October 12, 2001

 

Board of County Commissioners

Harnett County, North Carolina

 

We are pleased to present the Comprehensive Annual Financial Report (“CAFR”) of Harnett County (the “County”)  for the fiscal year ended June 30, 2001.  The financial statements and supplemental schedules contained herein have been audited by the independent, certified public accounting firm of Cherry, Bekaert & Holland,  LLP, and that firm’s unqualified opinion is included in the Financial Section of this report. The report itself is presented by the County, which is responsible for the accuracy of the data and for the completeness and fairness of its presentation, including all disclosures.  We believe the data as presented is accurate in all material aspects; that it is presented in a manner designed to set forth fairly the financial position and results of operations of the County as measured by the financial activity of its various funds; and that all disclosures necessary to enable the reader to gain the maximum understanding of the County’s financial affairs have been included.

 

This report is divided into four sections:  the Introductory, Financial, Statistical, and Compliance Sections.  The Introductory Section, which is unaudited, contains this letter of transmittal and information about the County’s organization and principal officials.  The Financial Section is composed of the auditors’ report, the general purpose financial statements, and the combining and individual fund and account group financial statements and schedules.  The general purpose financial statements are often issued separately for securities offerings or widespread distributions and are frequently referred to as “liftable” general purpose financial statements.  The Statistical Section, which is unaudited, contains fiscal and economic data designed to provide a more complete understanding of the County.  Many tables in this section present financial data for the past ten years.  Finally, the Compliance Section presents reports and schedules required by the federal and state Single Audit Acts.

 

The County is required to undergo an annual single audit in conformity with the provisions of the U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, and the State Single Audit Implementation Act.  Information related to this single audit, including the Schedule of Expenditures of Federal and State Awards, Schedule of Findings and Questioned Costs, Corrective Action Plan, Summary Schedule of Prior Year Audit Findings and independent auditor’s compliance and internal control reports on the general purpose financial statements and major federal and state programs, are presented in the compliance section of this report.

 

DESCRIPTION OF COUNTY

 

The County, formed in 1855, is located in the south central portion of North Carolina.  It lies partially in the Coastal Plain and partially in the Piedmont section.  The county seat, the Town of Lillington, has a population of  2,915.  The City of Dunn is the largest municipality located in the County with a population of 9,196.  These two municipalities comprise approximately 13% of the total County population.

 

Generally, the eastern two-thirds of the County exhibits topographic features common to the Coastal Plain of North Carolina.  It is an area of level to gently rolling terrain with elevations ranging from 100 to 300 feet above sea level.  Undeveloped lands are covered by pines and low-growing shrubs.  The major underlying geological formation includes sedimentary rocks consisting mostly of unconsolidated sands and clays.  Topographic features in the western part of the County resemble the Piedmont region of North Carolina.  It is an area of steeper hills with elevations as high as 450 feet above sea level.  Undeveloped lands are also covered by pines and low-growing shrubs.  The major underlying geological formation includes crystalline rocks, such as granite and slate.

 

The County contains 384,640 acres or 642 square miles.  The Cape Fear River, which flows from the northwest to the southeast part of the County, is the County's main drainage system.  The chief tributaries include the Upper Little River system, Lower Little River, and the Black River.

 

The County is governed by a Board of Commissioners (the "Board").  The Board consists of five members who are elected from districts, on a partisan basis, by a district vote and serve staggered four-year terms.  Elections for the Board are held in November of even-numbered years.  The Commissioners take office at the first meeting in December following the November election.  At that time, the Board elects a Chairman and a Vice Chairman from among its members.  Commissioners hold policy-making and legislative authority.  They are also responsible for adopting the budget and appointing the County Manager.  The manager is responsible for implementing policies, managing daily operations, and appointing department heads.

 

The County provides its citizens with a wide range of services including:  public safety, human services,  culture and recreation development, environmental protection, sanitation, and general government services.  This report includes the County’s activities in maintaining these services.  The County also extends financial support to certain boards, agencies, and commissions to assist their efforts in serving citizens.  Among these are the Harnett County Board of Education, Central Carolina Community College, the Mid-Carolina Council of Governments, and Lee-Harnett Mental Health.


 

ECONOMIC CONDITIONS and OUTLOOK

 

Harnett County is located in the center of North Carolina, on the Cape Fear River.  The County’s close proximity to the metropolitan Raleigh/Durham and Research Triangle Park area and the Fayetteville and Fort Bragg area enhances the profitability for business and industry.  The State of North Carolina is divided into seven metropolitan statistical areas (MSA’s) for economic development and Harnett County is located between two of the seven MSA’sCumberland and Wake County. Harnett County is part of the Research Triangle Regional Partnership, a thirteen-county region, whose primary responsibility is to market the region and attract industry.  Easy access to Interstate Highway 95, the eastern seaboard’s major north-south route which traverses the eastern side of the County,  and east to west access is available by Interstate 40.   Close proximity to the deep water ports of Wilmington and Morehead City make Harnett County a viable location for industries to locate.  The Raleigh-Durham International Airport is located within 30 miles.

 

During the past year, travelers spent $42.5 million in Harnett County and represents a 9.2% increase over the previous year.  The tourist industry generated $3,530.000 in state and local taxes.  The County offers 13 hotels, over 700 rooms and more than 40 restaurants in the Dunn area on the I-95 corridor.  The tourism accounts for over 500 jobs with an annual payroll of $7,750,000. 

 

Campbell University (the “University”) is located in Buies Creek and is the second largest private four-year university in North Carolina.  The University is known for its high quality education with low student/teacher ratio and offers undergraduate, graduate and doctoral degrees from the College of Arts and Sciences and Schools of Business, Pharmacy, Law and Divinity.

 

The Harnett County campus of Central Carolina Community College (“Central Carolina”) is home to the largest Laser and Electro-Optics Technology program between Boston and Florida and is the only such program in the Southeastern United States. The campus also offers training programs for local industries that are tailored to meet their changing needs for new job skills.

 

Residential growth in predominantly the southwest and northeast portions of the County continued in 2000-2001.  The County’s affordable cost of living index continues to contribute to population growth.  Residential construction permits were approved during the 1999-2000 year totaling $73,386,903.  Commercial and industrial construction projects totaled $10,584,520.  The County’s population grew over 34% from 1990 to 2000, ranking Harnett County as the eighth fastest growing county in the State.

 

Agriculture plays a significant role in the economy of Harnett County.  Gross income from all agriculture (farming and urban horticulture) for 2001 was $108.1 million.  Total gross income from farming in 2001 was $106.6 million.  The leading agricultural commodity was broiler and turkey production with a gross income of $51 million.  The second leading agricultural product was tobacco with a gross income of $26.3 million.  Other crops were soybeans, cotton, corn, sweet potatoes, vegetables, fruits, nuts, swine and beef production, dairy production, forestry, milk, wool, honey, horses, hay and fish. 

 

Urban horticulture is another important aspect of agricultural economy in Harnett County.  Greenhouses and nurseries occupy 500 acres and generate $8.6 million in gross income.  Seven golf courses occupy 1,500 acres and generate $1.7 million in gross income.

 

Principal taxpayers include a wholesale distributor, four public service companies, a textile manufacturer, shopping strip, a defense contractor, custom truck body manufacturer, a book manufacturer, and a mobile home manufacturer.  The County is fortunate to have such diversity among these corporate citizens.

 

An economic development assessment and action plan prepared by the Leak-Goforth Company, a development consultant, was presented to the County in March, 2001.  The plan calls for developing industrial parks at four strategic locations in the County to provide additional options for new and expanding industries.

 

Significant Economic Facts for the 2000-2001 fiscal year include the following:

 

¨       Powell and Powell Supply purchased the vacant This End Up Furniture facility and created 75 jobs.

 

¨       Carolina Pre-Cast concrete added a 10,000 square foot office facility.

 

¨       South River EMC built  a new 35,000 square foot corporate office in Dunn. 

 

¨       Davis Love, Inc. opened their new golf course at the Village at Anderson Creek, a 2,100 lot subdivision in Western Harnett County.  

 

¨       New Century Bank began construction on its $1.5 million corporate headquarters in Dunn.

 

 

MAJOR INITIATIVES

 

As Harnett County enters the twenty-first century, it continues to prepare for the future through various initiatives that will enhance the services provided by the County well into the new century. Utilizing policy initiatives, as well as infrastructure improvements, the County is making great strides in many areas.  The following is an overview of the accomplishments of County Government over the past year as well as its goals for the coming year.           

 

This year economic development efforts have taken center stage in County Government.  In an effort to head off continuing job and tax base loss, the County conducted a comprehensive economic development study, which outlined a plan of action for development efforts.  In response to this study, the Board of Commissioners increased funding significantly for economic development efforts and committed itself to the development of four industrial parks throughout the County.  In addition, the County has committed to a variety of steps which will place the County on the cutting edge of economic development in the southeast.   This overall effort requires the involvement of a variety of private and public groups dedicated to this common cause.  This list includes the Harnett Forward Together Committee, which serves as an integral part of this effort and serves as the County Government’s main partner in its overall program. 

 

As noted in previous years, continuing improvements to infrastructure will determine the County’s ability to respond to the tremendous growth we continue to experience.  The capital needs of public education continue as the number one priority of the County’s overall capital program.  During the past year, school construction has continued at a significant pace and will remain a priority in the years to come.   Schools currently under construction include Highland and Coats Elementary Schools.  In the coming year, the County will begin construction on a new high school to serve the western portion of the County as well as a new elementary school to serve the Lillington area.  The Public Utilities Department continues work on several capital projects.  These include the regional wastewater facility as well as sewer service along Highway 87 and the expansion of sewer service in  Anderson Creek.  In addition, the County has become a significant regional partner in water and sewer service.  This regional approach allows the County to make a profit on services sold outside the County, which allows for lower rates inside the County.  In addition, it allows the County some say-so as to intakes and discharges along the Cape Fear River.

 

Over the past few years, the County has also made a concentrated effort to improve the quality and efficiency of its facilities.  This year, efforts in this area continue.  Currently, a new courthouse and an adjoining office building are under construction and should be completed by June, 2002.  These facilities will house both District and Superior Courtrooms, as well as the Clerk of Court, District Attorney, Tax Office, and Register of Deeds.

 

Finally, in regards to overall public service, several departments continue changes in how they will service our citizens.  These include Central Permitting, GIS, Emergency Communications, and overall web site access to county services.  As always, Harnett County Government continues to strive to better serve its citizens and, at the same time, be mindful of the taxpayer.  With both of these factors in mind, we believe we are preparing our County for the future.  

 

AWARDS

 

The Harnett County Library received a grant award from the Bill & Melinda Gates Foundation.   This award is dedicated to partner with libraries to bring access to computers, the Internet, and digital information for patrons in low-income communities in the United States.   The awards consist of cash, productivity and reference software with upgrades, onsite installation, training, documentation, and technical and application support for two years.   As a result of this grant award,  the Harnett County Library was one of the first among state libraries to install a wireless teaching lab.  The Library also received an “Outstanding Library Newsletter” award, presented by the North Carolina Public Library Directors Association for the “Bookbag” which the library publishes monthly.

 

The Harnett County Department of Health Director Wayne Raynor, received the “Health Director of the Year – 2001”  award from the North Carolina Association of Local Health Directors.  Various programs were implemented under Mr. Raynor’s direction.  The Maternal Health Program was designed to address the infant mortality rate in Harnett County by providing prenatal clinic services through a public/private partnership for expectant mothers.  The ServSafe Food Handling Program was developed by the Environmental Health Division, in collaboration with the Cooperative Extension Service, for restaurant owners, managers, and employees and  provides a practical approach to food safety. 

 

The Harnett County Emergency Services Department was presented with two awards from the North Carolina Association of County Commissioners.  These awards recognized the department’s work for the “Fire Awareness Resistance Education Program” (F.A.R.E.) and the “Safe Kids Coalition”.  

 

The Safe Kid’s Coalition purpose is to reduce the number of preventable and unintentional injuries for kids.  These injuries include motor vehicle and bicycle accidents, falls, choking, drowning, fires and burns, and poisoning.  The Safe Kids mission is to educate the public through outreach to the community and school.  Examples of this outreach include distributing automobile child safety seats to Medicaid eligible and/or needy families and a smoke detector program for the elderly or households with children age 6 and under. 

 

The “Fire Awareness Resistance Education Program” (F.A.R.E.) was  implemented in response to the rash of fires, particularly woods fires, started by juveniles in hopes of educating elementary children about the dangers of fire.  The Harnett County Fire Marshall’s Office begain visiting the K-3 classes during the  Fire Prevention Week.  After a review of the program by the Harnett County Board of Education, the “Learn Not to Burn” curriculum was implemented in the standard course of study.

 

FINANCIAL INFORMATION

 

The budget is an integral part of a unit’s accounting system and daily operations.  An annual budget or project  ordinance, as adopted by the governing body, creates a legal limit on spending authorizations.  For Harnett County, annual budgets are adopted for the General, Special Revenue (except the Community Development Revolving Loan Fund, the Child Development Grant Fund, the Hurricane Fran Fund, and the Emergency Response Planning Fund), and Enterprise Funds.  Multi-year project budgets are adopted for Capital Projects.  Appropriations are made at the line item level. 

 

For internal accounting purposes, budgetary control is maintained on a specific line-item basis by the use of an encumbrance system.  As purchase orders are issued, corresponding appropriations are reserved for later payment.  If an over-encumbrance of balances would result, purchase orders are not written until additional appropriations are made available.  Open encumbrances are reported as reservations of fund balance at June 30, 2001.

 

In accordance with State law, the County's budget is prepared on the modified accrual basis, and its accounting records are maintained on that basis.  Under modified accrual accounting, revenues are recorded when measurable and available.  Expenditures are recorded when a fund liability is incurred, except for unmatured principal and interest on long-term debt and certain compensated absences. Governmental Fund Types, such as the County’s General Fund, Special Revenue Funds, Capital Project Funds, and Trust and Agency Funds are reported on the modified accrual basis in the financial statements.  The County’s Enterprise Funds are reported on the full accrual basis in the financial statements, under which revenues are recorded when earned and expenses are recorded when incurred.


 

County management is responsible for the accounting system and for establishing and maintaining an internal control structure.  The internal control structure is designed to provide reasonable, but not absolute, assurance regarding (1) the safeguarding of assets against loss from unauthorized use or disposition, (2) the reliability of financial records for preparing financial statements in conformity with generally accepted accounting principles and maintaining accountability for assets; and (3) compliance with applicable laws and regulations related to federal and state financial assistance programs. The concept of reasonable assurance recognizes that (1) the cost of a control should not exceed the benefits likely to be derived, and (2) the evaluation of costs and benefits requires estimates and judgments by management.

 

The County has 24  schools and a community college (Central Carolina Community College).  The County has evaluated its relationship with each of these entities.  The school administrative units and the community college are entities independent of the County because county allocations do not constitute a major portion of their revenues, and because the County has no authority to designate their management.  These entities are excluded from this report.  The notes to the combined financial statements provide a detailed explanation of the County's relationship to each of these entities and the reasons for their exclusion. The reader is referred to the annual financial reports issued by each of these entities.

 

All internal control evaluations occur within the above framework.  We believe that the County's internal accounting controls adequately safeguard assets and provide reasonable assurance of proper recording of financial transactions.  As a part of the County’s single audit (discussed in more detail in a later paragraph), the independent auditor performed a review of the County’s internal control structure.  This review was not an audit and no opinion was issued on the County’s internal control structure.

 

   The following paragraphs analyze the County's major financial activities:

 

General Governmental Fund Types

 

General governmental revenues totaled $63,420,910 an increase of 2.49%  from the prior year.  Revenues by source for the Governmental Funds (General, Special Revenue, Capital Projects) are as follows:

 

                                                       2001                         Fiscal                                               Percent
   Percent            Year Ended June 30,            Increase/        Increase/

                                       of Total              2001                  2000         (Decrease)      (Decrease)

    

     Ad valorem taxes              43.66%     $ 27,691,049     $ 25,027,816     $   2,663,233            10.64%

     Other taxes and licenses    18.65%       11,827,780       11,342,368           485,412             4.28%

     Intergovernmental             22.09%       14,012,400       17,655,266     (  3,642,866)        (20.63)%

     Permits & fees                   2.65%        1,680,296        1,683,467           (  3,171)         (  .19)%
     Sales and services              7.13%        4,518,842        4,041,423           477,419            11.81%
     Investment earnings            3.27%       2,071,810        1,135,207          936,603       82.51%
     Miscellaneous                    2.55%         1,618,733            995,797           622,936     62.56%
     Total                             100.00%     $63,420,910     $61,881,344     $   1,539,566      2.49%



 

 

 

Ad valorem taxes provide the County's primary source of revenue.  The revenue of $27,691,049 for 2000 - 2001 reflects a 10.64% increase over the previous year.  Current year collection rates are  92.32%. Investment earnings for 2000 - 2001 increased 82.51% over the previous year.  While the interest rates during the current year continued to decline, the County’s earnings increased due to the COPS 2000 proceeds for the courthouse and school projects. Permits and fees decreased .19% in 2000 – 2001   Although the permit fees charged by the Inspections Department remained the same, the number of permits issued for construction decreased. The sales and services category increased by 11.81%.  This increase reflects a continued increase in gross ambulance billings. The Intergovernmental category decreased 20.63%, and was due to a reduction of  various program revenues.

 

 

 

 

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General governmental expenditures totaled $73,950,975, an increase of 16.65% from the prior year.  Categorized by character and major function, expenditures for the Governmental Funds (General, Special Revenue, Capital Projects) were as follows:

 

 

                                              2001                        Fiscal                                            Percent
                                            Percent          Year Ended June 30,         Increase/        Increase/

                                            of Total            2001               2000         (Decrease)      (Decrease)

 

General government                  19.94%   $  14,743,012   $ 7,323,620     $  7,419,392          101.31%
Public safety                            19.21%       14,209,303    13,988,669           220,634            1.58%
Transportation                             .05%             38,665          40,478             (1,813)          (4.48)%

Environmental protection             .12%             89,927          84,628               5,299             6.26%

Economic and physical dev.        3.76%        2,781,166     1,889,076           892,090           47.22%
Human services                        28.19%       20,848,442    18,990,848        1,857,594            9.78%
Cultural and recreational              1.36%        1,006,145        851,386           154,759            18.18%
Education                                20.50%       15,162,953    16,201,445      ( 1,038,492)          (6.41)%
Debt service                             6.87%        5,071,362     4,025,659         1,045,703           25.98%
     Total                                100.00 %  $  73,950,975   $ 63,395,809   $ 10,555,166            16.65%

 


 

 

 

The expenditures in the education category decreased 6.41%, which was due to the Public School Building Bonds. These funds will no longer pass-through the County but will be sent directly to the Harnett County Board of Education by the State.  Harnett County continues to place an important emphasis on education. The General Government category represented the largest increase in expenditures.  While these expenditures increased 101.31% from the prior year, this increase was due largely to  the Masterplan Courthouse Capital Project. 

 

The Human Services category continues to be a large area of expenditures.  In 2000 - 2001, this category  increased 9.78% from the prior year.  Medicaid is a State mandated program and may increase or decrease as required by the State and  is based upon the number of eligible participants and the forecasted rates of inflation of the cost of services.  In 1998, the North Carolina General Assembly increased the income ceiling to 100% of the federal poverty level for the aged, blind and disabled citizens who became eligible for full Medicaid participation on January 1, 1999.  Harnett County must comply with these changes.  The increase in Day Care is due to a significant increase in child care in order to support employment for public assistance recipients, those transitioning off public assistance, and other low-income families at risk of going on public assistance.

 

Fund Balance in the General Fund - The General Fund ended the fiscal year with a total fund balance of  $15,888,723.  Over $6.8 million of this fund balance is unreserved, which is equal to 11.79% of the annual expenditures.  This fund balance is considered adequate to meet unforeseen events and to avoid cash flow shortfalls during periods of low tax collections.

 

Enterprise Funds

 

Operating revenues for the Solid Waste Management Fund totaled $2,394,576 down  6.7% from the prior year's revenue of $2,567,796.  Total operating expenses for this fund totaled $2,753,669, an increase of 7.75% from the prior year.   There was an operating loss of  $359,093.

 

Operating revenues for the Harnett County Public Utilities Fund totaled $9,704,913, up 7.215%  from the prior year’s revenue of $9,051,869.  Based upon our records, this increase is due to the increased number of daily average consumption and  service connections made.  The operating income of $1,465,686 is a good indication of how well revenues are covering total expenses.  Unlike many other government units, Harnett County has avoided subsidizing water and sewer district operations through transfers from the General Fund.

 

Debt Administration

 

Harnett County maintained its rating of A3 and A- for Certificates of Participation and A2 and A+ for General Obligations.  The County strives to avoid a heavy debt load.  Total general obligation bonded debt as of June 30, 2001 amounted to only $18,772,650 out of a legal debt limit of over $155 million.  Debt service costs for the Water and Sewer Funds total approximately $2.9 million and is paid solely by the Enterprise Fund revenues.  The General Fund recorded expenditures of $5.07 million for debt service.  Debt per capita is $86.46 and is based upon the County’s population of  91,025.

 

 

 

 

CASH MANAGEMENT

 

The County's idle cash during the year was invested in fully insured or collateralized certificates of deposit, and in demand deposits in the state-authorized mutual fund whose portfolio consists of certificates of deposit, prime quality commercial paper, U. S. Government securities and banker's acceptances.

 

A comparison of the investment portfolio at the close of the last two fiscal years is as follows:

 

                                                                               June 30, 2001                        June 30, 2000            

     Class                                        Amount            % of Total           Amount       % of Total 

 

     Certificates of deposit             $    3,644,188                28.77%    $      7,300,000            26.91%

     Commercial paper                        4,098,545                32.37%            4,088,346            15.07%
    
North Carolina Cash
          Management                          4,920,669                38.86%          15,734,755           58.02%            Total                 $  12,663,402                                                100.00%          $            27,123,101         100.00%

 

 
 
 
 
RISK MANAGEMENT

 

The County is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters.  The County carries commercial coverage for all risks of loss.  The County carries commercial coverage for Worker’s Compensation with limits or $1,000,000 for bodily injury by accident for each accident, $1,000,000 for bodily injury by disease policy limit, and $1,000,000 bodily injury by disease for each employee.  The comprehensive general liability general aggregate limit is $4 million.  There have been no significant reductions in insurance coverage from the previous year and settled claims have not exceeded coverage in any of the past three fiscal years  A schedule of insurance in force is included in the statistical section of this report.

 

Other Information

 

Harnett County intends to submit this report to the Government Finance Officers Association (“GFOA”) for its Certificate of Achievement for Excellence in Financial Reporting Program.  This program recognizes governmental units that publish easily read and efficiently organized Comprehensive Annual Financial Reports that conform to program standards.  A Certificate of Achievement is the highest form of recognition awarded in the field of government financial reporting. The Government Finance Officers Association of the United States and Canada (“GFOA”) awarded a Certificate of Achievement for Excellence in Financial Reporting to Harnett County for its comprehensive annual financial report for the fiscal year ended June 30, 2000.  This was the eighth consecutive year that the County has received this prestigious award.


 

Preparation of this report would not have been possible without the dedicated efforts of the entire staff of the Finance Department.  Each member of the Finance Department has my sincere appreciation for their contributions.  I would also like to thank the members of the Board of Commissioners and the County Manager for their continued support throughout the past year.

 

 

 

 

Respectfully submitted,

 

 

 

Vanessa W. Young

Finance Officer


HARNETT COUNTY

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