BASIC FINANCIAL STATEMENTS

Transcription

1 BASIC FINANCIAL STATEMENTS

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3 16 Exhibit A STATEMENT OF NET ASSETS JUNE 30, 2009 Primary Government Governmental Business-Type Activities Activities Total Assets: Cash and investments $ 24,006,801 $ 2,319,359 $ 26,326,160 Taxes receivable, net 1,352, ,764 1,498,813 Accounts receivable, net 4,177, ,210 4,286,004 Due from other governments 904,460 7, ,160 Notes receivable 340, ,020 Prepaid items 72,552-72,552 Restricted assets: Cash and investments 8,450, ,705 8,651,308 Capital assets: Land and other non-depreciable assets 23,747,249 5,547,946 29,295,195 Other capital assets, net of depreciation 44,462,055 9,815,001 54,277,056 Capital assets, net 68,209,304 15,362,947 83,572,251 Total assets 107,513,583 18,145, ,659,268 Liabilities: Accounts payable and accrued liabilities 3,548, ,786 3,686,876 Unearned revenues 410, ,527 Non-current liabilities: Due within one year 6,798, ,143 7,245,260 Due in more than one year 37,314,747 8,412,272 45,727,019 Total liabilities 48,071,481 8,998,201 57,069,682 Net Assets: Invested in capital assets, net of related debt 40,706,489 9,505,947 50,212,436 Restricted for: Education 2,765,381-2,765,381 Human services 50,336-50,336 General government 25,594-25,594 Unrestricted 15,894,302 (358,463) 15,535,839 Total net assets $ 59,442,102 $ 9,147,484 $ 68,589,586 The accompanying notes are an integral part of the financial statements.

4 17 STATEMENT OF ACTIVITIES Program Revenues Operating Capital Charges for Grants and Grants and Expenses Services Contributions Contributions Functions/Programs Primary Government Governmental Activities: General government $ 12,318,096 $ 1,729,064 $ 1,261,876 $ - Public safety 16,078,616 4,262, ,119 - Economic and physical development 2,943, , ,088 Human services 22,593,199 5,630,052 9,562,782 45,996 Cultural and recreation 472, Education 21,713, ,411 29,429 2,358,012 Interest and fees 1,351, Total governmental activities 77,470,552 11,791,045 11,863,076 2,692,096 Business-Type Activities: Interstates Water and Sewer 127, ,000 - Flat Rock Water and Sewer 357, , Landfill 2,813,131 2,363, ,440 - Total business-type activities 3,298,556 2,526, ,440 - Total primary government $ 80,769,108 $ 14,317,494 $ 12,105,516 $ 2,692,096 General Revenues: Ad valorem taxes Local option sales tax Other taxes Investment earnings, unrestricted Transfers to/from other funds Total general revenues and transfers Change in net assets Net assets, beginning of year - July 1 Net assets, end of year - June 30 The accompanying notes are an integral part of the financial statements.

5 18 Exhibit B Net (Expense) Revenue and Changes in Net Assets Primary Government Governmental Business-Type Activities Activities Total $ (9,327,156) $ - $ (9,327,156) (11,472,979) - (11,472,979) (1,989,409) - (1,989,409) (7,354,369) - (7,354,369) (472,404) - (472,404) (19,156,580) - (19,156,580) (1,351,438) - (1,351,438) (51,124,335) - (51,124,335) - 14, (194,454) (194,454) - (349,411) (349,411) - (529,667) (543,865) (51,124,335) (529,667) (51,668,200) 35,084,160-35,084,160 17,008,697-17,008, , ,869 1,257,322 23,426 1,280,748 (1,213,502) 1,213,502-52,707,546 1,236,928 53,944,474 1,583, ,261 2,290,472 57,858,891 8,440,223 66,299,114 $ 59,442,102 $ 9,147,484 $ 68,589,586 The accompanying notes are an integral part of the financial statements.

6 19 Exhibit C BALANCE SHEET - GOVERNMENTAL FUNDS JUNE 30, 2009 Schools Other Total Capital Governmental Governmental General Project Funds Funds Assets: Cash and investments $ 22,153,124 $ 79,375 $ 1,774,301 $ 24,006,800 Taxes receivable, net 1,211, ,555 1,352,049 Accounts receivable, net 3,982, ,563 78,728 4,177,794 Notes receivable 340, ,020 Prepaid items 72, ,552 Due from other governments 357, , ,460 Restricted assets: Cash and investments 2,794,871 5,655,732-8,450,603 Total assets $ 30,911,979 $ 5,851,670 $ 2,540,629 $ 39,304,278 Liabilities: Accounts payable and accrued liabilities $ 2,307,856 $ 754,644 $ 47,128 $ 3,109,628 Due to schools , ,464 Deferred revenues 1,607, ,913 1,762,575 Total liabilities 3,915, , ,505 5,310,667 Fund Balances: Reserved by State statute 4,694,297-49,127 4,743,424 Reserved for prepaids 72, ,552 Reserved for notes receivable 340, ,020 Reserved for Register of Deeds - automation enhancement 25, ,594 Reserved for debt service 2,765, ,765,381 Reserved for Health Department 50, ,336 Unreserved 19,048,281 5,097,026-24,145,307 Unreserved, reported in nonmajor: Special revenue funds - - 1,355,326 1,355,326 Capital project funds , ,671 Total fund balances 26,996,461 5,097,026 1,900,124 33,993,611 Total liabilities and fund balances $ 30,911,979 $ 5,851,670 $ 2,540,629 Amounts reported for governmental activities in the Statement of Net Assets are different because: Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds. 68,209,304 Long-term liabilities and compensated absences are not due and payable in the current period and, therefore, are not reported in the funds. (44,112,864) Deferred revenues in the governmental funds are used to offset accounts receivable not expected to be available within 90 days of year-end. These receivables are a component of net assets in the Statement of Net Assets. 1,352,051 Net assets of governmental activities $ 59,442,102 The accompanying notes are an integral part of the financial statements.

7 20 Exhibit D STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS Schools Other Capital Governmental General Project Funds Total Revenues: Ad valorem taxes $ 31,288,671 $ - $ 3,795,489 $ 35,084,160 Local option sales taxes 13,849,977-3,158,720 17,008,697 Unrestricted intergovernmental revenues 570, ,869 Restricted intergovernmental revenues 11,022,234 2,328, ,285 13,497,060 Permits and fees 703, ,950 Sales and services 10,454, ,747 11,087,095 Interest earned on investments 1,195,378 1,156 60,788 1,257,322 Miscellaneous 1,076, ,076,642 Total revenues 70,162,069 2,329,697 7,794,029 80,285,795 Expenditures: General government 8,469, ,926 9,409,386 Public safety 13,106,237-2,420,812 15,527,049 Economic and physical development 3,911, ,814 4,028,526 Human services 22,141, ,141,600 Cultural and recreation 930, ,255 Education 15,347,400 4,270,450 5,465,541 25,083,391 Debt service: Principal repayments 4,231,198-1,191,400 5,422,598 Interest 1,068, ,948 1,351,438 Total expenditures 69,206,352 4,270,450 10,417,441 83,894,243 Revenues over (under) expenditures 955,717 (1,940,753) (2,623,412) (3,608,448) Other Financing Sources (Uses): Transfers in 835,482 1,000,000 3,215,028 5,050,510 Transfers out (5,428,530) - (835,482) (6,264,012) Long-term debt issued - 5,600,000-5,600,000 Total other financing sources (uses) (4,593,048) 6,600,000 2,379,546 4,386,498 Net change in fund balances (3,637,331) 4,659,247 (243,866) 778,050 Fund Balances: Beginning of year - July 1 30,633, ,779 2,143,990 33,215,561 End of year - June 30 $ 26,996,461 $ 5,097,026 $ 1,900,124 $ 33,993,611 The accompanying notes are an integral part of the financial statements.

8 21 Exhibit E RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES - GOVERNMENTAL FUNDS Amounts reported for governmental activities in the Statement of Activities (Exhibit B) are different due to the following items: Net change in fund balances - total governmental funds (Exhibit D) $ 778,050 Property tax revenues in the Statement of Activities earned in prior periods are reported as revenues in the governmental funds statement. 77,624 Expenses related to compensated absences that do not require current financial resources are not reported as expenditures in the governmental funds statement. (917,188) Capital outlays are reported as expenditures in the governmental funds statement. However, in the Statement of Activities, capital outlay is not an expense, rather it is an increase in capital assets. 6,272,061 Depreciation expense allocates the costs of capital assets over their useful lives. It is not reported as an expenditure in the governmental funds statement. (2,035,391) The issuance of long-term debt provides current financial resources to governmental funds. However, in the Statement of Activities, these transactions are not a revenue, rather they are an increase in liabilities. (5,600,000) Capital assets disposed of not recognized on the modified accrual basis of accounting (2,414,542) Principal repayments are reported as expenditures in the governmental funds statement. However, in the Statement of Activities, these transactions are not an expense, rather they are a decrease in liabilities. 5,422,597 Change in net assets of governmental activities (Exhibit B) $ 1,583,211 The accompanying notes are an integral part of the financial statements.

9 22 Exhibit F GENERAL FUND STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL Variance with Budgeted Amounts Final Budget Original Final Actual Over/Under Revenues: Ad valorem taxes $ 30,737,750 $ 30,737,750 $ 31,288,671 $ 550,921 Local option sales taxes 13,939,000 13,939,000 13,849,977 (89,023) Unrestricted intergovernmental revenues 449, , , ,869 Restricted intergovernmental revenues 12,709,584 13,660,811 11,022,234 (2,638,577) Permits and fees 824, , ,950 (120,050) Sales and services 13,693,295 13,488,026 10,454,348 (3,033,678) Investment earnings 707, ,500 1,195, ,878 Miscellaneous 382, ,780 1,076, ,862 Total revenues 73,442,485 74,595,867 70,162,069 (4,433,798) Expenditures: General government 11,899,515 12,094,530 8,469,460 3,625,070 Public safety 13,241,693 13,750,041 13,106, ,804 Human services 24,000,040 23,952,319 22,141,600 1,810,719 Economic and physical development 7,297,982 7,290,079 3,911,712 3,378,367 Cultural and recreation 1,030,221 1,045, , ,088 Education 15,393,000 15,393,000 15,347,400 45,600 Debt service: Principal retirement 5,094,237 5,094,237 4,231, ,039 Interest and fees 1,068,469 1,068,469 1,068,490 (21) Total expenditures 79,025,157 79,688,018 69,206,352 10,481,666 Revenues over (under) expenditures (5,582,672) (5,092,151) 955,717 6,047,868 Other Financing Sources (Uses): Transfers in 835, , ,482 (3) Transfers out (2,898,249) (5,477,628) (5,428,530) 49,098 Appropriated fund balance 7,645,436 9,734,294 - (9,734,294) Total other financing sources (uses) 5,582,672 5,092,151 (4,593,048) (9,685,199) Net change in fund balance $ - $ - (3,637,331) $ (3,637,331) Fund Balance: Beginning of year - July 1 30,633,792 End of year - June 30 $ 26,996,461 The accompanying notes are an integral part of the financial statements.

10 23 Exhibit G STATEMENT OF NET ASSETS PROPRIETARY FUNDS JUNE 30, 2009 Major Nonmajor Flat Rock/ Bannertown Interstates Landfill Water and Water and Fund Sewer District Sewer District Total Assets: Current assets: Cash and cash equivalents $ 2,033,484 $ 160, ,302 $ 2,319,359 Taxes receivable 146, ,764 Accounts receivable, net 81,840 23,870 2, ,210 Due from other governments - 7,700-7,700 Restricted assets: Cash and cash equivalents 200, ,705 Total current assets 2,462, , ,802 2,782,738 Capital assets: Land and other non-depreciable assets 4,300,246 20,000 1,227,700 5,547,946 Other capital assets, net of depreciation 3,406,658 6,408,343-9,815,001 Capital assets, net 7,706,904 6,428,343 1,227,700 15,362,947 Total assets 10,169,697 6,620,486 1,355,502 18,145,685 Liabilities and Net Assets: Liabilities: Current liabilities: Accounts payable and accrued liabilities 10, , ,786 Current portion of long-term obligations 418,143 29, ,143 Total current liabilities 429,127 29, , ,929 Non-current liabilities: Accrued landfill closure and post-closure care cost 2,941, ,941,605 Long-term obligations 2,951,667 2,519,000-5,470,667 Other post-employment benefits obligation Total non-current liabilities 5,893,272 2,519,000-8,412,272 Total liabilities 6,322,399 2,548, ,802 8,998,201 Net Assets: Invested in capital assets, net of related debt 4,397,904 3,880,343 1,227,700 9,505,947 Unrestricted (550,606) 192,143 - (358,463) Total net assets $ 3,847,298 $ 4,072,486 $ 1,227,700 $ 9,147,484 The accompanying notes are an integral part of the financial statements.

11 24 Exhibit H STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS - PROPRIETARY FUNDS Major Nonmajor Flat Rock/ Bannertown Interstates Landfill Water and Water and Fund Sewer District Sewer District Total Operating Revenues: Charges for services $ 1,170,126 $ 163,169 $ - $ 1,333,295 Water Main Grant , ,000 Landfill fees 1,062, ,062,847 White goods and scrap tire 100, ,440 Other operating revenues 130, ,307 Total operating revenues 2,463, , ,000 2,768,889 Operating Expenses: Landfill recycling 734, ,879 Sanitation 1,453, ,453,961 Water and sewer - 249, , ,135 Depreciation and amortization 440, ,652 Landfill closure and post-closure costs 153, ,603 Total operating expenses 2,783, , ,802 3,160,230 Operating income (loss) (319,375) (86,164) 14,198 (391,341) Non-operating Revenues (Expenses): Investment earnings 22, ,426 Interest and fees paid (30,036) (108,290) - (138,326) Total non-operating revenues (expenses) (7,404) (107,496) - (114,900) Income (loss) before contributions and transfers (326,779) (193,660) 14,198 (506,241) Transfer from General Fund - - 1,213,502 1,213,502 Change in net assets (326,779) (193,660) 1,227, ,261 Net Assets: Beginning of year - July 1 4,174,077 4,266,146-8,440,223 End of year - June 30 $ 3,847,298 $ 4,072,486 $ 1,227,700 $ 9,147,484 The accompanying notes are an integral part of the financial statements.

12 25 Exhibit I STATEMENT OF CASH FLOWS PROPRIETARY FUNDS Major Nonmajor Flat Rock / Bannertown Interstates Landfill Water and Water and Fund Sewer District Sewer District Total Cash Flows from Operating Activities: Cash received from customers $ 2,433,611 $ 158,570 $ 139,500 $ 2,731,681 Cash paid for goods and services (2,268,991) (85,017) - (2,354,008) Cash paid to employees for services 22, ,222 Net cash provided (used) by operating activities 186,842 73, , ,895 Cash Flows from Non-capital Financing Activities: Interfund transfer in (out) - - 1,213,502 1,213,502 Net cash provided (used) by non-capital financing activities - - 1,213,502 1,213,502 Cash Flows from Capital and Related Financing Activities: Acquisition and construction of capital assets (2,891,700) - (1,227,700) (4,119,400) Proceeds from issuance of debt 3,000, ,000,000 Principal paid on bonds and notes payable (407,210) - - (407,210) Interest and fees paid on bonds (30,036) (108,290) - (138,326) Net cash provided (used) by capital and related financing activities (328,946) (108,290) (1,227,700) (1,664,936) Cash Flows from Investing Activities: Interest on investments 22, ,426 Net Increase (Decrease) in Cash and Cash Equivalents (119,472) (33,943) 125,302 (28,113) Cash and cash equivalents - beginning of year - July 1 2,353, ,516-2,548,177 Cash and cash equivalents - end of year - June 30 $ 2,234,189 $ 160,573 $ 125,302 $ 2,520,064 Reconciliation of Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities: Operating income (loss) $ (319,375) $ (86,164) $ 14,198 $ (391,341) Adjustments to reconcile operating income (loss) to Depreciation and amortization 440, , ,968 Change in assets and liabilities: (Increase) decrease in accounts receivable (30,109) (4,599) (2,500) (37,208) Increase (decrease) in accounts payable 10, , ,785 Increase (decrease) in compensated absences payable 5, ,578 Increase (decrease) in OPEB payable 16,644 Increase (decrease) in landfill postclosure liability 62, ,469 Net cash provided (used) by operating activities $ 186,842 $ 73,553 $ 139,500 $ 399,895 The accompanying notes are an integral part of the financial statements.

13 26 Exhibit J STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30, 2009 Agency Funds Assets: Cash and investments $ 93,359 Total assets $ 93,359 Liabilities: Accounts payable $ 93,359 Total liabilities $ 93,359 The accompanying notes are an intergral part of the financial statements.

14 27 1. Summary of Significant Accounting Policies The accounting policies of Surry County conform to generally accepted accounting principles as applicable to governments. The following is a summary of the more significant accounting policies. A. Reporting Entity The County, which is governed by a five-member board of commissioners, is one of the 100 counties established in North Carolina under North Carolina General Statute 153A-10. Generally accepted accounting principles require the entity to include component units in its financial statements if certain criteria are met. The County has one component unit which has no financial transactions or account balances. Therefore, it does not appear in the combined financial statements. The County has two component units which are reported as enterprise funds in the County s financial statements. Surry County Industrial Facility and Pollution Control Financing Authority Surry County Industrial Facility and Pollution Control Financing Authority (the Authority ) exists to issue and service revenue bond debt of private businesses for economic development purposes. The Authority is governed by a seven-member board of commissioners, all of whom are appointed by the County commissioners. The County can remove any commissioner of the Authority with or without cause. The Authority has no financial transactions or account balances; therefore, it is not presented in the combined financial statements. The Authority does not issue separate financial statements. The Interstates Water and Sewer District and the Flat Rock/Bannertown Water and Sewer District The Interstates Water and Sewer District and the Flat Rock / Bannertown Water and Sewer District (the Districts ) exist to provide and maintain water and sewer systems for the County residents within each district. Under State law [G.S. 162A-89], the County s Board of Commissioners also serves as the governing board for the Districts. The Flat Rock/Bannertown Water and Sewer District and the Interstates Water and Sewer District are reported as enterprise funds in the County s financial statements. The Interstates Water and Sewer District does not issue seperate financial statements. Complete financial statements for the Flat Rock/Bannertown Water and Sewer District may be obtained at the finance office of the County: 118 Hamby Road, Suite 333, Dobson, North Carolina

15 28 B. Basis of Presentation Government-Wide and Fund Financial Statements The Statement of Net Assets and the Statement of Activities report information on all of the nonfiduciary activities of the primary government. The effect of interfund activity has been removed from these statements in all material areas. 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 or segment is offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include (1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment; and (2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues. Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds. The fiduciary funds are excluded from the government-wide financial statements. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. All remaining governmental and enterprise funds are aggregated and reported as nonmajor funds. Proprietary fund operating revenues, such as charges for services, result from exchange transactions associated with the principal activity of the fund. Exchange transactions are those in which each party receives and gives up essentially equal values. Non-operating revenues, such as subsidies and investment earnings, result from non-exchange transactions or ancillary activities. Major Funds - The General Fund, the Schools Capital Project Fund, Flat Rock/Bannertown Water and Sewer District, and the Landfill Fund are major funds of the County for the year ended June 30, The County has the following fund categories: Governmental Funds account for the County's general governmental activities. Governmental funds include the following fund types: General Fund - The General Fund is the general operating fund of the County. It is used to account for all financial resources except those required to be accounted for in another fund. The County maintains separate Economic Development, Debt Service, Employee Benefits, a Home Program, Cooperative Extension, Sheriff s Special Accounts, Workers Compensation, Sheriffs Narcotic, Public Assistance, and Register of Deeds Automation funds for accounting purposes. These funds have been consolidated into the General Fund for financial reporting purposes.

16 29 Special Revenue Funds - Special revenue funds are used to account for specific revenue sources (other than special assessments, expendable trusts, or major capital projects) that are legally restricted to expenditures for specified purposes. The County maintains six special revenue funds: the Revaluation Fund, the Fire Districts Fund, the School Districts Fund, the Emergency Telephone 911 Fund, the Schools Capital Outlay Fund, and the Grant Projects Fund. The County also maintains a separate Capital Reserve Fund to account for 30% and 60%, respectively, of the proceeds of the Chapter 40 and Chapter 42 half-cent local option sales taxes. This fund has been consolidated into the Schools Capital Outlay Fund for financial reporting purposes. Capital Project Funds - Capital project funds are used to account for financial resources to be used for the acquisition or construction of major capital facilities (other than those financed by proprietary funds or trust funds). The County maintains two capital project funds within the governmental fund types: the Schools Capital Project Fund and the County Buildings Capital Project Fund. Proprietary Funds include the following fund types: Enterprise Fund - Enterprise funds are used to account for operations (a) that are financed and operated in a manner similar to private business enterprises, where the intent of the governing body is that the costs (expenses, including depreciation) of providing goods or services to the general public on a continuing basis are financed or recovered primarily through user charges; or (b) where the governing body has decided that periodic determination of revenues earned, expenses incurred, and/or net income is appropriate for capital maintenance, public policy, management control, accountability, or other purposes. Surry County has three enterprise funds: the Landfill Fund, the Flat Rock/Bannertown Water and Sewer District, and the Interstates Water and Sewer District. The Landfill Reserve Fund is a fund established by the County to accumulate the funds necessary for any expenses related to land acquisition, construction, equipping and closing a landfill. The Landfill Reserve Fund is consolidated with the Landfill Fund for financial reporting purposes. The Flat Rock/Bannertown Capital Project Fund is consolidated with the Flat Rock/Bannertown Water and Sewer District (the operating fund) for financial reporting purposes. A capital project fund has been established for the Interstates Water and Sewer District to account for the construction of the first water lines in the District. Fiduciary Funds account for the assets held by the County in a trustee capacity or as an agent for individuals, private organizations, other governmental units, and/or other funds. Fiduciary funds include the following fund type: Agency Funds - Agency funds are custodial in nature and do not involve measurement of results of operations. Agency funds are used to account for assets the County holds on behalf of others. The County maintains twelve agency funds: the Fines and Forfeitures Fund that accounts for the collection and payment of fines and forfeitures to three Boards of Education in the County; the CBA Money and Elderly or Handicap Transportation Assistance Funds that account for the collection and payment of State financial grant assistance to various sub-recipients; the Floodplain Mapping accounts for collection and remittance for fees for Floodplain mapping to

17 30 N.C. Department of Crime Control and Public Safety; the Motor Vehicle Tax Fund that accounts for registered motor vehicle property taxes that are billed and collected by the County for various municipalities and special districts within the County; the NC DOR-HB-1779 Fund accounts for the additional interest on delinquent motor vehicle property tax payments to be transferred to NC State Treasurer; the P.A.R.T Transportation Taxes Fund accounts for vehicle rental taxes collected for Piedmont Authority of Regional Transportation; the Jail Trust Fund that accounts for monies held by the County for inmates; the Social Services Trust Fund that accounts for funds held by the County for the subsistence needs of specific social services clients; and the Regional Tourism Fund which accounts for a partnership with surrounding counties in North Carolina and Virginia to promote tourism; the Dobson Zoning Fund that accounts for collection and remittance of zoning permits for the Town of Dobson; and the State Solid Waste Fund that accounts for the $2.00 per ton tax on landfill waste. C. Measurement Focus and Basis of Accounting In accordance with North Carolina General Statutes, all funds of the County are maintained during the year using the modified accrual basis of accounting. Government-Wide, Proprietary, and Fiduciary Fund Financial Statements - The government-wide, proprietary, and fiduciary fund financial statements are reported using the economic resources measurement focus, except for the agency funds which have no measurement focus. The government-wide, proprietary, and fiduciary fund financial statements are reported using the accrual basis of accounting. Revenues are recorded when earned, and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Non-exchange transactions, in which the County gives (or receives) value without directly giving (or receiving) equal value in exchange, include property taxes, grants, entitlements, and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from grants, entitlements, and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied. Amounts reported as program revenues include 1) charges to customers or applicants for goods, services, or privileges provided; 2) operating grants and contributions; and 3) capital grants and contributions, including special assessments. Internally-dedicated resources are reported as general revenues rather than as program revenues. Likewise, general revenues include all taxes. Proprietary funds distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund s principal ongoing operations. The principal operating revenues of the County enterprise funds are charges to customers for sales and services. The County also recognizes as operating revenue the portion of tap fees intended to recover the cost of connecting new customers to the system. Operating expenses for enterprise funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses.

18 31 Governmental Fund Financial Statements - Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under this method, revenues are recognized when measurable and available. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on long-term debt, claims and judgments, and compensated absences, which are recognized as expenditures to the extent they have matured. Long-term debt issued and acquisitions under capital leases are reported as other financing sources. General capital asset acquisitions are reported as expenditures in governmental funds. The County considers all revenues available if they are collected within 90 days after year-end, except for property taxes. Ad valorem property taxes are not accrued as revenue because the amount is not susceptible to accrual. At June 30, taxes receivable are materially past due and are not considered to be an available resource to finance the operations of the current year. Also, as of January 1, 1993, State law altered the procedures for the assessment and collection of property taxes on registered motor vehicles in North Carolina. Effective with this change in the law, Surry County is responsible for billing and collecting the property taxes on all registered motor vehicles on behalf of all municipalities and special tax districts in the County. For registered motor vehicles, property taxes are due the first day of the fourth month after the vehicles are registered. The billed taxes are applicable to the fiscal year in which they become due. Therefore, taxes for vehicles registered from March 2008 through February 2009 apply to the fiscal year ended June 30, Uncollected taxes which were billed during this period are shown as a receivable on these financial statements. Sales taxes collected and held by the State at year-end on behalf of the County are recognized as revenue. Intergovernmental revenues and sales and services are not susceptible to accrual because generally they are not measurable until received in cash. Expenditure-driven grants are recognized as revenue when the qualifying expenditures have been incurred and all other grant requirements have been satisfied. Under the terms of grant agreements, the County funds certain programs by a combination of specific cost-reimbursement grants, categorical block grants, and general revenues. Thus, when program expenses are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the County s policy to first apply cost-reimbursement grant resources to such programs, followed by categorical block grants, then by general revenues. 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. All governmental and business-type activities and enterprise funds of the County follow FASB Statements and Interpretations issued on or before November 30, 1989, Accounting Principles Board Opinions, and Accounting Research Bulletins, unless those pronouncements conflict with GASB pronouncements.

19 32 D. Budgetary Data The County s budgets are adopted as required by the North Carolina General Statutes. An annual budget ordinance is adopted for the General, Special Revenue and Enterprise Funds. All annual appropriations lapse at fiscal year-end. Project ordinances are adopted for the capital project funds. All budgets are prepared using the modified accrual basis of accounting, which is consistent with the accounting system used to record transactions. Expenditures may not legally exceed appropriations at the departmental level for the General, Special Revenue, and Enterprise Funds and at the object level for the Capital Project Funds. The County Manager is authorized to adjust approved budget appropriations within a department in order to provide compliance with North Carolina General Statutes; however, any revisions that alter total expenditures of any department must be approved by the governing board. During the year, several amendments to the original budget became necessary. The budget ordinance must be adopted by July 1 of the fiscal year or the governing board must adopt an interim budget that covers that time until the annual ordinance can be adopted. E. Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Significant areas where estimates are made are allowance for doubtful accounts and depreciation lives. F. Assets, Liabilities, and Fund Equity Deposits and Investments All of the County s deposits are made in board-designated official depositories and are secured as required by G.S The County may designate, as an official depository, any bank or savings association whose principal office is located in North Carolina. Also, the County may establish time deposit accounts such as NOW and SuperNOW accounts, money market accounts, and certificates of deposit. State law [G.S (c)] authorizes the County to invest in obligations of the United States or obligations fully guaranteed both as to principal and interest by the United States; obligations of the State of North Carolina; bonds and notes of any North Carolina local government or public authority; obligations of certain non-guaranteed federal agencies; certain high quality issues of commercial paper and bankers' acceptances; and the North Carolina Capital Management Trust (NCCMT), an SEC registered (2a-7) money market mutual fund.

20 33 The County s investments with a maturity of more than one year at acquisition and non-money market investments are carried at fair value as determined by quoted market prices. The securities of the NCCMT Cash Portfolio are valued at fair value, which is the NCCMT s share price. The NCCMT Term Portfolio s securities are valued at fair value. Money market investments that have a remaining maturity at the time of purchase of one year or less and nonparticipating interest earnings and investment contracts are reported at amortized cost. Cash and Cash Equivalents The County pools money from several funds to facilitate disbursement and investment and to maximize investment income. Therefore, all cash and investments are essentially demand deposits and are considered cash and cash equivalents. Restricted Assets The restricted assets of $5,655,732 in the Schools Capital Project Fund represent the balance of proceeds available under installment purchase contracts to finance construction and renovations to schools and a community college. The restricted assets of $2,794,871 in the General Fund represent the balance in a sinking fund required by a financing contract to construct schools. The restricted assets of $200,705 in the proprietary capital project funds represent the balances of proceeds available under installment purchase contracts to finance landfill construction. Ad Valorem Taxes Receivable In accordance with State laws [G.S and G.S (a)], the County levies ad valorem taxes on property other than motor vehicles on July 1, the beginning of the fiscal year. The taxes are due on September 1 (lien date); however, penalties and interest do not accrue until the following January 6. These taxes are based on the assessed values as of January 1, As allowed by State law, the County has established discounts that apply to taxes which are paid prior to the due date. In the County s General Fund, ad valorem tax revenues are reported net of such discounts. Allowances for Doubtful Accounts All receivables that are historically uncollectible accounts are shown net of an allowance for doubtful accounts. This amount is estimated by analyzing the percentage of receivables that were written off in prior years. Capital Assets Capital assets are recorded at original cost or estimated historical cost. Donated assets are recorded at their estimated fair value at the date of donation. Minimum capitalization cost is $5,000. The cost of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized.

21 34 The County holds title to certain properties of the Boards of Education of Surry County, Elkin and Mount Airy, which have been included in capital assets. The properties have been deeded to the County to permit installment purchase financing of acquisition and construction costs. Agreements between the County and the Boards of Education give the Boards of Education full use of the facilities, full responsibility for maintenance of the facilities, and provide that the County will convey title to the property back to the Boards of Education once all restrictions of the financing agreements and all sales tax reimbursement requirements have been met. The properties are not reflected as capital assets in the financial statements of the Boards of Education. Capital assets in the enterprise funds of the County are recorded at original cost at the time of acquisition. Capital assets donated to the enterprise fund operations are recorded at the estimated fair market value at the date of donation. Depreciation is provided over the estimated useful lives of the assets using the straight-line method. Capital assets are depreciated on a straight-line basis over the following useful lives to the cost of the assets: Years Equipment 5 Vehicles 5 Other improvements 10 Plant and distribution 40 Buildings Long-Term Obligations In the government-wide financial statements and in the 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 statement of net assets. In the fund financial statements for governmental fund types, the face amount of debt issued is reported as another financing source.

22 35 Net Assets / Fund Balances Net Assets Net assets in the government-wide and proprietary fund financial statements are classified as invested in capital assets, net of related debt; restricted and unrestricted. Restricted net assets represent constraints on resources that are either externally imposed by creditors, grantors, contributors, or laws or regulations of other governments or imposed by law through State statutes. Net assets are classified as follows: Restricted General Government - portion of net assets constituting the Automation Enhancement and Preservation Fund, funded by 10% of the fees collected and maintained by the Register of Deeds office. The funds are legally restricted for computer and imaging technology in the Register of Deeds office. Education - portion of net assets representing a sinking fund required by a financing contract that the County entered into to construct schools. Human Services portion of net assets representing unexpended Health Department grants and related fees. Fund Balances In the governmental fund financial statements, reservations, or restrictions of fund balance represent amounts that are not appropriable or are legally segregated for a specific purpose. Designations of fund balance represent tentative management plans that are subject to change. State law [G.S (b) (16)] restricts the appropriation of fund balance or fund equity to an amount not to exceed the sum of cash and investments minus the sum of liabilities, encumbrances, and deferred revenues arising from cash receipts as those amounts stand at the close of the fiscal year preceding the budget year. The governmental fund types classify fund balances as follows: Reserved Reserved by State Statute - portion of fund balance, which is not available for appropriation under State law [G.S (a)]. This amount is usually comprised of accounts receivable and interfund receivables, which are not offset by deferred revenues. Reserved for Prepaids portion of fund balance that is not available for appropriation because it presents the year-end balance of prepaid items that are not expendable available resources.

23 36 Reserved for Notes Receivable portion of fund balance that is not available for appropriation because it represents the year-end balance of notes receivable that are not expendable available resources. Reserved for Register of Deeds - portion of fund balance constituting the Automation Enhancement and Preservation Fund, funded by 10% of the fees collected and maintained by the Register of Deeds office. The funds are available for appropriation, but are legally restricted for computer and imaging technology in the Register of Deeds office. Reserved for Debt Service - portion of fund balance representing a sinking fund required by a financing contract entered into by the County to construct schools and the portion of fund balance representing proceeds available under an installment purchase contract to fund capital development. Reserved for Health Department - portion of fund balance available for appropriate but legally segregated for Health Department expenditures. It represents the balance of the total unexpended Health Department grants and related fees. Designations of equity represent tentative management plans that are subject to change. The unreserved fund balance had the following designations at June 30, 2009: Designated for subsequent year s expenditures: General Fund $ 9,400,876 Special Revenue Funds 70,714 Capital Project Funds 5,921,894 General Fund: Designated for health emergencies $ 86,224 Designated for group health plan and employee benefits 3,033,165 Designated for workers compensation 673,966 G. Revenues, Expenditures, and Expenses Compensated Absences The vacation policy of the County provides for the accumulation of up to thirty (30) days earned vacation leave with such leave being fully vested when earned. All vacation pay is accrued when earned in the government-wide and proprietary fund financial statements. The County's sick leave policy provides for an unlimited accumulation of earned sick leave. Sick leave does not vest, but any unused sick leave accumulated at the time of retirement may be used in the determination of length of service for retirement benefit purposes. Since the County has no obligation for the accumulated sick leave until it is actually taken, no accrual for sick leave has been made.

24 37 2. Deposits and Investments A. Deposits All of the County's deposits are either insured or collateralized using one of two methods. Under the Dedicated Method, all deposits exceeding the federal depository insurance coverage level are collateralized with securities held by the County's agent in the County s name. Under the Pooling Method, which is a collateral pool, all uninsured deposits are collateralized with securities held by the State Treasurer's agent in the name of the State Treasurer. Since the State Treasurer is acting in a fiduciary capacity for the County, these deposits are considered to be held by the County s agent in the entity s name. The amount of the pledged collateral is based on an approved averaging method for non-interest bearing deposits and the actual current balance for interestbearing deposits. Depositories using the Pooling Method report to the State Treasurer the adequacy of their pooled collateral covering uninsured deposits. The State Treasurer does not confirm this information with the County or with the escrow agent. Because of the inability to measure the exact amount of collateral pledged for the County under the Pooling Method, the potential exists for undercollaterization, and this risk may increase in periods of high cash flows. However, the State Treasurer of North Carolina enforces strict standards of financial stability for each depository that collateralizes public deposits under the Pooling Method. The County does not have policies regarding custodial credit risk for deposits, but relies on the State Treasurer to enforce standards of minimum capitalization for all Pooling Method financial institutions and to monitor them for compliance. The County complies with the provisions of G.S when designating official depositories and verifying that deposits are properly secured. At June 30, 2009, the County's deposits had a carrying amount of $25,015,677 and a bank balance of $34,183,885. Of the bank balance, $817,760 was covered by federal depository insurance, and $25,818,821 was covered by collateral held under the Pooling Method. Cash on hand was $3,780. B. Investments At June 30, 2009, the County had the following investments and maturities: Less than 6-12 Investment Type Fair Value 6 months months 1-5 years U.S. Government Agencies $ 5,036,258 $ - $ - $ 15,340,299 N.C. Capital Management Trust - Cash Portfolio 5,015,112 N/A N/A N/A Total investments $ 10,051,370 $ - $ - $ 15,340,299

25 38 Interest Rate Risk As a means of limiting its exposure to fair value losses arising from rising interest rates, the County s investment policy limits at least half of the County s investment portfolio to maturities of less than 12 months. Also, the County s investment policy requires purchases of securities to be laddered with staggered maturity dates and limits all securities to a final maturity of no more than five years. Credit Risk State law limits investments in commercial paper to the top rating issued by nationally recognized statistical rating organizations (NRSRO's); however, the County has no formal policy on managing credit risk. The County s investments in the N.C. Capital Management Trust Cash Portfolio carried a credit rating of AAA by Standard and Poor s as of June 30, The County s investments in U.S. Agencies are rated AAA by Standard and Poor s and Aaa by Moody s Investors Service. Concentration of Credit Risk The County places no limit on the amount that the County may invest in any one issuer. More than 5 percent of the County s investments are in U.S. Government Agencies. Investments in Federal Home Loan Bank are 20%, Federal Home Loan Mortgage Corporation are 30%, and Federal National Mortgage Agency are 50%. 3. Property Tax Use-Value Assessment On Certain Lands In accordance with the General Statutes, agriculture, horticulture, and forest land may be taxed by the County at the present-use value as opposed to market value. When the property loses its eligibility for use-value taxation, the property tax is recomputed at market value for the current year and the three preceding fiscal years, along with the accrued interest from the original due date. This tax is immediately due and payable. The following are property taxes that could become due if present usevalue eligibility is lost. These amounts have not been recorded in the financial statements. Year Levied Tax Interest Total 2006 $ 1,450,046 $ 474,890 $ 1,924, ,489, ,698 1,842, ,517, ,760 1,740, ,005, ,313 2,120,758 Total $ 6,461,759 $ 1,167,661 $ 7,629,420

26 39 4. Receivables Receivables at Exhibit A at June 30, 2009 were as follows: Due from Notes other Accounts Taxes Receivable Governments Total Governmental Activities: General $ 5,362,600 $ 2,078,063 $ 340,020 $ 357,415 $ 8,138,098 Other governmental 195, , , ,017 Total receivables 5,557,891 2,313, , ,460 9,116,115 Allowance for doubtful accounts (1,380,097) (961,695) - - (2,341,792) Total governmental activities $ 4,177,794 $ 1,352,049 $ 340,020 $ 904,460 $ 6,774,323 Amounts not scheduled for collection during the subsequent year $ - $ - $ 320,020 $ - $ 320,020 Business-Type Activities: Landfill Fund $ 167,681 $ 146,764 $ - $ - $ 314,445 Flatrock/Bannertown Water & Sewer 23, ,700 31,570 Interstates Water & Sewer 2, ,500 Total receivables 194, ,764-7, ,515 Allowance for doubtful accounts (85,841) (85,841) Total business-type activities $ 108,210 $ 146,764 $ - $ 7,700 $ 262,674 Due from other governments consisted of the following: Local option sales tax $ 855,333 Due from Mount Airy 7,700 E ,127 Total $ 912,160

27 40 5. Capital Assets A. Governmental Capital Assets A summary of changes in the County s governmental capital assets follows: By Asset Type: July 1, 2008 Additions Retirements Transfers June 30, 2009 Non-depreciable Assets: Construction in progress $ 17,005,434 $ 3,041,953 $ (925,113) $ (436,177) $ 18,686,097 Land 2,645,226 2,047,090 (67,341) 436,177 5,061,152 Depreciable Assets: Buildings and improvements 49,789,069 89,006 (1,120,412) - 48,757,663 Equipment 6,556, ,106 (465,778) - 6,807,432 Vehicles 3,478, ,904 (171,477) - 3,683,496 Total 79,473,902 6,272,059 (2,750,121) - 82,995,840 Accumulated Depreciation: Buildings and improvements (5,346,591) (1,183,908) 27,603 - (6,502,896) Equipment (5,119,754) (495,007) 139,823 - (5,474,938) Vehicles (2,620,378) (356,476) 168,152 - (2,808,702) Total (13,086,723) (2,035,391) 335,578 - (14,786,536) Capital assets, net $ 66,387,179 $ 4,236,668 $ (2,414,543) $ - $ 68,209,304 Depreciation expense was charged to functions/programs of the primary government as follows: Governmental Activities: General government $ 835,241 Public safety 685,786 Human services 86,438 Economic and physical development 58,953 Education 356,202 Cultural and recreation 12,771 Total $ 2,035,391