Letter of Transmittal

Transcription

1 Mecklenburg County J. Harry Weatherly, Jr. Director of Finance September 30, 2003 The Board of County Commissioners and County Manager Mecklenburg County Charlotte, North Carolina The Comprehensive Annual Financial Report (Report) of Mecklenburg County for the fiscal year ended June 30, 2003 is submitted herewith. Responsibility for both the accuracy of the presented data and the completeness and fairness of the presentation, including all disclosures, rests with the County. I believe the data, as presented, are accurate in all material aspects; that it is presented in a manner designed to fairly set forth the financial position and results of operations of the County as measured by the financial activity of its various funds; and that all disclosures necessary to enable the reader to gain an understanding of the County s financial activity have been included. The Report is divided into three sections: The Introduction includes this letter of transmittal, the organizational chart, and a list of the County s principal officials as well as facts and information and five-year trend data. This information is intended to familiarize the reader with the organizational structure of the County, the nature and scope of the services it provides and the specifics of its legal operating environment. The Financial Section contains the independent auditors report, management s discussion and analysis, the basic financial statements and the accompanying notes to the financial statements. Following the notes is the required supplemental information that presents certain disclosures and the combining and individual fund statements of a more detailed nature. The Statistical Section provides selected financial, economic, and demographic data for the past ten years to facilitate trend analysis. The Reporting Entity Mecklenburg County was created from a portion of Anson County through a petition that was granted on December 11, 1762 by the Provincial Assembly, effective February 1, During the colonial period, a governor appointed by the King of England administered the County. Settlers chose the name Mecklenburg for their county in the hopes of gaining favor with King George III. His wife, Queen Charlotte, was born in the German province of Mecklenburg. When Mecklenburg was established, it was considerably larger than it is today. Portions of what are now Cabarrus, Union, Lincoln, Rutherford, Cleveland and Gaston Counties and part of South Carolina were all once in Mecklenburg County. The City of Charlotte was incorporated on November 7, 1768 and was chosen the county seat in The current boundaries of the County were established in County officials continued to be appointed by the governor until The Constitution of North Carolina was rewritten in that year to allow citizens, for the first time, to elect officials to govern them at the County level. This form of government is still in practice today with the governing body known as the Board of County Commissioners (the Board). In 1963, the Board adopted the County Manager form of government and appointed a County Manager to perform the administrative duties of the County. The Board has six district and three at-large members. Elections for Board members are held in November of evennumbered years, and candidates run for office as members of a political party. Any registered voter is eligible to run for Commissioner. Following the election, Commissioners take office at the first meeting in December. It is also at the first meeting in December each year that the Board elects a chairman and vice-chairman from among its members. The Board appoints several officials to help carry out the County s business: a County Manager, who serves as chief executive officer; a County Attorney, who serves as legal advisor to the Board; a Director of Finance, who provides required financial information and guidance for planning and conducting fiscal management in operating the County; and a Clerk to the Board, who is responsible for keeping official Board records and preparing official minutes of all Board meetings. i

2 The County provides the following services: protection for both people and property; public works, including improvements to public properties, community development, recreation and cultural activities; human services, including social services, public health, mental health and environmental health; supportive court; and general administration. The County represents a primary government as defined by Governmental Accounting Standards Board Statement 14. In addition to the primary government, the basic financial statements include the discrete presentation of three legally separate entities, the Public Library of Charlotte and Mecklenburg County, the Mecklenburg County Alcoholic Beverage Control Board and the Mecklenburg Emergency Medical Services Agency. These entities are component units of the County as defined in Statement 14. Major County Initiatives As part of Mecklenburg Vision 2015, County operations have been divided into four strategic focus areas, each with a specific goal: Community Health & Safety, with the goal to make our community healthier and safer; Effective & Efficient Government, with the goal to provide services in a highly effective, efficient and inclusive manner, and to be accountable for results; Social, Education and Economic Opportunity, with the goal of creating an environment where all Mecklenburg residents can become self-sufficient and have equal access to services; Growth Management & Environment, with the goal of having a vibrant and diverse economy while protecting the natural resources and enhancing the quality of life. To achieve these goals the County has adopted the balanced scorecard approach to strategic planning and performance measurement, a methodology that holds that the complete measure of an organization s performance goes beyond just the bottom line to consider customer satisfaction, operational efficiency, and employee capacity and motivation. The scorecard identifies the results the Board intends to achieve for the community, either as the primary service provider or through partnerships with other organizations. The scorecard will be integrated into the budget and financial reporting process over the next three years. The following accomplishments highlight some of the activities County departments have pursued toward Mecklenburg Vision 2015: Land Use and Environmental Service: Processed and recycled over 700,000 cubic yards of debris from the December 2002 ice storm, a major disaster for the County. Implemented the Flood Tracking System to warn emergency response agencies of impending flood conditions. Completed property audits that generated $810 million in additional assessed valuation. Health and Human Services: Area Mental Health implemented the Assertive Community Treatment Program to serve individuals with severe and persistent mental illness in the community as an alternative to institutionalization. Area Mental Health continued to out source services to contracted agencies thereby saving County dollars. The Health Department implemented a bioterrorism laboratory and continues implementation of Medical Online Surveillance Tool (MOST), a system to monitor the daily flow of information such as school absenteeism, emergency room visits, Poison Control and Urgent Care Center visits to identify early community healthcare issues. The Public Health Pest Management program responded to the increased volume of calls regarding dead birds and West Nile virus, which resulted in 61 confirmed cases of the virus. Social Services, through the Work First program, has placed 8,194 individuals in the community workforce. The Senior Nutrition Program expanded the frozen meal program that provides five frozen meals weekly to homebound seniors to help them remain independent in their homes. Social Services implemented the Multiple Response System and Team Decision-Making, both of which reflect a philosophy of greater family and community engagement, to encourage the exploration of options other than taking children into social services custody, and reduced the number of children in Youth and Family Services custody by 12%. The Mecklenburg Medical Examiner s Office became the regional Medical Examiner facility for the five surrounding counties that were previously serviced by the Chapel Hill Office of Chief Medical Examiner. ii

3 Detention and Court Support Services: Court Services, through the success of the Pretrial Release and Misdemeanor Court programs, has improved the processing of offenders awaiting trial and reduced the number of offenders needing incarceration. Through improvements in the Structured Day and Drug Court Programs, Court Services provided alternatives to incarceration for felony offenders and continued its success in assisting offenders with obtaining substance abuse and mental health treatment, as well as job training and placement to help the participants become productive, positive members of the community. Construction began on a new 34-courtroom courthouse, to be completed in The Sheriff s Department replaced the outdated mug shot system with an automated Sex Offender Management System. Community Services Park and Recreation opened Ray s Splash Planet, a 29,000 square-foot indoor water park and completed the extension of the Stewart Creek/Irwin Creek Greenway to connect Ray s Splash Planet with Frazer Park and Seversville Park/Bruns Avenue School. The Women s Commission s focus on domestic violence included implementing Spanish speaking services, expanding support groups for victims and children of victims, and partnered with other community groups regarding domestic violence and child welfare. Economic Factors Affecting Financial Condition Mecklenburg County is the center of the nation s fifth largest urban region, with Charlotte, a mid-sized city, as the largest city. More than 6.7 million people live within a 100-mile radius of Mecklenburg County. Over half of the nation s metropolitan markets with populations over one million are within 650 miles of Charlotte. As a result, Charlotte and Mecklenburg County have emerged as a financial, distribution and transportation center for the entire urban region. The County continues to be an important location for regional headquarters of major national and international companies with over 400 foreign firms having facilities in the County. A large number of national corporations have selected the County for establishment of sales offices, division headquarters, research and development facilities and other administrative units. According to Dun and Bradstreet s 2003 Million Dollar Directory, 687 corporations are headquartered in Mecklenburg County. Fortune 500 service and industrial companies are represented with over 280 offices in the area, including six headquartered in the County Duke Energy, Goodrich, Inc., Nucor, Sonic Automotive, Family Dollar, and SPX. Major corporations operating within the County include IBM, AT&T, and Travelers Insurance. In 2002, business growth included approximately 692 new or expanded businesses in the County, creating over 5,600 new jobs and representing approximately $1.4 billion in capital investments. The County has experienced the effects of the nation-wide economic slow-down of the past year, but the area has continued to grow due to the benefit of the banking industry located in the area. The County is the second largest financial center in the United States, and serves as headquarters for financial institutions with assets of approximately $970 billion. The County s continued growth as a leading financial center is attributable to a number of factors. Among the most important factors are certain State laws permitting branch banking and the location of a branch of the Federal Reserve Bank in the County. Bank of America, N.A. and Wachovia Bank, N.A., two of the nation s five largest banks ranked by assets, are headquartered in the County. In total, there are 19 banks with over 225 banking offices located in the County. Bank of America, N.A. is ranked first in the nation in terms of deposits. Many of the banks in the County have international departments, overseas branches and representative offices offering investment banking, foreign currency exchange, multi-currency loans, trade financing, letters of credit, money transfers and cash management. In addition, over 350 mortgage and commercial finance institutions operate in the County. Employment in the financial and insurance sector is estimated to exceed 75,000. Also located in the County is a branch of the United States Small Business Administration that is active in arranging loans for smaller businesses. iii

4 The County has emerged as a center for communications activities as a result of the concentration of communications related companies in the County. The County has within its boundaries the state headquarters of BellSouth Telecommunications, Western Union s District Office for the state, one of AT&T s five regional processing centers, nine commercial television stations, one public television station, 27 radio stations, a newspaper with an average daily circulation of over 240,000, and twelve weekly newspapers. Although distribution and finance are the primary areas of activity, tourism is an expanding industry and manufacturing continues to be significant to the County. Important industries include textiles, food products, printed and published material, machinery and chemicals. The County has more than 1200 manufacturing firms that employ more than 38,000 workers. Tourism has generated numerous jobs, accounting for 11% of the County s employment. Numerous events at the Convention Center and sporting events in the area, such as the Carolina Panthers, a National Football League franchise, bring many visitors to the area. Until 2003, the County experienced a steady rate of growth, which is expected to continue, but at a slower rate than previously experienced. During 2003 the County experienced the same slow economic environment affecting the nation. This was reflected in the 2% drop in the number of commercial construction permits and a 3% drop in the number of residential construction permits. For the last several years, the County has experienced an unemployment rate less than the national average. Although the unemployment rate matched the national average for most of calendar year 2002, as of June 30, 2003, the unemployment rate for the County has dropped below the national average of 6.2% to 5.7%, where it is expected to remain for the next year. Long-term Financial Planning Providing the additional services that accompany continued growth, as well as financing the new schools, parks, libraries and other facilities needed to meet this growth, is a recurring challenge faced by the County, particularly in the slow economy that the nation has been experiencing. Capital needs are assessed on a three-year and ten-year basis every two years. Requests go to the Citizens Capital Budget Advisory Committee (CCBAC), an elevenmember advisory group, nine appointed by the Board and two appointed by the Board of Education. The CCBAC reviews, evaluates and prioritizes requests and recommends a capital improvement program to the Board in the spring of even-numbered years. In June, the Board adopts the capital improvements program and needed referendums are held in the fall. Beginning with calendar year 2003, the Board voted to schedule bond sales for January of each year to meet the cash needs of the capital projects. No bond referendum was held during fiscal During fiscal 2003 the County issued $346.4 million of general obligation bonds for school and community college facilities, park and recreation facilities, land acquisition, and library and court facilities, as well as $65.0 million variable rate bonds for school facilities, and $12.2 million of bonds used to refund Series 1986 and 1993 bonds. Financial Information County management is responsible for establishing and maintaining a comprehensive internal control framework designed to ensure that the assets of the County are protected from loss, theft or misuse, and that accounting data are compiled to allow for the preparation of financial statements in conformity with generally accepted accounting principles. The internal control framework is designed to provide reasonable, but not absolute, assurance that these objectives are met. The concept of reasonable assurance recognizes that: 1) the cost of a control should not exceed the benefits thereof; and 2) the evaluation of costs and benefits requires estimates and judgments by management. We believe the County s internal controls adequately safeguard assets and provide reasonable assurance of proper recording of financial transactions in compliance with the laws and regulations, contracts and grants. Budget Process State Statutes require the adoption of an annual balanced budget for all funds, except the agency fiduciary funds and those authorized by project ordinance. The process begins in January with the Board s Strategic Planning Conference, which is followed by workshop sessions for each departmental budget unit manager to assist in developing the line-item budget for each unit. Budget discussions for each core service occur between January and March. The County Manager, using revenue projections based upon current trends and anticipated changes prepared by the Director of Finance, and using expenditure budgets resulting from the core service review process, prepares a recommended budget that is submitted to the Board of County Commissioners in May. The Commissioners hold a public hearing and budget workshops before approving the final County budget by July 1, in iv

5 accordance with statutory regulations. During the budget year, the County Manager or designee is authorized to transfer budgeted amounts within any fund; however, any revisions that alter the total budget of any fund must be approved by the Board of County Commissioners. Budget to actual comparisons are provided in this report for each individual governmental fund for which an appropriated annual budget has been adopted. For the General Fund, this comparison is presented as part of the basic financial statements for governmental funds. For governmental funds, other than the General Fund, with appropriated annual budgets, the budget and actual comparisons are included in Combining and Individual Fund Statements and Schedules. Cash Management North Carolina General Statutes authorize counties to invest in obligations of the U. S. Treasury; obligations of any agency of the United States of America, provided the payment of principal and interest of such obligations is fully guaranteed by the United States; certain quasi-federal agencies; commercial paper bearing the highest credit rating available; bankers acceptances of accepting banks or holding companies either (i) incorporated in the State of North Carolina or (ii) having the highest available long-term debt rating; and the North Carolina Capital Management Trust, an SEC registered (2a-7) mutual fund. All of the County s investments are classified in the lowest credit risk category or are exempt from risk categorization because third party custodians take delivery of investment securities. County deposits are maintained with financial institutions which collateralize excess deposits by the option which allows securing uninsured deposits through the pooling of collateral method established by the depository with the State Treasurer for benefit of the State and local participating units as permitted under North Carolina Administrative Code, Title 20, Chapter 7. Additional information about the County s cash and investments activity is contained in the Notes to the Financial Statements. The County s system of cash flow forecasting and close monitoring of progressive investment policies has resulted in maximized investment yields, considering the depressed nature of the investment market. This year s investment earnings represented 1.03 cents on the property tax rate with the average interest on the investment portfolio yielding 1.79% at year-end. The average yields on six- and twelve-month Treasury constant maturities were.98% and 1.09%, respectively, at year-end. The County s average return earned during the year was 1.75% which exceeded the 1.51% average return of the Public Investor 10 Bill Index published by Government Finance Officers Association of the United States and Canada for the year. Risk Management The County participates in a self-funded risk-financing program. This program is administered by the City of Charlotte s Risk Management Division. The County will finance its own loss exposures up to the first $1,000,000 per occurrence per year with a separate reserve held in trust for the County and with current appropriations in the County budget except for property exposures over $100,000 and Workers Compensation exposures over $400,000 which are insured. Exposures between $500,000 and $1,000,000 per occurrence are covered by accumulated reserves held in a separate trust fund. As of June 30, 2003, reserves specifically designated for Mecklenburg County were sufficient to accommodate the actuarially determined liabilities. Automobile and general liability exposures above the coverage provided through the trust are covered by excess insurance policies in amounts up to $20 million. Other Relevant Information The financial statements have been prepared in compliance with applicable General Statutes of North Carolina and generally accepted accounting principles for governmental entities. Deloitte & Touche LLP, an independent public accounting firm, audited the statements and the supplemental schedules and their opinion precedes the basic financial statements. The audit was designed to meet the requirements of the Federal Single Audit Amendment of 1996, as well as the State Single Audit Act, N.C.G.S The reports required by these Acts are issued separately. On April 1, 2003, the Government Finance Officer s Association (GFOA) awarded its Certificate of Achievement for Excellence in Financial Reporting for the Comprehensive Annual Financial Report of Mecklenburg County for the year ended June 30, The 2002 Report was judged to conform to the high standards of financial reporting put forth by GFOA. The certificate is valid for a period of one year. The County has been awarded the certificate for the past 28 years. We believe the Report for fiscal year 2003 continues to substantially conform to those standards and this Report is being submitted to GFOA for the certificate program. GFOA also presented Mecklenburg County with its Distinguished Budget Presentation Award for the annual budget for fiscal year To receive this award, a governmental unit must publish a budget document that meets program criteria. This award is also valid for one year only. v

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