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Comprehensive Annual Financial Report - June 30, 2008City of MONROE North Carolina n heritage of progress Comprehensive Annual Financial Report For the fiscal year ended June 30, 2008 City of Monroe, North Carolina Comprehensive Annual Financial Report For The Fiscal Year Ended June 30, 2008 Prepared By Department of Finance and Administration Director of Finance and Administration James R. Fatland Accounting Manager Lisa Strickland Budget Analyst Mary Lou Clark CITY OF MONROE, NORTH CAROLINA TABLE OF CONTENTS June 30, 2008 INTRODUCTORY SECTION: Page Letterof Transmittal ......................................................................... ............................... vii - xi GFOA Certificate of Achievement for Excellence in Financial Reporting .............. xii List of Principal Officials ..................................................... ............................... xiii OrganizationalChart ....................................................................... ............................... xiv FINANCIAL SECTION: Independent A uditors'Report ........................................................... ............................... 1-2 Management's Discussion and Analysis ............................................ ............................... 3 -10 Exhibit Page Basic Financial Statements: Government -wide Financial Statements: Statement of Net Assets ............................................................ ............................... 1 13 Statement of Activities .............................................................. ............................... 2 14-15 Fund Financial Statements: Balance Sheet - Governmental Funds ........................................ ............................... 3 16 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Assets ..................................................... ............................... 4 17 Statement of Revenues, Expenditures, and Changes In Fund Balances — Governmental Funds ..... ....................... ............................... 5 18 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities .......................................................... ............................... 6 19 Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual - General Fund ............... ............................... 7 21 Statement of Net Assets - Proprietary Funds ............................... ............................... 8 22-23 Statement of Revenues, Expenses, and Changes in Fund Net Assets - Proprietary Funds ................................. ............................... 9 24-25 Statement of Cash Flows - Proprietary Funds ............................. ............................... 10 26-29 Notes to the Financial Statements ................................................... ............................... 30-57 Required Supplemental Financial Data: Law Enforcement Officers' Special Separation Allowance Schedule of Funding Progress ................................................... ............................... 58 Law Enforcement Officers' Special Separation Allowance Schedule of Employer Contributions ...................................... ............................... 59 I CITY OF MONROE, NORTH CAROLINA TABLE OF CONTENTS June 30, 2008 Other Supplemental Information: Combining and Individual Fund Statements and Schedules: Nonmajor Governmental Funds Page Combining Balance Sheet ........................................................ ............................... 62-63 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances ................................................... ............................... 64-65 Governmental Funds Budgetary Schedules: Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual - General Fund .......... ............................... 66-69 Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual - Special Revenue Funds .......................... 70-74 Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual - Capital Projects Funds ........................... 75 Enterprise Funds Budgetary Schedules: Schedule of Revenues and Expenditures - Budget and Actual - (NON- GAAP): Waterand Sewer Fund ..................................................... ............................... 76-78 Water and Sewer Capital Projects Funds ........................... ............................... 79-80 ElectricFund .................................................................... ............................... 81-83 Electric Capital Projects Funds .......................................... ............................... 84 NaturalGas Fund .............................................................. ............................... 85-87 Natural Gas Capital Projects Funds ................................... ............................... 88 Aquatics and Fitness Center Fund ...................................... ............................... 89-91 Aquatics and Fitness Center Capital Projects Funds ........... ............................... 92 AirportFund ..................................................................... ............................... 93 -95 Airport Capital Projects Funds ........................................... ............................... 96-97 11 CITY OF MONROE, NORTH CAROLINA TABLE OF CONTENTS June 30, 2008 Other Schedules Page Schedule of Ad Valorem Taxes Receivable ............................... ............................... 98 Analysis of Current Tax Levy - Citywide Levy ......................... ............................... 99 Table Page STATISTICAL SECTION: Financial Trends NetAssets by Component .............................................................. ............................... 1 103 Changes in Net Assets ................................................................... ............................... 2 104- 105 Fund Balances, Governmental Funds .............................................. ............................... 3 106 Changes in Fund Balances, Governmental Funds ........................... ............................... 4 107 Revenue Capacity Assessed Value and Actual Value of Taxable Property ................... ............................... 5 108 Direct and Overlapping Property Tax Rates ................................... ............................... 6 109 Principal Property Taxpayers ........................................................ ............................... 7 110 Property Tax Levies and Collections .............................................. ............................... 8 111 Debt Capacity Ratios of Outstanding Debt by Type .............................................. ............................... 9 112 Ratios of General Bonded Debt Outstanding ................................. ............................... 10 113 Direct and Overlapping Governmental Activities Debt .................. ............................... 11 114 Legal Debt Margin Information .................................................... ............................... 12 115 Pledged- Revenue Coverage ........................................................... ............................... 13 116 Demographic and Economic Information: Demographic and Economic Statistics ............................................ ............................... 14 117 PrincipalEmployers ..................................................................... ............................... 15 118 Operation Information: Full-Time Equivalent City Governmental Employees by Function . ............................... 16 119 Operating Indicators by Function ................................................... ............................... 17 120 Capital Asset Statistics by Function ............................................... ............................... 18 121 COMPLIANCE SECTION: Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards ............... ........... ..................... 123 -124 Report on Compliance with Requirements Applicable to Each Major Federal Program and Internal Control Over Compliance In Accordance with OMB Circular A -133 and the State Single Audit Implementation Act ....................................................................... ............................... 125- 126 Report on Compliance with Requirements Applicable to Each Major State Program and Internal Control Over Compliance In Accordance with Applicable Sections of OMB Circular A -133 and the State Single Audit Implementation Act ..................................... ............................... 127-128 iii CITY OF MONROE, NORTH CAROLINA TABLE OF CONTENTS June 30, 2008 Page Schedule of Findings and Questioned Costs ................................... ............................... 129-130 Summary Schedule of Prior Year Audit Findings .......................... ............................... 131 Schedule of Expenditures of Federal and State Awards .................. ............................... 132 - 133 1V INTRODUCTORY SECTION Introductory Section • Letter of Transmittal • Certificate of Achievement for Excellence in Financial Planning • List of Principal Officials • Organizational Chart CITY OF MONROE P.O. BOX 69 - MONROE, NC 28111 -0069 PHONE 704 - 282 -4500 FAX 704 - 283 -9098 November 6, 2008 To the Honorable Mayor Bobby Kilgore, Members of the City Council, and Citizens of the City of Monroe: We are pleased to present to you the Comprehensive Annual Financial Report ( "CAFR ") of the City of Monroe for the fiscal year ended June 30, 2008. North Carolina law requires that all general- purpose local governments publish within four months of the close of each fiscal year a complete set of financial statements presented in conformity with generally accepted accounting principles ( "GAAP ") and audited in accordance with generally accepted auditing standards by a firm of licensed certified public accountants. The independent certified public accounting firm of Potter & Company, P.A., has audited the financial statements and supplemental schedules contained herein, and issued an unqualified ( "clean") opinion on the City of Monroe's financial statements for the year ended June 30, 2008. The independent auditor's report is presented as the first component of the Financial Section of this report. Responsibility for both the accuracy of the data and the completeness and fairness of the presentation, including all disclosures, rests with the City. To the best of our knowledge and belief, the enclosed information is accurate in all material respects and is reported in a manner designed to present fairly the financial position and results of operations of the various funds of the City. All disclosures necessary to enable the reader to gain an understanding of the City's financial activities have been included. The goal of the annual independent audit is to provide reasonable assurance that the financial statements of the City for the fiscal year are free from material misstatement. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management; and evaluation of the overall financial statement presentation. The independent audit of the financial statements of the City was part of a broader, federally mandated "Single Audit" designed to meet the special needs of federal grantor agencies. The standards governing Single Audit engagements require the independent auditor to report not only on the fair presentation of the financial statements, but also on the audited government's internal controls and compliance with legal requirements, with special emphasis on internal controls and legal requirements involving the administration of federal awards. These reports are available in the City of Monroe's CAFR. Generally accepted accounting principles require that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management's Discussion and Analysis ( "MD &A "). This letter of transmittal is designed to complement the MD &A and should be read in conjunction with it. The City's MD &A can be found immediately following the Report of the Independent Auditors. vii The Reporting Entity and Services Provided For financial reporting purposes, in accordance with the criteria in Governmental Accounting Standards Board ( "GASB ") Statement No. 14, the City of Monroe includes all funds, agencies, boards, commissions and authorities that are controlled by or are financially dependent upon the City. Control by or financial dependence was determined on the basis of obligation of the City to finance deficits, guarantee debt, select the governing authority, approve the budget, have authority to make a public levy, and to have ownership of assets. As a result of implementing GASB Statement No. 14, the City of Monroe has included the City of Monroe ABC Board and the Monroe Tourism Development Authority as discretely presented component units. Additional information on these legally separate reporting entities can be found in the Notes to the Financial Statements. The City provides numerous services for its citizens including airport operations, cultural and recreational activities, general administration, planning, zoning, economic development, building inspections, code enforcement, police, fire, sanitation, cemetery management, tourism, public works, and street maintenance. The City also provides and maintains electric, natural gas, water, and sanitary sewer utilities for the benefit of its citizens and businesses. This report includes the fiscal activities of the City in the provision of these services. The City also provides financial support to certain boards, agencies and commissions to assist their efforts in serving our citizens. Organizations that receive support from the City include the American Red Cross, HealthQuest, Monroe High School Athletic Foundation, Downtown Monroe, Inc., Community Health Services of Union County, Union County Crisis Assistance Ministry, Union County Habitat for Humanity, Union County Community Arts Council, Council on Aging in Union County, the Monroe -Union County Community Development Corporation, the Union County Historic Preservation Commission, Turning Point, Union County Community Action, Inc., the Literacy Council of Union County, the Union County Community Shelter, the Union County Partnership for Children, and the Union County JobReady Partnership Council, Inc. Organization of Government The City of Monroe was established in 1844, and is located near the center of Union County in the southern Piedmont region of North Carolina. The City is a diverse community of nearly 34,000 residents, and has an incorporated area of over 29 square miles. Monroe serves as the County seat for Union County, and is the County's largest municipality. Monroe's corporate limits are approximately seven miles southeast of Charlotte, and the City has experienced tremendous growth due to its proximity to the fastest growing region of Charlotte and Mecklenburg County. The City has the statutory authority to extend its corporate limits through voluntary and involuntary annexation when deemed appropriate by the City Council. The City is organized under a Council- Manager form of government, with a six - member City Council and Mayor serving as the governing body, and who are responsible for policy - making and establishing legislative authority. Council members are elected on a non - partisan basis to staggered four -year terms. The Mayor is elected to serve a two -year term, and is a full voting member on the City Council. The City Council is responsible for passing ordinances, adopting the annual budget, appointing committees, and hiring the City Manager, City Attorney, and City Clerk. The City Manager is responsible for carrying out the policies and ordinances of the City Council, for overseeing the daily operations of the government, and for selecting the department heads to manage the various City departments. The City takes pride in the services offered to our citizens, and the mission of City staff is to provide reliable, responsive, quality service to our customers at the lowest reasonable cost. We accomplish this through professional and courteous service consistent with making Monroe a vibrant and progressive community. City staff strives to be proactive in addressing the various needs of the community, and adheres to the guiding principles of Teamwork, Customer Service, Respect, and Accountability. Economic Condition and Outlook In spite of global and national challenges, the City has continued to experience a favorable economic climate over the last fiscal year. Our existing industries have announced investments in manufacturing equipment and facility expansions totaling more than $100 million. Monroe's workforce is diversified, consisting of industrial, construction, agricultural, and retail employment. The City's economic base viii includes major employers involved in aerospace, plastics, food processing, professional services, and education. The City serves as a regional employment and commercial center for surrounding communities, but maintains a small town atmosphere while enjoying the benefits of being part of the Charlotte metropolitan region. Monroe's industrial citizens continue to grow and prosper. ATI Allvac, one of the City's largest employers, completed Phase 1 of a $250 million, 300,000 square foot facility in the Bakers area, which will eventually employ 125 workers. Phase 2 is well underway and targeted for completion in early 2010. This new facility will supply titanium and nickel base super alloys to the global aerospace, automotive and medical fields. Also, Turbomeca Manufacturing, a maker of helicopter engine components, opened its new 120,000 square foot facility in the Monroe Corporate Center. Turbomeca Manufacturing, a subsidiary of France's SAFRAN Group, invested $50 million and will create 180 new jobs over the next two years. Novant Health, through its affiliation with Presbyterian Healthcare, has completed the first phase of "The Park at Monroe ", a medical/retail complex on US 74 across from Poplin Place Shopping Center. This facility will contain medical offices, a same -day surgery facility, and specialty retail shops, and is scheduled to open in December 2008. The City's proximity to the Charlotte metropolitan region has contributed to our strong economy, and the area's labor force continues to expand. While many of our residents travel to Charlotte each day for their employment, more and more residents are finding employment opportunities in the City and County. This has resulted in Union County having the lowest unemployment rate in the Charlotte region, and one of the lowest unemployment rates in the State. Major Initiatives The City of Monroe has been involved in many significant initiatives during the past fiscal year. The City Council has identified and addressed key issues that are of importance to the future of the City, including utility planning for water, wastewater, electric, and natural gas demands brought on by system growth. The City has developed a fifteen year rate model for projecting water and wastewater rates to address the impact of future capital improvement projects on the City's rate structure. The goal is to achieve single digit rate increases rather than large rate increases in the year infrastructure is financed. City Council is committed to support the City's growth, and has authorized Certificates of Participation to fund construction of approximately 43 miles of natural gas pipeline to connect the City's system directly to the Transcontinental pipeline. The pipeline will provide the City with capacity to significantly grow and expand the natural gas system and provide significant opportunities for economic development. When complete, the City will be able to provide natural gas to our industries and citizens without having to pay costly transportation costs to a third parry provider. The City issued $30.9 million in Combined Enterprise Fund Revenue Bonds this past fiscal year to fund projects as follows: • Water System — Construction of a one million gallon water storage tank and water mains and lines. • Natural Gas System — Land acquisition and construction of a 8" natural gas line loop around the City. • Electric System — Construction of an electric substation, the installation of new transformers, the replacement of existing transformers, the construction of approximately 12.8 miles of transmission loop around the City and the installation of circuit breakers at an existing substation. • Airport — Runway extension, rehabilitation and improvements, street rerouting, upgrade of the terminal building, acquisition of ten T- Hangars and the construction of an additional ten T- Hangars, and the acquisition of land for future runway extension, road ramp and taxiway development. The City is taking steps to implement a stormwater utility effective January 1, 2009, to meet federal requirements and to also provide for comprehensive management of our drainage and stormwater issues. Also, a new solid waste enterprise fund was established on July 1, 2008. Revenue and expenses previously ix accounted for in the General Fund will now be accounted for in stormwater and solid waste enterprise funds. The City has approved a master plan for a reclaimed water system. The reclaimed water distribution system, currently in the design phase, will allow for the beneficial re -use of treated wastewater for non- potable uses. Reclaimed water development will also alleviate demands on the City's potable water system thereby freeing up water capacity for additional economic development. Estimated completion of this project is late 2010. The City has partnered with DukeNet Communications to provide access to the City's fiber optic cable infrastructure to businesses and commercial facilities within the City. Several companies have enrolled for this service, and recognize the benefit of having a source for high speed data and telephone access with strong redundancy support. The City continues to make significant investments in its police and fire operations. The City was notified in fall 2006 that we received a Staffing for Adequate Fire and Emergency Response ( "SAFER ") Grant to fund an additional 12 firefighter positions, which allowed us to increase fire department staffing. This grant is for a period of five years, and requires that the City gradually assume full funding for the positions. The City's fire department currently holds an ISO rating of "Y', which reflects well on the City's professional fire operations and our water system infrastructure. This rating also allows the City's businesses and homes to enjoy lower fire insurance premiums. The City has also received a Federal Fire Act grant for $210,000 to replace all of the department's self - contained breathing apparatus. The new breathing apparatus meets the latest standards, therefore providing a safer working environment for the City's firefighters which aids us in better serving our citizens. In 2007, our police department was accredited by the Commission on Accreditation for Law Enforcement Agencies, Inc., or CALEA. The award was presented to the City in July 2007 at the Commission's conference in Montreal, Quebec, Canada. The accreditation process requires the police department to comply with applicable standards to improve the delivery of law enforcement services. Accreditation increases effectiveness, efficiency and the department's ability to prevent and control crime. Adherence to CALEA standards also increases cooperation and coordination with other law enforcement agencies, as well as citizen and employee confidence in goals, objectives, policies and practices. In an ongoing effort to improve the service capabilities of the department, digital cameras are scheduled to be installed during fiscal year 2009 in all patrol cars. City Council also recognizes transportation as a major priority. The City is aggressively seeking funding for roadway improvements, and has been active in its support for the development and construction of the Monroe Bypass as well as M. L. King Boulevard. Currently, the City of Monroe is moving ahead with the relocation of Goldmine Road to facilitate the lengthening of the runway at the Charlotte- Monroe Executive Airport. The City owned and operated airport is a designated general aviation reliever airport to Charlotte Douglas, and the improvements will strengthen Monroe's position as a major aviation player for the region. In conjunction with the Downtown Master Plan prepared by Land Design, the City is moving forward with a number of transportation improvements that will enhance the development of the downtown area, as well as improve the pedestrian friendliness of the roadways. Two of the primary projects include reducing the number of lanes on Charlotte Avenue to enable placement of pedestrian refuge islands, and the second is the conversion of Jefferson Street and Franklin Street to two -way traffic. The City is also moving ahead with the re- alignment of Concord Avenue with Charlotte Avenue to address congestion as vehicles move out of the Downtown Area. City Council has approved a Master Plan for the downtown area. Monroe's Downtown and neighborhood business districts are no longer the primary provider of goods and services to Union County and surrounding communities. The growth of the highway system and subsequent suburban sprawl encourage us to travel longer distances to work or shop. The City of Monroe, Mayor and Council and concerned citizens would like to reverse this downward spiral, giving Downtown its own market niche. Opening new businesses Downtown, thereby improving the business mix, attracting shoppers and residents, raising property values and sales tax revenues are all elements of the plan. Restored buildings, attractive storefronts and pedestrian friendly walks and streets will gradually change and reinforce the public's perception that Downtown is the `heart and soul' of Union County. Monroe, designated a National Trust Main Street Community, uses the Main Street approach to Downtown revitalization, a comprehensive, incremental four -point approach. The revitalization effort will focus on the areas of design, organization, promotion, and economic restructuring: a practical Downtown management strategy, in combination with the Downtown Master Plan, will produce fundamental changes in the Downtown's economic base. The Monroe City Council has also approved funding for a Wi -Fi network for the downtown business district. The City of Monroe pursues grant funding to provide resources for the completion of various projects. The City has received funding for a second phase of the restoration of the Historic Armory facility and three airport reimbursement grants: one for airport runway lighting rehabilitation, the second for airport land acquisition, airfield improvements and an updated layout plan, and the third for airport improvements. The City is also a regular recipient of Local Law Enforcement Block Grants, Community Development Block Grants, Federal Assistance to Firefighters' Grants, and Homeland Security funds. Future Considerations The Governmental Accounting Standards. Board ( "GASB ") issued Statement No. 45 in June 2004. This Statement establishes standards for the measurement, recognition, and display of other post employment benefits ( "OPEB ") expenses and related liabilities, note disclosures, and if applicable, required supplementary information in the financial reports of state and local government employers. This statement will impact the City to the extent the City provides health insurance benefits to retirees. Implementation of GASB Statement No. 45 will be required no later than the fiscal year ending June 30, 2009. The City has developed preliminary estimates of the financial impacts the pronouncement through the assistance of an actuarial firm. Management is currently evaluating recommendations provided by a plan benefits consultant that specializes in benefit services. The recommendations can reduce the City's liability for post employment benefits, minimize the cash flow requirement for funding retiree benefits and retain the benefit contributions as an asset of the City, thereby improving the City's financial statements. Awards and Acknowledgements Awards. The Government Finance Officers Association of the United States and Canada ( "GFOA ") awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Monroe for its Comprehensive Annual Financial Report for the fiscal year ended June 30, 2007. This was the 15"' consecutive year that the City has received this prestigious award. In order to be awarded a Certificate of Achievement, a government must publish an easily readable and efficiently organized CAFR. This report must satisfy both GAAP and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe that our current CAFR continues to meet the Certificate of Achievement Program's requirements, and we are submitting it to the GFOA to determine its eligibility for another certificate. Acknowledgements. The preparation of this report is a very intensive project, and could not have been accomplished without the assistance and dedication of the Finance and Administration Department staff and other personnel from various departments who assisted in its preparation. A particular thank you goes to Accounting Manager Lisa Strickland and Budget Analyst Mary Lou Clark who have provided valuable assistance with their financial and accounting expertise this past year. The Mayor and City Council continue to be very supportive of our efforts to produce the best financial reports possible for our citizens, and they provide leadership and support in maintaining the highest standards of professionalism in the fiscal management of the City. We appreciate their support in granting us the time and funding to generate this document, and allowing us to submit it to the GFOA for consideration. Lastly, we would like to express our appreciation to our independent auditing firm, Potter & Company, P.A., for their cooperation and assistance in these efforts. Respectfi F. Craigy City Man - b .,. ames R. Fatland, CPFO Director of Finance and Administration xi Certificate of Achievement f in Financial Reporting Presented to City of Monroe North Carolina For its Comprehensive Annual Financial Report for the Fiscal Year Ended . June 30, 2007 A Certificate of Achievement for Excellence in Financial Reporting is presented by the Government Finance Officers Association of the United States and Canada to government units and public employee retirement systems whose comprehensive annual financial reports (CAFRs) achieve the highest standards in government accounting and financial reporting. OF TH V A _ r CORPOPAM A � President *Ape 4 j Executive Director xii CITY OF MONROE, NORTH CAROLINA LIST OF PRINCIPAL OFFICIALS June 30, 2008 Elected Officials Bobby G. Kilgore Mayor P.E. Bazemore Mayor Pro Tem John B. Ashcraft, Jr. Lynn A. Keziah F. Craig Meadows City Manager Terry M. Sholar City Attorney Bruce M. Bounds Director of Information Technology Debra C. Reed Director of Human Resources Don D. Mitchell Director of Energy Services Ronald D. Fowler Fire Chief C. Michael Courtney Director of Parks & Recreation Dottie M. Nash City Administration Brian J. Borne Downtown Monroe Director Billy A. Jordan Robert J. Smith H. Wayne Herron, Jr. Assistant City Manager/ Director of Planning and Building Bridgette H. Robinson City Clerk James R. Fatland Director of Finance and Administration James N. Loyd, Jr. Director of Engineering Debra C. Duncan Police Chief R. Christopher Plat6 Director of Economic Development and Aviation Russell G. Colbath Director of Water Resources xiii 6 u R s. 0 0 � u iA R 3 a u � A A c 0 u W e� O it GeS � � V o � a� O � bA i. � O O . 4 1 V b 0 w U L � � V �a L yy++ V � a w a d � a Ni L f� a W o � R p o u CYi � o L p a A a� _u o � u �A G W a v o N.i 0 0 a�i w c A x 0 .r y C7 L' R Ca V O L7 '� R on ^O xiv U R w � � U � � w U L � � V �a L yy++ V � a w a d � a Ni L f� a W o � R p o u CYi � o L p a A a� _u o � u �A G W a v o N.i 0 0 a�i w c A x 0 .r y C7 L' R Ca V O L7 '� R on ^O xiv FINANCIAL SECTION Financial Section FPJ POTTER &COMPANY, P.A. CERTIFIED PUBLIC ACCOUNTANTS INDEPENDENT AUDITORS' REPORT The Honorable Mayor and The City Council City of Monroe North Carolina We have audited the accompanying financial statements of the governmental activities, the business -type activities, the discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Monroe, North Carolina, as of and for the year ended June 30, 2008, which collectively comprise the City of Monroe's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the City of Monroe's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the basic financial statements are free of material misstatement. The financial statements of City of Monroe ABC Board and Monroe Tourism Development Authority were not audited in accordance with Government Auditing Standards. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the governmental activities, the business -type activities, the discretely presented, component units, each major fund, and the aggregate remaining fund information of the City of Monroe, North Carolina, as of June 30, 2008, and the respective changes in financial position and cash flows, where appropriate, thereof and the respective budgetary comparison for the General Fund for the year then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing; Standards, we have also issued our report dated October 24, 2008 on our consideration of the City of Monroe's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts, and grants. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. Management's Discussion and Analysis and the Law Enforcement Officers' Special Separation Allowance Schedule of Funding Progress and Schedule of Employer Contributions are not a required part of the basic financial statements but are supplementary information required by the Governmental Accounting Standards Board. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit this information and express no opinion on it. Our audit was performed for the purpose of forming an opinion on_ the financial statements that collectively comprise the basic financial statements of the City of Monroe, North Carolina. The 114 North Church Street ■ Monroe, NC 28112 ■ 704.283.8189 ■ 704.289.3439 fax ■ www.gotopotter.com introductory section, the other supplementary information section, and the statistical section as listed in the accompanying table of contents are presented for purposes of additional analysis and are not a required part of the basic financial statements. The accompanying schedule of expenditures of federal and State awards is presented for purposes of additional analysis as required by U.S. Office of Management and Budget Circular A -133, Audits of States, Local Governments, and Non- Profit Organizations, and the State Single Audit Implementation Act, and are not a required part of the basic financial statements of the City of Monroe. The other supplementary information and the schedule of expenditures of federal and State awards have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly. stated, in all material respects, in relation to the basic financial statements taken as a whole. The introductory section and the statistical section have not been subjected to the auditing procedures applied by us in the audit of basic financial statements and, accordingly, we express no opinion on them. October 24, 2008 Monroe, North Carolina 2 MANAGEMENT'S DISCUSSION AND ANALYSIS Management's Discussion and Analysis As management of the City of Monroe (the City), we offer readers of the City's financial statements this narrative overview and analysis of the financial activities of the City for the fiscal year ended June 30, 2008. We encourage readers to read the information presented here in conjunction with additional information that we have furnished in the City's financial statements, which follow this narrative. Financial Highlights • The assets of the City of Monroe exceeded its liabilities at the close of the fiscal year by $306,264,024 (net assets). Of this amount, $104,795,099 (unrestricted net assets) may be used to meet the government's ongoing obligations to citizens and creditors. • The government's total net assets increased by $18,058,787 of this increase $1,593,075 was from governmental activities and $16,465,712 was for business -type activities. • As of the close of the current fiscal year, the City's governmental funds reported combined ending fund balances of $23,208,182, an increase of $1,288,487 in comparison with the prior year. Approximately 67% of this total amount or $15,635,606 is available for spending at the government's discretion (unreserved fund balance). • At the end of the current fiscal year, unreserved fund balance for the General Fund was $15,635,606 or 52% of total general fund expenditures for the fiscal year. • The City's total debt not including compensated absences and self insurance claims payable, net of retirements, increased $42,899,623 (141 %) during the current fiscal year. The primary elements of the increase were the issuance of Combined Enterprise System Revenue Bonds totaling $44,015,000 and two installment financing issuances totaling $3,888,480 offset by $5,003,857 in debt retirements. Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to City of Monroe's basic financial statements. The City's basic financial statements consist of three components: 1) government -wide financial statements, 2) fund financial statements, and, 3) notes to the financial statements (see Figure 1). The basic financial statements present two different views of the City through the use of government - wide statements and fund financial statements. In addition to the basic financial statements, this report contains other supplemental information that will enhance the reader's understanding of the financial condition of the City of Monroe. Required Components of Annual Financial Report Figure 1 Management's Discussion and Analysis Government -wide Financial Statements Basic Financial Statements Fund Financial Notes to the Statements I Financial Statements Summary 10 Detail Basic Financial Statements The first two statements (Exhibits 1 and 2) in the basic financial statements are the Government -wide Financial Statements. They provide both short and long -term information about the City's financial status. The next statements (Exhibits 3 through 10) are Fund Financial Statements. These statements focus on the activities of the individual parts of the City's government. These statements provide more detail than the government -wide statements. There are three parts to the Fund Financial Statements: 1) the governmental funds statements; 2) the budgetary comparison statements; and, 3) the proprietary fund statements. The next section of the basic financial statements is the notes. The notes to the financial statements explain in detail some of the data contained in those statements. After the notes, supplemental information is provided to show details about the City's individual funds. Budgetary information required by the General Statutes also can be found in this part of the statements. Government -Wide Financial Statements The government -wide financial statements are designed to provide the reader with a broad overview of the City's finances, similar in format to a financial statement of a private- sector business. The government -wide statements provide short and long -term information about the City's financial status as a whole. The two government -wide statements report the City's net assets and how they have changed. Net assets are the difference between the City's total assets and total liabilities. Measuring net assets is one way to gage the City's financial condition. The government -wide statements are divided into three categories: 1) governmental activities; 2) business -type activities; and, 3) component units. The governmental activities include most of the City's basic services such as public safety, parks and recreation, and general administration. Property taxes and state and federal grant funds finance most of these activities. The business -type activities are those that the City charges customers to provide. These include the water and sewer, electric, natural gas, aquatics and fitness, and airport services offered by the City of Monroe. The final category is the component units. Although legally separate from the City, the ABC Board and the Tourism Development Authority are important to the City because the City exercises control over both Boards by appointing their members. The component units are also required to distribute a portion of their profits to the City. The government -wide financial statements are on Exhibits 1 and 2 of this report. Fund Financial Statements The fund financial statements (see Figure 1) provide a more detailed look at the City's most significant activities. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City of Monroe, like all other governmental entities in North Carolina, uses fund accounting to ensure and reflect compliance (or non- compliance) with finance- related legal requirements, such as North Carolina General Statutes or the City's budget ordinance. All of the funds of City of Monroe can be divided into two categories: Governmental Funds and Proprietary Funds. Governmental Funds — Governmental funds are used to account for those functions reported as governmental activities in the government -wide financial statements. Most of the City's basic services are accounted for in governmental funds. These funds focus on how assets can readily be converted into cash flow in and out, and what monies are left at year -end that will be available for spending in the next year. Governmental funds are reported using an accounting method called modified accrual accounting 4 which provides a short-term spending focus. As a result, the governmental fund financial statements give the reader a detailed short-term view that helps him or her determine if there are more or less financial resources available to finance the City's programs. The relationship between government activities (reported in the Statement of Net Assets and the Statement of Activities) and governmental funds is described in a reconciliation that is a part of the fund financial statements. The City of Monroe adopts an annual budget for its General Fund, as required by North Carolina General Statutes. The budget is a legally adopted document that incorporates input from the citizens of the City, the management of the City, and the decisions of the Council about which services to provide and how to pay for them. It also authorizes the City to obtain funds from identified sources to finance these current period activities. The budgetary statement provided for the General Fund demonstrates how well the City complied with the budget ordinance and whether or not the City succeeded in providing the services as planned when the budget was adopted. The budgetary comparison statement uses the budgetary basis of accounting and is presented using the same format, language, and classifications as the legal budget document. The statement shows four columns: 1) the original budget as adopted by the Council; 2) the final budget as amended by the Council; 3) the actual resources, charges to appropriations, and ending balances in the General Fund; and, 4) the difference or variance between the final budget and the actual resources and charges. To account for the difference between the budgetary basis of accounting and the modified accrual basis, a reconciliation showing the differences in the reported activities is shown at the end of the budgetary statement. Proprietary Funds — The City of Monroe maintains one type of proprietary fund. Enterprise Funds are used to report the same functions presented as business -type activities in the government -wide financial statements. The City uses enterprise funds to account for its water and sewer, electric, natural gas, aquatics and fitness center, and airport operations. These funds are the same as those functions shown in the business -type activities in the Statement of Net Assets and the Statement of Activities. Notes to the Financial Statements — The notes provide additional information that is essential to a full understanding of the data provided in the government -wide and fund financial statements. The notes to the financial statements begin on page 30 of this report. Other Information — In addition to the basic financial statements and accompanying notes, this report includes certain required supplementary information concerning the City of Monroe's progress in funding its obligation to provide pension benefits to its employees. Required supplementary information can be found beginning on page 58 of this report. Government -Wide Financial Analysis City of Monroe's Net Assets Figure 2 Governmental Activities Business -type Activities 2008 2007 Total 2008 2007 2008 2007 Current and other assets $25,222,942 $24,828,152 $124,887,117 $83,742,212 $151,527,732 $108,570,364 Capital assets 81,287,999 77,718,284 162,558,136 142,274,252 243,846,135 219,992,536 Total assets 106,510,941 102,546,436 287,445,253 226,016,464 395,373,867 328,562,900 Long -term liabilities outstanding 6,564,177 4,923,115 62,085,983 20,822,074 68,650,160 25,745,189 Other liabilities 5,717,321 4,986,953 13,324,689 9,625,521 20,459,683 14,612,474 Total liabilities 12,281,498 9,910,068 75,410,672 30,447,595 89,109,843 40,357,663 Net assets: Invested capital assets, net of related debt 73,466,565 71,568,216 127,957,064 118,219,103 201,423,629 189,787,319 Restricted 45,296 143,889 - - 45,296 143,889 Unrestricted 20,717,582 20,924,263 84,077,517 77,349,766 104,795,099 98,274,029 Total net assets $94,229,443 $92,636,368 $212,034,581 $195,568,869 $306,264,024 $288,205,237 As noted earlier, net assets may serve over time as one useful indicator of a government's financial condition. The assets of the City of Monroe exceeded liabilities by $306,264,024 as of June 30, 2008. The City's net assets increased by $18,058,787 for the fiscal year ended June 30, 2008. The largest portion of this increase ($13,240,511) reflects the City's investment in capital assets (e.g. land, buildings, machinery, and equipment), less any related debt still outstanding that was issued to acquire those items. The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City's investment in its capital assets is reported net of the outstanding related debt, the resources needed to repay that debt must be provided by other sources, since the capital assets cannot be used to liquidate these liabilities. An additional portion of the City's net assets ($45,296) represents resources that are subject to external restrictions on how they may be used. The remaining balance of $104,795,099 is unrestricted. Several particular aspects of the City's financial operations positively influenced the total unrestricted governmental net assets: • Continued diligence in the collection of property taxes by maintaining a tax collection percentage of 98.08 %, which is favorably comparable to the statewide average of 97.59 %. • Continued low cost of debt due to the City's high bond rating. City of Monroe's Changes in Net Assets Figure 3 Transfers (Decrease) Increase in net assets Net assets as previously reported — 7/l/07 Prior period adjustment— see note X Net assets restated — 7/l/07 Net assets — 6/30/08 (441,548) 237,210 441,548 (237,210) 3,087,095 537,600 14,848,116 17,528,844 92,636,368 92,098,768 195,568,869 178,040,025 (1,494,020) 1,617,596 91,142,348 197,186,465 Total Governmental Activities Business -type Activities $85,475,884 2008 2007 2008 2007 Revenues: $15,303,524 $13,851,160 8,192,064 8,111,690 Program revenues: 202,072 6,848,533 6,327,491 123, 828,913 Charges for services $4,825,229 $4,914,174 $80,650,655 $76,774,854 Operating grants and contributions 2,404,050 2,267,414 - - Capital grants and contributions 2,435,198 44,673 2,918,184 3,353,784 General revenues: Property taxes $15,303,524 $13,851,160 - - Othertaxes 8,192,064 8,111,690 Grants and contributions not restricted to specific grant programs 251,476 202,072 - - Other 1,933,953 1,582,745 4,914,580 4,744,746 Total revenues 35,345,494 30,973,928 88,483,419 84,873,384 Governmental Activities Business -type Activities 2008 2007 2008 2007 Expenses: General government $4,944,989 $4,176,279 $ - $ - Transportation 4,965,651 4,443,989 Public safety 14,246,734 13,557,249 Environmental protection 2,551,419 2,349,393 - - Cultureandrecreation 3,922,352 3,801,778 Economic and physical development 948,065 2,140,313 Interest in long -term debt 237,641 204,537 - Water and sewer - - 11,380,664 8,906,769 Electrical 39,702,549 37,041,713 Natural Gas 16,941,568 16,036,744 Aquatics and Fitness Center 3,187,412 2,934,584 Airport 2,864,658 2,187,520 Total expenses 31,816,851 30,673,538 74,076,851 67,107,330 (Decrease) Increase in net assets before transfers 3,528,643 300,390 14,406,568 17,766,054 Transfers (Decrease) Increase in net assets Net assets as previously reported — 7/l/07 Prior period adjustment— see note X Net assets restated — 7/l/07 Net assets — 6/30/08 (441,548) 237,210 441,548 (237,210) 3,087,095 537,600 14,848,116 17,528,844 92,636,368 92,098,768 195,568,869 178,040,025 (1,494,020) 1,617,596 91,142,348 197,186,465 Total $4,176,279 2008 2007 $85,475,884 $81,689,028 2,404,050 2,267,414 5,353,382 3,398,457 $15,303,524 $13,851,160 8,192,064 8,111,690 251,476 202,072 6,848,533 6,327,491 123, 828,913 115, 847,312 Total 2,934,584 2008 2007 $4,944,989 $4,176,279 4,965,651 4,443,989 14,246,734 13,557,249 2,551,419 2,349,393 3,922,352 3,801,778 948,065 2,140,313 237,641 204,537 11,380,664 8,906,769 39,702,549 37,041,713 16,941,568 16,036,744 3,187,412 2,934,584 2,864,658 2,187,520 105,893,702 97,780,868 17,935,211 18, 066,444 17,935,211 18, 066,444 288,205,237 270,138,793 123,576 288,328,813 $94,229,443 $92,636,368 $212,034,581 $195,568,869 $306,264,024 $288,205,237 Governmental activities — Governmental activities increased the City of Monroe's net assets by $3,087,095. Key elements of this net increase are as follows: 6 An increase in property taxes of 10.5% ($1,452,364), due primarily to a ad valorem tax rate increase of .02 cents. An increase in capital grants and contributions of $2,390,525 was due to the acceptance of infrastructure which includes streets, curbs, sidewalks and stormwater, for several subdivisions including Lexington Commons, Southwinds, Hamilton Place, Charlestown Townhomes and East Village. A decrease in economic and physical development expenses of $1,192,248 was due to a decrease in economic incentive grants. Business -type activities — Business -type activities increased the City of Monroe's net assets by $14,848,116 accounting for 83% of the total net growth in the government's net assets. Financial Analysis of the City's Funds As noted earlier, the City of Monroe uses fund accounting to ensure and demonstrate compliance with finance- related legal requirements. Governmental Funds — The focus of the City of Monroe's governmental funds is to provide information on near -term inflows, outflows, and balances of usable resources. Such information is useful in assessing the City's financing requirements. Specifically, unreserved fund balance can be a useful measure of a government's net resources available for spending at the end of the fiscal year. The General Fund is the chief operating fund of the City of Monroe. At the end of the current fiscal year, unreserved fund balance of the General Fund was $15,635,606, while total fund balance increased to $20,607,546. As a measure of the General Fund's liquidity, it may be useful to compare both unreserved fund balance and total fund balance to total fund expenditures. At June 30, 2008, unreserved fund balance is 52% of General Fund expenditures, while total fund balance is 69% of that same amount. At June 30, 2008, the governmental funds of City of Monroe reported a combined fund balance of $23,208,182. Fund balance for General Fund increased $2,553,414 while fund balance for the Special Revenue and Capital Projects Funds decreased $1,264,927. Proprietary Funds — The City of Monroe's proprietary funds provide the same type of information found in the government -wide statements but in more detail. The table below presents the unrestricted net assets and the total growth in net assets for all proprietary funds. General Fund Budgetary Highlights During the fiscal year, the City of Monroe revised the budget on several occasions. Generally, budget amendments fall into one of three categories: 1) amendments made to adjust the estimates that are used to prepare the original budget ordinance once exact information is available; 2) amendments made to recognize new funding amounts from external sources, such as federal and State grants; and, 3) increases in appropriations that become necessary to maintain services. Total amendments to the General Fund increased expenditures by $2,088,199 or 6.47 %. The key differences between the original budget and the final amended budget can be briefly summarized as follows: Unrestricted Net Assets Growth in Net Assets 2008 2007 2008 2007 Water and Sewer $20,974,365 $19,579,835 $5,636,701 $8,250,041 Electric 47,367,775 43,884,439 6,034,711 4,658,126 Natural Gas 11,611,959 10,454,846 2,556,349 2,655,108 Aquatics and Fitness Center 2,931,712 2,442,399 1,044,864 1,145,214 Airport 1,191,706 988,247 (424,509) 820,355 General Fund Budgetary Highlights During the fiscal year, the City of Monroe revised the budget on several occasions. Generally, budget amendments fall into one of three categories: 1) amendments made to adjust the estimates that are used to prepare the original budget ordinance once exact information is available; 2) amendments made to recognize new funding amounts from external sources, such as federal and State grants; and, 3) increases in appropriations that become necessary to maintain services. Total amendments to the General Fund increased expenditures by $2,088,199 or 6.47 %. The key differences between the original budget and the final amended budget can be briefly summarized as follows: • Funds were appropriated for prior year encumbrances in the amount of $488,781. • Funds were appropriated for grants and donations received in the amount of $291,048. Revenues exceeded final budget by $1,612,632 or 5.21 %. Expenditures increased almost 6.5% from the prior year, but were 93% of the final amended expenditure budget. Expenditures were held $2.4 million below final budget amounts. Some of the key differences are as follows: • A continued emphasis on cost control and prudent financial management by City department directors. • General Government expenditures were $1.2 million below the final budget primarily due to position vacancies and deferring professional and technical services. • Culture and Recreation expenditures were $.5 million below the final budget due to position vacancies and unspent building maintenance funds. Capital Asset and Debt Administration Capital assets — The City of Monroe's investment in capital assets for its governmental and business —type activities as of June 30, 2008, totals $243,846,134 (net of accumulated depreciation). These assets include buildings, roads and bridges, land, enterprise systems infrastructure, machinery and equipment, park facilities, and vehicles. Major capital asset transactions during the year include the following additions: • Electric and natural gas distribution systems construction • Water distribution and sewer collection systems construction • Airport improvements • New fire station 45 • Park Williams Athletic Center • General Fund infrastructure including streets, curbs, sidewalks and stormwater Capital Assets (Net of Depreciation) Figure 4 Additional information on the City's capital assets can be found in note IV.A.5 of the Basic Financial Statements. Governmental Activities $13,147,940 $13,147,940 28,762,699 28,438,576 4,479,272 5,825,173 2008 2007 $17,319,405 $17,332,480 38,663,889 36,658,414 6,007,825 7,436,501 6,555,838 6,756,348 147, 572,011 143, 527,027 27,727,167 8,281,766 $243,846,135 $219,992,536 Business -type Activities 2008 2007 Total 2008 2007 Land $4,171,465 $4,184,540 Buildings and improvements 9,901,190 8,219,838 Equipment 1,528,553 1,611,328 Vehicles and motorized equipment 4,949,026 4,974,573 Infrastructure 57,220,620 56,986,951 Construction in progress 3,517,145 1,741,054 Total $81,287,999 $77,718,284 1,606,812 1,781,775 90,3 51, 391 86,540,076 24,210,022 6,540,712 $162,558,136 $142,274,252 Long -term Debt — As of June 30, 2008, the City of Monroe had total bonded debt outstanding of $54,600,000. Of this, $790,000 is debt backed by the full faith and credit of the City. The remainder of the City's bonded debt represents bonds secured solely by specified revenue sources (i.e. revenue bonds). 8 City of Monroe's Outstanding Debt General Obligation and Revenue Bonds Figure 5 2uux 2001 General obligation bonds $790,000 $1,450,000 Revenue bonds 53,810,000 10,385,000 Total $54,600,000 $11,835,000 As mentioned in the financial highlights of this document, the City's total debt, net of retirements, increased $42,899,623 during the fiscal year. The primary elements of the increase were the issuance of Combined Enterprise System Revenue Bonds totaling $44,015,000 and two new installment financing issuances totaling $3,888,480 for equipment purchases and facility improvements and $5,003,857 in debt retirements. The City of Monroe continues to maintain its Al bond rating from Moody's Investor Service and A+ rating from Standard and Poor's Corporation. These bond ratings are clear indications of the sound financial condition of the City of Monroe. North Carolina General Statutes limit the amount of general obligation debt that a unit of government can issue to eight percent of the total assessed value of taxable property located within that government's boundaries. The legal debt margin for the City of Monroe is $206,209,775. Additional information regarding the City of Monroe's long -term debt can be found in note IV.B.7. beginning on page 49 of this report. Economic Factors and Next Year's Budgets and Rates The following key economic indicators reflect the growth and prosperity of the City. The annual unemployment rate for Union County has risen to 5.6 %, however, this amount has remained consistently below the State's average rate of 6.2 %. Despite the national economic slowdown, commercial growth continued to be strong increasing 16.8% over 2007. This increase is attributed to capital investments by Goodrich Corporation, Electricities, American Wick Drain and ATI Allvac. Other commercial and retail development and expansion has been strong as well. Reserve capacity for water and sewer for continued commercial and industrial growth is available. Residential development decreased to $35 million partly due to a residential moratorium imposed by City Council in January 2008 and a nationwide housing slowdown. Governmental Activities — Property taxes (benefiting from revaluation and a $.025/$100 valuation tax rate increase) and other taxes and licenses are expected to lead the increase in budgeted revenue by 7.8 %. The City will use these increases in revenues to finance programs currently in place. Budgeted expenditures in the General Fund are expected to increase approximately 17.1 %. The largest components of the increase are a new fire station and the addition of seven new full -time employees including four additional police officers, two additional code enforcement officers, and one new Armory Center employee. Business -type Activities — The following are highlights for the 2009 budgets for the business -type activities: • The budget for Business -type operating expenses increased by 15.3% in FY 09 versus FY 08. The largest increase was in natural gas utility which is the result of an increase in the cost of natural gas purchases for resale. Water and sewer rates were increased by 4.5% to plan for the significant anticipated cost of future capital projects. Electric and natural gas rates remained the same. The City has established two new business -type funds for fiscal year 2009 to account for Stormwater and Solid Waste activity. Revenues and Expenditures for Stormwater and Solid Waste were previously accounted for in the City's General Fund. Requests for Information This report is designed to provide an overview of the City's finances for those with an interest in this area. Questions concerning any of the information found in this report or requests for additional information should be directed to the City of Monroe Department of Finance and Administration at 300 West Crowell Street, Monroe, North Carolina, 28112, or visit the City's website at www.monroenc.org 10 BASIC FINANCIAL STATEMENTS Basic Financial Statements The Basic Financial Statements provide a summary overview of the financial position of the governmental activities, the business -type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information at June 30, and the respective changes in financial position and cash flows, where appropriate for the year then ended. • Government -Wide Financial Statements • Fund Financial Statements Governmental Fund Financial Statements Proprietary Fund Financial Statements • Notes to Financial Statements • Required Supplemental Information CITY OF MONROE, NORTH CAROLINA STATEMENT OFNETASSETS June 30, 2008 EXHIBIT 1 LIABILITIES Current liabilities Accounts payable and accrued liabilities Primary Government Component Units 10,037,835 380,848 43 Unearned revenue 329,965 - Monroe - - Self- insurance fund claims payable 292,225 - 292,225 Tourism Due to primary government Governmental Business -type - City of Monroe Development 3,384,299 Activities Activities Total ABC Board Authority ASSETS 984,926 - - Unamortized premium - 378,223 Current assets: - - Long -term liabilities: Cash and cash equivalents $ 19,882,749 $ 77,715,435 $ 97,598,184 $ 655,695 $ 152,675 Taxes receivable 859,755 - 859,755 - - Accounts receivable 687,355 6,611,234 7,298,589 4,665 39,415 Note receivable - 423,156 423,156 - - Due from other governments 3,182,672 - 3,182,672 - - Due from component units 69,610 - 69,610 - - Inventories 344,852 4,273,043 4,617,895 272,469 - Loans receivable (net) 21,379 - 21,379 - - Total current assets 25,048,372 89,022,868 114,071,240 932,829 192,090 Restricted assets: Cash and cash equivalents 1,462,912 32,546,797 34,009,709 - - Noncurrent assets: Note receivable - 1,156,280 1,156,280 - - Due from (to) other funds (1,417,673) 1,417,673 - - - Deferred charges - 743,499 743,499 - - Prepaid pension obligation 129,331 - 129,331 - - Capital assets Land, non - depreciable improvements, and construction in progress 7,688,610 37,357,962 45,046,572 317,013 - Other capital assets, net of depreciation 73,599,389 125,200,174 198,799,563 787,852 - Total capital assets 81,287,999 162,558,136 243,846,135 1,104,865 - Total noncurrent assets 79,999,657 165,875,588 245,875,245 1,104,865 - Total assets 106,510,941 287,445,253 393,956,194 2,037,694 192,090 LIABILITIES Current liabilities Accounts payable and accrued liabilities 1,710,832 8,327,003 10,037,835 380,848 43 Unearned revenue 329,965 - 329,965 - - Self- insurance fund claims payable 292,225 - 292,225 - - Due to primary government - - - 50,000 19,751 Current portion of long -term liabilities 3,384,299 3,634,537 7,018,836 50,000 - Payable from restricted assets - 984,926 984,926 - - Unamortized premium - 378,223 378,223 - - Long -term liabilities: Due in more than one year 6,564,177 62,085,983 68,650,160 212,500 - Total liabilities 12,281,498 75,410,672 87,692,170 693,348 19,794 NET ASSETS Invested in capital assets, net of related debt 73,466,565 127,957,064 201,423,629 842,366 - Restricted for: Streets 45,296 - 45,296 - - Other purposes - - - 151,706 - Unrestricted 20,717,582 84,077,517 104,795,099 350,274 172,296 Total net assets $ 94,229,443 $ 212,034,581 $ 306,264,024 $ 1,344,346 $ 172,296 The notes to the financial statements are an integral part of this statement. 13 CITY OF MONROE, NORTH CAROLINA STATEMENT OFACTIVITIES For the Year Ended June 30, 2008 Program Revenues Operating Grants Capital Grants Charges for and and Functions/Programs Expenses Services Contributions Contributions Primary government: Governmental activities General government $ 4,944,989 $ 1,132,181 $ Transportation 4,965,651 - Public safety 14,246,734 50,534 Environmental protection 2,551,419 2,795,464 Culture and recreation 3,922,352 843,633 Economic and physical development 948,065 3,417 Interest on long -term debt 237,641 - Total governmental activities 31,816,851 4,825,229 Business -type activities: Water and sewer Electric Natural gas Aquatics and Fitness Center Airport Total business -type activities Total primary government 11,3 80,664 12,705,298 39,702,549 43,050,885 16,941,568 18,836,178 3,187,412 4,161,767 2,864,658 1,896,527 -7n n-7< oci on <cn <cc 7,873 $ 1,153,571 1,017,436 1,625 216,370 7,175 2,435,198 2,404,050 2,435,198 - 2,918,184 - 2,918,184 $ 105,893,702 $ 85,475,884 $ 2,404,050 $ 5,353,382 Component units: ABC Board Tourism Development Authority Total component units $ 4,865,565 $ 4,971,135 $ - $ - 290,112 - 315,890 - $ 5,155,677 $ 4,971,135 $ 315,890 $ - General revenues: Taxes: Property taxes, levied for general purpose Local option sales tax Utility taxes Other taxes Grants and contributions not restricted to specific programs Unrestricted investment earnings Miscellaneous Gain on sale of capital assets Transfers Total general revenues and transfers Change in net assets Net assets, beginning as previously reported Prior period adjustment - see note X Net assets, beginning as restated Net assets, ending The notes to the financial statements are an integral part of this statement. 14 EXHIBIT 2 Net (Expense) Revenue and Changes in Net Assets Primary Government Component Units Monroe Tourism Governmental Business -type City of Monroe Development Activities Activities Total ABC Board Authority $ (3,804,935) $ - $ (3,804,935) - (1,376,882) - (1,376,882) - - (13,178,764) - (13,178,764) - - 245,670 - 245,670 - - (2,862,349) - (2,862,349) - - (937,473) - (937,473) - - (237,641) - (237,641) - - (22,152,374) - (22,152,374) - 4,242,818 - 3,348,336 - 1,894,610 - 974,355 - (968,131) - 9,491,988 (22,152,374) 9,491,988 4,242,818 3,348,336 1,894,610 974,355 (968,131) 9,491,988 (12,660,3 86) - - - 105,570 - - - - 25,778 - - - 105,570 25,778 15,303,524 - 15,303,524 - - 4,884,108 - 4,884,108 - - 1,430,266 - 1,430,266 - - 1,877,690 - 1,877,690 - - 251,476 - 251,476 - - 1,258,817 4,853,409 6,112,226 18,044 4,050 475,924 59,869 535,793 - - 199,212 1,302 200,514 - - (441,548) 441,548 - - - 25,239,469 5,356,128 30,595,597 18,044 4,050 3,087,095 14,848,116 17,935,211 123,614 29,828 92,636,368 195,568,869 288,205,237 1,220,732 142,468 (1,494,020) 1,617,596 123,576 - - 91,142,348 197,186,465 288,328,813 1,220,732 142,468 $ 94,229,443 $ 212,034,581 $ 306,264,024 $ 1,344,346 $ 172,296 15 CITY OF MONROE, NORTH CAROLINA BALANCE SHEET GOVERNMENTAL FUNDS June 30, 2008 ASSETS Cash and cash equivalents Receivables: Taxes Accounts Due from other governments Due from component unit Inventories Loans receivable (net) Cash and cash equivalents - restricted Total assets LIABILITIES AND FUND BALANCES Liabilities: Accounts payable and accrued liabilities Deferred revenue Unearned revenue Self- insurance fund claims payable Total liabilities Fund balances: Reserved for: Encumbrances State statute Streets - Powell bill Unreserved for General Fund: Designated for subsequent year's expenditures Designated for self- insurance expenditures Undesignated Unreserved for reported in: Special Revenue Funds Capital Projects Funds Total fund balances Total liabilities and fund balances General $ 17,132,892 $ 823,857 684,038 3,182,672 69,610 344,853 1,462, 912 EXHIBIT 3 Total Governmental Funds 2,749,857 $ 19,882,749 35,897 859,754 3,317 687,355 - 3,182,672 - 69,610 - 344,853 21,379 21,379 - 1,462,912 $ 23,700,834 $ 2,810,450 $ 26,511,284 $ 1,523,689 $ 187,144 $ 1,710,833 947,409 22,670 970,079 329,965 - 329,965 292,225 - 292,225 3,093,288 209,814 3,303,102 769,023 - 769,023 4,157,621 3,317 4,160,938 45,296 45,296 2,230,971 - 2,230,971 2,658,307 - 2,658,307 10,746,328 - 10,746,328 - 1,417,825 1,417,825 - 1,179,494 1,179,494 20,607,546 2,600,636 23,208,182 $ 23,700,834 $ 2,810,450 $ 26,511,284 The notes to the financial statements are an integral part of this statement. Other Governmental Funds 16 CITY OF MONROE, NORTH CAROLINA RECONCILIATION OF GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS June 30, 2008 Amounts reported for governmental activities in the statement of net assets are different because: Fund balances - total governmental funds (Exhibit 3) Capital assets used in governmental activities are not financial resources and therefore are not reported in the funds. Gross capital assets at historical cost Accumulated depreciation Other long -term assets are not available to pay for current period expenditures and therefore are deferred in the funds. Prepaid pension obligation Liabilities for earned but deferred revenues in fund statements. Principal repayment of loan from Electric Fund Long -term liabilities are not due and payable in the current period and therefore are not reported in the funds (Note IILA.). Prior period adjustment, see note X Net assets of governmental activities (Exhibit 1) The notes to the financial statements are an integral part of this statement. $ 123,057,823 (41,769,824 EXHIBIT 4 $ 23,208,182 81,287,999 129,331 970,079 76,348 (9,948,476) (1,494,020) $ 94,229,443 17 CITY OF MONROE, NORTH CAROLINA STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES -- GOVERNMENTAL FUNDS For the Year Ended Tune 30, 2008 Ia1:I011 "M m Other Total Governmental Governmental General Funds Funds REVENUES Ad valorem taxes Other taxes and licenses Unrestricted intergovernmental Restricted intergovernmental Program income Sales and services Investment earnings Miscellaneous Total revenues EXPENDITURES Current: General government Transportation Public safety Environmental protection Culture and recreation Economic and physical development Capital outlay Debt service: Principal retirement Interest and other charges Total expenditures Deficiency of revenues under expenditures OTHER FINANCING SOURCES (USES) Transfers from other funds Transfers to other funds Installment purchase obligations issued Total other financing sources (uses) Net change in fund balances Fund balance, beginning Fund balances, ending $ 15,227,297 $ 38,022 $ 15,265,319 855,174 371,635 1,226,809 7,177,379 - 7,177,379 2,315,050 62,589 2,377,639 - 5,543 5,543 5,137,066 - 5,137,066 1,241,930 16,888 1,258,818 650,277 - 650,277 32,604,173 494,677 33,098,850 4,670,579 - 4,670,579 2,905,734 - 2,905,734 14,260,777 - 14,260,777 2,551,419 - 2,551,419 3,676,005 - 3,676,005 - 829,538 829,538 - 3,817,516 3,817,516 1,660,339 - 1,660,339 182,511 - 182,511 29,907,364 4,647,054 34,554,418 2,696,809 (4,152,377) (1,455,568) 68,345 1,043,195 1,111,540 (1,628,820) (55,745) (1,684,565) 1,417,080 1,900,000 3,317,080 (143,395 2,887,450 2,744,055 2,553,414 (1,264,927) 1,288,487 18,054,132 3,865,563 21,919,695 $ 20,607,546 $ 2,600,636 $ 23,208,182 The notes to the financial statements are an integral part of this statement. 18 CITY OF MONROE, NORTH CAROLINA RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OFACTIVITIES For the Year Ended June 30, 2008 Amounts reported for governmental activities in the statement of activities are different because: Net change in fund balances - total governmental funds (Exhibit 5) Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which depreciation exceeded capital outlays in the current period (Note ILB.). Governmental funds report the proceeds from the sale of capital assets as an increase in financial resources. In the statement of activities, only the gain (loss) on the sale of capital assets is reported. Thus, the change in net assets differs from the change in fund balance by the net book value of the capital assets sold. Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds. Change in deferred revenue Change in allowance for loans receivable The issuance of long -term debt provides current financial resources to governmental funds, while the repayment of the principal of long -term debt consumes the current financial resources of governmental funds. Neither transaction has any effect on net assets in the government -wide statements. Also, governmental funds report the effect of issuance costs, premiums, discounts and similar items when debt is first issued, whereas these amounts are deferred and amortized in the statement of activities. This amount is the net effect of these differences in the treatment of long -term debt and related items (Note ILB.). Principal repayment of loan from Electric Fund Some expenses reported in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds. Compensated absences Net pension obligation Self- insurance fund claims payable Change in net assets of governmental activities (Exhibit 2) The notes to the financial statements are an integral part of this statement. $ 36,240 (3,507) (127,305) 11,727 (93,241) W.4.11. $ 1,288,487 3,729,520 (159,805) 32,733 (1,671,367) 76,346 (208,819) $ 3,087,095 19 .10 \'ROH; CITY OF MONROE, NORTH CAROLINA STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES -- BUDGET AND ACTUAL -- GENERAL FUND For the Year Ended Tune 30, 2008 REVENUES Ad valorem taxes Other taxes and licenses Unrestricted intergovernmental Restricted intergovernmental Sales and services Investment earnings Miscellaneous Total revenues EXPENDITURES Current: General government Transportation Public safety Environmental protection Culture and recreation Debt service: Principal retirement Interest and other charges Total expenditures Revenues over (under) expenditures OTHER FINANCING SOURCES (USES) Transfers from other funds Transfers to other funds Installment purchase obligations issued Total other financing sources (uses) FUND BALANCE APPROPRIATED Net change in fund balance Fund balance, beginning Fund balance, ending The notes to the financial statements are an integral part of this statement. Ia1:I0/11 1 Variance with Budgeted Amounts Final Budget - Actual Positive Original Final Amounts (Negative) $ 14,078,000 $ 14,501,657 $ 15,227,297 $ 725,640 758,000 758,000 855,174 97,174 6,857,500 6,857,500 7,177,379 319,879 1,688,846 1,979,894 2,315,050 335,156 5,127,180 5,341,475 5,137,066 (204,409) 720,000 1,075,640 1,241,930 166,290 448,800 477,375 650,277 172,902 29,678,326 30,991,541 32,604,173 1,612,632 4,958,901 5,894,936 4,670,579 1,224,357 2,823,319 3,129,075 2,905,734 223,341 13,816,757 14,455,510 14,260,777 194,733 2,361,016 2,561,016 2,551,419 9,597 4,021,778 4,224,433 3,676,005 548,428 2,212,845 1,780,204 1,660,339 119,865 - 237,641 182,511 55,130 30,194,616 32,282,815 29,907,364 2,375,451 (516,290 (1,291,274 2,696,809 3,988,083 48,000 70,600 68,345 (2,255) (876,815) (1,856,054) (1,628,820) 227,234 1,477,305 1,477,305 1,417,080 (60,225 648,490 (308,149 (143,395 164,754 (132,200 1,599,423 - (1,599,423) 2,553,414 $ 2,553,414 18,054,132 $ 20,607,546 21 CITY OF MONROE, NORTH CAROLINA STATEMENT OF NET ASSETS PROPRIETARY FUNDS June 30, 2008 ASSETS Current assets: Cash and cash equivalents Accounts receivable Note receivable Inventories Total current assets Noncurrent assets: Restricted assets: Cash and cash equivalents: Unspent bond proceeds Customer deposits Bond issuance costs Due from other funds Long -term note receivable Capital assets: Land and other non - depreciable assets Other capital assets, net of depreciation Capital assets (net) Total noncurrent assets Total assets LIABILITIES Current liabilities: Accounts payable and accrued liabilities Compensated absences Installment purchase obligations General obligation bonds payable Revenue bonds payable State revolving loans payable Total current liabilities Liabilities payable from restricted assets: Customer deposits Noncurrent liabilities: Compensated absences Bond premium Installment purchase obligations General obligation bonds payable Revenue bonds payable State revolving loans payable Total noncurrent liabilities Total liabilities NET ASSETS Invested in capital assets, net of related debt Unrestricted Total net assets Major Enterprise Water and Sewer Electric Natural Gas $ 20,143,862 $ 42,054,450 $ 11,419,200 889,689 4,184,009 1,443,207 - 423,156 - 349,624 3,624,732 179,451 21,383,175 50,286,347 13,041,858 5,352,950 13,840,962 1,145,417 120,897 611,514 252,515 99,716 423,923 70,286 - 1,417,673 - - 1,156,280 - 2,013,593 20,787,478 4,725,740 59,490,830 38,068,902 12,786,708 61,504,423 58,856,380 17,512,448 67,077,986 76,306,732 18,980,666 88,461,161 126,593,079 32,022,524 446,843 5,924,862 1,618,605 143,582 70,092 18,374 237,936 167,525 56,685 650,000 - - 341,992 197,296 85,712 827,077 - - 2,647,430 6,359,775 1,779,376 120,897 611,514 252,515 70,720 34,523 9,051 64,072 269,176 44,975 377,773 378,076 162,266 129,152 - - 10,756,814 24,382,131 4,707,889 5,104,832 - - 16,624,260 25,675,420 5,176,696 19,271,690 32,035,195 6,956,072 48,215,106 47,190,109 13,454,493 20,974,365 47,367,775 11,611,959 $ 69,189,471 $ 94,557,884 $ 25,066,452 The notes to the financial statements are an integral part of this statement. 22 EXHIBIT 8 Nonmajor Enterprise Funds Fund Aquatics and Fitness Center Airport Total $ 3,066,709 $ 1,031,214 $ 77,715,435 39,147 55,182 6,611,234 - - 423,156 8,224 111,012 4,273,043 3,114,080 1,197,408 89,022,868 - 11,222,542 31,561,871 - - 984,926 - 149,574 743,499 - - 1,417,673 - - 1,156,280 925,594 8,905,557 37,357,962 7,598,880 7,254,854 125,200,174 8,524,474 16,160,411 162,558,136 8,524,474 27,532,527 198,422,385 11,638,554 28,729,935 287,445,253 - - 5,104,832 146,630 190,063 8,327,003 23,944 - 255,992 778,386 35,936 1,276,468 - - 650,000 - - 625,000 - - 827,077 948,960 225,999 11,961,540 984,926 11,794 - 126,088 - - 378,223 2,789,825 76,137 3,784,077 - - 129,152 - 13,095,000 52,941,834 - - 5,104,832 2,801,619 13,171,137 63,449,132 3,750,579 13,397,136 75,410,672 4,956,263 14,141,093 127,957,064 2,931,712 1,191,706 84,077,517 $ 7,887,975 $ 15,332,799 $ 212,034,581 23 CITY OF MONROE, NORTH CAROLINA STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET ASSETS -- PROPRIETARY FUNDS For the Year Ended June 30, 2008 Major Enterprise OPERATING REVENUES Charges for services Other operating revenues Total operating revenues OPERATING EXPENSES Distribution systems Water filter plant Waste treatment plant Electric power purchases Natural gas purchases Aquatics and Fitness Center operations Airport operations Depreciation and amortization Total operating expenses Operating income (loss) NONOPERATING REVENUES (EXPENSES) Rate stabilization funds Power agency funding Gain (loss) on sale of capital assets Availability fees Other nonoperating revenues Investment earnings Interest and other charges Total nonoperating revenues (expenses) Income (loss) before contributions and transfers CAPITAL CONTRIBUTIONS CAPITAL GRANTS TRANSFERS FROM OTHER FUNDS TRANSFERS TO OTHER FUNDS Change in net assets Total net assets, beginning Prior period adjustment - see note X Total net assets, beginning as restated Total net assets, ending The notes to the financial statements are an integral part of this statement. Water $ 12,473,097 $ 42,961,611 $ 18,806,722 232,201 89,274 29,456 12,705,298 43,050,885 18,836,178 5,086,243 3,028,621 2,323,695 2,557,332 - - 2,368,124 - - - 35,396,259 - - - 14,101,837 1,714,407 1,917,006 422,100 11,726,106 40,341,886 16,847,632 979,192 2,708,999 1,988,546 - 181,068 - - 767,556 - 27,750 - (26,448) 1,009,760 - - 11,003 45,874 2,992 1,269,550 2,646,701 591,595 (664,318 (309,287 (93,936 1,653,745 3,331,912 474,203 2,632,937 6,040,911 2,462,749 2,918,184 - - 595,453 - 100,000 (509,873 (6,200 (6,400 5,636,701 6,034,711 2,556,349 63,552,770 86,905,577 22,510,103 - 1,617,596 - 63,552,770 88,523,173 22,510,103 $ 69,189,471 $ 94,557,884 $ 25,066,452 24 VA:I1 AU Nonmajor Enterprise Funds Fund Aquatics and Fitness Center Airport Total $ 3,994,631 $ 1,853,420 $ 80,089,481 167,136 43,107 561,174 4,161,767 1,896,527 80,650,655 - - 10,438,559 - - 2,557,332 - - 2,368,124 - - 35,396,259 - - 14,101,837 2,758,767 - 2,758,767 - 2,251,145 2,251,145 1,146,739 (878,635) 5,944,841 - - 181,068 - - 767,556 - - 1,302 - - 1,009,760 - - 59,869 170,509 175,054 4,853,409 17( 2,384) (89,496) (1,329,421) (1,875) 85,558 5,543,543 1,144,864 (793,077) 11,488,384 - - 2,918,184 - 368,568 1,064,021 (100,000) - (622,473) 1,044,864 (424,509) 14,848,116 6,843,111 15,757,308 195,568,869 - - 1,617,596 6,843,111 15,757,308 197,186,465 $ 7,887,975 $ 15,332,799 $ 212,034,581 25 CITY OF MONROE, NORTH CAROLINA STATEMENT OF CASH FLOWS PROPRIETARY FUNDS For the Year Ended June 30, 2008 CASH FLOWS FROM OPERATING ACTIVITIES Cash received from customers Cash paid for goods and services Cash paid to or on behalf of employees for services Customer deposits received Customer deposits returned Other operating revenues Net cash provided (used) by operating activities CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Transfers from other funds Transfers to other funds Net cash provided (used) by noncapital financing activities CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Proceeds from issuance of long -term debt Proceeds from sale of capital assets Acquisition and construction of capital assets Note receivable collected Principal paid on bond maturities and equipment obligations Interest paid on bond maturities and equipment obligations Rate stabilization funds Power agency funds Availability fees Bond issuance costs Net cash used by capital and related financing activities CASH FLOWS FROM INVESTING ACTIVITIES Earnings on investments Net increase in cash and cash equivalents Water and Sewer Electric Natural Gas Major Enterprise $ 12,691,436 (6,502,106) (3,286,799) 79,928 (111,224) 243,204 $ 42,450,061 (35,605,101) (726,275) 383,552 (565,013) 135,148 $ 18,560,045 (15,101,388) (601,627) 158,411 (194,772) 32,448 3,114,439 6,072,372 2,853,117 595,453 - 100,000 (509,873 (6,200 (6,400 85,580 (6,200 93,600 5,482,152 22,503,783 3,887,054 27,750 - - (1,287,420) (16,094,296) (4,608,879) - 499,502 - (2,056,306) (378,817) (127,374) (638,238) (292,039) (85,593) - 181,068 - - 767,556 - 1,009,760 - - (101,751) (428,205) (71,720) 2,435,947 6,758,552 (1,006,512) 1,269,550 2,646,701 591,595 6,905,516 15,471,425 2,531,800 Balances, beginning 18,712,193 41,035,501 10,285,332 Balances, ending $ 25,617,709 $ 56,506,926 $ 12,817,132 Noncash investing, capital and financing activities: The City received noncash capital contributions in the Water and Sewer Fund in the amount of $2,918,184 representing donated capital assets. The net book value of assets disposed in the Natural Gas Fund amounted to $26,448. The notes to the financial statements are an integral part of this statement. 26 EXHIBIT 10, Continued Nonmajor Enterprise Funds Fund Aquatics and Fitness Center Airport Total $ 3,955,484 $ 1,835,117 $ 79,492,143 (1,230,910) (1,747,860) (60,187,365) (1,468,781) (398,985) (6,482,467) - - 621,891 - - (871,009) 167,136 43,107 621,043 1,422,929 (268,621) 13,194,236 - 368,568 1,064,021 (100,000) - (622,473) (100,000) 368,568 441,548 - 13,095,000 44,967,989 - - 27,750 (65,398) (1,918,263) (23,974,256) - - 499,502 (746,418) (34,604) (3,343,519) (172,384) (89,496) (1,277,750) - - 181,068 - - 767,556 - - 1,009,760 - - (601,676) 98( 4,200) 11,052,637 18,256,424 170,509 175,054 4,853,409 509,238 11,327,638 36,745,617 2,557,471 926,118 73,516,615 $ 3,066,709 $ 12,253,756 $ 110,262,232 27 CITY OF MONROE, NORTH CAROLINA STATEMENT OF CASH FLOWS PROPRIETARY FUNDS For the Year Ended June 30, 2008 Major Enterprise Water and Sewer Electric Natural Gas Reconciliation of operating income to net cash provided by operating activities: Operating income (loss) $ 979,192 $ 2,708,999 $ 1,988,546 Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation and amortization 1,714,407 1,917,006 422,100 Other revenues 11,003 45,874 2,992 Changes in assets and liabilities: (Increase) decrease in accounts receivable 218,339 (511,550) (246,677) (Increase) decrease in inventories (360) (282,208) (15,555) Increase (decrease) in accounts payable and accrued liabilities 194,553 2,366,215 734,049 Increase in customer deposits (31,296) (181,461) (36,361) Increase (decrease) in compensated absences 28,601 9,497 4,023 Total adjustments 2,135,247 3,363,373 864,571 Net cash provided (used) by operating activities $ 3,114,439 $ 6,072,372 $ 2,853,117 The notes to the financial statements are an integral part of this statement. 28 Nonmajor Enterprise Funds Fund Aquatics and Fitness Center Airport Total $ 1,146,739 $ (878,635) $ 5,944,841 256,261 524,017 4,833,791 - - 59,869 (39,147) (18,303) (597,338) 2,607 (38,348) (333,864) 51,188 142,648 3,488,653 - - (249,118) 5,281 - 47,402 276,190 610,014 7,249,395 $ 1,422,929 $ (268,621) $ 13,194,236 29 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS June 30, 2008 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accounting policies of the City of Monroe and its discretely presented component units conform to generally accepted accounting principles as applicable to governments. The following is a summary of the more significant accounting policies: A. Reporting Entity The City of Monroe is a municipal corporation that is governed by an elected mayor and a six- member council. As required by generally accepted accounting principles, these financial statements present the City and its component units, legally separate entities for which the City is financially accountable. The discretely presented component units presented below are reported in a separate column in the City's financial statements in order to emphasize that they are legally separate from the City. City of Monroe ABC Board The members of the City of Monroe ABC Board's governing board are appointed by the City. In addition, the ABC Board is required by State statute to distribute a portion of its surpluses to the General Fund of the City. The ABC Board, which has a June 30 year end, is presented as if it were a proprietary fund (discrete presentation). Complete financial statements for the ABC Board may be obtained from the entity's administrative offices at City of Monroe ABC Board, 1771 Dickerson Boulevard, Monroe, North Carolina 28110. City of Monroe Tourism Development Authority The members of the City of Monroe Tourism Development Authority's governing board are appointed by the City. In addition, the Authority is required by its charter to distribute 67% of its net tax revenues to the General Fund of the City for the purpose of tourism development. The Tourism Development Authority, which has a June 30 year end, is presented as if it were a general government fund (discrete presentation). Complete financial statements for the Authority may be obtained from the entity's administrative offices at City of Monroe Tourism Development Authority, 300 West Crowell Street, Monroe, North Carolina 28112. B. Basis of Presentation Government -wide Statements: The statement of net assets and the statement of activities display information about the primary government and its component units. These statements include the financial activities of the overall government. Eliminations have been made to minimize the double counting of internal activities. The statements distinguish between the governmental and business -type activities of the City. Governmental activities generally are financed through taxes, intergovernmental revenues, and other non - exchange transactions. Business -type activities are financed in whole or in part by fees charged to external parties. The statement of activities presents a comparison between direct expenses and program revenues for the different business -type activities of the City and for each function of the City's governmental activities. Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expense allocations that have been made in the funds have been reversed for the statement of activities. Program revenues include (a) fees and charges paid by the recipients of goods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues. Fund Financial Statements: The fund financial statements provide information about the City's funds. Separate statements for each fund category — governmental and proprietary — are presented. The emphasis of fund financial statements is on major governmental and enterprise funds, each displayed in a separate 30 column. All remaining governmental and enterprise funds are aggregated and reported as nonmajor funds. Proprietary fund operating revenues, such as charges for services, result from exchange transactions associated with the principal activity of the fund. Exchange transactions are those in which each party receives and gives up essentially equal values. Nonoperating revenues, such as subsidies result from non- exchange transactions. Other nonoperating revenues are ancillary activities such as investment earnings. The City reports the following major governmental fund: General Fund. The General Fund is the general operating fund of the City. The General Fund accounts for all financial resources except those that are required to be accounted for in another fund. The primary revenue sources are ad valorem taxes, federal and State grants, and various other taxes and licenses. The primary expenditures are for public safety, street maintenance and construction, sanitation services, culture and recreation activities, and general government services. The City reports the following major enterprise funds: Water and Sewer Fund. This fund is used to account for the activities associated with the production, distribution and transmission of potable water and the activities associated with operating and maintaining the City's sewer and surface drainage systems. Electric Fund. This fund is used to account for the activities associated with the distribution and transmission of electricity by the City to its users. Natural Gas Fund. This fund is used to account for the activities associated with the distribution of natural gas by the City to its users. Aquatics and Fitness Center Fund. This fund is used to account for the activities associated with the operation of the City's Aquatics and Fitness Center. C. Measurement Focus and Basis of Accounting In accordance with North Carolina General Statutes, all funds of the City are maintained during the year using the modified accrual basis of accounting. Government -wide and Proprietary Fund Financial Statements. The government -wide and proprietary financial statements are reported using the economic resources measurement focus. The government -wide and proprietary fund financial statements are reported using the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Nonexchange transactions, in which the City gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, grants, and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied. Amounts reported as program revenues include 1) charges to customers or applicants for goods, services, or privileges provided, 2) operating grants and contributions, and 3) capital grants and contributions, including special assessments. Internally dedicated resources are reported as general revenues rather than as program revenues. Likewise, general revenues include all taxes. Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principal operating revenues of the City enterprise funds are charges to customers for sales and services. The City also recognizes as operating revenue the portion of fees intended to recover the cost of connecting new or reconnecting current customers to the water and sewer system. Operating expenses for enterprise funds include the cost of sales and services, administrative expenses and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. 31 Governmental Fund Financial Statements. Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under this method, revenues are recognized when measurable and available. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long -term debt, claims and judgments, and compensated absences, which are recognized as expenditures to the extent they have matured. General capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of general long- term debt and acquisitions under capital leases are reported as other financing sources. The City considers all revenues available if they are collected within 90 days after year -end, except for property taxes. Ad valorem taxes receivable 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, Union County is responsible for billing and collecting the property taxes on registered motor vehicles on behalf of all municipalities and special tax districts in the County, including the City of Monroe. For motor vehicles registered under the staggered 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, the City's vehicle taxes for vehicles registered in Union County from March 2007 through February 2008 apply to the fiscal year ended June 30, 2008. Uncollected taxes that were billed during this period are shown as a receivable in these financial statements and are offset by deferred revenues. Sales taxes and certain intergovernmental revenues, such as the utilities franchise tax, collected and held by the State at year -end on behalf of the City 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. Grant revenues which are unearned at year -end are recorded as unearned revenues. Under the terms of grant agreements, the City funds certain programs by a combination of specific cost - reimbursement grants, categorical block grants, and general revenues. Thus, when program expenses are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the City's policy to first apply cost - reimbursement grant resources to such programs, followed by categorical block grants, and then by general revenues. As permitted by generally accepted accounting principles, the City, the City of Monroe ABC Board, and the Monroe Tourism Authority have elected to apply only applicable FASB Statements and Interpretations issued on or before November 30, 1989 that do not contradict GASB pronouncements in its accounting and reporting practices for its proprietary operations. D. Budgetary Data The City's budgets are adopted as required by the North Carolina General Statutes. An annual budget is adopted for all funds except those which operate under project ordinances. All annual appropriations lapse at fiscal year -end. Project ordinances are adopted for the Capital Projects Funds, two Special Revenue Project Funds, (the City Grant Programs Fund and the State Grant Programs Fund), and the Enterprise Capital Projects Funds which are consolidated with their respective operating funds for reporting purposes. All budgets are prepared using the modified accrual basis of accounting. Expenditures may not legally exceed appropriations at the functional level for all annually budgeted funds and at the object level for the multi -year funds. The City's department heads may make transfers of appropriations within a department. Transfers of appropriations between departments require the approval of the City Manager. The legal level of budgetary control is at the functional level for all annually budgeted funds, and any transfers of appropriations between functions require the approval of the City Council. The legal level of budgetary control is at the object level for the funds budgeted by project ordinance, and any transfers of appropriations between objects require the approval of the City Council. The budget ordinance must be adopted by July 1 of the fiscal year or the governing board must adopt an interim budget that covers that time until the annual ordinance can be adopted. 32 E. Assets, Liabilities, and Fund Equity Deposits and Investments All deposits of the City, the ABC Board, and the Tourism Development Authority are made in board - designated official depositories and are secured as required by State law [G.S. 159 -31]. The City, ABC Board, and the Tourism Development Authority may designate, as an official depository, any bank or savings association whose principal office is located in North Carolina. Also, the City, the ABC Board, and the Tourism Development Authority 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 City, the ABC Board, and the Tourism Development Authority to invest in obligations of the United States or obligations fully guaranteed both as to principal and interest by the United States; obligations of the State of North Carolina; bonds and notes of any North Carolina local government or public authority; obligations of certain non - guaranteed federal agencies; certain high quality issues of commercial paper and bankers' acceptances and the North Carolina Capital Management Trust ( NCCMT). The City's investments are reported at fair value as determined by quoted market prices. The securities of the NCCMT — Cash Portfolio, a SEC - registered (2a -7) money market mutual fund, are valued at fair values, which is the NCCMT's share price. The NCCMT — Term Portfolio's securities are valued at fair value. The City, the ABC Board, and the Tourism Development Authority's investments with a maturity of more than one year at acquisition and non -money market investments are reported at fair value as determined by quoted market prices. The securities of the NCCMT Cash Portfolio, a SEC - registered (2a -7) money market mutual fund, are valued at fair value, which is the NCCMT's share price. The NCCMT Term Portfolio's securities are valued at fair value. Money market investments that have a remaining maturity at the time of purchase of one year or less are reported at amortized cost. Non - participating interest earning investment contracts are reported at cost. In accordance with State law, the City has invested in securities which are callable and which provide for periodic interest rate increases in specific increments until maturity. These investments are reported at fair value as determined by quoted market prices. 2. Cash and Cash Equivalents The City pools money from several funds to facilitate disbursement and investment and to maximize investment income. Therefore, all cash and investments are essentially demand deposits and are considered cash and cash equivalents. The ABC Board and the Tourism Development Authority consider all highly liquid investments (including restricted assets) with a maturity of three months or less when purchased to be cash and cash equivalents. Restricted Assets The unexpended bond proceeds of various enterprise fund serial bonds and unexpended installment financing obligations received by the City are classified as restricted for the enterprise fund and the general fund because their use is completely restricted to the purpose for which the bonds and installment obligations were issued. Customer deposits held by the City before any services are supplied are restricted to the service for which the deposit was collected. 4. Ad Valorem Taxes Receivable In accordance with State Law [G.S. 105 -347 and G.S. 159- 13(a)], the City levies ad valorem taxes on property other than motor vehicles on July 1st, the beginning of the fiscal year. The taxes are due on September 1st (lien date); however, interest does not accrue until the following January 6th. These taxes are based on the assessed values as of January 1, 2007. As allowed by State law, the City has established a schedule of discounts that apply to taxes that are paid prior to the due date. In the City's General Fund ad valorem tax revenues are reported net of such discounts. 33 Allowance for Doubtful Accounts Virtually all ad valorem taxes and accounts receivable are collected, and accordingly, an allowance for uncollectible receivables is not considered material or necessary. An allowance for doubtful accounts has been established for certain loans receivable that historically experience uncollectible accounts. The allowance is estimated by analyzing the percentage of receivables that were written off in prior years. 6. Inventories The inventories of the City and the ABC Board are valued at cost (first -in, first -out), which approximates market. The inventories of the City's general fund and enterprise funds and those of the ABC Board consist of materials and supplies held for subsequent use. The cost of these inventories is expensed when consumed rather than when purchased. 7. Capital Assets Capital assets are defined by the government as assets with an initial, individual cost of more than a certain cost and an estimated useful life in excess of two years. Minimum capitalization costs are as follows: land, $5,000; buildings, improvements, substations, lines, and other plant and distribution systems, $5,000; infrastructure, $100,000; furniture and equipment, $5,000; and vehicles, $5,000. Purchased or constructed capital assets are reported at cost or estimated historical cost. Donated capital assets are recorded at their estimated fair value at the date of donation. General infrastructure assets acquired prior to July 1, 2003 consist of the road network assets that were acquired or that received substantial improvements subsequent to July 1, 1980, and are reported at estimated historical cost using deflated replacement cost. The cost of normal maintenance and repairs that do not add to the value of the asset or materially extend assets' lives are not capitalized. Capital assets are depreciated using the straight -line method over the following estimated useful lives: Asset Class Estimated Useful Lives Infrastructure 30-50 Buildings and Improvements 20-45 Dams and Reservoirs 45 Plants and Distributions Systems 30-60 Vehicles and Motorized Equipment 6 -12 Other Equipment 5 -15 Capital assets of the ABC Board are depreciated over their useful lives on a straight -line basis as follows: Asset Class Estimated Useful Lives Buildings 40 Office Equipment 5-7 Vehicles 5 Store and Warehouse Equipment 5-7 The Tourism Development Authority had no capital assets at June 30, 2008. 8. Deferred/Unearned Revenues Governmental funds report deferred revenue in connection with receivables for revenues that are not 34 considered to be available to liquidate liabilities of the current period. Governmental funds also defer revenue recognition in connection with resources received but not yet earned. 9. Long -Term Obligations In the government -wide financial statements, and proprietary fund types in the fund financial statements, long -term debt and other long -term obligations are reported as liabilities in the applicable governmental activities, business -type activities, or proprietary fund type statement of net assets. Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the straight - line method that approximates the effective interest method. Bonds payable are reported net of the applicable bond premiums or discount. Bond issuance costs are reported as deferred charges and amortized over the term of the related debt. In fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. 10. Compensated Absences The vacation policy of the City provides for the accumulation of earned vacation leave with such leave being fully vested when earned as follows: Employees hired before July 1, 1992 Vacation leave may be accumulated without any applicable maximum until June 30 each year. However, if the employee separates from service, payment for accumulated vacation leave shall not exceed sixty (60) days. On June 30 of each year, any employee with more than (60) days of accumulated leave shall have the excess accumulation removed so that only sixty (60) days are carried forward to July 1 of the next fiscal year. The remaining excess amount will be converted to sick leave and added to the employee's sick leave balance. Employees hired after July 1, 1992 Vacation leave may be accumulated without any applicable maximum until June 30 of each year. However, if the employee separates from service, payment for accumulated vacation leave shall not exceed two times the employee's annual accrual rate (i.e. if the accrual rate is 15 days per year, the employee may only be paid for 30 days). On June 30 of each year, each employee may only carry over into the new fiscal year two times the employee's annual accrual rate. The remaining excess amount will be converted to sick leave and added to the employee's sick leave balance. Employees of the City of Monroe ABC Board earn two weeks paid vacation each year. Employees must take vacation leave in the year earned and are not allowed to carry forward any vacation time to subsequent years. The Tourism Development Authority had one employee during the year ended June 30, 2008. For the City's government -wide and proprietary funds, an expense and a liability for compensated absences and the salary- related payments are recorded as the leave is earned. The City has assumed a first -in, first - out method of using accumulated compensated time. The portion of that time that is estimated to be used in the next fiscal year has been designated as a current liability in the government -wide financial statements. The City and the ABC Board's sick leave policies provide for an unlimited accumulation of earned sick leave. Sick leave does not vest, but any unused sick leave accumulated at the time of retirement may be used in the determination of length of service for retirement benefit purposes. Since neither the City nor the ABC Board has any obligation for the accumulated sick leave until it is actually taken, no accrual for sick leave has been made. 35 11. Net Assets/Fund Balances Net assets in government -wide and proprietary fund financial statements are classified as invested in capital assets, net of related debt; restricted; and unrestricted. Restricted net assets represent constraints on resources that are either externally imposed by creditors, grantors, contributors, or laws or regulations of other governments or imposed by law through state statute. In the governmental fund financial statements, reservations of fund balance represent amounts that cannot be appropriated or are legally segregated for a specific purpose. Designations of fund balance represent tentative management plans that are subject to change. State law [G.S. 159- 13(b)(16)] restricts appropriation of fund balance for the subsequent year's budget 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 balances as follows: Reserved: Reserved for encumbrances — portion of fund balance available to pay for commitments related to purchase orders or contracts which remain unperformed at year end. Reserved by State statute - portion of fund balance, in addition to reserves for encumbrances, 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 have not been offset by deferred revenues. Reserved for streets - Powell Bill - portion of fund balance that is available for appropriation but legally segregated for street construction and maintenance expenditures. This amount represents the balance of the total unexpended Powell Bill funds. Unreserved: Designated - portion of total fund balance available for appropriation that has been designated for special purposes, such as: Subsequent year's expenditures — designated for the adopted 2008 -2009 budget ordinance. Self - insurance expenditures — designated to pay for unpaid claims under the self - funded insurance plans. Undesignated - portion of total fund balance available for appropriation that is uncommitted at year -end. 12. Management Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenditures /expenses during the reporting period. Actual results could differ from those estimates. 13. Other Resources The General Fund provides the basis of local resources for other governmental funds. These transactions are recorded as "Transfers — to other funds" in the General Fund and "Transfers — from other funds" in the receiving fund. 36 II. III. STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY Expenditures in the Airport Fund for operations exceeded budget appropriations by $95,389. Management and the board will more closely review the budget reports to ensure compliance in future years. RECONCILIATION OF GOVERNMENT -WIDE AND FUND FINANCIAL STATEMENTS A. Explanation of certain differences between the governmental fund balance sheet and the government -wide statement of net assets The governmental fund balance sheet includes reconciliation between fund balance - total governmental funds and net assets - governmental activities as reported in government -wide statement of net assets. One element of that reconciliation explains that "long -term liabilities, including installment purchase obligations, are not due and payable in the current period and therefore are not reported in the funds." The details of this $9,948,476 difference are as follows: Installment purchase obligations $ 7,821,435 Compensated absences 1,440,599 Self- insurance fund claims payable 686,443 Net adjustment to reduce fund balance - total governmental funds to arrive at net assets - governmental activities $ 9,948,477 B. Explanation of certain differences between the governmental fund statement of revenues, expenditures, and changes in fund balances and the government -wide statement of activities The government fund statement of revenues, expenditures, and changes in fund balances includes reconciliation between net change in fund balances - total governmental funds and change in net assets of governmental activities as reported in the government -wide statement of activities. One element of that reconciliation explains that "Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense." The details of this $3,729,520 difference are as follows: Capital outlay Depreciation expense $ 7,770,630 (4,041,110) Net adjustment to increase net change in fund balances - total governmental funds to arrive at change in net assets ofgovernmental activities $ 3,729,520 Another element of that reconciliation states that "the issuance of long -term debt provides current financial resources to governmental funds, while the repayment of the principal of long -term debt consumes the current financial resources of governmental funds. Neither transaction has any effect on net assets." The details of this ($1,671,367) are as follows: Debt issued or incurred: Installment purchase obligations Principal payments: Installment purchase obligations $ (3,331,706) 1,660,339 Net adjustment to decrease net change in fund balances - total governmental funds to arrive at change in net assets ofgovernmental activities $ ( 1,671,367) 37 IV. DETAIL NOTES ON ALL FUNDS A. Assets Deposits All of the deposits of the City, the ABC Board, and the Tourism Development Authority are either insured or collateralized by using one of two methods. Under the Dedicated Method, all deposits that exceed the federal depository insurance coverage level are collateralized with securities held by the City's, the ABC Board's, or the Tourism Development Authority's agents in these units' names. 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 City, the ABC Board, and the Tourism Development Authority, these deposits are considered to be held by the City's, the ABC Board's, and the Tourism Development Authority's agents in their names. The amount of the pledged collateral is based on an approved averaging method for non- interest bearing deposits and the actual current balance for interest bearing deposits. Depositories using the Pooling Method report to the State Treasurer the adequacy of their pooled collateral covering uninsured deposits. The State Treasurer does not confirm this information with the City, the ABC Board, the Tourism Development Authority, or the escrow agent. Because of the inability to measure the exact amount of collateral pledged for the City, the ABC Board, and the Tourism Development Authority under the Pooling Method, the potential exists for under - collateralization, and this risk may increase in periods of high cash flows. However, the State Treasurer of North Carolina enforces strict standards of financial stability for each depository that collateralizes public deposits under the Pooling Method. The City, the ABC Board and the Tourism Development Authority do not have formal policies regarding custodial credit risk for deposits, but rely on the State Treasurer to enforce standards of minimum capitalization for all pooling method financial institutions and to monitor them for compliance. The City, the ABC Board and the Tourism Development Authority comply with the provisions of G.S. 159 -31 when designating official depositories and verifying that deposits are properly secured. At June 30, 2008 the City's deposits had a carrying amount of $9,304,440 and a bank balance of $9,351,188. Of the carrying amount of $9,304,440, $1,989,232 was the amount of non - reimbursed installment obligation issued during the year. In addition, there was $44,267,888 in an escrow account with a trustee of unspent bond proceeds. Of the bank balance, $100,000 was covered by federal depository insurance and the remainder was covered by collateral held under the Pooling Method. The City's petty cash fund totaled $4,835. At June 30, 2008 the ABC Board's deposits had a carrying amount of $651,793 and a bank balance of $628,305. Of the bank balance, $100,000 was covered by federal depository insurance, and $528,305 was covered by collateral held under the Pooling Method. The ABC Board's petty cash fund totaled $3,900. At June 30, 2008, the Tourism Development Authority's deposits had a carrying amount of $152,675 and a bank balance of $152,675. Of the bank balance, $100,000 was covered by federal depository insurance, and $52,675 was covered by collateral held under the Pooling Method. 2. Investments As of June 30, 2008, the City had the following investments and maturities: Investment Type U.S. Government Agencies NC Capital Management Trust — Cash Portfolio NC Capital Management Trust — Term Portfolio Total 1 -3 3 -5 Fair Value 1 Year Years Years $ 52,690,002 $ 5,088,011 $ 39,643,597 $ 7,958,394 25,029,583 N/A N/A N/A 311,145 311,145 $ 78,030,730 38 Interest Rate Risk. The City does not have a formal investment policy that limits investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates. Credit Risk. The City has no formal policy regarding credit risk, but has internal management procedures that limits the City's investments to the provisions of G.S. 159 -30 and restricts the purchase of securities to the highest possible ratings whenever particular types of securities are rated. The investment in U.S. Government Agencies (Federal Home Loan Bank) is rated AAA by Standard and Poor's and Aaa by Moody's Investors Service. The City's investment in the NC Capital Management Trust Cash Portfolio carried a credit rating of AAAm by Standard and Poor's as of June 30, 2008. The City's investment in the NC Capital Management Trust Term Portfolio is unrated. The Term Portfolio is authorized to invest in obligations of the U.S. government and agencies, and in high grade money market instruments as permitted under North Carolina General Statutes 159 -30 as amended. Custodial Credit Risk. For an investment, the custodial risk is the risk that in the event of the failure of the counterparty, the City will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. The City has no policy on custodial credit risk. Concentration of Credit Risk. The City's Board places no limit on the amount that the City may invest in any one issuer. More than 5 percent of the City's investments are in Federal Home Loan Bank securities. This investment is 32.8% of the City's total investments. In addition, the City had 32.1% of its investment portfolio in the NCCMT — cash portfolio at June 30, 2008. Note Receivable The City granted a promissory note in the amount of $404,921 to an electric customer to reimburse the cost and installation of equipment during the fiscal year 2006. The remaining balance of the promissory note is payable in quarterly installments of $20,963 through August 2010. The note calls for interest to be paid quarterly at the applicable prime rate. Principal collections on the note receivable for the fiscal year ended totaled $83,853. The note is secured by equipment. 2008 Total Receivable $ 188,669 Less Current Portion 83,853 Total Note Receivable - Noncurrent $ 104,816 Scheduled future maturities of the note receivable are as follows: 2009 $ 83,853 2010 83,853 2011 20,963 $ 188,669 The City granted a promissory note in the amount of $1,730,070 to an electric customer to reimburse the cost and installation of equipment during the fiscal year 2007. The remaining balance of the promissory note is payable in monthly installments. Due to the nature of the terms agreed upon the payment amounts will vary and are unpredictable. The monthly payment amount is determined as follows: Each month electric charges will be calculated based on the LICPNC rate (LICPNC Bill) and electric charges will be calculated based on the LICPNC rate assuming peak generation had not been used (LICPNC Bill No Generation). The difference in these rate calculations (i.e. LICPNC Bill No Generation — LICPNC Bill) will be used to fund the City's recovery of one half of the installed cost of the generation. The customer's monthly bill will equal the LICPNC Bill plus one half of the difference in the LICPNC Bill No Generation and the LICPNC Bill. At the current rate of payment it is estimated that the note will be repaid in full during fiscal year 2013. The agreement is non interest bearing and is secured by equipment. 39 2008 Total receivable $ 1,390,767 Current portion 339,303 Total Note Receivable — Noncurrent $ 1,051,464 Future payments of the note receivable can vary based on the customers electricity usage. The current portion has been calculated based on payments received during the year ended June 30, 2008. 4. Receivables - Allowance for Doubtful Accounts The amounts presented in the Balance Sheet and the Statement of Net Assets are net of the following allowances for doubtful accounts: Special Revenue Fund Loans Receivable $ 25,096 5. Capital Assets Primary Government Capital asset activity for the primary government for the year ended June 30, 2008, was as follows: Depreciation expense was charged to functions /programs of the primary government as follows: General government $ 242,152 Transportation 2,328,793 Public safety 1,092,003 Culture and recreation 373,968 Economic and physical development 4,194 Total depreciation expense $ 4,041,110 40 Beginning Ending Balances Increases Decreases Balances Governmental activities: Capital assets not being depreciated: Land and land improvements $ 4,184,540 $ - $ 13,075 $ 4,171,465 Construction in progress 1,741,054 3,817,522 2,041,431 3,517,145 Total capital assets not being depreciated 5,925,594 3,817,522 2,054,506 7,688,610 Capital assets being depreciated: Buildings and improvements 14,084,098 2,082,503 64,300 16,102,301 Equipment 3,499,160 171,371 20,300 3,650,231 Vehicles and motorized equipment 11,743,900 1,360,887 374,998 12,729,789 Infrastructure 80,931,563 2,379,778 424,449 82,886,892 Total capital assets being depreciated 110,258,721 5,994,539 884,047 115,369,213 Less accumulated depreciation for: Buildings and improvements 5,864,260 392,821 55,970 6,201,111 Equipment 1,887,832 254,146 20,300 2,121,678 Vehicles and motorized equipment 6,769,327 1,380,925 369,489 7,780,763 Infrastructure 23,944,612 2,013,218 291,558 25,666,272 Total accumulated depreciation 38,466,031 $ 4,041,110 $ 737,317 41,769,824 Total capital assets being depreciated, net 71,792,690 73,599,389 Governmental activities capital assets, net $ 77,718,284 $ 81,287,999 Depreciation expense was charged to functions /programs of the primary government as follows: General government $ 242,152 Transportation 2,328,793 Public safety 1,092,003 Culture and recreation 373,968 Economic and physical development 4,194 Total depreciation expense $ 4,041,110 40 Beginning Ending Business -type activities: Water and Sewer Fund Capital assets not being depreciated: Land and land improvements $ 662,216 $ - $ - $ 662,216 Construction in progress 1,018,466 1,993,023 1,660,112 1,351,377 Total capital assets not being depreciated 1,680,682 1,993,023 1,660,112 2,013,593 Capital assets being depreciated: Buildings and improvements Equipment Vehicles and motorized equipment Infrastructure Total capital assets being depreciated Less accumulated depreciation for: Buildings and improvements Equipment Vehicles and motorized equipment Infrastructure Total accumulated depreciation 22,879,384 - - 22,879,384 2,131,307 398,106 - 2,529,413 2,814,464 49,169 - 2,863,633 49,696,570 3,425,415 - 53,121,985 77,521,725 3,872,690 - 81,394,415 Total capital assets not being depreciated 7,291,928 14,551,154 1,055,604 20,787,478 8,432,089 486,836 - 8,918,925 1,193,710 133,476 - 1,327,186 1,902,438 207,616 - 2,110,054 8,662,975 884,445 - 9,547,420 20,191,212 1,712,373 - 21,903,585 Total capital assets being depreciated, net 57,330,513 59,490,830 Water and Sewer Fund capital assets, net 59,011,195 61,504,423 Electric Fund 1,084,887 145,310 Capital assets not being depreciated: 1,432,265 21,804,879 Land and land improvements 4,408,506 - - 4,408,506 Construction in progress 2,883,422 14,551,154 1,055,604 16,378,972 Total capital assets not being depreciated 7,291,928 14,551,154 1,055,604 20,787,478 Capital assets being depreciated: Buildings and improvements Equipment Vehicles and motorized equipment Infrastructure Total capital assets being depreciated Less accumulated depreciation for: Buildings and improvements Equipment Vehicles and motorized equipment Infrastructure Total accumulated depreciation Total capital assets being depreciated, net Electric Fund capital assets, net 122,489 - 4,431,972 - 1,651,153 55,125 52,982,138 2,543,628 59,187,752 2,598,753 23,583 23,583 122,489 4,431,972 1,682,695 55,525,766 60,922 2,628 1,345,390 332,521 1,084,887 145,310 19,313,680 1,432,265 21,804,879 1,912,724 37,382,873 44,674,801 38,068,902 58,856,380 Natural Gas Fund Capital assets not being depreciated: Land and land improvements 69,580 - - 69,580 Construction in progress 731,006 4,144,776 219,622 4,656,160 Total capital assets not being depreciated 800,586 4,144,776 219,622 4,725,740 61,762, 922 63,550 - 1,677,911 23,583 1,206,614 - 20,745,945 23,583 23,694,020 41 Total capital assets being depreciated, net 7,692,267 7,598,880 Aquatics and Fitness Center Fund capital assets, net 8,715,341 8,524,474 Airport Fund Capital assets not being depreciated: Land and land improvements 7,082,044 - - 7,082,044 Construction in progress 1,810,338 1,918,263 1,905,088 1,823,513 Total capital assets not being depreciated 8,892,382 1,918,262 1,905,088 8,905,557 Capital assets being depreciated: Buildings and improvements 10,551,730 Equipment 80,181 Vehicles and motorized equipment 212,756 Total capital assets being depreciated 10,844,667 1,376,304 - 11,928,034 376,158 - 456,339 - - 212,756 1,752,462 - 12,597,129 E Beginning Ending Balances Increases Decreases Balances Capital assets being depreciated: Buildings and improvements 543,152 - - 543,152 Equipment 229,763 6,669 - 236,432 Vehicles and motorized equipment 537,614 165,143 88,469 614,288 Infrastructure 14,975,380 516,003 13,200 15,478,183 Total capital assets being depreciated 16,285,909 687,815 101,669 16,872,055 Less accumulated depreciation for: Buildings and improvements 90,394 11,939 - 102,333 Equipment 111,984 13,582 - 125,566 Vehicles and motorized equipment 396,077 38,177 57,984 376,270 Infrastructure 3,137,357 356,968 13,147 3,481,178 Total accumulated depreciation 3,735,812 420,666 71,131 4,085,347 Total capital assets being depreciated, net 12,550,097 12,786,708 Natural Gas Fund capital assets, net 13,350,683 17,512,448 Aquatics and Fitness Center Fund Capital assets not being depreciated: Land and land improvements 925,594 - - 925,594 Construction in progress 97,480 87,722 185,202 - Total capital assets not being depreciated 1,023,074 87,722 185,202 925,594 Capital assets being depreciated: Buildings and improvements 9,223,228 162,875 - 9,386,103 Equipment 63,988 - - 63,988 Vehicles and motorized equipment 12,280 - - 12,280 Total capital assets being depreciated 9,299,496 162,875 - 9,462,371 Less accumulated depreciation for: Buildings and improvements 1,578,922 250,329 - 1,829,251 Equipment 24,387 4,060 - 28,447 Vehicles and motorized equipment 3,920 1,873 - 5,793 Total accumulated depreciation 1,607,229 256,262 - 1,863,491 Total capital assets being depreciated, net 7,692,267 7,598,880 Aquatics and Fitness Center Fund capital assets, net 8,715,341 8,524,474 Airport Fund Capital assets not being depreciated: Land and land improvements 7,082,044 - - 7,082,044 Construction in progress 1,810,338 1,918,263 1,905,088 1,823,513 Total capital assets not being depreciated 8,892,382 1,918,262 1,905,088 8,905,557 Capital assets being depreciated: Buildings and improvements 10,551,730 Equipment 80,181 Vehicles and motorized equipment 212,756 Total capital assets being depreciated 10,844,667 1,376,304 - 11,928,034 376,158 - 456,339 - - 212,756 1,752,462 - 12,597,129 E Beginning Less accumulated depreciation for: Buildings and improvements Equipment Vehicles and motorized equipment Total accumulated depreciation Total capital assets being depreciated, net Airport Fund capital assets, net Business -type activities capital assets, net Construction commitments 4,719,080 463,324 51,421 28,341 50,810 29,299 4,821,311 $ 520,964 $ 6,023,356 1,297,334 14,915,738 14,675,758 $ 140,667,758 103,914 5,182,404 79,762 80,109 5,342,275 7,254,854 16,160,411 $ 162,558,136 The government has active construction projects as of June 30, 2008. At year end, the government's commitments with contractors are as follows: Projects Governmental Capital Projects Enterprise Aquatics and Fitness Center Water and Sewer Electric Natural Gas Airport Total Discretely presented component units Spent -to- Remaining Date Commitment $ 3,517,146 $ 904,494 22,327 112,319 1,351,377 3,082,264 16,378,970 8,084,930 4,656,164 1,194,417 1,823,511 1,297,334 $ 27,749,495 $ 14,675,758 Capital asset activity for the ABC Board for the year ended June 30, 2008, was as follows: Capital assets not being depreciated: Land and land improvements Capital assets being depreciated: Buildings and improvements Equipment Vehicles and motorized equipment Total capital assets being depreciated Less accumulated depreciation for: Buildings and improvements Equipment Vehicles and motorized equipment Total accumulated depreciation Total capital assets being depreciated, net Discretely Presented Component Unit capital assets, net Beginning Ending Balances Increases Decreases Balances $ 317,013 $ - $ - $ 317,013 1,020,104 - - 1,020,104 103,914 2,077 - 105,991 15,830 - - 15,830 1,139,848 2,077 - 1,141,925 229,810 25,904 - 255,714 73,627 8,902 - 82,529 15,830 - - 15,830 319,267 34,806 - 354,073 820,581 (32,729) - 787,852 $ 1,137,594 $ (32,729) $ - $ 1,104,865 43 Ending Decreases Balances The Tourism Development Authority had no capital assets. B. Liabilities Accounts Payable and Accrued Liabilities Payables at the government -wide level at June 30, 2008, were as follows: Governmental activities: General Fund Nonmajor Funds Total - governmental activities Business -type activities: Enterprise Funds Salaries and Vendors Benefits Other Total $ 1,188,082 $ 335,607 $ - $ 1,523,689 187,143 - - 187,143 $ 1,375,225 $ 335,607 $ - $ 1,710,832 $ 8,148,188 $ - $ 178,815 $ 8,327,003 Component units' payables at June 30, 2008, were as follows: Salaries and Vendors Benefits Other Total ABC Board $ 380,848 $ - $ - $ 380,848 Tourism Development Authority $ - $ - $ 43 $ 43 2. Pension Plan Obligations a. Local Governmental Employees' Retirement System Plan Description. The City of Monroe and the ABC Board contribute to the statewide Local Governmental Employees' Retirement System ( LGERS), a cost - sharing multiple - employer defined benefit pension plan administered by the State of North Carolina. LGERS provides retirement and disability benefits to plan members and beneficiaries. Article 3 of G.S. Chapter 128 assigns the authority to establish and amend benefit provisions to the North Carolina General Assembly. The Local Governmental Employees' Retirement 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 the State Controller, 1410 Mail Service Center, Raleigh, North Carolina 27699 -1410, or by calling (919) 981 -5454. Funding Policy. Plan members are required to contribute six percent of their annual covered salary. The City and the ABC Board are required to contribute at an actuarially determined rate. For the City, the current rate for employees not engaged in law enforcement and for law enforcement officers is 4.89% and 4.86 %, respectively, of annual covered payroll. For the ABC Board, the current rate for employees not engaged in law enforcement is 5.02% of annual covered payroll. The contribution requirements of members and of the City of Monroe and the ABC Board are established and may be amended by the North Carolina General Assembly. The City's contributions to LGERS for the years ended June 30, 2008, 2007, and 2006, were $990,287, $929,488, and $856,115, respectively. The ABC Board's contributions to LGERS for the years ended June 30, 2008, 2007, and 2006 were $15,096, $14,892, and $15,223, respectively. The contributions made by the City and the ABC Board equaled the required contributions for each year. b. Law Enforcement Officers' Special Separation Allowance 1. Plan Description. The City of Monroe administers a public employee retirement system (the "Separation Allowance "), a single - employer defined benefit pension plan that provides retirement benefits to the City's qualified sworn law enforcement officers. The Separation Allowance is equal to .85 percent of the annual equivalent of the 44 base rate of compensation most recently applicable to the officer for each year of creditable service. The retirement benefits are not subject to any increases in salary or retirement allowances that may be authorized by the General Assembly. Article 12D of G.S. Chapter 143 assigns the authority to establish and amend benefit provisions to the North Carolina General Assembly. All full time law enforcement officers of the City are covered by the Separation Allowance. At December 31, 2006, the Separation Allowance's membership consisted of: Retirees receiving benefits 13 Terminated plan members entitled to but not yet receiving benefits - Active plan members 80 Total 93 A separate report was not issued for the plan. 2. Summary of SignificantAccounting Policies Basis of Accounting. The City 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 administration costs. These expenditures are paid as they come due. 3. Contributions. The City 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 City'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, 2006 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 4.5% to 12.3% per year. Both (a) and (b) included an inflation component of 3.75 %. The assumptions did not include post - employment benefit increases. The unfunded actuarial accrued liability is being amortized as a level percentage of pay on a closed basis. The remaining amortization period at December 31, 2006 was 24 years. Annual Pension Cost and Net Pension Obligation. The City's annual pension cost and net pension obligation (prepayment) to the Separation Allowance for the current year were as follows: Annual required contribution $ 143,756 Interest on net pension obligation (8,526) Adjustment to annual required contribution 7,227 Annual pension cost 142,457 Contributions made 154,184 Decrease in net pension obligation (11,727) Net pension obligation, beginning of year (117,604) Net prepaid pension obligation, end of year $ (129,331) 45 3 Year Trend Information For Year Annual Pension Ended Cost Tune 30 (APC) 2006 $ 138,276 2007 134,652 2008 142,457 4. Funded Status and Funding Progress Percentage of Net Pension APC Obligation Contributed (Prepayment) 142.55% $ (65,249) 138.88% (117,604) 108.23% (129,331) As of December 31, 2007, the most recent actuarial valuation date, the plan was not funded. The actuarial accrued liability for benefits and the unfunded actuarial accrued liability (UAAL) was $1,650,670. The covered payroll (annual payroll of active employees covered by the plan) was $3,761,162, and the ratio of the UAAL to the covered payroll was 43.89 %. Supplemental Retirement Income Plan (1) Law Enforcement Officers Plan Description. The City contributes to the Supplemental Retirement Income Plan (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 City. 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 City to contribute each month an amount equal to five percent of each officer's salary, and all amounts contributed are vested immediately. Also, the law enforcement officers may make voluntary contributions to the plan. Contributions for the year ended June 30, 2008, were $266,656 which consisted of $197,674 from the City and $68,982 from the law enforcement officers. (2) General Employees The City has elected to contribute to the Supplemental Retirement Income Plan for general employees as well as for law enforcement officers. Participation begins after six months of employment. The City has elected to contribute each month an amount equal to five percent of each employee's salary, and all amounts contributed are vested immediately. Also, the employees may make voluntary contributions to the plan. Contributions for the year ended June 30, 2008, were $1,154,781, which consisted of $795,304 from the City and $359,477 from the employees. d. Firemen's and Rescue Squad Workers' Pension Fund Plan Description. The State of North Carolina contributes, on behalf of the City of Monroe, to the Firemen's and Rescue Squad Workers' Pension Fund (Fund), a cost - sharing multiple- employer defined benefit pension plan with a special funding situation administered by the State of North Carolina. The Fund provides pension benefits for eligible fire and rescue squad workers that have elected to become members of the fund. Article 86 of G.S. Chapter 58 assigns the authority to establish and amend benefit provisions to the North Carolina General Assembly. The Firemen's and Rescue Squad Workers' Pension Fund 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 the Fund. That report may be obtained by writing to the Office of the State Controller, 1410 Mail Service Center, Raleigh, North Carolina 27699 -1410, or by calling (919) 981 -5454. Funding Policy. Plan members are required to contribute $10 per month to the Fund. The State, a non- employer contributor, funds the plan through appropriations. The City does not contribute to the Fund. Contribution requirements of plan members and the State of North Carolina are established and may be amended by the North Carolina General Assembly. Ero On- Behalf Payments. For the fiscal year ended June 30, 2008, the City of Monroe has recognized on- behalf payments for pension contributions made by the state as a revenue and an expenditure of $11,804 for the 46 employed firemen who perform firefighting duties for the City's fire department. The employees elected to be members of the Firemen and Rescue Squad Worker's Pension Fund. Other Post - employment Benefits According to a City resolution, the City provides post - employment health care benefits to retirees of the City, provided they participate in the North Carolina Local Governmental Employees' Retirement System (System) and have at least 20 years of creditable service with the City. The amount the City pays towards these benefits is based on years of service with the City. At 20 and 25 years of service, the City pays 50% and 75% of the cost of health and dental insurance, respectively. With 30 years of service, the City pays 100% of the cost of health and dental insurance. In addition, retirees with 30 years of service receive $5,500 of life insurance coverage. When a retiree reaches age 65, they are transferred to the Medicare Supplement Group Plan and Part D Group Plan at the above - referenced percentage of cost based on years of service. At that time, any dependents covered are offered COBRA coverage. Currently, 65 retirees are eligible for post - employment health benefits. For the fiscal year ended June 30, 2008, the City made payments for post - employment benefit premiums of $263,310. The City obtains health care coverage through private insurers. Other Employment Benefits The City elected to provide death benefits to employees through the Death Benefit Plan for members of the Local Governmental Employees' Retirement System (Death Benefit Plan), a multiple - employer, State - administered, cost - sharing plan funded on a one -year term cost basis. The beneficiaries of those employees who die in active service after one year of contributing membership in the System, or who die within 180 days after retirement or termination of service and have at least one year of contributing membership service in the System at the time of death are eligible for death benefits. Lump sum death benefit payments to beneficiaries are equal to the employee's 12 highest months salary in a row during the 24 months prior to the employee's death, but the benefit may not exceed $50,000 or be less than $25,000. All death benefit payments are made from the Death Benefit Plan. The City has no liability beyond the payment of monthly contributions. Contributions are determined as a percentage of monthly payroll, based upon rates established annually by the State. Separate rates are set for employees not engaged in law enforcement and for law enforcement officers. Because the benefit payments are made by the Death Benefit Plan and not by the City, the City does not determine the number of eligible participants. For the fiscal year ended June 30, 2008, the City made contributions to the State for death benefits of $20,233. The City's required contributions for employees not engaged in law enforcement and for law enforcement officers represented .09% and .14% of covered payroll, respectively. The contributions to the Death Benefit Plan cannot be separated between the post - employment benefit amount and the other benefit amount. The City considers these contributions to be immaterial. 4. Deferred/Unearned Revenues The balance in deferred or unearned revenue on the fund statements and unearned revenues on the government -wide statements at year end is composed of the following elements: Deferred Unearned Revenue Revenue Property taxes receivable General $ 823,857 Nonmajor governmental 1,292 Privilege license receivable: General 59,946 Loans receivable: Nonmajor governmental 21,379 Special vehicle tax receivable: General 33,099 EIil Deferred Unearned Revenue Revenue Code enforcement liens receivable: General 30,507 - Prepaid taxes and licenses: General - 329,965 Total $ 970,080 $ 329,965 Risk Management The City 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 City is self - funded with regard to group health and workers' compensation insurance coverages. There have been no significant reductions in insurance coverage from the prior year, and settled claims have not exceeded coverage in any of the past three fiscal years. A liability for a claim is established if information indicates that it is probable that a liability has been incurred at the date of the financial statements and the amount of the loss is reasonably estimable. Liabilities include an amount for claims that have been incurred but not reported (IBNRs). The result of the process to estimate the claims liability is not an exact amount as it depends on many complex factors, such as inflation, changes in legal doctrines, and damage awards. Accordingly, claims are reevaluated periodically to consider the effects of inflation, recent claim settlement trends (including frequency and amount of pay outs), and other economic and social factors. The estimate of the claims liability also includes amounts for incremental claim adjustment expenses related to specific claims and other claim adjustment expenses regardless of whether allocated to specific claims. Flood Insurance The City carries flood insurance for properties located in Flood Zones B, C and X through participation in the North Carolina League of Municipalities Interlocal Risk Financing Fund of North Carolina. The City does not have properties of significant value in these Flood Zones. Self- Funded Insurance Group Health Insurance Effective July 1, 2002, the City established an employee medical benefit plan to self- insure claims up to $50,000 per year for each individual covered; claims above $50,000 and aggregate claims exceeding 125% of expected incurred and paid claims are covered by a stop loss insurance policy. Workers' Compensation Insurance The City has a self- funded workers' compensation insurance plan. Through this plan the City has workers' compensation coverage of up to the statutory limits. The self- insurance plan has a $350,000 retained risk per occurrence with a $1,000,000 aggregate limit. The City also carries employer's liability coverage with similar retention and limit amounts. Changes in the balance of claims liabilities during the year ended June 30, 2008 are as follows: 2008 Unpaid Claims, beginning of year $ 837,980 Incurred claims (including claims incurred but not reported as of June 30): Provision for current year events where the City has retained risk of loss 3,466,243 Ell 2008 Increase in provision for prior years' events where the City has retained risk of loss 408,640 Total Incurred Claims 4,712,863 Payments: Claims attributable to current -year events where the City has retained risk of loss 2,897,244 Claims attributable to prior years' events where the City has retained risk of loss 836,951 Total Payments 3,734,195 Unpaid Claims, end of year $ 978,668 Distribution: Current portion of long -term liabilities on statement of net assets $ 686,443 Liability on General Fund balance sheet 292,225 $ 978,668 The City protects itself from potential loss through participation in the North Carolina League of Municipalities Interlocal Risk Financing Fund of North Carolina for general liability, automobile liability, public officials and law enforcement liability. The City maintains coverage of $5,000,000 for comprehensive general liability, automobile liability, public officials and law enforcement liability. The City's potential loss for liability coverage is limited to the deductible amount of $50,000 per claim for all coverage except for real and personal property which has a deductible of $25,000 per claim. In accordance with G.S. 159 -29, the City's employees that have access to $100 or more at any given time of the City's funds are performance bonded through a commercial surety bond. The finance officer and tax collector are each individually bonded for $250,000 each. The remaining employees that have access to funds are bonded under a blanket bond for $250,000. The City of Monroe ABC Board is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; and natural disasters. The ABC Board has property, general liability, automobile liability, workers compensation, and employee health coverage. The ABC Board also has liquor legal liability coverage. There have been no significant reductions in insurance coverage from the prior year, and settled claims have not exceeded coverage in any of the past three fiscal years. The Tourism Development Authority is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; and natural disasters. The Authority does not carry commercial insurance to cover these risks of loss. All risk management activities are reported in the Authority's General Fund. Claims expenditures and liabilities are reported when it is probable that a loss has occurred and the amount of that loss can be reasonably estimated. Based on available information, the Authority had no liability claims at June 30, 2008. 6 Claims, Judgements, and Contingent Liabilities At June 30, 2008, the City was a defendant to various lawsuits. In the opinion of the City's management and the City attorney, the ultimate effect of these legal matters will not have a material adverse effect on the City's financial position. 7. Long -Term Obligations a. Installment Purchase Obligations The City has entered into various installment purchase obligations to acquire certain equipment and to finance building improvements: EL] Governmental Enterprise Funds Funds Total Executed December 17, 1996, and refinanced on December 20, 1998 to finance the construction of an aquatics and fitness center, requiring 26 semi- annual installments of $223,075 including interest at 4.48 %. $ Executed April 23, 1999, to finance construction of an addition to the aquatics and fitness center, requiring 26 semi - annual installments of $54,180 including interest at 4.48 %. Executed September 22, 1999, and refinanced on May 19, 2004, to finance acquisition, renovation, and furnishing of a police headquarters, requiring 21 semi - annual installments of $73,429 plus interest at 2.80 %. Executed December 22, 2003, to finance construction of an addition to the aquatics and fitness center, requiring 20 semi - annual installments of $182,145 including interest at 3.85 %. Executed June 11, 2004, to finance equipment, requiring 10 semi - annual installments of $206,140 plus interest at 2.74 %. Executed August 12, 2004, to finance construction of a street maintenance building, requiring 30 semi - annual installments of $34,533 plus interest at 3.89 %. Executed June 24, 2005, to finance equipment, requiring 10 semi - annual installments of $229,883 including interest at 3.07 %. Executed January 30, 2006 to finance equipment, requiring 36 monthly installments of $2,303 including interest at 3.00 %. Executed June 15, 2006, to finance equipment, requiring 10 semi - annual installments of $245,203 including interest at 3.81 %. Executed June 15, 2007, to finance equipment, requiring 10 semi - annual installments of $132,518 including interest at 3.8333 %. Executed February 8, 2008, to finance facility improvements, requiring 20 semi - annual installments of $95,000 plus interest at 3.827 %. Executed June 20, 2008, to finance equipment, requiring 10 semi - annual installments of $216,651 including interest at 3.19 %. - $ 1,430,516 $ 1,430,516 347,442 347,442 954,571 - 954,571 - 1,790,254 1,790,254 325,520 93,748 419,268 794,267 - 794,267 609,464 276,384 885,848 18,199 - 18,199 1,017,757 360,757 1,378,514 769,952 204,670 974,622 1,900,000 - 1,900,000 1,431,706 556,774 1,988,480 $ 7,821,436 $ 5,060,545 $ 12,881,981 50 Annual debt service payments of the installment purchase obligations as of June 30, 2008, are as follows: b. General Obligation Indebtedness The City's 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 its resources are reported as long -term debt in the Water and Sewer Fund. All general obligation bonds are collateralized by the full faith, credit, and taxing power of the City. Principal and interest requirements are appropriated when due. Bonds payable at June 30, 2008, are comprised of the following issue: Serviced by the Water and Sewer Fund: $6,330,000 1998 Water and Sewer Refunding Bonds due annually in amounts ranging from $140,000 to $750,000 through March 1, 2010; interest rate varying between 3.3% and 5.0 %. The amount shown is net of the unamortized deferred loss on the defeasance of $10,848. $ 779,152 Annual debt service requirements to maturity for general obligation bonds are as follows: Year Ending June 30 Business -Type Activities Principal Interest 2009 $ 650,000 $ 38,240 2010 140,000 5,740 Total $ 790,000 $ 43,980 The debt service requirements as presented above, have not been reduced by $10,848, the unamortized deferred loss incurred as a result of the advance refundings. At June 30, 2008, the City had a legal debt margin of $206,209,775. C. Revenue Bonds The City also issues bonds where it pledges income derived from the acquired or constructed assets to pay debt service. Revenue bonds outstanding at year end are as follows: 51 Governmental Activities Business -Type Activities Year Ending June 30 Principal Interest Principal Interest 2009 $ 1,825,896 $ 257,201 $ 1,276,468 $ 186,777 2010 1,520,075 198,342 1,230,130 137,441 2011 1,240,325 147,703 1,134,753 89,370 2012 904,916 106,975 774,502 44,028 2013 711,004 77,438 465,990 19,624 2014 -2018 1,515,619 163,241 178,702 3,440 2019 -2023 103,601 4,030 - - Total $ 7,821,436 $ 5,060,545 Total interest payments $ 954,930 $ 480,680 b. General Obligation Indebtedness The City's 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 its resources are reported as long -term debt in the Water and Sewer Fund. All general obligation bonds are collateralized by the full faith, credit, and taxing power of the City. Principal and interest requirements are appropriated when due. Bonds payable at June 30, 2008, are comprised of the following issue: Serviced by the Water and Sewer Fund: $6,330,000 1998 Water and Sewer Refunding Bonds due annually in amounts ranging from $140,000 to $750,000 through March 1, 2010; interest rate varying between 3.3% and 5.0 %. The amount shown is net of the unamortized deferred loss on the defeasance of $10,848. $ 779,152 Annual debt service requirements to maturity for general obligation bonds are as follows: Year Ending June 30 Business -Type Activities Principal Interest 2009 $ 650,000 $ 38,240 2010 140,000 5,740 Total $ 790,000 $ 43,980 The debt service requirements as presented above, have not been reduced by $10,848, the unamortized deferred loss incurred as a result of the advance refundings. At June 30, 2008, the City had a legal debt margin of $206,209,775. C. Revenue Bonds The City also issues bonds where it pledges income derived from the acquired or constructed assets to pay debt service. Revenue bonds outstanding at year end are as follows: 51 Serviced by the Water and Sewer Fund, Electric Fund, Airport Fund and Natural Gas Fund: $5,195,000 Combined Enterprise System Revenue Bonds, Series 1998, due annually in amounts ranging from $45,000 to $335,000 through March 1, 2023, interest rate varying between 3.3% and 4.6 %. The amount shown is net of the unamortized deferred loss on the defeasance of $107,796. $ 3,662,204 $6,525,000 Combined Enterprise System Refunding Revenue Bonds, Series 1998, due annually in amounts ranging from $40,000 to $675,000 through March 1, 2019, interest rate varying between 3.3% and 4.6 %. The amount shown is net of the unamortized deferred loss on the defeasance of $135,370. 5,889,630 $30,920,000 Combined Enterprise System Revenue Bonds, Series 2008A, due annually in amounts ranging from $765,000 to $2,055,000 through March 1, 2033, interest rate varying between 4.0% and 5.0 %. 30,920,000 $13,095,000 Combined Enterprise System Revenue Bonds, Series 2008B, due annually in amounts ranging from $450,000 to $1,005,000 through March 1, 2028, interest rate of 4.5404 %. 13,095,000 $ 53,566,834 The future payments of the revenue bonds for the years ending June 30, are as follows: The future payments as presented above, have not been reduced by $243,166, the unamortized deferred loss incurred as a result of the advance refundings. The City has been in compliance with the covenants as to rates, fees, rentals, and charges in Section 704 of the Bond Order Authorizing the Issuance of Combined Enterprise System Revenue Bonds (Bond Order) since its adoption on May 3, 1994. Section 704(a) of the Bond Order requires the debt service coverage ratio to be no less than 125 %. The debt service converage ratio calculation for the year ended June 30, 2008, is as follows: Operating revenues $ 76,488,888 Operating expenses (1) 67,113,256 Operating income 9,375,632 Nonoperating revenues (2) 4,682,900 52 Business -Type Activities Year Ending June 30 Principal Interest 2009 $ 625,000 $ 2,417,767 2010 1,865,000 2,392,767 2011 1,945,000 2,315,085 2012 2,015,000 2,233,385 2013 2,100,000 2,148,037 2014-2018 11,960,000 9,303,142 2019-2023 11,870,000 6,569,156 2024— 2028 12,050,000 3,930,390 2029 -2033 9,380,000 1,380,675 Total $ 53,810,000 $ 32,690,404 The future payments as presented above, have not been reduced by $243,166, the unamortized deferred loss incurred as a result of the advance refundings. The City has been in compliance with the covenants as to rates, fees, rentals, and charges in Section 704 of the Bond Order Authorizing the Issuance of Combined Enterprise System Revenue Bonds (Bond Order) since its adoption on May 3, 1994. Section 704(a) of the Bond Order requires the debt service coverage ratio to be no less than 125 %. The debt service converage ratio calculation for the year ended June 30, 2008, is as follows: Operating revenues $ 76,488,888 Operating expenses (1) 67,113,256 Operating income 9,375,632 Nonoperating revenues (2) 4,682,900 52 Income available for debt service 14,058,532 Debt service (3) 3,702,467 Debt service coverage ratio 380% (1) Per rate covenants, this does not include the depreciation expense of $4,345,270. (2) Per rate covenants, this includes investment earnings only. (3) Per rate covenants, this does not include amortization of the deferred loss incurred as a result of advance refundings. The City has pledged future water and sewer, electric, airport, and natural gas customer revenues, net of specified operating expenses, to repay $55.7 million in revenue bonds issued in 1998 and 2008. Proceeds from the bonds provided financing for various capital projects. The bonds are payable solely from the revenue sources of the enterprise funds noted above and are payable through 2033. Annual principal and interest payments on the bonds are expected to require less than 6% of net revenues. The total principal and interest remaining to be paid on the bonds is $86,500,404. Principal and interest paid for the current year and total customer net revenues were $1,334,038 and $76.5 million, respectively. d. Advance Refundings On October 27, 1998, the City issued $6,330,000 in General Obligation Refunding Bonds with interest rates ranging from 3.3% to 5.0% to advance refund $5,925,000 of outstanding 1991 Water and Sewer general obligation bonds with interest rates ranging from 6.10% to 6.25 %. On October 27, 1998, the City also issued $6,525,000 in Combined Enterprise System Refunding Revenue Bonds with interest rates ranging from 3.3% to 4.6% to advance refund $5,715,000 of outstanding 1994 Combined Enterprise System Revenue Bonds with interest rates ranging from 4.2% to 6.0 %. The net proceeds of $12,662,391 were used to purchase U.S. Government securities. Those securities were deposited in an irrevocable trust with an escrow agent to provide for all future debt service payments on the 1991 Water and Sewer Serial Bonds and the portion of the 1994 Combined Enterprise System Revenue Bonds which were refunded. As a result, these bonds are considered to be defeased, and the liability for all the 1991 Water and Sewer serial bonds and the 1994 Combined Enterprise System Revenue Bonds which were refunded have been removed from the Enterprise Funds. At June 30, 2008 none of the 1991 bonds were outstanding. The 1994 Combined Enterprise System Revenue Bonds were fully retired in fiscal year 2008. The advance refundings resulted in a difference between the reacquisition price and the net carrying amount of the old debt of $1,022,391. This difference, net of the accumulated amortization of $768,377, is reported in the accompanying financial statements as a deduction from bonds payable and is being charged to operations through the year 2019 using the effective interest method over the life of the new debt which is shorter than the life of the refunded debt. The bond issuance costs associated with the advance refunding were expensed during the period incurred because they were not considered to be material. The City completed the advance refundings to reduce its total debt service payments over the next 21 years by $841,061 and to obtain an economic gain (difference between the present values of the old and new debt service payments) of $615,185. State Revolving Loans The City has entered into six State Revolving Loans to finance water and sewer improvements. All State Revolving Loans are being serviced by revenues from the Water and Sewer Fund: Loan payable to the State of North Carolina Water Pollution Control Revolving Loan Fund with a maximum limit of $7,382,765 payable over 20 years with interest at 3.385 %. $ 2,583,968 53 Loan payable to the State of North Carolina Water Business -Type Pollution Control Revolving Loan Fund with a maximum Year Ending limit of $3,735,210 payable over 20 years with interest at 556,774 1,266,443 2.89 %. 1,120,563 Loan payable to the State of North Carolina Water Bond 2009 $ Loan Fund with a maximum limit of $1,515,662 payable 202,790 over 20 years with interest at 5.85 %. 606,265 Loan payable to the State of North Carolina Water Bond 2011 Loan Fund with a maximum limit of $1,484,338 payable 145,855 over 20 years with a revised interest rate of 3.43% 827,077 effective May 1, 2003 (previous rate was 5.30 %). 593,735 Loan payable to the State of North Carolina Water 88,861 Pollution Control Revolving Loan Fund with a maximum 1,796,524 limit of $1,159,030 payable over 20 years with interest at Total $ 3.035 %. 521,563 Loan payable to the State of North Carolina Water Liabilities Pollution Control Revolving Loan Fund with a maximum limit of $1,270,105 payable over 20 years with interest at Current 2.89 %. 505,815 $ 5,931,909 Annual debt service requirements to maturity for the State Revolving Loans are as follows: Governmental activities: Installment purchase obligations Compensated absences Self - insurance fund claims payable Governmental activities long -term liabilities Business -type activities: Compensated absences Installment purchase obligations General obligation bonds Less deferred amount for loss on defeasance Total general obligation bonds $ 6,150,068 $ 3,331,706 $ 1,660,339 $ 7,821,435 $ 1,825,896 1,313,294 1,022,825 895,520 1,440,599 965,201 593,202 3,827,435 3,734,194 686,443 686,443 $ 8,056,564 $ 8,181,966 $ 6,290,053 $ 9,948,477 $ 3,477,540 $ 334,678 $ Business -Type Activities Year Ending 5,770,214 556,774 1,266,443 June 30 Principal Interest 2009 $ 827,077 $ 202,790 2010 827,077 174,243 2011 827,077 145,855 2012 827,077 117,508 2013 827,077 88,861 2014-2017 1,796,524 103,182 Total $ 5,931,909 $ 832,439 f. Changes in Long -term Liabilities Current Balance Balance Portion of July 1, 2007 Increases Decreases June 30, 2008 Balance Governmental activities: Installment purchase obligations Compensated absences Self - insurance fund claims payable Governmental activities long -term liabilities Business -type activities: Compensated absences Installment purchase obligations General obligation bonds Less deferred amount for loss on defeasance Total general obligation bonds $ 6,150,068 $ 3,331,706 $ 1,660,339 $ 7,821,435 $ 1,825,896 1,313,294 1,022,825 895,520 1,440,599 965,201 593,202 3,827,435 3,734,194 686,443 686,443 $ 8,056,564 $ 8,181,966 $ 6,290,053 $ 9,948,477 $ 3,477,540 $ 334,678 $ 324,768 $ 277,366 $ 382,080 $ 255,992 5,770,214 556,774 1,266,443 5,060,545 1,276,468 1,450,000 - 660,000 790,000 650,000 28,419 - 17,571 10,848 - 1,421,581 - 642,429 779,152 650,000 54 Revenue bonds Less deferred amount for loss on defeasance Total revenue bonds State revolving loans Business -type activities long -term liabilities 10,385,000 44,015,000 590,000 53,810,000 625,000 280,631 - 37,465 243,166 - 10,104,369 44,015,000 552,535 53,566,834 625,000 6,758,985 - 827,076 5,931,909 827,077 $ 24,389,827 $ 44,896,542 $ 3,565,849 $ 65,720,520 $ 3,634,537 For governmental activities, compensated absences, and self- insurance fund claims payable are liquidated by the General Fund. For business -type activities, compensated absences are liquidated by the respective business -type fund. g. ABC Board The ABC Board has a note payable with a balance of $262,500 at June 30, 2008. Principal payments of $4,167 plus interest at a rate of 5.21% are made monthly maturing June 2013. The note is secured by the land, buildings, and equipment. The following is a schedule of the future minimum principal payments: Year Ending June 30 Principal 2009 $ 50,000 2010 50,000 2011 50,000 2012 50,000 2013 62,500 $ 262,500 C. Interfund Balances and Activity Balances due to /from other funds at June 30, 2008, consist of the following: Due to the Electric Fund for the purchase of land to be used for incentive grants for industries: General Fund $ 1,417,673 Balances due to /from component units at June 30, 2008, consist of the following: Due to the Primary Government for profit distributions from: Monroe ABC Board $ 50,000 Due to the Primary Government for Civic Center: Monroe Tourism Development Authority 19,751 $ 69,751 Transfers to /from other funds at June 30, 2008, consist of the following: From the Occupancy Tax Fund to the General Fund to pay administrative costs $ 55,745 From the General Fund to the City Grant Programs Special Revenue Fund for incentive grants to industries 322,200 From the General Fund to the Water and Sewer Fund for construction projects 85,580 55 From the General Fund to Capital Projects Funds for construction projects 720,995 From the Natural Gas Fund to the General Fund to pay utility billing costs 6,400 From the General Fund to the Airport Fund for Construction Projects 368,568 From the Electric Fund to the General Fund to pay utility billing costs 6,200 From Aquatics & Fitness Center Fund to the Natural Gas Fund for the optional return of donated assets as funds are available 100,000 $ 1,665,668 D. Revenues, Expenditures, and Expenses On- Behalf Payments for Fringe Benefits and Salaries For the fiscal year ended June 30, 2008, the City of Monroe has recognized on- behalf payments for pension contributions made by the state as a revenue and an expenditure of $11,804 for the 46 employed firemen who perform firefighting duties for the City's fire department. The employees elected to be members of the Firemen and Rescue Squad Worker's Pension Fund, a cost - sharing, multiple employer public employee retirement system established and administered by the State of North Carolina. The Plan is funded by a $10 monthly contribution paid by each member, investment income, and a State appropriation. Also, the City has recognized as a revenue and an expenditure on- behalf of payments for fringe benefits and salaries of $127,806 for the salary supplement and stipend benefits paid to eligible firemen by the local board of trustees of the Firemen's Relief Fund during the fiscal year ended June 30, 2008. Under State law the local board of trustees for the Fund receives an amount each year, which the board may use at its own discretion for eligible firemen or their departments. V. JOINTLY GOVERNED ORGANIZATIONS The City, in conjunction with eighteen other local governments, is a member of the North Carolina Municipal Power Agency Number 1 (Agency). The Agency was formed to enable municipalities that own electric distribution systems to finance, construct, own, operate, and maintain generation and transmission facilities. Each participating government appoints one commissioner to the Agency's governing board. The nineteen members, which receive power from the Agency, have signed power sales agreements to purchase a specified share of the power generated by the Agency. Except for the power sales purchase requirements, no local government participant has any obligation, entitlement, or residual interest. The City's purchases of power for the fiscal year ended June 30, 2008 were $35,396,259. Also, the City, in conjunction with eight Central North Carolina counties and fifty other municipalities established the Centralina 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 City paid membership fees of $8,763 to the Council during the fiscal year ended June 30, 2008. VI. JOINT VENTURE The City and the members of the City's fire department each appoint two members to the five - member local board of trustees for the Firemen's Relief Fund. The State Insurance Commissioner appoints one additional member to the local board of trustees. The Firemen's Relief Fund is funded by a portion of the fire and lightning insurance premiums that insurers remit to the State. The State passes these monies to the local board of the Firemen's Relief Fund. The funds are used to assist fire fighters in various ways. The City obtains an ongoing financial benefit from the Fund for the on- behalf of payments for salaries and 56 fringe benefits made to members of the City's fire department by the board of trustees. During the fiscal year ended June 30, 2008, the City reported revenues and expenditures for the payments of $127,806 made through the Firemen's Relief Fund. The participating governments do not have any equity interest in the joint venture, so no equity has been reflected in the financial statements at June 30, 2008. The Firemen's Relief Fund does not issue separate audited financial statements. Instead, the local board of trustees files an annual financial report with the State Firemen's Association. This report can be obtained from the Association at Post Office Box 188, Farmville, North Carolina 27828. VII. RELATED ORGANIZATION The seven - member board of the Monroe Housing Authority is appointed by the City Council and Mayor of the City of Monroe. The City is accountable for the Housing Authority because it appoints the governing board; however, the City is not financially accountable for the Housing Authority. The City of Monroe is also disclosed as a related organization in the notes to the financial statements for the Monroe Housing Authority. Complete financial statements for the Housing Authority can be obtained from the Authority's offices at Post Office Box 805, Monroe, North Carolina 28111. VIII. RELATED PARTY TRANSACTIONS The City and its discretely presented component units engaged in the following transactions during the year ended June 30, 2008: City of Monroe ABC Board Payments to the City for profit distributions $ 212,000 Payments to the City for law enforcement 62,358 Total $ 274,358 Monroe Tourism Development Authority: Payment of a pro -rata portion of the occupancy tax by the City to the Authority $ 315,890 Payment by the Authority to the City for the Civic Center $ 210,593 IX. SUMMARY DISCLOSURE OF SIGNIFICANT CONTINGENCIES Federal and State Assisted Programs The City has received proceeds from several federal and State grants. Periodic audits of these grants are required and certain costs may be questioned as not being appropriate expenditures under the grant agreements. Such audits could result in the refund of grant monies to the grantor agencies. Management believes that any required refunds will be immaterial. No provision has been made in the accompanying financial statements for the refund of grant monies. X. PRIOR PERIOD ADJUSTMENTS During the fiscal year ended June 30, 2007, the City classified an interfund loan from the Electric Fund to the General Fund as a transfer. Therefore, an adjustment to beginning net assets has been recorded to account for those accruals, the net effect of which increased beginning net assets of the Electric Fund and decreased beginning net assets of the General Fund by $1,494,020 by this change. The consolidated government -wide statements beginning net assets were not effected. During the fiscal year ended June 30, 2007, the City capitalized fixed assets in the Electric Fund that were to be reimbursed by an electric customer under a promissory note. An adjustment of $123,576 to beginning net assets has been recorded to account for the excess depreciation expense recorded in the year ending June 30, 2007, due to the cost of these assets being overstated. The note receivable discussed at Note IV.A.3 provides more detail of this transaction. 57 CITY OF MONROE, NORTH CAROLINA LAWENFORCEMENT OFFICERS' SPECIAL SEPARATIONALLOWANCE REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF FUNDING PROGRESS *Reflects changes in actuarial assumptions. 58 Actuarial Accrued UAAL Actuarial Liability (AAL) - Unfunded as a Actuarial Value of Projected AAL Funded Covered Percentage of Valuation Assets Unit Credit (UAAL) Ratio Payroll Covered Payroll Date (a) (b) (b -a) (a/b) (c) ((b -a) /c) 12/31/98 - $ 938,462 $ 938,462 0.00% $ 2,388,277 39.29% 12/31/99 - 903,751 903,751 0.00 2,628,197 34.39 * 12/31/00 - 1,162,961 1,162,961 0.00 2,574,271 45.18 12/31/01 - 1,164,941 1,164,941 0.00 2,819,591 41.32 12/31/02 - 1,210,250 1,210,250 0.00 2,777,185 43.58 12/31/03 - 1,295,336 1,295,336 0.00 2,910,965 44.50 12/31/04 - 1,406,395 1,406,395 0.00 2,865,536 49.08 12/31/05 - 1,400,593 1,400,593 0.00 3,368,588 41.58 12/31/06 - 1,442,095 1,442,095 0.00 3,623,857 39.79 12/31/07 - 1,650,670 1,650,670 0.00 3,761,162 43.89 *Reflects changes in actuarial assumptions. 58 CITY OF MONROE, NORTH CAROLINA LAWENFORCEMENT OFFICERS' SPECIAL SEPARATIONALLOWANCE REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OFEMPLOYER CONTRIBUTIONS Year Ended Annual Required Percentage June 30 Contribution Contributed 1999 $ 100,561 123.55% 2000 112,650 94.37 2001 113,793 95.10 2002 111,195 99.37 2003 116,909 106.01 2004 121,658 113.76 2005 137,815 119.31 2006 138,373 149.68 2007 143,756 122.24 2008 164,695 127.34 Notes to the Required Schedules: The information presented in the required supplementary schedules was determined as part of the actuarial valuations at the dates indicated. Additional information as of the latest actuarial valuation follows: Valuation date Actuarial cost method Amortization method Remaining amortization period Asset valuation method Actuarial assumptions: Investment rate of return* Projected salary increases* Cost -of- living adjustments December 31, 2006 Projected unit credit Level percentage of pay closed 24 Years Market value 7.25% 4.5% to 12.3% none *Includes inflation at 3.75% 59 m "XT "U I a heritage of'progress SUPPLEMENTAL FINANCIAL DATA Nonmajor Governmental Funds Special Revenue Funds Special Revenue Funds are used to account for specific revenues that are legally restricted to expenditures for specified purposes. Community Development - This fund is used to account for specific revenues that are restricted to fund continuing rehabilitation of housing within certain targeted areas of the City. Downtown Monroe - This fund is used to account for specific revenues that are restricted for the purpose of downtown revitalization. Occupancy Tax This fund is used to account for specific revenues that are restricted for the purpose of tourism development. City Grant Programs - This fund is used to account for specific revenues that are restricted to fund rehabilitation of homes within the Historic District, to make grants under the City's economic development incentive program, and to provide down payment assistance to qualified low and moderate income individuals to acquire homes. State Grant Programs - This fund is used to account for specific state grant revenues that are restricted for housing development in designated areas of the City. Capital Projects Funds Capital Projects Funds account for financial resources to be used for the acquisition or construction of major capital facilities other than those financed by proprietary funds. Capital Reserve — This fund is used to account for money held for future capital purposes. Capital Projects - This fund is used to account for the purchase, renovation, furnishing, or construction of roadway and facility improvements. CITY OF MONROE, NORTH CAROLINA COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS June 30, 2008 Special Revenue ASSETS Cash and cash equivalents Taxes receivable Accounts receivable Loans receivable Total assets LIABILITIES AND FUND BALANCES Liabilities: Accounts payable and accrued liabilities Deferred revenue Total liabilities Fund balances: Reserved for: State statute Unreserved for: Designated for subsequent year's expenditures Undesignated Total fund balances Total liabilities and fund balances Community Downtown Occupancy City Grant State Grant Development Monroe Tax Programs Programs $ 40,230 $ 57,796 $ - $1,317,388 $ 7,999 - 1,291 34,606 - - 3,317 - - - - 21,379 - - - - $ 64,926 $ 59,087 $ 34,606 $1,317,388 $ 7,999 $ - $ 3,751 $ 34,606 $ 1,837 $ 21,379 1,291 - - 21,379 5,042 34,606 1,837 3,317 - - - 40,230 54,045 - 1,315,551 7,999 43,547 54,045 - 1,315,551 7,999 $ 64,926 $ 59,087 $ 34,606 $1,317,388 $ 7,999 62 STATEMENT I Funds Total $ 1,423,413 3 5, 897 3,317 21,379 Capital Projects Total Nonmajor Governmental Funds $ 1,326,444 $ 2,749,857 - 35,897 - 3,317 - 21,379 $ 1,484,006 $ 1,326,444 $ 2,810,450 $ 40,194 $ 146,950 $ 187,144 22,670 - 22,670 62,864 146,950 209,814 3,317 1,417,825 - 3,317 1,179,494 1,179,494 - 1,417,825 1,421,142 1,179,494 2,600,636 $ 1,484,006 $ 1,326,444 $ 2,810,450 63 CITY OF MONROE, NORTH CAROLINA COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES NONMAJOR GOVERNMENTAL FUNDS For the Fiscal Year Ended June 30, 2008 REVENUES Ad valorem taxes Other taxes and licenses Restricted intergovernmental Program income Investment earnings Total revenues Special Revenue Community Downtown Occupancy City Grant State Grant Development Monroe Tax Programs Programs $ - $ 38,022 $ - $ - - 371,635 5,543 - - - 8,743 - 5,543 46,765 371,635 - 7,175 - 7,175 EXPENDITURES Current: Economic and physical development: Administration Loan assistance Incentive grants Program costs Tourism Capital outlay Total expenditures Revenues over (under) expenditures OTHER FINANCING SOURCES (USES) Transfers from other funds Transfers to other funds Installment purchase obligations issued Total other financing sources (uses) Net change in fund balances Fund balances, beginning Fund balances, ending 86 205,019 - - - 31,589 - - - - 269,779 - - - - - 7,175 - - 315,890 - - 86 205,019 315,890 301,368 7,175 5,457 (158,254) 55,745 (301,368) - - - - 322,200 - - - (55,745) - - - - (55,745 322,200 - 5,457 (158,254) 38,090 212,299 - 20,832 - - 1,294,719 7,999 $ 43,547 $ 54,045 $ - $1,315,551 $ 7,999 64 STATEMENT 2 Funds Total Nonmajor Capital Governmental Total Projects Funds $ 38,022 $ - $ 38,022 371,635 - 371,635 7,175 55,414 62,589 5,543 - 5,543 8,743 8,145 16,888 431,118 63,559 494,677 205,105 - 205,105 31,589 - 31,589 269,779 - 269,779 7,175 - 7,175 315,890 - 315,890 - 3,817,516 3,817,516 829,538 3,817,516 4,647,054 (398,420) (3,753,957) (4,152,377) 322,200 720,995 1,043,195 (55,745) - (55,745) - 1,900,000 1,900,000 266,455 2,620,995 2,887,450 (131,965) (1,132,962) (1,264,927) 1,553,107 2,312,456 3,865,563 $ 1,421,142 $ 1,179,494 $ 2,600,636 65 CITY OF MONROE, NORTH CAROLINA GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES -- BUDGET AND ACT UAL For the Fiscal Year Ended June 30, 2008 REVENUES Ad valorem taxes: Taxes Penalties and interest Total Other taxes and licenses: Privilege licenses Gross receipts tax on short-term rental property Cablevision franchise fees Motor vehicle tax Total Unrestricted intergovernmental: Local option sales taxes Telecommunications sales tax Utility franchise tax Beer and wine tax State fire fees ABC profit distribution Total Restricted intergovernmental: Powell Bill allocation Public safety reimbursement grants On- behalf payments - Fire and Rescue ABC Revenue for law enforcement Senior Center grant Equitable sharing of federally forfeited property Firefighters Assistance grant Union County Tourism Development Authority Katrina Transitional Housing grant Department of Transportation grant HAZMAT grant Total Sales and services: Recreational fees Refuse collection fees Utilities collection fees Building permit fees Cemetery revenues Sale of fixed assets Rentals Other fees Total Budget Actual $ 14,449,657 $ 15,151,434 52,000 75,863 14, 501,657 15,227,297 365,000 392,261 40,000 42,120 220,000 287,914 133,000 132,879 758,000 855,174 4,775,000 4,884,108 416,000 490,958 1,402,000 1,430,266 141,000 156,194 3,500 3,853 120,000 212,000 6,857,500 7,177,379 SCHEDULE 3 Variance Positive (Negative) $ 701,777 23,863 725,640 27,261 2,120 67,914 (121) 97,174 109,108 74,958 28,266 15,194 353 92,000 319,879 1,055,200 1,148,097 92,897 482,014 454,271 (27,743) - 139,610 139,610 58,146 44,312 (13,834) 5,467 5,467 - - 123,207 123,207 189,000 181,620 (7,380) 181,000 210,593 29,593 9,067 7,873 (1,194) 1,979,894 2,315,050 335,156 830,250 771,424 (58,826) 2,907,000 2,752,514 (154,486) 429,700 453,206 23,506 550,000 450,264 (99,736) 38,450 43,575 5,125 350,000 349,475 (525) 56,850 75,635 18,785 179,225 240,973 61,748 5,341,475 5,137,066 (204,409) - Continued - 66 SCHEDULE 3, Continued CITY OF MONROE, NORTH CAROLINA GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES -- BUDGET AND ACT UAL For the Fiscal Year Ended June 30, 2008 Investment earnings Miscellaneous: Resource officer reimbursement Payment in lieu of taxes Insurance reimbursement Donations Other Total Total revenues EXPENDITURES Current: General government: Administration Salaries and employee benefits Operating expenditures Capital outlay Interdepartmental charges Planning and zoning Salaries and employee benefits Operating expenditures Engineering Salaries and employee benefits Operating expenditures Capital Outlay Interdepartmental charges Utility /tax billing and collection Salaries and employee benefits Operating expenditures Capital outlay Interdepartmental charges Variance Positive Budget Actual (Negative) 1,075,640 1,241,930 166,290 100,000 118,728 18,728 295,200 331,137 35,937 - 2,614 2,614 40,575 46,005 5,430 41,600 151,793 110,193 477,375 650,277 172,902 30,991,541 32,604,173 1,612,632 3,051,136 2,841,998 209,138 2,854,384 2,192,195 662,189 48,405 40,577 7,828 (2,757,867) (2,742,502) (15,365) 3,196,058 2,332,268 863,790 851,035 780,374 70,661 92,490 91,929 561 943,525 872,303 71,222 836,954 834,806 2,148 346,105 160,430 185,675 7,540 7,573 (33) (152,872) (152,872) - 1,037,727 849,937 187,790 362,840 346,381 16,459 88,240 68,129 20,111 7,275 6,891 384 (448,065 (448,065) - 10,290 (26,664) 36,954 - Continued- 67 SCHEDULE 3, Continued CITY OF MONROE, NORTH CAROLINA GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES -- BUDGET AND ACT UAL For the Fiscal Year Ended June 30, 2008 Fire Salaries and employee benefits 4,876,567 4,815,694 Variance Operating expenditures 688,743 664,881 Positive Capital outlay Budget Actual (Negative) 6,157,806 Operations Center 114,203 Building standards and code enforcement Salaries and employee benefits 678,953 668,815 10,138 Operating expenditures 222,890 204,664 18,226 Capital outlay 39,500 37,630 1,870 Interdepartmental charges (615,817) (616,246) 429 Total 325,526 294,863 30,663 Special appropriations Operating expenditures 381,810 347,872 33,938 Total 5,894,936 4,670,579 1,224,357 Transportation: Streets and highways Salaries and employee benefits 1,200,479 1,157,090 43,389 Operating expenditures 1,745,476 1,572,205 173,271 Capital outlay 480,800 479,741 1,059 Interdepartmental charges (297,680) (303,302) 5,622 Total 3,129,075 2,905,734 223,341 Public safety: Police Salaries and employee benefits 6,090,405 6,090,156 249 Operating expenditures 1,110,275 1,052,648 57,627 Capital outlay 393,013 393,571 (558) 7,593,693 7,536,375 57,318 Fire Salaries and employee benefits 4,876,567 4,815,694 60,873 Operating expenditures 688,743 664,881 23,862 Capital outlay 592,496 563,028 29,468 6,157,806 6,043,603 114,203 Building standards and code enforcement Salaries and employee benefits 568,626 578,079 (9,453) Operating expenditures 135,385 102,720 32,665 Total 704,011 680,799 23,212 Total 14,455,510 14,260,777 194,733 - Continued - 68 SCHEDULE 3, Continued CITY OF MONROE, NORTH CAROLINA GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES -- BUDGET AND ACT UAL For the Fiscal Year Ended June 30, 2008 Environmental protection: Solid Waste: Operating expenditures Culture and recreation: Salaries and employee benefits Operating expenditures Capital outlay Interdepartmental charges Total Debt service: Principal retirement Interest and other charges Total Total expenditures Revenues over (under) expenditures OTHER FINANCING SOURCES (USES) Transfers from (to) other funds: Special Revenue Funds Occupancy Tax Fund City Grant Programs Capital Projects Funds Capital Projects Electric Fund Natural Gas Fund Water and Sewer Fund Airport Fund Repayment of loan to Electric Fund Installment purchase obligations issued Total other financing sources (uses) FUND BALANCE APPROPRIATED Net change in fund balance Fund balance, beginning Fund balance, ending Variance Positive Budget Actual (Negative) 2,561,016 2,551,419 9,597 2,453,142 2,333,013 120,129 1,812,935 1,416,812 396,123 140,240 140,120 120 (181,884 (213,940) 32,056 4,224,433 3,676,005 548,428 1,780,204 1,660,339 119,865 237,641 182,511 55,130 2,017,845 1,842,850 174,995 32,282,815 29,907,364 2,375,451 (1,291,274) 2,696,809 3,988,083 58,000 55,745 (2,255) (479,000) (322,200) 156,800 (725,433) (720,995) 4,438 6,200 6,200 - 6,400 6,400 - (88,053) (85,580) 2,473 (368,568) (368,568) - (195,000) (131,477) 63,523 1,477,305 1,417,080 (60,225 (308,149 (143,395) 164,754 1,599,423 - (1,599,423) $ - 2,553,414 $ 2,553,414 18,054,132 $ 20,607,546 69 SCHEDULE 4, Page I of S CITY OF MONROE, NORTH CAROLINA SPECIAL REVENUE FUNDS COMMUNITY DEVELOPMENT SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES -- BUDGETAND ACTUAL For the Fiscal Year Ended June 30, 2008 REVENUES Program income EXPENDITURES Current: Economic and physical development: Administration Net change in fund balance Fund balance, beginning Fund balance, ending Variance Positive Budget Actual (Negative) $ 5,000 $ 5,543 $ 543 5,000 86 4,914 $ - 5,457 $ 5,457 38,090 $ 43,547 70 SCHEDULE 4, Page 2 of S CITY OF MONROE, NORTH CAROLINA SPECIAL REVENUE FUNDS DOWNTOWNMONROE SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES -- BUDGETAND ACTUAL For the Fiscal Year Ended June 30, 2008 REVENUES Ad valorem taxes Investment earnings Total EXPENDITURES Current: Economic and physical development: Administration Revenues over (under) expenditures OTHER FINANCING SOURCES Transfers from other funds: General Fund FUND BALANCE APPROPRIATED Net change in fund balance Fund balance, beginning Fund balance, ending Variance Positive Budget Actual (Negative) $ 34,700 $ 38,022 $ 3,322 - 8,743 8,743 34,700 46,765 12,065 218,780 205,019 13,761 (184,080) (158,254) 25,826 - (184,080) $ - (158,254) $ (158,254) 212,299 $ 54,045 71 SCHEDULE 4, Page 3 of S CITY OF MONROE, NORTH CAROLINA SPECIAL REVENUE FUNDS OCCUPANCY TAX SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES -- BUDGETANDACTUAL For the Fiscal Year Ended June 30, 2008 REVENUES Other taxes and licenses: Occupancy tax EXPENDITURES Current: Economic and physical development: Tourism Revenues over expenditures OTHER FINANCING USES Transfers to other funds: General Fund Net change in fund balance Fund balance, beginning Fund balance, ending Budget Actual Variance Positive (Negative) $ 379,000 $ 371,635 $ (7,365) 321,000 315,890 5,110 58,000 55,745 (2,255 (58,000) (55,745) 2,255 72 SCHEDULE 4, Page 4 of S CITY OF MONROE, NORTH CAROLINA SPECIAL REVENUE FUNDS CITY GRANT PROGRAMS SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES -- BUDGETAND ACTUAL From Inception and For the Fiscal Year Ended June 30, 2008 Actual REVENUES Program income EXPENDITURES Current: Economic and physical development: Loan assistance Incentive grants Total expenditures Revenues over (under) expenditures Project Prior Current Total to Authorization Year Year Date Variance Positive (Negative) $ - $ 113,104 $ - $ 113,104 $ 113,104 275,000 113,105 31,589 144,694 130,306 2,814,572 1,414,909 269,779 1,684,688 1,129,884 3,089,572 1,528,014 301,368 1,829,382 1,260,190 (3,089,572) (1,414,910 (301,368) (1,716,278) 1,373,294 OTHER FINANCING SOURCES (USES) Transfers from other funds: General Fund 2,814,572 2,492,367 322,200 2,814,567 (5) Community Development Fund 275,000 217,262 - 217,262 (57,738) Total other financing sources (uses) 3,089,572 2,709,629 322,200 3,031,829 (57,743) Revenues and other financing sources over expenditures and other financing uses $ - $ 1,294,719 Fund balance, beginning Fund balance, ending 20,832 $ 1,315,551 $ 1,315,551 1,294,719 $ 1,315,551 73 SCHEDULE 4, Page S of S CITY OF MONROE, NORTH CAROLINA SPECIAL REVENUE FUNDS STATE GRANT PROGRAMS SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES -- BUDGETAND ACTUAL From Inception and For the Fiscal Year Ended June 30, 2008 Actual Project Prior Current Total to Authorization Year Year Date Variance Positive (Negative) REVENUES Restricted intergovernmental (06 -C -1544) $ 400,000 $ - $ 7,175 $ 7,175 $ (392,825) Restricted intergovernmental (04 -C -1312) 40,000 23,999 - 23,999 (16,001) Total Revenues 440,000 23,999 7,175 31,174 (408,826) EXPENDITURES Current: Economic and physical development: Program costs (06 -C -1544) Program costs (04 -C -1312) Total expenditures Revenues under expenditures OTHER FINANCING SOURCES Transfers from other funds: City Grant Programs Fund Revenues and other financing sources over (under) expenditures Fund balance, beginning Fund balance, ending 400,000 36,000 - 36,000 364,000 60,000 - 7,175 7,175 52,825 460,000 36,000 7,175 43,175 416,825 (20,000) (12,001) - (12,001 7,999 20,000 20,000 $ - $ 7,999 20,000 - $ 7,999 $ 7,999 7,999 $ 7,999 74 CITY OF MONROE, NORTH CAROLINA CAPITAL PROJECTS FUNDS CAPITAL PROJECTS SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES -- BUDGET AND ACT UAL From Inception And For The Fiscal Year Ended June 30, 2008 SCHEDULE S Fund balance, beginning Fund balance, ending 2,312,456 1,179,494 75 Actual Variance Project Prior Current Total to Positive Authorization Years Year Date (Negative) REVENUES Restricted intergovernmental $ 1,670,486 $ 846,077 $ 55,414 $ 901,491 $ (768,995) Miscellaneous 108 696 - 696 588 Investment earnings - - 8,145 8,145 8,145 Total revenues 1,670,594 846,773 63,559 910,332 (760,262) EXPENDITURES Capital outlay: Construction costs capitalized 2,582,763 2,239,664 343,093 2,582,757 6 Construction in progress 5,184,103 84,787 3,432,359 3,517,146 1,666,957 Other costs 1,180,930 866,073 42,064 908,137 272,793 Total expenditures 8,947,796 3,190,524 3,817,516 7,008,040 1,939,756 Revenues over (under) expenditures (7,277,202) (2,343,751) (3,753,957) (6,097,708) 1,179,494 OTHER FINANCING SOURCES (USES) Transfers from (to) other funds: General Fund 5,377,202 4,656,207 720,995 5,377,202 - Installment purchase obligations issued 1,900,000 - 1,900,000 1,900,000 - Total other financing sources (uses) 7,277,202 4,656,207 2,620,995 7,277,202 - Revenues and other financing sources over (under) expenditures and other financing uses $ - $2,312,456 (1,132,962) $ 1,179,494 $ 1,179,494 Fund balance, beginning Fund balance, ending 2,312,456 1,179,494 75 SCHEDULE 6 CITY OF MONROE, NORTH CAROLINA WATER AND SEWER FUND SCHEDULE OF REVENUES AND EXPENDITURES — BUDGETANDACTUAL (NON -GAAP) For the Fiscal Year Ended June 30, 2008 REVENUES Operating revenues: Charges for services: Water sales Sewer charges Water and sewer taps County waste water charges Other operating revenues Total operating revenues Nonoperating revenues: Availability fees Other nonoperating revenues Investment earnings Total nonoperating revenues Total revenues OTHER FINANCING SOURCES Installment purchase obligations issued Total other financing sources FUND BALANCE APPROPRIATED Total revenues and other financing sources Variance Positive Budget Actual (Negative) $ 5,218,900 $ 5,247,440 $ 28,540 6,650,000 6,485,222 (164,778) 134,800 86,779 (48,021) 555,000 653,653 98,653 12,558,700 12,473,094 (85,606 376,400 232,204 (144,196 12,935,100 12,705,298 (229,802) 1,353,100 1,009,760 (343,340) 10,500 38,332 27,832 680,280 1,200,262 519,982 2,043,880 2,248,354 204,474 14,978,980 14,953,652 (25,328 189,000 179,500 (9,500) 189,000 179,500 (9,500) (5,328,974) - 5,328,974 $ 9,839,006 $ 15,133,152 $ 5,294,146 - Continued - 76 SCHEDULE 6, Continued CITY OF MONROE, NORTH CAROLINA WATER AND SEWER FUND SCHEDULE OF REVENUES AND EXPENDITURES — BUDGETANDACTUAL (NON -GAAP) For the Fiscal Year Ended June 30, 2008 EXPENDITURES Distribution system: Salaries and employee benefits Operating expenditures Total Water filter plant: Salaries and employee benefits Operating expenditures Total Waste treatment plant: Salaries and employee benefits Operating expenditures Total Debt service: Principal retirement Interest and other charges Total Capital outlay Total expenditures OTHER FINANCING USES Transfers to other funds: General Fund Water and Sewer Capital Projects Fund Total other financing uses Total expenditures and other financing uses Variance Positive Budget Actual (Negative) $ 1,982,906 $ 1,887,735 $ 95,171 2,665,725 1,908,652 757,073 4,648,631 3,796,387 852,244 628,452 584,801 43,651 2,245,020 1,972,231 272,789 2,873,472 2,557,032 316,440 846,092 814,263 31,829 1,733,101 1,553,861 179,240 2,579,193 2,368,124 211,069 2,080,625 2,056,306 24,319 639,800 638,238 1,562 2,720,425 2,694,544 25,881 924,885 657,281 267,604 13,746,606 12,073,368 1,673,238 7,400 7,400 - (3,915,000 (3,922,284) 7,284 (3,907,600 (3,914,884) 7,284 $ 9,839,006 $ 8,158,484 $ 1,680,522 - Continued - 77 SCHEDULE 6, Continued CITY OF MONROE, NORTH CAROLINA WATER AND SEWER FUND SCHEDULE OF REVENUES AND EXPENDITURES — BUDGETANDACTUAL (NON -GAAP) For the Fiscal Year Ended June 30, 2008 Reconciliation from budgetary basis (modified accrual) to full accrual: Total revenues and other financing sources Total expenditures and other financing uses Revenues and other financing sources over expenditures and other financing uses Reconciling items: Debt principal Installment purchase obligations issued Amortization of deferred loss on refunding Amortization of bond premimum Amortization of bond issuance costs Capital outlay Capital contributions Construction in progress written off in current year Net book value of assets disposed Transfer to Water and Sewer Capital Projects Funds Transfer from General Fund to Water And Sewer Capital Projects Funds Net expense from capital projects consolidation Increase in compensated absences Depreciation and amortization Total reconciling items Change in net assets $ 15,133,152 8,158,484 6,974,668 2,056,306 (179,500) (26,649) 570 (2,035) 351,985 2,918,184 (863,348) (3,922,284) 92,980 (23,203) (28,601) (1,712,372) (1,337,967) $ 5,636,701 78 SCHEDULE 7, Page I of 2 CITY OF MONROE, NORTH CAROLINA WATER AND SEWER CAPITAL PROJECTS FUNDS CAPITAL RESERVE SCHED ULE OF REVENUES AND EXPENDITURES -- BUDGET AND ACTUAL (NON -GAAP) For the Fiscal Year Ended June 30, 2008 OTHER FINANCING SOURCES (USES) Transfers from other funds: Water and Sewer Capital Projects Funds Increase in fund balance Total other financing sources (uses) Fund balance, beginning Fund balance, ending Variance Positive Budget Actual (Negative) 3,318,739 $ 3,318,739 79 SCHEDULE 7, Page 2 of 2 REVENUES Investment earnings EXPENDITURES Construction costs capitalized Contruction in progress Other costs Total expenditures CITY OF MONROE, NORTH CAROLINA WATER AND SEWER CAPITAL PROJECTS FUNDS CAPITAL PROJECTS SCHEDULE OF REVENUES AND EXPENDITURES -- BUDGET AND ACTUAL (NON -GAAP) From Inception and For the Fiscal Year Ended June 30, 2008 Revenues over (under) expenditures OTHER FINANCING SOURCES (USES) Transfers from (to) other funds: Water and Sewer Fund General Fund Water and Sewer Capital Reserve Fund Bond issuance costs Proceeds from revenue bonds Total other financing sources (uses) Revenues and other financing sources over (under) expenditures and other financing uses Project Authorization Actual Prior Current Years Year Total to Date Variance Positive (Negative) $ - $ - $ 69,288 $ 69,288 $ 69,288 592,981 500,000 92,980 624,198 27,410 595,886 623,296 902 45,355,055 148,481 1,202,896 1,351,377 44,003,678 1,041,693 949,202 92,491 1,041,693 - 47,020,946 1,125,093 1,891,273 3,016,366 44,004,580 12,220,944 (34,800,002) (47,020,946) (1,125,093) (1,821,985) (2,947,078) 44,073,868 6,377,064 10,299,348 (3,922,285) 6,377,063 (1) 592,981 500,000 92,980 592,980 (1) 50,000 50,000 - 50,000 - (101,751) - (101,751) (101,751) - 40,102,652 - 5,302,652 5,302,652 (34,800,000) 47,020,946 10,849,348 1,371,596 12,220,944 (34,800,002) $ - $ 9,724,255 $ (450,389) $ 9,273,866 $ 9,273,866 80 SCHEDULE 8 CITY OF MONROE, NORTH CAROLINA ELECTRIC FUND SCHEDULE OF REVENUES AND EXPENDITURES — BUDGETANDACTUAL (NON -GAAP) For the Fiscal Year Ended June 30, 2008 REVENUES Operating revenues: Charges for services: Electric power sales Sales tax Total Other operating revenues Total operating revenues Nonoperating revenues: Rate stabilization funds Power agency funding Other nonoperating revenues Investment earnings Total nonoperating revenues Total revenues Variance Positive Budget Actual (Negative) $ 40,122,000 $ 41,820,692 $ 1,698,692 1,199,400 1,127,943 (71,457) 41,321,400 42,948,635 1,627,235 85,000 441,553 356,553 41,406,400 43,390,188 1,983,788 - 181,068 181,068 - 767,556 767,556 110,000 129,727 19,727 1,261,000 2,300,489 1,039,489 1,371,000 3,378,840 2,007,840 42,777,400 46,769,028 3,991,628 OTHER FINANCING SOURCES Installment purchase obligations issued Repayment of loan from General Fund Repayment of advance from Airport Fund Total other financing sources 262,000 226,900 (35,100) 195,900 131,477 (64,423) 359,000 359,000 - 816,900 717,377 (99,523 FUND BALANCE APPROPRIATED Total revenues and other financing sources 12,045,029 - (12,045,029) $ 55,639,329 $ 47,486,405 $ (8,152,924) - Continued - 81 SCHEDULE 8, Continued CITY OF MONROE, NORTH CAROLINA ELECTRIC FUND SCHEDULE OF REVENUES AND EXPENDITURES — BUDGETANDACTUAL (NON -GAAP) For the Fiscal Year Ended June 30, 2008 EXPENDITURES Operations: Salaries and employee benefits Operating expenditures Total Electric power purchases Debt service: Principal retirement Interest and other charges Total Capital outlay Total expenditures OTHER FINANCING USES Transfers to other funds Electric Capital Projects Funds General Fund Advance to Airport Fund Total other financing uses Total expenditures and other financing uses 42,621,329 41,057,594 12,652,800 11, 912,796 Variance 6,200 359,000 Positive Budget Actual (Negative) $ 845,337 $ 726,275 $ 119,062 3,156,008 2,020,932 1,135,076 4,001,345 2,747,207 1,254,138 35,400,000 35,396,259 3,741 422,100 378,817 43,283 277,800 292,039 (14,239) 699,900 670,856 29,044 2,520,084 2,243,272 276,812 42,621,329 41,057,594 12,652,800 11, 912,796 6,200 6,200 359,000 359,000 13,018,000 12,277,996 l G<2 "72 G 740,004 - 7 An nnA $ 55,639,329 $ 53,335,590 $ 2,303,739 - Continued - 82 SCHEDULE 8, Continued CITY OF MONROE, NORTH CAROLINA ELECTRIC FUND SCHEDULE OF REVENUES AND EXPENDITURES — BUDGETANDACTUAL (NON -GAAP) For the Fiscal Year Ended June 30, 2008 Reconciliation from budgetary basis (modified accrual) to full accrual: Total revenues and other financing sources Total expenditures and other financing uses Revenues and other financing sources under expenditures and other financing uses Reconciling items: Debt principal Installment purchase obligations issued Amortization of deferred loss on refunding Amortization of bond premimum Amortization of bond issuance costs Capital outlay Principal repayment of loan from general fund Payments received on note receivable Transfer to Electric Capital Projects Funds Net revenue from capital projects consolidation Increase in compensated absences Depreciation and amortization Total reconciling items Change in net assets $ 47,486,405 53,335,590 (5,849,185) 378,817 (226,900) (19,643) 2,395 (4,282) 2,120, 966 (76,347) (423,157) 11,912,796 141,472 (9,497) (1,912,724 11,883,896 $ 6,034,711 83 SCHEDULE 9 CITY OF MONROE, NORTH CAROLINA ELECTRIC CAPITAL PROJECTS FUNDS CAPITAL PROJECTS SCHEDULE OF REVENUES AND EXPENDITURES -- BUDGET AND ACTUAL (NON -GAAP) From Inception and For the Fiscal Year Ended June 30, 2008 84 Actual Variance Project Prior Current Total to Positive Authorization Years Year Date (Negative) REVENUES Power agency funding $ 5,805,850 $ 5,592,648 $ - $ 5,592,648 $ (213,202) Miscellaneous - - - - - Investment earnings - - 291,082 291,082 291,082 5,805,850 5,592,648 291,082 5,883,730 77,880 EXPENDITURES Construction costs capitalized 4,590,071 4,050,175 399,832 4,450,007 140,064 Construction in progress 38,261,329 2,805,430 13,573,540 16,378,970 21,882,359 Other costs 6,579,655 209,578 149,576 359,154 6,220,501 Total expenditures 49,431,055 7,065,183 14,122,948 21,188,131 28,242,924 Revenues over (under) expenditures (43,625,205) (1,472,535) (13,831,866) (15,304,401) 28,320,804 OTHER FINANCING SOURCES Transfers from other funds: Electric Fund 21,776,526 9,863,725 11,912,796 21,776,521 (5) Bond issuance costs (428,205) - (428,205) (428,205) - Proceeds from revenue bonds 22,276,884 - 22,276,883 22,276,883 (1) 43,625,205 9,863,725 33,761,474 43,625,199 (6) Revenues and other financing sources over expenditures $ - $ 8,391,190 $ 19,929,608 $ 28,320,798 $ 28,320,798 84 SCHEDULE 10 CITY OF MONROE, NORTH CAROLINA NATURAL GAS FUND SCHEDULE OF REVENUES AND EXPENDITURES — BUDGETANDACTUAL (NON -GAAP) For the Fiscal Year Ended June 30, 2008 Budget REVENUES Operating revenues: Charges for services: Natural gas sales Other operating revenues Total operating revenues Nonoperating revenues: Other nonoperating revenues Investment earnings Total nonoperating revenues Total revenues OTHER FINANCING SOURCES Installment purchase obligations issued Transfers from other funds: Aquatics and Fitness Center Fund Total other financing sources Fund balance appropriated Total revenues and other financing sources Variance Positive Actual (Negative) $ 17,851,500 $ 18,806,722 $ 955,222 30,000 29,456 (544 17,881,500 18,836,178 954,678 3,000 2,992 (8) 247,000 542,961 295,961 250,000 545,953 295,953 18,131,500 19,382,131 1,250,631 166,000 165,000 (1,000) 100,000 100,000 - 266,000 265,000 (1,000 3,362,489 - 3,362,489 $ 21,759,989 $ 19,647,131 $ 4,612,120 - Continued - 85 SCHEDULE 10, Continued CITY OF MONROE, NORTH CAROLINA NATURAL GAS FUND SCHEDULE OF REVENUES AND EXPENDITURES — BUDGETANDACTUAL (NON -GAAP) For the Fiscal Year Ended June 30, 2008 EXPENDITURES Operations: Salaries and employee benefits Operating expenditures Total Natural gas purchases Debt service: Principal retirement Interest and other charges Total Capital outlay Total expenditures OTHER FINANCING USES Transfers to other funds: General Fund Natural Gas Capital Projects Funds Total other financing uses Total expenditures and other financing uses Variance Positive Budget Actual (Negative) $ 399,987 $ 601,627 $ (201,640) 2,112,552 1,670,267 442,285 2,512,539 2,271,894 240,645 14,102,000 14,101, 837 163 128,550 127,374 1,176 86,000 85,593 407 214,550 212,967 1,583 934,500 583,599 350,901 17,763,589 17,170,297 593,292 6,400 6,400 - 3,990,000 3,688,317 301,683 3,996,400 3,694,717 301,683 $ 21,759,989 $ 20,865,014 $ 894,975 - Continued - 86 SCHEDULE 10, Continued CITY OF MONROE, NORTH CAROLINA NATURAL GAS FUND SCHEDULE OF REVENUES AND EXPENDITURES — BUDGETANDACTUAL (NON -GAAP) For the Fiscal Year Ended June 30, 2008 Reconciliation from budgetary basis (modified accrual) to full accrual: Total revenues and other financing sources Total expenditures and other financing uses Revenues and other financing sources over expenditures and other financing uses Reconciling items: Debt principal Installment purchase obligations issued Amortization of deferred loss on refunding Amortization of bond premimum Amortization of bond issuance costs Net book value of assets disposed Capital outlay Transfer to Natural Gas Capital Projects Funds Net income from capital projects consolidation Increase in compensated absences Depreciation and amortization Total reconciling items Change in net assets $ 19,647,131 20,865,014 (1,217,883 127,374 (165,000) (8,743) 400 (1,434) (26,448) 579,508 3,688,317 4,947 (4,023) (420,666 3,774,232 $ 2,556,349 87 SCHEDULE H CITY OF MONROE, NORTH CAROLINA NATURAL GAS CAPITAL PROJECTS FUNDS CAPITAL PROJECTS SCHEDULE OF REVENUES AND EXPENDITURES — BUDGETANDACTUAL (NON -GAAP) From Inception and For the Fiscal Year Ended June 30, 2008 REVENUES Miscellaneous Investment earnings Total revenues EXPENDITURES Construction costs capitalized Construction in progress Other costs Total expenditures Revenues over (under) expenditures OTHER FINANCING SOURCES Transfers from other funds: Natural Gas Fund Certificates of Participation Bond issuance costs Proceeds from revenue bonds Total other financing sources Revenues and other financing sources over (under) expenditures 5,850,319 2,162,001 3,688,316 Actual 22,544,000 - Variance Project Prior Current Total to Positive Authorization Years Year Date (Negative) $ - $ 2,493 $ - $ 2,493 $ 2,493 - - 48,634 48,634 48,634 - 2,493 48,634 51,127 51,127 552,655 447,505 104,816 552,321 334 31,371,495 731,011 3,925,153 4,656,164 26,715,331 121,103 77,415 43,686 121,101 2 32,045,253 1,255,931 4,073,655 5,329,586 26,715,667 (32,045,253) (1,253,438) (4,073,655) (5,327,093) 26,718,160 5,850,319 2,162,001 3,688,316 5,850,317 (2) 22,544,000 - - - (22,544,000) (71,120) - (71,120) (71,120) - 3,722,054 - 3,722,054 3,722,054 - 32,045,253 2,162,001 7,339,250 9,501,251 (22,544,002 $ - $ 908,563 $ 3,265,595 $ 4,174,158 $ 4,174,158 .. CITY OF MONROE, NORTH CAROLINA AQUATICS AND FITNESS CENTER FUND SCHEDULE OF REVENUES AND EXPENDITURES — BUDGETANDACTUAL (NON -GAAP) For the Fiscal Year Ended Tune 30, 2008 REVENUES Operating revenues: Charges for services: Recreational fees Other operating revenues Total operating revenues Nonoperating revenues: Other nonoperating revenues Investment earnings Total nonoperating revenues Total revenues FUND BALANCE APPROPRIATED Total revenues SCHEDULE 12 467,118 467,11 $ 4,563,118 $ 4,344,026 $ (219,092) - Continued - 89 Variance Positive Budget Actual (Negative) $ 3,884,000 $ 3,994,631 $ 110,631 139,000 167,136 28,136 4,023,000 4,161,767 138,767 - 11,750 11,750 73,000 170,509 97,509 73,000 182,259 109,259 4,096,000 4,344,026 248,026 467,118 467,11 $ 4,563,118 $ 4,344,026 $ (219,092) - Continued - 89 SCHEDULE 12, Continued CITY OF MONROE, NORTH CAROLINA AQUATICS AND FITNESS CENTER FUND SCHEDULE OF REVENUES AND EXPENDITURES — BUDGETANDACTUAL (NON -GAAP) For the Fiscal Year Ended June 30, 2008 EXPENDITURES Operations: Salaries and employee benefits Operating expenditures Total Debt service: Principal retirement Interest and other charges Total Capital outlay Total expenditures OTHER FINANCING USES Transfers to other funds: MAFC Capital Projects Natural Gas Fund Total other financing uses Total expenditures and other financing uses Variance Positive Budget Actual (Negative) $ 1,578,456 $ 1,468,781 $ 109,675 1,534,262 1,269,630 264,632 3,112,718 2,738,411 374,307 746,516 746,418 98 172,384 172,384 - 918,900 918,802 98 7,500 4,500 3,000 4,039,118 3,661,713 377,405 424,000 410,875 13,125 100,000 100,000 - 524,000 510,875 - $ 4,563,118 $ 4,172,588 $ 377,405 - Continued - 90 SCHEDULE 12, Continued CITY OF MONROE, NORTH CAROLINA AQUATICS AND FITNESS CENTER FUND SCHEDULE OF REVENUES AND EXPENDITURES — BUDGETANDACTUAL (NON -GAAP) For the Fiscal Year Ended Tune 30, 2008 Reconciliation from budgetary basis (modified accrual) to full accrual: Total revenues and other financing sources Total expenditures and other financing uses Revenues and other financing sources over expenditures and other financing uses Reconciling items: Debt principal Increase in compensated absences Net expense from capital projects consolidation Transfer to MAFC Capital Project Fund Depreciation and amortization Total reconciling items Change in net assets 4,344,026 172.588 171,438 746,418 (5,279) (22,326) 410,875 (256,262) 873,426 $ 1,044,864 91 SCHEDULE 13 CITY OF MONROE, NORTH CAROLINA AQUA TICS AND FITNESS CENTER CAPITAL PROJECTS FUNDS CAPITAL PROJECTS SCHEDULE OF REVENUES AND EXPENDITURES -- BUDGET AND ACTUAL (NON -GAAP) From Inception and For the Fiscal Year Ended June 30, 2008 Actual REVENUES Investment earnings EXPENDITURES Construction costs capitalized Other costs Total expenditures Revenues over (under) expenditures OTHER FINANCING SOURCES Transfers from other funds: Aquatics and Fitness Center Fund Total other financing sources Revenues and other financing sources over expenditures Project Prior Authorization Years Current Total to Year Date Variance Positive (Negative) 162,876 97,481 65,395 162,876 - 424,000 - 22,326 22,326 401,674 586,876 97,481 87,721 185,202 401,674 (586,876 (97,481 (87,721 (185,202) 401,674 586,876 175,999 410,875 586,874 (410,877) 586,876 175,999 410,875 586,874 (410,877) $ - $ 78,518 $ 323,154 $ 401,672 $ (9,203) 92 SCHEDULE 14 CITY OF MONROE, NORTH CAROLINA AIRPORT FUND SCHEDULE OF REVENUES AND EXPENDITURES — BUDGETANDACTUAL (NON -GAAP) For the Fiscal Year Ended June 30, 2008 REVENUES Operating revenues: Charges for services: Leases Flowage fee Sales of fuel Total Other operating revenues Total operating revenues OTHER FINANCING SOURCES Transfers from other funds: General Fund Airport Capital Project Fund Advance from Electric Fund Total other financing sources 11110 11t1:11W. I: »:Z1]WN/:VY1101 Total revenues and other financing sources Variance Positive Budget Actual (Negative) $ 190,100 $ 234,416 $ 44,316 480 - (480) 1,588,974 1,619,004 30,030 1,779,554 1,853,420 73,866 43,450 43,107 (343 1,823,004 1,896,527 73,523 351,815 351,815 - - 125,343 125,343 359,000 359,000 - 710,815 836,158 125,343 116,107 - (116,107) $ 2,649,926 $ 2,732,685 $ 82,759 - Continued - 93 SCHEDULE 14, Continued CITY OF MONROE, NORTH CAROLINA AIRPORT FUND SCHEDULE OF REVENUES AND EXPENDITURES — BUDGETANDACTUAL (NON -GAAP) For the Fiscal Year Ended June 30, 2008 Budget EXPENDITURES Operations: Salaries and employee benefits Operating expenditures Total Debt service: Principal retirement Interest and other charges Total Capital outlay Total expenditures OTHER FINANCING USES Transfers to other funds: Repayment of advance from Electric Fund Total other financing uses Total expenditures and other financing uses Variance Positive Actual (Negative) $ 384,549 $ 398,985 $ (14,436) 1,771,207 1,852,160 (80,953 2,155,756 2,251,145 (95,389 39,870 34,604 5,266 84,300 89,496 (5,196 124,170 124,100 70 11,000 - 11,000 2,290,926 2,375,245 (84,319 359,000 359,000 359,000 359,000 $ 2,649,926 $ 2,734,245 $ (84,319) - Continued - 94 SCHEDULE 14, Continued CITY OF MONROE, NORTH CAROLINA AIRPORT FUND SCHEDULE OF REVENUES AND EXPENDITURES — BUDGETANDACTUAL (NON -GAAP) For the Fiscal Year Ended Tune 30, 2008 Reconciliation from budgetary basis (modified accrual) to full accrual: Total revenues and other financing sources $ 2,732,685 Total expenditures and other financing uses 2,734,245 Revenues and other financing sources over expenditures and other financing uses (1,560) Reconciling items: Debt principal 34,604 Amortization of bond issuance costs (3,053) Capital outlay - Net expense from capital projects consolidation 175,054 Tranfer from Airport Capital Project Fund (125,343) Transfer from General Fund to Airport Capital Projects Fund 16,753 Depreciation and amortization (520,964) Total reconciling items (422,949) Change in net assets $ (424,509) 95 SCHEDULE IS, Page I of 2 CITY OF MONROE, NORTH CAROLINA AIRPORT CAPITAL PROJECTS FUNDS CAPITAL RESERVE SCHEDULE OF REVENUES AND EXPENDITURES — BUDGETANDACTUAL (NON -GAAP) For the Fiscal Year Ended June 30, 2008 OTHER FINANCING SOURCES (USES) Transfers from other funds: Airport Capital Projects Funds Increase in fund balance Total other financing sources (uses) Fund balance, beginning Fund balance, ending Variance Positive Budget Actual (Negative) 386,799 $ 386,799 96 SCHEDULE 15, Page 2 of 2 CITY OF MONROE, NORTH CAROLINA AIRPORT CAPITAL PROJECTS FUNDS CAPITAL PROJECTS SCHED ULE OF REVENUES AND EXPENDITURES -- BUDGET AND ACTUAL (NON -GAAP) From Inception and For the Fiscal Year Ended June 30, 2008 Project Authorization REVENUES Restricted intergovernmental Investment earnigs Total revenues $ 3,407,819 3,407,819 Actual Prior Current Total to Years Year Date $ 1,202,698 1,202,698 Variance Positive (Negative) $ - $ 1,202,698 $ (2,205,121) 175,054 175,054 175,054 175,054 1,377,752 (2,030,067) EXPENDITURES Construction costs capitalized 1,906,382 1,752,460 - 1,752,460 153,922 Construction in progress 15,813,616 57,876 1,765,635 1,823,511 13,990,105 Total expenditures 17,719,998 1,810,336 1,765,635 3,575,971 14,144,027 Revenues over (under) expenditures (14,312,179) (607,638) (1,590,581) (2,198,219) 11,938,906 OTHER FINANCING SOURCES (USES) Transfers from (to) other funds: General Fund 433,648 416,895 16,753 433,648 - Airport Fund 376,158 501,500 (125,343) 376,157 (1) Proceeds from revenue bonds 13,095,000 - 13,095,000 13,095,000 - Bond issuance costs (152,627) - (152,627) (152,627) - Installment purchase obligations issued 560,000 - - - (560,000) Total other financing sources (uses) 14,312,179 918,395 12,833,783 13,752,178 (560,001) Revenues and other financing sources over (under) expenditures and other financing uses $ - $ 310,757 $ 11,243,202 $ 11,553,959 $ 11,553,959 97 SCHEDULE 16 CITY OF MONROE, NORTH CAROLINA SCHEDULE OFAD VALOREM TAXES RECEIVABLE June 30, 2008 Ad valorem taxes receivable $ 823,856 Reconcilement with revenues: Ad valorem taxes - General fund $ 15,227,297 Amounts written off per statute of limitations 23,594 Refunds, releases of prior years' taxes 764 Interest and advertising cost recovery (75,863 Total collections and credits $ 15,175,792 D1: Uncollected Uncollected Balance Collections Balance Fiscal Year June 30, 2007 Additions And Credits June 30, 2008 2007-2008 $ - $ 15,092,984 $ 14,607,206 $ 485,778 2006-2007 488,475 149,519 493,780 144,214 2005-2006 103,906 - 35,934 67,972 2004-2005 53,742 - 10,202 43,540 2003-2004 35,937 - 16,781 19,156 2002-2003 20,792 - 1,352 19,440 2001 -2002 9,754 - 816 8,938 2000-2001 16,695 - 397 16,298 1999-2000 8,952 - 234 8,718 1998- 1999 10,036 - 234 9,802 1997- 1998 8,856 - 8,856 - $ 757,145 $ 15,242,503 $ 15,175,792 Ad valorem taxes receivable $ 823,856 Reconcilement with revenues: Ad valorem taxes - General fund $ 15,227,297 Amounts written off per statute of limitations 23,594 Refunds, releases of prior years' taxes 764 Interest and advertising cost recovery (75,863 Total collections and credits $ 15,175,792 D1: SCHEDULE 17 CITY OF MONROE, NORTH CAROLINA ANALYSIS OF CURRENT TAX LEVY CITY -WIDE LEVY For the Fiscal Year Ended June 30, 2008 Secondary Market Disclosures: Assessed Valuation: Assessment Ratio' Real property Motor vehicle property Personal property Public Service Companies Total Assessed Valuation Tax Rate per $100 Levy (includes discoveries, releases and abatements)' 'Percentage of appraised value has been established by statute. Valuation of railroads, telephone companies and other utilities as determined by the North Carolina Property Tax Commission. 'The levy includes interest and penalties. In addition to the City -wide rate, the levy by the City on behalf of the Downtown Monroe District for the fiscal year ended June 30, 2008 was $36,481. $ 1,878,049,563 227,534,632 583,078,514 49,984,245 2,738,646,954 0.55 $ 15,092,984 oil Total Levy Property excluding City - Wide registered Registered Property Total Motor Motor Valuation Rate Levy Vehicles Vehicles Original levy Property taxed at current year's rate $ 2,560,048,108 0.55 $ 14,034,405 $ 13,370,707 $ 663,698 Registered motor vehicles taxed at prior year's rate 103,982,269 612,379 - 612,379 Total 2,664,030,377 14,646,784 13,370,707 1,276,077 Public Utility Allocation 49,984,245 0.55 274,913 274,913 - Discoveries 43,148,382 0.55 277,787 277,787 - Abatements (18,516,050) 0.55 (106,500) (62,817) (43,683) Total property valuation $ 2,738,646,954 Net levy 15,092,984 13,860,590 1,232,394 Uncollected taxes at June 30, 2007 (485,778) (267,025) (218,753) Current year's taxes collected $ 14,607,206 $ 13,593,565 $ 1,013,641 Current levy collection percentage 96.78% 98.07% 82.25% Secondary Market Disclosures: Assessed Valuation: Assessment Ratio' Real property Motor vehicle property Personal property Public Service Companies Total Assessed Valuation Tax Rate per $100 Levy (includes discoveries, releases and abatements)' 'Percentage of appraised value has been established by statute. Valuation of railroads, telephone companies and other utilities as determined by the North Carolina Property Tax Commission. 'The levy includes interest and penalties. In addition to the City -wide rate, the levy by the City on behalf of the Downtown Monroe District for the fiscal year ended June 30, 2008 was $36,481. $ 1,878,049,563 227,534,632 583,078,514 49,984,245 2,738,646,954 0.55 $ 15,092,984 oil .10 \'ROH; STATISTICAL SECTION Statistical Section This part of the City of Monroe's comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the City's overall financial health. Page Financial Trends — These tables contain trend information to help the reader understand how the City's financial performance and well being have been changed over time .......................... 103 Revenue Capacity — These tables contain information to help the reader assess the City's most significant local revenue source, the propertytax ............................... ............................... 108 Debt Capacity These tables present information to help the reader assess the affordability of the City's current levels of outstanding debt and the City's ability to issue additional debt in thefuture .................................. ............................... 112 Demographic and Economic Information — These tables offer demographic and economic indicators to help the reader understand the environment within which the City's financial activities take place ...................... ............................... 117 Operation Information — These tables contain service and infrastructure data to help the reader understand how the information in the City's financial report relates to the services the City provides and the activities ..... ............................... 119 Sources: Unless otherwise noted, the information in these tables is derived from the comprehensive annual financial reports to the relevant year. m "XT "U I a heritage of'progress W N h ti N h y r�hW�a s O h U i yy I� U W. 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CL O.� CL ,� �, .p �Gr Q •-• ^ ¢' O J ,� O J U J Q � N O O � Xi v � .� �� Q '� '� J 'C.' U v .J.i .J.. O �v�v��v�a °aaN a�a�U�v��4 �4d✓'+�,d � gd Jr/]�V] �.w w °' � �UwU-- 0 W � F ^Y � � F F w V � -7t N — C\ � � N �--i 00 M ,--i N � t N — C\ � , N — o0 M M l7t r— \O O O l7t N � C\ � , N — 00 M N w ti � o Fw V W N � U � � � E~ cC bA O U O ,--i - - - o a �o 00 --i M M 00 N ,--i W M oc O N O U •� ,O CL ap T O� N CL W • . O A O � 10 , --i O ''" i. •• U bA CL T i O 0 o a ' o to to to • N tr U U U ¢+ N CL cot cot 0 0 U U O •�' O O ^O � 3 � O o � m "XT "U I a heritage of'progress COMPLIANCE SECTION POTTER &COMPANY, P.A. CERTIFIED PUBLIC ACCOUNTANTS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT A UDITING STANDARDS To the Honorable Mayor and Members of the City Council City of Monroe, North Carolina We have audited the accompanying financial statements of the governmental activities, the business -type activities, the aggregate discretely presented component units, each major fund, and the aggregated remaining fund information of the City of Monroe, North Carolina, as of and for the year ended June 30, 2008, which collectively comprises the City of Monroe's basic financial statements, and have issued our report thereon dated October 24, 2008. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States. The financial statements of the City of Monroe ABC Board and the City of Monroe Tourism Authority were not audited in accordance with Government Auditing Standards. Internal Control Over Financial Reporting In planning and performing our audit, we considered the City of Monroe's internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City of Monroe's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the City's internal control over financial reporting. A control deficiency exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the City's ability to initiate, authorize, record, process, or report financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the City's financial statements that is more than inconsequential will not be prevented or detected by the City's internal control. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected by the City's internal control. Our consideration of the internal control over financial reporting was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in internal control over financial reporting that might be significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above. Compliance and Other Matters As part of obtaining reasonable assurance about whether the City of Monroe's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. 123 114 North Church Street ■ Monroe, NC 28112 ■ 704.283.8189 ■ 704.289.3439 fax ■ www.gotopotter.com This report is intended solely for the information and use of management, others within the organization, members of City Council, and federal and State awarding agencies and pass - through entities and is not intended to be and should not be used by anyone other than these specified parties. October 24, 2008 Monroe, North Carolina 124 FP) POTTER &COMPANY, P.A. CERTIFIED PUBLIC ACCOUNTANTS REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR FEDERAL PROGRAM AND INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A -133 AND THE STATE SINGLE AUDIT IMPLEMENTATION ACT To the Honorable Mayor and Members of the City of Council City of Monroe, North Carolina Compliance We have audited the compliance of the City of Monroe, North Carolina, with the types of compliance requirements described in the U.S. Office of Management and Budget (OMB) Circular A -133 Compliance Supplement and the Audit Manual for Governmental Auditors in North Carolina, issued by the Local Government Commission, that are applicable to each of its major federal programs for the year ended June 30, 2008. The City of Monroe's major federal programs are identified in the summary of auditor's results section of the accompanying schedule of findings and questioned costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major federal programs is the responsibility of the City of Monroe's management. Our responsibility is to express an opinion on the City of Monroe's compliance based on our audit. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A -133, Audits of States, Local Governments, and Non- Profit Organizations, and the State Single Audit Implementation Act. Those standards, OMB Circular A -133, and the State Single Audit Implementation Act require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the City of Monroe's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on the City of Monroe's compliance with those requirements. In our opinion, the City of Monroe complied, in all material respects, with the requirements referred to above that are applicable to each of its major federal programs for the year ended June 30, 2008. Internal Control Over Compliance The management of the City of Monroe is responsible for establishing and maintaining effective internal control over compliance with requirements of laws, regulations, contracts and grants applicable to federal programs. In planning and performing our audit, we considered the City of Monroe's internal control over compliance with requirements that could have a direct and material effect on a major federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the City's internal control over compliance. A control deficiency in an entity's internal control over compliance exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect noncompliance with a type of compliance requirement of a federal program on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies that adversely affects the entity's ability to administer a federal program such that there is more than a remote likelihood that noncompliance with a type of compliance requirement of a federal program that is more than inconsequential will not be prevented or detected by the City's internal control. 125 114 North Church Street ■ Monroe, NC 28112 ■ 704.283.8189 ■ 704.289.3439 fax ■ www.gotopotter.com A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that material noncompliance with a type of compliance requirement of a federal program will not be prevented or detected by the City's internal control. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in internal control that might be significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above. This report is intended solely for the information and use of management, others within the organization, members of City Council, and federal and State awarding agencies and pass - through entities and is not intended to be and should not be used by anyone other than these specified parties. October 24, 2008 Monroe, North Carolina 126 r � POTTER &COMPANY, P.A. CERTIFIED PUBLIC ACCOUNTANTS REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR STATE PROGRAM AND INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH APPLICABLE SECTIONS OF OMB CIRCULAR A -133 AND THE STATE SINGLE AUDIT IMPLEMENTATION ACT To the Honorable Mayor and Members of the City Council City of Monroe, North Carolina Compliance We have audited the compliance of the City of Monroe, North Carolina, with the types of compliance requirements described in the Audit Manual for Governmental Auditors in North Carolina, issued by the Local Government Commission, that are applicable to each of its major State programs for the year ended June 30, 2008. The City of Monroe's major State programs are identified in the summary of auditor's results section of the accompanying schedule of findings and questioned costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major State programs is the responsibility of the City of Monroe's management. Our responsibility is to express an opinion on the City of Monroe's compliance based on our audit. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and applicable sections of OMB Circular AA 33, as described in the Audit Manual for Governmental Auditors in North Carolina, and the State Single Audit Implementation Act. Those standards, applicable sections of OMB Circular A -133, and the State Single Audit Implementation Act require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major State program occurred. An audit includes examining, on a test basis, evidence about the City of Monroe's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on the City of Monroe's compliance with those requirements. In our opinion, the City of Monroe complied, in all material respects, with the requirements referred to above that are applicable to each of its major State programs for the year ended June 30, 2008. Internal Control Over Compliance The management of the City of Monroe is responsible for establishing and maintaining effective internal control over compliance with requirements of laws, regulations, contracts and grants applicable to State programs. In planning and performing our audit, we considered the City of Monroe's internal control over compliance with requirements that could have a direct and material effect on a major State program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the City's internal control over compliance. A control deficiency in an entity's internal control over compliance exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect noncompliance with a type of compliance requirement of a State program on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies that adversely affects the entity's ability to administer a State program such that there is more than a remote likelihood that noncompliance with a type of a compliance requirement of a State program that is more than inconsequential will not be prevented or detected by the City's internal control. 127 114 North Church Street ■ Monroe, NC 28112 ■ 704.283.8189 ■ 704.289.3439 fax ■ www.gotopotter.com A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that material noncompliance with a type of compliance requirement of a State program will not be prevented or detected by the City's internal control. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in internal control that might be significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above. This report is intended solely for the information and use of management, and others within the organization, members of City Council, and federal and State awarding agencies and pass - through entities and is not intended to be and should not be used by anyone other than these specified parties. October 24, 2008 Monroe, North Carolina ;�& ;� 4 ar 7 128 SCHEDULE 18 CITY OF MONROE, NORTH CAROLINA SCHEDULE OF FINDINGS AND QUESTIONED COSTS For the Fiscal Year Ended June 30, 2008 Section I. Summary of Auditors' Results Financial Statements Type of auditors' report issued: Unqualified Internal control over financial reporting: • Material weakness(es) identified? yes X no • Significant Deficiency(s) identified that are not considered to be material weaknesses yes X none reported Noncompliance material to financial statements noted yes X no Federal Awards Internal control over major federal programs: • Material weakness(es) identified? yes X no • Significant Deficiency(s) identified that are not considered to be material weaknesses yes X none reported Type of auditors' report issued on compliance for major federal programs: Unqualified. Any audit findings disclosed that are required to be reported in accordance with Section 510(a) of Circular A -133 yes X no Identification of major federal programs: CFDA Number Name of Federal Program 97.083 Staffing for Adequate Fire & Emergency Response (SAFER) Dollar threshold used to distinguish between Type A and Type B Programs $ 300,000 Auditee qualified as low -risk auditee? X yes no State Awards Internal control over major State programs: • Material weakness(es) identified? yes X no • Significant Deficiency(s) identified that are not considered to be material weaknesses yes X none reported - Continued- 129 SCHEDULE 18, Continued CITY OF MONROE, NORTH CAROLINA SCHEDULE OF FINDINGS AND QUESTIONED COSTS For the Fiscal Year Ended June 30, 2008 Type of auditors' report issued on compliance for major State programs: Unqualified Any audit findings disclosed that are required to be reported in accordance with the State Single Audit Implementation Act yes X no Identification of major State programs: Program Name Powell Bill Section II - Financial Statement Findings None reported. Section III - Federal Award Findings and Questioned Costs None reported. Section IV - State Awards Findings and Questioned Costs None reported. 130 CITY OF MONROE, NORTH CAROLINA SUMMARY SCHEDULE OF PRIOR YEAR AUDIT FINDINGS For the Fiscal Year Ended June 30, 2008 Finding: None reported. SCHEDULE 19 all SCHEDULE 20 CITY OF MONROE, NORTH CAROLINA SCHEDULE OF EXPENDITURES OF FEDERAL AND STATE A WARDS For the Fiscal Year Ended Tune 30, 2008 State/ Federal Pass - Through Federal (Direct Grantor /Pass- Through CFDA Grantor's and Pass - Through) State Local Grantor/Program Title Number Number Expenditures Expenditures Expenditures Federal Grants: Cash Programs: U.S. Department of Justice: Direct Programs: Drug Enforcement Administration Law Enforcement Byrne Grant Bulletproof Vest Partnership Program U.S. Department of Homeland Security Direct Pro rg ams: Staffing for Adequate Fire & Emergency Response (SAFER) Assistance to Firefighers Grant U.S. Department of Transportation: Federal Aviation Administration: Passed - through the N.C. Department of Transportation: Streetscape Phase IV -A Federal Highway Administration: Passed - through the N.C. Department of Transportation: Government Highway Safety Program Total Assistance - Federal Programs State Grants: Cash Assistance: N.C. Department of Transportation: Powell bill NCSU Clean Fuel Advance Technology Grant N.C. Department of Community Assistance: Scattered Site Housing Grant N.C. Crime Control and Emergency Management: Katrina Transitional Housing N.C. Department of Health and Human Services: Aging Grant Total Assistance - State Programs Total Federal and State Assistance 16.579 $ 35,115 $ $ 460 16.592 29,942 - 16.607 2,800 2,800 97.083 385,432 67,422 97.044 181,620 20,179 20.205 36237.17.7.1 55,414 160,662 36237.17.7.2 20.600 26,378 22,756 716,701 274,279 1,244,125 - 9,720 3,041 7,175 - 7,873 - 5,467 1,822 - 1,274,360 4,863 $ 716,701 $ 1,274,360 $ 279,142 - Continued 132 SCHEDULE 20, Continued CITY OF MONROE, NORTH CAROLINA SCHEDULE OF EXPENDITURES OF FEDERAL AND STATE A WARDS For the Fiscal Year Ended June 30, 2007 Notes to the Schedule of Expenditures of Federal and State Financial Awards: The accompanying schedule of expenditures of federal and State awards includes the federal and State grant activity of the City of Monroe and is presented on the modified accrual basis of accounting. The information in this schedule is presented in accordance with the requirements of OMB Circular A -133, Audits of States, Local Governments, and Non - Profit Organizations, and the State Single Audit Implementation Act. Therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the preparation of the basic financial statements. 133 m "XT "U I a heritage of'progress + fi r r( � _� � - ;- -* t it I t HE f