracts payable 514, ,581 0 Salaries, compensated absences and benefits payable 92, , ,178 1,798,758 Due to other funds 9 231, ,207 0 Due to other governmental units 1, ,039 13, Payable from restricted assets: Customer deposits 89, , ,610 47,529 Landfill closure 100, ,811 0 Other current liabilities 2, ,610 19, ,441 69,545 Claims liabilities ,787,264 Total current liabilities 1,898, , ,075 3,544,472 6,294,132 Non-current liabilities: Compensated absences 500, ,196,930 1,697,774 17,218,023 Landfill closure and postclosure care payable 14,444, ,444,999 0 Claims liabilities ,914,001 Total non-current liabilities 14,945, ,196,930 16,142,773 25,132,024 Total liabilities 16,844, ,652 1,979,005 19,687,245 31,426,156 NET ASSETS Invested in capital assets, net of related debt 27,737,404 11,907,793 1,959,222 41,604,419 63,012 Unrestricted (3,918,475) 118,968 8,116,974 4,317,467 (7,979,581) Total net assets $23,818,929 $12,026,761 $10,076,196 $45,921,886 ($7,916,569) The accompanying notes are an integral part of the financial statements. 33

40 STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS PROPRIETARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2007 Business-type Activities Governmental Activities Solid Waste Civic Center Other Non-major Total Internal Service Fund Operating revenues: Licenses and permits ($142) $0 $3,435,821 $3,435,679 $0 Charges for services 8,835,786 4,307,419 13,216,527 26,359,732 18,767,364 Fines and forfeitures 124, , ,442 0 Miscellaneous income 30,004 6, , , ,613 Total operating revenues 8,990,560 4,314,095 16,944,249 30,248,904 18,903,977 Operating expenses: Personal services 2,615, ,880,982 13,496,124 6,539,806 Contractual services 1,264,437 5,020, ,309 6,524,288 0 Claims expense, changes in estimate, and fees ,347,760 Materials and supplies 661, ,881 1,430,752 4,007,339 Travel and vehicle costs 36, ,805 51,903 4,160 Depreciation 2,130,324 1,039, ,743 3,952,792 14,226 Bad debts 3,192 5,767 4,204,067 4,213,026 0 Memberships, dues and subscriptions 26, ,401 60,831 7,721 Insurance and bonds 290, , , ,627 4,084,647 Communications and freight services 21, , ,036 6,746 Utilities 161, , ,487 1,210 Maintenance 528,063 79, ,326 1,080,198 51,845 Rentals and leases 152, , ,737 1,836 Provision for closure and long-term care 760, ,880 0 Advertising and promotion 5, ,159 0 Miscellaneous 505,992 32, ,110 1,274, ,435 Total operating expenses 9,164,005 6,410,538 18,630,781 34,205,324 18,669,731 Operating income (loss) (173,445) (2,096,443) (1,686,532) (3,956,420) 234,246 Non-operating revenues (expenses): Interest income 836,099 43, ,420 1,201, ,919 Interest expense 0 (4,238) 0 (4,238) 0 Gain (loss) on disposal of assets (294,208) 0 (5,281) (299,489) 0 Insurance reimbursements ,141 Other income Total non-operating revenues (expenses) 541,891 38, , ,811 1,042,060 Income (loss) before contributions and transfers 368,446 (2,057,532) (1,368,523) (3,057,609) 1,276,306 Capital contributions 4, , ,860 26,149 Transfers in 0 1,054, ,054, ,000 Transfers (out) (201,000) 0 (1,112,249) (1,313,249) 0 Total contributions and transfers (196,471) 1,054,600 (493,918) 364, ,149 Change in net assets 171,975 (1,002,932) (1,862,441) (2,693,398) 1,752,455 Net assets at beginning of year 23,646,954 13,029,693 11,938,637 48,615,284 (9,669,024) Net assets at ending of year $23,818,929 $12,026,761 $10,076,196 $45,921,886 ($7,916,569) The accompanying notes are an integral part of the financial statements. 34

41 STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2007 Business-type Activities Governmental Activities Solid Waste Civic Center Other Non-major Total Internal Service Fund Cash flows from operating activities: Cash received from customers $9,332,470 $4,127,157 $16,609,077 $30,068,704 $15,667,972 Cash payments to suppliers for goods and services (3,572,145) (6,397,270) (6,978,250) (16,947,665) (11,775,400) Cash payments to employees for services (2,580,125) 0 (10,607,585) (13,187,710) (2,240,580) Other non-operating revenues (expenses) , ,701 99,141 Net cash provided by (used in) operating activities 3,180,200 (2,270,113) (761,057) 149,030 1,751,133 Cash flows from noncapital financing activities: Transfers in 0 1,054, ,054, ,000 Transfers out (201,000) 0 (1,112,249) (1,313,249) 0 Principal (paid)/received on interfund advance 0 (73,447) 0 (73,447) 677,000 Interest (paid)/received on interfund advance 0 (4,238) 0 (4,238) 31,432 Net cash provided by (used in) noncapital financing activities (201,000) 976,915 (1,112,249) (336,334) 1,158,432 Cash flows from capital and related financing activities: Acquisition and construction of capital assets (7,382,400) (218,749) (136,408) (7,737,557) (46,593) Net cash used in capital and related financing activities (7,382,400) (218,749) (136,408) (7,737,557) (46,593) Cash flow from investing activities: Interest on investments 836,099 43, ,420 1,201, ,919 Net cash provided by investing activities 836,099 43, ,420 1,201, ,919 Net increase (decrease) in cash & cash equivalents (3,567,101) (1,468,798) (1,687,294) (6,723,193) 3,805,891 Cash and cash equivalents at beginning of year 15,813,731 2,194,751 8,674,704 26,683,186 15,599,018 Cash and cash equivalents at end of year $12,246,630 $725,953 $6,987,410 $19,959,993 $19,404,909 Non-cash investing, capital and financing activities Capital contributions $4,529 $0 $618,331 $622,860 $26,149 The accompanying notes are an integral part of the financial statements (Continued) 35

42 STATEMENT OF CASH FLOWS PROPRIETARY FUNDS (CONTINUED) FOR THE YEAR ENDED SEPTEMBER 30, 2007 Business-type Activities Governmental Activities Solid Waste Civic Center Other Non-major Total Internal Service Fund Reconciliation of cash and cash equivalents at end of year to Statement of Net Assets: Current assets: Cash and cash equivalents $2,625 $443,352 $1,000 $446,977 $2,470,809 Equity in pooled cash and investments 6,047, ,601 6,701,423 13,031,285 16,886,571 Restricted assets: Cash and cash equivalents 6,196, ,196,744 47,529 Equity in pooled cash and investments , ,987 0 Total cash and cash equivalents at end of year $12,246,630 $725,953 $6,987,410 $19,959,993 $19,404,909 Reconciliation of operating income (loss) to net cash provided by (used in) operating activities: Operating income (loss) ($173,445) ($2,096,443) ($1,686,532) ($3,956,420) $234,246 Other non-operating revenues ,141 Adjustments to reconcile operating income (loss) to net cash provided by (used in) operating activities: Depreciation 2,130,324 1,039, ,743 3,952,792 14,226 Provision for uncollectible accounts 3,192 5,767 4,204,067 4,213,026 0 (Increase) decrease in assets: Accounts receivable 315,290 (69,694) (4,305,735) (4,060,139) (388,314) Due from other governments 38, ,664 (240,745) Inventory 0 (119) (16,207) (16,326) (378,591) Prepaid expense 0 (38,004) 0 (38,004) 0 Increase (decrease) in liabilities: Vouchers payable 335,967 (962,979) 9,715 (617,297) 195,366 Salaries and benefits payable (12,793) 0 28,603 15,810 7,865 Compensated absences 47, , ,604 1,641,070 Accrued taxes payable 0 (25,355) 0 (25,355) 0 Deposits (15,236) 0 (18,673) (33,909) 937 Due to other governments (2,299) 0 (4,702) (7,001) (720) Deferred revenue 0 (123,011) 0 (123,011) 43,345 Landfill closure and long-term care payable 512, ,726 0 Claims payable ,307 Net cash provided by (used in) operating activities $3,180,200 ($2,270,113) ($761,057) $149,030 $1,751,133 The accompanying notes are an integral part of the financial statements 36

43 STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS SEPTEMBER 30, 2007 ASSETS Cash and cash equivalents $8,278,725 Receivables (net of allowance for uncollectibles) 109,007 Due from other funds 644 Total assets $8,388,376 LIABILITIES Payable to others $1,496,516 Due to other funds 30,997 Due to other governmental units 3,778,910 Other current liabilities 3,081,953 Total liabilities $8,388,376 The accompanying notes are an integral part of the financial statements. 37

44 STATEMENT OF NET ASSETS COMPONENT UNITS SEPTEMBER 30, 2007 Governmental Activities Business-Type Activities Total Escambia Escambia Governmental County County and Law Library Santa Rosa Housing Finance Business-Type ASSETS Board Island Authority Authority Activities Current assets: Cash and cash equivalents $73,923 $2,394,651 $848,374 $3,316,948 Investments 0 0 1,775,695 1,775,695 Receivables (net of allowance for uncollectibles) , , ,138 Due from other governmental units 24, , ,516 Other current assets 0 10, , ,868 Total current assets 98,877 3,415,689 3,148,599 6,663,165 Noncurrent assets: Restricted assets Cash and cash equivalents 0 331, ,865 Investments 0 4,714, ,714,887 Capital assets (net of depreciation) 1,109,433 33,614, ,536 35,680,768 Supplemented mortgage loans 0 0 4,869,633 4,869,633 Bank participation agreements ,071 11,071 Other noncurrent assets 0 562, ,381 Total noncurrent assets 1,109,433 39,223,932 5,837,240 46,170,605 Total assets 1,208,310 42,639,621 8,985,839 52,833,770 LIABILITIES Current liabilities: Vouchers payable 5,687 2,953, ,558 3,059,393 Salaries, benefits and compensated absences payable 7,110 75, ,914 Due to other governmental units 0 521, ,191 Notes, loans, leases and bonds payable 0 6, ,683 Other current liabilities 0 226, ,888 Total current liabilities 12,797 3,783, ,558 3,897,069 Non-current liabilities: Compensated absences 0 182, ,929 Leases payable 0 6, ,539 Deferred revenues 0 423, ,827 Total non-current liabilities 0 613, ,295 Total liabilities 12,797 4,397, ,558 4,510,364 NET ASSETS Invested in capital assets, net of related debt 1,109,433 33,601, ,536 35,667,546 Restricted net assets 0 2,020,724 1,879,537 3,900,261 Unrestricted net assets 86,080 2,620,311 6,049,208 8,755,599 Total net assets $1,195,513 $38,242,612 $8,885,281 $48,323,406 The accompanying notes are an integral part of the financial statements. 38

45 STATEMENT OF ACTIVITIES COMPONENT UNITS FOR THE YEAR ENDED SEPTEMBER 30, 2007 Program Revenues Operating Capital Charges for Grants and Grants and Expenses Services Contributions Contributions Function/Program Activities Governmental Activities: Escambia County Law Library $106,757 $104,317 $0 $0 Total Governmental activities 106, , Business-type activities: Santa Rosa Island Authority 6,915,798 6,133, ,351,105 Housing Finance Authority 1,280,702 2,711, Total business-type activities 8,196,500 8,844, ,351,105 Total component units $8,303,257 $8,949,084 $0 $3,351,105 General Revenues Investment earnings Miscellaneous Total general revenues Change in net assets Net assets - beginning Net assets - ending The accompanying notes are an integral part of the financial statements. 39

46 Net (Expense) Revenue and Changes in Net Assets Governmental Activities Business-type Activities Law Santa Rosa Housing Finance Library Island Authority Authority Totals ($2,440) $0 $0 ($2,440) (2,440) 0 0 (2,440) 2,569, ,569, ,430,339 1,430, ,569,033 1,430,339 3,999,372 (2,440) 2,569,033 1,430,339 3,996,932 3, , , ,900 1, , ,797 4, , ,775 1,065,697 2,420 2,727,095 2,333,114 5,062,629 1,193,093 35,515,517 6,552,167 43,260,777 $1,195,513 $38,242,612 $8,885,281 $48,323,406 40

47 NOTES TO FINANCIAL STATEMENTS

48 ANNUAL AUDIT REPORT COUNTY-WIDE NOTES TO COMBINED FINANCIAL STATEMENTS SEPTEMBER 30, 2007 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Escambia County, Florida (the County) is a political subdivision of the State of Florida created pursuant to Chapter 7 of the Florida Statutes. The County is governed by a five member Board of County Commissioners (the Board), elected from single-member districts. The Board has no powers other than those expressly vested in it by State Statute and their governmental powers cannot be delegated. The Board appoints an administrator to administer all policies emanating from its statutory powers and authority. In addition to the Board, there are five elected Constitutional Officers, pursuant to Article 8, Section 1(d), of the Constitution of the State of Florida: Clerk of the Circuit Court & Comptroller (the Clerk), Sheriff, Tax Collector, Property Appraiser, and Supervisor of Elections. The accounting policies of the County conform to accounting principles generally accepted in the United States (US) as applicable to governments. The following is a summary of the more significant accounting policies. A. Financial Reporting Entity These combined financial statements include the operations of the Board of County Commissioners, Clerk of the Circuit Court & Comptroller, Sheriff, Tax Collector, Property Appraiser, Supervisor of Elections and those separately administered organizations for which the government is considered to be financially accountable. Blended component units, although legally separate entities, are, in substance, part of the government operations. Discretely presented component units are reported in a separate column in the government-wide financial statements to emphasize that they are legally separate from the government. Blended Component Units Community Redevelopment Agency (CRA) In 1995, the Board of County Commissioners adopted Ordinance No which established the Community Redevelopment Agency (CRA) of Escambia County pursuant to The Community Redevelopment Act of The Board serves as the CRA Board and has all rights, powers, duties, privileges and immunities authorized by the Act. The CRA is reported as a special revenue fund. Five redevelopment areas are included under the CRA jurisdiction. Discretely Presented Component Units Governmental Fund Type: Escambia County Law Library Board The Escambia County Law Library Board, created under Special Act, Chapter , Laws of Florida, provides for the maintenance of a central law library for the use of citizens, county officials, judges and officers of the courts of Escambia County. The Law Library is financially integrated with the County in that it is funded by collection of certain court fees. The Law Library is housed in a County facility and shares in administrative services provided by the County. The Law Library Board is composed of two (2) circuit judges, two (2) county judges and one (1) lawyer appointed by the local bar association. The operations of the Law Library are reported in the Law Library Fund, a special revenue fund, as a discrete component unit. Financial statements for the Escambia County Law Library Board can be obtained at 190 Governmental Center, Pensacola, Florida

49 ANNUAL AUDIT REPORT COUNTY-WIDE NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2007 Proprietary Fund Type: Santa Rosa Island Authority (SRIA) The Santa Rosa Island Authority (SRIA) was established by the provisions of Chapter , Laws of Florida, Special Acts of 1947, as amended. The County appoints five (5) members of the Authority s six (6) member Board, and one (1) member is elected by the eligible voters who are full time residents of the Island. The County approves the Authority s budget and issuance of debt. The County has veto power over decisions of the Authority. The SRIA serves as the County s leasing agent for property on Santa Rosa Island owned by the County. The operations of SRIA are reported in the SRIA Fund, a discrete component unit in this report. Financial statements for the SRIA can be obtained at 1 Via Deluna, Pensacola Beach, Florida Escambia County Housing Finance Authority The Escambia County Housing Finance Authority (HFA) was created in 1982 by Ordinance No pursuant to Chapter 78-89, Laws of Florida codified as Chapter 159, Part IV, Section through The County appoints five (5) members of the HFA and must approve by resolution any rules or regulations, the issuance of revenue bonds and all contracts and agreements. The Escambia County HFA and the County are not substantially the same. The HFA does not provide services almost entirely for the County. Therefore, the operations of the Escambia County HFA are reported as a discrete component unit in this report. Financial statements for the Escambia County HFA can be obtained at 25 West Cedar Street, Suite 530, Pensacola, Florida Because these component units have been reported as a part of the County, there are limited instances where special note references or separation will be required. If no separate note reference or categorization is made, the user should assume that information presented is equally applicable. Joint Ventures As defined in Governmental Accounting Standards Board (GASB) Statement Number 14, a joint venture is a separate legal entity or other organization that results from a contractual arrangement (or interlocal agreement) and that is owned, operated or governed by two or more participants as a separate and specific activity subject to joint control in which the participants retain (a) an on-going financial interest or (b) an on-going financial responsibility. The County participates and provides financial support to the following nonequity joint ventures: Human Relations Commission (HRC) The Commission was created by an Interlocal Agreement between Escambia County and the City of Pensacola in 1978, pursuant to Florida Statutes, Chapter , for the purpose of being responsible for the promotion of fair treatment and equal opportunity to all citizens of the local community. The Commission is composed of fourteen (14) members; seven (7) selected by the County and seven (7) selected by the City of Pensacola. The duration of this agreement is for a period of two (2) years, with a renewal provision. The County does not control budgeting or financing for the Commission. Separate financial statements are available from the Commission at 14 West Jordan Street, Suite 2E, Pensacola, Florida Pensacola Escambia County Promotion and Development Commission (PEDC) This Commission was created in 1967 by Chapter , Laws of Florida, amended in 1980 by Chapter , to promote and develop tourism and industry in Escambia County and in the City of Pensacola. The nine (9) member Commission consists of two (2) members of the Pensacola City Council, two (2) members of the Escambia County Commission, one (1) member of the Century City Council, the President of the Chamber of Commerce (1), one (1) representative of the Committee of 100 or the Tourist Advisory Council, one (1) at-large member appointed by the Pensacola City Council and one (1) at-large member appointed by the Escambia County Commission. The County and the City of Pensacola each contribute funds annually for the operation of the Commission, but neither has control of the budget or finances of the 42

50 ANNUAL AUDIT REPORT COUNTY-WIDE NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2007 Commission. The Commission has no outstanding debt. Separate financial statements are available from the Pensacola Escambia County Promotion and Development Commission at 117 West Garden Street, Pensacola, Florida Summary financial statements as of September 30, 2007 for the joint ventures are as follows: BALANCE SHEETS SEPTEMBER 30, 2007 HRC PEDC Assets and other debits $33,969 $298,828 Liabilities $15,998 $0 Fund equity and other credits Invested in capital assets 8,669 0 Reserved for restricted assets 0 61,198 Unreserved 9, ,630 Total fund equity 17, ,828 Total liabilities and fund equity $33,969 $298,828 STATEMENTS OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE FOR FISCAL YEAR ENDED SEPTEMBER 30, 2007 HRC PEDC Revenues $282,854 $306,663 Expenditures (279,806) (276,472) Excess (deficiency) of revenues over expenditures 3,048 30,191 Fund balance beginning 14, ,637 Fund balance ending $17,971 $298,828 43

51 ANNUAL AUDIT REPORT COUNTY-WIDE NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2007 B. Basic Financial Statements GASB Statement #34 Government-Wide and Fund Financial Statements The basic financial statements consist of the government-wide (based on the County as a whole, including its component units) and fund financial statements. Both sets of statements categorize primary activities as either governmental or business-type activities. The government-wide financial statements include a Statement of Net Assets and a Statement of Activities which report on the government as a whole and provide a consolidated financial picture of the government. For the most part, interfund activities are eliminated to avoid distorted financial results. The amounts reported as internal balances represent the residual amounts due between governmental and business-type activities. Fiduciary funds of the government are also eliminated from this presentation since these resources are not available for general government funding purposes. The Statement of Activities reports functional categories of programs provided by the County and demonstrates how and to what degree those programs are supported by specific revenue. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on external fees and charges for support. Likewise, the primary government is reported separately from certain legally separate component units for which the primary government is financially accountable. The statement of activities demonstrates the degree to which the direct expenses of a given program are supported by specific revenues. Direct expenses are those that are clearly identifiable with a specific program. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. General revenues consist of all taxes and other items collected that help support all functions of Escambia County government. Individual fund financial statements are provided for governmental funds, proprietary funds and fiduciary funds, even though the latter are excluded from the government-wide financial statements. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. The County reports the following major governmental funds: The General Fund is the government s primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund. The Disaster Recovery Fund accounts for financing provided from various State and Federal grants, such as Federal Emergency Management Agency (FEMA). The Hurricane Housing Recovery Program (HHRP) Fund accounts for the revenues and expenditures thereof. The fund is designed to provide stable and adequate funding for housing destroyed or damaged by hurricanes. The Community Redevelopment Agency (CRA) accounts for the revenues and expenditures of the redevelopment areas established within the County. The Transportation and Drainage Fund accounts for monies collected through permits, fees, and certain taxes and assessments. These monies are expended on engineering, street lighting, 44

52 ANNUAL AUDIT REPORT COUNTY-WIDE NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2007 transportation, and road projects that benefit those citizens of the unincorporated areas of the County. The Local Option Sales Tax Fund accounts for monies collected pursuant to Florida Statutes , which authorizes the County to impose a one percent (1%) local option infrastructure sales surtax upon taxable transactions occurring within Escambia County, to provide for road and drainage projects and improvements, recreation projects, public safety, expansion of jail and court facilities, and community redevelopment projects. The County reports the following major proprietary funds: The Solid Waste Fund accounts for solid waste disposal (landfill) operations, primarily financed through franchise fees and user charges. The Civic Center Fund accounts for the operation, maintenance and improvements of the County s Civic Center. Additionally, the government reports the following fund types: The Internal Service Fund accounts for risk management activities and garage and fuel activities provided to other County departments, as well as the administration of employee benefits. Additionally, it is used to account for balances and activity related to compensated absences policies of the Clerk and Sheriff. Agency Funds which are custodial in nature (assets equal liabilities) have no measurement focus since they serve only as clearing accounts for assets held by the County in a custodial or agency capacity for others. Agency funds are utilized by the Clerk of the Circuit Court, the Tax Collector and the Sheriff for various client related funds held by each entity until returned to the client. C. Basis of Presentation, Basis of Accounting The government-wide financial statements and the proprietary fund and fiduciary 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 when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the County considers revenues to be available if they are collected within 60 days of the end of the current fiscal period, except for certain grant revenues which are recognized as revenues in the same period the grant expenditures occurred. State shared revenues, sales taxes, franchise taxes, and interest associated with the current fiscal period are all considered to be susceptible to accrual and have been recognized as revenues of the current fiscal period. Expenditures generally are recorded when a liability is incurred, except debt service expenditures and expenditures related to compensated absences and claims and judgments, which are recorded only when payment is due. Capital asset acquisitions are recorded as expenditures in governmental funds. Monies received from issuing long-term debt and acquisitions under capital leases are reported as other financing sources. 45

53 ANNUAL AUDIT REPORT COUNTY-WIDE NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2007 Escambia County allocates indirect costs comprised of administrative overhead costs to functional activities using various allocation charge methods. Therefore, expenses reported for functional activities include these allocated indirect costs. Elimination of these charges would distort the direct costs of the functions concerned. Under the terms of some grant agreements, the County funds certain programs by a combination of specific cost-reimbursement grants, categorical block grants, and general revenues. Thus, when program expenses are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the County s policy to first apply cost-reimbursement grant resources to such programs, followed by categorical block grants, and then by general revenues. The County has elected to follow FASB statements and interpretations issued on or before November 30, 1989, for all governmental and business-type activities and enterprise funds, unless those standards conflict with or contradict guidance of the GASB pronouncements. As a general rule, the effect of interfund activity has been eliminated from the government-wide financial statements, with the exception of administrative overhead components as discussed above. Amounts reported as program revenue include 1) charges to customers for goods, services, or privileges provided; 2) operating grants and contributions; and 3) capital grants and contributions, including special assessments. Internally dedicated resources are reported as general revenues rather than program revenues. Likewise, general revenues include all taxes. Proprietary funds distinguish operating revenues and expenses from nonoperating 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 County s enterprise funds are charges to customers for sales and services. Operating expenses for enterprise funds and the internal service fund 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. D. Assets, Liabilities and Net Assets or Equity Cash or Cash Equivalents consists of cash on hand, demand deposits, and short-term investments with original maturities of three months or less from date of acquisition. Equity in Pooled Cash and Investments represent assets pooled for investment purposes with each individual fund and/or account maintained on a daily transaction basis. Such investments consist of demand deposits, certificates of deposit, notes of certain instrumentalities, and monies placed with the State Board of Administration s investment pool. Investment earnings are allocated to the participating funds on a pro-rata basis. As defined by GASB Statement No. 31, money market investments are reported at amortized cost rather than fair value. The County has adopted an investment policy in accordance with specific requirements of Florida Statute (1) (16). This policy authorizes investments in direct obligations of the U.S. Treasury, Federal Instrumentalities, time deposits and savings accounts in qualified public depositories, tax exempt obligations of the State of Florida, the Florida Counties Investment Trust, Securities and Exchange qualified open-end money market mutual funds, and repurchase agreements. The County may also invest in the Local Government Surplus Trust Fund, an external investment pool administered by the Florida State Board of Administration (SBA). Investments held in the SBA consist largely of treasury instruments, federal agency obligations, certificates of deposit, repurchase agreements, bankers 46

54 ANNUAL AUDIT REPORT COUNTY-WIDE NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2007 acceptances, and commercial paper. The SBA pool is a 2-a-7 like pool as defined in GASB Statement No. 31 and the reported investment balance is equal to the value of pooled shares. The Office of the Auditor General performs an operational audit of the activities and investments of the SBA. Trade Receivables are shown net of an allowance for uncollectibles, for all amounts older than 120 days, except for the Solid Waste Fund which uses a 90-day policy. The County records unbilled service receivables for services that have been rendered but not billed at the end of the fiscal year. Real and Personal Property Valuations are determined each year as of January 1 by the Property Appraiser s Office. Florida Statutes require all property be assessed at 100% of just value. For 2007, the Countywide millage rate was mills. All property taxes are billed in arrears and become due and payable on November 1 and are delinquent on April 1, of the following year. The legal lien date is January 1 of each year. Discounts of 4, 3, 2, and 1 percent are allowed for early payment in November through February, respectively. Virtually all unpaid taxes are collected via the sale of tax certificates prior to year end; thus there is no receivable reported for property taxes in the financial statements. Due From/(To) Other Funds are activities between funds. Such amounts are representative of lending/borrowing arrangements outstanding at the end of the fiscal year and referred to as either due to /from other funds (i.e., the current portion of interfund loans) or advances to/from other funds (i.e., the non current portion of interfund loans). Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as internal balances. Advances To/(From) Other Funds, as reported in the fund financial statements, are offset by a fund balance reserve account in applicable governmental funds to indicate that they are not available for appropriation and are not expendable available financial resources. Inventory amounts are valued at cost (first-in, first-out). Inventory balances in general, special revenue and enterprise funds are accounted for on the consumption method, i.e., expenditures and expenses are recognized when inventories are used. Reported inventories are equally offset by a fund balance reserve to indicate that they are not available spendable resources even though they are a component of net current assets. Restricted Assets are assets of both governmental and business-type activities that are restricted per resolutions or other agreements. Capital Assets, which include property, plant, equipment, and infrastructure assets (e.g., roads, bridges, sidewalks, and similar items), are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. Purchased or constructed assets are recorded at historical costs or estimated costs. Donated capital assets are recorded at estimated fair market value at the date of donation. The County capitalizes items costing $1,000 and having an estimated useful life in excess of one year. Buildings, public domain and system infrastructure assets which represent major expenditures for such items as roads, water and sewer lines, landfill improvements, and parks and drainage systems are capitalized at historical cost. Major outlays for capital assets and improvements are capitalized as projects are constructed. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized. 47

55 ANNUAL AUDIT REPORT COUNTY-WIDE NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2007 Depreciation has been provided using the straight-line method. The estimated useful lives of the various classes of depreciable capital assets are as follows: Buildings Improvements Infrastructure Equipment years years years 3 10 years Compensated Absences are accrued in accordance with GASB Statement No. 16. It is the policy of the County to permit employees to accumulate a limited amount of earned but unused leave benefits which will be paid to employees upon separation from service. Unpaid compensated absences are recorded as a liability when the benefits are earned in the government-wide and proprietary fund financial statements. For governmental funds, there is no legal requirement to accumulate expendable available financial resources to liquidate the obligation; these expenditures are recognized in the governmental funds when payments are made to employees. Unearned Revenues include amounts collected before revenue recognition criteria are met. Self Insurance Claims Payable represents liabilities for reported claims and incurred but not reported claims based on an actuarial review of claims pending and historical experience. Landfill Closure and Postclosure Care Payable represents the recognition of Municipal Solid Waste Landfill (MSWLF) closure and postclosure care costs under the State of Florida s Solid Waste Management Act of 1988 (the 1988 Act ), regulations of the Federal Environmental Protection Agency (EPA) and GASB Statement No. 18. MSWLF costs incurred for landfills accepting solid waste after final implementation of the 1988 Act and EPA regulations are recognized as an expense and a liability in each year that the MSWLF accepts solid waste based upon the landfill capacity used during that year. Long Term Obligations in the government-wide and the proprietary fund financial statements are reported as liabilities in the statement of net assets. Bond premiums, as well as issuance costs, are deferred and amortized over the life of the bonds using the straight-line method. In the fund financial statements, governmental fund types recognize bond premiums and discounts as well as bond issuance costs during the current period. The face amount of debt issued is reported as other financial sources. Premiums received on debt issuances are reported as other financing sources while discounts and debt issuance costs are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as expenditures of the funds in which proceeds of debt issuances are recorded. Fund Equity in the governmental fund s financial statements report reservations of fund balance for amounts that are not available for appropriation or are legally restricted by outside parties for use for a specific purpose. Designations of fund balance represent tentative management plans that are subject to change. 48

56 ANNUAL AUDIT REPORT COUNTY-WIDE NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2007 Net Assets The government-wide and business type fund financial statements utilize a net asset presentation. Net assets are categorized as invested in capital assets (net of related debt), restricted and unrestricted. Invested in Capital Assets (net of related debt) is intended to reflect the portion of net assets which are associated with non-liquid, capital assets less outstanding capital asset related debt. Restricted Net Assets are liquid assets (generated from revenues and net bond proceeds) which are not accessible for general use because of third-party (statutory, bond covenant or granting agency) limitations. Unrestricted Net Assets represent unrestricted liquid assets. While County management may have categorized and segmented portions for various purposes, the Board of County Commissioners has the unrestricted authority to revisit or alter these managerial decisions. Budgetary Information NOTE 2 STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY Annual budgets are adopted on a basis consistent with generally accepted accounting principles as required by Florida Statute 129 for all governmental funds. All annual appropriations lapse at fiscal year end. On or before May 1 of each year, the Sheriff, Clerk, Tax Collector, Property Appraiser, and Supervisor of Elections each submit to the Board of County Commissioners a tentative budget for the ensuing fiscal year. Within fifteen days after certification of the ad valorem tax roll by the Property Appraiser, the County Budget Officer submits to the Board a proposed budget for the fiscal year commencing the following October 1 st. The Budget includes proposed expenditures and the means of financing them. The Board holds public hearings and a final budget must be prepared and adopted no later than September 30. The County s budget is legally enacted through passage of a resolution. The appropriated budget is prepared by fund, function and department. The Office of Management and Budget is authorized to transfer budgeted amounts within departments of a fund and between departments of a fund; however, the Board of County Commissioners must approve any revisions that alter the total expenditures of any fund. The legal level of budgetary control (i.e., the level at which expenditures may not legally exceed appropriations) is the fund level. The Board of County Commissioners approved supplemental budget amendments during the year that increased the original budget. 49

57 ANNUAL AUDIT REPORT COUNTY-WIDE NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2007 NOTE 3 DETAIL NOTES ON ALL FUNDS A. Assets Deposits and Investments As of September 30, 2007, the carrying value of the County s deposits and investments with their respective credit ratings was as follows: Weighted Fair Credit Average Investment Type Value Rating Maturity (days) Demand and time deposits $36,789,170 N/A N/A Certificates of Deposit 12,500,000 N/A days Money Market Accounts 35,658,396 N/A N/A Local Government Surplus Funds Trust Fund 80,209,182 Unrated 34 days Federal Instrumentalities: US Agencies 15,364,732 Aaa 65.9 days Total Deposits and Investments $180,521,480 Credit Risk: The County s Investment Policy (Policy), limits credit risk by restricting authorized investments to the following: direct obligations of the United States or its agencies and instrumentalities, repurchase agreements, the Local Government Surplus Funds Trust Fund administered by Florida s State Board of Administration (a 2a7-like pool), certificates of deposit, money market mutual funds investing in direct obligations of the United States or its agencies and instrumentalities regulated by the SEC, and the Florida Local Government Investment Trust, an investment pool administered by the Florida Association of Court Clerks and Comptrollers. The credit ratings indicated in the above table are Moody s Investors Services (Moody s) ratings. Concentration of Credit Risk: The Policy requires that bank deposits be secured as provided by Chapter 280, Florida Statutes. This law requires local governments to deposit funds only in financial institutions designated as qualified public depositories by the Chief Financial Officer of the State of Florida, and creates the Public Deposits Trust Fund, a multiple financial institution pool with the ability to assess its member financial institutions for collateral shortfalls if a default or insolvency has occurred. As of September 30, 2007, all of the County s bank deposits were in qualified public depositories. The Policy requires the assets shall be diversified to control the risk of loss resulting from the over concentration of assets. The Policy establishes guidelines for limiting the percentage of the portfolio by permissible investment category as well as issuer limits within an investment category. The Policy requires execution of a third-party custodial safekeeping agreement for all purchased securities, and requires that securities be held in the County s name. As of September 30, 2007, all of the County s investments were held in a bank s trust department in the County s name. 50

58 ANNUAL AUDIT REPORT COUNTY-WIDE NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2007 Interest Rate Risk: The Policy limits the investment of current operating funds to no longer than one (1) year. Investments of current operating funds will be matched to cash flow needs. Investment of bond reserves, construction funds and other non-operating funds shall have a term appropriate to the need for funds, and in accordance with debt covenants, but shall not exceed five (5) years. Receivables at year end for the government s individual major funds, nonmajor, and internal service funds in the aggregate, including the applicable allowances for uncollectible accounts, are as follows: Allowance Accrued Gross for Accounts Notes Interest Receivables Uncollectible Net Governmental activities: General $12,763,851 $0 $304,137 $13,067,988 ($10,736,990) $2,330,998 Disaster recovery 7,746, ,746, ,746,990 HHRP 35, , ,600 Transportation and drainage 8, , ,034 Other non major funds 548,435 61, ,370 (64,602) 545,768 Internal Service Fund 2,637, ,637, ,637,146 Total governmental activities $23,740,056 $61,935 $304,137 $24,106,128 ($10,801,592) $13,304,536 Business-type activities: Solid Waste $681,623 $0 $0 $681,623 ($3,239) $678,384 Civic Center 135, ,814 (9,714) 126,100 Non major and other funds 8,424, ,424,188 (5,457,676) 2,966,512 Total business-type activities $9,241,625 $0 $0 $9,241,625 ($5,470,629) $3,770,996 Component units: Law Library $954 $0 $0 $954 $0 $954 Santa Rosa Island Authority 386, , ,524 Housing Finance Authority 227, , ,660 Total component units $615,138 $0 $0 $615,138 $0 $615,138 There were no unbilled receivables at September 30, The General Fund receivable contains approximately $10.7 million contested property taxes billed on Pensacola Beach. Due to pending litigation, this receivable is fully offset with an allowance for uncollectible accounts. 51

59 ANNUAL AUDIT REPORT COUNTY-WIDE NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2007 Capital Assets activity for the year ended September 30, 2007 was as follows: Balance at 10/01/2006 Balance at (as restated) Increases Decreases 09/30/2007 Primary Government: Governmental activities: Capital assets not depreciated: Land $28,294,691 $135,794 ($449,446) $27,981,039 Construction in progress 41,411,376 29,105,762 (41,411,376) 29,105,762 Total capital assets not depreciated 69,706,067 29,241,556 (41,860,822) 57,086,801 Capital assets depreciated: Infrastructure 500,144,332 40,667,526 (907,791) 539,904,067 Buildings and improvements 152,295,501 25,311,275 (99,154) 177,507,622 Equipment 96,654,511 17,390,574 (9,744,372) 104,300,713 Total capital assets depreciated 749,094,344 83,369,375 (10,751,317) 821,712,402 Less accumulated depreciation: Infrastructure 223,381,450 21,003,605 (264,240) 244,120,815 Building and improvements 48,381,706 6,301,095 (23,265) 54,659,536 Equipment 68,964,933 10,413,980 (6,306,800) 73,072,113 Total accumulated depreciation 340,728,089 37,718,680 (6,594,305) 371,852,464 Total capital assets depreciated, net 408,366,255 45,650,695 (4,157,012) 449,859,938 Governmental-type activities capital assets, net $478,072,322 $74,892,251 ($46,017,834) $506,946,739 Business-type activities: Land $3,428,614 $0 $0 $3,428,614 Capital assets depreciated: Buildings 31,860,903 1,405, ,266,109 Infrastructure 22,346,152 6,123, ,470,110 Equipment 15,031,168 1,055,924 (1,240,358) 14,846,734 Total capital assets depreciated 69,238,223 8,585,088 (1,240,358) 76,582,953 Less accumulated depreciation: Buildings 17,078,253 1,092, ,171,230 Infrastructure 8,040,279 1,152, ,192,848 Equipment 10,278,441 1,707,246 (942,617) 11,043,070 Total accumulated depreciation 35,396,973 3,952,792 (942,617) 38,407,148 Total capital assets depreciated, net 33,841,250 4,632,296 (297,741) 38,175,805 Business-type activities capital assets, net $37,269,864 $4,632,296 ($297,741) $41,604,419 As discussed in Note 8, the October 1, 2006 balances have been restated due to the reclassification of a proprietary fund now categorized as a governmental fund. 52

60 ANNUAL AUDIT REPORT COUNTY-WIDE NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2007 Depreciation expense was charged to functions/programs of the primary government as follows: Governmental activities: Business-type activities: General government $5,188,577 Solid waste $2,130,324 Public safety 8,826,788 Inspections (non-major) 129,532 Physical environment 616,699 Ambulance (non-major) 653,211 Transportation* 19,196,909 Civic center 1,039,725 Economic environment 1,055,477 Total depreciation expense $3,952,792 Human services 548,966 Culture and recreation 2,285,264 Total depreciation expense $37,718,680 *Transportation includes depreciation of general infrastructure assets. Depreciation on capital assets held by the government s internal service funds are charged to the general government function. Discretely Presented Component Units reported the following capital asset balances at September 30, 2007: SANTA ROSA ISLAND AUTHORITY HOUSING FINANCE AUTHORITY Buildings $3,650,986 Land $937,139 Improvements other than buildings 11,291,440 Improvements other than buildings 14,539 Equipment 1,281,014 Equipment 58,292 Construction in progress 22,055,599 Total at historical cost 1,009,970 Total at historical cost 38,279,039 Less accumulated depreciation: Less accumulated depreciation (4,664,240) Improvements other than buildings (14,539) Equipment (38,895) Santa Rosa Island Authority Total accumulated depreciation (53,434) capital assets, net $33,614,799 Housing Finance Authority capital assets, net $956,536 53

61 ANNUAL AUDIT REPORT COUNTY-WIDE NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2007 Interfund Receivables / Payables: During the course of its operations, the County has numerous transactions between funds to finance operations, provide services, construct assets, and service debt to the extent that certain interfund receivables and payables exist as of September 30, Balances of interfund receivables, payables, and advances are as follows: Interfund Interfund Advances Advances Receivables Payables To From General fund $916,297 $32,407 $0 $0 Disaster recovery ,682,355 HHRP 0 12, Local option sales tax 2,000, ,423,789 3,741,434 Nonmajor governmental 515,716 3,157, ,634 3,432,013 3,202,216 21,423,789 22,173,423 Solid waste 1, Civic center 0 231, Internal service 30, ,634 0 Fiduciary - agency , Total major and nonmajor $3,464,420 $3,464,420 $22,173,423 $22,173,423 Interfund Transfers: Transfer Transfer In Out Major Governmental Funds: General fund $2,079,578 $28,986,991 Disaster recovery 3,369,407 1,418,095 Community redevelopment agency 3,050,294 0 Transportation and drainage 11,807,318 27,000 Local option sales tax 1,785,343 4,797,616 Non-major Governmental Funds: Code enforcement 800,000 0 Mass transit 2,082,130 0 Grant projects 372, ,500 Tourist promotion 0 1,639,132 Public safety programs 269,888 1,649,972 Bob Sikes toll facilities 0 1,532,880 Debt service 13,711,868 0 Capital improvement 812,642 0 Road construction 0 83,968 Major Business-type Activities: Solid waste 0 201,000 Civic center 1,054,600 0 Non-major Business-type Activities: Inspections 0 942,876 Ambulance 0 169,373 Internal Service Fund 450,000 0 Total $41,645,403 $41,654,403 54

62 ANNUAL AUDIT REPORT COUNTY-WIDE NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2007 Transfers to or from other funds are based on budgetary requirements. Transfers are also used to move receipts restricted for debt service from the funds collecting the receipts to the debt service fund as required for bond coverage. Restricted Assets for business activities contain the following balances: Total Internal Solid Enterprise Service Waste Inspections Funds Fund Deposits $89,623 $284,987 $374,610 $47,529 Landfill closure 6,107, ,107,121 0 $6,196,744 $284,987 $6,481,731 $47,529 B. Liabilities Payable from Restricted Assets in the business-type activities contain the following balances: Total Solid Enterprise Internal Waste Inspections Funds Service Deposits $89,623 $284,987 $374,610 $47,529 Landfill closure and postclosure 100, ,811 0 $190,434 $284,987 $475,421 $47,529 55

63 ANNUAL AUDIT REPORT COUNTY-WIDE NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2007 Long-Term Debt Changes in long-term bonds, notes payable, loans, capital leases, and compensated absences during 2007 are as follows: Amounts Due Long-Term Beginning Within Balance Balance One Year Remaining Long-Term Debt 10/1/2006 Additions (Retirements) of 09/30/2007 9/30/2007 Governmental-type activities: Sales Tax Revenue Bonds $86,335,000 $0 ($1,755,000) ($1,800,000) $82,780,000 Capital Improvement Bonds 21,025,000 0 (450,000) (465,000) 20,110,000 Tourist Development Bonds 14,125,000 0 (890,000) (915,000) 12,320,000 Capital Improvement Notes 21,236,000 0 (10,866,000) (665,000) 9,705,000 State of Florida's Toll Facility Note 219,168 0 (83,333) (83,335) 52,500 Capital Leases 3,410,861 0 (673,595) (696,587) 2,040,679 General Compensated Absences Board of County Commissioners 5,778,124 4,803,324 (3,304,689) (4,161,804) 3,114,955 Tax Collector 1,073, ,109 (509,490) 0 1,164,720 Property Appraiser 497, ,740 (303,689) 0 569,890 Supervisor of Elections 136,936 79,442 (53,658) 0 162,720 Internal Service Compensated Absences: Board of County Commissioners 51, ,843 (36,081) 0 131,928 Clerk of the Circuit Court 1,550, ,747 (834,179) (190,739) 1,502,794 Sheriff 15,753,091 3,091,284 (1,673,544) (1,587,530) 15,583,301 Total $171,192,251 $10,044,489 ($21,433,258) ($10,564,995) $149,238,487 Compensated Absences: Solid Waste Compensated Absences $453,034 $171,499 ($123,689) $0 $500,844 Inspections Compensated Absences 454, ,645 (132,737) (41,707) 532,652 Ambulance Compensated Absences 556, ,979 (264,093) (16,870) 664,278 Total $1,463,747 $813,123 ($520,519) ($58,577) $1,697,774 The General Fund generally liquidates claims and judgments, and compensated absences for governmental activities. 56

64 ANNUAL AUDIT REPORT COUNTY-WIDE NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2007 Long-term Debt for governmental activities consists of the following: Interest Annual Final Amount Governmental Activities Rates % Principal Maturity Outstanding Bonds: Sales Tax Revenue Bonds Serial Bonds - Series ,800,000 to 3,290,000 10/01/22 36,205,000 Term Bond - Series ,450,000 to 5,485,000 10/01/33 48,375,000 Subtotal 84,580,000 Current (1,800,000) Long-term Sales Tax Revenue Bonds 82,780,000 Capital Improvement Bonds Serial Bonds - Series ,000 to 675,000 10/01/17 3,155,000 Term Bonds - Series ,130,000 to 6,260,000 10/01/32 17,420,000 Subtotal 20,575,000 Current (465,000) Long-term Capital Improvement Bonds 20,110,000 Tourist Development Bonds Series ,000 to 1,355,000 10/01/19 13,235,000 Current (915,000) Long-term Tourist Development Bonds 12,320,000 Total Outstanding Long-term Bonds 118,390,000 Notes: Capital Improvement Notes City of Gulf Breeze - Series 1997 Variable 450,000 to 1,085,000 10/01/17 7,990,000 City of Gulf Breeze - Series 2003 Variable 120,000 to 240,000 10/01/17 2,380,000 Subtotal 10,370,000 Current (665,000) Long-term Capital Improvement Notes 9,705,000 Other Notes State of Florida's Toll Facilities Note Interest free 52,500 to 83,334 06/16/09 135,835 Current (83,335) Long-term Notes 52,500 Total Outstanding Long-term Notes 10,505,835 (Continued) 57

65 ANNUAL AUDIT REPORT COUNTY-WIDE NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2007 Capital Leases SunTrust - Central Chiller Lease ,297 to 300,304 04/01/11 1,102,285 SunTrust - Leonard Street Chiller ,062 to 444,652 05/28/11 1,634,981 Subtotal 2,737,266 Current (696,587) Long-term Leases 2,040,679 Total Outstanding Capital Leases 2,737,266 Compensated Absences: Board of County Commissioners N / A N / A 7,276,759 BOCC Self Insurance Fund N / A N / A 131,928 Clerk of the Circuit Court N / A N / A 1,693,533 Sheriff N / A N / A 17,170,831 Tax Collector N / A N / A 1,164,720 Property Appraiser N / A N / A 569,890 Supervisor of Elections N / A N / A 162,720 Subtotal 28,170,381 Current (5,940,073) Long-term compensated absences 22,230,308 Total Outstanding Compensated Absences 28,170,381 Total Long-Term Debt $159,803,482 Business activity long-term debt consists of the following: Amount Interest Annual Final Outstanding Business Activities Rates % Principal Maturity 9/30/2007 Compensated Absences-Business Activities: Solid Waste Fund N / A N / A $500,844 Inspections Fund N / A N / A 574,359 Ambulance Fund N / A N / A 681,148 Subtotal 1,756,351 Current (58,577) Long-term Compensated Absences-Business Activities 1,697,774 Total Outstanding Business Activities Compensated Absences $1,756,351 58

66 ANNUAL AUDIT REPORT COUNTY-WIDE NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2007 Annual debt service requirements to maturity to retire long-term bonds, notes, and loans are as follows: Governmental Long-Term Debt Fiscal Total Year Principal Ending Revenue Bonds Notes and Loans and September 30, Principal Interest Principal Interest Interest 2008 $3,180,000 $5,442,991 $748,335 $408,055 $9,779, ,280,000 5,336, , ,254 9,750, ,390,000 5,237, , ,737 9,732, ,490,000 5,128, , ,172 9,744, ,605,000 5,011, , ,291 9,756, ,440,000 22,672,871 5,375, ,831 49,251, ,460,000 17,356,813 1,205,000 4,140 40,025, ,880,000 12,096, ,976, ,180,000 5,785, ,965, ,485, , ,745,538 Total governmental debt $118,390,000 $84,329,241 $10,505,835 $2,503,480 $215,728,556 Long-Term Debt Bonds Sales Tax Revenue Refunding Bonds Series 2002 in aggregate principal amount of $89,730,000, were issued under and pursuant to the Constitution and laws of the State of Florida, particularly Chapter 125, Florida Statutes, as amended, Home Rule Ordinance No of the County, as amended, and ordinances and resolutions adopted by the Commission of the County. The Bonds are limited special obligations of the County collateralized by a lien on and pledge of, among other things, the proceeds of the local government half-cent sales tax distributed to the County from the Local Government Half-Cent Sales Tax Clearing Trust Fund. The proceeds of the bonds were used to finance the costs of a current refunding of all of the County s Sales Tax Revenue Refunding Bonds Series 1993, originally issued in the amount of $50,355,000, with a balance of $48,830,000 at the date of refunding, and to provide approximately $39,000,000 to finance the cost of certain capital improvement projects of the County including (1) renovating and expanding the Sheriff s administrative building; (2) renovating the jail infirmary; (3) expanding the jail annex; (4) expanding the road prison; (5) acquiring and constructing a parking garage; (6) constructing, renovating, and expanding certain facilities contained within the administrative master plan; (7) constructing a library facility in Perdido Key; (8) renovating the juvenile justice addition; (9) constructing a new one-stop permitting building; (10) finishing out the third, fourth and fifth floors of the M.C. Blanchard Judicial Building; and (11) making certain stormwater improvements. The Project also includes construction and/or equipping of other capital improvements to be determined by the County. Capital Improvement Revenue Bonds Series 2002 in aggregate principal amount of $22,305,000 were issued pursuant to the authority of the Constitution, the laws of the State of Florida, County ordinances, the Santa Rosa Island Authority Special Act and various resolutions, including the interlocal agreement entered into by the Authority and the County. The proceeds are being spent to finance the construction of certain capital improvements on Santa Rosa Island including road improvements to Via DeLuna Drive and Fort Pickens Road, constructing a water reclamation and reuse system, making improvements to the stormwater management system, burying existing above-ground utilities, and making certain landscaping improvements. The 2002 Bonds are special limited obligations of the County, payable solely from and secured by pledge of residential and commercial lease revenues collected by Santa Rosa Island Authority from island leaseholders (per interlocal agreement) and net toll revenues collected for passage across Bob Sikes Bridge to Santa Rosa Island. 59

67 ANNUAL AUDIT REPORT COUNTY-WIDE NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2007 Tourist Development Revenue Refunding Bonds Series 2002 in aggregate principal amount of $16,885,000 were issued pursuant to the authority of the Constitution, the laws of the State of Florida, including the County s Home Rule Ordinances 74-8 and 89-7, and resolutions adopted by the Board of County Commissioners. The proceeds, together with other available moneys, were used to finance the costs of refunding all of the County s Tourist Development Revenue Bonds, Series 1992, originally issued in the amount of $6,915,000, with a balance of $4,650,000 at the date of refunding, and the County s outstanding promissory note payable to the Florida Local Government Finance Commission in the amount of $850,000, and to provide approximately $12,000,000 for certain improvements on Santa Rosa Island consisting of beach nourishment and certain capital improvements to the Civic Center. The principal and interest on the 2002 Bonds are payable solely from and collateralized by a lien upon and a pledge of the Tourist Development Tax levied and collected by the County. Long-Term Debt Notes Capital Improvement Revenue Note Series 1997 allowed the Board to borrow $10,000,000 from the Gulf Breeze, Florida Capital Funding Program to fund the acquisition and construction of certain capital improvement projects. Pledged revenues toward payment of the loan are the electric franchise fees. The loan requires monthly interest payments at variable rates equal to the PSA Municipal Market, plus a maximum 34 basis points. At September 30, 2007, the rate was 4.18%. Capital Improvement Revenue Note Series 1998 permitted borrowing $20,000,000 from the Gulf Breeze, Florida Capital Funding Program to fund additional capital projects. Pledged revenues towards payment of the loan were the infrastructure sales tax revenues. Repayments under the loan require monthly interest payments at variable rates equal to the PSA Municipal Market, plus a maximum 34 basis points. The note was paid off during fiscal year Capital Improvement Revenue Note Series 1999C permitted the Board to borrow $16,000,000 from the Gulf Breeze, Florida Capital Funding Program to fund additional capital projects. Pledged revenues towards payment of the loans were the infrastructure sales tax revenues. Repayments under the loan required semi-annual interest payments (with the interest rate set at %). The note was paid off during fiscal year Capital Improvement Revenue Note Series 2003 permitted the Board to borrow $3,000,000 from the Gulf Breeze, Florida Capital Funding Program to fund a capital building project for the Work Release Facility. There is a covenant by the Board to annually budget and appropriate sufficient funds to pay the debt service. The Board intends to use revenues generated from the Work Release Program. Repayments under the loan require monthly interest payments at variable rates equal to the PSA Municipal Market, plus a maximum 34 basis points. At September 30, 2007, the rate was 4.18%. Florida s Toll Facilities Revolving Trust Fund (TFRTF) allowed the County, in 1996, to enter into a loan agreement with the State of Florida s TFRTF. The TFRTF was created by the Florida Legislature to encourage the development and enhancement of the financial feasibility of revenue-producing road projects undertaken by local governmental entities. These interest-free advances are to be repaid either from proceeds from the project s anticipated bond issue or by installment payments over a five year period beginning in the seventh year from the date of the advance. Payments began in These advances were used to conduct feasibility studies on the proposed Escambia Expressway (extension of I- 110). 60

68 ANNUAL AUDIT REPORT COUNTY-WIDE NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2007 Capital Leases The Board of County Commissioners is obligated under lease-purchase agreements for purchases of new chiller equipment. These leases qualify as capital leases for accounting purposes and are recorded at the present value of the future minimum lease payments at the inception of the lease. The acquired assets have been recorded in the governmental assets of Escambia County, Florida at a value of $4,807,323 Amortization of $1,307,141 on the leased equipment is included in depreciation expense. The Santa Rosa Island Authority has entered into several capital leases for office equipment with terms of months. The acquired assets have been recorded at a net book value of $70,071. Amortization on equipment under capital lease is included in depreciation expense. Maturities of the obligations under capital lease are as follows: Santa Board of Rosa County Island Commissioners Authority Balance 10/01/2006 $3,410,861 $28,089 Additions 0 5,812 Principal payments (673,595) (20,679) Balance 09/30/2007 $2,737,266 $13,222 Future lease payments 2008 $780,113 $9, ,111 5, ,113 2, ,084 0 Total minimum lease payments 2,925,421 17,218 Less amount representing interest (188,155) (3,996) Net minimum lease payments $2,737,266 $13,222 Refunding of Outstanding Debt in prior years permitted the Board to defease certain special obligation and other revenue bonds by placing the proceeds of new bonds in irrevocable trusts to provide for all future debt service payments on the old bonds. Accordingly, the trust account asset and liabilities are not included in the County s financial statements. On September 30, 2007, five bond issues are outstanding with an aggregate principal amount of $53,090,000. Long-Term Debt Arbitrage Liability represents the excess of interest earned from the investment of certain debt proceeds and pledged revenues over the yield rate of the applicable debt. Pursuant to Section 148 (f) of the U.S. Internal Revenue Code, the County must rebate any excess to the United States Government. Arbitrage rebate, if any, is due and payable on each five-year anniversary of the respective bond issue. For the fiscal year ended September 30, 2007, there is no arbitrage rebate liability outstanding. Conduit Debt Obligations have been established in the County s name by private-sector entities for the acquisition and construction of industrial and commercial facilities deemed to be in the public interest. The bonds are secured by the property financed and are payable solely from payments received on the underlying mortgage loans. Neither the Board, nor the State, nor any political subdivision thereof, is obligated in any manner for repayment of the bonds. Accordingly, the bonds are not reported as liabilities 61

69 ANNUAL AUDIT REPORT COUNTY-WIDE NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2007 in the accompanying financial statements. As of September 30, 2007, the outstanding conduit debt of Escambia County is $2,799,056,497. Landfill Closure and Postclosure Care Payable represents the accrued liability for closure and postclosure costs for the County s landfills. Regulations require the County to cover landfills when they stop accepting waste and to perform certain maintenance and monitoring functions for thirty years after closure. Although closure and postclosure care costs will be paid only near or after the date the landfills stop accepting waste, the County reports a portion of these closure and postclosure care costs as an operating expense in each period based on landfill capacity used as of each balance sheet date. Currently, the Beulah, Klondike, Mobile Highway and Camp Five sites are closed. The Perdido Landfill is the only site accepting waste. At year end, $14,545,810 was reported ($100,811 payable from restricted assets and $14,444,999 as long-term liability) as the landfill closure and postclosure care liability in the balance sheet. This amount is based upon estimated costs to perform closure and postclosure care in 2007, determined from the most recently available engineering studies computed on the ratio of landfill capacity filled at year end to total estimated capacity. Capacity is measured in space utilized by the type of waste being accepted. The Class I capacity is at 91.89% and the Class III capacity is at 48.28%. The County will recognize the remaining estimated costs of closure and postclosure care of approximately $2.4 million as the remaining estimated capacity is filled. The Perdido Landfill was expected to be filled between early 2006 and mid Additional cells were developed during Actual cost may be higher due to inflation, changes in technology or changes in regulations. Closure and Postclosure Care Liability: Beginning Ending Balance Balance 10/1/2006 Additions Deletions 9/30/2007 Current: $97,875 $2,936 $0 $100,811 Long-term Liability 13,935, ,943 (248,153) 14,444,999 Total $14,033,084 $760,879 ($248,153) $14,545,810 State and federal laws and regulations require the County to make annual contributions to a cash escrow account to meet financial assurance requirements. The County is in compliance with these requirements at September 30, 2007 with restricted cash and investments of $6,107,121 held for these purposes. In the event closure escrows and interest earnings prove inadequate due to inflation, changes in technology or additional closure/postclosure care requirements, these costs may need to be covered by increased user charges. NOTE 4 OTHER INFORMATION The Risk Management program was established by the Board to self-insure certain types of claims against the Board of County Commissioners, Constitutional Officers, and Santa Rosa Island Authority including losses related to theft, damage and destruction of assets; torts; errors and omissions; injuries to employees; and natural disasters. The following are the types of risks and coverage: Workers Compensation self insured up to a limit of $450,000 per occurrence with statutory limits. Casualty and Property Casualty limits are self-insured for $100,000 per claim with a $200,000 aggregate; excess policy limits of $1,000,000 per occurrence, $2,000,000 aggregate. Property limits are $50,000 - $100,000 self insured retentions per occurrence. 62

70 ANNUAL AUDIT REPORT COUNTY-WIDE NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2007 During the fiscal year ended September 30, 2007, the County had no significant reductions in insurance coverage from the prior year. In addition, there have been no settlements which exceeded the County s insurance coverage for the last three fiscal years. The County currently reports all of its risk management activities, in the Internal Service Fund. Liabilities are reported when it is probable that a loss has occurred and the amount of the loss can be reasonably estimated. Liabilities include an amount for claims that have been incurred but not reported (IBNR). The undiscounted claims liabilities totaling $11,701,265 reported in the Internal Service Fund at September 30, 2007 are actuarially determined based on historical and current information regarding the Fund. Changes in the estimated liability for self-insured losses for the past two years are as follows: Unpaid claims, beginning $11,177,958 $13,901,801 Claims incurred and changes in estimates 4,141, ,165 Less: claims paid (3,617,889) (3,247,008) Unpaid claims, ending 11,701,265 11,177,958 Estimated claims due within one year (3,787,264) (3,128,182) Estimated claims due longer than one year $7,914,001 $8,049,776 Pension and Retirement Plan Substantially all full-time employees of the County are covered by the Florida Retirement System (FRS), a multiple employer cost sharing defined benefit pension plan. The FRS was established in 1970 by Chapter 121, Florida Statutes and is administered by the Florida Department of Management Services, Division of Retirement. Changes to the FRS can be made only by an act of the Florida Legislature. Rules governing the operation and administration of the system may be found in Chapter 60S of the Florida Administrative Code. The FRS issues a publicly available financial report that includes financial statements and required supplementary information. The report may be obtained by writing to FRS, 2639-C North Monroe Street, Tallahassee, Florida The FRS provides retirement and disability benefits, annual cost-of-living adjustments, and death benefits to plan members and beneficiaries. The FRS provides for vesting of benefits for all members actively employed on July 1, 2001, after 6 years of creditable service, regardless of membership class. Under the laws in effect before that date, members needed 7, 8, or 10 years of service to become vested, depending on their membership class. Normal retirement benefits are available to employees who retire at age 62 with 6 or more years of service, or to those employees who have at least 30 years of creditable service, regardless of age. Retirement age and years of service requirements vary depending on membership class. Early retirement is available after 6 years of service with a 5% reduction of benefits for each year prior to the normal retirement age. Retirement benefits are based upon age, average compensation and years-of-service credit where average compensation is computed as the average of an individual s five highest years of earnings. Deferred Retirement Option Program (DROP) is an elective program for eligible members of the FRS Pension Plan, Teachers Retirement System, and State and County Officers and Employees Retirement System who are eligible for normal retirement. Under this program, a member effectively retires and continues covered employment for up to 5 years. While in DROP, the member s deferred monthly retirement benefits accumulate, earning interest and cost-of-living increases. When the DROP period is over, the participant terminates covered employment and begins receiving their predetermined monthly retirement benefit, as well as the accrued DROP benefit. Disability retirees are not eligible to participate in DROP and DROP participants do not qualify for disability retirement. 63

71 ANNUAL AUDIT REPORT COUNTY-WIDE NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2007 The FRS is noncontributory for employees and all contributions are made by participating FRS employers. Participating employer contributions are based upon state-wide rates established by the State of Florida. Average contribution rates for the year ended September 30, 2007 were as follows: regular employees, 9.85%, special risk employees, 20.92%, elected officials, 16.53%, senior management employees, 13.12%, and DROP participants, 10.91%. Contributions made are equal to the actuarially determined contribution requirements for each year and are funded on a pay-as-you-go basis. Contributions for the past three years were as follows: Primary government $14,887,053 $12,556,163 $11,496,932 Discretely presented component units: Santa Rosa Island Authority 154, , ,920 Law Library Board 2,755 2,920 1,483 $15,044,514 $12,667,285 $11,610,335 Leasing Arrangements provide almost all of the revenues for the Santa Rosa Island Authority. The Authority leases the land on County-owned Santa Rosa Island to residents and businesses under residential and commercial leases that typically run for a period of 99 years. Many of the 99-year leases have options to renew for another 99-year term. Many leases, particularly those for restaurants and concessions, are generally for a shorter period. Lease payments in future years are estimated to average approximately $3.7 million per year. Construction Commitments - The County has active construction projects as of September 30, 2007 as follows: Engineering Services - Building $294,864 Engineering Services - Road Paving and Drainage 4,538,127 Engineering Services - NESD 825,466 Engineering Services - Parks 122,061 Engineering Services - Solid Waste 406,728 Building Contract - Building Construction 9,057,822 Road Contract - Road Paving and Drainage 3,128,101 Construction Contracts 592,347 Miscellaneous Contracts 517,465 $19,482,981 Of these commitments, $18,859,657 is reported in the governmental fund financial statements as reserved for encumbrances. The remaining $623,324 represents commitments in proprietary type funds which are not included in the financial statements in accordance with GAAP. These commitments are evidenced by signed purchase orders and contracts which were entered into prior to September 30, Other Commitments - The County has various non-construction contractual commitments at fiscal year end that will be re-appropriated in the new fiscal year. These commitments of $303,434 are included in Reserve for Encumbrances at September 30, The Santa Rosa Island Authority entered into various capital improvement contracts during the year. As of September 30, 2007, the Authority had outstanding commitments under these contracts totaling $3,456,

72 ANNUAL AUDIT REPORT COUNTY-WIDE NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2007 On September 30, 2002, the Santa Rosa Island Authority s Board of Directors approved an interlocal agreement with Escambia County in connection with certain plans for economic development, transportation and beach improvements at Pensacola Beach. By resolution approved by the Santa Rosa Island Authority Board, the Authority s lease fee revenues are pledged for repayment of Tourist Development Refunding Revenue Bonds, Series 2002 and the Capital Improvement Revenue Bonds, Series The Authority is scheduled to make payments to Escambia County of at least $600,000 each year through Significant Commitments Effective October 1, 2006, the Sheriff entered into a cancelable agreement with a vendor to provide for the delivery of medical care to individuals under the custody and control of the Sheriff. The agreement has an initial term of three years, and is renewable for two additional oneyear terms thereafter, unless either party delivers written notice of non-renewal. Under the agreement, the Sheriff pays a base price plus a per inmate day fee for those inmates assigned to the Work Camp. Financial considerations are based on predetermined inmate populations and are subject to adjustment. Medical service expense for the year ended September 30, 2007 was approximately $6.4 million. Estimated expenditures for 2008 and 2009 are $5.9 and $6.2 million, plus $.70 and $.74 per inmate per day for Work Camp inmates. The Sheriff entered into a cancelable agreement with a vendor to provide management services, food, materials, and supplies necessary to feed the inmate population at the corrections facility and the Escambia County Jail, through February 28, Upon mutual agreement, the agreement may be renewed for two one-year periods and each year thereafter. Food service expense under this contract for the year ended September 30, 2007 was approximately $2 million. Operating leases for the Board of County Commissioners are for various spaces throughout the County containing minimum guaranteed rentals averaging $25,994 monthly. The Board of County Commissioners has the option to extend lease terms annually. Lease expense for the year ended September 30, 2007 was $311,931. The Tax Collector is obligated under operating leases for office space with noncancellable terms in excess of one year as of September 30, Rent expense for the year ended September 30, 2007 was $291,484. Future minimum payments, as of September 30, 2007 for the Tax Collector, are as follows: Tax Collector Year Amount 2008 $250, , , , , ,925 $1,928,575 65

73 ANNUAL AUDIT REPORT COUNTY-WIDE NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2007 NOTE 5 CONTINGENT LIABILITIES The County is a defendant in various lawsuits. Although the outcome of these lawsuits is not presently determinable, in the opinion of the County Attorney the resolution of these matters will not have a material adverse effect on the financial condition of the County. The County receives significant financial assistance from federal and state agencies primarily in the form of capital and operating grants. The disbursement of funds received under these programs generally requires compliance with terms and conditions specified in the grant agreements and is subject to audit by grantor agencies. Disallowed claims, if any, resulting from such audits may become liabilities of the County. However, in the opinion of management, disallowed claims, if any, will not have a material effect on the County s financial statements. NOTE 6 INTERNAL SERVICE FUNDS The Sheriff and Clerk each established an internal service fund in 2004 to record the annual costs related to their respective compensated absences policies, to record the short-term and long-term components of such liabilities (including payments to employees), and to collect and hold cash and investments necessary to liquidate such liabilities. The related costs associated with these funds will be recovered via charges to the respective general funds and other funds having employees, in accordance with generally accepted criteria for establishment and use of an internal service fund. At September 30, 2007, the Sheriff s and Clerk s internal service funds have accumulated deficits of $15,583,301 and $843,481, respectively, which will be eliminated over a reasonable period of time based upon a moving amortization period. NOTE 7 SIGNIFICANT EVENTS Following the 2004 and 2005 hurricane seasons in which Escambia County was struck by Hurricanes Ivan, Dennis, Katrina, and Rita, the Board incurred significant payroll and operating costs related to work performed in the aid of public safety during the aftermath of these various storms. Escambia County, Florida was subsequently identified to be included in a major disaster declaration, issued by the U.S. Department of Homeland Security. In addition, the State of Florida Office of the Governor issued an Executive Order to declare a state of emergency for areas affected by the storms. The Board has estimated and included in the Disaster Recovery Fund those costs expected to be reimbursed from Federal and State sources. Final disposition of these costs is subject to review and approval by the Federal and State agencies prior to payment. The Board continues to make assessments of the overall financial impact caused by these storms. During fiscal year 2007, the County continued with loan agreements with several non-profit agencies, namely, Johnson Lakes Escambia Limited Partnership, Morris Court, Ltd., Arbours at Ensley, Ltd., Englewood Senior Limited Partnership, Palafox Landing, Ltd., and Silurian Ponds, Ltd., to develop affordable housing using the Hurricane Housing Recovery SHIP grant funding. The deferred grant stipulates that the rental units must be rented to low income tenants for a period ranging from years. If the terms of the agreements are satisfied, the loan is forgiven. Based on this stipulation, no payments are due unless this agreement is breached. The promissory notes and loan agreements for the rental development projects are recorded in the County s Official Records. If in the event any of these agreements are breached, the re-payment clause(s) will be recognized and the County will pursue collection of the respective loans. Because each of these loans varies in amount and length of maturity, the County has not assessed the amount that would be due upon default of any of these loans, but 66

74 ANNUAL AUDIT REPORT COUNTY-WIDE NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2007 recognizes that it could be a substantial amount. The County does not anticipate any of the loans to fall into default. As discussed in Note 3A, at September 30, 2007, Escambia County had $80,209,182 invested in the State Board of Administration s (SBA) Local Government Surplus Funds Trust Fund Investment Pool (Pool). Escambia County withdrew all its funds from the Pool on November 14, 2007 in response to growing concerns with the Pool s investments in asset-backed commercial paper that was subject to sub prime mortgage risk. On November 29, 2007, the SBA implemented a temporary freeze on the assets held in the Pool due to an unprecedented amount of withdrawals from the Fund coupled with the absence of market liquidity of the asset-backed commercial paper that was subject to sub prime mortgage risk. On December 4, 2007, based on recommendations from an outside financial advisor, the SBA restructured the Pool into two separate pools. Pool A consisted of all money market appropriate assets, which was approximately $12 billion or 86% of Pool assets. Pool B consisted of assets that had defaulted on a payment, paid more slowly than expected, and/or had any significant credit and liquidity risk, which was approximately $2 billion or 14% of Pool assets. At the time of the structuring, all current pool participants had their existing balances proportionally allocated into Pool A and Pool B. The County experienced no loss of principal. Interest earned by the pool for November was not allocated to any participants of the pool; instead, the interest earnings for November were diverted to Pool B to mitigate potential losses in that Pool. Escambia County s interest earnings for November were estimated to be approximately $163,000. Additional information regarding the Pool may be obtained from the SBA. On January 29, 2008, the Florida electorate approved an amendment to the Florida Constitution relative to property taxation. This amendment (referred to as Amendment 1) was placed on the ballot by the Florida Legislature at a special session held in October With respect to homestead property, Amendment 1 increases the current $25,000 homestead exemption by another $25,000 (for property values between $50,000 - $75,000), except for school district taxes. Since the new $25,000 homestead exemption does not apply to school district taxes, this effectively amounts to a $15,000 increase to the existing homestead exemption, resulting in an estimated annual savings of $240 for an average homeowner. Amendment 1 also allows property owners to transfer (make portable) up to $500,000 of their Save Our Homes benefits to their next homestead when they move. Save Our Homes became effective in 1995 and limits (caps) the annual increase in assessed value for homestead property to three percent (3%) or the percentage change in the Consumer Price Index, whichever is less. With respect to non-homestead property, Amendment 1 limits (caps) the annual increase in assessed value for nonhomestead property (businesses, industrial property, rental property, second homes, etc.) to ten percent (10%), except for school district taxes. The Amendment also provides a $25,000 exemption for tangible personal property. Amendment 1 becomes effective on October 1, 2008, with the exception of the ten percent (10%) assessment cap on non-homestead property which becomes effective on January 1, Based on information received from the Escambia County Property Appraiser's Office, the estimated annual loss of property tax revenues for the county from the additional homestead exemption and the $25,000 exemption for tangible personal property is approximately $12 million. At present, there is no accurate way to determine the impact of the portability and assessment cap on non-homestead property provisions in terms of potential loss of property tax revenues. NOTE 8 RESTATEMENT DUE TO FUND RECLASSIFICATION The Economic Development and Industrial Fund was originally established as a proprietary fund to account for the construction and operation of the industrial parks of Escambia County, with land sales the primary revenue source of the fund. The Board has determined that the fund no longer meets the criteria for reporting as a proprietary fund and has therefore elected, effective October 1, 2006, to present it as a 67

75 ANNUAL AUDIT REPORT COUNTY-WIDE NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2007 special revenue fund (the Industrial Parks fund). Accordingly, $973,733 was recorded as the opening fund balance of the Industrial Parks special revenue fund. This amount represents the ending net assets of the proprietary fund at September 30, 2006 reduced by its net capital assets. The beginning balances of both the governmental and proprietary funds capital asset activity schedules included in Note 3-A have been restated to reflect this change. 68

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81 ANNUAL AUDIT REPORT BOARD OF COUNTY COMMISSIONERS SEPTEMBER 30, 2007

82 ANNUAL AUDIT REPORT BOARD OF COUNTY COMMISSIONERS SEPTEMBER 30, 2007 REPORT OF INDEPENDENT AUDITORS SPECIAL PURPOSE BASIC FINANCIAL STATEMENTS FUND FINANCIAL STATEMENTS Balance Sheet Governmental Funds...3 Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds... 4 Statement of Revenues, Expenditures, and Changes in Fund Balances Budget and Actual General Fund, Disaster Recovery Fund, HHRP Fund, Community Redevelopment Agency Fund and Transportation Fund Statement of Net Assets Proprietary Funds Statement of Revenues, Expenses, and Changes in Net Assets Proprietary Funds Statement of Cash Flows Proprietary Funds Balance Sheet Governmental Funds Component Units Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds Component Units Statement of Net Assets - Proprietary Funds Component Units Statement of Revenues, Expenditures and Changes in Net Assets Proprietary Funds Component Units Notes to Financial Statements COMBINING FINANCIAL STATEMENTS Combining Balance Sheet - Non-major Governmental Funds Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Non-major Governmental Funds Schedule of Revenues, Expenditures, and Changes in Fund Balances Budget and Actual Comparison All Other Governmental Funds REPORTS AND MANAGEMENT LETTER Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards Management Letter Including Board of County Commissioners Responses

83 FINANCIAL SECTION This section contains the following subsections: REPORT OF INDEPENDENT AUDITORS BASIC FINANCIAL STATEMENTS FUND FINANCIAL STATEMENTS

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86 BOARD OF COUNTY COMMISSIONERS BALANCE SHEET GOVERNMENTAL FUNDS SEPTEMBER 30, 2007 Community Non-major Total Disaster Redevelopment Transportation Governmental Governmental General Recovery HHRP Agency Trust LOST II LOST III Funds Funds ASSETS Cash and cash equivalents $5,823 $0 $0 $0 $120 $0 $0 $4,410,563 $4,416,506 Equity in pooled cash and investments 34,046,338 2,361,477 6,537,736 4,881,890 5,424,793 32,055,544 3,765,073 29,885, ,958,819 Receivables (net of allowance for uncollectibles) 2,324,524 7,746,990 35, , ,616 10,559,764 Due from other funds 831, ,000, ,698 3,074,896 Due from other governmental units 4,986,185 7,719, ,098, ,367 3,444,327 6,452,262 24,411,102 Inventory 246, , , ,120 Advance to other funds ,423, ,423,789 Other assets ,485 4,485 Total assets $42,440,541 $17,828,270 $6,573,336 $4,881,890 $6,761,086 $56,189,700 $7,209,400 $41,736,258 $183,620,481 LIABILITIES Vouchers payable $1,920,253 $908,727 $202,803 $40,491 $1,006,052 $3,202,230 $295,730 $3,580,564 $11,156,850 Contracts payable 47, , ,421 15,701 1,548, , ,738 3,292,179 Salaries payable 2,081,543 1, , ,463 38, ,083 2,972,604 Due to other funds , ,831,198 2,843,698 Due to other governmental units 154, , , ,816,731 2,083,010 Other current liabilities 4,456,622 1,150,768 5,580, , ,104 12,223,285 Long-term liabilities: Advance from other funds 0 17,682, ,741, ,634 22,173,423 Total liabilities 8,660,712 20,307,584 5,902,037 77,600 1,677,535 4,789,487 4,305,042 11,025,052 56,745,049 FUND BALANCES Reserved for encumbrances 568,485 7,989, ,955 6,486 8,628, ,730 1,288,355 19,163,091 Reserved for advances to other funds ,423, ,423,789 Reserved for debt service , ,666 Reserved for inventory 246, , ,291 1,223,745 Unreserved, reported in: General fund 32,964, ,964,871 Special revenue funds 0 (10,469,292) 671,299 4,764,335 4,847, ,042,827 24,856,253 Capital projects ,348,322 2,262,628 3,338,067 26,949,017 Total fund balances 33,779,829 (2,479,314) 671,299 4,804,290 5,083,551 51,400,213 2,904,358 30,711, ,875,432 Total liabilities and fund balances $42,440,541 $17,828,270 $6,573,336 $4,881,890 $6,761,086 $56,189,700 $7,209,400 $41,736,258 $183,620,481 The accompanying notes are an integral part of the financial statements 3

87 BOARD OF COUNTY COMMISSIONERS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2007 Community Non-major Total Disaster Redevelopment Transportation Governmental Governmental General Recovery HHRP Agency Trust LOST II LOST III Funds Funds Revenues: Taxes $140,057,664 $0 $0 $0 $7,775,561 $24,005,711 $11,971,380 $8,707,849 $192,518,165 Licenses and permits 576, ,153 Intergovernmental 29,721,240 6,291,861 11,224, ,028,836 3,892, ,879,068 83,038,174 Charges for services 2,505, , ,876,526 13,050,773 Fines and forfeitures 123, , ,466 Investment income 3,491, , , , ,526 3,285, ,616,790 10,355,691 Special assessments 764, , ,368,665 12,138,354 Miscellaneous 2,125, ,988 67, ,590,127 74, ,452,876 8,471,777 Total revenues 179,365,472 6,593,717 11,659, ,819 18,296,072 31,257,942 11,971,380 61,418, ,789,553 Expenditures: Current: General government 51,650, ,305, ,930,306 55,886,271 Public safety 3,943,370 8,275, ,222, ,503,262 32,945,331 Physical environment 715, ,920,830 12,636,588 Transportation 247, ,259, ,918,344 33,425,249 Economic environment 470, ,224, ,932,485 21,627,469 Human services 3,727, ,032,199 4,759,335 Culture and recreation 2,831, ,579 2,984,793 Capital improvements ,197,608 9,067,022 7,484,825 60,749,455 Debt service Principal retirement ,717,928 14,717,928 Interest and fiscal charges 0 940, ,420,714 7,361,222 Total expenditures 63,586,445 9,216,338 11,224,492 1,305,389 28,481,875 44,197,608 9,067,022 80,014, ,093,641 Excess (deficiency) of revenue over (under) expenditures 115,779,027 (2,622,621) 434,962 (1,078,570) (10,185,803) (12,939,666) 2,904,358 (18,595,775) 73,695,912 Other financing sources (uses): Insurance reimbursements 0 7,764, ,296 7,778,464 Transfers in 3,715,634 3,369, ,050,294 11,807,318 1,785, ,048,863 41,776,859 Transfers out (123,839,462) (1,418,095) (4,797,616) 0 (5,129,452) (135,184,625) Total other financing sources (uses) (120,123,828) 9,715, ,050,294 11,807,318 (3,012,273) 0 12,933,707 (85,629,302) Net change in fund balances (4,344,801) 7,092, ,962 1,971,724 1,621,515 (15,951,939) 2,904,358 (5,662,068) (11,933,390) Fund balances at beginning of year 38,124,630 (9,572,173) 236,337 2,832,566 3,462,036 67,352, ,373, ,808,822 Fund balances (deficit) at end of year $33,779,829 $ (2,479,314) $ 671,299 $4,804,290 $5,083,551 $51,400,213 $2,904,358 $30,711,206 $126,875,432 The accompanying notes are an integral part of the financial statements 4

88 BOARD OF COUNTY COMMISSIONERS GENERAL FUND STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL FOR THE YEAR ENDED SEPTEMBER 30, 2007 Variance with Final Budget Original Final Positive Budget Budget Actual (Negative) Revenues: Taxes $149,220,589 $149,220,589 $140,057,664 ($9,162,925) Licenses and permits 488, , ,153 87,838 Intergovernmental 30,638,151 30,638,151 29,721,240 (916,911) Charges for services 1,949,813 1,949,813 2,505, ,094 Fines and forfeitures 61,620 61, ,543 61,923 Investment income 365, ,810 3,491,495 3,125,685 Special assessments 825, , ,007 (60,993) Miscellaneous 5,412,048 5,523,077 2,125,463 (3,397,614) Total revenues 188,961, ,072, ,365,472 (9,706,903) Expenditures: Current: General government 80,499,145 79,229,967 51,650,576 27,579,391 Public safety 5,503,375 5,646,298 3,943,370 1,702,928 Physical environment 644, , ,758 (2,625) Transportation 220, , ,899 (12,404) Economic environment 504, , ,492 74,986 Human services 3,803,152 3,920,327 3,727, ,191 Culture and recreation 3,030,359 3,220,273 2,831, ,059 Total expenditures 94,205,901 93,510,971 63,586,445 29,924,526 Excess (deficiency) of revenue over (under) expenditures 94,755,445 95,561, ,779,027 20,217,623 Other financing sources (uses): Insurance Reimbursements Transfers in 1,503,950 1,503,950 3,715,634 2,211,684 Transfers out (111,584,973) (125,135,876) (123,839,462) 1,296,414 Total other financing sources (uses) (110,081,023) (123,631,926) (120,123,828) 3,508,098 Net change in fund balances (15,325,578) (28,070,522) (4,344,801) 23,725,721 Fund balances at beginning of year 15,325,578 28,070,522 38,124,630 10,054,108 Fund balances (deficit) at end of year $0 $0 $33,779,829 $33,779,829 The accompanying notes are an integral part of the financial statements 5

89 BOARD OF COUNTY COMMISSIONERS DISASTER RECOVERY STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL FOR THE YEAR ENDED SEPTEMBER 30, 2007 Variance with Final Budget Original Final Positive Budget Budget Actual (Negative) Revenues: Intergovernmental $0 $7,307,000 $6,291,861 ($1,015,139) Investment income , ,868 Miscellaneous , ,988 Total revenues 0 7,307,000 6,593,717 (713,283) Expenditures: Current: Public safety 57,607 27,649,112 8,275,830 19,373,282 Debt service Principal retirement 2,880,183 2,880, ,880,183 Interest and fiscal charges 489, , ,508 (451,284) Total expenditures 3,427,014 31,018,519 9,216,338 21,802,181 Excess (deficiency) of revenue over (under) expenditures (3,427,014) (23,711,519) (2,622,621) 21,088,898 Other financing sources (uses): Insurance reimbursements 0 0 7,764,168 7,764,168 Transfers in 3,369,407 3,369,407 3,369,407 0 Transfers out 0 (1,418,095) (1,418,095) 0 Total other financing sources (uses) 3,369,407 1,951,312 9,715,480 7,764,168 Net change in fund balances (57,607) (21,760,207) 7,092,859 28,853,066 Fund balances at beginning of year 57,607 21,760,207 (9,572,173) (31,332,380) Fund balances (deficit) at end of year $0 $0 ($2,479,314) ($2,479,314) The accompanying notes are an integral part of the financial statements 6

90 BOARD OF COUNTY COMMISSIONERS HHRP STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL FOR THE YEAR ENDED SEPTEMBER 30, 2007 Variance with Final Budget Original Final Positive Budget Budget Actual (Negative) Revenues: Intergovernmental $20,890,145 $20,890,145 $11,224,492 ($9,665,653) Investment income , ,780 Miscellaneous ,182 67,182 Total revenues 20,890,145 20,890,145 11,659,454 (9,230,691) Expenditures: Current: Economic environment 20,890,145 20,890,145 11,224,492 9,665,653 Total expenditures 20,890,145 20,890,145 11,224,492 9,665,653 Excess (deficiency) of revenue over (under) expenditures , ,962 Fund balances at beginning of year , ,337 Fund balances (deficit) at end of year $0 $0 $671,299 $671,299 The accompanying notes are an integral part of the financial statements 7

91 BOARD OF COUNTY COMMISSIONERS COMMUNITY REDEVELOPMENT AGENCY STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL FOR THE YEAR ENDED SEPTEMBER 30, 2007 Variance with Final Budget Original Final Positive Budget Budget Actual (Negative) Revenues: Investment income $0 $0 $226,819 $226,819 Miscellaneous 1,300 1,300 0 (1,300) Total revenues 1,300 1, , ,519 Expenditures: Current: General government 2,359,201 5,884,161 1,305,389 4,578,772 Total expenditures 2,359,201 5,884,161 1,305,389 4,578,772 Excess (deficiency) of revenue over (under) expenditures (2,357,901) (5,882,861) (1,078,570) 4,804,291 Other financing sources (uses): Transfers in 2,357,901 3,762,368 3,050,294 (712,074) Transfers out (620,351) (712,074) 0 712,074 Total other financing sources (uses) 1,737,550 3,050,294 3,050,294 0 Net change in fund balances (620,351) (2,832,567) 1,971,724 4,804,291 Fund balances at beginning of year 620,351 2,832,567 2,832,566 (1) Fund balances (deficit) at end of year $0 $0 $4,804,290 $4,804,290 The accompanying notes are an integral part of the financial statements 8

92 BOARD OF COUNTY COMMISSIONERS TRANSPORTATION TRUST STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL FOR THE YEAR ENDED SEPTEMBER 30, 2007 Variance with Final Budget Original Final Positive Budget Budget Actual (Negative) Revenues: Taxes $7,578,656 $7,578,656 $7,775,561 $196,905 Intergovernmental 4,946,852 4,946,852 5,028,836 81,984 Charges for services 496, , , ,340 Investment income , ,526 Special assessments 5,947 5,947 5,682 (265) Miscellaneous 279,442 4,518,599 4,590,127 71,528 Total revenues 13,306,897 17,546,054 18,296, ,018 Expenditures: Current: General government 973,359 32, ,525 Public safety 4,829,403 5,265,026 5,222,869 42,157 Transportation 15,395,987 26,948,957 23,259,006 3,689,951 Total expenditures 21,198,749 32,246,508 28,481,875 3,764,633 Excess (deficiency) of revenue over (under) expenditures (7,891,852) (14,700,454) (10,185,803) 4,514,651 Other financing sources (uses): Transfers in 8,599,698 11,807,318 11,807,318 0 Total other financing sources (uses) 8,599,698 11,807,318 11,807,318 0 Net change in fund balances 707,846 (2,893,136) 1,621,515 4,514,651 Fund balances at beginning of year (707,846) 2,893,136 3,462, ,900 Fund balances (deficit) at end of year $0 $0 $5,083,551 $5,083,551 The accompanying notes are an integral part of the financial statements 9

93 BOARD OF COUNTY COMMISSIONERS STATEMENT OF NET ASSETS PROPRIETARY FUNDS SEPTEMBER 30, 2007 Business-type Activities Governmental Activities Non-major Internal Service ASSETS Solid Waste Ambulance Civic Center Inspections Total Fund Current assets: Cash and cash equivalents $2,625 $300 $443,352 $700 $446,977 $33,227 Equity in pooled cash and investments 6,047, , ,601 6,063,710 13,031,285 16,886,571 Receivables (net of allowance for uncollectibles) 678,384 2,966, , ,770,996 2,637,146 Due from other governmental units 1, , ,295 Inventory 0 142,057 54, , ,591 Restricted cash and cash equivalents 89, , ,610 47,529 Other current assets , ,190 0 Total current assets 6,818,992 3,746, ,620 6,349,736 17,897,591 20,259,359 Noncurrent assets: Restricted assets Cash and cash equivalents 6,107, ,107,121 0 Capital assets: Land and other non-depreciable assets 3,422,172 6, ,428,614 0 Capital assets (net of depreciation) 24,315,232 1,676,488 11,907, ,292 38,175,805 63,012 Advance to other funds ,634 Total noncurrent assets 33,844,525 1,682,930 11,907, ,292 47,711, ,646 Total assets 40,663,517 5,429,173 12,890,413 6,626,028 65,609,131 21,072,005 LIABILITIES Current liabilities: Vouchers payable 1,097,650 61, ,844 14,762 1,545, ,851 Contracts payable 514, ,581 0 Salaries and benefits payable 92, , , ,178 20,489 Due to other funds , ,198 0 Due to other governmental units 1,935 8, ,222 13, Other current liabilities 2, ,610 19, ,441 69,545 Claims liabilities ,787,264 Payable from restricted assets: Customer deposits 89, , ,610 47,529 Landfill closure 100, ,811 0 Total current liabilities 1,898, , , ,661 3,544,472 4,515,863 Non-current liabilities: Compensated absences 500, , ,652 1,697, ,928 Landfill closure and postclosure care payable 14,444, ,444,999 0 Claims liabilities ,914,001 Total non-current liabilities 14,945, , ,652 16,142,773 8,045,929 Total liabilities 16,844, , , ,313 19,687,245 12,561,792 NET ASSETS Invested in capital assets, net of related debt 27,737,404 1,682,930 11,907, ,292 41,604,419 63,012 Unrestricted (3,918,475) 2,752, ,968 5,364,423 4,317,467 8,447,201 Total net assets $23,818,929 $4,435,481 $12,026,761 $5,640,715 $45,921,886 $8,510,213 The accompanying notes are an integral part of the financial statements. 10

94 BOARD OF COUNTY COMMISSIONERS STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS PROPRIETARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2007 Business-type Activities Governmental Activities Non-major Internal Solid Waste Ambulance Civic Center Inspections Total Service Fund Operating revenues: Licenses and permits ($142) $0 $0 $3,435,821 $3,435,679 $0 Charges for services 8,835,786 13,210,876 4,307,419 5,651 26,359,732 14,722,000 Fines and forfeitures 124, , ,442 0 Miscellaneous income 30, ,831 6,676 17, , ,613 Total operating revenues 8,990,560 13,425,707 4,314,095 3,518,542 30,248,904 14,858,613 Operating expenses: Personal services 2,615,142 7,894, ,986,582 13,496, ,663 Contractual services 1,264, ,464 5,020,542 67,845 6,524,288 0 Claims expense, changes in estimate, and fees ,347,760 Materials and supplies 661, , ,636 1,430,752 4,007,339 Travel and vehicle costs 36,098 6, ,099 51,903 4,160 Depreciation 2,130, ,211 1,039, ,532 3,952,792 14,226 Bad debts 3,192 4,203,552 5, ,213,026 0 Memberships, dues and subscriptions 26,430 22, ,584 60,831 7,721 Insurance and bonds 290, , ,313 21, ,627 4,084,647 Communications and freight services 21,821 72, , ,036 6,746 Utilities 161, , ,487 1,210 Maintenance 528, ,209 79,809 34,117 1,080,198 51,845 Rentals and leases 152,090 12, , ,737 1,836 Provisions for closure and long-term care 760, ,880 0 Advertising and promotion 5, ,159 0 Miscellaneous 505, ,029 32, ,081 1,274, ,435 Total operating expenses 9,164,005 14,760,180 6,410,538 3,870,601 34,205,324 12,785,588 Operating income (loss) (173,445) (1,334,473) (2,096,443) (352,059) (3,956,420) 2,073,025 Non-operating revenues (expenses): Interest income 836,099 49,416 43, ,004 1,201, ,919 Interest expense 0 0 (4,238) 0 (4,238) 0 Gain (loss) on disposal of assets (294,208) (5,281) 0 0 (299,489) 0 Insurance reimbursements ,141 Other income Total non-operating revenues (expenses) 541,891 45,005 38, , ,811 1,042,060 Income (loss) before contributions and transfers 368,446 (1,289,468) (2,057,532) (79,055) (3,057,609) 3,115,085 Other financing sources (uses): Capital contributions 4, , ,860 26,149 Transfers in 0 0 1,054, ,054, ,000 Transfers (out) (201,000) (169,373) 0 (942,876) (1,313,249) 0 Total contributions and transfers (196,471) 448,958 1,054,600 (942,876) 364, ,149 Change in net assets 171,975 (840,510) (1,002,932) (1,021,931) (2,693,398) 3,591,234 Net assets at beginning of year 23,646,954 5,275,991 13,029,693 6,662,646 48,615,284 4,918,979 Net assets at ending of year $23,818,929 $4,435,481 $12,026,761 $5,640,715 $45,921,886 $8,510,213 The accompanying notes are an integral part of the financial statements. 11

95 BOARD OF COUNTY COMMISSIONERS STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2007 Business-type Activities Governmental Non-major Activities Solid Waste Ambulance Civic Center Inspections Total Internal Service Fund Cash flows from operating activities: Cash received from customers $9,332,470 $13,107,354 $4,127,157 $3,501,723 $30,068,704 $14,272,899 Cash payments to suppliers for goods and services (3,572,145) (6,229,236) (6,397,270) (749,014) (16,947,665) (11,775,400) Cash payments to employees for services (2,580,125) (7,734,805) 0 (2,872,780) (13,187,710) (567,036) Other non-operating revenues (expenses) 0 215, ,701 99,141 Net cash provided by (used in) operating activities 3,180,200 (640,986) (2,270,113) (120,071) 149,030 2,029,604 Cash flows from noncapital financing activities: Transfers in 0 0 1,054, ,054, ,000 Transfers out (201,000) (169,373) 0 (942,876) (1,313,249) 0 Principal (paid)/received on interfund advance 0 0 (73,447) 0 (73,447) 677,000 Interest (paid)/received on interfund advance 0 0 (4,238) 0 (4,238) 31,432 Net cash provided by (used in) noncapital financing activities (201,000) (169,373) 976,915 (942,876) (336,334) 1,158,432 Cash flows from capital and related financing activities: Acquisition and construction of capital assets (7,382,400) (117,254) (218,749) (19,154) (7,737,557) (46,593) Net cash used in capital and related financing activities (7,382,400) (117,254) (218,749) (19,154) (7,737,557) (46,593) Cash flow from investing activities: Interest on investments 836,099 49,416 43, ,004 1,201, ,919 Net cash provided by investing activities 836,099 49,416 43, ,004 1,201, ,919 Net increase (decrease) in cash & cash equivalents (3,567,101) (878,197) (1,468,798) (809,097) (6,723,193) 4,084,362 Cash and cash equivalents at beginning of year 15,813,731 1,516,210 2,194,751 7,158,494 26,683,186 12,882,965 Cash and cash equivalents at end of year $12,246,630 $638,013 $725,953 $6,349,397 $19,959,993 $16,967,327 Non-cash investing, capital and financing activities Capital contributions $4,529 $618,331 $0 $0 $622,860 $26,149 The accompanying notes are an integral part of the financial statements. 12

96 BOARD OF COUNTY COMMISSIONERS STATEMENT OF CASH FLOWS PROPRIETARY FUNDS Business-type Activities (CONTINUED) FOR THE YEAR ENDED SEPTEMBER 30, 2007 Governmental Non-major Activities Solid Waste Ambulance Civic Center Inspections Total Internal Service Fund Reconciliation of cash and cash equivalents at end of year to Statement of Net Assets: Current assets: Cash and cash equivalents $2,625 $300 $443,352 $700 $446,977 $33,227 Equity in pooled cash and investments 6,047, , ,601 6,063,710 13,031,285 16,886,571 Restricted assets: Cash and cash equivalents 6,196, ,196,744 47,529 Equity in pooled cash and investments , ,987 0 Total cash and cash equivalents at end of year $12,246,630 $638,013 $725,953 $6,349,397 $19,959,993 $16,967,327 Reconciliation of operating income (loss) to net cash provided by (used in) operating activities: Operating income (loss) ($173,445) ($1,334,473) ($2,096,443) ($352,059) ($3,956,420) $2,073,025 Other non-operating revenues ,141 Adjustments to reconcile operating income (loss) to net cash provided by (used in) operating activities: Depreciation 2,130, ,211 1,039, ,532 3,952,792 14,226 Provision for uncollectible accounts 3,192 4,203,552 5, ,213,026 0 (Increase) decrease in assets: Accounts receivable 315,290 (4,307,074) (69,694) 1,339 (4,060,139) (388,314) Due from other governments 38, ,664 (240,745) Inventory 0 (16,207) (119) 0 (16,326) (378,591) Prepaid expense 0 0 (38,004) 0 (38,004) 0 Increase (decrease) in liabilities: Vouchers payable 335,967 6,043 (962,979) 3,672 (617,297) 195,366 Salaries and benefits payable (12,793) 34,709 0 (6,106) 15,810 7,865 Compensated absences 47, , , ,604 80,762 Accrued taxes payable 0 0 (25,355) 0 (25,355) 0 Deposits (15,236) 0 0 (18,673) (33,909) 937 Due to other governments (2,299) (6,503) 0 1,801 (7,001) (720) Deferred revenue 0 0 (123,011) 0 (123,011) 43,345 Landfill closure and long-term care payable 512, ,726 0 Claims payable ,307 Net cash provided by (used in) operating activities $3,180,200 ($640,986) ($2,270,113) ($120,071) $149,030 $2,029,604 The accompanying notes are an integral part of the financial statements 13

97 BOARD OF COUNTY COMMISSIONERS BALANCE SHEET GOVERNMENTAL FUNDS COMPONENT UNITS SEPTEMBER 30, 2007 Escambia County Law Library Board ASSETS Cash and cash equivalents $73,923 Receivables (net of allowance for uncollectibles) 954 Due from other governmental units 24,000 Total assets $98,877 LIABILITIES Vouchers payable $5,687 Salaries payable 2,057 Other current liabilities 24,000 Total liabilities 31,744 FUND BALANCES Unreserved 67,133 Total fund balances 67,133 Total liabilities and fund balances $98,877 The accompanying notes are an integral part of the financial statements 14

98 BOARD OF COUNTY COMMISSIONERS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS COMPONENT UNITS FOR THE YEAR ENDED SEPTEMBER 30, 2007 Escambia County Law Library Board Revenues: Charges for services $92,408 Investment income 3,782 Miscellaneous 1,078 Total revenues 97,268 Expenditures: Current: General government 112,418 Total expenditures 112,418 Excess (deficiency) of revenue over (under) expenditures (15,150) Fund balances at beginning of year 82,283 Fund balances at end of year $67,133 The accompanying notes are an integral part of the financial statements 15

99 BOARD OF COUNTY COMMISSIONERS STATEMENT OF NET ASSETS PROPRIETARY FUNDS COMPONENT UNITS SEPTEMBER 30, 2007 Business-Type Activities Escambia County Santa Rosa Housing ASSETS Island Authority Finance Authority Total Current assets: Cash and cash equivalents $2,394,651 $848,374 $3,243,025 Investments 0 1,775,695 1,775,695 Receivables (net of allowance for uncollectibles) 386, , ,184 Due from other governmental units 623, ,516 Bank participation agreements 0 296, ,870 Other current assets 10, ,998 Total current assets 3,415,689 3,148,599 6,564,288 Noncurrent assets: Restricted assets: Cash and cash equivalents 331, ,865 Investments 4,714, ,714,887 Capital assets (net of depreciation) 33,614, ,536 34,571,335 Supplemented mortgage loans/deposits 0 4,869,633 4,869,633 Bank participation agreements 0 11,071 11,071 Other noncurrent assets 562, ,381 Total noncurrent assets 39,223,932 5,837,240 45,061,172 Total assets 42,639,621 8,985,839 51,625,460 LIABILITIES Current liabilities: Vouchers payable 2,953, ,558 3,053,706 Salaries, benefits and compensated absences payable 75, ,804 Due to other governmental units 521, ,191 Notes, loans, bonds and capital leases payable 6, ,683 Other current liabilities 226, ,888 Total current liabilities 3,783, ,558 3,884,272 Non-current liabilities: Compensated absences 182, ,929 Leases payable 6, ,539 Deferred revenues 423, ,827 Total non-current liabilities 613, ,295 Total liabilities 4,397, ,558 4,497,567 NET ASSETS Invested in capital assets, net of related debt 33,601, ,536 34,558,113 Restricted net assets 2,020,724 1,879,537 3,900,261 Unrestricted net assets 2,620,311 6,049,208 8,669,519 Total net assets $38,242,612 $8,885,281 $47,127,893 The accompanying notes are an integral part of the financial statements. 16

100 BOARD OF COUNTY COMMISSIONERS STATEMENT OR REVENUES, EXPENSES, AND CHANGES IN FUND NET ASSETS PROPRIETARY FUNDS COMPONENT UNITS FOR THE YEAR ENDED SEPTEMBER 30, 2007 Business-type Activities Escambia County Santa Rosa Housing Island Authority Finance Authority Total Operating revenues: Charges for services $6,133,726 $2,711,041 $8,844,767 Total operating revenues 6,133,726 2,711,041 8,844,767 Operating expenses: Personal services 2,833, ,357 3,197,295 Contractual services 610,438 79, ,299 Materials and supplies 279,480 22, ,369 Travel and vehicle costs 0 37,239 37,239 Depreciation 686,042 5, ,558 Memberships, dues and subscriptions 0 16,431 16,431 Utilities 200, ,992 Maintenance 55, ,866 Rentals and leases 0 51,784 51,784 Advertising and promotion 279, ,989 Miscellaneous 289, , ,510 Total operating expenses 5,236,630 1,280,702 6,517,332 Operating income (loss) 897,096 1,430,339 2,327,435 Non-operating revenues (expenses): Interest income 158, , ,118 Interest expense (6,600) 0 (6,600) Grant revenue 3,351, ,351,105 Grant expense (423,345) 0 (423,345) Other income (expense) (449,223) 542,719 93,496 Payments to Escambia County (800,000) 0 (800,000) Total non-operating revenues (expenses) 1,829, ,775 2,732,774 Change in net assets 2,727,095 2,333,114 5,060,209 Net assets at beginning of year 35,515,517 6,552,167 42,067,684 Net assets at ending of year $38,242,612 $8,885,281 $47,127,893 The accompanying notes are an integral part of the financial statements. 17

101 NOTES TO FINANCIAL STATEMENTS

102 ANNUAL AUDIT REPORT BOARD OF COUNTY COMMISSIONERS NOTES TO COMBINED FINANCIAL STATEMENTS SEPTEMBER 30, 2007 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Escambia County, Florida (the County) is a political subdivision of the State of Florida created pursuant to Chapter 7 of the Florida Statutes. The County is governed by a five member Board of County Commissioners (the Board ), elected from single-member districts. The Board has no powers other than those expressly vested in it by State Statute and their governmental powers cannot be delegated. The Board appoints an administrator to administer all policies emanating from its statutory powers and authority. In addition to the Board, there are five elected Constitutional Officers, pursuant to Article 8, Section 1(d), of the Constitution of the State of Florida: Clerk of the Circuit Court, Sheriff, Tax Collector, Property Appraiser, and Supervisor of Elections. The accounting policies of the Board conform to accounting principles generally accepted in the United States (US) as applicable to governments. The following is a summary of the more significant accounting policies. A. Financial Reporting Entity The combined financial statements include the operations of the Board and those separately administered organizations for which the government is considered to be financially accountable. Blended component units, although legally separate entities, are, in substance, part of the government operations. Discretely presented component units are reported in a separate statement in the basic financial statements to emphasize that they are legally separate from the primary government. These special-purpose financial statements are not intended to be a complete presentation of the financial position and results of operations of Escambia County, Florida taken as a whole. As permitted by Chapter (4), Rules of the Auditor General State of Florida, the special-purpose financial statements consists of only the fund level financial statements as defined in Governmental Accounting Standards Board (GASB) Statement No. 34, and do not include presentations of government-wide financial statements of the Board of County Commissioners. Blended Component Units Community Redevelopment Agency (CRA) In 1995, the Board adopted Ordinance No which established the Community Redevelopment Agency (CRA) of Escambia County pursuant to The Community Redevelopment Act of The Board serves as the CRA Board and has all rights, powers, duties, privileges and immunities authorized by the Act. The CRA is reported as a major special revenue fund. Five redevelopment areas are included under the CRA jurisdiction. Discretely Presented Component Units Governmental Fund Type: Escambia County Law Library Board The Escambia County Law Library Board, created under Special Act, Chapter , Laws of Florida, provides for the maintenance of a central law library for the use of citizens, county officials, judges and officers of the courts of Escambia County. The operations of the Law Library Board are funded by collection of fees by the Clerk of the Circuit Court & Comptroller on civil cases filed in the courts in addition to other costs provided by law. The Law Library Board is composed of two (2) circuit judges, two (2) county judges and one (1) lawyer appointed by the local bar association. The operations of the Law Library are reported in the Law Library Fund, a special revenue fund, as a discrete component unit. Financial statements for the Escambia County Law Library Board can be obtained at 190 Governmental Center, Pensacola, Florida

103 ANNUAL AUDIT REPORT BOARD OF COUNTY COMMISSIONERS NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2007 Proprietary Fund Type: Santa Rosa Island Authority (SRIA) The Santa Rosa Island Authority (SRIA) was established by the provisions of Chapter , Laws of Florida, Special Acts of 1947, as amended. The Board appoints five (5) members of the Authority s six (6) member Board, and one (1) member is elected by the eligible voters who are full time residents of the Island. The County approves the Authority s budget and issuance of debt. The Board has veto power over decisions of the Authority. The SRIA serves as the Board s leasing agent for property on Santa Rosa Island owned by the Board. The operations of SRIA are reported in the SRIA Fund, a discrete component unit in this report. Financial statements for the SRIA can be obtained at 1 Via Deluna, Pensacola Beach, Florida Escambia County Housing Finance Authority The Escambia County Housing Finance Authority (HFA) was created in 1982 by Ordinance No pursuant to Chapter 78-89, Laws of Florida codified as Chapter 159, Part IV, Section through The Board appoints five (5) members of the HFA and must approve by resolution any rules or regulations, the issuance of revenue bonds and all contracts and agreements. The Escambia County HFA and the Board are not substantially the same. The HFA does not provide services almost entirely for the Board. Therefore, the operations of the Escambia County HFA are reported as a discrete component unit in this report. Financial statements for the Escambia County HFA can be obtained at 25 West Cedar Street, Suite 530, Pensacola, Florida Because these component units have been reported as a part of the Board, there are limited instances where special note references or separation will be required. If no separate note reference or categorization is made, the user should assume that information presented is equally applicable. Joint Ventures As defined in GASB Statement Number 14, a joint venture is a separate legal entity or other organization that results from a contractual arrangement (or interlocal agreement) and that is owned, operated or governed by two or more participants as a separate and specific activity subject to joint control in which the participants retain (a) an on-going financial interest or (b) an on-going financial responsibility. The Board participates and provides financial support to the following nonequity joint ventures: Human Relations Commission (HRC) The Commission was created by an Interlocal Agreement between Escambia County and the City of Pensacola in 1978, pursuant to Florida Statutes, Chapter , for the purpose of being responsible for the promotion of fair treatment and equal opportunity to all citizens of the local community. The Commission is composed of fourteen (14) members; seven (7) selected by the Board and seven (7) selected by the City of Pensacola. The duration of this agreement is for a period of two (2) years, with a renewal provision. The Board does not control budgeting or financing for the Commission. Separate financial statements are available from the Commission at 14 West Jordan Street, Suite 2E, Pensacola, Florida Pensacola Escambia County Promotion and Development Commission (PEDC) This Commission was created in 1967 by Chapter , Laws of Florida, amended in 1980 by Chapter , to promote and develop tourism and industry in Escambia County and in the City of Pensacola. The nine (9) member Commission consists of two (2) members of the Pensacola City Council, two (2) members of the Escambia County Commission, one (1) member of the Century City Council, the President of the Chamber of Commerce (1), one (1) representative of the Committee of 100 or the Tourist Advisory Council, one (1) at-large member appointed by the Pensacola City Council, and one (1) at-large member appointed by the Escambia County Commission. The Board of County Commissioners and the City of Pensacola each contribute funds annually for the operation of the Commission, but neither has control of the budget or 19

104 ANNUAL AUDIT REPORT BOARD OF COUNTY COMMISSIONERS NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2007 finances of the Commission. The Commission has no outstanding debt. Separate financial statements are available from the Pensacola Escambia County Promotion and Development Commission at 117 West Garden Street, Pensacola, Florida Summary financial statements as of September 30, 2007 for the joint ventures are as follows: BALANCE SHEETS SEPTEMBER 30, 2007 HRC PEDC Assets and other debits $33,969 $298,828 Liabilities $15,998 $0 Fund equity and other credits Invested in capital assets 8,669 0 Reserved for restricted assets 0 61,198 Unreserved 9, ,630 Total fund equity 17, ,828 Total liabilities and fund equity $33,969 $298,828 STATEMENTS OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE FOR FISCAL YEAR ENDED SEPTEMBER 30, 2007 HRC PEDC Revenues $282,854 $306,663 Expenditures (279,806) (276,472) Excess (deficiency) of revenues over expenditures 3,048 30,191 Fund balance beginning 14, ,637 Fund balance ending $17,971 $298,828 B. Basic Financial Statements Fund Financial Statements The basic financial statements consist of the fund financial statements. These statements categorize primary activities as either governmental or business-type activities. Individual fund financial statements are provided for governmental funds, proprietary funds and discrete component units. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. 20

105 ANNUAL AUDIT REPORT BOARD OF COUNTY COMMISSIONERS NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2007 The Board reports the following major governmental funds: The General Fund is the government s primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund. The Disaster Recovery Fund accounts for resources provided from various State and Federal grants, such as Federal Emergency Management Agency (FEMA). The Hurricane Housing Recovery Program (HHRP) Fund accounts for the revenues and expenditures thereof. The fund is designed to provide stable and adequate funding for housing destroyed or damaged by hurricanes. The Community Redevelopment Agency (CRA) accounts for the revenues and expenditures of the redevelopment areas established within the County. The Transportation Trust Fund accounts for gasoline taxes and other revenues to be expended on various transportation projects within the County. The Local Option Sales Tax II Fund accounts for monies collected pursuant to Florida Statutes , which authorized counties to impose a one percent (1%) local option infrastructure sales surtax upon taxable transactions occurring within Escambia County, to provide for road and drainage projects and improvements, recreation projects, public safety, expansion of jail and court facilities, and community redevelopment projects. This tax which was to expire May 31, 2007 was extended for an additional 11 years and is accounted for in the Local Option Sales Tax III Fund. The Local Option Sales Tax III Fund accounts for monies collected pursuant to Florida Statutes , authorizing counties to impose a one percent (1%) local option infrastructure sales tax as described above. This tax was approved by referendum for the period January 1, 2007 December 31, The Board reports the following major proprietary funds: The Solid Waste Fund accounts for solid waste disposal (landfill) operations, primarily financed through franchise fees and user charges. The Ambulance Fund accounts for the cost of emergency medical services provided in Escambia County. All activities necessary to provide such services are accounted for in this fund. The Civic Center Fund accounts for the operation, maintenance and improvements of the County s Civic Center. The Inspection Fund accounts for building inspection services provided to the residents of Escambia County. Additionally, the Board reports the following fund type: The Internal Service Fund accounts for risk management activities and garage and fuel activities provided to other County departments, as well as the administration of employee benefits. 21

106 ANNUAL AUDIT REPORT BOARD OF COUNTY COMMISSIONERS NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2007 C. Basis of Presentation, Basis of Accounting Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the Board considers revenues to be available if they are collected within 60 days of the end of the current fiscal period, except for certain grant revenues which are recognized as revenues in the same period the grant expenditures occurred. State shared revenues, sales taxes, franchise taxes, and interest associated with the current fiscal period are all considered to be susceptible to accrual and have been recognized as revenues of the current fiscal period. Expenditures generally are recorded when a liability is incurred, except for debt service expenditures and expenditures related to compensated absences and claims and judgments, which are recorded when payment is due. Capital asset acquisitions are recorded as expenditures in governmental funds. Monies received from issuing longterm debt and acquisitions under capital leases are reported as other financing sources. Under the terms of some grant agreements, the Board funds certain programs by a combination of specific cost-reimbursement grants, categorical block grants, and general revenues. Thus, when the program expenses are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the Board s policy to first apply cost-reimbursement grant resources to such programs, followed by categorical block grants, and then by general revenues. The Board has elected to follow Financial Accounting Standards Board (FASB) statements and interpretations issued on or before November 30, 1989, for all governmental and business-type activities and enterprise funds, unless those standards conflict with or contradict guidance of the GASB pronouncements. Proprietary funds distinguish operating revenues and expenses from nonoperating 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 Board s enterprise funds are charges to customers for sales and services. Operating expenses for enterprise funds and the internal service fund 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 nonoperating revenues and expenses. D. Assets, Liabilities and Net Assets or Equity Cash or Cash Equivalents consists of cash on hand, demand deposits, and short-term investments with original maturities of three months or less from date of acquisition. Equity in Pooled Cash and Investments represent assets pooled for investment purposes with each individual fund and/or account maintained on a daily transaction basis. Such investments consist of demand deposits, certificates of deposit, notes of certain instrumentalities, and monies placed with the State Board of Administration s investment pool. Investment earnings are allocated to the participating funds on a pro-rata basis. As defined by GASB Statement No. 31, money market investments are reported at amortized cost rather than fair value. The Board has adopted an investment policy in accordance with specific requirements of Florida Statute (1) (16). This policy authorizes investments in direct obligations of the U.S. Treasury, Federal Instrumentalities, time deposits and savings accounts in qualified public depositories, tax exempt obligations of the State of Florida, the Florida Counties Investment Trust, Securities and 22

107 ANNUAL AUDIT REPORT BOARD OF COUNTY COMMISSIONERS NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2007 Exchange qualified open-end money market mutual funds, and repurchase agreements. The Board may also invest in the Local Government Surplus Trust Fund, an external investment pool administered by the State Board of Administration (SBA). Investments held in the SBA consist largely of treasury instruments, federal agency obligations, certificates of deposit, repurchase agreements, bankers acceptances, and commercial paper. The SBA pool is a 2-a-7 like pool as defined in GASB Statement No. 31 and the reported investment balance is equal to the value of pooled shares. The Office of the Auditor General performs an operational audit of the activities and investments of the SBA. Trade Receivables are shown net of an allowance for uncollectibles, for all amounts older than 120 days, except for the Solid Waste Fund, which uses a 90-day policy. The Board records unbilled service receivables for services that have been rendered but not billed at the end of the fiscal year. Real and Personal Property Valuations are determined each year as of January 1 by the Property Appraiser s Office. Florida Statues require all property be assessed at 100% of just value. For 2007, the County-wide millage rate was mills. All property taxes are billed in arrears and become due and payable on November 1, and are delinquent on April 1, of the following year. The legal lien date is January 1 of each year. Discounts of 4, 3, 2, and 1 percent are allowed for early payment in November through February, respectively. Virtually all unpaid taxes are collected via the sale of tax certificates prior to fiscal year end. Due From/(To) Other Funds are activities between funds. Such amounts are representative of lending/borrowing arrangements outstanding at the end of the fiscal year and are referred to as either due to /from other funds (i.e., the current portion of interfund loans) or advances to/from other funds (i.e., the non-current portion of interfund loans). Advances To/(From) Other Funds, as reported in the governmental fund financial statements, are offset by a fund balance reserve to indicate such amounts are not available for appropriation and are not expendable available financial resources. Inventory amounts are valued at cost (first-in, first-out). Inventory balances in general, special revenue and enterprise funds are accounted for on the consumption method, i.e., expenditures and expenses are recognized when inventories are used. Inventories are equally offset by a fund balance reserve since such amounts are not available spendable resources even though they are a component of net current assets. Restricted Assets are assets of governmental and business-type activities that are restricted per bond resolutions or other agreements. Capital Assets, which include property, plant, equipment, and infrastructure assets (e.g., roads, bridges, sidewalks, and similar items), are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. Purchased or constructed assets are recorded at historical cost or estimated cost. Donated capital assets are recorded at estimated fair market value at the date of donation. The Board capitalizes items costing $1,000 and having an estimated useful life in excess of one year. Buildings, public domain and system infrastructure assets which represent major expenditures for such items as roads, water and sewer lines, landfill improvements, and parks and drainage systems are capitalized at historical cost. Major outlays for capital assets and improvements are capitalized as projects are constructed. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend asset lives are not capitalized. 23

108 ANNUAL AUDIT REPORT BOARD OF COUNTY COMMISSIONERS NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2007 Depreciation has been provided using the straight-line method. The estimated useful lives of the various classes of depreciable capital assets are as follows: Buildings Improvements Infrastructure Equipment years years years 3 10 years Compensated Absences are accrued in accordance with GASB Statement No. 16. It is the policy of the Board to permit employees to accumulate a limited amount of earned but unused leave benefits which will be paid to employees upon separation from service. Unpaid compensated absences are recorded as a liability in the proprietary fund financial statements. For governmental funds, there is no legal requirement to accumulate expendable available financial resources to liquidate the obligation; these expenditures are recognized in the governmental funds when payments are made to employees. Self Insurance Claims Payable represents liabilities for reported claims and incurred but not reported claims based on an actuarial review of claims pending and historical experience. Landfill Closure and Post Closure Care Payable represents the recognition of Municipal Solid Waste Landfill (MSWLF) closure and postclosure care costs under the State of Florida s Solid Waste Management Act of 1988 (the 1988 Act ), regulations of the Federal Environmental Protection Agency (EPA) and GASB Statement No. 18. MSWLF costs incurred for landfills accepting solid waste after final implementation of the 1988 Act and EPA regulations are recognized as an expense and a liability in each year that the MSWLF accepts solid waste based upon the landfill capacity used during that year. Long Term Obligations in the proprietary fund types are reported as liabilities in the Statement of Net Assets. Long-term obligations related to governmental fund type activities are not reported in these special purpose financial statements. However, as required by Chapter (3)(g) Rules of the Auditor General State of Florida, the notes to the financial statements include disclosures related to such longterm obligations. Fund Equity in the governmental fund s financial statements report reservations of fund balance for amounts that are not available for appropriation or are legally restricted by outside parties for use for a specific purpose. Designations of fund balance represent tentative management plans that are subject to change. Net Assets The proprietary fund financial statements utilize a net asset presentation. Net assets are categorized as invested in capital assets (net of related debt), restricted and unrestricted. Invested in Capital Assets (net of Related Debt) is intended to reflect the portion of net assets which are associated with non-liquid, capital assets less outstanding capital asset related debt. Unrestricted Net Assets represent unrestricted liquid assets. While Board management may have categorized and segmented portions for various purposes, the Board has the unrestricted authority to revisit or alter these managerial decisions. 24

109 ANNUAL AUDIT REPORT BOARD OF COUNTY COMMISSIONERS NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2007 E. Revenues, Expenditures and Expenses Substantially all governmental fund revenues, expenditures and expenses are accrued. Property taxes are billed and generally collected within the same period in which the taxes are levied. A. Budgetary Information NOTE 2 STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY Annual budgets are adopted on a basis consistent with generally accepted accounting principles as required by Florida Statute 129 for all funds. All annual appropriations lapse at fiscal year end. On or before May 1 of each year, the Sheriff, Clerk of the Circuit Court & Comptroller, Tax Collector, Property Appraiser, and the Supervisor of Elections each submit to the Board a tentative budget for the ensuing fiscal year. Within fifteen days after certification of the ad valorem tax roll by the Property Appraiser, the County Budget Officer submits to the Board a proposed budget for the fiscal year commencing the following October 1 st. The Budget includes proposed expenditures and the means of financing them. The Board holds public hearings and a final budget must be prepared and adopted no later than September 30. The County s budget is legally enacted through passage of a resolution. The appropriated budget is prepared by fund, function and department. The Office of Management and Budget is authorized to transfer budgeted amounts within departments of a fund and between departments of a fund; however, the Board must approve any revisions that alter the total expenditures of any fund. The legal level of budgetary control (i.e., the level at which expenditures may not legally exceed appropriations) is the fund level. The Board approved supplemental budget amendments during the year that increased the original budget. 25

110 ANNUAL AUDIT REPORT BOARD OF COUNTY COMMISSIONERS NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2007 NOTE 3 DETAIL NOTES ON ALL FUNDS A. Assets Deposits and Investments As of September 30, 2007, the carrying value of the County s deposits and investments with their respective credit ratings was as follows: Weighted Fair Credit Average Investment Type Value Rating Maturity (days) Demand and time deposits $16,570,335 N/A N/A Certificates of Deposit 12,500,000 N/A days Money Market Accounts 35,658,396 N/A N/A Local Government Surplus Funds Trust Fund 80,209,182 Unrated 34 days Federal Instrumentalities: US Agencies 15,364,732 Aaa 65.9 days Total Deposits and Investments $160,302,645 Credit Risk: The Board s Investment Policy (Policy), limits credit risk by restricting authorized investments to the following: direct obligations of the United States or its agencies and instrumentalities, repurchase agreements, the Local Government Surplus Funds Trust Fund administered by Florida s State Board of Administration (a 2a7-like pool), certificates of deposit, money market mutual funds investing in direct obligations of the United States or its agencies and instrumentalities regulated by the SEC, and the Florida Local Government Investment Trust, an investment pool administered by the Florida Association of Court Clerks and Comptrollers. The credit ratings indicated in the above table are Moody s Investors Services (Moody s) ratings. Concentration of Credit Risk: The Policy requires that bank deposits be secured as provided by Chapter 280, Florida Statues. This law requires local governments to deposit funds only in financial institutions designated as qualified public depositories by the Chief Financial Officer of the State of Florida, and creates the Public Deposits Trust Fund, a multiple financial institution pool with the ability to assess its member financial institutions for collateral shortfalls if a default or insolvency has occurred. As of September 30, 2007, all of the Board s bank deposits were in qualified public depositories. The Policy requires the assets shall be diversified to control the risk of loss resulting from the over concentration of assets. The Policy establishes guidelines for limiting the percentage of the portfolio by permissible investment category as well as issuer limits within an investment category. The Policy requires execution of a third-party custodial safekeeping agreement for all purchased securities, and requires that securities be held in the Board s name. As of September 30, 2007, all of the Board s investments are held in a bank s trust department in the Board s name. 26

111 ANNUAL AUDIT REPORT BOARD OF COUNTY COMMISSIONERS NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2007 Interest Rate Risk: The Policy limits the investment of current operating funds to no longer than one (1) year. Investments of current operating funds will be matched to cash flow needs. Investment of bond reserves, construction funds and other non-operating funds shall have a term appropriate to the need for funds, and in accordance with debt covenants, but shall not exceed five (5) years. Receivables as of September 30, 2007, including the applicable allowances for uncollectible accounts, are as follows: Allowance Accrued Gross for Accounts Notes Interest Receivables Uncollectible Net Governmental type funds: General $12,757,377 $0 $304,137 $13,061,514 ($10,736,990) $2,324,524 Disaster recovery 7,746, ,746, ,746,990 HHRP 35, , ,600 Transportation trust 8, , ,034 Other non major funds 405,483 61, ,418 (22,802) 444,616 Total governmental activities $20,953,484 $61,935 $304,137 $21,319,556 ($10,759,792) $10,559,764 Proprietary type funds: Solid Waste $681,623 $0 $0 $681,623 ($3,239) $678,384 Ambulance 8,423, ,423,849 (5,457,676) 2,966,173 Civic Center 135, ,814 (9,714) 126,100 Non major Total business-type activities $9,241,625 $0 $0 $9,241,625 ($5,470,629) $3,770,996 Internal service fund $2,637,146 $0 $0 $2,637,146 $0 $2,637,146 Component units: Law Library $954 $0 $0 $954 $0 $954 Santa Rosa Island Authority 386, , ,524 Housing Finance Authority 227, , ,660 Total component units $615,138 $0 $0 $615,138 $0 $615,138 There were no unbilled receivables at September 30, The General Fund receivable contains approximately $10.7 million contested property taxes billed on Pensacola Beach. Due to pending litigation, this receivable is fully offset with an allowance for uncollectible accounts. 27

112 ANNUAL AUDIT REPORT BOARD OF COUNTY COMMISSIONERS NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2007 Governmental Capital Assets activity for the year ended September 30, 2007 was as follows: Balance at 10/1/2006 (Decreases)/ Balance at (as restated) Increases Transfers 09/30/2007 Primary Government: Governmental activities: Capital assets not depreciated: Land $28,294,691 $135,794 ($449,446) $27,981,039 Construction in progress 41,411,376 29,105,762 (41,411,376) 29,105,762 Total capital assets not depreciated 69,706,067 29,241,556 (41,860,822) 57,086,801 Capital assets depreciated: Infrastructure 500,144,332 40,667,526 (907,791) 539,904,067 Buildings and improvements 152,295,501 25,311,275 (99,154) 177,507,622 Equipment 71,012,554 14,650,006 (6,889,088) 78,773,472 Total capital assets depreciated 723,452,387 80,628,807 (7,896,033) 796,185,161 Less accumulated depreciation: Infrastructure 223,381,450 21,003,605 (264,240) 244,120,815 Building and improvements 48,381,706 6,301,095 (23,265) 54,659,536 Equipment 50,731,224 7,403,435 (3,599,240) 54,535,419 Total accumulated depreciation 322,494,380 34,708,135 (3,886,745) 353,315,770 Total capital assets depreciated, net 400,958,007 45,920,672 (4,009,288) 442,869,391 Governmental-type activities capital assets, net $470,664,074 $75,162,228 ($45,870,110) $499,956,192 As discussed in Note 8, the October 1, 2006 balance has been restated due to the reclassification of a proprietary fund now categorized as a governmental fund. Depreciation expense was charged by function/program of the governmental funds follows: Governmental activities: General government $5,174,351 Public safety 5,830,469 Physical environment 616,699 Transportation, including depreciation of general infrastructure assets 19,196,909 Economic environment 1,055,477 Human services 548,966 Culture and recreation 2,285,264 Total depreciation expense $34,708,135 28

113 ANNUAL AUDIT REPORT BOARD OF COUNTY COMMISSIONERS NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2007 Proprietary Fund Capital Assets activity for the year ended September 30, 2007 was as follows: Balance at 10/01/2006 Balance at (as restated) Increases Decreases 09/30/2007 Business-type activities: Land $3,428,614 $0 $0 $3,428,614 Capital assets depreciated: Buildings 31,860,903 1,405, ,266,109 Infrastructure 22,346,152 6,123, ,470,110 Equipment 15,031,168 1,055,924 (1,240,358) 14,846,734 Total capital assets depreciated 69,238,223 8,585,088 (1,240,358) 76,582,953 Less accumulated depreciation: Buildings 17,078,253 1,092, ,171,230 Infrastructure 8,040,279 1,152, ,192,848 Equipment 10,278,441 1,707,246 (942,617) 11,043,070 Total accumulated depreciation 35,396,973 3,952,792 (942,617) 38,407,148 Total capital assets depreciated, net 33,841,250 4,632,296 (297,741) 38,175,805 Business-type activities capital assets, net $37,269,864 $4,632,296 ($297,741) $41,604,419 Internal service: Equipment $102,388 $189,925 ($44,167) $248,146 Total capital assets depreciated 102, ,925 (44,167) 248,146 Less accumulated depreciation: Equipment 97,892 14,226 73, ,134 Total accumulated depreciation 97,892 14,226 73, ,134 Internal service capital assets, net $4,496 $204,151 $28,849 $63,012 As discussed in Note 8, the October 1, 2006 balance has been restated due to the reclassification of a proprietary fund now categorized as a governmental fund. Depreciation expense was charged to functions/programs of the proprietary funds as follows: Depreciation Expense Enterprise funds Solid Waste $2,130,324 Inspections (non-major) 129,532 Ambulance 653,211 Civic center 1,039,725 Total depreciation expense 3,952,792 Internal service fund 14,226 Total depreciation expense enterprise and internal service funds $3,967,018 29

114 ANNUAL AUDIT REPORT BOARD OF COUNTY COMMISSIONERS NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2007 Discretely Presented Component Units reported the following capital asset balances at September 30, 2007: SANTA ROSA ISLAND AUTHORITY HOUSING FINANCE AUTHORITY Buildings $3,650,986 Land $937,139 Improvements other than buildings 11,291,440 Improvements other than buildings 14,539 Equipment 1,281,014 Equipment 58,292 Construction in progress 22,055,599 Total at historical cost 1,009,970 Total at historical cost 38,279,039 Less accumulated depreciation: Less accumulated depreciation (4,664,240) Improvements other than buildings (14,539) Equipment (38,895) Santa Rosa Island Authority Total accumulated depreciation (53,434) capital assets, net $33,614,799 Housing Finance Authority capital assets, net $956,536 Interfund receivables, payables, and transfers: During the course of its operations, transactions occur between funds to finance operations, provide services, construct assets, and service debt resulting in interfund receivables, payables, and transfers at September 30, 2007 as follows: Due Due Advances Advances Transfers Transfers From To To From In Out General fund $831,198 $0 $0 $0 $3,715,634 $123,839,462 Disaster recovery ,682,355 3,369,407 1,418,095 HHRP 0 12, CRA ,050,294 0 Transportation trust ,807,318 0 Local option sales tax II 2,000, ,423, ,785,343 4,797,616 Local option sales tax III ,741, Non-major governmental funds 243,698 2,831, ,634 18,048,863 5,129,452 3,074,896 2,843,698 21,423,789 22,173,423 41,776, ,184,625 Solid waste ,000 Building inspections (non-major) ,876 Civic center 0 231, ,054,600 0 Ambulance ,373 Internal service , ,000 0 Total major and nonmajor $3,074,896 $3,074,896 $22,173,423 $22,173,423 $43,281,459 $136,497,874 General fund transfers out include funding to the County's other Elected Officials (1,636,056) (94,852,471) $41,645,403 $41,645,403 30

115 ANNUAL AUDIT REPORT BOARD OF COUNTY COMMISSIONERS NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2007 Restricted Assets for business activities contain the following balances: Total Internal Solid Enterprise Service Waste Inspections Funds Fund Deposits $89,623 $284,987 $374,610 $47,529 Landfill closure 6,107, ,107,121 0 $6,196,744 $284,987 $6,481,731 $47,529 B. Liabilities Payable from Restricted Assets in the business-type activities contain the following balances: Total Solid Enterprise Internal Waste Inspections Funds Service Deposits $89,623 $284,987 $374,610 $47,529 Landfill closure and postclosure 100, ,811 0 $190,434 $284,987 $475,421 $47,529 31

116 ANNUAL AUDIT REPORT BOARD OF COUNTY COMMISSIONERS NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2007 Long-Term Debt Changes in long-term bonds, notes payable, loans, capital leases, and compensated absences during 2007 are as follows: Amounts Due Long-Term Beginning Within Balance Balance One Year Remaining Long-Term Debt 10/1/2006 Additions (Retirements) of 09/30/2007 9/30/2007 Governmental-type activities: Sales Tax Revenue Bonds $86,335,000 $0 ($1,755,000) ($1,800,000) $82,780,000 Capital Improvement Bonds 21,025,000 0 (450,000) (465,000) 20,110,000 Tourist Development Bonds 14,125,000 0 (890,000) (915,000) 12,320,000 Capital Improvement Notes 21,236,000 0 (10,866,000) (665,000) 9,705,000 State of Florida's Toll Facility Note 219,168 0 (83,333) (83,335) 52,500 Capital Leases 3,410,861 0 (673,595) (696,587) 2,040,679 General Compensated Absences 5,778,124 4,803,324 (3,304,689) (4,161,804) 3,114,955 Total $152,129,153 $4,803,324 ($18,022,617) ($8,786,726) $130,123,134 Compensated Absences: Solid Waste Compensated Absences $453,034 $171,499 ($123,689) $0 $500,844 Inspections Compensated Absences 454, ,645 (132,737) (41,707) 532,652 Ambulance Compensated Absences 556, ,979 (264,093) (16,870) 664,278 Total $1,463,747 $813,123 ($520,519) ($58,577) $1,697,774 Internal Service Compensated Absences $51,166 $116,843 ($36,081) $0 $131,928 The General Fund generally liquidates claims and judgments, and compensated absences for governmental activities. 32

117 ANNUAL AUDIT REPORT BOARD OF COUNTY COMMISSIONERS NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2007 Long-term Debt for governmental activities consists of the following: Interest Annual Final Amount Governmental Activities Rates % Principal Maturity Outstanding Bonds: Sales Tax Revenue Bonds Serial Bonds - Series ,800,000 to 3,290,000 10/01/22 36,205,000 Term Bond - Series ,450,000 to 5,485,000 10/01/33 48,375,000 Total Sales Tax Revenue Bonds 84,580,000 Capital Improvement Bonds Serial Bonds - Series ,000 to 675,000 10/01/17 3,155,000 Term Bonds - Series ,130,000 to 6,260,000 10/01/32 17,420,000 Total Road Improvement Bonds 20,575,000 Tourist Development Bonds Series ,000 to 1,355,000 10/01/19 13,235,000 Total Long-term Bonds 118,390,000 Notes: Capital Improvement Notes City of Gulf Breeze - Series 1997 Variable 450,000 to 1,085,000 10/01/17 7,990,000 City of Gulf Breeze - Series 2003 Variable 120,000 to 240,000 10/01/17 2,380,000 Total Capital Improvement Notes 10,370,000 Other Notes State of Florida's Toll Facilities Note Nominal 52,500 to 83,333 06/16/09 135,835 Total Long-term Notes 10,505,835 Capital Leases SunTrust - Central Chiller Lease ,297 to 300,304 04/01/11 1,102,285 SunTrust - Leonard Street Chiller ,062 to 444,652 05/28/11 1,634,981 Total Capital Leases 2,737,266 Compensated Absences: Board of County Commissioners N / A N / A 7,276,759 Total Long-Term Debt $138,909,860 33

118 ANNUAL AUDIT REPORT BOARD OF COUNTY COMMISSIONERS NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2007 Business activity long-term debt consists of the following: Amount Interest Annual Final Outstanding Business Activities Rates % Principal Maturity 9/30/2007 Compensated Absences-Business Activities: Solid Waste Fund N / A N / A $500,844 Inspections Fund N / A N / A 574,359 Ambulance Fund N / A N / A 681,148 Total Business Activities Compensated Absences $1,756,351 Internal Service Fund Compensated Absences $131,928 Annual debt service requirements to maturity to retire long-term bonds, notes, and loans are as follows: Governmental Long-Term Debt Fiscal Year Total Principal Revenue Notes and Ending Bonds Loans and September 30, Principal Interest Principal Interest Interest 2008 $3,180,000 $5,442,991 $748,335 $408,055 $9,779, ,280,000 5,336, , ,254 9,750, ,390,000 5,237, , ,737 9,732, ,490,000 5,128, , ,172 9,744, ,605,000 5,011, , ,291 9,756, ,440,000 22,672,871 5,375, ,831 49,251, ,460,000 17,356,813 1,205,000 4,140 40,025, ,880,000 12,096, ,976, ,180,000 5,785, ,965, ,485, , ,745,538 Total governmental debt $118,390,000 $84,329,241 $10,505,835 $2,503,480 $215,728,556 34

119 ANNUAL AUDIT REPORT BOARD OF COUNTY COMMISSIONERS NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2007 Long-Term Debt Bonds Sales Tax Revenue Refunding Bonds Series 2002 in aggregate principal amount of $89,730,000, were issued under and pursuant to the Constitution and laws of the State of Florida, particularly Chapter 125, Florida Statutes, as amended, Home Rule Ordinance No of the County, as amended, and ordinances and resolutions adopted by the Commission of the County. The Bonds are limited special obligations of the County collateralized by a lien on and pledge of, among other things, the proceeds of the local government half-cent sales tax distributed to the County from the Local Government Half-Cent Sales Tax Clearing Trust Fund. The proceeds of the bonds were used to finance the costs of a current refunding of all of the County s Sales Tax Revenue Refunding Bonds Series 1993, originally issued in the amount of $50,355,000, with a balance of $48,830,000 at the date of refunding, and to provide approximately $39,000,000 to finance the cost of certain capital improvement projects of the County including (1) renovating and expanding the Sheriff s administrative building; (2) renovating the jail infirmary; (3) expanding the jail annex; (4) expanding the road prison; (5) acquiring and constructing a parking garage; (6) constructing, renovating, and expanding certain facilities contained within the administrative master plan; (7) constructing a library facility in Perdido Key; (8) renovating the juvenile justice addition; (9) constructing a new one-stop permitting building; (10) finishing out the third, fourth and fifth floors of the M.C. Blanchard Judicial Building; and (11) making certain stormwater improvements. The Project also includes construction and/or equipping of other capital improvements to be determined by the County. Capital Improvement Revenue Bonds Series 2002 in aggregate principal amount of $22,305,000 were issued pursuant to the authority of the Constitution, the laws of the State of Florida, County ordinances, the Santa Rosa Island Authority Special Act and various resolutions, including the interlocal agreement entered into by the Authority and the County. The proceeds are being spent to finance the construction of certain capital improvements on Santa Rosa Island including road improvements to Via DeLuna Drive and Fort Pickens Road, constructing a water reclamation and reuse system, making improvements to the stormwater management system, burying existing above-ground utilities, and making certain landscaping improvements. The 2002 Bonds are special limited obligations of the County, payable solely from and secured by pledge of residential and commercial lease revenues collected by Santa Rosa Island Authority from island leaseholders (per interlocal agreement) and net toll revenues collected for passage across Bob Sikes Bridge to Santa Rosa Island. Tourist Development Revenue Refunding Bonds Series 2002 in aggregate principal amount of $16,885,000 were issued pursuant to the authority of the Constitution, the laws of the State of Florida, including the County s Home Rule Ordinances 74-8 and 89-7, and resolutions adopted by the Board of County Commissioners. The proceeds, together with other available moneys, were used to finance the costs of refunding all of the County s Tourist Development Revenue Bonds, Series 1992, originally issued in the amount of $6,915,000, with a balance of $4,650,000 at the date of refunding, and the County s outstanding promissory note payable to the Florida Local Government Finance Commission in the amount of $850,000, and to provide approximately $12,000,000 for certain improvements on Santa Rosa Island consisting of beach nourishment and certain capital improvements to the Civic Center. The principal and interest on the 2002 Bonds are payable solely from and collateralized by a lien upon and a pledge of the Tourist Development Tax levied and collected by the County. Long-Term Debt Notes Capital Improvement Revenue Note Series 1997 allowed the Board to borrow $10,000,000 from the Gulf Breeze, Florida Capital Funding Program to fund the acquisition and construction of certain capital improvement projects. Pledged revenues toward payment of the loan are the electric franchise fees. The 35

120 ANNUAL AUDIT REPORT BOARD OF COUNTY COMMISSIONERS NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2007 loan requires monthly interest payments at variable rates equal to the PSA Municipal Market, plus a maximum 34 basis points. At September 30, 2007, the rate was 4.18%. Capital Improvement Revenue Note Series 1998 permitted borrowing $20,000,000 from the Gulf Breeze, Florida Capital Funding Program to fund additional capital projects. Pledged revenues towards payment of the loan were the infrastructure sales tax revenues. Repayments under the loan require monthly interest payments at variable rates equal to the PSA Municipal Market, plus a maximum 34 basis points. The note was paid off during fiscal year Capital Improvement Revenue Note Series 1999C permitted the Board to borrow $16,000,000 from the Gulf Breeze, Florida Capital Funding Program to fund additional capital projects. Pledged revenues towards payment of the loans were the infrastructure sales tax revenues. Repayments under the loan required semi-annual interest payments (with the interest rate set at %). The note was paid off during fiscal year Capital Improvement Revenue Note Series 2003 permitted the Board to borrow $3,000,000 from the Gulf Breeze, Florida Capital Funding Program to fund a capital building project for the Work Release Facility. There is a covenant by the Board to annually budget and appropriate sufficient funds to pay the debt service. The Board intends to use revenues generated from the Work Release Program. Repayments under the loan require monthly interest payments at variable rates equal to the PSA Municipal Market, plus a maximum 34 basis points. At September 30, 2007, the rate was 4.18%. Florida s Toll Facilities Revolving Trust Fund (TFRTF) allowed the County, in 1996, to enter into a loan agreement with the State of Florida s TFRTF. The TFRTF was created by the Florida Legislature to encourage the development and enhancement of the financial feasibility of revenue-producing road projects undertaken by local governmental entities. These interest-free advances are to be repaid either from proceeds from the project s anticipated bond issue or by installment payments over a five year period beginning in the seventh year from the date of the advance. Payments began in These advances were used to conduct feasibility studies on the proposed Escambia Expressway (extension of I- 110). Capital Leases The Board is obligated under lease-purchase agreements for the purchase of new chiller equipment. These leases qualify as capital leases for accounting purposes and are recorded at the present value of the future minimum lease payments at the inception of the lease. The acquired assets have been recorded in the governmental assets at value of $4,807,323. Amortization of $1,307,141 on the leased equipment is included in depreciation expense. The Santa Rosa Island Authority has entered into several capital leases for office equipment with terms of months. The acquired assets have been recorded at a net book value of $70,071. Amortization on equipment under capital lease is included in depreciation expense. 36

121 ANNUAL AUDIT REPORT BOARD OF COUNTY COMMISSIONERS NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2007 Maturities of the obligations under capital lease are as follows: Board of County Commissioners Santa Rosa Island Authority Balance 10/01/2006 $3,410,861 $28,089 Additions 0 5,812 Principal payments (673,595) (20,679) Balance 09/30/2007 $2,737,266 $13,222 Future lease payments 2008 $780,113 $9, ,111 5, ,113 2, ,084 0 Total minimum lease payments 2,925,421 17,218 Less amount representing interest (188,155) (3,996) Net minimum lease payments $2,737,266 $13,222 Refunding of Outstanding Debt in prior years permitted the Board to defease certain special obligation and other revenue bonds by placing the proceeds of new bonds in irrevocable trusts to provide for all future debt service payments on the old bonds. Accordingly, the trust account asset and liabilities are not included in the Board s financial statements. On September 30, 2007, five bond issues are outstanding with an aggregate principal amount of $53,090,000. Long-Term Debt Arbitrage Liability represents the excess of interest earned from the investment of certain debt proceeds and pledged revenues over the yield rate of the applicable debt. Pursuant to Section 148 (f) of the U.S. Internal Revenue Code, the County must rebate any excess to the United States Government. Arbitrage rebate, if any, is due and payable on each five-year anniversary of the respective bond issue. For the fiscal year ended September 30, 2007, there is no arbitrage rebate liability outstanding. Conduit Debt Obligations have been established in the County s name by private-sector entities for the acquisition and construction of industrial and commercial facilities deemed to be in the public interest. The bonds are secured by the property financed and are payable solely from payments received on the underlying mortgage loans. Neither the Board, nor the State, nor any political subdivision thereof, is obligated in any manner for repayment of the bonds. Accordingly, the bonds are not reported as liabilities in the accompanying financial statements. As of September 30, 2007, the outstanding conduit debt of Escambia County is $2,799,056,497. Landfill Closure and Postclosure Care Payable represents the accrued liability for closure and postclosure costs for the County s landfills. Regulations require the Board to cover landfills when they stop accepting waste and to perform certain maintenance and monitoring functions for thirty years after closure. Although closure and postclosure care costs will be paid only near or after the date the landfills stop accepting waste, the Board reports a portion of these closure and postclosure care costs as an operating expense in each period based on landfill capacity used as of each balance sheet date. Currently, the Beulah, Klondike, Mobile Highway and Camp Five sites are closed. The Perdido Landfill is the only site accepting waste. 37

122 ANNUAL AUDIT REPORT BOARD OF COUNTY COMMISSIONERS NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2007 At year end, $14,545,810 was reported ($100,811 payable from restricted assets and $14,444,999 as long-term liability) as the landfill closure and postclosure care liability in the balance sheet. This amount is based upon estimated costs to perform closure and postclosure care in 2007, determined from the most recently available engineering studies computed on the ratio of landfill capacity filled at year end to total estimated capacity. Capacity is measured in space utilized by the type of waste being accepted. The Class I capacity is at 91.89% and the Class III capacity is at 48.28%. The Board will recognize the remaining estimated costs of closure and postclosure care of approximately $2.4 million as the remaining estimated capacity is filled. The Perdido Landfill was expected to be filled between early 2006 and mid Additional cells were developed during Actual cost may be higher due to inflation, changes in technology or changes in regulations. Closure and Postclosure Care Liability: Beginning Ending Balance Balance 10/1/2006 Additions Deletions 9/30/2007 Current: $97,875 $2,936 $0 $100,811 Long-term Liability 13,935, ,943 (248,153) 14,444,999 Total $14,033,084 $760,879 ($248,153) $14,545,810 State and federal laws and regulations require the Board to make annual contributions to a cash escrow account to meet financial assurance requirements. The Board is in compliance with these requirements at September 30, 2007 with restricted cash and investments of $6,107,121 held for these purposes. In the event closure escrows and interest earnings prove inadequate due to inflation, changes in technology or additional closure/postclosure care requirements, these costs may need to be covered by increased user charges. NOTE 4 OTHER INFORMATION The Risk Management program was established by the Board to self-insure certain types of claims against the Board of County Commissioners, Constitutional Officers, and Santa Rosa Island Authority including losses related to theft, damage and destruction of assets; torts; errors and omissions; injuries to employees; and natural disasters. The following is the types of risks and coverage: Workers Compensation self insured up to a limit of $450,000 per occurrence with statutory limits. Casualty and Property Casualty limits are self-insured for $100,000 per claim with a $200,000 aggregate; excess policy limits of $1,000,000 per occurrence, $2,000,000 aggregate. Property limits are $50,000 - $100,000 self insured retentions per occurrence. During the fiscal year ended September 30, 2007, the County had no significant reductions in insurance coverage from the prior year. In addition, there have been no settlements which exceeded the County s insurance coverage for the last three fiscal years. 38

123 ANNUAL AUDIT REPORT BOARD OF COUNTY COMMISSIONERS NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2007 The Board currently reports all of its risk management activities, including claims liabilities, in the Internal Service Fund. Liabilities are reported when it is probable that a loss has occurred and the amount of the loss can be reasonably estimated. Liabilities include an amount for claims that have been incurred but not reported (IBNR). The claims liabilities totaling $11,701,265 reported in the Internal Service Fund at September 30, 2007 are actuarially determined based on historical and current information regarding the Fund Unpaid claims, beginning $11,177,958 $13,901,801 Claims incurred and changes in estimates 4,141, ,165 Less: claims paid (3,617,889) (3,247,008) Unpaid claims, ending 11,701,265 11,177,958 Estimated claims due within one year (3,787,264) (3,128,182) Estimated claims due longer than one year $7,914,001 $8,049,776 Pension and Retirement Plan Substantially all full-time employees of the Board are covered by the Florida Retirement System (FRS), a multiple employer cost sharing defined benefit pension plan. The FRS was established in 1970 by Chapter 121, Florida Statutes and is administered by the Florida Department of Management Services, Division of Retirement. Changes to the FRS can be made only by an act of the Florida Legislature. Rules governing the operation and administration of the system may be found in Chapter 60S of the Florida Administrative Code. The FRS issues a publicly available financial report that includes financial statements and required supplementary information. The report may be obtained by writing to FRS, 2639-C North Monroe Street, Tallahassee, Florida The FRS provides retirement and disability benefits, annual cost-of-living adjustments, and death benefits to plan members and beneficiaries. The FRS provides for vesting of benefits for all members actively employed on July 1, 2001, after 6 years of creditable service, regardless of membership class. Under the laws in effect before that date, members needed 7, 8, or 10 years of service to become vested, depending on their membership class. Normal retirement benefits are available to employees who retire at age 62 with 6 or more years of service, or to those employees who have at least 30 years of creditable service, regardless of age. Retirement age and years of service requirements vary depending on membership class. Early retirement is available after 6 years of service with a 5% reduction of benefits for each year prior to the normal retirement age. Retirement benefits are based upon age, average compensation and years-of-service credit where average compensation is computed as the average of an individual s five highest years of earnings. Deferred Retirement Option Program (DROP) is an elective program for eligible members of the FRS Pension Plan, Teachers Retirement System, and State and County Officers and Employees Retirement System who are eligible for normal retirement. Under this program, a member effectively retires and continues covered employment for up to 5 years. While in DROP, the member s deferred monthly retirement benefits accumulate, earning interest and cost-of-living increases. When the DROP period is over, the participant terminates covered employment and begins receiving their predetermined monthly retirement benefit, as well as the accrued DROP benefit. Disability retirees are not eligible to participate in DROP and DROP participants do not qualify for disability retirement. The FRS is noncontributory for employees and all contributions are made by participating FRS employers. Participating employer contributions are based upon state-wide rates established by the State of Florida. Average contribution rates for the year ended September 30, 2007 were as follows: regular employees, 9.85%, special risk employees, 20.92%, elected officials, 16.53%, senior management employees, 13.12%, and DROP participants, 10.91%. 39

124 ANNUAL AUDIT REPORT BOARD OF COUNTY COMMISSIONERS NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2007 Contributions made are equal to the actuarially determined contribution requirements for each year and are funded on a pay-as-you-go basis. Contributions for the past three years were as follows: Board of County Commissioners $5,635,591 $4,516,322 $3,961,085 Discretely presented component units: Santa Rosa Island Authority 154, , ,831 Law Library 2,755 2,920 1,483 $5,793,052 $4,627,444 $4,073,399 Leasing Arrangements provide almost all of the revenues for the Santa Rosa Island Authority. The Authority leases the land on County-owned Santa Rosa Island to residents and businesses under residential and commercial leases that typically run for a period of 99 years. Many of the 99-year leases have options to renew for another 99-year term. Many leases, particularly those for restaurants and concessions, are generally for a shorter period. Lease payments in future years are estimated to average approximately $3.7 million per year. Construction Commitments - The government has active construction projects as of September 30, 2007 as follows: Engineering Services - Building $294,864 Engineering Services - Road Paving and Drainage 4,538,127 Engineering Services - NESD 825,466 Engineering Services - Parks 122,061 Engineering Services - Solid Waste 406,728 Building Contract - Building Construction 9,057,822 Road Contract - Road Paving and Drainage 3,128,101 Construction Contracts 592,347 Miscellaneous Contracts 517,465 $19,482,981 Of these commitments, $18,859,657 is reported in the governmental fund financial statements as reserved for encumbrances. The remaining $623,324 represents commitments in proprietary type funds which are not included in the financial statements in accordance with GAAP. These commitments are evidenced by signed purchase orders and contracts which were entered into prior to September 30, Other Commitments - The Board has various non-construction contractual commitments at fiscal year end that will be re-appropriated in the new fiscal year. These commitments of $303,434 are included in Reserve for Encumbrances at September 30, The Santa Rosa Island Authority entered into various capital improvement contracts during the year. As of September 30, 2007, the Authority had outstanding commitments under these contracts totaling $3,456,193. On September 30, 2002, the Santa Rosa Island Authority s Board of Directors approved an interlocal agreement with Escambia County in connection with certain plans for economic development, transportation and beach improvements at Pensacola Beach. By resolution approved by the Santa Rosa Island Authority Board, the Authority s lease fee revenues are pledged for repayment of Tourist Development Refunding Revenue Bonds, Series 2002 and the Capital Improvement Revenue Bonds, 40

125 ANNUAL AUDIT REPORT BOARD OF COUNTY COMMISSIONERS NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2007 Series The Authority is scheduled to make payments to Escambia County of at least $600,000 each year through Operating leases for the Board are for various facilities throughout the County containing minimum guaranteed rentals averaging $25,994 monthly. The Board has the option to extend lease terms annually. Lease expense for the year ended September 30, 2007 was $311,931. NOTE 5 RELATED PARTY TRANSACTIONS During the fiscal year ended September 30, 2007, the Board purchased operating supplies of $107,000 and fixed assets of $1,958,433 on behalf of the Sheriff s office. These purchases are included in the Board of County Commissioner s expenditures for the year. The fixed assets were transferred to the Sheriff during the year and are included in the Sheriff s current year fixed asset additions. NOTE 6 CONTINGENT LIABILITIES The Board is a defendant in various lawsuits. Although the outcome of these lawsuits is not presently determinable, in the opinion of the County Attorney the resolution of these matters will not have a material adverse effect on the financial condition of the Board. The Board receives significant financial assistance from federal and state agencies primarily in the form of capital and operating grants. The disbursement of funds received under these programs generally requires compliance with terms and conditions specified in the grant agreements and is subject to audit by grantor agencies. Disallowed claims, if any, resulting from such audits may become liabilities of the Board. However, in the opinion of management, disallowed claims, if any, will not have a material effect on the Board s financial statements. NOTE 7 SIGNIFICANT EVENTS Following the 2004 and 2005 hurricane seasons in which Escambia County was struck by Hurricanes Ivan, Dennis, Katrina, and Rita, the Board incurred significant payroll and operating costs related to work performed in the aid of public safety during the aftermath of these various storms. Escambia County, Florida was subsequently identified to be included in a major disaster declaration, issued by the U.S. Department of Homeland Security. In addition, the State of Florida Office of the Governor issued an Executive Order to declare a state of emergency for areas affected by the storms. The Board has estimated and included in the Disaster Recovery Fund those costs expected to be reimbursed from Federal and State sources. Final disposition of these costs is subject to review and approval by the Federal and State agencies prior to payment. The Board continues to make assessments of the overall financial impact caused by these storms. During fiscal year 2007, the County continued with loan agreements with several non-profit agencies, namely, Johnson Lakes Escambia Limited Partnership, Morris Court, Ltd., Arbours at Ensley, Ltd., Englewood Senior Limited Partnership, Palafox Landing, Ltd., and Silurian Ponds, Ltd., to develop affordable housing using the Hurricane Housing Recovery SHIP grant funding. The deferred grant stipulates that the rental units must be rented to low income tenants for a period ranging from years. If the terms of the agreements are satisfied, the loan is forgiven. Based on this stipulation, no payments are due unless this agreement is breached. The promissory notes and loan agreements for the rental development projects are recorded in the County s Official Records. If in the event any of these 41

126 ANNUAL AUDIT REPORT BOARD OF COUNTY COMMISSIONERS NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2007 agreements are breached, the re-payment clause(s) will be recognized and the County will pursue collection of the respective loans. Because each of these loans varies in amount and length of maturity, the County has not assessed the amount that would be due upon default of any of these loans, but recognizes that it could be a substantial amount. The County does not anticipate any of the loans to fall into default. As discussed in Note 3A, at September 30, 2007, Escambia County had $80,209,182 invested in the State Board of Administration s (SBA) Local Government Surplus Funds Trust Fund Investment Pool (Pool). Escambia County withdrew all its funds from the Pool on November 14, 2007 in response to growing concerns with the Pool s investments in asset-backed commercial paper that was subject to sub prime mortgage risk. On November 29, 2007, the SBA implemented a temporary freeze on the assets held in the Pool due to an unprecedented amount of withdrawals from the Fund coupled with the absence of market liquidity of the asset-backed commercial paper that was subject to sub prime mortgage risk. On December 4, 2007, based on recommendations from an outside financial advisor, the SBA restructured the Pool into two separate pools. Pool A consisted of all money market appropriate assets, which was approximately $12 billion or 86% of Pool assets. Pool B consisted of assets that had defaulted on a payment, paid more slowly than expected, and/or had any significant credit and liquidity risk, which was approximately $2 billion or 14% of Pool assets. At the time of the structuring, all current pool participants had their existing balances proportionally allocated into Pool A and Pool B. The County experienced no loss of principal. Interest earned by the pool for November was not allocated to any participants of the pool; instead, the interest earnings for November were diverted to Pool B to mitigate potential losses in that Pool. Escambia County s interest earnings for November were estimated to be approximately $163,000. Additional information regarding the Pool may be obtained from the SBA. On January 29, 2008, the Florida electorate approved an amendment to the Florida Constitution relative to property taxation. This amendment (referred to as Amendment 1) was placed on the ballot by the Florida Legislature at a special session held in October With respect to homestead property, Amendment 1 increases the current $25,000 homestead exemption by another $25,000 (for property values between $50,000 - $75,000), except for school district taxes. Since the new $25,000 homestead exemption does not apply to school district taxes, this effectively amounts to a $15,000 increase to the existing homestead exemption, resulting in an estimated annual savings of $240 for an average homeowner. Amendment 1 also allows property owners to transfer (make portable) up to $500,000 of their Save Our Homes benefits to their next homestead when they move. Save Our Homes became effective in 1995 and limits (caps) the annual increase in assessed value for homestead property to three percent (3%) or the percentage change in the Consumer Price Index, whichever is less. With respect to non-homestead property, Amendment 1 limits (caps) the annual increase in assessed value for nonhomestead property (businesses, industrial property, rental property, second homes, etc.) to ten percent (10%), except for school district taxes. The Amendment also provides a $25,000 exemption for tangible personal property. Amendment 1 becomes effective on October 1, 2008, with the exception of the ten percent (10%) assessment cap on non-homestead property which becomes effective on January 1, Based on information received from the Escambia County Property Appraiser's Office, the estimated annual loss of property tax revenues for the county from the additional homestead exemption and the $25,000 exemption for tangible personal property is approximately $12 million. At present, there is no accurate way to determine the impact of the portability and assessment cap on non-homestead property provisions in terms of potential loss of property tax revenues. 42

127 ANNUAL AUDIT REPORT BOARD OF COUNTY COMMISSIONERS NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2007 NOTE 8 RESTATEMENT DUE TO FUND RECLASSIFICATION The Economic Development and Industrial Fund was originally established as a proprietary fund to account for the construction and operation of the industrial parks of Escambia County, with land sales the primary revenue source of the fund. The Board has determined that the fund no longer meets the criteria for reporting as a proprietary fund and has therefore elected, effective October 1, 2006, to present it as a special revenue fund (the Industrial Parks fund). Accordingly, $973,733 was recorded as the opening fund balance of the Industrial Parks special revenue fund. This amount represents the ending net assets of the proprietary fund at September 30, 2006 reduced by its net capital assets. The beginning balances of both the governmental and proprietary funds capital asset activity schedules included in Note 3-A have been restated to reflect this change. 43

128 NON-MAJOR FINANCIAL STATEMENTS

129 NON-MAJOR GOVERNMENTAL FUNDS SPECIAL REVENUE FUNDS Escambia County Restricted to account for monies donated to the County for a specific purpose. Industrial Parks to account for the development and operation of the industrial parks of Escambia County. Code Enforcement to account for the enforcement of ordinances and statutes to enhance the quality of life for and protect citizens from environmentally unsafe conditions. Mass Transit Fund - to account for the operation and maintenance of the Escambia County Transit System. Financing is provided from user fees, reimbursement from the City of Pensacola and an Urban Mass Transit Administration operating grant. M and A State I Fund to account for the cost of mosquito and other arthropod control. Financing is provided by State matching funds on a dollar for dollar basis. Tourist Promotion Fund - to account for revenues restricted for promotion, development and advertisement of Escambia County tourism. Financing is provided by a tourist development tax levied under Chapter Florida Statutes. Other Grant Projects Fund to account for financing provided from various State and Federal grants. Misdemeanor Probation Fund to account for the cost of supervision of the misdemeanor program. Financing is provided by a fee charged to a person on parole pursuant to Section , Florida Statutes. Article V to account for revenues and costs for court related fees, charges, costs, fines and other monetary penalties. Perdido Key Beach Mouse to account for developmental impact fees on the natural habitat of the Perdido Key Beach Mouse, an endangered species, as determined by the Florida Fish and Wildlife Agency. These funds will be used to mitigate the negative impact on the mouse habitat. SHIP to account for the revenues and expenditures thereof. The grant is designed to provide stable and adequate funding for housing so that Public-Private partnerships can efficiently build, rehabilitate, and preserve affordable housing. Law Enforcement Trust Fund to account for revenues generated from Forfeiture proceedings. These monies are deposited into a special Law Enforcement Fund pursuant to Section , Florida Statutes. Escambia County Affordable Housing Fund to account for funding to assist with delivery of affordable housing assistance and support for low income families in Escambia County and the City of Pensacola, primarily in conjunction with the Escambia Consortium Home Program. The fund also provides a source for payment of up front costs while awaiting reimbursement from the HOME program letter of credit. CDBG HUD Entitlement Fund to account for Federal HUD Block Grant revenues and the expenditures thereof. Handicapped Parking Fines Fund to account for monies collected under Chapter 316, Florida Statutes, also known as the State Uniform Traffic Control, which authorizes counties to regulate the parking of vehicles and to enforce regulations relating to disabled persons parking. Family Mediation Fund to account for monies provided through a private grant and authorized under Chapters and , Florida Statutes. These funds were used to assure each minor child frequent and continuing contact with both parents after separation or dissolved marriages and to encourage parents to share the rights and responsibilities of child rearing.

130 NON-MAJOR GOVERNMENTAL FUNDS (Continued) Fire Protection Fund to account for monies assessed by the Board of County Commissioners to property owners in unincorporated areas of Escambia County to provide for fire protection. Emergency 911 Operations Fund to account for monies restricted for the operation of the E-911 operations. HUD-CDBG Housing Rehabilitation Loan Fund to account for funding to provide assistance for low/moderate income families within the unincorporated county through the rehabilitation of several substandard homes. Home Fund to account for HUD Housing Assistance revenues and the expenditures thereof. This grant provides for the rehabilitation of severely substandard homes. Bob Sikes Toll Facilities Fund - to account for monies received from tolls, rates, fees, permits and passes for the operation, maintenance and debt service of the bridge, and other expenses for parks and recreation on Santa Rosa Island as approved by the Board of County Commissioners. MSBU Assessment Program to account for monies collected for Municipal Service Benefit Units (MSBU) pursuant to County Ordinance No and Chapter 125, Florida Statutes. Master Drainage Basin Fund to account for monies to provide drainage within specific districts. DEBT SERVICE FUND to account for the resources accumulated and payments made for principal and interest on long-term debt of governmental funds. CAPITAL PROJECTS FUNDS Capital Improvement Fund to account for resources designated for use on various capital improvements. Federal Transit Administration Fund - to account for the cost of machinery, equipment, and office furniture for the Mass Transit activity for the County. Financing was provided by an Urban Mass Transportation Administration Grant (80%), State matching funds (10%), and Escambia County matching funds (10%). New Road Construction Fund to account for the Local Option Gas Tax monies to be used for the acquisition and construction of new roads. Escambia County Toll Expressway Fund to account for loan proceeds used for the engineering study on the feasibility of the Interstate I-110 extension. Local Option Sales Tax (LOST) Fund to account for monies collected pursuant to Florida Statutes and County Ordinance 92-10, which authorizes counties to impose a one percent (1%) local option infrastructure sales surtax upon taxable transactions occurring within Escambia County, as provided in Chapter , Florida Statutes. Ordinance was extended for an eight-year period. Monies collected under the extension are reported in the LOST II Fund.

131 BOARD OF COUNTY COMMISSIONERS NON-MAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEET SEPTEMBER 30, 2007 Assets Cash and cash equivalents Equity in pooled cash and investments Receivables (net of allowance for uncollectibles) Due from other funds Due from other governmental units Inventory Deferred Charges Total assets Special Revenue Funds Other Escambia Co. Industrial Code Mass M and A Tourist Grant Misdemeanor Restricted Parks Enforcement Transit State I Promotion Projects Probation $0 $0 $0 $0 $79,130 $0 $0 $0 1,050, , , , ,166,784 1,642, ,042 71, , , , , , , ,215,565 1,100 12, , ,485 $1,153,229 $665,300 $623,616 $1,488,438 $79,130 $4,398,162 $5,857,811 $945,627 Liabilities and Fund Balances Liabilities: Vouchers payable Contracts payable Salaries payable Due to other funds Due to other governmental units Other current liabilities Advance from other funds Total liabilities Fund balances: Reserved for encumbrances Reserved for debt service Reserved for inventory Unreserved - undesignated Total fund balances Total liabilities and fund balances $2,328 $3,642 $78,027 $43,278 $35,217 $391,116 $1,382,846 $47, , , ,372 65, , ,198 2,000, , , ,805 29,279 21, , , , ,986 1,107, , ,160 35, ,314 4,304, ,164 8,555 22, ,054, , , ,071,101 (464,175) 502, ,699 43,913 3,775, , ,463 1,092,243 (441,803) 502, ,278 43,913 3,775,848 1,553, ,463 $1,153,229 $665,300 $623,616 $1,488,438 $79,130 $4,398,162 $5,857,811 $945,627 (Continued) 44

132 BOARD OF COUNTY COMMISSIONERS NON-MAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEET (Continued) SEPTEMBER 30, 2007 Assets Cash and cash equivalents Equity in pooled cash and investments Receivables (net of allowance for uncollectibles) Due from other funds Due from other governmental units Inventory Deferred Charges Total assets Special Revenue Funds Escambia Law Couty Perdido Key Enforcement Affordable CDBG-HUD Handicapped Family Fire Article V Beach Mouse SHIP Trust Housing Entitlement Parking Fines Mediation Protection $0 $0 $4,052,493 $0 $0 $0 $0 $0 $0 3,286,644 26,370 7, ,316 1,841, , , ,192 4,471, , , , , , ,968 2, , , $3,530,515 $26,370 $4,074,422 $381,020 $1,864,136 $482,159 $196,210 $131,192 $4,595,956 Liabilities and Fund Balances Liabilities: Vouchers payable Contracts payable Salaries payable Due to other funds Due to other governmental units Other current liabilities Advance from other funds Total liabilities Fund balances: Reserved for encumbrances Reserved for debt service Reserved for inventory Unreserved - undesignated Total fund balances Total liabilities and fund balances $343,780 $0 $35,265 $0 $260 $24,672 $1,409 $215 $478, , ,597 15, , ,542, , , ,901, ,495 8, ,922 1, , ,500 1,628,695 26,370 4,038, ,258 1,863, , , ,977 3,680,086 1,628,695 26,370 4,038, ,258 1,863, , , ,977 3,785,586 $3,530,515 $26,370 $4,074,422 $381,020 $1,864,136 $482,159 $196,210 $131,192 $4,595,956 (Continued) 45

133 BOARD OF COUNTY COMMISSIONERS NON-MAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEET (Continued) SEPTEMBER 30, 2007 Assets Cash and cash equivalents Equity in pooled cash and investments Receivables (net of allowance for uncollectibles) Due from other funds Due from other governmental units Inventory Deferred Charges Total assets Special Revenue Funds HUD-CDBG Bob Emergency Housing Sikes MSBU 911 Rehab HUD Toll Assessment Master Debt Operations Loan Home Facilities Program Drainage Service $0 $0 $0 $600 $0 $0 $0 713,745 14, ,888 2,652, ,465 1,751, , ,708 22, , ,338 66, $1,044,022 $31,192 $321,703 $2,719,909 $216,465 $1,751,461 $747,291 Liabilities and Fund Balances Liabilities: Vouchers payable Contracts payable Salaries payable Due to other funds Due to other governmental units Other current liabilities Advance from other funds Total liabilities Fund balances: Reserved for encumbrances Reserved for debt service Reserved for inventory Unreserved - undesignated Total fund balances Total liabilities and fund balances $21,683 $0 $97,983 $19,667 $24,261 $49,556 $ , , ,000 5, , ,983 25,062 39,295 49, ,120 19, , ,005,504 31, ,720 2,694, ,050 1,682, ,005,504 31, ,720 2,694, ,170 1,701, ,291 $1,044,022 $31,192 $321,703 $2,719,909 $216,465 $1,751,461 $747,291 (Continued) 46

134 BOARD OF COUNTY COMMISSIONERS NON-MAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEET (Continued) SEPTEMBER 30, 2007 Assets Cash and cash equivalents Equity in pooled cash and investments Receivables (net of allowance for uncollectibles) Due from other funds Due from other governmental units Inventory Deferred Charges Total assets Capital Project Funds Capital Federal New Improvement Transit Road Program Administration Construction LOST Totals $278,340 $0 $0 $0 $4,410,563 1,607, ,020 1,256, ,965 29,885, , , ,922 21, , ,452, , ,485 $2,338,370 $283,575 $1,416,012 $372,965 $41,736,258 Liabilities and Fund Balances Liabilities: Vouchers payable Contracts payable Salaries payable Due to other funds Due to other governmental units Other current liabilities Advance from other funds Total liabilities Fund balances: Reserved for encumbrances Reserved for debt service Reserved for inventory Unreserved - undesignated Total fund balances Total liabilities and fund balances $362,800 $0 $75,379 $61,497 3,580, , ,509 6, ,738 9, , , ,831,198 25, ,816, , , , ,557 68,052 11,025, , ,549 6,560 1,288, , ,666 1,601, ,575 1,154, ,353 28,380,894 1,705, ,575 1,226, ,913 30,711,206 $2,338,370 $283,575 $1,416,012 $372,965 $41,736,258 47

135 BOARD OF COUNTY COMMISSIONERS NON-MAJOR GOVERNMENTAL FUNDS COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES YEAR ENDED SEPTEMBER 30, 2007 Revenues: Taxes Intergovernmental Charges for services Fines and forfeitures Investment income Special assessments Miscellaneous Total revenues Special Revenue Funds Other Escambia Co. Industrial Code Mass M and A Tourist Grant Misdemeanor Perdido Key Restricted Parks Enforcement Transit State I Promotion Projects Probation Article V Beach Mouse $0 $0 $1,714,227 $0 $0 $5,260,218 $0 $0 $0 $0 20,130 42, ,025,200 37, ,304, , , ,795 3,169,862 2,028, , , ,265 58,760 14,273 52,527 1, ,916 66,921 48, ,675 1, , , ,000 3, , ,415 47, , ,110 1,826,111 6,189,942 38,803 5,439,455 12,443,911 3,267,722 2,163,961 18,070 Expenditures: Current: General government Public safety Physical environment Transportation Economic environment Human services Culture and recreation Capital improvements Debt service Principal retirement Interest and fiscal charges Total expenditures 30, , ,763, ,610 2,832, , , ,124, ,932 9,250, , ,183, ,150, , ,913, , , , , ,246 65, , , , ,180 2,124,017 8,205,706 49,176 3,081,286 12,479,246 2,832,020 1,888,062 0 Excess (deficiency) of revenue over (under) expenditures 344, ,930 (297,906) (2,015,764) (10,373) 2,358,169 (35,335) 435, ,899 18,070 Other financing sources (uses): Insurance reimbursements Transfers in Transfers out Net other financing sources (uses) ,000 2,082, , , (1,630,132) 0 (303,860) (581,535) ,000 2,082,130 0 (1,630,132) 372,335 (303,860) (311,647) 0 Net change in fund balances Fund balances at beginning of year Fund balances at end of year 344, , ,094 66,366 (10,373) 728, , ,842 (35,748) 18, ,257 (973,733) 0 776,912 54,286 3,047,811 1,216, ,621 1,664,443 8,300 $1,092,243 ($441,803) $502,094 $843,278 $43,913 $3,775,848 $1,553,071 $803,463 $1,628,695 $26,370 (Continued) 48

136 BOARD OF COUNTY COMMISSIONERS NON-MAJOR GOVERNMENTAL FUNDS COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES (Continued) YEAR ENDED SEPTEMBER 30, 2007 Revenues: Taxes Intergovernmental Charges for services Fines and forfeitures Investment income Special assessments Miscellaneous Total revenues Special Revenue Funds Escambia HUD-CDBG Law County Emergency Housing Enforcement Affordable CDBG-HUD Handicapped Family Fire 911 Rehab HUD SHIP Trust Housing Entitlement Parking Fines Mediation Protection Operations Loan Home $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 1,473, ,809 3,121, , , ,333, , , , ,670 23,942 88,963 17,973 11,012 7, ,697 28,550 1,658 9, ,653, , , , ,143 8,726 8, ,977, , ,123 3,139,267 53,421 7,226 10,211,413 1,568,250 10,051 1,342,834 Expenditures: Current: General government Public safety Physical environment Transportation Economic environment Human services Culture and recreation Capital improvements Debt service Principal retirement Interest and fiscal charges Total expenditures , , ,789, , ,397, ,514 2,915, ,333, , ,397, , ,514 2,915,794 51, ,789, , ,333,014 Excess (deficiency) of revenue over (under) expenditures (419,857) (38,209) 228, ,473 2,164 6,671 (578,496) 990,350 10,051 9,820 Other financing sources (uses): Insurance reimbursements Transfers in Transfers out Net other financing sources (uses) , (205,500) 0 0 (169,373) (595,204) (205,500) 0 0 (155,077) (595,204) 0 0 Net change in fund balances Fund balances at beginning of year Fund balances at end of year (419,857) (38,209) 228,609 17,973 2,164 6,671 (733,573) 395,146 10,051 9,820 4,458, ,467 1,634, , , ,306 4,519, ,358 21, ,900 $4,038,927 $372,258 $1,863,475 $444,237 $194,801 $130,977 $3,785,586 $1,005,504 $31,192 $175,720 (Continued) 49

137 BOARD OF COUNTY COMMISSIONERS NON-MAJOR GOVERNMENTAL FUNDS COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES (Continued) YEAR ENDED SEPTEMBER 30, 2007 Revenues: Taxes Intergovernmental Charges for services Fines and forfeitures Investment income Special assessments Miscellaneous Total revenues Special Revenue Funds Capital Project Funds Bob Sikes MSBU Capital Federal New Toll Assessment Master Debt Improvement Transit Road Facilities Program Drainage Service Program Administration Construction LOST Totals $0 $0 $0 $0 $0 $0 $1,733,404 $0 $8,707, , ,963, ,879,068 3,124, ,876, , ,484 23,220 87, , ,149 14, ,606 30,131 2,616, , , ,368, ,294 1,452,876 3,244, , , , ,149 1,978,277 1,867,010 49,455 61,418,697 Expenditures: Current: General government Public safety Physical environment Transportation Economic environment Human services Culture and recreation Capital improvements Debt service Principal retirement Interest and fiscal charges Total expenditures 906, ,930, ,503, , ,920, , , ,918, ,932, ,032, , ,472,884 1,963,970 3,526, ,076 7,484, ,717, ,717, ,320, ,420, , , ,623 21,038,026 1,472,884 1,963,970 3,526, ,076 80,014,472 Excess (deficiency) of revenue over (under) expenditures 2,337,732 (54,672) 174,456 (20,054,311) (921,735) 14,307 (1,659,885) (471,621) (18,595,775) Other financing sources (uses): Insurance reimbursements Transfers in Transfers out Net other financing sources (uses) , ,711, , ,048,863 (1,532,880) (27,000) (83,968) 0 (5,129,452) (1,532,880) (27,000) 0 13,711, ,642 0 (83,968) 0 12,933,707 Net change in fund balances 804,852 (81,672) 174,456 (6,342,443) (109,093) 14,307 (1,743,853) (471,621) (5,662,068) Fund balances at beginning of year Fund balances at end of year 1,889, ,842 1,527,439 7,089,734 1,814, ,268 2,970, ,534 36,373,274 $2,694,847 $177,170 $1,701,895 $747,291 $1,705,211 $283,575 $1,226,455 $304,913 $30,711,206 50

138 BOARD OF COUNTY COMMISSIONERS ESCAMBIA COUNTY RESTRICTED SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL FOR THE YEAR ENDED SEPTEMBER 30, 2007 Variance with Final Budget Original Final Positive Budget Budget Actual (Negative) Revenues: Intergovernmental $22,796 $22,796 $20,130 ($2,666) Charges for services 204, , , ,436 Investment income ,265 50,265 Miscellaneous 60,000 74, ,168 47,203 Total revenues 287, , , ,238 Expenditures: Current: General government 28, ,944 30,584 78,360 Public safety 99, , ,072 Physical environment 94, , , ,774 Transportation 28, ,990 2,963 98,027 Human services 21,656 43, ,387 Culture and recreation 0 14,965 14,965 0 Total expenditures 273,311 1,035, , ,620 Excess (deficiency) of revenue over (under) expenditures 14,385 (732,872) 344,986 1,077,858 Other financing sources (uses): Transfers in 0 86,565 0 (86,565) Transfers out 0 (86,565) 0 86,565 Total other financing sources (uses) Net change in fund balances 14,385 (732,872) 344,986 1,077,858 Fund balances at beginning of year (14,385) 732, ,257 14,385 Fund balances (deficit) at end of year $0 $0 $1,092,243 $1,092,243 51

139 BOARD OF COUNTY COMMISSIONERS INDUSTRIAL PARKS SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL FOR THE YEAR ENDED SEPTEMBER 30, 2007 Variance with Final Budget Original Final Positive Budget Budget Actual (Negative) Revenues: Intergovernmental $0 $396,176 $42,350 ($353,826) Investment income ,760 58,760 Miscellaneous 0 677, ,000 (125,000) Total revenues 0 1,073, ,110 (420,066) Expenditures: Current: Economic environment 0 1,526,075 42,352 1,483,723 Debt service: Interest and fiscal charges 97,194 97,194 78,828 18,366 Total expenditures 97,194 1,623, ,180 1,502,089 Excess (deficiency) of revenue over (under) expenditures (97,194) (550,093) 531,930 1,082,023 Other financing sources (uses): Transfers in 0 109,402 0 (109,402) Transfers out 0 (109,402) 0 109,402 Total other financing sources (uses) Net change in fund balances (97,194) (550,093) 531,930 1,082,023 Fund balances at beginning of year 97, ,093 (973,733) (1,523,826) Fund balances (deficit) at end of year $0 $0 ($441,803) ($441,803) 52

140 BOARD OF COUNTY COMMISSIONERS CODE ENFORCEMENT SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL FOR THE YEAR ENDED SEPTEMBER 30, 2007 Variance with Final Budget Original Final Positive Budget Budget Actual (Negative) Revenues: Taxes $1,596,000 $1,596,000 $1,714,227 $118,227 Fines and forfeitures 26,000 26,000 93,966 67,966 Investment income ,273 14,273 Miscellaneous 70,000 70,000 3,645 (66,355) Total revenues 1,692,000 1,692,000 1,826, ,111 Expenditures: Current: Physical environment 2,410,900 2,435,900 2,124, ,883 Total expenditures 2,410,900 2,435,900 2,124, ,883 Excess (deficiency) of revenue over (under) expenditures (718,900) (743,900) (297,906) 445,994 Other financing sources (uses): Transfers in 800, , ,000 (25,000) Total other financing sources (uses) 800, , ,000 (25,000) Net change in fund balances 81,100 81, , ,994 Fund balances at beginning of year (81,100) (81,100) 0 81,100 Fund balances (deficit) at end of year $0 $0 $502,094 $502,094 53

141 BOARD OF COUNTY COMMISSIONERS MASS TRANSIT SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL FOR THE YEAR ENDED SEPTEMBER 30, 2007 Variance with Final Budget Original Final Positive Budget Budget Actual (Negative) Revenues: Intergovernmental $5,205,872 $5,232,557 $5,025,200 ($207,357) Charges for services 2,133,394 1,064, ,043 (106,276) Investment income ,527 52,527 Miscellaneous 34,105 34, , ,067 Total revenues 7,373,371 6,330,981 6,189,942 (141,039) Expenditures: Current: Transportation 9,109,629 9,011,748 8,183, ,830 Debt service Interest and fiscal charges 50,000 50,000 21,788 28,212 Total expenditures 9,159,629 9,061,748 8,205, ,042 Excess (deficiency) of revenue over (under) expenditures (1,786,258) (2,730,767) (2,015,764) 715,003 Other financing sources (uses): Transfers in 1,914,532 2,082,130 2,082,130 0 Total other financing sources (uses) 1,914,532 2,082,130 2,082,130 0 Net change in fund balances 128,274 (648,637) 66, ,003 Fund balances at beginning of year (128,274) 648, , ,275 Fund balances (deficit) at end of year $0 $0 $843,278 $843,278 54

142 BOARD OF COUNTY COMMISSIONERS M AND A STATE I SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL FOR THE YEAR ENDED SEPTEMBER 30, 2007 Variance with Final Budget Original Final Positive Budget Budget Actual (Negative) Revenues: Intergovernmental $36,600 $36,600 $37,000 $400 Investment income 1,000 1,000 1, Total revenues 37,600 37,600 38,803 1,203 Expenditures: Current: Human services 37,600 91,886 49,176 42,710 Total expenditures 37,600 91,886 49,176 42,710 Excess (deficiency) of revenue over (under) expenditures 0 (54,286) (10,373) 43,913 Fund balances at beginning of year 0 54,286 54,286 0 Fund balances (deficit) at end of year $0 $0 $43,913 $43,913 55

143 BOARD OF COUNTY COMMISSIONERS TOURIST PROMOTION FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL FOR THE YEAR ENDED SEPTEMBER 30, 2007 Variance with Final Budget Original Final Positive Budget Budget Actual (Negative) Revenues: Taxes $5,676,700 $5,676,700 $5,260,218 ($416,482) Investment income , ,916 Miscellaneous Total revenues 5,676,700 5,676,700 5,439,455 (237,245) Expenditures: Current: Physical environment 0 100,000 94,932 5,068 Economic environment 3,825,508 4,914,890 2,913,108 2,001,782 Culture and recreation 0 78,195 73,246 4,949 Total expenditures 3,825,508 5,093,085 3,081,286 2,011,799 Excess (deficiency) of revenue over (under) expenditures 1,851, ,615 2,358,169 1,774,554 Other financing sources (uses): Transfers out (2,164,964) (2,164,964) (1,630,132) 534,832 Total other financing sources (uses) (2,164,964) (2,164,964) (1,630,132) 534,832 Net change in fund balances (313,772) (1,581,349) 728,037 2,309,386 Fund balances at beginning of year 313,772 1,581,349 3,047,811 1,466,462 Fund balances (deficit) at end of year $0 $0 $3,775,848 $3,775,848 56

144 BOARD OF COUNTY COMMISSIONERS OTHER GRANT PROJECTS SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL FOR THE YEAR ENDED SEPTEMBER 30, 2007 Variance with Final Budget Original Final Positive Budget Budget Actual (Negative) Revenues: Intergovernmental $10,476,115 $34,553,814 $12,304,280 ($22,249,534) Charges for services ,795 36,795 Fines and forfeitures Investment income 0 14,683 66,921 52,238 Miscellaneous 6,000 26,000 35,415 9,415 Total revenues 10,482,115 34,594,497 12,443,911 (22,150,586) Expenditures: Current: General government 286, , , ,873 Public safety 150,224 1,719, ,610 1,026,066 Physical environment 8,410,825 28,575,834 9,250,612 19,325,222 Transportation 800,000 1,150,000 1,150,000 0 Economic environment 92, , , ,986 Human services 660,514 1,945, ,104 1,010,817 Culture and recreation 100, ,490 65, ,122 Total expenditures 10,500,650 35,003,332 12,479,246 22,524,086 Excess (deficiency) of revenue over (under) expenditures (18,535) (408,835) (35,335) 373,500 Other financing sources (uses): Transfers in 18, , ,335 (7,000) Total other financing sources (uses) 18, , ,335 (7,000) Net change in fund balances 0 (29,500) 337, ,500 Fund balances at beginning of year 0 29,500 1,216,071 1,186,571 Fund balances (deficit) at end of year $0 $0 $1,553,071 $1,553,071 57

145 BOARD OF COUNTY COMMISSIONERS MISDEMEANOR PROBATION SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL FOR THE YEAR ENDED SEPTEMBER 30, 2007 Variance with Final Budget Original Final Positive Budget Budget Actual (Negative) Revenues: Charges for services $3,298,875 $3,298,875 $3,169,862 ($129,013) Fines and forfeitures 2,000 2,000 2, Investment income 20,000 20,000 48,112 28,112 Miscellaneous 58,000 58,000 47,198 (10,802) Total revenues 3,378,875 3,378,875 3,267,722 (111,153) Expenditures: Current: Public safety 3,080,081 3,551,702 2,832, ,682 Total expenditures 3,080,081 3,551,702 2,832, ,682 Excess (deficiency) of revenue over (under) expenditures 298,794 (172,827) 435, ,529 Other financing sources (uses): Transfers out (330,750) (330,750) (303,860) 26,890 Total other financing sources (uses) (330,750) (330,750) (303,860) 26,890 Net change in fund balances (31,956) (503,577) 131, ,419 Fund balances at beginning of year 31, , , ,044 Fund balances (deficit) at end of year $0 $0 $803,463 $803,463 58

146 BOARD OF COUNTY COMMISSIONERS ARTICLE V SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL FOR THE YEAR ENDED SEPTEMBER 30, 2007 Variance with Final Budget Original Final Positive Budget Budget Actual (Negative) Revenues: Intergovernmental $47,418 $2,708,520 $0 ($2,708,520) Charges for services 1,893,966 1,893,966 2,028, ,204 Investment income , ,675 Miscellaneous Total revenues 1,941,384 4,602,486 2,163,961 (2,438,525) Expenditures: Current: General government 1,608,646 5,586,483 1,763,635 3,822,848 Public safety 137, , , ,302 Total expenditures 1,746,396 5,858,212 1,888,062 3,970,150 Excess (deficiency) of revenue over (under) expenditures 194,988 (1,255,726) 275,899 1,531,625 Other financing sources (uses): Transfers in 269, , ,888 0 Transfers out (570,000) (581,535) (581,535) 0 Total other financing sources (uses) (300,112) (311,647) (311,647) 0 Net change in fund balances (105,124) (1,567,373) (35,748) 1,531,625 Fund balances at beginning of year 105,124 1,567,373 1,664,443 97,070 Fund balances (deficit) at end of year $0 $0 $1,628,695 $1,628,695 59

147 BOARD OF COUNTY COMMISSIONERS PERDIDO KEY BEACH MOUSE SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL FOR THE YEAR ENDED SEPTEMBER 30, 2007 Variance with Final Budget Original Final Positive Budget Budget Actual (Negative) Revenues: Investment income $0 $0 $1,070 $1,070 Special assessments 369, ,063 17,000 (352,063) Total revenues 369, ,063 18,070 (350,993) Expenditures: Current: Physical environment 351, , ,789 Total expenditures 351, , ,789 Excess (deficiency) of revenue over (under) expenditures 17,574 9,274 18,070 8,796 Fund balances at beginning of year (17,574) (9,274) 8,300 17,574 Fund balances (deficit) at end of year $0 $0 $26,370 $26,370 60

148 BOARD OF COUNTY COMMISSIONERS S.H.I.P. SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL FOR THE YEAR ENDED SEPTEMBER 30, 2007 Variance with Final Budget Original Final Positive Budget Budget Actual (Negative) Revenues: Intergovernmental $5,728,905 $5,728,905 $1,473,589 ($4,255,316) Investment income , ,670 Miscellaneous , ,926 Total revenues 5,728,905 5,728,905 1,977,185 (3,751,720) Expenditures: Current: Economic environment 5,728,905 5,748,905 2,397,042 3,351,863 Total expenditures 5,728,905 5,748,905 2,397,042 3,351,863 Excess (deficiency) of revenue over (under) expenditures 0 (20,000) (419,857) (399,857) Fund balances at beginning of year 0 20,000 4,458,784 4,438,784 Fund balances (deficit) at end of year $0 $0 $4,038,927 $4,038,927 61

149 BOARD OF COUNTY COMMISSIONERS LAW ENFORCEMENT TRUST FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL FOR THE YEAR ENDED SEPTEMBER 30, 2007 Variance with Final Budget Original Final Positive Budget Budget Actual (Negative) Revenues: Fines and forfeitures $0 $273,000 $419,907 $146,907 Investment income ,942 23,942 Total revenues 0 273, , ,849 Expenditures: Current: Public safety 0 683, , ,409 Total expenditures 0 683, , ,409 Excess (deficiency) of revenue over (under) expenditures 0 (410,467) (38,209) 372,258 Fund balances at beginning of year 0 410, ,467 0 Fund balances (deficit) at end of year $0 $0 $372,258 $372,258 62

150 BOARD OF COUNTY COMMISSIONERS ESCAMBIA COUNTY AFFORDABLE HOUSING SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL FOR THE YEAR ENDED SEPTEMBER 30, 2007 Variance with Final Budget Original Final Positive Budget Budget Actual (Negative) Revenues: Intergovernmental $0 $0 $120,809 $120,809 Investment income 2,400 2,400 88,963 86,563 Miscellaneous 27,600 27, , ,751 Total revenues 30,000 30, , ,123 Expenditures: Current: Economic environment 1,413,257 1,664, ,514 1,489,352 Total expenditures 1,413,257 1,664, ,514 1,489,352 Excess (deficiency) of revenue over (under) expenditures (1,383,257) (1,634,866) 228,609 1,863,475 Fund balances at beginning of year 1,383,257 1,634,866 1,634,866 0 Fund balances (deficit) at end of year $0 $0 $1,863,475 $1,863,475 63

151 BOARD OF COUNTY COMMISSIONERS CDBG HUD ENTITLEMENT FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL FOR THE YEAR ENDED SEPTEMBER 30, 2007 Variance with Final Budget Original Final Positive Budget Budget Actual (Negative) Revenues: Intergovernmental $5,460,317 $8,664,108 $3,121,294 ($5,542,814) Investment income ,973 17,973 Total revenues 5,460,317 8,664,108 3,139,267 (5,524,841) Expenditures: Current: Economic environment 5,254,817 8,433,608 2,915,794 5,517,814 Total expenditures 5,254,817 8,433,608 2,915,794 5,517,814 Excess (deficiency) of revenue over (under) expenditures 205, , ,473 (7,027) Other financing sources (uses): Transfers out (205,500) (230,500) (205,500) 25,000 Total other financing sources (uses) (205,500) (230,500) (205,500) 25,000 Net change in fund balances ,973 17,973 Fund balances at beginning of year , ,264 Fund balances (deficit) at end of year $0 $0 $444,237 $444,237 64

152 BOARD OF COUNTY COMMISSIONERS HANDICAPPED PARKING FEES SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL FOR THE YEAR ENDED SEPTEMBER 30, 2007 Variance with Final Budget Original Final Positive Budget Budget Actual (Negative) Revenues: Charges for services $40,000 $40,000 $42,409 $2,409 Investment income ,012 11,012 Total revenues 40,000 40,000 53,421 13,421 Expenditures: Current: Public safety 12,654 76,866 3,338 73,528 Human services 25, ,771 47, ,852 Total expenditures 38, ,637 51, ,380 Excess (deficiency) of revenue over (under) expenditures 2,000 (190,637) 2, ,801 Fund balances at beginning of year (2,000) 190, ,637 2,000 Fund balances (deficit) at end of year $0 $0 $194,801 $194,801 65

153 BOARD OF COUNTY COMMISSIONERS FAMILY MEDIATION SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL FOR THE YEAR ENDED SEPTEMBER 30, 2007 Variance with Final Budget Original Final Positive Budget Budget Actual (Negative) Revenues: Investment income $0 $0 $7,226 $7,226 Total revenues 0 0 7,226 7,226 Expenditures: Current: General government 116, , ,751 Total expenditures 116, , ,751 Excess (deficiency) of revenue over (under) expenditures (116,654) (124,306) 6, ,977 Fund balances at beginning of year 116, , ,306 0 Fund balances (deficit) at end of year $0 $0 $130,977 $130,977 66

154 BOARD OF COUNTY COMMISSIONERS FIRE PROTECTION SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL FOR THE YEAR ENDED SEPTEMBER 30, 2007 Variance with Final Budget Original Final Positive Budget Budget Actual (Negative) Revenues: Intergovernmental $3,000 $3,000 $17,791 $14,791 Charges for services 200, , ,000 0 Investment income 65,000 65, , ,697 Special assessments 9,236,010 9,236,010 9,653, ,772 Miscellaneous 10,171 10,171 4,143 (6,028) Total revenues 9,514,181 9,514,181 10,211, ,232 Expenditures: Current: General government 207, Public safety 10,672,001 13,398,408 10,789,909 2,608,499 Total expenditures 10,879,249 13,398,408 10,789,909 2,608,499 Excess (deficiency) of revenue over (under) expenditures (1,365,068) (3,884,227) (578,496) 3,305,731 Other financing sources (uses): Insurance reimbursements ,296 14,296 Transfers out (169,373) (169,373) (169,373) 0 Total other financing sources (uses) (169,373) (169,373) (155,077) 14,296 Net change in fund balances (1,534,441) (4,053,600) (733,573) 3,320,027 Fund balances at beginning of year 1,534,441 4,053,600 4,519, ,559 Fund balances (deficit) at end of year $0 $0 $3,785,586 $3,785,586 67

155 BOARD OF COUNTY COMMISSIONERS E-911 OPERATIONS SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL FOR THE YEAR ENDED SEPTEMBER 30, 2007 Variance with Final Budget Original Final Positive Budget Budget Actual (Negative) Revenues: Intergovernmental $360,500 $360,500 $759,641 $399,141 Investment income 2,497 2,497 28,550 26,053 Special assessments 915, , ,333 (143,667) Miscellaneous 0 0 8,726 8,726 Total revenues 1,277,997 1,277,997 1,568, ,253 Expenditures: Current: Public safety 794,018 1,229, , ,476 Total expenditures 794,018 1,229, , ,476 Excess (deficiency) of revenue over (under) expenditures 483,979 48, , ,729 Other financing sources (uses): Transfers out (595,204) (595,204) (595,204) 0 Total other financing sources (uses) (595,204) (595,204) (595,204) 0 Net change in fund balances (111,225) (546,583) 395, ,729 Fund balances at beginning of year 111, , ,358 63,775 Fund balances (deficit) at end of year $0 $0 $1,005,504 $1,005,504 68

156 BOARD OF COUNTY COMMISSIONERS HUD CDBG HOUSING REHAB LOAN SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL FOR THE YEAR ENDED SEPTEMBER 30, 2007 Variance with Final Budget Original Final Positive Budget Budget Actual (Negative) Revenues: Intergovernmental $48,000 $48,000 $0 ($48,000) Investment income 2,000 2,000 1,658 (342) Miscellaneous 0 0 8,393 8,393 Total revenues 50,000 50,000 10,051 (39,949) Expenditures: Current: Economic environment 50,000 71, ,141 Total expenditures 50,000 71, ,141 Excess (deficiency) of revenue over (under) expenditures 0 (21,141) 10,051 31,192 Fund balances at beginning of year 0 21,141 21,141 0 Fund balances (deficit) at end of year $0 $0 $31,192 $31,192 69

157 BOARD OF COUNTY COMMISSIONERS HUD HOME FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL FOR THE YEAR ENDED SEPTEMBER 30, 2007 Variance with Final Budget Original Final Positive Budget Budget Actual (Negative) Revenues: Intergovernmental $3,420,058 $3,737,499 $1,333,014 ($2,404,485) Investment income 0 0 9,820 9,820 Total revenues 3,420,058 3,737,499 1,342,834 (2,394,665) Expenditures: Current: Economic environment 3,420,058 3,737,499 1,333,014 2,404,485 Total expenditures 3,420,058 3,737,499 1,333,014 2,404,485 Excess (deficiency) of revenue over (under) expenditures 0 0 9,820 9,820 Fund balances at beginning of year , ,900 Fund balances (deficit) at end of year $0 $0 $175,720 $175,720 70

158 BOARD OF COUNTY COMMISSIONERS BOB SIKES TOLL FACILITIES SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL FOR THE YEAR ENDED SEPTEMBER 30, 2007 Variance with Final Budget Original Final Positive Budget Budget Actual (Negative) Revenues: Charges for services $2,800,000 $2,800,000 $3,124,881 $324,881 Investment income , ,484 Miscellaneous Total revenues 2,800,000 2,800,000 3,244, ,373 Expenditures: Current: General government 1,058,502 1,434, , ,981 Total expenditures 1,058,502 1,434, , ,981 Excess (deficiency) of revenue over (under) expenditures 1,741,498 1,365,378 2,337, ,354 Other financing sources (uses): Transfers out (1,601,498) (1,601,498) (1,532,880) 68,618 Total other financing sources (uses) (1,601,498) (1,601,498) (1,532,880) 68,618 Net change in fund balances 140,000 (236,120) 804,852 1,040,972 Fund balances at beginning of year (140,000) 236,120 1,889,995 1,653,875 Fund balances (deficit) at end of year $0 $0 $2,694,847 $2,694,847 71

159 BOARD OF COUNTY COMMISSIONERS MSBU ASSESSMENT PROGRAM SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL Variance with FOR THE YEAR ENDED SEPTEMBER 30, 2007 Final Budget Original Final Positive Budget Budget Actual (Negative) Revenues: Investment income $0 $0 $23,220 $23,220 Special assessments 475, , ,816 19,673 Total revenues 475, , ,036 42,893 Expenditures: Current: Physical environment 408, , ,868 59,807 Transportation 118, , ,840 50,712 Total expenditures 526, , , ,519 Excess (deficiency) of revenue over (under) expenditures (51,242) (208,084) (54,672) 153,412 Other financing sources (uses): Transfers out 0 (27,000) (27,000) 0 Total other financing sources (uses) 0 (27,000) (27,000) 0 Net change in fund balances (51,242) (235,084) (81,672) 153,412 Fund balances at beginning of year 51, , ,842 23,758 Fund balances (deficit) at end of year $0 $0 $177,170 $177,170 72

160 BOARD OF COUNTY COMMISSIONERS MASTER DRAINAGE SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL Variance with FOR THE YEAR ENDED SEPTEMBER 30, 2007 Final Budget Original Final Positive Budget Budget Actual (Negative) Revenues: Investment income $0 $0 $87,345 $87,345 Special assessments 184, , , ,729 Total revenues 184, , , ,074 Expenditures: Current: Transportation 174,805 1,702, ,623 1,357,620 Total expenditures 174,805 1,702, ,623 1,357,620 Excess (deficiency) of revenue over (under) expenditures 9,200 (1,518,238) 174,456 1,692,694 Other financing sources (uses): Transfers in 0 1,527,438 0 (1,527,438) Transfers out 0 (1,527,438) 0 1,527,438 Total other financing sources (uses) Net change in fund balances 9,200 (1,518,238) 174,456 1,692,694 Fund balances at beginning of year (9,200) 1,518,238 1,527,439 9,201 Fund balances (deficit) at end of year $0 $0 $1,701,895 $1,701,895 73

161 BOARD OF COUNTY COMMISSIONERS DEBT SERVICE FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL FOR THE YEAR ENDED SEPTEMBER 30, 2007 Variance with Final Budget Original Final Positive Budget Budget Actual (Negative) Revenues: Intergovernmental $600,000 $600,000 $660,000 $60,000 Investment income 35,725 35, , ,990 Total revenues 635, , , ,990 Expenditures: Debt service: Principal retirement 15,202,847 15,202,847 14,717, ,919 Interest and fiscal charges 6,429,903 6,540,582 6,320, ,484 Total expenditures 21,632,750 21,743,429 21,038, ,403 Excess (deficiency) of revenue over (under) expenditures (20,997,025) (21,107,704) (20,054,311) 1,053,393 Other financing sources (uses): Transfers in 21,645,560 21,645,560 13,711,868 (7,933,692) Total other financing sources (uses) 21,645,560 21,645,560 13,711,868 (7,933,692) Net change in fund balances 648, ,856 (6,342,443) (6,880,299) Fund balances at beginning of year (648,535) (537,856) 7,089,734 7,627,590 Fund balances (deficit) at end of year $0 $0 $747,291 $747,291 74

162 BOARD OF COUNTY COMMISSIONERS CAPITAL IMPROVEMENT PROGRAM SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL FOR THE YEAR ENDED SEPTEMBER 30, 2007 Variance with Final Budget Original Final Positive Budget Budget Actual (Negative) Revenues: Investment income $0 $0 $551,149 $551,149 Total revenues , ,149 Expenditures: Capital improvements: General government 381,631 4,826,707 1,472,884 3,353,823 Total expenditures 381,631 4,826,707 1,472,884 3,353,823 Excess (deficiency) of revenue over (under) expenditures (381,631) (4,826,707) (921,735) 3,904,972 Other financing sources (uses): Bond(s) issued 0 750,000 0 (750,000) Transfers in 0 812, ,642 0 Total other financing sources (uses) 0 1,562, ,642 (750,000) Net change in fund balances (381,631) (3,264,065) (109,093) 3,154,972 Fund balances at beginning of year 381,631 3,264,065 1,814,304 (1,449,761) Fund balances (deficit) at end of year $0 $0 $1,705,211 $1,705,211 75

163 BOARD OF COUNTY COMMISSIONERS FEDERAL TRANSIT ADMINISTRATION SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL FOR THE YEAR ENDED SEPTEMBER 30, 2007 Variance with Final Budget Original Final Positive Budget Budget Actual (Negative) Revenues: Intergovernmental $339,308 $4,979,229 $1,963,970 ($3,015,259) Investment income ,307 14,307 Total revenues 339,308 4,979,229 1,978,277 (3,000,952) Expenditures: Capital improvements: Transportation 339,308 4,979,229 1,963,970 3,015,259 Total expenditures 339,308 4,979,229 1,963,970 3,015,259 Excess (deficiency) of revenue over (under) expenditures ,307 14,307 Fund balances at beginning of year , ,268 Fund balances (deficit) at end of year $0 $0 $283,575 $283,575 76

164 BOARD OF COUNTY COMMISSIONERS ROAD CONSTRUCTION SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL FOR THE YEAR ENDED SEPTEMBER 30, 2007 Variance with Final Budget Original Final Positive Budget Budget Actual (Negative) Revenues: Taxes $1,672,774 $1,672,774 $1,733,404 $60,630 Investment income , ,606 Total revenues 1,672,774 1,672,774 1,867, ,236 Expenditures: Capital improvements: Transportation 1,504,885 4,475,193 3,526, ,298 Total expenditures 1,504,885 4,475,193 3,526, ,298 Excess (deficiency) of revenue over (under) expenditures 167,889 (2,802,419) (1,659,885) 1,142,534 Other financing sources (uses): Transfers out (84,250) (84,250) (83,968) 282 Total other financing sources (uses) (84,250) (84,250) (83,968) 282 Net change in fund balances 83,639 (2,886,669) (1,743,853) 1,142,816 Fund balances at beginning of year (83,639) 2,886,669 2,970,308 83,639 Fund balances (deficit) at end of year $0 $0 $1,226,455 $1,226,455 77

165 BOARD OF COUNTY COMMISSIONERS LOCAL OPTION SALES TAX (LOST) SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL FOR THE YEAR ENDED SEPTEMBER 30, 2007 Variance with Final Budget Original Final Positive Budget Budget Actual (Negative) Revenues: Charges for services $0 $0 $30 $30 Investment income 0 48,000 30,131 (17,869) Miscellaneous ,294 19,294 Total revenues 0 48,000 49,455 1,455 Expenditures: Capital improvements: General government 0 714, , ,248 Transportation 0 110,149 6, ,210 Total expenditures 0 824, , ,458 Excess (deficiency) of revenue over (under) expenditures 0 (776,534) (471,621) 304,913 Fund balances at beginning of year 0 776, ,534 0 Fund balances (deficit) at end of year $0 $0 $304,913 $304,913 78

166 BOARD OF COUNTY COMMISSIONERS LOCAL OPTION SALES TAX (LOST) II SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL FOR THE YEAR ENDED SEPTEMBER 30, 2007 Variance with Final Budget Original Final Positive Budget Budget Actual (Negative) Revenues: Taxes $22,932,173 $22,932,173 $24,005,711 $1,073,538 Intergovernmental 0 3,125,000 3,892, ,677 Investment income 2,000,000 2,000,000 3,285,413 1,285,413 Miscellaneous 0 937,879 74,141 (863,738) Total revenues 24,932,173 28,995,052 31,257,942 2,262,890 Expenditures: Capital improvements: General government 5,109,513 22,270,065 6,325,689 15,944,376 Public safety 6,199,074 13,533,563 11,785,370 1,748,193 Transportation 11,693,043 43,607,556 22,357,612 21,249,944 Culture and recreation 1,625,000 6,138,230 3,728,937 2,409,293 Total expenditures 24,626,630 85,549,414 44,197,608 41,351,806 Excess (deficiency) of revenue over (under) expenditures 305,543 (56,554,362) (12,939,666) 43,614,696 Other financing sources (uses): Transfers in 367,247 1,785,342 1,785,343 1 Transfers out (11,436,523) (11,436,523) (4,797,616) 6,638,907 Total other financing sources (uses) (11,069,276) (9,651,181) (3,012,273) 6,638,908 Net change in fund balances (10,763,733) (66,205,543) (15,951,939) 50,253,604 Fund balances at beginning of year 10,763,733 66,205,543 67,352,152 1,146,609 Fund balances (deficit) at end of year $0 $0 $51,400,213 $51,400,213 79

167 BOARD OF COUNTY COMMISSIONERS LOCAL OPTION SALES TAX (LOST) III SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL FOR THE YEAR ENDED SEPTEMBER 30, 2007 Variance with Final Budget Original Final Positive Budget Budget Actual (Negative) Revenues: Taxes $10,787,583 $10,787,583 $11,971,380 $1,183,797 Total revenues 10,787,583 10,787,583 11,971,380 1,183,797 Expenditures: Capital improvements: General government 2,639, Public safety 2,550,000 7,048,204 6,399, ,626 Physical environment 2,258, , , ,200 Culture and recreation 2,800,000 2,550,000 2,318, ,356 Total expenditures 10,248,204 10,248,204 9,067,022 1,181,182 Excess (deficiency) of revenue over (under) expenditures 539, ,379 2,904,358 2,364,979 Fund balances at beginning of year (539,379) (539,379) 0 539,379 Fund balances (deficit) at end of year $0 $0 $2,904,358 $2,904,358 80

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175 ANNUAL AUDIT REPORT CLERK OF THE CIRCUIT COURT & COMPTROLLER SEPTEMBER 30, 2007

176 ANNUAL AUDIT REPORT CLERK OF THE CIRCUIT COURT & COMPTROLLER SEPTEMBER 30, 2007 TABLE OF CONTENTS Report of Independent Auditors Fund Financial Statements: Governmental Funds Balance Sheet... 3 Statement of Revenues, Expenditures, and Changes in Fund Balance... 4 Page Statement of Revenues, Expenditures, and Changes in Fund Balance Budget (GAAP Basis) and Actual Internal Service Fund Statement of Net Assets...7 Statement of Revenues, Expenses, and Changes in Net Assets... 8 Statement of Cash Flows... 9 Fiduciary Funds Statement of Fiduciary Net Assets Agency Funds Notes to the Financial Statements Combining Statement of Fiduciary Net Assets All Agency Funds Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards Management Letter Clerk of the Circuit Court & Comptroller s Response to Management Letter... 21

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179 CLERK OF THE CIRCUIT COURT & COMPTROLLER BALANCE SHEET GOVERNMENTAL FUNDS SEPTEMBER 30, 2007 Special Total Revenue Governmental General Court Fund Funds ASSETS Cash and cash equivalents $747,054 $935,378 $204,973 $1,887,405 Receivables (net of allowance for uncollectibles) 6, ,532 Due from other governmental units 33,153 3,080 43,750 79,983 Total assets $786,531 $938,458 $248,931 $1,973,920 LIABILITIES Vouchers payable $31,679 $9,627 $30,927 $72,233 Salaries payable 117, ,071 20, ,859 Due to other governmental units 628, , ,183,551 Other current liabilities 8,284 69, ,723 Deferred revenue 1,013 1, ,139 Total liabilities 786, ,458 51,516 1,776,505 FUND BALANCES Unreserved Special revenue funds , ,415 Fund balances , ,415 Total liabilities and fund balances $786,531 $938,458 $248,931 $1,973,920 The accompanying notes are an integral part of the financial statements 3

180 CLERK OF THE CIRCUIT COURT & COMPTROLLER STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2007 Special Total Revenue Governmental General Court Fund Funds Revenues: Intergovernmental $88,717 $462,016 $513,157 $1,063,890 Charges for services 2,269,787 3,267, ,129 6,482,596 Fines and forfeitures 0 3,651, ,651,128 Investment income 51, ,461 31, ,053 Miscellaneous 0 66, ,454 Total revenues 2,410,433 7,722,739 1,489,949 11,623,121 Expenditures: Current: General government Personal services 3,611,892 7,137, ,126 11,598,908 Operating expenditures 592, , ,717 1,672,003 Capital outlay 23, , ,571 Total expenditures 4,228,102 7,593,877 1,712,503 13,534,482 Excess (deficiency) of revenue over (under) expenditures (1,817,669) 128,862 (222,554) (1,911,361) Other Financing Sources (Uses): Transfers in 1,822, ,822,091 Transfers out (4,422) 0 0 (4,422) Payments to Clerk of Court Trust Fund 0 (128,862) (32,400) (161,262) Total transfers 1,817,669 (128,862) (32,400) 1,656,407 Net change in fund balances 0 0 (254,954) (254,954) Fund balances at beginning of year 452, ,369 Fund balances (deficit) at end of year $0 $0 $197,415 $197,415 The accompanying notes are an integral part of the financial statements 4

181 CLERK OF THE CIRCUIT COURT & COMPTROLLER COMBINED STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - ALL GOVERNMENTAL FUND TYPES BUDGET (GAAP BASIS) AND ACTUAL YEAR ENDED SEPTEMBER 30, 2007 General Fund Court Fund Variance- Variance- Original Final positive Original Final positive Budget Budget Actual (negative) Budget Budget Actual (negative) Revenues: Intergovernmental $87,000 $87,000 $88,717 $1,717 $370,807 $462,017 $462,016 ($1) Charges for services 2,637,902 2,637,902 2,269,787 (368,115) 2,927,196 2,927,196 3,267, ,484 Fines and forfeitures ,884,973 3,884,973 3,651,128 (233,845) Interest 50,000 50,000 51,929 1, , , ,461 5,461 Miscellaneous 5,500 5,500 0 (5,500) 50,895 50,895 66,454 15,559 Total revenues 2,780,402 2,780,402 2,410,433 (369,969) 7,503,871 7,595,081 7,722, ,658 Expenditures: Current: General government: Personal services 3,643,326 3,813,297 3,611, ,405 7,049,258 7,139,086 7,137,890 1,196 Operating expenditures 743, , , , , , ,068 8 Capital outlay 17,500 23,994 23, Total general government 4,404,028 4,602,493 4,228, ,391 7,503,871 7,595,081 7,593,877 1,204 Total expenditures 4,404,028 4,602,493 4,228, ,391 7,503,871 7,595,081 7,593,877 1,204 Excess (deficiency) of revenues over expenditures (1,623,626) (1,822,091) (1,817,669) 4, , ,862 Other financing sources (uses): Transfers in 1,623,626 1,822,091 1,822, Transfers out 0 0 (4,422) (4,422) Payments to Clerk of Court Trust Fund (128,862) (128,862) Total other financing sources (uses) 1,623,626 1,822,091 1,817,669 (4,422) 0 0 (128,862) (128,862) Net change in fund balances Fund balance at beginning of year 0 0 Fund balance at end of year $0 $0 $0 $0 $0 $0 $0 $0 (Continued) The accompanying notes are an integral part of the financial statements. 5

182 CLERK OF THE CIRCUIT COURT & COMPTROLLER COMBINED STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - ALL GOVERNMENTAL FUND TYPES BUDGET (GAAP BASIS) AND ACTUAL (Continued) YEAR ENDED SEPTEMBER 30, 2007 Revenues: Intergovernmental Charges for services Fines and forfeitures Interest Miscellaneous Total revenues Special Revenue Fund Totals Variance- Variance- Original Final positive Original Final positive Budget Budget Actual (negative) Budget Budget Actual (negative) $300,000 $513,157 $513,157 $0 $757,807 $1,062,174 $1,063,890 $1,716 1,150, , , ,715,610 6,510,124 6,482,596 (27,528) ,884,973 3,884,973 3,651,128 (233,845) 14,300 31,167 31, , , ,053 7, ,395 56,395 66,454 10,059 1,464,812 1,489,350 1,489, ,749,085 11,864,833 11,623,121 (241,712) Expenditures: Current: General government: Personal services Operating expenditures Capital outlay Total general government Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses): Transfers in Transfers out Payments to Clerk of Court Trust Fund Total other financing sources (uses) Net change in fund balances Fund balance at beginning of year Fund balance at end of year 590, , , ,283,369 11,801,509 11,598, , , , , ,917,042 1,844,995 1,672, , , , , , , , ,464,812 1,712,503 1,712, ,372,711 13,910,077 13,534, ,595 1,464,812 1,712,503 1,712, ,372,711 13,910,077 13,534, ,595 0 (223,153) (222,554) 599 (1,623,626) (2,045,244) (1,911,361) 133, ,623,626 1,822,091 1,822, (4,422) (4,422) 0 0 (32,400) (32,400) 0 0 (161,262) (161,262) 0 0 (32,400) (32,400) 1,623,626 1,822,091 1,656,407 (165,684) 0 (223,153) (254,954) (31,801) 0 (223,153) (254,954) (31,801) 0 223, , , , , ,216 $0 $0 $197,415 $197,415 $0 $0 $197,415 $197,415 The accompanying notes are an integral part of the financial statements. 6

183 CLERK OF THE CIRCUIT COURT & COMPTROLLER STATEMENT OF NET ASSETS INTERNAL SERVICE FUND SEPTEMBER 30, 2007 ASSETS Cash and cash equivalents $850,052 Total current assets 850,052 LIABILITIES Current liabilities: Compensated absences payable 190,739 Total current liabilities 190,739 Non-current liabilities: Compensated absences payable 1,502,794 Total non-current liabilities 1,502,794 Total liabilities 1,693,533 NET ASSETS Unrestricted (deficit) ($843,481) The accompanying notes are an integral part of the financial statements. 7

184 CLERK OF THE CIRCUIT COURT & COMPTROLLER STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS INTERNAL SERVICE FUND FOR THE YEAR ENDED SEPTEMBER 30, 2007 Operating revenues: Charges for services $1,326,747 Total operating revenues 1,326,747 Operating expenses: Personal services 1,119,315 Total operating expenses 1,119,315 Change in net assets 207,432 Net assets (deficit) at beginning of year (1,050,913) Net assets (deficit) at ending of year ($843,481) The accompanying notes are an integral part of the financial statements. 8

185 CLERK OF THE CIRCUIT COURT & COMPTROLLER STATEMENT OF CASH FLOWS INTERNAL SERVICE FUND FOR THE YEAR ENDED SEPTEMBER 30, 2007 Cash provided by (used in) operating activities Receipts from interfund services provided $350,000 Net increase (decrease) in cash and cash equivalents 350,000 Cash and cash equivalents at beginning of year 500,052 Cash and cash equivalents at end of year $850,052 Reconciliation of operating income (loss) to net cash provided by (used in) operating activities: Operating income (loss) $207,432 Increase (decrease) in liabilities: Compensated absences payable 142,568 Net cash provided by (used in) operating activities $350,000 The accompanying notes are an integral part of the financial statements. 9

186 CLERK OF THE CIRCUIT COURT & COMPTROLLER STATEMENT OF FIDUCIARY NET ASSETS - AGENCY FUNDS SEPTEMBER 30, 2007 ASSETS Cash and cash equivalents $3,229,290 Receivables (net of allowance for uncollectibles) 22,683 Total assets $3,251,973 LIABILITIES Payable to others $196,395 Cash bonds 629,755 Court registry deposits 2,322,661 Advances - Juror payroll 103,162 Total liabilities $3,251,973 The accompanying notes are an integral part of the financial statements. 10

187 ANNUAL AUDIT REPORT CLERK OF THE CIRCUIT COURT & COMPTROLLER NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2007 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Office of the Clerk of the Circuit Court & Comptroller (the Clerk ) of Escambia County, Florida, is established as a constitutional official by Article VIII, Section 1 (d) of the Constitution of the State of Florida. The accounting policies of the Clerk conform to accounting principles generally accepted in the United States of America as applicable to local governments. The following is a summary of the more significant accounting policies. PRINCIPLES USED IN DETERMINING THE SCOPE OF ENTITY FOR FINANCIAL REPORTING PURPOSES Although the Clerk is operationally autonomous from the Escambia County Board of County Commissioners, it does not hold sufficient corporate powers of its own to be considered a legally separate entity for financial reporting purposes. Therefore, the Clerk is reported as a part of the primary government of Escambia County, Florida. These special-purpose financial statements are not intended to be a complete presentation of the financial position and results of operations of Escambia County, Florida taken as a whole. As permitted by Chapter (4), Rules of the Auditor General of the State of Florida, the special-purpose financial statements consists of only the fund level financial statements as defined in Government Accounting Standards Board (GASB) Statement No. 34, and do not include presentations of government-wide statements of the Clerk. BASIS OF PRESENTATION FUND ACCOUNTING The Clerk s financial records and accounts are maintained in accordance with the principles of fund accounting, whereby resources are classified for accounting and reporting purposes into funds to insure compliance with any special restrictions or limitations on the use of such resources. The Clerk s funds are defined as follows: Governmental Funds The General Fund is the general operating fund of the Clerk. It is used to account for all financial resources except those required to be accounted for in other funds. The Clerk s Court Fund accounts for court-related financial resources and activities of the Clerk. The Clerk s Special Revenue Fund accounts for monies collected according to Chapter 28.24, Florida Statutes to be used exclusively for the purchase and maintenance of equipment, personal training, and technical assistance in modernizing the official records system and for funding court-related technology needs of the Clerk as defined in Chapter , Florida Statutes. Also included in the Special Revenue Fund are activities related to Title IV-D child support cases. Title IV-D funding provides assistance to the plaintiff and enforcement of collections through the Office of Child Support Enforcement. 11

188 ANNUAL AUDIT REPORT CLERK OF THE CIRCUIT COURT & COMPTROLLER NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2007 Additionally, the Clerk reports the following fund types: The Internal Service Fund (a proprietary fund) accounts for the balances and activity related to the Clerk s compensated absences policies. Fiduciary Funds Agency Funds Agency funds are used to account for assets held for individuals, private organizations, or other governments. Agency Funds are custodial in nature (assets equal liabilities) and do not involve measurement of the results of operations. BASIS OF ACCOUNTING The general fund is reported using the current resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon thereafter to pay liabilities of the current period. For this purpose, the Clerk considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when the related fund liability is incurred. Capital asset acquisitions are recorded as expenditures in governmental funds. Proprietary funds (the internal service fund) are reported using the accrual basis of accounting. 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 the proprietary fund s principal ongoing operations. The principal operating revenues of the Clerk s internal service fund are charges to funds related to the Clerk s compensated absences activity. Operating expenses for the internal service fund include recognition of changes in the compensated absences liabilities. All revenues and expenses not meeting these definitions are reported as non-operating revenues and expenses. Fiduciary fund financial statements are reported using the accrual basis of accounting. BUDGETS AND BUDGETARY ACCOUNTING The Clerk operates under budget procedures pursuant to Florida Statutes. The budget is adopted on a basis consistent with accounting principles generally accepted in the United States of America. The legal level of budgetary control is at the fund level. CASH, CASH EQUIVALENTS AND INVESTMENTS Cash equivalents are highly liquid investments with original maturities of three months or less when purchased. Investments are recorded at fair value in accordance with GASB Statement No

189 ANNUAL AUDIT REPORT CLERK OF THE CIRCUIT COURT & COMPTROLLER NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2007 COMPENSATED ABSENCES Employees may accumulate a limited amount of earned but unused sick leave, annual leave, and compensatory time, which will be paid upon separation from service. The liabilities and expenses for compensated absences are recorded in the internal service fund. NOTE 2 SPECIAL REPORTING TREATMENTS Appropriations from the Board of County Commissioners are recorded as transfers in on the Statement of Revenues, Expenditures and Changes in Fund Balance Budget (GAAP Basis) and Actual. In accordance with Florida Statutes, the General Fund s excess of revenues over expenditures is returned to the Board of County Commissioners at year end and is reported as a transfer out on the Statement of Revenues, Expenditures and Changes in Fund Balance. In accordance with Florida Statutes, the Court Fund s excess of revenues over expenditures is returned to the Clerk of Court Trust Fund at year end and is reported as Payments to Clerk of Court Trust Fund on the Statement of Revenues, Expenditures and Changes in Fund Balance. Capital assets (vehicles, equipment and other tangible property costing at least $1,000 with a useful life of more than one year) are recorded as expenditures at the time of purchase. These assets are capitalized at cost and depreciated in Escambia County s government-wide financial statements. ASSETS NOTE 3 DETAILED NOTES ON ALL FUNDS Cash Deposits The investment of surplus funds is governed by the provisions of Florida Statute as to the type of investments that can be made. Deposits may be exposed to custodial credit risk, which is the risk of loss in the event of a bank failure. The Clerk manages custodial credit risk by maintaining its deposits in financial institutions designated as Qualified Public Depositories by the State Treasurer. All deposits were fully insured through a combination of Federal depository insurance and participation of the financial institution in the multiple financial institution collateral pool as specified in Chapter 280, Florida Statutes. Accordingly, risk of loss due to bank failure is not significant. At September 30, 2007, the reported amount of the Clerk s deposits was approximately $5,967,000, and the bank balance was approximately $7,000,000, consisting entirely of deposits in a checking account. 13

190 ANNUAL AUDIT REPORT CLERK OF THE CIRCUIT COURT & COMPTROLLER NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2007 Receivables The Clerk records an allowance for accounts receivable related to returned checks that may become uncollectible. At September 30, 2007, the allowance for returned checks in the Court Fund was $41,800. No other allowances for uncollectible accounts are maintained since other receivables are considered collectible. LIABILITIES Pension and Retirement Plan Substantially all full-time employees of the Clerk are covered by the Florida Retirement System (FRS), a multiple employer cost sharing defined benefit pension plan. The FRS was established in 1970 by Chapter 121, Florida Statutes and is administered by the Florida Department of Management Services, Division of Retirement. Changes to the FRS can be made only by an act of the Florida Legislature. Rules governing the operation and administration of the system may be found in Chapter 60S of the Florida Administrative Code. The FRS issues a publicly available financial report that includes financial statements and required supplementary information. The report may be obtained by writing to FRS, 2639-C North Monroe Street, Tallahassee, Florida The FRS provides retirement and disability benefits, annual cost-of-living adjustments, and death benefits to plan members and beneficiaries. The FRS provides for vesting of benefits for all members actively employed on July 1, 2001, after 6 years of creditable service, regardless of membership class. Under the laws in effect before that date, members needed 7, 8, or 10 years of service to become vested, depending on their membership class. Normal retirement benefits are available to employees who retire at age 62 with 6 or more years of service, or to those employees who have at least 30 years of creditable service, regardless of age. Retirement age and years of service requirements vary depending on membership class. Early retirement is available after 6 years of service with a 5% reduction of benefits for each year prior to the normal retirement age. Retirement benefits are based upon age, average compensation and years-of-service credit where average compensation is computed as the average of an individual s five highest years of earnings. Deferred Retirement Option Program (DROP) is an elective program for eligible members of the FRS Pension Plan, Teachers Retirement System, and State and County Officers and Employees Retirement System who are eligible for normal retirement. Under this program, a member effectively retires and continues covered employment for up to 5 years. While in DROP, the member s deferred monthly retirement benefits accumulate, earning interest and cost-of-living increases. When the DROP period is over, the participant terminates covered employment and begins receiving their predetermined monthly retirement benefit, as well as the accrued DROP benefit. Disability retirees are not eligible to participate in DROP and DROP participants do not qualify for disability retirement. The FRS is noncontributory for employees and all contributions are made by participating FRS employers. Participating employer contributions are based upon state-wide rates established by the State of Florida. Average contribution rates for the fiscal year ended September 30, 2007 were as follows: regular employees, 9.85%, special risk employees, 20.92%, elected officials, 16.53%, senior management employees, 13.12%, and DROP participants, 10.91%. The Clerk s contributions, funded on a pay-as-you-go basis, were equal to the actuarially determined contribution requirements for each year and totaled $831,033, $680,113, and $605,914, for the years ended September 30, 2007, 2006, and 2005, respectively. 14

191 ANNUAL AUDIT REPORT CLERK OF THE CIRCUIT COURT & COMPTROLLER NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2007 Risk Management - The County has a risk management program to self-insure claims against the Board of County Commissioners, Constitutional Officers, and Santa Rosa Island Authority for the following types of risks: Workers Compensation self insured up to a limit of $450,000 per occurrence with statutory limits. Casualty and Property Casualty limits are self-insured for $100,000 per claim with a $200,000 aggregate; excess policy limits of $1,000,000 per occurrence, $2,000,000 aggregate. Property limits are $50,000 - $100,000 self insured retentions per occurrence. The Clerk participated in the County s self-insurance program during fiscal year 2007 at a cost of approximately $50,000. There also were no significant reductions in insurance coverage from the prior year and there have been no settlements which exceeded the Clerk s insurance coverage in any of the past three fiscal years. Long-Term Debt Obligations Compensated Absences As required by Chapter (3)(g), Rules of the Auditor General, disclosures regarding long-term liabilities are as follows: Balance 10/01/06 $1,550,965 Additions 976,747 Deletions (834,179) Balance 09/30/07 1,693,533 Less current portion (190,739) Long term balance $1,502,794 Internal Service Fund The Internal Service Fund, established in 2004, is designed to record the annual costs related to the Clerk s compensated absences policies, to record the short-term and long-term components of such liabilities (including payments to employees), and to collect and hold cash and investments necessary to liquidate such liabilities. The related costs associated with the fund will be recovered via charges to the general and court funds, in accordance with generally accepted criteria for establishment and use of an internal service fund. At September 30, 2007, the fund has an accumulated deficit of $843,481, which will be eliminated over a reasonable period of time based upon a moving amortization period. NOTE 4 CLAIMS AND CONTINGENCIES The Clerk is contingently liable with respect to lawsuits and other claims which might be filed incidental to the ordinary course of operations. In the opinion of management, based on the advice of legal counsel, there are no lawsuits or claims outstanding which will have a material adverse effect on the financial position of the Clerk. 15

192 CLERK OF THE CIRCUIT COURT & COMPTROLLER COMBINING STATEMENT OF FIDUCIARY NET ASSETS - ALL AGENCY FUNDS SEPTEMBER 30, 2007 Court Juror and Domestic General Registry Witness Restitution Relations Trust Totals ASSETS Cash and cash equivalents $2,322,661 $103,162 $107,207 $56,063 $640,197 $3,229,290 Accounts receivable (net of allowance for uncollectibles) , ,683 Total assets $2,322,661 $103,162 $107,207 $78,746 $640,197 $3,251,973 LIABILITIES Payable to others $0 $0 $107,207 $78,746 $10,442 $196,395 Cash bonds , ,755 Deposits - court registry 2,322, ,322,661 Advances - juror and witness payroll 0 103, ,162 Total liabilities $2,322,661 $103,162 $107,207 $78,746 $640,197 $3,251,973 16

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198 ANNUAL AUDIT REPORT SHERIFF SEPTEMBER 30, 2007

199 ANNUAL AUDIT REPORT SHERIFF SEPTEMBER 30, 2007 TABLE OF CONTENTS Report of Independent Auditors Fund Financial Statements: Governmental Funds Balance Sheet... 3 Statement of Revenues, Expenditures, and Changes in Fund Balances... 4 Page Statement of Revenues, Expenditures, and Changes in Fund Balances Budget (GAAP Basis) and Actual Internal Service Fund Statement of Net Assets...7 Statement of Revenues, Expenses, and Changes in Net Assets... 8 Statement of Cash Flows... 9 Fiduciary Fund Information Statement of Fiduciary Net Assets Agency Funds Notes to the Financial Statements Supplementary Information: Combining Balance Sheet Non-major Governmental (Special Revenue) Funds Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Non-Major Governmental (Special Revenue) Funds Combining Statement of Revenues, Expenditures, and Changes in Fund Balance Budget (GAAP Basis) and Actual Non-Major Governmental (Special Revenue) Funds Combining Statement of Fiduciary Net Assets All Agency Funds Other Communications: Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards Management Letter Sheriff s Response to Management Letter... 48

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202 SHERIFF BALANCE SHEET GOVERNMENTAL FUNDS Other Major Funds Non-major Total SEPTEMBER 30, 2007 Hurricane Governmental Governmental General Ivan Funds Funds ASSETS Cash and cash equivalents $3,554,452 $1,105,347 $575,657 $5,235,456 Receivables (net of allowance for uncollectibles) , ,094 Due from other funds 65, ,020 95,348 Due from other governmental units 24, ,351 88,582 Inventory 250, ,852 Total assets $3,895,013 $1,105,347 $770,972 $5,771,332 LIABILITIES Vouchers payable $324,349 $0 $35,753 $360,102 Salaries payable 3,177, ,177,531 Due to other funds ,351 64,351 Due to other governmental units 393, ,133 Deferred revenue , ,705 Total liabilities 3,895, ,809 4,422,822 FUND BALANCES Unreserved, reported in: Special revenue funds 0 1,105, ,163 1,348,510 Fund balances 0 1,105, ,163 1,348,510 Total liabilities and fund balances $3,895,013 $1,105,347 $770,972 $5,771,332 The accompanying notes are an integral part of the financial statements 3

203 SHERIFF STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS Other Major Funds Non-major Total FOR THE YEAR ENDED SEPTEMBER 30, 2007 Hurricane Governmental Governmental General Ivan Funds Funds Revenues: Intergovernmental $0 $0 $468,836 $468,836 Charges for services , ,040 Fines and forfeitures 0 0 1,877 1,877 Investment income 0 0 7,056 7,056 Miscellaneous , ,627 Total revenues 0 0 1,315,436 1,315,436 Expenditures: Current: Public safety Personal services 63,430, ,499 63,565,636 Operating expenditures 15,942,166 4, ,736 16,783,810 Capital outlay 356, , ,152 Total expenditures 79,728,861 4,908 1,119,829 80,853,598 Excess (deficiency) of revenue over (under) expenditures (79,728,861) (4,908) 195,607 (79,538,162) Other financing sources (uses): Transfers in 79,754, ,754,796 Transfers out (25,935) 0 0 (25,935) Total other financing sources (uses) 79,728, ,728,861 Net change in fund balances 0 (4,908) 195, ,699 Fund balances at beginning of year 0 1,110,255 47,556 1,157,811 Fund balances at end of year $0 $1,105,347 $243,163 $1,348,510 The accompanying notes are an integral part of the financial statements 4

204 SHERIFF GENERAL FUND STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET (GAAP BASIS) AND ACTUAL FOR THE YEAR ENDED SEPTEMBER 30, 2007 Variance with Final Budget Original Final Positive Budget Budget Actual (Negative) Expenditures: Current: Public safety Personal services 61,542,712 64,842,712 63,430,137 1,412,575 Operating expenditures 13,976,112 13,976,112 15,942,166 (1,966,054) Capital outlay 918, , , ,414 Total expenditures 76,437,796 79,754,796 79,728,861 25,935 Excess (deficiency) of revenue over (under) expenditures (76,437,796) (79,754,796) (79,728,861) 25,935 Other financing sources (uses): Transfers in 76,437,796 79,754,796 79,754,796 0 Transfers out 0 0 (25,935) (25,935) Total other financing sources (uses) 76,437,796 79,754,796 79,728,861 (25,935) Net change in fund balances Fund balances at beginning of year Fund balances at end of year $0 $0 $0 $0 The accompanying notes are an integral part of the financial statements 5

205 SHERIFF HURRIANCE IVAN STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET (GAAP BASIS) AND ACTUAL FOR THE YEAR ENDED SEPTEMBER 30, 2007 Variance with Final Budget Original Final Positive Budget Budget Actual (Negative) Revenues: Intergovernmental $0 $4,908 $0 ($4,908) Total revenues 0 4,908 0 (4,908) Expenditures: Current: Public safety Operating expenditures 0 4,908 4,908 0 Total expenditures 0 4,908 4,908 0 Excess (deficiency) of revenue over (under) expenditures 0 0 (4,908) (4,908) Fund balance at beginning of year 0 0 1,110,255 1,110,255 Fund balance at end of year $0 $0 $1,105,347 $1,105,347 The accompanying notes are an integral part of the financial statements 6

206 SHERIFF INTERNAL SERVICE FUND STATEMENT OF NET ASSETS SEPTEMBER 30, 2007 ASSETS Current assets: Cash and cash equivalents $1,587,530 Total current assets 1,587,530 LIABILITIES Current liabilities: Compensated absences payable 1,587,530 Total current liabilities 1,587,530 Non-current liabilities: Compensated absences payable 15,583,301 Total non-current liabilities 15,583,301 Total liabilities 17,170,831 NET ASSETS Unrestricted ($15,583,301) The accompanying notes are an integral part of the financial statements. 7

207 SHERIFF INTERNAL SERVICE FUND STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS FOR THE YEAR ENDED SEPTEMBER 30, 2007 Operating revenues: Charges for services $2,718,617 Total operating revenues 2,718,617 Operating expenses: Personal services 4,764,828 Total operating expenses 4,764,828 Change in net assets (2,046,211) Net assets at beginning of year (13,537,090) Net assets at ending of year ($15,583,301) The accompanying notes are an integral part of the financial statements. 8

208 SHERIFF INTERNAL SERVICE FUND STATEMENT OF CASH FLOWS FOR THE YEAR ENDED SEPTEMBER 30, 2007 Cash used by operating activities: Receipts from interfund services provided $1,045,073 Pyaments for personal services ($1,673,544) Net increase (decrease) in cash and cash equivalents (628,471) Cash and cash equivalents at beginning of year 2,216,001 Cash and cash equivalents at end of year $1,587,530 Reconciliation of operating income (loss) to net cash provided by (used in) operating activities: Operating income (loss) ($2,046,211) Increase (decrease) in liabilities: Compensated absences payable 1,417,740 Net cash provided by (used in) operating activities ($628,471) The accompanying notes are an integral part of the financial statements. 9

209 SHERIFF STATEMENT OF FIDUCIARY NET ASSETS - AGENCY FUNDS SEPTEMBER 30, 2007 ASSETS Cash and cash equivalents $1,279,212 Total assets $1,279,212 LIABILITIES Deposits $1,062,125 Due to other funds 30,997 Due to other governmental units 170,157 Other current liabilities 15,933 Total liabilities $1,279,212 The accompanying notes are an integral part of the financial statements. 10

210 ANNUAL AUDIT REPORT SHERIFF NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2007 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Office of the Sheriff (the Sheriff ) of Escambia County, Florida, is established as a constitutional official by Article VIII, Section 1 (d) of the Constitution of the State of Florida. The accounting policies of the Sheriff conform to accounting principles generally accepted in the United States of America as applicable to local governments. The following is a summary of the more significant accounting policies. PRINCIPLES USED IN DETERMINING THE SCOPE OF ENTITY FOR FINANCIAL REPORTING PURPOSES Although the Sheriff is operationally autonomous from the Escambia County Board of County Commissioners, it does not hold sufficient corporate powers of its own to be considered a legally separate entity for financial reporting purposes. Therefore, the Sheriff is reported as a part of the primary government of Escambia County, Florida. These special-purpose financial statements are not intended to be a complete presentation of the financial position and results of operations of Escambia County, Florida taken as a whole. As permitted by Chapter (4), Rules of the Auditor General State of Florida, the special-purpose financial statements consist of only the fund level financial statements as defined in Governmental Accounting Standards Board (GASB) No. 34, and do not include presentations of government-wide financial statements of the Sheriff. BASIS OF PRESENTATION FUND ACCOUNTING The Sheriff s financial records and accounts are maintained in accordance with the principles of fund accounting, whereby resources are classified for accounting and reporting purposes into funds to insure compliance with any special restrictions or limitations on the use of such resources. The Sheriff reports the following major governmental funds: General Fund The general fund is the general operating fund of the Sheriff. It is used to account for all financial resources except those required to be accounted for in other funds. Hurricane Ivan Fund The fund was established to account for costs and related grant reimbursements attributable to Hurricane Ivan. Additionally, the Sheriff reports the following funds: Special Revenue Funds The Sheriff maintains special revenue funds to account for grants and commissary fund activity. Proprietary Fund: Internal Service Fund The internal service fund accounts for balances and activity related to the Sheriff s compensated absences policies. Fiduciary Funds: Agency Funds Agency funds are used to account for assets held as an agency for individuals, private organizations or other governments. Agency funds are custodial in nature (assets equal liabilities) and do not involve measurement of the results of operations. 11

211 ANNUAL AUDIT REPORT SHERIFF NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2007 BASIS OF ACCOUNTING Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the Sheriff considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred. Capital asset acquisitions are recorded as expenditures in governmental funds. Under terms of grant agreements, the Sheriff funds certain programs by a combination of specific costreimbursement grants, categorical block grants, and general revenues. Thus, when the program expenses are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the Sheriff s policy to first apply cost-reimbursement grant resources to such programs, followed by categorical block grants, and then by general revenues. Proprietary funds (the internal service fund) are reported using the accrual basis of accounting. Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with the proprietary fund s principal ongoing operations. The principal operating revenues of the Sheriff s internal service fund are charges to funds related to the Sheriff s compensated absences activity. Operating expenses for the internal service fund include recognition of increases in the compensated absences liabilities. All revenues and expenses not meeting these definitions are reported as nonoperating revenues and expenses. Fiduciary fund financial statements are reported using the accrual basis of accounting. BUDGETS AND BUDGETARY ACCOUNTING The Sheriff operates under budget procedures pursuant to Florida Statutes. The budget is adopted on a basis consistent with accounting principles generally accepted in the United States of America. The budget for the Sheriff s general fund is a legally adopted budget whereas budgets for the special revenue funds are prepared and used solely as an internal management tool and are not considered legally adopted. The legal level of budgetary control is at the fund level. CASH AND CASH EQUIVALENTS Cash equivalents are highly liquid investments with original maturities of three months or less when purchased. INVENTORY Inventory, which consists of expendable supplies held for consumption, is stated at lower of cost or market, determined primarily by the first-in, first-out method. The cost is recorded as an expenditure at the time individual inventory items are purchased and reported as inventory based on physical inventory of supplies on hand at year end. 12

212 ANNUAL AUDIT REPORT SHERIFF NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2007 COMPENSATED ABSENCES The Sheriff and the Florida Police Benevolent Association, Inc., the law enforcement bargaining unit, have several labor agreements representing employees of the Sheriff. Under these labor agreements, employees may accumulate a limited amount of earned but unused sick leave, annual leave, and compensatory time, which will be paid upon separation from service. CAPITAL ASSETS Capital assets (vehicles, equipment and other tangible property costing at least $1,000 with a useful life of more than one year) are recorded as expenditures in the acquiring fund when purchased. Donated capital assets are recorded at estimated fair market value on the date donated. Title to buildings and improvements vests with the Escambia County Board of County Commissioners, and the Board records the capitalization of these assets and any related depreciation, in the County s government-wide financial statements. Depreciation of equipment is calculated using the straight-line method with an estimated useful life of five years. NOTE 2 SPECIAL REPORTING TREATMENTS Appropriations from the Board of County Commissioners are recorded as transfers in on the Statement of Revenues, Expenditures and Changes in Fund Balance Budget (GAAP Basis) and Actual. In accordance with Florida Statutes, the excess of revenues over expenditures is returned to the Board of County Commissioners at year-end and is reported as a transfer out on the Statement of Revenues, Expenditures and Changes in Fund Balance. ASSETS NOTE 3 DETAILED NOTES ON ALL FUNDS Cash Deposits and Investments The Sheriff has an investment policy governed by the provisions of Florida Statute as to the type of investments that can be made. Authorized investments include the Local Government Surplus Trust Fund or any intergovernmental investment pool authorized pursuant to the Florida Interlocal Cooperation Act of 1969, Security and Exchange registered money market funds with the highest credit quality rating from a recognized rating agency, savings accounts or certificates of deposit in state-certified depositories, notes, bonds or T-bills or other direct obligations of the United States Treasury, federal agencies and instruments, and repurchase agreements. Deposits may be exposed to custodial credit risk, which is the risk of loss in the event of a bank failure. The Sheriff manages custodial credit risk by maintaining deposits in financial institutions designated as Qualified Public Depositories by the State Treasurer. All deposits were fully insured through a combination of Federal depository insurance and participation of the financial institution in the multiple financial institution collateral pool as specified in Chapter 280, Florida Statutes. Accordingly, risk of loss due to bank failure is not significant. 13

213 ANNUAL AUDIT REPORT SHERIFF NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2007 At September 30, 2007, the reported amount of the Sheriff s deposits was $8,102,198 and the bank balance was $9,370,802, consisting entirely of deposits with financial institutions in checking and money market accounts. Changes in Capital Assets It is not appropriate to report capital assets and the related depreciation in the governmental fund financial statements. However, the following information is reported as a component of the County s government-wide financial statements and is required to be disclosed by Chapter (3)(g) Rules of the Auditor General: Balance Balance 10/01/06 Additions Deletions 09/30/07 Equipment $25,539,569 $2,550,643 ($2,811,119) $25,279,093 Less accumulated depreciation (18,135,817) (2,996,319) 2,780,578 (18,351,558) Net $7,403,752 ($445,676) ($30,541) $6,927,535 Depreciation expense for the year ended September 30, 2007 was $2,996,319. LIABILITIES Pension and Retirement Plan - Substantially all full-time employees of the Sheriff are covered by the Florida Retirement System (FRS), a multiple employer cost sharing defined benefit pension plan. The FRS was established in 1970 by Chapter 121, Florida Statutes and is administered by the Florida Department of Management Services, Division of Retirement. Changes to the FRS can be made only by an act of the Florida Legislature. Rules governing the operation and administration of the system may be found in Chapter 60S of the Florida Administrative Code. The FRS issues a publicly available financial report that includes financial statements and required supplementary information. The report may be obtained by writing to FRS, 2639-C North Monroe Street, Tallahassee, Florida The FRS provides retirement and disability benefits, annual cost-of-living adjustments, and death benefits to plan members and beneficiaries. The FRS provides for vesting of benefits for all members actively employed on July 1, 2001 after 6 years of creditable service, regardless of membership class. Under the laws in effect before that date, members needed 7, 8, or 10 years of service to become vested, depending on membership class. Normal retirement benefits are available to employees who retire at age 62 with 6 or more years of service, or to those employees who have at least 30 years of creditable service, regardless of age. Retirement age and years of service requirements vary depending on membership class. Early retirement is available after 6 years of service with a 5% reduction of benefits for each year prior to the normal retirement age. Retirement benefits are based upon age, average compensation and years-of-service credit where average compensation is computed as the average of an individual s five highest years of earnings. Deferred Retirement Option Program (DROP) is an elective program for eligible member of the FRS Pension Plan, Teachers Retirement System, and State and County Officers and Employees Retirement System who are eligible for normal retirement. Under this program, a member effectively retires and continues covered employment for up to 5 years. While in DROP, the member s deferred monthly retirement benefits accumulate, earning interest and cost-of-living increases. When the DROP period is over, the participant terminates covered employment and begins receiving their predetermined monthly 14

214 ANNUAL AUDIT REPORT SHERIFF NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2007 retirement benefit, as well as the accrued DROP benefit. Disability retirees are not eligible to participate in DROP, and DROP participants do not qualify for disability retirement. The FRS is noncontributory for employees and all contributions are made by participating FRS employers. Participating employer contributions are based upon state-wide rates established by the State of Florida. Average contribution rates for the fiscal year ended September 30, 2007 were as follows: regular employees, 9.85%, special risk employees, 20.92%, elected officials, 16.53%, senior management employees, 13.12%, and DROP participants, 10.91%. The Sheriff s contributions, funded on a pay-as-you-go basis, were equal to the actuarially determined contribution requirements for each year and totaled $7,584,963, $6,278,295, and $6,442,401, for the years ended September 30, 2007, 2006, and 2005, respectively. Risk Management Prior to October 1, 2005, the Sheriff participated in Escambia County s risk management program to self-insure claims against the Board of County Commissioners, Constitutional Officers, and Santa Rosa Island Authority for the following types of risks: Workers Compensation self insured up to a limit of $450,000 per occurrence with statutory limits. Casualty and Property Casualty limits are self-insured for $100,000 per claim with a $200,000 aggregate; excess policy limits of $1,000,000 per occurrence, $2,000,000 aggregate. Property limits are $50,000 - $100,000 self insured retentions per occurrence. Effective October 1, 2005, the Sheriff began participating in the Preferred Governmental Insurance Trust Workers Compensation Program with an annual premium cost for the year ended September 30, 2007 of $1,718,258. Coverage limits under the policy include $1,000,000 bodily injury for each accident, and $1,000,000 bodily injury by disease for each employee with a $1,000,000 limit. The plan calls for an annual final premium calculation after fiscal year end using the actual premium basis, proper classifications, and experience modifications and rates that lawfully apply to the Sheriff. A final premium adjustment has not been calculated for the year ended September 30, During the fiscal year ended September 30, 2007, the Sheriff had no significant reductions in insurance coverage from the prior year. In addition, there have been no settlements which exceeded the Sheriff s insurance coverage in any of the past three fiscal years. 15

215 ANNUAL AUDIT REPORT SHERIFF NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2007 Long-Term Debt Compensated Absences As required by Chapter (3)(g), Rules of the Auditor General, disclosures regarding long-term liabilities area as follows: Balance 10/01/06 $15,753,091 Additions 3,091,284 Deletions (1,673,544) Balance 09/30/07 17,170,831 Less current portion (1,587,530) Long term balance $15,583,301 Significant Commitments Effective October 1, 2006, the Sheriff entered into a cancelable agreement with a vendor to provide for the delivery of medical care to individuals under the custody and control of the Sheriff. The agreement has an initial term of three years, and is renewable for two additional oneyear terms thereafter, unless either party delivers written notice of non-renewal. Under the agreement, the Sheriff pays a base price plus a per inmate day fee for those inmates assigned to the Work Camp. Financial considerations are based on predetermined inmate populations and are subject to adjustment. Medical service expense for the year ended September 30, 2007 was approximately $6.4 million. Estimated expenditures for 2008 and 2009 are $5.9 and $6.2 million, plus $.70 and $.74 per inmate per day for Work Camp inmates. The Sheriff entered into a cancelable agreement with a vendor to provide management services, food, materials, and supplies necessary to feed the inmate population at the corrections facility and the Escambia County Jail, through February 28, Upon mutual agreement, the agreement may be renewed for two one-year periods and each year thereafter. Food service expense under this contract for the year ended September 30, 2007 was approximately $2 million. Internal Service Fund The Internal Service Fund, established in 2004, is designed to record the annual costs related to the Sheriff s Compensated Absences Policies, to record the short-term and long-term components of such liabilities (including payments to employees), and to collect and hold cash and investments necessary to liquidate such liabilities. The related costs associated with the fund will be recovered via charges to the general fund and other funds having employees, in accordance with generally accepted criteria for establishment and use of an internal service fund. During 2007, the fund s accumulated deficit increased by approximately $2 million due to increased salary expenses. Management plans to eliminate the $15.6 million accumulated deficit over a reasonable period of time based upon a moving amortization period. NOTE 4 CLAIMS AND CONTINGENCIES The Sheriff is contingently liable with respect to lawsuits and other claims incidental to the ordinary course of operations. In the opinion of management, based on the advice of legal counsel, the ultimate disposition of these lawsuits or claims will not have a material adverse effect on the financial position of the Sheriff. 16

216 ANNUAL AUDIT REPORT SHERIFF NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2007 The Sheriff receives significant financial assistance from federal and state agencies primarily in the form of operating grants. The disbursement of funds received under these programs generally requires compliance with terms and conditions specified in the grant agreements and is subject to audit by grantor agencies. Disallowed claims, if any, resulting from such audits may become liabilities of the Sheriff. FEMA is currently investigating a potential overpayment to the Sheriff relating to Hurricane Ivan, however, a final resolution has not yet been reached, nor has any liability to FEMA been recorded as of September 30, 2007, as any such amount due is not known. In the opinion of management, disallowed claims related to all grants, will not have a material effect on the Sheriff s financial statements. NOTE 5 FEDERAL AND STATE FINANCIAL ASSISTANCE During the year, the Sheriff received, or maintained assets to be used for, federal and state financial assistance under the following programs: United States Treasury Department Law Enforcement Trust United States Justice Department Law Enforcement Trust Residential Substance Abuse Treatment Program II JAG State II Grant Buffer Zone Grant VCDC G-Unit Grant VCDC Door to Door Residential Substance Abuse Treatment Program III Safe Neighborhood II Grant JAG Federal III Grant BPV Grant Safe Neighborhood VCDC III 2004 Law Enforcement Block Grant FBI Task Force Operation Falcon Hurricane Dennis JAG Federal JAG State American Heart Association-AED Grant VCDC Klug Grant VCDC Baby Girl Grant These programs are presented in the schedules of federal and state financial assistance within the Escambia County financial report. 17

217 ANNUAL AUDIT REPORT SHERIFF NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2007 NOTE 6 INTERFUND RECEIVABLES AND PAYABLES Fund Receivable Payable General Fund $65,328 $0 Non-major Governmental Funds 30,020 64,351 Fiduciary Funds - Agency Funds 0 30,997 $95,348 $95,348 The General Fund receivable consists primarily of advances made to the nonmajor governmental funds, which will be paid back after reimbursement is received from grantors. NOTE 7 RELATED PARTY TRANSACTIONS During 2007, the Board of County Commissioners purchased operating supplies of approximately $107,000 and fixed assets of $1,958,433 on behalf of the Sheriff. These purchases are included in the Board of County Commissioners expenditures. The fixed assets were transferred to the Sheriff during the year and are included in the Sheriff s current year fixed asset additions. 18

218 SHERIFF COMBINING BALANCE SHEET NON-MAJOR GOVERNMENTAL FUNDS SPECIAL REVENUE FUNDS SEPTEMBER 30, 2007 Treasury Justice Department Department Law Enforcement Law Enforcement RSAT II JAG State II JAG Federal II Buffer VCDC VCDC Assets Trust Trust Grant Grant Grant Zone G-Unit Door to Door Cash and cash equivalents $456 $202,820 $0 $0 $0 $0 $12,870 $17,845 Receivables (net of allowance for uncollectibles) Due from other funds Due from other governmental units , Total assets $456 $202,820 $0 $2,823 $0 $0 $12,870 $17,845 Liabilities and Fund Balances Liabilities: Vouchers payable $0 $0 $0 $0 $0 $0 $0 $0 Due to other funds , Deferred revenue , ,870 17,845 Total liabilities , , ,870 17,845 Fund balances: Unreserved - undesignated Total fund balances Total liabilities and fund balances $456 $202,820 $0 $2,823 $0 $0 $12,870 $17,845 (Continued) 19

219 SHERIFF COMBINING BALANCE SHEET NON-MAJOR GOVERNMENTAL FUNDS SPECIAL REVENUE FUNDS (Continued) SEPTEMBER 30, 2007 Assets Cash and cash equivalents Receivables (net of allowance for uncollectibles) Due from other funds Due from other governmental units Total assets Safe RSAT III Neighboorhood JAG Federal BPV Safe Block FBI Grant II Grant III Grant Grant Neighborhood VC & DC III Grants 2004 Task Force $0 $0 $0 $0 $0 $71,134 $0 $ ,000 3, , $11,000 $3,021 $0 $46,545 $0 $71,134 $0 $696 Liabilities and Fund Balances Liabilities: Vouchers payable Due to other funds Deferred revenue Total liabilities Fund balances: Unreserved - undesignated Total fund balances Total liabilities and fund balances $0 $0 $0 $0 $0 $0 $0 $0 11,000 3, , , ,000 3, , , $11,000 $3,021 $0 $46,545 $0 $71,134 $0 $696 (Continued) 20

220 SHERIFF COMBINING BALANCE SHEET NON-MAJOR GOVERNMENTAL FUNDS SPECIAL REVENUE FUNDS (Continued) SEPTEMBER 30, 2007 Assets Cash and cash equivalents Receivables (net of allowance for uncollectibles) Due from other funds Due from other governmental units Total assets Disaster Operation Hurricane JAG JAG VCDC VCDC Relief Fund Falcon Dennis Federal State AHA-AED Klug Baby Girl $3,357 $0 $15,512 $0 $0 $1,815 $22,944 $94, $3,357 $266 $15,512 $0 $0 $1,815 $22,944 $94,464 Liabilities and Fund Balances Liabilities: Vouchers payable Due to other funds Deferred revenue Total liabilities Fund balances: Unreserved - undesignated Total fund balances Total liabilities and fund balances $0 $0 $0 $0 $0 $0 $0 $ , ,815 22,944 94,464 3, ,815 22,944 94, , , $3,357 $266 $15,512 $0 $0 $1,815 $22,944 $94,464 (Continued) 21

221 SHERIFF COMBINING BALANCE SHEET NON-MAJOR GOVERNMENTAL FUNDS SPECIAL REVENUE FUNDS (Continued) SEPTEMBER 30, 2007 Assets Jail Commissary Totals Cash and cash equivalents Receivables (net of allowance for uncollectibles) Due from other funds Due from other governmental units Total assets $132,440 $575, , ,944 30,020 30, ,351 $263,404 $770,972 Liabilities and Fund Balances Liabilities: Vouchers payable Due to other funds Deferred revenue Total liabilities Fund balances: Unreserved - undesignated Total fund balances Total liabilities and fund balances $35,753 $35, , ,705 35, , , , , ,163 $263,404 $770,972 22

222 SHERIFF COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - NONMAJOR GOVERNMENTAL FUNDS - SPECIAL REVENUE FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2007 Treasury Justice Department Department Law Enforcement Law Enforcement RSAT II JAG State II JAG Federal II Buffer VCDC VCDC Trust Trust Grant Grant Grant Zone G-Unit Door to Door Revenues: Intergovernmental $0 $0 $38,833 $40,691 $0 $49,000 $37,130 $7,155 Charges for services Fines and forfeitures 0 1, Investment income 0 7, Miscellaneous Total revenues 0 8,933 38,833 40, ,000 37,130 7,155 Expenditures: Current: Public safety Personal services , ,893 7,155 Operating expenditures 0 8,933 38, ,237 0 Capital outlay , Total expenditures 0 8,933 38,833 40, ,000 37,130 7,155 Excess (deficiency) of revenues over (under) expenditures Fund balances at beginning of year Fund balances at end of year $0 $0 $0 $0 $0 $0 $0 $0 (Continued) 23

223 SHERIFF COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - NONMAJOR GOVERNMENTAL FUNDS - SPECIAL REVENUE FUNDS (Continued) FOR THE YEAR ENDED SEPTEMBER 30, 2007 Revenues: Intergovernmental Charges for services Fines and forfeitures Investment income Miscellaneous Total revenues Expenditures: Current: Public safety Personal services Operating expenditures Capital outlay Total expenditures Excess (deficiency) of revenues over (under) expenditures Fund balances at beginning of year Fund balances at end of year Safe RSAT III Neighborhood JAG Federal BPV Safe Block FBI Grant II Grant III Grant Grant Neighborhood VC & DC III Grants 2004 Task Force $11,000 $5,322 $0 $54,829 $6,451 $20,974 $12,261 $1, ,000 5, ,829 6,451 20,974 12,261 1, , ,592 20, ,910 11, , , , ,000 5, ,829 6,451 20,974 12,261 1, $0 $0 $0 $0 $0 $0 $0 $0 (Continued) 24

224 SHERIFF COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - NONMAJOR GOVERNMENTAL FUNDS - SPECIAL REVENUE FUNDS (Continued) FOR THE YEAR ENDED SEPTEMBER 30, 2007 Revenues: Intergovernmental Charges for services Fines and forfeitures Investment income Miscellaneous Total revenues Expenditures: Current: Public safety Personal services Operating expenditures Capital outlay Total expenditures Excess (deficiency) of revenues over (under) expenditures Fund balances at beginning of year Fund balances at end of year Disaster Operation Hurricane JAG JAG VCDC VCDC Relief Fund Falcon Dennis Federal State AHA-AED Klug Baby Girl $8,522 $1,182 $39,402 $34,852 $9,487 $60,753 $24,833 $4, ,522 1,182 39,402 34,852 9,487 60,753 24,833 4, , , ,981 4,249 3, ,890 4, , , , , ,522 1,182 23,890 34,852 9,487 60,753 24,833 4, , $0 $0 $15,512 $0 $0 $0 $0 $0 (Continued) 25

225 SHERIFF COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - NONMAJOR GOVERNMENTAL FUNDS - SPECIAL REVENUE FUNDS (Continued) FOR THE YEAR ENDED SEPTEMBER 30, 2007 Revenues: Intergovernmental Charges for services Fines and forfeitures Investment income Miscellaneous Total revenues Expenditures: Current: Public safety Personal services Operating expenditures Capital outlay Total expenditures Excess (deficiency) of revenues over (under) expenditures Fund balances at beginning of year Fund balances at end of year Jail Commissary Totals $0 $468, , , , , , , ,667 1,315, , , , , ,572 1,119, , ,607 47,556 47,556 $227,651 $243,163 26

226 SHERIFF COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET (GAAP BASIS) AND ACTUAL NON-MAJOR GOVERNMENTAL FUNDS - SPECIAL REVENUE FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2007 Treasury Law Enforcement Trust Justice Law Enforcement Trust Variance- Variance- Original Final positive Original Final positive Budget Budget Actual (negative) Budget Budget Actual (negative) Revenues: Intergovernmental $0 $0 $0 $0 $0 $0 $0 $0 Charges for services Fines and forfeitures (436) 0 204,697 1,877 (202,820) Investment income (20) 0 7,056 7,056 0 Miscellaneous Total revenues (456) 0 211,753 8,933 (202,820) Expenditures: Current: Public safety Personal services Operating expenditures ,753 8, ,820 Capital outlay Total expenditures ,753 8, ,820 Excess (deficiency) of revenues over (under) expenditures Fund balances at beginning of year Fund balances at end of year $0 $0 $0 $0 $0 $0 $0 $0 (Continued) 27

227 SHERIFF COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET (GAAP BASIS) AND ACTUAL NON-MAJOR GOVERNMENTAL FUNDS - SPECIAL REVENUE FUNDS (Continued) FOR THE YEAR ENDED SEPTEMBER 30, 2007 Revenues: Intergovernmental Charges for services Fines and forfeitures Investment income Miscellaneous Total revenues Expenditures: Current: Public safety Personal services Operating expenditures Capital outlay Total expenditures Excess (deficiency) of revenues over (under) expenditures Fund balances at beginning of year Fund balances at end of year RSAT II JAG State II Grant Variance- Variance- Original Final positive Original Final positive Budget Budget Actual (negative) Budget Budget Actual (negative) $0 $38,833 $38,833 $0 $0 $40,691 $40,691 $ ,833 38, ,691 40, ,691 40, ,833 38, ,833 38, ,691 40, $0 $0 $0 $0 $0 $0 $0 $0 (Continued) 28

228 SHERIFF COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET (GAAP BASIS) AND ACTUAL NON-MAJOR GOVERNMENTAL FUNDS - SPECIAL REVENUE FUNDS (Continued) FOR THE YEAR ENDED SEPTEMBER 30, 2007 Revenues: Intergovernmental Charges for services Fines and forfeitures Investment income Miscellaneous Total revenues Expenditures: Current: Public safety Personal services Operating expenditures Capital outlay Total expenditures Excess (deficiency) of revenues over (under) expenditures Fund balances at beginning of year Fund balances at end of year JAG Federal II Buffer Zone Variance- Variance- Original Final positive Original Final positive Budget Budget Actual (negative) Budget Budget Actual (negative) $0 $54,431 $0 ($54,431) $0 $49,000 $49,000 $ ,431 0 (54,431) 0 49,000 49, , , ,000 49, , , ,000 49, $0 $0 $0 $0 $0 $0 $0 $0 (Continued) 29

229 SHERIFF COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET (GAAP BASIS) AND ACTUAL NON-MAJOR GOVERNMENTAL FUNDS - SPECIAL REVENUE FUNDS (Continued) FOR THE YEAR ENDED SEPTEMBER 30, 2007 Revenues: Intergovernmental Charges for services Fines and forfeitures Investment income Miscellaneous Total revenues Expenditures: Current: Public safety Personal services Operating expenditures Capital outlay Total expenditures Excess (deficiency) of revenues over (under) expenditures Fund balances at beginning of year Fund balances at end of year VCDC G-Unit VCDC Door to Door Variance- Variance- Original Final positive Original Final positive Budget Budget Actual (negative) Budget Budget Actual (negative) $0 $50,000 $37,130 ($12,870) $0 $25,000 $7,155 ($17,845) ,000 37,130 (12,870) 0 25,000 7,155 (17,845) 0 50,000 29,893 20, ,000 7,155 17, ,237 (7,237) ,000 37,130 12, ,000 7,155 17, $0 $0 $0 $0 $0 $0 $0 $0 (Continued) 30

230 SHERIFF COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET (GAAP BASIS) AND ACTUAL NON-MAJOR GOVERNMENTAL FUNDS - SPECIAL REVENUE FUNDS (Continued) FOR THE YEAR ENDED SEPTEMBER 30, 2007 Revenues: Intergovernmental Charges for services Fines and forfeitures Investment income Miscellaneous Total revenues Expenditures: Current: Public safety Personal services Operating expenditures Capital outlay Total expenditures Excess (deficiency) of revenues over (under) expenditures Fund balances at beginning of year Fund balances at end of year RSAT III Grant Safe Neighborhood II Grant Variance- Variance- Original Final positive Original Final positive Budget Budget Actual (negative) Budget Budget Actual (negative) $0 $50,000 $11,000 ($39,000) $0 $5,322 $5,322 $ ,000 11,000 (39,000) 0 5,322 5, ,322 5, ,000 11,000 39, ,000 11,000 39, ,322 5, $0 $0 $0 $0 $0 $0 $0 $0 (Continued) 31

231 SHERIFF COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET (GAAP BASIS) AND ACTUAL NON-MAJOR GOVERNMENTAL FUNDS - SPECIAL REVENUE FUNDS (Continued) FOR THE YEAR ENDED SEPTEMBER 30, 2007 Revenues: Intergovernmental Charges for services Fines and forfeitures Investment income Miscellaneous Total revenues Expenditures: Current: Public safety Personal services Operating expenditures Capital outlay Total expenditures Excess (deficiency) of revenues over (under) expenditures Fund balances at beginning of year Fund balances at end of year JAG Federal III Grant BPV Grant Variance- Variance- Original Final positive Original Final positive Budget Budget Actual (negative) Budget Budget Actual (negative) $0 $111,553 $0 ($111,553) $0 $64,172 $54,829 ($9,343) ,553 0 (111,553) 0 64,172 54,829 (9,343) , , ,172 54,829 9, , , ,172 54,829 9, $0 $0 $0 $0 $0 $0 $0 $0 (Continued) 32

232 SHERIFF COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET (GAAP BASIS) AND ACTUAL NON-MAJOR GOVERNMENTAL FUNDS - SPECIAL REVENUE FUNDS (Continued) FOR THE YEAR ENDED SEPTEMBER 30, 2007 Revenues: Intergovernmental Charges for services Fines and forfeitures Investment income Miscellaneous Total revenues Expenditures: Current: Public safety Personal services Operating expenditures Capital outlay Total expenditures Excess (deficiency) of revenues over (under) expenditures Fund balances at beginning of year Fund balances at end of year Safe Neighborhood VC & DC III Variance- Variance- Original Final positive Original Final positive Budget Budget Actual (negative) Budget Budget Actual (negative) $0 $11,008 $6,451 ($4,557) $0 $92,108 $20,974 ($71,134) ,008 6,451 (4,557) 0 92,108 20,974 (71,134) 0 6,257 5, ,108 20,037 72, , , (937) ,008 6,451 4, ,108 20,974 71, $0 $0 $0 $0 $0 $0 $0 $0 (Continued) 33

233 SHERIFF COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET (GAAP BASIS) AND ACTUAL NON-MAJOR GOVERNMENTAL FUNDS - SPECIAL REVENUE FUNDS (Continued) FOR THE YEAR ENDED SEPTEMBER 30, 2007 Revenues: Intergovernmental Charges for services Fines and forfeitures Investment income Miscellaneous Total revenues Expenditures: Current: Public safety Personal services Operating expenditures Capital outlay Total expenditures Excess (deficiency) of revenues over (under) expenditures Fund balances at beginning of year Fund balances at end of year Block Grants 2004 FBI Task Force Variance- Variance- Original Final positive Original Final positive Budget Budget Actual (negative) Budget Budget Actual (negative) $0 $12,261 $12,261 $0 $0 $7,500 $1,910 ($5,590) ,261 12, ,500 1,910 (5,590) ,500 1,910 5, ,209 9, ,052 3, ,261 12, ,500 1,910 5, $0 $0 $0 $0 $0 $0 $0 $0 (Continued) 34

234 SHERIFF COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET (GAAP BASIS) AND ACTUAL NON-MAJOR GOVERNMENTAL FUNDS - SPECIAL REVENUE FUNDS (Continued) FOR THE YEAR ENDED SEPTEMBER 30, 2007 Revenues: Intergovernmental Charges for services Fines and forfeitures Investment income Miscellaneous Total revenues Expenditures: Current: Public safety Personal services Operating expenditures Capital outlay Total expenditures Excess (deficiency) of revenues over (under) expenditures Fund balances at beginning of year Fund balances at end of year Disaster Relief Operation Falcon Variance- Variance- Original Final positive Original Final positive Budget Budget Actual (negative) Budget Budget Actual (negative) $0 $11,879 $8,522 ($3,357) $0 $1,182 $1,182 $ ,879 8,522 (3,357) 0 1,182 1, ,182 1, ,753 3,396 3, ,126 5, ,879 8,522 3, ,182 1, $0 $0 $0 $0 $0 $0 $0 $0 (Continued) 35

235 SHERIFF COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET (GAAP BASIS) AND ACTUAL NON-MAJOR GOVERNMENTAL FUNDS - SPECIAL REVENUE FUNDS (Continued) FOR THE YEAR ENDED SEPTEMBER 30, 2007 Revenues: Intergovernmental Charges for services Fines and forfeitures Investment income Miscellaneous Total revenues Expenditures: Current: Public safety Personal services Operating expenditures Capital outlay Total expenditures Excess (deficiency) of revenues over (under) expenditures Fund balances at beginning of year Fund balances at end of year Hurricane Dennis JAG Federal Variance- Variance- Original Final positive Original Final positive Budget Budget Actual (negative) Budget Budget Actual (negative) $0 $39,402 $39,402 $0 $0 $62,249 $34,852 ($27,397) ,402 39, ,249 34,852 (27,397) , , ,402 23,890 15, ,672 4, ,079 30,180 2, ,402 23,890 15, ,249 34,852 27, ,512 15, $0 $0 $15,512 $15,512 $0 $0 $0 $0 (Continued) 36

236 SHERIFF COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET (GAAP BASIS) AND ACTUAL NON-MAJOR GOVERNMENTAL FUNDS - SPECIAL REVENUE FUNDS (Continued) FOR THE YEAR ENDED SEPTEMBER 30, 2007 Revenues: Intergovernmental Charges for services Fines and forfeitures Investment income Miscellaneous Total revenues Expenditures: Current: Public safety Personal services Operating expenditures Capital outlay Total expenditures Excess (deficiency) of revenues over (under) expenditures Fund balances at beginning of year Fund balances at end of year JAG State AHA-AED Variance- Variance- Original Final positive Original Final positive Budget Budget Actual (negative) Budget Budget Actual (negative) $0 $9,487 $9,487 $0 $0 $62,568 $60,753 ($1,815) ,487 9, ,568 60,753 (1,815) 0 9,487 9, ,051 60,236 1, ,487 9, ,568 60,753 1, $0 $0 $0 $0 $0 $0 $0 $0 (Continued) 37

237 SHERIFF COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET (GAAP BASIS) AND ACTUAL NON-MAJOR GOVERNMENTAL FUNDS - SPECIAL REVENUE FUNDS (Continued) FOR THE YEAR ENDED SEPTEMBER 30, 2007 Revenues: Intergovernmental Charges for services Fines and forfeitures Investment income Miscellaneous Total revenues Expenditures: Current: Public safety Personal services Operating expenditures Capital outlay Total expenditures Excess (deficiency) of revenues over (under) expenditures Fund balances at beginning of year Fund balances at end of year VCDC Klug VCDC Baby Girl Variance- Variance- Original Final positive Original Final positive Budget Budget Actual (negative) Budget Budget Actual (negative) $0 $47,777 $24,833 ($22,944) $0 $98,713 $4,249 ($94,464) ,777 24,833 (22,944) 0 98,713 4,249 (94,464) 0 39,072 9,981 29, ,713 4,249 94, ,705 14,852 (6,147) ,777 24,833 22, ,713 4,249 94, $0 $0 $0 $0 $0 $0 $0 $0 (Continued) 38

238 SHERIFF COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET (GAAP BASIS) AND ACTUAL NON-MAJOR GOVERNMENTAL FUNDS - SPECIAL REVENUE FUNDS (Continued) FOR THE YEAR ENDED SEPTEMBER 30, 2007 Revenues: Intergovernmental Charges for services Fines and forfeitures Investment income Miscellaneous Total revenues Expenditures: Current: Public safety Personal services Operating expenditures Capital outlay Total expenditures Excess (deficiency) of revenues over (under) expenditures Fund balances at beginning of year Fund balances at end of year Jail Commissary Totals Variance- Variance- Original Final positive Original Final positive Budget Budget Actual (negative) Budget Budget Actual (negative) $0 $0 $0 $0 $0 $945,136 $468,836 ($476,300) 0 170, ,040 33, , ,040 33, ,133 1,877 (203,256) ,076 7,056 (20) 0 534, ,627 99, , ,627 99, , , , ,862,280 1,315,436 (546,844) , , , , ,572 3, ,212, , , , ,594 59, , ,572 3, ,818,842 1,119, , , , , , , , ,556 47, ,556 47,556 $0 $43,438 $227,651 $184,213 $0 $43,438 $243,163 $199,725 39

239 SHERIFF COMBINING STATEMENT OF FIDUCIARY NET ASSETS - ALL AGENCY FUNDS SEPTEMBER 30, 2007 General Evidence Law Flex Auction Employee Recovery Trust Enforcement Explorers Benefits Fund Events Fund Fund Trust Fund ASSETS Cash and cash equivalents $5,108 $513,143 $13,998 $11,727 $10,400 $278,373 $148,704 Total assets $5,108 $513,143 $13,998 $11,727 $10,400 $278,373 $148,704 LIABILITIES Deposits $5,108 $497,415 $13,793 $11,727 $0 $278,373 $0 Due to other funds Due to other governmental units , ,704 Other current liabilities 0 15, Total liabilities $5,108 $513,143 $13,998 $11,727 10,400 $278,373 $148,704 (Continued) 40

240 SHERIFF COMBINING STATEMENT OF FIDUCIARY NET ASSETS - ALL AGENCY FUNDS (Continued) SEPTEMBER 30, 2007 ASSETS Cash and cash equivalents Total assets Prisoners' Trust Personal Fund Account Totals $30,350 $267,409 $1,279,212 $30,350 $267,409 $1,279,212 LIABILITIES Deposits Due to other funds Due to other governmental units Other current liabilities Total liabilities $30,350 $225,359 $1,062, ,997 30, , , ,933 $30,350 $267,409 $1,279,212 41

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248 ANNUAL AUDIT REPORT TAX COLLECTOR SEPTEMBER 30, 2007

249 ANNUAL AUDIT REPORT TAX COLLECTOR SEPTEMBER 30, 2007 TABLE OF CONTENTS Report of Independent Auditors Fund Financial Statements: General Fund Balance Sheet... 3 Statement of Revenues, Expenditures, and Changes in Fund Balance Budget (GAAP Basis) and Actual... 4 Fiduciary Fund Information Statement of Fiduciary Net Assets Agency Funds... 5 Page Notes to the Financial Statements Combining Statement of Fiduciary Net Assets All Agency Funds Report on the Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards Schedule of Findings and Responses Management Letter Tax Collector s Response to Management Letter... 17

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252 TAX COLLECTOR BALANCE SHEET GENERAL FUND SEPTEMBER 30, 2007 General ASSETS Cash and cash equivalents $870,759 Other current assets 38,171 Total assets $908,930 LIABILITIES Vouchers payable $158,795 Salaries payable 178,254 Due to other funds 644 Due to other governmental units 571,237 Total liabilities 908,930 FUND BALANCE Unreserved 0 Fund balance 0 Total liabilities and fund balance $908,930 The accompanying notes are an integral part of the financial statements 3

253 TAX COLLECTOR STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET (GAAP BASIS) AND ACTUAL GENERAL FUND YEAR ENDED SEPTEMBER 30, 2007 Variance- Original Final positive Budget Budget Actual (negative) Revenues: Charges for services $2,386,560 $2,386,560 $2,551,168 $164,608 Miscellaneous 337, , , ,529 Total revenues 2,724,260 2,724,260 3,169, ,137 Expenditures: Current: General government Personal services 4,888,109 4,890,934 4,858,241 32,693 Operating expenditures 1,279,550 1,237,550 1,161,757 75,793 Capital outlay 0 348, ,080 1,195 Total expenditures 6,167,659 6,476,759 6,367, ,681 Excess (deficiency) of revenues over expenditures (3,443,399) (3,752,499) (3,197,681) 554,818 Other financing sources (uses): Transfers in 3,766,827 3,766,827 3,766,827 0 Transfers out (323,428) (14,328) (569,146) (554,818) Total other financing sources (uses) 3,443,399 3,752,499 3,197,681 (554,818) Net change in fund balance Fund balance at beginning of year Fund balance at end of year $0 $0 $0 $0 The accompanying notes are an integral part of the financial statements. 4

254 TAX COLLECTOR STATEMENT OF FIDUCIARY NET ASSETS - AGENCY FUNDS SEPTEMBER 30, 2007 ASSETS: Agency Funds Cash and cash equivalents $3,770,223 Accounts receivable (net of allowance for uncollectibles) 86,324 Due from other funds 644 Total assets 3,857,191 LIABILITIES: Payable to others 248,438 Due to other governmental units 3,608,753 Total liabilities 3,857,191 NET ASSETS $0 The accompanying notes are an integral part of the financial statements. 5

255 ANNUAL AUDIT REPORT TAX COLLECTOR NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2007 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Office of the Tax Collector of Escambia County, Florida (the Tax Collector ), is established as a constitutional official by Article VIII, Section 1 (d) of the Constitution of the State of Florida. The accounting policies of the Tax Collector conform to accounting principles generally accepted in the United States of America as applicable to local governments. The following is a summary of the more significant accounting policies. PRINCIPLES USED IN DETERMINING THE SCOPE OF ENTITY FOR FINANCIAL REPORTING PURPOSES Although the Tax Collector is operationally autonomous from the Escambia County Board of County Commissioners, it does not hold sufficient corporate powers of its own to be considered a legally separate entity for financial reporting purposes. Therefore, the Tax Collector is reported as a part of the primary government of Escambia County, Florida. These special-purpose financial statements are not intended to be a complete presentation of the financial position and results of operations of Escambia County, Florida taken as a whole. As permitted by Chapter (4), Rules of the Auditor General State of Florida, the special-purpose financial statements consists of only the fund level financial statements as defined in Governmental Accounting Standards Board (GASB) Statement No. 34, and do not include presentations of government-wide statements of the Tax Collector. BASIS OF PRESENTATION FUND ACCOUNTING The Tax Collector s financial records and accounts are maintained in accordance with the principles of fund accounting, whereby resources are classified for accounting and reporting purposes into funds to insure compliance with any special restrictions or limitations on the use of such resources. The funds used are defined as follows: Governmental Funds General Fund The general fund is the general operating fund of the Tax Collector. It is used to account for all financial resources except those required to be accounted for in other funds. Fiduciary Funds Agency Funds Agency funds are used to account for assets held for individuals, private organizations, or other governments. Agency funds are custodial in nature (assets equal liabilities) and do not involve measurement of the results of operations. 6

256 ANNUAL AUDIT REPORT TAX COLLECTOR NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2007 BASIS OF ACCOUNTING The general fund is accounted for using the modified accrual basis of accounting. Revenues are recognized when they become susceptible to accrual that is when they are both measurable and available to finance expenditures of the current period. The Tax Collector considers receivables collected within sixty days after year-end to be available and recognizes them as revenues of the current year. Expenditures are generally recognized under the modified accrual basis of accounting when the related fund liability is incurred. However, expenditures for compensated absences are recognized when payments are made to employees. Fiduciary fund financial statements are reported using the accrual basis of accounting. BUDGETS AND BUDGETARY ACCOUNTING The Tax Collector operates under budget procedures pursuant to Florida Statutes. The budget is adopted on a basis consistent with accounting principles generally accepted in the United States of America. The legal level of budgetary control is at the fund level. CASH AND CASH EQUIVALENTS Cash equivalents are highly liquid investments with original maturities of three months or less when purchased. COMPENSATED ABSENCES Employees may accumulate a limited amount of earned but unused paid time off (PTO) and compensatory time, which will be paid upon separation from service. These expenditures are not recognized in the general fund until payments are made to employees. NOTE 2 SPECIAL REPORTING TREATMENTS Commissions earned from the Board of County Commissioners are recorded as transfers in on the Statement of Revenues, Expenditures and Changes in Fund Balance Budget (GAAP Basis) and Actual. In accordance with Florida Statutes, the excess revenues over expenditures is returned to the Board of County Commissioners at year end and is reported as a Transfer out on the Statement of Revenues, Expenditures and Changes in Fund Balance Budget (GAAP Basis) and Actual. Capital assets (vehicles, equipment and other tangible property costing at least $1,000 with a useful life of more than one year) are recorded as expenditures at the time of purchase. These assets are capitalized at cost and depreciated in Escambia County s government-wide financial statements. 7

257 ANNUAL AUDIT REPORT TAX COLLECTOR NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2007 NOTE 3 DETAILED NOTES ASSETS Cash Deposits The investment of surplus funds is governed by the provisions of Florida Statute as to the type of investments that can be made. Deposits may be exposed to custodial credit risk, which is the risk of loss in the event of a bank failure. The Tax Collector manages custodial credit risk by maintaining its deposits in a financial institution designated as a Qualified Public Depository by the State Treasurer. All deposits were fully insured through a combination of Federal depository insurance and participation of the financial institution in the multiple financial institution collateral pool as specified in Chapter 280, Florida Statutes. Accordingly, risk of loss due to bank failure is not significant. At September 30, 2007, the reported amount of the Tax Collector s deposits was $4,640,982, and the bank balance was $4,845,088, consisting entirely of deposits in checking and savings accounts. LIABILITIES Pension and Retirement Plan - Substantially all full-time employees of the Tax Collector are covered by the Florida Retirement System (FRS), a multiple employer cost sharing defined benefit pension plan. The FRS was established in 1970 by Chapter 121, Florida Statutes and is administered by the Florida Department of Management Services, Division of Retirement. Changes to the FRS can be made only by an act of the Florida Legislature. Rules governing the operation and administration of the system may be found in Chapter 60S of the Florida Administrative Code. The FRS issues a financial report that includes financial statements and required supplementary information. The report may be obtained by writing to FRS, 2639-C North Monroe Street, Tallahassee, Florida The FRS provides retirement and disability benefits, annual cost-of-living adjustments, and death benefits to plan members and beneficiaries. The FRS provides for vesting of benefits for all members actively employed on July 1, 2001 after 6 years of creditable service, regardless of membership class. Under the laws in effect before that date, members need 7, 8, or 10 years of service to become vested, depending on their membership class. Normal retirement benefits are available to employees who retire at age 62 with 6 or more years of service, or to those employees who have at least 30 years of creditable service, regardless of age. Retirement age and years of service requirements vary depending on membership class. Early retirement is available after 6 years of service with a 5% reduction of benefits for each year prior to the normal retirement age. Retirement benefits are based upon age, average compensation and years-of-service credit where average compensation is computed as the average of an individual s five highest years of earnings. Deferred Retirement Option Program (DROP) is an elective program for eligible members of the FRS Pension Plan, Teachers Retirement System, and State and County Officers and Employee s Retirement System who are eligible for normal retirement. Under this program, a member effectively retires and continues covered employment for up to 5 years. While in DROP, the member s deferred monthly retirement benefits accumulate, earning interest and cost-of-living increases. When the DROP period is over, the participant terminates covered employment and begins receiving their predetermined monthly retirement benefit, as well as the accrued DROP benefit. Disability retirees are not eligible to participate in DROP, and DROP participants do not qualify for disability retirement. 8

258 ANNUAL AUDIT REPORT TAX COLLECTOR NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2007 The FRS is noncontributory for employees and all contributions are made by participating FRS employers. Participating employer contributions are based upon state-wide rates established by the State of Florida. Average contribution rates for the fiscal year ended September 30, 2007 were as follows: regular employees, 9.85%, special risk employees, 20.92%, elected officials, 16.53%, senior management employees, 13.12%, and DROP participants, 10.91%. The Tax Collector s contributions, funded on a pay-as-you-go basis, were equal to the actuarially determined contribution requirements for each year and totaled $376,821, $309,326, and $257,791, for the years ended September 30, 2007, 2006, 2005, respectively. Risk Management - The County has a risk management program to self-insure claims against the Board of County Commissioners, Constitutional Officers, and Santa Rosa Island Authority for the following types of risks: Workers Compensation self insured up to a limit of $450,000 per occurrence with statutory limits. Casualty and Property Casualty limits are self-insured for $100,000 per claim with a $200,000 aggregate; excess policy limits of $1,000,000 per occurrence, $2,000,000 aggregate. Property limits are $50,000 - $100,000 self insured retentions per occurrence. The Tax Collector participated in the County s self-insurance program during fiscal year 2007 at a cost of $21,443. There also were no significant reductions in insurance coverage from the prior year and there have been no settlements which exceeded the Tax Collector s insurance coverage in any of the past three fiscal years. Long-Term Debt Obligations Compensated Absences As required by Chapter (3)(g), Rules of the Auditor General, disclosures regarding long-term liabilities are as follows: Balance 10/01/06 $1,073,101 Additions 601,109 Deletions (509,490) Long-term liability at 09/30/07 $1,164,720 9

259 ANNUAL AUDIT REPORT TAX COLLECTOR NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2007 NOTE 4 INTERFUND RECEIVABLES AND PAYABLES Fund Receivable Payable General fund $0 $644 Fiduciary funds - agency funds Total $644 $644 The General Fund payable consists of Tax Fund monies collected but not remitted to the Tax Fund at September 30, NOTE 5 CLAIMS AND CONTINGENCIES The Tax Collector is contingently liable with respect to lawsuits and other claims which might arise in the ordinary course of operations. In the opinion of management, based on the advice of legal counsel, there are no lawsuits or claims outstanding which could have a material adverse effect on the financial position of the Tax Collector. NOTE 6 COMMITMENTS The Tax Collector is committed to operating leases for office space with noncancellable terms in excess of one year. Future minimum lease payments are as follows: Year Amount 2008 $250, , , , , ,925 $1,928,575 Rent expense for the year ended September 30, 2007 was $291,

260 TAX COLLECTOR COMBINING STATEMENT OF FIDUCIARY NET ASSETS - AGENCY FUNDS SEPTEMBER 30, 2007 Tax Tag Fund Fund Total ASSETS: Cash and cash equivalents $3,087,674 $682,549 $3,770,223 Accounts receivable (net of allowance for uncollectibles) ,073 86,324 Due from other funds Total assets 3,088, ,622 3,857,191 LIABILITIES: Payable to others $83,335 $165,103 $248,438 Due to other governmental units 3,005, ,519 3,608,753 Total liabilities 3,088, ,622 3,857,191 NET ASSETS $0 $0 $0 11

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267 ANNUAL AUDIT REPORT PROPERTY APPRAISER SEPTEMBER 30, 2007

268 ANNUAL AUDIT REPORT PROPERTY APPRAISER SEPTEMBER 30, 2007 TABLE OF CONTENTS Report of Independent Auditors Fund Financial Statements: General Fund Balance Sheet... 3 Statement of Revenues, Expenditures, and Changes in Fund Balance Budget (GAAP Basis) and Actual... 4 Notes to the Financial Statements Page Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards Management Letter Property Appraiser s Response to Management Letter... 13

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271 PROPERTY APPRAISER BALANCE SHEET GENERAL FUND SEPTEMBER 30, 2007 General Fund ASSETS Cash and cash equivalents $1,508,908 Total assets $1,508,908 LIABILITIES Vouchers payable $331,779 Salaries payable 138,187 Due to other governmental units 1,038,942 Total liabilities 1,508,908 FUND BALANCE Unreserved 0 Fund balance 0 Total liabilities and fund balance $1,508,908 The accompanying notes are an integral part of the financial statements 3

272 PROPERTY APPRAISER STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET (GAAP BASIS) AND ACTUAL GENERAL FUND YEAR ENDED SEPTEMBER 30, 2007 Variance- Original Final positive Budget Budget Actual (negative) Revenues: Charges for services $0 $16,987 $27,327 $10,340 Miscellaneous ,182 69,182 Total revenues 0 16,987 96,509 79,522 Expenditures: Current: General government Personal services 4,762,445 4,706,405 4,447, ,835 Operating expenditures 1,069,030 2,069,030 1,486, ,444 Capital outlay 325, , ,250 13,750 Reserve for contingencies 102, , ,000 Total expenditures 6,258,475 7,452,435 6,495, ,029 Excess (deficiency) of revenues over expenditures (6,258,475) (7,435,448) (6,398,897) 1,036,551 Other financing sources (uses): Transfers in 6,258,475 7,435,448 7,435,450 2 Transfers out 0 0 (1,036,553) (1,036,553) Total other financing sources (uses) 6,258,475 7,435,448 6,398,897 (1,036,551) Net change in fund balance Fund balance at beginning of year Fund balance at end of year $0 $0 $0 $0 The accompanying notes are an integral part of the financial statements. 4

273 ANNUAL AUDIT REPORT PROPERTY APPRAISER NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2007 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Office of the Property Appraiser (the Property Appraiser ) of Escambia County, Florida, is established as a constitutional official by Article VIII, Section 1 (d) of the Constitution of the State of Florida. The accounting policies of the Property Appraiser conform to accounting principles generally accepted in the United States of America as applicable to local governments. The following is a summary of the more significant accounting policies. REPORTING ENTITY Although the Property Appraiser is operationally autonomous from the Escambia County Board of County Commissioners, it does not hold sufficient corporate powers of its own to be considered a legally separate entity for financial reporting purposes. Therefore, the Property Appraiser is reported as a part of the primary government of Escambia County, Florida. These special-purpose financial statements are not intended to be a complete presentation of the financial position and results of operations of Escambia County, Florida taken as a whole. As permitted by Chapter (4), Rules of the Auditor General of the State of Florida, the special-purpose financial statements consists of only the fund level financial statements as defined in Governmental Accounting Standards Board (GASB) Statement No. 34, and do not include presentations of government-wide financial statements of the Property Appraiser. FUND ACCOUNTING The Property Appraiser s financial records and accounts are maintained in accordance with the principles of fund accounting, whereby resources are classified for accounting and reporting purposes into funds to insure compliance with any special restrictions or limitations on the use of such resources. The Property Appraiser s general fund (a governmental fund type) is the sole operating fund of the Property Appraiser. No additional funds are required to be maintained. BASIS OF ACCOUNTING The general fund is accounted for using the modified accrual basis of accounting. Revenues are recognized when they become susceptible to accrual that is when they are both measurable and available to finance expenditures of the current period. The Property Appraiser considers receivables collected within sixty days after year-end to be available and recognizes them as revenues of the current year. Expenditures are generally recognized under the modified accrual basis of accounting when the related fund liability is incurred. However, expenditures for compensated absences are recognized when payments are made to employees. 5

274 ANNUAL AUDIT REPORT PROPERTY APPRAISER NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2007 BUDGETS AND BUDGETARY ACCOUNTING The Property Appraiser operates under budget procedures pursuant to Chapter , Florida Statutes. The budget is adopted on a basis consistent with accounting principles generally accepted in the United States of America. The legal level of budgetary control is at the fund level. CASH AND CASH EQUIVALENTS Cash equivalents are highly liquid investments with original maturities of three months or less when purchased. COMPENSATED ABSENCES Employees may accumulate a limited amount of earned but unused sick leave, annual leave, and compensatory time, which will be paid upon separation from service. These expenditures are not recognized in the general fund until payments are made to employees. NOTE 2 SPECIAL REPORTING TREATMENTS Appropriations from the Board of County Commissioners are recorded as transfers in on the Statement of Revenues, Expenditures and Changes in Fund Balance Budget (GAAP Basis) and Actual. In accordance with Florida Statutes, the excess revenues over expenditures is returned to the Board of County Commissioners at year-end and is reported as a transfer out on the Statement of Revenues, Expenditures and Changes in Fund Balance Budget (GAAP Basis) and Actual. Capital assets (vehicles, equipment and other tangible property costing at least $1,000 with a useful life of more than one year) are recorded as expenditures at the time of the purchase. These assets are capitalized at cost and depreciated in Escambia County s government-wide financial statements. ASSETS NOTE 3 DETAILED NOTES Cash Deposits The investment of surplus funds is governed by the provisions of Florida Statute as to the type of investments that can be made. Deposits may be exposed to custodial credit risk, which is the risk of loss in the event of bank failure. The Property Appraiser manages custodial risk by maintaining its deposits in a financial institution designated as a Qualified Public Depository by the State Treasurer. All deposits were fully insured through a combination of Federal depository insurance and participation of the financial institution in the multiple financial institution collateral pool as specified in Chapter 280, Florida Statutes. Accordingly, risk of loss due to bank failure is not significant. At September 30, 2007, the reported amount of the Property Appraiser s deposits was $1,508,908, and the bank balance was $1,727,949, consisting entirely of deposits in a checking account. 6

275 ANNUAL AUDIT REPORT PROPERTY APPRAISER NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2007 LIABILITIES Pension and Retirement Plan - Substantially all full-time employees of the Property Appraiser are covered by the Florida Retirement System (FRS), a multiple employer cost sharing defined benefit pension plan. The FRS was established in 1970 by Chapter 121, Florida Statutes and is administered by the Florida Department of Management Services, Division of Retirement. Changes to the FRS can be made only by an act of the Florida Legislature. Rules governing the operation and administration of the system may be found in Chapter 60S of the Florida Administrative Code. The FRS issues a financial report that includes financial statements and required supplementary information. The report may be obtained by writing to FRS, 2639-C North Monroe Street, Tallahassee, Florida The FRS provides retirement and disability benefits, annual cost-of-living adjustments, and death benefits to plan members and beneficiaries. The FRS provides for vesting of benefits for all members actively employed on July 1, 2001 after 6 years of creditable service, regardless of membership class. Under the laws in effect before that date, members needed 7, 8, or 10 years of service to become vested, depending on their membership class. Normal retirement benefits are available to employees who retire at age 62 with 6 or more years of service, or to those employees who have at least 30 years of creditable service, regardless of age. Retirement age and years of service requirements vary depending on membership class. Early retirement is available after 6 years of service with a 5% reduction of benefits for each year prior to the normal retirement age. Retirement benefits are based upon age, average compensation and years-of-service credit where average compensation is computed as the average of an individual s five highest years of earnings. Deferred Retirement Option Program (DROP) is an elective program for eligible members of the FRS Pension Plan, Teachers Retirement System, and State and County Officers and Employees Retirement System who are eligible for normal retirement. Under this program, a member effectively retires and continues covered employment for up to 5 years. While in DROP, the member s deferred monthly retirement benefits accumulate, earning interest and cost-of-living increases. When the DROP period is over, the participant terminates covered employment and begins receiving their predetermined monthly retirement benefit, as well as the accrued DROP benefit. Disability retirees are not eligible to participate in DROP, and DROP participants do not qualify for disability retirement. The FRS is noncontributory for employees and all contributions are made by participating FRS employers. Participating employer contributions are based upon state-wide rates established by the State of Florida. Average contribution rates for the fiscal year ended September 30, 2007 were as follows: regular employees, 9.85%, special risk employees, 20.92%, elected officials, 16.53%, senior management employees, 13.12%, and DROP participants, 10.91%. The Property Appraiser s contributions, funded on a pay-as-you-go basis, were equal to the actuarially determined contribution requirements for each year and totaled $365,658, $264,621, and $229,741, for the years ended September 30, 2007, 2006, and 2005, respectively. 7

276 ANNUAL AUDIT REPORT PROPERTY APPRAISER NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2007 Risk Management The County has a risk management program to self-insure claims against the Board of County Commissioners, Constitutional Officers, and Santa Rosa Island Authority for the following types of risks: Workers Compensation self insured up to a limit of $450,000 per occurrence with statutory limits. Casualty and Property Casualty limits are self-insured for $100,000 per claim with a $200,000 aggregate; excess policy limits of $1,000,000 per occurrence, $2,000,000 aggregate. Property limits are $50,000 - $100,000 self insured retentions per occurrence. The Property Appraiser participated in the County s self-insurance program during the year at a cost of $30,577. There also were no significant reductions in insurance coverage from the prior year and there have been no settlements which exceeded the Property Appraiser s insurance coverage in any of the past three fiscal years. Long-Term Debt Obligations As required by Chapter (3)(g), Rules of the Auditor General, disclosures regarding long-term liabilities are as follows: Compensated Absences Balance 10/01/06 $497,839 Increase 375,740 Decrease (303,689) Balance 09/30/07 $569,890 NOTE 4 CLAIMS, CONTINGENCIES AND COMMITMENTS The Property Appraiser is contingently liable with respect to lawsuits and other claims which might arise in the ordinary course of operations. In the opinion of management, based on the advice of legal counsel, there are no lawsuits or claims outstanding which could have a material adverse effect on the financial position of the Property Appraiser. In September 2006, the Property Appraiser entered a contract for computer hardware and software configuration and installation, as well as maintenance and support services extending through September 30, If funding is unavailable, the Property Appraiser may terminate the agreement without further obligation. Total project cost for the system is $717,000, of which approximately $617,000 was paid prior to September 30,

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283 ANNUAL AUDIT REPORT SUPERVISOR OF ELECTIONS SEPTEMBER 30, 2007 TABLE OF CONTENTS Report of Independent Auditors... 1 Fund Financial Statement: General Fund Balance Sheet... 2 Statement of Revenues, Expenditures, and Changes in Fund Balance Budget (GAAP Basis) and Actual... 3 Notes to the Financial Statements Page Report on the Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards Management Letter Supervisor of Election s Response to Management Letter... 11

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285 SUPERVISOR OF ELECTIONS BALANCE SHEET GENERAL FUND SEPTEMBER 30, 2007 General Fund ASSETS Due from other governmental units $322,267 Total assets $322,267 LIABILITIES Vouchers payable $34,344 Salaries payable 52,846 Deferred revenue 235,077 Total liabilities 322,267 FUND BALANCE Unreserved 0 Fund balance 0 Total liabilities and fund balance $322,267 The accompanying notes are an integral part of the financial statements 2

286 SUPERVISOR OF ELECTIONS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET (GAAP BASIS) AND ACTUAL GENERAL FUND YEAR ENDED SEPTEMBER 30, 2007 Variance- Original Final positive Budget Budget Actual (negative) Revenues: Intergovernmental $0 $147,483 $64,484 ($82,999) Charges for services 0 200, ,324 (1,676) Total Revenues 0 347, ,808 (84,675) Expenditures: Current: General government Personal services 1,341,602 1,594,244 1,496,661 97,583 Operating expenditures 788,621 1,135, , ,713 Capital outlay 45,000 46,200 42,555 3,645 Total general government 2,175,223 2,776,056 2,336, ,941 Total expenditures 2,175,223 2,776,056 2,336, ,941 Excess (deficiency) of revenues over expenditures (2,175,223) (2,428,573) (2,073,307) 355,266 Other financing sources: Transfers in 2,175,223 2,428,573 2,073,307 (355,266) Total other financing sources 2,175,223 2,428,573 2,073,307 (355,266) Net change in fund balance Fund balance at beginning of year Fund balance at end of year $0 $0 $0 $0 The accompanying notes are an integral part of the financial statement. 3

287 ANNUAL AUDIT REPORT SUPERVISOR OF ELECTIONS NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2007 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Office of the Supervisor of Elections (the Supervisor of Elections ) of Escambia County, Florida, is established as a constitutional official by Article VIII, Section 1 (d) of the Constitution of the State of Florida. The accounting policies of the Supervisor of Elections conform to accounting principles generally accepted in the United States of America as applicable to local governments. The following is a summary of the more significant accounting policies. REPORTING ENTITY Although the Supervisor of Elections is operationally autonomous from the Escambia County Board of County Commissioners, it does not hold sufficient corporate powers of its own to be considered a legally separate entity for financial reporting purposes. Therefore, the Supervisor of Elections is reported as a part of the primary government of Escambia County, Florida. These special-purpose financial statements are not intended to be a complete presentation of the financial position and results of operations of Escambia County, Florida taken as a whole. As permitted by Chapter (4), Rules of the Auditor General of the State of Florida, the special-purpose financial statements consists of only the fund level financial statements as defined in Governmental Accounting Standards Board (GASB) Statement No. 34, and do not include presentations of government-wide financial statements of the Supervisor of Elections. FUND ACCOUNTING The Supervisor of Elections financial records and accounts are maintained in accordance with the principles of fund accounting, whereby resources are classified for accounting and reporting purposes into funds to insure compliance with any special restrictions or limitations on the use of such resources. The Supervisor of Elections general fund (a governmental fund type) is the sole operating fund of the Supervisor of Elections. No additional funds are required to be maintained. BASIS OF ACCOUNTING The general fund is accounted for using the modified accrual basis of accounting. Revenues are recognized when they become susceptible to accrual that is when they are both measurable and available to finance expenditures of the current period. The Supervisor of Elections considers receivables collected within sixty days after year-end to be available and recognizes them as revenues of the current year. Expenditures are generally recognized under the modified accrual basis of accounting when the related fund liability is incurred. However, expenditures for compensated absences are recognized when payments are made to employees. BUDGETS AND BUDGETARY ACCOUNTING The Supervisor of Elections operates under budget procedures pursuant to Florida Statutes. The budget is adopted on a basis consistent with accounting principles generally accepted in the United States of America. The legal level of budgetary control is at the fund level. 4

288 ANNUAL AUDIT REPORT SUPERVISOR OF ELECTIONS NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2007 COMPENSATED ABSENCES Employees may accumulate a limited amount of earned but unused sick leave, annual leave, and compensatory time, which will be paid upon separation from service. These expenditures are not recognized in the general fund until payments are made to employees. NOTE 2 SPECIAL REPORTING TREATMENTS Appropriations from the Board of County Commissioners are recorded as transfers in on the Statement of Revenues, Expenditures and Changes in Fund Balance Budget (GAAP Basis) and Actual. Capital assets (vehicles, equipment and other tangible property costing at least $1,000 with a useful life of more than one year) are recorded as expenditures at the time of purchase. These assets are capitalized at cost and depreciated in Escambia County s government-wide financial statements. The Supervisor of Elections does not maintain a separate cash account. Rather, the Escambia County Clerk of the Circuit Court & Comptroller, serving as the accountant for the Supervisor of Elections, records all cash activity using a common cash account of the Board of County Commissioners. The Due from other governments reflected on the Supervisor of Elections balance sheet, represents the amount of cash held by the Board of County Commissioners on behalf of the Supervisor of Elections. Deferred revenues reflect amounts collected before revenue recognition criteria are met. PENSIONS AND RETIREMENT PLAN NOTE 3 DETAILED NOTES Substantially all full-time employees of the Supervisor of Elections are covered by the Florida Retirement System (FRS), a multiple employer cost sharing defined benefit pension plan. The FRS was established in 1970 by Chapter 121, Florida Statutes and is administered by the Florida Department of Management Services, Division of Retirement. Changes to the FRS can be made only by an act of the Florida Legislature. Rules governing the operation and administration of the system may be found in Chapter 60S of the Florida Administrative Code. The FRS issues a financial report that includes financial statements and required supplementary information. The report may be obtained by writing to FRS, 2639-C North Monroe Street, Tallahassee, Florida The FRS provides retirement and disability benefits, annual cost-of-living adjustments, and death benefits to plan members and beneficiaries. The FRS provides for vesting of benefits for all members actively employed on July 1, 2001 after 6 years of creditable service, regardless of membership class. Under the laws in effect before that date, members needed 7, 8, or 10 year of service to become vested, depending on their membership class. Normal retirement benefits are available to employees who retire at age 62 with 6 or more years of service, or to those employees who have at least 30 years of creditable service, regardless of age. Retirement age and years of service requirements vary depending on membership class. Early retirement is available after 6 years of service with a 5% reduction of benefits for each year prior to the normal retirement age. Retirement benefits are based upon age, average compensation and years-of-service credit where average compensation is computed as the average of an individual s five highest years of earnings. 5

289 ANNUAL AUDIT REPORT SUPERVISOR OF ELECTIONS NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2007 Deferred Retirement Option Program (DROP) is an elective program for eligible members of the FRS Pension Plan, Teachers Retirement System, and State and County Officers and Employees Retirement System who are eligible for normal retirement. Under this program, a member effectively retires and continues covered employment for up to 5 years. While in DROP, the member s deferred monthly retirement benefits accumulate, earning interest and cost-of-living increases. When the DROP period is over, the participant terminates covered employment and begins receiving their predetermined monthly retirement benefit, as well as the accrued DROP benefit. Disability retirees are not eligible to participate in DROP, and DROP participants do not qualify for disability retirement. The FRS is noncontributory for employees and all contributions are made by participating FRS employers. Participating employer contributions are based upon state-wide rates established by the State of Florida. Average contribution rates for the fiscal year ended September 30, 2007 were as follows: regular employees, 9.85%, special risk employees, 20.92%, elected officials, 16.53%, senior management employees, 13.12%, and DROP participants, 10.91%. The Supervisor of Elections contributions, funded on a pay-as-you-go basis, were equal to the actuarially determined contribution requirements for each year and totaled $92,987, $81,339, and $69,835, for the years ended September 30, 2007, 2006, and 2005, respectively. LONG-TERM LIABILITIES As required by Chapter (3)(g), Rules of the Auditor General, disclosures regarding long-term liabilities are as follows: Compensated Absences: Balance 10/01/06 $136,936 Increases 79,442 Decreases (53,658) Balance 09/30/07 $162,720 RISK MANAGEMENT The County has a risk management program to self-insure claims against the Board of County Commissioners, Constitutional Officers, and Santa Rosa Island Authority for the following types of risks: Workers Compensation self insured up to a limit of $450,000 per occurrence with statutory limits. Casualty and Property Casualty limits are self-insured for $100,000 per claim with a $200,000 aggregate; excess policy limits of $1,000,000 per occurrence, $2,000,000 aggregate. Property limits are $50,000 - $100,000 self insured retentions per occurrence. The Supervisor of Elections participated in the County s self-insurance program during fiscal year 2007 at a cost of $6,777. During the fiscal year ended September 30, 2007, the Supervisor of Elections had no significant reductions in insurance coverage from the prior year. In addition, there have been no settlements which exceeded the Supervisor of Elections insurance coverage in any of the past three fiscal years. 6

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