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HomeMy WebLinkAboutAgenda - 01-19-2021; 4-d - Presentation of Comprehensive Annual Financial Report for FYE 6-30-2020 1 ORANGE COUNTY BOARD OF COMMISSIONERS ACTION AGENDA ITEM ABSTRACT Meeting Date: January 19, 2021 Action Agenda Item No. 4-d SUBJECT: Presentation of Comprehensive Annual Financial Report for FYE 6/30/2020 DEPARTMENT: Finance and Administrative Services ATTACHMENT(S): INFORMATION CONTACT: 1. GFOA Award for Excellence in Gary Donaldson, (919) 245-2453 Financial Reporting Paul Laughton, (919) 245-2152 2. PowerPoint Presentation - Mauldin & Jenkins 3. PowerPoint Presentation - FY 2019-20 Financial Review (For Reference Purposes Only) UNDER SEPARATE COVER 4. Comprehensive Annual Financial Report, June 30, 2020 ONLY AVAILABLE ELECTRONICALLY AT: http://www.co.orange.nc.us/732/Finan cial-Audit PURPOSE: To receive the Comprehensive Annual Financial Report (CAFR) for the fiscal year ended June 30, 2020. BACKGROUND: The CAFR reports on all financial activity of the County for the fiscal year July 1, 2019 through June 30, 2020. Mauldin and Jenkins, a firm of Certified Public Accountants, audited the financial statements. The financial statements 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 financial report for the Orange County Sportsplex, as required under the management contract, is included in the County's CAFR. The County received an unmodified (clean) audit opinion on the financial statements received from the audit. The financial audit results indicate compliance with County financial policies. The representatives of Mauldin and Jenkins will cover highlights of the report and answer any questions. 2 FINANCIAL IMPACT: The financial report indicates a strong financial position for Orange County. SOCIAL JUSTICE IMPACT: The following Orange County Social Justice Goal is applicable to this item: • GOAL: ENSURE ECONOMIC SELF-SUFFICIENCY The creation and preservation of infrastructure, policies, programs and funding necessary for residents to provide shelter, food, clothing and medical care for themselves and their dependents. ENVIRONMENTAL IMPACT: There is no Orange County Environmental Responsibility Goal impact associated with this item. RECOMMENDATION(S): The Manager recommends that the Board receive this Report as information. 3 Government Finance Officers Association 203 North LaSalle Street,Suite 2700 Chicago,Illinois 60601-1210 312.977.9700 `fax: 312.977.4806 11/2/2020 Penny Rich Chair,Board of County Commissioners Orange County,North Carolina Dear Ms. Rich: We are pleased to notify you that your comprehensive annual financial report (CAFR) for the fiscal year ended June 30, 2019 qualifies for GFOA's Certificate of Achievement for Excellence in Financial Reporting. The Certificate of Achievement is the highest form of recognition in governmental accounting and financial reporting,and its attainment represents a significant accomplishment by a government and its management. When a Certificate of Achievement is awarded to a government, an Award of Financial Reporting Achievement(AFRA)is also presented to the individual(s)or department designated by the government as primarily responsible for its having earned the Certificate. This award has been sent to the submitter as designated on the application. We hope that you will arrange for a formal presentation of the Certificate and Award of Financial Reporting Achievement, and give appropriate publicity to this notable achievement. A sample news release is included to assist with this effort. We hope that your example will encourage other government officials in their efforts to achieve and maintain an appropriate standard of excellence in financial reporting. Sincerely, Michele Mark Levine Director,Technical Services AULDIN ORANGE COUNTY & ENKINS NORTH CAROLINA ■ � r ",y Presentationof 2020 Audit Orange • unty, North Carolina December 1 . 2020 AULD[N 5 IOS-IENKINS ORANGE COUNTY Agenda NORTH CAROLINA Engagement Team Results of the 2020 Audit Financial Ratios Comments, Recommendations, and Other Issues Questions & Comments AULDIN & ENKINS --- ORANGE COUNTY Engagement Team NORTH CAROLINA ■ Mauldin & Jenkins, LLC; General Information ■ Founded in 1918. ■ Large regional firm serving the Southeastern United States. ■ Offices located in Atlanta, GA, Macon, GA, Albany, GA, Savannah, GA, Bradenton, FL, Chattanooga, TN, Birmingham, AL, and Columbia, SC employing approximately 280 personnel. ■ In addition to our governmental practice, we have large banking, healthcare, not-for-profit, benefit plan and tax practices. ■ Mauldin & Jenkins, LLC; Governmental Sector ■ Largest specific industry niche served by the Firm representing 25% of Firm practice. ■ Serve more governmental entities throughout the Southeast than many other certified public accounting firm requiring over 100,000 hours of service on an annual basis. ■ Over 100 professional staff persons with current governmental experience. ■ Current auditor for over 500 total governments in the Southeast, including approximately: ■ 57 counties; ■ 126 municipalities; ■ 62 school systems; ■ 48 state entities; and, ■ 130+ entities that submit a CAFR to GFOA for participation in Certificate of Achievement program. ■ Engagement team leaders for Orange County ■ Tim Lyons, Engagement Partner ■ James Bence, Quality Review Partner <rt` 2 AULDIN & ENKINS - - ORANGE COUNTY Results of 2020 Audit NORTH CAROLINA ■ Our Responsibility Under Auditing Standards Generally Accepted in the United States of America (GAAS) and Government Auditing Standards (GAS) — We considered the internal control structure for the purpose of expressing our opinion on the County's basic financial statements and not providing assurance on the internal control structure. — Our audit was performed in accordance with GAAS and GAS. — Our objective is to provide reasonable—not absolute—assurance that the basic financial statements are free of material misstatement. — We did not audit the financial statements of the Orange County ABC Board. We reviewed and relied on the report of other auditors for amounts included in the County's statements related to the ABC Board. — The basic financial statements are the responsibility of the County's management. ■ Report on 2020 Basic Financial Statements — We anticipate issuing an Unmodified ("clean") opinion on basic financial statements. — Presented fairly in accordance with accounting principles generally accepted in the United States of America. — Our responsibility does not extend beyond financial information contained in our report. 3 AULDIN & ENKINS --- ORANGE COUNTY Results of 2020 Audit (continued) NORTH CAROLINA ■ Significant Accounting Policies — The significant accounting policies used by the County are described in Note 1 to the basic financial statements. — The policies used by the County are in accordance with generally accepted accounting principles and similar government organizations. — In considering the qualitative aspects of its policies, the County is not involved in any controversial or emerging issues for which guidance is not available. ■ Management Judgment/Accounting Estimates — The County uses various estimates as part of its financial reporting process — including valuation of accounts receivable, depreciation of capital assets, self-insurance claim liabilities, and pension and OPEB assumptions. — Management's estimates used in preparation of financial statements were deemed reasonable in relation to the financial statements taken as a whole. We considered this information and the qualitative aspects of management's calculations in evaluating the County's significant accounting estimates. T 'ti �_; 4 AULDIN & ENKINS --- ORANGE COUNTY Results of 2020 Audit (continued) NORTH CAROLINA ■ Financial Statement Disclosures — The footnote disclosures to the financial statements are also an integral part of the financial statements and the process used by management to accumulate the information included in the disclosures was the same process used in accumulating the statements. The overall neutrality, consistency, and clarity of the disclosures was considered as part our audit. ■ Relationship with Management — We received full cooperation from the County's management and staff. — There were no disagreements with management on accounting issues or financial reporting matters. ■ Audit Adjustments — There were several posted adjustments which were necessary during the audit process. Those entries have been provided to management and have all been recorded on the County's general ledger by management and they have agreed with all adjustments. — We have two (2) proposed and passed audit adjustments. The first passed adjustment pertains to depreciation errors that occurred in the prior year ($468,000) and the second passed adjustment pertains to the County's net pension liability for LGERS as more contributions were credited to the County's NPL than were reported as deferred outflows as of June 30, 2019 ($418,000). ■ Management Representation We requested, and received, written representations from management relating to the accuracy of information included in the financial statements and the completeness and accuracy of various information requested by us. �..; 5 AULDIN 10 & ENKINS --- ORANGE COUNTY Results of 2020 Audit (continued) NORTH CAROLINA ■ Consultation with Other Accountants — To the best of our knowledge, management has not consulted with, or obtained opinions from, other independent accountants during the year, nor did we face any issues requiring outside consultation. ■ Significant Issues Discussed with Management — There were no significant issues discussed with management related to business conditions, plans, or strategies that may have affected the risk of material misstatement of the financial statements. ■ Information in Documents Containing Audited Financial Statements — Our responsibility for other information in documents containing the County's comprehensive annual financial report and our report thereon does not extend beyond the information identified in our report. If the County intends to publish or otherwise reproduce the financial statements and make reference to our firm, we must be provided with printers' proof for our review and approval before printing. The County must also provide us with a copy of the final reproduced material for our approval before it is distributed. ■ Auditor Independence — In accordance with AICPA professional standards, M&J is independent with regard to the County and its financial reporting process. — There were no fees paid to M&J for management advisory services during fiscal year 2020 that might affect our independence as auditors. 6 AULDIN & ENKINS - - ORANGE COUNTY General Fund NORTH CAROLINA Balance Ratio to Expenditures As of June 30, 2020, the 35.0% County has 3.6 months worth of expenditures in fund balance. The 30.0% 3.7% ° portion which is available 3.3/° for future budgeted use ° 6.1% ° ° is 15.5% of 2020 25.0/° 7.1/° 7.6/° 7.2°� expenditures. 20.0% � 4.3% ° 3.7/° 3.8% 3.6% 15.0% Committed 10.0% Restricted - State stabilization 5.0% Assigned ■ Unassigned 0.0% 2017 2018 2019 2020 Source: The County's Comprehensive Annual Financial Reports T AULDIN 12 & ENKINS Trend Analysis of Property and Sales ORANGE COUNTY Y p Y Tax Revenue per capita NORTH CAROLINA 1,200 11071 1,105 1,109 1,035 1,000 800 N Taxes (General only) 600 Sales tax 0 0 Taxes (Fire) 400 204 221 214 200 38 42 44 43 2017 2018 2019 2020 Source: The County's Comprehensive Annual Financial Reports 8 IAULD[N 13 & ENKINS General Fund Budget to Actual Results - ORANGE COUNTY Fiscal Year 2020 NORTH CAROLINA Original Amendments Final Actual Variance Revenues $ 225,185,824 $ 5,021,220 $ 230,207,044 $ 228,292,446 $ (1,914,598) -0.8% Expenditures 229,128,780 7,856,279 236,985,059 226,843,988 10,141,071 4.3% Net Other Financing Uses (3,865,050) 1,380,712 (2,484,338) 389,934 2,874,272 115.7% Net Change $ (7,808,006) $ (1,454,347) $ (9,262,353) $ 1,838,392 $ 11,100,745 119.8% ❑ General Fund revenues were .8% less than the amended budgeted amount. The final budget reflects the addition of Round 1 of CARES Act Funding which the GASB requires to remain as unearned revenue until spent. ❑ Expenditures for many functional areas were less than budget by $10.1million (4.3%) from the operating budget. Several departments came in under budget due to personnel vacancies and efforts to spend conservatively. ❑ Budgeted use of fund balance was not needed to the extent anticipated, as actual revenues and other financing sources exceeded expenditures. ❑ General Fund significant transfers were $4,247,000 to School Capital Improvement Fund; $3.0 million from School Capital Improvements; $2,475,000 from County Capital Improvement Fund; and $1,732,000 to non-major governmental funds. AULDIN 14 & ENKINS ORANGE COUNTY Enterprise Results NORTH CAROLINA Solid Waste sportsPlex Landfill Fund Fund CASH FLOWS FROM OPERATING ACTIVITIES Receiptsfrom customers and users 5 10,912,639 $ 3,153,162 Pay m ants to su p pliers [5,133,123) (1,591,106) . Solid Waste Fund reported Payments to employees (4,397,604) (1,125,122) p Net cashprovidedby[used in)aperatingactivities 1,391,912 436,934 income from operations of CASH FLOWS FRO MNON-CAPITAL FINANCINISACTIVITIES $242,000 and an overall Transferstootherfunds - (9,402) increase in net position of Transfers from other funds 11,695 Receipt of intergovernmental revenues 3,681 - $301 ,000. At year end, the Net cash provided by(used in)non-capital financing activities 15,376 (9'402) fund reports approximately CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES $8,4 million in unrestricted Purchases and acquisition of capital assets (489,914) (245,623) Interfund reimbursement for capital projects - (432,022) net position. Pro Eeedsfrom issuance of debt 1,334,030 585,000 Principal payments on long-term debt (569,071) (412,713) Bond premium 51,952 79,010 • The SportsPlex Fund income Refunding depositswith escrow agent (164,395) from operations of $179,000 Pro needs fro rn the sale of capital assets 9,221 - Interest paid and fiscal fees paid (171,687) (160,427) and an overall increase in net Net cash used in capital and related financing activities (198,856) (606,g55) position of $19,000. At year CASH FLOWS FROM INVESTING ACTIVITIES end, the fund reports Interest received 153,739 Net cash provided by investing activities 153,738 - approximately $521 ,000 in Net increase{decrease)in cash and cash equivalents 1,362,160 (179,323) unrestricted net position. Cash and cash equivalents,beginning of year 14,730,640 451,206 Cash and cash equivalents,end of year $ 16,092,800 $ 271,983 -=s 10 AULDIN 15 & ENKINS Comments, Recommendations, ORANGE COUNTY and Other Issues (Continued) NORTH CAROLINA Recommendations and Comments in the Management Letter (1) The Information Technology environment is characterized by rapid change and there has been no shortage of headlines about cybersecurity attacks. While breaches of large organizations have been very high profile and have received a lot of press coverage, organizations of all sizes face the same types of threats and are experiencing similar breaches. Many organizations are still struggling to effectively address cybersecurity issues; however, they are no longer ignoring them. During the performance of our audit of the financial statements of the County, we noted that the organization is taking measures to prevent such an attack on the County, but is lacking some elements of a Cybersecurity Framework or Cybersecurity Risk Management Program (CRMP). A functioning CRMP will assist the County with comprehensively identifying cybersecurity weaknesses, potential threats and risks, and controls used to safeguard information and systems. We recommend that the entity investigate and consider implementation of a Cybersecurity Risk Management Program including: continued coverage of monitoring and testing of controls in place. (2) During the current year, the County entered into a debt transaction that refunded several notes and bonds payable. At the time of the transaction, the proceeds from the new debt were deposited with an escrow agent to retire the previously outstanding debt. While the net effect of the transactions was minimal (i.e., cash from the new debt relatively equaled the escrow agent deposits), generally accepted accounting principles (GAAP) require that the County's governmental funds reflect both the proceeds from the refunding debt as well as the payments made to the escrow agent to retire the refunded debt. As a result, audit adjustments were required to properly reflect the full transaction and correct the amounts reflected by the County on a "net" basis. Going forward, we recommend the County identify and categorize a debt transaction as either new money or as a refunding so that reviews of the accounting and reporting after the fact will more easily identify the proper accounting treatment to be applied to ensure amounts are presented in the County's financial statements in accordance with GAAP. 11 AULDIN 16 & ENKINS Comments, Recommendations, ORANGE COUNTY and Other Issues (Continued) NORTH CAROLINA ■ New GASB Pronouncements for Future Years Statement No. 84, Fiduciary Activities, was issued in January 2017 and is effective for the first reporting period beginning after December 15, 2018. However, in light of the COVID-19 Pandemic, in May 2020 the GASB issued Statement No. 95 (Postponement of the Effective Dates of Certain Authoritative Guidance) which changed the effective date of Statement No. 84 to reporting periods beginning after December 15, 2019. Statement No. 87, Leases, was issued in June 2017 and is effective for the first reporting period beginning after December 15, 2019. However, in light of the COVID-19 Pandemic, in May 2020 the GASB issued Statement No. 95 (Postponement of the Effective Dates of Certain Authoritative Guidance) which extended the effective date of Statement No. 87 by eighteen months. This statement increases the usefulness of governments' financial statements by requiring recognition of certain lease assets and liabilities for leases that previously were classified as operating leases and recognized as inflows of resources or outflows of resources based on the payment provisions of the contract. It establishes a single model for lease accounting based on the principle that a lease is the financing of the right to use an underlying asset. Under this statement, a lessee is required to recognize a lease liability and an intangible right-to-use lease asset, and a lessor is required to recognize a lease receivable and a deferred inflow of resources, thereby enhancing the relevance and consistency of information about governments' leasing activities. Definition of a Lease: A lease is defined as a contract that conveys control of the right to use another entity's nonfinancial asset (the underlying asset) as specified in the contract for a period of time in an exchange or exchange-like transaction. Examples of nonfinancial assets include buildings, land, vehicles, and equipment. Any contract that meets this definition should be accounted for under the leases guidance, unless specifically excluded in this statement. 12 AULDIN 17 & ENKINS Comments, Recommendations, ORANGE COUNTY and Other Issues (Continued) NORTH CAROLINA ■ New GASB Pronouncements for Future Years (Continued) Statement No. 87, Leases (Continued) Lease Term: The lease term is defined as the period during which a lessee has a non-cancelable right to use an underlying asset, plus the following periods, if applicable: Periods covered by a lessee's option to extend the lease if it is reasonably certain, based on all relevant factors, that the lessee will exercise that option; Periods covered by a lessee's option to terminate the lease if it is reasonably certain, based on all relevant factors, that the lessee will not exercise that option; Periods covered by a lessor's option to extend the lease if it is reasonably certain, based on all relevant factors, that the lessor will exercise that option; Periods covered by a lessor's option to terminate the lease if it is reasonably certain, based on all relevant factors, that the lessor will not exercise that option. A fiscal funding or cancellation clause should affect the lease term only when it is reasonably certain that the clause will be exercised. Lessees and lessors should reassess the lease term only if one or more of the following occur: The lessee or lessor elects to exercise an option even though it was previously determined that it was reasonably certain that the lessee or lessor would not exercise that option; The lessee or lessor elects not to exercise an option even though it was previously determined that it was reasonably certain that the lessee or lessor would exercise that option; and/or An event specified in the lease contract that requires an extension or termination of the lease takes place. 13 AULDIN 18 & ENKINS Comments, Recommendations, ORANGE COUNTY and Other Issues (Continued) NORTH CAROLINA ■ New GASB Pronouncements for Future Years (Continued) Statement No. 87, Leases (Continued) A lessor should recognize interest revenue on the lease receivable and an inflow of resources (for example, revenue)from the deferred inflows of resources in a systematic and rational manner over the term of the lease. The notes to financial statements should include a description of leasing arrangements and the total amount of inflows of resources recognized from leases. Lease Modifications and Terminations: An amendment to a lease contract should be considered a lease modification, unless the lessee's right to use the underlying asset decreases, in which case it would be a partial or full lease termination. A lease termination should be accounted for by reducing the carrying values of the lease liability and lease asset by a lessee, or the lease receivable and deferred inflows of resources by the lessor, with any difference being recognized as a gain or loss. A lease modification that does not qualify as a separate lease should be accounted for by re-measuring the lease liability and adjusting the related lease asset by a lessee and re-measuring the lease receivable and adjusting the related deferred inflows of resources by a lessor. Subleases and Leaseback Transactions: Subleases should be treated as transactions separate from the original lease. The original lessee that becomes the lessor in a sublease should account for the original lease and the sublease as separate transactions, as a lessee and lessor, respectively. A transaction qualifies for sale-leaseback accounting only if it includes a sale. Otherwise, it is a borrowing. The sale and lease portions of a transaction should be accounted for as separate sale and lease transactions, except that any difference between the carrying value of the capital asset that was sold and the net proceeds from the sale should be reported as a deferred inflow of resources or a deferred outflow of resources and recognized over the term of the lease. A lease-leaseback transaction should be accounted for as a net transaction. The gross amounts of each portion of the transaction should be disclosed. 14 AULDIN 19 & ENKINS Comments, Recommendations, ORANGE COUNTY and Other Issues (Continued) NORTH CAROLINA ■ New GASB Pronouncements for Future Years (Continued) Statement No. 89, Accounting for Interest Cost Incurred Before the End of a Construction Period was issued in June 2018 and is effective for reporting periods beginning after December 15, 2019 (meaning June 30, 2021). However, in light of the COVID-19 Pandemic, in May 2020 the GASB issued Statement No. 95 (Postponement of the Effective Dates of Certain Authoritative Guidance) which changed the effective date of Statement No. 89 to reporting periods beginning after December 15, 2020. Statement 90, Majority Equity Interests — An Amendment of GASB's No. 14 and 61 was issued in August 2018, and is effective for reporting periods beginning after December 15, 2018 (meaning June 30, 2020). However, in light of the COVID-19 Pandemic, in May 2020 the GASB issued Statement No. 95 (Postponement of the Effective Dates of Certain Authoritative Guidance) which changed the effective date of Statement No. 90 to reporting periods beginning after December 15, 2019. Statement No. 91, Conduit Debt Obligations was issued in May 2019 and is effective for the first reporting period beginning after December 15, 2020, meaning for those with year ends of December 31, 2021 and beyond. However, in light of the COVID-19 Pandemic, in May 2020 the GASB issued Statement No. 95 (Postponement of the Effective Dates of Certain Authoritative Guidance) which changed the effective date of Statement No. 91 to reporting periods beginning after December 15, 2021. Statement No. 92, Omnibus 2020 was issued in January 2020 and is effective as follows: upon the effective date of Statement No. 87 and implementation Guide No. 2019-3, reinsurance recoveries, and terminology used to refer to derivative instruments are effective upon issuance. For fiscal years beginning after June 15, 2020, relative to the requirements related to intra-entity transfers of assets and those related to the applicability of Statements No. 73 and 74. For reporting periods beginning after June 15, 2020, relative to the requirements related to application of Statement No. 84 to postemployment benefit arrangements and those related to nonrecurring fair value measurements of assets or liabilities. For government acquisitions occurring in reporting periods beginning after June 15, 2020. The requirements related to the measurement of liabilities (and assets, if any) associated with AROs in a government acquisition. 15 AULDIN 20 & ENKINS Comments, Recommendations, ORANGE COUNTY and Other Issues (Continued) NORTH CAROLINA ■ New GASB Pronouncements for Future Years (Continued) Statement No. 93, Replacement of Interbank Offered Rates was issued in March 2020 and is effective for reporting periods ending after December 31, 2021, meaning December 31, 2022 for the Authority. However, in light of the COVID-19 Pandemic, on April 15, 2020 the GASB has proposed to postpone the effective date of this pronouncement for one additional year. As a result of global reference rate reform, the London Interbank Offered Rate ("LIBOR") is expected to cease to exist in its current form at the end of 2021, prompting governments to amend or replace financial instruments for the purpose of replacing LIBOR with other reference rates, by either changing the reference rate or adding or changing fallback provisions related to the reference rate. Statement No. 94, Public-Private and Public-Public Partnerships and Availability Payment Arrangements was issued in March 2020 and is effective for fiscal years beginning after June 15, 2022 which means year ends of June 30, 2023 and following Statement No. 95, Postponement of Effective Dates of Certain Authoritative Guidance was issued as temporary relief to governments in light of the COVID-19 pandemic. Statement No. 95 delays the implementation of certain, other standards by 12 months (83,84,88,89,) and GASB Statement No. 87 by 18 months. However, during the current year the City has implemented GASB Statement No. 88, Certain Debt Disclosures. Statement No. 96, Subscription-Based Information Technology Arrangements was issued in May 2020 and is effective for reporting periods ending after June 15, 2022. This statement provides guidance on the accounting and financial reporting for subscription- based information technology arrangements (SBITAs) for government and end users. This statement (1) defines a SBITA; (2) establishes that a SBITA results in a right-to-use subscription asset as an intangible asset and a corresponding subscription liability; (3) provides the capitalization criteria for outlays other than subscription payments, including implementation costs of a SBITA; and (4) requires note disclosures regarding a SBITA. To the extent relevant, the standards for SBITAs are based on the standards established in Statement No. 87, Leases, as amended. 16 AULDIN 21 & ENKINS Comments, Recommendations, ORANGE COUNTY and Other Issues (Continued) NORTH CAROLINA ■ New GASB Pronouncements for Future Years (Continued) Other Pending or Current GASB Projects - As noted by the numerous pronouncements issued by GASB over the past decade, the GASB continues to research various projects of interest to governmental units. Subjects of note include: Re-examination of the Financial Reporting Model - GASB has added this project to its technical agenda to make improvements to the existing financial reporting model (established via GASB 34). Improvements are meant to enhance the effectiveness of the model in providing information for decision-making and assessing a government's accountability. GASB anticipates a final standard expected in early 2022. Conceptual Framework-A constant matter being looked at by GASB. Current measurement focus statements (for governmental funds) to change to near-term financial resources measurement. May dictate a period (such as 60 days) for revenue and expenditure recognition. May expense things such as supplies and prepaid assets at acquisition. Will look into which balances (at all statement levels) are measured at acquisition and which need to be re-measured at year-end. Project placed on hold for now. Revenue and Expense Recognition - Another long-term project where the GASB is working to develop a comprehensive application model for recognition of revenues and expenses from non-exchange, exchange, and exchange-like transactions. The final standard is expected in 2023. Compensated Absences - A technical topic being examined by the GASB currently due to significant changes in benefits offered by governmental employers. Current GAAP does not address certain items such as paid time off (PTO) and there is a wide divergence in practice. A final standard on this topic is expected towards the end of 2021 Prior-Period Adjustments, Accounting Changes, and Error Corrections -A technical topic being examined by the GASB due to a wide diversity in practice regarding required presentation on the face of the financial statements, disclosures, etc. A final standard on this topic is expected in early 2022. 17 IAULD[N 22 & ENKINS — Free Quarterly Continuing Education ORANGE COUNTY for Governmental Clients NORTH CAROLINA Since March of 2009: Mauldin & Jenkins provides free quarterly continuing education for all of our governmental clients. Topics are tailored to be of interest to governmental entities. In an effort to accommodate our entire governmental client base, we offer the sessions several times per quarter at a variety of client provided locations resulting in greater networking and knowledge sharing among our governmental clients. We normally see approximately 100 people per quarter. Examples of subjects addressed in the past few quarters include: Revenue Accounting Requirements GASB Updates Internal Controls — Revenues & Receipts Internal Controls — Expenses, Disbursements & Payroll Collateral ization of Deposits SPLOST Accounting, Reporting & Compliance Capital Asset Accounting Grant Accounting, Processes and Controls Policies & Procedures Manuals Segregation of Duties GASB No. 51 — Intangible Assets Single Audits for Auditees GASB No. 54 — Governmental Fund Balance Best Budgeting Practices, Policies and Processes Internal Revenue Compliance (Payroll) CAFR Preparation GASB No. 60 — Service Concession Arrangements GASB No. 61, the Financial Reporting Entity GASB No. 63 & 65 — Deferred Inflows and Outflows GASB No 67 & 68, Accounting/Reporting Pension Plans AULDIN 23 & ENKINS --- ORANGE COUNTY NORTH CAROLINA Questions & Comments 24 ORANGE COUNTY NORTH GAROLINA FY 2019-20 Financial Audit Report Summary Gary Donaldson, Chief Financial Officer January 19, 2021 25 Y 2019-20 Operating and Capital Funds Summary ➢ Clean Audit Opinion for FY 2019-20 Financial Audit submitted to Local Government Commission (LGC) ➢ Federal and State Grant Audit In Progress March 31 , 2021 LGC extended deadline due to COVID; ➢ Unassigned Fund Balance at 15.6%; General Fund Cash advances for pending FEMA reimbursable expenses; ➢ Favorable Budget versus Actuals Performance and Fund Reserve Levels consistent with Quarterly Financial reports and Long-Term Financial Model; ➢ No General Fund Subsidy to Solid Waste Fund; ➢ Affirmation of `AAA Bond Rating by all Three Major Credit Rating Agencies ➢ Series 2020 General Obligations Bonds: $20 million for OCS-Cedar Ridge HS Wing and Various School Improvements and Series 2020 Limited Obligation Bonds: $40.7 million for Northern Campus, Solid Waste Vehicles and Equipment RANGE COUNTY NORTH CAROLINA 26 FY 2019-20 General Fund Summary Results Original Amendments Final Actual Variance Revenues $ 225,181,824 $ 5,021,220 $ 230,207,044 $ 228,292,446 $ (1,914,598) -0.8% Expenditures 229,128,780 7,856,279 236,985,059 226,843,988 10,141,071 4.3% Net Transfers (3,865,050) 1,380,712 (2,484,338) 389,934 2,874,272 Net Change $ (7,808,006) $ 1,454,347 $ (9,262,353) $ 1,838,392 $ 11,100,745 ➢ Revenue exceeded Expenditures by $1.8 million; 228.2 million in revenues compared to $226.8 million. The revenues and expenditures above excludes transfers in and out; ➢ General Fund actual revenues were .8% less than the amended budget. The final budget reflects the addition of Round 1 CARES Act Funding (only $1.3M of the $2.6M in the Actual Revenues) which the accounting standard requires to remain as deferred revenue until spent; ➢ General Fund actual expenditures were 4.3% below the amended budget; attributed to salary savings and curtailment of discretionary operational spending; ➢ No use of appropriated fund balance was necessary; revenues exceeded expenditures for third consecutive fiscal year; ➢ General Fund major transfers to Affordable Housing Fund (Section 8), County Capital Projects and School Capital Projects L ORANGE COUNTY NORTH CAROLINA 27 FY 2019-20 General Fund Budget versus Actual Variance with Budget Actual Final Budget Original Final Amounts Positive(Negative) Revenues Property taxes $ 164,693,098 $ 164,980,316 $ 164,688,450 $ (291,865) 5a I es tax 27,122,861 27,122,851 28,126,253 1,003,402 Intergovernmental revenue 18,813,941 23,171,928 20,472,870 (2,599,059) Charges for services 11,928,834 11,760,652 11,720,638 (40,014) Investment earnings 415,000 449,723 709,277 259,554 License and permits 313,250 313,250 267,010 (46,250) M isceilaneo u s 1,898,830 2,409,304 2,3 07,939 (100,365) Total revenues 225,185,824 230,207,044 228,292,445 (1,914,598) Expenditures Current: Com m u n ity se rvice 13,552,637 14,D79,750 12,755,492 1,324,268 Generai government 10,539,757 10,895,770 9,896,723 999,047 Public safety 26,629,096 28,021,756 26,088,189 1,933,577 Human services 41,679,917 42,405,672 38,881,489 3,524,183 Education 93,508,573 93,508,573 93,136,297 372,285 Support services 12,465,362 17,319,090 15,178,951 2,140,139 Debt service: Principal retirements 24,045,822 24,045,822 21,749,149 2,296,673 Interest 6,708,606 6,709,606 8,958,547 (2,249,941) Cost of issuance - - 199,161 (199,161) Total expenditures 229,129,780 236,985,059 226,843,988 10,141,071 ORANGE COUNTY NORTH CAROLINA 28 FY 2019-20 Audited Fund Balances and Net Positions County Funds Beginning Fund Balance Ending Fund Balance General Fund-Unassigned Fund Balance $ 35,697,519 $ 35,238,474 Article 46 Sales Tax Fund $ 4,241,654 $ 5,430,687 Community Development Fund $ 1,756,359 $ 2,266,246 Housing Section 8 Fund $ 363.492 $ 496,333 Emergency Telephone Fund' $ 67,661 $ 17,589 Fire District Tax Funds $ 1,551,004 $ 1,587,359 Visitors Bureau Fund $ 755,377 $ 521,555 Spay/Neuter Fund $ 50,448 $ 44,724 Enterprise Fund Net Positions Beginning Net Position Ending Net Position Solid Waste Enterprise Fund-Unrestricted $ 7,042,248 $ 8,423,192 S orts lex Enterprise Fund-Unrestricted $ 164,252 $ 520,709 Notes. 1) E-911 Board Mandated use of Fund Balance which was budgeted for one-time call taking equipment requirements and a prerequisite for subscriber fee funding increase. E-911 Board approved additional funding December 2020. ORANGE COUNTY NORTH CAROLINA 29 COVID Fiscal Challenges for remainder of FY 2020-21 and FY 2021 -22 ➢ Sustained Revenue declines consistent with Economist Reports; • Moody's Analytics December Report indicates Nationwide Negative Revenue Climate throughout 2021 for State and Local governments ➢ General Fund Cash Outlays for pending FEMA reimbursements; • FEMA reimbursements within FY 2020-21 is key element on unassigned fund balance ➢ Forecast Financial Model and Mid-Year Projections and County Measures ORANGE COUNTY NORTH CAROLINA 30 Questions/Comments ORANGE COUNTY NORTH CAROLINA