--- type: document title: 2013-Audit file: ../2013-Audit.pdf tags: - Russell_County - Audit_and_Budget_Information - '2013' docDate: '2013' contentType: application/pdf contentLength: 2504318 sha256sum: 7a850f7b7ed9ce28e3b65ac91eaa9f17b062f3748343ae03380d24215614e950 sha1sum: 57073b758b9163ebf83d63c9789822aacdbb2c0b --- COUNTY OF RUSSELL, VIRGINIA ANNUAL FINANCIAL REPORT FISCAL YEAR ENDED JUNE 30, 2013 COUNTY OF RUSSELL, VIRGINIA ANNUAL FINANCIAL REPORT FISCAL YEAR ENDED JUNE 30, 2013 INTRODUCTORY SECTION COUNTY OF RUSSELL, VIRGINIA ANNUAL FINANCIAL REPORT FISCAL YEAR ENDED JUNE 30, 2013 TABLE OF CONTENTS Page List of Elected and Appointed Officials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 FINANCIAL SECTION Independent Auditors· Report ............ ........ ........... .............. ...................... ..... 2-4 Management's Discussion and Analysis.............................................................. 5-14 Exhibit Page Basic Financial Statements: Government-wide Financial Statements: Statement of Net Position ........................................................................ . 1 15 Statement of Activities ............................................................................. . 2 16 Fund Financial Statements: Balance Sheet - Governmental Funds .......................................................... . 3 17 Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position .................................................................................. . 4 18 Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental Funds ........................................................................... . 5 19 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities ........... . 6 20 Statement of Net Position - Proprietary Funds ................................................ . 7 21 Statement of Revenues, Expenses, and Changes in Net Position - Proprietary Funds ............................................................................. . 8 22 Statement of Cash Flows - Proprietary Funds ................................................. . 9 23 Statement of Fiduciary Net Position - Fiduciary Funds ...................................... . 10 24 Notes to Financial Statements ...................................................................... . 25-63 Required Supplementary Information: Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual General Fund ............................................................................................ 11 64 Special Revenue Fund- Coal Road................................................................ 12 65 Special Revenue Fund - Workforce Investment Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 66 Schedule of Pension and OPEB Funding Progress.................................................. 14 67 COUNTY OF RUSSELL, VIRGINIA ANNUAL FINANCIAL REPORT FiscaL YEAR ENDED JUNE 30, 2013 TABLE OF CONTENTS INTRODUCTORY SECTION Page List of Elected and Appointed Officials .. 1 FINANCIAL SECTION Independent Auditors’ Report .. 24 Management's Discussion and Analysis. 54 Exhibit Page Basic Financial Statements: Government-wide Financial Statemen Statement of Net Position 1 15 Statement of Activities. 2 16 Fund Financial Statement: Balance Sheet - Governmental FUNS ......s.c+csssesesrssstcsesstetsssisecsssvesecessseesees 30017 Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position . 4 4B Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental Funds 5 19 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities 6 20 Statement of Net Position - Proprietary Funds... 7 2 Statement of Revenues, Expenses, and Changes in Net Position - Proprietary Funds 8 2 Statement of Cash Flows - Proprietary Funds . 9 2B Statement of Fiduciary Net Position - Fiduciary Funds . 1024 Notes to Financial Statements. 25-63 Required Supplementary Information: Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual General Fund . : . 64 Special Revenue Fund - Coal Road 12 65 Special Revenue Fund - Workforce Investment Board 3 66 Schedule of Pension and OPEB Funding Progress... 14 «67 COUNTY OF RUSSELL, VIRGINIA ANNUAL FINANCIAL REPORT FISCAL YEAR ENDED JUNE 30, 2013 TABLE OF CONTENTS (CONTINUED) FINANCIAL SECTION (CONTINUED) Exhibit Page Other Supplementary Information: Statement of Changes in Assets and Liabilities - Agency Funds . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . 15 68 Discretely Presented Component Unit- School Board: Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 69 Statement of Revenues, Expenditures, and Changes in Fund Balances -- Governmental Funds............................................................................. 17 70 Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual................................................................................. 18 71 Schedule Page Supporting Schedules: Schedule of Revenues - Budget and Actual - Governmental Funds ......................... . 1 72-77 Schedule of Expenditures- Budget and Actual - Governmental Funds ..................... . 2 78-81 Other Statistical Information: Table Page Government-wide Information: Government-Wide Expenses by Function ....................................................... . 1 82 Government-Wide Revenues ...................................................................... . 2 83 Fund Information: General Governmental Expenditures by Function ............................................ . 3 84 General Governmental Revenues by Source ................................................... . 4 85 Property Tax Levies and Collections ............................................................ . 5 86 Assessed Value of Taxable Property ............................................................. . 6 87 Property Tax Rates ................................................................................. . 7 88 Ratio of Net General Bonded Debt to Assessed Value and Net Bonded Debt Per Capita .................................................................................. . 8 89 Ratio of Annual Debt Service Expenditures for General Bonded Debt to Total General Governmental Expenditures ................................................. . 9 90 COUNTY OF RUSSELL, VIRGINIA ANNUAL FINANCIAL REPORT FiscaL YEAR ENDED JUNE 30, 2013 TABLE OF CONTENTS (CONTINUED) FINANCIAL SECTION (CONTINUED) Exhibit Other Supplementary Information: Statement of Changes in Assets and Liabilities - Agency Funds . 15 Discretely Presented Component Unit - School Board: Balance Sheet .... 16 Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds . 7 Schedule of Revenues, Expenditures, and Changes in Fund Balances ~ Budget and Actual... 18 Schedule Supporting Schedules: Schedule of Revenues - Budget and Actual - Governmental Funds . 1 Schedule of Expenditures - Budget and Actual - Governmental Funds 2 Other Statistical Information: Table Government-wide Information Government-Wide Expenses by Function 1 Government-Wide Revenues... 2 Fund Information: General Governmental Expenditures by Function 3 General Governmental Revenues by Source .. 4 Property Tax Levies and Collections 5 Assessed Value of Taxable Property. 6 Property Tax Rates 7 Ratio of Net General Bonded Debt to Assessed Value and Net Bonded Debt Per Capita. 8 Ratio of Annual Debt Service Expenditures for General t to Total General Governmental Expenditures. 9 68 69 70 71 Page 72-77 78-81 Page 82 83 84 85 86 87 88 89 90 COMPLIANCE SECTION Compliance: COUNTY OF RUSSELL, VIRGINIA ANNUAL FINANCIAL REPORT FISCAL YEAR ENDED JUNE 30, 2013 TABLE OF CONTENTS (CONTINUED) Independent Auditors' Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards ....................................... . Independent Auditors' Report on Compliance For Each Major Program and on Internal Control over Compliance in Accordance with OMB Circular A-133 ......................... . Schedule of Expenditures of Federal Awards ..................................................... . Schedule of Findings and Questioned Costs ...................................................... . 91-92 93-94 95-97 98-100 COUNTY OF RUSSELL, VIRGINIA ANNUAL FINANCIAL REPORT FiscAL YEAR ENDED JUNE 30, 2013 TABLE OF CONTENTS (CONTINUED) COMPLIANCE SECTION Page Compliance: Independent Auditors’ Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards .. 91-92 Independent Auditors’ Report on Compliance For Each Major Program and on Internal Control over Comptiance in Accordance with OMB Circular A-133..... 93-94 Schedule of Expenditures of Federal Awards 95-97 Schedule of Findings and Questioned Costs . 98-100 INTRODUCTORY SECTION INTRODUCTORY SECTION COUNTY OF RUSSELL, VIRGINIA BOARD OF SUPERVISORS Jon Bowerbank, Chairman Joseph Puckett, Vice Chairman Bob Gibson Rebecca Dye COUNTY SCHOOL BOARD Charlie Collins, Chairman Carl Jackson, Vice Chairman Wayne Bostic Tom Griffith SOCIAL SERVICES BOARD Harry Ferguson, Jr., Chairman Roger Brown, Vice Chairman Bill Hale OTHER OFFICIALS Larry Rasnake Earnest (Shy) Kennedy Danny L. Brown Bob Hillman Linda Cross Linda Garrett Rebecca Dye Laurel Rasnick Clerk of the Circuit Court ............................................ Ann S. McReynolds Commonwealth's Attorney .................................................. Brian Patton Commissioner of the Revenue ...................................... Randy N. Williams Treasurer ............................................................... Patrick Thompson Sheriff ............................................................................ Steve Dye Superintendent of Schools .............................................. Dr. Brenda Hess Director of Social Services .................................................. Carol Brunty County Administrator ........................................................ Rufus Hood County Attorney ........................................................... Matthew Crum -1- COUNTY OF RUSSELL, VIRGINIA BOARD OF SUPERVISORS Jon Bowerbank, Chairman Joseph Puckett, Vice Chairman Larry Rasnake Bob Gibson Earnest (Shy) Kennedy Rebecca Dye Danny L. Brown COUNTY SCHOOL BOARD Charlie Collins, Chairman Carl Jackson, Vice Chairman Bob Hillman Wayne Bostic Linda Cross Tom Griffith Linda Garrett SOCIAL SERVICES BOARD Harry Ferguson, Jr., Chairman Roger Brown, Vice Chairman Rebecca Dye Bill Hale Laurel Rasnick OTHER OFFICIALS Clerk of the Circuit Court. Commonwealth's Attorney. Commissioner of the Revenue Treasure! Sheriff Superintendent of Schools. Director of Social Services. County Administrator County Attorne\ ‘Ann S. McReynolds +. Brian Patton, Randy N. Williams Patrick Thompson . Steve Dye Dr. Brenda Hess .Carol Brunty .. Rufus Hood Matthew Crum FINANCIAL SECTION FINANCIAL SECTION ROBINSON, FARMER, COX ASSOCIA TJES ClR f If ff D Pl !BLJC ACCOl 1·\'! t1N JS INDEPENDENT AUDITORS' REPORT To the Members of the Board of Supervisors County of Russell, Virginia Lebanon, Virginia Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business­ type activities, the discretely presented component units, each major fund, and the aggregate remaining fund information of County of Russell, Virginia, as of and for the year ended June 30, 2013, and the related notes to the financial statements, which collectively comprise the County's basic financial statements as listed in the table of contents. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors' Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We did not audit the financial statements of the Russell County Public Service Authority. Those financial statements were audited by other auditors whose report has been furnished to us and our opinion insofar as it relates to the amounts included for the Russell County Public Service Authority is based solely on the report of the other auditors. We conducted our audit in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the Specifications for Audits of Counties, Cities, and Towns, issued by the Auditor of Public Accounts of the Commonwealth of Virginia. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. -2- ROBINSON, FARMER, COX ASSOCIATES CUR TID PUBLIC ACCOUN 7s S PROFESSIONAL LIMITED LIABILITY COMPANY INDEPENDENT AUDITORS’ REPORT To the Members of the Board of Supervisors County of Russell, Virginia Lebanon, Virginia Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business- type activities, the discretely presented component units, each major fund, and the aggregate remaining fund information of County of Russell, Virginia, as of and for the year ended June 30, 2013, and the related notes to the financial statements, which collectively comprise the County’s basic financial statements as listed in the table of contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the Preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors’ Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We did not audit the financial statements of the Russell County Public Service Authority. Those financial statements were audited by other auditors whose report has been furnished to us and our opinion insofar as it relates to the amounts included for the Russell County Public Service Authority is based solely on the report of the other auditors. We conducted our audit in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the Specifications for Audits of Counties, Cities, and Towns, issued by the Auditor of Public Accounts of the Commonwealth of Virginia. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Basis for Qualified Opinion The financial statements referred to above include only the primary government of the County of Russell, Virginia and discretely presented component units-School Board, The Industrial Development Authority of Russell County, and Russell County Public Service Authority, which consists of all funds that comprise the County's legal entity. The financial statements do not include financial data for the County's legally separate component unit (Castlewood Water and Sewage Authority.) Accounting principles generally accepted in the United States of America require financial data for the County's legally separate component units to be reported with the financial data of the County's primary government. The amount by which this departure would affect the assets, liabilities, net position, revenues, and expenses of the government-wide financial statements has not been determined. The financial statements referred to above include the fiscal year 2012 net Other Postemployment Benefits (OPEB) obligation as allocated to the County of Russell, Virginia based on an actuarial valuation prepared for use in fiscal year 2011 and 2012. The County has not received an updated actuarial valuation as required by GASB Statement No. 45. The amount by which this departure would affect the assets, liabilities, net position, revenues, and expenses of the government-wide financial statements has not been determined. Qualified Opinion In our opinion, except for the possible effects of the matters described in the "Basis for Qualified Opinion" paragraph, the financial statements referred to above present fairly, in all material respects, the financial position of the governmental activities and the discretely presented component units of County of Russell, Virginia, as of June 30, 2013, and the changes in financial position thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Unmodified Opinions In our opinion, based on our audit and the report of other auditors, the financial statements referred to above present fairly, in all material respects, the respective financial position of the business-type activities, each major fund, and the aggregate remaining fund information for the primary government of the County of Russell, Virginia, as of June 30, 2013, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Emphasis of Matter As described in Note 1 to the financial statements, in 2013, the County of Russell, Virginia adopted new accounting guidance, GASB Statement Nos. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position and 65, Items Previously Reported as Assets and Liabilities. Our opinion is not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management's discussion and analysis, schedule of pension and OPEB funding progress, and budgetary comparison information be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. -3- Basis for Qualified Opinion The financial statements referred to above include only the primary government of the County of Russell, Virginia and discretely presented component units-School Board, The Industrial Development Authority of Russell County, and Russell County Public Service Authority, which consists of all funds that comprise the County's legal entity. The financial statements do not include financial data for the County’s legally separate component unit (Castlewood Water and Sewage Authority.) Accounting principles generally accepted in the United States of America require financial data for the County’s legally separate component units to be reported with the financial data of the County’s primary government. The amount by which this departure would affect the assets, liabilities, net position, revenues, and expenses of the government-wide financial statements has not been determined. The financial statements referred to above include the fiscal year 2012 net Other Postemployment Benefits (OPEB) obligation as allocated to the County of Russell, Virginia based on an actuarial valuation prepared for use in fiscal year 2011 and 2012. The County has not received an updated actuarial valuation as required by GASB Statement No. 45. The amount by which this departure would affect the assets, liabilities, net position, revenues, and expenses of the government-wide financial statements has not been determined. Qualified Opinion In our opinion, except for the possible effects of the matters described in the “Basis for Qualified Opinion” paragraph, the financial statements referred to above present fairly, in all material respects, the financial position of the governmental activities and the discretely presented component units of County of Russell, Virginia, as of June 30, 2013, and the changes in financial position thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Unmodified Opinions In our opinion, based on our audit and the report of other auditors, the financial statements referred to above present fairly, in all material respects, the respective financial position of the business-type activities, each major fund, and the aggregate remaining fund information for the primary government of the County of Russell, Virginia, as of June 30, 2013, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Emphasis of Matter ‘As described in Note 1 to the financial statements, in 2013, the County of Russell, Virginia adopted new accounting guidance, GASB Statement Nos. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position and 65, Items Previously Reported as Assets and Liabilities. Our opinion is not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis, schedule of pension and OPEB funding progress, and budgetary comparison information be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historicat context. We, and other auditors, have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. The budgetary comparison information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. Other Information Our audit was conducted for the purpose of forming opm10ns on the financial statements that collectively comprise the County of Russell, Virginia's basic financial statements. The other supplementary information, and other statistical information are presented for purposes of additional analysis and are not a required part of the basic financial statements. The schedule of expenditures of federal awards is presented for purposes of additional analysis as required by U.S. Office of Management and Budget Circular A·133, Audits of States, Local Governments, and Non· Profit Organizations, and is also not a required part of the basic financial statements. The other supplementary information and schedule of expenditures of federal awards are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, other supplementary information and schedule of expenditures of federal awards are fairly stated, in all material respects, in relation to the basic financial statements as a whole. The other statistical information has not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on it. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report February 18, 2014, on our consideration of the County of Russell, Virginia's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering County of Russell, Virginia's internal control over financial reporting and compliance. Blacksburg, Virginia February 18, 2014 -4- We, and other auditors, have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. The budgetary comparison information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. Other information ur audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the County of Russell, Virginia’s basic financial statements. The other supplementary information, and other statistical information are presented for purposes of additional analysis and are not a required part of the basic financial statements. The schedule of expenditures of federal awards is presented for purposes of additional analysis as required by U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non- Profit Organizations, and is also not a required part of the basic financial statements. The other supplementary information and schedule of expenditures of federal awards are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, other supplementary information and schedule of expenditures of federal awards are fairly stated, in all material respects, in relation to the basic financial statements as a whole. The other statistical information has not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on it. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report February 18, 2014, on our consideration of the County of Russell, Virginia’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering County of Russell, Virginia's internal control over financial reporting and compliance. Holicinoen, Shomar, yy lbsocictes Blacksburg, Virginia February 18, 2014 Management's Discussion and Analysis As management of the County of Russell, Virginia, we offer readers of the County of Russell's financial statements this narrative overview and analysis of the financial activities of the County of Russell, Virginia for the fiscal year ended June 30, 2013. Financial Highlights • The assets of the County of Russell, Virginia exceeded its liabilities and deferred inflows of resources at the close of the most recent fiscal year by $15,698,677 (net position). Of this amount, $4,658,528 (unrestricted net position) may be used to meet the government's ongoing obligations to citizens and creditors. • The government's total net position decreased by $572,850. This loss is spread between governmental activities ($461 ,482 loss) and business-type activity (Dante Sewer loss $111 ,368). • As of the close of the current fiscal year, the County of Russell's governmental funds reported combined ending fund balances of $6,025,301 a decrease of $2,152,708 in comparison with the prior year. Most of this total amount, $5,092,135 is available for spending at the government's discretion (unassigned fund balance). • At the end of the current fiscal year, unassigned fund balance for the general fund was $5,092,135, or 16.0% of total general fund expenditures. • The County of Russell's total long-term debt decreased by $2,636,566 (12.8%) during the current fiscal year. The key factors in this decrease were the principal payments on outstanding issues. There were no new long-term debt issues for the county. Overview of the Financial Statements This discussion and analysis are intended to serve as an introduction to the County of Russell's basic financial statements. The County of Russell's basic financial statements comprise three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. Government-wide financial statements. The government-wide financial statements are designed to provide readers with a broad overview of the County of Russell's finances, in a manner similar to a private-sector business. The statement (!f net position presents information on all of the County of Russell's a) assets and deferred outflows of resources and b) liabilities and deferred inflows of resources, with the difference between the two reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the County of Russell is improving or deteriorating. The statement of activities presents information showing how the government's net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless (!f the timing of the related cash .flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned, but unused vacation leave). -5- Management's Discussion and Analysis As management of the County of Russell, Virginia, we offer readers of the County of Russell's financial statements this narrative overview and analysis of the financial activities of the County of Russell, Virginia for the fiscal year ended June 30, 2013. Financial Highlights * The assets of the County of Russell, Virginia exceeded its liabilities and deferred inflows of resources at the close of the most recent fiscal year by $15,698,677 (net position). Of this amount, $4,658,528 (unrestricted net position) may be used to meet the government's ‘ongoing obligations to citizens and creditors * The government's total net position decreased by $572,850. This loss is spread between governmental activities ($461,482 loss) and business-type activity (Dante Sewer loss $111,368). © As of the close of the current fiscal year, the County of Russell's governmental funds reported combined ending fund balances of $6,025,301 a decrease of $2,152,708 in comparison with the prior year. Most of this total amount, $5,092,136 is available for spending at the government's discretion (unassigned fund balance). ‘* At the end of the current fiscal year, unassigned fund balance for the general fund was $5,092,135, or 16,0% of total general fund expenditures. ‘+ The County of Russell's total long-term debt decreased by $2,636,566 (12.8%) during the current fiscal year. The key factors in this decrease were the principal payments on outstanding issues. There were no new long-term debt issues for the county. Overview of the Financial Statements This discussion and analysis are intended to serve as an introduction to the County of Russell's basic financial statements. The County of Russell's basic financial statements comprise three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. Government-wide financial statements. The government-wide financial statements are designed to provide readers with a broad overview of the County of Russell's finances, in a manner similar to a private-sector business. The statement of net position presents information on all of the County of Russells a) assets and deferred outflows of resources and b) liabilities and deferred inflows of resources, with the difference between the two reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the County of Russell is improving or deteriorating. The statement of activities presents information showing how the government's net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regurdless of the timing of the related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned, but unused vacation leave). Both of the government-wide financial statements distinguish functions of the County of Russell that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the County of Russell include general government administration, judicial administration, public safety, public works, health and welfare, education (including the Russell County School Board), parks, recreation and cultural activities, community development and the Industrial Development Authority. The business-type activities of the County of Russell include the Russell County Public Service Authority and the Castlewood Water and Sewer Authority. The government-wide financial statements include not only the County of Russell itself (known as the primary government), but also the legally separate Russell County School Board, Russell County Industrial Development Authority, Russell County Public Service Authority and the Castlewood Water and Sewer Authority for which the County of Russell is financially accountable. Financial information for these component units is reported separately from the financial information presented for the primary government itself. The government-wide financial statements can be found on pages 15-16 of this report. Fund financial statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The County of Russell, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the County of Russell can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds. Governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government's near-term financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental.fimds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government's near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmentalfimds and governmental activities. The County of Russell maintains three different governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the general fund, coal road fund, and workforce investment board fund, each of which are considered to be major funds. The basic governmental fund financial statements can be found on pages 17-20 of this report. -6- Both of the government-wide financial statements distinguish functions of the County of Russell that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the County of Russell include general government administration, judicial administration, public safety, public works, health and welfare, education (including the Russell County School Board), parks, recreation and cultural activities, community development and the Industrial Development Authority. The business-type activities of the County of Russell include the Russell County Public Service Authority and the Castlewood Water and Sewer Authority. The government-wide financial statements include not only the County of Russell itself (known as the primary government), but also the legally separate Russell County Schoo! Board, Russell County Industrial Development Authority, Russell County Public Service Authority and the Castlewood Water and Sewer Authority for which the County of Russell is financially accountable. Financial information for these component units Is reported separately from the financial information presented for the primary government itself. ‘The government-wide financial statements can be found on pages 15-16 of this report. Fund financial statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The County of Russell, ike other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the County of Russell can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds. Governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, a8 well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government's near-term financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements By doing so, readers may better understand the long-term impact of the government's near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental finds and governmental activities. The County of Russell maintains three different governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the general fund, coal road fund, and workforce investment board fund, each of which are considered to be major funds. The basic governmental fund financial statements can be found on pages 17-20 of this report, Proprietary funds. The County of Russell maintains two different types of proprietary funds. Enterprise funds are those used to report the same functions presented as business-type activities in the government-wide financial statements. The County of Russell uses an enterprise fund to account for its water treatment system (in Dante). Internal service funds are an accounting device used to accumulate and allocate costs internally among the County of Russell's various functions. The County of Russell uses an internal service fund to account for its health insurance. Because both of these services predominantly benefit governmental rather than business-type functions, they have been included within governmental activities in the government-wide financial statements. Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail. The basic proprietary fund financial statements can be found on pages 21-23 of this report. Fiduciary Funds. Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statement because the resources of those funds are not available to support the County of Russell's own programs. The accounting used for fiduciary funds is much like that used for proprietary funds. The basic fiduciary funds financial statements can be found on page 24 of this report. Notes to the .financial statements. The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages 25-63 of this report. Other information. In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information. The County of Russell adopts an annual appropriated budget for its general fund and special revenue funds. Budgetary comparison statements have been provided for the general fund and each of the special revenue funds to demonstrate compliance with this budget. Information concerning the County of Russell's progress in funding its obligation to provide pension benefits to its employees. Required supplementary information can be found on pages 64-68 of this report. Government-wide Financial Analysis As noted earlier, net position may serve over time as a useful indicator of a government's financial position. In the case of the County of Russell, assets exceeded liabilities and deferred inflows of resources by $15,698,677 at the close of the most recent fiscal year. A significant portion of the County of Russell's net position (64.3%) reflects its investment in capital assets (e.g., land, buildings, machinery, and equipment); less any related debt used to acquire those assets that is still outstanding. The County of Russell uses these assets to provide services to citizens; consequently, these assets are not available for future spending. Although the County of Russell's investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. An additional portion of the County of Russett's net position (6.0%) represents resources that are subject to external restrictions on how they may be used. The remaining balance of -7- Proprietary funds. The County of Russell maintains two different types of proprietary funds, Enterprise funds are those used to report the same functions presented as business-type activities in the government-wide financial statements. The County of Russell uses an enterprise fund to account for its water treatment system (in Dante). Internal service finds are an accounting device used to accumulate and allocate costs internally among the County of Russell's various functions. The County of Russell uses an internal service fund to account for its health insurance. Because both of these services predominantly benefit governmental rather than business-type functions, they have been included within governmental activities in the government-wide financial statements. Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail The basic proprietary fund financial statements can be found on pages 21-23 of this report. Fiduciary Funds. Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statement because the resources of those funds are nor available fo support the County of Russell's own programs. The accounting used for fiduciary funds is much like that used for proprietary funds. The basic fiduciary funds financial statements can be found on page 24 of this report. Notes to the financial statements. The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages 25-63 of this report. Other information. \n addition to the basic financial statements and accompanying notes, this, report also presents certain required supplementary information. The County of Russell adopts an annual appropriated budget for its general fund and special revenue funds. Budgetary comparison statements have been provided for the general fund and each of the special revenue funds to demonstrate compliance with this budget. Information concerning the County of Russell’s progress in funding its obligation to provide pension benefits to its employees. Required supplementary information can be found on pages 64-68 of this report. ‘Government-wide Financial Analysis As noted earlier, net position may serve over time as a useful indicator of a government's financial position. In the case of the County of Russell, assets exceeded liabilities and deferred inflows of resources by $15,698,677 at the close of the most recent fiscal year. A significant portion of the County of Russell's net position (64.3%) reflects its investment in capital assets (e.g., land, buildings, machinery, and equipment); less any related debt used to acquire those assets that is still outstanding. The County of Russell uses these assets to provide services to citizens; consequently, these assets are not available for future spending. Although the County of Russell's investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. An additional portion of the County of Russell's net position (6.0%) represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net position ($4,658,528) may be used to meet the government's ongoing obligations to citizens and creditors. At the end of the current fiscal year, the County of Russell is able to report positive balances in all three categories of net position for the government as a whole. Within the governmental and business-type activities, positive balances are reported for each category except the unrestricted balance for the business-type activity which reported negative net position of $14,838. In the prior fiscal year the unrestricted balance for the business-type activity also reported a negative amount ($15, 118). County of Russell's Net Position Governmental activities Business-type activities Total 2013 2012 2013 2012 2013 2012 Current and other assets $ 18,031,233 $ 20,699,938 $ 52,831 $ 56,744 $ 18,084,064 $ 20,756,682 Capital assets 18,518,571 20,152,631 3,254,610 3,385,627 21,773,181 23,538,258 Total assets '$ ' 36,549,804 $ , 40,852,569 $ , 3,307,441 $ ' 3,442,371 $ ' 39,857,245 $ 44,294,940 long-term liabilities outstanding $ 17,194,489 $ 19,811,686 $ 713,586 $ 732,955 $ 17,908,075 $ 20,544,641 Other liabilities 1,662,039 2,554,530 18,094 22,287 1,680,133 2,576,817 Total liabilities $ 18,856,528 $ 22,366,216 $ 731,680 $ 755,242 $ 19,588,208 $ 23,121,458 Deferred inflows of resources $ 4,570,360 $ 4,901,955 $ $ $ 4,570,360 $ 4,901,955 Net position: Net investment in capital assets $ 7,559,783 $ 7,183,413 $ 2,541,024 $ 2,652,672 $ 10,100,807 $ 9,836,085 Restricted 889,767 1,245,468 49,575 49,575 939,342 1,295,043 Unrestricted 4,673,366 5,155,517 (14,838) (15,118) 4,658,528 5,140,399 Total net position $ 13,122,916 $ 13,584,398 $ 2,575,761 $ 2,687,129 $ 15,698,677 $ 16,271,527 There was a decrease of $482,151 in unrestricted net position reported in connection with the County of Russell's governmental activities. Most of the change in net position is attributable to the substantial increase in education expenditures. Governmental activities. Governmental activities decreased the County of Russell's net position by $461,482, which is a 3.4% change indicating the revenue was not sufficient to cover the expenditures. A notable change in expenditures was an increase in Education cost in the amount of $2,895,431, which is offset somewhat by decreases in General Government Administration ($1 ,001 ,467) and Public Works ($1 ,469,431) costs. -8- unrestricted net position ($4,658,528) may be used to meet the government's ongoing obligations to citizens and creditors. At the end of the current fiscal year, the County of Russell is able to report positive balances in all three categories of net position for the government as a whole. Within the governmental and business-type activities, positive balances are reported for each category except the unrestricted balance for the business-type activity which reported negative net position of $14,838. In the prior fiscal year the unrestricted balance for the business-type activity also reported a negative amount ($15,118). County of Russell’s Net Position Governmental activities Business-type activities Total 28 mB 28 mn Current and other assets $ 18031233 $§ 268938 S$ —SDABL SHTML $18 ORK $ 20756682 Capital assets WBSIgST1 20452631 3.254610 3385627 UTR 23.538, 258 Total assets "s ssigam"S apesaseo”S— 33m7an"S — ganan"S saes7a5"S 44294900 Long-term liabilities outstanding $17,194,489 $ 19,811,686 $ 713,586 $ © 732,955 $ 17,908,075 $ 20,504,641 Other lites 1662039 2.554530 18004 DIS 160018 __ 2576817 Total liabilities $18,856,528 $ 22366,216 $ 731,680 $ 755,282 $ 19588208 $ 23,121,458 Deferred inflows ofresources $4,570,360 $ 4.901955 $ _$ = $ 4570360 $ 4,901,955 ‘Net position: Netinvestmentin capitalassets $7,559783 $ 7183413 $ 2544024 § 2652672 $ 1000807 $ 9.835.085 Restricted 889767 1,205,468, 855 49575 saat 1,205,088 Unrestricted 4973366 5185517 (14838) (15,118) 4.sgsz8 5,140 399 Total net position $ 13122916 9 13,584,388 $ — 2575,761 $ 2,687,129 $§ 15,698.67 $ 16,271,527 There was a decrease of $482,151 in unrestricted net position reported in connection with the County of Russell's governmental activities. Most of the change in net position is attributable to the substantial increase in education expenditures. Governmental activities. Governmental activities decreased the County of Russell's net position by $461,482, which is a 3.4% change indicating the revenue was not sufficient to cover the expenditures. A notable change in expenditures was an increase in Education cost in the amount of $2,895,431, which is offset somewhat by decreases in General Government Administration ($1,001,467) and Public Works ($1,469,431) costs. County of Russell Changes in Net Position Governmental activities Business-type activities Total 2013 2012 2013 2012 2013 2012 Revenues: Program revenues: Charges for services $ 352,519 $ 428,699 $ 46,192 $ 59,709 $ 398,711 $ 488,408 Operating grants and contributions 9,689,526 9,677,480 9,689,526 9,677,480 Capital grants and contributions 761,738 761,738 General revenues: Property taxes 14,686,993 13,142,777 14,686,993 13,142,777 Other taxes 5,079,612 6,881,302 5,079,612 6,881,302 Grants and contributions not restricted to specific programs 2,713,386 2,445,435 2,713,386 2,445,435 Other 106,344 215,361 106,344 215,361 Total revenues 32,628,380 33,552,792 46192 59 709 32,674,572 33,612,501 Expenses: General government 1,265,678 2,267,145 1,265,678 2,267,145 Judicial administration 2,097,216 2,119,900 2,097,216 2,119,900 Public safety 5,894,181 5,296,188 5,894,181 5,296,188 Public works 4,591,542 6,060,973 4,591,542 6,060,973 Health and welfare 8,270,658 8,397,896 8,270,658 8,397,896 Education 7,484,972 4,589,631 7,484,972 4,589,631 Parks, recreation and cultural 529,706 539,126 529,706 539,126 Community development 2,173,719 3,493,655 2,173,719 3,493,655 Interest on long-term debt 498,401 522,300 498,401 522,300 Service Authority 441,349 410,664 441,349 410,664 Total expenses 32,806,073 33,286,814 441,349 410,664 33,247,422 33,697,478 Change in net position before transfers (177,693) 265,978 (395,157) (350,955) (572,850) (84,977) Transfers (283,789) (238,597) 283,789 238,597 Change in net position (461,482) 27,381 (111,368) (112,358) (572,850) (84,977) Net position· beginning 13,584,398 13,557,017 2,687,129 2,799,487 16,271,527 16,356,504 Net position· ending $ 13,122,916 $ 13,584,398 $ 2,575,761 $ 2,687,129 $ 15,698,677 $ 16,271,527 -9- County of Russell Changes in Net Position Governmental activities Businesstype acts Total poss par 23 pars 2013 au Revenes Program revenues: Charges for sence $ Bas9 $399 $ BLN § 59709 § «BBR TTL $688,408 Operating eens and contributions 9689526 967480 56s5518 9677480 Capital rants an contributions : T6LTB : T6738 General revenues - : Property taxes 14,686,993 B77 14,686,993 13,142,777 other tres Son9612 6 881,302 5079612 6 881,302 Grants and contribution not restricted to spec programs 2713386 2,465,435 2713386, 435 other 106384 215361 106,388 118361 Total revenues 32608380 33,582,192 46192 59709 32674572 33612501 Expenses: General goverment 1265678 2,267.48 1265678 2,261,85 Joti administration 209721 2119900 dosmz6 2.219900 Public safety 5894181 5,286,188 Sa0e 181 5,296,188 Public works 4sosn 6060973 4ss158 6060973 Heath and welfare 8270658 8397896 8270688 8,397,896 Education 1486972 4889831 7a84972 4589631 Fats, eretion and ctu 529,706 539,106 52316 539,126 Community development 2a73719 3,893,555 2189 3493685 Interest on ng term debt 488,401 522300 : 498 401 22300 Service Authority : aa1s9 1064 46149 410.68 Total expenses waa6073 3.286814 ag suoses 330702 asTATB hang net postion before transfers (u77653) 265978 395.187) (350955) 572880) (gsr?) Transfers (23789) (238597) 283,789 238597 Change in et poston (461482) m7381 (UN 368) (12358) (572,850) (e497) Net poston - begining 13584398 13557017 2687129 2.799487 16271527 16356508 Net poston - ending $_1322916 § 13884388 § —_2575,761 $ 2687109 § 15698677 $ _ 16271527 ~------ - E~~~~ses and ~;~;;~~~~~e~~~~~-~-ov~r~mental ----------1 I I $o,ooo,ooo Activities ----------- $8,000,000 $7,000,000 $6,000,000 $5,000,000 $4,000,000 $3,000,000 $2,000,000 $1,000,000 $- fill Expenses 11 Program Revenues Revenues by Source - Governmental Activities 1!1 Charges for services Iilli Operating grants and contributions Capital grants and contributions 1!1 Property taxes ill Other taxes Grants and contributions not restricted to specific programs Other -10- Expenses and Program Revenues - Governmental Activities $9,000,000 $8,000,000 $7,000,000 $6,000,000 $5,000,000 $4,000,000 $3,000,000 _ $2,000,000 neo a B Expenses Program Revenues Revenues by Source - panned Charges for services @ Operating grants and contributions 1 Capital grants and contributions Property taxes. Other taxes not restricted to specific programs 2 Other | | | o% 25 Grants and contributions -10- Business-type activities. Business-type activities decreased the County of Russell's net position by $111,368. The Dante Water Treatment System referred to as "the Service Authority," incurred expenses of $441,349 and collected program revenue of $46,192. The Service Authority also received a General Fund subsidy of $283,789. By policy, the Dante Service Authority is not an enterprise activity and therefore is not expected to be self-supporting. $500,000 $450,000 $400,000 $350,000 $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 $- Service Authority (Dante Water Treatment System) Expenses Program Revenue Revenues by Source - Business Type Activities 0% iEl! Charges for services I!! Other -11- Business-type activities. Business-type activities decreased the County of Russell's net position by $111,368. The Dante Water Treatment System referred to as “the Service Authority,” incurred expenses of $441,349 and collected program revenue of $46,192. The Service Authority also received a General Fund subsidy of $283,789. By policy, the Dante Service Authority is not an enterprise activity and therefore is not expected to be self-supporting. Service Authority (Dante Water Treatment System) $500,000 $450,000 $400,000 $350,000 $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 Expenses Program Revenue Revenues by Source - Business Type Activities 0% 18 Charges for services Other A Financial Analysis of the Governmental Funds As noted earlier, the County of Russell uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental funds. The focus of the County of Russell's governmental fimds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the county of Russell's financing requirements. In particular, unassigned fimd balance may serve as a useful measure of a government's net resources available for spending at the end of the fiscal year. As of the end of the current fiscal year, the County of Russell's governmental funds reported combined ending fund balances of $6,025,301, a decrease of $2,152,708 in comparison with the prior year. The majority of this fund balance represents unassigned fund balance ($5,092, 135), which is available for spending at the government's discretion. The remainder of fund balance is restricted or committed to indicate that it is not available for new spending because it has already been restricted or committed for the Coal Road/Revenue Sharing projects or debt service and bond covenants. The general fund is the chief operating fund of the County of Russell. At the end of the current fiscal year, unassigned fund balance was $5,092,135. As a measure of the general fund's liquidity, it may be useful to compare fund balance to total fund expenditures. Unassigned fund balance represents 16.0% of general fund expenditures. The fund balance of the County of Russell's General Fund decreased by $1,792,470 during the current fiscal year. The key factor in the increase is: • An increase in General Fund Education expenditures in the amount of $3,559,498, which is offset by decreases in other expenditures. The Coal Road Fund provides the 50% match required for the Virginia Department of Transportation's (VDOT) Revenue Sharing Program. Part of the coal and gas severance taxes collected are deposited into this fund and used to fund the approved projects. Several projects are approved and were in the planning stages at July 1, 2012. Construction on these projects, along with the related expenditures, occurred during fiscal year 2013. As a result, the fund balance in the Coal Road Fund decreased by $355,701 during the fiscal year. The balance of $889,767 at the end of the year is committed for various projects. The Workforce Investment Board Fund is a state and federal funded program. No County funds are used to support this program. The fund balance decreased by $4,537 during the year ended June 30, 2013. The entire fund balance of $43,399 is restricted for future program support. Proprietary jimds. The County of Russell's proprietary funds provide the same type information found in the government-wide financial statements, but in more detail. Unrestricted net position of the Dante Service Authority at the end of the year amounted to ($14,838), and those for the Health Insurance Fund amounted to $3,081,760. The total growth or (decline) in the net position for both funds was ($111 ,368) and $677,104, respectively. Other factors concerning the finances of these two funds have been addressed in the discussion of the County of Russell's business-type activities and proprietary funds. -12- Financial Analysis of the Governmental Funds As noted earlier, the County of Russell uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental funds. The focus of the County of Russell's governmental funds is to provide information on near-term inflows, outflows, and balances of spenduble resources. Such information is useful in assessing the county of Russell's financing requirements. In particular, unassigned find balance may serve as a useful measure of a government's net resources available for spending at the end of the fiscal year. As of the end of the current fiscal year, the County of Russell's governmental funds reported combined ending fund balances of $6,025,301, a decrease of $2,152,708 in comparison with the prior year. The majority of this fund balance represents unassigned fund balance (5,092,135), which is available for spending at the government's discretion. The remainder of fund balance is restricted or committed to indicate that it is not available for new spending because it has already been restricted or committed for the Coal Road/Revenue Sharing projects or debt service and bond covenants. The general fund is the chief operating fund of the County of Russell. At the end of the current fiscal year, unassigned fund balance was $5,092,135. As a measure of the general fund's liquidity, it may be useful to compare fund balance to total fund expenditures. Unassigned fund balance represents 16.0% of general fund expenditures. The fund balance of the County of Russell's General Fund decreased by $1,792,470 during the current fiscal year. The key factor in the increase is: * An increase in General Fund Education expenditures in the amount of $3,559,498, which is offset by decreases in other expenditures. The Coal Road Fund provides the 50% match required for the Virginia Department of Transportation's (VDOT) Revenue Sharing Program. Part of the coal and gas severance taxes collected are deposited into this fund and used to fund the approved projects. Several projects are approved and were in the planning stages at July 1, 2012. Construction on these projects, along with the related expenditures, occurred during fiscal year 2013. As a result, the fund balance in the Coal Road Fund decreased by $355,701 during the fiscal year. The balance of $889,767 at the end of the year is committed for various projects. The Workforce Investment Board Fund is a state and federal funded program. No County funds are used to support this program. The fund balance decreased by $4,537 during the year ended June 30, 2013, The entire fund balance of $43,399 is restricted for future program support. Proprietary funds. The County of Russell's proprietary funds provide the same type information found in the government-wide financial statements, but in more detail. Unrestricted net position of the Dante Service Authority at the end of the year amounted to ($14,838), and those for the Health Insurance Fund amounted fo $3,081,760. The total growth or (decline) in the net position for both funds was ($111,368) and $677,104, respectively. Other factors concerning the finances of these two funds have been addressed in the discussion of the County of Russell's business-type activities and proprietary funds. 120 General Fund Budgetary Highlights For many years, management in Russell County simply adjusted the final budget at June 30 to equal the actual expenditures. In fiscal year 2011, this practice was stopped. During fiscal year 2013 proper procedures were followed in which the original budget was adjusted to reflect supplemental appropriations adopted by the Board of Supervisors throughout the year or during a public hearing to formally amend the budget. This provides a properly appropriated Final Budget for CAFR presentation. Capital Asset and Debt Administration Capital assets The County of Russell's investment in capital assets for its governmental and business-type activities as of June 30, 2013, amounts to $21,773,181 (net of accumulated depreciation). This investment in capital assets includes land, buildings, a utility plant, and machinery and equipment. The total investment in the County of Russell's capital assets for the current fiscal year decreased by 7.5% (8.1% decrease for governmental activities and 3.9% decrease for business-type activities). The decrease in investment is due to additional accumulated depreciation. Due to the continued depressed economy, the County did not expend significant funds on capital assets in fiscal year 2013. Governmental activities Business-type activities Total 2013 2012 2013 2012 2013 2012 Land $ 1,561,333 $ 1,541,333 $ $ $ 1,561,333 $ 1,541,333 Construction in Progress Buildings 15,565,287 17,007,601 $15,565,287 $17,007,601 Utility plant 3,254,610 3,385,627 $ 3,254,610 $ 3,385,627 Machinery and equipment 1 391 951 1 603.697 :li 1,391 ,951 :li 1,603,697 Total $ 18 518 571 $20 152 631 $3 254 610 $3,385 627 $21 773 181 $23 528 2:28 Additional information on the County of Russell's capital assets can be found in note 10 on pages 51-52 of this report. Long-term debt. At the end of the current fiscal year, the County of Russell's governmental funds had total debt outstanding of $17,194,489. Of this total, $13,898,183 comprises general obligation and revenue bonds all backed by the full faith and credit of the County and $2,112,110 comprise Literary Fund Loans and Literary Anticipation Note. -13- General Fund Budgetary Highlights For many years, management in Russell County simply adjusted the final budget at June 30 to equal the actual expenditures. In fiscal year 2071, this practice was stopped. During fiscal year 2013 proper procedures were followed in which the original budget was adjusted to reflect supplemental appropriations adopted by the Board of Supervisors throughout the year or during a public hearing to formally amend the budget. This provides a properly appropriated Final Budget for CAFR presentation. Capital Asset and Debt Administration Capital assets The County of Russell's investment in capital assets for its governmental and business-type activities as of June 30, 2013, amounts to $21,773,181 (net of accumulated depreciation). This investment in capital assets includes land, buildings, a utility plant, and machinery and equipment. The total investment in the County of Russell's capital assets for the current fiscal year decreased by 7.5% (8.1% decrease for governmental activities and 3.9% decrease for business-type activities). The decrease in investment is due to additional accumulated depreciation. Due to the continued depressed economy, the County did not expend significant funds on capital assets in fiscal year 2013. Governmental activities Business-type activities Total 2013 2012 2013 2012 2013 2012 Land $ 1,561,333 $ 1,541,333 § - $ - $ 1,561,333 $ 1,541,333 Construction in Progress - - - - - - Buildings 15,565,287 17,007,601 a - $15,565,287 $17,007,601 Utility plant - - 3,254,610 3,385,627 $ 3.254.610 $ 3,385,627 Machinery and equipment 4,391,951 41,603.697 = - $ 1,391,954 $ 1,603,697 Total $18,518,571 $20,152,631 $3,254,610 $3,385,627 $21,773,181 $23,528,258 Additional information on the County of Russell's capital assets can be found in note 10 on pages 51-52 of this report Long-term debt. At the end of the current fiscal year, the County of Russell's governmental funds had total debt outstanding of $17,194,489. Of this total, $13,898,183 comprises general obligation and revenue bonds all backed by the full faith and credit of the County and $2,112,110 comprise Literary Fund Loans and Literary Anticipation Note. The remainder of Russell County's debt represents lease purchase agreements, landfill post- closure liabilities, OPEB obligations and compensated absences. Governmental Activities Business-type Activities Total 2013 2012 2013 2012 2013 2012 General obligation bonds $ 8,753,677 $9,471,649 $ $ $8,753,677 $9,471,649 Literary loans 2,095,423 2,564,585 2,095,423 2,564,585 Revenue bonds 4,877,995 5,114,923 713,586 732,955 5,591,581 5,847,878 Literary anticipation note 16,687 630,395 16,687 630,395 Deferred amounts: Bond premium 266,511 283,315 266,511 283,315 Lease purchase agreements 341,188 617,454 341,188 617,454 closure/post-closure liability 267,913 526,868 267,913 526,868 OPEB obligations 6,609 6,609 6,609 6,609 Compensated absences 568.486 595.888 568 486 595 888 Total $:lZ :191 189 $:19 8:1:1 686 $ Z:13 586 $ Z32 955 $11 908 O:Z5 $20 544 61:1 Requests for Information This financial report is designed to provide a general overview of the County of Russell's finances for all those with an interest in the government's finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to Rufus W. Hood, County Administrator, County of Russell, P.O. Box 1208, 137 Highland Drive, Lebanon, VA 24266. -14- The remainder of Russell County's debt represents lease purchase closure liabilities, OPEB obligations and compensated absences. agreements, landfill post- Governmentel Acivites _Business-lype Activites Total 2012 2013 2012 2012 General obligation bonds S9.47te49 § $9.471,640 Literary loans 2.564.585 085,423 2.864.585 Revenue bonds 5114923 713,586 752.055 5501581 5.847878 Literary anticipation note 630,395 16987 630,395, Deferred amounts: Bond premium 208511 289,318 266,511 283,318 Loase purchase agreoments 341188617454 3e1168 17/454 closure/post-lasure lilly 2e7e13 $26,868 persis 526,868 OPES obligations 6.609 6.609 6.808 6,608, Compensated absences 565485 __595.858 a 595, “Total Siziaisss Geto STE EAS Zakors smseaest Requests for Information This financial report is designed to provide a general overview of the County of Russell's finances for all those with an interest in the government's finances. Questions conceming any of the information provided in this report or requests for additional financial information should be addressed to Rufus W. Hood, County Administrator, County of Russell, P.O. Box 1208, 137 Highland Drive, Lebanon, VA 24266. Basic Financial Statements Basic Financial Statements Exhibit 1 County of Russell, Virginia Statement of Net Position June 30, 2013 Component Units Primary Government Industrial Russell County Governmental Business-type Development Public Service Activities Activities Total School Board Authority Authority ASSETS Cash and cash equivalents $ 5, 719,700 $ $ 5,719,700 $ 351,024 $ 853,752 $ 103,886 Receivables (net of allowance for uncollectibles): Taxes receivable 8,396,689 8,396,689 Accounts receivable 672,033 3,256 675,289 44,540 20,339 260,332 Due from component unit 883,334 883,334 Due from other governmental units 1,572,681 1,572,681 1,508,496 Inventories 11,223 Prepaid items 385,063 25,582 Restricted assets: Temporarily restricted: Cash and cash equivalents 786,796 49,575 836,371 158,722 Capital assets (net of accumulated depreciation): Land 1,561,333 1,561,333 4,643,707 2,264,397 106,332 Land improvements 331,618 Buildings and improvements 15,565,287 15,565,287 10,918,096 6,581,104 107,097 Machinery and equipment 1,391,951 1,391,951 1,460,965 358,573 2,244,427 Utility plant in service 3,254,610 3,254,610 14,744,150 Construction in progress 1,302,926 3,821,553 Less: Accumulated Depreciation (4,506,368) Total assets $ 36,549,804 $ 3,307,441 $ 39,857,245 $ 19,311,891 $ 11,712,709 $ 17,076,936 LIABILITIES Accounts payable $ 1,446,854 $ 16,360 $ 1,463,214 5 377,926 $ 307,908 $ 313,102 Accrued liabilities 774 774 990,356 109,968 Customer deposits 18,200 Accrued interest payable 214,411 1,734 216,145 48,935 22,055 Due to primary government 683,334 200,000 Long-term liabilities: Due within one year 1,759,796 20,175 1,779,971 671,190 1,053,103 200,889 Due in more than one year 15,434,693 693,411 16,128,104 686,106 5,774,560 6,379,322 Total liabilities $ 18,856,528 $ 731,680 $ 19,588,208 $ 3,408,912 $ 7,384,506 $ 7,043,536 DEFERRED INFLOWS OF RESOURCES Unavailable revenue - property taxes $ 4,570,360 $ $ 4,570,360 $ $ $ NET POSITION Net investment in capital assets $ 7,559,783 $ 2,541,024 $ 10,100,807 $ 17,022,768 $ 4,691,433 $ 9,936,980 Restricted for: Coal Road 889,767 889,767 Debt service and bond covenants 49,575 49,575 158,722 Unrestricted (deficit) 4,673,366 (14,838) 4,658,528 (1,119,789) (363,230) (62,302) Total net position $ 13,122,916 $ 2,575,761 $ 15,698,677 $ 15,902,979 $ 4,328,203 $ 10,033,400 The accompanying notes to the financial statements are an integral part of this statement. -15- County of Russell, Virginia ‘Statement of Net Postion exhibit + June 30, 2013 Component Units Primary Government Industria Russell County Governmental Businer-type Development Public Service Aetivities Activities School Board Authority Authority, assers Cash and cash equivalents 55,719,700 § S 5719700 $3502 § aSITSZ $103,806 Receivables (not of allowance fr uncllecibles) Taxes receivable 8,396,609 2,396,689 : Accounts receivable 67,033 3056 678,289 4450 20.9 260,382 Due from component unit 883,334 83,304 : : ‘ue from other governmental units 4,572,681 1768 1,508,496 : Inventories : creel Prepaid items 385,083, 25,582 Restricted asses: “Temporarily restrict! ‘cash and cash equivalents 786,796 49,575 36,371 158,722 Ccaplta assets (net of accumulated depreciation: and 1,561,333 1,561,333 4,683,707 2,264,397 106,332 Land improvements 331,618 Bullings and improvements 15,565,287 15,565,287 10,938,096 6 581,108 Machinery and equipment 1,391,951 1.391,951 1,460,965 358.573 ‘att pant ia service 325610 3.254.610 Constction in progress 1,302,026 Less: Accumulated Depreciation (4,506,368) Total assets tea SaaS we Tees TTDI 7.076.936 asiLies ‘Accounts payable S 14t6es4 $16,300 $1,463,214 § 377,926 S$ 307,508 § 313,102 Accrued liabilities 7 : 74 990,356 109,968 ‘Customer deposits : : : : 13,200 ‘Accrued interes payable aan ana 216,045 : 43,935 22,055, Due to primary government : . : 683,334 700,000 Long-term liabilities: ‘Due within ane year 1,759,796 2.78 wren ona 3,083,103 200,888 ‘Due in mare than ane year 15,436,698 3.41116, 128,104 686,106 5,774,560 637932 Total ibiities 316,856,528 $731,080 19,508,208 “S3.a08,912 8 7.284506 S 7,003,536 DEFERRED INFLOWS OF RESOURCES ‘Unavalable revenue - property taxes Ss _ 4570360 § 54570360 § s A NET Posmon Net investment n capital assets S 7,558,783 § 2,549,024 § 10,100,807 $17,022,768 5 4691.43 $ 9,936,500 Restricted fr: Coal Road 999,767 989,767 : Debs service and bond covenants 29.515 8.573 80,722 Uncestricted (deficit) 473,366 114838) 4,658,508 1.119.788) (363.230) (62,302) Total net position $B,122,916 5 2375,161_3 15,698,677 “S_ 15,900,979 $4,328,203 $70,033,400 ‘The accompanying notes tothe financial statements are an integral part of this statement Functions/Programs PRIMARY GOVERNMENT: Governmental activities: General government administration Judicial administration Public safety Public works Health and welfare Education Parks, recreation, and cultural Community development Interest on long-term debt Total governmental activities Business-type activities: Service Authority Total primary government COMPONENT UNITS: School Board Industrial Development Authority Russell County Public Service Authority Total component units County of Russell, Virginia Statement of Activities For the Year Ended June 30, 2013 Program Revenues Primary Government Charges for Services Operating Grants and Capital Grants and Governmental Business-type Contributions Contributions s 1,265,678 4,679 307,375 2,097,216 8,085 588,220 5,894,181 105,009 1,692,927 4,591,542 205,056 15,169 8,270,658 6,879,852 7,484,972 529,706 29,690 338,530 2,173,719 498,401 32,806,073 352,519 9,822,073 441,349 46,192 s 33,247,422 398,711 9,822,073 s 41 '136,895 647,817 32,016,007 1,098,857 17,466 1,850,003 1,133,980 44,085,755 1,781,797 s 32,033,473 General revenues: General property taxes Other local taxes: Local sale5 and use taxes Coal road and severence taxes Consumers' utility taxes Motor vehicle licenses Other local taxes Unrestricted revenues from use of money and property Miscellaneous Payments from the County of Russell, Virginia 1,387,708 1,411,104 2,798,812 Grants and contributions not restricted to specific programs Gain on disposal of capital assets Transfers Total general revenues and transfers Change in net position Net position- beginning, as restated Net position - ending (953,624) {1 ,500,911) {4,096,245) (4,371,317) {1,390,806) {7,484,972) {161 ,486) {2,173,719) 14,686,993 1,689,275 2,285,086 567,707 355,686 181,858 45,865 60,479 2,580,839 {283,789) Z2,169,999 (461,482) 13,584,398 13,122,916 283,789 283,789 (111 ,368) 2,687,129 2,575,761 The accompanying notes to the financial statements are an integral part of this statement. s Net (Expense) Revenue and Changes in Net Position Component Units Industrial Exhibit 2 Russell County Development Public Service School Board (8,473,071) $ 306,317 14,686,993 1,689,275 2,285,086 567,707 355,686 181,858 45,865 3,215 638,040 4,898 60,479 292,514 196,335 61,721 7,962,364 1,537,278 1,213,068 2,580,839 79,117 22,453,788 8,258,093 s 2,371,653 1,358,804 {572,850) (214,978) s 2,677,970 2,053,885 16,271,527 16,117,957 1,650,233 7,979,515 15,698,677 15,902,979 s 4,328,203 10,033,400 oF county of Ruel Vig Satement of Ate orth Yen Ende June 30, 2013 eh? Funston Progam Sovernmenta acts: {General goverment amination ‘cal amtration Prkicworts esi an welfare ark, rerention, a oda ‘cnmunty development Inert eng tr debe uses type activities: sence sutorty Total primary government Cconponen UNITS: Seat Bord sti Development autocty use Canty Public Sence Authority Tot component unis Net (expense) Revenue and Program Revenues ‘Changes in Not Postion Primary ‘Campane Goverment Unite Operating capital Tarra Rawel Coanty Charges or Ganleand—_Granteand Governmental Busnets-ype Development Publi Service fapmiss Service: Gtributions Cantrutions ——tivleg—-Actviie?—=«“Total_-«=«‘Sehool Board authority” uthorty S 12678 $4679 § 307375 5S s3an0) 5 s dome sors "ae 20 song) Samat sas.co7 692.927 4.096.245) Aseise 105.056 15.68 ea7n3i7) same 6379.52 90.806) aba asasr) 518.706 26830 6786) ama ar73719) ‘oa. (98.01), THe. -§ iss S__ 9a TRS TRoLeN sais s 410 8 995,197) 5_ 095.151) Sm § warn §_9eOTS (95.157) $006 38) S mi6a9s § earsi7 § mo. § Ss warsory § s 1036857 17o6 1,307,708: 306,307 Nesnos 1.123900 2 tani0e 265001 $ Hus. 155 Syst 3 ROA Sz SEAL ea 95 cena event “Genera property taxes 5 14860985 § 5S meses 5 5 ‘Other oat or: eestor apne tes 689.075 1.689.278 osl oad and severance taxes 2.288.088 2.285.086 eosumers way ates ser207 ‘e707 Noter vail enses 355,686, 35,686 ‘ther oat axes 1a58 9858 Unreseict evens fam us of money ad prepety 5088 45.85 3218800 4398 Miscellaneous aan coarse 1968 ani Payments rem the County oF Ruse, Virgins 79a 4s AB Oe Grants and cotribtions not restrict to ec prorams 2.500 839 2.80839 Sain on eposl of cata sets r07 Tenses 2e3.709) 283,709 Total general revenues and rasfers 51999 2 a7 5 TSS eR SS change met coon SSL § (LSB) S GIZASOY S (214978) §—2ATTITO 8 2.053.885 Net poston -baginig, 2 restated sass 2657.9 7s ToT sea.a9s 7.9718 Net besten ening Sia na.916 F255. 761§ 15.08.4775 15,502.99 SA ze IS 0.003.400 ‘The acomesing notes othe financial ttemens are an interal soo ne statement Exhibit 3 County of Russell, Virginia Balance Sheet Governmental Funds June 30, 2013 Coal Workforce General Road Investment Board Total ASSETS Cash and cash equivalents s 2,405,137 s s 120,642 s 2,525,779 Receivables (net of allowance for uncollectibles): Taxes receivable 8,396,689 8,396,689 Accounts receivable 258,314 71,507 329,821 Due from other funds 46,115 65,105 111,220 Due from component unit 883,334 883,334 Due from other governmental units 1,246,030 326,651 1,572,681 Restricted assets: Temporarily restricted: Cash and cash equivalents 786,796 786,796 Total assets s 13,235,619 923,408 447,293 s 14,606,320 LIABILITIES Accounts payable s 666,166 s 33,641 s 292,674 s 992,481 Accrued liabilities 774 774 Due to other funds 111,220 111,220 Total liabilities 666,940 s 33,641 s 403,894 s 1,104,475 DEFERRED INFLOWS OF RESOURCES Unavailable revenue - property taxes 7,476,544 s s s 7,476,544 FUND BALANCES Restricted: Coal Road s s 889,767 s 889,767 Committed: Special revenue funds 43,399 43,399 Unassigned: 5,092,135 5,092,135 Total fund balances s 5,092,135 889,767 s 43,399 s 6,025,301 Total liabilities, deferred inflows of resources, and fund balances s 13,235,619 923,408 s 447,293 s 14,606,320 The accompanying notes to the financial statements are an integral part of this statement. -17- County of Russoll, Virginia Balance Sheet Governmental Funds june 30, 2013 exhibit 3 ASSETS Cash and eash equivalents Receivables (net of allowance for collectibles} Taxes receivable Accounts receivable ‘ue fram other funds ue from component unit ue from other governmental units Restricted assets: Temporarily restricted! Cash an cash equivalents Total assets asiumies ‘Accounts payeble Accrued tables Bue to other funds Total abilities DEFERRED INFLOWS OF RESOURCES Unavailable revenue - property taxes FUND BALANCES. Restricted Coal Road Committed Special revenue funds Unassigned: Total fund balances coat Woekforce Road lavestment Board Total $ 2405,037 § s 120602 § 2,805,779 8,396,669 8,396,669 258,314 7,507 329,821 26,115, 65,105 1.220 285,334 83,334 1,246,030 326.651 1,572,681 788,796 785,796 FRE _ 973.c08 BS S605, 370 S e516 § — T6e1 S 2674 $992,481 74 77% 111,220 111,220, 3 w9% 5 __Saoa_S 403.0945 1.104.475 Ss 7765M_§ A S_7476,504 s +S 88,067 § Ss a89,767 : a8 339 5,092,135, : 5,092,135 3 5,002.135 5 __ 669,767 5 BI_S_ 6.025.301 § I$ 14,606,320 Total iabilities, deferred lions of resources, and fund balances $13,735,619 5 923,408 ‘The eccomparying notes tothe financial statements are an integral part ofthis statement, County of Russell, Virginia Reconciliation of the Balance Sheet of Governmental Funds To the Statement of Net Position June 30, 2013 Amounts reported for governmental activities in the statement of net position are different because: Total fund balances per Exhibit 3 - Balance Sheet- Governmental Funds Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds. Land Buildings and improvements Machinery and equipment Other long-term assets are not available to pay for current-period expenditures and, therefore, are deferred in the funds. Internal service funds are used by management to charge the costs of certain activities, such as insurance and telecommunications, to individual funds. The assets and liabilities of the internal service funds are included in governmental activities in the statement of net position. Long-term liabilities, including bonds payable, are not due and payable in the current period and, therefore, are not reported in the funds. Bonds, literary loans, and note Capital lease Unamortized premium Accrued interest payable Landfill accrued closure and postclosure liability Net OPEB obligation Compensated absences Net position of governmental activities The accompanying notes to the financial statements are an integral part of this statement. -18- 1,561,333 15,565,287 1,391,951 (15,743,782) (341, 188) (266,511 1 (214,411) (267,913) (6,609) (568,486) Exhibit 4 $ 6,025,301 18,518,571 2,906,184 3,081 '760 (17,408,900) $ 13,122,916 Exhibit 4 County of Russell, Virginia Reconciliation of the Balance Sheet of Governmental Funds To the Statement of Not Position June 30, 2013 Amounts reported for governmental activities in the statement of net position are different because: Total fund balances per Exhibit 3 - Balance Sheet - Governmental Funds 5 6,025,301 Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds, Land 1,561,333, Busldings and improvements 15,565,287 Machinery and equipment 1,391,951 18,518,571 Other long-term assets are not avallable to pay for current-periad expenditures and, therefore, are deferred in the funds, 2,906,184 Internal service funds are used by management to charge the costs of certain activities, such as Insurance and telecommunications, to individual funds. The assets and liabilities of the internal service funds are included in governmental activities in the statement of net position. 3,081,760 Long-term liabilities, including bonds payable, are not due and payable in the current period and, therefore, are not reported in the funds, Bonds, literary loans, and note (15,743,782) Capital lease (341,188) Unamortized premium (266,511) Accrued interest payable (214,41) Landfill accrued closure and postelosure liability (267,913) Net OPEB obligation (6,609), Compensated absences (568,486) (17,408,900) Net position of governmental activities EEE ‘The accompanying nates to the financial statements are an integral part ofthis statement. 18. Exhibit 5 County of Russell, Virginia Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds For the Year Ended June 30, 2013 Coat Workforce General Road Investment Board Total REVENUES General property taxes s 14,696,587 s s s 14,696,587 Other local taxes 3,937,219 1 '142,393 5,079,612 Permits, privilege fees, and regulatory licenses 34,152 34,152 Fines and forfeitures 14,955 14,955 Revenue from the use of money and property 31,431 5,232 36,663 Charges for services 303,412 303,412 Miscellaneous 60,479 60,479 Recovered costs 1,009,359 1,009,359 Intergovernmental revenues: Commonwealth 7, 734,506 2,550 7,737,056 Federal 2,458,978 2,206,878 4,665,856 Total revenues s 30,281,078 s 1 '147,625 $ 2,209,428 s 33,638,131 EXPENDITURES Current: General government administration s 1,797,929 s s s 1,797,929 Judicial administration 2,096,382 2,096,382 Public safety 5,742,101 5,742,101 Public works 3,241,005 1,503,326 4,744,331 Health and welfare 6,120,771 2,213,965 8,334,736 Education 6,390,469 6,390,469 Parks, recreation, and cultural 488,706 488,706 Community development 2,283,910 2,283,910 Nondepartmental 423,737 423,737 Capital projects 334,929 334,929 Debt service: Principal retirement 2,314,036 2,314,036 Interest and other fiscal charges 555,784 555,784 Total expenditures s 31,789,759 s 1,503,326 s 2,213,965 s 35,507,050 Excess (deficiency) of revenues over (under) expenditures s (1 ,508,681) $ (355,701) s (4,537) s (1,868,919) OTHER FINANCING SOURCES (USES) Transfers out s (283,789) s s s (283,789) Net change in fund balances s (1 '792,470) s (355, 701) s (4,537) s (2,152,708) Fund balances- beginning 6,884,605 1,245,468 47,936 8,178,009 Fund balances- ending s 5,092,135 s 889,767 s 43,399 s 6,025,301 The accompanying notes to the financial statements are an integral part of this statement. -19- Exhibit 5 County of Russell, Virginia Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds For the Year Ended June 30, 2013 Coat Workforce General Road Investment Board Total REVENUES General property taxes, 5 14,696,587 $ :$ + $14,696,587 Other local taxes 3,937,219 1,142,393 5,079,612 Permits, privilege fees, and regulatory licenses 34,152, - : 34,152 Fines and forfeitures 14,955, : 14,955 Revenue from the use of money and property 31,431 9,232 : 36,663, Charges for services 303,412 : 303,412 ‘Miscellaneous 60,479 : 60,479 Recovered costs 1,009,359 : = 1,009,359 ntergovernmentat revenues: Commonwealth 7,734,506 : 2,550 7,737,056 Federal 2,458,978 : 2,206,878 4,665,856 Total revenues 3 30,281,078 $1,147,625 §) 2,209,428 $33,638,131 EXPENDITURES Current’ General government administration $1,797,929 $ “8 = $1,797,929 Jusicial administration 2,096,382 : = 2,096,382 Public safety 5,742,101 : - 5,742,101 Public works 3,241,005 1,503,326 = 4,744,331 Health and welfare 6,120,771 - 2,213,965 8,334,736 Education 6,390,469 6,390,469 Parks, recreation, and cultural 488,706 : 488,706 Community development 2,283,910 : 2,283,910 Nondepartmental 423,737 - : 423,737 Capital projects 334,929 : : 334,929 Debt service: : Principal retirement 2,314,086 : + 2,314,036 Interest and other fiscal charges 995,784 : : 585,784 Total expenditures 331,789,759 $1,503,326 §) 2,213,965 8 35,507,050 Excess (deficiency) of revenues over (under) expenditures (1,508,681) $__ (355,701) $. (4,537) $ (1,868,919) OTHER FINANCING SOURCES (USES) Transfers out S$ (283,789) $ _3 = S__ (283,789) Net change in fund balances S (1,792,470) $ (355,701) $ (4,537) $ (2,152,708) Fund balances - beginning 6,884,605 1,245,468 41,936 8,178,009 Fund batances - ending $5,092,135 S$ 889,767_$ 43,399_§ 6,025,301 ‘The accompanying notes to the financial statements are an integral part of this statement. County of Russell, Virginia Reconciliation of Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds To the Statement of Activities For the Year Ended June 30, 2013 Amounts reported for governmental activities in the statement of activities are different because: Net change in fund balances - total governmental funds Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which depreciation exceeded capital outlays in the current period. Capital outlay Reversion of assets back to the School Board (net) Depreciation expense Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds. The issuance of long-term obligations (e.g. bonds, leases) provides current financial resources to governmental funds, while the repayment of the principal of long-term obligations consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net position. Also, governmental funds report the effect of premiums, discounts, and similar items when obligations is first issued, whereas these amounts are deferred and amortized in the statement of activities. This amount is the net effect of these differences in the treatment of long-term obligations and related items. Principal Payments: Bonds, literary loans, and notes Landfill accrued closure and postclosure liability Capital lease 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 governmental funds. (Increase) decrease in compensated absences (Increase) decrease in accrued interest payable Amortization of bond premiums Internal service funds are used by management to charge the costs of certain activities, such as insurance and telecommunications, to individual funds. The net revenue (expense) of certain internal service funds is reported with governmental activities. Change in net position of governmental activities The accompanying notes to the financial statements are an integral part of this statement. -20- 378,940 (876,894) Exhibit 6 $ (2,152,708) (1 '1 36, 106) (1 ,634,060) 2,037,770 258,955 276,266 27,402 40,579 16,804 (9,594) 2,572,991 84,785 677,104 $ (461,482) County of Russel, Virginia Reconciliation of Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds To the Statement of Activities For the Year Ended June 30, 2013 Exhibit 6 Amounts reported for governmental activities in the statement of activities are different because: Net change in fund balances - total governmental funds Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets s allocated over their estimated useful les and reported as depreciation expense. This is the {amount by which depreciation exceeded capital outlays in the current period. Capital outlay Reversion of assets back to the School Board (net) Depreciation expense Revenues in the statement of activities that do not provide current financial resources are not reported as revenves in the funds. “The issuance of long-term obligations (e.g. bonds, leases) provides current Financial resources to governmental funds, while the repayment of the principal of long-term obligations consumes the current financial resources of ‘governmental funds. Neither transaction, however, has any effect on net position. Also, governmental funds Feport the effect of premiums, discounts, and similar items when obligations is first issued, whereas hese amounts are deferred and amortized in the statement of activites. This amount is the net effect of these differences inthe treatment of long-term obligations and related items. Principal Payments Bonds, literary loans, and notes Landfill accrued closure and postelosure Wability Capital lease ‘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 governmental funds, (increase) decrease in compensated absences (tnerease) decrease in accrued Interest payable Amortization of bond premiums Internal service funds are used by management to charge the costs of certain activities, such as insurance and telecommunications, to individual funds, The net revenue (expense) of certain intemal service funds is reported with governmental activities, Change in net position of governmental activities, The accompanying notes to the financial statements are an integral part of this statement, § (2,152,708) 378,940 (676,894) 11.136,106) (1,634,060) 9,094) 2,037,770 258,955, 276266 2,572,991 27,0 40,579 16,00 84,785, 677,104 3 aia Exhibit 7 County of Russell, Virginia Statement of Net Position Proprietary Funds June 30, 2013 Enterprise Internal Fund Service Fund Dante Self Fund Health Insurance ASSETS Current assets: Cash and cash equivalents s s 3,193,921 Interest receivable 58 1,504 Accounts receivable, net of allowance for uncollectibles 3,198 340,708 Total current assets s 3,256 $ 3,536,133 Noncurrent assets: Restricted assets: Cash and cash equivalents (in custody of others) $ 49,575 $ Capital assets: Utility plant in service $ 5,240,699 $ Less accumulated depreciation (1 '986,089) Total capital assets $ 3,254,610 $ Total noncurrent assets $ 3,304,185 $ Total assets $ 3,307,441 $ 3,536,133 LIABILITIES Current liabilities: Accounts payable $ 16,360 $ 454,373 Accrued interest payable 1 '734 Revenue bonds - current portion 20,175 Total current liabilities $ 38,269 $ 454,373 Noncurrent liabilities: Revenue bonds - net of current portion $ 693,411 $ Total liabilities $ 731,680 $ 454,373 NET POSITION Net investment in capital assets $ 2,541,024 $ Restricted for debt service and bond covenants 49,575 Unrestricted (14,838) 3,081,760 Total net position $ 2,575,761 $ 3,081,760 The accompanying notes to the financial statements are an integral part of this statement. -21- County of Russell, Virginia ‘Statement of Net Position Proprietary Funds dune 30, 2013 Exhibit 7 ASSETS, Current assets: Cash and cash equivalents Interest receivable Accounts receivable, net of allowance for uncollectibles Total current assets Noncurrent assets: Restricted assets: Cash and cash equivalents (in custody of others) Capital assets: Utility plant in service Less accumulated depreciation Total capital assets Total noncurrent assets Total assets LIABILITIES Current liabilities: Accounts payable Accrued interest payable Revenue bonds - current portion Total current liabilities Noncurrent liabilities: Revenue bonds - net of current portion Total tiabilities NET POSITION Net investment in capital assets Restricted for debt service and bond covenants Unrestricted Total net position ‘The accompanying notes to the financial statements are an integral part of this statement. Qe 5 Enterprise Fund Dante Fund 58 3,198 3,256 49,575 5,240,699 (1,986,089) 3,254,610 304,185 3,307,441 16,360 1,734 20,175 38,269 693,411 734,680 2,541,024 49,575 (14,838) 7,575,761 Internal Service Fund ‘Self Health Insurance 5 3,193,921 1,504 340,708 3,536,133, 3,536,133, 454,373 454,373 3,081,760 3,081,760 Exhibit 8 County of Russell, Virginia Statement of Revenues, Expenses, and Changes in Net Position Proprietary Funds For the Year Ended June 30, 2013 Enterprise Internal Fund Service Fund Dante Self Fund Health Insurance OPERATING REVENUES Charges for services: Sewer revenues s 46,192 s Insurance premiums 5,494,453 Total operating revenues s 46,192 s 5,494,453 OPERATING EXPENSES Salaries and benefits s 157,187 s Professional services 8,389 Utilities 1,045 Materials and supplies 39,456 Office expenses 62,531 Repairs and maintenance 9,689 Insurance claims and expenses 4,826,551 Depreciation 131,017 Total operating expenses s 409,314 s 4,826,551 Operating income (loss) s (363,122) s 667,902 NONOPERATING REVENUES (EXPENSES) Investment income s s 9,202 Interest expense (32,035) Total nonoperating revenues (expenses) s (32,035) s 9,202 Income before transfers s (395, 157) s 677,104 Transfers in s 283,789 s Change in net position s (111 ,368) s 677,104 Total net position - beginning 2,687,129 2,404,656 Total net position - ending s 2,575,761 s 3,081,760 The accompanying notes to the financial statements are an integral part of this statement. -22- Exhibit 8 County of Russell, Virginia Statement of Revenues, Expenses, and Changes in Net Position Proprietary Funds For the Year Ended June 30, 2013 Enterprise internal Fund Service Fund Dante Self Fund Health Insurance OPERATING REVENUES Charges for services: Sewer revenues s 46,192 § : Insurance premiums 5,494,453 Total operating revenues $ 46,192 $ 5,494,453 OPERATING EXPENSES Salaries and benefits $ 197,187 $ : Professional services 8,389 utilities 1,045 ‘Materials and supplies 39,456 : Office expenses 62,531 : Repairs and maintenance 9,689 : Insurance claims and expenses : 4,826,551 Depreciation 131,017 : Total operating expenses 409,314_§ 826,551 Operating income (loss) (363,122) $ 667,902 NONOPERATING REVENUES (EXPENSES) Investment income $ -$ 9,202 Interest expense (32,035) - Total nonoperating revenues (expenses) 3 (62,035) $ 9,202 Income before transfers $ 895,157) $ 67,104 Transfers in s 283,789_$ - Change in net position 3 (117,368) § 677,104 Total net position - beginning 2,687,129 2,404,656 Total net position - ending $ 2,575,761 _$ 3,081,760, The accompanying notes to the financial statements are an integral part of this statement. 22- County of Russell, Virginia Statement of Cash Flows Proprietary Funds For the Year Ended June 30, 2013 CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers and users Receipts for insurance premiums Payments to suppliers Payments to employees Payments for premiums Net cash provided by (used for) operating activities CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Transfers from other funds CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Principal payments on bonds Interest payments Net cash provided by (used for) capital and related financing activities CASH FLOWS FROM INVESTING ACTIVITIES Interest income Net increase (decrease) in cash and cash equivalents Cash and cash equivalents - beginning Cash and cash equivalents - ending Reconciliation of operating income (loss) to net cash provided by (used for) operating activities: Operating income (loss) Adjustments to reconcile operating income (loss) to net cash provided by (used for) operating activities: Depreciation (Increase) decrease in accounts receivable Increase (decrease) in accounts payable Total adjustments Net cash provided by (used for) operating activities $ $ $ $ $ $ $ $ $ $ $ $ Enterprise Fund Dante Fund 49,408 (125,260) (157, 187) (233,039) 283,789 (19,369) (32,078) (51,447) 39 (658) 50,233 49,575 Exhibit 9 Internal Service Fund Self Health Insurance $ 5,153,745 (4,938,609) $ 215,136 $ $ $ $ 10,206 $ 225,342 2,968,579 $ 3,193,921 (363, 122) $ 667,902 131,017 3,216 (4, 150) 130,083 (233,039) $ $ $ (340,708) (112,058) (452, 766) 215,136 The accompanying notes to the financial statements are an integral part of this statement. -23- Exhibit 9 County of Russell, Virginia, Statement of Cash Flows Proprietary Funds For the Year Ended June 30, 2013 Enterprise Internal Fund Service Fund Dani Fund Health insurance CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers and users 5 49,408 § : Receipts for Insurance premiums : 5,193,745, Payments to suppliers (125,260) . Payments to employees (157,187) - Payments for premiums (4,938,609) Net cash provided by (used for) operating activities 3 (233,088) $ 215,136 ‘CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Transfers from other funds s 283,789_$ ‘CASH FLOWS FROM CAPITAL AND RELATED FINANCING. ACTIVITIES. Principal payments on bonds $ (19,369) 5 - Interest payments 32,078) Net cash provided by (used for) capitat anc related financing activities 8 (s1.4ey) S : CASH FLOWS FROM INVESTING ACTIVITIES Interest income 38 10,206 Net increase (decrease) in cash and cash equivalents 8 (658) 5 225,342 Cash and cash equivalents - beginning 50,233 2,968,579 Cash and cash equivalents » ending 29,575 $3,193,921 Reconciliation of operating income (loss) to net cash provided by (used for) operating activt Operating income (loss) (263,122) $ 67,902 Adjustments to reconcile operating income (loss) to net cash provided by (used for) operating activites: Depreciation s 131,017 § {Increase) decrease in accounts receivable 3,216 (40,708) Increase (decrease) in accounts payable (4,150) (112,058) Total adjustments 3 730,083 5 (452,766) Net cash provided by (used for) operating activities $ 233,039) $ 215,136 The accompanying notes to the financial statements are an integral part of this statement. -23- ASSETS Cash and cash equivalents Total assets LIABILITIES County of Russell, Virginia Statement of Fiduciary Net Position Fiduciary Fund June 30, 2013 Amounts held for Social Services clients Amounts held for VASAP Total liabilities s s s s The accompanying notes to the financial statements are an integral part of this statement. -24- Exhibit 10 Agency Funds 50,670 50,670 60,387 (9,717) 50,670 Exhibit 10 County of Russell, Virginia Statement of Fiduciary Net Position Fiduciary Fund June 30, 2013 Agency Funds ASSETS. Cash and cash equivatents $ 50,670 Total assets $ 50,670 LIABILITIES Amounts held for Social Services clients $ 60,387 ‘Amounts held for VASAP. (3,717) Total liabitities $ 50,670 ‘The accompanying notes to the financial statements are an integral part of this statement. 24 COUNTY OF RUSSELL, VIRGINIA NOTES TO THE fiNANCIAL STATEMENTS JUNE 30, 2013 Note 1-Summary of Significant Accounting Policies: The financial statements of the County conform to generally accepted accounting principles (GAAP) applicable to governmental units promulgated by the Governmental Accounting Standards Board (GASB). The following is a summary of the more significant policies: A. Financial Reporting Entity The County of Russell, Virginia is a municipal corporation governed by an elected six-member Board of Supervisors. The accompanying financial statements present the government and its component units, entities for which the government is considered to be financially accountable. Blended component units, although legally separate entities, are, in substance, part of the government's operations. Each discretely presented component unit is reported in a separate column in the government-wide financial statements (see note below for description) to emphasize that it is legally separate from the government. Blended component units - None Discretely Presented Component Units - The component unit columns in the financial statements include the financial data of the County's discretely presented component units. They are reported in a separate column to emphasize that they are legally separate from the County. The Russell County School Board operates the elementary and secondary public schools in the County. School Board members are popularly elected. The School Board is fiscally dependent upon the County because the County approves all debt issuances of the School Board and provides significant funding to operate the public schools since the School Board does not have separate taxing powers. The School Board is presented as a governmental fund type. The School Board does not issue separate financial statements. The Industrial Development Authority of Russell County, Virginia (IDA) encourages and provides financing for industrial development in Russell County. The financial statements of the IDA have been included because the County appoints the governing body and has made moral obligation resolutions to finance deficits of any kind or nature that may occur each year subject to annual appropriation. Complete financial statements of the IDA can be obtained in writing at 137 Highland Drive, Lebanon, VA 24266. The Russell County Public Service Authority (PSA) provides water and sewer service to residents of Russell County. The Authority is fiscally dependent on the County because the County appoints the governing body and has financing guarantees involving the Authority. Complete financial statements of the PSA can be obtained in writing at 7341 Swords Creek Road, Swords Creek, VA 24649. The Castlewood Water and Sewage Authority of Russell County provides water and sewer service to residents of Russell County. The Authority is fiscally dependent on the County because the County appoints the governing body and has financing guarantees involving the Authority. Complete financial statements of the Authority can be obtained in writing at P.O. Box 655, Castlewood, VA 24224, but they were not available as of the report date. -25- COUNTY OF RUSSELL, VIRGINIA NOTES TO THE FINANCIAL STATEMENTS. JUNE 30, 2013 Note 1-Summary of Significant Accounting Policies: The financial statements of the County conform to generally accepted accounting principles (GAAP) applicable to governmental units promulgated by the Governmental Accounting Standards Board (GASB). The following is a summary of the more significant policies: A. Financial Reporting Entity The County of Russell, Virginia is a municipal corporation governed by an elected six-member Board of Supervisors. The accompanying financial statements present the government and its component units, entities for which the government is considered to be financially accountable. Blended component units, although legally separate entities, are, in substance, part of the government's operations. Each discretely presented component unit is reported in a separate column in the government-wide financial statements (see note below for description) to emphasize that it is legally separate from the government. Blended component units - None Discretely Presented Component Units - The component unit columns in the financial statements include the financial data of the County's discretely presented component units. They are reported ina separate column to emphasize that they are legally separate from the County. The Russell County School Board operates the elementary and secondary public schools in the County. School Board members are popularly elected. The School Board is fiscally dependent upon the County because the County approves all debt issuances of the School Board and provides significant funding to operate the public schools since the School Board does not have separate taxing powers, The School Board is presented as a governmental fund type. The School Board does not issue separate financial statements. The Industrial Development Authority of Russell County, Virginia (IDA) encourages and provides financing for industrial development in Russell County. The financial statements of the IDA have been included because the County appoints the governing body and has made moral obligation resolutions to finance deficits of any kind or nature that may occur each year subject to annual appropriation. Complete financial statements of the IDA can be obtained in writing at 137 Hightand Drive, Lebanon, VA 24266. The Russell County Public Service Authority (PSA) provides water and sewer service to residents of Russell County. The Authority is fiscally dependent on the County because the County appoints the governing body and has financing guarantees involving the Authority. Complete financial statements of the PSA can be obtained in writing at 7341 Swords Creek Road, Swords Creek, VA 24649. The Castlewood Water and Sewage Authority of Russell County provides water and sewer service to residents of Russell County. The Authority is fiscally dependent on the County because the County appoints the governing body and has financing guarantees involving the Authority. Complete financial statements of the Authority can be obtained in writing at P.O. Box 655, Castlewood, VA 24224, but they were not available as of the report date. -25- COUNTY OF RUSSELL, VIRGINIA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2013 Note 1-Summary of Significant Accounting Policies: (continued) A. Financial Reporting Entity (continued) Related Organizations - The County's officials are also responsible for appointing the members of the boards of other organizations, but the county's accountability for these organizations does not extend beyond making the appointment. Jointly Governed Organizations - The County, in conjunction with other local jurisdictions, participates in supporting the Southwest Virginia Regional Jail and the Cumberland Mountain Community Services Board. The governing bodies of these organizations are appointed by the respective governing bodies of the participating jurisdictions. During the year, the County contributed $2,157,445 to the Regional Jail and $154,433 to the Community Services Board. The County does not have any ongoing financial responsibility for these Organizations. B. Government-wide and Fund Financial Statements Government-wide financial statements- The reporting model includes financial statements prepared using full accrual accounting for all of the government's activities. This approach includes not just current assets and liabilities but also capital assets and long-term liabilities (such as buildings and general obligation debt). The government-wide financial statements (i.e., the statement of net position and the statement of activities) report information on all of the nonfiduciary activities of the primary government and its component units. For the most part, the effect of interfund activity has been removed from these statements. 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. Likewise, the primary government is reported separately from certain legally separate component units for which the primary government is financially accountable. Statement of Net Position -The government-wide Statement of Net Position is designed to display the financial position of the primary government (government and business-type activities) and its component units. Governments report all capital assets, including infrastructure, in the government­ wide statement of net position and report depreciation expense - the cost of "using up" capital assets - in the statement of activities. The net position of a government will be broken down into three categories: 1) net investment in capital assets; 2) restricted; and 3) unrestricted. Statement of Activities - The government-wide Statement of Activities reports expenses and revenues in a format that focuses on the cost of each of the government's functions. The expense of individual functions is compared to the revenues generated directly by the function (for instance, through user charges or intergovernmental grants). The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are 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. -26- COUNTY OF RUSSELL, VIRGINIA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2013 Note 1-Summary of Significant Accounting Policies: (continued) A. Financial Reporting Entity (continued) Related Organizations - The County's officials are also responsible for appointing the members of the boards of other organizations, but the county's accountability for these organizations does not extend beyond making the appointment. Jointly Governed Organizations - The County, in conjunction with other local jurisdictions, participates in supporting the Southwest Virginia Regional Jail and the Cumberland Mountain Community Services Board. The governing bodies of these organizations are appointed by the respective governing bodies of the participating jurisdictions. During the year, the County contributed §2,157,445 to the Regional Jail and $154,433 to the Community Services Board. The County does not have any ongoing financial responsibility for these Organizations. B. Government-wide and Fund Financial Statements Government-wide financial statements - The reporting model includes financial statements prepared using full accrual accounting for all of the government’s activities. This approach includes not just current assets and liabilities but also capital assets and long-term liabilities (such as buildings and general obligation debt). The government-wide financial statements (i.e., the statement of net position and the statement of activities) report information on all of the nonfiduciary activities of the primary government and its component units. For the most part, the effect of interfund activity has been removed from these statements. 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. Likewise, the primary government is reported separately from certain legally separate component units for which the primary government is financially accountable. Statement of Net Position - The government-wide Statement of Net Position is designed to display the financial position of the primary government (government and business-type activities) and its component units. Governments report all capital assets, including infrastructure, in the government- wide statement of net position and report depreciation expense - the cost of “using up” capital assets - in the statement of activities. The net position of a government will be broken down into three categories: 1) net investment in capital assets; 2) restricted; and 3) unrestricted. Statement of Activities - The government-wide Statement of Activities reports expenses and revenues in a format that focuses on the cost of each of the government’s functions. The expense of individual functions is compared to the revenues generated directly by the function (for instance, through user charges or intergovernmental grants). The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are 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. COUNTY OF RUSSELL, VIRGINIA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2013 Note 1-Summary of Significant Accounting Policies: (continued) B. Government·wide and Fund Financial Statements (continued) Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds, even though the latter are excluded from the government-wide financial statements. Major individual governmental funds and major individual enterprise funds, if any, are reported as separate columns in the fund financial statements. C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund and fiduciary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. The government·wide Statement of Activities reflects both the gross and net cost per functional category (public safety, public works, health and welfare, etc.) which are otherwise being supported by general government revenues (property, sales and use taxes, certain intergovernmental revenues, fines, permits and charges, etc.) The Statement of Activities reduces gross expenses (including depreciation) by related program revenues, operating and capital grants, and contributions. The program revenues must be directly associated with the function (public safety, public works, health and welfare, etc.) or a business·type activity. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the government considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. Property taxes, franchise taxes, licenses, and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. Accordingly, real and personal property taxes are recorded as revenues and receivables when billed, net of allowances for un-collectible amounts. Property taxes not collected within 60 days after year-end are reflected as unavailable revenues. Sales and utility taxes, which are collected by the state or utilities and subsequently remitted to the County, are recognized as revenues and receivables upon collection by the state or utility, which is generally in the month preceding receipt by the County. -27- COUNTY OF RUSSELL, VIRGINIA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2013 Note 1-Summary of Significant Accounting Policies: (continued) B. Government-wide and Fund Financial Statements (continued) Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds, even though the latter are excluded from the government-wide financial statements. Major individual governmental funds and major individual enterprise funds, if any, are reported as separate columns in the fund financial statements. C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund and fiduciary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. The government-wide Statement of Activities reflects both the gross and net cost per functional category (public safety, public works, health and welfare, etc.) which are otherwise being supported by general government revenues (property, sales and use taxes, certain intergovernmental revenues, fines, permits and charges, etc.) The Statement of Activities reduces gross expenses (including depreciation) by retated program revenues, operating and capital grants, and contributions. The program revenues must be directly associated with the function (public safety, public works, health and welfare, etc.) or a business-type activity. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available, Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the government considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. Property taxes, franchise taxes, licenses, and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. Accordingly, real and personal property taxes are recorded as revenues and receivables when billed, net of allowances for un-collectible amounts. Property taxes not collected within 60 days after year-end are reflected as unavailable revenues. Sales and utility taxes, which are collected by the state or utilities and subsequently remitted to the County, are recognized as revenues and receivables upon collection by the state or utility, which is generally in the month preceding receipt by the County. COUNTY OF RUSSELL, VIRGINIA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2013 Note 1-Summary of Significant Accounting Policies: (continued) C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation (continued) Licenses, permits, fines and rents are recorded as revenues when received. Intergovernmental revenues, consisting primarily of federal, state and other grants for the purpose of funding specific expenditures, are recognized when earned or at the time of the specific expenditure. Revenues from general-purpose grants are recognized in the period to which the grant applies. All other revenue items are considered to be measurable and available only when the government receives cash. The government reports the following major governmental funds: The General Fund is the government's primary operating fund. It accounts for and reports all financial resources of the general government, except those required to be accounted for in other funds. The General Fund includes the activities of the Social Services, E·911, Dog Tag, Damage Stamp, Revenue Anticipation Note, Law Library, and Knox Creek Funds. The aforementioned Funds have been merged with the General Fund for financial reporting purposes. The Coal Road and Workforce Investment Board Funds serve as the County's major Special Revenue Funds. The Coal Road Fund accounts for and reports financial resources to be used for improvements to roads used in conjunction with coal mining and other expenses allowable by the Code of Virginia, (1950), as amended. The Workforce Investment Board Fund accounts for and reports financial resources to be used for workforce development benefiting the County. The government reports the following major proprietary funds: The County operates a water treatment system. The activities of the system are accounted for in the Dante fund. Additionally, the government reports the following fund types: Internal Service Funds account for the financing of goods and services provided to other departments or agencies of the government, or to other governments, on a cost reimbursement basis. The Internal Service Funds consist of the Self Health Insurance Funds. Fiduciary funds (Trust and Agency Funds) account for assets held by the government in a trustee capacity or as agent or custodian for individuals, private organizations, other governmental units, or other funds. Agency funds include the Special Welfare Fund and VA5AP Fund. The Special Welfare Fund includes activity of the Title XX and the 551 Fund, which have all been merged for financial reporting purposes. As a general rule, the effect of interfund activity has been eliminated from the government-wide financial statements. Exceptions to this general rule are other charges between the government's functions. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. -28- COUNTY OF RUSSELL, VIRGINIA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2013 Note 1-Summary of Significant Accounting Policies: (continued) C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation (continued) Licenses, permits, fines and rents are recorded as revenues when received. Intergovernmental revenues, consisting primarily of federal, state and other grants for the purpose of funding specific expenditures, are recognized when earned or at the time of the specific expenditure. Revenues from general-purpose grants are recognized in the period to which the grant applies. All other revenue items are considered to be measurable and available only when the government receives cash, The government reports the following major governmental funds: The General Fund is the government's primary operating fund. It accounts for and reports all financial resources of the general government, except those required to be accounted for in other funds. The General Fund includes the activities of the Social Services, €-911, Dog Tag, Damage Stamp, Revenue Anticipation Note, Law Library, and Knox Creek Funds. The aforementioned Funds have been merged with the General Fund for financial reporting purposes. The Coal Road and Workforce Investment Board Funds serve as the County's major Special Revenue Funds. The Coal Road Fund accounts for and reports financial resources to be used for improvements to roads used in conjunction with coal mining and other expenses allowable by the Code of Virginia, (1950), as amended. The Workforce Investment Board Fund accounts for and reports financial resources to be used for workforce development benefiting the County. The government reports the following major proprietary funds: ‘The County operates a water treatment system. The activities of the system are accounted for in the Dante fund. Additionally, the government reports the following fund types: Internal Service Funds account for the financing of goods and services provided to other departments or agencies of the government, or to other governments, on a cost reimbursement basis. The Internal Service Funds consist of the Self Health Insurance Funds. Fiduciary funds (Trust and Agency Funds) account for assets held by the government in a trustee capacity or as agent or custodian for individuals, private organizations, other governmental units, or other funds. Agency funds include the Special Welfare Fund and VASAP Fund. The Special Welfare Fund includes activity of the Title XX and the SS! Fund, which have all been merged for financial reporting purposes. As a general rule, the effect of interfund activity has been eliminated from the government-wide financial statements, Exceptions to this general rule are other charges between the government’s. functions. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. COUNTY OF RUSSELL, VIRGINIA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2013 Note 1-Summary of Significant Accounting Policies: (continued) C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation (continued) 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 nan-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's Internal Service Funds are charges to departments for health insurance. Operating expenses for Internal Service Funds include the cost of services and administrative expenses. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses. D. Assets, deferred outflows/inflows of resources, liabilities, and net position/fund balance: 1. Cash and Cash Equivalents The government's cash and cash equivalents are considered to be cash on hand, demand deposits, and short-term investments with original maturities of three months or less from the date of acquisition. Deposits with banks are covered by the Federal Deposit Insurance Corporation (FDIC) and Collateralized in accordance with the Virginia Security for Public Deposits Act (the "Act"). Investments for the government, as well as for its component units, are reported at fair value. The State Treasurer's Local Government Investment Pool operates in accordance with appropriate state laws and regulations. The reported value of the pool is the same as the fair value of the pool shares. 2. Receivables and Payables Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as either "due to/from other funds" (i.e., the current portion of interfund loans) or "advances to/from other funds" (i.e., the non-current portion of interfund loans). All other outstanding balances between funds are reported as "due to/from other funds." Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as "internal balances." Advances between funds, as reported in the fund financial statements, are offset by nonspendable fund balance in applicable governmental funds to indicate that they are not available for appropriation and are not expendable available financial resources. -29- COUNTY OF RUSSELL, VIRGINIA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2013 Note 1-Summary of Significant Accounting Policies: (continued) C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation (continued) 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’s Internal Service Funds are charges to departments for health insurance. Operating expenses for Internal Service Funds include the cost of services and administrative expenses. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses. D. Assets, deferred outflows/ inflows of resources, liabilities, and net position/fund balance: 1. Cash and Cash Equivalents The government's cash and cash equivalents are considered to be cash on hand, demand deposits, and short-term investments with original maturities of three months or less from the date of acquisition. Deposits with banks are covered by the Federal Deposit Insurance Corporation (FDIC) and Collateralized in accordance with the Virginia Security for Public Deposits Act (the “Act”). Investments for the government, as well as for its component units, are reported at fair value. The State Treasurer's Local Government Investment Pool operates in accordance with appropriate state laws and regulations. The reported value of the pool is the same as the fair value of the pool shares. 2. Receivables and Payables Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as either “due to/from other funds” (i.e., the current portion of interfund loans) or “advances to/from other funds” (i.e, the non-current portion of interfund loans). All other outstanding balances between funds are reported as “due to/from other funds.” Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as “internal balances.” Advances between funds, as reported in the fund financial statements, are offset by nonspendable fund balance in applicable governmental funds to indicate that they are not available for appropriation and are not expendable available financial resources. -29- COUNTY OF RUSSELL, VIRGINIA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2013 Note 1-Summary of Significant Accounting Policies: (continued) D. Assets, deferred outflows/inflows of resources, liabilities, and net position/fund balance: (continued) 3. Property Taxes Property is assessed at its value on January 1. Property taxes attach as an enforceable lien on property as of January 1. Real estate taxes are payable in installments on June 5'h and December 5'h. Personal property taxes are due and collectible on December 5'h. The County bills and collects its own property taxes. 4. Allowance for Uncollectible Accounts The County calculates its allowance for uncollectible accounts using historical collection data and, in certain cases, specific account analysis. The allowance amounted to approximately $886,473 at June 30, 2013 and is comprised solely of property taxes. 5. Use of 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. 6. Capital Assets Capital assets, which include property, plant, equipment, and infrastructure assets (e.g., roads, bridges, sidewalks, and similar items), are reported in the applicable governmental column in the government-wide financial statements. Capital assets are defined by the government as assets with an initial, individual cost of more than $5,000 (amount not rounded) and an estimated useful life in excess of one year. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date of donation. The cost of normal maintenance and repairs that do not add to the value of the asset or materially extend the asset's life are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed. Property, plant, equipment, and infrastructure of the primary government, as well as the Component Unit - School Board, are depreciated using the straight line method over the following estimated useful lives: Assets Buildings Building improvements Structures, lines, and accessories Machinery and equipment -30- Years 40 40 20·40 4·30 COUNTY OF RUSSELL, VIRGINIA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2013 Note 1-Summary of Significant Accounting Policies: (continued) D. Assets, deferred outflows/inflows of resources, liabilities, and net position/fund balance: (continued) 3. Property Taxes Property is assessed at its value on January 1. Property taxes attach as an enforceable lien on property as of January 1. Real estate taxes are payable in installments on June 5" and December 5'". Personal property taxes are due and collectible on December 5". The County bills and collects its own property taxes. Allowance for Uncollectible Accounts The County calculates its allowance for uncollectible accounts using historical collection data and, in certain cases, specific account analysis. The allowance amounted to approximately $886,473 at June 30, 2013 and is comprised solely of property taxes. Use of 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. Capital Assets Capital assets, which include property, plant, equipment, and infrastructure assets (e.g., roads, bridges, sidewalks, and similar items), are reported in the applicable governmental column in the government-wide financial statements. Capital assets are defined by the government as assets with an initial, individual cost of more than $5,000 (amount not rounded) and an estimated useful life in excess of one year. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date of donation. The cost of normal maintenance and repairs that do not add to the value of the asset or materially extend the asset’s life are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed. Property, plant, equipment, and infrastructure of the primary government, as well as the Component Unit - School Board, are depreciated using the straight line method over the following estimated useful lives: Assets Years Buildings 0 Building improvements 40 Structures, lines, and accessories 20-40 Machinery and equipment 4:30 -30- COUNTY OF RUSSELL, VIRGINIA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2013 Note 1-Summary of Significant Accounting Policies: (continued) D. Assets, deferred outflows/inflows of resources, liabilities, and net position/fund balance: (continued) 7. Prepaid Items Certain payments to vendors represent costs applicable to future accounting periods and are recorded as prepaid items in both the government-wide and fund financial statements. The cost of prepaid items is recorded as expenditures/expenses when consumed rather than when purchased. 8. Deferred Outflows/Inflows of Resources In addition to assets, the statement of financial position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until then. The County does not have any deferred outflows of resources as of June 30, 2013. In addition to liabilities, the statement of financial position will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. The County has one type of item that qualifies for reporting in this category. Under a modified accrual basis of accounting, unavailable revenue representing property taxes receivable is reported in the governmental funds balance sheet. This amount is comprised of uncollected property taxes due prior to June 30, 2nd half installments levied during the fiscal year but due after June 30th, and amounts prepaid on the 2nd half installments and is deferred and recognized as an inflow of resources in the period that the amount becomes available. Under the accrual basis, 2nd half installments levied during the fiscal year but due after June 30th and amounts prepaid on the 2nd half installments are reported as deferred inflows of resources. 9. Compensated Absences Vested or accumulated vacation leave that is expected to be liquidated with expendable available financial resources is reported as an expenditure and a fund liability of the governmental fund that will pay it. In accordance with the provisions of Governmental Accounting Standards No. 16, Accounting for Compensated Absences, no liability is recorded for non-vesting accumulating rights to receive sick pay benefits. The County accrues salary-related payments associated with the payment of compensated absences. All vacation pay is accrued when incurred in the government-wide and proprietary fund financial statements. The remainder of this page left blank intentionally. -31- COUNTY OF RUSSELL, VIRGINIA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2013 Note 1-Summary of Significant Accounting Policies: (continued) D. Assets, deferred outflows/inflows of resources, liabilities, and net position/fund balance: (continued) 7. Prepaid Items Certain payments to vendors represent costs applicable to future accounting periods and are recorded as prepaid items in both the government-wide and fund financial statements. The cost of prepaid items is recorded as expenditures/expenses when consumed rather than when purchased. 8. Deferred Outflows/Inflows of Resources In addition to assets, the statement of financial position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until then. The County does not have any deferred outflows of resources as of June 30, 2013. In addition to liabilities, the statement of financial position will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. The County has one type of item that qualifies for reporting in this category. Under a modified accrual basis of accounting, unavailable revenue representing property taxes receivable is reported in the governmental funds balance sheet. This amount is comprised of uncollected property taxes due prior to June 30, 2nd half installments levied during the fiscal year but due after June 30th, and amounts prepaid on the 2nd half installments and is deferred and recognized as an inflow of resources in the period that the amount becomes available. Under the accrual basis, 2nd half installments levied during the fiscal year but due after June 30th and amounts prepaid on the 2nd half installments are reported as deferred inflows of resources. 9. Compensated Absences Vested or accumulated vacation leave that is expected to be liquidated with expendable available financial resources is reported as an expenditure and a fund liability of the governmental fund that will pay it. In accordance with the provisions of Governmental Accounting Standards No. 16, Accounting for Compensated Absences, no liability is recorded for non-vesting accumulating rights to receive sick pay benefits. The County accrues salary-related payments associated with the payment of compensated absences. All vacation pay is accrued when incurred in the government-wide and proprietary fund financial statements. The remainder of this page left blank intentionally. -3t- COUNTY OF RUSSELL, VIRGINIA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2013 Note 1-Summary of Significant Accounting Policies: (continued) D. Assets, deferred outflows/inflows of resources, liabilities, and net position/fund balance: (continued) 10. Long-term Obligations ln the government-wide financial statements, and proprietary fund types in the fund financial statements, long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund type statement of net position. Bond premiums and discounts, are deferred and amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of the applicable bond premium or discount. ln the fund financial statements, governmental fund types recognize bond premiums and discounts, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. 11. Fund Equity The County reports fund balance in accordance with GASB Statement 54, Fund Balance Reporting and Governmental Fund Type Definitions. The following classifications describe the relative strength of the spending constraints placed on the purposes for which resources can be used: • Nonspendable fund balance - amounts that are not in spendable form (such as inventory and prepaid expenditures) or are required to be maintained intact (corpus of a permanent fund); • Restricted fund balance - amounts constrained to specific purposes by their providers (such as grantors, bondholders, and higher levels of government), through constitutional provisions, or by enabling legislation; • Committed fund balance - amounts constrained to specific purposes by a government itself, using its highest level of decision-making authority; to be reported as committed, amounts cannot be used for any other purpose unless the government takes the same highest level action to remove or change the constraint; • Assigned fund balance - amounts a government intends to use for a specific purpose; intent can be expressed by the governing body or by an official or body to which the governing body delegates the authority; • Unassigned fund balance- amounts that are available for any purpose; positive amounts are only reported in the general fund. The Board of Supervisors is the highest level of decision-making authority and the formal action that is required to establish, modify or rescind a fund balance commitment is a resolution approved by the Board of Supervisors. The resolution must either be approved or rescinded as applicable, prior to the last day of the fiscal year for which the commitment is made. The amount subject to the constraint may be determined in the subsequent period. -32- COUNTY OF RUSSELL, VIRGINIA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2013 Note 1-Summary of Significant Accounting Policies: (continued) D. Assets, deferred outflows/inflows of resources, liabilities, and net position/fund balance: (continued) 10. 1. Long-term Obligations in the government-wide financial statements, and proprietary fund types in the fund financial statements, long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund type statement of net position. Bond premiums and discounts, are deferred and amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of the applicable bond premium or discount. In the fund financial statements, governmental fund types recognize bond premiums and discounts, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Fund Equity The County reports fund balance in accordance with GASB Statement 54, Fund Balance Reporting and Governmental Fund Type Definitions. The following classifications describe the relative strength of the spending constraints placed on the purposes for which resources can be used: = Nonspendable fund balance - amounts that are not in spendable form (such as inventory and prepaid expenditures) or are required to be maintained intact (corpus of a permanent fund); = Restricted fund balance - amounts constrained to specific purposes by their providers (such as grantors, bondholders, and higher levels of government), through constitutional provisions, or by enabling legislation; = — Committed fund balance - amounts constrained to specific purposes by a government itself, using its highest level of decision-making authority; to be reported as committed, amounts cannot be used for any other purpose unless the government takes the same highest level action to remove or change the constraint; = Assigned fund balance - amounts a government intends to use for a specific purpose; intent can be expressed by the governing body or by an official or body to which the governing body delegates the authority; = Unassigned fund balance - amounts that are available for any purpose; positive amounts are only reported in the general fund. The Board of Supervisors is the highest level of decision-making authority and the formal action that is required to establish, modify or rescind a fund balance commitment is a resolution approved by the Board of Supervisors. The resolution must either be approved or rescinded as applicable, prior to the last day of the fiscal year for which the commitment is made. The amount subject to the constraint may be determined in the subsequent period. -32- COUNTY OF RUSSELL, VIRGINIA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2013 Note 1-Summary of Significant Accounting Policies: (continued) D. Assets, deferred outflows/inflows of resources, liabilities, and net position/fund balance: (continued) 11. Fund Equity (continued) The Board of Supervisors has authorized the County Administrator as the official authorized to assign fund balance to a specific purpose as approved by the fund balance policy. The County of Russell will maintain an unassigned fund balance in the general fund equal to 16% of the expenditures/operating revenues (two months). The County considers a balance of less than 10% to be a cause for concern, barring unusual of deliberate circumstances. The County considers restricted fund balance to be spent when an expenditure is incurred for purposes for which restricted and unassigned, assigned, or committed fund balances are available, unless prohibited by legal documents or contracts. When an expenditure is incurred for purposes for which committed, assigned or unassigned amounts are available, the County considers committed fund balance to be spent first, then assigned fund balance, and lastly unassigned fund balance. 12. Net Position Net position is the difference between a) assets and deferred outflows of resources and (b) liabilities and deferred inflows of resources. Net investment in capital assets represents capital assets, less accumulated depreciation, less any outstanding debt related to the acquisition, construction or improvement of those assets. Deferred outflows of resources and deferred inflows of resources that are attributable to the acquisition, construction, or improvement of those assets or related debt are also included in this component of net position. 13. Net Position Flow Assumption Sometimes the County will fund outlays for a particular purpose from both restricted (e.g., restricted bond or grant proceeds) and unrestricted resources. In order to calculate the amounts to report as restricted- net position and unrestricted- net position in the government­ wide and proprietary fund financial statements, a flow assumption must be made about the order in which the resources are considered to be applied. It is the County's policy to consider restricted - net position to have been depleted before unrestricted - net position is applied. The remainder of this page left blank intentionally. -33- COUNTY OF RUSSELL, VIRGINIA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2013 Note 1-Summary of Significant Accounting Policies: (continued) D. Assets, deferred outflows/inflows of resources, liabilities, and net position/fund balance: (continued) 12. 13. 11. Fund Equity (continued) The Board of Supervisors has authorized the County Administrator as the official authorized to assign fund balance to a specific purpose as approved by the fund balance policy. The County of Russell will maintain an unassigned fund balance in the general fund equal to 16% of the expenditures/operating revenues (two months). The County considers a balance of less than 10% to be a cause for concern, barring unusual of deliberate circumstances, ‘The County considers restricted fund balance to be spent when an expenditure is incurred for purposes for which restricted and unassigned, assigned, or committed fund balances are available, unless prohibited by legal documents or contracts. When an expenditure is incurred for purposes for which committed, assigned or unassigned amounts are available, the County considers committed fund balance to be spent first, then assigned fund balance, and lastly unassigned fund balance. Net Position Net position is the difference between a) assets and deferred outflows of resources and (b) liabilities and deferred inflows of resources. Net investment in capital assets represents capital assets, less accumulated depreciation, tess any outstanding debt related to the acquisition, construction or improvement of those assets. Deferred outflows of resources and deferred inflows of resources that are attributable to the acquisition, construction, or improvement of those assets or related debt are also included in this component of net position. Net Position Flow Assumption Sometimes the County will fund outlays for a particular purpose from both restricted (e.¢., restricted bond or grant proceeds) and unrestricted resources. In order to calculate the amounts to report as restricted - net position and unrestricted - net position in the government wide and proprietary fund financial statements, a flow assumption must be made about the order in which the resources are considered to be applied. It is the County’s policy to consider restricted - net position to have been depleted before unrestricted - net position is applied. The remainder of this page left blank intentionally. COUNTY OF RUSSELL, VIRGINIA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2013 Note 1-Summary of Significant Accounting Policies: (continued) D. Assets, deferred outflows/inflows of resources, liabilities, and net position/fund balance: (continued) 14. Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position, Statement No. 63 of the Governmental Accounting Standards Board: The County implemented the financial reporting provisions of the above Statement for the fiscal year ended June 30, 2013. This Statement provides guidance for reporting deferred inflows and deferred outflows of resources. The requirements of this Statement will improve financial reporting by standardizing the presentation of deferred outflows of resources and deferred inflows of resources and their effects on an entity's net position. With the implementation of this Statement, certain terminology has changed and financial statement descriptions have changed from "net assets" to "net position." The net equity reported in the financial statements was not changed as a result of implementing this Statement and no restatement of prior balances is required. 15. Items Previously Reported as Assets and Liabilities, Statement No. 65 of the Governmental Accounting Standards Board: The County implemented the financial reporting provisions of the above Statement for the fiscal year ended June 30, 2013. This Statement establishes accounting and financial reporting standards that reclassify, as deferred outflows of resources or deferred inflows of resources, certain items that were previously reported as assets and liabilities and recognizes, as outflows of resources or inflows of resources, certain items that were previously reported as assets and liabilities. The net equity reported in the financial statements was not changed as a result of implementing this Statement and no restatement of prior balances is required. The remainder of this page left blank intentionally. -34- COUNTY OF RUSSELL, VIRGINIA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2013 Note 1-Summary of Significant Accounting Policies: (continued) D. Assets, deferred outflows/inflows of resources, liabilities, and net position/fund balance: (continued) 14, 15. Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position, Statement No, 63 of the Governmental Accounting Standards Board: The County implemented the financial reporting provisions of the above Statement for the fiscal year ended June 30, 2013. This Statement provides guidance for reporting deferred inflows and deferred outflows of resources. The requirements of this Statement will improve financial reporting by standardizing the presentation of deferred outflows of resources and deferred inflows of resources and their effects on an entity's net position. With the implementation of this Statement, certain terminology has changed and financial statement descriptions have changed from “net assets” to “net position.” The net equity reported in the financial statements was not changed as a result of implementing this Statement and no restatement of prior balances is required. Items Previously Reported as Assets and Liabilities, Statement No. 65 of the Governmental Accounting Standards Board: The County implemented the financial reporting provisions of the above Statement for the fiscal year ended June 30, 2013. This Statement establishes accounting and financial reporting standards that reclassify, as deferred outflows of resources or deferred inflows of resources, certain items that were previously reported as assets and liabilities and recognizes, as outflows of resources or inflows of resources, certain items that were previously reported as assets and liabilities. The net equity reported in the financial statements was not changed as a result of implementing this Statement and no restatement of prior balances is required. ‘The remainder of this page left blank intentionally. -34- COUNTY OF RUSSELL, VIRGINIA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2013 Note 2-Stewardship, Compliance, and Accountability: A. Budgetary Information The following procedures are used by the County in establishing the budgetary data reflected in the financial statements: 1. Prior to March 30, the County Administrator submits to the Board of Supervisors a proposed operating and capital budget for the fiscal year commencing the following July 1. The operating and capital budget includes proposed expenditures and the means of financing them. All Funds of the County have legally adopted budgets with the exception of the Industrial Development Authority Fund and Agency Funds. 2. Public hearings are conducted to obtain citizen comments. 3. Prior to June 30, the budget is legally enacted through passage of an Appropriations Resolution. 4. The Appropriations Resolution places legal restrictions on expenditures at the function level. Only the Board of Supervisors can revise the appropriation for each department or category. The County Administrator is authorized to transfer budgeted amounts within general government departments; however, the School Board is authorized to transfer budgeted amounts within the school system's categories. 5. Formal budgetary integration is employed as a management control device during the year for the General Fund, and the Special Revenue Funds (except the School Fund). The School Fund is integrated only at the level of legal adoption. 6. All budgets are adopted on a basis consistent with generally accepted accounting principles (GAAP). 7. Appropriations lapse on June 30, for all County units. 8. Encumbrance accounting, under which purchase orders, contracts, and other commitments for the expenditure of monies are recorded in order to commit that portion of the applicable appropriations, is not part of the County's accounting system. B. Excess of expenditures over appropriations The County had numerous departments and funds that had excess expenditures over appropriations in the current year. C. Deficit fund equity At June 30, 2013, there were no funds which had deficit fund equity. -35- COUNTY OF RUSSELL, VIRGINIA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2013 Note 2-Stewardship, Compliance, and Accountability: A Budgetary Information ‘The following procedures are used by the County in establishing the budgetary data reflected in the financial statements: 1 Prior to March 30, the County Administrator submits to the Board of Supervisors a proposed operating and capital budget for the fiscal year commencing the following July 1. The operating and capital budget includes proposed expenditures and the means of financing them. All Funds of the County have legally adopted budgets with the exception of the Industrial Development Authority Fund and Agency Funds. Public hearings are conducted to obtain citizen comments. Prior to June 30, the budget is legally enacted through passage of an Appropriations Resolution. The Appropriations Resolution places legal restrictions on expenditures at the function level. Only the Board of Supervisors can revise the appropriation for each department or category. The County Administrator is authorized to transfer budgeted amounts within general government departments; however, the School Board is authorized to transfer budgeted amounts within the school system's categories. Formal budgetary integration is employed as a management control device during the year for the General Fund, and the Special Revenue Funds (except the School Fund). The School Fund is integrated only at the level of legal adoption. Alt budgets are adopted on a basis consistent with generally accepted accounting principles (GAAP). Appropriations lapse on June 30, for all County units. Encumbrance accounting, under which purchase orders, contracts, and other commitments for the expenditure of monies are recorded in order to commit that portion of the applicable appropriations, is not part of the County's accounting system. Excess of expenditures over appropriations The County had numerous departments and funds that had excess expenditures over appropriations in the current year. Deficit fund equity At June 30, 2013, there were no funds which had deficit fund equity. COUNTY OF RUSSELL, VIRGINIA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2013 Note 3-Deposits and Investments: Deposits: Deposits with banks are covered by the Federal Deposit Insurance Corporations (FDIC) and collateralized in accordance with the Virginia Security for Public Deposits Act (the "Act") Section 2.2· 4400 et. seq. of the Code of Virginia. Under the Act, banks and savings institutions holding public deposits in excess of the amount insured by the FDIC must pledge collateral to the Commonwealth of Virginia Treasury Board. Financial Institutions may choose between two collateralization methodologies and depending upon that choice, will pledge collateral that ranges in the amounts from 50% to 130% of excess deposits. Accordingly, all deposits are considered fully collateralized. Investments: Statutes authorize local governments and other public bodies to invest in obligations of the United States or agencies thereof, obligations of the Commonwealth of Virginia or political subdivisions thereof, obligations of the International Bank for Reconstruction and Development (World Bank), the Asian Development Bank, the African Development Bank, "prime quality" commercial paper and certain corporate notes, banker's acceptances, repurchase agreements, and the State Treasurer's Local Government Investment Pool (LGIP). At June 30, 2013, the County had no investments. Note 4-Due from Other Governmental Units: The following amounts represent receivables from other governments at year-end: Commonwealth of Virginia: Local sales tax State sales tax Non-categorical aid Categorical aid-shared expenses Categorical aid-Virginia Public Assistance funds Categorical aid-other Categorical aid-Comprehensive Services Act funds Federal Government: Categorical aid-Virginia Public Assistance funds Categorical aid-Workforce Investment funds School federal programs Categorical aid-other Total Amount Due from Other Governmental Units -36- s Primary Government 296,591 320,630 180,243 137,747 42,341 114,332 146,827 326,651 319 1,572,681 s Component Unit School Board 674,359 834,137 1,508,496 COUNTY OF RUSSELL, VIRGINIA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2013 Note 3-Deposits and Investments: Deposits: Deposits with banks are covered by the Federal Deposit Insurance Corporations (FDIC) and collateralized in accordance with the Virginia Security for Public Deposits Act (the “Act”) Section 2.2 4400 et. seq. of the Code of Virginia. Under the Act, banks and savings institutions holding public deposits in excess of the amount insured by the FDIC must pledge collateral to the Commonwealth of Virginia Treasury Board. Financial institutions may choose between two collateralization methodologies and depending upon that choice, will pledge collateral that ranges in the amounts from 50% to 130% of excess deposits. Accordingly, all deposits are considered fully collateralized. Investments: Statutes authorize local governments and other public bodies to invest in obligations of the United States or agencies thereof, obligations of the Commonwealth of Virginia or political subdivisions thereof, obligations of the International Bank for Reconstruction and Development (World Bank), the Asian Development Bank, the African Development Bank, “prime quality” commercial paper and certain corporate notes, banker's acceptances, repurchase agreements, and the State Treasurer's Local Government Investment Pool (LGIP). At June 30, 2013, the County had no investments. Note 4-Due from Other Governmental Units: The following amounts represent receivables from other governments at year-end: Primary Component Unit Government School Board Commonweaith of Virginia: Local sales tax 296,591 : State sales tax - 674,359 Non-categorical aid 320,630 - Categorical aid-shared expenses 180,243 : Categorical aid-Virginia Public Assistance funds 137,747 - Categorical aid-other 42,341 - Categorical aid-Comprehensive Services Act funds 114,332 Federal Government: Categorical aid-Virginia Public Assistance funds 146,827 - Categorical aid-Workforce Investment funds 326,651 - School federal programs - 834,137 Categorical aid-other 7,319 Total Amount Due from Other Governmental Units $1,572,681 $ 1,508,496 COUNTY OF RUSSELL, VIRGINIA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2013 Note 5-lnterfund/Component-Unit Obligations: Fund Primary Government: Due to Primary Due from Primar) Government/ Component Unit Government/ Component Unit General Fund $==== s ===88=3~,3=34= Component Unit: School Board IDA Total s s 683,334 s 200,000 883,334 $===88=3~,3=34= lnterfund transfers and remaining balances for the year ended June 30, 2013, consisted of the following: Fund Primary Government: General Fund Dante Fund Total Primary Government: General Fund Coal Road Fund Workforce Investment Board Fund Total Transfers In s 283,789 s 283,789 Due From s 46,115 65,105 s 111,220 Transfers Out s 283,789 s 283,789 Due To s 111,220 s 111,220 Transfers are used to (1) move revenues from the fund that statute or budget requires to collect them to the fund that statute or budget requires to expend them and (2) use unrestricted revenues collected in the General Fund to finance various programs accounted for in other funds in accordance with budgeting authorization. The remainder of this page left blank intentionally. -37- COUNTY OF RUSSELL, VIRGINIA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2013 Note 5-Interfund/Component-Unit Obligations: Due to Primary Government/ Fund Component Unit Due from Primary Government/ Component Unit Primary Government: General Fund 5 Component Unit: School Board $ 683,334 IDA 200,000 Total $ 883,334 Interfund transfers and remaining balances for the year ended June 30, Fund Transfers In $ $ $ 2013, consisted of the following: Transfers Out, Primary Government: General Fund $ Dante Fund 283,789 Total 283,789 Primary Government: Due From General Fund $46,115 Coal Road Fund 65,105 Workforce Investment Board Fund : Total $111,220 $ 283,789 283,789 Due To 3 7 111,220 $111,220 Transfers are used to (1) move revenues from the fund that statute or budget requires to collect them to the fund that statute or budget requires to expend them and (2) use un restricted revenues collected in the General Fund to finance various programs accounted for in other funds in accordance with budgeting authorization. The remainder of this page left blank intentionally. -3T- COUNTY OF RUSSELL, VIRGINIA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2013 Note 6-Long-Term Obligations: Primary Government - Governmental Activity Indebtedness The following is a summary of long-term obligation transactions of the County for the year ended June 30, 2013: Balance Increases/ Decreases/ Balance July 1, 2012 Issuances Retirements June 30, 2013 General obligation bonds s 9,471,649 s s (717,972) s 8, 753,677 Literary loans 2,564,585 (469,162) 2,095,423 Revenue bonds 5,114,923 (236, 928) 4,877,995 Literary anticipation note 630,395 (613,708) 16,687 Deferred Amounts: Bond premiums 283,315 (16,804) 266,511 Capital lease 617,454 (276,266) 341 '188 Landfill closure/ postclosure liability 526,868 (258, 955) 267,913 Net OPEB obligation 6,609 6,609 Compensated absences 595,888 454,472 (481 ,874) 568,486 Total s 19,811,686 s 454,472 s (3,071 ,669) s 17,194,489 Annual requirements to amortize long-term obligations and related interest are as follows: Year Ending General Obligation Bonds Literary Loans Revenue Bonds June 30, Principal Interest Principal Interest Principal Interest 2014 s 611,026 s 403,830 s 282,792 s 38,872 s 237,459 s 2015 627,696 372,805 375,977 41,092 237,459 2016 644,976 340,870 375,977 32,130 237,459 2017 647,901 308,788 375,977 23,167 237,459 2018 670,770 277,286 282,792 14,205 237,459 2019-2023 3,284,952 856,665 401 '908 13,642 1 '187,295 2024-2028 1,706,356 366,998 1 '135,623 2029-2033 560,000 50,388 1 ,017, 958 2034-2038 349,824 Totals s 8,753,677 s 2,977,630 s 2,095,423 s 163,108 s 4,877, 995 s -38- COUNTY OF RUSSELL, VIRGINIA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2013 Note 6-Long-Term Obligations: Primary Government - Governmental Activity indebtedness The following is a summary of long-term obligation transactions of the County for the year ended June 30, 2013: General obligation bonds Literary loans Revenue bonds Literary anticipation note Deferred Amounts: Bond premiums. Capital leas e Landfill closure/ postclosure liability Net OPEB obligation Compensated absences Total Balance Increases’ _Decreases/ Balance July 1, 2012 _Issuances__Retirements__June 30, 2013 S$ 9,471,649 $ 7 § (717,972) $8,753,677 2,564,585 : (469,162) 2,095,423 5,114,923 - (236,928) 4,877,995 630,395, - (613,708) 16,687 283,315 : (16,804) 266,511 617,454 (276,266) 341,188 526,868 (258,955) 267,943 6,609 : : 6,609 595,888 454,472 (481,874) 568,486 $19,811,686 $454,472 $__ (3,071,669) $__ 17,194,489 Annual requirements to amortize long-term obligations and related interest are as follows: Year Ending General Obligation Bonds Literary Loans Revenue Bonds June 30, Principal Interest Principal __Interest_ _ Principal___Interest 2014 § ~~ 611,026 $ 403,830 $ 282,792 $ 38,872 $237,459 $ 2015 627,696 372,805 375,977 41,092 237,459 2016 644,976 340,870 375,977 32,130 237,459 2017 647,901 308,788 375,977 23,167 237,459 2018 670,770 277,286 282,792 14,205 237,459 2019-2023 «3,284,952 856,665, 401,908 13,642 1,187,295 2024-2028 ‘1,706,356 366,998 - - 1,135,623 2029-2033 560,000 50,388 1,017,958 2034-2038 - : 349,824 Totals $ 8,753,677 $ 2,977,630 $ 2,095,423 $ 163,108 $__ 4,877,995 $ -38- COUNTY OF RUSSELL, VIRGINIA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2013 Note 6-Long-Term Obligations: (continued) Primary Government- Governmental Activity Indebtedness (continued) Details of long-term indebtedness: Final Amount of Balance Amount Interest Date Maturity Installment Original Governmental Due Within Rates Issued Date Amounts Issue Activities One Year General Obligation Bonds: General obligation bond 5.10%-6.10% 1995 2016 $15,000 a+ s 325,000 s 45,000 s 15,000 General obligation bond 5.10%-6.10% 1997 2016 $5,000 a+ 140,000 25,000 5,000 General obligation bond 4.10%-5.23% 1999 2019 $25,000 a+ 510,000 175,000 25,000 General obligation bond 4.98%-5.10% 2000 2021 $94,999-115,952 a+ 1,802,210 839,548 94,999 General obligation bond 2.35%-5.10% 2002 2023 $213,799-272,702 a+ 4,382,954 2,419,261 213,799 General obligation bond 4.60%-5.10% 2006 2027 $147,228·197,458 a+ 3,205,190 2,394,868 147,228 General obligation bond 4.60%-5.10% 2009 2030 $55,000-110,000 a+ 1,485,000 1,340,000 55,000 General obligation bond 3.05%-5.05% 2010 2031 $55,000-120,000 a+ 1,620,000 1,515,000 55,000 Total General Obligation Bonds s 8,753,677 s 611,026 Revenue Bonds: Revenue bond 0.00% 11/28/2001 2033 $15,595 sa 935,690 592,604 31,190 Revenue bond 0.00% 11/28/2001 2033 $27,973 sa 1,678,400 1,080,612 55,946 Revenue bond 0.00% 11/28/2001 2025 $8,612 sa 344,477 206,686 17,224 Revenue bond 0.00% 11/1/2002 2033 $13,707 sa 822,366 534,538 27,412 Revenue bond 0.00% 3/10/2005 2036 $9,276 sa 556,538 417,404 18,551 Revenue bond 0.00% 10/14/2005 2036 $1,524sa 91,439 70,103 3,048 Revenue bond 0.00% 10/14/2005 2037 $31,779 sa 1, 906,717 1,493,595 63,557 Revenue bond 0.00% 4/2812006 2037 $6,925 sa 415,513 325,484 13,851 Revenue bond 0.00% 3/30/2007 2037 $3,340 sa 197,179 156,969 6,680 Total Revenue Bonds s 4,877,995 s 237,459 Plus: Unamortized Premium s 266,511 s 16,804 Total General Obligation and Revenue Bonds s 13,898,183 s 865,289 The remainder of this page left blank intentionally. -39- COUNTY OF RUSSELL, VIRGINIA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2013 Note 6-Long-Term Obligations: (continued) Primary Government - Governmental Activity Indebtedness (continued) Details of long-term indebtednes: General Obligation Bonds: Generat obligation bond General obligation bond General obligation bond General obligation bond General obligation bond General obligation bond General obligation bond General obligation bond ‘Total General Obligation Bonds Revenue Bonds: Revenue bond Revenue bond Revenue bond Revenue bond Revenue bond Revenue bond Revenue bond Revenve bond Revenue bond Total Revenue Bonds Plus Unamortized Premium Interest Rates 5.108-6.108, 5.1086, 10% A185. 23% 4,.985-5.10% 2.3585. 10% AOS 10% 4.6085. 105 3.058-5.05% 0.00%, 0.00%, 0.00%, 0.00%, 0.00% 0.00% 0.00% 0.00% 0.00% Total Generat Obligation and Revenue Bonds Date Issued 1995 1997 1999 2000 2002 2006 2009 2010 11/28/2001 11/28/2004 11/28/2008 siya 3710/2005 10/14/2005 1071472005 477812006 3/30/2007 Final Maturity Date 2016 2016 2009 2021 2023 2007 2030 2031 2033 2033 2028 2033 2036 2036 2037 2037 2037 lnstaliment ‘Amounts $15,000 as $5,000 a+ 525,000 a $94,999-115,952 av 5213,799-272,702 a+ $147,228-197, 458 a+ $55,000-110,000 a+ $55,000-120,000 a+ 515,595 sa $27,973 sa $8,612 5a $13,707 sa $9,276 sa $1,524 sa $3,779 sa $6,925 se $3,340 sa 5 Amaunt of Original 325,000 149,000 510,000 1,802,210 4,382,954 3,208,190 4,485,000 1,620,000 935,690 1,678,400 346,477 822,366 996,538 91,439 1,906,717 45,513 197,179 The remainder of this page left blank intentionally. -39- Balance “Amnount Governmental Due Within Activities One Year 3 43,000 $15,000 2,000 5,000 175,000 25,000 839,548 94,999 2,419,261 213,799 2,394,868 147,228 1,340,000 35,000 1,515,000 5,000 $8,753,677 $611,026 592,604 31,190 1,080,612 55,946 206,686 17,04 534,538 27,412 417,404 18,551 70,103 3,048, 1,493,595 63,557 305,484 13.851 156,969 6,680 $4,877,995 § 237,459 $266,511 $16,804 $13,898,183 $865,289 COUNTY OF RUSSELL, VIRGINIA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2013 Note 6-Long-Term Obligations: (continued) Primary Government- Governmental Activity Indebtedness (continued) Details of long-term indebtedness: (continued) Final Amount of Balance Amount Interest Date Maturity Installment Original Governmental Due Within Rates Issued Date Amounts Issue Activities One Year Literary loans: Literary loan 3.00% 7/15/1986 2017 $30,222 a+ s 960,000 s 90,666 s Literary loan 3.00% 7/15/1986 2017 $62,693 a+ 2,000,000 188,889 Literary loan 3.00% 2/1/1988 2018 $18,522 a+ 530,999 92,610 18,522 Literary loan 3.00% 2/1/1988 2018 $12,581 a+ 358,151 62,905 12,581 Literary loan 3.00% 2/1/1988 2018 $3,005 a+ 84,805 15,025 3,005 Literary loan 3.00% 2/1/1988 2018 $9,995 a+ 281,079 49,975 9,995 Literary loan 3.00% 2/1/1988 2018 $6,989 a+ 196,873 34,945 6,989 Literary loan 2.00% 1/112000 2020 $57,757 a+ 1,155,140 404,299 57,757 Literary loan 2.00% 3/15/1999 2019 $55,700 a+ 1,114,086 334,286 55,700 Literary loan 2.00% 3/15/1999 2019 $8,200 a+ 161,449 46,649 8,200 Literary loan 2.00% 6/15/1999 2019 $21,134a+ 422,680 126,804 21 '134 Literary loan 2.00% 6/15/1999 2019 $44,020 a+ 880,411 264,131 44,020 Literary loan 2.00% 11/15/2000 2021 $24,689 a+ 493,789 197,521 24,689 Literary loan 3.00% 12/15/2000 2021 $7,700 a+ 154,118 61,718 7,700 Literary loan 2.00% 7/1/2003 2023 $12,500 a+ 250,000 125,000 12,500 Total Literary Loans s 2,095,423 s 282,792 Literary Anticipation Note 4.10% 9/412008 9/4/2013 s 992,638 s 16,687 s 16,687 Other Obligations: Capital Lease (Note 7) s 341,188 s 168,663 Landfill Closure and Postclosure Liability 267,913 Net OPEB Obligation 6,609 Compensated Absences 568,486 426,365 Total Other Obligations s 1,184,196 s 595,028 Total Long-term Obligations s 17,194,489 s 1,759,796 (a+)· annual principal installments shown; does not include semi-annual interest installments The remainder of this page left blank intentionally. -40- COUNTY OF RUSSELL, VIRGINIA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2013 Note 6-Long-Term Obligations: (continued) Primary Government - Governmental Activity Indebtedness (continued) Details of long-term indebtedness: (continued) Final Amount of Balance: ‘Amount Interest Date Maturity Installment Original Governmental__Due Within Rates Issued Date Amounts Issue Activities One Year Literary loans Literary loan 3.00% 7/15/1986 2017 «$30,222 a $ 960,000 $ 90,666 § : Literary loan 3.00% 7/15/1986 2017-—«$62,693 a+ 2,000,000 188,889 : Literary loan 3.00% 2/1/1988 2018-«$18,522a+ 530,999 92,610 18,522 Literary loan 3.00% 2/1/1988 2018 «$12,581.ar 358,151 62,905, 12,581 Literary toan 3.00% 2/1/1988 2018——$3,005 as 84,805, 15,025 3,005 Literary loan 3.008 2/1/1988 2018 $9,995 a+ 281,079 9,975 9,995 Literary toan 3.00% 2/1/1988 2018——$6,989 a+ 196,873 34,945, 6,989 Literary toan 2.00% 1/1/2000 2020 $57,757 a+ 1,155,140 404,299 51,757 Literary loan 2.00% 3/15/1999 2019 $55,700a+ 1,114,086, 334,286 35,700 Literary toan 2.00% 3/15/1999 2019——$8,200 a 161,449 46,649, 8,200 Literary toan 2.00% 6/15/1999 2019 S2T134ax 422,680 126,804 21,134 Literary toan 2.00% 6/15/1999 2019 $44,020. a+ 880,411 264,134 44,020 Literary loan 2.00% 11/15/2000 2021 $24,689 a» 493,789 197,524 24,689 Literary loan 3.008 12/15/2000 2021 $7,700 a+ 154,118 61,718 7,700 Literary loan 200% 7/1/2003 2023 $12,500a+ 250,000 125,000 500 Total Literary Loans S$ 2,095,423 § _ 282,792 Literary Anticipation Note 4.10% 9/4/2008 9/4/2013, S 992,638 $ 16,687 $ 16,687 Other Obligations: Capital Lease (Note 7) 5 341,188 $168,663 Landfill Closure and Postelosure Liability 267,913 Net OPEB Obligation 6,609 : Compensated Absences 368,486 426,365 Total Other Obligations 1,184,196 $595,028, Total Long-term Obligations $17,194,489 $1,759,796 (a+) - annual principal installments shown; does not include semi-annual interest installments The remainder of this page left blank intentionally. 40. COUNTY OF RUSSELL, VIRGINIA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2013 Note 6-Long-Term Obligations: (continued) Primary Government - Business-type Activity Indebtedness: The following is a summary of long-term obligation transactions of the Enterprise Fund for the year ended June 30, 2013: July 1, 2012 Issuances Retirements June 30, 2013 Revenue bonds s 732,955 s - s (19,369) s 713,586 ------'--- Annual requirements to amortize long-term obligations and related interest are as follows: Year Ending Revenue Bonds June 30, Principal Interest 2014 s 20,175 s 31,272 2015 21 ,015 30,432 2016 21,894 29,553 2017 22,814 28,633 2018 23,776 27,671 2019-2023 126,492 122,306 2024-2028 157,168 90,691 2029-2033 196,743 51,117 2034-2036 123,509 7,723 Totals s 713,586 s 419,398 Details of long-term indebtedness: Final Amount of Balance Amount Interest Date Maturity Original Governmental Due Within Rates Issued Date Issue Activities One Year Revenue Bonds: Revenue bond 0.00% 3/24/1999 2019 s 37,500 s 10,313 s 1,875 Revenue bond 4.50% 4/10/1996 2036 900,000 703,273 18,300 Total Revenue Bonds s 713,586 s 20,175 -41- COUNTY OF RUSSELL, VIRGINIA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2013 Note 6-Long-Term Obligations: (continued) Primary Government - Business-type Activity Indebtedness: The following is a summary of long-term obligation transactions of the Enterprise Fund for the year ended June 30, 2013: July 1, 2012 _Issuances__Retirements _June 30, 2013 Revenue bonds $ 732,955_$ 28 (19,369) $ 713,586 Annual requirements to amortize long-term obligations and related interest are as follows: Year Ending Revenue Bonds June 30, Principal Interest 2014 S$ 20,175 $ 31,272 2015 21,015 30,432 2016 21,894 29,553 2017 22,814 28,633 2018 23,776 27,671 2019-2023 126,492 122,306 2024-2028 157,168 90,691 2029-2033 196,743 51,117 2034-2036 123,509 7,723 Totals $713,586 $ 419,398 Details of long-term indebtedness: Final Amount of Balance Amount Interest. Date Maturity Original Governmental Due Within Rates Issued Date Issue Activities One Year Revenue Bonds: Revenue bond 0.00% 3/24/1999 2019 $37,500 § = 10,313 $1,875 Revenue bond 4.50% 4/10/1996 2036 900,000 703,273, 18,300 Total Revenue Bonds 713,586 $ 20,175 AL COUNTY OF RUSSELL, VIRGINIA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2013 Note 6-Long-Term Obligations: (continued) Component Unit - School Board Indebtedness The following is a summary of long-term obligation transactions of the discretely presented component unit for the year ended June 30, 2013: Balance July 1, 2012, Balance As restated Increases Decreases June 30, 2013 Net OPEB obligation s 44,828 s 885,708 s (503,000) s 427,536 Early retirement incentive 546,791 (368,111) 178,680 Compensated absences 740,978 565,835 (555,733) 751,080 Total s 1,332,597 s 1,451,543 s (1 ,426,844) s 1,357,296 Details of long-term indebtedness: Amount Total Due Within Amount One Year Other Obligations: Early retirement incentive s 178,680 s 107,880 Net OPEB Obligation 427,536 Compensated Absences 751,080 563,310 Total Other Obligations s 1,357,296 s 671 '190 The remainder of this page left blank intentionally. -42- COUNTY OF RUSSELL, VIRGINIA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2013 Note 6-Long-Term Obligations: (continued) Component Unit - School Board Indebtedness The following is a summary of long-term obligation transactions of the discretely presented component unit for the year ended June 30, 2013: Balance July 1, 2012, Balance As restated Increases Decreases _June 30, 2013, Net OPEB obligation $ 44,828 $ 885,708 $ (503,000) $ 427,536 Early retirement incentive 546,791 : (368,111) 178,680 Compensated absences 740,978 565,835 (555,733) 751,080 Total $___ 1,332,597 $1,451,543 $_ (1,426,844) $1,357,296 Details of long-term indebtedness: Amount: Total Due Within Amount: One Year Other Obligations: Early retirement incentive $ 178,680 $ 107,880 Net OPEB Obligation 427,536 - Compensated Absences 751,080 563,310 Total Other Obligations $1,357,296 $671,190 The remainder of this page left blank intentionally. 42. COUNTY OF RUSSELL, VIRGINIA NOTES TO fiNANCIAL STATEMENTS (CONTINUED) JUNE 30, 2013 Note 7 -Capital Lease: Primary Government The County has entered into a lease agreement to finance the acquisition of school buses for the School Board. This lease agreement qualifies as a capital lease for accounting purposes and, therefore, has been recorded at the present value of minimum lease payments at the date of inception. The capital assets acquired through capital leases are as follows: Machinery & Equipment Machinery and equipment s 565,114 Less: Accumulated depreciation (70,638) Net capital asset s 494,476 The future minimum lease obligations and the net present value of minimum lease payments as of June 30, 2013, were as follows: Year Ending Capital June 30, Leases 2014 s 176,476 2015 176,476 Subtotal s 352,952 Less, amount representing interest (11,764) Present Value of Lease Agreement s 341,188 The remainder of this page left blank intentionally. -43- COUNTY OF RUSSELL, VIRGINIA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2013 Note 7-Capital Lease: Primary Government The County has entered into a lease agreement to finance the acquisition of school buses for the School Board. This lease agreement qualifies as a capital lease for accounting purposes and, therefore, has been recorded at the present value of minimum lease payments at the date of inception. ‘The capital assets acquired through capital leases are as follows: Machinery & Equipment Machinery and equipment $565,114 Less: Accumulated depreciation (70,638) Net capital asset $494,476 The future minimum lease obligations and the net present value of minimum lease payments as of June 30, 2013, were as follows: Year Ending Capital June 30, Leases 2014 $176,476 2015 176,476 Subtotal $ 352,952 Less, amount representing interest (14,764) Present Value of Lease Agreement $ The remainder of this page left blank intentionally. 43. COUNTY OF RUSSELL, VIRGINIA NOTES TO fiNANCIAL STATEMENTS (CONTINUED) JUNE 30, 2013 Note 8-Employee Retirement System and Defined Benefit Pension Plan: A. Plan Description Name of Plan: Identification of Plan: Administering Entity: Virginia Retirement System (VRS) Agent and Cost-Sharing Multiple-Employer Defined Benefit Pension Plan Virginia Retirement System (System) All full-time, salaried permanent (professional) employees of public school divisions and employees of participating employers are automatically covered by VRS upon employment. Benefits vest after five years of service credit. Members earn one month of service credit for each month they are employed and their employer is paying into the VRS. Members are eligible to purchase prior public service, active duty military service, certain periods of leave, and previously refunded VRS service as service credit in their plan. VRS administers two defined benefit plans for local government employees- Plan 1 and Plan 2: • Members hired before July 1, 2010 and who were vested as of January 1, 2013 are covered under Plan 1. Non-hazardous duty members are eligible for an unreduced retirement benefit beginning at age 65 with at least five years of service credit or age 50 with at least 30 years of service credit. They may retire with a reduced benefit early at age 55 with at least five years of service credit or age 50 with at least 10 years of service credit. • Members hired or rehired on or after July 1, 2010 and Plan 1 members who were not vested on January 1, 2013 are covered under Plan 2. Non-hazardous duty members are eligible for an unreduced benefit beginning at their normal Social Security retirement age with at least five years of service credit or when the sum of their age and service equals 90. They may retire with a reduced benefit as early as age 60 with at least five years of service credit. • Eligible hazardous duty members in Plan 1 and Plan 2 are eligible for an unreduced benefit beginning at age 60 with at least 5 years of service credit or age 50 with at least 25 years of service credit. These members include sheriffs, deputy sheriffs and hazardous duty employees of political subdivisions that have elected to provide enhanced coverage for hazardous duty service. They may retire with a reduced benefit as early as age 50 with at least five years of service credit. All other provisions of the member's plan apply. The VRS Basic Benefit is a lifetime monthly benefit based on a retirement multiplier as a percentage of the member's average final compensation multiplied by the member's total service credit. Under Plan 1, average final compensation is the average of the member's 36 consecutive months of highest compensation. Under Plan 2, average final compensation is the average of the member's 60 consecutive months of highest compensation. The retirement multiplier for non­ hazardous duty members is 1. 70%. The retirement multiplier for sheriffs and regional jail superintendents is 1.85%. The retirement multiplier for eligible political subdivision hazardous duty employees other than sheriffs and jail superintendents is 1. 70% or 1.85% as elected by the employer. The multiplier for Plan 2 members was reduced to 1.65% effective January 1, 2013 unless they are hazardous duty employees and their employer has elected the enhanced retirement multiplier. At retirement, members can elect the Basic Benefit, the Survivor Option, a Partial Lump-Sum Option Payment (PLOP) or the Advance Pension Option. A retirement reduction factor is applied to the Basic Benefit amount for members electing the Survivor Option, PLOP or Advance Pension Option or those retiring with a reduced benefit. -44- COUNTY OF RUSSELL, VIRGINIA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2013 Note 8-Employee Retirement System and Defined Benefit Pension Plan: A. Plan Description Name of Plan: Virginia Retirement System (VRS) Identification of Plan: Agent and Cost-Sharing Multiple-Employer Defined Benefit Pension Plan Administering Entity: Virginia Retirement System (System) All full-time, salaried permanent (professional) employees of public school divisions and employees of participating employers are automatically covered by VRS upon employment. Benefits vest after five years of service credit. Members earn one month of service credit for each month they are employed and their employer is paying into the VRS. Members are eligible to purchase prior public service, active duty military service, certain periods of leave, and previously refunded VRS service as service credit in their plan. VRS administers two defined benefit plans for local government employees - Plan 1 and Plan 2: ‘* Members hired before July 1, 2010 and who were vested as of January 1, 2013 are covered under Plan 1. Non-hazardous duty members are eligible for an unreduced retirement benefit beginning at age 65 with at least five years of service credit or age 50 with at least 30 years of service credit. They may retire with a reduced benefit early at age 55 with at least five years of service credit or age 50 with at least 10 years of service credit. ‘* Members hired or rehired on or after July 1, 2010 and Plan 1 members who were not vested on January 1, 2013 are covered under Plan 2. Non-hazardous duty members are eligible for an unreduced benefit beginning at their normal Social Security retirement age with at least five years of service credit or when the sum of their age and service equals 90, They may retire with a reduced benefit as early as age 60 with at least five years of service credit. © Eligible hazardous duty members in Plan 1 and Plan 2 are eligible for an unreduced benefit beginning at age 60 with at least 5 years of service credit or age 50 with at least 25 years of service credit. These members include sheriffs, deputy sheriffs and hazardous duty employees of political subdivisions that have elected to provide enhanced coverage for hazardous duty service. They may retire with a reduced benefit as early as age 50 with at least five years of service credit. All other provisions of the member’s plan apply. The VRS Basic Benefit is a lifetime monthly benefit based on a retirement multiplier as a percentage of the member’s average final compensation multiplied by the member’s total service credit. Under Plan 1, average final compensation is the average of the member's 36 consecutive months of highest compensation, Under Plan 2, average final compensation is the average of the member’s 60 consecutive months of highest compensation. The retirement multiplier for non- hazardous duty members is 1.70%. The retirement multiplier for sheriffs and regional jail superintendents is 1.85%. The retirement multiplier for eligible political subdivision hazardous duty employees other than sheriffs and jail superintendents is 1.70% or 1.85% as elected by the employer. The multiplier for Plan 2 members was reduced to 1.65% effective January 1, 2013 unless they are hazardous duty employees and their employer has elected the enhanced retirement multiplier. At retirement, members can elect the Basic Benefit, the Survivor Option, a Partial Lump-Sum Option Payment (PLOP) or the Advance Pension Option. A retirement reduction factor is applied to the Basic Benefit amount for members electing the Survivor Option, PLOP or Advance Pension Option or those retiring with a reduced benefit. 44. COUNTY OF RUSSELL, VIRGINIA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2013 Note 8-Employee Retirement System and Defined Benefit Pension Plan: (continued) A. Plan Description (continued) Retirees are eligible for an annual cost-of-living adjustment (COLA) effective July 1 of the second calendar year of retirement. Under Plan 1, the COLA cannot exceed 5.00%; under Plan 2, the COLA cannot exceed 6.00%. During years of no inflation or deflation, the COLA is 0.00%. The VRS also provides death and disability benefits. Title 51.1 of the Code of Virginia (1950), as amended, assigns the authority to establish and amend benefit provisions to the General Assembly of Virginia. The system issues a publicly available comprehensive annual financial report that includes financial report that includes financial statements and required supplementary information for VRS. A copy of the most recent report may be obtained from the VRS website at http: I I www. vareti re. orgl Pdf I Publ icationsl 2012 -annual-report. pdf or by writing to the System's Chief Financial Officer at P.O. Box 2500, Richmond, VA, 23218-2500. B. Funding Policy Primary Government: Plan members are required by Title 51.1 of the Code of Virginia (1950), as amended, to contribute 5.00% of their compensation toward their retirement. All or part of the 5.00% member contribution may be assumed by the employer. Beginning July 1, 2012 new employees were required to pay the 5% member contribution. In addition, for existing employees, employers were required to begin making the employee pay the 5% member contribution. This could be phased in over a period of up to 5 years and the employer is required to provide a salary increase equal to the amount of the increase in the employee-paid member contribution. In addition, the County of Russell, Virginia is required to contribute the remaining amounts necessary to fund its participation in the VRS using the actuarial basis specified by the Code of Virginia and approved by the VRS Board of Trustees. The County of Russell, Virginia's contribution rate for the fiscal year ended 2013 was 14.36% of annual covered payroll. Discretely Presented Component Unit - School Board (Non-Professional Employees): Plan members are required by Title 51.1 of the Code of Virginia (1950), as amended, to contribute 5.00% of their compensation toward their retirement. All or part of the 5.00% member contribution may be assumed by the employer. Beginning July 1, 2012 new employees were required to pay the 5% member contribution. In addition, for existing employees, employers were required to begin making the employee pay the 5% member contribution. This could be phased in over a period of up to 5 years and the employer is required to provide a salary increase equal to the amount of the increase in the employee-paid member contribution. In addition, the School Board is required to contribute the remaining amounts necessary to fund its participation in the VRS using the actuarial basis specified by the Code of Virginia and approved by the VRS Board of Trustees. The School Board's contribution rate for the fiscal year ended 2013 was 16.24% of annual covered payroll. The remainder of this page left blank intentionally. -45- COUNTY OF RUSSELL, VIRGINIA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2013 Note 8-Employee Retirement System and Defined Benefit Pension Plan: (continued) A Plan Description (continued) Retirees are eligible for an annual cost-of-living adjustment (COLA) effective July 1 of the second calendar year of retirement. Under Plan 1, the COLA cannot exceed 5.00%; under Plan 2, the COLA cannot exceed 6.00%. During years of no inflation or deflation, the COLA is 0.00%. The VRS. also provides death and disability benefits. Title 51.1 of the Code of Virginia (1950), as amended, assigns the authority to establish and amend benefit provisions to the General Assembly of Virginia. The system issues a publicly available comprehensive annual financial report that includes financial report that includes financial statements and required supplementary information for VRS. A copy of the most recent report may be obtained from the VRS website at http://www. varetire.org/Pdf/Publications/2012-annual-report.pdf or by writing to the System’s Chief Financial Officer at P.O. Box 2500, Richmond, VA, 23218-2500. Funding Policy Primary Government: Plan members are required by Title 51.1 of the Code of Virginia (1950), as amended, to contribute 5.00% of their compensation toward their retirement. All or part of the 5.00% member contribution may be assumed by the employer. Beginning July 1, 2012 new employees were required to pay the 5% member contribution. In addition, for existing employees, employers were required to begin making the employee pay the 5% member contribution. This could be phased in over a period of up to 5 years and the employer is required to provide a salary increase equal to the amount of the increase in the employee-paid member contribution. In addition, the County of Russell, Virginia is required to contribute the remaining amounts necessary to fund its participation in the VRS using the actuarial basis specified by the Code of Virginia and approved by the VRS Board of Trustees. The County of Russell, Virginia’s contribution rate for the fiscal year ended 2013 was 14.36% of annual covered payroll. Discretely Presented Component Unit - School Board (Non-Professional Employees): Plan members are required by Title 51.1 of the Code of Virginia (1950), as amended, to contribute 5.00% of their compensation toward their retirement. All or part of the 5.00% member contribution may be assumed by the employer. Beginning July 1, 2012 new employees were required to pay the 5% member contribution. In addition, for existing employees, employers were required to begin making the employee pay the 5% member contribution. This could be phased in over a period of up to 5 years and the employer is required to provide a salary increase equal to the amount of the increase in the employee-paid member contribution. In addition, the School Board is required to contribute the remaining amounts necessary to fund its participation in the VRS using the actuarial basis specified by the Code of Virginia and approved by the VRS Board of Trustees. The School Board’s contribution rate for the fiscal year ended 2013 was 16.24% of annual covered payroll. The remainder of this page left blank intentionally. -A5- COUNTY OF RUSSELL, VIRGINIA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2013 Note 8-Employee Retirement System and Defined Benefit Pension Plan: (continued) C. Annual Pension Cost For fiscal year 2013, the County and School Board annual pension costs of $800,479 and $434,345 were equal to the required and actual contributions for the County and the School Board Non­ Professionals, respectively. Three-Year Trend Information Primary Government: County Discretely Presented-Component Unit: School Board Non-Professional 1 Employer portion only Primary Government: Fiscal Year Ending 6/30/2011 6/30/2012 6/30/2013 6/3012011 6/30/2012 6/30/2013 Annual Pension Cost (APC) 1 $ 579,314 576,628 800,479 $ 384,524 386,243 434,345 Percentage of APC Contributed 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% Net Pension Obligation $ $ The FY 2013 required contribution was determined as part of the June 30, 2011 actuarial valuation using the entry age actuarial cost method. The actuarial assumptions at June 30, 2011 included (a) an investment rate of return (net of administrative expenses) of 7.00%, (b) projected salary increases ranging from 3. 75% to 5.60% for general government employees, 3. 75% to 6.20% per year for teachers, and 3.50% to 4. 75% for employees eligible for enhanced benefits available to law enforcement officers, firefighters, and sheriffs, and (c) a cost-of-living adjustment of 2.50% per year for Plan 1 employees and 2.25% for Plan 2 employees. Both the investment rate of return and the projected salary increases include an inflation component of 2.50%. The actuarial value of the County's assets is equal to the modified market value of assets. This method uses techniques that smooth the effects of short-term volatility in the market value of assets over a five-year period. The County's unfunded actuarial accrued liability is being amortized as a level percentage of projected payrolls on an open basis. The remaining amortization period at June 30, 2011 for the Unfunded Actuarial Liability (UAAL) was 30 years. The remainder of this page left blank intentionally. -46- COUNTY OF RUSSELL, VIRGINIA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2013 Note 8-Employee Retirement System and Defined Benefit Pension Plan: (continued) C Annual Pension Cost For fiscal year 2013, the County and School Board annual pension costs of $800,479 and $434,345 were equal to the required and actual contributions for the County and the School Board Non- Professionals, respectively. Three-Year Trend Information Fiscal Annual Percentage Net Year Pension of APC Pension Ending Cost (APC)* Contributed Obligation Primary Government: County 6/30/2011 $ 579,314 100.00% $ 6/30/2012 576,628 100.00% 6/30/2013 800,479 100.00% Discretely Presented-Component Unit: School Board Non-Professional 6/30/2011 $384,524 100.00% $ : 6/30/2012 386,243 10.00% - 6/30/2013 434,345 100.0% - ‘Employer portion only Primary Government: The FY 2013 required contribution was determined as part of the June 30, 2011 actuarial valuation using the entry age actuarial cost method. The actuarial assumptions at June 30, 2011 included (a) an investment rate of return (net of administrative expenses) of 7.00%, (b) projected salary increases ranging from 3.75% to 5.60% for general government employees, 3.75% to 6.20% per year for teachers, and 3.50% to 4.75% for employees eligible for enhanced benefits available to law enforcement officers, firefighters, and sheriffs, and (c) a cost-of-living adjustment of 2.50% per year for Plan 1 employees and 2.25% for Plan 2 employees. Both the investment rate of return and the projected salary increases include an inflation component of 2.50%, The actuarial value of the County’s assets is equal to the modified market value of assets. This method uses techniques that smooth the effects of short-term volatility in the market value of assets over a five-year period. The County’s unfunded actuarial accrued liability is being amortized as a level percentage of projected payrolls on an open basis. The remaining amortization period at June 30, 2011 for the Unfunded Actuarial Liability (UAAL) was 30 years. The remainder of this page teft blank intentionally. COUNTY OF RUSSELL, VIRGINIA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2013 Note 8-Employee Retirement System and Defined Benefit Pension Plan: (continued) C. Annual Pension Cost (continued) Discretely Presented-Component Unit School Board - Non-Professional: The FY 2013 required contribution was determined as part of the June 30, 2011 actuarial valuation using the entry age actuarial cost method. The actuarial assumptions at June 30, 2011 included (a) an investment rate of return (net of administrative expenses) of 7.00%, (b) projected salary increases ranging from 3.75% to 5.60% for general government employees, 3. 75% to 6. 20% per year for teachers, and 3. 50% to 4. 75% for employees eligible for enhanced benefits available to law enforcement officers, firefighters, and sheriffs, and (c) a cost-of-living adjustment of 2.50% per year for Plan 1 employees and 2.25% for Plan 2 employees. Both the investment rate of return and the projected salary increases include an inflation component of 2.50%. The actuarial value of the School Board's assets is equal to the modified market value of assets. This method uses techniques that smooth the effects of short-term volatility in the market value of assets over a five-year period. The School Board's unfunded actuarial accrued liability is being amortized as a level percentage of projected payrolls on an open basis. The remaining amortization period at June 30, 2011 for the Unfunded Actuarial Liability (UAAL) was 30 years. D. Funded Status and Funding Progress Primary Government: As of June 30, 2012, the most recent actuarial valuation date, the plan was 70.15% funded. The actuarial accrued liability for benefits was $28,359,443, and the actuarial value of assets was $19,894,452, resulting in an unfunded actuarial accrued liability (UAAL) of $8,464,991. The covered payroll (annual payroll of active employees covered by the plan) was $5,481,683, and ratio of the UAAL to the covered payroll was 154.42%. Discretely Presented Component Unit- School Board (Non-Professional Employees): As of June 30, 2012, the most recent actuarial valuation date, the plan was 61.14% funded. The actuarial accrued liability for benefits was $16,469,710, and the actuarial value of assets was $10,068,998, resulting in an unfunded actuarial accrued liability (UAAL) of $6,400,712. The covered payroll (annual payroll of active employees covered by the plan) was $2,689,457, and ratio of the UAAL to the covered payroll was 237.99%. The schedule of funding progress, presented as Required Supplementary Information (RSI) following the notes to the financial statements, presents multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liability (AAL) for benefits. The remainder of this page left blank intentionally. -47- COUNTY OF RUSSELL, VIRGINIA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2013 Note 8-Employee Retirement System and Defined Benefit Pension Plan: (continued) c. Annual Pension Cost (continued) Discretely Presented-Component Unit School Board - Non-Professional: The FY 2013 required contribution was determined as part of the June 30, 2011 actuarial valuation using the entry age actuarial cost method. The actuarial assumptions at June 30, 2011 included (a) an investment rate of return (net of administrative expenses) of 7.00%, (b) projected salary increases ranging from 3.75% to 5.60% for general government employees, 3.75% to 6.20% per year for teachers, and 3.50% to 4.75% for employees eligible for enhanced benefits available to law enforcement officers, firefighters, and sheriffs, and (c) a cost-of-living adjustment of 2.50% per year for Plan 1 employees and 2.25% for Plan 2 employees. Both the investment rate of return and the projected salary increases include an inflation component of 2.50%. The actuarial value of the School Board’s assets is equal to the modified market value of assets. This method uses techniques that smooth the effects of short-term volatility in the market value of assets over a five-year period. The School Board’s unfunded actuarial accrued liability is being amortized as a level percentage of projected payrolls on an open basis. The remaining amortization period at June 30, 2011 for the Unfunded Actuarial Liability (UAAL) was 30 years. Funded Status and Funding Progress Primary Government: As of June 30, 2012, the most recent actuarial valuation date, the plan was 70.15% funded. The actuarial accrued liability for benefits was $28,359,443, and the actuarial value of assets was $19,894,452, resulting in an unfunded actuarial accrued liability (UAL) of $8,464,991. The covered payroll (annual payroll of active employees covered by the plan) was $5,481,683, and ratio of the UAL to the covered payroll was 154.42%. Discretely Presented Component Unit - School Board (Non-Professional Employees): As of June 30, 2012, the most recent actuarial valuation date, the plan was 61.14% funded, The actuarial accrued liability for benefits was $16,469,710, and the actuarial value of assets was $10,068,998, resulting in an unfunded actuarial accrued liability (UAL) of $6,400,712. The covered payroll (annual payroll of active employees covered by the plan) was $2,689,457, and ratio of the UAL to the covered payroll was 237.99%. The schedule of funding progress, presented as Required Supplementary Information (RSI) following the notes to the financial statements, presents multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liability (AL) for benefits. The remainder of this page left blank intentionally. AT- COUNTY OF RUSSELL, VIRGINIA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2013 Note 8-Employee Retirement System and Defined Benefit Pension Plan: (continued) E. Discretely Presented Component Unit School Board Professional Employees: Plan Description The Russell County School Board contributes to the Virginia Retirement System (VRS), a cost· sharing multiple-employer defined benefit pension plan administered by the Virginia Retirement System. VRS provides retirement and disability benefits, annual cost-of-living adjustments, and death benefits to plan members and beneficiaries. Title 51.1 of the Code of Virginia (1950), as amended, assigns the authority to establish and amend benefit provisions to the General Assembly of Virginia. The system issues a publicly available comprehensive annual financial report that includes financial report that includes financial statements and required supplementary information for VRS. A copy of the most recent report may be obtained from the VRS website at http:/ /www.varetire.org/Pdf /Publications/2012-annual·report.pdf or obtained by writing to the System's Chief Financial Officer at P. 0. Box 2500, Richmond, Virginia 23218-2500. Funding Policy Plan members are required by Title 51.1 of the Code of Virginia (1950), as amended, to contribute 5.00% of their compensation toward their retirement. All or part of the 5.00% member contribution may be assumed by the employer. Beginning July 1, 2012 new employees were required to pay the 5% member contribution. In addition, for existing employees, employers were required to begin making the employee pay the 5% member contribution. This could be phased in over a period of up to 5 years and the employer is required to provide a salary increase equal to the amount of the increase in the employee-paid member contribution. In addition, the School Board is required to contribute the remaining amounts necessary to fund its participation in the VRS using the actuarial basis specified by the statute and approved by the VRS Board of Trustees. The School Board's contribution to the statewide cost sharing pool for professional employees was $2,037,610, $1,164,108, and $700,575 for the fiscal years ended 2013, 2012, and 2011, respectively. Employer contributions represented 11.66%, 6.33%, and 3. 93% of covered payroll for the fiscal years ended 2013, 2012, and 2011, respectively. The remainder of this page left blank intentionally. -48- COUNTY OF RUSSELL, VIRGINIA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2013 Note 8-Employee Retirement System and Defined Benefit Pension Plan: (continued) E. Discretely Presented Component Unit School Board Professional Employees: Plan Description The Russell County School Board contributes to the Virginia Retirement System (VRS), a cost- sharing multiple-employer defined benefit pension plan administered by the Virginia Retirement System. VRS provides retirement and disability benefits, annual cost-of-living adjustments, and death benefits to plan members and beneficiaries. Title 51.1 of the Code of Virginia (1950), as amended, assigns the authority to establish and amend benefit provisions to the General Assembly of Virginia. The system issues a publicly available comprehensive annual financial report that includes financial report that includes financial statements and required supplementary information for VRS. A copy of the most recent report may be obtained from the VRS website at http://www.varetire.org/Pdf /Publications/2012-annual-report.pdf or obtained by writing to the System’s Chief Financial Officer at P. 0. Box 2500, Richmond, Virginia 23218-2500. Funding Policy Plan members are required by Title 51.1 of the Code of Virginia (1950), as amended, to contribute 5.00% of their compensation toward their retirement. Alor part of the 5.00% member contribution may be assumed by the employer. Beginning July 1, 2012 new employees were required to pay the 5% member contribution. In addition, for existing employees, employers were required to begin making the employee pay the 5% member contribution. This could be phased in over a period of up to 5 years and the employer is required to provide a salary increase equal to the amount of the increase in the employee-paid member contribution. In addition, the School Board is required to contribute the remaining amounts necessary to fund its participation in the VRS using the actuarial basis specified by the statute and approved by the VRS Board of Trustees, The School Board’s contribution to the statewide cost sharing pool for professional employees was $2,037,610, $1,164, 108, and $700,575 for the fiscal years ended 2013, 2012, and 2011, respectively. Employer contributions represented 11.66%, 6.33%, and 3.93% of covered payroll for the fiscal years ended 2013, 2012, and 2011, respectively. The remainder of this page left blank intentionally. COUNTY OF RUSSELL, VIRGINIA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2013 Note 9-Capital Assets: Capital asset activity for the year ended June 30, 2013 was as follows: Primary Government: Beginning Balance Increases Governmental Activities: Capital assets, not being depreciated: Land s 1,541,333 s 20,000 s Capital assets, being depreciated: Buildings and improvements s 28,465,973 s s Machinery and equipment 3,780,691 358,940 Total capital assets being depreciated s 32,246,664 s 358,940 s Accumulated depreciation: Buildings and improvements s (11 ,402,017) s (683,170) s Machinery and equipment (2,233,349) (452, 936) Total accumulated depreciation s (13,635,366) s (1,136,106) s Total capital assets being depreciated, net s 18,611,298 s (777, 166) s Governmental activities capital assets, net s 20,152,631 s (757, 166) s The remainder of this page left blank intentionally. -49- Ending Decreases Balance s 1,561,333 (1,812,215) s 26,653,758 (374,364) 3,765,267 (2, 186,579) s 30,419,025 996,716 s (11 ,088,471) 312,969 (2,373,316) 1,309,685 s (13,461 ,787) (876,894) s 16,957,238 (876,894) s 18,518,571 COUNTY OF RUSSELL, VIRGINIA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2013 Note 9-Capital Assets: Capital asset activity for the year ended June 30, 2013 was as follows: Primary Government: Governmental Activities: Capital assets, not being depreciated: Land Capital assets, being depreciated: Buildings and improvements Machinery and equipment Total capital assets being depreciated Accumulated depreciation: Buildings and improvements Machinery and equipment Total accumulated depreciation Total capital assets being depreciated, net Governmental activities capital assets, net Beginning Ending Balance Increases Decreases Balance 1,541,333 $ 20,000 $ + $___ 1,561,333 28,465,973 § $ (1,812,215) $26,653,758 3,780,691 358,940 (374,364) 3,765,267 32,246,664 $ 358,940 $_ (2,186,579) $30,419,025 (11,402,017) $ (683,170) $996,716 § (11,088,471) (2,233,349) (452,936) 312,969 (2,373,316) (13,635,366) $__ (1,136,106) $_ 1,309,685 $__ (13,461,787) 18,611,298 $ (777,166) $__ (876,894) $__16,957,238 20,152,631 $___ (757,166) $_(876,894) $_ 18,518,571 The remainder of this page left blank intentionally. COUNTY OF RUSSELL, VIRGINIA NOTES TO fiNANCIAL STATEMENTS (CONTINUED) JUNE 30, 2013 Note 9-Capital Assets: (continued) Primary Government: (continued) Business-Type Activities Capital assets, being depreciated: Beginning Balance Increases Decreases Ending Balance Utility plant $ 5,240,699 s _____ - s ____ -_ s 5,240,699 Accumulated depreciation: Utility plant $ (1 ,855,072) $ (131,017) s ____ s (1,986,089) Total capital assets being depreciated, net $ 3,385,627 $ (131,017) s _____ s 3,254,610 Business-Type activities capital assets, net $ 3,385,627 $ (131,017) s ____ s 3,254,610 Depreciation expense was charged to functions/programs of the primary government as follows: Governmental activities: General government administration Judicial administration Public safety Public works Health and welfare Education Parks, recreation, and cultural Community development Total depreciation expense-governmental activities Business-Type activities: Sewer Authority s 15,600 754 213,546 49,978 24,866 785,326 38,222 7,814 s 1,136,106 s ==13=1 ;.,'0=17= The remainder of this page left blank intentionally. -50- COUNTY OF RUSSELL, VIRGINIA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2013 Note 9-Capital Assets: (continued) Primary Government: (continued) Business-Type Activities Capital assets, being depreciated: Utility plant $ ‘Accumulated depreciation: Utility plant $ Total capital assets being depreciated, net § Business-Type activities capital assets, net $ Beginning Ending Balance Increases Decreases Balance 5,240,699 $ $ = $_ 5,240,699 (1,855,072) $__(131,017) $ = $_(1,986,089) 3,385,627 § (131,017) $ = $__ 3,254,610 3,385,627_ $ (131,017) $ = $_ 3,254,610 Depreciation expense was charged to functions/ programs of the primary government as follows: Governmental activities: General government administration $ 15,600 Judicial administration 754 Public safety 213,546 Public works 49,978 Health and welfare 24,866 Education 785,326 Parks, recreation, and cultural 38,222 Community development 7,814 Total depreciation expense-governmental activities $_1,136,106 Business-Type activities: Sewer Authority $__131,017 The remainder of this page left blank intentionally. COUNTY OF RUSSELL, VIRGINIA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2013 Note 9-Capital Assets: (continued) Capital asset activity for the School Board for the year ended June 30, 2013 was as follows: Discretely Presented Component Unit - School Board: Capital assets, not being depreciated: Beginning Balance Increases Decreases Ending Balance Land s 4,643,707 s ---- s ___ _ s ___ 4.:...,6_4--'3'c...7_07_ Capital assets, being depreciated: Buildings and improvements Machinery and equipment Total capital assets being depreciated Accumulated depreciation: Buildings and improvements Machinery and equipment Total accumulated depreciation Total capital assets being depreciated, net Governmental activities capital assets, net Note 1 0-Risk Management: s s s s s s 20,471,789 s 1,812,215 s 6,248,380 327,091 26,720,169 s 2,139,306 s (9,797,780) s (1 ,568, 128) s (4,585,495) (529,011) (14,383,275) s (2,097, 139) s 12,336,894 s 42,167 s 16,980,601 s 42,167 s s 22,284,004 (203,000) 6,372,471 (203,000) s _ ____::c28::..:'.:..:65:..:c6.:...,4.:..:75=- s (11 ,365, 908) 203,000 (4,911,506) 203,000 s (16,277,414) s 12,379,061 s 17,022,768 The County and its Component Unit - School Board are exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; and natural disasters. The County and the related Component Unit - School Board participate with other localities in a public entity risk pool for their coverage of general liability, property, crime and auto insurance with the Virginia Association of Counties Risk Pool. Each member of this risk pool jointly and severally agrees to assume, pay and discharge any liability. The County and the School Board pay the Risk Pool contributions and assessments based upon classification and rates into a designated cash reserve fund out of which expenses of the pool, claims and awards are to be paid. In the event of a loss, deficit, or depletion of all available excess insurance, the pool may assess all members in the proportion to which the premium of each bears to the total premiums of all members in the year in which such deficit occurs. The County and its Component Unit- School Board continue to carry commercial insurance for all other risks of loss. Settled claims resulting from these risks have not exceeded commercial insurance coverage in any of the past three fiscal years. The remainder of this page left blank intentionally. -51- COUNTY OF RUSSELL, VIRGINIA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2013 Note 9-Capital Assets: (continued) Capital asset activity for the School Board for the year ended June 30, 2013 was as follows: Discretely Presented Component Unit - School Board: Beginning Ending Balance Increases Decreases Balance Capital assets, not being depreciated: Land S____ 4,643,707. $ 3 = S$ 4,643,707 Capital assets, being depreciated: Buildings and improvements S$ 20,471,789 $1,812,215 $ + $22,284,004 Machinery and equipment 6,248,380 327,091 (203,000) 6,372,471 Total capital assets being depreciated S___ 26,720,169 $2,139,306 $” (203,000) $28,656,475 Accumulated depreciation: Buildings and improvements S$ (9,797,780) $ (1,568,128) $ = $ (11,365,908) ‘Machinery and equipment (4,585,495) (529,011) 203,000 (4,911,506) Total accumulated depreciation $__ (14,383,275) $_ (2,097,139) $ 203,000 $___(16,277,414) Total capital assets being depreciated, net $_—12,336,894 $42,167 § = $12,379,064 Governmental activities capital assets, net $_—*16,980,601_ $___42,167_ $ = $___ 17,022,768 Note 10-Risk Management: The County and its Component Unit - School Board are exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; and natural disasters. The County and the related Component Unit - School Board participate with other localities in a public entity risk pool for their coverage of general liability, property, crime and auto insurance with the Virginia Association of Counties Risk Pool. Each member of this risk pool jointly and severally agrees to assume, pay and discharge any liability. The County and the School Board pay the Risk Pool contributions and assessments based upon classification and rates into a designated cash reserve fund out of which expenses of the pool, claims and awards are to be paid. In the event of a loss, deficit, or depletion of all available excess insurance, the pool may assess all members in the proportion to which the premium of each bears to the total premiums of all members in the year in which such deficit occurs. The County and its Component Unit - School Board continue to carry commercial insurance for all other risks of loss. Settled claims resulting from these risks have not exceeded commercial insurance coverage in any of the past three fiscal years. The remainder of this page left blank intentionally. Bt COUNTY OF RUSSELL, VIRGINIA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2013 Note 11-Contingent Liabilities: Federal programs in which the County and its component units participate were audited in accordance with the provisions of U.S. Office of Management and Budget Circular A·133, Audits of States, Local Governments, and Non-Profit Organizations. Pursuant to the provisions of this circular all major programs and certain other programs were tested for compliance with applicable grant requirements. While matters of noncompliance were disclosed by the audit, the Federal Government may subject grant programs to additional compliance tests, which may result in disallowed expenditures. In the opinion of management, any future disallowances of current grant program expenditures, if any, would be immaterial. Note 12-Surety Bonds: Fidelity & Deposit Company of Maryland· Surety: Ann McReynolds, Clerk of the Circuit Court Patrick Thompson, Treasurer Randy N. Williams, Commissioner of the Revenue Steve Dye, Sheriff All constitutional officers· employees: blanket bond Hartford Company · Surety: Tammy Gilbert · Clerk of the School Board All school employees: blanket bond USF&G Insurance Co. · Surety: All Social Services employees· blanket bond Note 13-Landfill Closure and Postclosure Care Cost: $ $ $ 1,010,000 400,000 3,000 30,000 50,000 10,000 10,000 100,000 State and federal laws and regulations require the County to place a final cover on its landfill site when it stops accepting waste and to perform certain maintenance and monitoring functions at the site after closure. $267,913 is the total estimated closure and postclosure care liability at June 30, 2013. This represents the cumulative amount based on the use of 100% of the estimated capacity of the landfill and is based on what it would cost to perform all remaining closure and postclosure in 2013. Actual costs for closure and postclosure monitoring may change due to inflation, deflation, changes in technology or changes in regulations. The County uses the Commonwealth of Virginia's financial assurance mechanism to meet the Department of Environmental Quality's assurance requirements for landfill closure and postclosure costs. The County demonstrated financial assurance requirements for closure, post-closure care, and corrective action costs through the submission of a Local Government Financial Test to the Virginia Department of Environmental Quality in accordance with Section 9VA C20·70 of the Virginia Administrative Code. The remainder of this page left blank intentionally. -52- COUNTY OF RUSSELL, VIRGINIA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2013 Note 11-Contingent Liabilities: Federal programs in which the County and its component units participate were audited in accordance with the provisions of U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Pursuant to the provisions of this circular all major programs and certain other programs were tested for compliance with applicable grant requirements. While matters of noncompliance were disclosed by the audit, the Federal Government may subject grant programs to additional compliance tests, which may result in disallowed expenditures. In the opinion of management, any future disallowances of current grant program expenditures, if any, would be immaterial. Note 12-Surety Bond: Fidelity & Deposit Company of Maryland-Surety: ‘Ann McReynolds, Clerk of the Circuit Court $1,010,000 Patrick Thompson, Treasurer 400,000 Randy N. Williams, Commissioner of the Revenue 3,000 Steve Dye, Sheriff 30,000 All constitutional officers’ employees: blanket bond 50,000 Hartford Company - Surety: Tammy Gilbert - Clerk of the School Board $10,000 All school employees: blanket bond 10,000 USF&G Insurance Co. - Surety: ‘AIL Social Services employees-blanket bond $ 100,000 Note 13-Landfill Closure and Postclosure Care Cost: State and federal laws and regulations require the County to place a final cover on its landfill site when it stops accepting waste and to perform certain maintenance and monitoring functions at the site after closure. $267,913 is the total estimated closure and postclosure care liability at June 30, 2013. This represents the cumulative amount based on the use of 100% of the estimated capacity of the landfill and is based on what it would cost to perform all remaining closure and postclosure in 2013. Actual costs for closure and postclosure monitoring may change due to inflation, deflation, changes in technology or changes in regulations. The County uses the Commonwealth of Virginia’s financial assurance mechanism to meet the Department of Environmental Quality’s assurance requirements for landfill closure and postclosure costs. ‘The County demonstrated financial assurance requirements for closure, post-closure care, and corrective action costs through the submission of a Local Government Financial Test to the Virginia Department of Environmentat Quality in accordance with Section 9VA C20-70 of the Virginia Administrative Code. The remainder of this page left blank intentionally. 52. COUNTY OF RUSSELL, VIRGINIA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2013 Note 14-Unavailable Revenue: Governmental funds report unavailable revenue in connection with receivables for revenues not considered to be available to liquidate liabilities of the current period. Governmental funds also defer revenue recognition in connection with resources that have been received, but not yet earned. At the end of the current fiscal year, the various components of unavailable revenue reported in the governmental funds were as follows: Delinquent property taxes receivable Prepaid taxes Total unavailable revenue for governmental funds Note 15-Self Health Insurance: $ $ Gov't-wide Statements Governmental Activities 7,337,069 65,753 7,402,822 $ $ Balance Sheet Governmental Funds 4,504,607 65,753 4,570,360 The County of Russell, Virginia established a limited risk management program for health insurance. Premiums are paid into the health plan fund from the County and School Board and are available to pay claims, and administrative costs of the program. During the fiscal year 2013, a total of $4,826,551 was paid in benefits and administrative costs. The risk assumed by the County and School Board is based on the number of participants in the program. The risk varies by the number of participants and their specific plan type. As of June 30, 2013, the County and School Board were exposed to risk which represents the difference between the claims to date and the ceiling liability as calculated based on enrollment levels and health plan coverage. Additional costs in excess of the ceiling liability are covered as part of the contract with the County. Incurred but not reported claims of $454,373 have been accrued as a liability based primarily on actual cost incurred prior to June 30 but paid after year-end. lnterfund premiums are based primarily upon the insured funds' claims experience and are reported as quasi­ external interfund transactions. Changes in the claims liability during fiscal year 2013 were as follows: Current Year Balance at Claims and Balance at Beginning of Changes in Claim End of Fiscal Year Fiscal Year Estimates Payments Fiscal Year 2012-13 s 566,431 s 4,714,493 s (4,826, 551) s 454,373 The remainder of this page left blank intentionally. -53- COUNTY OF RUSSELL, VIRGINIA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2013 Note 14-Unavai ble Revenue: Governmental funds report unavailable revenue in connection with receivables for revenues not considered to be available to liquidate liabilities of the current period. Governmental funds also defer revenue recognition in connection with resources that have been received, but not yet earned. At the end of the current fiscal year, the various components of unavailable revenue reported in the governmental funds were as follows: Govt Statements Balance Sheet Governmental Activities __ Governmental Funds Delinquent property taxes receivable $ 7,337,069 $ 4,504,607 Prepaid taxes 65,753 65,753 Total unavailable revenue for governmental funds $ 7,402,822 $ 4,570,360 Note 15-Self Health Insurance: The County of Russell, Virginia established a limited risk management program for health insurance. Premiums are paid into the health plan fund from the County and School Board and are available to pay claims, and administrative costs of the program. During the fiscal year 2013, a total of $4,826,551 was paid in benefits and administrative costs, The risk assumed by the County and School Board is based on the number of participants in the program. The risk varies by the number of participants and their specific plan type. As of June 30, 2013, the County and School Board were exposed to risk which represents the difference between the claims to date and the ceiling liability as calculated based on enrollment levels and health plan coverage. Additional costs in excess of the ceiling liability are covered as part of the contract with the County. Incurred but not reported claims of $454,373 have been accrued as a liability based primarily on actual cost incurred prior to June 30 but paid after year-end. Interfund premiums are based primarily upon the insured funds’ claims experience and are reported as quasi- external interfund transactions. Changes in the claims liability during fiscal year 2013 were as follows: Current Year Balance at_ Claims and Balance at Beginning of Changes in Claim End of Fiscal Year _ Fiscal Year Estimates Payments Fiscal Year 2012-13 $ 566,431 $ 4,714,493 S$ (4,826,551) $ 454,373 The remainder of this page left blank intentionally. 53. COUNTY OF RUSSELL, VIRGINIA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2013 Note 16-0ther Postemployment Benefits-Health Insurance: A. Plan Description The County of Russell and Russell County's Component Unit- School Board administer a single-employer healthcare plan ("the Plan"). The Plan provides for participation by eligible retirees and their dependents in the health insurance programs available to County and School Board employees. The Plan will provide retiring employees the option to continue health insurance offered by the County and School Board. Any County or School Board eligible retiree may receive this benefit until he/she has reached sixty five years of age. To be eligible for this benefit a retiree must meet the following criteria: attained age 50 and 15 years of service and not eligible for Medicare and the last 10 years must be with the County or School Board prior to retirement. The benefits, employee contributions and the employer contributions are governed by the Board of Supervisors and the School Board and can be amended through the Board of Supervisors and the School Board action respectively. The Plan does not issue a publicly available financial report. B. Funding Policy The County and School Board currently pay for the post-retirement health care benefits on a pay-as-you­ go basis. The County and School Board currently have 496 employees that are eligible, respectively, for the program. In addition, 100 percent of premiums are the responsibility of the retiree. Health benefits include Medical, Dental, and Vision coverage for retirees and eligible spouses/dependents. Retirees are eligible to choose one of the following medical options through the County and School Board. The rates are as follows: Medical & Rx Retiree Spouse Under 65 s 8,600 s 8,600 COBRA Retiree Family Under 65 s 5,880 s 13,842 The remainder of this page is left blank intentionally. -54- COUNTY OF RUSSELL, VIRGINIA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2013 Note 16-Other Postemployment Benefits-Health Insurance: A. Plan Description The County of Russell and Russell County’s Component Unit - School Board administer a single-employer healthcare plan (“the Plan”). The Plan provides for participation by eligible retirees and their dependents in the health insurance programs available to County and School Board employees. The Plan will provide retiring employees the option to continue health insurance offered by the County and School Board. Any County or School Board eligible retiree may receive this benefit until he/she has reached sixty five years of age. To be eligible for this benefit a retiree must meet the following criteria: attained age 50 and 15 years of service and not eligible for Medicare and the last 10 years must be with the County or School Board prior to retirement. The benefits, employee contributions and the employer contributions are governed by the Board of Supervisors and the School Board and can be amended through the Board of Supervisors and the ‘School Board action respectively. The Plan does not issue a publicly available financial report. B. Funding Policy The County and School Board currently pay for the post-retirement health care benefits on a pay-as-you- go basis. The County and School Board currently have 496 employees that are eligible, respectively, for the program. In addition, 100 percent of premiums are the responsibility of the retiree. Health benefits include Medical, Dental, and Vision coverage for retirees and eligible spouses/dependents, Retirees are eligible to choose one of the following medical options through the County and School Board. The rates are as follows: Medical & Rx Retiree Spouse Under 65 S$ 8,600 $ 8,600 COBRA Retiree Family Under 65 $5,880 $13,842 The remainder of this page is left blank intentionally COUNTY OF RUSSELL, VIRGINIA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2013 Note 16-0ther Postemployment Benefits-Health Insurance: (continued) C. Annual OPEB Cost and Net OPEB Obligation The County's annual other postemployment benefit (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 fiscal year 2012, the amount actually contributed to the plan, and changes in the County's net OPEB obligation during fiscal year 2012. The OPEB plan has not been updated for the current year. Annual required contribution $ 42,919 Interest on net OPEB obligation 361 Adjustment to annual required contribution (526) Annual OPEB cost (expense) 42,754 Contributions made (43,298) Increase (decrease) in net OPEB obligation (544) Net OPEB obligation · beginning of year 7,153 Net OPEB obligation · end of year $ 6,609 The County's annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for 2012 and the two preceding years were as follows: Percentage of Fiscal Annual Annual OPEB Cost Net OPEB Year Ended OPEB Cost Contributed Obligation 6/30/2010 $ 42,981 99.99% $ 4,949 6/30/2011 42,373 94.80% 7,153 6/30/2012 42,754 101.27% 6,609 The remainder of this page is left blank intentionally. -55- COUNTY OF RUSSELL, VIRGINIA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2013 Note 16-Other Postemployment Benefits-Health Insurance: (continued) C. Annual OPEB Cost and Net OPEB Obligation The County's annual other postemployment benefit (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 fiscal year 2012, the amount actually contributed to the plan, and changes in the County's net OPEB obligation during fiscal year 2012. The OPEB plan has not been updated for the current year. Annual required contribution $42,919 Interest on net OPEB obligation 361 Adjustment to annual required contribution (526) Annual OPEB cost (expense) 42,754 Contributions made (43,298) Increase (decrease) in net OPEB obligation (544) Net OPEB obligation - beginning of year 7,153 Net OPEB obligation - end of year $6,609 The County’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for 2012 and the two preceding years were as follows: Percentage of Fiscal Annual Annual OPEB Cost Net OPEB Year Ended _ OPEB Cost Contributed Obligation 6/30/2010 $ 42,981 99.99% $ 4,949 6/30/2011 42,373 94.80% 7,153 6/30/2012 42,754 101.27% 6,609 The remainder of this page is left blank intentionally. COUNTY OF RUSSEll, VIRGINIA NOTES TO FINANCIAl STATEMENTS (CONTINUED) JUNE 30, 2013 Note 16-0ther Postemployment Benefits-Health Insurance: (continued) C. Annual OPEB Cost and Net OPEB Obligation (continued) The School Board's annual other postemployment benefit (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 School Board's annual OPEB cost for the year, the amount actually contributed to the plan, and changes in the School Board's net OPEB obligation: Annual required contribution $ 886,300 Interest on net OPEB obligation 1,793 Adjustment to annual required contribution (2,385) Annual OPEB cost (expense) 885,708 Contributions made (503,000) Increase (decrease) in net OPEB obligation 382,708 Net OPEB obligation · beginning of year 44,828 Net OPEB obligation - end of year $ 427,536 The School Board's annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for 2013 and the two preceding years were as follows: Percentage of Fiscal Annual Annual OPEB Cost Net OPEB Year Ended OPEB Cost Contributed Obligation 6/30/2011 $ 276,346 94.80% $ 48,377 6/30/2012 278,829 101.27% 44,828 6/30/2013 885,708 56.79% 427,536 D. Funded Status and Funding Progress The funded status of the Plan for the County as of July 1, 2010, the most recent actuarial valuation date, is as follows: Actuarial accrued liability (AAL) $ 464,748 Actuarial value of plan assets $ Unfunded actuarial accrued liability (UAAL) $ 464,748 Funded ratio (actuarial value of plan assets I AAL) 0.00% Covered payroll (active plan members) $ 5,581,443 UAAL as a percentage of covered payroll 8.33% -56- COUNTY OF RUSSELL, VIRGINIA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2013 Note 16-Other Postemployment Benefits-Health Insurance: (continued) C. Annual OPEB Cost and Net OPEB Obligation (continued) The School Board’s annual other postemployment benefit (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 School Board’s annual OPEB cost for the year, the amount actually contributed to the pian, and changes in the School Board's net OPEB obligation: Annual required contribution Interest on net OPEB obligation Adjustment to annual required contribution Annual OPEB cost (expense) Contributions made Increase (decrease) in net OPEB obligation Net OPEB obligation - beginning of year Net OPEB obligation - end of year 886,300 1,793 (2,385) 885,708 (603,000) 382,; The School Board’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for 2013 and the two preceding years were as follows: Percentage of Fiscal Annual Annual OPEB Cost. Net OPEB YearEnded _ OPEB Cost Contributed Obligation 6/30/2011 $ 276,346 94.80% $ 48,377 6/30/2012 278,829 101.27% 44,828 6/30/2013 885,708 56.79% 427,536 D. Funded Status and Funding Progress ‘The funded status of the Plan for the County as of July 1, 2010, the most recent actuarial valuation date, is as follows: Actuarial accrued liability (AAL) Actuarial value of plan assets Unfunded actuarial accrued liability (UAL) Funded ratio (actuarial vatue of plan assets / AAL) Covered payrolt (active plan members) UAAL as a percentage of covered payroll 464,748 464,748 0.00% 5,581,443 8.33% COUNTY OF RUSSELL, VIRGINIA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2013 Note 16-0ther Postemployment Benefits-Health Insurance: (continued) D. Funded Status and Funding Progress (continued) The funded status of the Plan for the School Board as of July 1, 2012, the most recent actuarial valuation date, is as follows: Actuarial accrued liability (AAL) Actuarial value of plan assets Unfunded actuarial accrued liability (UAAL) Funded ratio (actuarial value of plan assets I AAL) Covered payroll (active plan members) UAAL as a percentage of covered payroll s s s s 8, 991,400 8,991,400 0.00% 21,181,100 42.45% Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far in the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. 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, will present multiyear trend information, as it becomes available, about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. E. 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 to 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 of assets, consistent with the long-term perspective of the calculations. As of July 1, 2012, the most recent actuarial valuation date, the projected unit of credit actuarial cost method was used. Under this method, future benefits are projected and the present value of such benefits is allocated from date of hire to date of eligibility the actuarial assumptions included: inflation at 2.50 percent, plus productivity component of 1.25 percent, investment rate of return at 4.00 percent, and a health care trend rate of 7.50 percent graded to 4.80 percent over 72 years. The UAAL is being amortized as a level percentage over the remaining amortization period, which at July 1, 2012 was 20 years. -57- COUNTY OF RUSSELL, VIRGINIA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2013 Note 16-Other Postemployment Benefits-Health Insurance: (continued) D. Funded Status and Funding Progress (continued) The funded status of the Plan for the School Board as of July 1, 2012, the most recent actuarial valuation date, is as follows: ‘Actuarial accrued liability (AAL) $ 8,991,400 Actuarial value of pian assets $ - Unfunded actuarial accrued liability (UAL) $ 8,991,400 Funded ratio (actuarial value of plan assets / AL) 0.00% Covered payroll (active plan members) $ 21,181,100 UAAL as a percentage of covered payroll ALASK Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far in the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. 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, will present multiyear trend information, as it becomes available, about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. E. 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 to 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 of assets, consistent with the long-term perspective of the calculations. As of July 1, 2012, the most recent actuarial valuation date, the projected unit of credit actuarial cost method was used. Under this method, future benefits are projected and the present value of such benefits is allocated from date of hire to date of eligibility the actuarial assumptions included: inflation at 2.50 percent, plus productivity component of 1.25 percent, investment rate of return at 4.00 percent, and a health care trend rate of 7.50 percent graded to 4.80 percent over 72 years. The UAAL is being amortized as a level percentage over the remaining amortization period, which at July 1, 2012 was 20 years. 57 COUNTY OF RUSSELL, VIRGINIA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2013 Note 17-0ther Postemployment Benefits-VRS Health Insurance Credit: A. Plan Description The County and School Board participate in the Health Insurance Credit Program, a plan designed to assist retirees with the cost of health insurance coverage. This program is an agent and cost sharing, multiple-employer defined benefit plan administered by the Virginia Retirement System (VRS). The Virginia General Assembly establishes the dollar amount of the health insurance credit for each year of creditable service. The credit amount and eligibility differs for state, school division, political subdivision, local officer, local social services department and general registrar retirees. An employee of the County or School Board, who retires under VRS with at least 15 years of total creditable service under the System and is enrolled in a health insurance plan, is eligible to receive a monthly health insurance credit of $1.50 per year of creditable service up to a maximum monthly credit of $45. However, such credit shall not exceed the health insurance premium for the retiree. Disabled retirees automatically receive the maximum monthly health insurance credit of $45. Benefit provisions and eligibility requirements are established by Title 51.1, Chapter 14 of the Code of Virginia. The VRS actuarially determines the amount necessary to fund all credits provided, reflects the cost of such credits in the applicable employer contribution rate pursuant to §51.1-145, and prescribes such terms and conditions as are necessary to carry out the provisions of the health insurance credit program. VRS issues separate financial statements as previously discussed in Note 9. B. Funding Policy Primary Government: As a participating local political subdivision, the County is required to contribute the entire amount necessary to fund participation in the program using the actuarial basis specified by the Code of Virginia and the VRS Board of Trustees. The County's contribution rate for the fiscal year ended 2013 was 0.23% of annual covered payroll. Discretely Presented Component Unit - School Board (Non-Professional Employees): As a participating local political subdivision, the Covington School Board is required to contribute the entire amount necessary to fund participation in the program using the actuarial basis specified by the Code of Virginia and the VRS Board of Trustees. The School Board's contribution rate for the fiscal year ended 2013 was 0.59% of annual covered payroll. C. Annual OPEB Cost and Net OPEB Obligation Primary Government: The annual cost of OPEB under Governmental Accounting Standards Board (GASB) 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other than Pensions, is based on the annual required contribution (ARC). The County is required to contribute the 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. -58- COUNTY OF RUSSELL, VIRGINIA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2013 Note 17-Other Postemployment Benefits-VRS Health Insurance Credit: A, Plan Description The County and School Board participate in the Health Insurance Credit Program, a plan designed to assist retirees with the cost of health insurance coverage. This program is an agent and cost sharing, muttiple-employer defined benefit plan administered by the Virginia Retirement System (VRS). The Virginia General Assembly establishes the dollar amount of the health insurance credit for each year of creditable service. The credit amount and eligibility differs for state, school division, political subdivision, local officer, local social services department and general registrar retirees. An employee of the County or School Board, who retires under VRS with at least 15 years of total creditable service under the System and is enrolled in a health insurance plan, is eligible to receive a monthly health insurance credit of $1.50 per year of creditable service up to a maximum monthly credit of $45. However, such credit shall not exceed the health insurance premium for the retiree. Disabled retirees automatically receive the maximum monthly health insurance credit of $45. Benefit provisions and eligibility requirements are established by Title 51.1, Chapter 14 of the Code of Virginia. The VRS actuarially determines the amount necessary to fund all credits provided, reflects the cost of such credits in the applicable employer contribution rate pursuant to §51.1-145, and prescribes such terms and conditions as are necessary to carry out the provisions of the health ‘insurance credit program. VRS issues separate financial statements as previously discussed in Note 9. B. Funding Policy Primary Government: As a participating local political subdivision, the County is required to contribute the entire amount necessary to fund participation in the program using the actuarial basis specified by the Code of Virginia and the VRS Board of Trustees. The County’s contribution rate for the fiscal year ended 2013 was 0.23% of annual covered payroll. Discretely Presented Component Unit - School Board (Non-Professional Employees): As a participating local political subdivision, the Covington School Board is required to contribute the entire amount necessary to fund participation in the program using the actuarial basis specified by the Code of Virginia and the VRS Board of Trustees. The School Board’s contribution rate for the fiscal year ended 2013 was 0.59% of annual covered payroll. C. Annual OPEB Cost and Net OPEB Obligation Primary Government: The annual cost of OPEB under Governmental Accounting Standards Board (GASB) 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other than Pensions, is based on the annual required contribution (ARC). The County is required to contribute the 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. COUNTY OF RUSSELL, VIRGINIA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2013 Note 17-0ther Postemployment Benefits-VRS Health Insurance Credit: (continued) C. OPEB Cost and Net OPEB Obligation (continued) Primary Government: (continued) For 2013, the County's contribution of $1,764 was equal to the ARC and OPEB cost. The County's annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for 2013 and the two preceding years are shown below: Fiscal Annual Percentage Net Year OPEB of ARC OPEB Ending Cost (ARC) Contributed Obligation Primary Government: County 6/3012011 s 3,304 100.00% s 6/30/2012 3,289 100.00% 6/3012013 1,764 100.00% Discretely Presented Component Unit - School Board (Non-Professional Employees): The annual cost of OPEB under Governmental Accounting Standards Board (GASB) 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other than Pensions, is based on the annual required contribution (ARC). The School Board is required to contribute the 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. For 2013, the School Board's contribution of S 15,780 was equal to the ARC and OPEB cost. The School Board's annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for 2013 is as follows: Discretely Presented Component Unit School Board Year Ending 6/30/2013 s OPEB Cost (ARC) 15,780 of ARC Contributed 100.00% OPEB Obligation s Note: 2013 is the first year of the VRS health insurance credit program for non-professional school board employees. The remainder of this page is left blank intentionally. -59- COUNTY OF RUSSELL, VIRGINIA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2013 Note 17-Other Postemployment Benefits-VRS Health Insurance Credit: (continued) C. OPEB Cost and Net OPEB Obligation (continued) Primary Government: (continued) For 2013, the County’s contribution of $1,764 was equal to the ARC and OPEB cost. The County’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for 2013 and the two preceding years are shown below: Fiscal Annual Percentage Net Year OPEB of ARC OPEB Ending Cost (ARC) Contributed _ Obligation Primary Government: County 6/30/2011 $ 3,304 100.00% $ - 6/30/2012 3,289 10.00% 6/30/2013 1,764 100.00% Discretely Presented Component Unit - School Board (Non-Professional Employees): The annual cost of OPEB under Governmental Accounting Standards Board (GASB) 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other than Pensions, is based on the annual required contribution (ARC). The School Board is required to contribute the 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. For 2013, the School Board’s contribution of $15,780 was equal to the ARC and OPEB cost. The School Board’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for 2013 is as follows: Year OPEB of ARC OPEB Ending Cost (ARC) Contributed _ Obligation Discretely Presented Component Unit School Board 6/30/2013 § 15,780 100.00% $ Note: 2013 is the first year of the VRS health insurance credit program for non-professional school board employees. The remainder of this page is left blank intentionally. -59- COUNTY OF RUSSELL, VIRGINIA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2013 Note 17-0ther Postemployment Benefits-VRS Health Insurance Credit: (continued) D. Funded Status and Funding Progress Primary Government: The funded status of the plan as of June 30, 2012, the most recent actuarial valuation date, is as follows: Actuarial accrued liability (AAL) Actuarial value of plan assets Unfunded actuarial accrued liability (UAAL) Funded ratio (actuarial value of plan assets/ AAL) Covered payroll (active plan members) UAAL as a percentage of covered payroll s s s s 101,849 78,231 23,618 76.81% 1,769,420 1.33% 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 and reflect a long·term perspective. Examples include assumptions about future employment, mortality, and the healthcare cost trend. 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 is increasing or decreasing over time relative to the actuarial accrued liability for benefits. The projection of benefits for financial reporting purposes does not explicitly incorporate the potential effects of legal or contractual funding limitations. Discretely Presented Component Unit · School Board (Non·Professional Employees): The funded status of the plan as of June 30, 2012, the most recent actuarial valuation date, is as follows: Actuarial accrued liability (AAL) Actuarial value of plan assets Unfunded actuarial accrued liability (UAAL) Funded ratio (actuarial value of plan assets/ AAL) Covered payroll (active plan members) UAAL as a percentage of covered payroll s s s s 161,463 161,463 0.00% 2,689,457 6.00% 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 and reflect a long-term perspective. Examples include assumptions about future employment, mortality, and the healthcare cost trend. 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. -60- COUNTY OF RUSSELL, VIRGINIA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2013 Note 17-Other Postemployment Benefits-VRS Health Insurance Credit: (continued) D. Funded Status and Funding Progress Primary Government: The funded status of the plan as of June 30, 2012, the most recent actuarial valuation date, is as fotlows: Actuarial accrued liability (AAL) $ 101,849 Actuarial value of plan assets $ 78,231 Unfunded actuarial accrued liability (UAAL) $ 23,618 Funded ratio (actuarial value of plan assets/AAL) 76.81% Covered payroll (active plan members) $1,769,420 UAAL as a percentage of covered payroll 1.33% 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 and reflect a long-term perspective. Examples include assumptions about future employment, mortality, and the healthcare cost trend. 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 is increasing or decreasing over time relative to the actuarial accrued liability for benefits. The projection of benefits for financial reporting purposes does not explicitly incorporate the potential effects of legal or contractual funding limitations. Discretely Presented Component Unit - School Board (Non-Professional Employees): The funded status of the plan as of June 30, 2012, the most recent actuarial valuation date, is as follows: ‘Actuarial accrued liability (AL) $ 161,463 Actuarial value of plan assets s - Unfunded actuarial accrued liability (UAAL) 5 161,463 Funded ratio (actuarial value of plan assets/AAL) 0.00% Covered payroll (active plan members) $2,689,457 UAAL as a percentage of covered payroll 6.00% 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 and reflect a long-term perspective. Examples include assumptions about future employment, mortality, and the healthcare cost trend. 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. -60- COUNTY OF RUSSELL, VIRGINIA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2013 Note 17-0ther Postemployment Benefits-VRS Health Insurance Credit: (continued) D. Funded Status and Funding Progress (continued) Discretely Presented Component Unit - School Board (Non-Professional Employees): (continued) 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 is increasing or decreasing over time relative to the actuarial accrued liability for benefits. The projection of benefits for financial reporting purposes does not explicitly incorporate the potential effects of legal or contractual funding limitations. E. Actuarial Methods and Assumptions Primary Government: Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and 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 to that point. The actuarial methods and assumptions used included techniques that are designed to reduce short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. The entry age normal cost method was used to determine the plan's funding liabilities and costs. The actuarial assumptions included a 7.00% investment rate of return, compounded annually, including an inflation component of 2.50%, and a payroll growth rate of 3.00%. The UAAL is being amortized as a level percentage of payrolls on an open basis. The remaining open amortization period at June 30, 2012 was 29 years. Discretely Presented Component Unit- School Board (Non-Professional Employees): Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and 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 to that point. The actuarial methods and assumptions used included techniques that are designed to reduce short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. The entry age normal cost method was used to determine the plan's funding liabilities and costs. The actuarial assumptions included a 7.00% investment rate of return, compounded annually, including an inflation component of 2.50%, and a payroll growth rate of 3.00%. The UAAL is being amortized as a level percentage of payroll on an open basis. The remaining open amortization period at June 30, 2012 was 29 years. F. Professional Employees- Discretely Presented Component Unit School Board The School Board participates in the Health Insurance Credit Program, a plan designed to assist retirees with the cost of health insurance coverage. This program is a cost sharing, multiple-employer defined benefit plan administered by the Virginia Retirement System (VRS). The Virginia General Assembly establishes the dollar amount of the health insurance credit for each year of creditable service. -61- COUNTY OF RUSSELL, VIRGINIA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2013 Note 17-Other Postemployment Benefits-VRS Health Insurance Credit: (continued) D. Funded Status and Funding Progress (continued) Discretely Presented Component Unit - School Board (Non-Professional Employees): (continued) 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 is increasing or decreasing over time relative to the actuarial accrued liability for benefits. The projection of benefits for financial reporting purposes does not explicitly incorporate the potential effects of legal or contractual funding limitations. E. Actuarial Methods and Assumptions Primary Government Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and 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 to that point. The actuarial methods and assumptions used included techniques that are designed to reduce short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. The entry age normal cost method was used to determine the plan’s funding liabilities and costs. The actuarial assumptions included a 7.00% investment rate of return, compounded annually, including an inflation component of 2.50%, and a payroll growth rate of 3.00%. The UAAL is being amortized as a level percentage of payrolls on an open basis. The remaining open amortization period at June 30, 2012 was 29 years. Discretely Presented Component Unit - School Board (Non-Professional Employees): Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as. understood by the employer and 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 to that point. The actuarial methods and assumptions used included techniques that are designed to reduce short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. The entry age normal cost method was used to determine the plan’s funding liabilities and costs. The actuarial assumptions included a 7.00% investment rate of return, compounded annually, including an inflation component of 2.50%, and a payroll growth rate of 3.00%. The UAL is being amortized as a level percentage of payroll on an open basis. The remaining open amortization period at June 30, 2012 was 29 years. F. Professional Employees - Discretely Presented Component Unit School Board The School Board participates in the Health Insurance Credit Program, a plan designed to assist retirees with the cost of health insurance coverage. This program is a cost sharing, multiple-employer defined benefit plan administered by the Virginia Retirement System (VRS). The Virginia General Assembly establishes the dollar amount of the health insurance credit for each year of creditable service. 61- COUNTY OF RUSSELL, VIRGINIA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2013 Note 17-0ther Postemployment Benefits-VRS Health Insurance Credit: (continued) F. Professional Employees - Discretely Presented Component Unit School Board (continued) A teacher, who retires under VRS with at least 15 years of total creditable service under the System and is enrolled in a health insurance plan, is eligible to receive a monthly health insurance credit of $4 per year of creditable service. However, such credit shall not exceed the health insurance premium for the retiree. Disabled retirees automatically receive a monthly health insurance credit of $4 multiplied by the smaller of (i) twice the amount of their creditable service or (ii) the amount of creditable service they would have completed at age 60 if they had remained in service to that age. The School Board is required to contribute, at an actuarially determined rate, the entire amount necessary to fund participation in the program. The School Board's contribution to VRS was $193,975, $110,342 and $165,875 for the fiscal years ended 2013, 2012, and 2011, respectively. The School Board's contributions represented 1.11%, 0.60% and 1.08% of covered payroll for the fiscal years ended 2013, 2012, and 2011, respectively. Note 18-Moral Obligation: The County has signed support agreements that back certain debt obligations of The Industrial Development Authority of Russell County (a component unit of the County). In these agreements, the Board of Supervisors has a non-binding (moral obligation) to fund the Russell County Industrial Development Authority in amounts sufficient to cover debt service on referenced obligations. To date, the County of Russell, Virginia has provided funds sufficient to cover such debt service. As of June 30, 2013, the outstanding balance such loans was $600,000. During fiscal year 2013, the County paid $944,503 in debt service for The Industrial Development Authority of Russell County. The Industrial Development Authority of Russell County expects the County to pay the remaining $600,000 during fiscal year 2014. The County has signed a support agreement that backs certain debt obligations of the Russell County Public Service Authority (a component unit of the County). In the agreement, the Board of Supervisors has a moral obligation to fund the Russell County Public Service Authority in amounts sufficient to cover debt service issued during fiscal year 2013 in the amount of $700,843. To date, the County of Russell, Virginia has provided funds sufficient to cover such debt service. During fiscal year 2013, the County paid $132,046 in debt service for the Russell County Public Service Authority. The remainder of this page is left blank intentionally. -62- COUNTY OF RUSSELL, VIRGINIA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2013 Note 17-Other Postemployment Benefits-VRS Health Insurance Credit: (continued) F, Professional Employees - Discretely Presented Component Unit School Board (continued) Ateacher, who retires under VRS with at least 15 years of total creditable service under the System and is enrolled in a health insurance plan, is eligible to receive a monthly health insurance credit of $4 per year of creditable service. However, such credit shall not exceed the health insurance premium for the retiree. Disabled retirees automatically receive a monthly health insurance credit of $4 multiplied by the smaller of (i) twice the amount of their creditable service or (ii) the amount of creditable service they would have completed at age 60 if they had remained in service to that age. The School Board is required to contribute, at an actuarially determined rate, the entire amount necessary to fund participation in the program. The School Board’s contribution to VRS was $193,975, $110,342 and $165,875 for the fiscal years ended 2013, 2012, and 2011, respectively. The School Board’s contributions represented 1.11%, 0.60% and 1.08% of covered payroll for the fiscal years ended 2013, 2012, and 2011, respectively. Note 18-Moral Obligation: The County has signed support agreements that back certain debt obligations of The Industrial Development Authority of Russell County (a component unit of the County). In these agreements, the Board of Supervisors has a non-binding (moral obligation) to fund the Russell County Industrial Development Authority in amounts sufficient to cover debt service on referenced obligations. To date, the County of Russell, Virginia has provided funds sufficient to cover such debt service. As of June 30, 2013, the outstanding balance such loans was $600,000. During fiscal year 2013, the County paid $944,503 in debt service for The Industrial Development Authority of Russell County. The Industrial Devetopment Authority of Russell County expects the County to pay the remaining $600,000 during fiscal year 2014. The County has signed a support agreement that backs certain debt obligations of the Russell County Public Service Authority (a component unit of the County). In the agreement, the Board of Supervisors has a moral obligation to fund the Russell County Public Service Authority in amounts sufficient to cover debt service issued during fiscal year 2013 in the amount of $700,843. To date, the County of Russell, Virginia has provided funds sufficient to cover such debt service. During fiscal year 2013, the County paid $132,046 in debt service for the Russell County Public Service Authority. The remainder of this page is left blank intentionally. -62- COUNTY OF RUSSELL, VIRGINIA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2013 Note 19-0perating Lease: The County has signed a lease agreement with The Industrial Development Authority of Russell County to pay rent equivalent to the required debt service as it relates to the Russell County Government Center. To date, the County of Russell, Virginia has provided funds sufficient to cover such debt service. As of June 30, 2013, the outstanding balance of the loan was $5,086,100. Future required rent payments are as follows: Year Ending Operating Lease June 30, Principal Interest 2014 s 223,300 s 116,497 2015 355,100 109,767 2016 363,300 101,621 2017 372,100 92,744 2018 381,000 83,925 2019·2023 2,044,500 280,035 2024·2028 1,346,800 47,997 Totals s 5,086,100 s 832,586 Note 20-Upcoming Pronouncements: The GASB has issued Statement No. 68, ""Accounting and Financial Reporting for Pensions; an amendment of GASB Statement No. 27 :· This Statement replaces the requirements of Statements No. 27 and No. 50 related to pension plans that are administered through trusts or equivalent arrangements. The requirements of Statements No. 27 and No. 50 remain applicable for pensions that are not administered as trusts or equivalent arrangements. The requirements of this Statement are effective for financial statements for fiscal years beginning after June 15, 2014. The County has not determined the impact of this pronouncement on its financial statements. Note 21-Litigation: As of June 30, 2013, there were no matters of litigation involving the County which would materially affect the County's financial position should an court decisions on pending matters not be favorable. Note 22 -Restatement: Beginning net position of the School Board has been restated due to the discovery of an early retirement incentive program and an additional adjustment for unrecorded depreciation expense in the prior year. The restatement is demonstrated below: Net Position as Previously Reported 6/30/12 Early Retirement Incentive Program Depreciation Expense Net Position as Restated 6/30/12 -63- Component Unit · School Board s s 16,988,114 (451, 958) (418, 199) 16,117,957 COUNTY OF RUSSELL, VIRGINIA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2013 Note 19-Operating Leas: The County has signed a lease agreement with The Industrial Development Authority of Russell County to pay rent equivalent to the required debt service as it relates to the Russell County Government Center. To date, the County of Russell, Virginia has provided funds sufficient to cover such debt service. As of June 30, 2013, the outstanding balance of the loan was $5,086,100. Future required rent payments are as follows: Year Ending Operating Lease June 30, Principal Interest 2014 $ 223,300 $ 116,497 2015 355,100 109,767, 2016 363,300 101,621 2017 372,100 92,744 2018 381,000 83,925 2019-2023 2,044,500 280,035 2024-2028 1,346,800 47,997 Totals 086,700 S$ 832,586 Note 20-Upcoming Pronouncements: The GASB has issued Statement No. 68, “Accounting and Financial Reporting for Pensions; an amendment of GASB Statement No. 27.” This Statement replaces the requirements of Statements No. 27 and No. 50 related to pension plans that are administered through trusts or equivalent arrangements. The requirements of Statements No. 27 and No. 50 remain applicable for pensions that are not administered as trusts or equivalent arrangements. The requirements of this Statement are effective for financial statements for fiscal years beginning after June 15, 2014. The County has not determined the impact of this pronouncement on its financial statements. As of June 30, 2013, there were no matters of litigation involving the County which would materially affect the County’s financial position should an court decisions on pending matters not be favorable. Note 22-Restatement: Beginning net position of the School Board has been restated due to the discovery of an early retirement incentive program and an additional adjustment for unrecorded depreciation expense in the prior year. The restatement is demonstrated below: Component Unit - Schoot Board Net Position as Previously Reported 6/30/12 $ 16,988,114 Early Retirement Incentive Program (451,958) Depreciation Expense (418,199) Net Position as Restated 6/30/12 16,117,957 Required Supplementary Information Required Supplementary Information Exhibit 11 County of Russell, Virginia General Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances ~ Budget and Actual For the Year Ended June 30, 2013 Variance with Budgeted Amounts Final Budget - Actual Positive Original Final Amounts (Negative) REVENUES General property taxes $ 13,985,801 $ 13,985,801 $ 14,696,587 $ 710,786 Other local taxes 5,062, 996 5,042, 996 3,937,219 (1,105,777) Permits, privilege fees, and regulatory licenses 19,800 19,800 34,152 14,352 Fines and forfeitures 73,806 73,806 14,955 (58,851) Revenue from the use of money and property 50,000 50,000 31,431 (18,569) Charges for services 270,900 474,108 303,412 (170,696) Miscellaneous 44,000 44,000 60,479 16,479 Recovered costs 383,000 383,000 1,009,359 626,359 Intergovernmental revenues: Commonwealth 7,956,339 7,956,339 7,734,506 (221 ,833) Federal 2,355,448 2,355,448 2,458, 978 103,530 Total revenues $ 30,202,090 $ 30,385,298 $ 30,281,078 $ (104,220) EXPENDITURES Current: General government administration $ 1,571,513 $ 1,726,663 $ 1 '797, 929 $ (71,266) Judicial administration 2,150,066 2,154,866 2,096,382 58,484 Public safety 5,197,517 5,419,427 5,742,101 (322,674) Public works 3,638,060 3,514,305 3,241,005 273,300 Health and welfare 6,770,802 6, 708,456 6,120,771 587,685 Education 7,258,593 7,258,593 6,390,469 868,124 Parks, recreation, and cultural 469,655 469,655 488,706 (19,051) Community development 1,532,898 1,530,569 2,283,910 (753,341) Nondepartmental 806,600 408,328 423,737 (15,409) Capital projects 100,000 280,008 334,929 (54,921) Debt service: Principal retirement 1 ,424, 901 1 ,424, 901 2,314,036 (889,135) Interest and other fiscal charges 352,481 352,481 555,784 (203,303) Total expenditures $ 31,273,086 $ 31,248,252 $ 31,789,759 $ (541 ,507) Excess (deficiency) of revenues over (under) expenditures $ (1 ,070,996) $ (862,954) $ (1 ,508,681) $ (645, 727) OTHER FINANCING SOURCES (USES) Transfers out $ (100,000) $ (183,042) $ (283,789) $ (100,747) Net change in fund balances $ (1,170,996) $ (1,045,996) $ (1 ,792,470) $ (746,474) Fund balances - beginning 1 '170, 996 1 ,045, 996 6,884,605 5,838,609 Fund balances -ending $ $ $ 5,092,135 $ 5,092,135 -64- County of Russell, Virginia General Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual For the Year Ended June 30, 2013, Exhibit 14 REVENUES General property taxes Other local taxes Permits, privilege fees, and regulatory licenses Fines and forfeitures Revenue from the use of money and property Charges for services Miscellaneous Recovered costs Intergovernmental revenues: Commonwealth Federal Total revenues EXPENDITURES. Current: General government administration Judicial administration Public safety Public works Health and welfare Education Parks, recreation, and cultural ‘Community development Nondepartmental Capital projects Debt service: Principal retirement, Interest and other fiscal charges Total expenditures, Excess (deficiency) of revenues over (under) expenditures OTHER FINANCING SOURCES (USES) Transfers out Net change in fund balances Fund balances - beginning Fund balances - ending Variance with Budgeted Amounts Final Budget - Actual Positive Original Final ‘Amounts (Negative! $13,985,801 $13,985,801 § 14,696,587 $ 710,786 5,062,996 5,042,996 3,937,219 (1,105,777) 19,800 19,800 34,152 14,352 73,806 73,806 14,955 (68,851) 50,000 50,000 31,431 (18,569) 270,900 474,108 303,412 (170,696) 44,000 44,000 60,479 16,479 383,000 383,000 1,009,359 626,359 7,996,339 7,956,339 ‘7,734,506, (221,833) 2,395,448 2,355,448 2,458,978 103,530 3 30,202,090_$ 30,385,298 _§ 30,261,078 _§ (104,220) $1,571,513 $4,726,663 $1,797,929 § (71,266) 2,150,066 2,154,866 2,096,382 38,484 5,197,517 5,419,427 5,742,101 (622,674) 3,638,060 «3,514,305. «3,241,005 273,300 6,770,802 6,708,456 6,120,771 587,685 7,258,593 7,258,593 6,390,469 868,124 469,655, 469,655 488,706 (19,051) 1,532,898 1,530,569 2,283,910 (753,341) 806,600 408,328 423,737 (15,409) 100,000 280,008 334,929 (54,921) 4,424,901 1,424,901 2,314,036 (889,135) 352,481 352,481 955,784 (203,303) $34,773,086 $34,248,252 $31,789,759 $ (541,507) $_(1,070,996) $ (862,954) $ (1,508,681) $ (645,727) $ (100,000) $__ (183,042) $__ (283,789) $ (100,747) $ (1,170,996) $ (1,045,996) $ (1,792,470) § (746,474) 4,170,996 1,045,996 6,884,605 __—5,838,609 s —s $5,072, 135_§ 5,092,135 -64- County of Russell, Virginia Special Revenue Fund -Coal Road Fund Exhibit 12 Schedule of Revenues, Expenditures, and Changes in Fund Balances- Budget and Actual For the Year Ended June 30, 2013 REVENUES Other local taxes Revenue from the use of money and property Total revenues EXPENDITURES Current: Public works Excess (deficiency) of revenues over (under) expenditures Net change in fund balances Fund balances - beginning Fund balances- ending Budgeted Amounts Original Final s 1,320,000 s 1,320,000 s s 1,320,000 s 1,320,000 s s 1,320,000 s 1,320,000 s s s s s s s s s s -65- Variance with Final Budget - Actual Amounts 1 '142,393 s 5,232 1,147,625 s 1,503,326 s (355,701) s (355,701) s 1,245,468 889,767 s Positive (Negative) (177,607) 5,232 (172,375) (183,326) (355, 701) (355,701) 1,245,468 889,767 County of Russell, Virginia Special Revenue Fund - Coal Road Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual For the Year Ended June 30, 2013 Exhibit 12 REVENUES Other local taxes Revenue from the use of money and property Total revenues EXPENDITURES. Current: Public works Excess (deficiency) of revenues over (under) expenditures Net change in fund balances Fund balances - beginning Fund balances - ending, Variance with Budgeted Amounts Final Budget - Actuat Positive Original Final Amounts (Negative) $1,320,000 $ 1,320,000 $1,142,393 $ (177,607) - : 5,232 5,232 $_ £320,000 § 1,320,000 $4,147,625 (172,375) $1,320,000 $ _ 1,320,000_$ 1,503,326 $ (183,326) $ s $55,701) $__ (355,701) 8 5 $355,701) $ (355,701) : 1,245,468 1,245,468 3 =~ $ = $889,767 _§ 889,767 65- County of Russell, Virginia Special Revenue Fund -Workforce Investment Board Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual For the Year Ended June 30, 2013 Exhibit 13 Variance with REVENUES Intergovernmental revenues: Commonwealth Federal Total revenues EXPENDITURES Current: Health and welfare Excess (deficiency) of revenues over (under) expenditures Net change in fund balances Fund balances - beginning Fund balances- ending Budgeted Amounts Final Budget - Actual Positive Original Final Amounts (Negative) $ $ $ 2,550 $ 2,550 3,198,324 3,198,324 2,206,878 (991 ,446) $ 3,198,324 $ 3,198,324 $ 2,209,428 $ (988,896) $ 3,198,324 $ 3,198,324 $ 2,213,965 $ 984,359 $ $ $ $ $ $ $ $ $ -66- (4,537) $ (4,537) $ 47,936 43,399 $ (4,537) (4,537) 47,936 43,399 County of Russell, Virginia Special Revenue Fund - Workforce Investment Board Fund ‘Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual For the Year Ended June 30, 2013 Exhibit 13 REVENUES Intergovernmental revenues: Commonwealth Federal Total revenues EXPENDITURES. Current: Health and welfare Excess (deficiency) of revenues over (under) expenditures Net change in fund balances Fund balances - beginning Fund balances - ending Variance with Budgeted Amounts Final Budget - Actual Positive Original Amounts (Negative) 5 : : 2,550 $ 2,550 3,198,324 3,198,324 2,206,878 (991,446) 53,198,324 3,198, 324 2,209,428 (988,896) $3,198,324 3,198,324 2,213,965 $984,359 s (4,537) §___(4,537) $ (4,537) § (4,537) : : 47,936 41,936 3 43,399 $43,309 Exhibit 14 County of Russell, Virginia Schedule of Pension and OPEB Funding Progress For the Year Ended June 30, 2013 Primary Government County Retirement Plan: Actuarial Actuarial Actuarial Unfunded UAAL as a Valuation Value of Accrued AAL (UAAL) Funded Ratio Covered %of Covered as of Assets Liability (AAL) (3( ~ (Z) (Z)/(3) Payroll Payroll (4)/(6) (1) (Z) (3) (4) (5) (6) (7) June 30, 2012 19,894,452 28,359,443 8,464,991 70.15% 5,481,683 154.42% June 30, 2011 20,084,643 27,499,897 7,415,254 73.04% 5,413,452 136.98% June 30, 2010 19,759,376 26,221,057 6,461,681 75.36% 5,581,443 115.77% County Other Postemployment Benefits-Health Insurance: Actuarial Actuarial Actuarial Unfunded UAAL as a Valuation Value of Accrued AAL (UAAL) Funded Ratio Covered %of Covered as of(") Assets Liability (AAL) (3) ~ (Z) (2)/(3) Payroll Payroll (4)/(6) (1) (Z) (3) (4) (5) (6) (7) July1,2010 464,748 464,748 0.00% 5,581,443 8.33% July 1, 2008 546,570 546,570 0.00% 4,198,697 13.02% County Other Postemployment Benefits-VRS Health Insurance Credit: Actuarial Actuarial Actuarial Unfunded UAAL as a Valuation Value of Accrued AAL (UAAL) Funded Ratio Covered %of Covered as of Assets Liability (AAL) (3) ~ (Z) (2)/(3) Payroll Payroll (4)/(6) (1) (Z) (3) (4) (5) (6) (7) June 30, 2012 78,231 101,849 23,618 76.81% 1,769,420 1.33% June 30, 2011 82,852 100,667 17,815 82.30% 1,523,173 1.17% June 30, 2010 71,521 76,866 5,345 93.05% 5,581,443 0.10% Discretely Presented Component Unit: School Board Non-Professional Retirement Plan: Actuarial Actuarial Actuarial Unfunded UAAL as a Valuation Value of Accrued AAL (UAAL) Funded Ratio Covered %of Covered as of Assets Liability (AAL) (3) ~ (1) (2)/(3) Payroll Payroll (4)/(6) (1) (1) (3) (4) (5) (6) (7) June 30, 2012 10,068,998 s 16,469,710 6,400,712 61.14% 2,689,457 237.99% June 30, 2011 10,328,276 16,067,146 5,738,870 64.28% 2,693,695 213.05% June 30, 2010 10,392,200 15,863,210 5,471,010 65.51% 2,838,654 192.73% School Board Other Postemployment Benefits-Health Insurance: Actuarial Actuarial Actuarial Unfunded UAAL as a Valuation Value of Accrued AAL (UAAL) Funded Ratio Covered %of Covered as of Assets Liability (AAL) (3) ~ (1) (2)/(3) Payroll Payroll (4)/(6) (1) (1) (3) (4) (5) (6) (7) July 1, 2012 8,991,400 8,991,400 0.00% 21 '181 '100 42.45% July 1, 2010 3,030,967 3,030,967 0.00% 20,559,274 14.74% July 1, 2008 3,755,059 3,755,059 0.00% 24,186,441 15.53% School Board Other Postemployment Benefits-VRS Health Insurance Credit: Actuarial Actuarial Actuarial Unfunded UAAL as a Valuation Value of Accrued AAL (UAAL) Funded Ratio Covered %of Covered as of{"") Assets Liability (AAL) (3). (2) (2)/(3) Payroll Payroll {4)/(6) (1) (1) (3) (4) (5) (6) (7) June 30, 2012 161,463 161,463 0.00% 2,689,457 6.00% I" I ·An actuarial valuation was not performed in the last two fiscal years for the County. t••) -This was the initial valuatioin as the School Board recently joined this plan. -67- County of Ruse, Virgina Schadule of Ponsion and OPEB Fund ogress For the Yoar Ended Juno 30,2013 exh 4 Primary Government County Retirement Plan Actual petunia Aetwaral ——_Unfonded estas Vateation Value of Aecrued «AL (UANL)-— Funded Ratio Covered Covres iol sss _Liaity aL) _-@) evo) Payroll Payroll 4/18) i @ 8 @ co 6 7 pe 30,2012 § 19,894,452 § 78,358,401 § 8,484,001 yoIse —$ 54biéen “hune 30,2011” 20'0s4eas aon ao7TaIS BAT. Sans. 136.088 “ine 30,2010 19'780,376 26.221,057 as, 681 v5.68 Soe 577% county other Pstemployment Senefls Healt Insurance: actuarial Actuarat Actuarial Unfunded ast as Valuation Value of ‘Accrued «RAL (UAAL_—— “Funded Ratio Covered == Covered Bolt) Bssets___abiity (Au) _@)-@) aio) Payee __—_ayeol 16) a a oO @ 6 o O July 1,200 § Sans $64 768 0% S330 Bae Sty 9, 2008 546,570 546,570 o.00% Anger 13.00% County Other Postemployment Benefits RS Health Insurance Creat: setuarat Actuarial petuarlal = Unfndes xara Valuation Value of ‘Accrued AML (UAAL)-—“FandedRatia.—=—