Shelby County Commission

Transcription

1 Report on the Commission, Alabama October 1, 2008 through September 30, 2009 Filed: October 8, 2010 Department of Examiners of Public Accounts 50 North Ripley Street, Room 3201 P.O. Box Montgomery, Alabama Website: Ronald L. Jones, Chief Examiner

2

3

4

5 Table of Contents Page Summary A Contains items pertaining to state and local legal compliance, Commission operations, and other matters. Schedule of State and Local Compliance and Other Findings C Contains detailed information about findings pertaining to state and local legal compliance, and other findings. Independent Auditor s Report E Reports on whether the financial information constitutes a fair presentation of the financial position and results of financial operations in accordance with generally accepted accounting principles (GAAP). Management s Discussion and Analysis H Provides information required by the Governmental Accounting Standards Board (GASB) that is prepared by management of the Commission introducing the basic financial statements and providing an analytical overview of the Commission s financial activities for the year. This information has not been audited, and no opinion is provided about the information. Basic Financial Statements 1 Provides the minimum combination of financial statements and notes to the financial statements that is required for the fair presentation of the Commission s financial position and results of operations in accordance with GAAP. Exhibit #1 Statement of Net Assets 2 Exhibit #2 Statement of Activities 4 Exhibit #3 Balance Sheet Governmental Funds 6 Exhibit #4 Exhibit #5 Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Assets 8 Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds 9 Commission

6

7 Table of Contents Page Exhibit #6 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities 11 Exhibit #7 Statement of Net Assets Proprietary Funds 12 Exhibit #8 Statement of Revenues, Expenses and Changes in Net Assets Proprietary Funds 14 Exhibit #9 Statement of Cash Flows Proprietary Funds 15 Exhibit #10 Statement of Fiduciary Net Assets 17 Exhibit #11 Statement of Changes in Fiduciary Net Assets 18 Notes to the Financial Statements 19 Required Supplementary Information 45 Provides information required by the GASB to supplement the basic financial statements. This information has not been audited and no opinion is provided about the information. Exhibit #12 Exhibit #13 Exhibit #14 Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual General Fund 46 Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual Gasoline Tax Fund 50 Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual Public Buildings, Roads and Bridges Fund 52 Exhibit #15 Schedule of Funding Progress Defined Benefit Pension Plan 54 Exhibit #16 Schedule of Funding Progress Other Postemployment Benefits 55 Supplementary Information 56 Contains financial information and notes relative to federal financial assistance. Exhibit #17 Schedule of Expenditures of Federal Awards 57 Notes to the Schedule of Expenditures of Federal Awards 61 Commission

8

9 Table of Contents Page Additional Information 62 Provides basic information related to the Commission, including reports and items required by generally accepted government auditing standards and/or U. S. Office of Management and Budget (OMB) Circular A-133 for federal compliance audits. Exhibit #18 Exhibit #19 Exhibit #20 Exhibit #21 Exhibit #22 Commission Members and Administrative Personnel a listing of the Commission members and administrative personnel. 63 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 a report on internal controls related to the financial statements and on whether the Commission complied with laws and regulations which could have a direct and material effect on the Commission s financial statements. 64 Report on Compliance With Requirements Applicable to Each Major Program and on Internal Control Over Compliance in Accordance With OMB Circular A-133 a report on internal controls over compliance with requirements of laws, regulations, contracts, and grants applicable to major federal programs and an opinion on whether the Commission complied with laws, regulations, and the provisions of contracts or grant agreements which could have a direct and material effect on each major program. 66 Schedule of Findings and Questioned Costs a schedule summarizing the results of audit findings relating to the financial statements as required by Government Auditing Standards and findings and questioned costs for federal awards as required by OMB Circular A Auditee Response a response by the Commission on the results of the audit. 70 Commission

10

11 Department of Examiners of Public Accounts SUMMARY Commission October 1, 2008 through September 30, 2009 The Commission (the Commission ) is a nine-member body elected by the citizens of. The members and administrative personnel in charge of governance of the Commission are listed on Exhibit 18. The Commission is the governmental agency that provides general administration, public safety, construction and maintenance of county roads and bridges, sanitation services, health and welfare services and educational services to the citizens of. This report presents the results of an audit the objectives of which were to determine whether the financial statements present fairly the financial position and results of financial operations and whether the Commission complied with applicable laws and regulations, including those applicable to its major federal financial assistance programs. The audit was conducted in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States as well as the requirements of the Department of Examiners of Public Accounts under the authority of the Code of Alabama 1975, Section An unqualified opinion was issued on the financial statements, which means that the Commission s financial statements present fairly, in all material respects, its financial position and the results of its operations for the fiscal year ended September 30, Findings are numbered and reported by the fiscal year in which the finding originally occurred A

12 Instances of noncompliance with state and local laws and regulations and other matters were found during the audit as shown on the Schedule of State and Local Compliance and Other Findings and they are summarized below: CURRENT FINDINGS relates to a former employee of the Commission making fictitious adjustments to bank reconciliations and making unauthorized withdrawals from bank accounts relates to the Commission s failure to properly bid purchases in accordance with the Code of Alabama 1975, Section The following officials/employees were invited to an exit conference to discuss the results of the audit: Alex Dudchock, County Manager; and Commission Members: Lindsey Allison, Daniel Acker, Jon Parker, Tommy Edwards, Joel Bearden, Robbie Hayes, Rick Shepherd, Larry Dillard, Corley Ellis, Ted Crockett, and Earl Cunningham. The following individuals attended the exit conference held at the Office of the Commission: Alex Dudchock, County Manager; Commission Members: Lindsey Allison, Daniel Acker, Jon Parker, Tommy Edwards, Robbie Hayes, Rick Shepherd, Larry Dillard, Corley Ellis, and representatives of the Departments of Examiners of Public Accounts: James Hall, Audit Manager; Cathy Cook, Examiner of Public Accounts and Brian Davis, Examiner of Public Accounts B

13 Schedule of State and Local Compliance and Other Findings C

14 Schedule of State and Local Compliance and Other Findings For the Year Ended September 30, 2009 Ref. No. Finding/Noncompliance Finding: The Commission has policies and procedures in place to ensure that bank reconciliations are properly performed and expenditures are properly authorized and documented. However, a former employee of the Commission made fictitious adjustments to a bank reconciliation and made unauthorized withdrawals from the Commission s bank accounts over the course of several years. The employee initiated unauthorized withdrawals totaling $15, from the Commission s bank accounts on 19 different occasions. All amounts have been repaid. Recommendation: The Commission should ensure that all policies and procedures concerning bank reconciliations and expenditures are being followed Finding: The Code of Alabama 1975, Section , requires that all expenditures of funds of whatever nature for labor, services, work, or for the purchase of materials, equipment, supplies, or other personal property involving fifteen thousand dollars ($15,000) or more, shall be made under contractual agreement entered into by free and open competitive bidding, on sealed bids, to the lowest responsible bidder. The Commission purchased chemicals totaling at least $187, without bidding. Recommendation: The Commission should comply with the Code of Alabama 1975, Section Commission D

15 Independent Auditor s Report E

16 Independent Auditor s Report We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the Commission, as of and for the year ended September 30, 2009, which collectively comprise the basic financial statements of the Commission as listed in the table of contents as Exhibits 1 through 11. These financial statements are the responsibility of the Commission s management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the Shelby County Commission, as of September 30, 2009, and the respective changes in financial position and cash flows, where applicable, thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. The Commission adopted the provisions of Governmental Accounting Standard Board (GASB) Statement Number 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions, during the fiscal year ended September 30, This represents a change in the Commission s method of accounting for certain postemployment benefits. In accordance with Government Auditing Standards, we have also issued our report dated September 3, 2010 on our consideration of the Commission s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit F

17

18 This Page Intentionally Blank

19 Management s Discussion and Analysis (Required Supplementary Information) H

20 MANAGEMENT S DISCUSSION AND ANALYSIS This discussion and analysis of the financial performance of, Alabama (Shelby) is designed to provide an overview of Shelby s financial activities for the fiscal year ended September 30, This report should be read in conjunction with Shelby s basic audited financial statements which begin herein on page 1. USING THIS ANNUAL REPORT The annual report consists of a series of financial statements. The Statement of Net Assets Exhibit 1 and the Statement of Activities Exhibit 2 provide information about the activities of the County as a whole and present a longer-term view of Shelby s finances. Exhibits 3 through 14 report the financial activity of Shelby on a fund basis. Fund financial statements report how the services were financed in the short term as well as what remains for future spending. These exhibits report operations in more detail than the government-wide statements by providing information recapped by Shelby s most significant funds the Governmental Funds, the Proprietary Funds, and the Fiduciary Funds. The Proprietary Funds report Business-Type Activities associated with the operation of a Water system and a Solid Waste system. The remaining exhibits provide financial information about activities for which Shelby acts solely as a trustee or agent for the benefit of those outside the government. FINANCIAL HIGHLIGHTS * The governmental fund type fund balances for Shelby decreased by $.286 million or.08%. The government funds decrease was mainly the result of the excess of expenditures over revenues and transfers of $.952 million from continuing operations in the General Fund, the excess of expenditures over revenues for the continued on-going development of infrastructure for highways, roads and bridges for $1.441 million accounted for in the Public Buildings, Roads and Bridges Fund, offset by the excess of revenues over expenditures in the Gasoline Tax Fund of $.207 million and the increase of revenues over expenses from continuing operations for $1.900 million accounted for in the Other Government Funds. * The proprietary fund type operations for Shelby reported a net loss from the solid waste operations of $.207 million with non-operating revenues exceeding non-operating expenses by $.156 million for a total net loss of $.051 million. The water system reported an operating loss of $2.832 million with non-operating expenses exceeding non-operating revenues by $1.528 million for a total net loss of $4.360 million. Developer contributions were $.146 million for the year. * Total net assets for governmental fund type funds increased by $9.456 million or 4.21%. The increase is the result of general fund revenues in excess of general fund expenses. I

21 * Total net assets for proprietary fund type funds decreased by $4.264 million or 4.78%. The decrease in proprietary fund net assets is a result of an operating loss from continuing operations of $.051 million in the Solid Waste Fund; an operating loss from continuing operations of $2.832 million in the Water System fund; a net loss of $1.528 million in nonoperating expenses over non-operating revenues for the Water System and the receipt of developer capital contributions of $.146 million. Loses in the Water System were anticipated by Shelby with the start up of a new water plant. Such losses are to be covered as detailed in the section specifically covering the proprietary funds included later in this analysis. * Total revenues for governmental funds decreased $3.181 million or 4.46% while operating revenues for proprietary funds decreased $.941 million or.088%. * Total expenditures for governmental funds increased $.832 million or.012% while expenses for proprietary funds increased $2.007 million or 18.72%. Reporting the County as a Whole One of the most important questions asked under the current guidelines that govern this annual report is if Shelby is, as a whole, better off or worse off as a result of the activities of the year reported on. The Statement of Net Assets and the Statement of Activities report information about Shelby as a whole and about its activities in a way that helps answer this question. These statements are compiled using the accrual basis of accounting for all assets and liabilities which is similar to the accounting methods used by most private sector companies. All of the current year s revenues and expenses are taken into account regardless of when cash is received or paid. These two statements report Shelby s net assets and changes in them. The County s net assets, defined as the difference between assets and liabilities, can be thought of as one way to measure its financial health or financial position. Over time, increases or decreases in the County s net assets are one indicator of whether its financial health is improving or deteriorating. Other non-financial factors need to be considered such as changes in the County s property tax base and the condition of the County s infrastructure to assess the overall health of the County. In the Statement of Net Assets and the Statement of Activities, we divide the County into two kinds of activities. * Government activities - Most of the County s basic services are reported here. These include general government, public safety, highway operations, health, welfare, culture and recreation. Property taxes, sales and use taxes, license and permits, and charges for services finance most of these activities. * Business-Type activities - The County charges fees to users to cover all or most of the cost of certain services it provides. Shelby operates a Water system and a Solid Waste system that are included in this category. J

22 Reporting the County s Most Significant Funds The fund financial statements begin with Exhibit 3 and provide detailed information about the most significant funds individually as opposed to the County as a whole. Some funds are required to be established by State law. The County Commission has established many other funds to help control and manage the money received for particular purposes or to show that it is meeting legal responsibilities for using certain taxes, grants or other monies. The County has three types of funds: governmental, proprietary and fiduciary. Each fund employs different accounting approaches. * Governmental Funds - Most of the basic services are reported in governmental funds. These funds focus on how the money flows into and out of those funds. The balances left at year end are available for spending. The governmental funds are reported using an accounting method called modified accrual accounting. This measures cash and all other financial assets that can readily be converted into cash. The governmental fund statements provide a detailed short term view of the general government operations and basic service provided. Governmental fund information helps the reader determine whether there are more or fewer financial resources available to spend in the near future to finance the County s programs. The relationship between governmental activities reported in the Statement of Net Assets and the Statement of Activities and in the governmental funds is detailed in Exhibit 6 of this Report. * Proprietary Funds - When the County charges users for the services it provides, the revenue and expenses for these services are generally reported in the proprietary funds. Shelby operates enterprise funds, a component of proprietary funds, which provide water and solid waste disposal. These funds are intended to be self-supporting through user fees charged for the services. The proprietary funds are reported in the same way that all activities are reported in the Statement of Net Assets and the Statement of Activities under Business-Type Activities. The proprietary fund statements provide more detail and additional information to allow for an analysis of the short term view of the general enterprise operations and basic service provided. The proprietary funds are reported using the full accrual accounting method. * Fiduciary Funds - Fiduciary funds are used to account for resources held for the benefit of parties outside the general government entities. Fiduciary funds are not reflected in the government wide financial statements because the resources are not available to support the County s own programs. K

23 THE COUNTY AS A WHOLE A comparative analysis of the Net Assets as of September 30, 2008 and 2009 are as presented below. Net Assets September 30, 2008 and 2009 ($000 omitted) Total Governmental Business-type Primary Activities Activities Government As Restated As Restated Current & other assets $ 69,737 $ 65,201 $ 39,468 $ 33,054 $109,205 $ 98,255 Capital assets $193,405 $203,676 $121,273 $121,188 $314,678 $324,864 Total Assets $263,142 $268,877 $160,741 $154,242 $423,883 $423,119 Current liabilities ($32,854) ($28,787) ($ 3,581) ($ 2,926) ($36,435) ($31,713) Other liabilities ($ 5,716) ($ 6,062) ($67,941) ($66,361) ($73,657) ($72,423) Total Liabilities ($38,570) ($34,849) ($71,522) ($69,287)($110,092)($104,136) Net assets: Invested in capital assets, Net of related debt $191,537 $202,162 $61,001 $62,623 $252,538 $264,785 Restricted $ 3,796 $ 4,098 $ 3,796 $ 4,098 Unrestricted $ 29,239 $ 27,768 $28,218 $22,332 $ 57,457 $ 50,100 Total net assets $224,572 $234,028 $89,219 $84,955 $313,791 $318,983 L

24 Changes in Net Assets For the Year Ended September 30, 2009 and 2008 ($000 omitted) Governmental Activities Increase (Decrease) As Restated Revenues Charges for Services $13,526 $14,865 ($ 1,339) Operating Grants and Contributions $ 7,173 $ 7,633 ($ 460) Capital Grants and Contributions $ 8,760 $ 201 $ 8,559 Property Taxes for General Purposes $14,417 $13,504 $ 913 Property Taxes for Specific Purposes $11,516 $10,841 $ 675 County Sales and Use Taxes $11,441 $12,796 ($ 1,355) County Lodging Taxes $ 1,578 $ 1,925 ($ 347) Grants & Contributions not restricted $ 1,215 $ 908 $ 307 Miscellaneous Taxes $ 4,923 $ 5,619 ($ 696) Interest Revenue $ 540 $ 1,581 ($ 1,041) Gain on Disposal of Capital Assets $ 1,318 $ -0- $ 1,318 Miscellaneous $ 1,549 $ 1,484 $ 65 Total Revenues $77,956 $71,357 $ 6,599 Expenditures/Expenses General Government $21,611 $22,327 ($ 716) Public Safety $29,960 $28,059 $ 1,901 Highways and Roads $13,589 $14,918 ($ 1,329) Health $ 590 $ 588 $ 2 Welfare $ 670 $ 951 ($ 281) Culture and Recreation $ 1,901 $ 1,991 ($ 90) Education $ 146 $ 125 $ 21 Interest on Long-Term Debt $ 33 $ 71 ($ 38) Total Expenditures/Expenses $68,500 $69,030 ($ 530) Increase (Decrease) in Net Assets $ 9,456 $ 2,327 $ 7,129 Net Assets, Beginning of Year $224,572 $222,245 $ 2,327 Net Assets, End of Year $234,028 $224,572 $ 9,456 M

25 Changes in Net Assets For the Year Ended September 30, 2009 and 2008 ($000 omitted) Business-type Activities Increase (Decrease) As Restated Revenues Operating Grants and Contributions $ -0- $ -0- $ -0- Interest Revenue $ 274 $ 1,257 ($ 983) Gain on Disposal of Capital Assets $ 4 $ -0- $ 4 Solid Waste Fees $ 3,409 $ 3,763 ($ 354) Water Fees $ 6,267 $ 6,848 ($ 581) Miscellaneous $ 896 $ 22 $ 874 Total Revenues $10,850 $ 11,890 ($ 1,040) Expenditures/Expenses Solid Waste $ 3,623 $ 3,569 $ 54 Water $ 11,637 $ 7,836 $ 3,801 Total Expenditures/Expenses $ 15,260 $ 11,405 $ 3,855 Excess (Deficiencies) Before Contributions ($ 4,410) $ 485 ($ 4,895) Contributions Developer Contributions $ 146 $ 2,807 ($ 2,661) Increase (Decrease) in Net Assets ($ 4,264) $ 3,292 ($ 7,556) Net Assets, Beginning of Year $89,219 $ 85,927 $ 3,292 Net Assets, End of Year $84,955 $ 89,219 ($ 4,264) N

26 Changes in Net Assets For the Year Ended September 30, 2009 and 2008 ($000 omitted) Total Primary Government Increase (Decrease) As Restated Revenues Charges for Services $13,526 $14,865 ($ 1,339) Operating Grants and Contributions $ 7,173 $ 7,633 ($ 460) Capital Grants and Contributions $ 8,760 $ 201 $ 8,559 Property Taxes for General Purposes $14,417 $13,504 $ 913 Property Taxes for Specific Purposes $11,516 $10,841 $ 675 County Sales and Use Taxes $11,441 $12,796 ($ 1,355) County Lodging Taxes $ 1,578 $ 1,925 ($ 347) Grants & Contributions not restricted $ 1,215 $ 908 $ 307 Miscellaneous Taxes $ 4,923 $ 5,619 ($ 696) Interest Revenue $ 814 $ 2,838 ($ 2,024) Gain on Disposal of Capital Assets $ 1,322 $ -0- $ 1,322 Solid Waste Fees $ 3,409 $ 3,763 ($ 354) Water Fees $ 6,267 $ 6,848 ($ 581) Miscellaneous $ 2,445 $ 1,506 $ 939 Total Revenues $88,806 $83,247 $ 5,559 Expenditures/Expenses General Government $21,611 $22,327 ($ 716) Public Safety $29,960 $28,059 $ 1,901 Highways and Roads $13,589 $14,918 ($ 1,329) Health $ 590 $ 588 $ 2 Welfare $ 670 $ 951 ($ 281) Culture and Recreation $ 1,901 $ 1,991 ($ 90) Education $ 146 $ 125 $ 21 Interest on Long-Term Debt $ 33 $ 71 ($ 38) Solid Waste $ 3,623 $ 3,569 $ 54 Water $ 11,637 $ 7,836 $ 3,801 Total Expenditures/Expenses $83,760 $80,435 $ 3,325 Excess (Deficiencies) Before Contributions $ 5,046 $ 2,812 $ 2,234 Contributions Developer Contributions $ 146 $ 2,807 ($ 2,661) Increase (Decrease) in Net Assets $ 5,192 $ 5,619 ($ 427) Net Assets, Beginning of Year $313,791 $308,172 $ 5,619 Net Assets, End of Year $318,983 $313,791 $ 5,192 O

27 THE COUNTY S FUNDS Government Funds The following information compares the revenues and expenditures for all governmental fund types for the fiscal years ended September 30, 2009 and (000 omitted) Revenues by Source $ change % change Taxes $43,876 $44,686 ($ 810) ( 1.81%) Licenses and Permits $ 739 $ 1,244 ($ 505) (40.59%) Intergovernmental $ 8,685 $ 8,742 ($ 57) ( 3.59%) Charges for Services $12,787 $13,621 ($ 834) ( 6.12%) Miscellaneous $ 2,089 $ 3,064 ($ 975) ( 3.18%) Total Revenues $68,176 $71,357 ($ 3,181) ( 4.46%) The primary components of the decrease in taxes are: (000 omitted) $ change % change Property Taxes - Real Property $ 18,937 $17,508 $ 1, % County Sales and Use Taxes $ 11,497 $12,636 ($ 1,139) (9.01%) County Lodging Tax $ 1,578 $ 1,925 ($ 347) (18.03%) Rental Tax $ 2,544 $ 2,590 ($ 46) ( 1.80%) Mortgage and Deed Tax $ 1,123 $ 1,428 ($ 305) (21.36%) Totals $ 35,679 $ 36,087 ($ 408) ( 1.13%) The primary decrease in license and permits was due to a decrease in the revenue received from the issuance of building permits. Building permits decreased $.511 million from 2008 to 2009, a decrease of 57.50%. The decrease in the intergovernmental revenue is due to several components. In 2008 Shelby received $.875 million in Mineral Severance Tax compared to only $.758 in 2009 or a decrease of $.117 million or 13.37%. In 2008 Shelby received $.524 million in funding from the Department of Revenue, Motor Vehicle License Division compared to only $.461 million in 2009, a $.063 million or 12.02% decrease. In 2008 Shelby received $.376 million in Oil & Gas Production Privilege Tax compared to $.216 million in 2009, a decrease of $.160 million or 42.55%. These decreases were offset by an increase in payment of the Oil & Gas Capital Improvement revenue sharing from the State Department of Revenue of $.322 million or 67.93%. P

28 The decrease in charges for services was primarily due to a decrease in work performed for and charged back to other government entities within the county. In 2008 Shelby received $1.623 million for such charges compared to $.632 million in 2009, a decrease of $991 million or 61.06%. The decrease in miscellaneous revenues is due to several components. Interest revenue decreased $.691 million or 65.22% from 2008 to Shelby received a $.191 million donation for County infrastructure expenditures in 2008 but $.0 donations in $2009. This decrease was partial offset by a $.125 million donation from the Community Health Foundation to aid in the support of local volunteer fire and rescue organizations. (000) omitted Expenditures by Function $ change % change General Government $18,570 $19,366 ($ 796) ( 4.11%) Public Safety $28,192 $26,766 $ 1, % Highway and Roads $11,940 $13,161 ($1,221) ( 9.28%) Health $ 560 $ 561 ($ 1) (.02%) Welfare $ 669 $ 951 ($ 282) (29.65%) Culture and Recreation $ 1,404 $ 1,489 ($ 85) ( 5.71%) Education $ 146 $ 125 $ % Capital Outlay $ 8,055 $ 6,448 $ 1, % Debt Service - Principal $ 353 $ 152 $ % - Interest and Fiscal Charges $ 33 $ 71 ($ 38) (53.52%) Total Expenditures $69,922 $69,090 $ % Overall operating expenses for General Fund departments remained comparable from 2008 to In anticipation of reduced revenues for 2009, Shelby took several cost saving steps. The decrease in general government expenditures are primarily the result of a reduction in expenses associated with equipment and capital projects. In 2008 Shelby had $.980 million in expenditures for these type of projects however in 2009 only $.439 million for a decrease of $541 million or 55.20%. Additionally, a total of 31 positions were eliminated within the various county departments. Shelby had an increase of approximately $.346 million in salary and benefit expenditures. This increase was offset by reductions in other various departmental operating expenditures. The increase in the public safety expenditures are primarily the result of increases in salary and benefit expenditures for personnel in the Sheriff s Office and Adult Jail. The Sheriff s Office had an operating expenditures increase of $.874 million or 5.67% from 2008 to The Adult Jail operating expenditures increased $.343 million or 9.62% from 2008 to Q

29 The decrease in the expenditures for highways and roads department is a result of several factors. A primary factor to the total decrease was a decrease in the general operating expenditures from $7.997 million in 2008 to $7.646 million in 2009 resulting in a net decrease of $.351 million or 4.39%. There was also a decrease in expenditures in 2009 for several road and bridge projects that began in 2008 and before. For 2009, $4.126 million was expended for these infrastructure improvements versus $4.690 million in 2008, a decrease of $.564 million or 12.03%. Historically road and bridge projects are multi-year programs that result in cyclical payments from year to year. The decrease in the welfare expenditures is a result of a decrease in the payment associated with the operating lease for the facilities occupied by local Department of Human Relations during the year. This lease was based on the payment of a Public Building Authority bond to build and lease back the building. This bond was paid off in 2008 thereby eliminating any further lease payment. Total payments were $.269 million in 2008 compared to $.0 million in 2009, a decrease of $.269 million or %. The increase in the capital outlay expenditures is a result of payments in 2009 for ongoing capital needs in the various county operating departments that were not required in This included certain expenditures reclassified in the Highway Department for road and bridge infrastructure improvements that were completed during (000 omitted) Fund Balance Revenues $68,176 $71,357 Expenditures ($69,922) ($69,090) Other Financing Sources (Uses) $ 1,461 $ 14 Net Changes in Fund Balance ($ 285) $ 2,281 Proprietary Funds The following information compares the revenues and expenses for all proprietary fund enterprise type operations for the fiscal years ended September 30, 2009 and (000 omitted) Revenues by Source $ change % change Charges for Services $ 9,675 $ 10,612 ($ 937) ( 8.83%) Intergovernmental $ -0- $ -0- $ Miscellaneous $ 17 $ 21 ($ 4) (19.05%) Equity in Joint Venture $ -0- $ -0- $ Total Revenues $ 9,692 $10,633 ($ 941) ( 8.85%) R

30 The decrease in revenues for 2009 is the result of a decrease in revenue from solid waste activities of $.355 million or 9.43% from 2008 compared to 2009 and in the sale of water of $.581 million or 8.48% from 2008 compared to Shelby began selling water from the new water plant in 2009 which began production in This decrease in revenue is attributable to the overall general slowdown in the economy. (000) omitted Operating Expenses $ change % change Operations and Maintenance $ 1,365 $ 666 $ % Personnel Services $ 3,296 $ 3,019 $ % Professional Services $ 458 $ 446 $ % Materials and Supplies $ 752 $ 953 ($ 201) (21.09%) Repairs and Maintenance $ 355 $ 547 ($ 192) (35.10%) Rentals $ 32 $ 32 $ Utilities $ 360 $ 292 $ % Depreciation $ 4,140 $ 2,856 $ 1, % Landfill Closure Costs $ 319 $ 75 $ % Purchase of Water $ 1,468 $ 1,656 ($ 188) (11.35%) Equity in Joint Venture $ 186 $ 182 $ % Total Expenditures $ 12,731 $ 10,724 $ 2, % The increase in operations and maintenance is a result of expenses for operating the new water plant during the continued start up process. There were also several ongoing projects that were required in the existing facility in 2009 that had less or no expenses required in In anticipation of higher operating expenses associated with the start up of the new water plant, funds obtained through the sale of the waste water plant were designated to be used to bridge the cash flow needs. The increase in personnel services is due to an increase in benefits costs which were a 10% increase in the health insurance premiums and a percentage increase in the retirement contribution percentage as adjusted by the administrator of the plan. The increase in professional services is due to an increase in the contract operating fee for the operation of the new south water treatment plant. The decrease in both materials and supplies and repairs and maintenance results from a decrease in chemicals and other associated costs due to a corresponding decrease in gallons of water produced and sold. The increase in depreciation expense is due to recognizing a full years worth of depreciation on the new water plant that was placed in service in FY The increase in the landfill closure costs is the result of an increase in the estimated liability for closure and post closure care costs of the landfill. The estimated total current cost of the landfill closure and post closure is based on the amount that would be paid if all expenditures to close, monitor, and maintain the landfill was acquired in S

31 The increase in s allocable share of the joint venture loss is a result of an increase in the price per thousand gallons of water purchased due to increasing operating costs at the joint venture filtration plant. (000 omitted) Fund Equity Operating Revenues $ 9,692 $10,633 Operating Expenditures ($12,731) ($10,724) Net Non Operating Revenues ($ 1,371) $ 510 Capital Contributions $ 146 $ 2,989 Net Changes in Fund Equity ($ 4,264) $ 3,407 The capital contributions represent developer contributions which are reported as revenues in accordance with Governmental Accounting Standards Board Statement 33. SIGNIFICANT CHANGES IN INDIVIDUAL FUND BALANCES Governmental Funds Total Governmental Funds is made up of three major individual component funds. The General Fund The General Fund had a net decrease of $952,144 to the fund balance. This is the primary operating fund of the County. The net decrease for 2009 is the result of net expenditures in excess of net revenues for the year. The two primary sources of revenue for the County are property taxes and sales and use taxes. For 2009 property taxes for all purposes increased $1.324 million or 6.18% over 2008 revenues. Sales and use taxes decreased $1.139 million or 9.01% over 2008 revenues. The Gasoline Tax Fund The Gasoline Tax Fund had a net increase of $206,875 to the fund balance. This is the primary operating fund for the Highway Department. All revenues in this fund are generated from the various gasoline taxes enacted through State legislation. All such funds are restricted specifically for highway department operation and highway infrastructure maintenance and improvements. The net increase is due to the use of funds transferred from the Public Buildings, Roads and Bridges Fund to operate the Department for the 2009 year. The Public Buildings, Roads and Bridges Fund The Public Buildings, Roads and Bridges Fund had a net decrease of $1,441,093 to the fund balance. These funds are to be used for specific purposes under current State laws. The majority of the projects paid for from these funds have a lengthy lead time from planning to completion. Excess receipts will accumulate in this fund until required to be paid out for these purposes. This fiscal year had an excess of funds transferred out over funds received to cover expenditures for ongoing projects. T

32 There are no restrictions, commitments or other limitations that significantly affect the availability of any Governmental Fund resources for future use. Proprietary Funds Total Proprietary Funds is made up of two individual funds. The Solid Waste Fund The Solid Waste Fund had a decrease of $50,689 in Net Assets. This fund had a net loss of $207,265 as a result of operating expenses in excess of operating revenues from charges for services. This was offset by a net income in the non-operating component of this fund of $156,576. The primary component of this income was interest revenue of $154,366. This combined to produce the decrease in Net Assets in the current fiscal period. The Water System Fund The Water System Fund had a decrease of $4,213,534 in Net Assets. This decrease involved several components. Operating expenses were in excess of operating revenues resulting in a net loss of $2,832,087 for the current fiscal year. In addition to this net operating loss the Water System had a net excess of expenses over revenues from non-operating sources of $1,527,719. This was made up of interest income of $120,025, miscellaneous income of $879,089, and gain on the disposition of capital assets of $2,136 offset by interest expense and fiscal charges of $2,528,968. The Water System had net capital contributions of $146,272 from developer contributions. There are no restrictions, commitments or other limitations that significantly affect the availability of any Proprietary Fund resources for future use. BUDGETS The County Commission has established an annual budget process whereby all of the operating groups submit an annual budget request to the Commission for department operating expenses for the coming year. The Commission reviews, adjusts as necessary and then adopts an original budget to fund the operating needs of the department. Throughout the year, the Commission and county management will compare the original adopted budget to actual results of operations. A determination is then made of what, if any, amendments need to be made to the original budget to reflect changes in funding needs. For the year, there were no significant variations between the original and final budget. Analysis of final budget amounts to the actual budget results determined that only minor variances occurred during the year which required no further analysis. Statements reflecting the original and final budgetary amounts compared to actual amounts on a budgetary basis, are shown in Exhibit 12 for the General Fund, Exhibit 13 for the Gasoline Tax Fund, and Exhibit 14 for the Public Buildings, Roads and Bridges Fund. In reconciling the differences between actual amounts on budgetary basis and actual amounts per GAAP basis, as covered in these exhibits, several amounts are adjusted to recognize differences due to year end revenue and expense recognition methods. The net effect of this reconciliation results in a net difference of $22, in the General Fund and $10, in the Public Building, Roads and Bridges Fund. U

33 SIGNIFICANT FINANCIAL FACTS, DECISIONS OR CONDITIONS There are several financial facts, decisions and/or conditions that are expected to have a significant effect on the financial position or results of operations of Shelby. Beginning in fiscal year , Shelby was mandated by the State of Alabama Department of Revenue to perform annual re-evaluations of all real and personal property within the County. In prior years, a re-evaluation was performed on a three to five year cycle. This resulted in a significant increase to property values in the year of re-evaluation, with a corresponding increase in the taxes collected thereon, followed by several years of nominal increases. In adopting a yearly reevaluation program, property values are expected to increase in a more linear progression in future years. Based on recent historical information, it is expected that the average yearly increase in property values will be approximately six percent (6%) per year. General economic conditions remain stable in Shelby however a significant source of revenue for the County General Fund is the local sales and use tax. Historically, receipts from this source of revenue have increased by an average of seven percent (7.0%) per year. From fiscal year 2007 to fiscal year 2008 sales and use tax collections remained flat year over year. In fiscal year 2009, Shelby experienced a decrease in sales and use tax collections year over year for the first time in over a decade. Sales and use tax collections decreased 9.01% from fiscal year 2008 to fiscal year Future increases or decreases will depend on the general economic condition however based on the current year, it is expected that the rate of growth for this source of revenue will remain low when compared to historical averages over the next several years. CAPITAL ASSET AND DEBT ADMINISTRATION Capital Assets At the end of fiscal year 2008, Shelby is in full compliance with all of the provisions of Governmental Accounting Standards Board Statement 34, investment in roads, bridges and other associated infrastructure. The net effect has been reported in the Statement of Net Assets and Note 5 Capital Assets of the Notes to the Financial Statements which accompany the financial statements as of September 30, During the 2008 fiscal year, construction on the new water plant and transmission lines was substantially completed. This resulted in a reclassification of $74,772, in the Business-Type Activities from the Capital Assets, Not Being Depreciated - Construction in Progress to the Capital Assets Being Depreciated designation. The net effect has been reported in the Statement of Net Assets Proprietary Funds Exhibit #7 and Note 5 Capital Assets of the Notes to the Financial Statements which accompany the financial statements as of September 30, V

34 On October 1, 2005 the Commission entered into a contract to sell the Waste Water System to Southwest Water Company for $8,500,000. The sale included the physical plant and real property along with certain personal property. Shelby removed the assets and corresponding depreciation from their records which resulted in a loss of $7,604,666. The effects of this transaction are included in the exhibits and notes to accompany the financial statements as of September 30, The primary intent for the use of the proceeds from the sale of the Waste Water System was to help fund the construction of a new water plant and bridge the cash needs during start up of operations. These proceeds are invested in interests bearing instruments and will be used to pay principle and interest on borrowed funds as needed. Debt Administration On December 1, 2004, Shelby entered into a general obligation warrant in the amount of $21,225,000 made up of principle of $20,001,941 and deferred interest of $1,223,059. These funds were borrowed through the Drinking Water State Revolving Fund (DWSRF) for the construction of the South Water Treatment Plant. The obligation number is 2004-DWSRF-BL. The obligation contains a three year interest deferral program during the construction phase of the project. The first payment on this obligation was paid on February 1, This obligation has an effective interest rate of 3.05%. On October 1, 2005, the Commission entered into a second agreement with the DWSRF to issue a general obligation warrant in the amount of $25,325,000 made up of principle of $23,002,568 and deferred interest of $2,322,432 for additional funding of construction of the South Water Treatment Plant. The obligation number is 2005-DWSRF-BL. This obligation contains a three year interest deferral program during the construction phase of the project. The first payment under this obligation was paid on August 1, This obligation has an effective interest rate of 3.44%. On November 20, 2007, the Commission entered into a third agreement with the DWSRF to issue a general obligation warrant in the amount of $16,370,000 for additional funding of construction of the South Water Treatment Plant. The obligation number is 2007-DWSRF-DL. The first payment under this obligation was paid on February 1, This obligation has an effective interest rate of 3.50%. In prior years, the Commission defeased certain warrants by placing sufficient funds in irrevocable trusts to provide for all future debt service payments on the old warrants. Accordingly, the trust account assets and liability for the defeased warrants are not included in the Commission s financial statements. CONTACTING SHELBY S FINANCIAL MANAGEMENT This financial report is designed to provide our citizens, taxpayers, customers, investors, and creditors with a general overview of the County s finances and to show the County s accountability for the money received. If you have questions about this report or need additional financial information, please contact the office of the County Manager, 200 West College Street, P. O. Box 467, Columbiana, Alabama W

35 Basic Financial Statements 1

36 Statement of Net Assets September 30, 2009 Governmental Business-Type Activities Activities Total ASSETS Current Assets Cash and Cash Equivalents $ 34,007, $ 26,049, $ 60,057, Investments 4,958, ,958, Receivables (Note 4) 2,881, ,876, ,758, Property Taxes Receivable 22,693, ,693, Interest Receivable 2, , Loans Receivable 250, , Deferred Charges - Unamortized Bond Issuance Costs 195, , Interfund Balances 18, (18,085.78) Prepaid Items 271, , , Inventories 370, , , Total Current Assets 65,200, ,663, ,864, Noncurrent Assets Investment in Joint Venture 1,046, ,046, Deferred Charges - Unamortized Bond Issuance Costs 3,343, ,343, Capital Assets (Note 5): Nondepreciable 12,260, ,437, ,697, Depreciable, Net 191,416, ,751, ,167, Total Noncurrent Assets 203,676, ,578, ,255, Total Assets 268,877, ,241, ,119, LIABILITIES Current Liabilities Payables (Note 8) 2,491, , ,912, Accrued Interest Payable 257, , Deferred Revenue 23,714, ,714, Accrued Wages Payable 1,132, , ,228, Retainage Payable 916, ,192, ,108, Long-Term Liabilities: Portion Due and Payable Within One Year: Warrants Payable 925, , Notes Payable 73, , Estimated Liability for Compensated Absences 202, , , Other Postemployment Benefits 257, , , Total Current Liabilities $ 28,787, $ 2,925, $ 31,712, The accompanying Notes to the Financial Statements are an integral part of this statement. Commission 2 Exhibit #1

37 Governmental Business-Type Activities Activities Total Noncurrent Liabilities Portion Due and Payable After One Year: Warrants Payable $ $ 61,180, $ 61,180, Notes Payable 1,441, ,441, Estimated Liability for Compensated Absences 3,838, , ,065, Estimated Liability for Landfill Closure/Postclosure Care Costs 4,889, ,889, Other Postemployment Benefits 782, , , Total Noncurrent Liabilities 6,062, ,361, ,423, Total Liabilities 34,849, ,287, ,136, NET ASSETS Invested in Capital Assets, Net of Related Debt 202,161, ,622, ,784, Restricted for: Capital Projects 2,506, ,506, Road Projects 1,384, ,384, Other Purposes 206, , Unrestricted 27,768, ,332, ,100, Total Net Assets $ 234,028, $ 84,954, $ 318,982, Commission 3 Exhibit #1

38 Statement of Activities For the Year Ended September 30, 2009 Program Revenues Charges Operating Grants Functions/Programs Expenses for Services and Contributions Primary Government Governmental Activities: General Government $ 21,611, $ 11,071, $ 325, Public Safety 29,960, ,421, ,209, Highways and Roads 13,588, , ,637, Health 590, Welfare 670, Culture and Recreation 1,900, Education 145, Interest on Long-Term Debt 32, Total Governmental Activities 68,500, ,525, ,172, Business-Type Activities: Landfill 3,623, ,408, Water 11,637, ,266, Total Business-Type Activities 15,260, ,675, Total Primary Government $ 83,760, $ 23,200, $ 7,172, General Revenues: Taxes: Property Taxes for General Purposes Property Taxes for Specific Purposes County Sales and Use Taxes County Lodging Tax Miscellaneous Taxes Interest Revenue Grants and Contributions Not Restricted to Specific Programs Gain on Disposition of Capital Assets Miscellaneous Total General Revenues Change in Net Assets Net Assets - Beginning of Year, as Restated (Note 16) Net Assets - End of Year The accompanying Notes to the Financial Statements are an integral part of this statement. Commission 4 Exhibit #2

39 Net (Expenses) Revenues and Changes in Net Assets Primary Government Capital Grants Governmental Business-Type and Contributions Activities Activities Total $ 23, $ (10,190,206.35) $ $ (10,190,206.35) 6, (26,323,297.00) (26,323,297.00) 8,730, , , (590,284.16) (590,284.16) (670,404.82) (670,404.82) (1,900,490.25) (1,900,490.25) (145,833.37) (145,833.37) (32,935.43) (32,935.43) 8,760, (39,041,687.18) (39,041,687.18) (214,700.20) (214,700.20) 146, (5,224,379.79) (5,224,379.79) 146, (5,439,079.99) (5,439,079.99) $ 8,906, (39,041,687.18) (5,439,079.99) (44,480,767.17) 14,417, ,417, ,516, ,516, ,441, ,441, ,578, ,578, ,923, ,923, , , , ,215, ,215, ,317, , ,322, ,548, , ,444, ,497, ,174, ,672, ,456, (4,264,222.57) 5,192, ,571, ,219, ,790, $ 234,028, $ 84,954, $ 318,982, Commission 5 Exhibit #2

40 Balance Sheet Governmental Funds September 30, 2009 General Fund Gasoline Tax Fund Assets Cash and Cash Equivalents $ 20,792, $ 20, Investments 3,493, Receivables (Note 4) 2,173, , Property Taxes Receivable 16,461, Due From Other Funds 689, , Prepaid Items 262, , Inventories 66, , Total Assets 43,938, , Liabilities and Fund Balances Liabilities Payables (Note 8) 2,031, , Due To Other Funds 2, Deferred Revenue 17,235, Accrued Wages Payable 961, , Retainage Payable 916, Estimated Liabilities for Compensated Absences 28, Total Liabilities 21,174, , Fund Balances Reserved for: Prepaid Items 262, , Inventories 66, , Claims Costs 615, Encumbrances 2,823, , Capital Projects Funds Unreserved, Reported in: General Fund 18,996, Special Revenue Funds (65,982.73) Total Fund Balances 22,763, , Total Liabilities and Fund Balances $ 43,938, $ 501, The accompanying Notes to the Financial Statements are an integral part of this statement. Commission 6 Exhibit #3

41 Public Buildings, Other Total Roads and Governmental Governmental Bridges Fund Funds Funds $ 1,502, $ 11,692, $ 34,007, ,464, ,958, , , ,881, ,232, ,693, , , , , , ,736, ,716, ,892, , ,491, , , ,478, ,714, , ,132, , , ,478, ,033, ,973, , , , , ,250, ,314, ,397, ,493, ,493, ,996, , ,832, ,774, ,257, ,682, ,918, $ 7,736, $ 13,716, $ 65,892, Commission 7 Exhibit #3

42 This Page Intentionally Blank

43 Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Assets September 30, 2009 Total Fund Balances - Governmental Funds (Exhibit 3) $ 36,918, Amounts reported for governmental activities in the Statement of Net Assets (Exhibit 1) are different because: Capital assets used in governmental activities are not financial resources and therefore are not reported as assets in governmental funds. 203,676, Certain liabilities are not due and payable in the current period and therefore are not reported as liabilities in the funds. These liabilities at year-end consist of: Due and Payable Within One Year Due and Payable After One Year Notes Payable $ 73, $ 1,441, Estimated Liability for Compensated Absences 173, ,838, Other Post Employment Benefits 257, , Total Long-Term Liabilities $ 504, $ 6,062, (6,566,958.30) Total Net Assets - Governmental Activities (Exhibit 1) $ 234,028, The accompanying Notes to the Financial Statements are an integral part of this statement. Commission 8 Exhibit #4

44 Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds For the Year Ended September 30, 2009 General Fund Gasoline Tax Fund Revenues Taxes $ 35,241, $ Licenses and Permits 738, Intergovernmental 1,666, ,166, Charges for Services 12,525, , Miscellaneous 515, , Total Revenues 50,687, ,201, Expenditures Current: General Government 16,988, Public Safety 27,972, Highways and Roads 302, ,572, Health 560, Welfare 544, Culture and Recreation 925, Education 145, Capital Outlay 4,169, , Debt Service: Principal Retirement Interest and Fiscal Charges Total Expenditures 51,609, ,338, Excess (Deficiency) of Revenues Over Expenditures (922,216.50) (6,136,667.22) Other Financing Sources (Uses) Transfers In 1,638, ,341, Sale of Capital Assets 9, , Transfers Out (1,678,117.87) Total Other Financing Sources (Uses) (29,927.31) 6,343, Net Change in Fund Balances (952,143.81) 206, Fund Balances - Beginning of Year, as Restated (Note 16) 23,715, , Fund Balances - End of Year $ 22,763, $ 215, The accompanying Notes to the Financial Statements are an integral part of this statement. Commission 9 Exhibit #5

45 Public Buildings, Other Total Roads and Governmental Governmental Bridges Fund Funds Funds $ 7,056, $ 1,578, $ 43,876, , ,852, ,684, , ,787, , ,521, ,088, ,085, ,200, ,175, ,581, ,569, , ,192, ,064, ,939, , , , , ,404, , ,119, ,055, , , , , ,973, ,921, ,085, (1,773,418.03) (1,746,394.36) 3,525, ,504, ,448, ,460, (8,527,000.00) (1,299,826.47) (11,504,944.34) (8,527,000.00) 3,673, ,460, (1,441,092.61) 1,900, (285,787.58) 2,698, ,781, ,204, $ 1,257, $ 12,682, $ 36,918, Commission 10 Exhibit #5

46 This Page Intentionally Blank

47 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities For the Year Ended September 30, 2009 Net Change in Fund Balances - Total Governmental Funds (Exhibit 5) $ (285,787.58) Amounts reported for governmental activities in the Statement of Activities (Exhibit 2) are different because: Governmental funds report capital outlays as expenditures. However, in the Statement of Activities, the cost of those assets is allocated over their estimated useful lives as depreciation expense. This is the amount by which capital outlays exceeded depreciation in the current period. Capital Outlay Expenditures $ 8,055, Depreciation Expense 6,104, ,950, In the Statement of Activities, only the loss on the sale of capital assets is reported, whereas, in the governmental funds, the proceeds from the sale increases financial resources. The changes in net assets differs from the change in fund balance by the cost of capital assets sold: Proceeds From Sale of Capital Assets $ (1,460,606.78) Gain on Sale of Capital Assets 1,317, (142,716.54) In the Statement of Activities, donations of capital assets are recorded as revenue, where as in the governmental funds it is not recorded since they do not provide current financial resources. 8,463, Repayment of debt principal is an expenditure in the governmental funds, but it reduces long-term liabilities in the Statement of Net Assets and does not affect the Statement of Activities. Repayment of Principal 353, 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. Net Decrease in Estimated Liability for Compensated Absences $ 158, Increase in Estimated Liability for Other Post Employment Benefits (1,040,188.55) (882,019.01) Change in Net Assets of Governmental Activities (Exhibit 2) $ 9,456, The accompanying Notes to the Financial Statements are an integral part of this statement. Commission 11 Exhibit #6

48 Statement of Net Assets Proprietary Funds September 30, 2009 Enterprise Funds Total Solid Waste Water System Enterprise Fund Fund Funds Assets Current Assets Cash and Cash Equivalents $ 17,833, $ 8,216, $ 26,049, Receivables (Note 4) 479, ,397, ,876, Interest Receivable 1, , Loans Receivable 250, , Prepaid Items 6, , , Deferred Charges-Unamortized Warrant Issuance Costs 195, , Inventories 280, , Total Current Assets 18,320, ,361, ,681, Noncurrent Assets Investment in Joint Venture 1,046, ,046, Deferred Charges-Unamortized Warrant Issuance Costs 3,343, ,343, Capital Assets (Note 5): Nondepreciable 2,771, ,665, ,437, Depreciable, Net 2,076, ,674, ,751, Total Noncurrent Assets 4,847, ,730, ,578, Total Assets 23,168, ,091, ,260, Liabilities Current Liabilities Payables (Note 8) 104, , , Due to Other Funds 14, , , Accrued Wages Payable 45, , , Accrued Interest Payable 257, , Retainage Payable 1,192, ,192, Warrants Payable 925, , Other Post Employment Benefits 10, , , Estimated Liability for Compensated Absences 7, , , Total Current Liabilities $ 182, $ 2,761, $ 2,943, The accompanying Notes to the Financial Statements are an integral part of this statement. Commission 12 Exhibit #7

49 Enterprise Funds Total Solid Waste Water System Enterprise Fund Fund Funds Noncurrent Liabilities Other Post Employment Benefits $ 30, $ 33, $ 64, Warrants Payable 61,180, ,180, Estimated Liability for Compensated Absences 134, , , Estimated Liability for Landfill Closure/ Postclosure Care Costs 4,889, ,889, Total Noncurrent Liabilities 5,054, ,306, ,361, Total Liabilities 5,237, ,067, ,305, Net Assets Invested in Capital Assets, Net of Related Debt 4,847, ,774, ,622, Unrestricted 13,083, ,249, ,332, Total Net Assets $ 17,931, $ 67,023, $ 84,954, Commission 13 Exhibit #7

50 This Page Intentionally Blank

51 Statement of Revenues, Expenses and Changes in Net Assets Proprietary Funds For the Year Ended September 30, 2009 Enterprise Funds Total Solid Waste Water System Enterprise Fund Fund Funds Operating Revenues Charges for Services $ 3,408, $ 6,266, $ 9,675, Miscellaneous 7, , , Total Operating Revenues 3,415, ,276, ,692, Operating Expenses Operations and Maintenance 1,365, ,365, Personnel Services 1,665, ,630, ,295, Professional Services 159, , , Materials and Supplies 534, , , Repairs and Maintenance 248, , , Rentals 5, , , Utilities 23, , , Depreciation 667, ,472, ,139, Landfill Closure Costs 318, , Purchase of Water 1,468, ,468, Equity Interest in Joint Venture 186, , Total Operating Expenses 3,623, ,108, ,731, Operating Income (Loss) (207,264.55) (2,832,087.13) (3,039,351.68) Nonoperating Revenues (Expenses) Interest Revenue 154, , , Interest and Fiscal Charges (2,528,967.66) (2,528,967.66) Miscellaneous 879, , Gain on Disposition of Capital Assets 2, , , Total Nonoperating Revenues (Expenses) 156, (1,527,718.51) (1,371,142.89) Income (Loss) Before Contributions (50,688.93) (4,359,805.64) (4,410,494.57) Capital Contributions Capital Contributions 146, , Changes in Net Assets (50,688.93) (4,213,533.64) (4,264,222.57) Total Net Assets - Beginning of Year, as Restated (Note 16) 17,981, ,237, ,219, Total Net Assets - End of Year $ 17,931, $ 67,023, $ 84,954, The accompanying Notes to the Financial Statements are an integral part of this statement. Commission 14 Exhibit #8

52 Statement of Cash Flows Proprietary Funds For the Year Ended September 30, 2009 Enterprise Funds Total Solid Waste Water System Enterprise Fund Fund Funds Cash Flows from Operating Activities Cash Received for Services $ 3,447, $ 6,348, $ 9,796, Other Operating Revenues 7, , , Cash Payments to Employees (1,603,659.84) (1,580,144.44) (3,183,804.28) Cash Payments for Goods and Services (889,561.73) (4,378,750.74) (5,268,312.47) Net Cash Provided (Used) by Operating Activities 962, , ,361, Cash Flows from Noncapital Financing Activities Loan to Talladega-Shelby Joint Water Venture (250,000.00) (250,000.00) Cash Received (Paid) From Other Funds 13, (48,180.58) (34,988.04) Net Cash Provided (Used) by Noncapital Financing Activities 13, (298,180.58) (284,988.04) Cash Flows from Capital and Related Financing Activities Acquisition of Capital Assets (115,000.00) (3,585,723.32) (3,700,723.32) Proceeds From Sale of Capital Assets 2, , , Interest Paid (2,271,008.03) (2,271,008.03) Principal Payments on Warrants (1,915,000.00) (1,915,000.00) Retainage Payments Remitted (622,277.45) (622,277.45) Net Cash Provided (Used) by Capital and Related Financing Activities (112,790.10) (8,390,972.97) (8,503,763.07) Cash Flows from Investing Activities Interest Received 152, , , Net Cash Flows Provided by Investing Activities 152, , , Net Increase (Decrease) in Cash 1,015, (8,170,365.98) (7,155,232.44) Cash and Cash Equivalents - Beginning of Year 17,019, ,185, ,204, Restatement (200,931.25) 200, Cash and Cash Equivalents - Beginning of Year, as Restated 16,818, ,386, ,204, Cash and Cash Equivalents - End of Year $ 17,833, $ 8,216, $ 26,049, The accompanying Notes to the Financial Statements are an integral part of this statement. Commission 15 Exhibit #9

53 Enterprise Funds Total Solid Waste Water System Enterprise Fund Fund Funds Reconciliation of Operating Income to Net Cash Provided by Operating Activities Operating Income/(Loss) $ (207,264.55) $ (2,832,087.13) $ (3,039,351.68) Adjustments to Reconcile Operating Income to Net Cash Provided by Operating Activities (Gain)/Loss in Equity Investment in Joint Venture 186, , Depreciation and Amortization 667, ,472, ,139, (Increase)/Decrease in Prepaid Expenses 6, , , (Increase)/Decrease in Accounts Receivable 39, , , (Increase)/Decrease in Inventories (93,983.94) (93,983.94) Increase/(Decrease) in Accounts Payable 75, (469,846.28) (394,607.45) Increase/(Decrease) in Accrued Wages and Benefits Payable 3, , , Increase/(Decrease) in Estimated Liability for Compensated Absences 16, , , Increase/(Decrease) in Estimated Liability for Other Post Employment Benefits 41, , , Increase/(Decrease) in Estimated Liability for Landfill Closure/Postclosure Care Costs 318, , Total Adjustments 1,169, ,231, ,400, Net Cash Provided by Operating Activities $ 962, $ 399, $ 1,361, Noncash Capital Financing Activities: Capital assets of $146, were acquired through contributions from developers. Commission 16 Exhibit #9

54 Statement of Fiduciary Net Assets September 30, 2009 Private-Purpose Trust Funds Agency Funds Assets Cash and Cash Equivalents $ 12,806, $ 623, Receivables (Note 4) 4, Total Assets 12,811, , Liabilities Payables (Note 8) 159, , Due to Individuals 2,740, Employee Benefits Payable 482, Total Liabilities 2,899, $ 623, Net Assets Held in Trust for Individuals, Organizations and Other Governments 9,911, Total Net Assets $ 9,911, The accompanying Notes to the Financial Statements are an integral part of this statement. Commission 17 Exhibit #10

55 Statement of Changes in Fiduciary Net Assets For the Year Ended September 30, 2009 Private-Purpose Trust Funds Additions Excess from Land Sales $ 10,275, Worthless Check Collection Service Charge 156, District Attorney's Fees 51, Receipts for Beneficiaries 1,986, Interest 165, Total Additions 12,635, Deductions Land Redemption 8,604, District Attorney 234, Disbursements to Beneficiaries 2,072, Disbursed to County General Fund 12, Total Deductions 10,924, Changes in Net Assets 1,710, Net Assets Held in Trust for Individuals, Organizations and Other Governments Net Assets - Beginning of Year, as Restated (Note 16) 8,200, Net Assets - End of Year $ 9,911, The accompanying Notes to the Financial Statements are an integral part of this statement. Commission 18 Exhibit #11

56 Notes to the Financial Statements For the Year Ended September 30, 2009 Note 1 Summary of Significant Accounting Policies The financial statements of the Commission (the Commission ) have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP) as applied to governmental units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. The more significant of the government's accounting policies are described below. A. Reporting Entity The Commission is a general purpose local government governed by separately elected commissioners. Generally accepted accounting principles (GAAP) require that the financial statements present the Commission (the primary government) and its component units. Component units are legally separate entities for which a primary government is financially accountable or other organizations for which the nature and significance of their relationship with the primary government are such that exclusion would cause the reporting entity s financial statements to be misleading or incomplete. B. Government-Wide and Fund Financial Statements Government-Wide Financial Statements The statement of net assets and the statement of activities display information about the Commission. These statements include the financial activities of the primary government, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. These statements distinguish between the governmental and business-type activities of the Commission. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions. Business-type activities are financed in whole or in part by fees charged to external parties. The statement of activities presents a comparison between direct expenses and program revenues for each segment of the business-type activities of the Commission and for each function of the Commission s governmental activities. Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. The Commission does not allocate indirect expenses to the various functions. Program revenues include (a) charges to customers or applicants who purchase, use or directly benefit from goods, services, or privileges provided by a given function or program and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues. Commission 19

57 Fund Financial Statements Notes to the Financial Statements For the Year Ended September 30, 2009 The fund financial statements provide information about the Commission s funds, including fiduciary funds. Separate statements for each fund category governmental, proprietary, and fiduciary are presented. The emphasis of fund financial statements is on major governmental and enterprise funds, each displayed in a separate column. All remaining governmental and enterprise funds are aggregated and reported as nonmajor funds in the other governmental funds and other enterprise fund s columns. The Commission reports the following major governmental funds: General Fund The general fund is the primary operating fund of the Commission. It is used to account for all financial resources except those required to be accounted for in another fund. The Commission primarily received revenues from collections of property taxes and revenues collected by the State of Alabama and shared with the Commission. Also, accounted for in the general fund are workers' compensation benefits and employee health insurance to self-insure the Commission against liability claims. Gasoline Tax Fund This fund is used to account for the expenditure of the seven-cent State gasoline tax revenue for the construction, improvement, maintenance and supervision of highways, bridges, and streets. Public Buildings, Roads and Bridges Fund This fund is used to account for the expenditures of special county property taxes for building and maintaining public buildings, roads and bridges. The Commission reports the following major enterprise funds: Solid Waste Fund This fund is used to account for cost of providing landfill disposal services to customers. Water System Fund This fund is used to account for cost of providing water waste service to county residents. Commission 20

58 Notes to the Financial Statements For the Year Ended September 30, 2009 The Commission reports the following fund types in the Other Governmental Funds column: Governmental Fund Types Special Revenue Funds These funds are used to account for the proceeds of specific revenue sources (other than those derived from special assessments or dedicated for major capital projects) requiring separate accounting because of legal or regulatory provisions or administrative action. Capital Projects Funds These funds are used to account for financial resources to be used for the acquisition or construction of major capital facilities (other than those financed by proprietary funds). The Commission reports the following fiduciary fund types: Fiduciary Fund Types Private-Purpose Trust Funds These funds are used to report all trust agreements under which principal and income benefit individuals, private organizations, or other governments. Agency Funds These funds are used to report assets held by the Commission in a purely custodial capacity. The County collects these assets and transfers them to the proper individual, private organizations, or other government. C. Measurement Focus, Basis of Accounting and Financial Statement Presentation The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund and fiduciary fund financial statements. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of the timing of related cash flows. Nonexchange transactions, in which the Commission gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, grants, entitlements, and donations. On an accrual basis, revenue from grants, entitlements, and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied. Revenue from property taxes is recognized in the fiscal year for which the taxes are levied. As a general rule the effect of interfund activity has been eliminated from the government-wide financial statements. Exceptions to the general rule are charges between the government s solid waste function and various other functions of the government. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. Commission 21

59 Notes to the Financial Statements For the Year Ended September 30, 2009 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 Commission considers revenues to be available if they are collected within sixty (60) days of the end of the current fiscal year. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt, claims and judgments, compensated absences, and landfill closure and postclosure care costs, which are recognized as expenditures to the extent they have matured. General capital asset acquisitions are reported as expenditures in governmental funds. General long-term debt issued and acquisitions under capital leases are reported as other financing sources. Proprietary funds distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund s principal ongoing operations. The principal operating revenues of the Commission s enterprise funds are charges to customers for sales and services. Operating expenses for enterprise funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. Under the terms of grant agreements, the Commission 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 Commission s policy to first apply costreimbursement grant resources to such programs, followed by general revenues. Private-sector standards of accounting and financial reporting issued prior to December 1, 1989, generally are followed in both the government-wide and proprietary fund financial statements to the extent that those standards do not conflict with or contradict guidance of the Governmental Accounting Standards Board. Governments also have the option of following subsequent private-sector guidance for their business-type activities and enterprise funds, subject to this same limitation. The Commission has not elected to follow subsequent private-sector guidance. D. Assets, Liabilities, and Net Assets/Fund Balances 1. Deposits and Investments Cash and cash equivalents include cash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition. 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. Commission 22

60 Notes to the Financial Statements For the Year Ended September 30, 2009 State statutes authorize the County Commission to invest in obligations of the U. S. Treasury and securities of federal agencies and certificates of deposit. Investments are reported at fair value. 2. Receivables Sales tax receivables are based on the amounts collected within 60 days after year-end. Sales, rental, tobacco, and lodging tax receivables consist of taxes that have been paid by consumers in September. This tax is normally remitted to the Commission within the next 60 days. Millage rates for property taxes are levied at the first regular meeting of the Commission in February of each year. Property taxes are assessed for property as of October 1 of the preceding year based on the millage rates established by the County Commission. Property taxes are due and payable the following October 1 and are delinquent after December 31. Amounts receivable, net of estimated refunds and estimated uncollectible amounts, are recorded for the property taxes levied in the current year. However, since the amounts are not available to fund current year operations, the revenue is deferred and recognized in the subsequent fiscal year when the taxes are both due and collectible and available to fund operations. Receivables due from other governments include amounts due from grantors for grants issued for specific programs and capital projects. Accounts receivables in the proprietary funds are amounts due from customers for services, such as water and landfill, provided by the County. Receivables from external parties are amounts that are being held in a trustee or agency capacity by the fiduciary funds. 3. Inventories Inventories are valued at cost, which approximates market, using the first-in/first-out (FIFO) method. Inventories of governmental funds are recorded as expenditures when consumed rather than when purchased. 4. Prepaid Items Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government-wide and fund financial statements. Commission 23

61 Notes to the Financial Statements For the Year Ended September 30, Capital Assets Capital assets, which include property, equipment, and infrastructure assets (e.g., roads, bridges, water and sewer systems, and similar items), are reported in the applicable governmental and business-type activities columns in the government-wide financial statements. Such assets are valued at cost where historical records are available and at an estimated historical cost where no historical records exist. Donated fixed assets are valued at their estimated fair market value on the date received. Additions, improvements and other capital outlays that significantly extend the useful life of an asset are capitalized. Other costs incurred for repairs and maintenance are expensed as incurred. Major outlays of capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase of capital assets of business-type activities is included as part of the capitalized value of the assets constructed. Depreciation on all assets is provided on the straight-line basis over the assets estimated useful life. Capitalization thresholds (the dollar values above which asset acquisitions are added to the capital asset accounts) and estimated useful lives of capital assets reported in the government-wide statements and proprietary funds are as follows: Capitalization Threshold Estimated Useful Life Governmental Activities: Infrastructure Roads $250, years Infrastructure Bridges $ 50, years Infrastructure Airports $ 50, years Land Improvements Exhaustible $ 50, years Buildings and Improvements $ 50, years Equipment and Furniture $ 5, years Business-Type Activities: Buildings $ 50, years Equipment and Furniture $ 5, years Lines $ 5, years Boosters and Regulators $ 5, years Tanks $ 5, years Pump Stations $ 5, years Plant and Equipment $ 5, years Motor Vehicles and Heavy Equipment $ 5, years Landfill Cells $ 5,000 8 years Commission 24

62 Notes to the Financial Statements For the Year Ended September 30, 2009 The majority of governmental activities infrastructure assets are roads and bridges. The Association of County Engineers has determined that due to the climate and materials used in road construction, the base of the roads in the county will not deteriorate and therefore should not be depreciated. The remaining part of the roads, the surface, will deteriorate and will be depreciated. The entire costs of bridges in the county will be depreciated. 6. Long-Term Obligations In the government-wide financial statements, and proprietary fund types in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund type statement of net assets. Bond/Warrant premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds. Bonds/Warrants payable are reported net of the applicable bond/warrant premium or discount. Bond/Warrant issuance costs are reported as deferred charges and amortized over the term of the related debt. 7. Compensated Absences The Commission has a standard leave policy for its full-time employees as to sick and annual leave. Annual Leave Eligible employees earn annual leave at a rate between one and two days per month depending on years of completed service, and sick leave at a rate of one day per month. Upon separation from county service, employees may be paid for up to thirty days of annual leave. Employees can accumulate one hundred fifty days of sick leave. Upon separation from county service due to retirement, employees may also be paid for one-half of their accumulated sick leave up to a maximum of seventy-five days. Compensatory Leave Compensatory leave is provided to permanent full-time employees in accordance with the Fair Labor Standards Act. Employees may accumulate up to eighty hours maximum. Upon separation, employees may be paid for accumulated compensatory time. Compensatory leave is calculated at one and one half times the regular hours. The Commission uses the termination method to accrue its sick leave liability. Under this method an accrual for earned sick leave is made only to the extent it is probable that the benefits will result in termination payments, rather than be taken as absences due to illness or other contingencies, such as medical appointments and funerals. Commission 25

63 8. Net Assets/Fund Equity Notes to the Financial Statements For the Year Ended September 30, 2009 Net assets are reported on the government-wide and proprietary fund financial statements and are required to be classified for accounting and reporting purposes into the following net asset categories: Invested in Capital Assets, Net of Related Debt Capital assets, net of accumulated depreciation and outstanding principal balances of debt attributable to the acquisition, construction or improvement of those assets. Any significant unspent related debt proceeds at year-end related to capital assets are not included in this calculation. Restricted Constraints imposed on net assets by external creditors, grantors, contributors, laws or regulations of other governments, or law through constitutional provision or enabling legislation. Unrestricted Net assets that are not subject to externally imposed stipulations. Unrestricted net assets may be designated for specific purposes by action of the Commission. Fund equity is reported in the fund financial statements. Governmental funds 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. Note 2 Stewardship, Compliance, and Accountability A. Budgets Budgets are adopted on a basis of accounting consistent with accounting principles generally accepted in the United States of America (GAAP) for the General Fund with the exception of ad valorem taxes, which are budgeted only to the extent expected to be received rather than on the modified accrual basis of accounting. The Public Buildings, Roads and Bridges Fund budgets on a basis of accounting consistent with GAAP with the exception of ad valorem taxes that are budgeted only to the extent expected to be received rather than on the modified accrual basis of accounting. Capital projects funds adopt project-length budgets. All appropriations lapse at fiscal year-end. The present statutory basis for county budgeting operations is the County Financial Control Act of 1935, as amended by Act Number , Acts of Alabama. According to the terms of the law, at some meeting in September of each year, but in any event not later than October 1, the Commission must estimate the anticipated revenues, estimated expenditures and appropriations for the respective amounts that are to be used for each of such purposes. The appropriations must not exceed the total revenues available for appropriation plus any balances on hand. Expenditures may not legally exceed appropriations. Commission 26

64 Notes to the Financial Statements For the Year Ended September 30, 2009 Encumbrances (e.g., purchase orders, contracts) outstanding at year-end are reported as reservations of fund balances and do not constitute expenditures or liabilities because the commitments will be reappropriated and honored during the subsequent year. Budgets may be adjusted during the fiscal year when approved by the County Commission. Any changes must be within the revenues and reserves estimated to be available. B. Deficit Fund Balances/Net Assets of Individual Funds As of September 30, 2009, the Index Fee Fund had a deficit fund balance of $668, The deficit occurred due to the purchase of a software system for the Office of Judge of Probate. Note 3 Deposits and Investments A. Deposits The custodial credit risk for deposits is the risk that, in the event of a bank failure, the Commission will not be able to cover deposits or will not be able to recover collateral securities that are in the possession of an outside party. The Commission's deposits at year-end were entirely covered by federal depository insurance or by the Security for Alabama Funds Enhancement Program (SAFE Program). The SAFE Program was established by the Alabama Legislature and is governed by the provisions contained in the Code of Alabama 1975, Sections 41-14A-1 through 41-14A-14. Under the SAFE Program all public funds are protected through a collateral pool administered by the Alabama State Treasurer s Office. Under this program, financial institutions holding deposits of public funds must pledge securities as collateral against those deposits. In the event of failure of a financial institution, securities pledged by that financial institution would be liquidated by the State Treasurer to replace the public deposits not covered by the Federal Depository Insurance Corporation (FDIC). If the securities pledged fail to produce adequate funds, every institution participating in the pool would share the liability for the remaining balance. Some of the Commission's investments, totaling $916,089.48, were in certificates of deposit. These certificates of deposit are classified as Deposits in order to determine insurance and collateralization. However, they are classified as Investments on the financial statements. Commission 27

65 Notes to the Financial Statements For the Year Ended September 30, 2009 B. Investments The Code of Alabama 1975, Section and Section , authorized the Commission to invest in obligations of the U. S. Treasury and federal agency securities along with certain pre-refunded public obligation such as bonds or other obligations of any state of the United States of America or any agency, instrumentality or local governmental unit of any such state. Investment Type Maturities Greater Than 10 Years Total Investments Government National Mortgage Association Securities $4,041, $4,041, Total Investments $4,041, $4,041, Interest Rate Risk Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. The Commission does not have a formal investment policy that limits investment maturities as a means of managing its exposure to fair value losses arising from increased interest rates. Credit Risk State law requires that pre-refunded public obligations, such as any bonds or other obligations of any state of the United States of America or of any agency instrumentality or local governmental unit of any such state that the Commission invests in be rated in the highest rating category of Standard & Poor s Corporation and Moody s Investors Service, Inc. The Commission s investment policy specifies that investments can be in certificates of deposits and obligations of the Department of the Treasury of the United States of America, i.e. Treasury bills or Treasury notes. Custodial Credit Risk For an investment, this is the risk that, in the event of the failure of the counterparty, the government will not be able to cover the value of its investments or collateral securities that are in the possession of an outside party. The Commission s investment policy does not limit the amount of securities that can be held by counterparties. Concentrations of Credit Risk Concentration of credit risk is the risk of loss attributed to the magnitude of a government s investment in a single issuer. The Commission s investment policy does not address concentrations of credit risk. Commission 28

66 Notes to the Financial Statements For the Year Ended September 30, 2009 Note 4 Receivables On September 30, 2009, receivables for the Commission s individual major funds, other governmental and fiduciary funds in the aggregate are as follows: General Fund Gasoline Tax Fund Public Buildings, Roads and Bridges Fund Other Governmental Funds Total Governmental Funds Fiduciary Funds Receivables: Accounts $ 361, $ 5, $ $ 23, $ 390, $ Intergovernmental 556, , , , ,102, , Taxes 1,255, , ,388, Total Receivables $2,173, $191, $1, $515, $2,881, $4, On September 30, 2009, receivables for the Commission s proprietary funds were as follows: Solid Waste Fund Water System Fund Total Proprietary Funds Receivables: Accounts $479, $ 518, $ 997, Intergovernmental 879, , Total Receivables $479, $1,397, $1,876, Governmental funds report deferred revenues in connection with receivables for revenues that are not considered to be available to liquidate liabilities of the current period. Governmental funds also defer revenue recognition in connection with resources that have been received, but not yet earned. At September 30, 2009, the various components of deferred revenue and unearned revenue reported in the governmental funds were as follows: Unavailable Unearned Ad Valorem Taxes Receivable $22,360, $ Motor Vehicle Ad Valorem Taxes 1,013, Reappraisal Maintenance Revenues 192, Other Miscellaneous Revenues 147, Total Deferred/Unearned Revenue for Governmental Funds $22,360, $1,353, Commission 29

67 Note 5 Capital Assets Notes to the Financial Statements For the Year Ended September 30, 2009 Capital asset activity for the year ended September 30, 2009, was as follows: Balance 10/01/2008, as Restated (*) Additions/ Reclassifications (**) Retirements/ Reclassifications (**) Balance 09/30/2009 Governmental Activities: Capital Assets, not Being Depreciated: Land and Improvements - Inexhaustible $ 9,864, $ 338, $ (138,213.40) $ 10,064, Construction in Progress 1,183, , (838,759.22) 421, Infrastructure in Progress - Roads 2,912, , (3,078,505.04) 424, Infrastructure in Progress - Bridges 241, ,108, ,349, Total Capital Assets, not Being Depreciated 14,202, ,113, (4,055,477.66) 12,260, Capital Assets Being Depreciated: Infrastructure - Roads 110,774, ,492, ,266, Infrastructure - Bridges 17,881, , ,924, Infrastructure - Airport 6,077, ,077, Land Improvements - Exhaustible 8,637, , ,283, Buildings and Improvements 50,161, ,121, ,283, Equipment and Furniture 27,975, ,018, (701,153.88) 31,293, Total Capital Assets Being Depreciated 221,508, ,322, (701,153.88) 239,129, Less Accumulated Depreciation for: Infrastructure - Roads (4,506,923.99) (344,942.90) (4,851,866.89) Infrastructure - Bridges (3,620,900.44) (427,350.84) (4,048,251.28) Infrastructure - Airport (1,277,610.47) (303,891.75) (1,581,502.22) Land Improvements - Exhaustible (1,889,148.39) (431,887.38) (2,321,035.77) Buildings and Improvements (11,103,875.77) (1,228,635.81) (12,332,511.58) Equipment and Furniture (19,906,800.66) (3,368,182.16) 696, (22,578,332.08) Total Accumulated Depreciation (42,305,259.72) (6,104,890.84) 696, (47,713,499.82) Total Capital Assets Being Depreciated, Net 179,203, ,217, (4,503.14) 191,416, Governmental Activities Capital Assets, Net $193,405, $14,330, $(4,059,980.80) $203,676, (*) Beginning Balance Restated by ($46,682.20) to correct prior year errors. (**) Included in the Additions/Reclassifications and the Retirements/Reclassifications column are $3,917, in reclassifications. Commission 30

68 Notes to the Financial Statements For the Year Ended September 30, 2009 Balance Additions/ Retirements/ Balance 10/01/2008 Reclassifications Reclassifications 09/30/2009 Business-Type Activities: Capital Assets, Not Being Depreciated: Land $ 3,177, $ $ $ 3,177, Construction in Progress 3,819, ,440, ,259, Total Capital Assets, Not Being Depreciated 6,996, ,440, ,437, Capital Assets Being Depreciated: Buildings 941, , Equipment and Furniture 6,444, , (56,189.50) 6,490, Lines 64,134, , ,646, Boosters and Regulators 1,926, ,926, Tanks 5,282, ,282, Plant and Equipment 50,582, ,028, ,610, Landfill Cell 3,522, ,522, Total Capital Assets Being Depreciated 132,835, ,642, (56,189.50) 134,421, Less Accumulated Depreciation for: Buildings (118,306.12) (44,626.99) (162,933.11) Equipment and Furniture (4,367,138.17) (607,488.93) 55, (4,919,337.60) Lines (7,288,217.96) (2,122,622.55) (9,410,840.51) Boosters and Regulators (584,503.95) (77,075.04) (661,578.99) Tanks (762,301.72) (123,125.71) (885,427.43) Plant and Equipment (2,284,565.48) (1,007,619.03) (3,292,184.51) Landfill Cell (3,153,476.80) (184,470.13) (3,337,946.93) Total Accumulated Depreciation (18,558,510.20) (4,167,028.38) 55, (22,670,249.08) Total Capital Assets Being Depreciated, Net 114,276, (2,524,853.80) (900.00) 111,751, Total Business-Type Activities Capital Assets, Net $121,273, $ (84,045.78) $ (900.00) $121,188, Depreciation expense was charged to functions/programs of the primary government as follows: Current Year Depreciation Expense Governmental Activities: General Government $2,651, Public Safety 1,431, Highways and Roads 1,498, Health 27, Welfare Culture and Recreation 496, Total Depreciation Expense - Governmental Activities $6,104, Current Year Depreciation Expense Business-Type Activities: Solid Waste $ 667, Water 3,472, Total Depreciation Expense - Business-Type Activities $4,139, Commission 31

69 Note 6 Defined Benefit Pension Plan A. Plan Description Notes to the Financial Statements For the Year Ended September 30, 2009 The Commission contributes to the Employees Retirement System of Alabama, an agent multiple-employer public employee retirement system that acts as a common investment and administrative agent for the various state agencies and departments. Substantially all employees of the Commission are members of the Employees Retirement System of Alabama. Membership is mandatory for covered or eligible employees of the Commission. Benefits vest after 10 years of creditable service. Vested employees may retire with full benefits at age 60 or after 25 years of service. Retirement benefits are calculated by two methods with the retiree receiving payment under the method which yields the highest monthly benefit. The methods are (1) Minimum Guaranteed, and (2) Formula, of which the Formula method usually produces the highest monthly benefit. Under this method retirees are allowed % of their average final salary (best three of the last ten years) for each year of service. Disability retirement benefits are calculated in the same manner. Pre-retirement death benefits in the amount of the annual salary for the fiscal year preceding death is provided to plan members. The Employees Retirement System was established as of October 1, 1945, under the provisions of Act Number 515, Acts of Alabama 1945, for the purpose of providing retirement allowances and other specified benefits for State employees, State police, and on an elective basis to all cities, counties, towns and quasi-public organizations. The responsibility for general administration and operation of the Employees Retirement System is vested in the Board of Control. Benefit provisions are established by the Code of Alabama 1975, Sections through , as amended, Sections through , as amended, and Sections 36-27B-1 through 36-27B-6. Authority to amend the plan rests with the Legislature of Alabama. However, the Legislature has granted the Commission authority to accept or reject various Cost-Of-Living-Adjustments (COLAs) granted to retirees. The Retirement Systems of Alabama issues a publicly available financial report that includes financial statements and required supplementary information for the Employees Retirement System of Alabama. That report may be obtained by writing to The Retirement Systems of Alabama, 135 South Union Street, Montgomery, Alabama Commission 32

70 Notes to the Financial Statements For the Year Ended September 30, 2009 B. Funding Policy Employees of the Commission, with the exception of full-time law enforcement officers, are required by statute to contribute 5 percent of their salary to the Employees Retirement System. As of January 1, 2001, full-time law enforcement officers are required by statute to contribute 6 percent of their salary to the Employees Retirement System. The Commission is required to contribute the remaining amounts necessary to fund the actuarially determined contributions to ensure sufficient assets will be available to pay benefits when due. The contribution requirements of the Commission are established by the Employees Retirement System based on annual actuarial valuations. The employer's contribution rate for the year ended September 30, 2009 was 8.84 percent based on the actuarial valuation performed as of September 30, 2006 and amended on September 8, C. Annual Pension Cost For the year ended September 30, 2009, the Commission s annual pension cost of $2,674, was equal to the Commission s required and actual contribution. The required contribution was determined using the entry age normal method. The actuarial assumptions as of September 30, 2008, the latest actuarial valuation date, were: (a) 8 percent investment rate of return on present and future assets, and (b) projected salary increases ranging from 7.75 percent at age 20 to 4.61 percent at age 65. Both (a) and (b) include an inflation component of 4.5 percent. The actuarial value of assets was determined using techniques that smooth the effects of short-term volatility in the market value of investments over a five-year period. The unfunded actuarial accrued liability is being amortized as a level percentage of projected payroll on an open basis. The remaining amortization period as of September 30, 2008 was 18 years. The following is three-year trend information for the Commission: Fiscal Year Ended Annual Pension Cost (APC) Percentage of APC Contributed Net Pension Obligated 9/30/2009 $2,674, % $0 9/30/2008 $2,535, % $0 9/30/2007 $2,253, % $0 Commission 33

71 D. Funded Status and Funding Progress Notes to the Financial Statements For the Year Ended September 30, 2009 As of September 30, 2008, the most recent actuarial valuation date, the plan was 73.7 percent funded. The actuarial accrued liability for benefits was $68,662,525 and the actuarial value of assets was $50,586,610, resulting in an unfunded actuarial accrued liability (UAAL) of $18,075,915. The covered payroll (annual payroll of active employees covered by the plan) was $29,574,536, and the ratio of the UAAL to the covered payroll was 61.1 percent. The Schedule of Funding Progress, presented as RSI following the notes to the financial statements, presents multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liability for benefits. Note 7 Other Postemployment Benefits (OPEB) A. Plan Description contributes to a self-insured medical plan. The plan provides medical insurance benefits to eligible retirees and their spouses. The Code of Alabama 1975, Sections through , gives authority to the County to establish and amend benefit provisions. The plan does not issue a stand-alone financial report. The provisions of GASB Statement Number 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other than Pensions, were implemented prospectively. B. Funding Policy The County s contributions were on a pay-as-you-go basis as of September 30, The County does not anticipate at this time setting up a trust fund to fund its postemployment medical plans. The County contributes 100% of the cost of current-year premiums for eligible retirees medical insurance premiums for single coverage only (dependents are not included). For the fiscal year ending September 30, 2009, the County contributed $308,479 to cover approximately 40 participants. Plan members receiving benefits contribute 0% for single coverage costs. Commission 34

72 C. Annual OPEB Cost Notes to the Financial Statements For the Year Ended September 30, 2009 For the fiscal year ending September 30, 2009, the County s annual other postemployment benefit (OPEB) cost (expense) for medical insurance was $1,433,773. The County s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for fiscal year ending September 30, 2009, is as follows: Fiscal Year Ended Annual OPEB Cost Percentage of Annual OPEB Cost Contributed Net OPEB Obligation 9/30/2009 $1,433, % $1,125,294 D. Funding Status and Funding Progress The funding status of the plan as of October 1, 2008, was as follows: Actuarial Accrued Liability (AAL) $11,356,292 Actuarial Value of Plan Assets 0 Unfunded Actuarial Accrued Liability (UAAL) $11,356,292 Funded Ratio (Actuarial Value of Plan Assets/AAL) 0% Covered Payroll (Active Plan Members) $30,446,239 UAAL as a Percentage of Covered Payroll 37% Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trends. Amounts determined regarding the funding status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, will in future years present multiyear trend information that will show whether the actuarial value of the plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. Commission 35

73 E. Actuarial Methods and Assumptions Notes to the Financial Statements For the Year Ended September 30, 2009 Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. The actuarial cost method used was the unit credit method. The actuarial assumptions included a four (4) percent investment return assumption (or discount rate) and an annual healthcare cost trend rate of eight (8) percent initially, reduced by decrements to an ultimate rate of five (5) percent after ten years. It was assumed that 99 percent of future retirees would elect medical coverage. The unfunded actuarial accrued liability is being amortized as a level dollar amount on an open period. The unfunded actuarial accrued liability (UAAL) is being amortized over thirty (30) years. Note 8 Payables On September 30, 2009, payables for the Commission s individual major funds, other governmental and fiduciary funds in the aggregate are as follows: Vendors Intergovernmental Total Payables Governmental Activities: General Fund $ 972, $1,058, $2,031, Gasoline Tax Fund 122, , Other Governmental Funds 337, , Total Governmental Activities $1,432, $1,058, $2,491, Fiduciary Funds: Private-Purpose Trust Funds $ 159, $ $ 159, Agency Fund $ $ 141, $ 141, Commission 36

74 Notes to the Financial Statements For the Year Ended September 30, 2009 On September 30, 2009, payables for the Commission s proprietary funds were as follows: Vendors Intergovernmental Other Total Payables Business-Type Activities: Solid Waste Fund $ 58, $ 46, $ $104, Water System Fund 230, , , , Total Business-Type Activities $288, $110, $21, $420, Note 9 Lease Obligations Operating Leases The Commission is obligated under certain leases accounted for as operating leases. Operating leases do not give rise to property rights or lease obligations, and therefore the results of the lease agreements are not reflected as part of the Commission's capital assets. During the fiscal year ended September 30, 2009, total costs paid by the Commission were $279, for governmental activities. Future minimum lease payments at September 30, 2009, were as follows: Fiscal Year Ending Governmental Activities September 30, 2010 $263, , , , Total $487, Note 10 Long-Term Debt The Notes Payable consists of notes dated April 24, 2002 for the purchase of an Imaging System and the refunding notes dated September 5, 2007 for the purchase of the Soccer Blast facility and related property. The General Obligation Warrants, Series 2004 DWSRF-BL, dated December 1, 2004, were issued for the construction of the South Water Treatment Plant. The General Obligation Warrants, Series 2005 DWSRF-DL, dated October 1, 2005, were issued for the construction of the South Water Treatment Plant. Commission 37

75 Notes to the Financial Statements For the Year Ended September 30, 2009 The General Obligation Warrants, Series 2007 DWSRF-BL, dated November 28, 2007, were issued for the construction of the South Water Treatment Plant. The Water Revenue Bonds, Series 1999, which were included as part of the merger with the Westover Water Authority, were issued for water system improvements. The following is a summary of long-term debt transactions for the Commission for the year ended September 30, 2009: Debt Outstanding 10/01/2008 Issued/ Increased Repaid/ Decreased Debt Outstanding 09/30/2009 Amounts Due Within One Year Governmental Activities: Notes Payable $ 1,867, $ $ 353, $ 1,514, $ 73, Other Liabilities: Estimated Liability for Compensated Absences 4,170, , ,040, , Other Post Employment Benefits 1,040, ,040, , Total Governmental Activities Long-Term Liabilities 6,038, ,040, , ,595, , Business-Type Activities: Warrants Payable: Drinking Water State Revolving Fund General Obligation Warrants Series ,180, , ,080, , Series ,325, , ,230, , Series ,370, , ,795, , Series 1999 Water Revenue Bonds 1,145, ,145, Deferred Amounts: Unamortized Discount (8,351.99) (8,351.99) Total Warrants Payable 64,011, ,906, ,105, , Other Liabilities: Estimated Liability for Postclosure Landfill Costs 4,570, , ,889, Estimated Liability for Compensated Absences 217, , , , Other Post Employment Benefits 85, , , Total Business-Type Activities Long-Term Liabilities $68,800, $425, $1,906, $67,319, $957, The Notes Payable liabilities will be repaid from the following funds: the Promotional Fund for the purchase of Soccer Blast and the Probate Judge s Indexing Fee Fund. The Warrants Payable liability will be repaid from the Water System Fund. The compensated absences liability attributable to the governmental activities will be liquidated by several of the Commission s governmental funds. Commission 38

76 Notes to the Financial Statements For the Year Ended September 30, 2009 The following is a schedule of debt service requirements to maturity: Governmental Activities Total Principal and Notes Payable Interest Requirements Fiscal Year Ending Principal Interest to Maturity September 30, 2010 $ 73, $ 20, $ 93, , , , ,366, , ,494, Totals $1,514, $167, $1,682, Business-Type Activities Total Principal and Warrants Payable Interest Requirements Fiscal Year Ending Principal Interest to Maturity September 30, 2010 $ 925, $ 2,063, $ 2,988, ,095, ,032, ,127, ,290, ,995, ,285, ,490, ,951, ,441, ,725, ,901, ,626, ,820, ,465, ,285, ,570, ,746, ,316, ,190, ,424, ,614, Totals $62,105, $25,579, $87,684, Warrant Issuance Costs and Discount The Commission has bond issuance costs in connection with the issuance of its General Obligation Warrants, Series 2004; General Obligation Warrants, Series 2005; and General Obligation Warrants, Series 2007, as well as bond discounts in connection with the issuance of the Water Revenue Bonds, Series The issuance costs and bond discount are being amortized using the straight-line method over a period of twenty years. Issuance Costs Discount Total Issuance Costs and Discount $3,740, $ 8, Current Amount Amortized (200,508.54) (8,351.99) Balance Issuance Costs and Discount $3,539, $ Commission 39

77 Notes to the Financial Statements For the Year Ended September 30, 2009 Note 11 Landfill Closure and Postclosure Care Costs State and federal laws and regulations require that the Commission place a final cover on its landfill when closed and perform certain maintenance and monitoring functions at the landfill site for thirty years after closure. In addition to operating expenses related to current activities of the landfill, an expense provision and related liability are being recognized based on the future closure and postclosure care costs that will be incurred near or after the date the landfill no longer accepts waste. The recognition of these landfill closure and postclosure care costs is based on the amount of the landfill used during the year. The estimated liability for landfill closure and postclosure care costs has a balance of $4,889,631.81, as of September 30, 2009, which is based on 83.56% usage (filled) of the landfill. It is estimated that an additional $961, will be recognized as closure and postclosure care expenses between the date of the balance sheet and the date the landfill is expected to be filled to capacity. The estimated total current cost of the landfill closure and postclosure care ($5,851,342.00) is based on the amount that would be paid if all equipment, facilities, and services required to close, monitor, and maintain the landfill were acquired as of September 30, However, the actual cost of closure and postclosure care may be higher due to inflation, changes in technology, or changes in landfill laws and regulations. Note 12 Risk Management The Commission is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The Commission has purchased general liability insurance through a commercial insurance carrier. The Commission also purchases commercial insurance for other risks of loss, including property and casualty insurance. Settled claims resulting from these claims have not exceeded commercial insurance coverage in any of the past three years. The Commission purchases workers compensation insurance coverage through a commercial carrier. The Commission retains the risk of loss of $350,000 per occurrence, with the exception of police officers and drivers for which the Commission retains the risk of loss of $400,000 per occurrence, with an aggregate limit of indemnity of $1,000,000 per occurrence and $3,000,000 aggregate limit overall. The Commission has employee health insurance coverage through the Local Government Health Insurance Program, administered by the State Employee s Health Insurance Board (SEHIB). Employees may choose to participate in a plan administered by Blue Cross/Blue Shield which functions as a public entity risk pool. This plan is self-sustaining through member premiums. Monthly premiums are determined annually by the plan s actuary and are based on the pool s claims experience, considering any remaining fund balance on hand available for claims. Commission 40

78 Notes to the Financial Statements For the Year Ended September 30, 2009 The Commission is self insured with regard to employee disability insurance. Active employees who have attained full-time permanent status are eligible to receive benefits of $ per week for a period of twenty-six weeks after all accumulated sick leave has been used. To be eligible, an employee must submit proof of their claim on approved claims forms along with verification that the employee no longer has any sick leave days available. A physician s statement of disability must be submitted upon initial discovery of the disability and a new one must be provided every six weeks as long as a disability is claimed. The schedule below presents the changes in claims liability for the past three years for disability insurance: Current Year Beginning of Claims and Balance at Fiscal Year Changes in Claim Fiscal Fiscal Year Liability Estimates Payments Year-End $ $14, $14, $ $ $16, $16, $ $ $10, $10, $ Note 13 Interfund Transactions Due To/From Other Funds The amounts due to/from other funds at September 30, 2009, were as follows: General Fund Due From Other Funds Gasoline Tax Fund Other Governmental Funds Totals Due To Other Funds: General Fund $ $ $2, $ 2, Other Governmental Funds 688, , Solid Waste Fund 14, , Water System Fund , , Totals $689, $17, $2, $709, Commission 41

79 Notes to the Financial Statements For the Year Ended September 30, 2009 Interfund Transfers The amounts of interfund transfers during the fiscal year ended September 30, 2009, were as follows: Transfers In Other General Gasoline Governmental Fund Tax Fund Funds Totals Transfers Out: General Fund $ $ $1,678, $ 1,678, Public Buildings, Roads and Bridges Fund 1,000, ,966, ,561, ,527, Other Governmental Funds 638, , , ,299, Totals $1,638, $6,341, $3,525, $11,504, The Commission typically used transfers to fund ongoing operating subsidies. Note 14 Related Organizations The Commission appoints a majority of the members of the Board for the following organizations: Park and Recreational Authority, Community Corrections, Public Building Authority, and Economic and Industrial Development Authority. The Commission, however, is not financially accountable, because it does not impose its will and have a financial benefit or burden relationship, for these organizations and the organizations are not considered part of the Commission s financial reporting entity. These organizations are considered related organizations of the County Commission. Note 15 Joint Ventures The Commission is involved in a joint venture with the Talladega County Commission. The counties each own a 50% share of a water filtration plant located on the Coosa River. The plant provides water to customers in both Talladega and Shelby Counties. As of September 30, 2009, the operations of the Talladega/Shelby Filtration Plant are recorded as a separate entity. Only the equity share of s investment in the joint venture is shown on the financial statements. As of September 30, 2009, s investment in joint venture was $1,046, Records of the Filtration Plant are maintained by personnel of the Environmental Services Department. Financial Statements of the Talladega/Shelby Filtration Plant may be obtained from the Environmental Services Department. Commission 42

80 Note 16 Restatements Restatement of Fund Balances Notes to the Financial Statements For the Year Ended September 30, 2009 The beginning fund balance of the General Fund was restated to properly reflect casual sales tax revenue due to be remitted from previous years. The beginning fund balance was restated as follows: General Fund Gasoline Tax Fund Public Buildings, Roads, and Bridges Fund Other Governmental Funds Total Governmental Funds Fund Balance, September 30, 2008, as Previously Reported $24,046, $8, $2,698, $10,781, $37,534, Restatement: Taxes (330,640.42) (330,640.42) Fund Balance, September 30, 2008, as Restated $23,715, $8, $2,698, $10,781, $37,204, Restatement of Net Assets Beginning net assets for Governmental Activities were restated to properly reflect casual sales tax revenue due to be remitted from prior years and to correct a prior year error in the recording of capital assets. Governmental Activities Net Assets, September 30, 2008, as Previously Reported $224,949, Fund Restatements (330,640.42) Restatement of Capital Assets (46,682.20) Net Assets, September 30, 2008, as Restated $224,571, Commission 43

81 Restatement of Fiduciary Net Assets Notes to the Financial Statements For the Year Ended September 30, 2009 Beginning net assets for Fiduciary Funds were restated to correct a prior year error. Fiduciary Funds Net Assets, September 30, 2008, as Previously Reported $8,523, Fund Restatements (322,513.81) Net Assets, September 30, 2008, as Restated $8,200, Restatement of Proprietary Net Assets Beginning net assets for Proprietary Funds were restated to correct a prior year error. Solid Waste Fund Water System Fund Total Proprietary Funds Net Assets, September 30, 2008, as Previously Reported $18,182, $71,036, $89,219, Fund Restatements (200,931.25) 200, Net Assets, September 30, 2008, as Restated $17,981, $71,237, $89,219, Commission 44

82 This Page Intentionally Blank

83 Required Supplementary Information Commission 45

84 Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual - General Fund For the Year Ended September 30, 2009 Budgeted Amounts Actual Amounts Original Final Budgetary Basis Revenues Taxes $ 37,532, $ 37,532, $ 35,218, Licenses and Permits 1,396, ,396, , Intergovernmental 2,058, ,058, ,666, Charges for Services 13,635, ,635, ,525, Miscellaneous 1,659, ,659, , Total Revenues 56,282, ,282, ,664, Expenditures Current: General Government 20,413, ,487, ,988, Public Safety 28,289, ,461, ,972, Highways and Roads 302, Health 620, , , Welfare 814, ,534, , Culture and Recreation 1,180, ,645, , Education 150, , , Capital Outlay 2,424, ,302, ,169, Debt Service: Interest and Fiscal Charges 4, , Total Expenditures 53,896, ,210, ,609, Excess (Deficiency) of Revenues Over Expenditures 2,385, (928,803.00) (945,112.86) Other Financing Sources (Uses) Transfers In 1,638, Sale of Capital Assets 9, Transfers Out (1,678,117.87) Total Other Financing Sources (Uses) (29,927.31) Net Change in Fund Balances 2,385, (928,803.00) (975,040.17) Fund Balances - Beginning of Year 21,822, ,822, ,420, Fund Balances - End of Year $ 24,208, $ 20,893, $ 23,445, Commission 46 Exhibit #12

85 Budget to GAAP Differences Actual Amounts GAAP Basis (1) $ 22, $ 35,241, , ,666, ,525, , , ,687, ,988, ,972, , , , , , ,169, ,609, , (922,216.50) 1,638, , (1,678,117.87) (29,927.31) 22, (952,143.81) (2) (704,187.58) 23,715, $ (681,291.22) $ 22,763, Commission 47 Exhibit #12

86 Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual - General Fund For the Year Ended September 30, 2009 Explanation of differences: (1) The Commission recognizes motor vehicle ad valorem taxes as they are received without regard to when they are earned. Net Increase in Fund Balance - Budget to GAAP (2) The amount reported as "fund balance" on the budgetary basis of accounting derives from the basis of accounting used in preparing the Commission's budget. This amount differs from the fund balance reported in the Statement of Revenues, Expenditures and Changes in Fund Balances because of the cumulative effect of transactions such as those described above. Encumbrances outstanding at year-end are reported only as reservations of fund balances and do not constitute expenditures or liabilities. Commission 48 Exhibit #12

87 $ $ 22, , Commission 49 Exhibit #12

88 Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual - Gasoline Tax Fund For the Year Ended September 30, 2009 Budgeted Amounts Actual Amounts Original Final Budgetary Basis Revenues Intergovernmental $ 2,263, $ 2,263, $ 2,166, Charges for Services 12, Miscellaneous 121, , , Total Revenues 2,384, ,384, ,201, Expenditures Current: Highways and Roads 9,140, ,213, ,572, Capital Outlay 1,359, ,414, , Total Expenditures 10,500, ,628, ,338, Excess (Deficiency) of Revenues Over Expenditures (8,115,866.00) (8,243,741.00) (6,136,667.22) Other Financing Sources (Uses) Transfers In 6,341, Sale of Capital Assets 1, Total Other Financing Sources (Uses) 6,343, Net Change in Fund Balances (8,115,866.00) (8,243,741.00) 206, Fund Balances - Beginning of Year 8, , , Fund Balances - End of Year $ (8,107,463.28) $ (8,235,338.28) $ 215, Commission 50 Exhibit #13

89 Budget to GAAP Differences Actual Amounts GAAP Basis $ $ 2,166, , , ,201, ,572, , ,338, (6,136,667.22) 6,341, , ,343, , , $ $ 215, Commission 51 Exhibit #13

90 Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual - Public Buildings, Roads and Bridges Fund For the Year Ended September 30, 2009 Budgeted Amounts Actual Amounts Original Final Budgetary Basis Revenues Taxes $ 7,290, $ 7,290, $ 7,045, Miscellaneous 233, , , Total Revenues 7,524, ,524, ,074, Other Financing Sources (Uses) Transfers Out (8,527,000.00) Total Other Financing Sources (Uses) (8,527,000.00) Net Change in Fund Balances 7,524, ,524, (1,452,065.13) Fund Balances - Beginning of Year 3,041, ,041, ,041, Fund Balances - End of Year $ 10,565, $ 10,565, $ 1,589, Explanation of differences: (1) The Commission recognizes motor vehicle ad valorem taxes as they are received without regard to when they are earned. Net Increase in Fund Balance - Budget to GAAP (2) The amount reported as "fund balance" on the budgetary basis of accounting derives from the basis of accounting used in preparing the Commission's budget. This amount differs from the fund balance reported in the Statement of Revenues, Expenditures and Changes in Fund Balances because of the cumulative effect of transactions such as those described above. Encumbrances outstanding at year-end are reported as reservations of fund balances and do not constitute expenditures or liabilities. Commission 52 Exhibit #14

91 Budget to GAAP Differences Actual Amounts GAAP Basis (1) $ 10, $ 7,056, , , ,085, (8,527,000.00) (8,527,000.00) 10, (1,441,092.61) (2) (342,815.63) 2,698, $ (331,843.11) $ 1,257, $ $ 10, , Commission 53 Exhibit #14

92 This Page Intentionally Blank

93 Schedule of Funding Progress Defined Benefit Pension Plan For the Year Ended September 30, 2009 Actuarial Valuation Date Actuarial Value of Assets (a) Actuarial Accrued Liability (AAL) Entry Age (b)* Unfunded AAL (UAAL) (b-a) Funded Ratio (a/b) Covered Payroll (c) UAAL as a Percentage of Covered Payroll [(b-a)/c] 9/30/2008 $50,586,610 $68,662,525 $18,075, % $29,574, % 9/30/2007 $47,207,835 $61,070,019 $13,862, % $26,862, % 9/30/2006** $42,283,298 $55,865,780 $13,582, % $24,541, % * Reflects liability for cost of living benefit increases granted on or after October 1, ** Reflects changes in actuarial assumptions. 54 Exhibit #15 Commission

94 Schedule of Funding Progress Other Postemployment Benefits For the Year Ended September 30, 2009 Actuarial Valuation Date Actuarial Value of Assets (a) Actuarial Accrued Liability (AAL) Entry Age (b) Unfunded AAL (UAAL) (b-a) Funded Ratio (a/b) Covered Payroll (c) UAAL as a Percentage of Covered Payroll [(b-a)/c] 10/01/2008 $-0- $11,356,292 $11,356,292 0% $30,446,239 37% 55 Exhibit #16 Commission

95 Supplementary Information Commission 56

96 Schedule of Expenditures of Federal Awards For the Year Ended September 30, 2009 Federal Grantor/ Federal Pass-Through Pass-Through Grantor/ CFDA Grantor's Program Title Number Number U. S. Department of Agriculture Passed Through Alabama Department of Education Child Nutrition Cluster: School Breakfast Program - Cash Assistance National School Lunch Program - Cash Assistance Non-Cash Assistance (Commodities) Total National School Lunch Program Total Child Nutrition Cluster (M) Total U. S. Department Agriculture U. S. Department of Housing and Urban Development Passed Through Alabama Department of Economic and Community Affairs Emergency Shelter Grants Program (M) ESG08004 Total U. S. Department of Housing and Urban Development U. S. Department of Justice Direct Programs Bulletproof Vest Partnership Program Recovery Act - Edward Byrne Memorial Justice Assistance Grant (JAG) Program/Grants to Units of Local Governments SB-B Passed Through Alabama Department of Economic and Community Affairs Edward Byrne Memorial Justice Assistance Grant Program DJ01019 Edward Byrne Memorial Justice Assistance Grant Program DJ01009 Sub-Total Edward Byrne Memorial Justice Assistance Grant Program Total U. S. Department of Justice U. S. Department of Transportation Passed Through Alabama Department of Transportation Airport Improvement Program Total U. S. Department of Transportation Sub-Total Forward Commission 57 Exhibit #17

97 Budget Assistance Federal Revenue Period Total Share Recognized Expenditures 10/01/ /30/2009 $ 14, $ 14, $ 14, $ 14, /01/ /30/ , , , , , , , , , , , , , , , , , , , , /11/ /10/ , , , , , , , , /28/ /30/2009 5, , , , /01/ /28/ , , , , /01/ /31/ , , , , /01/ /31/ , , , , , , , , , , , , /01/ /31/ , , , , , , , , $ 1,275, $ 781, $ 418, $ 418, Commission 58 Exhibit #17

98 Schedule of Expenditures of Federal Awards For the Year Ended September 30, 2009 Federal Grantor/ Federal Pass-Through Pass-Through Grantor/ CFDA Grantor's Program Title Number Number Sub-Total Brought Forward U. S. Environmental Protection Agency Passed Through Alabama Emergency Management Agency Nonpoint Source Implementation Grants C Total U. S. Environmental Protection Agency U. S. Department of Health and Human Services Passed Through Alabama Department of Public Health Public Health Emergency Preparedness C National Bioterrorism Hospital Preparedness Program CEP-65-QW8-09 Sub-Total Alabama Department of Public Health Passed Through Alabama Secretary of State Voting Access for Individuals With Disabilities - Grants to States Total U. S. Department of Health and Human Services U. S. Department of Homeland Security Passed Through Alabama Department of Homeland Security Homeland Security Grant Program SHL Passed Through Alabama Emergency Management Agency Homeland Security Grant Program Sub-Total Homeland Security Grant Program Disaster Grants - Public Assistance (Presidentially Declared Disasters) Hazard Mitigation Grant Emergency Management Performance Grants Emergency Management Performance Grants Sub-Total Emergency Management Performance Grants Pre-Disaster Mitigation Total U. S. Department of Homeland Security Total Expenditures of Federal Awards (M) = Major Program The accompanying Notes to the Schedule of Expenditures of Federal Awards are an integral part of this schedule. Commission 59 Exhibit #17

99 Budget Assistance Federal Revenue Period Total Share Recognized Expenditures $ 1,275, $ 781, $ 418, $ 418, /12/ /30/ , , , , , , , , /18/ /30/ , , , , /09/ /09/2009 6, , , , , , , , /01/ /30/ , , , , , , , , /01/ /31/ , , , , /01/ /30/ , , , , , , , , /01/ /30/ , , , , /28/ /31/ , , , , /01/ /15/ , , , , /01/ /30/ , , , , , , , , /01/ /30/ , , , , , , , , $ 1,637, $ 1,119, $ 730, $ 730, Commission 60 Exhibit #17

100 Note 1 Basis of Presentation Notes to the Schedule of Expenditures of Federal Awards For the Year Ended September 30, 2009 The accompanying Schedule of Expenditures of Federal Awards includes the federal grant activity of the Commission and is presented on the modified accrual basis of accounting. The information in this schedule is presented in accordance with the requirements of OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Therefore, some amounts presented in this schedule may differ from amounts presented in or used in the preparation of the basic financial statements. Commission 61

101 Additional Information Commission 62

102 Commission Members and Administrative Personnel October 1, 2008 through September 30, 2009 Commission Members Hon. Lindsey Allison Chairman 454 Valley View Drive Pelham, AL Hon. Daniel M. Acker Member th Street Southwest Alabaster, AL Hon. Jon Parker Member 840 Highway 54 Montevallo, AL Hon. Tommy Edwards Member 568 South Hills Drive Calera, AL Hon. Joel Bearden Member 6234 Helena Road #261 Helena, AL Hon. Robbie Hayes Member P. O. Box 376 Chelsea, AL Hon. Rick Shepherd Member 328 Greystone Glen Circle Hoover, AL Hon. Larry Dillard Member 2432 Vale Drive Birmingham, AL Hon. Corley Ellis Member P. O. Box 1177 Columbiana, AL Hon. Ted Crockett Member 4024 Shandwick Lane Birmingham, AL Hon. Earl Cunningham Member P. O. Box 652 Montevallo, AL Term Expires Administrative Personnel Mr. Alex Dudchock County Manager 1031 Newhaven Court Birmingham, AL Exhibit #18 Commission

103 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 We have audited the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the Commission as of and for the year ended September 30, 2009, which collectively comprise the Commission s basic financial statements and have issued our report thereon dated September 3, We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Internal Control Over Financial Reporting In planning and performing our audit, we considered the Commission s internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinion on the financial statements, but not for the purposes of expressing an opinion on the effectiveness of the Commission s internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Commission s internal control over financial reporting. A control deficiency 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 misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the entity s ability to initiate, authorize, record, process, or report financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the entity s financial statements that is more than inconsequential will not be prevented or detected by the entity s internal control. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected by the entity s internal control. Our consideration of internal control over financial reporting 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 financial reporting that we consider to be material weaknesses, as defined above. 64 Exhibit #19 Commission

104

105 Report on Compliance With Requirements Applicable to Each Major Program and on Internal Control Over Compliance in Accordance With OMB Circular A-133 Compliance We have audited the compliance of the Commission with the types of compliance requirements described in the U. S. Office of Management and Budget (OMB) Circular A-133 Compliance Supplement that are applicable to its major federal program for the year ended September 30, The Commission s major federal program is identified in the Summary of Examiner s Results Section of the accompanying Schedule of Findings and Questioned Costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to its major federal program is the responsibility of the Commission s management. Our responsibility is to express an opinion on the Commission s compliance based on our audit. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the Commission s compliance with those requirements and performing such other procedures, as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination of the Commission s compliance with those requirements. In our opinion, the Commission complied, in all material respects, with the requirements referred to above that are applicable to its major federal program for the year ended September 30, Internal Control Over Compliance The management of the Commission 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 the Commission 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, 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 the Commission s internal control over compliance. 66 Exhibit #20 Commission

106

107 Financial Statements Schedule of Findings and Questioned Costs For the Year Ended September 30, 2009 Section I Summary of Examiner's Results Type of opinion issued: Unqualified Internal control over financial reporting: Material weakness(es) identified? Yes X No Significant deficiency(ies) identified that are not considered to be material weakness(es)? Yes X None reported Noncompliance material to financial statements noted? Yes X No Federal Awards Internal control over major programs: Material weakness(es) identified? Yes X No Significant deficiency(ies) identified that are not considered to be material weakness(es)? Yes X None reported Type of opinion issued on compliance for major programs: Unqualified Any audit findings disclosed that are required to be reported in accordance with Section 510(a) of Circular A-133? Yes X No Identification of major programs: CFDA Number(s) Name of Federal Program or Cluster and Child Nutrition Cluster Emergency Shelter Grants Program Dollar threshold used to distinguish between Type A and Type B programs: $300, Auditee qualified as low-risk auditee? X Yes No 68 Exhibit #21 Commission

108 Schedule of Findings and Questioned Costs For the Year Ended September 30, 2009 Section II Financial Statement Findings (GAGAS) Ref. No. Type of Finding Finding/Noncompliance Questioned Costs No matters were reportable. Section III Federal Awards Findings and Questioned Costs Ref. No. CFDA No. Program Finding/Noncompliance No matters were reportable. Questioned Costs 69 Exhibit #21 Commission

109 Auditee Response 70 Exhibit #22 Commission

110