MID-CUMBERLAND HUMAN RESOURCE AGENCY ANNUAL FINANCIAL STATEMENTS. Year Ended June 30, 2010

Transcription

1 ANNUAL FINANCIAL STATEMENTS Year Ended June 30, 2010

2 ANNUAL FINANCIAL STATEMENTS Year Ended June 30, 2010 TABLE OF CONTENTS Page FINANCIAL SECTION Independent Auditor's Report 1 Management's Discussion and Analysis 3 BASIC FINANCIAL STATEMENTS Government-wide Financial Statements Statement of Net Assets 7 Statement of Activities 8 Fund Financial Statements Balance Sheet - Governmental Funds 9 Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Assets 10 Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental Funds 11 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities 12 Statement of Net Assets - Proprietary Fund 13 Statement of Revenues, Expenses and Changes in Net Assets - Proprietary Fund 14 Statement of Cash Flows - Proprietary Fund 15 Statement of Net Assets - Fiduciary Fund 16 Notes to the Basic Financial Statements 17

3 ANNUAL FINANCIAL STATEMENTS Year Ended June 30, 2010 TABLE OF CONTENTS (Continued) Page SUPPLEMENTARY INFORMATION Combining Balance Sheet - Nonmajor Governmental Funds 25 Combining Statement of Revenues, Expenditures and Changes in Fund Balance - Nonmajor Governmental Funds 26 Statement of Changes in Assets and Liabilities - Agency Fund 28 COMPLIANCE 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 29 Report on Compliance with Requirements Applicable to Each Major Program and Internal Control over Compliance in Accordance with OMB Circular A Schedule of Expenditures of Federal Awards 33 Schedule of Expenditures of State Awards 37 Notes to Schedules of Expenditures of Federal and State Awards 39 Schedule of Findings and Questioned Costs 40 Summary Schedule of Prior Audit Findings and Questioned Costs 41

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5 The management's discussion and analysis on pages 3 through 6 is not a required part of the basic financial statements but is supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Mid-Cumberland Human Resource Agency s basic financial statements. The combining and individual nonmajor fund financial statements, and schedules listed in the table of contents are presented for purposes of additional analysis and are not a required part of the basic financial statements. The accompanying schedules of expenditures of federal and state awards is presented for the purpose of additional analysis as required by U.S. Office of Management and Budget Circular A-133, Audit of States, Local Governments and Non-Profit Organizations, and is also not a required part of the basic financial statements of Mid-Cumberland Human Resource Agency. The schedules of federal and state awards have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. The combining and individual nonmajor fund financial statements have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we express no opinion on them. Chattanooga, Tennessee January 14,

6 MANAGEMENT'S DISCUSSION AND ANALYSIS Mid-Cumberland Management's Discussion and Analysis (MD&A) section provides a financial analysis for the year ended June 30, Please read this section in conjunction with the Agency s financial statements. Financial Highlights The Agency s net assets increased by $1,651,027 (32%), from $5,088,691 in 2009 to $6,739,718 for The increase was attributed to improved performance in Governmental activities and significant capital outlays funded by ARRA. The Agency s cash balance increased by $1,784,950 (107%), from $1,669,121 in 2009 to $3,454,071 for Accounts Receivable decreased by $892,572 (34%), from $2,656,430 in 2009 to $1,763,858 for The increase in cash and decrease in accounts receivable are both attributed to increased performance on collections from managed care organizations and more timely payments from grantor agencies. Total Current Assets increased by $892,378 (21%) from $4,325,551 in 2009 to $5,217,929 for Total Current Liabilities decreased by $425,267 (27%), from $1,578,407 in 2009 to $1,153,140 in The Agency s Governmental funds income before financing sources/uses increased $112,039 (10%) from $1,124,555 in 2009 to $1,236,594 for The unrestricted net assets for the Agency increased by $1,317,645 (48%) from $2,747,144 in 2009 to $4,064,789 for Overview of Annual Report The Agency s annual report consists of a series of financial statements. These statements include governmentwide financial statements, fund financial statements, and the related notes to these statements. The report also includes additional supplementary information for these statements. Government-wide statements present the Agency s overall financial activities as a whole. Fund financial statements provide more detailed information about specific Agency funds. The remaining statements provide financial information about activities for which the Agency acts solely as a trustee. Government-Wide Financial Statements The Agency s annual report contains two government-wide financial statements; the Statement of Net Assets and the Statement of Activities. These statements report, on an accrual basis, all assets and liabilities and the changes in them. This reporting provides a way to measure and assess the Agency s overall financial health. Increases or decreases in the Agency s net assets provide good insight about whether the Agency s financial condition is improving or deteriorating. Other non-financial information should also be considered in this assessment. The Statement of Net Assets and the Statement of Activities has only one type of activity: Governmental Activities - The Agency s services are reported in this activity group, including Rural Transportation Services, Meals on Wheels and Senior Dining, Homemaker/Companion Services, Transportation Rural Planning, Youth Workforce Development, Community Corrections and Misdemeanor Services, Ombudsman services, WIC assistance, and Representative Payee services. The general fund is also reported in this group. Federal and state grants, local governments, United Way agencies, local contributions and program income fund these activities. 3

7 Fund Financial Statements The Agency establishes and maintains funds to manage and control monies for specific services and functions. Within the basic financial statements, fund financial statements focus on the Agency's funds rather than the Agency as a whole. They also help assure compliance with financial laws and regulations. The Agency s two significant fund types are as follows: Governmental funds Most of the Agency s services (see Governmental activities on previous page) are reported in the governmental funds. They are reported on the modified accrual accounting basis. These funds focus on the inflows and outflows of monies and the year-end balances, providing a view of available financial resources. Proprietary funds The Agency s internal service funds are reported in the proprietary funds. These funds are used to provide supplies and services for the Agency's other programs and activities. They report activities equivalent to the reporting of the Statement of Net Assets and the Statement of Activities. The Agency as Trustee The Agency s fiduciary activities are reported on the Statement of Changes in Assets and Liabilities - Agency Fund. These activities are excluded from the Agency s other financial statements since these assets cannot be used to finance its operations. Notes to the Financial Statements The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. Government-wide Financial Analysis Our analysis below focuses on net assets and changes in net assets of the Agency's governmental activities: NET ASSETS (in thousands) Change Increase (Decrease) Current Assets $5,218 $4,325 21% Capital Assets 2,675 2,342 14% Total Assets 7,893 6,667 18% Current/Total Liabilities 1,153 1,578 (27)% Net Assets: Invested in Capital Assets 2,675 2,342 14% Unrestricted 4,065 2,747 48% Restricted Total Net Assets $6,740 $5,089 32% 4

8 CHANGES IN NET ASSETS (in Thousands) Change Increase (Decrease) Program revenues: Charges for services $ 8,463 $ 8,686 (3)% Federal grants 5,237 4,143 26% State grants and contributions 3,271 3,372 (3)% Other revenues (25) 31 (-181)% 16,946 16,232 4% Program expenses: Agency operations and administration 3,000 3,235 (7)% Transportation programs 6,774 6,706 1% Nutrition programs 2,141 1,987 8% Other programs 3,380 3,531 (4)% Total expenses 15,295 15,459 (1)% Increase in net assets $ 1,651 $ % The Agency s net assets increased by $1,651,027 in 2010, to $6,739,718. This amount included the net increase in fund balances for all governmental funds of $1,213,320, the net effect on disposition of assets ($2,230), and the amount by which capital outlays exceeded depreciation $439,937. The Agency s total revenues (before interest income, gain (loss) on disposal of assets, and miscellaneous items) increased by $769,970 (5%), from $16,201,029 in 2009 to $16,970,999 in Total expenses decreased by $164,031 (1%), from $15,459,023 in 2009 to $15,294,992 in The increase in revenue is mostly attributed to increases in federal ARRA funding. Total Current Assets increased by $892,378 (21%) from $4,325,551in 2009 to $5,217,929 for Total Current Liabilities decreased by $425,267 (27%), from $1,578,407 in 2009 to $1,153,140 in The Agency's cash balance increased by $1,784,950 (107%), from $1,669,121 in 2009 to $3,454,071 in Agency receivables (excluding internal balances) decreased by $892,572 (34%) from $2,656,430 in 2009 to $1,763,858 for These improvements are attributed to increased performance on collections from managed care organizations and more timely payments from grantor agencies. Mid-Cumberland s funding continues to be derived predominately from federal and state grants, and program service income from managed care organizations. The Agency is continually seeking cost controls and pursuing other funding sources to continue the agency s growth in delivery of services. 5

9 Agency Fund Analysis The Agency s operations report in one significant fund. The analysis for this fund is below: Governmental funds The governmental funds' financial performance continued to improve in The fund reported an increase in revenues over expenditures of $112,039 (10%) in 2010, from $1,124,555 in 2009 to $1,236,594 in The unrestricted fund balance for 2010 was $4,302,740. Capital Assets and Debt Administration The Agency had net capital additions of $1,220,848 for These additions were mostly attributed to vans and IT spending for the transportation program. See note C for additional capital asset detail. The Agency maintains a $200,000 credit line to fund current operations. At year-end, the Agency had $200,000 available on this credit line. This credit line has been maintained for the past several years, and has proven sufficient to fund the Agency s operations. Economic Factors and Next Year s Budget Mid-Cumberland contracts primarily with Agencies with the state of Tennessee and managed care organizations; therefore they are not directly affected by macroeconomic factors. However, the state, federal and local governments and managed care organizations are affected by these factors, indirectly affecting Mid- Cumberland s grant and operating budgets. These effects can be positive or negative due to the economic environment. The overall Agency operations are expected to remain static for the 2011 year as slow economic growth continues to pressure state and local governments. The Agency also continues to streamline personnel to reduce costs and implemented strict cost control oversight to assure the Agency remains within its budgetary spending limits on a grant by grant basis. Contacting the Agency s Financial Management This report is designed to provide a general overview of Mid-Cumberland s finances, comply with financerelated laws and regulations, and demonstrate the Agency s commitment to public accountability. If you have any questions or would like additional information please contact the Agency s Executive Director at 1101 Kermit Drive, Suite 300, Nashville, TN

10 STATEMENT OF NET ASSETS June 30, 2010 Governmental Activities ASSETS Cash $3,454,071 Receivables: Grants (Federal) 276,865 Grants (State) 205,267 Participants and other (net) 1,281,726 Capital assets, net 2,674,929 TOTAL ASSETS 7,892,858 LIABILITIES Accounts payable 274,442 Accrued payroll costs 488,696 Accrued payroll taxes and withholding 38,455 Accrued paid time off 327,382 Due to grantor (Federal) 1,360 Deferred revenue 22,805 TOTAL LIABILITIES 1,153,140 NET ASSETS Investment in capital assets 2,674,929 Unrestricted 4,064,789 TOTAL NET ASSETS $6,739,718 See accompanying notes to basic financial statements. 7

11 STATEMENT OF ACTIVITIES Year Ended June 30, 2010 Indirect Expense Allocation Charges for Services PROGRAM REVENUES Operating Grants and Contributions Capital Grants and Contributions Net (Expenses) Revenues FUNCTION/PROGRAMS Expenses Governmental activities: Agency operations and administration $ 3,663,654 $(663,315) $4,181,492 $ 325,932 $ -- $1,507,085 Transportation programs 6,382, ,169 3,143,804 2,962,694 1,178, ,474 Nutrition programs 2,077,911 62,846 1,074,979 1,004, (60,963) Other community services programs 3,171, ,300 63,011 3,035, (280,589) Total governmental activities $15,294,992 $ -- $8,463,286 $7,329,401 $1,178,312 $1,676,007 CHANGES IN NET ASSETS: Governmental Activities Net revenue $1,676,007 Interest earnings 524 Loss on disposal of capital assets (25,504) Change in net assets 1,651,027 Net assets - beginning 5,088,691 Net assets - ending $6,739,718 See accompanying notes to basic financial statements. 8

12 BALANCE SHEET - GOVERNMENTAL FUNDS June 30, 2010 General Fund Transportation Programs Nutrition Programs Other Governmental Funds Total Governmental Funds ASSETS Cash $3,454,071 $ -- $ -- $ -- $3,454,071 Receivables: Grants (Federal) -- 79,650 10, , ,865 Grants (State) -- 11, , ,267 Participants and other (net) 837, , ,978 3,560 1,281,726 Due from other funds 837, ,944 TOTAL ASSETS $5,129,207 $331,164 $211,707 $383,795 $6,055,873 LIABILITIES Accounts payable $ 175,245 $ 78,399 $ 4,166 $ 15,284 $ 273,094 Accrued payroll costs 488, ,696 Accrued payroll taxes and withholding 38, ,455 Accrued paid time off 124, ,769 40,217 29, ,382 Due to other funds , , , ,341 Due to grantor (Federal) ,360 1,360 Deferred revenue , ,805 TOTAL LIABILITIES 826, , , ,795 1,753,133 FUND BALANCES Unreserved 4,302, ,302,740 TOTAL FUND BALANCES 4,302, ,302,740 TOTAL LIABILITIES AND FUND BALANCES $5,129,207 $331,164 $211,707 $383,795 $6,055,873 See accompanying notes to basic financial statements. 9

13 RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS TO THE STATEMENT OF NET ASSETS June 30, 2010 Total governmental fund balances $4,302,740 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 not reported in the funds. However, in the statement of net assets the cost of these assets are capitalized and expensed over their estimated lives through annual depreciation expense. 2,674,929 Internal service fund liabilities (237,951) Net assets of governmental activities $6,739,718 See accompanying notes to basic financial statements. 10

14 STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS Year Ended June 30, 2010 General Fund Transportation Programs Nutrition Programs Other Governmental Funds Total Governmental Funds REVENUES Federal grants $ -- $2,986,819 $ 396,537 $1,853,471 $ 5,236,827 State grants 84,114 1,114,912 19,000 1,019,585 2,237,611 Local program 241,818 39, , ,904 1,033,275 Program income 4,146,859 3,143,804 1,074,979 63,011 8,428,653 Interest income TOTAL REVENUES 4,473,315 7,284,810 2,079,794 3,098,971 16,936,890 EXPENDITURES Salaries 1,060,071 2,729, ,168 1,427,479 5,761,358 Fringe benefits 261,074 1,015, , ,477 1,862,327 Participant wages , ,204 Participant fringe benefits ,159 41,159 Travel 41,517 39,104 32,092 95, ,046 Rent 41,237 90,716 22, , ,383 Communications 27, ,276 31,604 61, ,051 Utilities -- 13,058 2,637 9,684 25,379 Printing and supplies 31,108 49,908 25,900 38, ,101 Equipment -- 1,182, ,831 1,218,605 Equipment - non capital 37,047 11,637 5,739 6,991 61,414 Maintenance and repairs , ,187 Professional and contracted services 1,942, ,473 25,219 43,658 2,156,429 Insurance, bonding and licensing 9, ,066 7,118 57, ,736 Food ,173, ,173,654 Gasoline , ,990 Training and seminars 5,422 12, ,608 45,127 Specific assistance to participants ,264 66,264 Other ,422 12,422 Indirect costs 122, ,169 62, , ,893 Miscellaneous 39,923 22,454 16,791 4,399 83,567 TOTAL EXPENDITURES 3,619,285 6,902,360 2,079,680 3,098,971 15,700,296 Excess of Revenue over (under) Expenditures 854, , ,236,594 OTHER FINANCING SOURCES (USES) Transfer in 382, ,564 Transfers out -- (382,450) (114) -- (382,564) Disposal of capital assets (23,274) (23,274) Total Other Financing Sources (Uses) 359,290 (382,450) (114) -- (23,274) Excess of Revenue over (under) Expenditures and Other Financing Sources (Uses) 1,213, ,213,320 Fund balance at beginning of year 3,089, ,089,420 Fund balance at end of year $4,302,740 $ -- $ -- $ -- $ 4,302,740 See accompanying notes to basic financial statements. 11

15 RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES Year Ended June 30, 2010 Net change in fund balances - total governmental funds $1,213,320 Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlay as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which capital outlays exceeded depreciation in the current period. Depreciation expense (772,575) Capital outlay 1,212, ,937 The net effect of various transactions involving the sale of capital assets (2,230) Change in net assets of governmental activities $1,651,027 See accompanying notes to basic financial statements. 12

16 STATEMENT OF NET ASSETS - PROPRIETARY FUND June 30, 2010 Governmental Activities - Internal Service Fund ASSETS Property and equipment, net $237,951 TOTAL ASSETS 237,951 LIABILITIES Accounts payable 1,348 Internal balances 236,603 TOTAL LIABILITIES 237,951 NET ASSETS Investment in capital assets -- Net assets - Unrestricted -- TOTAL NET ASSETS $ -- See accompanying notes to basic financial statements. 13

17 STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS - PROPRIETARY FUND Year Ended June 30, 2010 Governmental Activities - Internal Service Fund OPERATING REVENUES Fees for services $147,294 TOTAL OPERATING REVENUES 147,294 OPERATING EXPENSES Contracted services 6,926 Rent 17,066 Insurance 1,188 Printing 2,937 Depreciation 89,387 Maintenance 4,652 Gasoline 1,864 TOTAL OPERATING EXPENSES 124,020 NET OPERATING INCOME 23,274 NONOPERATING EXPENSES Loss on disposal of assets (23,274) TOTAL NONOPERATING EXPENSES -- CHANGE IN NET ASSETS -- Net assets beginning of year -- Net assets end of year $ -- See accompanying notes to basic financial statements. 14

18 STATEMENT OF CASH FLOWS - PROPRIETARY FUND Year Ended June 30, 2010 Governmental Activities - Internal Service Fund CASH FLOWS FROM OPERATING ACTIVITIES Cash received from users $147,294 Cash paid to suppliers for goods and services (34,908) NET CASH PROVIDED IN OPERATING ACTIVITIES 112,386 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Transfer to general fund (104,050) NET CASH USED IN NONCAPITAL FINANCING ACTIVITIES (104,050) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Purchase of capital assets (8,336) NET CASH USED IN CAPITAL AND RELATED FINANCING ACTIVITIES (8,336) CASH FLOWS FROM INVESTING ACTIVITIES -- Net increase in cash -- Cash, beginning of year -- Cash, end of year $ -- RECONCILIATION OF OPERATING INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES Operating income $ 23,274 Adjustments to reconcile net operating income to net cash provided by operating activities: Depreciation 89,387 Decrease in: Accounts payable (275) NET CASH PROVIDED BY OPERATING ACTIVITIES $112,386 See accompanying notes to basic financial statements. 15

19 STATEMENT OF NET ASSETS - FIDUCIARY FUND June 30, 2010 Agency Fund ASSETS Cash $337,068 LIABILITIES Amounts held in custody for others $337,068 See accompanying notes to basic financial statements. 16

20 NOTES TO THE BASIC FINANCIAL STATEMENTS NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES FINANCIAL REPORTING ENTITY The Mid-Cumberland Human Resource Agency (the Agency) was established in 1974 in accordance with Title 13, Chapter 26, as amended, of the Tennessee Code Annotated. This legislation provides a regional system to deliver human resource programs in the state's counties and cities. The Agency is governed by a Board that consists of the county mayor of each county within the Agency's service district, the mayor of each municipality within the district, a state representative and senator within the district and a local representative appointed by the county judge of each service district. The Agency is also governed by a policy council that consists of two representatives from each county served and two legislators. For financial reporting purposes, the Mid- Cumberland Human Resource Agency includes all fund types and account groups over which the Board of Directors exercises primary financial accountability. BASIS OF PRESENTATION Government-Wide Statements The statement of net assets and the statement of activities display information about the primary government (the Agency). These statements include the financial activities of the overall government, except for fiduciary activities. Eliminations have been made to minimize the double-counting of internal activities. Governmental activities generally are funded through federal and state grants, county and local government contributions, charitable contributions, intergovernmental revenues, and contract and program fees. The statement of activities presents a comparison between the direct expenses and program revenues (charges for services, operating grants and contributions, and capital grants and contributions) for governmental programs. This government-wide focus is more on the sustainability of the Agency as an entity and the changes in the Agency's net assets resulting from the current year's activities. Governmental Fund Financial Statements The fund financial statements provide information about the Agency's funds. The emphasis of fund financial statements is on the major funds in the governmental funds. All remaining governmental funds are aggregated and reported as nonmajor funds. The Agency reports the following major funds: General Fund - used to account for all resources not specifically accounted for in another fund. Transportation Programs - accounts for activities of the Agency's various transportation operations (i.e., Public Transportation and Access to Jobs). Nutrition Programs - accounts for the activities of the Agency's various nutritional operations (i.e., Meals-On- Wheels and congregate meals). 17

21 NOTES TO THE BASIC FINANCIAL STATEMENTS (Continued) MEASUREMENT FOCUS, BASIS OF ACCOUNTING The accounts of the Agency are organized on the basis of funds. Governmental resources are allocated to and accounted for in individual funds based upon the purposes for which they are to be spent and the means by which spending activities are controlled. Government-Wide Financial Statements include a Statement of Net Assets and Statement of Activities and Changes in Net Assets. These statements present a summary of Governmental Activities for the Agency. Fiduciary activities of the Agency are not included in these statements. These statements are presented on an "economic resources" measurement focus and the accrual basis of accounting. Accordingly, all the Agency's assets and liabilities, including capital assets and long-term liabilities, are included in the accompanying Statement of Net Assets. The Statement of Activities presents changes in net assets. Under the accrual basis of accounting, revenues are recognized in the period in which they are earned while expenses are recognized in the period in which the liability is incurred. The types of transactions reported as program revenues for the Agency are reported in three categories: 1.) charges for services, 2.) operating grants and contributions, and 3.) capital grants and contributions. Certain eliminations have been made as prescribed by GASB Statement No. 34 in regards to interfund activities, payables and receivables. All internal balances in the Statement of Net Assets have been eliminated. In the Statement of Activities, internal service fund transactions have been eliminated. Governmental Fund Financial Statements include a Balance Sheet and a Statement of Revenues, Expenditures and Changes in Fund Balances for all major governmental funds and non-major funds aggregated. An accompanying schedule is presented to reconcile and explain the differences in fund balances and changes in fund balances as presented in these statements to the net assets and changes in net assets presented in the Government-Wide financial statements. The Agency has presented all major funds that met those qualifications. All governmental funds are accounted for on a spending or "current financial resources" measurement focus and the modified accrual basis of accounting. Accordingly, only current assets and current liabilities are included on the Balance Sheets. The Statement of Revenue, Expenditures, and Changes in Fund Balances present increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in net current assets. Under the modified accrual basis of accounting, revenues are recognized in the accounting period in which they become both measurable and available to finance expenditures of the current period. Accordingly, revenues are recorded when received in cash, except that revenues subject to accrual (90 days after year-end) are recognized when due. The primary revenue sources, which have been treated as susceptible to accrual by the Agency, are federal grants, state grants, local programs and program income. Expenditures are recorded in the accounting period in which the related fund liability is incurred. Proprietary Fund Financial Statements include a Statement of Net Assets, a Statement of Revenues, Expenses and Changes in Fund Net Assets, and a Statement of Cash Flows. The only proprietary fund is the internal service fund. The internal service balances and activities have been combined with the governmental activities in the Government-Wide financial statements. The cost of these services are allocated to the appropriate function/program in the statement of activities. 18

22 NOTES TO THE BASIC FINANCIAL STATEMENTS (Continued) All business-type (proprietary) activities of the Agency follow the Financial Accounting Standards Board Statements and Interpretations issued on or before November 30, 1989, Accounting Principal Board Opinions, and Accounting Research Bulletins, unless those pronouncements conflict with GASB pronouncements. Agency Fund is used to account for amounts held in trust for others. These amounts are incidental and held for a short period of time. The Agency collects monies from the Social Security Administration to be given to recipients of the Social Security Program. Cash and cash equivalents. For purposes of the statement of cash flows, the proprietary fund type considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. At June 30, 2010, the Agency had no cash equivalents. Use of Estimates. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Capital Assets. The Agency's capital assets, which include furniture and fixtures, computers, software and peripherals, and vehicles, are reported in the applicable governmental columns in the government-wide financial statements. Capital assets are defined by the Agency as assets with an initial, individual cost of more than $500 and an estimated useful life in excess of one year. Such assets are recorded at historical cost. The cost of normal maintenance and repairs that do not add to the value of the asset or materially extend the assets lives are not capitalized. Capital assets of the Agency are being depreciated using the straight line method over the following estimated useful lives: Furniture and fixtures Computers, software and peripherals Vehicles Leasehold improvements 5 years 3-5 years 5 years 5 years Equipment acquired with grant funds, and recorded in these financial statements, may require that the grantor retain an equity interest in the asset. Grantor agencies may also maintain the right to determine the use of the proceeds from the sale of these assets. Compensated absences. The Agency provides paid time off benefits to permanent employees. Paid time off is earned at the following rates: Years of Service Days of Paid Time Off Earned

23 NOTES TO THE BASIC FINANCIAL STATEMENTS (Continued) Income taxes. The agency is a not-for-profit corporation as described in Section 501(c)(3) of the Internal Revenue Code and is exempt from federal income taxes on related income pursuant to Section 501(a) of the Code. Interfund Transactions. Exchange transactions between funds are reported as revenues in the seller funds and as expenditures/expenses in the purchaser funds. Flows of cash or goods from one fund to another without a requirement for repayment are reported as interfund transfers. Interfund transfers are reported as other financing sources/uses in governmental funds and after nonoperating revenues/expenses in enterprise funds. Repayments from funds responsible for particular expenditures/expenses to the funds that initially paid for them are not presented in the financial statements. Budgetary Process. The Agency does not have an annual appropriated budget. The grant documents serve as the financial plans for budgetary purposes. NOTE B - CASH Cash on the balance sheet includes deposits with financial institutions and investments in a repurchase agreement. The bank balances are either insured or collateralized by the Federal Deposit Insurance Corporation or Tennessee Bank Collateral Pool and are not subject to custodial credit risk. The Agency s investments are categorized to give an indication of the level of risk assumed by the Agency. The categories are described as follows: Category 1 - Insured or collateralized with securities held by the entity or by its agent in the entity s name. Category 2 - Collateralized with securities held by pledging financial institution s trust department or agent in the entity s name. Category 3 - Uncollateralized. Deposits categorized by level of risk for the year ended June 30, 2010, are as follows: Cash Bank Balance Carrying Amount Category 1 - Demand deposits insured or collateralized by the State of Tennessee Collateral Pool or Federal Deposit Insurance $3,615,798 $3,454,071 20

24 NOTES TO THE BASIC FINANCIAL STATEMENTS (Continued) NOTE C - CAPITAL ASSETS Capital asset activity for the fiscal year ending June 30, 2010, was as follows: Beginning Balances Increases Decreases Ending Balances Governmental Activities: Capital assets being depreciated: Furniture and fixtures $ 181,828 $ 4,787 $(46,931) $ 139,684 Computers, software and peripherals 1,652, ,049 (37,091) 1,764,570 Vehicles 3,198,929 1,067, ,265,941 Total capital assets being depreciated 5,033,369 1,220,848 (84,022) 6,170,195 Less accumulated depreciation for: Furniture and fixtures (85,315) (24,473) 23,657 (86,131) Computers, software and peripherals (619,578) (303,167) 34,861 (887,884) Vehicles (1,986,929) (534,322) -- (2,521,251) Total accumulated depreciation (2,691,822) (861,962) 58,518 (3,495,266) Governmental activity capital assets, net $2,341,547 $ 358,886 $(25,504) $2,674,929 Governmental activities depreciation expense was as follows: Agency operations and administration $ 79,651 Transportation programs 667,896 Nutrition programs 3,915 Other community service programs 110,500 Total governmental activities depreciation expense $861,962 NOTE D - INTERFUND ACTIVITY Amounts due to/from other funds as of June 30, 2010, are as follows: Due To Due From General Fund Transportation Programs $118,996 General Fund Nutrition Programs 144,519 General Fund Nonmajor Governmental Funds 337,826 General Fund Internal Service Fund 236,603 21

25 NOTES TO THE BASIC FINANCIAL STATEMENTS (Continued) Interfund balances between governmental funds are created mainly from the general fund's payment of expenditures on behalf of other governmental funds. Amounts transferred to/from other funds as of June 30, 2010, are as follows: General Fund Transportation Program Nutrition Program Transfer in $382,564 $ -- $ -- Transfers out , NOTE E - PENSION PLANS The Mid-Cumberland Human Resource Agency provides pension benefits for all its eligible employees through a defined contribution plan administered by Wachovia Bank, N.A. In a defined contribution plan, benefits depend solely on amounts contributed to the plan plus investment earnings. Employees are eligible to participate after 12 months and 1,000 hours of employment. Under the plan, the Agency currently contributes 6.12% of each employee s eligible compensation. A participant is 100% vested after two years of credited service in the Agency's contribution to their account. The Agency s total contribution was $257,451 for the year ended June 30, The Agency s plan allows employees to defer a portion of their annual compensation pursuant to Section 457 of the Internal Revenue Code. Employees are immediately vested for all their contributions. NOTE F - COMMITMENTS AND CONTINGENCIES Operating Lease Agreements. The Agency currently leases office space for the central administrative office in Nashville, Tennessee. The Agency also entered into short-term leases for other space as needed by the individual programs throughout the geographic area served. This space includes program offices, storage space and program training sites. Total rental payments for these properties and miscellaneous office equipment, for the year ended June 30, 2010, was $348,170. Future minimum lease payments with initial or remaining periods of one year or more (including renewal options) at June 30, 2010 are as follows: Fiscal Year Ending June 30, Property Equipment 2011 $194,424 $22, ,665 22, ,557 9, ,000 1,868 $605,646 $57,076 22

26 NOTES TO THE BASIC FINANCIAL STATEMENTS (Continued) Risk Management. The Mid-Cumberland Human Resource Agency is exposed to various risks of loss related to general liability; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The Agency carries commercial insurance for general liability, loss of assets, employee dishonesty, and injuries to employees. Settled claims resulting from these risks have not exceeded commercial insurance coverage in any of the past three fiscal years. The Agency elected to provide basic health and dental insurance coverage for its employees through several commercial group insurance plans. The Agency s obligation under these insurance plans is limited to a maximum $470 per month per employee for individual coverage and $997 per month per employee for family coverage, based on the plan selected by the employee. Litigation. The Agency is subject to claims and suits arising principally in the normal course of operations. In the opinion of management, the ultimate resolution of such pending legal proceedings has been adequately provided for in the basic financial statements. Grant Programs. The Agency participates in numerous federal and state grant programs which are governed by various rules and regulations of the grantor agencies. Costs charged to the respective grant programs are subject to audit and adjustment by the grantor agencies; therefore, to the extent that the Agency has not complied with the rules and regulations governing the grants, refunds of any money received may be required and the collectibility of any related receivable at June 30, 2010, may be impaired. In the opinion of the Agency, there are no significant contingent liabilities relating to compliance with the rules and regulations governing the respective grants; therefore, no provision has been recorded in the accompanying basic financial statements for such contingencies. NOTE G - LINE OF CREDIT (SHORT-TERM DEBT) The Agency has a $200,000 unsecured line of credit agreement with Regions Bank, which expires on February 27, The line of credit agreement has a stated interest rate of the prime rate plus one percent, and at June 30, 2010, the combined rate was 4.25%. The purpose of the above short-term obligation is to assure that the Agency's cash flow needs are met and to pay operating expenses. There was no activity during fiscal year NOTE H - SUBSEQUENT EVENTS The Agency noted no transactions that would provide evidence about material conditions that did not exist at the balance sheet date but arose subsequently, through the date these financial statements were available to be issued, January 14,

27 SUPPLEMENTARY INFORMATION 24

28 COMBINING BALANCE SHEET - NONMAJOR GOVERNMENTAL FUNDS June 30, 2010 SPECIAL REVENUE Community Corrections WIC Homemaker Ombudsman Youth Can Total Nonmajor Funds ASSETS Receivables: Grants (Federal) $ -- $3,482 $65,536 $18,455 $ 99,013 $186,486 Grants (State) 193, ,749 Participants and other (net) ,560 3,560 Total assets $193,749 $3,482 $65,536 $18,455 $102,573 $383,795 LIABILITIES Accounts payable $ 12,883 $ -- $ -- $ 968 $ 1,433 $ 15,284 Accrued paid time off -- 2, ,907 23,677 29,325 Due to other funds 180, ,176 14,580 77, ,826 Due to grantor (Federal) , ,360 Total liabilities 193,749 3,482 65,536 18, , ,795 FUND BALANCES Fund balances - Unreserved Total fund balances Total liabilities and fund balances $193,749 $3,482 $65,536 $18,455 $102,573 $383,795 25

29 COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - NONMAJOR GOVERNMENTAL FUNDS Year Ended June 30, 2010 SPECIAL REVENUE Community Corrections WIC Homemaker REVENUES Federal grants $ -- $83,847 $347,621 State grants 1,002, Local program ,051 Program income 52, TOTAL REVENUES 1,055,305 83, ,672 EXPENDITURES Salaries 563,556 55, ,774 Fringe benefits 163,952 21, ,637 Participant wages Participant fringe benefits Travel 7, ,534 Rent 68, ,411 Communications 30, ,923 Utilities 9, Printing and supplies 26, ,929 Equipment 27, Equipment - non-capital 5, ,140 Professional and contracted services 34, ,727 Insurance, bonding and licensing 14, ,529 Training and seminars 13, ,720 Specific assistance to participants Other 12, Indirect costs 71,271 5,816 32,301 Miscellaneous 4, TOTAL EXPENDITURES 1,055,305 83, ,672 Excess of Revenue Over (Under) Expenditures Fund balance at beginning of year Fund balance at end of year $ -- $ -- $ -- 26

30 Ombudsman SPECIAL REVENUE Youth Can Total Nonmajor Funds $100,900 $1,321,103 $1,853,471 1,371 15,515 1,019,585 27,653 17, , ,405 63, ,924 1,364,223 3,098,971 76, ,319 1,427,479 19, , , , , ,159 41,159 6,251 41,623 95,333 3,983 27, ,483 5,183 19,676 61, ,684 2,911 1,859 38,185 1,920 6,094 35, ,991 2,591 2,102 43, ,877 57,687 1,174 9,996 27, ,264 66, ,422 8,879 90, , , ,924 1,364,223 3,098, $ -- $ -- $ -- 27

31 STATEMENT OF CHANGES IN ASSETS AND LIABILITIES - AGENCY FUND Year Ended June 30, 2010 Balance July 1, 2009 Additions Deductions Balance June 30, 2010 SSI RECIPIENT TRUST FUND ASSETS Cash $393,873 $2,473,873 $2,530,678 $337,068 LIABILITIES Amounts held in custody for others $393,873 $2,473,873 $2,530,678 $337,068 28

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33 Compliance and Other Matters As part of obtaining reasonable assurance about whether Mid-Cumberland Human Resource Agency s financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. This report is intended solely for the information and use of the Board of Directors, management, and federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. Chattanooga, Tennessee January 14,

34

35 Internal Control Over Compliance Management of Mid-Cumberland Human Resource Agency is responsible for establishing and maintaining effective internal control over compliance with requirements of laws, regulations, contracts, and grants applicable to federal programs. In planning and performing our audit, we considered Mid-Cumberland Human Resource Agency s internal control over compliance with requirements that could have a direct and material effect on a major federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with OMB Circular A-133, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of Mid- Cumberland Human Resource Agency's internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect and correct noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in internal control that might be significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above. This report is intended solely for the information and use of the Board of Directors, management, and federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. Chattanooga, Tennessee January 14,

36 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS Year Ended June 30, 2009 Federal CFDA Number Agency or Pass- Through Number Federal Grantor/Pass-Through Grantor Agency/Program Title U.S. DEPARTMENT OF AGRICULTURE Passed through Greater Nashville Regional Council: Nutrition Program for the Elderly (6/09) Nutrition Program for the Elderly (6/10) Nutrition Program for the Elderly (6/10) (ARRA) Nutrition Program for the Elderly (6/10) (ARRA) Passed through Tennessee Department of Health: Special Supplemental Food for Women, Infants, and Children (9/09) GG Special Supplemental Food for Women, Infants, and Children (9/10) GG U.S. DEPARTMENT OF LABOR Passed through Nashville Career Advancement Center: WIA-Youth Activities (06/10) WIA-Youth Activities (06/10) (ARRA) WIA-Youth Activities (06/10) WIA-Youth Activities (06/10) (ARRA) WIA-Youth Activities (06/10) WIA-Youth Activities (06/10) (ARRA) U.S. DEPARTMENT OF TRANSPORTATION Passed through Tennessee Department of Transportation: Public Transportation (Section 5311) (6/09) Z Public Transportation (Section 5311) (6/10) GG Public Transportation Capital (04/09-03/14) (6/10) (ARRA) Z Public Transportation (Access to Jobs) (7/08-6/13) (6/10) Z Public Transportation (Section 5309) (08/08-07/12) (6/10) GG Public Transportation (Section 5309) (10/08-10/11) (6/10) GG Public Transportation (Section 5310) (06/10-12/10) (6/10) Z Public Transportation (RPO) (07/09-07/10) (6/10) GG Public Transportation (5317) (07/08-07/13) (6/10) Z Subtotal 33

37 (Deferred) Accrued Revenue at June 30, 2009 Receipts or Revenues Recognized Disbursements/ Expenditures Adjustments (Deferred) Accrued Revenue at June 30, 2010 $ 4,900 $ 4,900 $ -- $ -- $ ,500 29, , , , ,434 79, ,845 6,609 28,573 21, ,400 61, ,483 60, , , , , , , ,737 43,168 43, , , , , , , , ,984 21,587 46,441 24, ,576,074 1,576, , , ,024 5,043 37,978 44, ,683 69, ,148 45, , , , , , ,169 56, , $637,296 $4,762,107 $4,274,232 $ -- $149,421 34

38 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS Year Ended June 30, 2010 (Continued) Federal Grantor/Pass-Through Grantor Agency/Program Title Subtotal from Previous Page Federal CFDA Number Agency or Pass- Through Number FEDERAL EMERGENCY MANAGEMENT AGENCY Passed through Local Emergency Food and Shelter Boards: Emergency Food and Shelter (Phase XXVII) (06/10) Various Emergency Food and Shelter (06/09) (ARRA) Various Emergency Food and Shelter (Phase XXVII) (06/10) Various U.S. DEPARTMENT OF HEALTH & HUMAN SERVICES Passed through Greater Nashville Regional Council: Special Programs for the Aging - Title III-C Nutrition Services (6/09) Title III-C Nutrition Services (6/10) Title III-B Transportation Services (6/09) Title III-B Transportation Services (6/10) Title VII Ombudsman Funds (6/09) Title VII Ombudsman Funds (6/10) Title III-B Ombudsman (6/09) Title III-B Ombudsman (6/10) Passed through Tennessee Department Human Services: Social Services Block Grant - Homemaker SSBG (6/09) Z Homemaker SSBG (6/10) Z Child Care Certificate Services (06/09) GG Total Federal Awards 35

39 (Deferred) Accrued Revenue at June 30, 2009 Receipts or Revenues Recognized Disbursements/ Expenditures Adjustments (Deferred) Accrued Revenue at June 30, 2010 $637,296 $4,762,107 $4,274,232 $ -- $149,421 (30,563) 27,369 43,162 14, (698) 30,785 11,112 20, , (22,805) 17,929 17, , , ,183 52, , , ,453 11,667 11, ,833 63, ,567 4,087 4, ,612 37, ,888 1,031 2, (1,360) , , , $693,417 $5,712,685 $5,236,827 $35,141 $252,700 36