HomeMy WebLinkAboutAgenda - 11-16-2010 - 3aORANGE COUNTY
BOARD OF COMMISSIONERS
ACTION AGENDA ITEM ABSTRACT
Meeting Date: November 16, 2010
Action Agenda
Item No. 3 _ a
SUBJECT: Presentation of Comprehensive Annual Financial Report FYE 6/30/2010
DEPARTMENT: Financial Services
PUBLIC HEARING: (Y/N) No
ATTACHMENT(S):
1. GFOA Award for Financial Reporting
2. PowerPoint Presentation -Martin
Starnes & Associates (Under
Separate Cover)
To be provided under separate cover:
3. Comprehensive Annual Financial
Report, FYE June 30, 2010
4. 2010 Management Letter
INFORMATION CONTACT:
Clarence G. Grier, Director, 245-2453
PURPOSE: To receive the Comprehensive Annual Financial Report (CAFR) for the fiscal year
ended June 30, 2010.
BACKGROUND: The CAFR reports on all financial activity of the County for the fiscal year
July 1, 2009 through June 30, 2010. The financial statements have been audited by Martin
Starnes and Associates, a firm of Certified Public Accountants that was selected through a
Request for Proposals (RFP) process to perform the audit for the next three fiscal years. The
financial statement and audit are required by Chapter 159-34 of the North Carolina General
Statutes. The County prepares a Comprehensive Annual Financial Report (CAFR) that meets
the standards set by the Government Finance Officers Association (GFOA). The CAFR is
submitted to the GFOA in order to be awarded the Certificate of Achievement for Excellence in
Financial Reporting. The County's CAFR has received this award for twenty-eight consecutive
fiscal years. The financial report for the Orange County SportsPlex, required under the
management contract, is included in the County's CAFR.
The audit results for the fiscal year show that Orange County has a strong financial position.
The County received an unqualified (good) audit opinion on the financial statements received
from the audit. The Financial Services Director and representatives of Martin Starnes will cover
highlights of the report and will be available to answer questions.
FINANCIAL IMPACT: The financial report shows a continued strong financial position for
Orange County. The undesignated fund balance of the County's General Fund is 11.8% of
expenditures and transfers out at the end of the fiscal year. The goal is to have the
2
undesignated fund balance reach 17% of expenditures and transfers out. This indicates a
sound financial position from which Orange County will be able to weather financial
uncertainties going forward.
RECOMMENDATION(S): The Manager recommends that the Board of County Commissioners
receive this Report as information.
A~a~-~ ~
3
Certificate of
Achievement
for Excellence
in Financial
Reporting
Presented to
Orange County
North Carolina
For its Comprehensive Annual
Financial Report
for the Fiscal Year Ended
June 30, 2009
A Certificate of Achievement for Excellence in Financial
Reporting is presented by the Government Finance Officers
Association of the United States and Canada to
government units and public employee retirement
systems whose comprehensive annual financial
reports (CAFRs) achieve the highest
standards in government accounting
and financial reporting.
President
Executive Director
~~--~
MARTIN • STARVES
& ASSOCIATES, CPAs, P.A.
Orange County
2010 Audited Financial Statements
Audit Highlights
^ Unqualified opinion
^ No findings or questioned costs
Audit Process
^ Planning and risk assessment
^ Interim procedures
^ Final procedures
^ Year-round process
Budget Vs. Actual
General Fund
Revenues
Expenditures
Other financing
sources (uses)
Change in fund
balance
Budget Actual Variance
$177,578,024 $177,671,063 $ 93,039
174,825,408 167,852,563 (6,972,845)
(2,752,616) (8,537,393) (5,784,777)
0 1,281,107 1,281,107
2
Tax Collection Percentages
100.00% 98.75% 98.63%
97.50%
95.00%
92.50%
90.00%
2009 2010
Fund Balance
Serves as a measure of the County's financial
resources available.
v Assets -Liabilities =Fund Balance
3 Classifications:
- Reserved
- Unreserved Designated (Available)
- Unreserved Undesignated (Available)
MARTIN•STARNES
& ASSOCIATES. CPAS, P.A.
3
Fund Balance (General Fund)
Fiscal Year Fiscal Year
2009 ~ 2010 Change
Reserved $ 9,195,023 $ 9,942,748 $ 747,725
Unreserved, desiglated 1,988,442 401,673 (1,586,769)
Unreserved, undesignated 18,977,470 21,097,621 2,120,151
Total fund balance $ 30,160,935 $ 31,442,042 $ 1,281,107
Fund Balance History (General Fund)
$35,000,000 30,160,935 31,442,042
$30,000,00(1
$25,000,000
$20,000,000
S15,000,000
$10,000,000
55,000,000
$-
2009 2010
4
Unreserved Fund Balance as a Percent of
Expenditures -General Fund
30%
25%
20%
11.39% 12.01%
15%
10%
5%
0%
2009 2010
MARTIN•STARNES
& ASSOCIATES, CPAs, P.A.
Revenues -General Fund
,%
^ b ValoremTaxs
^ boY QRlonglf Tom:
^ IrtapWl RiifxleB
^ 171af°Bt(p.~fviCB6
^ OtINr
To° 3: alliflidV~(Yl9ikKJ11dY:
Ad Vabrcm Toes anvaelrnarN°2frlit~
Intergovenunemal Revenue aJO3nBBeantlparrrllta
Local Option Sala Tax ~tiacalluwas
5
Taxes
(Ad Valorem and Local Option Sales)
145,957,951 148,643,287
$150,000,000
$140,000,000
$130,000,000
$120,000,000
$110,000,000
$100,000,000
2009 2010
MARTIN•STARNES
& ASSOCIATES, CPAs, P.A.
Intergovernmental
18,336,123 18,221,132
$20,000,000
$16,000,000
$12,000,000
$8,000,000
$4,000,000
$-
2009 2010
MARTIN • STARN E S
& Assoc~Ares. CPAs, P.A.
6
Charges for Services
$10,000,000 8,869'046
$9,000,000
$8,000,000
$7,000,000
$6,000,000
$5,000,000
$4,000,000
$3,000,000
$2,000,000
$1,000,000
$-
2009 2010
MARTIN•STARNES
& ASSOCIATES, CPAs. P.A.
Expenditures
4%
Ton 3:
Education 1%
Human Services
Debt Service
_.
General Fund
^ Governing & Mgmt
^ General Services
^ Public Safety
^ Community &
% Environment
^ Human Services
^ Culture & Rec
^ Education
^ Debt Service
7
Education Expenditures
64,722,715 63,048,729
$70,000,000
$60,000,000
$50,000,000
$40,000,000
$30,000,000
$20,000,000
$10,000,000
$-
2009 2010
MARTIN • STARNES
& ASSOCIATES, CPAs, BA.
Human Services Expenditures
35,796,384 33,812,781
$40,000,000
$35,000,000
$30,000,000
$25,000,000
$20,000,000
$15,000,000
$10,000,000
$5,000,000
$-
2009 2010
MARTIN•STARNES
& ASSOCIATES. CPAs, P.A.
Debt Service Expenditures
530,000,000 25 814 979
$25,000,000
$20,000,000 17 79
$15,000,000
$10,000,000
$5,000,000
5-
2009 2010
MARTIN • STARN ES
& ASSOCIATES, CPAs, P.A.
Major Enterprise Funds
SportsPlex Solid Waste
Fund Fund
a Total operating revenues $ 2,469,834 $ 8,165,176
a Total operating expenses $ 2,654,303 $ 11,119,607
a Operating Loss $ (184,469) $ (2,954,431)
MARTIN•STARNES
& ASSOCIATES, CPAs. P.A.
9
Major Enterprise Funds
Required Casb Flow Unrestricted
Debt Service From Oueratious Net Assets
^ Solid Waste $ 644,722 $ 1,844,763 $ (1,009,803)
^ SportsPlex $ 664,247 $ 17,712 $ 540,989
Financial Reporting Change For 2011
The County's financial statements for 2011 will
reflect an accounting standards change
regarding special revenue funds and fund
balance reporting.
We will review the County's fund structure in
the Spring of 2011 and alert management of
any reporting changes that will be necessary.
10
Summary of Responses to Recession
^ 16 counties increase tax rate -Avg. of 3.3
cents
^ 49 counties, of 95, cut budgets (again)
(Source: NC County Commissioners Association)
11
Summary of Responses to Recession (cont.)
^ 44 counties report hiring freeze
^ 43 counties cut positions
^ 1000+ fewer positions, on top of 2009-10 cuts of 1000
^ 14 counties laid off existing employees
^ 595 county workers lost jobs
^ 7 counties implement mandatory fwloughs
^ Other actions include salary decreases, fewer paid holidays, decreased/stopped 401k
(Source: NC County Commissioners Association)
Summary of Responses to Recession (cont.)
^ 25 counties, of 95 counties reporting, see decreased property
valuations
^ 31 of 100 counties see assessed value above market value
(Unprecedented in 20+ years of calculating market to av ratio)
^ 2009-10 sales taxes nearly 5% below 2008-09
^ 2008-09 10% off 2007-08
(Source: NC County Commissioners Association)
12
Summary of Responses to Recession (cont.)
^ 48 counties rely on fund balance to help offset
budget deficit in 2010
^ 20 counties use fund balance to replace lottery funds
^ 61 counties report using some or all of lottery funds
for school debt service
(Source: NC County Commissioners Association)
W at Does Our State Legis ature
Face?
The 2009-10 budget included:
^ $1.3 billion in temporary taxes
^ $1.6 billion federal stimulus dollars
^ $0.3 billion in non-recurring budget reductions
^ Summary: Static budget gap going into 2011-2012 $3.2 billion
(Source: NC County Commissioners Association)
13
What llo The State Problems Mean to
Local Government?
^ Expect "transformational" government at the State level
^ Everything is on the table
^ Local Revenue Options?
^ Cuts (15%) /New Taxes /Tax Reform?
^ Potential loss of 10,000+ state jobs
^ Retirement System
(Source: NC County Commissioners Association)
Orange County
MARTIN • STARVES
& ASSOCIATES, CPAs, P.A.
14
Updated PowerPoint presentation
of the
Comprehensive- Annual Financial Report
Please replace presentation sent Friday, November 12, 2010
MARTIN • STARVES
& ASSOC[ATES, CPAs, P.A.
Orange County
2010 Audited Financial Statements
Audit Highlights
^ Unqualified opinion
^ No findings or questioned costs
Audit Process
^ Planning and risk assessment
^ Interim procedures
^ Final procedures
^ Year-round process
Budget vs. Actual
General Fund
Budget Actual Variance
Revenues $ 177,578,024 $ 177,671,063 $ 93,039
Expenditures 174,825,408 167,852,563 6,972,845
Other financing
sources (uses) X2,752,616) (8 537,393) X5,784,777)
Change in fund
balance $ - $ 1,281,107 $ 1,281,107
2
Tax Collection Percentages
100.00% 98.75% 98.63%
97.50%
95.00%
92.50%
90.00%
2009 2010
Fund Balance
Serves as a measure of the County's financial
resources available.
y Assets -Liabilities =Fund Balance
3 Classifications:
- Reserved
- Unreserved Designated (Available)
- Unreserved Undesignated (Available)
MARTIN • STARNES
& ASSOCIATES, CPAS, P.A.
3
Fund Balance (General Fund)
Fiscal Year Fiscal Year
2009 2010 Change
Reserved $ 9,195,023 $ 9,942,748 $ 747,725
Unreserved, designated 1,988,442 401,673 (1,586,769)
Unreserved, undesignated 18,977,470 21,097,621 2,120,151
Total fund balance $ 30,160,935 $31,442,042 $ 1,281,107
Fund Balance History (General Fund)
$35,000,000 30,160,935 31,442,042
$30,000,000
$25,000,000
$20,000,000
$15,000,000
$10,000,000
$5,000,000
$-
2009 2010
4
Unreserved Fund Balance as a Percent of
Expenditures -General Fund
20%
0
15% 11.39% °
10%
5%
0%
2009 2010
MARTIN • STARNES
& ASSOCIATES, CPAs, P.A.
Top 3 Revenues
General Fund
Other Revenues include:
-Charges for Services
-Investment earnings
-Licenses and pemuts
-Miscellaneous
^ Ad Valorem Taxes
^ Local Option Sales
Tax
^ hUer~v't Revenues
^ other
5
Taxes
(Ad Valorem and Local Option Sales)
$160,000,000 148,643,287
145,957,951
$150,000,000
$140,000,000
$130,000,000
$120,000,000
$110,000,000
2009 2010
MARTIN•STARNES
& ASSOCIATES, CPAs, P.A.
Intergovernmental
18,336,123 18,221,132
$20,000,000
$16,000,000
$12,000,000
$8,000,000
$4,000,000
$-
2009 2010
MARTIN•STARNES
& ASSOCIATES. CPAs, P.A.
6
Charges for Services
$12,000,000 9,571,342
8,869,046
$10,000,000
58,000,000
$6,000,000
$4,000,000
$2,000,000
$-
2009 2010
MARTIN • STARNES
& ASSOCIATES, CPAs, P.A.
Top 3 Expenditures -General Fund
Other Expenses Include:
-Governing and management
-General services
-Community and environment
-Public Safety
-Culture and Recreation
^ Human Services
^ Education
^ Debt Service
^ Other
7
Education Expenditures
$75,000,000 64+722 715 63,048,729
$60,000,000
$45,000,000
$30,000,000
$15,000,000
$-
2009 2010
MARTIN•STARNES
& ASSOCIATES, CPAs, P.A.
Human Services Expenditures
$so,ooo,ooo
35,796,384 33,812,781
$40,000,000
$30,000,000
$20,000,000
$10,000,000
$-
2009 2010
MARTIN • STARNES
& ASSOCIATES, CPAs, P.A.
Debt Service Expenditures
$30,000,000 25 814 979
$25,000,000
$20,000,000 1 179
$15,000,000
$10,000,000
$5,000,000
$-
2009 2010
MARTIN•STARNES
& As50ClATES, CPAs, P.A.
Major Enterprise Funds
SportsPlex
Fund
Total operating revenues $ 2,469,834
Total operating expenses $ 2,654,303
:• Operating Loss $ (184,469)
Solid Waste
Fund
$ 8,165,176
$ 11,119,607
$ (2,954,431)
MARTIN • STARN ES
& ASSOCIATES, CPAs, P.A.
9
Major Enterprise Funds
Required Cash Flow Unrestricted
Debt Service From Ouerations Net Assets
^ Solid Waste $ 644,722 $ 1,844,763 $ (1,009,803)
^ SportsPlex $ 664,247 $ 17,712 $ 540,989
Financial Reporting Change For 2011
The County's financial statements for 2011 will reflect an
accounting standards change regarding special revenue funds
and fund balance reporting.
We will review the County's fund structure in the Spring of 2011
and alert management of any reporting changes that will be
necessary.
10
Summary of Responses to Recession
^ 16 counties increase tax rate -Avg. of 3.3
cents
^ 49 counties, of 95, cut budgets (again)
(Source: NC County Commissioners Association)
11
Summary of Responses to Recession (cont.)
^ 44 counties report hiring freeze
^ 43 counties cut positions
^ 1000+ fewer positions, on top of 2009-10 cuts of 1000
^ 14 counties laid off existing employees
^ 595 county workers lost jobs
(Source: NC County Commissioners Association)
Summary of Responses to Recession (cont.)
^ 7 counties implement mandatory furloughs
^ Other actions include salary decreases, fewer paid holidays,
decreased/stopped 401k
^ 25 counties, of 95 counties reporting, see decreased property
valuations
^ 31 of 100 counties see assessed value above market value
(Unprecedented in 20+ years of calculating market to av
ratio)
(Source: NC County Commissioners Association)
12
Summary of Responses to Recession (cont.)
^ 2009-10 sales taxes nearly 5% below 2008-09
^ 2008-09 10% off 2007-08
^ 48 counties rely on fund balance to help offset budget deficit
in 2010
^ 20 counties use fund balance to replace lottery funds
^ 61 counties report using some or all of lottery funds for
school debt service
(Source: NC County Commissioners Association)
W at Does Our State Legislature
Face?
The 2009-10 budget included:
^ $1.3 billion in temporary taxes
^ $1.6 billion federal stimulus dollars
^ $0.3 billion in non-recurring budget reductions
^ Summary: Static budget gap going into 2011-2012 $3.2
billion
(Source: NC County Commissioners Association)
13
What llo The State Problems Mean to
Local Government?
^ Expect "transformational" government at the State level
^ Everything is on the table
^ Local Revenue Options?
^ Cuts (15%) /New Taxes /Tax Reform?
^ Potential loss of 10,000+ state jobs
^ Retirement System
(Source: NC County Commissioners Association)
Orange County
MARTIN • STARVES
& ASSOCIATES, CPAs, P.A.
14
~/1ART' I N •~+ 5 TARN E S
& ASSOCIATES, CPAs, P.A.
'A Prclfessio~taJ:4ssuciurion of Certified Puhlic Accor~ntunts and :~Llulragement Coi~sulfunts"
To the Board of Commissioners
Orange County, North Carolina
In planning and performing our audit of Orange County, North Carolina's basic financial
statements for the year ended June 30, 2010, we considered the County's internal control
structure to determine our auditing procedures for the purpose of expressing an opinion on the
financial statements and not to provide assurance on the internal control structure. We
previously reported on the Orange's internal control structure in our report dated November 11,
2010. This letter does not affect that report or our report on the financial statements dated
November 11, 2010.
During our audit, we noted certain matters involving internal controls and other operational
matters that are presented for your consideration. We will review the status of these comments
during our next audit engagement. Our comments and recommendations, all of which have been
discussed with appropriate members of management, are intended to improve the internal control
or result in other operating efficiencies. We will be pleased to discuss these comments in further
detail at your convenience, perform any additional study of these matters, or assist you in
implementing the recommendations. Our comments are summarized as follows:
Lack of Written Internal Control Policies. During our audit, we noted that the Finance
Department does not have written internal control policies. Management is responsible for
identifying and documenting internal controls and the objectives that they were designed to
achieve. During our internal control inquiries, we noted that controls are in place, are verbally
communicated, and are understood by finance employees. However, these controls have not
been properly documented and distributed as a formal department policy. Documentation of the
design of controls is evidence that the controls are identified, capable of being communicated to
those responsible for their performance, and capable of being monitored and evaluated by the
entity.
Recommendation - We recommend that the Finance Department prepare written internal
control policies. Internal controls should be documented for, but not limited to, the following
major areas: cash receipts, cash disbursements, payroll, and general ledger access. The
documentation should include information on user rights, who can access various accounting
modules, the approval process and data entry for budget amendments, budget oversight, and
journal entries. Management's documentation may take various forms, for example, entity
policy manuals, narrative memoranda, or procedural write-ups. In addition, the Finance
Department should continue to actively review and update internal controls for any changes in
department structure or transactions.
730 13th Avenue Drive SE ~ Hickory, North Carolina 28602 ~ Phone 828-327-2727 ~ Fax 828-328-2324
13 South Center Street • Taylorsville, North Carolina 28681 • Phone 828-632-9025 • Fax 828-632-9085
Toll Free Both Locations 1-800-948-0585 • Website: www.martinstarnes.com
Management's Response. Management concurs with the recommendation. We recognize this
as a weakness and have started the process of documenting the current internal control policies
we use on a daily, monthly, and annual basis to document the safeguards over assets.
Capital Assets. While working with the Finance Office to complete the 2010 fiscal year audit,
County staff had difficulty producing reports from the capital asset module that reconciled to
their capital asset audit schedule. This could have been prevented with timely reconciliations to
the audit balances. Subledgers for capital assets were not adequately examined and reconciled to
the general ledger on a regular basis. Errors are more likely to occur since records are not being
updated on a timely basis as assets are purchased and or disposed of. We also found that
personnel had difficulty producing proper reports, which are necessary to audit the capital asset
balances.
Recommendation. Capital asset additions, capital contributions, transfers, and disposals should
be entered monthly as part of month-end close. Capital outlay expenditures should be examined
and properly identified to ensure all items meeting the capitalization threshold are added to the
capital asset listing properly. Personnel reconciling assets should be able to identify where
capital outlay was expensed in the various funds. Monthly subledger reports should be
compared to capital outlay expense accounts, as well as disposals, transfers, and contributed
assets documentation. All monthly reconciliations and subledger reports should be compared to
the general ledger and should be turned in to the Finance Director for review. At year end, the
Finance Department should prepare the year-end capital asset footnote and compare to the
general ledger and Munis capital asset reports before the auditors arrive for final fieldwork. We
also recommend additional staff training on the capital asset module and its various functions
and reports.
Management's Response. Management concurs with the recommendation. This has been the
result of the process of recording and recognizing capital assets being a decentralized process
with two separate departments handling the process. This has been resolved by centralizing the
processing, recording, reconciling of capital assets in the Financial Services Department.
We will review the status of these comments .during our next audit engagement. We have
already discussed these items with various members of Orange County management. We will be
pleased to discuss them in further detail at your convenience to perform any additional study of
these matters or to assist you in implementing the recommendations.
Sincerely,
Martin Starnes & Associates, CPAs, P.A.
Hickory, NC
2