CAMPBELL COUNTY, VIRGINIA

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1 COMPREHENSIVE ANNUAL FINANCIAL REPORT FISCAL YEAR ENDED JUNE 30, 2008 FINANCIAL AND MANAGEMENT SERVICES DEPARTMENT

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3 TABLE OF CONTENTS INTRODUCTORY SECTION Letter of Transmittal...i Certificate of Achievement for Excellence in Financial Reporting...vii Directory of Principal Officials...viii Organizational Chart...ix FINANCIAL SECTION Independent Auditor s Report... 1 Management s Discussion and Analysis... 3 Basic Financial Statements Government-Wide Financial Statements Exhibit 1 Statement of Net Assets Exhibit 2 Statement of Activities Fund Financial Statements Exhibit 3 Balance Sheet Governmental Funds Exhibit 4 Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds Exhibit 5 Statement of Net Assets Health Insurance Fund Exhibit 6 Statement of Revenues, Expenses, and Changes in Fund Net Assets Health Insurance Fund Exhibit 7 Statement of Cash Flows Health Insurance Fund Exhibit 8 Statement of Net Assets Fiduciary Funds Notes to Financial Statements Required Supplementary Information Exhibit 9 Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget to Actual General Fund Exhibit 10 Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget to Actual-Landfill Fund Exhibit 11 Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget to Actual E-911 Fund Page

4 Other Supplementary Information Agency Funds: Exhibit A-1 Combining Statement of Fiduciary Net Assets Exhibit A-2 Combining Statement of Changes in Fiduciary Assets and Liabilities Discretely Presented Component Unit School Board Exhibit B-1 Combining Balance Sheet Exhibit B-2 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Exhibit B-3 Statement of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual School Fund Discretely Presented Component Unit Campbell County Industrial Development Authority Exhibit C-1 Statement of Net Assets Proprietary Fund Exhibit C-2 Statement of Revenues, Expenses, and Changes in Fund Net Assets Proprietary Fund Exhibit C-3 Statement of Cash Flows Proprietary Fund Capital Projects Funds Budget Comparison Exhibit D-1 Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget to Actual Capital Projects Fund Exhibit D-2 Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget to Actual School Construction Capital Projects Fund Supporting Schedule Schedule 1 Schedule of Expenditures of Federal Awards STATISTICAL SECTION Table 1 Net Assets by Component Table 2 Changes in Net Assets Table 3 Fund Balances Governmental Funds...83 Table 4 Changes in Fund Balances Governmental Funds Table 5 Assessed Value and Estimated Actual Value of Taxable Property Table 6 Principal Property Taxpayers Table 7 Property Tax Levies and Collections Table 8 Ratios of Total Outstanding Debt Table 9 Ratios of General Bonded Debt Table 10 Principal Employers Table 11 Demographic and Economic Statistics Table 12 Full Time Equivalent Employees by Function Table 13 Operating Indicators by Function Table 14 Capital Asset Statistics by Function/Program COMPLIANCE SECTION Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards Report on Compliance with Requirements Applicable to Each Major Program and on Internal Control over Compliance in Accordance with OMB Circular A Summary of Compliance Matters Schedule of Findings and Questioned Costs

5 INTRODUCTORY SECTION

6 SUPERVISORS CHARLES W. FALWELL STANLEY I. GOLDSMITH EDDIE GUNTER, JR. HUGH T. PENDLETON, JR. J.D. PUCKETT HUGH W. ROSSER STEVEN M. SHOCKLEY BOARD OF SUPERVISORS POST OFFICE BOX 100, RUSTBURG, VIRGINIA COUNTY ADMINISTRATOR R. DAVID LAURRELL ALTAVISTA (434) BROOKNEAL (434) LYNCHBURG (434) RUSTBURG (434) FAX NO. (434) November 15, 2008 To the Honorable Members of the Board of Supervisors To the Citizens of Campbell County County of Campbell, Virginia We are pleased to present the Comprehensive Annual Financial Report of the County of Campbell, Virginia, (the County ), for the fiscal year ended June 30, This report was prepared by the County s Department of Management Services. Responsibility for both the accuracy of the presented data and the completeness and fairness of the presentation, including all disclosures, rests with the County. We believe the data, as presented, is accurate in all material respects; 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 the maximum understanding of the County s financial affairs have been included. The management of the County is responsible for establishing and maintaining an internal control structure to ensure the protection of County assets. 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. Budgetary Controls: In addition to the internal accounting controls noted above, the County also maintains budgetary controls. These budgetary controls ensure compliance with provisions embodied in the annual appropriated budget approved by the Board of Supervisors. Activities of the general fund and capital projects funds are included in the annual appropriated budget. RESPECTING THE PAST, ATTENDING THE PRESENT, CONCENTRATING ON THE FUTURE i

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13 DIRECTORY OF PRINCIPAL OFFICIALS June 30, 2008 Stanley I. Goldsmith Steven W. Shockley James D. Puckett Donald T. Roberts George Jones J. Fredrick Watson Bobby Blanks Gloria Rogers Joyce Dixon Ricky E. Jones Rita Clark Karen K. Tanner BOARD OF SUPERVISORS Hugh T. Pendleton, Jr., Chairman Charles Falwell, Vice Chairman COUNTY SCHOOL BOARD Barry Jones, Chairman R. Leon Brandt, Jr., Vice Chairman COUNTY SOCIAL SERVICES BOARD John E. Price, Chairman James R. Mays, Vice Chairman COUNTY LIBRARY BOARD Frank Lukanich, Jr., Chairman Rusty Hicks, Vice Chairman OTHER OFFICIALS Hugh W. Rosser Eddie Gunter, Jr. G. Roger Akers Gary R. Mattox Donald Floyd, Jr. Carolyn Porter Betsy Keaton Joseph Lunsford Judge of the Circuit Court J. Michael Gamble Judge of the Circuit Court J. Samuel Johnston, Jr. Clerk of the Circuit Court Deborah E. Hughes Judge of the General District Court R. Patrick Yeatts Judge of the Juvenile & Domestic Relations Circuit Court A. Ellen White Commonwealth s Attorney Neil S. Vener County Attorney David W. Shreve Commissioner of the Revenue Calvin C. Massie, Jr. Treasurer Robin T. Jefferson Sheriff Terry E. Gaddy Superintendent of Schools Dr. George E. Nolley Social Services Director Richard M. Verilla Library Director Nan Carmack County Administrator R. David Laurrell viii

14 ORGANIZATIONAL CHART 2008 Campbell County Citizens Clerk of the Circuit Court Commissioner of the Revenue Sheriff Board of Supervisors Treasurer Commonwealth Attorney School Board Board Committees Public Safety Joint School Committee Public Works Human Services Administration/Management Services Community & Economic Development County Attorney County Schools County Administrator Voter Registration Administration of Justice Board of Equalization Circuit Court Board of Zoning Court Services Appeals General District Court J & D Court Magistrates Administrative Support VPI Extension Health Department Forestry FSA (Formerly ASCS) Commissions Planning Commission Building Codes Appeals Social Services Board Social Services Department Library Board of Trustees County Library Authorities Utilities & Service Authority Airport Authority Management Services Community Development Economic Development Public Safety Public Works Recreation Youth, Adult & Community Information Systems Committees/ Commissions Central Accounting Central Purchasing Budget/Finance Personnel Reassessment Building Inspections/E&S Planning & Zoning GIS/Addressing Subdivisions Economic Development Tourism Business Assistance Animal Control Communications Emergency Planning Fire/EMS Operations ix Building & Grounds Engineering Landfill Custodian Services ix Athletics & Sports Cultural Arts Special Events Senior Recreation Public Information Parks CSA RSVP WAVE VJCCCA REVMAX Senior Services Volunteerism & Community Services Mainframe PC s Network Database Industrial Development Authority Transportation Safety

15 FINANCIAL SECTION

16 INDEPENDENT AUDITOR S REPORT To the Honorable Members of the Board of Supervisors Campbell County, Virginia We have audited the accompanying financial statements of the governmental activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of Campbell County, Virginia as of and for the year ended June 30, 2008, which collectively comprise the County s basic financial statements as listed in the table of contents. These financial statements are the responsibility of the County s management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the Specifications for Audits of Counties, Cities, and Towns issued by the Auditor of Public Accounts of the Commonwealth of Virginia. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of Campbell County, Virginia, as of June 30, 2008, and the respective changes in financial position and cash flows, where applicable, thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued our report dated December 11, 2008, on our consideration of the County s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and important in assessing the results of our audit. 1 Providing Professional Business Advisory & Consulting Services 2215 Langhorne Rd. P.O. Box Lynchburg, VA (24506) Fax: Member: SEC and Private Companies Practice Sections of American Institute of Certified Public Accountants

17 The management s discussion and analysis on pages 3 through 13 and the required supplementary information on pages 53 through 57 are not a required part of the basic financial statements but are supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the County s basic financial statements. The introductory section, the combining and individual fund statements and schedules listed in the table of contents as other supplementary information, and the statistical section are presented for purposes of additional analysis and are not a required part of the basic financial statements. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, and is also not a required part of the County s basic financial statements. The combining and individual fund statements and schedules and the schedule of expenditures of federal awards have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we express no opinion on them. Roanoke, Virginia December 11, 2008 CERTIFIED PUBLIC ACCOUNTANTS 2

18 MANAGEMENT S DISCUSSION AND ANALYSIS As management of the County of Campbell, Virginia we offer readers of the County s financial statements this narrative overview and analysis of the financial activities of the County for the fiscal year ended June 30, FINANCIAL HIGHLIGHTS The assets of the County exceeded its liabilities at the close of the most recent fiscal year by $ 51,471,920 (net assets). The County s combined funds reported ending fund balances of $51,239,415, an increase of $26,818,488. Approximately twenty percent of the year ending combined fund balances, or $10,028,693, is available for spending at the County s discretion (unreserved, undesignated fund balance). The increase in the fund balances is primarily due to the June 2008 bond issue for three new capital projects; the renovations and additions to Concord Elementary school, the renovations and additions to the County courthouse and County building complex, and the Rustburg to Concord waterline. Bond proceeds totaling $34,275,000 for these three capital projects were deposited on June 26, At the end of the current fiscal year, unreserved, undesignated fund balance for the general fund was 18.5% percent of total general fund expenditures for the year. The general fund undesignated cash balance at year end was $4,022,470, which represents actual year-end cash, cash equivalents and investments totaling $12,493,849 plus unrealized appropriated revenues minus unspent appropriated expenditures. The County issued new debt totaling $34,875,000 for the three large capital projects listed above plus the purchase of new aerial platform firefighting equipment. The County paid down pre-existing debt principal in the amount of $2,448,395 related to School facilities. Overview of the Financial Statements This discussion and analysis are intended to serve as an introduction to the County s basic financial statements. The County s basic financial statements comprise three components: Government-wide financial statements, Fund financial statements, and Notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. Government-wide financial statements - The Government-wide financial statements are designed to provide readers with a broad overview of the County s finances, in a manner similar to a private-sector business. 3

19 The statement of net assets presents information on all of the County s assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the County is improving or deteriorating. The statement of activities presents information showing how the County s net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in the statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation leave). Both of the government-wide financial statements distinguish functions of the County that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the County include general government administration, public safety and administration of justice, education, health, welfare, human service programs, planning, community development, recreation, and cultural activities. The Government-wide financial statements include not only the County of Campbell, Virginia itself (known as the primary government), but also a legally separate school district and an Industrial Development Authority for which the County of Campbell, Virginia has incurred a moral obligation to provide funding for the payment of debt. Financial information for these component units is reported separately from the financial information present for the primary government itself. Fund financial statements - A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The County of Campbell, Virginia, like other local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the County can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds. Governmental funds - Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statement, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on the balance of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government s near-term financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the County s near-term financing decisions. Both the governmental fund balance sheet and the governmental statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. 4

20 The County maintains four individual governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the General Fund, the Landfill fund), the General Capital Projects Fund, and the School Construction Capital Projects Fund, all of which are considered to be major funds. The E-911 fund was collapsed during FY2007 and was merged with the General Fund in FY2008. The County adopts an annual appropriated budget for its governmental funds. A budgetary comparison statement has been provided for the General Fund, the Special Revenue Fund, and the Capital Projects Funds, and the School Construction Projects fund to demonstrate compliance with this budget. Proprietary funds - The County maintains one proprietary fund the Health Insurance Fund. The Health Insurance Fund is an internal service fund and is used to account for costs of providing health and dental insurance to employees. Proprietary funds use the accrual basis of accounting, similar to a private sector business. These funds are restricted in their use for current and future health related costs only, including a reserve to meet future retiree obligations. Fiduciary funds - The County is the trustee, or fiduciary agent, for the County s agency funds. It is responsible for ensuring that the assets reported in these funds are used for their intended purposes. All of the County s fiduciary activities are reported in a separate statement of fiduciary net assets and a statement of changes in fiduciary net assets. The County excludes these activities from the County s government-wide financial statements because the County cannot use these assets to finance its operations. Notes to the financial statements - The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. Other information - In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information for budgetary comparison schedules and presentation of combining financial statements for the discretely presented component unit School Board. The School Board does not issue separate financial statements. The IDA also does not issue separate financial statements. Government-wide Financial Analysis As noted earlier, net assets may serve over time as a useful indicator of a County s financial position. In the case of the County, assets exceeded liabilities by $ 51,471,920 at the close of the most recent fiscal year. The largest portion of the County s net assets (46 percent) reflects its investment in capital assets (e.g., land, buildings and improvements, vehicles, machinery, and equipment) less any related debt used to acquire those assets that is still outstanding. The County uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the County s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. 5

21 Summary of Net Assets Governmental Activities * Current and other assets $ 78,813,719 $ 47,833,466 Capital assets 68,098,076 61,078,310 Total assets 146,911, ,911,776 Long-term liabilities Outstanding 71,058,082 38,356,188 Current liabilities 24,381,793 23,801,565 Total liabilities 95,439,875 62,157,753 Net assets: Invested in capital assets, net of related debt 39,715,828 30,237,231 Restricted schools construction - - Unrestricted 11,756,092 16,516,792 Total net assets $ 51,471,920 $ 46,754,023 At the end of the current fiscal year, the County is able to report positive balances in all categories of net assets. During the current fiscal year, the County s net assets increased by $4,717,897. Nondepreciable capital assets increased by $8,445,709 due to new capital construction projects in FY2008. Cash, cash equivalents, and investments increased by $28,787,479 in the Governmental Activities primarily due to increases in debt proceeds to fund large new capital projects. However, long term liabilities increased as well in the Governmental Activities funds for debt issuances totaling $34,875,000 in FY2008 to pay for these new projects. Landfill Closure/Post Closure liabilities increased by $351,010 due to cost inflation factors and revisions to estimates of the remaining unused capacity of the active Landfill cells. The Health Insurance Fund net assets amount increased by $2,596,754. This was due to a decrease in claims for the year, in conjunction with increases in premium contributions. Governmental Activities: Governmental activities increased the County s net assets by $4,717,897. Key elements of this increase are summarized in the table on the following page. 6

22 Changes in Net Assets Governmental Activities * Program Revenues: Charges for services $ 12,340,314 $ 11,580,788 Operating grants and Contributions 13,171,193 12,571,430 Capital grants and Contributions 1,181, ,373 General Revenues: General property taxes 27,801,209 26,181,462 Other local taxes 10,409,697 9,985,749 Use of money and property 1,406,527 1,641,200 Grants and Contributions not restricted to specific purposes 4,051,899 4,092,302 Capital gain - - Other general revenues 344, ,748 Gain on Sale of capital assets 147,578 Total revenues 70,855,148 66,987,052 Expenses: General government Administration 10,558,342 10,442,305 Judicial administration 1,528,774 1,442,333 Public safety 10,869,255 9,595,475 Public works 5,432,700 4,547,485 Health and welfare 11,738,042 11,038,564 Education 20,812,779 18,929,774 Parks, recreation, and cultural 1,933,983 1,871,066 Community development 2,139,589 2,134,058 Interest and other fiscal charges 1,123,787 1,185,531 Total expenses 66,137,251 61,186,591 Change in net assets 4,717,897 5,800,461 Net assets, beginning 46,754,023 40,953,562 Net assets, ending $ 51,471,920 $ 46,754,023 7

23 Government-wide Financial Analysis (Continued) Revenues for governmental activities exceeded expenses including current year depreciation on capital assets by $4,717,897 for FY2008. Current year depreciation expense for capital assets totaled $2,870,758. Revenues for governmental activities increased by approximately $3,868,096; whereas, expenses increased by $4,622,079. EXPENSES Increases in public safety expenses of $1,273,780 were impacted by increased emergency services cost. FY08 was the first full complete year for paid EMS services; whereas FY07 was the startup of a paid EMS services. Other increases in public safety are due to increased costs in the Sheriff s department such as gasoline costs, salary increases for law enforcement officers, and the addition of two sheriff deputy positions. Other public safety departments were also impacted by salary increases and gasoline cost increases. Salary increases and other related costs also increased costs associated with public safety and law enforcement grants. The Probation department costs increased as well with Juvenile Detention and Group Homes costs rising in the amount of $70,000 on a combined basis. Increase in Public Works by $885,215 is due primarily to increases in general maintenance costs, salary increases, and gasoline and diesel fuel for vehicles and heavy equipment. Increase in Health and Welfare of $699,478 due to increased cost in Social Services programs and administration and in Comprehensive Services Act (Children at Risk) services. Increase in education expenses of $1,883,005. The Board of Supervisors reappropriated $4,442,098 to the Schools for FY2008 for encumbrances and carryovers for School contracts and obligations not completed as of June 30, PROGRAM/GENERAL REVENUES Increase in charges for services of $759,526 primarily due to new paid EMS revenue recovery program for paid EMS services and the increase in revenue in the county s self insured health insurance fund due to increases in premium contributions. Increases in operating grants and contributions of $599,763 from Federal and State funding primarily in social services and children at risk; reimbursement for constitutional office salaries for the offices of the Sheriff, Treasurer, Commissioner of the Revenue, Clerk of Court and Commonwealth Attorney. Increase in capital grants and contributions of $523,619 due to increase in state and federal funding in public safety and law enforcement grants; community development grants decreased due to the timing of projects and the resulting reimbursement. Increase in general property taxes of $1,619,747 due to increase in real estate taxes due to property reassessment and increased construction; increases in collections of other personal property taxes due to updated assessment information and the continuation of DMV stops for delinquent car tax. Increase in other local taxes of $423,948 due to increase in local sales tax due to increased retail sales and other business growth in the County; increases in communications tax due to new state funding formula based on five percent sales tax for all communication services. Decrease in use of money and property of $234,673 primarily due to lower investment rates of return on our investments. 8

24 Financial Analysis of the County s Funds As noted earlier, the County used fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental Funds - The focus of the County s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the County s financing requirements. In particular, unreserved fund balance may serve as a useful measure of a County s net resources available for spending at the end of the fiscal year. Approximately twenty percent of the combined governmental fund balance, or $10,028,693, constitutes unreserved, undesignated fund balances, which are available for spending at the County s discretion. The remainder of fund balance is reserved or designated to indicate that is not available for new spending because it has already been committed for: Capital improvement projects Education encumbrances and carryovers for expenditures Other encumbrances and carryovers for expenditures Unreserved, undesignated fund balance of the general fund was $10,170,316, while the total general fund balance was $16,702,827. As a measure of the general fund s liquidity, it may be useful to compare both unreserved fund balance and total fund balance to total fund expenditures. Unreserved, undesignated general fund balance represents 18.5 percent of total general fund expenditures, while total fund balance represents 30 percent of total general fund expenditures. The general fund balance increased by $1,527,581 during the current fiscal year, or 10.1%. General fund revenues, expenditures and transfers to other funds increased significantly from the prior year with total revenues exceeding expenditures and transfers combined by $1,527,581. The largest expenditure increase occurred in Education with a $1,867,653 increase from prior year. The Board of Supervisors reappropriated $4,442,098 for encumbrances and carryovers for School contracts and obligations not completed as of June 30, General fund revenues increased by $2,401,002 due to the increase in charges for services, general property taxes, and other local taxes as well as intergovernmental funding. The E-911 special revenue fund balance decreased by $506,642 as the E-911 fund was collapsed and merged with the General Fund. Local E-911 surcharge tax ceased as a local tax in the E-911 fund and is now part of the State disbursement for communication tax in the general fund. A new special revenue fund was established July 1, 2007 for the Landfill operating and capital expenditures. Expenditures surpassed revenues by $809,622 in the Landfill fund; however, transfers in from the Capital Improvement fund and the General Fund brought the Landfill fund into a positive fund balance of $3,114,056 at June 30 th. The entire Landfill fund balance was either encumbered or carried over to FY09 in order to complete contracts or projects already under way. 9

25 The County capital projects fund balance increased by $12,308,031. This increase is due primarily to bond proceeds for capital construction projects. Total revenue in the County capital improvement fund in FY08 decreased slightly from FY07; however, expenditures increased in total by $3,858,994 primarily in the areas of Public Works and Economic Development. Public Works projects included County courthouse and office complex construction as well as the Rustburg to Concord waterline. Economic Development capital expenditures increased by $1,000,000 for the Wards Crossing West shopping center development project. The County also purchased new aerial platform firefighting equipment costing $785,000. The capital projects fund has a remaining fund balance of $21,573,854, all of which is reserved or designated for existing and future capital projects. The school construction fund has a fund balance of $9,848,678 at June 30 th. This increase is primarily due to the bond proceeds received for the debt issuance for Concord Elementary school renovations and additions in the amount of $16,000,000 less construction invoices paid or accrued for FY08. The expenditures for the school construction project fund totaled $5,917,618 during the year. The remainder of the Concord Elementary School renovation expenditures will take place in FY09. General Fund Budgetary Highlights Differences between the general fund original expenditure budget of $54,464,480 and the final amended budget of $63,746,387 were relatively significant ($9,281,907 increase in appropriations) and can be briefly summarized as follows: $986,536 increase in public safety due primarily to increases in cost of law enforcement including equipment, supplies, salary increases and associated benefits; grants for law enforcement and other public safety grants that totaled $256,892 much of which is paid for by State/Federal funding. Paid EMS services budget increased by $278,110 due to growth in new program. $4,442,098 increase in education funding consisting of budget encumbrances approved from prior fiscal year of $3,311,228 and a budget carryover request from the prior fiscal year of $1,130,870. $1,756,741 increase in health and welfare expenditures due to increases in CSA Comprehensive Services Act for Children at Risk in the amount of $1,087,943 and $621,342 increase in social services administration and public assistance grants. Both the CSA program and public assistance grants are primarily funded by State/Federal. $1,530,724 increase in the community and economic development contribution for various economic incentives to be paid totaling $897,371 for business expansion incentives and projects that were not originally appropriated, and $262,236 for debt service to be reimbursed to the Water Authority (CCUSA) for the Leesville Road waterline project. The payment to the CCUSA is fully funded by revenue collected from users of the waterline that is reimbursed to the County. 10

26 During the year general fund actual revenues exceeded original budget estimates by $2,569,103 and came under amended budget amounts by $248,349. Actual expenditures exceeded original budget estimates by $562,179 and actual expenditures were less than the amended budget by $8,719,728. The largest component of this difference in the level of expenditures is Education. Actual education expenditures were $4,945,863 under the amended budget. The Board of Supervisors subsequently re-appropriated $3,854,952 to the Schools for FY2009 encumbrances covering contracts and obligations not completed as of June 30, REVENUES AND EXPENDITURES GENERAL FUND BUDGET TO ACTUAL Final Budget Actual Variance Local $ 41,914,852 $ 42,297,683 $ 382,831 Intergovernmental 18,182,845 17,551,665 (631,180) Total revenues $ 60,097,697 $ 59,849,348 $ (248,349) Expenditures: General Government $ 4,183,097 $ 3,934,042 $ 249,055 Judicial 1,692,322 1,498, ,504 Public Safety 10,256,949 9,891, ,844 Public Works 1,633,335 1,427, ,304 Health and Welfare 12,738,352 11,836, ,617 Education 24,231,891 19,286,028 4,945,863 Parks, Recreation & Cultural 1,952,837 1,806, ,279 Community Development 2,802,369 1,605,571 1,196,798 Debt Service 4,255,235 3,740, ,464 Total expenditures $ 63,746,387 $ 55,026,659 $ 8,719,728 Revenues: Total actual local revenue exceeded final budget by $382,831 or less than 1%. The increase in total local revenue compared to final budget was lead by local sales tax growth; growth in Business Licenses; and increase in vehicle license fees due to an increase in the number of vehicles registered within the County. Local revenue comprised 70.7% of total actual General Fund Revenue. Intergovernmental revenue was $631,180 less than final budget (3.5% less). Intergovernmental revenue comprised 29.3% of total actual General Fund revenue. A significant portion of the shortfall in Intergovernmental revenue was caused by reimbursements from State/Federal being less than budget as expenditures in these same programs were also less than budget. The County s reimbursement revenue is based on actual expenditures centered in these programs and is not based on budgeted expenditures. Total revenues were $248,349 less than final budget (less than one half of 1%). Expenditures: Total General Fund actual expenditures of $55,026,659 were $8,719,728 less than the final budget of $63,746,387. Education expenditures represented by transfers from the General Fund to the School Board Component Unit were $4,945,863 less than final budget. Education budget encumbrances requests subsequently approved to be carried over to FY2009 for contracts that were not completed as of June 30, 2008 comprised $3,854,952 of this amount. The Schools did not submit carryover requests this year. Community & Economic Development expenditures were $1,196,798 less than final budget primarily due to contributions for economic incentives for business expansion totaling $863,000 that will not be paid out until the requirements from the applicants have been fully met in future years. Additionally, a supplemental appropriation for Community Development for $158,173 for FY2009 debt service reimbursement to the Water Authority (CCUSA) for the Leesville Road waterline was carried over to pay for debt service for the waterline in FY

27 Public Safety expenditures were $365,844 less than final budget in part due to grant projects not completed as of June 30, These funds were subsequently carried over to the FY2009 budget. Health and Welfare, including Social Services, expenditures were $901,617 less than final budget. Public Assistance Grants were $217,404 less than final budget as the level of usage for several of these grants did not materialize as expected. The Public Assistance Grants program is primarily funded by State/Federal and funding is limited to what is actually spent rather than what is budgeted. The CSA (Children at Risk) program expenditures were less than final budget by $446,000 as there was a decline in the number of children served during the latter part of the year. The majority of the funding for these Social Service programs comes from State/Federal. Capital Asset and Debt Administration Capital assets The County s investment in capital assets for its governmental funds as of June 30, 2008 totals $68,098,076 (net of accumulated depreciation) for an increase of $7,019,766. This investment in capital assets includes land and land improvements, buildings and improvements, vehicles and machinery and equipment. Depreciation expense for the year for all capital assets all funds totaled $2,870,758. Readers interested in additional information should refer to Note 6 to the financial statements. Capital Assets Condensed As of June 30,2008 Accumulated Governmental Activities Original Cost Depreciation Net Capital Assets Capital assets, not being depreciated: Land and land improvements $ 2,382,113 $ 2,382,113 Construction in progress 3,432,024 3,432,024 School Construction-in- Progress 6,284,332 6,284,332 Total capital assets, not being depreciated 12,098,469 12,098,469 Other capital assets: Buildings 6,694,393 2,663,760 4,030,633 Other improvements 12,972,723 8,071,032 4,901,691 School buildings and improvements* 58,918,225 14,742,612 44,175,613 Furniture, equipment and vehicles 10,387,209 7,495,539 2,891,670 Total other capital assets 88,972,550 32,972,943 55,999,607 TOTAL CAPITAL ASSETS $ 101,071,019 $ 32,972,943 $ 68,098,076 * School Board capital assets are jointly owned by the County (primary government) and the component unit School Board. The County reports depreciation on these assets as an element of its share of the costs of the public school system. 12

28 DEBT SCHEDULES Of the $62.7 million total principal balance of outstanding debt at the end of the year, $50.6 million was for General Obligation Bonds and $12.1 million was for State Literary Loans payable. General Obligation Bonds amounted to 1.1% of the County s assessed value for real estate, well below the maximum limit set by the State of 10% of assessed value for real estate. The County s total outstanding debt principal was paid down by $2.5 million to the new total of $62.7 million after adding the new debt issuance of $34.8 million. Annual requirements to amortize all long-term debt and related interest, including capital leases, are as follows: Year Ending June 30, Principal Interest Total ,618,916 2,606,268 5,225, $ 3,007,153 2,487,452 5,494, ,457,196 2,345,924 5,803, ,259,527 2,210,672 5,470, ,252,633 2,073,026 5,325, ,182,049 8,368,124 24,550, ,952,503 5,084,709 20,037, ,335,000 1,864,226 15,199, ,625,000 9,954 2,634,954 Total $ 62,689,977 $ 27,050,355 $ 89,740,332 Annual debt service paid amounted to $3,624,918 for principal, interest and bank service charges combined for the reporting period. Lease costs for Public Safety equipment totaled $34,684 for principal and $6,168 for interest. Additionally, the County paid $75,000 in bond issuance costs related to the bond issuance of $34.3 million completed in June Readers interested in additional information should refer to Note 7 to the financial statements. CONTACT THE COUNTY S FINANCIAL MANAGEMENT This financial report is designed to provide interested parties with a general overview of the County s finances and to demonstrate the County s accountability for the money it receives. If you have questions concerning any information provided in this report or need additional financial information, contact: Director of Management Services Phone Number Campbell County aclane@co.campbell.va.us P.O. Box 100 You may visit us on the web at: Rustburg, Virginia Phone number

29 14 BASIC FINANCIAL STATEMENTS

30 EXHIBIT 1 STATEMENT OF NET ASSETS June 30, 2008 Component Units Industrial Governmental School Development Activities Board Authority Total ASSETS Cash and cash equivalents (Note 2) $ 3,164,872 $ 9,677,094 $ 97,890 $ 12,939,856 Investments (Note 2) 18,033, ,033,155 Receivables, net (Note 3) 16,852,718 6,530-16,859,248 Due from other governments (Note 4) 3,534,666 2,222,584-5,757,250 Prepaid items 79, , ,091 Due from primary government (Note 5) , ,500 Due from component units (Note 5) 2,227, ,227,646 Inventories 15,648 96, ,439 Restricted assets: Cash and cash equivalents (Note 2) 34,830,188-39,027 34,869,215 Noncurrent assets: Bond issuance costs 75, ,000 Capital assets: (Note 6) Nondepreciable 12,098, , ,775 12,595,905 Depreciable, net 55,999,607 8,609,523 1,338,671 65,947,801 Total assets 146,911,795 21,337,448 1,931, ,181,106 LIABILITIES Accounts payable 3,159, ,163-3,625,593 Accrued payroll and related liabilities 963,593 6,523,021-7,486,614 Accrued interest payable 552, ,804 Due to primary government (Note 5) - 2,227,646-2,227,646 Due to component units (Note 5) 268, ,500 Due to other governments 275, ,000 Unearned revenue (Note 3) 16,360, ,360,497 Long-term liabilities: Due within one year (Note 7) 2,801, ,346 3,140,315 Due in more than one year (Note 7) 71,058, ,383 1,403,146 72,714,611 Total liabilities 95,439,875 9,470,213 1,741, ,651,580 NET ASSETS Invested in capital assets, net of related debt 39,715,828 8,919,184 53,454 48,688,466 Unrestricted 11,756,092 2,948, ,917 14,841,060 Total net assets $ 51,471,920 $ 11,867,235 $ 190,371 $ 63,529,526 The Notes to Financial Statements are an integral part of this statement. 15

31 EXHIBIT 2 STATEMENT OF ACTIVITIES Year Ended June 30, 2008 Net (Expense) Revenue and Program Revenues Changes in Net Assets Component Units Operating Capital Industrial Charges for Grants and Grants and Total Primary School Development Function Expenses Services Contributions Contributions Government Board Authority Total Primary Government: Governmental activities: General government administration $ 10,558,342 $ 9,541,595 $ 723,763 $ - $ (292,984) $ - $ - $ - Judicial administration 1,528, , ,721 5,921 (632,592) Public safety 10,869,255 1,348,131 2,784, ,938 (6,621,933) Public works 5,432,700 1,105,008 16, ,568 (3,477,433) Health and welfare 11,738,042-8,576,747 - (3,161,295) Education 20,812, (20,812,779) Parks, recreational and cultural 1,933, , ,224 10,729 (1,493,990) Community development 2,139,589-95, ,836 (1,826,959) Interest on long-term debt 1,123, (1,123,787) Total primary government $ 66,137,251 $ 12,340,314 $ 13,171,193 $ 1,181,992 (39,443,752) Component Units: School Board $ 77,574,347 $ 2,453,634 $ 55,810,836 $ - - (19,309,877) - (19,309,877) Industrial Development Authority 843, , (631,774) (631,774) Total component units $ 78,417,717 $ 2,665,230 $ 55,810,836 $ - - (19,309,877) (631,774) (19,941,651) General revenues: Property taxes 27,801, ,801,209 Local sales and use tax 4,088, ,088,656 Communication sales and use tax 1,597, ,597,777 Business license tax 1,622, ,622,910 Vehicle license tax 1,443, ,443,756 Consumer utility tax 822, ,313 Other taxes 834, ,285 Grants and contributions not restricted to specific programs 4,051, ,051,899 Interest and investment income 1,406,527 36,323 1,054 1,443,904 Other 344, ,512 8,784 1,007,035 Gain on sale of capital assets 147, , ,708 Contributions from Campbell County - 19,286, ,000 19,964,028 Total general revenues 44,161,649 19,975, ,968 64,940,480 Change in net assets 4,717, , ,194 5,555,077 Net assets beginning, as restated (Note 19) 46,754,023 11,201,249 19,177 57,974,449 Net assets ending $ 51,471,920 $ 11,867,235 $ 190,371 $ 63,529,526 The Notes to Financial Statements are an integral part of this statement. 16

32 EXHIBIT 3 BALANCE SHEET - GOVERNMENTAL FUNDS June 30, 2008 School Special Construction Total General Revenue Capital Capital Governmental Fund (Landfill) Projects Projects Funds ASSETS Cash and cash equivalents $ 1,625,272 $ 421,489 $ - $ - $ 2,046,761 Investments 9,257,189 2,402, ,659,741 Receivables, net 16,704, , ,852,718 Prepaid items 114, ,081 Inventories 15, ,648 Due from other funds - - 1,500,000-1,500,000 Due from component units 2,227, ,227,646 Due from other governments 3,223, , ,534,666 Restricted assets: Cash and cash equivalents 1,611,388-21,338,248 11,880,552 34,830,188 Total assets $ 34,779,329 $ 3,283,320 $ 22,838,248 $ 11,880,552 $ 72,781,449 LIABILITIES AND FUND BALANCES Liabilities: Accounts payable $ 1,277,346 $ 169,264 $ 1,180,946 $ 531,874 $ 3,159,430 Accrued liabilities 217, ,897 Due to other funds ,500,000 1,500,000 Due to component units ,448-83,448 Due to other governments 275, ,000 Deferred revenue 16,306, ,306,259 Total liabilities 18,076, ,264 1,264,394 2,031,874 21,542,034 Fund balances (deficits): Reserved for: Encumbrances 855, ,106 1,523,783 9,990,301 12,646,022 EMS capital investment 220, ,231 Prepaid items 114, ,081 Inventories 15, ,648 Unreserved: Designated 5,326,719 2,837,950 20,050,071-28,214,740 Undesignated 10,170, (141,623) 10,028,693 Total fund balances (deficits) 16,702,827 3,114,056 21,573,854 9,848,678 51,239,415 Total liabilities and fund balances $ 34,779,329 $ 3,283,320 $ 22,838,248 $ 11,880,552 Amounts reported for governmental activities in the statement of net assets are different because: Capital assets used in governmental activities are not current financial resources and therefore are not reported in the funds. 68,098,076 Receivables on the statement of net assets that do not provide current financial resources are reported as deferred revenue in the funds 602,632 Internal service funds are used by management to charge the costs of of health care costs to individual funds. The assets and liabilities of the self insurance internal services funds is included in the governmental activities in the statement of net assets 6,054,704 Long-term liabilities are not due and payable in the current period and therefore are not reported as liabilities in the governmental funds: Accrued interest payable $ (552,804) Long term commitments to IDA (185,052) General obligation bonds and literary fund loans (62,689,977) Capital lease obligations (70,156) Bond issuance costs 75,000 Bond premiums (452,303) Landfill closure/postclosure (9,569,647) Compensated absences (1,077,968) (74,522,907) Net assets of governmental activities $ 51,471,920 The Notes to Financial Statements are 17 an integral part of this statement.