basic financial statements - surry county, north carolina · 2018-04-07 · basic financial...

BASIC FINANCIAL STATEMENTS

Exhibit A

SURRY COUNTY, NORTH CAROLINA

STATEMENT OF NET ASSETS

JUNE 30, 2012

Surry County

Tourism and

Governmental Business-Type Development

Activities Activities Total Authority

Assets:

Current assets:

Cash and investments 16,590,015$ 1,586,521$ 18,176,536$ 32,907$

Taxes receivable, net 1,707,115 95,640 1,802,755 -

Accounts receivable, net 4,012,808 138,326 4,151,134 7,504

Due from other governments 951,503 26,630 978,133 -

Notes receivable 270,594 - 270,594 -

Internal balances 100,542 (100,542) - -

Restricted assets:

Cash and investments 5,120,497 - 5,120,497 -

Total current assets 28,753,074 1,746,575 30,499,649 40,411

Capital assets:

Land and other non-depreciable assets 22,167,267 1,777,321 23,944,588 -

Other capital assets, net of depreciation 72,092,368 15,835,311 87,927,679 -

Capital assets, net 94,259,635 17,612,632 111,872,267 -

Total assets 123,012,709 19,359,207 142,371,916 40,411

Liabilities:

Accounts payable and accrued liabilities 4,214,429 65,723 4,280,152 10,464

Unearned revenues 638,516 - 638,516 -

Non-current liabilities:

Due within one year 8,283,754 496,616 8,780,370 -

Due in more than one year 52,312,210 6,707,509 59,019,719 -

Total liabilities 65,448,909 7,269,848 72,718,757 10,464

Net Assets:

Invested in capital assets, net of

related debt 42,472,931 13,072,772 55,545,703 -

Restricted for:

Stabilization for State statute 5,092,033 - 5,092,033 7,504

Education 1,627,555 - 1,627,555 -

Debt service 4,587,228 - 4,587,228 -

Public safety 678,673 - 678,673 -

Register of Deeds 115,922 - 115,922 -

Unrestricted (deficit) 2,989,458 (983,413) 2,006,045 22,443

Total net assets 57,563,800$ 12,089,359$ 69,653,159$ 29,947$

Primary Government

The accompanying notes are an integral part of the financial statements.

17


STATEMENT OF ACTIVITIES

FOR THE YEAR ENDED JUNE 30, 2012

Operating Capital

Charges for Grants and Grants and

Expenses Services Contributions Contributions

Functions/Programs:

Primary Government:

Governmental Activities:

General government 10,964,428$ 2,042,869$ 2,184,020$ -$

Public safety 17,735,735 4,904,825 798,151 -

Economic and physical development 2,756,635 381,725 1,338,764 -

Human services 21,736,284 4,383,072 11,030,549 -

Cultural and recreation 992,421 - - -

Education 21,248,856 - 179,267 132,583

Interest and fees 2,322,521 - - -

Total governmental activities 77,756,880 11,712,491 15,530,751 132,583

Business-Type Activities:

Interstates Water and Sewer Fund 99,417 33,147 115,000 -

Flat Rock Water and Sewer Fund 363,497 176,926 - -

Dobson Area Water and Sewer Fund 159,854 64,351 - -

Elkin Area Water and Sewer Fund 43,359 26,693 - -

Landfill Fund 2,724,372 2,210,812 128,410 -

Total business-type activities 3,390,499 2,511,929 243,410 -

Total primary government 81,147,379$ 14,224,420$ 15,774,161$ 132,583$

Component Unit:

Surry County Tourism and Development Authority 75,711$ -$ 2,366$ -$

General Revenues:

Ad valorem taxes

Local option sales tax

Other taxes

Occupancy tax

Investment earnings, unrestricted

Total general revenues, excluding transfers

Transfers

Total general revenues and transfers

Change in net assets

Net Assets:

Beginning of year - July 1

End of year - June 30

Program Revenues


18

Exhibit B

Component Unit

Surry County

Tourism and

Governmental Business-Type Development

Activities Activities Total Authority

(6,737,539)$ -$ (6,737,539)$

(12,032,759) - (12,032,759)

(1,036,146) - (1,036,146)

(6,322,663) - (6,322,663)

(992,421) - (992,421)

(20,937,006) - (20,937,006)

(2,322,521) - (2,322,521)

(50,381,055) - (50,381,055)

- 48,730 48,730

- (186,571) (186,571)

- (95,503) (95,503)

- (16,666) (16,666)

- (385,150) (385,150)

- (635,160) (635,160)

(50,381,055) (635,160) (51,016,215)

(73,345)$

34,883,475 - 34,883,475 -

15,123,965 - 15,123,965 -

1,459,490 - 1,459,490 -

- - - 74,504

362,324 63 362,387 -

51,829,254 63 51,829,317 74,504

(501,541) 501,541 - -

51,327,713 501,604 51,829,317 74,504

946,658 (133,556) 813,102 1,159

56,617,142 12,222,915 68,840,057 28,788

57,563,800$ 12,089,359$ 69,653,159$ 29,947$

Primary Government

Net (Expense) Revenue and Changes in Net Assets


19

Exhibit C


BALANCE SHEET - GOVERNMENTAL FUNDS

JUNE 30, 2012

Nonmajor

Schools County Other Total

Capital Buildings Capital Governmental Governmental

General Project Project Funds Funds

Assets:

Cash and investments 14,841,214$ 1,002,444$ -$ 746,357$ 16,590,015$

Taxes receivable, net 1,508,482 - - 198,633 1,707,115

Accounts receivable, net 4,003,862 - - 8,946 4,012,808

Notes receivable 270,594 - - - 270,594

Due from other governments 808,865 111,394 - 31,244 951,503

Due from other funds 114,410 - - - 114,410

Restricted assets:

Cash and investments 4,838,946 167,850 113,701 - 5,120,497

Total assets 26,386,373$ 1,281,688$ 113,701$ 985,180$ 28,766,942$

Liabilities:

Accounts payable and accrued liabilities 3,646,099$ 49,833$ -$ 54,370$ 3,750,302$

Due to other funds - - 4,922 8,946 13,868

Due to schools 464,127 - - - 464,127

Deferred revenues 2,133,686 - - 211,947 2,345,633

Total liabilities 6,243,912 49,833 4,922 275,263 6,573,930

Fund Balances:

Non-spendable:

Notes receivable 270,594 - - - 270,594

Restricted for:

Stabilization for State statute 4,940,449 111,394 - 40,190 5,092,033

Restricted, all other 5,378,094 1,120,461 113,701 678,673 7,290,929

Committed:

General government 178,529 - - - 178,529

Assigned 5,515,932 - - - 5,515,932

Unassigned 3,858,863 - (4,922) (8,946) 3,844,995

Total fund balances 20,142,461 1,231,855 108,779 709,917 22,193,012

Total liabilities and fund balances 26,386,373$ 1,281,688$ 113,701$ 985,180$

Amounts reported for governmental activities in the Statement of Net Assets

are different because:

Capital assets used in governmental activities are not financial resources and,

therefore, are not reported in the funds. 94,259,635

Long-term liabilities and compensated absences are not due and payable in

the current period and, therefore, are not reported in the funds. (60,595,964)

Deferred revenues in the governmental funds are used to offset accounts

receivable not expected to be available within 90 days of year-end. These

receivables are a component of net assets in the Statement of Net Assets. 1,707,117

Net assets of governmental activities 57,563,800$

Major


20

Exhibit D


STATEMENT OF REVENUES, EXPENDITURES, AND

CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS


Nonmajor

Schools County Other Total

Capital Buildings Capital Governmental Governmental

General Project Project Funds Funds

Revenues:

Ad valorem taxes 30,982,155$ -$ -$ 3,901,320$ 34,883,475$

Local option sales taxes 15,123,965 - - - 15,123,965

Unrestricted intergovernmental revenues 1,459,490 - - - 1,459,490

Restricted intergovernmental revenues 13,307,179 132,583 149,310 8,946 13,598,018

Permits and fees 644,773 - - - 644,773

Sales and services 10,692,786 - - 374,932 11,067,718

Interest earned on investments 355,478 2,595 719 3,532 362,324

Miscellaneous 2,065,316 - - - 2,065,316

Total revenues 74,631,142 135,178 150,029 4,288,730 79,205,079

Expenditures:

General government 10,071,587 - - - 10,071,587

Public safety 14,408,411 - - 2,727,191 17,135,602

Economic and physical development 2,768,559 - 901,348 8,946 3,678,853

Human services 21,286,982 - - - 21,286,982

Cultural and recreation 890,715 - - - 890,715

Education 15,835,240 3,461,448 - 1,670,609 20,967,297

Debt service:

Principal repayments 5,682,631 - - - 5,682,631

Interest 2,273,903 - 48,618 - 2,322,521

Total expenditures 73,218,028 3,461,448 949,966 4,406,746 82,036,188

Revenues over (under) expenditures 1,413,114 (3,326,270) (799,937) (118,016) (2,831,109)

Other Financing Sources (Uses):

Transfers in - - 410,507 - 410,507

Transfers out (511,559) - - - (511,559)

Total other financing sources (uses) (511,559) - 410,507 - (101,052)

Net change in fund balances 901,555 (3,326,270) (389,430) (118,016) (2,932,161)

Fund Balances:

Beginning of year - July 1 19,240,906 4,558,125 498,209 827,933 25,125,173

End of year - June 30 20,142,461$ 1,231,855$ 108,779$ 709,917$ 22,193,012$

Major


21

Exhibit E


RECONCILIATION OF THE STATEMENT OF REVENUES,

EXPENDITURES, AND CHANGES IN FUND BALANCES

TO THE STATEMENT OF ACTIVITIES - GOVERNMENTAL FUNDS


Amounts reported for governmental activities in the Statement of Activities (Exhibit B)

are different due to the following items:

Net change in fund balances - total governmental funds (Exhibit D) (2,932,161)$

Exhibit D reports revenues using a current financial resources basis, which generally means revenue

is recognized when collected or is expected to be collected within 90 days of year-end. Exhibit B reports

revenues when the earning process is complete, regardless of when it is collected. This measurement

difference causes timing of revenue recognition differences for the following revenue types:

Property tax revenues in the Statement of Activities earned in prior periods are reported as revenues

in the governmental funds statement. 279,433

Expenses related to compensated absences that do not require current financial resources are not

reported as expenditures in the governmental funds statement. (772,413)

Transfer of capital assets from Enterprise Fund to the General Fund (400,489)

Capital outlays are reported as expenditures in the governmental funds statement. However, in the

Statement of Activities, capital outlay is not an expense, rather it is an increase in capital assets. 1,773,344

Depreciation expense allocates the costs of capital assets over their useful lives. It is reported as an

expenditure in the governmental funds statement. (2,561,847)

Some expenses reported in the statement of activities do not require the use of current

financial resources and, therefore, are not reported as expenditures in the governmental funds. 244,151

Capital assets disposed of, but not recognized, on the modified accrual basis of accounting (365,991)

Principal repayments are reported as expenditures in the governmental funds statement.

However, in the Statement of Activities, these transactions are not an expense, rather

they are a decrease in liabilities. 5,682,631

Change in net assets of governmental activities (Exhibit B) 946,658$


22

Exhibit F


GENERAL FUND

STATEMENT OF REVENUES, EXPENDITURES, AND

CHANGES IN FUND BALANCE - BUDGET AND ACTUAL


Variance with

Final Budget

Original Final Actual Over/Under

Revenues:

Ad valorem taxes 30,072,515$ 30,072,515$ 30,982,155$ 909,640$

Local option sales taxes 11,119,000 11,134,200 12,367,760 1,233,560

Unrestricted intergovernmental revenues 1,271,137 1,271,137 1,459,490 188,353

Restricted intergovernmental revenues 11,950,808 14,004,443 13,307,179 (697,264)

Permits and fees 709,000 709,000 644,773 (64,227)

Sales and services 14,790,441 15,083,214 10,692,786 (4,390,428)

Investment earnings 207,944 207,944 270,932 62,988

Miscellaneous 928,625 1,841,260 2,065,316 224,056

Total revenues 71,049,470 74,323,713 71,790,391 (2,533,322)

Expenditures:

General government 12,820,238 14,038,569 9,825,649 4,212,920

Public safety 14,154,899 14,764,232 14,408,411 355,821

Human services 22,642,889 23,666,162 21,286,982 2,379,180

Economic and physical development 2,974,734 3,706,855 2,768,559 938,296

Cultural and recreation 936,064 953,508 890,715 62,793

Education 14,441,860 14,441,860 14,402,180 39,680

Debt service:

Principal retirement 6,245,670 6,245,670 5,682,631 563,039

Interest and fees 2,273,906 2,273,906 2,273,903 3

Total expenditures 76,490,260 80,090,762 71,539,030 8,551,732

Revenues over (under) expenditures (5,440,790) (5,767,049) 251,361 6,018,410

Other Financing Sources (Uses):

Transfers in 1,608,747 1,608,747 1,608,744 (3)

Transfers out (330,223) (755,223) (732,298) 25,442

Appropriated fund balance 4,162,266 4,913,525 - (4,913,525)

Total other financing sources (uses) 5,440,790 5,767,049 876,446 (4,890,603)

Net change in fund balance -$ -$ 1,127,807 1,127,807$

Fund Balance:

Beginning of year - July 1 18,161,179

End of year - June 30 19,288,986$

Budgeted Amounts


23


STATEMENT OF NET ASSETS

PROPRIETARY FUNDS

JUNE 30, 2012

Flat Rock/

Bannertown

Landfill Water and

Fund Sewer District

Assets:

Current assets:

Cash and cash equivalents 1,119,771$ 85,550$

Taxes receivable 95,640 -

Accounts receivable, net 103,408 28,511

Due from other governments - 6,412

Total current assets 1,318,819 120,473

Capital assets:

Land and other non-depreciable assets 1,500,951 20,000

Other capital assets, net of depreciation 5,611,213 5,915,393

Capital assets, net 7,112,164 5,935,393

Total assets 8,430,983 6,055,866

Liabilities and Net Assets:

Liabilities:

Current liabilities:

Accounts payable and accrued liabilities 55,770 -

Due to other funds - 89,489

Current portion of accrued landfill closure and post-closure care cost 46,991 -

Current portion of long-term obligations 417,625 32,000

Total current liabilities 520,386 121,489

Non-current liabilities:

Accrued landfill closure and post-closure care cost 2,519,614 -

Long-term obligations 1,760,895 2,427,000

Total non-current liabilities 4,280,509 2,427,000

Total liabilities 4,800,895 2,548,489

Net Assets:

Invested in capital assets, net of related debt 5,031,304 3,476,393

Unrestricted (1,401,216) 30,984

Total net assets 3,630,088$ 3,507,377$

Major


24

Exhibit G

Nonmajor

Interstates Dobson Area Elkin Area

Water and Water and Water and

Sewer District Sewer Fund Sewer Fund Total

381,200$ -$ -$ 1,586,521$

- - - 95,640

1,111 1,935 3,361 138,326

6,672 11,334 2,212 26,630

388,983 13,269 5,573 1,847,117

256,370 - - 1,777,321

1,834,721 2,473,984 - 15,835,311

2,091,091 2,473,984 - 17,612,632

2,480,074 2,487,253 5,573 19,459,749

3,015 6,938 - 65,723

- 6,331 4,722 100,542

- - - 46,991

- - - 449,625

3,015 13,269 4,722 662,881

- - - 2,519,614

- - - 4,187,895

- - - 6,707,509

3,015 13,269 4,722 7,370,390

2,091,091 2,473,984 - 13,072,772

385,968 - 851 (983,413)

2,477,059$ 2,473,984$ 851$ 12,089,359$

Major


25


STATEMENT OF REVENUES, EXPENSES, AND CHANGES

IN FUND NET ASSETS - PROPRIETARY FUNDS


Flat Rock/

Bannertown

Landfill Water and

Fund Sewer District

Operating Revenues:

Charges for services 969,640$ 176,926$

Local contribution - -

Landfill fees 1,150,006 -

White goods and scrap tire 128,410 -

Other operating revenues 91,166 -

Total operating revenues 2,339,222 176,926

Operating Expenses:

Landfill recycling 836,638 -

Sanitation 1,322,784 -

Water and sewer - 93,355

Depreciation and amortization 553,324 164,317

Landfill closure and post-closure costs (66,628) -

Total operating expenses 2,646,118 257,672

Operating income (loss) (306,896) (80,746)

Non-Operating Revenues (Expenses):

Investment earnings - 63

Interest and fees paid (78,254) (105,825)

Total non-operating revenues (expenses) (78,254) (105,762)

Income (loss) before

contributions and transfers (385,150) (186,508)

Transfer from General Fund 25,000 -

Capital contributions - -

Change in net assets (360,150) (186,508)

Net Assets:

Beginning of year - July 1 3,990,238 3,693,885

End of year - June 30 3,630,088$ 3,507,377$

Major


26

Exhibit H

Nonmajor




33,147$ 64,351$ 26,693$ 1,270,757$

115,000 - - 115,000

- - - 1,150,006

- - - 128,410

- - - 91,166

148,147 64,351 26,693 2,755,339

- - - 836,638

- - - 1,322,784

51,865 104,168 43,359 292,747

47,552 55,686 - 820,879

- - - (66,628)

99,417 159,854 43,359 3,206,420

48,730 (95,503) (16,666) (451,081)

- - - 63

- - - (184,079)

- - - (184,016)

48,730 (95,503) (16,666) (635,097)

18,718 39,817 17,517 101,052

- 400,489 - 400,489

67,448 344,803 851 (133,556)

2,409,611 2,129,181 - 12,222,915

2,477,059$ 2,473,984$ 851$ 12,089,359$

Major


27


STATEMENT OF CASH FLOWS

PROPRIETARY FUNDS


Flat Rock/

Bannertown

Landfill Water and

Fund Sewer District

Cash Flows from Operating Activities:

Cash received from customers 2,276,167$ 166,486$

Cash paid for goods and services (2,164,245) (93,355)

Cash paid to employees for services 14,093 -

Net cash provided (used) by operating activities 126,015 73,131

Cash Flows from Non-Capital Financing Activities:

Interfund transfer in (out) 25,000 -

Net cash provided (used) by non-capital financing activities 25,000 -

Cash Flows from Capital and Related Financing Activities:

Acquisition and construction of capital assets (230,238) -

Principal paid on bonds and notes payable (376,732) (31,000)

Interest and fees paid on bonds (78,254) (105,825)

Net cash provided (used) by capital and related financing activities (685,224) (136,825)

Cash Flows from Investing Activities:

Interest on investments - 63

Net increase (decrease) in cash and cash equivalents (534,209) (63,631)

Cash and Cash Equivalents:

Beginning of year - July 1 1,653,980 149,181

End of year - June 30 1,119,771$ 85,550$

Reconciliation of Operating Income (Loss) to Net

Cash Provided (Used) by Operating Activities:

Operating income (loss) (306,896)$ (80,746)$

Adjustments to reconcile operating income (loss) to

net cash provided (used) by operating activities:

Depreciation and amortization 553,324 164,317

Change in assets and liabilities:

(Increase) decrease in accounts receivable (63,055) (2,415)

Increase (decrease) in accounts payable 3,549 (8,025)

Increase (decrease) in compensated absences payable (4,104) -

Increase (decrease) in other post-employment benefits payable 18,197 -

Increase (decrease) in landfill post-closure liability (75,000) -

Net cash provided (used) by operating activities 126,015$ 73,131$

Non-Cash Transactions:

Transfer of capital assets between funds -$ -$

Major


28

Exhibit I

Nonmajor




144,383$ 67,492$ 27,445$ 2,681,973$

(51,258) (107,309) (44,962) (2,461,129)

- - - 14,093

93,125 (39,817) (17,517) 234,937

18,718 39,817 17,517 101,052

18,718 39,817 17,517 101,052

(12,000) - - (242,238)

- - - (407,732)

- - - (184,079)

(12,000) - - (834,049)

- - - 63

99,843 - - (497,997)

281,357 - - 2,084,518

381,200$ -$ -$ 1,586,521$

48,730$ (95,503)$ (16,666)$ (451,081)$

47,552 55,686 - 820,879

(3,764) - (1,460) (70,694)

607 - 609 (3,260)

- - - (4,104)

- - - 18,197

- - - (75,000)

93,125$ (39,817)$ (17,517)$ 234,937$

-$ 400,489$ -$

Major


29

Exhibit J


STATEMENT OF FIDUCIARY NET ASSETS

FIDUCIARY FUNDS

JUNE 30, 2012

Agency

Funds

Assets:

Cash and investments 202,809$

Accounts receivable 26,280

Total assets 229,089$

Liabilities:

Accounts payable 137,758$

Intergovernmental payable 91,331

Total liabilities 229,089$


30


NOTES TO THE FINANCIAL STATEMENTS


1. Summary of Significant Accounting Policies

The accounting policies of Surry County (the "County") conform to generally accepted accounting

principles as applicable to governments. The following is a summary of the more significant

accounting policies.

A. Reporting Entity

The County, which is governed by a five-member Board of Commissioners, is one of the 100

counties established in North Carolina under North Carolina General Statute 153A-10. Generally

accepted accounting principles require the entity to include component units in its financial

statements if certain criteria are met. The County has one component unit which has no financial

transactions or account balances. Therefore, it does not appear in the combined financial

statements. The County has two component units which are reported as enterprise funds in the

County’s financial statements. The County has one component unit that is presented as a

discretely presented component unit. This component unit is reported jointly in a separate column

in the County’s financial statements in order to emphasize that they are legally separate from the

County.

Surry County Industrial Facility and Pollution Control Financing Authority

The Surry County Industrial Facility and Pollution Control Financing Authority (the “Authority”)

exists to issue and service revenue bond debt of private businesses for economic development

purposes. The Authority is governed by a seven-member board of commissioners, all of whom

are appointed by the County Commissioners. The County can remove any commissioner of the

Authority with or without cause. The Authority has no financial transactions or account balances;

therefore, it is not presented in the combined financial statements. The Authority does not issue

separate financial statements.

The Interstates Water and Sewer District and the Flat Rock/Bannertown

Water and Sewer District

The Interstates Water and Sewer District and the Flat Rock/Bannertown Water and Sewer District

(the “Districts”) exist to provide and maintain water and sewer systems for the County residents

within each district. Under State law [G.S. 162A-89], the County’s Board of Commissioners also

serves as the governing board for the Districts. The Flat Rock/Bannertown Water and Sewer

District and the Interstates Water and Sewer District are reported as enterprise funds in the

County’s financial statements. The Interstates Water and Sewer District does not issue separate

financial statements. Complete financial statements for the Flat Rock/Bannertown Water and

Sewer District may be obtained at the finance office of the County: 118 Hamby Road, Suite 333,

Dobson, North Carolina 27017.

31




The Surry County Tourism and Development Authority

The Surry County Tourism and Development Authority is a special taxing district made up of the

unincorporated areas of the County. A six percent room occupancy tax was implemented

effective September 1, 2009 to promote travel and tourism related activities within the district.

The Surry Tourism and Development Authority issues separate financial statements. Complete

financial statements for the Surry County Tourism and Development Authority may be obtained

at the finance office of the County: 118 Hamby Road, Suite 333, Dobson, North Carolina 27017.

B. Basis of Presentation

Government-Wide and Fund Financial Statements

The Statement of Net Assets and the Statement of Activities report information on all of the non-

fiduciary activities of the primary government. The effect of interfund activity has been removed

from these statements in all material areas. Governmental activities, which normally are

supported by taxes and intergovernmental revenues, are reported separately from business-type

activities, which rely to a significant extent on fees and charges for support.

The Statement of Activities demonstrates the degree to which the direct expenses of a given

function or segment is offset by program revenues. Direct expenses are those that are clearly

identifiable with a specific function or segment. Program revenues include (1) charges to

customers or applicants who purchase, use, or directly benefit from goods, services, or privileges

provided by a given function or segment and (2) grants and contributions that are restricted to

meeting the operational or capital requirements of a particular function or segment. Taxes and

other items not properly included among program revenues are reported instead as general

revenues.

Separate financial statements are provided for governmental funds, proprietary funds, and

fiduciary funds. The fiduciary funds are excluded from the government-wide financial

statements. Major individual governmental funds and major individual enterprise funds are

reported as separate columns in the fund financial statements. All remaining governmental and

enterprise funds are aggregated and reported as nonmajor funds.

Proprietary fund operating revenues, such as charges for services, result from exchange

transactions associated with the principal activity of the fund. Exchange transactions are those in

which each party receives and gives up essentially equal values. Non-operating revenues, such as

subsidies and investment earnings, result from non-exchange transactions or ancillary activities.

32




The County reports the following major governmental funds:

General Fund. The General Fund is the general operating fund of the County. It is used to

account for all financial resources except those required to be accounted for in another fund. The

County maintains separate Economic Development, Debt Service, Employee Benefits, Home

Program, Cooperative Extension, Sheriff’s Special Accounts, Workers’ Compensation, Sheriff-

Narcotics, Public Assistance, and Register of Deeds Automation Funds for accounting purposes.

These funds have been consolidated into the General Fund for financial reporting purposes. The

Revaluation Fund is a legally budgeted fund under North Carolina General Statutes; however, for

statement presentation in accordance with GASB Statement No. 54 it is presented in the General

Fund. The County also maintains a separate Capital Reserve Fund (Schools Capital Outlay Fund)

to account for 30% and 60%, respectively, of the proceeds of the Chapter 40 and Chapter 42

half-cent local option sales taxes; however, for statement presentation in accordance with GASB

Statement No. 54 it is presented in the General Fund.

Capital Project Funds. Capital project funds are used to account for financial resources to be

used for the acquisition or construction of major capital facilities (other than those financed by

proprietary funds or trust funds). The County maintains two major capital project funds within

the governmental fund types:

Schools Capital Project Fund – accounts for local funds and financing proceeds used to fund

school construction projects.

County Buildings Capital Project Fund – accounts for funds used for the construction of

County buildings.

The County reports the following nonmajor governmental funds:

Special Revenue Funds. Special revenue funds are used to account for specific revenue sources

(other than special assessments, expendable trusts, or major capital projects) that are legally

restricted to expenditures for specified purposes. The County maintains four special revenue

funds: the Fire Districts Fund, the School Districts Fund, the Emergency Telephone 911 Fund,

and the Grants Project Fund.

The County reports the following major enterprise funds:

Enterprise Funds. Enterprise funds are used to account for operations (a) that are financed and

operated in a manner similar to private business enterprises, where the intent of the governing

body is that the costs (expenses, including depreciation) of providing goods or services to the

general public on a continuing basis are financed or recovered primarily through user charges; or

(b) where the governing body has decided that periodic determination of revenues earned,

expenses incurred, and/or net income is appropriate for capital maintenance, public policy,

management control, accountability, or other purposes. Surry County has four major enterprise

funds: the Landfill Fund, the Flat Rock/Bannertown Water and Sewer District, the Interstates

Water and Sewer District, and the Dobson Area Water and Sewer Fund. The Landfill Reserve

Fund is a fund established by the County to accumulate the funds necessary for any expenses

related to land acquisition, construction, equipping, and closing a landfill.

33




The Interstates Water and Sewer District Fund accounts for water and sewer activities. A capital

project fund has been established for the Interstates Water and Sewer District to account for the

construction of the first water lines in the District. This fund is consolidated with the Interstates

Water and Sewer District (the operating fund) for financial reporting purposes.

The County reports the following nonmajor enterprise fund:

The Elkin Area Water and Sewer Fund accounts for water and sewer activities in the Gentry Road

area of Elkin.

The County reports the following fund types:

Fiduciary Funds account for the assets held by the County in a trustee capacity or as an agent for

individuals, private organizations, other governmental units, and/or other funds. Fiduciary funds

include the following fund type:

Agency Funds. Agency funds are custodial in nature and do not involve measurement of results

of operations. Agency funds are used to account for assets the County holds on behalf of others.

The County maintains six agency funds: the Social Services Trust Fund that accounts for funds

held by the County for the subsistence needs of specific social services clients; the Jail Trust Fund

that accounts for monies held by the County for inmates; the Motor Vehicle Tax Fund that

accounts for registered motor vehicle property taxes that are billed and collected by the County

for various municipalities and special districts within the County; the State Solid Waste Disposal

Tax Fund that accounts for the $2.00 per ton tax on landfill waste; the Regional Tourism Fund

which accounts for a partnership with surrounding counties in North Carolina and Virginia to

promote tourism; and a Miscellaneous Agency Funds group. The following agency funds are

accounted for in the Miscellaneous Agency Funds group; the Fines and Forfeitures Fund that

accounts for the collection and payment of fines and forfeitures to three Boards of Education in

the County; the CBA Money and Elderly or Handicap Transportation Assistance Funds that

account for the collection and payment of State financial grant assistance to various sub-

recipients; the Floodplain Mapping accounts for collection and remittance for fees for Floodplain

mapping to N.C. Department of Crime Control and Public Safety; the Mental Health – ABC Fund

which accounts for funds paid by Municipal ABC Boards in Surry County on the number of

bottles of spirituous liquor sold during the month by all stores; the NC DOR-HB-1779 Fund

accounts for the additional interest on delinquent motor vehicle property tax payments to be

transferred to NC State Treasurer; the P.A.R.T Transportation Taxes Fund accounts for vehicle

rental taxes collected for Piedmont Authority of Regional Transportation; the Dobson Zoning

Fund that accounts for collection and remittance of zoning permits for the Town of Dobson; the

State Treasurer General Fund which accounts for fees collected by the Register of Deeds for

filing a Deed of Trust; the Department of Cultural Resources Fund which accounts for fees

collected by the Register of Deeds which are used to offset the cost of the Archives and Records

Management Program; the Excise Tax of Deeds Fund which accounts for the tax rate of one

dollar on each five hundred dollars of real property conveyed to another person remitted to the

Department of Revenue and distributed per G.S. 105-228.3; the Domestic Violence Center Fund

which accounts for thirty dollars of each marriage license issued forwarded to the Department of

34




Administration and credited to the Domestic Violence Center Fund established under G.S. 50B-9;

the Contractor Permits Inspections fund which accounts for a ten dollar fee collected on building

permits paid to the NC Licensing Board for the Homeowners Recovery Fund per G.S. 87-15.6b;

the State Fees concealed Handgun Permits Fee Fund which accounts for the State’s portion of

permit fees paid for concealed weapon permits under G.S.14-415.19; and the Cell Tower Lease

Town of Pilot Mountain Fund which accounts for the Town of Pilot Mountain's portion of

monthly rent paid for cell tower space.

C. Measurement Focus and Basis of Accounting

In accordance with North Carolina General Statutes, all funds of the County are maintained

during the year using the modified accrual basis of accounting.

Government-Wide, Proprietary, and Fiduciary Fund Financial Statements. The

government-wide, proprietary, and fiduciary fund financial statements are reported using the

economic resources measurement focus, except for the agency funds which have no measurement

focus. The government-wide, proprietary, and fiduciary fund financial statements are reported

using the accrual basis of accounting. Revenues are recorded when earned, and expenses are

recorded at the time liabilities are incurred, regardless of when the related cash flows take place.

Non-exchange transactions, in which the County gives (or receives) value without directly giving

(or receiving) equal value in exchange, include property taxes, grants, entitlements, and

donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for

which the taxes are levied. Revenue from grants, entitlements, and donations is recognized in the

fiscal year in which all eligibility requirements have been satisfied.

Amounts reported as program revenues include 1) charges to customers or applicants for goods,

services, or privileges provided; 2) operating grants and contributions; and 3) capital grants and

contributions, including special assessments. Internally-dedicated resources are reported as

general revenues rather than as program revenues. Likewise, general revenues include all taxes.

Proprietary funds distinguish operating revenues and expenses from non-operating items.

Operating revenues and expenses generally result from providing services and producing and

delivering goods in connection with a proprietary fund’s principal ongoing operations. The

principal operating revenues of the County enterprise funds are charges to customers for sales and

services. The County also recognizes as operating revenue the portion of tap fees intended to

recover the cost of connecting new customers to the system. Operating expenses for enterprise

funds include the cost of sales and services, administrative expenses, and depreciation on capital

assets. All revenues and expenses not meeting this definition are reported as non-operating

revenues and expenses.

Governmental Fund Financial Statements. Governmental funds are reported using the current

financial resources measurement focus and the modified accrual basis of accounting. Under this

method, revenues are recognized when measurable and available. Expenditures are recorded

when the related fund liability is incurred, except for principal and interest on long-term debt,

claims and judgments, and compensated absences, which are recognized as expenditures to the

extent they have matured. Long-term debt issued and acquisitions under capital leases are

reported as other financing sources. General capital asset acquisitions are reported as

expenditures in governmental funds.

35




The County considers all revenues available if they are collected within 90 days after year-end,

except for property taxes. Ad valorem property taxes are not accrued as revenue because the

amount is not susceptible to accrual. At June 30, taxes receivable are materially past due and are

not considered to be an available resource to finance the operations of the current year. Also, as

of January 1, 1993, State law altered the procedures for the assessment and collection of property

taxes on registered motor vehicles in North Carolina. Effective with this change in the law, Surry

County is responsible for billing and collecting the property taxes on all registered motor vehicles

on behalf of all municipalities and special tax districts in the County. For registered motor

vehicles, property taxes are due the first day of the fourth month after the vehicles are registered.

The billed taxes are applicable to the fiscal year in which they become due. Therefore, taxes for

vehicles registered from March 2011 through February 2012 apply to the fiscal year ended June

30, 2012. Uncollected taxes which were billed during this period are shown as a receivable on

these financial statements.

Sales taxes collected and held by the State at year-end on behalf of the County are recognized as

revenue. Intergovernmental revenues and sales and services are not susceptible to accrual

because generally they are not measurable until received in cash. Expenditure-driven grants are

recognized as revenue when the qualifying expenditures have been incurred and all other grant

requirements have been satisfied.

Under the terms of grant agreements, the County funds certain programs by a combination of

specific cost-reimbursement grants, categorical block grants, and general revenues. Thus, when

program expenses are incurred, there are both restricted and unrestricted net assets available to

finance the program. It is the County’s policy to first apply cost-reimbursement grant resources

to such programs, followed by categorical block grants, then by general revenues.

When both restricted and unrestricted resources are available for use, it is the County’s policy to

use restricted resources first, then unrestricted resources as they are needed.

All governmental and business-type activities and enterprise funds of the County follow FASB

Statements and Interpretations issued on or before November 30, 1989, Accounting Principles

Board Opinions, and Accounting Research Bulletins, unless those pronouncements conflict with

GASB pronouncements.

D. Budgetary Data

The County’s budgets are adopted as required by the North Carolina General Statutes. An annual

budget ordinance is adopted for the General Fund, special revenue funds, and enterprise funds.

All annual appropriations lapse at fiscal year-end. Project ordinances are adopted for the capital

project funds. All budgets are prepared using the modified accrual basis of accounting, which is

consistent with the accounting system used to record transactions.

36




Expenditures may not legally exceed appropriations at the departmental level for the General,

Special Revenue, and Enterprise Funds and at the object level for the Capital Project Funds. The

County Manager is authorized to adjust approved budget appropriations within the same fund,

and such action is reported to the Board at a subsequent meeting. During the year, several

amendments to the original budget became necessary. The budget ordinance must be adopted by

July 1 of the fiscal year or the governing board must adopt an interim budget that covers that time

until the annual ordinance can be adopted.

E. Estimates

The preparation of financial statements in conformity with generally accepted accounting

principles requires management to make estimates and assumptions that affect certain reported

amounts and disclosures. Accordingly, actual results could differ from those estimates.

Significant areas where estimates are made are allowance for doubtful accounts and depreciation

lives.

F. Assets, Liabilities, and Fund Equity

Deposits and Investments

All of the County’s deposits are made in board-designated official depositories and are secured as

required by G.S. 159-31. The County may designate, as an official depository, any bank or

savings association whose principal office is located in North Carolina. Also, the County may

establish time deposit accounts such as NOW and SuperNOW accounts, money market accounts,

and certificates of deposit.

State law [G.S. 159-30(c)] authorizes the County to invest in obligations of the United States or

obligations fully guaranteed both as to principal and interest by the United States; obligations of

the State of North Carolina; bonds and notes of any North Carolina local government or public

authority; obligations of certain non-guaranteed federal agencies; certain high quality issues of

commercial paper and bankers' acceptances; and the North Carolina Capital Management Trust

(NCCMT), an SEC registered (2a-7) money market mutual fund. The County’s investments with

a maturity of more than one year at acquisition and non-money market investments are carried at

fair value as determined by quoted market prices. The securities of the NCCMT Cash Portfolio

are valued at fair value, which is the NCCMT’s share price. The NCCMT Term Portfolio’s

securities are valued at fair value. Money market investments that have a remaining maturity at

the time of purchase of one year or less and non-participating interest earnings and investment

contracts are reported at amortized cost.

Cash and Cash Equivalents

The County pools money from several funds to facilitate disbursement and investment and to

maximize investment income. Therefore, all cash and investments are essentially demand

deposits and are considered cash and cash equivalents.

37




Restricted Assets

The restricted assets of $167,850 in the Schools Capital Project Fund represent the balance of

proceeds available under installment purchase contracts to finance construction and renovations

to schools and a community college. The restricted assets of $113,701 in the County Capital

Project Fund represent the balance of proceeds available under an installment purchase contract

to finance County Building upgrades. The total restricted assets of $4,838,946 in the General

Fund represents the balance in a sinking fund required by a financing contract to construct

schools of $4,660,417 and money in the Revaluation Fund of $178,529 is restricted per North

Carolina General Statute 153A-150.

Ad Valorem Taxes Receivable

In accordance with State laws [G.S. 105-347 and G.S. 159-13(a)], the County levies ad valorem

taxes on property other than motor vehicles on July 1, the beginning of the fiscal year. The taxes

are due on September 1 (lien date); however, penalties and interest do not accrue until the

following January 6. These taxes are based on the assessed values as of January 1, 2011. As

allowed by State law, the County has established discounts that apply to taxes which are paid

prior to the due date. In the County’s General Fund, ad valorem tax revenues are reported net of

such discounts.

Allowances for Doubtful Accounts

All receivables that are historically uncollectible accounts are shown net of an allowance for

doubtful accounts. This amount is estimated by analyzing the percentage of receivables that were

written off in prior years.

Capital Assets

Capital assets are recorded at original cost or estimated historical cost. Donated assets are

recorded at their estimated fair value at the date of donation. Minimum capitalization cost is

$5,000. The cost of normal maintenance and repairs that do not add to the value of the asset or

materially extend assets’ lives are not capitalized.

The County holds title to certain properties of the Boards of Education of Surry County, Elkin

and Mount Airy, which have been included in capital assets. The properties have been deeded to

the County to permit installment purchase financing of acquisition and construction costs.

Agreements between the County and the Boards of Education give the Boards of Education full

use of the facilities, full responsibility for maintenance of the facilities, and provide that the

County will convey title to the property back to the Boards of Education once all restrictions of

the financing agreements and all sales tax reimbursement requirements have been met. The

properties are not reflected as capital assets in the financial statements of the Boards of

Education.

38




Capital assets in the enterprise funds of the County are recorded at original cost at the time of

acquisition. Capital assets donated to the enterprise fund operations are recorded at the estimated

fair market value at the date of donation. Depreciation is provided over the estimated useful lives

of the assets using the straight-line method.

Capital assets are depreciated on a straight-line basis over the following useful lives to the cost of

the assets:

Years

Equipment 5

Vehicles 5

Other improvements 10

Plant and distribution 40

Buildings 20-50

Long-Term Obligations

In the government-wide financial statements and in the proprietary fund types in the fund

financial statements, long-term debt and other long-term obligations are reported as liabilities in

the applicable governmental activities, business-type activities, or the proprietary fund Statement

of Net Assets.

In the fund financial statements for governmental fund types, the face amount of debt issued is

reported as an other financing source.

Net Assets/Fund Balances

Net Assets

Net assets in government-wide and proprietary fund financial statements are classified as invested

in capital assets, net of related debt, restricted and unrestricted. Restricted net assets represent

constraints on resources that are either externally imposed by creditors, grantors, contributors,

laws or regulations of other governments, or imposed by law through State statutes.

Fund Balances

In the governmental fund financial statements, fund balance is composed of five classifications

designed to disclose the hierarchy of constraints placed on how fund balance can be spent.

39




The governmental fund types classify fund balances as follows:

Non-Spendable Fund Balance

This classification includes amounts that cannot be spent because they are either (a) not in

spendable form or (b) legally or contractually required to be maintained in tact.

Notes Receivable – portion of fund balance that is not an available resource because it represents

the year-end balance of notes receivable that are not expendable available resources.

Restricted Fund Balance

This classification includes amounts that are restricted to specific purposes externally imposed by

creditors or imposed by law.

Stabilization for State Statute – portion of fund balance that is not an available resource for

appropriation in accordance with State law [G.S. 159-8(a)].

Restricted for Register of Deeds – portion of fund balance restricted by State statute for

automation enhancement (software) improvements.

Restricted for General Government– portion of fund balance restricted by revenue source to be

used to support general government activities.

Restricted for Education – portion of fund balance restricted by revenue source to be used to

support future public education expenditures.

Restricted for Debt Service – portion of fund balance restricted by revenue source to be used to

support future debt service expenditures.

Restricted for Public Safety – portion of fund balance restricted by revenue source for public

safety related activities.

School County

Capital Building Other

General Project Capital Governmental

Purpose Fund Fund Project Fund Funds Total

Restricted, all other:

Register of Deeds 115,922$ -$ -$ -$ 115,922$

General Government - - 113,701 - 113,701

Education 674,944 1,120,461 - - 1,795,405

Debt Service 4,587,228 - - - 4,587,228

Public Safety - - - 678,673 678,673

Total 5,378,094$ 1,120,461$ 113,701$ 678,673$ 7,290,929$

40




Committed Fund Balance

This classification includes amounts that can be used only for the specific purposes determined by

a formal action of the government's highest level of decision-making authority. The Board of

Commissioners is the highest level of decision-making authority for the government that can, by

adoption of an ordinance prior to the end of the fiscal year, commit fund balance. Once adopted,

the limitation imposed by the ordinance remains in place until a similar action is taken (the

adoption of another ordinance) to remove or revise the limitation.

Committed for General Government – portion of fund balance that can only be used for tax

revaluation.

General

Purpose Fund

Committed:

General government 178,529$

Assigned Fund Balance

Assigned fund balance is the portion of fund balance that Surry County intends to use for specific

purposes. The County's governing body has the authority to assign fund balance. The Manager

and Finance Officer, as granted in the officially adopted budget ordinance, have been granted

limited authority to assign fund balance.

Subsequent Year's Expenditures – portion of fund balance that is appropriated in the next year's

budget that is not already classified in restricted of committed. The governing body approves the

appropriation; however, the budget ordinance authorizes the Manager and Finance Officer to

make certain modifications without requiring Board approval.

Assigned fund balance at June 30, 2012 is as follows:

General

Purpose Fund

Subsequent year's expenditures 5,515,932$

Unassigned Fund Balance

Unassigned fund balance represents the portion of fund balance that has not been assigned to

another fund or is not restricted, committed, or assigned to specific purposes within the General

Fund.

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Surry County has a revenue spending policy that provides guidance for programs with multiple

revenue sources. The Finance Officer will use resources in the following order: bond/debt

proceeds, federal funds, state funds, local non-County funds, and County funds. For purposes of

fund balance classification, expenditures are to be spent from restricted fund balance first,

followed in-order by committed fund balance, assigned fund balance, and lastly, unassigned fund

balance. The Finance Officer has the authority to deviate from this policy if it is in the best

interest of the County or when required by grant or other contractual agreements.

The County has not officially adopted a fund balance policy.

The following schedule provides management and citizens with information on the portion of

General Fund balance that is available for appropriation.

Total fund balance - General Fund 20,142,461$

Less:

Notes receivable (270,594)

Stabilization for State statute (4,940,449)

Total available balance 14,931,418$

Reconciliation of the Statement of Revenues, Expenditures, and Changes In Fund Balance -

Budget and Actual - General Fund to the Statement of Revenues, Expenditures, and

Changes in Fund Balance - Governmental Funds

A legally budgeted tax Revaluation Fund and School Capital Outlay Fund are consolidated into

the General Fund for reporting purposes on the Statement of Revenues, Expenditures, and

Changes in Fund Balances - Governmental Funds (Exhibit D). Fund balance for the General

Fund is reconciled as follows:

Fund balance, ending (Exhibit F) 19,288,986$

Schools Capital Outlay Fund:

Revenues:

Local option sales taxes 2,756,205

Interest earned on investments 84,546

Expenditures:

Education (1,433,060)

Transfers out - General Fund (1,608,744)

Fund balance, beginning 875,999

Revaluation Fund:

Expenditures:

General Government (245,938)

Transfers in - General Fund 220,739

Fund balance, beginning 203,728

Fund balance, ending (Exhibit D) 20,142,461$

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G. Revenues, Expenditures, and Expenses

Compensated Absences

The vacation policy of the County provides for the accumulation of up to thirty (30) days earned

vacation leave with such leave being fully vested when earned. All vacation pay is accrued when

earned in the government-wide and proprietary fund financial statements.

The County's sick leave policy provides for an unlimited accumulation of earned sick leave. Sick

leave does not vest, but any unused sick leave accumulated at the time of retirement may be used

in the determination of length of service for retirement benefit purposes. Since the County has no

obligation for the accumulated sick leave until it is actually taken, no accrual for sick leave has

been made.

2. Deposits and Investments

A. Deposits

All of the County's deposits are either insured or collateralized using one of two methods. Under

the Dedicated Method, all deposits exceeding the federal depository insurance coverage level are

collateralized with securities held by the County's agent in the County’s name. Under the Pooling

Method, which is a collateral pool, all uninsured deposits are collateralized with securities held by

the State Treasurer's agent in the name of the State Treasurer. Since the State Treasurer is acting

in a fiduciary capacity for the County, these deposits are considered to be held by the County’s

agent in the entity’s name. The amount of the pledged collateral is based on an approved

averaging method for non-interest bearing deposits and the actual current balance for interest-

bearing deposits. Depositories using the Pooling Method report to the State Treasurer the

adequacy of their pooled collateral covering uninsured deposits. The State Treasurer does not

confirm this information with the County or with the escrow agent. Because of the inability to

measure the exact amount of collateral pledged for the County under the Pooling Method, the

potential exists for undercollaterization, and this risk may increase in periods of high cash flows.

However, the State Treasurer of North Carolina enforces strict standards of financial stability for

each depository that collateralizes public deposits under the Pooling Method. The County does

not have policies regarding custodial credit risk for deposits, but relies on the State Treasurer to

enforce standards of minimum capitalization for all Pooling Method financial institutions and to

monitor them for compliance. The County complies with the provisions of G.S. 159-31 when

designating official depositories and verifying that deposits are properly secured.

At June 30, 2012, the County's deposits had a carrying amount of $18,456,307 and a bank

balance of $20,448,008. Of the bank balance, $834,989 was covered by federal depository

insurance, and $19,613,019 was covered by collateral held under the Pooling Method. Cash on

hand was $3,780.

43




B. Investments

At June 30, 2012, the County had the following investments and maturities:

Less Than 6-12

Investment Type Fair Value 6 Months Months 1-5 Years

U.S. Government Agencies 1,506,180$ -$ -$ 1,506,180$

N.C. Capital Management Trust -

Cash Portfolio 3,533,575 N/A N/A N/A

Total investments 5,039,755$ -$ -$ 1,506,180$

Interest Rate Risk - As a means of limiting its exposure to fair value losses arising from rising

interest rates, the County’s investment policy limits at least half of the County’s investment

portfolio to maturities of less than 12 months. Also, the County’s investment policy requires

purchases of securities to be laddered with staggered maturity dates and limits all securities to a

final maturity of no more than five years.

Credit Risk - State law limits investments in commercial paper to the top rating issued by

nationally recognized statistical rating organizations (NRSRO's); however, the County has no

formal policy on managing credit risk. The County’s investments in the N.C. Capital

Management Trust Cash Portfolio carried a credit rating of AAA by Standard and Poor’s as of

June 30, 2012. The County’s investments in U.S. Agencies are rated AAA by Standard and

Poor’s and Aaa by Moody’s Investors Service.

Concentration of Credit Risk - The County places no limit on the amount that the County may

invest in any one issuer. More than 25 percent of the County’s investments are in U.S.

Government Agencies. Investments in Federal Home Loan Mortgage Corporation are 33% and

Federal National Mortgage Agency 67%.

3. Property Tax Use-Value Assessment On Certain Lands

In accordance with the General Statutes, agriculture, horticulture, and forest land may be taxed by the

County at the present-use value as opposed to market value. When the property loses its eligibility

for use-value taxation, the property tax is recomputed at market value for the current year and the

three preceding fiscal years, along with the accrued interest from the original due date. This tax is

immediately due and payable. The following are property taxes that could become due if present use-

value eligibility is lost. These amounts have not been recorded in the financial statements.

Year

Levied Tax Interest Total

2009 2,005,445$ 656,783$ 2,662,228$

2010 2,044,447 485,556 2,530,003

2011 2,070,509 305,400 2,375,909

2012 2,103,254 120,937 2,224,191

Total 8,223,655$ 1,568,676$ 9,792,331$

44




4. Receivables

Receivables at Exhibit A at June 30, 2012 were as follows:

Due from

Notes Other

Accounts Taxes Receivable Governments Total


General 5,970,734$ 2,331,586$ 270,594$ 355,479$ 8,928,393$

Other governmental 8,946 291,564 - 596,024 896,534

Total receivables 5,979,680 2,623,150 270,594 951,503 9,824,927

Allowance for doubtful accounts (1,966,872) (916,035) - - (2,882,907)

Total governmental activities 4,012,808$ 1,707,115$ 270,594$ 951,503$ 6,942,020$

Amounts not scheduled for collection

during the subsequent year -$ -$ 235,210$ -$ 235,210$


Landfill Fund 111,629$ 155,034$ -$ -$ 266,663$

Flatrock/Bannertown

Water & Sewer District 28,511 - - 6,412 34,923

Dobson Area Water & Sewer District 1,935 - - 11,334 13,269

Elkin Area Water & Sewer District 3,361 - - 2,212 5,573

Interstates Water & Sewer District 1,111 - - 6,672 7,783

Total receivables 146,547 155,034 - 26,630 328,211

Allowance for doubtful accounts (8,221) (59,394) - - (67,615)

Total business-type activities 138,326$ 95,640$ -$ 26,630$ 260,596$

Due from other governments consisted of the following:

Governmental Business-Type

Activities Activities

Local option sales tax 808,865$ -$

Lottery proceeds 111,394 -

Due from Elkin - 2,212

Due from Dobson - 18,006

Due from Mount Airy - 6,412

E-911 31,244 -

Total 951,503$ 26,630$

45




5. Capital Assets

A. Governmental Capital Assets

A summary of changes in the County’s governmental capital assets follows:

July 1, 2011 Additions Retirements Transfers June 30, 2012

By Asset Type:

Non-Depreciable Assets:

Construction in progress 25,239,263$ 974,625$ -$ (11,501,157)$ 14,712,731$

Land 7,430,626 36,510 (12,600) - 7,454,536

Depreciable Assets:

Buildings and improvements 70,021,054 52,101 - 11,150,053 81,223,208

Equipment 5,813,143 582,518 (574,757) (49,385) 5,771,519

Vehicles 3,839,491 127,590 (131,554) - 3,835,527

Total 112,343,577 1,773,344 (718,911) (400,489) 112,997,521

Less Accumulated Depreciation:

Buildings and improvements (9,307,139) (1,751,407) 5,446 - (11,053,100)

Equipment (4,385,412) (430,733) 232,736 - (4,583,409)

Vehicles (2,836,408) (379,707) 114,738 - (3,101,377)

Total (16,528,959) (2,561,847) 352,920 - (18,737,886)

Capital assets, net 95,814,618$ (788,503)$ (365,991)$ (400,489)$ 94,259,635$

Depreciation expense was charged to functions/programs of the primary government as follows:


General government 1,120,712$

Public safety 594,622

Human services 73,946

Economic and physical development 54,236

Education 590,924

Cultural and recreation 127,407

Total 2,561,847$

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B. Proprietary Capital Assets

The capital assets of the proprietary funds at June 30, 2012 are as follows:

July 1, 2011 Additions Retirements June 30, 2012


Landfill Fund:


Land 1,500,951$ -$ -$ 1,500,951$

Depreciable Assets:

Building and improvements 8,715,114 22,549 - 8,737,663

Fencing 93,127 - - 93,127

Heavy equipment 2,324,441 10,500 (14,850) 2,320,091

Vehicles 690,013 148,000 - 838,013

Scales 104,895 - (35,812) 69,083

Light equipment 177,383 49,189 - 226,572

Total 13,605,924 230,238 (50,662) 13,785,500


Building and improvements (3,222,769) (385,478) - (3,608,247)

Fencing (46,534) (933) - (47,467)

Heavy equipment (2,081,691) (121,020) 14,850 (2,187,861)

Vehicles (541,462) (21,537) - (562,999)

Scales (112,095) - 35,812 (76,283)

Light equipment (166,123) (24,356) - (190,479)

Total (6,170,674) (553,324) 50,662 (6,673,336)

Capital assets, net 7,435,250 (323,086) - 7,112,164

47




July 1, 2011 Additions Transfers June 30, 2012

Flat Rock/ Bannertown

Water and Sewer District:


Land 20,000 - - 20,000

Depreciable Assets:

Plant and distribution 6,572,659 - - 6,572,659

Total 6,592,659 - - 6,592,659


Plant and distribution (492,949) (164,317) - (657,266)


Dobson Area Water and

Sewer District:

Depreciable Assets:

Plant and distribution 2,160,691 - 400,489 2,561,180

Less Accumulated Depreciation: -


Capital assets, net 2,129,181 (55,686) 400,489 2,473,984

Interstates Water and

Sewer District:


Land 16,140 - - 16,140

Construction in progress 228,230 12,000 - 240,230

Depreciable Assets:

Plant and distribution 1,902,086 - - 1,902,086

Total 2,146,456 12,000 - 2,158,456




Total business-type

capital assets, net 17,790,784$ (578,641)$ 400,489$ 17,612,632$

48




6. Commitments

The government has active construction projects. At June 30, 2012, the government’s commitments

with contractors and projects were as follows:

Remaining

Project Spent-To-Date Commitment

Guaranteed Energy Savings Contract 1,032,345$ 115,493$

School Construction 22,635,908 900,734

Interstates Sewer Collection System 240,230 4,770

Total 23,908,483$ 1,020,997$

7. Payables

Payables at Exhibit A at June 30, 2012 were as follows:

Insurance

Claims

Due to Incurred, But

Vendors Schools Not Reported Total


General Fund 2,820,334$ 464,127$ 825,765$ 4,110,226$

Capital project funds 49,833 - - 49,833

Special revenue funds 54,370 - - 54,370

Total governmental activities 2,924,537 464,127 825,765 4,214,429


Landfill Fund 55,770 - - 55,770

Interstates Water and Sewer District 3,015 - - 3,015

Dobson Area Water and Sewer District 6,938 - - 6,938

Total business-type activities 65,723 - - 65,723

Total 2,990,260$ 464,127$ 825,765$ 4,280,152$

49




8. Pension Plan Obligations

A. Local Governmental Employees' Retirement System

Plan Description. Surry County contributes to the statewide Local Governmental Employees'

Retirement System (LGERS), a cost-sharing multiple-employer defined benefit pension plan

administered by the State of North Carolina. LGERS provides retirement and disability benefits

to plan members and beneficiaries. Article 3 of G.S. Chapter 128 assigns the authority to

establish and amend benefit provisions to the North Carolina General Assembly. The LGERS is

included in the Comprehensive Annual Financial Report (CAFR) for the State of North Carolina.

The State's CAFR includes financial statements and required supplementary information for

LGERS. That report may be obtained by writing to the Office of the State Controller, 1410 Mail

Service Center, Raleigh, North Carolina 27699-1410, or by calling (919) 981-5454.

Funding Policy. Plan members are required to contribute six percent of their annual covered

salary. The County is required to contribute at an actuarially determined rate. For the County,

the current rate for employees not engaged in law enforcement and for law enforcement officers

is 6.47% and 6.41%, respectively, of annual covered payroll. The contribution requirements of

members and of Surry County are established and may be amended by the North Carolina

General Assembly. The County's contributions to LGERS for the years ended June 30, 2012,

2011, and 2010 were $1,502,899, $1,410,108, and $1,068,315, respectively. The contributions

made by the County equaled the required contributions for each year.

B. Law Enforcement Officers’ Special Separation Allowance

Plan Description. Surry County administers a public employee retirement system (the

"Separation Allowance"), a single-employer defined benefit pension plan that provides retirement

benefits to the County's qualified sworn law enforcement officers. The Separation Allowance is

equal to .85 percent of the annual equivalent of the base rate of compensation most recently

applicable to the officer for each year of creditable service. The retirement benefits are not

subject to any increases in salary or retirement allowances that may be authorized by the General

Assembly. Article 12D of G. S. Chapter 143 assigns the authority to establish and amend benefit

provisions to the North Carolina General Assembly. The plan does not issue a separate stand-

alone financial report. Each local government makes benefit payments required under this plan.

All full-time County law enforcement officers are covered by the Separation Allowance. At

December 31, 2011, the Separation Allowance's membership consisted of 60 active plan

members and 6 retired and terminated members.

50




Summary of Significant Accounting Policies

Basis of Accounting. The County has chosen to fund the Separation Allowance on a pay-as-you-

go basis. There are no plan assets and the liability is not material; therefore, the plan is not

presented as a pension trust fund in the County's Comprehensive Annual Financial Report.

Pension expenditures are made from the General Fund, which is maintained on the modified

accrual basis of accounting.

Method Used to Value Investments. No funds are set aside to pay benefits and administration

costs. These expenditures are paid as they come due.

Contributions. The County is required by Article 12D of G. S. Chapter 143 to provide these

retirement benefits and has chosen to fund the benefit payments on a pay-as-you-go basis through

appropriations made in the General Fund operating budget. The County's obligation to contribute

to this plan is established and may be amended by the North Carolina General Assembly. There

were no contributions made by employees.

The annual required contribution for the current year was determined as part of the December 31,

2010 actuarial valuation using the projected unit, credit actuarial cost method. The actuarial

assumptions included (a) 5.00% investment rate of return and (b) projected salary increases

ranging from 4.25% to 7.85% per year. Item (b) included an inflation component of 3.0%. The

assumptions did not include post-retirement benefit increases. The actuarial value of assets was

market value. The unfunded actuarial accrued liability is being amortized as a level of percentage

pay on a closed basis. The remaining amortization period at December 31, 2010 was 20 years.

Annual Pension Cost and Net Pension Obligation. The County's annual pension cost and net

pension obligation to the Separation Allowance for the current year were as follows:

Employer annual required contribution 103,519$

Interest on net pension obligation 20,753

Adjustment to annual required contribution (24,761)

Annual pension cost 99,511

Employer contributions made (66,535)

Increase (decrease) in net pension obligation 32,976

Net pension obligation - July 1 415,062

Net pension obligation - June 30 448,038$

Annual Percentage Net

Year Ended Pension of APC Pension

June 30 Cost (APC) Contributed Obligation

2010 92,431$ 88.39% 380,821$

2011 110,000 68.87% 415,062

2012 99,511 66.86% 448,038

Three-Year Trend Information

51




Funded Status and Funding Progress. As of December 31, 2011, the most recent actuarial

valuation date, the plan was not funded. The actuarial accrued liability for benefits was

$978,683, and the actuarial value of assets was $-0-, resulting in an unfunded actuarial accrued

liability (UAAL) of $978,683.

The covered payroll (annual payroll of active employees covered by the plan) was $2,164,213,

and the ratio of the UAAL to the covered payroll was 45.22 percent.

The Schedule of Funding Progress, presented as required supplementary information following

the notes to the financial statements, presents multi-year trend information about whether the

actuarial value of the plan assets are increasing or decreasing over time relative to the actuarial

accrued liability benefits.

C. Supplemental Retirement Income Plan for Law Enforcement Officers

Plan Description. The County contributes to the Supplemental Retirement Income Plan (the

“Plan”), a defined contribution pension plan administered by the Department of State Treasurer

and a Board of Trustees. The Plan provides retirement benefits to law enforcement officers

employed by the County. Article 5 of G.S. Chapter 135 assigns the authority to establish and

amend benefit provisions to the North Carolina General Assembly. The Supplemental Retirement

Income Plan for Law Enforcement Officers is included in the Comprehensive Annual Financial

Report (CAFR) for the State of North Carolina. The State’s CAFR includes pension trust fund

financial statements for the Internal Revenue Code Section 401(k) plan that includes the

Supplemental Retirement Income Plan for Law Enforcement Officers. That report may be

obtained by writing to the Office of the State Controller, 1410 Mail Service Center, Raleigh,

North Carolina 27699-1410, or by calling (919) 981-5454.

Funding Policy. Article 12E of G.S. Chapter 143 requires that the County contribute each month

an amount equal to five percent of each officer’s salary, and all amounts contributed are vested

immediately. Also, the law enforcement officers may make voluntary contributions to the plan.

Contributions for the year ended June 30, 2012 were $132,126, which consisted of $108,696 from

the County and $23,430 from the law enforcement officers.

D. Register of Deeds’ Supplemental Pension Fund

Plan Description. Surry County also contributes to the Register of Deeds’ Supplemental

Pension Fund (the “Fund”), a non-contributory, defined contribution plan administered by the

North Carolina Department of State Treasurer. The Fund provides supplemental pension benefits

to any County Register of Deeds who is retired under the Local Governmental Employees’

Retirement System (LGERS) or an equivalent locally sponsored plan. Article 3 of G.S. Chapter

161 assigns the authority to establish and amend benefit provisions to the North Carolina General

Assembly. The Fund is included in the Comprehensive Annual Financial Report (CAFR) for the

State of North Carolina. The State’s CAFR includes pension trust fund financial statements for

the Internal Revenue Code Section 401(k) plan that includes the Supplemental Retirement

Income Plan for Law Enforcement Officers. That report may be obtained by writing to the Office

of the State Controller, 1410 Mail Service Center, Raleigh, North Carolina 27699-1410, or by

calling (919) 981-5454.

52




Funding Policy. On a monthly basis, the County remits to the Department of State Treasurer an

amount equal to one and one-half percent (1.5%) of the monthly receipts collected pursuant to

Article 3 of G.S. Chapter 161. Immediately following January 1 of each year, the Department of

State Treasurer divides ninety-three percent (93%) of the amount in the Fund at the end of the

preceding calendar year into equal shares to be disbursed as monthly benefits. The remaining

seven percent (7%) of the Fund’s assets may be used by the State Treasurer in administering the

Fund. For the fiscal year ended June 30, 2012, the County’s required and actual contributions

were $5,976.

E. Other Post-Employment Healthcare Benefits

In addition to providing pension benefits, Surry County has elected to provide post-retirement

healthcare benefits to retirees employed on or before June 16, 2008 of the County who participate

in the North Carolina Local Governmental Employees' Retirement System (the “System”) and

have at least twenty years of creditable service with the County. The County pays half the cost of

coverage for these benefits to qualifying retirees. Also, qualifying retirees can purchase coverage

for their dependents at the County's group rates. Currently, seventy-one (71) are eligible for post-

retirement health benefits. For the fiscal year ended June 30, 2012, the County made payments

for post-retirement health benefit premiums of $195,506. The County provides healthcare

coverage through a self-funded health plan. However, the County obtains specific and aggregate

stop-loss coverage through a private insurer. Claims are managed by a third-party administrator.

On June 16, 2008, Surry County abolished the retirees’ insurance plan. All individuals employed

on or before June 16, 2008 are grandfathered and will remain eligible for the benefit unless

terminated prior to meeting eligibility requirements. This is a single employer defined benefit

plan. A separate report was not issued for the plan.

Membership of the Plan consisted of the following at December 31, 2011, the date of the latest

actuarial valuation:

Law

General Enforcement

Employees Officers

Retirees and dependents receiving benefits 70 -

Terminated plan members entitled to,

but not yet receiving, benefits - -

Active plan members 434 48

Total 504 48

Funding Policy. The County pays 50% of the cost of coverage for the healthcare benefits paid to

qualified retirees under a County resolution that can be amended by the County Commissioners.

The County’s members pay 50% of individual coverage plus 100% of any dependent coverage

carried. The County has chosen to fund the healthcare benefits on a pay-as-you-go basis.

53




The current ARC rate is 6.36% of annual covered payroll. For the current year, the County

contributed $195,506, or 1.14% of annual covered payroll. The County purchases insurance from

a private carrier for healthcare coverage of retirees over 65 years of age. Retirees under age 65

remain on the County’s self-insured health plan. The County’s required contributions, under a

County resolution, for employees not engaged in law enforcement and for law enforcement

officers represented 6.36% and 6.36% of covered payroll, respectively. Contributions made by

members were approximately $195,506; no dependent coverage was elected by current retirees.

The County’s obligation to contribute to the Plan is established and may be amended by the

County Commissioners.

Summary of Significant Accounting Policies. Post-employment expenditures are made from

the General Fund, which is maintained on the modified accrual basis of accounting. No funds are

set aside to pay benefits and administration costs. These expenditures are paid as they come due.

Annual OPEB Cost and Net Obligation. The County’s annual OPEB cost (expense) is

calculated based on the annual required contribution of the employer (ARC), an amount

actuarially determined in accordance with the parameters of GASB Statement 45. The ARC

represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost

each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to

exceed thirty years. The following table shows the components of the County’s annual OPEB

cost for the year, the amount actually contributed to the plan, and changes in the County’s net

OPEB obligation for the healthcare benefits:

Governmental Business -Type

Activities Activities Total

Annual required contribution 1,069,831$ 21,833$ 1,091,664$

Interest on net OPEB obligation 97,951 1,999 99,950

Adjustments to annual required contribution (84,506) (1,725) (86,231)

Annual OPEB cost (expense) 1,083,276 22,107 1,105,383

Contributions made (191,596) (3,910) (195,506)

Increase (decrease) in net OPEB obligation 891,680 18,197 909,877

Net OPEB obligation, beginning of year - July 1 2,450,749 47,996 2,498,745

Net OPEB obligation, end of year - June 30 3,342,429$ 66,193$ 3,408,622$

The County’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and

the net OPEB obligation for 2012 were as follows:

Year Ended OPEB Annual OPEB OPEB

June 30 Cost Cost Contributed Obligation

2009 985,050$ 15.52% 832,188$

2010 985,050 18.13% 1,638,611

2011 1,056,775 23.90% 2,498,745 2012 1,105,383 17.69% 3,408,622

54




Funded Status and Funding Progress. As of December 31, 2011, the most recent actuarial

valuation date, the plan was not funded. The actuarial accrued liability for benefits and, thus, the

unfunded actuarial accrued liability (UAAL) was $10,945,383. The covered payroll (annual

payroll of active employees covered by the plan) was $17,175,350, and the ratio of the UAAL to

the covered payroll was 63.7 percent. Actuarial valuations of an ongoing plan involve estimates

of the value of reported amounts and assumptions about the probability of occurrence of events

far into the future. Examples include assumptions about future employment, mortality, and

healthcare trends. Amounts determined regarding the funded status of the plan and the annual

required contributions of the employer are subject to continual revision as actual results are

compared with past expectations and new estimates are made about the future. The Schedule of

Funding Progress, presented as required supplementary information following the notes to the

financial statements, presents multi-year trend information about whether the actuarial value of

plan assets are increasing or decreasing over time related to the actuarial accrued liabilities for

benefits.

Actuarial Methods and Assumptions. Projections of benefits for financial reporting purposes

are based on the substantive plan (the plan as understood by the employer and the plan members)

and include the types of benefits provided at the time of each valuation and the historical pattern

of sharing of benefit costs between the employer and plan members at that point. The actuarial

methods and assumptions used include techniques that are designed to reduce the effects of short-

term volatility in actuarial accrued liabilities and the actuarial value assets, consistent with the

long-term perspective of the calculations.

In the December 31, 2011 actuarial valuation, the projected unit credit actuarial cost method was

used. The actuarial assumptions included a 4.0 percent investment rate of return (net of

administrative expenses), which is the expected long-term investment returns on the employer’s

own investments calculated based on the funded level of the plan at the valuation date, and an

annual pre-Medicare cost trend increase 9.50 to 5.0 percent annually and an annual post-Medicare

trend rate increase of 7.00 to 5.00 percent annually. Both rates included a 3.00 percent inflation

assumption. The actuarial value of assets, if any, was determined using techniques that spread the

effects of short-term volatility in the market value of investments over a five-year period. The

UAAL is being amortized as a level percentage of projected payroll on an closed basis. The

remaining amortization period at December 31, 2011, was thirty years.

As of June 30, 2012, management had not decided on the funding options for this outstanding

obligation; therefore, OPEB will continue to be funded on a pay-as-you-go basis going into the

next fiscal year. Management will continue their efforts to find a way to fund the annual required

contribution while maintaining the level of service as prioritized by the County Board.

55




F. Other Employment Benefits

The County, pursuant to local ordinance, has elected to provide death benefits to employees

through the Death Benefit Plan for members of the Local Governmental Employees' Retirement

System (Death Benefit Plan), a multiple-employer, State-administered, cost-sharing plan funded

on a one-year term cost basis. The beneficiaries of those employees who die in active service

after one year of contributing membership in the System, or who die within 180 days after

retirement or termination of service and have at least one year of contributing membership service

in the System at the time of death, are eligible for death benefits. Lump sum death benefit

payments to beneficiaries are equal to the employee's twelve highest months' salary in a row

during the 24 months prior to the employee's death, but the benefit must be between $25,000 and

$50,000. All death benefit payments are made from the Death Benefit Plan. The County has no

liability beyond the payment of monthly contributions. Contributions are determined as a

percentage of monthly payroll, based upon rates established annually by the State. Separate rates

are set for employees not engaged in law enforcement and for law enforcement officers. Because

the benefit payments are made by the Death Benefit Plan and not by the County, the County does

not determine the number of eligible participants. For the fiscal year ended June 30, 2012, the

County made contributions to the State for death benefits of $23,926. The County's required

contributions for employees not engaged in law enforcement and for law enforcement officers

represented .11% and .14% of covered payroll, respectively. The contributions to the Death

Benefit Plan cannot be separated between the post-employment benefit amount and the other

benefit amount.

9. Operating Leases

The County is committed under various operating leases for land, buildings, and equipment. For the

year ended June 30, 2012, total lease expenditures under these operating leases totaled $97,479. An

analysis of obligations under operating leases follows:

Year Ending

June 30 Amount

2013 97,479$

2014 95,582

2015 91,455

2016 78,532

2017 73,191

Total 436,239$

56




10. Long-Term Obligations

A. Installment Purchases and Notes Payable

Serviced by Governmental Funds

Amount Date Rate Period Amount Balance Purpose

Construct:

2,746,000$ December 2000 5.19% Annual 183,067$ 732,268$ County jail

1,990,000 December 2000 5.16% Annual 165,834 165,834 Human Services building

9,750,000 June 2001 4.475% Semi-annual 406,250 812,500 Judicial Center

2,254,550 June 2001 0.00% Annual - 2,254,550 School QZAB

7,000,000 December 2005 3.71% Semi-annual 350,000 2,450,000 School

4,309,000 September 2003 4.03% Semi-annual 143,633 1,867,233 College classroom building



4,300,000 January 2006 4.33% Semi-annual 179,167 2,150,000 School

1,500,000 December 2006 3.74% Semi-annual 75,000 675,000 School

1,800,000 December 2006 0.00% Annual - 1,800,000 School QZAB


1,265,000 September 2003 3.97% Semi-annual 52,708 368,958 Workforce Development

5,600,000 June 2009 3.58% Semi-annual 233,333 4,200,000 School

8,914,879 June 2010 5.88% Semi-annual - 8,914,879 School QSCB

7,500,000 June 2010 5.88% Semi-annual - 7,500,000 School RZED

1,563,270 June 2010 5.88% Semi-annual - 1,563,270 School QZAB

1,787,753 June 2010 5.88% Semi-annual 125,000 1,537,753 School BAB

1,194,555 June 2011 4.07% Quarterly 23,500 1,194,555 Equipment

2,000,000 June 2011 5.00% Semi-annual 83,287 1,841,455 School QSCB

5,600,000 June 2011 4.62% Annual 250,000 5,350,000 Economic Development

Total installment purchase contracts and notes payable 51,078,255$

Annual debt service requirements to maturity for installment purchase contracts and notes

payable serviced by governmental funds are as follows:

Year Ending

June 30 Principal Interest

2013 4,936,736$ 2,011,317$

2014 4,403,303 1,794,227

2015 6,919,226 1,585,005

2016 4,278,896 1,364,170

2017 3,631,774 1,169,978

2018-2022 17,965,071 3,349,187

2023-2026 8,943,249 521,825

Total 51,078,255$ 11,795,709$

57




Serviced by Proprietary Funds

Outstanding


Construct:

$177,843 -

3,000,000$ June 2009 3.31% Semi-annual $223,789 2,080,860$ Landfill

Total installment purchases 2,080,860$

Original Issue Payment Information

Annual debt service requirements to maturity for installment purchase contracts serviced by the

proprietary funds are as follows:

Year Ending


2013 389,305$ 65,681$

2014 402,298 52,689

2015 415,724 39,263

2016 429,598 25,388

2017 443,935 11,051

Total 2,080,860$ 194,072$

B. Bonds Payable

All general obligation bonds serviced by the County’s General Fund are collateralized by the full

faith, credit, and taxing power of the County. Principal and interest payments are appropriated

when due.

Bonds payable at June 30, 2012 are comprised of the following individual issues:

Outstanding


Construct:

1,100,000$ February 2010 2 - 5% Annual

$55,000-

$75,000 990,000$

Public Building

Series 2010A

8,145,000 February 2010 2 - 5% Annual $200,000-

$1,770,000 2,885,000 Refunding Series

2010B

Total general obligation bonds 3,875,000$

Original Issue Payment Information

58




Annual debt service requirements to maturity for general obligation bonds are as follows:

Year Ending


2013 1,680,000$ 94,294$

2014 1,115,000 60,694

2015 255,000 38,394

2016 55,000 33,129

2017 55,000 31,644

2018-2022 275,000 130,306

2023-2027 295,000 68,088

2028-2029 145,000 8,775

Total 3,875,000$ 465,324$

C. Bonds Payable – Proprietary Fund

All general obligation bonds serviced by Flat Rock/Bannertown Water and Sewer District of

Surry County are collateralized by the full faith, credit, and taxing power of Surry County.

Principal and interest payments are appropriated when due.

Bonds payable is comprised of the following issue:


Construct:

$29,000 - Water and Sewer

2,548,000$ Sept 2007 4.25% Annual $116,000 2,459,000$ Series 2007

Annual debt service requirements to maturity for general obligation bonds serviced by the

Proprietary Fund are as follows:

Year Ending


2013 32,000$ 104,508$

2014 34,000 103,148

2015 35,000 101,703

2016 37,000 100,215

2017 38,000 98,643

2018-2022 216,000 467,543

2023-2027 266,000 417,563

2028-2032 327,000 356,065

2033-2037 402,000 280,457

2038-2042 496,000 187,425

2043-2047 576,000 73,780

Total 2,459,000$ 2,291,050$

59




Changes in Long-Term Debt

The following is a summary of changes in long-term debt for the year ended June 30, 2012:

Current

Balance Balance Portion of

July 1, 2011 Increases Decreases June 30, 2012 Balance


General obligation bonds 5,670,000$ -$ 1,795,000$ 3,875,000$ 1,680,000$

Installment purchases/notes payable 54,965,886 - 3,887,631 51,078,255 4,936,736

Compensated absences 2,004,486 2,077,198 2,229,442 1,852,242 1,667,018

Other post-employment benefits 2,450,749 1,083,276 191,596 3,342,429 -

Separation allowance for law

enforcement officers' liability 415,062 99,511 66,535 448,038 -

Total governmental activities 65,506,183$ 3,259,985$ 8,170,204$ 60,595,964$ 8,283,754$


Installment purchases 2,457,592$ -$ 376,732$ 2,080,860$ 389,305$

General obligation bonds 2,490,000 - 31,000 2,459,000 32,000

Other post-employment benefits 47,996 22,107 3,910 66,193 -

Accrued landfill closure

and post-closure care cost 2,641,605 - 75,000 2,566,605 46,991

Compensated absences 35,571 26,487 30,591 31,467 28,320

Total business-type activities 7,672,764$ 48,594$ 517,233$ 7,204,125$ 496,616$

Compensated absences and the net pension and other post-employment benefit obligations

typically have been liquidated in the General Fund. Compensated absences are accounted for on

a LIFO basis, assuming that employees are taking leave time as it as earned.

At June 30, 2012, the County had a legal debt margin of $369,576,127.

60




D. Capital Assets, Net of Related Debt

The total invested in capital assets, net of related debt of June 30, 2012 is composed of the

following elements:

Governmental Business-Type

Activities Activities

Capital assets, net of

accumulated depreciation 94,259,635$ 17,612,632$

Less: capital debt

Gross debt 54,953,255 4,539,860

Less:

School debt related to assets to

which the County does not hold title (2,885,000) -

County related debt 52,068,255 4,539,860

Add: Unexpended debt proceeds 281,551 -

Capital assets, net of related debt 42,472,931$ 13,072,772$

11. Deferred/Unearned Revenues

The balance in deferred revenues on the fund statements and unearned revenues on the government-

wide statements at year-end is composed of the following elements:

Deferred Unearned

Revenues Revenues

Ad valorem taxes:

Receivable, net (General Fund) 1,508,482$ -$

Receivable, net (special revenue funds) 198,633 -

Prepaid Taxes (special revenue funds) 13,314 -

Prepaid taxes (General Fund) 216,193 229,505

Unearned grant receipts 409,011 409,011

Total 2,345,633$ 638,516$

61




12. Interfund Balances and Activity

The following is a summary of interfund transfers.

From To Purpose

Transfers From/To Other Funds:

General Fund 220,739$ To accumulate resources for the

Revaluation Fund 220,739$ revaluation of real property

General Fund 410,507 To accumulate resources for

County Buildings Capital Project Fund 410,507 various County capital projects

General Fund 25,000 To supplement other funding

Landfill Fund 25,000 sourced for landfill operations

General Fund 400,489 To transfer capital assets from

Dobson Area Water/ Sewer Fund 400,489 General Fund to Dobson W/S


Dobson Area Water/ Sewer Fund 39,817 sources for water/sewer operations


Elkin Area Water/Sewer Fund 17,517 sources for water/sewer operations


Interstates Water/Sewer Project Fund 18,718 sources for water/sewer operations

School Capital Outlay Fund 1,608,744 Reimbursement of funds

General Fund 1,608,744 for school-related debt

Total 2,741,531$ 2,741,531$

Transfers

The composition of interfund balances as of June 30, 2012 is as follows:

Receivable Entity Payable Entity Amount

General Fund County Building Capital Project Fund 4,922$

General Fund Grant Project Fund 8,946

General Fund Dobson Area Water/ Sewer Fund 6,331

General Fund Elkin Area Water/Sewer Fund 4,722

General Fund Flat Rock/ Bannertown Water and Sewer District 89,489

Total 114,410$

The interfund balances above are advances until project financing is received.

62




Benefit Payments Issued by the State

The amounts listed below were paid directly to individual recipients by the State from federal and

State monies on behalf of the County. County personnel are involved with certain functions,

primarily eligibility determinations, which cause benefit payments to be issued by the State. These

amounts disclose this additional aid to County recipients, which do not appear in the basic financial

statements, because they are not revenues and expenditures of the County.

Federal State

Temporary Assistance for Needy Families 429,883$ (44)$

Medicaid 60,871,449 35,083,657

Special Supplemental Food Program

for Woman, Infants, and Children 1,811,712 -

Low Income Home Energy Assistance 451 -

Total 63,113,495$ 35,083,613$

13. Related Organization

Northern Hospital Board of Trustees. The Chairman of the County's governing board is responsible

for appointing the members of the Board of the Northern Hospital Board of Trustees. The County's

accountability for this organization does not extend beyond making these appointments. The entity

exists to provide healthcare services for persons inside and outside the County. Complete financial

statements for Northern Hospital of Surry County may be obtained at PO Box 1101, 830 Rockford

Street, Mount Airy, NC 27030.

14. Joint Ventures

The County, in conjunction with the County of Yadkin and the County of Iredell, participates in

Crossroads Behavioral Healthcare. The County appoints seven members out of the twenty-one

member Board. The entity exists to provide mental health services for the citizens of all three

counties. The County contributed $212,345 to the entity during the fiscal year ended June 30, 2012.

The participating governments do not have any equity interest in the joint venture, so no equity

interest has been reflected in the financial statements at June 30, 2012. Complete financial statements

for the Mental Health Authority may be obtained from the Mental Health Authority's administrative

offices at 200 Business Park Drive, Elkin, North Carolina 28621.

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The County also participates in a joint venture to operate the Northwest Regional Library (the

“library”) with four other local governments. The County appoints four members, and the other three

participating governments each appoint three Board members to the thirteen-member Board of the

library. The County has an ongoing financial responsibility for the joint venture because the library's

continued existence depends on the participating governments' continued funding. None of the

participating governments have any equity interest in the library, so no equity interest has been

reflected in the financial statements at June 30, 2012. In accordance with the intergovernmental

agreement between the participating governments, the County appropriated $426,500 to the library

for the year ended June 30, 2012 to supplement its activities. Complete financial statements for the

library may be obtained from the library's offices at 111 North Front Street, Elkin, North Carolina

28621.

The County, in conjunction with the State of North Carolina and the County Boards of Education,

participates in a joint venture to operate Surry Community College (the “community college”). Each

of the three participants appoints four members of the fourteen-member Board of Trustees of the

community college. The President of the Student Government Association of the community college

serves as a non-voting, ex-officio member of the Board of Trustees. The community college is

included as a component unit of the State. The County has the basic responsibility for providing

funding for the facilities of the community college and also provides some financial support for

operations of the community college. In addition to providing annual appropriations for facilities, the

County periodically issues general obligation bonds to provide financing for new and restructured

facilities. The County has an ongoing financial responsibility for the community college because of

the statutory responsibilities to provide funding for the facilities of the community college. The

County contributed $2,176,140 to the community college for operating purposes during the fiscal year

ended June 30, 2012. In addition, the County has previously issued general obligation bonds of

$3,500,000 and installment financing of $5,574,000 for community college capital facilities. The

participating governments do not have any equity interest in the joint venture; therefore, no equity

interest has been reflected in the County's financial statements at June 30, 2012. Complete financial

statements for the community college may be obtained from the community college's administrative

offices at South Main Street, Dobson, North Carolina 27017.

15. Jointly Governed Organization

The County, in conjunction with four other counties and twenty-one other municipalities, established

the Northwest Piedmont Council of Governments (the “Council”). The participating governments

established the Council to coordinate various funding received from federal and State agencies. Each

participating government appoints one member of the Council's governing board. On July 1, 2011

Northwest Piedmont Council of Governments merged with Piedmont Triad Regional Council of

Governments. The new council serves eleven additional counties and sixty-one municipalities. The

County disbursed $325,029 to the Council during the fiscal year ended June 30, 2012. Complete

financial statements for the Council may be obtained at 400 West Fourth Street, Suite 400, Winston

Salem, North Carolina 27101.

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The County, in conjunction with four other counties and the Northwest Piedmont Council of

Governments, established the Boone Trail Housing Consortium (the “Consortium”). The

participating counties established the Consortium to administer the Home Program, a federal grant

from the U.S. Department of Housing and Urban Development. Each county appoints three members

and three alternative members to the Consortium's governing board. The County is the lead agency

for the Consortium, and the revenues and expenditures of the Consortium are reported in Schedule 4.

The County, in conjunction with the City of Mount Airy, established the Mount Airy-Surry County

Airport Authority (the “Airport Authority”). The participating governments established the Airport

Authority to operate and manage a local, non-commercial airport facility. The County appoints three

members of a six-member governing board. The County disbursed $90,000 to the Airport Authority

during the fiscal year ended June 30, 2012. Complete financial statements for the Airport Authority

may be obtained at 146 Howard Woltz Jr. Way, Mount Airy, NC 27030-9020.

The County, in conjunction with four other counties and fourteen other municipalities, established the

Yadkin Valley Economic Development District, Inc. (the “District”). The participating governments

established the District to oversee the economic development of the District. The County appoints

three members and three alternative members of a twenty-seven member governing board. The

County disbursed $1,060,793 to the District during the fiscal year ended June 30, 2012. Complete

financial statements for the District may be obtained at PO Box 309, Boonville, NC 27011.

16. Closure and Post-Closure Care Costs – Landfill Facilities

Federal and State laws and regulations have required the County to place a final cover on two landfill

facilities located in Mount Airy and Elkin, North Carolina, and to perform certain maintenance and

monitoring functions at the sites for thirty years after closure. The closure and post-closure care costs

are paid only near or after the date that the landfills stop accepting waste. The County reports a

portion of these closure and post-closure care costs as an operating expense in each period based on

landfill capacity use as of each balance sheet date.

The County closed two municipal solid waste (MSW) landfills in 1998; however the landfills

continued to be permitted for construction and demolition material. In 2009, these landfills were

permanently closed and 100% of $1,596,466 in estimated post-closure costs had been accrued. These

funds will be used for required monitoring and related costs for a period of thirty years. As of June

30, 2012, Surry County is responsible for twenty-seven years of additional monitoring and reports

post-closure liability of $1,519,245 for these two landfills.

In 1998, Surry County opened a third Subtitle D lined landfill. This landfill was expanded in 2009

with the opening of a new eleven-acre cell. This expansion increased the expected useful life of the

landfill from nine to twenty-five years. The County expects to close the current cells in 2034. Current

estimates for closure, post-closure and potential corrective actions total $7,518,277. These amounts

are based on what it would cost to perform all closure, post-closure care and any potential corrective

actions in 2012. Actual costs may be higher due to inflation, changes in technology, or changes in

regulations.

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Based on years of expected life, the Subtitle D landfill has 88% remaining capacity. The $2,566,605

reported as landfill closure and post-closure care liability at June 30, 2012, represents the cumulative

amount reported to date for the closure, post-closure care and potential corrective action costs of all

three landfills. Of the cumulative amount reported to date, $1,047,360 represents the Subtitle D

landfill which exceeds the amount required based on used capacity (12%). This excess results from

the increase in expected remaining life from nine to twenty-five years. Since potential corrective

actions can be substantial and can occur in any given year, the County will continue to recognize the

excess until used capacity reaches the cumulative amount. The County will recognize the remaining

$6.47 million as the remaining capacity is filled.

The County has met the requirements of a local government financial test that is one option under

federal and State laws and regulations that helps determine if a unit is financially able to meet closure

and postclosure care requirements. The County has also elected to establish a fund to accumulate

resources for the payment of expansion, closure and post-closure care costs. The County expects that

future inflation costs will be paid from the interest earnings on these annual contributions. However,

if interest earnings are inadequate or additional post-closure care requirements are determined (due to

changes in technology or applicable laws or regulations, for example), these costs may need to be

covered by charges to future landfill users or by future tax revenues.

17. Risk Management

The County is exposed to various risks of losses related to torts; theft of, damage to, and destruction

of assets; errors and omissions; injuries to employees; and natural disasters. The County carries

commercial coverage for general liability, property and casualty, errors and omissions, and umbrella

insurance. Through this coverage, the County obtains property coverage equal to replacement cost

values of owned property with the exception of contractor’s equipment, which is insured for actual

cash value, and vehicles that are insured for actual cash value or the cost of repair. Commercial

automobile liability has a limit of $1,000,000 per accident. The County’s general liability coverage

has a limit of $1,000,000 for each occurrence and a $2,000,000 aggregate limit. The County’s errors

and omissions coverage has a limit of $1,000,000 per occurrence with aggregate limits of $3,000,000.

In addition to the coverage above, the County has umbrella coverage with per occurrence and

aggregate limits of $7,000,000.

The County carries commercial coverage for all other risks of loss. There have been no significant

reductions in insurance coverage from the previous year, and settled claims have not exceeded

coverage in any of the past three years.

The County carries $1,000,000 per occurrence with aggregate limits of $5,000,000 in flood insurance

except for flood zones A and V.

In accordance with G.S. 159-29, the County’s Finance Officer and Tax Collector are each

individually bonded for $250,000 and $100,000 respectively. The remaining employees that have

access to funds are insured with a commercial carrier.

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The Health and Nutrition Center carries malpractice insurance through a commercial carrier. The

County also provides employee life insurance coverage through a commercial carrier. The County

provides workers' compensation coverage and healthcare coverage through self-funded health plans.

Claims are managed by third-party administrators and the County obtains specific and aggregate stop-

loss coverage through private insurers.

Liabilities are reported when it is probable that a loss has occurred and the amount of the loss can be

reasonably estimated. Liabilities include an amount for claims that have been incurred, but not

reported (IBNR’s).

Changes in the balances of claims liabilities for health insurance during the past fiscal year are as

follows:

2012 2011

Unpaid claims, beginning 589,906$ 556,841$

Incurred claims 3,947,152 2,998,823

Claim payments (4,011,293) (2,965,758)

Unpaid claims, ending 525,765$ 589,906$

Changes in the balances of claims liabilities for workers' compensation insurance during the past

fiscal year are as follows:

2012 2011

Unpaid claims, beginning 573,018$ 328,867$

Incurred claims 641,775 531,018

Claim payments (914,793) (286,867)

Unpaid claims, ending 300,000$ 573,018$

Claims typically have been liquidated in the General Fund.

18. Claims and Judgments

At June 30, 2012, the County was defendant to various lawsuits. In the opinion of the County's

Management and the County Attorney, the ultimate effect of these legal matters will not have a

material adverse effect on the County's financial position.

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19. Summary Disclosure of Significant Contingencies

Federal and State-Assisted Programs

The County has received proceeds from several federal and State grants. Periodic audits of these

grants are required and certain costs may be questioned as not being appropriate expenditures under

the grant agreements. Such audits could result in the refund of grant monies to the grantor agencies.

Management believes that any required refunds will be immaterial. No provision has been made in

the accompanying financial statements for the refund of grant monies.

20. Subsequent Event

Subsequent to year-end, with a closing date of October 1, 2012, the County sold their Home Health

Certificate of Need for $2.5 million.

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