Comprehensive Annual Financial Report County of Chester, Pennsylvania For the Year Ended December 31, 2007

Transcription

1 Comprehensive Annual Financial Report County of Chester, Pennsylvania For the Year Ended December 31, 2007 Prepared by the Office of the Controller Valentino F. DiGiorgio III, Esq., Controller

2 Comprehensive Annual Financial Report County of Chester, Pennsylvania For the Year Ended December 31, 2007 Prepared by the Office of the Controller Valentino F. DiGiorgio III, Esq., Controller

3 Introductory Section

4 Comprehensive Annual Financial Report For the Fiscal Year Ended December 31, 2007 TABLE OF CONTENTS Page INTRODUCTORY SECTION Table of Contents...i Message from the Controller...v Certificate of Achievement for Excellence in Financial Reporting... vii Letter of Transmittal...ix County of Chester Government Organizational Chart... xiv County of Chester Elected Officials...xv FINANCIAL SECTION Independent Auditor s Report... 1 Management s Discussion and Analysis... 3 Basic Financial Statements: Government-wide Financial Statements: Statement of Net Assets Statement of Activities Fund Financial Statements: Balance Sheet Governmental Funds Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Assets Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities Statement of Net Assets Proprietary Funds Statement of Revenues, Expenses, and Changes in Fund Net Assets Proprietary Funds Statement of Cash Flows Proprietary Funds Statement of Fiduciary Net Assets Fiduciary Funds Statement of Changes in Fiduciary Net Assets Fiduciary Funds Notes to the Financial Statements 1) Summary of Significant Accounting Policies ) Deposits and Investments ) Property Taxes ) Risk Management ) Capital Assets ) Intangible Assets ) Interfund Receivables, Payables and Transfers ) Compensated Absences ) Deferred Revenue ) Leases ) Long-term Liabilities ) Interest Rate Swaps ) Reserved Fund Balances ) Employee Retirement Trust Fund ) Other Post-Employment Benefits ) Related Party Transactions ) Commitments and Contingencies ) Closure and Post-closure Costs i

5 Comprehensive Annual Financial Report For the Fiscal Year Ended December 31, 2007 TABLE OF CONTENTS Required Supplementary Information: Employee Retirement Plan Schedule of Funding Progress Employee Retirement Plan Schedule of Employer Contributions OPEB Plan Schedule of Funding Progress OPEB Plan Schedule of Employer Contributions Other Post-Employment Benefits Schedule of Revenues, Expenditures, and Changes in Fund Balances Budget (GAAP Basis) and Actual: General Fund Mental Health / Mental Retardation Fund Managed Behavioral Healthcare Fund Notes to Required Supplementary Information: Budgetary Information Supplementary Information: Combining and Individual Fund Statements and Schedules: Description of Funds Nonmajor Governmental Funds Description of Funds Major Governmental Funds Combining Balance Sheet Nonmajor Governmental Funds Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Governmental Funds Schedule of Revenues, Expenditures, and Changes in Fund Balances Budget (GAAP Basis) and Actual: Domestic Relations Fund Liquid Fuels Fund Department of Community Development Fund Parks and Recreation Fund Public Safety Communications Fund Library Fund Human Services Fund Aging Fund Drug and Alcohol Fund Subsidized Child Day Care Fund Children Youth & Families Fund Capital Reserve Fund Debt Service Fund Capital Improvement Fund Description of Funds Internal Service Funds Combining Statement of Net Assets Internal Service Funds Combining Statement of Revenues, Expenses, and Changes in Fund Net Assets Internal Service Funds Combining Statement of Cash Flows Internal Service Funds Description of Funds Nonmajor Component Units Combining Statement of Net Assets Nonmajor Component Units Combining Statement of Activities Nonmajor Component Units Description of Funds Fiduciary Funds Combining Statement of Fiduciary Net Assets Agency Funds Combining Statement of Changes in Assets and Liabilities Agency Funds Capital Assets Used in the Operation of Governmental Funds: Comparative Schedules By Source Schedule by Function and Activity Schedule of Changes by Function and Activity ii

6 Comprehensive Annual Financial Report For the Fiscal Year Ended December 31, 2007 TABLE OF CONTENTS STATISTICAL SECTION Narrative Summary Description Table Page Net Asset by Component Changes in Net Assets Fund Balances of Governmental Funds Changes in Fund Balances Governmental Funds Assessed Value and Estimated Market Value of Taxable Property Real Property Tax Rates - Direct and Overlapping Governments (Mills per $1,000 of Assessed Value) Direct and Overlapping Property Tax Rates Principal Taxpayers Property Tax Levies and Collections Ratios of General Bonded Debt Outstanding Direct and Overlapping Governmental Activities Debt Legal Debt Margin Information Demographic Economic Statistics Principal Employers Full-time Equivalent County Government Employees by Function Operating Indicators by Function Capital Asset Statistics by Function and Activity Miscellaneous Statistics iii

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8 June 23, 2008 To the Citizens of the County of Chester, Pennsylvania: I am pleased to provide the Comprehensive Annual Financial Report (CAFR) of the County of Chester, Pennsylvania, (the County), for the fiscal year ended December 31, The Office of the County Controller has prepared the report with assistance from various County officials. The County s management assumes full responsibility for the completeness and reliability of the information contained in this report. I believe the enclosed data is accurate in all material respects and is reported in a manner designed to present fairly the financial position and results of operations of the various funds of the County in accordance with generally accepted accounting principles. All disclosures necessary to enable the reader to gain an understanding of the County s financial activities have been included. The County of Chester, one of Pennsylvania s original three counties, was named by William Penn in It is located in southeastern Pennsylvania, approximately 30 miles west of Philadelphia. The Borough of West Chester is the County Seat. The County has 73 political subdivisions, consisting of one third class city (Coatesville), 15 boroughs and 57 townships. The County has a population of approximately 486,000 and covers 782 square miles, including some of the most productive agricultural land in Pennsylvania. Population and employment has dramatically grown in Chester County during the past thirty years as suburban development continues to spread westward and as high technology businesses grow along the Route 202 corridor. The median income of the County s households is one of the highest in the Commonwealth of Pennsylvania. A three member Board of County Commissioners performs all of the County s legislative and executive functions, and is responsible for the management and administration of the County s fiscal affairs. The Controller is the elected financial officer of the County and, as such, supervises the County s fiscal affairs including the accounts, transactions, and official acts relating thereto of all officers and persons entrusted with the public moneys of the County. The Treasurer is elected to receive and receipt all monies due or accruing to the County. The Court of Common Pleas is part of the Unified Judicial System provided for by the Pennsylvania Constitution. Court related row offices include the Coroner, Clerk of Courts, District Attorney, Jury Commissioners (two), Prothonotary, Recorder of Deeds, Register of Wills and Sheriff. v

9 This report is designed to make the financial position of the County of Chester readily available to taxpayers, bond rating firms, underwriters, budget planners, government officials, investors, creditors, and the general public. The County s financial statements have been audited by the certified public accounting firm of Maillie, Falconiero & Company, LLP, to ensure that the financial reporting is of the highest quality and based on national standards. The information contained in this report provides a comprehensive picture of the financial position of the County of Chester. Furthermore, this report reflects the commitment of Chester County Commissioners and other County leadership, in all areas and on all levels, to cost effective government and the responsible management and administration of the financial operations of the County now and in the future. We appreciate the cooperation extended to us by County elected officials, the staff of the Finance Department, and all County departments and agencies addressed in this audit. I also wish to express my personal appreciation and respect for the professional staff of the Chester County Controller s Office for their contribution to this report and their dedication to the mission of this office. Each of us continues to be committed to maintaining the highest professional standards and practices, and to monitoring the financial performance of the County in the best interest of the citizens of Chester County. As your County Controller, I am always mindful that County government resources are limited and result from the hard work and resourcefulness of Chester County taxpayers. As such, the Controller s Office will continue to monitor the financial performance of the County to ensure the highest standards of service, efficiency and affordability are maintained. Sincerely, Valentino F. DiGiorgio III, Esq. Controller, County of Chester vi

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12 June 23, 2008 To the Honorable Chairman, Members of the Chester County Board of Commissioners and Citizens of Chester County: It is my privilege to submit to you the Comprehensive Annual Financial Report (CAFR) of the County of Chester, Pennsylvania, for the year ended December 31, Responsibility for the accuracy and the completeness of the presentation, including all disclosures, rests with management. The report was prepared with an emphasis on full disclosure to enable the reader to gain an understanding of the County s operations and financial position. MANAGEMENT DISCUSSION & ANALYSIS The Management s Discussion and Analysis (MD&A) provides a narrative introduction, overview and analysis to accompany the Financial Statements and should be read in conjunction with this letter. Chester County s MD&A can be found immediately following the report of the independent auditors. BUDGET Chester County is required to adopt an annual budget no later than December 31. The County is legally required to maintain budgetary controls at the major function level, but in practice maintains budgetary control at the major expenditure object level. Budgets may be adjusted by means of a budget amendment or by an internal budget transfer. For a more detailed discussion of the budget, please refer to the Notes to Required Supplementary Information on page 76. ECONOMIC CONDITION AND OUTLOOK The economy of Chester County is healthy. The unemployment rate is among the lowest in the Commonwealth. The population of the County continues to increase as does the tax base. In addition, the County s Aaa bond rating was reaffirmed in 2007 demonstrating the County s economic ability to finance capital infrastructure. County 2000 Census 2007 Estimate % change Chester 433, , % Lancaster 470, , % Berks 373, , % Montgomery 750, , % Bucks 597, , % Delaware 550, , % Region 3,176,393 3,338, % ix

13 The County s labor force consists of more than 200,000 people. The Delaware Valley Regional Planning Commission has projected growing employment in the County. The chart below compares the projected growth rate between Chester County and nearby counties. County 2000 Census 2030 Forecast Projected Growth Rate Chester 238, , % Bucks 267, , % Delaware 238, , % Montgomery 492, , % Philadelphia 741, , % Contributing to the positive economic outlook is the diversity of the County s economy. A recent report by the Work Force Investment Board highlights the breadth of the County s economy. In addition to being the home of several fortune 500 companies including the Vanguard Group, Herr s Snack Foods, Cephalon, Inc. and QVC, Inc., the County is also home to Kaolin Mushroom Farms. In 2006 the company produced 59 percent of all mushrooms in the United States. Jobs by Sector Manufacturing 10% Finance, Insurance & Real Estate 11% Construction 6% Transportation 3% Retail Trade & Wholesale 18% Services 49% Agricultural & Mining 3% LONG TERM FINANCIAL PLANNING As the Chester County population continues to grow the financial planning models of the County show increase demand for services and commitment of financial resources. The chart below identifies the increase in debt required to fund the capital investment program. Capital Funding Requirements Millions $800 $600 $400 $200 $ x

14 Projects included are funds for a new public safety training facility, open space preservation, walking and biking trails, upgrades of the County s emergency communication systems, and technology infrastructure investment. From an ongoing operations perspective, expenses are expected to increase as the criminal justice system, as well as other growth sensitive services meet the needs of the citizens. It is anticipated that costs will increase for personnel, office space, and support. FINANCIAL POLICIES Chester County has adopted a Working Capital Reserve Policy to maintain the stability of County finances and to provide a guideline for maintaining adequate contingency reserves. As of December 31, 2007, the County had designated $15.7 million for the reserve. The reserve, which is 10 percent of the General Fund expenditure budget, would enable the County to deal with such issues as fluctuations in federal and state funding, extraordinary increases in operating costs or emergencies. In developing and evaluating the County s accounting system, consideration is given to the adequacy of internal accounting controls. Internal accounting controls are designed to provide reasonable, but not absolute, assurance regarding: (1) the safeguarding of assets against loss from unauthorized use or disposition, and (2) the reliability of financial records for preparing financial statements and maintaining accountability for assets. The concept of reasonable assurance recognizes that: (1) the cost of a control should not exceed the benefits likely to be derived; and (2) the evaluation of costs and benefits requires estimates and judgments by management. All internal control evaluations occur within the above framework. We believe that the County s internal accounting controls adequately safeguard assets and provide reasonable assurance of proper recording of financial transactions. MAJOR INITIATIVES AND ACCOMPISHMENTS Strategic Planning In 2008 the County will embark on an effort to develop a strategic planning system that will lead to a results-based budgeting initiative. Using the assistance of a citizen based taskforce, the County will build on existing strategic efforts to set forth the County s priorities and major initiatives for the next five years. Open Space Preservation and Resource Protection. Since 1989 the County has embarked on preserving open space, farmland and important natural recreation resources. In 2007 the County issued a report outlining its efforts in this area. Below is a breakdown of acreage preserved through County funding. This total represents 43 percent of total lands protected. Acres Preserved through Open Space Program Municipal park grants Conservancy grants Farmland preservation County park acquisitions Total 5,676 acres 6,925 acres 25,741 acres 4,961 acres 43,303 acres The County has and continues to be active in creating trails. The largest project is the Chester Valley Trail. This project which stretches 16 miles from Downingtown to County Line Road in Tredyffrin Township is being built using funding from the County, State and private developers. xi

15 Chester Valley Trail Route Capital Program. In 2007 the County continued to construct its new Justice Center. Consisting of 375,000 square feet, the new facility will house the County s judicial system. Completion is expected in The County will also continue to plan for and implement the consolidation of other non-judicial agencies. The County will also complete the expansion and renovation of the Prison. When completed, 512 new beds will have been added. Greenhouse Gas Reduction Efforts. The County has formed a task force to identify recommendations on how to best address climate change with regard to economic, technical, and environmental considerations. The task force is made up of a diverse group of experts and citizen volunteers who will outline efforts that can be taken by County government, other organizations, and citizens. AWARDS AND ACKNOWLEDGEMENTS Certificate of Achievement for Excellence in Financial Reporting. The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the County for its CAFR for the fiscal year ended December 31, In order to be awarded a Certificate of Achievement, a government unit must publish an easily readable and efficiently organized comprehensive annual financial report. This report must satisfy both generally accepted accounting principles and applicable legal requirements. The Certificate of Achievement is a prestigious national award recognizing conformance with the highest standards for preparation of state and local government financial reports. The County has received a Certificate of Achievement consistently for the last twenty-five years. Distinguished Budget Presentation Award. Chester County has been presented the Award for Distinguished Budget Presentation by the GFOA for the fifteenth consecutive year. To receive this xii

16 award, a governmental unit must publish a budget document that meets program criteria as a policy document, operations guide, financial plan and communications device. Acknowledgements I would like to acknowledgement the support of the Board of Commissioners. Their commitment to delivering and maintaining the highest quality of fiscal management and government services to County residents sets the tone for excellence, which all members of the County s financial and administrative team strive to maintain. Without the Commissioners support this report would not be possible. Respectfully submitted, Mark J. Rupsis Chief Administrative Officer xiii

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18 2007 County of Chester Elected Officials JUDICIARY The Honorable Paula Francisco Ott, President Judge The Honorable Thomas G. Gavin The Honorable Robert J. Shenkin The Honorable Howard F. Riley, Jr. The Honorable James P. MacElree, II The Honorable Jacqueline C. Cody The Honorable Katherine B. L. Platt The Honorable William P. Mahon The Honorable Anthony A. Sarcione The Honorable Phyllis R. Streitel The Honorable Edward Griffith The Honorable John L. Hall The Honorable Ronald C. Nagle The Honorable Lawrence E. Wood, Senior Judge BOARD OF COMMISSIONERS Carol Aichele, Chairman Donald A. Mancini, Esq., Vice Chairman Patrick C. O'Donnell DISTRICT ATTORNEY Joseph W. Carroll, Esq. CONTROLLER Valentino F. DiGiorgio, III, Esq. - Controller TREASURER Alan J. Randzin REGISTER OF WILLS Paula Gowen SHERIFF Carolyn B. Welsh RECORDER OF DEEDS Terence Farrell PROTHONOTARY Bryan Walters CORONER Robert O. Satriale, M.D. CLERK OF COURTS DIVISION OF COMMON PLEAS Teena A. Peters JURY COMMISSIONERS Mimi H. Sack Martha E. Smith xv

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20 Financial Section

21 Independent Auditor s Report

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24 Management s Discussion and Analysis

25 Management s Discussion and Analysis December 31, 2007 INTRODUCTION Management s Discussion and Analysis (MD&A) includes an introduction to the basic financial statements for governments and an analytical overview of Chester County s financial activities for the year ended December 31, It is best understood if read in conjunction with the Letter of Transmittal, the basic financial statements, and the supplementary information. The report also includes a statistical section with financial and demographic data to further enhance the reader s understanding of Chester County. MD&A is designed to focus on the current year s activities and the resulting changes in the County s financial position. Currently known facts that may have a significant impact on the County s financial position now and in the foreseeable future are also discussed. The required elements of general purpose external financial reporting are: Management s Discussion and Analysis Basic Financial Statements Government-wide Financial Statements Fund Financial Statements Notes to the Financial Statements Required Supplementary Information (other than MD&A) FINANCIAL HIGHLIGHTS The following financial highlights are described in more detail in the analysis sections of the MD&A: The General Fund reported an ending fund balance of $39.3 million, an increase of $5.9 million from The General Fund unreserved, designated Working Capital Reserve for contingencies increased from $14.9 million to $15.7 million, or 10 percent of the $157.4 million General Fund budget for General Fund unreserved, undesignated fund balance increased from $17.4 million to $22.7 million. General Fund reserved fund balance decreased from $1.1 million to $0.8 million. Ending fund balances for the four tax supported funds; in the aggregate, totaled $65.1 million. Government-wide net assets (assets minus liabilities) at the end of the year were $1.8 million, an increase of $2.4 million from Government-wide outstanding General Obligation Bonds and Notes Payable were $474.5 million, an increase from 2006 of $99.3 million. New funding was required for the completion of major facilities projects. Unaudited see accompanying independent auditors report 3

26 Management s Discussion and Analysis December 31, 2007, Continued OVERVIEW OF THE FINANCIAL REPORT The County s reporting entity is comprised of the primary government and its component units. Component units are legally separate organizations for which the County is financially accountable or for which there is a significant relationship. The table below provides a condensed summary of the County s basic financial statements. The narrative following the table explains the statements and accompanying information in more detail. Major Features of Chester County s Government-wide and Fund Financial Statements Fund Statements Government-wide Statements Governmental Funds Proprietary Funds Fiduciary Funds Scope Entire County government (except fiduciary funds) and the County s component units The activities of the County that are not proprietary or fiduciary, such as judicial and corrections Activities the County operates similar to private businesses such as The Pocopson Nursing Home and internal services to County departments Funds for which the County is the trustee or agent for someone else s resources, such as the employees retirement plan Required financial statements Statement of Net Assets Statement of Activities Balance sheet Statement of Revenues, Expenditures, and Changes in Fund Balances Budget and Actual Statement of Net Assets Statement of Revenues, Expenses, and Changes in Net Assets Statement of Cash Flows Statement of Fiduciary Net Assets Statement of Changes in Fiduciary Net Assets Accounting basis and measurement focus Accrual accounting and economic resources focus Modified accrual accounting and current financial resources focus Accrual accounting and economic resources focus Accrual accounting and economic resources focus Type of asset/liability information All assets and liabilities, both financial and capital, and short-term and long-term Only assets expected to be used up and liabilities that come due during the year or soon thereafter; no capital assets included All assets and liabilities, both financial and capital, and short-term and long-term All assets and liabilities, both short-term and long-term Type of inflow/outflow information All revenues and expenses during year, regardless of when cash is received or paid Revenues for which cash is received during or soon after the end of the year; expenditures when goods or services have been received and payment is due during the year or soon thereafter All revenues and expenses during year, regardless of when cash is received or paid All revenues and expenses during year, regardless of when cash is received or paid Unaudited see accompanying independent auditors report 4

27 Government-wide Financial Statements Management s Discussion and Analysis December 31, 2007, Continued The government-wide financial statements provide information on governmental and business-type activities, excluding fiduciary, activities in a manner similar to the private sector. The statements are prepared using the accrual basis of accounting. Revenues and expenses are taken into account when earned or incurred regardless of when cash is received or paid. Governmental and business-type activities are reported in separate columns which add to a total for the primary government. The government-wide financial statements also include segregated information for entities known as component units. Component units are legally separate units for which the County has financial accountability. The County has six component units the Solid Waste Authority, the Area Airport Authority, the Water Resources Authority, the Library Board, the Visitors and Conference Bureau, and the General Authority. The Statement of Net Assets reports assets and both current and noncurrent liabilities, with the difference between assets and liabilities reported as net assets. Over time, increases or decreases in net assets may serve as one indicator of whether the County s financial position is improving or deteriorating. Additionally, non-financial factors, such as changes in the real estate tax base or the condition of County facilities, should be considered when assessing the overall financial condition of the County. The Statement of Activities shows the extent to which program revenues offset the expenses of governmental and business-type activities. This is intended to summarize and simplify users analysis of the cost of various governmental services and/or subsidy to business-type activities. The statement also reports the change in net assets as a result of the fiscal year s revenues and expenses. The governmental activities included in the statement reflect the County s basic services, including general government, judicial departments, public safety communications, corrections, the public works bridge program, human services, culture and recreation, and conservation and development. Taxes, charges for services and intergovernmental revenues finance the majority of these services. The primary government has one business-type activity the Pocopson Nursing Home. The County charges fees directly, or through third party billing, to help cover the cost of the nursing home. Fund Financial Statements A fund is a separate fiscal and accounting entity that is used to segregate sources and uses of funding for specific purposes. The County uses fund accounting to ensure and demonstrate compliance with financerelated legal requirements. The funds of the County are divided into three categories governmental, proprietary, and fiduciary. Each category is reported using the measurement focus and basis of accounting required for that category. In the fund financial statements, the focus is on major funds rather than the County as a whole. Major funds are separately reported while all others are combined into a single, aggregated presentation. Governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide Statement of Activities. However, unlike the government-wide statements, the governmental fund statements focus on current sources and uses of expendable resources and on the balance of expendable resources available at the end of the year. Governmental funds information helps the reader to determine whether there are more or fewer financial resources that can be spent in the near future to finance the County s programs. Because this information does not encompass the long-term focus of the government-wide financial statements, a reconciliation of the fund financial statements to the government-wide financial statements is presented immediately after the fund financial statements. For example, the fund financial statements will reflect bond proceeds as other financing sources and capital outlays and bond and note principal payments as expenditures. The reconciliation will eliminate these transactions and incorporate the capital assets and long-term obligations into the governmental activities column in the government-wide statements, among other reconciling items. Unaudited see accompanying independent auditors report 5

28 Management s Discussion and Analysis December 31, 2007, Continued The County maintains seventeen individual governmental funds. Information is presented separately for the General Fund, the Managed Behavioral Healthcare Fund, the Mental Health/Mental Retardation Fund, the Capital Improvement Fund, and the Debt Service Fund. These five funds have been identified as major funds based on minimum criteria set forth in Governmental Accounting Standards Board (GASB) Statement 34, Basic Financial Statements and Management s Discussion and Analysis for State and Local Governments. Financial data for the remaining governmental funds are combined into a single, aggregated presentation labeled Other Governmental Funds. Individual financial information for each of these non-major governmental funds is provided in the form of combining statements in the Supplementary Information section of the report. Proprietary funds. Proprietary funds are financed and operated in a manner similar to private business enterprises in which costs are recovered primarily through user charges. The County maintains two different types of proprietary funds that use the accrual basis of accounting - enterprise and internal service. An enterprise fund is used to report the same functions as presented in business-type activities in the government-wide financial statements. The County has an enterprise fund, the Pocopson Home, which is the geriatric center. Two internal service funds, which are presented in a single, aggregated column in the proprietary fund statements, are used to account for the provision of employee benefits and desktop computing resources to County departments on a cost reimbursement basis. Although both the fund and government-wide financial statements provide a long-term and short-term focus, reconciliation is still required. This is due to the fact that the excess income or loss for internal service funds has been redistributed to customers in the government-wide statements. The reconciliation appears on the bottom of the proprietary funds financial statements. Fiduciary funds. Fiduciary funds are used to account for resources held for the benefit of parties outside the government. The County is responsible for ensuring that the assets of these funds are used for their intended purposes. The County is the trustee, or fiduciary, for the Employees Retirement Fund, the Tax Claim Agency Fund, the Hotel Tax Agency Fund, and the Row Office Agency Fund. Fiduciary activities are reported in a manner similar to proprietary funds in a Statement of Fiduciary Net Assets and a Statement of Changes in Fiduciary Net Assets. Fiduciary funds are excluded from the government-wide statements because the assets of these funds are not available to support the County s programs. Notes to the Financial Statements The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes immediately follow the financial statements. Other Information In addition to the basic financial statements and accompanying notes, the financial section includes Required Supplementary Information (RSI) and other supplementary information. These statements and schedules can be found immediately following the Notes to the Financial Statements. Unaudited see accompanying independent auditors report 6

29 Management s Discussion and Analysis December 31, 2007, Continued Government-wide Statement of Net Assets GOVERNMENT-WIDE FINANCIAL ANALYSIS The table below summarizes the Statement of Net Assets for the primary government as of December 31, 2007 and compares it to Chester County Primary Government Summary of Net Assets December 31, 2007 and 2006 Governmental Business-type Activities Activities Total Assets: Current assets $ 246,305,556 $ 122,188,357 $ 2,009,530 $ 3,335,115 $ 248,315,086 $ 125,523,472 Capital assets 308,899, ,142,065 5,035,687 3,941, ,935, ,083,562 Other noncurrent assets 3,504,759 56,372, ,618-3,818,377 56,372,059 Total Assets 558,710, ,702,481 7,358,835 7,276, ,068, ,979,093 Liabilities: Current liabilities 88,535,880 82,790,387 1,405,229 1,503,918 89,941,109 84,294,305 Noncurrent liabilities 473,355, ,247,185 1,016,093 1,100, ,371, ,347,524 Total Liabilities 561,890, ,037,572 2,421,322 2,604, ,312, ,641,829 Net Assets: Invested in capital assets, net of related debt 5,005,509 1,075,397 4,285,405 3,139,954 9,290,914 4,215,351 Restricted 5,059,801 7,070,657 68,482 65,157 5,128,283 7,135,814 Unrestricted (13,246,180) (13,481,145) 583,626 1,467,244 (12,662,554) (12,013,901) Total Net Assets $ (3,180,870) $ (5,335,091) $ 4,937,513 $ 4,672,355 $ 1,756,643 $ (662,736) Total net assets. Government-wide total net assets at the close of 2007 were $1.8 million, an increase of $2.4 million from As of the end of 2007, the cumulative amount of debt used to finance capital assets titled to others was $83.9 million, an increase of $11.4 million from the total at the end of Grants were provided to municipalities for park development and community development projects; such as streetscape improvements and water and sewer infrastructure. Land conservancies received grants to maintain open space. Absent the effect of the accumulated outstanding debt used for these projects, the County would have reported higher total government-wide net assets. As of the end of 2007, $21.8 million in open space program commitments to other municipalities and to land conservancies remain. Governmental activities net assets. Total governmental net assets were $(3.2) million, an increase of $2.1 million from the prior year. Net assets are a measure of the difference between all assets and all liabilities, regardless of their potential relevance for near-term financing decisions. The most significant factor causing the increase was the continued capital construction of County facilities. The expansion of the Chester County prison and the construction of the new Justice Center are expected to be completed in Investment in capital assets, net of related debt was $5.0 million at the end of the year, an increase of $3.9 million from the prior year. Although investment in capital assets is reported net of related outstanding debt, the resources needed to repay this debt must be provided from other sources. The Unaudited see accompanying independent auditors report 7

30 Management s Discussion and Analysis December 31, 2007, Continued capital assets themselves cannot be used to liquidate these liabilities, as the assets are used to provide governmental services. Resources that are subject to various external restrictions on how they may be used in support of programs and services totaled $5.1 million at the end of the year, a decrease of $2.0 million. This decrease is reflected in the funds restricted for the County records improvement and the affordable housing act. Unrestricted governmental net assets amount to $(13.2) million, an increase of $0.2 million from Unrestricted net assets are net assets remaining after removing net assets, invested in capital assets, net of related debt and net assets, restricted. The increase from 2006 can be attributed primarily to the additional cash and investments on hand as of December 31, Business-type net assets. Total business-type net assets for the Pocopson Home, the County s business-type activity, were $4.9 million. This is up $0.3 million from the prior year. The increase was due to additional grant funding received as a result of decertifying 15 patient beds from 290 to 275 for the facility in The investment in capital assets net of related debt was $4.3 million, while unrestricted assets were $0.6 million. Government-wide Statement of Activities The table below summarizes the changes in net assets for the primary government for the period ended December 31, 2007 and compares the changes to Chester County Primary Government Summary of Changes in Net Assets For the Year Ended December 31, 2007 and 2006 Unaudited see accompanying independent auditors report Governmental Business-type Activities Activities Total Revenues: Program revenues: Charges for services $ 39,283,988 $ 40,403,375 $ 21,572,855 $ 20,425,579 $ 60,856,843 $ 60,828,954 Operating grants and contributions 194,405, ,305, ,405, ,305,506 Capital grants and contributions 176,594 2,879, , ,784 1,126,062 3,509,925 General revenues: Taxes 136,094, ,496, ,094, ,496,054 Investment earnings 9,130,749 8,185,997 7,418 48,324 9,138,167 8,234,321 Miscellaneous 1,753,971 6,356, ,753,971 6,356,148 Total Revenues $ 380,845,346 $ 371,626,221 $ 22,529,741 $ 21,104,687 $ 403,375,087 $ 392,730,908 Expenses: General government $ 32,972,229 $ 32,488,547 $ - $ - $ 32,972,229 $ 32,488,547 Judicial government 38,771,294 37,537, ,771,294 37,537,257 Public safety 15,993,396 16,438, ,993,396 16,438,544 Corrections 36,234,750 31,876, ,234,750 31,876,487 Public w orks 1,506,075 1,347, ,506,075 1,347,222 Human services 207,131, ,374,187 23,867,112 23,048, ,998, ,422,643 Culture and recreation 16,752,209 15,740, ,752,209 15,740,917 Conservation and development 8,286,655 8,000, ,286,655 8,000,414 Interest on long-term debt 19,440,346 22,656, ,440,346 22,656,810 Total Expenses $ 377,088,596 $ 359,460,385 $ 23,867,112 $ 23,048,456 $ 400,955,708 $ 382,508,841 Excess (deficiency) before transfers 3,756,750 12,165,836 (1,337,371) (1,943,769) 2,419,379 10,222,067 Transfers (1,602,529) (2,964,828) 1,602,529 2,964, Decrease/Increase in net assets 2,154,221 9,201, ,158 1,021,059 2,419,379 10,222,067 Net assets - beginning (5,335,091) (14,536,099) 4,672,355 3,651,296 (662,736) (10,884,803) Net assets - ending $ (3,180,870) $ (5,335,091) $ 4,937,513 $ 4,672,355 $ 1,756,643 $ (662,736) 8

31 Management s Discussion and Analysis December 31, 2007, Continued Governmental activities revenues. Revenues for the County s governmental activities were $380.8 million for the year ended December 31, The pie chart below shows the composition of revenues by percent. Revenues by Source Governmental Activities For the Year Ended December 31, 2007 Investment Earnings and Miscellaneous 2.9% Charges for Services 10.3% Taxes 35.7% Capital Grants and Contributions 0.1% Operating Grants and Contributions 51.0% Operating grants and contributions are the largest source of governmental activities revenues. The 2007 total of $194.4 million, or 51.0 percent of revenue, represents an increase of $10.1 million or 5.5 percent from Managed Behavioral Healthcare revenues increased $4.8 million from This was due to negotiated changes in the HealthChoices Program administered by the Commonwealth. Capitation revenues increased by 9.5 percent for 2007 and membership increased 2.5 percent over Also, Mental Health/Mental Retardation received additional funding of $4.1 million for increased mental health services for Waiver and Long-Term Structured Residence (LTSR). Taxes comprise the next largest revenue source at $136.1 million, or 35.7 percent of governmental revenues. For budget year 2007 the real estate tax rate was mills per $1,000 of assessed property, up 3.68 percent from mills for Capital grants and contributions totaled $0.2 million and were used for public works bridge programs. Capital grants vary from year-to-year based upon projects that would be eligible for intergovernmental funding and do not lend themselves to year-to-year comparison. Charges for services amounted to 10.3 percent of governmental activities funding sources. Those who benefited from services paid $39.3 million of the costs for services. Charges for services include fees, fines, licenses, permits, and commissions for certain fees collected by County row officers on behalf of the Commonwealth of Pennsylvania. Investment earnings and miscellaneous income, combined amounted to $10.9 million or 2.9 percent of revenues, a decrease of $3.7 million from Interest income from investments was $9.1 million, an Unaudited see accompanying independent auditors report 9

32 Management s Discussion and Analysis December 31, 2007, Continued increase of $0.9 million from Miscellaneous income decreased $4.6 million from The decrease was a result of bond premiums recognized in 2006 and not in Governmental activities expenses. Expenses for governmental activities totaled $377.1 million, up $17.6 million from Expenses by Function Governmental Activities For the Year Ended December 31, 2007 Culture and Recreation 4.4% Interest on longterm debt 5.2% General Government 8.7% Judicial Government 10.4% Human Services 54.9% Public Safety 4.2% Corrections 9.6% Public Works, Conservation and Development 2.6% Human services programs with costs totaling $207.1 million, comprised 54.9 percent of governmental activities expense, up $13.8 million. This was due to increased program spending for Managed Behavioral Healthcare for two Commonwealth initiatives, along with increases in membership and rate structure. In addition, the Mental Health/Mental Retardation program received additional funding for increased demand in services. Judicial government is composed of the Court of Common Pleas, the minor judiciary, child support enforcement, and row offices that provide services to the courts. Expenses were $38.8 million, or 10.4 percent of the total, up $1.2 million from the prior year. Constable costs increased 22 percent from 2006 due to changes in reimbursement rates set by the Commonwealth. General government expenses for the administration of County government were $33.0 million and represent 8.7 percent of the total; up $0.5 million from last year. The majority of the increase was due to additional personal services costs in the Department of Computer Information Services (DCIS). Approved full-time positions increased by 7 from 2006 to Other increases were off-set from savings from the Voluntary Retirement Incentive Plan. Correctional expenses were $36.2 million or 9.6 percent of the total, up $4.4 million. Factors contributing to the increase include additional personnel services costs during the expansion of the prison and the recognition of litigation expenses in the amount of $1.3 million. Corrections programs include costs for the prison, adult probation services, and juvenile probation services. Unaudited see accompanying independent auditors report 10

33 Management s Discussion and Analysis December 31, 2007, Continued Public safety includes emergency management, operations of the enhanced 911 communications center, hazardous materials response, and emergency medical services. Expenses totaled $16.0 million or 4.2 percent of the total, a decrease of $0.4 million from the previous year. This decrease was due to the reduction in indirect costs charged. Culture and recreation expenses, which include parks and recreational activities as well as library programs, totaled $16.8 million or 4.4 percent of total expenses, an increase of $1.0 million from Changes in the scope of projects contributed to the increases in expenses. The balance of program expenses, $9.8 million, were for public works bridge activities and conservation and development programs related to land use planning, soil conservation, agricultural development, and water resources. This is an increase of $0.4 million from Net cost of governmental activities. The following table presents a summary of expenses, program revenues, and the net cost of services for programs before taxes, investment earnings, and miscellaneous income. Total expenses were $377.1 million. Those who benefited paid $39.3 million in charges for governmental services. Intergovernmental operating and capital grants subsidized $194.6 million for certain programs. Net Cost of Chester County's Governmental Activities For the Year Ended December 31, 2007 and 2006 Program Net Cost Expenses Revenues Of Services General government $ 32,972,229 $ 32,488,547 $ 13,532,752 $ 18,017,587 $ 19,439,477 $ 14,470,960 Judicial government 38,771,294 37,537,257 14,108,437 13,516,250 24,662,857 24,021,007 Public safety 15,993,396 16,438,544 10,542,045 9,053,433 5,451,351 7,385,111 Corrections 36,234,750 31,876,487 4,186,887 4,603,722 32,047,863 27,272,765 Public works 1,506,075 1,347,222 1,006, , , ,494 Human services 207,131, ,374, ,556, ,746,434 18,575,353 14,627,753 Culture and recreation 16,752,209 15,740, , ,014 16,359,145 15,369,903 Conservation and development 8,286,655 8,000,414 1,539,263 2,401,854 6,747,392 5,598,560 Debt service 19,440,346 22,656, ,440,346 22,656,810 Total $ 377,088,596 $ 359,460,385 $ 233,865,650 $ 227,588,022 $ 143,222,946 $ 131,872,363 Business-type activities. Net assets of the County s nursing home were $4.9 million after a $1.6 million transfer from governmental activities. In 2006 the transfer from governmental activities was $3.0 million. Net patient service revenues for the nursing home increased by $1.1 million due to rate increases in Medicaid and Medicare. Additional capital grant funding of $0.9 million was received for facilities enhancements, an increase of $0.3 million from the prior year. In addition, expenses for contracted agency nurses were $0.3 million less in 2007 than in FUNDS FINANCIAL ANALYSIS The County uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Unaudited see accompanying independent auditors report 11

34 Management s Discussion and Analysis December 31, 2007, Continued Governmental Funds The accounting focus of the County s governmental funds is to provide information on near-term inflows, outflows, and balances of expendable resources. Such information is valuable in assessing the County s financing requirements. In particular, unreserved fund balances serve as a useful measure of a government s net resources available for spending at the end of the year. For the year ended December 31, 2007, Chester County governmental funds reported combined ending fund balances of $166.3 million, an increase of $60.8 million. Unreserved and undesignated fund balance increased by $6.1 million due to favorable operating results. Over $2.0 million in personnel savings was recognized from voluntary retirement positions not filled immediately and transfers to other funds were $3.5 million less than budgeted. Fund balance for unreserved and designated for capital projects increased $50.6 million primarily due to borrowings for the completion of the prison expansion, the new Justice Center and the continuation of capital programs, such as open space. The chart below shows the components of fund balances as of December 31, Governmental Funds Fund Balance Components As of December 31, 2007 Unreserved and undesignated $26,392, % Reserved $5,308, % Unreserved and designated for debt service $22,181, % Unreserved and designated for working capital reserve $15,700, % Unreserved and designated for capital projects $96,742, % General Fund. The General Fund is the primary operating fund of the County. At the end of 2007, the total General Fund balance was $39.3 million, an increase of $5.9 million. Unreserved fund balance totaled $38.4 million and fund balance reserved for restricted purposes totaled $0.8 million. The unreserved, designated working capital reserve totaled $15.7 million. One measure of the County s financial strength is the level of cash reserves for contingencies. The Board of Commissioners maintains a working capital reserve in order to provide a stable tax and revenue structure. Consequently, at the end of each year, an amount equal to 10 percent of the subsequent year s General Fund expenditure budget is designated as a working capital reserve. Unaudited see accompanying independent auditors report 12

35 Management s Discussion and Analysis December 31, 2007, Continued The unreserved, undesignated General Fund balance totaled $22.7 million, an increase of $5.3 million from the prior year. A portion of the unreserved, undesignated fund balance at year end in the amount of $10.0 million was allocated as a funding source to the 2008 General Fund budget. Managed Behavioral Healthcare Fund. The Managed Behavioral Healthcare special revenue fund had an unreserved, undesignated fund balance of $0.7 million at the end of Revenues increased from $49.3 million to $54.0 million, an increase of $4.7 million. Expenditures increased from $49.0 million to $54.3 million, an increase of $5.3 million. As discussed earlier, this was due to two Commonwealth initiatives, growth in membership and increases in rate structure. Mental Health/Mental Retardation Fund. The Mental Health/Mental Retardation special revenue fund maintains no fund balance. Revenues in this fund increased to $69.5 million from $64.0 million, an increase of 8.6 percent. Expenditures increased from $65.3 million to $71.0 million, an increase of $5.7 million or 8.7 percent. Mental Health/Mental Retardation received additional funding for increased mental health services for Waiver and Long-Term Structured Residence (LTSR). The General Fund transfers an amount sufficient to bring the fund balance to zero. In 2007, there was a transfer of $1.5 million from the General fund. Capital Improvement Fund. The Capital Improvement Fund had a total fund balance of $94.4 million, an increase of $50.0 million from the prior year. Proceeds from the 2006 and 2007 General Obligation Notes combined with $2.6 million derived from capital grants and interest income, supported $65.3 million in capital expenditures. Debt Service Fund. As of the end of the year the total fund balance was $22.2 million, an increase of $6.2 million from the prior year. The County issued the 2007 General Obligation Bond to refund the 2005 General Obligation Note Series A & B. The County realized savings of over $5.7 million in 2007 as a result of the refunding transaction. The County issued 2007 General Obligation Note Series A & B ($50 million) and 2007 General Obligation Note Series C & D ($65 million). Proceeds will be used to fund the County s capital programs. The County generally classifies variable rate loans from the Delaware Valley Regional Finance Authority as general obligation notes and fixed rate borrowings issued through an underwriter and sold to bondholders as general obligation bonds. Proprietary Funds The County maintains three proprietary funds the Pocopson Home enterprise fund and two governmental-type internal service funds, the Benefits fund and the Technology fund. The fund financial statements for the business-type activity enterprise fund contain the same information as the governmentwide statements but in greater detail. Governmental-activity internal services funds are reported in the aggregate in the fund financial statements. In the government-wide statements, these costs are allocated to governmental and business type activities. Pocopson Home Fund. Total net assets of the Pocopson Home enterprise fund as of December 31, 2007, were $3.2 million. Of this amount, $4.3 million is invested in capital assets net of related debt and $(1.1) million in restricted and unrestricted net assets combined. After a transfer of $1.6 million from the General Fund, the Pocopson Home enterprise fund ended the year with an increase of $0.3 million in net assets. Internal Service Funds. Net assets of the internal service funds as of December 31, 2007, were $11.1 million, up $3.6 million from the prior year. This was due to favorable claims experience, changing from an equivalent premium base to pay-as-you-go and decreases in long-term disability reserves. Unaudited see accompanying independent auditors report 13

36 Management s Discussion and Analysis December 31, 2007, Continued GENERAL FUND BUDGETARY HIGHLIGHTS This section provides a summary of the major factors involved in the variances in revenue and expenditure budgets between: 1) the Original Budget and the Final Amended Budget; and 2) the Final Amended Budget and the Actual Amounts for the General Fund General Fund Original Budget vs. Final Amended Budget Over the course of the year the original budget was increased to recognize supplemental revenues which were subsequently applied to the appropriations budget. The budget increased $0.9 million due to an increase in intergovernmental revenues (general grants and health and welfare grants). The increases were the result of the following: Carryover intergovernmental funding. Most grants are awarded on a fiscal year that differs from the County s calendar year budget. The original budget was based upon estimates of the amounts remaining from awards made during Positive variances between estimates and actual were eligible for carryover. Final allocations and new awards of intergovernmental revenues during Variances between final amended and original budget reflect the Commonwealth s July 1 - June 30 fiscal year versus the County s calendar year General Fund Final Amended Budget vs. Actual Amounts Revenue Variances. Variances between actual revenues and the final budget for revenues totaled $(0.3) million. Tax collections were slightly less than budget by $0.2 million. Anticipated revenues not received in Public Health primarily caused the $0.6 million negative variance for licenses and permits. The slow down in the housing market resulted in the issuance of fewer sewage and well permits. Departmental earnings were $0.3 million higher than budget. As a result of adding a collection officer, adult probation supervision fees increased over Real estate transfer fees exceeded the budget and constable fee revenues collected were greater due to the increase in constables rates. Higher than expected interest rates on investments contributed to a $0.6 million positive variance in interest earnings. Expenditure and Other Financing Uses Variances. Variances between the final budget for expenditures and other financing uses totaled a positive $8.6 million. Significant variances include the following: The general government departments, in aggregate, under spent their final operating budgets by $4.0 million. Savings from the Voluntary Retirement Incentive Plan resulted in positive variances within personal services for several of the departments. Facilities Management, DCIS and nondepartmental under spent their budgets for materials and services due to changes in the scope of project requests. Judicial and corrections departments under spent their budgets by $2.1 million and $0.2 million, respectively. Most of the positive variance was a result of employee turnover and vacancies. Less pass-thru funding to other organizations contributed to Emergency Services under spending their budget by $0.4 million. Unaudited see accompanying independent auditors report 14

37 Management s Discussion and Analysis December 31, 2007, Continued The Health department s expenditures were $1.3 million less than anticipated due to reduced grant funding. The Planning department under spent their budget by $0.3 million primarily due to savings in personal services. Operating transfers out had a positive variance of $3.5 million. This was primarily due to the Public Safety Fund receiving more wireless revenue funding than anticipated and the Enterprise Fund (Pocopson Home) receiving additional net patient service revenues from the Commonwealth due to rate increases for Medicaid and Medicare. Capital Assets CAPITAL ASSETS AND DEBT ADMINISTRATION Chester County s investment in capital assets as of December 31, 2007 amounted to $308.9 million, net of accumulated depreciation. The following table summarizes the County s investment in capital assets. Capital Assets, Net of Depreciation December 31, 2007 and 2006 Governmental Business-type Total Total Activities Activities December 31, 2007 December 31, 2006 Land and improvements $ 19,241,010 $ 33,234 $ 19,274,244 $ 22,488,706 Buildings and improvements 54,832,883 2,519,265 57,352,148 55,492,139 Machinery equipment 13,894, ,873 14,570,101 15,343,166 Machinery equipment capital lease 1,059,601-1,059,601 1,017,935 Infrastructure 8,425,906-8,425,906 8,789,739 Construction in progress 144,692,121 1,807, ,499, ,764,275 Land development rights 66,754,062-66,754,062 57,176,169 Total $ 308,899,811 $ 5,035,687 $ 313,935,498 $ 269,072,129 Highlights of the amounts expended during 2007 for major capital assets include: $28.1 million for the on-going construction of the new Justice Center $8.0 million for the prison expansion and over $4.8 million for public safety $9.6 million for land development rights Additional detailed information on the County s capital assets can be found in Note 5 of the Notes to the Financial Statements. Long-term Debt The Commonwealth of Pennsylvania Local Government Unit Debt Act governs the amount of general obligation bonded indebtedness the County can incur. Under this Act, the County can legally incur nonelectoral debt equal to three hundred percent of its borrowing base. The borrowing base is calculated as one third of total revenues for the past three years minus certain statutory deductions. As of December 31, 2007 the County had outstanding debt of $474.5 million or approximately 38.1 percent of the maximum $1.2 billion as permitted by law. This amount represents 1.3 percent of the total taxable property value as of the end of the year. Total debt increased $99.3 million as a result of the Unaudited see accompanying independent auditors report 15

38 Management s Discussion and Analysis December 31, 2007, Continued issuance of the 2007 General Obligation Bond to refund the 2005 General Obligation Note Series A & B, the 2007 General Obligation Note Series A & B ($50 million), and 2007 General Obligation Note Series C & D ($65 million) less scheduled principal payments paid in General Obligation Debt Outstanding December 31, 2007 and 2006 Governmental Business-type Activities Activities Total General obligation bonds $ 278,089,718 $ 224,139,234 $ 750,282 $ 800,766 $ 278,840,000 $ 224,940,000 General obligation notes 195,624, ,213, ,624, ,213,000 Total $ 473,713,718 $ 374,352,234 $ 750,282 $ 800,766 $ 474,464,000 $ 375,153,000 Additional detailed information on the County s long-term debt can be found in Note 11 of the Notes to the Financial Statements. ECONOMIC FACTORS AND 2007 BUDGET Chester County continues to enjoy a diverse tax base with little concentration in any one taxpayer. The top ten taxpayers represent 2.81 percent of the total assessed values as of December 31, Chester County s average annual unemployment rate in 2007 was 3.1 percent, below the Commonwealth of Pennsylvania and the national averages of 4.3 percent and 4.6 percent, respectively. A $549.1 million consolidated budget was adopted for Concurrently, the real estate tax rate was set at mills, the same rate as CONTACTING CHESTER COUNTY S FINANCIAL MANAGEMENT This financial report is designed to provide our citizens, taxpayers, investors, customers and creditors with a general overview of Chester County s finances and to demonstrate the County s accountability for the money it receives. Questions regarding this report or requests for additional financial information should be directed to Valentino F. DiGiorgio, Controller, 2 North High Street, Suite 540, West Chester, PA, , or visit the County s web site at Unaudited see accompanying independent auditors report 16

39 Basic Financial Statements

40 Statement of Net Assets December 31, 2007 Primary Government Component Units Governmental Business-Type Solid Waste Nonmajor Activities Activities Total Authority Component Units ASSETS Current assets: Cash and cash equivalents $ 96,081,756 $ 204,938 $ 96,286,694 $ 911,778 $ 3,772,985 Investments 2,957,341-2,957,341 9,628, ,000 Receivables (net where applicable, of allowances for uncollectible amounts): Taxes 5,969,454-5,969, Accounts 40,076 3,216,590 3,256,666 1,378, ,510 Grants 13,563, ,776 13,683,509-81,398 Accrued interest and dividends 273, , Other 3,198, ,105 4,098, Internal balances 2,563,533 (2,563,533) Inventories 88,689 93, , Prepaids 2,890,173 31,907 2,922, , ,247 Other assets 127,754 6, , Advances to subcontractors 3,380,874-3,380, Restricted cash and cash equivalents 60,870,561-60,870, Restricted investments 54,299,221-54,299, ,689 - Total current assets 246,305,556 2,009, ,315,086 12,433,267 4,804,140 Noncurrent assets: Other assets 2,154,533-2,154, Restricted cash and cash equivalents 413, , , Restricted investments 786, ,505 19,266,723 - Due from authorities 150, , Capital assets, not being depreciated 229,409,356 1,807, ,216, Capital assets, being depreciated, net 79,490,455 3,228,372 82,718,827 15,457,230 16,574,966 Intangible assets, net ,810 11,909 Total noncurrent assets 312,404,570 5,349, ,753,875 34,799,763 16,586,875 Total assets 558,710,126 7,358, ,068,961 47,233,030 21,391,015 LIABILITIES Current liabilities: Vouchers and accounts payable 34,275, ,902 34,541, , ,132 Accrued salaries 2,697, ,768 3,026, ,983 12,544 Accrued interest payable 3,978,591-3,978, Funds held in escrow 1,398,730-1,398, Funds held as fiduciary - 307, , Due to other governments 1,608,976-1,608, Unearned revenue 22,116,181-22,116, Other liabilities 1,315,937-1,315, , ,961 Compensated absences 3,591, ,919 4,040, Workers' compensation claims 507, , Health and long-term disability claims 2,111,229-2,111, Capital leases payable 703, , Notes and bonds payable 14,230,105 53,901 14,284,006-17,481 Closure and postclosure care costs ,689 - Total current liabilities 88,535,880 1,405,229 89,941,109 2,098, ,118 Noncurrent liabilities: Advance from primary government ,170 Accrued salaries 356, , Compensated absences 4,019, ,712 4,339, Workers' compensation claims 1,862,465-1,862, Health and long-term disability claims 284, , Capital leases payable 356, , Notes and bonds payable 466,475, , ,172, ,964 98,536 Closure and postclosure care costs ,949,238 - Total noncurrent liabilities 473,355,116 1,016, ,371,209 11,068, ,706 Total liabilities 561,890,996 2,421, ,312,318 13,167, ,824 NET ASSETS Invested in capital assets, net of related debt 5,005,509 4,285,405 9,290,914 15,414,076 16,574,966 Restricted for: Hatfield house nonexpendable 942, , Hatfield house expendable 282, , Agricultural easement 334, , Child support enforcement 222, , Landfill closure ,317,485 - Affordable housing act 1,046,394-1,046, County records improvement 2,212,574-2,212, Nolan estate 19,149-19, Bequeath - 68,482 68, Donor ,753 Special purpose ,101,615 Unrestricted: (13,246,180) 583,626 (12,662,554) 10,334,419 2,685,857 Total net assets (deficit) $ (3,180,870) $ 4,937,513 $ 1,756,643 $ 34,065,980 $ 20,512,191 See accompanying notes to the financial statements. 17

41 Statement of Activities For the Year Ended December 31, 2007 Program Revenues Operating Capital Charges for Grants and Grants and Functions/Programs Expenses Services Contributions Contributions Primary government Governmental activities: General government $ 32,972,229 $ 13,242,431 $ 290,321 $ - Judicial government 38,771,294 8,520,523 5,587,914 - Public safety 15,993,396 9,868, ,666 - Corrections 36,234,750 2,779,337 1,407,550 - Public works 1,506, , ,594 Human services 207,131,642 3,480, ,075,339 - Culture and recreation 16,752, , ,996 - Conservation and development 8,286,655 1,121, ,963 - Interest on long-term debt 19,440, Total governmental activities 377,088,596 39,283, ,405, ,594 Business-type activities: Geriatric center 23,867,112 21,572, ,468 Total business type activities 23,867,112 21,572, ,468 Total primary government $ 400,955,708 $ 60,856,843 $ 194,405,068 $ 1,126,062 Component units Solid waste authority Public works 11,461,919 14,624, Nonmajor component units 6,483,290 1,755,460 2,709,738 49,655 Total component units $ 17,945,209 $ 16,379,947 $ 2,709,738 $ 49,655 General revenues Taxes: Property taxes, levied for general purposes Property taxes, levied for debt service Property taxes, levied for parks and recreation Property taxes, levied for library Personal property taxes Hotel taxes Investment earnings Miscellaneous Transfers Total general revenues and transfers Change in net assets Net assets - beginning Net assets - ending See accompanying notes to the financial statements. 18

42 Net (Expense) Revenue and Changes in Net Assets Primary Government Component Units Nonmajor Governmental Business-Type Solid Waste Component Activities Activities Total Authority Units $ (19,439,477) $ - $ (19,439,477) $ - $ - (24,662,857) - (24,662,857) - - (5,451,351) - (5,451,351) - - (32,047,863) - (32,047,863) - - (499,162) - (499,162) - - (18,575,353) - (18,575,353) - - (16,359,145) - (16,359,145) - - (6,747,392) - (6,747,392) - - (19,440,346) - (19,440,346) - - (143,222,946) - (143,222,946) (1,344,789) (1,344,789) (1,344,789) (1,344,789) - - (143,222,946) (1,344,789) (144,567,735) ,162, (1,968,437) ,162,568 (1,968,437) 96,430,852-96,430, ,245,199-27,245, ,580,939-5,580, ,797,602-6,797, ,384-40, ,514,785 9,130,749 7,418 9,138,167 1,348, ,349 1,753,971-1,753, ,767 - (1,602,529) 1,602, ,377,167 1,609, ,987,114 1,557,725 1,724,134 2,154, ,158 2,419,379 4,720,293 (244,303) (5,335,091) 4,672,355 (662,736) 29,345,687 20,756,494 $ (3,180,870) $ 4,937,513 $ 1,756,643 $ 34,065,980 $ 20,512,191 19

43 Balance Sheet Governmental Funds December 31, 2007 Assets: Managed Mental Health Behavioral Mental General Healthcare Retardation Cash and cash equivalents $ 28,788,511 $ 1,081,705 $ 16,720,172 Investments 893, ,353 Taxes receivable 4,541, Grants receivable 3,332, ,277 Interest and dividends receivable 180, Other receivables 2,058, ,053 Due from other funds 8,171, Inventories 88, Prepaids 759, Other assets 7, Advances to subcontractors - - 3,345,696 Due from authorities 150, Restricted cash and cash equivalents 590,168 11,084,568 - Restricted investments 786, Total Assets $ 50,348,183 $ 12,166,273 $ 21,062,072 Liabilities and fund balances: Liabilities: Vouchers and accounts payable $ 2,003,554 $ 48,768 $ 11,662,221 Accrued liabilities 1,558,873 9,877 94,337 Funds held in escrow 582, Due to other funds - 368,662 - Due to other governments - - 1,583,032 Deferred revenues 5,065,573 11,084,568 7,722,482 Other liabilities 1,864, Total liabilities 11,074,573 11,511,875 21,062,072 Fund balances: Reserved for: County records improvement Agricultural easement Child support enforcement Prepaids 847, Nolan estate Affordable housing act Hatfield house Unreserved, reported in: General fund 38,425, Special revenue - 654,398 - Capital projects Debt service Total fund balances 39,273, ,398 - Total liabilites and fund balances $ 50,348,183 $ 12,166,273 $ 21,062,072 See accompanying notes to the financial statements. 20

44 Other Total Capital Debt Governmental Governmental Improvement Service Funds Funds $ 2,680,244 $ 21,265,033 $ 10,206,469 $ 80,742,134 57, , ,488 2,453, , ,005 5,969, ,092-9,698,642 13,563,733 91,544-1, , ,056 2,927, ,171, ,689-90,184 10, , ,743 9, ,178 3,380, ,170 48,651, ,551 60,739,888 53,947, ,733,968 $ 105,683,450 $ 22,971,891 $ 21,832,694 $ 234,064,563 $ 11,266,060 $ 4,756 $ 5,856,566 $ 30,841,925 5, ,438 2,335, , , ,526,633 3,895, ,217 1,610,249 4, ,651 1,933,688 26,595, ,864,299 11,275, ,449 12,026,000 67,740, ,212,574 2,212, , , , , , ,149 19, ,046,394 1,046, , , ,425, ,012,406 3,666,804 94,074,087-2,668,179 96,742,266-22,181,442-22,181,442 94,408,224 22,181,442 9,806, ,324,368 $ 105,683,450 $ 22,971,891 $ 21,832,694 $ 234,064,563 21

45 Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Assets December 31, 2007 Fund balance - governmental funds balance sheet $ 166,324,368 Amounts reported for governmental activities in the statement of net assets are different because: Capital assets, of $442,755,604 less accumulated depreciation of $134,915,394, used in governmental activities, are not financial resources and therefore are not reported in the funds. Those assets consist of: Land 12,888,505 Land improvements,net 6,352,505 Land development rights 66,754,062 Infrastructure, net 8,425,906 Buildings and improvements, net 53,322,670 Leasehold improvements, net 1,510,214 Machinery and equipment, net 13,894,228 Construction in process 144,692,121 Total capital assets 307,840,211 Department of Community Development low income housing loans reported as an expenditure on a fund basis and recognized as a recievable on a government-wide basis. 670,300 Internal service funds are used by management to charge the costs of certain activities, such as workers compensation, flexible benefits and computer equipment replacement. Those assets and liabilities consist of: Cash 16,739,209 Receivables 311,609 Prepaids 2,018,000 Machinery and equipment capital lease, net 1,059,601 Total assets 20,128,419 Vouchers payable (2,979,393) Due to other funds (1,712,394) Accrued salaries and wages payable (5,079) Health care and dependent care FSA withholding (155,210) Other FSA withholding (11,479) Parking FSA withholding (1,519) Transit FSA withholding (162) Accrued health and dental liability (2,000,000) Accrued long term disability (395,754) Accrued workers' compenation claims liability (507,805) Capital leases payable (1,059,601) Accrued workers' compensation payable liability (1,862,465) Total liabilities (10,690,861) Total net assets 9,437,558 Some liabilities, including notes and bonds payable of $473,713,718 and compensated absences of $7,611,601, are not due and payable in the current period and therefore are not reported in the funds. Bonds and notes payable (480,705,761) Compensated absences (7,611,601) Accrued bond and note interest payable (3,978,591) Unamortized proceeds of interest rate swap (623,234) Net OPEB obligation (1,458) Accrued prison stipulation and settlement agreement (1,250,000) (494,170,645) Other assets are not available to pay for current-period expenditures and therefore are deferred in the funds. Delinquent real estate taxes 4,234,426 Negative net pension obligation 11,428 Bond issuance costs, net 1,602,872 Deferred tax claim fees 868,612 6,717,338 Net assets of governmental activities $ (3,180,870) See accompanying notes to the financial statements. 22

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47 Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds For the Year Ended December 31, 2007 Managed Mental Health Behavioral Mental General Healthcare Retardation Revenues: Taxes: Real estate $ 96,009,327 $ - $ - Personal property 40, Licenses and permits 973, General grants 3,900, Health and welfare grants 7,636,576 53,886,253 67,594,096 Departmental earnings 12,814, ,862 Court costs and fines 4,761, Interest and rent 3,564,450 94,167 1,704,033 Other 2,961,240-64,426 Total revenues 132,662,019 53,980,420 69,483,417 Expenditures: Current: General government 25,302, Judicial 33,271, Public safety 2,660, Corrections 34,797, Public works Human services 10,833,950 54,269,626 71,004,411 Culture and recreation Conservation and development 4,833, Capital outlay: Bridges Other 23, Debt service: Principal Interest Debt issuance costs Total expenditures 111,722,617 54,269,626 71,004,411 Excess (deficiency) of revenues over (under) expenditures 20,939,402 (289,206) (1,520,994) Other financing sources (uses): Issuances of refunding bond Premium on bond issue Note issuance Note refunding Transfers in - 79,945 1,587,494 Transfers out (15,437,299) (411,063) (66,500) Sale of capital assets 368, Total other financing sources (uses) (15,068,735) (331,118) 1,520,994 Net change in fund balances 5,870,667 (620,324) - Fund balances: Beginning of year 33,402,943 1,274,722 - End of year $ 39,273,610 $ 654,398 $ - See accompanying notes to the financial statements. 24

48 Other Total Capital Debt Governmental Governmental Improvement Service Funds Funds $ - $ 26,978,702 $ 12,320,116 $ 135,308, , , ,594-14,011,751 18,089, ,188, ,305,713-1,477,286 11,889,296 26,302, ,692 4,888,707 2,391,218 1,667,759 1,011,503 10,433,130 46,200 1,502, ,282 4,914,323 2,614,012 31,625,922 84,889, ,255,218 1,512,567 36, ,687 27,235, ,592,821 38,864, ,355-11,911,169 14,779, , ,534, ,731-1,110,810 1,291,541 6,329,360-64,475, ,912,532 3,514,263-12,072,433 15,586,696 3,629, ,463,138 8, ,000 49,186,537-1,305,533 50,515,485-13,785,739-13,785,739-15,102,807-15,102, , ,296 65,306,766 29,606,947 96,851, ,762,005 (62,692,754) 2,018,975 (11,962,210) (53,506,787) - 63,445,000-63,445,000-2,391,371-2,391, ,000, ,000,000 - (65,297,000) - (65,297,000) - 3,649,265 12,955,276 18,271,980 (2,329,517) - (1,630,130) (19,874,509) , ,670,483 4,188,636 11,325, ,305,406 49,977,729 6,207,611 (637,064) 60,798,619 44,430,495 15,973,831 10,443, ,525,749 $ 94,408,224 $ 22,181,442 $ 9,806,694 $ 166,324,368 25

49 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities For the Year Ended December, Net change in fund balances - total governmental funds $ 60,798,619 Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which capital outlays exceeded depreciation in the current period. In the current period these amounts are: Expenditures for capital assets 53,917,804 Depreciation expense (9,131,681) Retirement and sale of equipment (113,859) Land and land improvement donation (Embreeville Park) (956,183) Net adjustment 43,716,081 Revenue in the statement of activities that are not available to provide current financial resources are not reported as revenues in the funds. At the governmentwide level revenue recognition is not limited by availability. The effects of these adjustments in the current year are: Real estate taxes 746,423 Tax claim fees (5,679) Department of Community Development loans (23,440) The issuance of long-term debt provides current financial resources to governmental funds, while the repayment of the principal of debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net assets. Also, governmental funds report the effect of issuance costs, premiums, discounts, and similar items when debt is first issued, whereas these amounts are deferred and amortized in the statement of activities. This amount is the net effect of these differences in the treatment of long-term debt and related items. The net effects of these differences in the current period are: 717,304 Proceeds from note issuance (115,000,000) Proceeds of long term debt refundings (63,445,000) Premiums of long term debt refundings (2,391,371) Accrued Bond and Interest Expense (3,978,591) Debt retirement 65,297,000 Principal repayments 13,785,739 Payments of issuance cost 682,296 Amortization of bond premiums 298,438 Amortization of swaption proceeds 293,874 Amortization of issuance cost (322,894) Net OPEB obligation 482 Negative net pension obligation 11,428 Accrued prison stipulation and settlement agreement-legal fees (536,791) Accrued prison stipulation and settlement agreement-short-term-salary (356,604) Accrued prison stipulation and settlement agreement-long-term-salary (356,604) Net adjustment (106,018,598) 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 the governmental funds: Compensated absences (386,551) Internal service funds are used by management to charge the costs of certain activities, such as workers' compensation, flexible benefits and computer equipment replacement, to individual funds. The non-operating revenue of certain activities of internal service funds is reported with governmental activities. The results of operations are eliminated through consolidation. 3,327,366 Change in net assets of governmental activities $ 2,154,221 See accompanying notes to the financial statements. 26

50 Statement of Net Assets Proprietary Funds December 31, 2007 Business-type Activities Enterprise Fund Pocopson Governmental Activities Internal Service Funds Assets: Current assets: Cash and cash equivalents $ 204,938 $ 16,235,603 Investments - 503,606 Receivables (net where applicable, of allowances for uncollectible amounts): Accounts 3,216,590 - Grants 119,776 - Other 900, ,609 Inventories 93,499 - Prepaids 31,907 2,018,000 Other assets 6,248 - Restricted cash and cash equivalents 313,618 - Total current assets 4,886,681 19,068,818 Noncurrent assets: Capital assets, net 5,035,687 1,059,601 Total noncurrent assets 5,035,687 1,059,601 Total assets 9,922,368 20,128,419 Liabilities: Current liabilities: Vouchers and accounts payable 265,902 2,979,392 Due to other funds 4,275,927 - Accrued liabilities 328,768 5,079 Funds held as fiduciary 307,739 - Other liabilities - 168,371 Compensated absences 448,919 - Workers' compensation claims - 507,805 Health and long-term disability claims - 2,111,229 Notes and bonds payable 53,901 - Capital leases payable - 703,584 Total current liabilities 5,681,156 6,475,460 Noncurrent liabilities: Compensated absences 319,712 - Workers' compensation claims - 1,862,465 Health and long-term disability claims - 284,525 Notes and bonds payable 696,381 - Capital leases payable - 356,017 Total noncurrent liabilities 1,016,093 2,503,007 Total liabilities 6,697,249 8,978,467 Net assets: Invested in capital assets, net of related debt 4,285,405 - Restricted from bequeath 68,482 - Unrestricted (1,128,768) 11,149,952 Total net assets 3,225,119 $ 11,149,952 Internal service activities that are included in this report but are eliminated from the statement of net assets through consolidation. 1,712,394 Net assets of business-type activities $ 4,937,513 See accompanying notes to the financial statements. 27

51 Statement of Revenues, Expenses and Changes in Fund Net Assets Proprietary Funds For the Year Ended December 31, 2007 Business-type Activities Enterprise Fund Pocopson Governmental Activities Internal Service Funds Operating revenues: Net patient service revenues $ 21,540,895 $ - Self insurance premiums - employer - 29,149,130 Self insurance premiums - employee - 3,026,631 Computer usage fees - 1,501,794 Other 31, ,647 Total operating revenues 21,572,855 34,334,202 Operating expenses: Personal services 18,415, ,128 Other services and charges 3,753,204 8,455,712 Self insurance claims 169,680 21,651,307 Depreciation 433,785 1,028,386 Amortization Indirect costs 1,318,728 64,092 Total operating expenses 24,091,229 31,719,625 Operating (loss) income (2,518,374) 2,614,577 Nonoperating revenues (expenses): Interest income 7, ,711 Interest expense (37,654) (1,174) Total nonoperating revenues (expenses) (30,236) 974,537 (Loss) income before contributions and transfers (2,548,610) 3,589,114 Capital grant 949,468 - Transfers in 1,602,529 - Change in net assets 3,387 3,589,114 Total net assets - beginning 3,221,732 7,560,838 Total net assets - ending $ 3,225,119 $ 11,149,952 Change in net assets $ 3,387 Internal service activities that are included in this report but are eliminated from the statement of activities through consolidation. 261,771 Change in net assets of business-type activities $ 265,158 See accompanying notes to the financial statements. 28

52 Statement of Cash Flows Proprietary Funds For the Year ended December 31, 2007 Business-type Governmental Activities Activities Enterprise Fund Internal Services Pocopson Funds Cash flows from operating activities Receipts from customers and users $ 21,611,433 $ 33,677,556 Payments to suppliers (5,406,936) (6,284,777) Payments to employees (18,388,301) (590,893) Claims paid - (22,751,098) Other receipts 31,960 2,129,253 Net cash provided by (used in) operating activities (2,151,844) 6,180,041 Cash flows from noncapital financing activities Operating subsidies and transfers to other funds 2,343,559 - Cash flows from capital and financing activities Principal paid on capital related debt (51,261) (1,028,386) Interest paid on capital related debt (37,654) (1,174) Capital grant 1,434,928 - Capital purchases (1,527,975) - Net cash provided by (used in) capital and financing activities (181,962) (1,029,560) Cash flows from investing activities Interest and dividends received 7, ,711 Net cash provided by investing activities 7, ,711 Net increase in cash and cash equivalents 17,171 6,126,192 Cash and cash equivalents beginning of year (including Enterprise Fund restricted cash of $368,558) 501,385 10,613,017 Cash, cash equivalents and investments end of year (including Enterprise Fund restricted cash of $313,618) $ 518,556 $ 16,739,209 Reconciliation of operating (loss) income to net cash provided (used) by operating activities: Operating (loss) income $ (2,518,374) $ 2,614,577 Adjustments to reconcile operating loss to net cash used by operating activities: Depreciation of plant and equipment 433,785 1,028,386 Amortization of intangible assets (Increase) decrease in: Receivables, net 66, ,606 Prepaids (14,294) - Other assets-advances 11,918 - Increase (decrease) in: Funds held as fiduciary 4,338 - Accounts payable and accrued expenses (134,564) 2,164,262 Accrued leave (1,448) - Health and long-term disability claims - 238,210 Net cash provided (used) by operating activities $ (2,151,844) $ 6,180,041 Non cash transactions: Computers were acquired through capital lease of $1,069,735 in the Internal Service Funds. See accompanying notes to financial statements. 29

53 Statement of Fiduciary Net Assets Fiduciary Funds December 31, 2007 Employee Retirement Trust Fund Agency Funds Assets: Cash and cash equivalents $ 8,033,042 $ 10,967,735 Investments: US government obligations 30,927,843 44,548 Corporate bonds 2,856,318 - Equity mutual funds 39,636,031 - Stocks 114,845,288 - Mutual funds 67,033,648 - Accrued interest and dividends 302,833 - Agency tax / interest receivables - 12,265,312 Hotel tax receivable - 132,417 Total Assets $ 263,635,003 $ 23,410,012 Liabilities: Accounts payable $ 125,637 $ - Accrued liabilities 72,789 - Due to other governments - 3,399,964 Other liabilities - 6,139,059 Due to taxing authorities - 13,612,557 Hotel tax payable - 258,432 Total Liabilities 198,426 $ 23,410,012 Net assets Held in trust for pension benefits and other purposes $ 263,436,577 See accompanying notes to the financial statements. 30

54 Statement of Changes in Fiduciary Net Assets Fiduciary Funds Year ended December 31, 2007 Employee Retirement Trust Fund Additions: Contributions: Employee $ 6,034,203 Employer 7,847,367 Total contributions 13,881,570 Investment income: Net increase in fair value of investments 10,823,077 Interest 3,451,969 Dividends 2,988,690 Total investment gain 17,263,736 Less: investment management fees 978,233 Total investment gain - net 16,285,503 Total additions 30,167,073 Deductions: Benefit payments 11,685,331 Refund of employee contributions 974,691 Interest on refunds of employee contributions 219,152 Total deductions 12,879,174 Net increase in plan net assets 17,287,899 Plan net assets at beginning of year 246,148,678 Plan net assets at end of year $ 263,436,577 See accompanying notes to financial statements. 31

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56 Notes to the Financial Statements

57 Notes to the Financial Statements December 31, ) Summary of Significant Accounting Policies A) Reporting Entity The County of Chester, one of Pennsylvania s original three counties, was named by William Penn in It is located in southeastern Pennsylvania, approximately 30 miles west of Philadelphia. The Borough of West Chester is the County Seat. The County has 73 political subdivisions, consisting of one third class city (Coatesville), 15 boroughs and 57 townships. The County has a population of approximately 486,000 and covers 782 square miles, including some of the most productive agricultural land in Pennsylvania. Population and employment has dramatically grown in Chester County during the past thirty years as suburban development continues to spread westward and as high technology businesses grow along the Route 202 corridor. The median income of the County s households is one of the highest in the Commonwealth of Pennsylvania. As required by generally accepted accounting principles, the financial statements present the County of Chester (the primary government) and its component units. The component units (discussed below) are included in the County s reporting entity because of the significance of their operational or financial relationships with the County. Consistent with the guidance contained in Statement No. 14 of the Governmental Accounting Standards Board (GASB), The Financial Reporting Entity, as amended by Statement No. 39, the criteria used by the County to evaluate the possible inclusion of related entities (Authorities, Boards, Councils, and similar entities) within its reporting entity, are financial accountability and the nature and significance of the relationship. In determining financial accountability in a given case, the County reviews the applicability of the following criteria: Organizations that make up the legal County entity. Legally separate organizations if County officials appoint a voting majority of the organization s governing body and the County is able to impose its will on the organization or if there is a potential for the organization to provide specific financial benefits to, or impose specific financial burdens on, the County as defined below: Impose its Will If the County can significantly influence the programs, projects, or activities of, or the level of services performed or provided by, the organization. Financial Benefit or Burden Exists if the County (1) is entitled to the organization s resources or (2) is legally obligated or has otherwise assumed the obligation to finance the deficits of, or provide support to, the organization or (3) is obligated in some manner for the debt of the organization. Legally separate organizations that are fiscally dependent on the County. Fiscal dependency is established if the organization is unable to adopt a budget, levy taxes or set rates or charges, or issue bonded debt without approval by the County. Organizations that raise and hold economic resources for the direct benefit of the County. Organizations that are legally separate, tax-exempt entities and that meet all of the following criteria should be discretely presented as component units. These criteria are: The economic resources received or held by the separate organization are entirely or almost entirely for the direct benefit of the County, its component units, or its constituents. 33

58 Notes to the Financial Statements December 31, 2007, Continued 1) Summary of Significant Accounting Policies, Continued A) Reporting Entity, Continued The County, or its component units, is entitled to, or has the ability to otherwise access, a majority of the economic resources received or held by the separate organization. The economic resources received or held by an individual organization that the County, or its component units, is entitled to, or has the ability to otherwise access, are significant to the County. Based on the foregoing criteria, the reporting entity has been defined to include all the fund types and component units for which the County is financially accountable or for which there is a significant relationship. Specific information on the nature of the component units and a description of how the aforementioned criteria have been considered in determining whether to include such units in the County s financial statements are provided in the following paragraphs. Discretely Presented Component Units The component units presented in two columns in the government-wide financial statements include the financial data of the County s one major component unit and five non-major component units in separate columns. They are reported in separate columns to emphasize that they are legally separate from the County. Major Component Unit Chester County Solid Waste Authority (CCSWA): The CCSWA acquires, holds and operates solid waste disposal facilities and enters into waste disposal contracts. The members of the governing board of the Solid Waste Authority are appointed by the Board of County Commissioners. The County guarantees the debt of the Solid Waste Authority. The Authority was audited by other independent auditors for the year ended December 31, Non-major Component Units Chester County Area Airport Authority: The Chester County Area Airport Authority is responsible for the operations and administration of the Chester County Area Airport. The members of the governing board of the Area Airport Authority are appointed by the Board of County Commissioners. The County provides financial support through appropriations. The Authority was audited by Maillie, Falconiero & Company, LLP for the year ended December 31, Chester County Water Resources Authority: The Authority owns and operates four regional flood control facilities that were constructed on behalf of the County. The members of the governing board of the Water Resources Authority are appointed by the Board of County Commissioners. The County provides financial support through appropriations and the administrative staff are County employees. The Authority was audited by Maillie, Falconiero & Company, LLP for the year ended December 31, Chester County Library and Library System Board: The Library Board is responsible for the operations and administration of the County Library and supported libraries. The members of the governing board of the Library are appointed by the Board of County Commissioners. The County provides financial support which supplements State Library Aid and fees to fund operating expenditures. The administrative staff is all County employees. The Library was audited by Maillie, Falconiero & Company, LLP for the year ended December 31,

59 Notes to the Financial Statements December 31, 2007, Continued 1) Summary of Significant Accounting Policies, Continued A) Reporting Entity, Continued Non-major Component Units, Continued Chester County Conference and Visitors Bureau, Inc.: The purpose of the Bureau is to plan and promote programs designed to increase tourism. The members of the governing board of the Visitors Bureau are appointed by the Board of County Commissioners. The County provides financial support through the levy and collection of a hotel tax. The Visitors Bureau was audited by other independent auditors for the year ended June 30, Chester County General Authority: The Authority was created for the purpose of carrying out projects which are permitted under the Pennsylvania Municipality Authorities Act and are located in the County of Chester. The County has advanced the Authority the funds necessary to cover current expenses. The members of the governing board of the authority are appointed by the Board of County Commissioners. The Authority was dormant in 2007, in preparation for dissolution. The Authority was not audited for the year ended December 31, Complete financial statements of the individual component units can be obtained directly from their administrative offices. Administrative Offices Chester County Area Airport Authority Chester County Solid Waste Authority GO Carlson Chester County Airport PO Box 476 Coatesville, PA Honey Brook, PA Chester County Water Resources Authority Chester County General Authority Government Services Center 2 North High Street, Suite Westtown Road, Suite 280 PO Box 2748 West Chester, PA West Chester, PA Chester County Conference and Visitors Bureau Chester County Library 17 Wilmont Mews, Suite Exton Square Parkway West Chester, PA Exton, PA Related Organizations The Board of County Commissioners is also responsible for appointing all or some of the members of the boards of other organizations. The County s accountability for these organizations does not extend beyond making the appointments. The Board of Commissioners appoints board members of the following: Chester County Housing Authority Chester County Health and Education Facilities Authority Chester County Industrial Development Authority Delaware Valley Regional Finance Authority Southeastern Pennsylvania Transportation Authority 35

60 Notes to the Financial Statements December 31, 2007, Continued 1) Summary of Significant Accounting Policies, Continued B) Government-wide and Fund Financial Statements The accounting policies of the County of Chester conform to generally accepted accounting principles applicable to governments. The basic financial statements are presented using the government-wide financial statements and the fund financial statements. Both of these are explained below. The government-wide financial statements (i.e., the statement of net assets and the statement of activities) report information on all of the non-fiduciary activities of the County. For the most part interfund activities have been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely, to a significant extent on fees and charges for support. The statement of activities demonstrates the degree to which the direct expenses of a given function are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function. Administrative overhead charges of the general government are included in the direct expenses. Program revenues include: charges to customers who purchase, use, or directly benefit from goods, services or privileges provided by a given function and grants and contributions that are restricted to meeting the operational or capital requirements of a particular function. Interest revenue earned on program revenues is included with functional revenue. Taxes and other items not properly included among the program revenues are reported as general revenues. Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds, however, the fiduciary activities are excluded from the government-wide financial statements because they are used to report assets that can not be used to support the County s programs. Major individual governmental funds are reported in separate columns in the fund financial statements. 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, with the exception that measurement focus is not applicable for agency funds since they only report assets and liabilities. For all others, revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements have been met. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collected within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the County considers tax revenues to be available if they are collected within 60 days, and all other revenues to be available if they are collected within 180 days of the end of the current fiscal period. In some situations the availability period in connection with expenditure-driven grants will be extended beyond this period, when all eligibility criteria have been met and it can be reasonably assumed that the reason for the delay in reimbursement will not become a permanent impairment. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. Property taxes, grants, charges for services, permits, licenses, and investment income associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. All other revenue items are considered to be measurable and available only when cash is received by the County. 36

61 Notes to the Financial Statements December 31, 2007, Continued 1) Summary of Significant Accounting Policies, Continued C) Measurement Focus, Basis of Accounting and Financial Statement Presentation, Continued The County reports the following major governmental funds: General Fund This fund is the County s primary operating fund. It accounts for the general operating activities of the County, except for those required to be accounted for in another fund. The general tax revenues of the County as well as other resources received and not designated for a special purpose are accounted for in the General Fund. Managed Behavioral Healthcare Fund This fund is for the operations and administration of medical assistance funded mental health and drug and alcohol services for Chester and Montgomery Counties. Financing is provided by state and federal grants and program income. Mental Health/Mental Retardation Fund (MH/MR) This fund is for the operations and administration of the County MH/MR program. Financing is provided by state and federal grants with an appropriation from the County General Fund. Debt Service Fund This fund is maintained to account for the accumulation of financial resources to be utilized for payment of interest and principal on long-term debt. Capital Improvement Fund This fund accounts for resources to be used for the acquisition or construction of capital assets by the County or its grantees. Costs are financed by the proceeds of long-term debt and inter-governmental revenues. The County reports the following proprietary fund: Enterprise Fund - The Pocopson Home Fund is maintained to account for activities of the County s geriatric center with the intent that the costs (including depreciation and other non-cash expenses) of providing goods or services on a continuing basis be financed or recovered, primarily through user charges. Additionally the government reports the following fund types: Internal Service Funds are maintained to account for and finance services and commodities furnished exclusively for user offices, departments and other agencies and funds of the County on a cost reimbursement basis. The principal services include the leasing or purchase of desktop computer hardware and software and a self insurance program for workers compensation and health benefits. Fiduciary Funds are trust and agency funds maintained to account for assets held by the County in a trustee or agency capacity. The Employee Retirement Trust Fund is accounted for in essentially the same manner as proprietary funds since the measurement of periodic net income and the determination of capital maintenance are critical. Agency funds are accounted for in essentially the same manner as governmental funds. The Tax Claim fund collects delinquent taxes and interest on behalf of other taxing authorities, the Row Office fund assesses and collects fees on behalf of other government agencies and the Hotel Tax fund assesses and collects taxes to be used by the Chester County Conference and Visitors Bureau. 37

62 Notes to the Financial Statements December 31, 2007, Continued 1) Summary of Significant Accounting Policies, Continued D) Cash and Cash Equivalents For purposes of the Statement of Cash Flows, cash and cash equivalents include certain short-term investments generally maturing in three months or less, when acquired and includes restricted cash. E) Investments Investments are stated at fair value for all funds. F) Receivables Taxes receivable are reported net of an allowance for uncollectible amounts of $36,278. Enterprise Fund receivables are reported net of an allowance for uncollectible amounts of $391,387. Community Development Fund notes receivable are reported net of an allowance for uncollectible amounts of $621,331. Inter-fund Receivables As a result of its operations, the County affects a variety of transactions between funds to finance operations, service debt and other similar functions. Accordingly, to the extent that certain inter-fund transactions have not been paid or received, appropriate inter-fund receivables or payables have been established. G) Deferred Revenues Deferred Revenues are amounts which have met asset recognition criteria but for which revenue recognition criteria have not been met, principally property taxes and grants. H) Applicability of Optional Private-sector Guidance The County applies to both the government-wide and proprietary fund financial statements those applicable Governmental Accounting Standards Board (GASB) pronouncements and only those Financial Accounting Standards Board (FASB) Statements and Interpretations, Accounting Principles Board (APB) Opinions and Accounting Research Bulletins (ARB) issued on or before November 30, 1989, unless they conflict with or contradict GASB pronouncements. I) Inter-fund Eliminations As a general rule, the effect of inter-fund activity has been eliminated from the government-wide financial statements. Exceptions to this general rule are balances between the governmental activities and the business-type activities. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. J) Flow Assumption for Restricted Resources Net assets are restricted when constraints placed on them are either externally imposed or are imposed by constitutional provisions or enabling legislation. Internally imposed designations of resources are not presented as restricted net assets. When both restricted and unrestricted resources are available for use, it is the County s policy to use restricted resources first, then unrestricted resources as they are needed. 38

63 Notes to the Financial Statements December 31, ) Summary of Significant Accounting Policies, Continued K) Operating and Non-operating Revenues Proprietary funds distinguish operating revenues and expenses from non-operating items. The principal operating revenues of the Pocopson Home are charges to customers for providing patient services. Operating expenses for the Pocopson Home include the cost of services, administrative expenses, and depreciation on capital assets. All other revenues and expenses not meeting the above criteria are reported as non-operating revenues and expenses. L) Deposits and Investments Under Section 1706 of the County Code, the County is authorized to invest in the following: United States Treasury bills. Short-term obligations of the U.S. Government or its agencies or instrumentalities. Savings accounts or time deposits, other than certificates of deposit, or share accounts of institutions having their principal place of business in the Commonwealth of Pennsylvania (Commonwealth) and insured by Federal Agencies. Obligations of the United States of America or any of its agencies or instrumentalities backed by the full faith and credit of the United States of America, the Commonwealth of Pennsylvania or any of its agencies or instrumentalities backed by the full faith and credit of the Commonwealth, or of any political subdivision of the Commonwealth of Pennsylvania or any of its agencies or instrumentalities backed by the full faith and credit of the political subdivision. The County may also invest in shares of a registered investment company, provided that investments of that company are in authorized investments as noted above. Certificates of deposit purchased from institutions having their principal place of business in the Commonwealth and insured by Federal agencies. For any amounts in excess of the insured maximum, such deposits shall be collateralized by a pledge or assignment of assets pursuant to Act No. 72 of the General Assembly. Certificates of deposit may not exceed 20 percent of a bank's total capital surplus or 20 percent of a savings and loan's or savings bank's assets net of its liabilities. "Commercial paper" and "prime commercial paper" meeting certain requirements. Pension or retirement funds may be invested by the County according to the "Prudent Man Rule" as defined by the Decedents, Estates and Fiduciaries Act, 20 PA C.S.A (b)., which is referred to in the County Code. It is the policy of the County to invest funds under the County's control principally in certificates of deposit, repurchase agreements, U.S. Government Securities and money market mutual funds. Funds under the County's direct control exclude monies of the Retirement Trust Fund and component units. M) Inventories Inventories in both government-wide and fund financial statements consist of items maintained for consumption. These items are recorded as expenses/expenditures on a cost basis when consumed. Ending inventory is valued on a weighted average cost basis. 39

64 Notes to the Financial Statements December 31, ) Summary of Significant Accounting Policies, Continued N) Advance Deposits and Prepaid Costs Postage and other miscellaneous advances are recorded as prepaid items in both government-wide and fund financial statements. These items are recorded as expenses/expenditures when consumed. O) Restricted Assets Restricted cash and investments in the governmental activities are made up of the following items. An amount of $103,495,046 represents the unspent proceeds from debt issues for capital projects. An amount of $413,551 represents the portfolio of the Hatfield Trust in the Parks and Recreation Fund. An amount of $590,168 represents amounts received from the sale of properties by Tax Claim which are due to other taxing authorities, $11,084,568 represents amounts received by the Managed Behavioral Healthcare program, which will be distributed to the program provider and other County programs based on commonwealth performance measures and $786,505 representing a commonwealth investment funding an Installment Purchase Agreement which is paying a land owner for Land Development Rights. Restricted cash and cash equivalents in the business activities are made up of $245,136 which belongs to the Pocopson Nursing Home residents and $68,482 representing the Vera Hinkle bequeath to the home. P) Capital Assets Capital assets, which include land, buildings, building improvements, equipment, improvements other than buildings, and infrastructure (bridges acquired, reconstructed or significantly improved in fiscal years ending after December 31, 1980), are recorded in the applicable governmental or businesstype activities columns in the government-wide financial statements. Capital assets are defined by the County as assets with a value of $5,000 or more. This capitalization threshold is applied to individual capital assets rather than to groups/sets of capital assets (e.g. chairs, desks, etc.). Such assets are valued at historical cost or estimated historical cost if actual historical cost is not available. Donated capital assets are valued at their estimated fair market value on the date donated. Maintenance, repairs, and minor equipment are charged to operations when incurred. Expenses that materially change capacities or extend useful lives are capitalized. Upon sale or retirement of land, buildings, and equipment, the cost and related accumulated depreciation, if applicable, are eliminated from the respective accounts and any resulting gain or loss is included in the results of operations. Major outlays for capital assets and improvements are capitalized as projects are constructed. Infrastructure, buildings, building improvements, certain land improvements, equipment, furnishings, vehicles and computer equipment/software are depreciated by using the straight-line method over the estimated useful lives as follows: Infrastructure Buildings Building improvements Land improvements Heavy (operating) equipment Office equipment Office furnishings Vehicles Computer equipment/software 40 years 40 years 15 years 15 years 7 years 5 years 7 years 5 years 3 years 40

65 Notes to the Financial Statements December 31, ) Summary of Significant Accounting Policies, Continued P) Capital Assets, Continued Capital assets of Proprietary Funds are stated at historical cost and depreciated using the straight-line method utilizing the following estimated useful lives: Buildings and improvements Equipment 8-50 years 3-20 years The County of Chester is one of the leading farming counties in the Commonwealth of Pennsylvania and is committed to preserving its agricultural land from further non-agricultural development. The County of Chester has developed the Chester County Agricultural Conservation Easement Program. The program purchases from existing working farms Land Development Rights which is a perpetual contract, preventing the land from being diverted from its current agricultural use. The County of Chester carries these investments in Land Development Rights as intangible assets at their historical cost, which is not amortized. In the event that the land would become not suitable for farming and the current farm owner and County mutually agree, the property could be sold for development other than farming. The county would realize proceeds at the then current market price for giving up its rights in the property acquired under the agricultural easement program. Q) 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 premiums and discounts are deferred and amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of the applicable bond premium or discount. In governmental funds long-term debt is accounted for as other financing sources and uses when issued or paid respectively. R) Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenditures/expenses during the reporting period. Actual results could differ from those estimates. S) Compensated Absences Vacation Pay Time accrues at various rates based on length of service. Employees are encouraged to utilize earned vacation time by December 31 of each year. Earned but unused vacation, not exceeding fifteen days, can be carried over into the next year. Any excess accumulated time and accompanying salary will be forfeited. Accordingly, a liability for unused vacation pay of fifteen or less days is accrued each year for each employee in the government-wide financial statements. Sick Pay Employees earn one sick day for each month of service or 12 days per year. The County has a longterm financial incentive program for employee s sick pay. Under the long-term program, upon voluntary termination from employment after eight or more years of continuous full-time service, a full- 41

66 Notes to the Financial Statements December 31, 2007, Continued 1) Summary of Significant Accounting Policies, Continued S) Compensated Absences, Continued Sick Pay, Continued time county employee is eligible to receive payment at 25 percent of their hourly rate at the time of resignation/retirement, for unused sick leave, in an amount not to exceed three months gross pay. Accordingly, a liability for accumulated sick pay for employees with eight or more years service as well as one for employees with less than eight years that are projected to meet the minimum criteria in the future is accrued each year in the government-wide financial statements. T) Net Asset Classifications Invested in capital assets, net of related debt consists of capital assets net of accumulated depreciation and reduced by the outstanding balances of any bonds, mortgages, notes or other borrowings that are attributable to the acquisition, construction or improvement of those assets. Net assets are reported as restricted when constraints placed on them are either externally imposed by creditors (such as through debt covenants), grantors, contributors, or laws or regulations of other governments or imposed by law through constitutional provisions or enabling legislation. Hatfield trust nonexpendable and expendable Restricted under the provisions of the Hatfield Memorial Trust. Agricultural easement Act 156 requires that all interest on tax roll-back penalties, under Act 319, be restricted and used for agricultural conservation easements and for the development of conservation plans and monitoring and enforcement of these easements. Child support enforcement Title IV-D grant funds that are restricted for the father incentive program. Affordable housing act Fees collected by the Recorder of Deeds that are restricted to fund affordable housing efforts in the county. County records improvement Act 8 of the Pennsylvania legislature provides that a fee for each document recorded be restricted for records improvement activities. Nolan estate Use restricted by provisions of Nolan estate that proceeds may only be used for the improvement of Hibernia Park. Bequeath Use restricted by provisions of Vera Hinkle trust that proceeds and interest be used for improvements in the Pocopson Home. Unrestricted net assets consisted of net assets that do not meet the definition of restricted or invested in capital assets, net of related debt. U) New Accounting Pronouncements GASB has also issued Statement No. 48, Sales, Pledges and Transfers of Assets and Future Revenues. This statement provides criteria that governments will use to determine whether to classify certain transactions as sold or collateralized, that is, whether proceeds received from a certain transaction should be reported as revenue or a liability. This statement is effective for periods beginning after December 15, Although the County has not, as a matter of practice, sold or pledged receivables and future revenues, the County will implement this statement when applicable. 42

67 Notes to the Financial Statements December 31, 2007, Continued 1) Summary of Significant Accounting Policies, Continued U) New Accounting Pronouncements, Continued GASB has also issued Statement No. 49, Accounting and Financial Reporting for Pollution Remediation Obligations. This statement addresses accounting and financial reporting standards for pollution (including containment) remediation obligations, which are obligations to address the current or potential detrimental effects of existing pollution by participating in pollution remediation activities such as site assessment cleanups. The requirements of this statement are effective for periods beginning after December 15, The effect of implementation of this statement has not yet been determined. GASB has also issued Statement No. 50, Pension Disclosures. This statement more closely aligns financial reporting requirements for pensions with those for other post-employment benefits (OPEB) and, in doing so, enhances information disclosed in notes to financial statements or presented as required supplementary information (RSI) by pension plans and by employers that provide pension benefits. This statement is intended to improve the transparency and decision usefulness of reported information about pensions by state and local governmental plans and employers. The requirements of this statement are effective for periods beginning after June 15, 2007.The effect of implementation of this statement has not yet been determined. In October 2007, the GASB issued Statement No. 51, Accounting and Financial Reporting for Intangible Assets. Intangible assets are referred to in the description of capital assets in Statement No. 34, Basic Financial Statements and Management's Discussion and Analysis for State and Local Governments. This reference has created questions as to whether and when intangible assets should be considered capital assets for financial reporting purposes. An absence of sufficiently specific authoritative guidance that addresses these questions has resulted in inconsistencies in the accounting and financial reporting of intangible assets among state and local governments, particularly in the areas of recognition, initial measurement, and amortization. The objective of this Statement is to establish accounting and financial reporting requirements for intangible assets to reduce these inconsistencies, thereby enhancing the comparability of the accounting and financial reporting of such assets among state and local governments. This Statement requires that all intangible assets not specifically excluded by its scope provisions be classified as capital assets. Accordingly, existing authoritative guidance related to the accounting and financial reporting for capital assets should be applied to these intangible assets, as applicable. This Statement also provides authoritative guidance that specifically addresses the nature of these intangible assets. Such guidance should be applied in addition to the existing authoritative guidance for capital assets. The requirements of this Statement are effective for financial statements for periods beginning after June 15, The effect of implementation of this statement has not yet been determined. In January 2008, the GASB issued Statement No.52, Land and Other Real Estate Held as Investments by Endowments. Accounting standards previously required permanent and term endowments, including permanent funds, to report land and other real estate held as investments at their historical cost. Endowments exist to invest resources for the purpose of generating income. Other entities that exist for similar purposes pension and other postemployment benefit plans, external investment pools, and Internal Revenue Code Section 457 deferred compensation plans however, report land and other real estate held as investments at their fair value. This Statement establishes consistent standards for the reporting of land and other real estate held as investments by essentially similar entities. It requires endowments to report their land and other real estate investments at fair value. Governments also are required to report the changes in fair value as investment income and to disclose the methods and significant assumptions employed to determine fair value, and other information that they currently present for other investments reported at fair value. 43

68 Notes to the Financial Statements December 31, 2007, Continued 1) Summary of Significant Accounting Policies, Continued U) New Accounting Pronouncements, Continued This Statement more appropriately reports the resources available in endowments and more closely aligns financial reporting with the objectives of endowments. It results in property held for similar purposes by comparable entities being reported in the same manner. Reporting land and other real estate held as investments at fair value enhances users' ability to meaningfully evaluate an entity's investment decisions and performance. The provisions of this Statement are effective for financial statements for periods beginning after June 15, The effect of implementation of this statement has not yet been determined. 2) Deposits and Investments Deposits and investments of the County (including restricted items) shown in the Statement of Net Assets: Cash and cash equivalents $ 96,286,694 Investments 2,957,341 Restricted cash and cash equivalents 61,597,730 Restricted investments 55,085,726 $ 215,927,491 Cash or investment type Investment Maturites from December 31, 2007 Statement of Net Assets Less than More than (Primary Government) Fair Value 1 year Years Years 10 years US government obligations $ 58,043,067 $ 57,256,562 $ - $ 185,712 $ 600,793 Cash and cash equivalents 157,884,424 Total cash and other investments $ 215,927,491 Deposits and investments of the County shown in the Statement of Fiduciary Net Assets: Employee retirement trust fund Cash and cash equivalents $ 75,066,690 Investments 188,265,480 Agency funds Cash and cash equivalents 10,967,735 Investments 44,548 $ 274,344,453 44

69 Notes to the Financial Statements December 31, 2007, Continued 2) Deposits and Investments, Continued Cash or investment type Investment Maturites from December 31, 2007 Statement of Fiduciary Net Assets Less than More than (Fiduciary Funds) Fair Value 1 year Years Years 10 years US government obligations $ 30,972,391 $ 1,204,611 $ 12,556,715 $ 14,364,874 $ 2,846,191 Corporate debt 2,856,318 1,195,036 1,315, ,064 - Total debt securites 33,828,709 $ 2,399,647 $ 13,871,933 $ 14,710,938 $ 2,846,191 Cash and cash equivalents 86,034,425 Equity mutual funds 39,636,031 Stocks 114,845,288 Total cash and other investments $ 274,344,453 Deposits Custodial Credit Risk Custodial credit risk is the risk that in the event of a bank failure, the County s deposits may not be returned to it. The County does not have a formal deposit policy for custodial credit risk. As of December 31, 2007, the Federal Depository Insurance Corporation insured $610,281 of the County s $234,780,995 bank balances. The remaining bank balances of $234,170,714 were exposed to custodial credit risk, which is collateralized in accordance with Act 72 of the Commonwealth of Pennsylvania Legislature, which permits the institution to pool collateral for all governmental deposits, and has the collateral held by a custodian in the institution s name. These deposits have a carrying amount of $243,918,849. The County Code Section 1706 governs the types of investments that are allowable for operating funds. In addition, the County has formally adopted an Investment Policy that places additional restrictions on the investment of operating funds. The following is a description of the County s investment risks: Credit Risk Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. County funds may only be invested in those instruments identified in the County Code, subsection (c). The following conditions apply: County operating funds may be invested subject to the following limitations and statutory requirements of the County Code: Instrument Limit U.S. Treasury Bills; 100% Short-term obligations of the U.S. Government, its agencies or instrumentalities; 100% Obligations of the U.S. Government, its agencies or instrumentalities backed by the full faith and credit of the U.S.; Obligations of the Commonwealth of Pennsylvania, any of its political subdivisions, or their agencies or instrumentalities; 100% 100% 45

70 Notes to the Financial Statements December 31, 2007, Continued 2) Deposits and Investments, Continued Instrument Limit Certificates of deposit; 50% Statutorily permitted Money Market Mutual Funds or Local Government Investment Pools; 100% Statutorily permitted Commercial Paper 25% In addition to the above, the County chooses not to invest more than 50 percent of the County s total invested operating funds with any single bank or financial institution. These internal limitations shall be on an average basis calculated at the end of each month. The credit ratings for debt securities held by the Primary Government are as follows: Issurer Moody's Rating Amount US Govt. AAA $ 58,043,067 The credit ratings for debt securities held by the Fiduciary Funds are as follows: Issurer Moody's Rating Amount US Govt. AAA $ 30,972,391 Corporate AAA 497,840 Corporate AA 544,920 Corporate A 1,315,218 Corporate BAA 498,340 Total $ 33,828,709 Custodial Credit Risk Custodial credit risk is the risk that in the event of the failure of the counterparty, the County will not be able to recover the value of its investment or collateral securities that are in the possession of an outside entity. The County s policy is to have all investment securities held in its name in a segregated account with our primary banking institution. The primary government and the retirement fund have separate custodial relationships with separate banking institutions. The preceding two detailed schedules portray the split between the two banking institutions. Concentration of Credit Risk The Investment Policy of the Primary Government does not place any limits or restrictions on investment in any one issuer. The County Code does restrict the types of investments that are permissible. Of those permitted investments, only Commercial Paper and Negotiable Certificates of Deposits would expose the County to Concentration of Credit Risk. As of December 31, 2007 the County did not own any commercial paper but did have certificates of deposit totaling $45,000,000 which was split between two institutions. The County Retirement Fund does not have a policy on Concentration of Credit Risk. Interest Rate Risk Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. The County has adopted a policy of holding all investments to maturity. Accordingly, any change in fair value due to changing market interest rates is temporary. 46

71 Notes to the Financial Statements December 31, 2007, Continued 3) Property Taxes Real estate property taxes attach as an enforceable lien on property on or about January 17 of the subsequent year. Taxes are billed on or about February 1, payable under the following terms: 2 percent discount, February 1 through April 1; face amount, April 2 through May 31 and 10 percent penalty after May 31. The County bills and collects its own property taxes, and revenues are recognized in the period in which they are levied. On a fund basis revenues are recognized when they are available to pay current year liabilities. The rate of taxation in 2007 was mills, of which mills was designated for debt service, mills for Parks and Recreation, mills for Library system, and the remaining mills for general purposes. 4) Risk Management The County 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 County purchases commercial insurance to cover these risks of loss including general liability, excess liability, property insurance, employee life, and accident insurance. Settled claims have not exceeded the commercial coverage insurance in any of the past three fiscal years; and there have been no significant changes in insurance coverage in those years. The County is exposed to risk of loss related to self insurance activities for workers compensation, health care, prescription and long term disability programs. The Benefits Internal Service Fund is used to account for risk associated with the employee health care, prescription, long-term disability and workers compensation programs. The claims for the personal choice medical prescription and the long-term disability programs are paid from the Benefits Internal Service Fund. The County is totally self insured for liabilities related to Personal Choice medical claims. The County retains risk for the first $200,000 per year per individual for medical claims and maintains excess Commercial insurance for the liability in excess of $200,000 per year per individual. As outlined in the contract with the provider, reserves must be maintained at $2 million. In addition, the County maintains a $1,338,000 advance to facilitate claims processing. Prescriptions claims are paid when they are incurred. The County maintains a $500,000 advance with the provider to facilitate claims processing. The County is partially self insured for the liability pertaining to long-term disability coverage. Any new liabilities after April 1, 2007 are fully insured. Existing prior liabilities continue to be self insured by the County. Reserves as of December 31, 2007 are estimated and are based on information received after the end of the year. Except for employee members under one collective bargaining agreement, the maximum dental coverage per individual is $1,700 and $1,500 for participating dentists and non participating dentists, respectively. In addition, participating dentists under the Premier plan are capped at $1,500 per individual. The health care and long-term disability liability balance is based on the requirements of GASB Statement No. 10, which requires that a liability for claims be reported if information prior to the issuance of financial statements indicates that it is probable that a liability has been incurred at the date of the financial statements and the amount of loss can be reasonably estimated. The claim liability is provided to the County by the various health care providers. 47

72 Notes to the Financial Statements December 31, 2007, Continued 4) Risk Management, Continued The County is self insured for workers' compensation. The County has excess workers compensation insurance with a self insured retention per occurrence of $350,000, except for employees who fall under the Police category in which case the limit is $400,000. A commercially purchased Excess Workers' Compensation policy pays the remainder of the claim up to statutory limits in excess of the $350,000 or $400,000 ( Police ) self insurance retention. The County maintains workers compensation reserves for claims incurred and claims incurred but not reported in the Benefits Internal Service Fund. Independent of these reserves, the County maintains a $180,000 deposit with a third party administrator to facilitate claim processing. This amount is included in prepaid expenditures, in the Benefits Internal Service Fund. The accrued liability for workers compensation and long-term disability claims is determined by an actuary in accordance with actuarial principles; such claims are not discounted for workers compensation and are discounted at 5 1/2 percent for long term disability ( LTD ) claims. The various County funds contribute to the Benefits Internal Service Fund through appropriations based on claims of the current and prior years. All accrued self insurance liabilities at December 31, 2007 are summarized as follows: Benefits Internal Service Fund Long Due within Term one year Total Health $ - $ 2,000,000 $ 2,000,000 LTD 284, , ,754 Workers' comp 1,862, ,805 2,370,270 Total $ 2,146,990 $ 2,619,034 $ 4,766,024 The following summary provides aggregate information on prior year self insurance liabilities; incurred claims and payments during the year ended December 31, 2007 and reported self insurance liabilities at December 31, December 31, December 31, 2006 Incurred Claims Payments 2007 Due within Liability Current Prior Current Prior Liability one year Health 1,421,394 11,628,552 - (11,049,946) - 2,000,000 2,000,000 LTD 735,974 (14,772) (162,497) (30,000) (132,951) 395, ,229 Workers comp 2,370, ,543 - (481,543) - 2,370, ,805 Totals $ 4,527,638 $ 12,095,323 $ (162,497) $ (11,561,489) $ (132,951) $ 4,766,024 $ 2,619,034 48

73 Notes to the Financial Statements December 31, 2007, Continued 4) Risk Management, Continued The following summary provides aggregate information on prior year self insurance liabilities; incurred claims and payments during the year ended December 31, 2006 and reported self insurance liabilities at December 31, December 31, December 31, 2005 Incurred Claims Payments 2006 Due within Liability Current Prior Current Prior Liability one year Health 1,575,697 10,148,995 2,006,009 (10,302,385) (2,006,922) 1,421,394 1,421,394 LTD 1,174, ,379 (394,382) - (215,097) 735, ,506 Workers comp 2,370, ,977 - (247,977) - 2,370, ,593 Totals $ 5,120,041 $ 10,568,351 $ 1,611,627 $ (10,550,362) $ (2,222,019) $ 4,527,638 $ 1,986,493 5) Capital Assets The following is a summary of the changes in capital assets for the year ended December 31, Governmental Activities Primary Government Balance at Balance at January 1, 2007 Increases Decreases December 31, 2007 Governmental Activities: Capital assets, not being depreciated: Land and improvements $ 21,088,136 $ 422,047 $ 3,547,010 $ 17,963,173 Land development rights 57,176,169 9,577,893-66,754,062 Construction in process 108,089,860 43,527,067 6,924, ,692,121 Total Capital Assets, not being depreciated 186,354,165 53,527,007 10,471, ,409,356 Capital assets, being depreciated: Buildings and improvements 99,454,510 5,372, , ,673,232 Infrastructure 14,482, ,482,294 Land improvements 1,441,296 7,720-1,449,016 Machinery and equipment 88,868,689 4,606,519 44,696 93,430,512 Machinery and equipment capital lease 2,880,377 1,069, ,359 3,106,753 Total Capital Assets, being depreciated 207,127,166 11,056,776 1,042, ,141,807 Less accumulated depreciation for: Buildings and improvements 46,766,595 3,118,221 44,467 49,840,349 Infrastructure 5,692, ,833-6,056,388 Land improvements 94,473 76, ,179 Machinery and equipment 73,923,201 5,622,079 8,996 79,536,284 Machinery and equipment capital lease 1,862,442 1,028, ,359 2,047,152 Total Accumulated Depreciation 128,339,266 10,208, , ,651,352 Total Capital Assets, being depreciated, net 78,787, , ,313 79,490,455 Governmental Activities Capital Assets, net $ 265,142,065 $ 54,374,875 $ 10,617,129 $ 308,899,811 49

74 Notes to the Financial Statements December 31, 2007, Continued 5) Capital Assets, Continued Governmental Activities, Continued Depreciation was charged to governmental functions as follows: General government $ 5,906,485 Judicial government 272,471 Public safety 1,831,306 Corrections 428,027 Public works 399,911 Human services 572,299 Culture and recreation 791,796 Conservation and development 6,613 Total $ 10,208,908 Proprietary Funds Geriatric Center Enterprise Fund January 1, December 31, 2007 Additions Deletions 2007 Cost: Land and improvements $ 241,371 $ - $ - $ 241,371 Buildings 5,379, ,379,158 Building improvements 5,511, ,511,050 Equipment 1,338, ,527-1,764,161 Construction in Progress 704,867 1,102,448-1,807,315 $ 13,175,080 $ 1,527,975 $ - $ 14,703,055 Accumulated depreciation: Land and improvements $ 206,643 $ 1,494 $ - $ 208,137 Buildings 4,632,988 65,894-4,698,882 Buildings improvements 3,452, ,065-3,672,061 Equipment 940, ,332-1,088,288 $ 9,233,583 $ 433,785 $ - $ 9,667,368 Net book value: Land and improvements $ 34,728 $ - $ 1,494 $ 33,234 Buildings 746,170-65, ,276 Building improvements 2,058, ,065 1,838,989 Equipment 397, , , ,873 Construction in Progress 704,867 1,102,448-1,807,315 $ 3,941,497 $ 1,527,975 $ 433,785 $ 5,035,687 50

75 Notes to the Financial Statements December 31, 2007, Continued 5) Capital Assets, Continued Component Units Capital Assets Chester County Solid Waste Authority: January 1, December 31, 2007 Additions Deletions 2007 Land $ 52,203,074 $ 1,257,093 $ - $ 53,460,167 Building improvements 16,409,057 1,415, ,581 17,467,734 Heavy equipment 6,061, ,908 62,936 6,616,390 Equipment 1,177, , ,546 1,112,181 75,850,988 3,413, ,063 78,656,472 Less: accumulated depreciation and depletion 59,144,298 4,598, ,780 63,199,242 $ 16,706,690 $ (1,185,177) $ 64,283 $ 15,457,230 6) Intangible Assets Component Unit Chester County Solid Waste Authority Intangible assets consisted of the following at December 31, 2007: Value assigned Accumulated Net book at acquisition Amortization value Operating permit and airspace $ 15,000,000 $ 14,924,190 $ 75,810 Amortization period is as follows: Estimated life of landfill site as measured by the physical usage, or depletion, of the site. 7) Inter-fund Receivables, Payables and Transfers The compositions of inter-fund balances as of December 31, 2007 are as follows: Due to / from other funds: Receivable Fund Payable Fund Amount General Fund Managed Behavioral Health Care Fund $ 368,662 Enterprise Fund 4,275,927 Nonmajor Governmental Funds 3,526,633 $ 8,171,222 During the year, the cash pool absorbs temporary cash short falls. At year-end, any balances representing temporary cash short falls are reclassified as receivables in the General Fund. 51

76 Notes to the Financial Statements December 31, 2007, Continued 7) Inter-fund Receivables, Payables and Transfers, Continued The compositions of inter-fund transfers as of December 31, 2007 are as follows: Inter-fund tranfers: Transfers In: O.M.B.H. MH/MR Debt Nonmajor Enterprise Fund Fund Service Governmental Fund Total Transfers out: General Fund $ - $ 1,462,494 $ 360,001 $ 12,012,275 $ 1,602,529 $ 15,437,299 Managed Behavioral Health Care - 125, , ,063 Mental Health/Mental Retardation ,500-66,500 Capital Improvement Fund - - 2,329, ,329,517 Nonmajor Governmental Funds 79, , ,438-1,630,130 Total transfers out $ 79,945 $ 1,587,494 $ 3,649,265 $ 12,955,276 $ 1,602,529 $ 19,874,509 The General Fund transferred its share of the grants match to various Special Revenue Funds and funded the year end deficit of the Enterprise Fund. The Capital Improvement Fund and other non-major funds helped fund the debt service needs of the Debt Service Fund. Other Special Revenue Funds also transferred funds to various other funds for provider services in accordance with their grant provisions. 8) Compensated Absences At December 31, 2007, accumulated vacation pay for governmental activities was $3,395,983 (including accrued FICA and Medicare) and accumulated sick pay was $4,247,364 (including accrued FICA and Medicare). These amounts total $7,643,347 and are reported in the government-wide financial statements. At December 31, 2007, accumulated vacation for business-type activities/proprietary Funds was $421,365 (including accrued FICA and Medicare) and accumulated sick pay was $347,266 (including accrued FICA and Medicare). These amounts total $768,631 and are included in accrued expenses. Vacation and sick pay are recorded as an expense and a liability in the proprietary fund when earned. Governmental funds record the use of vacation and sick time, to be liquidated with expendable available financial resources, as an expenditure in the current year by the governmental fund that will pay it. A compensated absence liability is only reported in governmental funds if they have matured, for example, unused reimbursable leave as a result of employee resignation or retirement. 9) Deferred Revenue Government Wide Fund Statement Statement General Fund: Deferred fees $ 920,000 $ 920,000 Deferred tax claim fees 868, Unearned grant revenue 210, ,529 Other deferred revenues 10, ,197 Undistributed cash receipts 1,538 1,538 Property tax receivable-gross $ 3,672,984 - Less: 60 day collection 1/08-2/08 (619,090) 3,053,894 - Total General Fund 5,065,573 1,766,299 52

77 Notes to the Financial Statements December 31, 2007, Continued 9) Deferred Revenue, Continued Government Wide Fund Statement Statement Mental Health/Mental Retardation Fund: Unearned grant revenue 7,722,482 7,722,482 Total Mental Health/Mental Retardation Fund 7,722,482 7,722,482 Managed Behavioral Healthcare Fund: Unearned grant revenue 11,084,568 11,084,568 Total Managed Behavioral Health Care Fund 11,084,568 11,084,568 Debt Service Fund: Property tax receivable-gross $ 953,567 - Less: 60 day collection 1/08-2/08 (167,916) 785,651 - Total Debt Service Fund 785,651 - Capital Improvement Fund: Other deferred revenues 4,000 4,000 Total Capital Improvement Fund 4,000 4,000 Nonmajor Funds: Deferred fees 417, ,954 Unearned grant revenue 1,119,624 1,119,625 Other deferred revenues 1,253 1,253 Property tax receivable-gross $ 474,004 - Less: 60 day collection 1/08-2/08 (79,147) 394,857 - Total Nonmajor Funds 1,933,688 1,538,832 Total $ 26,595,962 $ 22,116,181 Unearned revenue reported on the modified accrual basis of accounting is $4,479,781 greater than the deferred revenue reported on the accrual basis of accounting. The difference is made up of $623,232 in unamortized swaption premium on the accrual basis less $4,234,401 in recognized real estate taxes and $868,612 in recognized tax claim fees on the modified accrual basis. 10) Leases Operating Leases The County leases office space, land and certain equipment under several operating leases with expiration dates through

78 Notes to the Financial Statements December 31, 2007, Continued 10) Leases, Continued Operating Leases, Continued Future minimum lease payment requirements under the various leases are as follows: 2008 $ 3,055, ,207, ,690, ,309, ,218, ,000,460 Total minimum payments required $ 11,481,810 Total rental expense for these leases during 2007 was $2,725,482. Capital Leases The County has entered into lease agreements as the lessee for financing the acquisition of personal computers. These lease agreements qualify as capital leases for accounting purposes. The assets acquired through capital leases are as follows: Governmental Activities Asset: Personal computers $ 3,081,703 Less: accumulated depreciation (2,022,102) $ 1,059,601 The future minimum lease obligations and the net present value of these minimum lease payments as of December 31, 2007 were as follows: Governmental Year Ending December 31, 2007 Activities 2008 $ 703, ,017 Total minimum lease payments 1,059,601 Less: amount representing interest - Present value of minimum lease payments $ 1,059,601 54

79 Notes to the Financial Statements December 31, 2007, Continued 11) Long-term Liabilities Long-term liability activity for the year ended December 31, 2007, was as follows: Balance Balance Due Within January 1, 2007 Additions Reductions December 31, 2007 One Year Governmental activities: General obligation bonds $ 224,138,457 $ 63,445,000 $ 9,493,739 $ 278,089,718 $ 9,331,099 Premium on bonds 4,899,110 2,391, ,438 6,992, ,006 General obligation notes 150,213, ,000,000 69,589, ,624,000 4,481,000 Capital leases 1,017,936 1,069,734 1,028,069 1,059, ,584 Compensated absences 7,225,050 3,991,405 3,604,854 7,611,601 3,623,498 Net OPEB obligation 1, , ,482 1,458 1,458 Accrued salaries - 356, ,604 - Workers' compensation claims 2,370, , ,543 2,370, ,805 Health and L/T disability claims 2,157,368 11,451,283 11,212,897 2,395,754 2,111,229 Governmental activities Long-term liabilities $ 392,023,131 $ 198,833,940 $ 96,356,022 $ 494,501,049 $ 21,177,679 Business-type activities: General obligation bonds $ 801,543 $ - $ 51,261 $ 750,282 $ 53,901 Compensated absences 770, , , , ,919 Business-type acitvities Long-term liabilities $ 1,571,622 $ 471,691 $ 524,400 $ 1,518,913 $ 502,820 Internal service funds predominantly serve the governmental funds. Accordingly, long-term liabilities for workers compensation claims, health and L/T disability claims and net OPEB obligation are included as part of the above totals for governmental funds. Compensated absences are generally liquidated by the governmental fund that will pay it. An analysis of debt service requirements to maturity on bonds and notes payable follows: Total Debt Principal Interest Net Swap Service Requirements Requirements Payments Requirements Year ended December 31: General Obligation Bonds: ,385,000 12,620,221-22,005, ,745,000 12,250,987-21,995, ,155,000 11,871,541-22,026, ,620,000 11,428,797-22,048, ,755,000 10,959,896-22,714, ,415,000 46,302, ,717, ,855,000 29,786, ,641, ,910,000 8,764,395-82,674, ,840, ,985, ,825,485 55

80 Notes to the Financial Statements December 31, 2007, Continued 11) Long-term Liabilities, Continued Year ended December 31: Total Debt Principal Interest Net Swap Service Requirements Requirements Payments Requirements General Obligation Notes: ,481,000 7,335,900 (233,191) 11,583, ,742,000 7,167, ,095 12,122, ,843,000 6,954, ,702 13,937, ,683,000 6,536,494 62,112 22,281, ,338,000 5,940,975 (19,895) 22,259, ,423,000 20,146,650 (71,101) 101,498, ,628,000 7,463,306 (21,926) 54,069, ,949,000 2,200,106-18,149, ,537,000 66,319-3,603, ,624,000 63,811,800 68, ,504,596 Total $ 474,464,000 $ 207,797,285 $ 68,796 $ 682,330,081 To be retired by: Governmental Funds $ 473,713,718 $ 207,487,009 $ 68,796 $ 681,269,523 Proprietary Funds 750, ,276-1,060,558 $ 474,464,000 $ 207,797,285 $ 68,796 $ 682,330,081 Variable note interest is calculated using the SIFMA (Securities Industry and Financial Markets Association) Index interest rate plus 30 basis points as of 12/31/07, 3.75 percent. Swap Payment is calculated using the effective interest rate as of 12/31/07, percent. Pertinent information regarding general obligation debt outstanding is presented below: Date of Issue Amount of Original Issue Purpose Balance Outstanding at December 31, ,000,000 Refund 1995 General Obligation Bond, capital projects consisting of preservation of open space, the acquisition of certain information technology, facilities improvements, and the payment of costs incurred by the County to issue the bonds (final maturity in 2018). 1,445, ,390,000 Partially refund 1995 General Obligation Bond Bond originally incurred to refund 1992 General Obligation Note (final maturity in 2016). 19,960, ,550,000 Refund 1998 General Obligation Note which had been issued for open space, recreation and agricultural preservation program and capital improvements to public park facilities. Advance refund 1996 General Obligation Bond which had been issued for open space, reassessment of real property, 911 and improvements to County facilities and information technology (final maturity 2022). 24,145, ,675,000 Refund 2000 General Obligation Note and 2000 General Obligation Note Series B. The 2000 General Obligation Note was issued to refund the 1997 General Obligation Note and 1997 General Obligation Note Series A. The 2000 General Obligation Note Series B was issued to implement the Open Space Recreaction and Agricultural Preservation program, to acquire equipment and fixtures, for construction and improvements to County buildings and for the payment of interest during the acquisition and constuction period (final maturity 2020). 16,535,000 56

81 Notes to the Financial Statements December 31, 2007, Continued 11) Long-term Liabilities, Continued Date of Issue Amount of Original Issue Purpose Balance Outstanding at December 31, * 22,922,000 Refund the 1993 General Obligation Bond which refunded a substantial portion of the 1991 General Obligation bond which advance refunded 1987 General Obligation bond issue and refinanced 1988 General Obligation debt, and capital lease (final maturity 2011). 13,479, ,265,000 Implementation of Open Space Recreation and Agricultural Preservation program, acquisition of equipment and fixtures, construction and improvements to County buildings, bridges, community revitalization and other public transportation projects and the payments of interest during acquisition and construction period (final maturity 2022). 19,330, ,685,000 Refund 2001 General Obligation Note Series A and 2002 General Obligation Note. The 2001 and 2002 General Obligation Notes were issued to implement the Open Space Recreation and Agricultural Preservation program, to acquire equipment and fixtures, for construction and improvements to County buildings and for the payment of interest during the acquisition and constuction period. The balance will be applied for the same purpose (final maturity 2024). 3,175, ,750,000 Proceeds of the Bonds will be used for and toward: (1) the advance refunding of a portion of the General Obligation Bonds, Series of 1998 in the amount of $19,095,000 and (2) the advance refunding of a portion of the General Obligation Bonds, Series of 2001 in the amount of $25,585,000 both Bonds were originally issued for the implementation of Open Space Recreation and Agricultural Preservation program, acquisition of equipment and fixtures, construction and improvements to County buildings, bridges, community revitalization and other public transportation projects and the payments of interest during acquisition and construction period (final maturity 2022). 44,655, ,725,000 Proceeds of the Bonds will be used for and toward: (1) the advance refunding of a portion of the General Obligation Bonds, Series of 2003 in the amount of $1,100,000 and (2) the advance refunding of a portion of the General Obligation Bonds, Series of 2005 in the amount of $81,500,000 both Bonds were originally issued for the implementation of Open Space Recreation and Agricultural Preservation program, acquisition of equipment and fixtures, construction and improvements to County buildings, bridges, community revitalization and other public transportation projects and the payments of interest during acquisition and construction period (final maturity 2024). 86,150, * 68,500,000 Implementation of Open Space Recreation and Agricultural Preservation program, acquisition of equipment and fixtures, construction and improvements to County buildings, bridges, community revitalization and other public transportation projects and the payments of interest during acquisition and construction period (final maturity 2020). 67,145, ,445,000 Refund 2005 General Obligation Note Series A & B. The 2005 General Obligation Notes were issued to implement the Open Space Recreation and Agricultural Preservation program, to acquire equipment and fixtures, for construction and improvements to County buildings and for payment of interest during the acquisition and construction period (final maturity 2027). 63,445, * 50,000,000 Implementation of Open Space Recreation and Agricultural Preservation program, acquisition of equipment and fixtures, construction and improvements to County buildings, bridges, community revitalization and other public transportation projects and the payments of interest during acquisition and construction period (final maturity 2028). 50,000, * 65,000,000 Implementation of Open Space Recreation and Agricultural Preservation program, acquisition of equipment and fixtures, construction and improvements to County buildings, bridges, community revitalization and other public transportation projects and the payments of interest during acquisition and construction period (final maturity 2020). 65,000,000 $ 651,907,000 $ 474,464,000 (*) Rates reset weekly using the SIFMA plus 30 basis points, with the maximum interest rate for these issues being 15 percent. Rate at December 31, 2007 was 3.75 percent. Interest rates on the above fixed rate obligations range from 2.0 to 5.5 percent. The County has pledged its taxing power as security for outstanding general obligation debt. 57

82 Notes to the Financial Statements December 31, 2007, Continued 11) Long-term Liabilities, Continued On July 15, 2007 the County issued General Obligation Bonds, Series of 2007 in the aggregate principal amount of $63,445,000. The proceeds of the Bonds, which includes an original issue premium of $2,391,371, will be used for and toward the current refunding of the County s General Obligation Notes, Series A and B of 2005, currently outstanding in the principal amount of $65,297,000 (collectively, the 2005 Note ) and payment of the costs incurred by the County in connection with the issuance of the Bonds. The 2005 Notes were originally issued to fund the implementation of the Open Space Recreation and Agricultural Preservation program, acquisition of equipment and fixtures, construction and improvements in County buildings, bridges, community revitalization and other public transportation projects. The economics of refunding variable rate notes with a fixed rate bond cannot be quantified without knowledge of what the variable rate would be in the future. On August 27, 2007 the County issued General Obligation Notes, Series A and B of 2007 in the aggregate principal amount of $50,000,000. The proceeds of the notes shall be applied for and toward projects consisting of the financing of the implementation of the Open Space Recreation and Agricultural Preservation program, acquisition of equipment and fixtures, construction and improvements in County buildings, bridges, community revitalization and other public transportation projects. On December 17, 2007 the County issued General Obligation Notes, Series C and D of 2007 in the aggregate principal amount of $65,000,000. The proceeds of the notes shall be applied for and toward projects consisting of the financing of the implementation of the Open Space Recreation and Agricultural Preservation program, acquisition of equipment and fixtures, construction and improvements in County buildings, bridges, community revitalization and other public transportation projects. In prior years the County defeased various general obligation bonds by placing the proceeds of new bonds in an irrevocable trust to provide for all future debt service payments on the old bonds. Accordingly, the trust account assets and the liability for the defeased bonds are not included in the accompanying financial statements. As of December 31, 2007, the principal amount outstanding relative to defeased debt was $177,995,000. This is made up of $15,725,000 of the 1991 general obligation bonds, $16,315,000 of the 1993 general obligation bonds, $18,675,000 of the 1996 general obligation bonds, $19,095,000 of the 1998 general obligation bonds, $25,585,000 of the 2001 general obligation bonds, $1,100,000 of the 2003 general obligation bonds and $81,500,000 of the 2005 general obligation bonds. 12) Interest Rate Swaps 2003 Note Swap Swap has an effective date of December 15, 2001 and a maturity date of December 15, The County pays a fixed amount based on a schedule and receives 67 percent of the one month US dollar London Interbank Offered Rate (LIBOR). There is an initial notional amount of $22,805,000. The counterparty is Commerce Bank, N.A. who has a Moody s A1 rating. As of December 31, 2007 the swap had a negative value of $977, Bond Series A Basis Swap On December 1, 2005 the County entered into the 2005 Bond Series A Swap. Under the 2005 Bond, Series A swap, the County pays to the counterparty the SIFMA Municipal Swap Index rate and receives a variable payment computed as 67 percent of the one month US dollar London Interbank Offered Rate (LIBOR) plus percent. The County will also receive three payments of $515,000 on February 15, 2006, 2007 and The counterparty is The Bank of New York who has a Moody s Aaa rating. The swap has a notional amount of $44,750,000. As of December 31, 2007, the swap had a negative fair value of $89,

83 Notes to the Financial Statements December 31, 2007, Continued 12) Interest Rate Swaps, Continued 2005 Bond Series A Constant Maturity Swap On October 25, 2006 the County entered into the 2005 Bond, Series A constant maturity swap. Under the terms of the swap the County pays to the counterparty percent of the one month US dollar London Interbank Offered Rate (LIBOR) and receives percent of the ten year US dollar International Swaps and Derivative Association (ISDA) rate. The counterparty is Wachovia Bank who has a Moody s Aa1 rating. The effective date for the swap is November 15, 2007 and the notional amount is $44,655,000. Fair value As of December 31, 2007 the swap had a positive fair value of $731, ) Reserved Fund Balances General Fund Reserve for prepaids $847,822 This reserve represents those assets accounted for under the consumption method. In addition to the above, the County designated $15,700,000 for a Working Capital Reserve, which by policy equals ten percent of the 2008 General Fund budget. Special revenue funds Child support enforcement $222,466 This reserve represents the amount restricted for the Domestic Relations Title IV-D incentive program. Affordable housing act $1,046,394 This reserve represents fees collected by Recorder of Deeds on property transfers to be used to fund affordable housing efforts in the County. Hatfield house $625,526 These reserves represent both the expendable and nonexpendable portions of the Hatfield Memorial Trust which are contained within the Parks and Recreation Fund. Nolan estate $19,149 This reserve represents funds donated to the Parks and Recreation Fund to be used for the upkeep of Hibernia Park. Capital Projects Funds Capital reserve fund for county records improvement $2,212,574 This reserve represents additional fees collected for the recording of deeds, to be used to support development and improvement of office records management. Capital improvement fund reserve for agricultural easement $334,137 This reserve represents interest on breaches of previously preferenced real estate sold to developers. In addition to the above, the County designated $94,074,087 for various capital projects as of December 31,

84 Notes to the Financial Statements December 31, ) Employee Retirement Trust Fund Basis of Accounting The County of Chester Employee Retirement Trust Fund financial statements are prepared using the accrual basis of accounting. Plan member contributions are recognized in the period in which the contributions are due. Employer contributions are recognized when due and the employer has made a formal commitment to provide the contributions. Benefits and refunds are recognized when due and payable in accordance with the terms of the plan. Plan Description The County of Chester provides a single-employer defined benefit pension plan that is administered by the County Retirement Board. All employees working over 1,000 hours per year are required to enter the plan. County elected officials have the option of enrolling in the plan. The plan is included in the basic financial statements of the County of Chester as a retirement trust fund. A separate, audited GAAPbasis pension plan report is not issued. The plan provides retirement, disability and death benefits to plan members and their beneficiaries pursuant to Act 96 of 1971 of the Commonwealth of Pennsylvania (County Pension Law). Cost-of-living adjustments are provided at the discretion of the County Retirement Board. Employees who have reached the normal retirement age of 60, or age 55 with 20 years of County service, are entitled to annual retirement benefits equal to the member s annuity based on the actuarial equivalent of the accumulated payroll deductions, and a County annuity equal to the product of: (a) the Final Average Salary (three highest years) times (b) the employee s applicable class rates times (c) the membership service in the applicable class. The Plan permits early retirement on a voluntary basis before age 55 with 20 years of service and, on an involuntary basis, after eight years of service. Employees become 100 percent vested after five years of service. Death and disability benefits are also provided for in the Plan. If an active employee dies at age 60 or older, or after 10 years of County service, death benefits are paid to the employee s beneficiary. Active employees who become totally disabled receive an annual pension equal to 25 percent of the Final Average Salary after 5 years of County service. Membership Membership of the plan consisted of the following at December 31, 2007, the date of the latest actuarial valuation: Retirees and beneficiaries receiving benefits 877 Terminated plan members entitled to but not yet receiving benefits 148 Active plan members 2,478 Total 3,503 60

85 Notes to the Financial Statements December 31, 2007, Continued Funding Policy and Contributions Plan members are required to contribute 5 percent of their annual covered salary and may contribute up to 15 percent. The County contributions are determined as part of an annual actuarial valuation. Per Act 96 of 1971, as amended, contribution requirements of the plan members and the County may be amended by the General Assembly of the Commonwealth of Pennsylvania. Administrative costs of the plan are financed through investment earnings. Actuarial Valuation Information The County has an actuarial valuation prepared on an annual basis. The following methods and assumptions were used to prepare the valuation: Actuarial Cost Method: Asset Valuation Method: Entry Age 5-Year Smoothed Market Actuarial Assumptions: Investment Rate of Return * 7.5% Projected Salary Increases * 4.25%-4.5%; graduated.25% increment over 1 year * Includes Inflation at 3% The actuarial methods have not changed from the prior year actuarial valuation; however, the actuarial assumptions have changed. The salary scale was increased from 4.0 percent per annum to 4.25 percent for 2007 with subsequent increases of.25 percent per year until the ultimate assumed rate of 4.5 percent is attained for 2009 and later years. The Chester County Employee's Retirement System uses the entry age normal method. Under this method, an actuarial accrued liability is determined as the actuarial present value of projected benefits for all participants minus the actuarial present value of future normal costs. The normal cost is determined as the annual amount required to fund from date of hire to actuarial present value of projected benefits for each participant under the assumed retirement age. Amortization As of January 1, 2007 Amortization Initial Effective Remaining Outstanding Charge or Amount Date Period Balance Credit Amortization of Liability for: Initial unfunded liability $ 41,599,223 1/1/05 27 years $ 40,260,740 $ 3,518,871 Retiree COLA increase 1,449,306 1/1/06 8 years 1,236, ,143 Retiree COLA increase 2,420,708 1/1/08 10 years 2,420, ,663 Experience loss 301,431 1/1/06 13 years 277,485 34,148 Experience gain (96,905) 1/1/07 14 years (93,195) (10,978) Experience gain (22,090,237) 1/1/08 15 years (22,090,237) (2,502,542) ERIP 5,801,066 1/1/08 5 yeas 5,801,066 1,433,819 Total $ 27,813,301 $ 3,037,124 61

86 Notes to the Financial Statements December 31, 2007, Continued 14) Employee Retirement Trust Fund, Continued Amortization, Continued Total Amortization Charge $ 3,037,124 Normal Cost with interest to end of year $ 4,488,810 Total Funding Requirement for 2008 (ARC) $ 7,525,934 Annual Pension Cost and Net Pension Obligation Interest Change Net Annual on Net Percentage in Net Pension Required Pension ARC Pension of ARC Pension Obligation Year Contribution Obligation Adjustment Cost Contribution Contributed Obligation Balance 2007 $ 7,845,648 (900) (1,467) 7,846,215 7,845, % 567 (11,428) 2006 $ 8,373,341 (945) (1,552) 8,373,948 8,373, % 607 (11,995) 2005 $ 8,173,783 (993) (1,631) 8,174,421 8,173, % 638 (12,602) The amortization factor for the ARC adjustment is based upon level percentage of projected payroll on a closed basis. Voluntary Retirement Incentive Plan The Voluntary Retirement Incentive Plan was offered during the period of July 1, 2006 through January 5, By law, counties are allowed to offer early retirement incentive plans once every five years. In order to be eligible to retire under this Plan, the employee must be an active participant in the Chester County Employees Retirement Plan and must be age 55 or older with a minimum of 10 years of credited service or be any age with 30 or more years of credited service. As part of the Plan, the Commissioners authorized and the Retirement Board approved a special early retirement incentive that provides additional full years of service equal to 25 percent of credited service at the current designated county class rate. Under this Plan, beginning July 1, 2006, the retiree health care benefit was no longer available. One hundred and forty-two (142) employees elected to participate in this plan out of a possible four hundred and twenty-three (423) employees who were eligible. Component Units - Employees' Retirement Plan Chester County Solid Waste Authority Defined Contribution Plan CCSWA maintains a Single Employer Defined Contribution Employee Benefit Plan, with Prudential, covering substantially all employees. Participation begins January 1 in the year following the date of hire. CCSWA contributions for each employee are fully vested after one year of continued service. Contributions to the plan are at the discretion of CCSWA's Board up to a maximum of 15 percent of employee compensation. The average rate for 2007 and 2006 was 12 percent. Total CCSWA payroll costs for 2007 and 2006 approximated $1,540,000 and $1,410,000 respectively. Total expense under the Plan in 2007 and 2006 approximated $183,000 and $165,000 respectively. 62

87 Notes to the Financial Statements December 31, 2007, Continued 15) Other Post-Employment Benefits In the year 2006, the County early implemented GASB Statement No. 45, Accounting and Financial Reporting by Employers for Post-employment Benefits Other than Pensions. This pronouncement requires the County to calculate and record a net other post-employment benefit obligation (NOPEBO) at December 31, The NOPEBO is, in general, the cumulative difference between the actuarial required contribution and the actual contributions since January 1, Plan Description In addition to providing a pension benefits plan, the County provides post-employment health care and life insurance benefits (OPEB) for eligible retired employees, spouses and dependants through a single employer defined benefit plan. The benefits, benefits level, employee contribution and employer contribution are administered by the County Commissioners and can be amended by the County through its personnel manual and union contracts. The plan is not accounted for as a trust fund, as an irrevocable trust has not been established to account for the plan. A separate, audited GAAP basis benefits plan report is not issued. The activity of the plan is reported in the County s Benefits Fund, an internal service fund. Benefits Provided The County provides post-employment health care and life insurance benefits to detective union members and eligible participants retired before July 1, Employees who retire after June 30, 2006, with the exception of the detective union members, will only be eligible for the life insurance benefit. The County terminated healthcare options for new retirees after June 30, All medical health care benefits are provided through the County s self-insurance plan. The benefit levels are the same as those afforded to active employees. Benefits include medical services and prescriptions. A $5,000 life insurance policy is provided for life of the retiree and is fully paid for by the County. Membership Membership of the plan consisted of the following at December 31, 2007, the date of the first actuarial valuation: Pocopson Detectives Home Other Total Retirees and beneficiaries receiving benefits * Active employees ,948 2,280 Total ,185 2,576 *Retired with medical

88 Notes to the Financial Statements December 31, 2007, Continued 15) Other Post-Employment Benefits, Continued Funding Policy and Contributions The County negotiates the contribution percentage between the County and employees through the union contracts and personnel policy. All eligible retirees contribute 50 percent of the actuarially determined premium to the plan and the County contributes the remainder to cover the cost of providing the benefits to the retirees through the self-insured plan (pay-as-you-go). For the fiscal year ending December 31, 2007, the retirees contributed $266,447 toward the cost of their healthcare. Annual OPEB Cost and Net OPEB Obligation The County had its first actuarial valuation performed for the plan as of December 31, 2006 to determine the funded status of the plan as of that date as well as the employer s annual required contribution (ARC) for the year ended. Actuarial valuations are performed every two years. The County s 2007 OPEB cost of $647,482 was greater than the ARC of $647,000 for the year. The County s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for 2007 were as follows: Percentage Annual Annual Fiscal Year OPEB Employer OPEB Cost Net OPEB Ending Cost Contribution Contributed Obligation December 31, 2007 $ 647,000 $ 647, % $ (482) December 31, 2006 $ 647,000 $ 645, % $ 1,940 The net OPEB obligation (NOPEBO) as of December 31, 2007, was calculated as follows: Total December 31, 2006 Net OPEB Obligation (NOO) $ 1,940 Annual OPEB Cost (AOC) 647,000 Less contributions made 647,482 December 31, 2007 Net OPEB Obligation (NOO) $ 1,458 Funded Status and Funding Progress. The funded status of the plan as of December 31, 2006, was a follows: Actuarial Accrued Liability (AAL) $ 4,398,000 Actuarial Value of Plan Assets - Unfunded Actuarial Accrued Liability (UAAL) $ 4,398,000 Funded Ratio (actuarial value of plan assets/aal) 0% Covered Payroll (active plan members) $ 85,371,000 UAAL as a percentage of covered payroll 5% 64

89 Notes to the Financial Statements December 31, 2007, Continued 15) Other Post-Employment Benefits, Continued Funded Status and Funding Progress 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, claim cost, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contribution 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, presents multiyear trend information that shows whether the actuarial value of plan assets is increasing or decreasing over time relative to actuarial accrued liabilities for benefits. Actuarial Methods and Assumptions Actuarial valuations are performed every two years for the County s OPEB plan. 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 the 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. In the December 31, 2006 actuarial valuation, the projected unit credit cost method was used. The actuarial assumptions included a 5 percent investment rate of return and an annual healthcare cost trend rate of 13.5 percent initially, reduced by decrements to an ultimate rate of 5 percent in the year The actuarial value of assets was not determined as the County has not advance funded its obligation. The plans unfunded actuarial accrued liability is being amortized over 10 years at a level dollar amount. 16) Related Party Transactions The County is affiliated with the Southeastern Pennsylvania Transportation Authority (SEPTA) as a result of the following factors: SEPTA provides transportation services to County residents. The County has representation on SEPTA's governing board. The County partially subsidizes SEPTA's operations and capital projects. Because of the pervasive nature of SEPTA's operations (SEPTA services all of Southeastern Pennsylvania, including several governmental entities significantly larger than Chester County), it was not considered part of the County's reporting entity; however, the County does consider SEPTA a related party based on the factors enumerated above. It further does not meet the requirements of Statement No. 14 (as amended by Statement No. 39) of the Governmental Accounting Standards Board, to be included as a component unit. During 2007, the County provided operating and capital subsidies to SEPTA of approximately $1,373,077 and $166,636, respectively. 65

90 Notes to the Financial Statements December 31, 2007, Continued 16) Related Party Transactions, Continued In addition, as of December 31, 2007, the County has committed to fund operating and capital subsidies to SEPTA approximating $812,500 and $225,673, respectively. In 1985, Chester County and three neighboring counties co-sponsored the formation of the Delaware Valley Regional Finance Authority (DVRFA) for the purpose of establishing a pooled loan program for the benefit of local governmental units in the four-county area. Under the terms of the DVRFA's loan program, eligible borrowers include boroughs, cities, townships, and school districts located in the fourcounty area, as well as the sponsoring counties themselves. The DVRFA does not constitute a joint venture arrangement under current GASB pronouncements. However, Chester County is affiliated with the DVRFA via its sponsorship role and continuing representation on the Authority's Board. The DVRFA has credit facilities and insurance arrangements in place to guarantee their debt. In 2007 and in previous years, the County borrowed from the DVRFA through general obligation notes of which $195,624,000 were outstanding at December 31, (See note 11). 17) Commitments and Contingencies A. Through 1996, the County levied a tax on personal property (defined primarily as equity and fixedincome securities) held by County residents. In 1996, the U.S. Supreme Court declared a North Carolina intangibles tax, similar to the County's personal property tax, unconstitutional. During 2000, the Pennsylvania Supreme Court ruled that the personal property tax was constitutional; however, the exemption for holdings of in-state securities was unconstitutional. The Pennsylvania Supreme Court, in the Annenberg decision, ordered that counties fashion a backward looking remedy to correct the unconstitutional exemption from the tax. The County has in good faith implemented the backward looking remedy as required by the Annenberg decision. At this date there is no law suit filed and no litigation currently. Although the County did not and does not anticipate collection of back taxes, there was $40,384 collected in 2007 which was recorded as current general revenue. B. In the normal course of business, there are various claims and suits pending against the County and its elected officials. For the period ending December 31, 2007, the County has accrued a $1,250,000 liability to settle a class action suit on behalf of past and present employees of Chester County Prison who served as correctional officers within the past three (3) years. The lawsuit alleges that the Chester County Prison had a policy of requiring its correctional officers to work in excess of forty (40) hours per week without paying them proper overtime compensation. Management is of the opinion that there are no other pending claims or suits which will have a material adverse effect on the County s financial position at December 31, C. At the end of the year there was approximately $21.8 million contractually committed to purchase assets on behalf of others, in accordance with the County s Open Space Program. 66

91 Notes to the Financial Statements December 31, 2007, Continued 17) Commitments and Contingencies, Continued D. The County has 2 active construction projects as of December 31, The projects include the construction of a new Justice Center and the expansion of the existing Prison. Expended Through Remaining Project December 31, 2007 on Contract Prison Expansion $ 35,092,180 $ 1,273,631 Justice Center 68,110,812 7,645,612 Component Unit Commitment and Contingencies Chester County Solid Waste Authority Total $ 103,202,992 $ 8,919,243 The Authority maintains insurance coverage for environmental and other matters subject to certain policy exclusions. The insurance limits in force for 2007 were $6,000,000 for each occurrence and $12,000,000 aggregate. Any significant claims against the Authority relative to environmental matters that are not covered by existing insurance arrangements, if asserted and not successfully defended, could have a material adverse impact on the Authority s financial position and results of operations. As of December 31, 2007, however, the Authority was not aware of any such claims, asserted or unasserted, related to its operations. 18) Closure and Post-closure Costs Component Unit - Closure and Post-closure Costs Chester County Solid Waste Authority State and federal laws and regulations require CCSWA to place a cover on the completed sections of the landfill when it stops accepting waste at a site, and to perform certain maintenance and monitoring functions at the landfill site for extended periods (up to thirty years) after closure. Although closure and post-closure care costs are paid only when CCSWA stops accepting waste at a site, a portion of such costs are reported as an operating expense each period based on landfill capacity used as of each balance sheet date. CCSWA increases and decreases its estimated liability for closure and post-closure costs each year based on revised cost estimates provided by consulting engineers and percentage of the facility utilized. During 2007 and 2006, costs of $1,467,168 and $1,279,792, respectively, were expensed. Amounts reported as closure and post-closure care liabilities at December 31, 2007 and 2006 are as follows: Current $ 405,689 $ 359,761 Noncurrent 10,949,238 11,831,226 $ 11,354,927 $ 12,190,987 67

92 Notes to the Financial Statements December 31, 2007, Continued 18) Closure and Post-closure Costs, Continued The current closure and post-closure financial assurance requirement approved by the DEP is $20,903,100 as of December 31, The Authority will recognize the remaining estimated cost of closure and post-closure care of approximately $9,458,173 for the entire site (measured as of December 31, 2007) as the remaining estimated capacity is filled. Actual costs may differ due to the rate of inflation, changes in technology, or changes in regulations. In 1996, the Authority obtained permits to operate the Area C-Overfill landfill unit. This 45-acre, 4-cell unit provided capacity through Closure and post-closure liabilities for this unit began to be accrued in 1997, when Cells 1 and 2 began operations. In 2005, the Authority obtained permits to operate the Area D landfill unit. The 53.6-acre Area D cell is expected to provide capacity through Closure and post-closure liabilities for this unit began to accrue in Total cash and investments on deposit in trust accounts specifically restricted for closure and postclosure care costs totaled $19,672,412 and $17,107,497 at December 31, 2007 and 2006, respectively. To provide additional security for certain closure and post-closure obligations, the Authority has obtained letters of credit in favor of the DEP for $1,700,000, maturing November 30, 2005, guaranteed by the County. The letter of credit terminated on November 30, The United States Environmental Protection Agency (EPA) has enacted regulations that became effective in October of 1993, which, among other things, require municipal solid waste organizations to conduct post-closure care monitoring activities for a minimum of thirty years for new landfill units. Management of CCSWA has been advised by legal counsel that such regulations do not apply to certain older portions of CCSWA's landfill site that did not receive waste after the date the regulations were published. Accordingly, based on management's present intentions, CCSWA's recorded liability for post-closure obligations reflects the estimated costs of post-closure care for these older areas of the landfill site for a period of twenty years after closure, consistent with a Closure Plan submitted by the CCSWA and approved by the DEP. CCSWA is permitted to voluntarily conduct post-closure care activities for a period in excess of twenty years and has resolved to annually review and re-evaluate its plans and intentions in this regard. Further, CCSWA's recorded obligations for closure and postclosure care activities are accounting estimates that are based on a number of variables and could change significantly in the future as a result of changes in regulatory requirements, technology and management's plans. 68

93 Required Supplementary Information

94 Required Supplementary Information Year Ended December 31, 2007 Employee Retirement Plan Schedule of Funding Progress Actuarial UAAL as a Actuarial Accrued Unfunded Percentage Actuarial Value of Liability (AAL) AAL Funded Covered of Covered Valuation Assets Entry Age (UAAL) Ratio Payroll Payroll Date (a) (b) (b-a) (a/b) ( c ) ((b-a)/c) 1/1/2005 $ 185,581,923 $ 228,301,740 $ 42,719, % $ 104,297, % 1/1/2006 $ 201,651,975 $ 245,161,278 $ 43,509, % $ 101,441, % 1/1/2007 $ 222,871,098 $ 265,136,166 $ 42,265, % $ 103,537, % 1/1/2008 $ 261,412,287 $ 289,225,588 $ 27,813, % $ 111,960, % The method of actuarial valuation changed from Aggregate Actuarial Cost to Entry Age in 2005, therefore more than 4 years of data are not available. Notes to the Required Schedules The information presented in the required supplementary schedules was determined as part of the actuarial valuations at the dates indicated. Additional information as of the latest actuarial valuation follows: Valuation Date 12/31/2007 Actuarial Cost Method: Entry Age Asset Valuation Method: 5-Year Smoothed Market Actuarial Assumptions: Investment Rate of Return * 7.5% Projected Salary Increases * 4.25%-4.5%; graduated in.25% increments over 1 year * Includes Inflation at 3% Employee Retirement Plan Schedule of Employer Contributions Annual Required Percentage of ARC Year Ended Contributions ( ARC ) Contributed December 31, 2007 $ 7,845, % December 31, 2006 $ 8,373, % December 31, 2005 $ 8,173, % December 31, 2004 $ 8,031, % December 31, 2003 $ 5,879, % In addition to the ARC, in 2007, the county contributed $1,719 for employees who are on active military duty. Unaudited - see accompanying independent auditors' report. 69

95 Required Supplementary Information Year Ended December 31, 2007 OPEB Plan Schedule of Funding Progress UAAL as a Actuarial Actuarial Accrued Unfunded Percentage Actuarial Value of Liabilities (AAL) AAL Funded Covered of Covered Valuation Assets Project Unit Credit (UAAL) Ratio Payroll Payroll Date (a) (b) (b-a) (a/b) ( c ) (b-a)/( c ) 12/31/2006 $0 $4,398,000 $4,398,000 0% $85,371,000 5% The County implemented GASB Statement No.45 for the fiscal year ended December 31,2006. Information for prior years is not available. OPEB Plan Schedule of Employer Contribution Annual Required Percentage Employer Contribution of ARC Year Ended Contribution (ARC) Contributed 2007 $647,482 $647, % , , % The County implemented GASB Statement No.45 for the fiscal year ended December 31,2006. Information for prior years is not available. Other Post-Employment Benefits The employer contribution reported on page 65 represents the current amount paid by the County for the current year cost of the benefits, which were entirely paid out or on behalf of eligible retirees. Accordingly, as disclosed on page 65, no assets have been placed in trust to advance fund the employer s obligation. Unaudited - see accompanying independent auditors' report. 70

96 General Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget (GAAP Basis) and Actual For the Year Ended December 31, 2007 Budgeted Amounts Variance with Original Final Actual Amounts Final Budget Revenues: Taxes: Real estate $ 96,257,495 $ 96,257,495 $ 96,009,327 $ (248,168) Personal property ,384 40,384 Licenses and permits 1,585,305 1,585, ,745 (611,560) General grants 3,879,701 4,181,719 3,900,690 (281,029) Health and welfare grants 7,306,274 7,820,106 7,636,576 (183,530) Departmental earnings 12,475,300 12,475,682 12,814, ,910 Court costs and fines 4,853,464 4,860,464 4,761,015 (99,449) Interest and rent 2,979,050 2,979,050 3,564, ,400 Other 2,724,014 2,800,158 2,961, ,082 Total revenues 132,060, ,959, ,662,019 (297,960) Expenditures: Current: General government Commissioners 1,182,528 1,182, , ,003 Finance 810, , , ,838 Human resources 994, , ,394 10,617 Contracts and purchasing 799, , ,508 35,669 General services 821, , ,765 38,888 Public information 136, ,016 65,979 70,037 Voter services 1,813,838 1,813,838 1,784,236 29,602 Assessment 2,230,495 2,230,495 2,143,679 86,816 Tax claim 670, , ,517 98,448 Treasurer 819, , ,072 28,003 Controller 1,851,756 1,851,756 1,742, ,132 Solicitor 471, , ,859 72,209 Public defender 3,310,212 3,310,212 2,964, ,408 Recorder of deeds 1,659,485 1,659,867 1,458, ,156 Facilities management 5,426,503 5,276,503 4,903, ,245 DCIS 12,241,798 11,538,984 10,621, ,790 Archives 395, , ,355 59,804 Veterans affairs 314, , ,294 25,412 Non-departmental 4,384,725 4,640,518 3,553,062 1,087,456 40,333,320 39,736,681 35,747,148 3,989,533 Reimbursable costs Allocated costs (1,696,578) (1,696,578) (1,696,560) (18) Indirect costs (7,540,893) (7,540,893) (7,456,043) (84,850) Maintenance in lieu of rent (1,287,604) (1,287,604) (1,291,824) 4,220 Reimbursable costs (10,525,075) (10,525,075) (10,444,427) (80,648) Unaudited - see accompaning independent auditor's report. 71

97 General Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget (GAAP Basis) and Actual For the Year Ended December 31, 2007 Budgeted Amounts Variance with Original Final Actual Amounts Final Budget Judicial Court administration 5,997,157 5,997,157 5,511, ,210 Court reporters 1,593,290 1,593,290 1,396, ,545 District justices 7,442,487 7,442,487 6,886, ,869 Law library 380, , , Clerk of courts 1,197,617 1,192,397 1,140,408 51,989 Constables 2,475,000 2,475,000 2,170, ,924 Coroner 608, , ,148 15,135 District attorney 8,300,632 8,328,573 8,203, ,916 Prothonotary 1,264,145 1,264,145 1,166,879 97,266 Register of wills 782, , ,690 28,245 Sheriff 4,462,944 4,462,944 4,301, ,976 Bail agency 884, , , ,728 35,389,612 35,406,333 33,271,214 2,135,119 Public safety Emergency services 2,747,233 3,048,480 2,660, ,336 2,747,233 3,048,480 2,660, ,336 Corrections Prison 24,666,612 25,575,612 25,569,043 6,569 Adult probation 5,600,893 5,679,893 5,679, Juvenile probation 3,721,236 3,721,236 3,548, ,882 33,988,741 34,976,741 34,797, ,461 Human services Health department 12,098,822 12,172,151 10,833,950 1,338,201 12,098,822 12,172,151 10,833,950 1,338,201 Conservation and development Planning 3,040,694 3,078,885 2,789, ,868 Water resources 423, , ,710 55,263 Agricultural development 712, , , ,903 Soil conservation 1,193,305 1,193,305 1,064, ,164 5,370,893 5,464,091 4,833, ,198 Capital outlay: Other - 23,520 23, Total expenditures 119,403, ,302, ,722,617 8,580,305 Excess (deficiency) of revenues over (under) expenditures 12,657,057 12,657,057 20,939,402 8,282,345 Unaudited - see accompaning independent auditor's report. 72

98 General Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget (GAAP Basis) and Actual For the Year Ended December 31, 2007 Budgeted Amounts Variance with Original Final Actual Amounts Final Budget Other financing sources (uses): Transfers in 52,655 52,655 - (52,655) Transfers out (18,909,712) (18,909,712) (15,437,299) 3,472,413 Sale of capital assets , ,564 Total other financing sources (uses) (18,857,057) (18,857,057) (15,068,735) 3,788,322 Net change in fund balances (6,200,000) (6,200,000) 5,870,667 12,070,667 Fund balances: Beginning of year - 33,402,943 33,402,943 - End of year $ (6,200,000) $ 27,202,943 $ 39,273,610 $ 12,070,667 Unaudited - see accompaning independent auditor's report. 73

99 Mental Health/Mental Retardation Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget (GAAP Basis) and Actual For the Year Ended December 31, 2007 Budgeted Amounts Variance with Original Final Actual Amounts Final Budget Revenues: Health and welfare grants $ 64,568,924 $ 70,572,737 $ 67,594,096 $ (2,978,641) Departmental earnings , ,862 Interest and rent 720, ,000 1,704, ,033 Other 88,644 88,644 64,426 (24,218) Total Revenues 65,377,568 71,381,381 69,483,417 (1,897,964) Expenditures: Current: General government Human services 66,783,616 72,787,885 71,004,411 1,783,474 Total expenditures 66,783,616 72,787,885 71,004,411 1,783,474 Excess (deficiency) of revenues over (under) expenditures (1,406,048) (1,406,504) (1,520,994) (114,490) Other financing sources (uses): Transfers in (1,548,991) - 1,587,494 1,587,494 Transfers out 142, ,987 (66,500) (209,487) Total other financing sources (uses) (1,406,048) 142,987 1,520,994 1,378,007 Net change in fund balances (2,812,096) (1,263,517) - 1,263,517 Fund balances: Beginning of year End of year $ (2,812,096) $ (1,263,517) $ - $ 1,263,517 Unaudited - see accompanying independent auditor's report. 74

100 Managed Behavioral Health Care Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget (GAAP Basis) and Actual For the Year Ended December 31, 2007 Budgeted Amounts Variance with Original Final Actual Amounts Final Budget Revenues: Health and welfare grants $ 50,177,323 $ 54,944,369 $ 53,886,253 $ (1,058,116) Interest and rent 26,284 26,284 94,167 67,883 Total Revenues 50,203,607 54,970,653 53,980,420 (990,233) Expenditures: Current: Human services 49,803,607 54,610,243 54,269, ,617 Total expenditures 49,803,607 54,610,243 54,269, ,617 Excess (deficiency) of revenues over (under) expenditures 400, ,410 (289,206) (649,616) Other financing sources (uses): Transfers in (25,000) - 79,945 79,945 Transfers out 425, ,021 (411,063) (853,084) Total other financing sources (uses) 400, ,021 (331,118) (773,139) Net change in fund balances 800, ,431 (620,324) (1,422,755) Fund balances: Beginning of year - 1,274,722 1,274,722 - End of year $ 800,000 $ 2,077,153 $ 654,398 $ (1,422,755) Unaudited - see accompanying independent auditor's report. 75

101 Notes to Required Supplementary Information December 31, 2007 Budgetary Information The County follows these procedures in developing its budget: The County Code, Act of August 9, 1955 (P.L.323, No. 130), as amended, requires that the annual budget be adopted no later than December 31 for the succeeding fiscal year beginning January 1. The Code also requires that the proposed budget be available for public inspection at least twenty days prior to the date set for adoption. Annual budgets are adopted on a basis consistent with generally accepted accounting principles for all governmental and business type funds. County department heads are required to submit operating and capital expenditure budget requests and revenue estimates to the Finance Department by June 30. The requested budgets are submitted by category of expenditure or revenue in accordance with the account structure established in the County s financial system and also by major program or activity to enhance stakeholders understanding of county services and to aid the Board of Commissioners in implementing program priorities. During July and August, the Finance Department and County senior staff meet with department heads to review budget requests. Review meetings are followed by public work sessions at which selected departments are asked to present their program budgets to the Commissioners. No later than October 31, the proposed budget is available for public inspection. A public budget hearing is held during November and the budget adopted no later than the statutory deadline. The County is legally required to maintain budgetary controls at the major function level. Unexpended appropriations lapse at year-end. 76

102 Supplementary Information

103 Supplementary Information December 31, 2007 Description of Funds Nonmajor Governmental Funds Domestic Relations Fund Operations of the County Domestic Relations Program. Financing is provided by the federal government and a General Fund appropriation. Liquid Fuels Fund Maintenance and construction of County bridges. Financing is provided by the County's share of state gasoline taxes and federal grants. Community Development Fund Operations and administration of the Housing and Community Development programs and programs operated under the Job Training Partnership Act (JTPA). Financing is provided by federal and state grants. Parks and Recreation Fund Operations of the County's parks and provision of recreation programs. Financing is primarily provided by designated real estate taxes. Public Safety Communication Fund Operation and administration of 911 emergency telephone system for the County. Financing is provided by a surcharge levied on telephone bills and a General Fund appropriation. Library Fund Operations and administration of the County s Library system. Financing is provided by state grants, the General Fund, and designated real estate taxes. Human Services Fund Operation and administration of the Human Services Program. Financing is provided by state and federal grants and program income. Office of Aging Fund Operations and administration of the County Senior Citizens Program. Financing is provided by private contributions, state and federal grants, and a matching appropriation from the County General Fund. Drug and Alcohol Fund Operations and administration of the County Drug and Alcohol Program. Financing is provided by state and federal grants with a matching appropriation from the County General Fund. 77

104 Supplementary Information December 31, 2007 Description of Funds Nonmajor Governmental Funds, Continued Children Youth & Families Fund This fund is for the operations and administration of the County CYF program. Financing is provided by state and federal grants with an appropriation from the County General Fund. The General Fund also finances costs in excess of state funding ceilings. Subsidized Child Day Care Fund Operations and administration of the County Subsidized Child Day Care Program. Financing is provided by state and federal grants. Capital Reserve Fund Certain capital expenditures financed principally by a General Fund transfer. Description of Funds Major Governmental Funds Debt Service Maintained for the accumulation of resources for the payment of principal and interest on general obligation long-term debt. Capital Improvements Fund Projects for the acquisition and/or construction of assets with an extended useful life are financed through the issuance of general obligation notes and bonds. 78

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106 Combining Balance Sheet Nonmajor Governmental Funds December 31, 2007 Domestic Community Parks and Relations Liquid Fuels Development Recreation Assets: Cash and cash equivalents $ - $ 128,194 $ - $ 1,949,790 Investments - 3,997-60,797 Taxes receivable ,810 Grants receivable 1,059,635 31,489 2,514,663 - Interest and dividends receivable ,655 Other receivables 1, ,320 8,495 Prepaids 160-3,789 6,780 Other assets - - 1,743 - Advances to subcontractors Restricted cash and cash equivalents ,551 Total assets $ 1,060,879 $ 163,680 $ 2,632,515 $ 2,650,878 Liabilities and fund balances: Liabilities: Vouchers and accounts payable $ 10,271 $ 159,440 $ 1,095,422 $ 66,425 Accrued liabilities 72,586 4,240 26,186 61,593 Funds held in escrow ,458 Due to other funds 709, ,035 - Due to other governments - - 2,555 - Deferred revenues 45, ,318 Total liabilities 838, ,680 1,586, ,794 Fund balances: Reserved for: County records improvement Child support enforcement 222, Nolan estate ,149 Affordable housing act - - 1,046,394 - Hatfield house ,526 Unreserved ,679,409 Total fund balances 222,466-1,046,394 2,324,084 Total liabilites and fund balances $ 1,060,879 $ 163,680 $ 2,632,515 $ 2,650,878 80

107 Subsidized Human Drug and Child Day Public Safety Library Services Aging Alcohol Care $ - $ 1,344,446 $ 475,918 $ 50 $ 433,391 $ 948,346-41,921 14,840-13,509 29, , , , ,853 24, ,019 9,191-26,675 10,870 11, ,070 1,500 1, $ 463,019 $ 1,659,753 $ 672,963 $ 522,391 $ 1,330,231 $ 1,013,946 $ 200,176 $ 27,594 $ 434,042 $ 167,666 $ 635,393 $ 1,002, ,785 78,404 8,605 39,146 20,247 11, , , , , , , , , , , ,391 1,330,231 1,013, ,332, ,332, $ 463,019 $ 1,659,753 $ 672,963 $ 522,391 $ 1,330,231 $ 1,013,946 (Continued on the next page.) 81

108 Combining Balance Sheet, Continued Nonmajor Governmental Funds December 31, 2007 Total Children, Nonmajor Youth and Capital Governmental Family Reserve Funds Assets: Cash and cash equivalents $ 16,095 $ 4,910,239 $ 10,206,469 Investments - 153, ,488 Taxes receivable ,005 Grants receivable 4,553,099-9,698,642 Interest and dividends receivable - - 1,655 Other receivables 15,770 13, ,056 Prepaids ,907 Other assets - - 1,743 Advances to subcontractors ,178 Restricted cash and cash equivalents ,551 Total assets $ 4,585,142 $ 5,077,297 $ 21,832,694 Liabilities and fund balances: Liabilities: Vouchers and accounts payable $ 1,860,866 $ 196,544 $ 5,856,566 Accrued liabilities 193, ,438 Funds held in escrow ,458 Due to other funds 2,177,918-3,526,633 Due to other governments 17,332-27,217 Deferred revenues 335,599-1,933,688 Total liabilities 4,585, ,544 12,026,000 Fund balances: Reserved for: County records improvement - 2,212,574 2,212,574 Child support enforcement ,466 Nolan estate ,149 Affordable housing act - - 1,046,394 Hatfield house ,526 Unreserved - 2,668,179 5,680,585 Total fund balances - 4,880,753 9,806,694 Total liabilites and fund balances $ 4,585,142 $ 5,077,297 $ 21,832,694 82

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110 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Governmental Funds For the Year Ended December 31, 2007 Domestic Community Parks and Relations Liquid Fuels Development Recreation Revenues: Taxes: Real estate $ - $ - $ - $ 5,555,008 Personal property Licenses and permits General grants - 830,319 7,277,134 8,369 Health and welfare grants 4,137,582-1,548,495 - Departmental earnings 33,051-1,397,306 96,771 Court costs and fines 54, Interest and rent 3,170 5,227 11, ,719 Other - 3,800 60,022 39,497 Total revenues 4,228, ,346 10,294,640 6,032,364 Expenditures: Current: General government Judicial 5,592, Public safety Corrections Public works - 1,110, Human services ,087,437 - Culture and recreation ,483,579 Conservation and development Capital outlay: Bridges Other 29,222 92,413 7, ,356 Debt Service: Principal Interest Debt issuance costs Total expenditures 5,622,043 1,203,223 12,094,609 5,653,935 Excess (deficiency) of revenues over (under) expenditures (1,393,469) (363,877) (1,799,969) 378,429 Other financing sources (uses): Transfers in 1,507, , Transfers out - - (25,000) - Total other financing sources (uses) 1,507, ,877 (25,000) - Net change in fund balances 114,368 - (1,824,969) 378,429 Fund balances: Beginning of year 108,098-2,871,363 1,945,655 End of year $ 222,466 $ - $ 1,046,394 $ 2,324,084 84

111 Subsidized Human Drug and Child Day Public Safety Library Services Aging Alcohol Care $ - $ 6,765,108 $ - $ - $ - $ ,882 5,472, , ,274,214-4,367,877 11,224,834 9,573, , , ,308 28,947 9,253 19,284 27,700 94, ,018 1,080 41, ,859,494 6,997,434 3,569,123 5,522,883 4,617,524 11,252, ,911, ,832,494 5,401,597 5,383,563 11,239,534-6,588, , , ,939,419 6,588,781 4,039,702 5,401,597 5,383,563 11,239,534 (2,079,925) 408,653 (470,579) 121,286 (766,039) 13,000 2,079, , , , (114,211) (395,790) (11,000) (13,000) 2,079, ,579 (121,286) 766,039 (13,000) - 408, , $ - $ 1,332,997 $ - $ - $ - $ - (Continued on the next page.) 85

112 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Governmental Funds, Continued For the Year Ended December 31, 2007 Total Children, Nonmajor Youth and Capital Governmental Families Reserve Funds Revenues: Taxes: Real estate $ - $ - $ 12,320,116 Personal property Licenses and permits General grants 1,118-14,011,751 Health and welfare grants 20,635,786-45,188,788 Departmental earnings 596, ,162 11,889,296 Court costs and fines ,692 Interest and rent ,965 1,011,503 Other ,282 Total revenues 21,234, ,127 84,889,428 Expenditures: Current: General government - 383, ,687 Judicial - - 5,592,821 Public safety ,911,169 Corrections Public works - - 1,110,810 Human services 26,530,560-64,475,185 Culture and recreation ,072,433 Conservation and development Capital outlay: Bridges Other - 770,912 1,305,533 Debt Service: Principal Interest Debt issuance costs Total expenditures 26,530,560 1,154,672 96,851,638 Excess (deficiency) of revenues over (under) expenditures (5,296,175) (713,545) (11,962,210) Other financing sources (uses): Transfers in 6,367,304 1,000,000 12,955,276 Transfers out (1,071,129) - (1,630,130) Total other financing sources (uses) 5,296,175 1,000,000 11,325,146 Net change in fund balances - 286,455 (637,064) Fund balances: Beginning of year - 4,594,298 10,443,758 End of year $ - $ 4,880,753 $ 9,806,694 86

113 Domestic Relations Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget (GAAP Basis) and Actual For the Year Ended December 31, 2007 Budgeted Amounts Variance with Original Final Actual Amounts Final Budget Revenues: Health and welfare grants $ 4,195,666 $ 4,247,965 $ 4,137,582 $ (110,383) Departmental earnings 31,500 31,500 33,051 1,551 Court costs and fines 48,000 48,000 54,771 6,771 Interest and rent 6,000 6,000 3,170 (2,830) Total Revenues 4,281,166 4,333,465 4,228,574 (104,891) Expenditures: Current: Judicial 5,850,539 5,858,338 5,592, ,517 Capital outlay: Other - 44,500 29,222 15,278 Total expenditures 5,850,539 5,902,838 5,622, ,795 Excess (deficiency) of revenues over (under) expenditures (1,569,373) (1,569,373) (1,393,469) 175,904 Other financing sources (uses): Transfers in (1,569,373) - 1,507,837 1,507,837 Total other financing sources (uses) (1,569,373) - 1,507,837 1,507,837 Net change in fund balances (3,138,746) (1,569,373) 114,368 1,683,741 Fund balances: Beginning of year - 108, ,098 - End of year $ (3,138,746) $ (1,461,275) $ 222,466 $ 1,683,741 87

114 Liquid Fuels Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget (GAAP Basis) and Actual For the Year Ended December 31, 2007 Budgeted Amounts Variance with Original Final Actual Amounts Final Budget Revenues: General grants $ 630,000 $ 799,000 $ 830,319 $ 31,319 Interest and rent 2,000 2,000 5,227 3,227 Other 88,000-3,800 3,800 Total Revenues 720, , ,346 38,346 Expenditures: Current: Public works 994,518 1,126,751 1,110,810 15,941 Capital outlay: Other 96,000 96,000 92,413 3,587 Total expenditures 1,090,518 1,222,751 1,203,223 19,528 Excess (deficiency) of revenues over (under) expenditures (370,518) (421,751) (363,877) 57,874 Other financing sources (uses): Transfers in (421,751) - 363, ,877 Transfers out 51, Total other financing sources (uses) (370,518) - 363, ,877 Net change in fund balances (741,036) (421,751) - 421,751 Fund balances: End of year $ (741,036) $ (421,751) $ - $ 421,751 88

115 Department of Community Development Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget (GAAP Basis) and Actual For the Year Ended December 31, 2007 Budgeted Amounts Variance with Original Final Actual Amounts Final Budget Revenues: General grants $ 12,904,737 $ 13,057,475 $ 7,277,134 $ (5,780,341) Health and welfare grants 2,038,957 1,973,349 1,548,495 (424,854) Departmental earnings 1,200,000 1,200,000 1,397, ,306 Interest and rent 60,225 60,225 11,683 (48,542) Other 52,513 54,897 60,022 5,125 Total Revenues 16,256,432 16,345,946 10,294,640 (6,051,306) Expenditures: Current: Human services 16,856,432 18,094,320 12,087,437 6,006,883 Capital outlay: Other - 7,711 7, Total expenditures 16,856,432 18,102,031 12,094,609 6,007,422 Excess (deficiency) of revenues over (under) expenditures (600,000) (1,756,085) (1,799,969) (43,884) Other financing sources (uses): Transfers out 25,000 25,000 (25,000) (50,000) Total other financing sources (uses) 25,000 25,000 (25,000) (50,000) Net change in fund balances (575,000) (1,731,085) (1,824,969) (93,884) Fund balances: Beginning of year - 2,871,363 2,871,363 - End of year $ (575,000) $ 1,140,278 $ 1,046,394 $ (93,884) 89

116 Parks and Recreation Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget (GAAP Basis) and Actual For the Year Ended December 31, 2007 Budgeted Amounts Variance with Original Final Actual Amounts Final Budget Revenues: Taxes: Real estate $ 5,564,259 $ 5,564,259 $ 5,555,008 $ (9,251) General grants 3,500 3,500 8,369 4,869 Departmental earnings 82,727 82,727 96,771 14,044 Interest and rent 341, , ,719 (8,747) Other 25,718 25,718 39,497 13,779 Total Revenues 6,017,670 6,017,670 6,032,364 14,694 Expenditures: Current: Culture and recreation 6,459,650 6,430,155 5,483, ,576 Capital outlay: Other 258, , , ,159 Total expenditures 6,717,670 6,717,670 5,653,935 1,063,735 Excess (deficiency) of revenues over (under) expenditures (700,000) (700,000) 378,429 1,078,429 Net change in fund balances (700,000) (700,000) 378,429 1,078,429 Fund balances: Beginning of year - 1,945,655 1,945,655 - End of year $ (700,000) $ 1,245,655 $ 2,324,084 $ 1,078,429 90

117 Public Safety Communications Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget (GAAP Basis) and Actual For the Year Ended December 31, 2007 Budgeted Amounts Variance with Original Final Actual Amounts Final Budget Revenues: Departmental earnings $ 7,968,576 $ 7,968,576 $ 9,573,474 $ 1,604,898 Interest and rent 114, , ,537 77,337 Other 575, ,500 94,483 (481,017) Total Revenues 8,658,276 8,658,276 9,859,494 1,201,218 Expenditures: Current: Public safety 12,740,900 12,712,641 11,911, ,472 Capital outlay: Other - 28,259 28,250 9 Total expenditures 12,740,900 12,740,900 11,939, ,481 Excess (deficiency) of revenues over (under) expenditures (4,082,624) (4,082,624) (2,079,925) 2,002,699 Other financing sources (uses): Transfers in (4,082,624) - 2,079,925 2,079,925 Total other financing sources (uses) (4,082,624) - 2,079,925 2,079,925 Net change in fund balances (8,165,248) (4,082,624) - 4,082,624 Fund balances: End of year $ (8,165,248) $ (4,082,624) $ - $ 4,082,624 91

118 Library Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget (GAAP Basis) and Actual For the Year Ended December 31, 2007 Budgeted Amounts Variance with Original Final Actual Amounts Final Budget Revenues: Taxes: Real estate $ 6,778,046 $ 6,778,046 $ 6,765,108 $ (12,938) Interest and rent 95,000 95, ,308 37,308 Other 100, , , Total Revenues 6,973,046 6,973,046 6,997,434 24,388 Expenditures: Current: Culture and recreation 7,798,513 7,914,872 6,588,781 1,326,091 Total expenditures 7,798,513 7,914,872 6,588,781 1,326,091 Excess (deficiency) of revenues over (under) expenditures (825,467) (941,826) 408,653 1,350,479 Net change in fund balances (825,467) (941,826) 408,653 1,350,479 Fund balances: Beginning of year - 924, ,344 - End of year $ (825,467) $ (17,482) $ 1,332,997 $ 1,350,479 92

119 Human Services Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget (GAAP Basis) and Actual For the Year Ended December 31, 2007 Budgeted Amounts Variance with Original Final Actual Amounts Final Budget Revenues: General grants $ 269,000 $ 278,000 $ 264,882 $ (13,118) Health and welfare grants 3,355,603 3,642,128 3,274,214 (367,914) Interest and rent 10,000 30,000 28,947 (1,053) Other - 2,000 1,080 (920) Total Revenues 3,634,603 3,952,128 3,569,123 (383,005) Expenditures: Current: Human services 3,860,603 4,172,317 3,832, ,823 Capital outlay: Other 200, , ,208 2,792 Total expenditures 4,060,603 4,382,317 4,039, ,615 Excess (deficiency) of revenues over (under) expenditures (426,000) (430,189) (470,579) (40,390) Other financing sources (uses): Transfers in (591,000) - 584, ,790 Transfers out 165, ,611 (114,211) (300,822) Total other financing sources (uses) (426,000) 186, , ,968 Net change in fund balances (852,000) (243,578) - 243,578 Fund balances: End of year $ (852,000) $ (243,578) $ - $ 243,578 93

120 Aging Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget (GAAP Basis) and Actual For the Year Ended December 31, 2007 Budgeted Amounts Variance with Original Final Actual Amounts Final Budget Revenues: General grants $ 5,302,149 $ 5,692,864 $ 5,472,487 $ (220,377) Interest and rent 12,000 11,900 9,253 (2,647) Other 113, ,412 41,143 (166,269) Total Revenues 5,427,955 5,912,176 5,522,883 (389,293) Expenditures: Current: Human services 5,332,459 5,790,880 5,401, ,283 Total expenditures 5,332,459 5,790,880 5,401, ,283 Excess (deficiency) of revenues over (under) expenditures 95, , ,286 (10) Other financing sources (uses): Transfers in (274,504) - 274, ,504 Transfers out 370, ,800 (395,790) (791,590) Total other financing sources (uses) 95, ,800 (121,286) (517,086) Net change in fund balances 190, ,096 - (517,096) Fund balances: End of year $ 190,992 $ 517,096 $ - $ (517,096) 94

121 Drug and Alcohol Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget (GAAP Basis) and Actual For the Year Ended December 31, 2007 Budgeted Amounts Variance with Original Final Actual Amounts Final Budget Revenues: General grants $ - $ 176,187 $ 157,442 $ (18,745) Health and welfare grants 4,169,620 4,113,757 4,367, ,120 Court costs and fines 288, ,160 72,921 (295,239) Interest and rent 20,000 20,000 19,284 (716) Other (416) Total Revenues 4,478,520 4,678,520 4,617,524 (60,996) Expenditures: Current: Human services 5,397,235 5,596,735 5,383, ,172 Total expenditures 5,397,235 5,596,735 5,383, ,172 Excess (deficiency) of revenues over (under) expenditures (918,715) (918,215) (766,039) 152,176 Other financing sources (uses): Transfers in (929,715) - 777, ,039 Transfers out 11,000 11,500 (11,000) (22,500) Total other financing sources (uses) (918,715) 11, , ,539 Net change in fund balances (1,837,430) (906,715) - 906,715 Fund balances: End of year $ (1,837,430) $ (906,715) $ - $ 906,715 95

122 Subsidized Child Day Care Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget (GAAP Basis) and Actual For the Year Ended December 31, 2007 Budgeted Amounts Variance with Original Final Actual Amounts Final Budget Revenues: Health and welfare grants $ 9,899,642 $ 12,523,922 $ 11,224,834 $ (1,299,088) Interest and rent 25,000 25,000 27,700 2,700 Other - 2,000 - (2,000) Total Revenues 9,924,642 12,550,922 11,252,534 (1,298,388) Expenditures: Current: Human services 9,911,642 12,537,922 11,239,534 1,298,388 Total expenditures 9,911,642 12,537,922 11,239,534 1,298,388 Excess (deficiency) of revenues over (under) expenditures 13,000 13,000 13,000 - Other financing sources (uses): Transfers out 13,000 13,000 (13,000) (26,000) Total other financing sources (uses) 13,000 13,000 (13,000) (26,000) Net change in fund balances 26,000 26,000 - (26,000) Fund balances: End of year $ 26,000 $ 26,000 $ - $ (26,000) 96

123 Children Youth & Families Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget (GAAP Basis) and Actual For the Year Ended December 31, 2007 Budgeted Amounts Variance with Original Final Actual Amounts Final Budget Revenues: General grants $ - $ 1,118 $ 1,118 $ - Health and welfare grants 22,835,605 22,818,584 20,635,786 (2,182,798) Departmental earnings 783, , ,532 (187,427) Interest and rent Other Total Revenues 23,619,564 23,603,661 21,234,385 (2,369,276) Expenditures: Current: Human services 29,184,121 29,150,240 26,530,560 2,619,680 Total expenditures 29,184,121 29,150,240 26,530,560 2,619,680 Excess (deficiency) of revenues over (under) expenditures (5,564,557) (5,546,579) (5,296,175) 250,404 Other financing sources (uses): Transfers in (6,629,995) - 6,367,304 6,367,304 Transfers out 1,065,438 1,100,438 (1,071,129) (2,171,567) Total other financing sources (uses) (5,564,557) 1,100,438 5,296,175 4,195,737 Net change in fund balances (11,129,114) (4,446,141) - 4,446,141 Fund balances: End of year $ (11,129,114) $ (4,446,141) $ - $ 4,446,141 97

124 Capital Reserve Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget (GAAP Basis) and Actual For the Year Ended December 31, 2007 Budgeted Amounts Variance with Original Final Actual Amounts Final Budget Revenues: Departmental earnings $ - $ - $ 192,162 $ 192,162 Interest and rent 151, , ,965 97,965 Total Revenues 151, , , ,127 Expenditures: Current: General government 2,213,011 2,323, ,687 1,939,926 Human services 2, Culture and recreation 67,000 67, ,927 Capital outlay: Other 1,201,484 1,350, , ,325 Total expenditures 3,483,735 3,740,850 1,154,672 2,586,178 Excess (deficiency) of revenues over (under) expenditures (3,332,735) (3,589,850) (713,545) 2,876,305 Other financing sources (uses): Transfers in (1,000,000) - 1,000,000 1,000,000 Total other financing sources (uses) (1,000,000) - 1,000,000 1,000,000 Net change in fund balances (4,332,735) (3,589,850) 286,455 3,876,305 Fund balances: Beginning of year - 4,594,298 4,594,298 - End of year $ (4,332,735) $ 1,004,448 $ 4,880,753 $ 3,876,305 98

125 Debt Service Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget (GAAP Basis) and Actual For the Year Ended December 31, 2007 Budgeted Amounts Variance with Original Final Actual Amounts Final Budget Revenues: Taxes: Real estate $ 26,675,072 $ 26,675,072 $ 26,978,702 $ 303,630 Departmental earnings - - 1,477,286 1,477,286 Interest and rent 1,906, ,000 1,667, ,759 Other 1,000,000 1,000,000 1,502, ,175 Total Revenues 29,581,322 28,425,072 31,625,922 3,200,850 Expenditures: Current: General government 1,551,933 1,557,933 36,105 1,521,828 Debt service: Principal 19,352,675 19,352,675 13,785,739 5,566,936 Interest 15,139,828 16,377,578 15,102,807 1,274,771 Debt issuance costs ,296 (682,296) Total expenditures 36,044,436 37,288,186 29,606,947 7,681,239 Excess (deficiency) of revenues over (under) expenditures (6,463,114) (8,863,114) 2,018,975 10,882,089 Other financing sources (uses): Bond issuance ,445,000 63,445,000 Premium on bond issue - - 2,391,371 2,391,371 Note refunding - - (65,297,000) (65,297,000) Transfers in (1,019,475) - 3,649,265 3,649,265 Total other financing sources (uses) (1,019,475) - 4,188,636 4,188,636 Net change in fund balances (7,482,589) (8,863,114) 6,207,611 15,070,725 Fund balances: Beginning of year - 15,973,831 15,973,831 - End of year $ (7,482,589) $ 7,110,717 $ 22,181,442 $ 15,070,725 99

126 Capital Improvements Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget (GAAP Basis) and Actual For the Year Ended December 31, 2007 Budgeted Amounts Variance with Original Final Actual Amounts Final Budget Revenues: General grants $ 2,464,852 $ 2,689,742 $ 176,594 $ (2,513,148) Interest and rent - 2,102,000 2,391, ,218 Other ,200 46,200 Total Revenues 2,464,852 4,791,742 2,614,012 (2,177,730) Expenditures: Current: General government 12,279,326 8,887,035 1,512,567 7,374,468 Public safety 175, , , ,997 Corrections 181, , ,707 (554,416) Public works 755, , , ,879 Human services 7,979,618 8,250,907 6,329,360 1,921,547 Culture and recreation 4,557,148 4,934,191 3,514,263 1,419,928 Conservation and development 8,255,376 7,787,093 3,629,246 4,157,847 Capital outlay: Bridges 3,431,000 1,605,642 8,000 1,597,642 Other 50,138,642 60,955,712 49,186,537 11,769,175 Total expenditures 87,752,601 93,972,833 65,306,766 28,666,067 Excess (deficiency) of revenues over (under) expenditures (85,287,749) (89,181,091) (62,692,754) 26,488,337 Other financing sources (uses): Bond issuance (50,000,000) Note issuance ,000, ,000,000 Transfers out - 2,400,000 (2,329,517) (4,729,517) Total other financing sources (uses) (50,000,000) 2,400, ,670, ,270,483 Net change in fund balances (135,287,749) (86,781,091) 49,977, ,758,820 Fund balances: Beginning of year - 44,430,495 44,430,495 - End of year $ (135,287,749) $ (42,350,596) $ 94,408,224 $ 136,758,

127 Supplementary Information December 31, 2007 Description of Funds Internal Service Funds Technology Leasing/purchase of desktop computer hardware and software on a cost reimbursement basis. Benefits Account for self-insurance activities on a cost reimbursement basis. 101

128 Combining Statement of Net Assets Internal Services Funds December 31, 2007 Technology Benefits Total Assets: Current assets Cash and cash equivalents $ 476,749 $ 15,758,854 $ 16,235,603 Investments 14, , ,606 Receivables (net where applicable, of allowances for uncollectible amounts): Accounts Other - 311, ,609 Prepaids - 2,018,000 2,018,000 Total current assets 491,615 18,577,203 19,068,818 Noncurrent assets Capital assets 1,059,601-1,059,601 Total assets 1,551,216 18,577,203 20,128,419 Liabilities: Current liabilities: Vouchers and accounts payable - 2,979,392 2,979,392 Accrued salaries - 5,079 5,079 Other liabilities - 168, ,371 Workers' compensation claims - 507, ,805 Health and long-term disablity claims - 2,111,229 2,111,229 Capital leases payable 703, ,584 Total current liabilities 703,584 5,771,876 6,475,460 Noncurrent liabilities: Workers' compensation claims - 1,862,465 1,862,465 Health and long-term disablity claims - 284, ,525 Capital leases payable 356, ,017 Total noncurrent liabilities 356,017 2,146,990 2,503,007 Total liabilities 1,059,601 7,918,866 8,978,467 Net assets: Invested in capital assets De net of related debt Unrestricted 491,615 10,658,337 11,149,952 Total net assets $ 491,615 $ 10,658,337 $ 11,149,

129 Combining Statement of Revenues, Expenses and Changes in Fund Net Assets Internal Services Funds For the Year Ended December 31, 2007 Technology Benefits Total Operating revenues: Self insurance premiums - employer $ - $ 29,149,130 $ 29,149,130 Self insurance premiums - employee - 3,026,631 3,026,631 Computer usage fees 1,501,794-1,501,794 Other - 656, ,647 Total operating revenues 1,501,794 32,832,408 34,334,202 Operating expenses: Personal services - 520, ,128 Other services and charges 402,946 8,052,766 8,455,712 Self insurance claims - 21,651,307 21,651,307 Depreciation 1,028,386-1,028,386 Indirect costs - 64,092 64,092 Total operating expenses 1,431,332 30,288,293 31,719,625 Operating income 70,462 2,544,115 2,614,577 Nonoperating revenues (expenses): Interest income 27, , ,711 Interest expense (1,174) - (1,174) Total nonoperating revenues (expenses) 26, , ,537 Change in net assets 96,681 3,492,433 3,589,114 Total net assets - beginning 394,934 7,165,904 7,560,838 Total net assets - ending $ 491,615 $ 10,658,337 $ 11,149,

130 Combining Statement of Cash Flows Internal Service Funds Year ended December 31, 2007 Technology Benefits Total Cash Flows From Operating Activities Receipts from customers $ 1,501,794 $ 32,175,762 $ 33,677,556 Payments to suppliers (402,946) (5,881,831) (6,284,777) Payments to employees - (590,893) (590,893) Claims paid - (22,751,098) (22,751,098) Other receipts (payments) - 2,129,253 2,129,253 Net cash provided (used) by operating activities 1,098,848 5,081,193 6,180,041 Cash Flows From Capital and Related Financing Activities Principal paid on capital debt (1,028,386) - (1,028,386) Interest paid on capital debt (1,174) - (1,174) Net cash provided (used) by capital and related financing activities (1,029,560) - (1,029,560) Cash Flows From Investing Activities Interest and dividends 27, , ,711 Net cash provided by investing activities 27, , ,711 Net increase (decrease) in cash and cash equivalents 96,681 6,029,511 6,126,192 Balances-beginning of the year 394,934 10,218,083 10,613,017 Balances-end of the year $ 491,615 $ 16,247,594 $ 16,739,209 Reconciliation of operating income to net cash provided (used) by operating activities: Operating (loss) income $ 70,462 $ 2,544,115 $ 2,614,577 Adjustments to reconcile operating income to net cash provided (used) by operating activities: Depreciation 1,028,386-1,028,386 (Increase) decrease in receivable - 134, ,606 (Increase) decrease in prepaid items Increase (decrease) in accounts payable - 2,164,262 2,164,262 Increase (decrease) in workers comp.claims Increase (decrease) in health care claims - 238, ,210 Net cash provided by operating activities $ 1,098,848 $ 5,081,193 $ 6,180,041 Non cash transactions: Computers were acquired through capital lease of $1,069,735 in the Technology Fund. 104

131 Supplementary Information December 31, 2007 Description of Funds Nonmajor Component Units Chester County Area Airport Authority Operations and administration of the Chester County Area Airport. Chester County Water Resources Authority The Authority owns and operates four regional flood control facilities that were constructed on behalf of the County. Financing is principally provided by transfers from the County. Chester County Library Operations and administration of the County Library and supported libraries. Financing is provided by state and federal grants and appropriations from other government organizations. Chester County Conference and Visitors Bureau, Inc. Operations and administration of the Chester County Conference and Visitors Bureau, Inc. Plans and promotes programs designed to increase tourism. Financing is provided through the levy and collection of a hotel tax. Chester County General Authority The authority created for the purpose of carrying out projects which are permitted under the Pennsylvania Municipality Authorities Act and are located in the County of Chester. 105

132 Combining Statement of Net Assets Nonmajor Component Units December 31, 2007 Water Chester Area Chester County Resources County Airport Conference and General Authority Library Authority Visitor's Bureau Authority Total Assets Current assets Cash and cash equivalents $ 556,447 $ 2,167,703 $ 535,606 $ 481,994 $ 31,235 $ 3,772,985 Investments , ,000 Accounts receivable 59,016 1,488 21, , ,510 Grants receivable , ,398 Prepaids - 243,262 4,675 4, ,247 Other assets Total current assets 615,463 2,412, ,971 1,101,918 31,335 4,804,140 Noncurrent assets Organizational cost, net ,909-11,909 Capital assets, net 6,121,586 2,774,445 7,640,395 38,540-16,574,966 Total noncurrent assets 6,121,586 2,774,445 7,640,395 50,449-16,586,875 Total assets 6,737,049 5,186,898 8,283,366 1,152,367 31,335 21,391, Liabilities Current liabilities Vouchers and accounts payable 186, ,639 59,681 81, ,132 Accrued liabilities ,970-12,544 Notes payable , ,481 Grants payable - 37,726 86, ,976 Other liabilities 6,179 23,953 65,068 23, ,985 Total current liabilities 192, , , , ,118 Noncurrent liabilities Advances from primary government ,170 56,170 Notes payable , ,536 Total liabilities 192, , , ,170 56, ,824 Net assets Invested in capital assets, net of related debt 6,121,586 2,774,445 7,640,395 38,540-16,574,966 Restricted Donor - 63,503-86, ,753 Special purpose - 941, ,877-1,101,615 Unrestricted 422,637 1,259, , ,530 (24,835) 2,685,857 Total net assets $ 6,544,223 $ 5,039,306 $ 8,004,300 $ 949,197 $ (24,835) $ 20,512,191

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134 Combining Statement of Activities Nonmajor Component Units For the Year Ended December 31, 2007 Program Revenues Operating Capital Charges for Grants and Grants and Functions/Programs Expenses Services Contributions Contributions Water Resources Authority Conservation and development $ 599,357 $ 195,934 $ 434,538 $ - Library Culture and recreation 2,717, ,843 2,022,023 - Area Airport Authority Public works 1,265, ,274-49,655 Conference and Visitor's Bureau Culture and recreation 1,900, , ,177 - General Authority Public works Total nonmajor component units $ 6,483,290 $ 1,755,460 $ 2,709,738 $ 49,655 General revenues: Hotel Tax Investment earnings Total general revenues Change in net assets Net assets - beginning Net assets - ending 108

135 Net (Expense) Revenue and Changes in Net Assets Water Area Conference Resources Airport and Visitor's General Authority Library Authority Bureau Authority Totals $ 31,115 $ - $ - $ - $ - $ 31,115 - (90,085) (90,085) - - (596,716) - - (596,716) (1,312,751) - (1,312,751) ,115 (90,085) (596,716) (1,312,751) - (1,968,437) ,514,785-1,514,785 26, ,738 25,844 34, ,349 26, ,738 25,844 1,549,029-1,724,134 57,638 32,653 (570,872) 236,278 - (244,303) 6,486,585 5,006,653 8,575, ,919 (24,835) 20,756,494 $ 6,544,223 $ 5,039,306 $ 8,004,300 $ 949,197 $ (24,835) $ 20,512,

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137 Supplementary Information December 31, 2007 Description of Funds Fiduciary Funds Tax Claim Agency Delinquent taxes and interest collected by the Tax Claim Office on behalf of other taxing authorities. Row Offices Agency Fees assessed by row offices on behalf of other government agencies. Hotel Tax Agency Hotel Tax assessed and collected to be utilized by the County Conference and Visitors Bureau. 111

138 Combining Statement of Fiduciary Net Assets Agency Funds For the year ended December 31, 2007 Tax Row Hotel Claim Office Tax Total Assets: Cash and cash equivalents $ 1,306,507 $ 9,539,023 $ 122,205 $ 10,967,735 Investments 40,738-3,810 44,548 Agency tax/interest receivables 12,265, ,265,312 Hotel tax receivable , ,417 Total Assets 13,612,557 9,539, ,432 23,410,012 Liabilities: Due to other governments - 3,399,964-3,399,964 Other liabilities - 6,139,059-6,139,059 Due to taxing authorities 13,612, ,612,557 Hotel tax payable , ,432 Total Liabilities $ 13,612,557 $ 9,539,023 $ 258,432 $ 23,410,

139 Combining Statement of Changes in Assets and Liabilities Agency Funds For the year ended December 31, 2007 Tax Claim Agency Fund Balance Balance January 1, December 31, 2007 Additions Deletions 2007 Assets: Cash and cash equivalents $ 1,031,277 $ 26,872,736 $ 26,597,506 $ 1,306,507 Investments 121,355-80,617 40,738 Agency tax/interest receivables 12,296,820 24,321,294 24,352,802 12,265,312 Total Assets 13,449,452 51,194,030 51,030,925 13,612,557 Liabilities: Due to taxing authorities 13,449,452 24,042,192 23,879,087 13,612,557 Total Liabilities $ 13,449,452 $ 24,042,192 $ 23,879,087 $ 13,612,557 Row Offices Agency Fund Assets: Cash and cash equivalents $ 12,876,212 $ 475,754 $ 3,812,943 $ 9,539,023 Total Assets 12,876, ,754 3,812,943 9,539,023 Liabilities: Due to other governments 672,868 2,744,797 17,701 3,399,964 Other liabilities 12,203,344 6,139,059 12,203,344 6,139,059 Total Liabilities $ 12,876,212 $ 8,883,856 $ 12,221,045 $ 9,539,

140 Combining Statement of Changes in Assets and Liabilities Agency Funds For the year ended December 31, 2007 Hotel Tax Agency Fund Balance Balance January 1, December 31, 2007 Additions Deletions 2007 Assets: Cash and cash equivalents $ 91,400 $ 1,663,267 $ 1,632,462 $ 122,205 Investments 10,755-6,945 3,810 Hotel tax receivable 148,057 1,805,366 1,821, ,417 Total Assets 250,212 3,468,634 3,460, ,432 Liabilities: Hotel tax payable 250,212 3,639,466 3,631, ,432 Total liabilities $ 250,212 $ 3,639,466 $ 3,631,246 $ 258,432 Total Agency Funds Assets: Cash and cash equivalents $ 13,998,889 $ 29,011,757 $ 32,042,911 $ 10,967,735 Investments 132,110-87,562 44,548 Agency tax/interest receivables 12,296,820 24,321,294 24,352,802 12,265,312 Hotel tax receivable 148,057 1,805,366 1,821, ,417 Total Assets 26,575,876 55,138,417 58,304,281 23,410,012 Liabilities: Due to other governments 672,868 2,744,797 17,701 3,399,964 Other liabilities 12,203,344 6,139,059 12,203,344 6,139,059 Due to taxing authorities 13,449,452 24,042,192 23,879,087 13,612,557 Hotel tax payable 250,212 3,639,466 3,631, ,432 Total Liabilities $ 26,575,876 $ 36,565,514 $ 39,731,378 $ 23,410,

141 Capital Assets Used in the Operation of Governmental Funds

142 Capital Assets Used in the Operation of Governmental Funds Comparitve Schedules by Source December 31, 2007 Governmental funds capital assets: Land and improvements $ 19,412,190 Land development rights 66,754,062 Buildings and improvements 104,673,231 Infrastructure 14,482,294 Furniture, fixtures and equipment 92,741,707 Construction in progress 144,692,121 Total governmental funds capital assets 442,755,605 Less: Accumulated depreciation (134,915,394) Net governmental funds capital assets $ 307,840,211 Investment in governmental funds capital assets by source: General Fund $ 141,027,535 Special Revenue Funds 54,957,834 Capital Projects Funds 245,563,155 Donations 1,207,081 Total governmental funds capital assets 442,755,605 Less: Accumulated depreciation (134,915,394) Net governmental funds capital assets $ 307,840,211 This schedule presents only the capital asset balances related to governmental funds. Internal service funds are not included in the above amounts. (See note 5). 115

143 Capital Assets Used in the Operation of Governmental Funds Schedule By Function and Activity Year Ended December 31, 2007 Land Buildings Furniture Land and land Development and building Fixtures and Function and activity Total improvements Rights improvements Infrastructure Equipment General government $ 91,227,838 $ 2,572,161 $ - $ 39,075,082 $ - $ 49,580,595 Judicial government 2,926, , ,614-2,055,113 Public safety 35,110, ,063-1,964,586-32,977,976 Corrections 14,141, ,879-12,567,440-1,398,253 Public works 14,812, ,482, ,721 Human services 16,634, ,302,756-3,332,089 Culture and recreation 21,792,974 6,046,613 1,948,815 10,867,324-2,930,222 Conservation and development 70,912,547 5,969,562 64,805, ,738 General government buildings 30,504,105 4,200,676-26,303, Total govermental funds capital assets 298,063,484 19,412,190 66,754, ,673,231 14,482,294 92,741, Less: Accumulated depreciation 134,915, ,179-49,840,349 6,056,388 78,847,478 Total 163,148,090 $ 19,241,011 $ 66,754,062 $ 54,832,882 $ 8,425,906 $ 13,894,229 Construction in progress 144,692,121 Net governmental funds capital assets $ 307,840,211 This schedule presents only the capital asset balances related to governmental funds. Internal service funds are not included in the above amounts. (See note 5).

144 Capital Assets Used in the Operation of Governmental Funds Schedule of Changes by Function and Activity For the fiscal year ended December 31, 2007 Primary Government Balance at Balance at January 1, 2007 Increases Decreases December 31, 2007 Function and activity General government $ 86,177,492 $ 7,006,781 $ 1,956,435 $ 91,227,838 Judicial government 2,843,313 83,650-2,926,963 Public safety 33,376,133 1,734,492-35,110,625 Corrections 14,045,741 95,831-14,141,572 Public works 14,719,602 92,413-14,812,015 Human services 16,240, ,881-16,634,845 Culture and recreation 19,989,458 2,759, ,183 21,792,974 Conservation and development 63,925,480 6,987,067-70,912,547 General government buildings 30,504, ,504,105 Total governmental funds capital assets 281,822,288 19,153,814 2,912, ,063,484 Constrution in process 108,089,860 43,527,067 6,924, ,692,121 Less: Accumulated depreciation 125,788,019 9,296, , ,915,394 Net governmental funds capital assets $ 264,124,129 $ 53,384,410 $ 9,668,328 $ 307,840,211 This schedule presents only the capital asset balances related to governmental funds. Internal service funds are not included in the above amounts. (See note 5). 117

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146 Statistical Section

147 Statistical Section Year Ended December 31, 2007 Narrative Summary Chester County has adopted the provisions of the Governmental Accounting Standards Board (GASB) Statement No. 44, Economic Condition Reporting: The Statistical Section. The statement is intended to improve consistency and comparability in reporting and to provide clearer guidance regarding the applicability of the standards for the statistical section to all types of governmental entities. This part of the County s comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the County s overall financial health. Financial Trends These schedules contain trend information to help the reader understand how the County s financial performance and well-being have changed over time. Revenue Capacity These schedules contain information to help the reader assess the County s most significant local revenue source, the real estate property tax. Debt Capacity These schedules present information to help the reader assess the affordability of the County s current levels of outstanding debt and the County s ability to issue additional debt in the future. Demographic and Economic Information These schedules offer demographic and economic indicators to help the reader understand the environment within which the County s financial activities take place. Operating Information These schedules contain service and capital asset data to help the reader understand how the information in the County s financial report relates to the services the County provides and the activities it performs. Note: The County implemented GASB Statement No. 34 in Schedules presenting government-wide information include information beginning in that year. 119

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