NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

The accounting policies of Harnett County and its component units conform to accounting principles generally accepted in the United States of America as applicable to governments.  The following is a summary of the more significant accounting policies:

 

A.        Reporting Entity

                       

The County, which is governed by a five-member board of commissioners, is one of the 100 counties established in North Carolina under North Carolina General Statute (“G.S.”) 153A-10.  As required by accounting principles generally accepted in the United States of America, these financial statements present the County and its component units, legally separate entities for which the County is financially accountable.  One component unit of the County has no financial transactions or account balances; therefore, it does not appear in the combined financial statements.  The blended component units, although they are legally separate entities, are in substance, part of the County’s operations.

 

Blended Component Units

 

                        Harnett Water and Sewer Districts

 

Harnett County Water and Sewer Districts (the “Districts”) exist to provide and maintain a water system for the county residents within the districts.  Under State law [G.S. 162A-89], the County’s board of Commissioners also serve as the governing board for the Districts.  Therefore, the Districts are reported as an enterprise fund in the County’s financial statements.  The Districts do not issue separate financial statements.

                       

The County has the following nine water and sewer districts, which are accounted for in enterprise funds:

 

                        Northeast Metro Water and Sewer District         Southwest Water and Sewer District

                        Buies Creek/Coats Sewer District                      Northwest  Water and Sewer District

                        South Central Water and Sewer District             Southeast Water and Sewer District

                        West Central Water and Sewer District              East Central Water and Sewer District

                        Bunnlevel/Riverside Water and Sewer District


The County entered into an agreement during fiscal year 1998, with each existing District and which will encompass additional Districts as they are created, that transferred all assets, liabilities (excluding bond indebtedness, loans, and installment notes, along with accrued interest payable), operational rights, and responsibilities to the County.  In consideration for this agreement, along with related accrued interest payables, the County agreed to pay the Districts an amount equal to debt service costs for the respective Districts for the duration of the respective bonds, loans, and  notes.

 

The County maintains the Districts’ assets, provides water and sewer operations and makes payments on outstanding debts on behalf of the respective Districts.  Therefore, the County’s financial statements reflect the assets and debts in the Harnett County Public Utilities Fund.  The Board of County Commissioners sits as the Board of each District.  No separate financial statements are issued by these Districts as they have no operations, only certain outstanding debt that is paid on their behalf by the County pursuant to the agreement noted above.

 

                        Other Component Unit

 

                        Harnett County Industrial Facility and Pollution Control Financing Authority

 

Harnett County Industrial Facility and Pollution Control Financing Authority (“the Authority") exists to issue and service revenue bond debt of private businesses for economic development purposes.  The Authority is governed by a seven-member board of commissioners, all of whom are appointed by the County commissioners.  The County can remove any commissioner of the Authority with or without cause.  The Authority has no financial transactions or account balances; therefore, it is not presented in the combined financial statements.  The Authority does not issue separate financial statements.

 

            B.        Basis of Presentation - Fund Accounting

 

The accounts of the County are organized and operated on the basis of funds and account groups.  A fund is an independent fiscal and accounting entity with a self-balancing set of accounts comprised of assets, liabilities, fund equity, revenues, and expenditures or expenses, as appropriate.  Fund accounting segregates funds according to their intended purpose and is used to aid management in demonstrating compliance with finance-related legal and contractual provisions.  The minimum number of funds is maintained consistent with legal and managerial requirements.  The account groups are not funds, but are a reporting device used to account for certain assets and liabilities of the governmental funds that are not recorded directly in those funds.

           

 

 

 

 

 

The County has the following fund categories (further divided by fund type) and account groups.

Governmental Fund Types

 

Governmental Funds are used to account for Harnett County’s general governmental activities.  Governmental funds include the following fund types:

 

General Fund - The General Fund is the general operating fund of the County.  The General Fund accounts for all financial resources except those required to be accounted for in another fund.  

 

The primary revenue sources are ad valorem taxes, sales taxes, and federal and state grants.  The primary expenditures are for general government services, public safety, human services, and education.  Debt service for general long-term debt is recorded as part of the general fund.

 

Special Revenue Funds - Special Revenue Funds account for the proceeds of specific revenue sources (other than expendable trusts and major capital projects) that are legally restricted to expenditures for specified purposes. The County maintains eight Special Revenue Funds:  the Section 8 Housing Fund, the Special Districts Fund, the Community Development Block Grant Revolving Fund, the Law Enforcement  Fund, the Child Development Grants Fund, the Hurricane Fran Fund, the Emergency Telephone System Fund,  and the Emergency Response Planning Fund.  Three of these funds were closed at June 30, 2001.

 

Capital Project Funds - Capital Project Funds account for financial resources to be used for the acquisition and construction of major capital facilities (other than those financed by proprietary funds).  The County maintains five Capital Project Funds within the governmental fund types:  the Masterplan Courthouse Capital Project Fund, the Airport Capital Projects Fund, the Shawtown Revitalization Capital Project Fund, the Patterson/Bailey COBG Capital Project Fund and the General Fund Capital Project Fund.

 

Proprietary Fund Types

 

                        Enterprise Funds - Enterprise funds are used to account for those operations that are (a) financed and operated in a manner similar to private business enterprises - where the intent of the governing body is that the costs (i.e.,  expenses, including depreciation) of providing goods or services to the public on a continuing basis be financed or recovered primarily through user charges; or (b) where the governing body has decided that periodic determination of revenues earned, expenses incurred, and/or net income is appropriate for capital maintenance, public policy, management control, accountability, or other purposes. 

 

 

 

 

Harnett County has a Solid Waste Management fund, a Public Utilities Fund, and nine water and sewer districts, which are accounted for as individual funds.  The nine water and sewer districts include the Buies Creek/Coats Sewer Fund, South Central Water and Sewer Fund, West Central Water and Sewer Fund, Northwest Water and Sewer Fund, Southwest Water and Sewer Fund, Southeast Water and Sewer Fund, East Central Water and Sewer Fund, and Bunnlevel/Riverside Water and Sewer Fund., and the Northeast Metro Water and Sewer Fund. 

           

The Enterprise Fund also includes four capital project funds. Those funds include the following capital projects:

 

Buies Creek/Coats Capital Project Fund:  Titan Industries Capital Project Fund, Buies Creek Wastewater Expansion Capital Project, and Comprehensive Wastewater Study Capital Project.

 

Southwest Capital Project Fund:  Southwest Regional Distribution Transmission Capital Project, Southwest Wastewater Expansion Capital Project Fund, and Western Harnett and Johnsonville School Sewer Extension Capital Project.

 

Northeast Metro Capital Projects Fund: Water Treatment Pilot Program, Lillington Regional Wastewater Capital Project, Southwest Regional Transmission III (Design Phase) Capital Project, Riverside Capital Project, Wastewater SCADA Improvements Capital Project, Harnett-Wake Transmission Capital Project, Wellons Acquisition and Anderson Creek Sewer Extension Capital Project, South Central Capital Project, Anderson Creek Water Acquisition Capital Project, Harnett Fuquay Wastewater Capital Project, and Northeast Water Plant 18 mgd Expansion Capital Project.

 

Closure Dunn/Erwin Landfill Capital Project Fund:  Closure Dunn/Erwin Landfill.

 

The capital project funds are included with the Harnett County Public Utilities Fund for financial reporting purposes.

 

Fiduciary Fund Type

 

Fiduciary Funds account for the assets held by the County in a trustee capacity or as an agent for individuals, private organizations, other governmental units, and/or other funds.  Fiduciary funds include the following funds:

 

Agency Funds - Agency funds are custodial in nature and do not involve the measurement of operating results.  Agency funds are used to account for assets held by the County as an agent on behalf of others.  The County maintains three Agency Funds:  the Social Services Trust Fund, Cooperative Extension Special Trust Fund and the Motor Vehicle Tax Fund. The Cooperative Extension Special Trust Fund was closed at June 30, 2001.

 

 

            Account Groups

 

General Fixed Assets Account Group - This account group is established to account for all fixed assets of the County, other than those accounted for in the proprietary fund.

 

General Long-Term Debt Account Group - This account group is established to account for general long-term debt and all long-term obligations of the County except those which are accounted for in the proprietary fund.

 

C.        Measurement Focus and Basis of Accounting

 

The accounting and financial reporting treatment applied to a fund is determined by its measurement focus.  All governmental funds are accounted for using a current financial resources measurement focus.  With this measurement focus, only current assets and current liabilities generally are included on the balance sheet.   Operating statements of these funds present increases (i.e., revenues and other financing sources) and decreases (i.e., expenditures and other financing uses) in net current assets.

 

The proprietary funds are accounted for on a flow of economic resources measurement focus. With this measurement focus, all assets and all liabilities associated with the operation of these funds are included on the balance sheet.  Proprietary fund type equity (i.e., net total assets) is segregated into contributed capital and retained earnings components.  Operating statements for these funds present increases (e.g., revenues) and decreases (e.g., expenses) in net total assets.  As required for periods beginning after June 15, 2000 by Statement 33 of the Government Accounting Standards Board, Accounting and Financial Reporting for Nonexchange Transactions, the County has begun recognizing capital contributions as revenue in the current year, rather than as contributed capital.  No adjustment to the balance of the contributed capital account is required.

 

The fiduciary fund type is an agency fund that is purely custodial (assets equal liabilities) and thus does not involve a measurement of results of operations.

 

Basis of accounting determines when revenues and expenditures or expenses and the related assets and liabilities are recognized in the accounts and reported in the financial statements.  Basis of accounting relates to the timing of the measurements made, regardless of the measurement focus applied.


 

In accordance with North Carolina General Statutes, all funds of the County are maintained during the year using the modified accrual basis of accounting.  The governmental fund types and agency funds are presented in the financial statements on this same basis.  Under the modified accrual basis, revenues are recognized in the accounting period when they become susceptible to accrual (i.e., when they are "measurable" and "available") to pay liabilities of the current period.  In addition, expenditures are recorded when the related fund liability is incurred, if measurable, except for unmatured principal and interest on general long-term debt, which are recognized when due, and certain compensated absences and claims and judgments, which are recognized when the obligations are expected to be liquidated with expendable available financial resources.

 

The County recognizes assets of nonexchange transactions in the period when the underlying transaction occurs, when an enforceable legal claim has arisen, or when all eligibility requirements are met. Revenues are recognized, on the modified accrual basis, when they are measurable and available. Nonexchange transactions occur when one government provides (or receives) value to (from) another party without receiving (or giving) equal or nearly equal value in return. State shared revenues, sales tax, property taxes, federal grants funding federal mandates, and most donations are examples of nonexchange transactions.

 

The County considers all revenues available if they are collected within 60 days after year-end, except for property taxes.  Ad valorem property taxes are not accrued as a revenue because the amount is not susceptible to accrual.  At June 30, taxes receivable are materially past due and are not considered to be an available resource to finance the operations of the current year.  Also, as of January 1, 1993, state law altered the procedures for the assessment and collection of property taxes on registered motor vehicles in North Carolina.  Effective with this change in the law, Harnett County is responsible for billing and collecting the property taxes on all registered motor vehicles on behalf of all municipalities and special tax districts in the County.  For those motor vehicles registered under the staggered system and for vehicles newly-registered under the annual system, property taxes are due the first day of the fourth month after the vehicles are registered.  The billed taxes are applicable to the fiscal year in which they become due.  Therefore, taxes for vehicles registered from March 2000 through February 2001 apply to the fiscal year ended June 30, 2001.  Uncollected taxes which were billed during this period are shown as a receivable on these financial statements. For motor vehicles which are renewed and billed under the annual system, taxes are due on May 1 of each year. Uncollected taxes are reported as a receivable on the financial statements offset by deferred revenues because the due date and the date upon which the interest begins to accrue passed prior to June 30.  The taxes for vehicles registered annually that have already been collected as of year-end are also reflected as deferred revenues at June 30, 2001 because they are intended to finance the County's operations during the 2002 fiscal year.

 

Sales taxes collected and held by the State at year-end on behalf of the County are recognized as revenue.  Intergovernmental revenues, and sales and services are not susceptible to accrual because generally they are not measurable until received in cash.  Expenditure-driven grants are recognized as revenue when the qualifying expenditures have been incurred and all other grant requirements have been satisfied.

 

Proprietary funds are presented in the financial statements on the accrual basis of accounting.  Under this basis, revenues are recognized in the accounting period when earned and expenses are recognized in the period they are incurred.  As permitted by accounting principles generally accepted in the United States of America, the County has elected to apply only applicable FASB Statements and Interpretations issued before November 30, 1989 in its accounting and reporting practices for its proprietary operations.

 

                        New Pronouncements

 

In March 1999, the GASB adopted Statement No. 34 (“GASB 34”), (Basic Financial Statements  - and Management’s Discussion and Analysis – for State and Local Governments), making it effective in three phases based on the County’s total annual revenues in the first fiscal year ending after June 15, 1999.  GASB 34 establishes new financial reporting requirements for state and local governments throughout the United States. GASB 34 will be required to be implemented for the fiscal year ended June 30, 2003.

 

            D.        Budgetary Data

 

The County’s budgets are adopted as required by the North Carolina General Statues.  Formal budgetary accounting is employed as a management control for all funds of the County.  Annual budget ordinances are adopted each fiscal year, and amended as required, for the General Fund, all special revenue funds except the Community Development Revolving Loan Fund, the Child Development Grant Fund, the Hurricane Fran Fund, and the Emergency Response Planning Fund, which are authorized by project ordinances, and for the enterprise funds.  All annual appropriations lapse at the fiscal year-end.  Project ordinances are adopted for the capital project funds.  All budgets are prepared using the modified accrual basis of accounting, which is consistent with the accounting system used to record transactions.


 

The legal level of control over expenditures is at the department level for the General Fund, Enterprise funds, and Special Revenue funds.  The balances in the Capital Reserve Funds will be appropriated when transferred to the General Fund or their respective capital project funds.  The County Manager is authorized by the budget ordinance to transfer amounts between line item expenditures within a department without limitation with an official report on such transfers at the next regular meeting of the Board of Commissioners.  These changes should not result in changes in recurring obligations such as salaries.  He may not transfer amounts between departments of the same fund or transfer amounts between funds nor from any contingency appropriation within a fund.  All other transfers, as well as any revisions that alter the total expenditures of any fund, require prior approval by the Board of Commissioners.  During the year, a significant number of amendments to the original budget were necessary.

 

A budget calendar is included in the North Carolina General Statutes which prescribes the last day on which certain steps of the budget procedure are to be performed.  The following schedule lists the tasks to be performed and the date by which each is required to be completed.

 

March 20 -        Each department head submits to the budget officer the budget requests and revenue estimates for their department for the budget year.

 

May 1      -       The budget and the budget message shall be submitted to the governing    board.  The public hearing on the budget should be scheduled at this             time.

 

                        June 19    -        The budget ordinance shall be adopted by the governing board.

 

Encumbrances

 

As required by G. S. 159-26(d), the County maintains encumbrance accounts which are considered to be "budgetary accounts."  Encumbrances outstanding at year-end represent the estimated amounts of the expenditures ultimately to result if unperformed contracts in progress at year-end are completed.  Encumbrances outstanding at year-end do not constitute expenditures or liabilities. 

 

At June 30, 2001, $2,421 of open purchase orders and contracts relating the General Fund was outstanding.  These encumbrances outstanding are reported as “Reserved for encumbrances” in the fund balance section of the Combined Balance Sheet.  An appropriation is made in the subsequent year to complete these transactions.


 

            E.         Assets, Liabilities, and Fund Equity

 

Deposits and Investments

 

All deposits of the County are made in board-designated official depositories and are secured as required by G.S. 159-31.  The County may designate, as an official depository, any bank or savings association whose principal office is located in North Carolina.  Also, the County may establish time deposit accounts such as NOW and SuperNow accounts, money market accounts, and certificates of deposit.

 

State Law G. S. 159-30(c) authorizes the County to invest in obligations of the United States or obligations fully guaranteed both as to principal and interest by the United States; obligations of the State of North Carolina; bonds and notes of any North Carolina local government or public authority; obligations of certain non-guaranteed federal agencies; certain high quality issues of commercial paper and banker’s acceptances; and the North Carolina Capital Management Trust (“NCCMT”).

 

The County’s investments with a maturity of more than one year at acquisition and non-money market investments are carried at fair value as determined by quoted market prices.  The securities of the NCCMT Cash Portfolio, an SEC-registered (2a-7) money market mutual funds, are valued at fair value, which is the NCCMT’s share price.  The NCCMT Term Portfolio’s securities are valued at fair value.  Money market investments including commercial paper that have a remaining maturity at the time of purchase of one year or less and non-participating interest earnings and investment contracts are reported at amortized cost.          

 

Cash and Cash Equivalents

 

The County pools monies from several funds to facilitate disbursement and investment and to maximize investment income.  Therefore, all cash and investments are essentially demand deposits and are considered cash and cash equivalents.  The investment income is allocated based on each fund’s monthly balance in relation to the total pooled cash balance.

 

For purposes of the Statement of Cash Flows, the County’s proprietary funds consider equity in pooled cash and investments to be cash equivalents as they are essentially demand deposit accounts.


 

Restricted Assets

 

The unexpended bond proceeds of the Water and Sewer Fund Serial Bonds issued by the County are considered restricted assets (i.e., cash and investments) for the enterprise fund because their use is completely restricted to the purpose for which the bonds were originally issued.  The unexpended certificate of participation proceeds in the General Fund, Water and Sewer Fund, and the Capital Projects Funds are deposited in a trustee account and are also shown as restricted assets because of contractual requirements.  Such amounts are included in cash and investments.  Customer deposits held by the County before any services are supplied are restricted to the service for which the deposit was collected.

 

Ad Valorem Taxes Receivable and Deferred Revenues

 

In accordance with State law [G.S. 105-347 and G.S. 159-13(a)], the County levies ad valorem taxes on property other than motor vehicles on July 1, the beginning of the fiscal year.  The taxes are due on September 1 (lien date); however, penalties and interest do not accrue until the following January 6.  These taxes are based on the assessed values as of January 1, 2000.   

 

Ad valorem taxes receivable are not accrued as a revenue because the amount is not considered "available."  At June 30, taxes receivable are materially past due and are not considered to be an available resource to finance the operations of the subsequent year.  Accounting principles generally accepted in the United States of America state that property tax revenues which are measurable but not available should be recorded as deferred revenues.  The receivable amount is reduced by an allowance for doubtful accounts, and an amount equal to the net receivable is shown as deferred revenues on the Combined Balance Sheet.  In addition, property taxes collected in advance of the fiscal year to which they apply are recorded as deferred revenues.

 

Allowance for Doubtful Accounts

 

All receivables that historically experience uncollectible accounts are shown net of allowances for doubtful accounts.  These amounts are estimated by analyzing the percentage of receivables which are not expected to be collected.

 

Inventory

 

Inventory is determined by physical count and valued at cost, which approximates market.  The inventory of the General Fund consists of expendable supplies held for consumption that are recorded as expenditures when purchased.  The inventory of the enterprise funds consists of chemicals, meters and meter boxes, fuel oil, tubing and other supplies held for consumption.  In each case, the cost of the inventory carried in the County’s enterprise fund is recorded as an expense when the inventory is consumed.

Fixed Assets

 

Fixed assets used in governmental fund type operations (general fixed assets) are accounted for in the General Fixed Assets Account Group.  Accumulated depreciation is not recorded on general fixed assets.  General fixed assets are recorded at cost.  Donated fixed assets are recorded at their estimated fair market value on the date donated.

 

Public domain or infrastructure general fixed assets are not capitalized because such assets are immovable and of value only to the County. Also, the County has elected not to capitalize those interest costs which are incurred during the construction period of general fixed assets.

 

Property, plant, and equipment in the proprietary funds of the County are recorded at original cost at the time of acquisition.  Property, plant, and equipment donated to these proprietary fund type operations are recorded at the estimated fair market value at the date of donation.  Any interest incurred during the construction phase of proprietary fund type fixed assets is reflected in the capitalized value of the asset constructed.  Assets are depreciated on a straight-line basis.  Gains or losses on dispositions are credited or charged to operations.  Proprietary fund assets of the County are depreciated on a class life basis at the following rates:

 

                        Plant, distribution and collection systems             20 to 40 years

                        Furniture and maintenance equipment                                         4 to 10 years

                        Vehicles                                                                       3 to 7 years

 

Long-Term Debt

 

For governmental fund types, bond issuance costs are recognized during the current period.  Bond proceeds are reported as other financing sources.  Issuance costs, whether or not withheld from the actual net proceeds received, are reported as debt service expenditures.  For the proprietary fund types, material bond issuance costs are deferred and amortized over the life of the bonds using the effective interest method.  The Long-term debt for water system improvements is carried within the enterprise funds rather than in the general long-term debt account group.  The debt service requirements for that debt are being met by water revenues, but the taxing power of the District is pledged to make these payments if water revenues should ever be insufficient.  Long-term debt for other purposes is included in the general long-term debt account group.  The debt service requirements for all of the debt carried in the general long-term debt account group are appropriated annually in the General Fund.

 

Fund Equity

 

Reservations or restrictions of equity represent amounts that are not appropriable or are legally segregated for a specific purpose.  Designations of equity represent tentative management plans that are subject to change. 

 

State law [G.S. 159-13(b) (16)] restricts the appropriation of fund balance or fund equity to an amount not to exceed the sum of cash and investments minus the sum of liabilities, encumbrances and deferred revenues arising from cash receipts as those amounts stand at the close of the fiscal year preceding the budget year. 

 

The governmental fund types classify fund balance as follows:

 

Reserved

 

Reserved for Inventories  - portion of fund balance not available for appropriation because it represents the year-end balance of ending inventories, which are not expendable, available resource.

 

Reserved for Encumbrances - portion of fund balance available to pay for commitments relating to purchase orders and contracts which remain unperformed at year-end.

 

Reserved by State Statute - portion of fund balance, in addition to reserves for encumbrances and reserves for inventories, which is not available for appropriation under State Law [G.S. 159-8 (a)].  This amount is usually comprised of accounts receivable and interfund receivables which are not offset by deferred revenues.

 

Unreserved

 

Designated for Subsequent Year's Expenditures - portion of total fund balance available for appropriation which has been designated for the adopted 2001-2002 budget ordinance.

 

Undesignated - portion of total fund balance available for appropriation which is uncommitted at year-end.

 

Contributed capital is recorded in proprietary funds that have received capital grants or  contributions from developers, customers, or other funds.  The majority of contributed capital consists of water and sewer lines built by developers and donated to the County.

 

F.         Revenues, Expenditures and Expenses

 

Other Resources

 

The General Fund provides the basis of local resources for other governmental funds.  These transactions are recorded as "operating transfers out" in the General Fund and "operating transfers in" in the receiving fund.

 

Compensated Absences

 

The vacation policy of the County provides for the accumulation of up to 10 days earned vacation leave with such leave being fully vested when earned.  For the County, the current portion of the accumulated vacation pay is not considered to be material; therefore, no expenditure or liability has been reported in the County’s governmental funds. The County's liability for accumulated earned vacation and the salary-related payments as of June 30, 2001 is recorded in the General Long-Term Debt Account Group.  For the Enterprise Funds, an expense and a liability for compensated absences and the salary-related payments are recorded within those funds as the leave is earned.

 

The County's sick leave policy provides for an unlimited accumulation of earned sick leave.  Sick leave does not vest but any unused sick leave accumulated at the time of retirement may be used in the determination of length of service for retirement benefit purposes.  Because the County has no obligation for the accumulated sick leave until it is actually taken, no accrual for sick leave has been made.

 

            G.        Totals  (Memorandum Only) Columns

 

The total columns on the accompanying financial statements are captioned as “Total (Memorandum Only)” because they do not represent consolidated financial information and are presented only to facilitate financial analysis.  The columns do not present information that reflects financial position, results of operations, or cash flows in accordance with accounting principles generally accepted in the United States of America for the primary government.  Interfund eliminations have not been made in the aggregation of this data.

           

H.                Comparative Data/Reclassifications

 

Comparative total data for the prior year have been presented in selected sections of the accompanying financial statements in order to provide an understanding of the changes in the County’s financial position and operations.  Comparative totals have not been included on the statements where their inclusion would not provide enhanced understanding of the County’s financial position and operations or would cause the statements to be unduly complex or difficult to understand.  Also, certain amounts presented in the prior year’s data have been reclassified to be consistent with the current year’s presentation.


 

NOTE 2   -  STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY

           
Deficit Fund Balance or Retained Earnings

 

At June 30, 2001, the following individual funds had a deficit in fund equity:

 

            Special Revenue Funds:  

                 Section 8 Housing Fund                                                                                $ (226,482)

                 Special Districts                                                                                                      (864)

 

Non-Compliance with North Carolina General Statutes

 

During the year ended June 30, 2001, expenditures exceeded appropriated amounts at the level of budget ordinance appropriation in the General Fund  and Capital Project Funds as follows:

                                                                                Budget                  Actual                    Variance  

 

General Fund:

   Department

      Medical Examiner                                       $             32,500      $             34,950      $             (2,450)

 

   Intergovernmental

      Education                                                            11,286,282               11,330,282                   (44,000)

 

Capital Project Funds:

   School 2000 COPS

      Education                                                                -                           3,648,474               (3,648,474)

 

 

NOTE 3 - RECONCILIATION OF GAAP AND BUDGET BASIS EXPENDITURES

 

The accompanying schedules reconcile certain transactions which are treated differently on the Combined Statement of Revenues, Expenditures, and Changes in Fund Balances - All Governmental Fund Types and the Combined Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual - General Fund and Annually Budgeted Special Revenue Funds.  A reconciliation for the Special Revenue Funds is included below:


 

Increase                                                                   Combined         (Decrease)         Budgetary

Special Revenue Fund:

    Revenues:                                        

            Restricted intergovernmental revenues             $  603,230     $       (28,572)1       $  574,658

            Permits and fees                                                618,408                  3,3851                          621,793

            Investment earnings                                             25,438             (15,845)1              9,593

            Other general revenues                                        80,739             (73,465)1              7,274

 

    Expenditures:                                                                                                                       

            Public safety                                                   3,458,687             (43,024)1        3,415,663

 

    Other financing uses:

            Operating transfer                                              (16,884)            (12,039)1                    (4,845)

 

1 Community Development Block Grant Fund, Child Development Grant Fund, Hurricane Fran Fund, and Emergency Response Planning Fund that are budgeted on a project ordinance basis.

 

NOTE 4 - CASH AND INVESTMENTS

 

A.  Deposits

 

All of the County's deposits are either insured or collateralized by using one of two methods.  Under the Dedicated Method, all deposits exceeding the federal depository insurance coverage are collateralized with securities held by the County's agent in the County’s name.  Under the Pooling Method, which is a collateral pool, all uninsured deposits are collateralized with securities held by the State Treasurer's agent in the name of the State Treasurer.  Since the State Treasurer is acting in a fiduciary capacity for the County, these deposits are considered to be held by the County's agent in the County's name.  The amount of the pledged collateral is based on an approved averaging method for noninterest bearing deposits and the actual current balance for interest-bearing deposits.  Depositories using the Pooling Method report to the State Treasurer the adequacy of their pooled collateral covering uninsured deposits.  The State Treasurer does not confirm this information with the County or the escrow agent.  Because of the inability to measure the exact amount of collateral pledged for the County under the Pooling Method, the potential exists for undercollateralization, and this risk may increase in periods of high cash flows.  However, the State Treasurer of North Carolina enforces strict standards of financial stability for each depository that collateralizes public deposits under the Pooling Method.

 

At June 30, 2001, the County's deposits had a carrying amount of $30,338,796 and a bank balance of $32,186,763.  Of the bank balance, $234,051 is covered by federal depository insurance and $31,952,712 was covered by collateral held under the Pooling Method.   

 

At June 30, 2001, Harnett County had $3,520 cash on hand.

B.  Investments

 

The County's investments are categorized to give an indication of the level of custodial risk assumed by each of these entities at year-end.  In the following tables, Column A includes investments that are insured or registered or for which the securities are held by the County or its agents in the entity’s name.  Column B includes uninsured  and unregistered investments for which the securities are held by the counterparty’s trust department  or agent in the County’s name.  Column C includes uninsured and unregistered investments for which the securities are held by the counterparty, or by its trust department or agent but not in the County’s name.  The County’s investments in the North Carolina Capital Management Trust are exempt from risk categorization because the County does not own any identifiable securities in these mutual funds.

 

At  June 30, 2001, the County’s Investment balances were as follows: 

 

                                             Categories                         Reported            Fair

                                                     A                   B                 C                 Value              Value   

 

Commercial Paper                  $        -           $   4,098,545   $      -            $   4,098,545     $   4,098,545

                                             $        -           $   4,098,545   $      -                4,098,545         4,098,545

 

North Carolina Capital Management Trust                                                 4,920,669          4,920,669

 

Total investments                                                                                       9,019,214          9,019,214

 

Certificates of deposit                                                                                3,644,188          3,644,188

 

Demand Deposits                                                                                     26,698,128         26,698,128

 

Total cash and investments                                                                    $ 39,361,530     $  39,361,530

 

Cash and investments at June 30, 2001, include the following restricted amounts:

 

     General Fund:

Harnett County COPS 1994 School Construction                             $      2,613,491

Harnett County COPS 1994 Governmental Complex                               1,287,242

 

     Capital Project Funds:

Harnett County COPS 2000 School Construction                                    6,969,063

Harnett County COPS 2000 Courthouse Construction                            11,127,882

 

     Enterprise Funds:

            Harnett County Public Utility Fund                                                            476,361

            Northeast Projects Fund                                                                           376,312

            Southwest Projects Fund                                                                          362,480

            Total                                                                                             $    23,212,831

 

 

 

NOTE 5 - RECEIVABLES

 

Taxes and accounts receivable as of year end are shown on the Combining Balance Sheet, net of the allowance for doubtful accounts, as follows:

 

 

 

NOTE  6 - DEFERRED REVENUES

 

The balance in deferred revenues at June 30, 2001 composed of the following elements:

 

                                                                                                                       Special

                                                                                 General                         Revenue

                                                                                    Fund                             Funds                            

Prepaid taxes not yet earned                                    $       12,263                     $      -     

Taxes receivable, net                                                   3,135,541                         325,150

Total                                                                       $   3,144,925                     $  325,150


 

NOTE 7 - FIXED ASSETS

 

A.  General Fixed Assets

 

A summary of changes in general fixed assets follows:

                                                                                                           

                                                                                Contributed

                                       July 1, 2000    Additions      Additions      Transfers    Deletions    June 30, 2001

Land and improvements    $   4,207,704  $         7,118   $      -         $         -        $      -         $      4,214,822

Bldg and improvements       19,696,881          12,773           -                    -              (8,410)       19,701,244

Furniture                                 199,345          28,925           -                    -              (9,756)            218,514

Equipment                            2,582,897        112,815           -                    -            (86,105)         2,609,607

Computer hardware              2,423,826        234,551           -                    -          (197,084)         2,461,293

Vehicles                               3,392,468        333,203          3,102              -          (305,129)         3,423,644

Computer software               1,072,208        232,507           -                    -            (82,787)         1,221,928

Construction in progress        2,527,418     10,065,503           -                    -                -               12,592,921

    Total general fixed

            assets                  $ 36,102,747  $ 11,027,395  $      3,102   $         -        $ (689,271)  $    46,443,973

 

By function:

                                            July 1, 2000     Additions        Retirements       Transfers     June 30, 2001

General government            $  15,669,213   $     329,531     $        (439,377)                 $   (3,190)         $   15,556,177

Public safety                             8,357,153          431,568               (184,248)                     (8,239)              8,596,234

Environmental protect                      9,515              -                          -                  -                      9,515

Transportation                           3,743,516              -                          -                   -                3,743,516

Econ and physical development    601,326           21,966                (12,194)                     (1,662)              609,436

Human services                        3,829,433           22,734                (38,625)                     16,357               3,829,899

Cultural and recreation              1,365,173          159,195                (14,827)                     (3,266)              1,506,275

Construction in progress             2,527,418      10,065,503                    -                   -               12,592,921

Total general fixed

            assets                     $  36,102,747   $ 11,030,497     $        (689,271)                 $   -                  $   46,443,973

 

Fixed assets additions for the fiscal year ended June 30, 2001 are listed by fund below:

 

                        General Fund                                                             $       964,994

                        Capital Project Funds:

                          Masterplan Courthouse Update Capital Project Fund        6,425,086

                          General Fund Capital Project Fund                                  3,214,131

                                  Shawtown Revitalization Capital Project Fund                       18,271

                          Patterson/Bailey – CDBG Capital Project Fund                  111,960

                          Airport Capital Project Fund                                               296,055

                          Total Capital Project Funds                                           10,065,503

 

                           Total fixed asset additions                                        $   11,030,497


B.  Proprietary Fund Types Fixed Assets

 

The fixed assets of the proprietary funds at June 30, 2001 are summarized as follows:

 

   Public Utilities      Solid Waste

                      Fund             Management             Total      

Land and land improvement                      $        298,103   $          1,793,149   $      2,091,252

Plant, distribution and collection systems          72,679,838                     -               72,679,838

Furniture and maintenance equipment               1,651,999               1,504,242           3,156,241

Vehicles                                                            954,287                   78,955           1,033,242

Construction in progress                                  23,597,894                      -              23,597,894

                                                                     99,182,121               3,376,346       102,558,467

Less accumulated depreciation                        16,203,584               1,710,332         17,913,916

 

Net fixed assets                                       $    82,978,537   $          1,666,014   $    84,644,551

 

Construction period interest expense, net of interest earned in the amount of ($ 39,668) has been capitalized in the cost of proprietary fund fixed assets during the year ended June 30, 2001.

 

At June 30, 2001, the proprietary fund’s construction in progress consists of the following projects:

 

                                                                                                     Project                   Expended

                                                                                                 Authorization                  To Date      

Lillington Regional Wastewater Capital Project                     $                 235,000      $              141,808

Southwest Regional Transmission III (Design Phase)

                        Capital Project                                                               120,000                      (16,116)

Riverside Capital Project                                                                      2,441,528                   2,039,300

Wastewater SCADA Improvements Capital Project                                671,850                      477,748

Harnett-Wake Transmission Capital Project                                        12,105,476                  10,070,143

Wellons Acquisition and Anderson Creek Sewer

                        Extension Capital Project                                             4,431,316                   3,996,915

Northeast Water Plant 18mgd Expansion Capital Project                        3,376,450                   2,330,759

Harnett Fuquay Wastewater Capital Project                                          2,287,000                      143,814

Anderson Creek Water Acquisition Capital Project                                  400,000                           (674)

South Central Capital Project                                                                    67,000                           (113)

Titan Industries Capital Project Fund                                                   1,424,567                   1,007,941

Southwest Regional Distribution Transmission

                        Capital Project                                                             3,216,509                   3,104,039

Southwest Wastewater Expansion Capital Project Fund                         1,001,500                      231,397

Western Harnett & Johnsonville School Sewer Extension

                        Capital Project                                                               462,985                        70,933

Total                                                                                   $             32,626,386      $          23,597,894

 


NOTE 8 – CONDUIT DEBT OBLIGATIONS

 

Harnett County Industrial Facility and Pollution Control Authority has issued industrial revenue bonds to provide financial assistance to private businesses for economic development purposes.  These bonds are secured by the properties financed and are payable solely from payments received from the private businesses involved.  Ownership of the acquired facilities is in the name of the private business served by the bond issuance.  Neither the County, the Authority, the State, nor any political subdivision thereof is obligated in any manner for the repayment of bonds.  Accordingly, the bonds are not reported as liabilities in the accompanying financial statements.  As of June 30, 2001, there was one series of industrial revenue bonds outstanding, with an aggregate principal amount payable of $2.7 million.

 

 

NOTE 9 - 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 of $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 County has recorded a $50,000 accrual in the accompanying general purpose financial statements to cover any claims not paid by the insurance carrier. 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.

 

NOTE 10 - LEASE OBLIGATIONS

 

The County has entered into agreements to lease certain equipment.  At June 30, 2001, the original cost of equipment under these leases is approximately $906,958. Title passes to the County at the end of the lease term.  These agreements are in substance lease-purchases (capital leases) and are included in the General Long-Term Debt Account Group. The following is a schedule of minimum future payments required under capital lease obligations:

 

General Long-Term Debt Account Group:

      Lease purchases of various office equipment

            Payments of varying amounts totaling $20,978 per month                                        $       538,103

            Less amounts representing interest                                                                                 (39,507)

            Total                                                                                                                    $       498,596

 


 

 NOTE 11 - LONG TERM OBLIGATIONS

 

Notes payable financed by the governmental funds are accounted for in the General Long-Term Debt Account Group and are repaid from the resources of the General Fund.  The notes payable and the general obligation bonds issued to finance the construction of facilities utilized in the operations of the water and sewer system and which are being retired by resources from users are reported as long-term debt in the enterprise funds.  All bonds are collateralized by the full faith, credit and taxing power of the district in which the obligations originate.  Principal and interest requirements are appropriated when due.

 

The following is a schedule of long-term debt at June 30, 2001:

 

Notes payable:


 

Black River Drainage District loan dated July 1, 1998, to assume the outstanding debt from the Harnett County Drainage District Number One; due on January 1 in decreasing installments ranging from $1,062 to $135 through January, 2011; interest rate 5.00%  (Original Issue:  $23,901)

 

Certificates of  Participation (COPS 1992) dated November 1, 1992 for the purchase of the assets of the Northeast Metropolitan Water District; due on December 1 and June 1 in increasing installments ranging from $125,000 to $300,000 through June 1, 2008; interest increasing from 3.75% to 7.00%  (Original issue:  $3,100,000)

 

Certificates of Participation (COPS 1994) dated December 1, 1994 for the construction of school facilities, Department  of Social Services/Health facility and a water reservoir and pumping station; due on December 1 and June 1 in increasing installments ranging from $1,585,000 to $4,010,000 through December 1, 2014; interest increasing from 4.90% to 7.50%; secured  in part by land purchased under a sale lease back agreement between the County and the Harnett County Board of Education where by the land was purchased from the Board by the County for $1 (Original issue:  $40,995,000)

 

Certificates of Participation (COPS 2000) dated July 1, 2001 for the construction of  the County Courthouse and schools; due on May 16 and November 16 in increasing installments ranging from $1,240,000 to $1,830,000 through December 16, 2016; interest increasing from 4.75% to 5.50% (Original issue:  $23,675,000)

 

 

 

 

 

 

 

 

$                18,119

 

 

 

 

 

             1,735,000

 

 

 

 

 

 

 

 

 

            29,895,000

 

 

 

 

            23,675,000

 

 


Central Carolina Community College Classroom Construction note, dated June 1997; due on December 12 and June 12 in installments ranging from $22,778 to $46,613, through June 2012; interest rate 5.00% (Original issue: $1,000,000)

 

Clean water bond dated June 1, 1996 for the expansion of the water treatment plant; due on November 1 and May 1 in installments of $150,000 through May 1, 2016; interest rate 5.85% (Original issue:  $3,000,000)

 

Harnett County installment purchase dated December 20, 1999, for the purpose of installing water and sewer lines and the purchase of an existing wastewater treatment facility; due on December 1 and June 1 in equal installments of  $311,667, through December 1, 2014; interest rate 5.30%.  (Original issue:  $4,675,000)

 

Harnett County State Revenue Loan, dated March 29, 2001, for the purchase of installing water lines into Wake County; due on May 1 and November 1 in installments of $43,202 through May 1, 2020; interest rate 5.25% (Original issue:  $864,047)

 

Harnett Production Enterprise note, dated April 14, 1998, for the expansion of the Adult Special Needs Shelter ; due on October 1 and April 1 in installments ranging from $56,228 to $87,313 through April 2008; interest rate 4.95% (Original issue:  $1,400,000)

                                                                                                                                                               

Southwest Water and Sewer District, (“the District”), water bonds issued by the District dated July 16, 1998; due on November 1 and May 1 in installments of  $141,211; Through May, 2017; interest at 5.3% (Original issue:   $2,683,000)

 

Revolving loan dated June 1, 1995 for the expansion of the water treatment plant; due on May 1 and November  1, in installments of  $150,000, through May 1, 2017; interest rate 3.22%  (Original issue:  $3,000,000)

                                                                                                                                                               

Total notes payable

 

General obligation bonds:

 

Sanitary Sewer Refunding Bonds, dated May 1, 1993, issued by the Buies Creek-Coats Water and Sewer District; due on December 1 and June 1 in installments ranging from $70,000 to $110,000 through June 1, 2012; interest increasing from 5.6% to 5.7%  (Original issue:  $1,880,000)

 

 

 

 

$              801,012

 

 

 

 

             2,250,000

 

 

 

 

 

             4,363,333

 

 

 

 

                820,845

 

 

 

 

             1,047,844

 

 

 

 

             2,259,368

 

 

 

 

             2,240,000

 

            69,265,521

 

 

 

 

 

 

 

             1,140,000

 


Water Bonds Series A issued by the East Central Water and Sewer District dated October 10, 1995; due June 1 in installments ranging from $36,500 to $146,000 through  June 1, 2035; interest at 5.125% (Original issue:  $3,608,000)

 

Water Bonds Series B issued by the East Central Water and Sewer District dated October 10, 1995; due June 1 in installments ranging from $2,000 to $8,000 through June 1, 2035; interest at 5.25%  (Original issue:  $172,000)

                                                                                                                       

Water Bonds issued by Northwest Water and Sewer District; dated June 25, 1990, due on June 1 in installments ranging from $16,000 to $64,000; through June 1, 2029; interest at 6% (Original issue:  $1,604,000)

 

Water Bonds for the Northwest Phase II Capital Project issued by the Northwest Water and Sewer District dated October 1, 1997, due on June 1 and December 1 in installments ranging from $35,000 to $80,000 through June 1, 2016; interest at 5.30%  (Original issue $995,000)

 

Sanitary Sewer Bonds for Bunnlevel/Riverside issued by South Central Water and Sewer District, dated July 22, 1991; due on June 1 in installments ranging from $2,000 to $8,000 through June 1, 2031; interest at 5% (Original issue:  $191,000)

 

Water Refinancing Bonds issued by South Central Water and Sewer District, dated May 4, 1989; due on June 1 in increasing installments ranging from $15,400 to $174,500 through June 1, 2009; interest at 10.50% (Original issue $1,576,700)

 

Water Bonds issued by South Central Water and Sewer  District, dated March 16, 1990, due on June 1 in increasing installments ranging from $9,500 to $38,000; through June 1, 2029; interest at 6% (Original issue:  $951,000)

 

Water Bonds issued for the South Central Phase III Capital Project by  the South Central Water and Sewer District dated October 1, 1996; due on December 1 and June 1,1998 in increasing installments ranging from $20,000 to $160,000 through June 1, 2014; interest at 5.50%  (Original issue:  $1,140,000)

 

Water Bonds issued for the South Central Phase III Capital Project by the South Central Water and Sewer District dated June 9, 1997, due on June 1 in installments ranging from $10,500 to $42,000 through June 1, 2037; interest rate 5.0%  (Original issue:  $1,000,000)

 

 

 

$            3,451,500

 

 

 

 

                164,000

 

 

 

 

             1,429,000

 

 

 

 

 

                890,000

 

 

 

 

                173,000

 

 

 

 

             1,010,500

 

 

 

 

                833,000

 

 

 

 

 

                980,000

 

 

 

 

    978,500
Water Bonds issued by the Southeast Water and Sewer District dated December 13, 1993;  due on June 1 in installments ranging  from $15,500 to $62,000 through June 1, 2033; interest at 5.125% (Original issue:  $1,482,000)

 

1991A Water Series Bonds issued by Southwest Water and Sewer District dated November 4, 1991; due on June 1 in installments ranging from $25,000 to $100,000 through June 1, 2031; interest at 5.875% (Original issue:  $2,619,000)

 

1991B Water Series Bonds issued by Southwest Water and Sewer District dated November 4, 1991; due on June 1 in installments ranging from $5,000 to $20,000 through June 1, 2030; interest at 5.875% (Original issue:  $475,000)

 

Water Bonds for Carolina Lakes issued by Southwest Water and Sewer District dated March 1, 1992; due on September 1 and March 1 in installments ranging from $20,000 to $25,000 through March 1, 2013; interest increasing from 6.5% to 6.7% (Original issue:  $520,000)

 

Series A Water Bond issued for the Southwest Phase II Capital Project by Southwest Water and Sewer District dated June 23, 1997; due on December 1 and June 1, in installments ranging from $9,500 to $38,000 through June 1, 2037; interest at 5.0%.  (Original issue:  $880,000)

 

1989A Water Series Bonds issued by West Central Water and Sewer District, dated June 27, 1989; due on June 1 in installments ranging from $6,250 to $25,000; through June 2029; interest at 6.5% (Original issue:  $670,000)

 

1989B Water Series Bonds issued by West Central Water and Sewer District, dated June 27, 1989, ; due on June 1 in installments ranging from $1,300 to $5,000; through June 1, 2029; interest at 7.375%; (Original issue:  $130,000)

 

Water Bonds issued by the West Central Water and Sewer District, dated December 13, 1993,; due on June 1 in installments ranging from $18,500 to $74,000; through June 1, 2033; interest at 5.125%.  (Original issue:  $1,800,000)

 

Total general obligation bonds payable                                                   

 

 

 

 

 

 

$            1,379,000

 

 

 

 

             2,377,500

 

 

 

 

                431,000

 

 

 

 

 

                295,000

 

 

 

 

 

                861,000

 

 

 

 

                589,750

 

 

 

 

                113,400

 

 

 

 

             1,676,500

 

            18,772,650
Bond anticipation notes:

 

$1,194,000 Water Notes issued on April 25, 2001 and due on July 25, 2001; interest at 3.295%.  The notes will be repaid from a $1,194,000 bond issue expected to be sold in the next fiscal year.

 

            Total bond anticipation notes                                                                 

 

Lease obligations:                                                                                                         

 

General Fund

 

Special Revenue Funds

 

            Total lease obligations

 

Total


 

 

 

 

$            1,194,000

 

             1,194,000

 

 

 

                446,335

 

                  52,261

 

                498,596

 

$          89,730,767


 

The following is a summary of changes in general long-term debt for the year ended June 30, 2001:

 

                                                                                            July 1,                                                                                       June 30,
                                                                                              2000                     Additions                Payments                     2001     

 

           Notes payable                                                $     31,214,358        $      23,675,000        $        2,142,933      $    52,746,425

           Capitalized leases                                                      488,468                     222,119                     211,991                 498,596

           Accrued Vacation                                                      897,460                     127,668                           -                    1,025,128

           Law Enforcement Officers'
               Special Separation Allowance                             188,523                      28,973                           -                       217,496

          

           Total                                                                $     32,788,809        $      24,053,760        $        2,354,924      $    54,487,645

 

                                                                                            July 1,                                                                                       June 30,
                                                                                              2000                     Additions                Payments                     2001     

           By purpose:
              Black River Drainage                                 $            19,448        $                -              $               1,329      $           18,119
              Governmental buildings                                     7,693,200                13,605,000                     518,401            20,779,799

              Central Carolina Community

                  Classroom Construction                                    854,502                           -                             53,490                 801,012

              School Construction                                         21,476,850                10,070,000                  1,447,200            30,099,650

              Harnett Production Enterprises                         1,170,358                           -                           122,513              1,047,845

              Equipment                                                                488,468                     222,119                     211,991                 498,596
              Accrued vacation                                                   897,460                     127,668                           -                    1,025,128               
              Law Enforcement Officers'
                 Special Separation Allowance                           188,523                      28,973                           -                       217,496

           Total                                                                $     32,788,809        $      24,053,760        $        2,354,924      $    54,487,645

 

The following summarizes the annual debt service requirements to maturity for the County (excluding accrued vacation and Law Enforcement Officers’ Special Separation Allowance):

 

At June 30, 2001, Harnett County had bonds authorized but unissued in the amount of $1,800,000 for Riverside Water and Sewer District.  The County is subject to the Local Government Bond Act of North Carolina which limits the amount of net bonded debt the County may have outstanding to eight percent of the appraised value of property subject to taxation.  At June 30, 2001, such statutory limit for the County was $224,988,729 providing a legal debt margin of approximately $155,224,612.

 

NOTE 12 - PENSION PLAN OBLIGATIONS

 

A.  Multiple - Employer Plans

 

      Local Governmental Employees’ Retirement System

 

All regular full-time employees participate in the statewide Local Governmental Employee’s Retirement System (the “System”), a multiple-employer, cost-sharing, defined benefit pension plan administered by the State of North Carolina.  The System provides retirement and disability benefits to plan members and beneficiaries.  Article 3 of G.S. Chapter 128 assigns the authority to establish and amend benefit provisions to the NC General Assembly.  The System is  included in the Comprehensive Annual Financial Report  (“CAFR”) for the State of North Carolina.  The State’s CAFR includes financial statements and required supplementary information for LGERS. That report may be obtained by writing to the Office of State Controller, 1410 Mail Service Center, Raleigh, NC 27699-1410, or by calling (919) 981-5454.

 

 

            Funding Policy

 

Plan members are required to contribute six percent of their annual covered salary.  The County is required to contribute at an actuarially determined rate.  For the County, the current rate for employees not engaged in law enforcement and for law enforcement officers is 4.91% and 4.63% respectively of annual covered payroll.  The contribution requirements of members and of the County are established and may be amended by the North Carolina General Assembly.  The County’s contributions to LGERS for the years ended June 30, 1999, 2000, and 2001  were $679,827, $754,540, and $815,936 respectively.  The contributions made by the County equaled the required contributions for each year.

 

B.  Single - Employer Plan

 

            Law Enforcement Officers' Special Separation Allowance

 

            Plan Description

 

Harnett County administers a public employee retirement system (the “Separation Allowance”), a single-employer, defined benefit pension plan that provides retirement benefits to the County’s qualified sworn law enforcement officers.  The separation allowance is equal to .85% of the annual equivalent of the base rate of compensation most recently applicable to the officer for each year of credible service.  The retirement benefits are not subject to any increase in salary or retirement allowances that may be authorized by the General Assembly.  Article 12D of G.S. Chapter 143 assigns the authority to establish and amend benefit provisions to the North Carolina General Assembly.  Separate financial statements were not issued.

 

All full-time County law enforcement officers are covered by the Separation Allowance.  At December 31, 2000, the Separation Allowance’s membership consisted of:

 

                  Retirees receiving benefits                                                                           2

                  Terminated plan members entitled to

                        but not yet receiving benefits                                                                  0

                  Active plan members                                                                                 72                      

                        Total                                                                                                   74

 

            Basis of Accounting

 

The County has chosen to fund the Separation Allowance on a  “pay as you go” basis.  Pension expenditures are made from the General Fund, which is maintained on the modified accrual basis of accounting.

 

            Method Used to Value Investments

 

No funds are set aside to pay benefits and administrative costs.  These expenditures are paid as they come due.

 

 

Contributions

 

The County is required by Article 12D of G.S. Chapter 143 to provide these retirement benefits and has chosen to fund the benefit payments on a pay as you go basis through appropriations made in the General Fund operating budget.  The County’s obligation to contribute to this plan is established and may be amended by the North Carolina General Assembly.  There were no contributions made by employees.

 

The annual required contribution for the current year was determined as part of the December 31, 1999 actuarial valuation using the projected unit credit actuarial cost method.  The actuarial assumptions included (a) 7.25% investment rate of return (net of administrative expenses) and (b) projected salary increases of 5.9% to 9.8% per year.  Item  (b) included an inflation component of 3.75%.  The assumptions did not include post-retirement benefit increases.  The actuarial value of assets was market value.  The unfunded actuarial accrued liability is being amortized as a level dollar amount on a closed basis.  The remaining amortization period at December 31, 2000 was 20 years.

 

Three Year Trend Information

 

              Fiscal Year                  Annual Pension        Percentage of APC     Net Pension Obligation

                  Ended                       Cost (“APC”)                       Contributed                   End of Year        

           

                 6/30/01                    $           46,665                   37.91%                $           217,496  

                 6/30/00                                 43,401                   35.21%                             188,523

                 6/30/99                                 37,859                   26.10%                             160,404

                      

           

Annual Pension Cost and Net Pension Obligation 

 

The County’s annual pension cost and net pension obligation to the Separation Allowance for the current year were as follows:

 

                                    Annual required contributed                           $     50,534

 

                                    Interest on net pension obligation                           13,668

 

                                    Adjustment to annual required contribution            (17,537)

 

                                    Annual pension cost                                             46,665

 

                                    Contributions made                                             (17,692)

 

                                    Increases  in net pension obligation                        28,973

 

                                    Net pension obligation beginning of year              188,523

 

                                    Net pension obligation end of fiscal year         $    217,496

 

 

C.        Supplemental Retirement Income Plan for Law Enforcement Officers

 

            Plan Description

 

The County contributes to the Supplemental Retirement Income Plan (“The Plan”), a defined contribution pension plan administered by the Department of State Treasurer and a Board of Trustees.  The Plan provides retirement benefits to law enforcement officers employed by the County.  Article 5 of G.S. Chapter 135 assigns the authority to establish and amend benefit provisions to the North Carolina General Assembly.

 

            Funding Policy

 

Article 12E of G.S. Chapter 143 requires the County to contribute each month, an amount equal to 5% of each officer’s salary, and all amounts contributed are vested immediately.  Also, the law enforcement officers may make voluntary contributions to the plan.  Contributions for the year ended June 30, 2001 were $142,212, which consisted of $104,857 from the County and  $37,355 from the law enforcement officers.

 

 

The County has complied with changes in the internal revenue code laws which govern the County’s Deferred Compensation Plan, requiring all assets of the plan to be held in trust for the exclusive benefit of the participants and their beneficiaries.  In accordance with GASB Statement 32, the County’s Deferred Compensation Plan is not reported within the County’s Agency Funds.

 

 D.       Registers of Deeds' Supplemental Pension Fund

 

            Plan Description

 

Harnett County also contributes to the Register of Deeds’ Supplemental Pension Fund (“The Fund”), a non-contributory, defined contribution plan administered by the North Carolina Department of State Treasurer.  The Fund provides supplemental pension benefits to any eligible county        register of deeds who is retired under the Local Governmental Employees’ Retirement System    (LGERS) or an equivalent locally sponsored plan.  Article 3 of G.S. Chapter 161 assigns the authority to establish and amend benefit provisions to the North Carolina General Assembly.

 

Funding Policy

 

On a monthly basis, the County remits to the department of State Treasurer, an amount equal to four and one-half percent (4.5%) of the monthly receipts collected pursuant to Article 1 of G.S. 161.  Immediately following January 1 of each year, the Department of State Treasurer divides ninety-three percent (93%) of the amount in the Fund at the end of the preceding calendar year into equal shares to be disbursed as monthly benefits.  The remaining seven percent (7%) of the Fund’s assets may be used by the State Treasurer in administering the Fund.  For the fiscal year ended June 30, 2001, the County’s required and actual contributions were  $17,146.


 

E.         Other Post-Employment Benefits

 

At retirement, all employees have the option to purchase basic medical insurance at the County's group rate.  The entire cost of this insurance is paid by the County for those employees, until age 65, who retire with 30 years of Harnett County service.  Those employees who retire with less than 30 years of service with Harnett County have their post-retirement benefits paid for by the County, but on a prorated basis.  Currently 14 retirees are eligible for post-retirement health benefits.  For the fiscal year ended June 30, 2001, the County made payments for post-retirement health benefit premiums of $27,918.  The County obtains health care coverage through private insurers.

 

NOTE 13 - CLOSURE AND POSTCLOSURE CARE COSTS - DUNN-ERWIN SOLID WASTE LANDFILL

 

State and federal laws and regulations require the County to place a final cover on its Dunn-Erwin Solid Waste Landfill when it stops accepting waste and to perform certain maintenance and monitoring functions at the site for 30 years after closure.  Although closure and postclosure care costs will be paid only near or after the date that the landfill stops accepting waste, the County reports a portion of these closure and postclosure care costs as an operating expense in each period based on landfill capacity used as of each balance sheet date.  Expenditures of $19,280 have been applied to the liability during the current fiscal year.  The $3,648,710 postclosure care liability at June 30, 2001 represents a cumulative amount reported to date based on the use of 100% of the total estimated capacity of the landfill.  The County closed the Dunn-Erwin Solid Waste Landfill on January 1, 1998.  These amounts are based on what it would cost to perform all closure and postclosure care in 2001.  Actual costs may be higher due to inflation, changes in technology, or changes in regulations.

 

NOTE 14 - COMMITMENTS AND CONTINGENCIES

 

            Commitments

 

The County had commitments under uncompleted construction contracts in the Enterprise Funds totaling $2,557,590 and in the Governmental Funds totaling $9,585,153 at June 30, 2001.

 

            Arbitrage

 

During the year ended June 30, 2001 the 2000 COPS issue was subject to arbitrage regulations.  The arbitrage rebate payments are due on the fifth anniversary of the bond issue date.  It is management’s belief that no rebates will be payable.

 


Claims and Judgments

 

At June 30, 2001, the County was a defendant in various lawsuits.  In the opinion of the County's management and the County attorney, the ultimate outcome of these legal matters will not have a material adverse effect on the County's financial position.

 

            Federal and State Assisted Programs

           

The County has received proceeds from several federal and state awards.  Periodic audits of these awards are required and certain costs may be questioned as not being appropriate expenditures under the award agreements.  Such audits could result in the refund of award monies to the grantor agencies.  Management believes that any required refunds will be immaterial.  No provision has been made in the accompanying financial statements for the refund of award monies.

 

 NOTE 15 - FUND EQUITY

 

Enterprise Funds - Contributed Capital

 

Grants, entitlements, and shared revenues restricted for the acquisition or construction of capital assets are recorded as contributed capital prior to the implementation of GASB Statement 33, Accounting and Financial Reporting for Nonexchange Transactions.  As required by GASB Statement 33, the County has begun recognizing capital contributions as revenue in the current year rather than as contributed capital.  The County utilizes an option allowed under NCGA Statement 2 for the combined statement of revenues, expenses and changes in retained earnings whereby it charges depreciation expense on assets acquired or constructed through grants, entitlements, or shared revenues to the contributed capital account rather than to retained earnings.

 

The following is a summary of the changes in contributed capital for the year ended June 30, 2001:

 

                                                        Federal                 State                   Local                  Total      

            Contributed capital,

              July 1, 2000                    $    12,269,238     $      2,887,284     $    14,217,005     $    29,373,527

 

            Less:

              Depreciation                            332,277                 59,644               184,884               576,806

 

            Contributed capital,

              June 30, 2001                 $    11,936,961     $      2,827,640     $    14,032,121     $    28,796,721

 


 

NOTE 16 - INTERFUND  RECEIVABLES AND PAYABLES

 

The composition of interfund balances as of June 30, 2001 is as follows:

                                                                                                                                                                                                                                                                        Interfund                 Interfund

                                                                                                   Receivable             Payable    

 

General Fund                                                                            $        214,309      $            -     

Special Revenue Funds -

     Section 8 Housing Fund                                                                       -                     214,309

 

Total                                                                                         $        214,309      $        214,309

 

NOTE 17 – TRANSFERS AMONG FUNDS

 

A summary of interfund operating transfers by fund for the year ended June 30, 2001 is as follows:

 

NOTE 18 – SEGMENT INFORMATION FOR ENTERPRISE FUNDS

 

The County operates two enterprise funds, one of which provides water and sewer services and one which provides solid waste disposal services.  Segment information for the year ended June 30, 2001 is as follows:

                  

                                                                                             Public                            Solid

                                                                     Utilities                          Waste

                                                                       Fund                       Management                     Total        

 

Operating revenue                                    $       9,704,913              $       2,394,576            $     12,099,489

                                                                                     

Depreciation expense                                        2,094,642                           97,124                     2,191,766

 

Operating income (loss)                                     1,465,686                        (359,093)                    1,106,593

 

Net income (loss)                                              3,645,697                        (122,920)                    3,522,777

 

Capital contributions                                          6,811,905                             -                           6,811,905

 

Plant, property, and equipment 

  additions                                                       16,198,376                           23,596                   16,221,972

 

Net working capital                                           2,659,301                      2,976,562                     5,635,863

 

Total assets                                                     90,379,278                      4,923,062                   95,302,340

 

Bonds and other long-term

  liabilities payable from

  operating sources                                          36,633,843                      3,671,311                   40,305,154

 

Total equity                                                     52,024,087                         971,265                   52,995,352

 

NOTE 19 - JOINT VENTURES

 

The County, in conjunction with Lee County, participates in the Lee/Harnett Area Mental Health Authority.  Harnett County appoints eight members to the 15-member board.  The Authority is a joint venture established to provide the participating counties with legally mandated mental health services.  The County has an ongoing financial responsibility for the Authority because the Authority's continued existence depends on the participating governments' continued funding.  The County contributed $177,280 to the Authority during the fiscal year ended June 30, 2001.  Neither of the participating governments has any equity interest in the Authority, so no equity interest has been reflected in the financial statements at June 30, 2001.  Complete financial statements for the Authority can be obtained from the Authority's administrative office at Highway 421, Post Office Box 457, Buies Creek, North Carolina  27506.

 

The County, in conjunction with the State of North Carolina, Lee County, Chatham County and the Lee County Board of Education, participates in a joint venture to operate Central Carolina Community College.  Harnett County appoints two members of the 17-member board of trustees of the community college.  The president of the community college's student government association serves as a non-voting, ex officio member of the board of trustees.  The community college is included as a component unit of the state. 

 

The County has the basic responsibility for providing funding for the Harnett County facilities of the community college and also provides some financial support for the community college's operations.  The County has an ongoing financial responsibility for the community college because of the statutory responsibilities to provide funding for the community college's Harnett County facilities.  The County contributed $318,119 to the community college for operating purposes during the fiscal year ended June 30, 2001.  The participating governments do not have any equity interest in the joint venture; therefore, no equity interest has been reflected in the County's financial statements at June 30, 2001.  Complete financial statements for the community college may be obtained from the community college's administrative offices at 1105 Kelly Drive, Sanford, North Carolina  27330.

 

The County, in conjunction with the City of Dunn and the Dunn Area Chamber of Commerce, participates in the Averasboro Township Tourism Development Authority.  The Authority is a joint venture established to receive the net proceeds of the room occupancy and tourism development tax levied in Averasboro Township in Harnett County.  The Authority may spend these proceeds to develop, promote, and advertise travel and tourism in Averasboro Township, to sponsor tourist-oriented events and activities for Averasboro Township, to operate and maintain museums and historic sites throughout Averasboro Township, and to purchase, operate, and maintain a convention facility for Averasboro Township.  The County appoints two members to the seven-member board.  The County has an ongoing financial responsibility for the Authority because the Authority's continued existence depends on the participating governments' continued funding.  The County remitted $128,950 to the Authority during the fiscal year ended June 30, 2001.  Neither of the participants has any equity interest in the Authority, so no equity interest has been reflected in the financial statements at June 30, 2001.  Complete financial statements for the Authority can be obtained from the Dunn Area Chamber of Commerce at 209 West Divine Street, Post Office Box 548, Dunn, North Carolina  28335.

 

NOTE 20 -  JOINTLY GOVERNED ORGANIZATION

 

The County, in conjunction with two other counties and twenty municipalities, established the Mid-Carolina Council of Governments (Council).  The participating governments established the Council to coordinate various funding received from federal and state agencies.  Each participating government appoints one member to the Council's governing board.  The County paid membership fees of $13,405 to the Council during the fiscal year ended June 30, 2001.

 

NOTE 21 -  SUPPLEMENTAL AND ADDITIONAL SUPPLEMENTAL ONE-HALF OF ONE PERCENT

 

Local Government Sales and Use Taxes

 

Chapter 105, Articles 40 and 42, of the North Carolina General Statutes requires the County to use a portion of the proceeds of its supplemental and additional supplemental sales taxes, or local option sales taxes, for public school capital outlays or to retire public school indebtedness.  During the fiscal year ended June 30, 2001, the County reported these local option sales taxes within its General Fund.  The County expended the restricted portion of these taxes for public school capital outlays.


 

NOTE 22 - SCHOOL FACILITIES FINANCE ACT OF 1987

 

The General Assembly passed the School Facilities Finance Act of 1987 (“Act”) to assist county governments in meeting their public school facility capital needs.  The Act created a state-funded program for the construction and renewal of school facilities:  the Public School Building Capital Fund administered by the Office of State Budget and Management.  The Public School Building Capital Fund may also be used to finance equipment needs under the local school unit’s technology plan.

 

Public School Building Capital Fund

 

This program is funded using a portion of the corporate income taxes which are imposed on corporations doing business in the state.  Each calendar quarter, the Department of Revenue shall  remit to the State Treasurer for the credit in the fund, an amount equal to the applicable fraction provided by the following table of the net collections of corporate income taxes received during the previous quarter minus $2.5 million, which it deposits into the Critical School Facilities Needs Fund.

 

                     Period                                                                       Fraction             

            Prior to 10/1/97                                                 Two thirty-firsts (2/31)

            10/1/97 to 9/30/98                                              One-fifteenth (1/15)

            10/1/98 to 9/30/99                                              Two twenty-ninths (2/29)

            10/1/99 to 9/30/00                                              One fourteenth (1/14)

            After 9/30/00                                                    Five sixty-ninths (5/69)

           

Monies in the fund are allocated to Harnett County on the basis of the average daily membership (“ADM”) for Harnett County Board of Education as determined by the State Board of Education.  The Office of State Budget and Management establishes and maintains an ADM allocation account for the County.  At June 30, 2001 the balance of the County's ADM account was $3,642,562.  The County must match this balance on the basis of one dollar for every three dollars of State funds for financing the school unit’s facilities capital needs.  The local school technology plan does not require a county match.

 

After approving a school capital project authorized by the Act, the Office of State Budget and Management will transfer funds from the County's ADM allocation account to its disbursing account maintained with the State Treasurer.  At June 30, 2001, the County's disbursing account had a zero balance and there were no additional authorized capital projects.  These funds are available for future appropriations upon application.  The County must match the balance on the basis of one dollar for every three dollars of state funds.

 

Funds in the allocation and disbursing accounts are considered state monies until the County issues warrants to disburse them.  At that time, they are recognized in the General Fund as a restricted intergovernmental revenue.

 

 

 

 

 

NOTE 23 - PUBLIC SCHOOL BUILDING BOND ACT OF 1996

 

The General Assembly passed the Public School Building Bond Act of 1996 to provide the for issuance of $1.8 billion in State bonds to be used for making grants to counties for qualified public school capital outlay projects.  The Department of Public Instruction is responsible for project approval and the distribution of funds.  The principal amounts of bonds or notes issued by the State in any twelve month period may not exceed $450 million.

 

Of the total $1.8 billion authorized, $30 million will be allocated as grants to counties that have small county school systems, after considering whether the counties demonstrate both greater than average school construction needs and high property tax rates.  The primary allocation of $1.77 billion will be distributed to all counties based on the average daily membership, the ability to pay, and the growth rate of the school administrative units located within each county.

 

The distribution of the primary allocation is subject to the satisfaction of certain match requirements by the counties.  Match requirements may be satisfied by non-State expenditures for public school facilities made on or after January 1, 1992.  Harnett County’s matching requirement of $.50 for each dollar of allocated bond proceeds has been fulfilled.

 

Because the County has met its matching requirement, the County recognized revenues equal to the liabilities incurred for approved project expenditures.  Harnett County requests bond funds by project to be transferred to an account established by Harnett County Board of Education for payment of invoices.  To date, the County has expended  $32,122,222 of their total allocation of  $42,985,558.

 

NOTE 24 - BENEFIT PAYMENTS ISSUED BY THE STATE

 

The amounts listed below were paid directly to individual recipients by the state from federal and state monies.  County personnel are involved with certain functions, primarily eligibility determinations, that cause benefit payments to be issued by the state.  These amounts disclose this additional aid to County recipients which do not appear in the general purpose financial statements because they are not revenues and expenditures of the County.

                                                                                                       Federal                    State    

 

Medicaid Assistance Programs – Medicaid Title XIX                     $    40,485,247         $  20,300,120

Food Stamps                                                                                       5,484,830                     -     

Aid to Families with Dependent Children                                                  (16,034)                  (4,197)

Temporary Assistance for Needy Families                                            1,460,829                 (1,955)

Special Assistance to Adults                                                                             -               1,079,654

Low Income Home Energy Assistance                                                    157,940                     -     

Child Welfare Services - Permanency Planning                                           (821)                  71,768

Title IV-E- Adoption Assistance                                                             138,322                   41,743

Special Supplemental Food Program for

   Women, Infants and Children                                                            1,603,793                     -     

Total                                                                                            $    49,314,106         $  21,487,133

 

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