HomeMy Public PortalAboutComprehensive Annual Financial Report Year Ended June 30, 2014Comprehensive Annual Financial Report
Year Ended
June 30, 2014
Town of Hillsborough,
North Carolina
Tom Stevens
Mayor
Eric J. Peterson
Town Manager
Heidi Lamay
Finance Director
Town of Hillsborough Finance Department
Carolyn Glasgow, Assistant Finance Director
Robert TeCarr, Financial Analyst
Sarah Butcher, Accounts Payable Clerk
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Town of Hillsborough, North Carolina
TABLE OF CONTENTS
Page No.
INTRODUCTORY SECTION
List of Principal Officials ............................................................................ i
Organizational Chart ................................................................................. ii
Letter of Transmittal .................................................................................. iii
GFOA Certificate of Achievement ............................................................. ix
FINANCIAL SECTION
Independent Auditors’ Report ................................................................... 1
Management’s Discussion and Analysis .................................................. 5
Exhibit Basic Financial Statements
Government-Wide Financial Statements:
1 Statement of Net Position ...................................................................... 19
2 Statement of Activities ........................................................................... 20
Fund Financial Statements:
3 Balance Sheet - Governmental Funds .................................................. 22
4 Statement of Revenues, Expenditures and Changes in Fund
Balance - Governmental Funds ........................................................... 23
5 Statement of Revenues, Expenditures and Changes in Fund
Balance - Budget and Actual - General Fund ..................................... 25
6 Statement of Net Position - Proprietary Fund ....................................... 26
7 Statement of Revenues, Expenses and Changes in Net
Position - Proprietary Fund .................................................................. 27
8 Statement of Cash Flows - Proprietary Fund ........................................ 28
9 Statement of Fiduciary Assets and Liabilities - Special
Assessment Debt Agency Fund .......................................................... 30
Notes to Financial Statements .................................................................. 31
Exhibit Required Supplementary Financial Data
Law Enforcement Officers’ Special Separation Allowance
Required Supplementary Information
A-1 Schedule of Funding Progress .............................................................. 71
A-2 Schedule of Employer Contributions ..................................................... 72
Notes to the Required Schedules.......................................................... 72
Town of Hillsborough, North Carolina
TABLE OF CONTENTS (Continued)
Exhibit Required Supplemental Financial Data (Continued) Page No.
Other Postemployment Benefits Required Supplementary
Information
B-1 Schedule of Funding Progress .............................................................. 73
B-2 Schedule of Employer Contributions ..................................................... 74
Notes to the Required Schedules.......................................................... 74
Schedule Supplementary Information
Combining and Individual Fund Financial Statements Section
Governmental Funds
1 General Fund - Schedule of Revenues, Expenditures, and
Changes in Fund Balance - Budget and Actual .................................. 77
2 Schedule of Revenues and Expenditures Compared with
Budget - Riverwalk Phase II Capital Project Fund .............................. 81
3 Schedule of Revenues and Expenditures Compared with
Budget - Major General Capital Projects Fund ................................... 82
4 Schedule of Revenues and Expenditures Compared with
Budget - Nonmajor General Capital Reserve Fund ............................ 83
5 Combining Balance Sheet - Nonmajor Governmental Funds .............. 84
6 Combining Statement of Revenues, Expenditures and
Changes in Fund Balances - Nonmajor Governmental Funds ........... 85
7 Schedule of Revenues and Expenditures Compared with
Budget - Riverwalk Phase III Capital Project Fund ............................. 86
8 Schedule of Revenues and Expenditures Compared with
Budget - Riverwalk CMAQ Capital Project Fund ................................. 87
Enterprise Fund
9 Schedule of Revenues Compared with Budget (Non-GAAP) -
Water and Sewer Fund ........................................................................ 88
10 Schedule of Expenditures Compared with Budget (Non-
GAAP) - Water and Sewer Fund ......................................................... 89
11 Schedule of Revenues and Expenditures Compared with
Budget (Non-GAAP) - Water and Sewer Capital Projects
Fund ..................................................................................................... 92
12 Schedule of Revenues and Expenditures Compared with
Budget (Non-GAAP) - Water and Sewer Capital Reserve
Fund ..................................................................................................... 93
Town of Hillsborough, North Carolina
TABLE OF CONTENTS (Continued)
Schedule Additional Financial Data Page No.
13 Schedule of Ad Valorem Taxes Receivable ............................................. 97
14 Analysis of Current Tax Levy .................................................................... 98
Table STATISTICAL SECTION
Financial Trends Information
1 Net Position by Component ................................................................... 103
2 Changes in Net Position… .................................................................... 104
3 Fund Balances, Governmental Funds................................................... 105
4 Changes in Fund Balances, Governmental Funds ............................... 106
Revenue Capacity Information
5 Program Revenues by Function/Program ............................................. 108
6 Tax Revenues by Source, Governmental Funds .................................. 109
7 Assessed Value and Actual Value of Taxable Property ....................... 110
8 Direct and Overlapping Property Tax Rates ......................................... 111
9 Property Tax Review and Collections ................................................... 112
10 Principal Property Taxpayers ................................................................ 113
11 Water Sold by Type of Customer and In and Out of Town ................... 114
12 Water and Sewer Rates ........................................................................ 115
Debt Capacity Information
13 Ratios of Outstanding Debt by Type ..................................................... 117
14 Ratios of General Bonded Debt Outstanding ........................................ 118
15 Direct and Overlapping Governmental Activities Debt .......................... 119
16 Legal Debt Margin Information .............................................................. 120
Demographic and Economic Information
17 Demographic and Economic Statistics .................................................. 122
18 Principal Employers ............................................................................... 123
19 Full-Time Equivalent City Government Employees by
Function/Program ................................................................................. 124
Operating Information
20 Operating Indicators by Function/Program ........................................... 126
21 Capital Asset Statistics by Function/Program ....................................... 127
Town of Hillsborough, North Carolina
TABLE OF CONTENTS (Continued)
Schedule Page No.
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 .................................................................................. 131
Report on Compliance with Requirements Applicable to Its
Major Federal Program and Internal Control over Compliance
in Accordance with OMB Circular A-133 and the State Single
Audit Implementation Act ......................................................................... 133
Report on Compliance with Requirements Applicable to Its
Major State Program and Internal Control over Compliance in
Accordance with OMB Circular A-133 and the State Single
Audit Implementation Act ......................................................................... 135
15 Schedule of Findings and Questioned Costs ........................................... 137
16 Schedule of Prior Year Audit Findings ...................................................... 141
17 Schedule of Expenditures of Federal and State Awards .......................... 142
INTRODUCTORY SECTION
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Town of Hillsborough, North Carolina
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LIST OF PRINCIPAL OFFICIALS
Board of Town Commissioners
Tom Stevens, Mayor
L. Eric Hallman ................................................................ Mayor Pro Tem
Brian J. Lowen .................................................................. Commissioner
Evelyn P. Lloyd ................................................................. Commissioner
Frances L. Dancy.............................................................. Commissioner
Michael F. Gering ............................................................. Commissioner
Town Officials
Eric J. Peterson, Town Manager
Heidi Lamay, Finance Director
Emily Bradford, Budget Officer
Kenneth Keel, Town Engineer/Utilities Director
Katherine Cathey, Town Clerk/Personnel Officer
Duane Hampton, Police Chief
Margaret Hauth, Planning Director
Ken Hines, Public Works Director
Catherine Wright, Public Information Officer
Jennifer Della Valle, Management Analyst/Assistant PIO
Robert Hornik, Town Attorney
Town of Hillsborough, North Carolina
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ORGANIZATIONAL CHART
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December 5, 2014
Honorable Mayor Stevens,
Board of Town Commissioners,
and Citizens of Hillsborough
Hillsborough, North Carolina 27278
The Comprehensive Annual Financial Report of Hillsborough, North Carolina for the fiscal year
ended June 30, 2014, is submitted for your review and use. The Town, like all other local
governments in the state, is required by state law to publish a complete set of financial statements
within four months of the close of each fiscal year. Responsibility for the accuracy of the data and
the completeness and fairness of the presentation, including all disclosures, rests with the Town. As
management, we assert that, to the best of our knowledge, this financial report is complete and
reliable in all material respects, and is reported in a manner designed to fairly present the financial
position and results of the operations of the governmental and business-type activities. All
disclosures necessary to gain the maximum understanding of the Town’s financial affairs have been
included.
The Town’s management is responsible for establishing and maintaining an internal control structure
that is designed to ensure the Town’s assets are protected from loss, theft or misuse, and to ensure
adequate accounting data are compiled to allow for the preparation of financial statements which
conform with accounting principles generally accepted in the United States of America (GAAP).
Since the cost of internal controls should not outweigh their benefits, the Town’s internal control
structure has been designed to provide reasonable rather than absolute assurance that the financial
statements will be free from material misstatement.
North Carolina statutes and the Town’s Ordinance require an annual audit by independent certified
public accountants. The accounting firm of Dixon Hughes Goodman LLP, a firm of licensed certified
public accountants, was selected and awarded the contract for Fiscal Year 2014. The goal of an
independent audit is to provide reasonable assurance that the financial statements are free of
material misstatement. An independent audit involves examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements; assessing the accounting
principles used and the significant estimates made by management; and evaluating the overall
financial statement presentation. 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 transmittal letter is designed to
complement the Management’s Discussion & Analysis and should be read in conjunction with it. The
Town’s MD&A can be found immediately following the independent auditor’s report.
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THE REPORTING ENTITY AND ITS SERVICES
Founded in 1754, Hillsborough, the county seat of Orange County, is located at the intersection of
interstates 85 and 40, near several urban centers and universities. The small town setting is six to 30
miles from Chapel Hill, Durham, and Raleigh. Hillsborough’s 6,398 residents have easy access to
employment opportunities within the Research Triangle Park area. Within Hillsborough, the economy
is centered on government, retail, service providers, and manufacturing. Orange County and the
Town of Hillsborough are major local employers. The Town’s historical sites attract a large number
of tourists.
The Town is operated under the council-manager form of government. Commissioners on the five-
member, nonpartisan board serve four-year staggered terms and are elected at large. The mayor,
also elected at large, serves a two-year term, chairs the board meetings, and votes when a tie
occurs.
The Town provides a full range of municipal services, including police, fire inspection and protection,
parks, street maintenance, solid waste collection, and cemetery. The Town provides financial
support to certain boards, agencies and commissions to assist their efforts in serving citizens. The
Town has evaluated its relationship with each of these entities according to criteria established by
Governmental Accounting Standards Board Statement 14 and has determined that the Hillsborough
Tourism Development Authority and Hillsborough Tourism Board are required to be included in the
financial report.
The Town operates its own water and sanitary sewer systems. The Town’s water treatment plant
has a capacity of three million gallons per day (MGD) and is currently treating an average daily flow
of 1.161 MGD. The Town’s water system serves a total population of 14,709, which includes Town
residents and customers from outlying areas. The sanitary sewer system has a treatment capacity of
3 MGD, with a current average daily flow of 0.950 MGD.
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ECONOMIC CONDITIONS AND OUTLOOK
The Town of Hillsborough, Orange County and the Research Triangle Park area have experienced
limited growth in recent years, but are still considered to be among the most desirable areas of the
country to live and work, according to several national surveys. The economy of Hillsborough is
diversified with government, manufacturing, wholesale and retail businesses, as well as numerous
service providers. Approximately 42.00% of Hillsborough’s tax base is commercial in nature - this is
a strong indicator of a healthy and diverse property tax base. Local industries are involved in a range
of operations, from simple assembly to complex manufacturing processes resulting in products such
as hydraulic equipment, electronic equipment, and computerized medical diagnostic equipment.
The Town’s unemployment rate has been below state and national rates over the past 18 years.
This trend continued during the current year in which the Town’s unemployment rate, as of June
2014, was 4.8% for Orange County, while the state and national rates were 6.5% and 6.1%,
respectively.
The Town’s economy is expected to remain stable because of the benefits derived from a lower
unemployment rate, a stable employment base, and the March 2004 annexation of a 337-acre
mixed-use development called Waterstone. While taking longer to develop than expected,
Waterstone is expected to increase the Town’s population by 25% and increase the tax base by 25%
over the next seven years. The single-family and townhome developments are expected to start
construction and sales in late 2014. Work on the apartment complex is scheduled for 2015. These
three residential projects alone will add over 500 residential units and more than 1,000 residents to
Hillsborough. U.N.C. Hospitals purchased 90 of the 337 acres in FY09 to construct a $220 million
medical use facility. The hospital is scheduled to open in July 2015. The medical office section
opened in 2013; this includes administrative offices and a variety of medical services.
In addition to the Waterstone development, Hillsborough is seeing growth throughout town. Current
projects which are beginning construction include: Corbin Creek Woods (18 units), Forrest Ridge
(233 units), and Elfin Pond Townhomes (104 units). The combination of these developments and
growth in Waterstone will roughly increase Hillsborough's population by 30% over the next four years.
Other projects, commercial and residential, are currently in the planning stages by various
developers throughout town.
The Town's investment several years ago in the 20-acre lot primarily obtained as a rail station site is
strategically located adjacent to both of the rail lines, downtown, Daniel Boone Villages, and the
Collins property (138 acres of undeveloped land). This is the planned site for a rail station and
potential public-private partnership for development in this area. The Sustainable Cities Design
Academy grant award for the Town in early 2014 will provide a concept plan by late 2014 to help with
economic development efforts in this area. This encourages the type of infill development that is
congruent with the Town's long-term vision, as well as being more sustainable and affordable from a
municipal service provision perspective.
The stable outlook reflects the continued economic development within the Town and maintenance of
the Town’s good financial position. Reserve levels are sufficient and within the Town’s adopted
policy. The outlook also reflects the expectation that the Town will effectively manage its debt burden
and capital needs.
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LONG-TERM FINANCIAL PLANNING AND MAJOR INITIATIVES
Each year, the Town prepares a multiyear operational and capital improvement budget. While this is
the eighteenth year a multiyear financial planning format has been used; FY08 was the first year that
a balanced scorecard system was used to implement and communicate the board’s mission, vision,
and strategic priorities. During the year, the Town funded and managed many significant projects
including the following:
The Wastewater Plant upgrade began in September 2011. The project is to be completed in
two phases. Phase I was substantially completed by June of 2014. Final close-out on the
project is anticipated late in 2014. Phase II is estimated to begin construction 7 to 12 years
from now. The upgrade is needed due to the limitations in hydraulic capacity and to meet the
new Falls Lake nutrient reduction criteria, which will go into effect in 2016.
Completed the second of a four-year $2.0 million street repaving and repair plan. The plan is
being funded without debt and uses the Town's Powell Bill (gas tax allocation) and General
Fund revenues to pay for the four-year project. The plan addresses (1) the highest priority
street repaving and repair needs and, (2) via an updated pavement condition survey in early
2015, will identify the average annual cost and lane miles for repaving, while also decreasing
the life cycle costs associated with maintaining the street system.
Riverwalk Phases II and III are scheduled for completion and the grand opening in October
2014 ($2.24 million with annual debt payments of about $128,000 starting in FY14) will run
from Allison Street near Occoneechee Mountain east, through downtown, and connect with
Orange County’s River Park, passing just south of Cameron Street, and extending west until
connection with the Classical American Homes Preservation Trust property near the Historic
Occoneechee Speedway and its trail system, ending near Cameron Street. The Trust plans to
complete trail and bridge work sometime in the next year or two that will extend the
connection to the Speedway, as well as the Mountains to Sea Trail.
Congestion Mitigation and Air Quality (CMAQ) Grant Sidewalk, Pedestrian Safety and
Accessibility Project ($124,000) - Pedestrian and bicycle connectors for Nash, Calvin and
Allison streets; sidewalk/accessibility; curb, gutter and other improvements; and connections
for Gold Park and Riverwalk. This would complete the western connection from Gold Park to
Allison Street and add a sidewalk with access trails near Occoneechee Mountain State
Natural Area. The project cost of $124,000 to leverage $496,000 of CMAQ funds is
scheduled for 2015.
The Town is in the process of addressing future capital facility needs that will be critical in
serving Hillsborough's growing population. Land and buildings are being acquired near the
current Town Hall that can eventually be used to relocate the Town Hall Annex, Police
Department headquarters, and Fire Station that are currently located downtown. All three
facilities are outdated, in need of upgrade, and are occupying property that would be better
used to compliment current business uses in the downtown district. Town staff is starting work
on a space study in early 2015 to help plan for operational facility needs over the next 20
years. The study is critical as a second fire station will soon be needed in the southern part of
town. In addition, the current public works facilities are in exceptionally poor shape and
located adjacent to the Eno River in the flood plain.
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To address long-term water supply needs and accommodate the type of growth that match
the Town's vision, Phase 2 expansion of the West Fork Eno River Reservoir is currently in the
design stage. Phase 2 will yield an additional 1.2 million gallons per day of water capacity.
Construction must be completed by the end of calendar year 2018 to comply with the current
permit. Delay in construction means that new permit requirements could more than double the
current $8.6 million estimate for the project. Construction is projected to start in 2016.
DEBT ADMINISTRATION
Hillsborough’s debt burden is below average, with net overall debt at $811 per capita. There has
been no new general bonded debt over the last 17 fiscal years, and no debt service expenditures on
general obligation bonded debt have been incurred in the General Fund during the last 17 fiscal
years. The Town has avoided a heavy debt load, which has plagued many municipalities, in its
General Fund. Debt service costs make up 7.8% of General Fund expenditures. Additionally, no new
bonded debt is recorded in the Water and Sewer Fund. A final payment of $14,700 was paid in
FY13, with no outstanding as of June 30, 2014. While there is no remaining bond debt, other debt
payments account for 10.78% of expenditures.
FINANCIAL POLICIES
The Town of Hillsborough has adopted a policy to maintain a General Fund balance level between
20% and 60% of operating expenditures, with a target of 33% or the equivalent of four months of
operating expenditures.
The Town has diversified its investment by security type and institution to avoid incurring
unreasonable risks inherent in over-investing in specific instruments, individual financial institutions or
maturities. Without exception, no more than 50% of the Town’s total investment portfolio will be
invested in a single security type or with a single financial institution.
OTHER INFORMATION
The Government Finance Officers Association (GFOA) of the United States and Canada awarded a
Certificate of Achievement for Excellence in Financial Reporting to the Town of Hillsborough for its
comprehensive annual financial report (CAFR) for the fiscal year ended June 30, 2013. The
Certificate of Achievement is a prestigious national award recognizing conformance with the highest
standards for preparation of a state and local government financial report.
To be awarded a Certificate of Achievement, a governmental unit must publish an easily readable
and efficiently organized comprehensive annual financial report that conforms to program standards.
The annual report must satisfy both generally accepted accounting principles and applicable legal
requirements.
A Certificate of Achievement is valid for a period of one year. The Town of Hillsborough has received
a Certificate of Achievement for the last 20 consecutive years (fiscal years ended 1994 through
2013). We believe our current report continues to conform to the Certificate of Achievement program
requirements, and we will submit it to the GFOA.
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ACKNOWLEDGMENTS
We appreciate the assistance and dedication of the Finance Department staff throughout the
year, especially during the preparation of this report. We would like to thank all members of the
department who contributed to its preparation and to the independent certified public
accountants, Dixon Hughes Goodman LLP, for their assistance. The cooperation of each Town
department is appreciated, as we work together in conducting the Town’s financial operations.
We also express our appreciation to the mayor and the members of the Board of Commissioners
for their continued support, guidance, and advice in planning and conducting the financial
activities of the Town in a responsible and progressive manner. The Town’s improving financial
condition in the General Fund and willingness to address the challenges facing the Water and
Sewer Fund are a tribute to that involvement.
Respectfully submitted,
Heidi Lamay
Eric J. Peterson Heidi Lamay
Town Manager Finance Director
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FINANCIAL SECTION
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- 1 -
INDEPENDENT AUDITORS’ REPORT
To the Honorable Mayor and Members
of the Board of Town Commissioners
Town of Hillsborough
Hillsborough, North Carolina
Report on the Financial Statements
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 aggregate remaining fund information of the Town of Hillsborough, North Carolina, as of
and for the year ended June 30, 2014, and the related notes to the financial statements, which
collectively comprise the Town of Hillsborough’s basic financial statements as listed in the table
of contents.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial
statements in accordance with accounting principles generally accepted in the United States of
America; this includes the design, implementation, and maintenance of internal control relevant
to the preparation and fair presentation of financial statements that are free from material
misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express opinions on these financial statements based on our audit. We
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
financial statements are free of material misstatement. The financial statements of the
Hillsborough Tourism Development Authority and the Hillsborough Tourism Board were not
audited in accordance with Government Auditing Standards.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial statements. The procedures selected depend on the auditor’s
judgment, including the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the entity’s preparation and fair presentation of the
financial statements in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
entity’s internal control. Accordingly, we express no such opinion. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of
significant accounting estimates made by management, as well as evaluating the overall
financial statement presentation of the financial statements.
- 2 -
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our audit opinions.
Opinions
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 aggregate
discretely presented component units, each major fund, and the aggregate remaining fund
information of the Town of Hillsborough, North Carolina, as of June 30, 2014, and the respective
changes in its financial position and cash flows, where appropriate, thereof, and the respective
budgetary comparison for the General Fund for the year then ended in accordance with
accounting principles generally accepted in the United States of America.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that
Management’s Discussion and Analysis and the Law Enforcement Officers’ Special Separation
Allowance and the Other Postemployment Benefits Schedules of Funding Progress and
Employer Contributions on pages 5 through 16 and pages 71 through 74, respectively, be
presented to supplement the basic financial statements. Such information, although not a part
of the basic financial statements, is required by the Governmental Accounting Standards Board
who considers it to be an essential part of the financial reporting for placing the basic financial
statements in an appropriate operational, economic, or historical context. We have applied
certain limited procedures to the required supplementary information in accordance with
auditing standards generally accepted in the United States of America, which consist of inquiries
of management about the methods of preparing the information and comparing the information
for consistency with management’s responses to our inquiries, the basic financial statements,
and other knowledge we obtained during our audit of the basic financial statements. We do not
express an opinion or provide any assurance on the information because the limited procedures
do not provided us with sufficient evidence to express an opinion or provide any assurance.
Supplementary and Other Information
Our audit was conducted for the purpose of forming opinions on the financial statements that
collectively comprise the Town of Hillsborough’s basic financial statements. The introductory
section, combining and individual fund financial statements, budgetary schedules, other
schedules, and the statistical section, as well as the schedule of expenditures of federal and
state awards 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, are presented for purposes of additional analysis and are not a required
part of the basic financial statements.
- 3 -
The combining and individual fund financial statements, budgetary schedules, other schedules
and the schedule of expenditures of federal and state awards are the responsibility of
management and were derived from and relate directly to the underlying accounting and other
records used to prepare the basic financial statements. Such information has been subjected to
the auditing procedures applied in the audit of the basic financial statements and certain
additional procedures, including comparing and reconciling such information directly to the
underlying accounting and other records used to prepare the basic financial statements or to the
basic financial statements themselves, and other additional procedures in accordance with
auditing standards generally accepted in the United States of America. In our opinion, the
combining and individual fund financial statements, budgetary schedules, other schedules and
the schedule of expenditures of federal and state awards are fairly stated, in all material
respects, in relation to the basic financial statements taken as a whole.
The introductory information and the statistical sections have not been subjected to the auditing
procedures applied in the audit of the basic financial statements and, accordingly, we do not
express an opinion or provide any assurance on them.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated
December 5, 2014, on our consideration of the Town of Hillsborough’s internal control over
financial reporting and on our tests of its compliance with certain provisions of laws, regulations,
contracts, and grant agreements and other matters. The purpose of that report is to describe
the scope of our testing of internal control over financial reporting and compliance, and the
results of that testing, and not to provide an opinion on internal control over financial reporting or
on compliance. That report is an integral part of an audit performed in accordance with
Government Auditing Standards in considering the Town of Hillsborough’s internal control over
financial reporting and compliance.
High Point, North Carolina
December 5, 2014
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TOWN OF HILLSBOROUGH, NORTH CAROLINA
MANAGEMENT’S DISCUSSION AND ANALYSIS
June 30, 2014
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As management of the Town of Hillsborough (the “Town”), we offer readers of the Town’s financial
statements this narrative overview and analysis of the financial activities of the Town for the fiscal
year ended June 30, 2014. Readers are encouraged to consider this information in conjunction with
additional information furnished in the Town’s financial statements, which follow this narrative.
Financial Highlights
The assets of the Town exceeded its liabilities and deferred inflows of resources at the close
of the fiscal year by $53,935,109 (net position).
The Town’s total net position increased by $8,296,746 primarily due to infrastructure
improvements, an increase in the sewer rates and developer-paid capital facility fees in the
business-type activities net position.
As of the close of the current fiscal year, the Town’s governmental funds reported ending fund
balances of $7,075,105, a net increase of $646,081 in comparison to the prior year. This is
the result of increased revenues over budget. Approximately 29% of this total amount or
$2,027,354 is nonspendable, or restricted.
At the end of the current fiscal year, unassigned fund balance for the General Fund was
$4,151,581, or 54.6% of total General Fund expenditures, including other financing uses, for
the fiscal year.
The Town’s total debt increased by $2,376,588 during the current fiscal year. The Town had
additional borrowing on revolving loans payable of $2,472,930 and installment purchases of
$2,727,143. These additional borrowings were offset by retirement of $2,838,631 in existing
debt during the year.
The Town maintained its A2 (Moody’s Investor Service) and A (Standard & Poor’s) bond
ratings for the 20th consecutive year.
Overview of the Financial Statements
This discussion and analysis are intended to serve as an introduction to the Town of Hillsborough’s
basic financial statements. The Town’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 Town
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 Town of Hillsborough.
TOWN OF HILLSBOROUGH, NORTH CAROLINA
MANAGEMENT’S DISCUSSION AND ANALYSIS
June 30, 2014
- 6 -
Required Components of Annual Financial Report
Figure 1
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 Town’s
financial status.
The next statements (Exhibits 3 through 9) are Fund Financial Statements. These statements
focus on the activities of the individual parts of the Town’s government. These statements provide
more detail than the government-wide statements. There are four parts to the Fund Financial
Statements: (1) the governmental funds statements; (2) the budgetary comparison statements;
(3) the proprietary fund statements; and (4) the fiduciary fund statements.
The next section of the basic financial statements is the notes section. 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 Town’s individual funds. Budgetary
information required by the General Statutes also can be found in this part of the statements.
Management’s
Discussion and
Analysis
Basic
Financial
Statements
Notes to the
Financial
Statements
Fund
Financial
Statements
Government-Wide
Financial
Statements
Summary Detail
TOWN OF HILLSBOROUGH, NORTH CAROLINA
MANAGEMENT’S DISCUSSION AND ANALYSIS
June 30, 2014
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Government-Wide Financial Statements
The government-wide financial statements are designed to provide the reader with a broad overview
of the Town’s finances, similar in format to the financial statements of a private-sector business. The
government-wide statements provide short-and long-term information about the Town’s financial
status as a whole.
The two government-wide statements report the Town’s net position and how they have changed.
Net position is the difference between the Town’s total assets and total liabilities and deferred inflows
of resources. Measuring net position is one way to evaluate the Town’s financial condition.
The government-wide statements are divided into three categories: (1) governmental activities;
(2) business-type activities; and (2) component units. The governmental activities include most of the
Town’s basic services such as public safety, fire, street maintenance, solid waste collection,
cemetery and general administration. Property taxes and state and federal grant funds finance most
of these activities. The business-type activities are those that the Town charges customers to
provide. These include the water and sewer services offered by the Town. The final category is the
component units. Although legally separate from the Town, the Tourism Development Authority and
the Tourism Board are important to the Town. The Town exercises control over these entities by
appointing its members and remits a percentage of taxes collected to each of these entities.
The government-wide financial statements are on pages 19 through 21 of this report.
Fund Financial Statements
The fund financial statements (see Figure 1) provide a more detailed look at the Town’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 Town of Hillsborough,
like all other governmental entities in North Carolina, uses fund accounting to ensure and reflect
compliance (or noncompliance) with finance-related legal requirements, such as the General Statutes
or the Town’s budget ordinance. All of the funds of the Town can be divided into three categories:
governmental funds, proprietary funds and fiduciary 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 Town’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 that 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 Town’s programs.
The relationship between governmental activities (reported in the Statement of Net Position and the
Statement of Activities) and governmental funds is described in a reconciliation that is a part of the
fund financial statements.
TOWN OF HILLSBOROUGH, NORTH CAROLINA
MANAGEMENT’S DISCUSSION AND ANALYSIS
June 30, 2014
- 8 -
The Town of Hillsborough adopts an annual budget for its General Fund, as required by the General
Statutes. The budget is a legally adopted document that incorporates input from the citizens of the
Town, the management of the Town, and the decisions of the Board about which services to provide
and how to pay for them. It also authorizes the Town to obtain funds from identified sources to
finance these current-period activities. The budgetary statement provided for the General Fund
demonstrates how well the Town complied with the budget ordinance and whether or not the Town
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 Board; (2) the final budget as amended by the
Board; (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 Town of Hillsborough has 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 Town uses enterprise funds to account for its water and sewer activity.
These funds are the same as those functions shown in the business-type activities in the Statement
of Net Position and the Statement of Activities.
Fiduciary Funds – Fiduciary funds are used to account for resources held for the benefit of parties
outside of the government. The Town of Hillsborough has one fiduciary fund, which is an agency
fund.
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 are on pages 31 through 67 of this report.
Other Information - In addition to the basic financial statements and accompanying notes, this
report includes certain required supplementary information concerning the Town’s progress in
funding its obligation to provide pension benefits to its employees. Required supplementary
information can be found beginning on page 71 of this report.
Interdependence with Other Entities – The Town depends on financial resources flowing from, or
associated with, both the federal government and the State of North Carolina. Because of this
dependency, the Town is subject to changes in specific flows of intergovernmental revenues based
on modifications to federal and state laws and federal and state appropriations.
TOWN OF HILLSBOROUGH, NORTH CAROLINA
MANAGEMENT’S DISCUSSION AND ANALYSIS
June 30, 2014
- 9 -
2014 2013 2014 2013 2014 2013
Current assets 8,346,930$ 7,183,439$ 10,566,525$ 8,657,753$ 18,913,455$ 15,841,192$
Other assets 19,673 23,548 - - 19,673 23,548
Capital assets, net 14,504,644 9,832,147 49,452,191 46,922,155 63,956,835 56,754,302
Total assets 22,871,247 17,039,134 60,018,716 55,579,908 82,889,963 72,619,042
Long-term liabilities
outstanding 3,825,096 2,929,625 21,676,034 20,205,653 25,501,130 23,135,278
Other liabilities 1,560,803 1,113,188 1,865,115 2,681,756 3,425,918 3,794,944
Total liabilities 5,385,899 4,042,813 23,541,149 22,887,409 28,927,048 26,930,222
Deferred inflows of
resources 27,806 26,909 - - 27,806 26,909
Net position:
Net investment in capital asset 10,924,631 6,723,808 27,110,293 26,017,050 38,034,924 32,740,858
Restricted 1,700,808 1,831,742 2,591,211 2,590,989 4,292,019 4,422,731
Unrestricted 4,832,103 4,390,314 6,776,063 4,084,460 11,608,166 8,474,774
Total net position 17,457,542$ 12,945,864$ 36,477,567$ 32,692,499$ 53,935,109$ 45,638,363$
Governmental Activities Business-Type Activities Total
Government-Wide Financial Analysis
The Town of Hillsborough’s Net Position
Figure 2
As noted earlier, net position may serve over time as one useful indicator of a government’s financial
condition. The assets of the Town of Hillsborough exceeded liabilities and deferred inflows of
resources by $53,935,109 as of June 30, 2014. The Town’s net position increased by $8,296,746 for
the fiscal year ended June 30, 2014. However, the largest portion (70.52%) reflects the Town’s net
investment in capital assets (e.g., land, buildings, machinery, equipment, distribution and collection
systems and infrastructure, less any related debt still outstanding that was issued to acquire those
items). The Town uses these capital assets to provide services to citizens; consequently, these
assets are not available for future spending. Although the Town’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 Town of Hillsborough’s net position, $4,292,019 (7.96%) represents
resources that are subject to external restrictions on how they may be used. The remaining balance
of $11,608,166 (21.52%) is unrestricted and may be used to meet the Town’s ongoing obligation to
citizens and creditors.
TOWN OF HILLSBOROUGH, NORTH CAROLINA
MANAGEMENT’S DISCUSSION AND ANALYSIS
June 30, 2014
- 10 -
Several particular aspects of the Town’s financial operations positively influenced the total
unrestricted governmental net position:
Continued diligence in the collection of property taxes by maintaining a tax collection
percentage of 98.1%, which is comparable to the 2013 statewide average of 97.5%.
Numerous cost savings measures implemented by all departments.
Many departments finishing the year with expenditures under budget.
Increase to the sewer rate yielding higher than expected revenues.
Continued low cost of debt due to the Town’s good bond rating and low interest rates.
The Town of Hillsborough’s Changes in Net Position
Figure 3
2014 2013 2014 2013 2014 2013
Revenues:
Program revenues:
Charges for services 144,942$ 341,181$ 9,025,607$ 7,686,356$ 9,170,549$ 8,027,537$
Operating grants and contributions 316,576 175,347 - - 316,576 175,347
Capital grants and contributions 3,741,958 334,525 1,028,171 - 4,770,129 334,525
General revenues:
Property taxes 5,404,126 5,142,069 - - 5,404,126 5,142,069
Local option sales taxes 1,114,306 1,072,463 - - 1,114,306 1,072,463
Gross receipts on short-term rental
property 7,117 9,535 - - 7,117 9,535
Privilege licenses 43,891 96,469 - - 43,891 96,469
Motor vehicle license fees 31,420 47,054 - - 31,420 47,054
Solid waste disposal 2,451 3,904 - - 2,451 3,904
Unrestricted intergovernmental
revenues 809,190 734,401 - - 809,190 734,401
Other 42,108 30,263 2,601 4,177 44,709 34,440
Total revenues 11,658,085 7,987,211 10,056,379 7,690,533 21,714,464 15,677,744
Expenses:
General government 1,524,025 1,301,963 - - 1,524,025 1,301,963
Public safety 3,619,529 3,395,465 - - 3,619,529 3,395,465
Transportation 500,491 497,540 - - 500,491 497,540
Environmental protection 833,623 580,312 - - 833,623 580,312
Economic and physical development 367,389 485,977 - - 367,389 485,977
Community activities and projects 119,251 64,878 - - 119,251 64,878
Parks and recreation 55,849 36,267 - - 55,849 36,267
Interest on long-term debt 126,250 105,022 - - 126,250 105,022
Water and sewer - - 6,271,311 6,279,271 6,271,311 6,279,271
Total expenses 7,146,407 6,467,424 6,271,311 6,279,271 13,417,718 12,746,695
Increase in net position 4,511,678 1,519,787 3,785,068 1,411,262 8,296,746 2,931,049
Beginning net position 12,945,864 11,426,077 32,692,499 31,281,237 45,638,363 42,707,314
Net position, June 30 17,457,542$ 12,945,864$ 36,477,567$ 32,692,499$ 53,935,109$ 45,638,363$
Business-Type Activities TotalGovernmental Activities
TOWN OF HILLSBOROUGH, NORTH CAROLINA
MANAGEMENT’S DISCUSSION AND ANALYSIS
June 30, 2014
- 11 -
Governmental Activities. Governmental activities increased the Town’s net position by $4,511,678,
thereby accounting for 54.38% of the total growth in the net position of the Town of Hillsborough. Key
elements of this increase are as follows:
Contribution of $3,050,033 of capital assets during the year.
Increased property tax revenue due to changes in state law for property taxes on registered
motor vehicles.
Business-Type Activities. Business-type activities increased the Town’s net position by
$3,785,068, accounting for 45.62% of the total growth in the government’s net position. Key
elements of this increase are as follows:
An increase in sewer revenue resulting from a sewer rate increase of 8.8%.
Increases in water and sewer facility fees due to increased development activity.
Contributions of capital assets in the amount of $1,028,171.
Cost-cutting measures resulting in lower than expected expenses.
Financial Analysis of the Town of Hillsborough’s Funds
As noted earlier, the Town of Hillsborough uses fund accounting to ensure and demonstrate
compliance with finance-related legal requirements.
Governmental Funds. The focus of the Town’s governmental funds is on providing information on
near-term inflows, outflows, and balances of usable resources. Such information is useful in
assessing the Town’s financing requirements.
The General Fund is the chief operating fund of the Town. At the end of the current fiscal year, the
Town of Hillsborough’s fund balance available in the General Fund was $5,125,070, while total fund
balance reached $6,117,466. The Governing Body of the Town of Hillsborough has determined that
the Town should maintain an available fund balance of 20% to 60% (with a targeted or preferred goal
of 33%) of general fund expenditures in case of unforeseen needs or opportunities, in addition to
meeting the cash flow needs of the Town. The Town currently has fund balance available for
appropriation of 67.2% of general fund expenditures, while total fund balance represents 80.2% of
the same amount.
At June 30, 2014, the governmental funds of the Town reported a combined fund balance of
$7,075,105, with a net increase in fund balance of $646,081. This increase is partially related to
property taxes, which increased $293,645 from last year. The increase in property taxes was driven
mostly by changes in state law related to property taxes on registered motor vehicles. In addition,
proceeds from installment debt obligations for certain construction projects have outpaced the
construction activity.
TOWN OF HILLSBOROUGH, NORTH CAROLINA
MANAGEMENT’S DISCUSSION AND ANALYSIS
June 30, 2014
- 12 -
General Fund Budgetary Highlights. During the fiscal year, the Town 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.
The difference between the original budget and the final budget is attributed in part to the following:
$34,000 was saved by delaying conceptual design on rail station.
$615,369 was saved by delaying acquisition of two properties, 604 and 618 N. Churton Street.
$194,783 was saved with lower than anticipated street-resurfacing costs.
$58,171 was saved by delaying the purchase of two patrol cars.
Actual operating revenues for the General Fund were more than the budgeted amount by $785,545.
Expenditures were $1,201,076 less than budgeted, primarily due to the delaying of purchases and
bids coming in lower than anticipated.
Proprietary Funds. The Town’s proprietary funds provide the same type of information found in the
government-wide statements, but in more detail. Unrestricted net position of the Water and Sewer
Activities at the end of the fiscal year amounted to $6,776,063, a 65.09% or $2,691,603 increase
from the previous year. The increase is largely contributed to revenues exceeding expenditures in
the current year. The total growth in net position was $3,785,068. Other factors concerning the
fund’s finances have been addressed in the discussion of the Town’s business-type activities.
Capital Asset and Debt Administration
Capital Assets. The Town’s investment in capital assets for its governmental and business-type
activities as of June 30, 2014 totals $63,956,835 (net of accumulated depreciation). These assets
include buildings, land, machinery and equipment, infrastructure, park facilities and vehicles.
Major capital asset transactions during the year include the following:
The continued construction of the Wastewater Treatment Plant ($1,834,892)
The continued development of Riverwalk Phase II ($1,536,175)
Street resurfacing ($433,222)
Major developer-dedicated capital asset transactions during the year include the following:
Acquisition of Waterstone streets ($1,183,844)
Acquisition of Woodsedge pump station and outfall ($389,664)
Acquisition of Cates Creek outfall - Phase 2 ($485,817)
Acquisition of various infrastructure ($2,019,379)
TOWN OF HILLSBOROUGH, NORTH CAROLINA
MANAGEMENT’S DISCUSSION AND ANALYSIS
June 30, 2014
- 13 -
The Town of Hillsborough’s Capital Assets
(Net of Accumulated Depreciation)
Figure 4
2014 2013 2014 2013 2014 2013
Land 2,672,428$ 2,672,428$ 6,005,443$ 6,005,443$ 8,677,871$ 8,677,871$
Construction in progress 2,179,190 559,883 19,796,803 17,982,370 21,975,993 18,542,253
Buildings and improvements 2,815,842 2,951,288 2,078,652 2,163,115 4,894,494 5,114,403
Plant and distribution systems - - 20,724,837 19,992,834 20,724,837 19,992,834
Infrastructure 6,003,162 2,647,821 492,676 352,683 6,495,838 3,000,504
Equipment 84,798 100,053 257,636 322,361 342,434 422,414
Vehicles 749,224 877,126 96,144 103,349 845,368 980,475
Total 14,504,644$ 9,808,599$ 49,452,191$ 46,922,155$ 63,956,835$ 56,730,754$
Governmental Activities Business-Type Activities Total
Additional information on the Town’s capital assets can be found in Note 4.A.5. of the basic financial
statements.
Long-Term Debt. As of June 30, 2014, the Town of Hillsborough had no outstanding bonded debt.
The Town’s debt represents revolving loans payable and installment purchases secured solely by
revenues of the project or specified purchases.
The Town of Hillsborough’s Outstanding Debt
General Obligation Bonds, Revolving Loans Payable and Installment Purchases
Figure 5
2014 2013 2014 2013 2014 2013
Revolving loan payable -$ -$ 18,644,077$ 16,247,369$ 18,644,077$ 16,247,369$
Deferred amount on
refundings - - (54,277) (69,423) (54,277) (69,423)
Installment purchases 4,024,586 3,084,791 3,939,307 4,914,368 7,963,893 7,999,159
Total 4,024,586$ 3,084,791$ 22,529,107$ 21,092,314$ 26,553,693$ 24,177,105$
Governmental Activities Business-Type Activities Total
The Town’s total debt increased by $2,376,588 during the current fiscal year, primarily due to the
revolving loans payable for Riverwalk Phases II and III.
As mentioned in the financial highlights section of this document, the Town maintained, for the 19th
consecutive year, its A2 bond rating from Moody’s Investor Service and A rating from Standard and
Poor’s Corporation. This bond rating is a clear indication of the sound financial condition of the Town
of Hillsborough. This achievement is a primary factor in keeping interest costs low on the Town’s
outstanding debt.
TOWN OF HILLSBOROUGH, NORTH CAROLINA
MANAGEMENT’S DISCUSSION AND ANALYSIS
June 30, 2014
- 14 -
North Carolina General Statutes limit the amount of general obligation debt that a unit of government
can issue to 8% of the total assessed value of taxable property located within that government’s
boundaries. The legal debt margin for the Town of Hillsborough is $58,836,614. The Town does not
have any bonds authorized but unissued at June 30, 2014.
Additional information regarding the Town’s long-term debt can be found in Note 4.B.8 of the basic
financial statements.
Economic Factors and Next Year’s Budgets and Rates
The following key economic indicators reflect the stability and prosperity of the Town of Hillsborough.
Low unemployment. Orange County’s unemployment rate of 4.8% as of June 30, 2014, is
well below the state average of 6.5%.
Water/sewer rate increase. In the new fiscal year, beginning July 1, 2014, the water rate
remained the same and the sewer rate increased by 8.8%.
No increase in property tax rate. The property tax rate will not increase in FY15.
No general obligation debt in the General Fund.
Budget Highlights for the Fiscal Year Ending June 30, 2015
Governmental Activities: With new development starting to ramp up in FY14 and an increase
expected for FY15, forecasts for the primary sources of revenue (e.g., property and sales tax) were
calculated using a 1% growth factor. As in prior years, the Town’s budget development was guided
by three principles: (1) take care of what we’ve got; (2) invest in Hillsborough’s future; and
(3) minimize rate impacts on the citizens/customers.
Original budgeted operational expenditures in the General Fund were expected to increase 15.66%
to $8,770,269 over FY14 original budget. Appropriated fund balance of $782,995 was recommended
to balance the FY 2015 budget. The largest increments are in employee compensation, including
funding compensation and benefits adjustments, two new positions, street repair, and the first year of
debt service on Riverwalk Phases II and III.
TOWN OF HILLSBOROUGH, NORTH CAROLINA
MANAGEMENT’S DISCUSSION AND ANALYSIS
June 30, 2014
- 15 -
The Town started a major four-year street resurfacing program in FY13, estimated at $2 million, to
address key needs and avoid escalating repair costs. For Year 3 of the plan, the Town anticipates
spending $529,000, plus $210,000 in unused funds from FY14 due to lower than expected bids, to
improve the highest priority streets.
Other budget highlights in brief:
Expenses to increase by 3.9%
Merit system budgeted at 3.25% average raise for employees
Debt payments for Riverwalk Phases II and III $176,520 annually
Pedestrian/vehicular downtown access improvements: $120,000 plus $375,000 in NCDOT
contributions.
Business-Type Activities: Water rates will not increase in 2015, while sewer rates will increase by
8.8% to cover loan payments associated with the wastewater treatment expansion in FY15.
Original budgeted operational expenditures in the Water/Sewer Fund are expected to increase by
13.07% to $9,524,302 over FY 2014 original budget. Actual expenditures for FY 2014 were
$750,669 under budget, primarily due to debt financing the entire South Zone Water Tank rather than
using capital reserve fees to reduce the debt issuance amount. Debt service payments will begin in
FY15 with the capital reserve funds being used to cover the payments for the first few years. Many
cuts and deferments were made to this year’s budget to avoid a more significant rate increase and to
limit the further use of net position.
It was determined through an engineering and financial analysis in early 2007 that it is considerably
more cost effective for Hillsborough to upgrade and expand its wastewater treatment plant, which is
more than 35 years old, than to pipe the Town’s wastewater to the City of Durham for treatment
($17.5 million vs. $108 million). Now a $19.2 million upgrade/expansion, this project is critical, as the
Town must meet new, more stringent nitrogen discharge limits into the local Eno River. The design
work was completed in FY11 and construction started midyear FY12. Construction was completed in
January 2014.
TOWN OF HILLSBOROUGH, NORTH CAROLINA
MANAGEMENT’S DISCUSSION AND ANALYSIS
June 30, 2014
- 16 -
The Town continues work to correct sewer inflow and infiltration problems ($50,000 annually). This
project is critical, as inflow and infiltration create a variety of serious issues, such as decreased plant
treatment capacity, pump station overflows, lower quality treatment of discharged water and
increased operational costs.
Other budget highlights in brief:
Wastewater Treatment Plant expansion loan repayment beings in FY15 with annual debt
service of $1.46 million.
Continue design work on West Fork Eno Reservoir Phase II expansion ($600,000). Design
began in FY14 ($200,000).
Elimination of two Wastewater Treatment Plant positions (savings of $118,000). Efficiency
improvements eliminate need for overnight shifts.
Merit system budgeted at 3.25% average raise for employees.
High-deductible health insurance alternative offered at no cost to employees and given initial
monies for deposit to health savings account. Employees who elect to stay on existing health
will pay 5 percent of the cost.
Requests for Information
This report is designed to provide an overview of the Town’s finances. Questions concerning any of
the information found in this report or requests for additional information should be directed to the
Director of Finance, Town of Hillsborough, 137 North Churton Street, Post Office Box 429,
Hillsborough, North Carolina 27278.
- 17 -
BASIC FINANCIAL STATEMENTS
- 18 -
THIS PAGE LEFT INTENTIONALLY BLANK.
Exhibit 1
Hillsborough
Tourism Hillsborough
Governmental Business-Type Development Tourism
ASSETS Activities Activities Total Authority Board
Current assets:
Cash and investments 5,778,941$ 6,253,361$ 12,032,302$ 80,015$ 183,436$
Receivables:
Taxes receivable, net 158,716 - 158,716 - -
Accrued interest receivable, property
taxes 8,164 - 8,164 - -
Accounts receivable, net 43,908 1,135,876 1,179,784 - -
Due from other governments 1,018,989 - 1,018,989 - -
Due from primary government - - - 37,041 48,036
Prepaid expenses 9,129 4,345 13,474 - 788
Restricted assets
Cash and investments 1,329,083 3,172,943 4,502,026 - -
Total current assets 8,346,930 10,566,525 18,913,455 117,056 232,260
Noncurrent assets:
Net pension asset 19,673 - 19,673 - -
Capital assets:
Land and construction-in-progress 4,851,618 25,802,246 30,653,864 - -
Other capital assets, net of
depreciation 9,653,026 23,649,945 33,302,971 - -
Total capital assets 14,504,644 49,452,191 63,956,835 - -
Total noncurrent assets 14,524,317 49,452,191 63,976,508 - -
Total assets 22,871,247 60,018,716 82,889,963 117,056 232,260
LIABILITIES
Current liabilities:
Accounts payable and accrued liabilities 716,157 273,226 989,383 - 18,388
Payable from restricted
assets - customer deposits 103,942 394,523 498,465
Accrued interest payable 34,430 21,856 56,286 - -
Due to component units 85,077 - 85,077 - -
Current portion of long-term liabilities 621,197 1,175,510 1,796,707 - -
Total current liabilities 1,560,803 1,865,115 3,425,918 - 18,388
Long-term liabilities:
Due in more than one year 3,825,096 21,676,034 25,501,130 - -
Total liabilities 5,385,899 23,541,149 28,927,048 - 18,388
DEFERRED INFLOWS OF RESOURCES 27,806 - 27,806 - -
NET POSITION
Net investment in capital assets 10,924,631 27,110,293 38,034,924 - -
Restricted for:
Stabilization by state statute 920,240 - 920,240 37,041 48,036
Streets 190,494 - 190,494 - -
Travel and tourism - - - - -
Capital projects 590,074 - 590,074 - -
Water and sewer projects - 2,591,211 2,591,211 - -
Unrestricted 4,832,103 6,776,063 11,608,166 80,015 165,836
Total net position 17,457,542$ 36,477,567$ 53,935,109$ 117,056$ 213,872$
TOWN OF HILLSBOROUGH, NORTH CAROLINA
STATEMENT OF NET POSITION
June 30, 2014
Primary Government Component Units
The accompanying notes are an integral part of this statement.
- 19 -
Operating Capital
Charges Grants and Grants and
Functions/Programs Expenses for Services Contributions Contributions
Primary government:
Governmental activities:
General government 1,524,025$ 126,909$ 4,294$ 1,257,734$
Public safety 3,619,529 13,893 - -
Transportation 500,491 - 312,282 -
Environmental protection 833,623 - - 2,059,224
Economic and physical development 367,389 - - -
Community activities and projects 119,251 - - -
Parks and recreation 55,849 4,140 - 425,000
Interest on long-term obligations 126,250 - - -
Total governmental activities 7,146,407 144,942 316,576 3,741,958
Business-type activities:
Water and sewer 6,271,311 9,025,607 - 1,028,171
Total business-type activities 6,271,311 9,025,607 - 1,028,171
Total primary government 13,417,718$ 9,170,549$ 316,576$ 4,770,129$
Component units:
Hillsborough Tourism Development Authority 3,765$ -$ -$ -$
Hillsborough Tourism Board 302,155 - - -
Total component units 305,920$ -$ -$ -$
General revenues:
Taxes:
Property taxes, levied for general purposes
Local option sales taxes
Gross receipts on short-term rental property
Privilege licenses
Motor vehicle license fees
Solid waste disposal
Unrestricted intergovernmental revenues
Investment earnings, unrestricted
Payment from Town of Hillsborough
Miscellaneous
Total general revenues not including transfers
Transfers
Total general revenues and transfers
Change in net position
Net position - beginning
Net position - ending
Program Revenues
TOWN OF HILLSBOROUGH, NORTH CAROLINA
STATEMENT OF ACTIVITIES
Year Ended June 30, 2014
The accompanying notes are an integral part of this statement.
- 20 -
Exhibit 2
Tourism
Governmental Business-Type Development Tourism
Activities Activities Total Authority Board
(135,088)$ -$ (135,088)$
(3,605,636) - (3,605,636)
(188,209) - (188,209)
1,225,601 - 1,225,601
(367,389) - (367,389)
(119,251) - (119,251)
373,291 - 373,291
(126,250) - (126,250)
(2,942,931) - (2,942,931)
- 3,782,467 3,782,467
- 3,782,467 3,782,467
(2,942,931) 3,782,467 839,536
(3,765)$ -$
- (302,155)
(3,765) (302,155)
5,404,126 - 5,404,126 - -
1,114,306 - 1,114,306 - -
7,117 - 7,117 - -
43,891 - 43,891 - -
31,420 - 31,420 - -
2,451 - 2,451 - -
809,190 - 809,190 - -
2,209 2,601 4,810 - 10
- - - 67,558 301,976
39,899 - 39,899 - 29,665
7,454,609 2,601 7,457,210 67,558 331,651
- - - - -
7,454,609 2,601 7,457,210 67,558 331,651
4,511,678 3,785,068 8,296,746 63,793 29,496
12,945,864 32,692,499 45,638,363 53,263 184,376
17,457,542$ 36,477,567$ 53,935,109$ 117,056$ 213,872$
Primary Government Component Units
Net Revenue (Expense) and Changes in Net Position
- 21 -
Exhibit 3
Riverwalk Consolidated
Phase II General
Capital Capital Total Total
Project Projects Nonmajor Governmental
ASSETS General Fund Fund Funds Funds
Cash and investments 5,665,766$ -$ 7,070$ 106,105$ 5,778,941$
Taxes receivable 158,716 - - - 158,716
Accounts receivable, net 43,908 - - - 43,908
Prepaid items 72,156 - - - 72,156
Due from other governments 976,533 42,456 - - 1,018,989
Restricted assets
Cash and investments 294,436 223,236 590,074 221,337 1,329,083
Total assets 7,211,515$ 265,692$ 597,144$ 327,442$ 8,401,793$
LIABILITIES, DEFERRED INFLOWS OF
RESOURCES AND FUND BALANCES
LIABILITIES
Accounts payable and accrued liabilities 525,974$ 187,077$ -$ 3,106$ 716,157$
Payable from restricted assets - customer deposits 103,942 - - - 103,942
Due to component units 85,077 - - - 85,077
Total liabilities 714,993 187,077 - 3,106 905,176
DEFERRED INFLOWS OF RESOURCES 379,056 42,456 - - 421,512
FUND BALANCES
Nonspendable
Prepaid items 72,156 - - - 72,156
Restricted for:
Stabilization by state statute 920,240 - - - 920,240
Streets 190,494 - - - 190,494
Capital projects - 36,159 590,074 218,231 844,464
Committed for:
Capital projects - - - 106,105 106,105
Assigned for:
Subsequent year’s expenditures 782,995 - - - 782,995
Unassigned 4,151,581 - 7,070 - 4,158,651
Total fund balances 6,117,466 36,159 597,144 324,336 7,075,105
Total liabilities, deferred inflows of
resources and fund balances 7,211,515$ 265,692$ 597,144$ 327,442$
Amounts reported for governmental activities in
the statement of net position are different because:
Capital assets used in governmental activities are
not financial resources and therefore not reported
in the funds.14,504,644
Liabilities for earned but deferred revenues in the
fund statements, including accrued interest
receivable on property taxes.401,870
Some assets, including net pension asset
are reported in governmental activities, but
not reported in the fund statements.19,673
Prepaid expenses in the fund statements for debt
service payments that represent a reduction of
long-term obligations in governmental activities.(63,027)
Some liabilities, including accrued interest, are not
due and payable in the current period, and
therefore are not reported in the funds.(4,480,723)
Net position of governmental activities 17,457,542$
TOWN OF HILLSBOROUGH, NORTH CAROLINA
BALANCE SHEET - GOVERNMENTAL FUNDS
June 30, 2014
Major Funds
The accompanying notes are an integral part of this statement.
- 22 -
Exhibit 4
Page 1 of 2
Riverwalk Consolidated
Phase II General
Capital Capital Total Total
Project Projects Nonmajor Governmental
General Fund Fund Funds Funds
Revenues
General revenues
Ad valorem taxes 5,429,114$ -$ -$ -$ 5,429,114$
Other taxes and licenses 1,199,185 - - - 1,199,185
Unrestricted intergovernmental revenues 809,190 - - - 809,190
Restricted intergovernmental revenues 386,172 382,544 - - 768,716
Investment earnings 1,854 234 74 47 2,209
Other general revenues 48,337 - - - 48,337
Total general revenues 7,873,852 382,778 74 47 8,256,751
Functionally related revenues
Use and rental fees 140,802 - - - 140,802
Total revenues 8,014,654 382,778 74 47 8,397,553
Expenditures
General government 1,354,095 - 1,445,207 - 2,799,302
Public safety 3,455,438 - - - 3,455,438
Transportation 851,502 - - - 851,502
Environmental protection 806,210 - 52 - 806,262
Economic and physical development 367,389 - - - 367,389
Community activities and projects 119,251 - - - 119,251
Parks and recreation 55,850 1,536,175 - 83,131 1,675,156
Debt service
Principal retirement 474,458 - - - 474,458
Interest and fiscal charges 118,711 - - - 118,711
Total expenditures 7,602,904 1,536,175 1,445,259 83,131 10,667,469
Revenues over (under) expenditures 411,750 (1,153,397) (1,445,185) (83,084) (2,269,916)
Other financing sources (uses)
Transfers to General Fund - - (126,054) - (126,054)
Transfers from General Fund - - - 43,000 43,000
Transfer from General Capital Reserve Fund 126,054 - - - 126,054
Transfer to Riverwalk Phase III Fund (43,000) - - - (43,000)
Contribution from property owners - - 1,445,207 - 1,445,207
Proceeds of refunding installment purchases 1,277,143 - - - 1,277,143
Debt service - principal on refunding (1,256,353) - - - (1,256,353)
Installment purchase obligations issued - 1,210,000 - 240,000 1,450,000
Total other financing sources 103,844 1,210,000 1,319,153 283,000 2,915,997
Net change in fund balances 515,594 56,603 (126,032) 199,916 646,081
Fund balances, beginning 5,601,872 (20,444) 723,176 124,420 6,429,024
Fund balances, ending 6,117,466$ 36,159$ 597,144$ 324,336$ 7,075,105$
Major Funds
Year Ended June 30, 2014
TOWN OF HILLSBOROUGH, NORTH CAROLINA
STATEMENT OF REVENUES, EXPENDITURES AND
CHANGES IN FUND BALANCE - GOVERNMENTAL FUNDS
The accompanying notes are an integral part of this statement.
- 23 -
Exhibit 4
Page 2 of 2
Reconciliation of the Governmental Funds Statement of Revenues,
Expenditures and Changes in Fund Balance to the Statement of Activities:
Net change in fund balances - total governmental funds 646,081$
Amounts reported for governmental activities in the statement of activities are
different because:
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
capital outlays ($2,246,332) exceeded depreciation ($600,819) in the current
period.1,645,513
The net effect of transactions involving capital assets donated to the Town. 3,050,533
Revenues in the statement of activities that do not provide current financial
resources are not reported as revenues in the funds.
Change in deferred revenues related to property taxes. (24,988)
Change in deferred revenues related to grants receivable. 234,991
The repayment of the principal of long-term debt ($1,730,811) consumes the
current financial resources of governmental funds. This transaction has no effect
on net position.1,730,811
The issuance of the principal of long-term debt ($2,727,143) provides current
financial resources to governmental funds. This transaction has no effect
on net position.(2,727,143)
Some expenses reported in the statement of activities do not require the use of
current financial resources and, therefore, are not reported as expenditures in
governmental funds.
Change in accrued and prepaid interest on general long-term debt (7,542)
Compensated absences 2,112
Net pension obligation (3,875)
Net OPEB obligation (34,815)
Changes in net position of governmental activities 4,511,678$
TOWN OF HILLSBOROUGH, NORTH CAROLINA
STATEMENT OF REVENUES, EXPENDITURES AND
CHANGES IN FUND BALANCE - GOVERNMENTAL FUNDS
Year Ended June 30, 2014
The accompanying notes are an integral part of this statement.
- 24 -
Exhibit 5
Variance
Original Final Positive
Budget Budget Actual (Negative)
Revenues
General revenues
Ad valorem taxes 5,119,000$ 5,132,000$ 5,429,114$ 297,114$
Other taxes and licenses 1,072,200 1,072,484 1,199,185 126,701
Unrestricted intergovernmental revenues 630,000 659,964 809,190 149,226
Restricted intergovernmental revenues 165,150 204,814 386,172 181,358
Investment earnings 2,500 2,500 1,854 (646)
Other general revenues 15,000 16,545 48,337 31,792
Total general revenues 7,003,850 7,088,307 7,873,852 785,545
Functionally related revenues
Use and rental fees 123,000 123,000 140,802 17,802
Total revenues 7,126,850 7,211,307 8,014,654 803,347
Expenditures
General government 1,417,667 1,671,752 1,469,658 202,094
Public safety 3,597,458 3,735,913 3,581,492 154,421
Transportation 1,011,963 1,082,226 851,502 230,724
Environmental protection 671,998 842,682 906,112 (63,430)
Economic and physical development 295,000 275,300 367,389 (92,089)
Community activities and projects 198,739 908,524 178,579 729,945
Parks and recreation 256,285 287,583 248,172 39,411
Contingency 100,000 - - -
Total expenditures 7,549,110 8,803,980 7,602,904 1,201,076
Revenues over (under) expenditures (422,260) (1,592,673) 411,750 2,004,423
Other financing sources (uses)
Transfer to Goldpark/Riverwalk Project Fund (34,000) - - -
Transfer from General Capital Reserve Fund 126,054 126,054 126,054 -
Transfer to Riverwalk Phase III Fund - (43,000) (43,000) -
Transfer to Riverwalk - CMAC Fund - - - -
Installment purchase obligations issued - 615,370 - (615,370)
Proceeds of refunding installment purchases - - 1,277,143 1,277,143
Debt service - principal - - (1,256,353) (1,256,353)
Total other financing sources 92,054 698,424 103,844 (594,580)
Appropriated fund balance 330,206 894,249 - (894,249)
Net change in fund balance -$ -$ 515,594 515,594$
Fund balance, beginning 5,601,872
Fund balance, ending 6,117,466$
GENERAL FUND
Year Ended June 30, 2014
TOWN OF HILLSBOROUGH, NORTH CAROLINA
STATEMENT OF REVENUES, EXPENDITURES AND
CHANGES IN FUND BALANCE - BUDGET AND ACTUAL
The accompanying notes are an integral part of this statement.
- 25 -
Exhibit 6
Proprietary
Fund Type
ASSETS Enterprise
Current assets:
Cash and investments 6,253,361$
Accounts receivable, net 1,135,876
Prepaid expenses 4,345
Restricted assets:
Cash and investments 3,172,943
Total current assets 10,566,525
Capital assets:
Land and construction-in-progress 25,802,246
Other capital assets, net of depreciation 23,649,945
Total capital assets 49,452,191
Total noncurrent assets 49,452,191
Total assets 60,018,716
LIABILITIES
Current liabilities:
Accounts payable and accrued liabilities 273,226
Payable from restricted assets - customer deposits 394,523
Accrued interest payable 21,856
Current portion of long-term liabilities 1,175,510
Total current liabilities 1,865,115
Long-term liabilities:
Due in more than one year 21,676,034
Total liabilities 23,541,149
NET POSITION
Net investment in capital assets 27,110,293
Restricted for:
Water and sewer projects 2,591,211
Unrestricted 6,776,063
Total net position 36,477,567$
TOWN OF HILLSBOROUGH, NORTH CAROLINA
STATEMENT OF NET POSITION - PROPERIETARY FUND
June 30, 2014
The accompanying notes are an integral part of this statement.
- 26 -
Exhibit 7
Proprietary
Fund Type
Enterprise
OPERATING REVENUES
Charges for services 7,404,183$
Other operating revenues 1,621,424
TOTAL OPERATING REVENUES 9,025,607
OPERATING EXPENSES
Personnel services 2,495,982
Depreciation 787,434
Other current charges 2,873,028
TOTAL OPERATING EXPENSES 6,156,444
OPERATING INCOME 2,869,163
NONOPERATING REVENUES (EXPENSES)
Investment earnings 2,601
Interest and fees (114,867)
TOTAL NONOPERATING EXPENSES (112,266)
INCOME BEFORE CAPITAL
CONTRIBUTIONS AND TRANSFERS 2,756,897
CAPITAL CONTRIBUTIONS AND TRANSFERS
Capital contribution from developer 1,028,171
TOTAL CAPITAL CONTRIBUTIONS
AND TRANSFERS 1,028,171
CHANGE IN NET POSITION 3,785,068
NET POSITION, BEGINNING OF YEAR 32,692,499
NET POSITION, END OF YEAR 36,477,567$
Year Ended June 30, 2014
TOWN OF HILLSBOROUGH, NORTH CAROLINA
STATEMENT OF REVENUES, EXPENSES AND
CHANGES IN NET POSITION - PROPRIETARY FUND
The accompanying notes are an integral part of this statement.
- 27 -
Exhibit 8
Page 1 of 2
Proprietary
Fund-Type
Enterprise
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from customers 8,978,367$
Cash paid for goods and services (2,968,781)
Cash paid to or on behalf of employees for services (2,453,160)
NET CASH PROVIDED BY
OPERATING ACTIVITIES 3,556,426
CASH FLOWS FROM CAPITAL AND RELATED FINANCING
ACTIVITIES
Acquisition and construction of capital assets (2,996,789)
Proceeds from issuance of long-term debt 2,472,930
Principal paid on bonds, notes and installment purchases (1,051,283)
Interest paid on bonds and installment purchases (130,046)
NET CASH USED BY CAPITAL AND
RELATED FINANCING ACTIVITIES (1,705,188)
CASH FLOWS FROM INVESTING ACTIVITIES
Interest on investments 2,601
NET CASH PROVIDED BY
INVESTING ACTIVITIES 2,601
NET INCREASE IN CASH
AND CASH EQUIVALENTS 1,853,839
CASH AND CASH EQUIVALENTS, BEGINNING 7,572,465
CASH AND CASH EQUIVALENTS, ENDING 9,426,304$
CASH AND CASH EQUIVALENTS
Unrestricted 6,253,361$
Restricted 3,172,943
TOTAL CASH AND CASH EQUIVALENTS 9,426,304$
Year Ended June 30, 2014
TOWN OF HILLSBOROUGH, NORTH CAROLINA
STATEMENT OF CASH FLOWS - PROPRIETARY FUND
The accompanying notes are an integral part of this statement.
- 28 -
Exhibit 8
Page 2 of 2
Proprietary
Fund-Type
Enterprise
Year Ended June 30, 2014
TOWN OF HILLSBOROUGH, NORTH CAROLINA
STATEMENT OF CASH FLOWS - PROPRIETARY FUND
RECONCILIATION OF OPERATING INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES
Operating income 2,869,163$
Adjustments to reconcile operating income to net cash
provided by operating activities:
Depreciation 787,434
Provision for uncollectible accounts 95,000
Changes in assets and liabilities:
Decrease in accounts receivable (150,269)
Increase in prepaid expense 336
Increase in accounts payable and accrued liabilities (82,389)
Increase in deposits 8,029
Increase in OPEB liability 23,893
Increase in compensated absences payable 5,229
NET CASH PROVIDED BY
OPERATING ACTIVITIES 3,556,426$
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES
Capital asset additions included in accounts payable and
accrued liabilities 719,176$
Capital contribution from developer 1,028,171$
The accompanying notes are an integral part of this statement.
- 29 -
Exhibit 9
Special
Assessment
ASSETS Debt
Cash 171,082$
Total assets 171,082$
LIABILITIES
Due to others 171,082$
Total liabilities 171,082$
TOWN OF HILLSBOROUGH, NORTH CAROLINA
STATEMENT OF FIDUCIARY ASSETS AND LIABILITIES -
June 30, 2014
SPECIAL ASSESSMENT DEBT AGENCY FUND
The accompanying notes are an integral part of this statement.
- 30 -
TOWN OF HILLSBOROUGH, NORTH CAROLINA
NOTES TO FINANCIAL STATEMENTS
June 30, 2014
- 31 -
Note 1. Summary of Significant Accounting Policies
The accounting policies of the Town of Hillsborough (the “Town”) conform to accounting
principles generally accepted in the United States of America (“GAAP”) as applicable to
governments. The Governmental Accounting Standards Board (“GASB”) is the accepted
standard-setting body for establishing governmental accounting and financial reporting
principles. The following is a summary of the more significant accounting policies:
A. Reporting Entity
The Town of Hillsborough is a municipal corporation which is governed by an elected
mayor and a five-member board. As required by GAAP, these financial statements
present the Town and its component units, which are legally separate entities for which the
Town is financially accountable. The discretely presented component units presented
below are reported in separate columns in the Town’s financial statements in order to
emphasize that they are legally separate from the Town.
Hillsborough Tourism Development Authority (“the Authority”)
The Authority was created on April 9, 2012 by resolution of the Town, under the
authority of the North Carolina General Assembly. The Authority is responsible for
promoting travel and tourism in the Hillsborough area. The Authority receives revenue
from a three percent occupancy tax, which is levied and collected by the Town and the
remitted net of administration fees. The members of the Authority are appointed by
the Town’s Board of Commissioners.
Hillsborough Tourism Board (“the Board”)
The Board was created on November 8, 1993, by resolution of the Town, under the
authority of the North Carolina General Assembly. The Board is responsible for
promoting tourism within the Town of Hillsborough. The Board receives revenues
through a one percent prepared food and beverage tax, which is levied and collected
by the Town and remitted net of administration fees. The Board is composed of nine
members appointed by the Town’s Board of Commissioners.
Requests for complete financial statements for each of the component units may be
directed to the Finance Officer, c/o Hillsborough Tourism Development Authority or c/o
Hillsborough Tourism Board, Hillsborough, North Carolina, or by telephone at (919)
732-2104.
TOWN OF HILLSBOROUGH, NORTH CAROLINA
NOTES TO FINANCIAL STATEMENTS
June 30, 2014
- 32 -
Note 1. Summary of Significant Accounting Policies (Continued)
B. Basis of Presentation
Government-Wide Statements: The statement of net position and the statement of
activities include the financial activities of the overall government. These statements
distinguish between the governmental and business-type activities of the Town.
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 Town and for each function of the
Town’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
Town’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 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 and investment earnings, result from nonexchange
transactions or ancillary activities.
The Town’s fiduciary fund is presented in the fund financial statements as an agency fund.
Since by definition these assets are being held for the benefit of a third party and cannot
be used to address activities or obligations of the government, these funds are not
incorporated into the government-wide statements.
The Town reports the following major governmental funds:
General Fund - The General Fund is the general operating fund of the Town. It is
used to account for all financial resources except those required to be accounted for in
another fund. The primary revenue sources are ad valorem taxes, state grants, and
various other taxes and licenses. The primary expenditures are for general
government administration, public safety, street maintenance and construction, and
sanitation services.
TOWN OF HILLSBOROUGH, NORTH CAROLINA
NOTES TO FINANCIAL STATEMENTS
June 30, 2014
- 33 -
Note 1. Summary of Significant Accounting Policies (Continued)
B. Basis of Presentation (Continued)
Riverwalk Phase II Capital Project Fund - The project will connect Gold
Park/Riverwalk Phase I to downtown. The connection will serve as a highly desirable
recreation amenity, pedestrian route and economic development investment by adding
an additional attraction to downtown that should draw more tourists.
General Capital Projects Fund - This fund is used to accumulate expenditures
related to multiple capital projects budgeted to be completed within one year. The
General Capital Reserve Fund is consolidated in the General Capital Projects Fund.
The Town reports the following nonmajor governmental funds:
Riverwalk Phase III Capital Project Fund - Phase III of Riverwalk will extend
Riverwalk east toward lands owned by Classical American Home Preservation Trust
to make its outside connections to the trails at the Historic Occoneechee Speedway.
This trail portion will have a natural, unpaved surface to protect sensitive lands and
denote a transition from an urban greenway to less formal trails operated by the trust
for the public’s use.
Riverwalk CMAQ Capital Project Fund - Three important sidewalk components are
grouped for funding purposes through the Congestion Mitigation and Air Quality
program within the Department of Transportation. Riverwalk provides a viable
alternative to driving by allowing many residents of Hillsborough to walk or bike into
downtown, whether for work, shopping, or recreation. These sidewalk connections
are along Eno Mountain Road and provide access into the Occoneechee State natural
area (connecting to Gold Park); South Nash Street near the commercial area and the
rail trestle, and Calvin Street, connecting to Gold Park and Riverwalk.
The Town reports the following major enterprise fund:
Water and Sewer Fund - This fund is used to account for the Town’s water and
sewer operations. For financial reporting purposes, the Water and Sewer Capital
Projects Fund (“WS Capital Projects Fund”) and Water and Sewer Capital Reserve
Fund (“WS Capital Reserve Fund”) have been consolidated with the Water and Sewer
Fund.
The Town reports the following fiduciary fund:
Special Assessment Debt Agency Fund - This fund is used to account for proceeds
that the Town has received from special assessments that have not been remitted to
Regions Bank. Regions Bank is the Trustee of the Series 2013 Special Revenue
Bonds.
TOWN OF HILLSBOROUGH, NORTH CAROLINA
NOTES TO FINANCIAL STATEMENTS
June 30, 2014
- 34 -
Note 1. Summary of Significant Accounting Policies (Continued)
C. Measurement Focus and Basis of Accounting
In accordance with North Carolina General Statutes, all funds of the Town are maintained
during the year using the modified accrual basis of accounting.
Government-Wide and Proprietary Fund Financial Statements. The government-wide and
proprietary fund 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 Town 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 revenue 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 Town’s enterprise funds are charges to customers
for sales and services. The Town also recognizes as operating revenue the portion of tap
fees intended to recover the cost of connecting new 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.
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.
TOWN OF HILLSBOROUGH, NORTH CAROLINA
NOTES TO FINANCIAL STATEMENTS
June 30, 2014
- 35 -
Note 1. Summary of Significant Accounting Policies (Continued)
C. Measurement Focus and Basis of Accounting (Continued)
The Town 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 for
property other than motor vehicles are materially past due and are not considered to be an
available resource to finance the operations of the subsequent year. Also, as of
September 1, 2013, 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, the State of North Carolina is responsible for billing and collecting the property
taxes on registered motor vehicles on behalf of all municipalities and special tax districts.
Property taxes are due when vehicles are registered. The billed taxes are applicable to the
fiscal year in which they are received. Uncollected taxes that were billed in periods prior to
September 1, 2013 and for limited registration plates are shown as a receivable in these
financial statements and are offset by deferred inflows of resources.
Sales taxes and certain intergovernmental revenues, such as utilities franchise tax,
collected and held by the state at year end on behalf of the Town, 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 that are unearned at year end are recorded as deferred inflows of resources.
Under the terms of grant agreements, the Town 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
position available to finance the program. It is the Town’s policy to first apply cost-
reimbursement grant resources to such programs, followed by categorical block grants,
and then by general revenues.
TOWN OF HILLSBOROUGH, NORTH CAROLINA
NOTES TO FINANCIAL STATEMENTS
June 30, 2014
- 36 -
Note 1. Summary of Significant Accounting Policies (Continued)
D. Budgetary Data
The Town’s budgets are adopted by the governing board as required by the North Carolina
General Statutes. An annual budget is adopted for the General Fund and the Water and
Sewer Fund. All annual appropriations lapse at the fiscal year end. Project ordinances are
adopted for the Riverwalk Phase II Capital Project Fund, Riverwalk Phase III Capital
Project Fund, Riverwalk CMAQ Capital Project Fund, General Capital Projects Fund,
Water and Sewer Capital Projects Fund, and the Water and Sewer Capital Reserve Fund.
The enterprise fund projects and capital reserve are consolidated with the Water and
Sewer Fund 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 multiyear funds. The
Town Manager is authorized by the budget ordinance to transfer appropriations and may
allow any amount of money to be transferred between functional areas within a fund. The
Town Manager is also authorized to effect interdepartmental transfers within the same
fund, not to exceed 10% of the appropriated monies for the department whose allocation is
reduced. The Finance Director may make minor adjustments to the budget without
obtaining prior governing board approval by formal budget amendment. Such changes
must be within a fund and not between two or more funds. The Finance Director is
required to inform the board at the next meeting after the budget adjustment is made.
Budget amendments typically involve larger sums of money and require the governing
board’s approval. During the year, several amendments to the original budget were
necessary.
E. Assets, Liabilities, Deferred Outflows/Inflows of Resources and Fund Equity
1. Deposits and Investments
All deposits of the Town are made in board-designated official depositories and are
secured as required by state law (G.S. 159-31). The Town may designate, as an
official depository, any bank or savings association whose principal office is located in
North Carolina. Also, the Town 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 Town 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 nonguaranteed
federal agencies; certain high quality issues of commercial paper and bankers’
acceptances; and the North Carolina Capital Management Trust (“NCCMT”). The
Town’s investments are reported at fair value as determined by quoted market prices.
The securities of the NCCMT Cash Portfolio, a Security Exchange Commission-
registered (2a-7) money market mutual fund, are valued at fair value, which is the
NCCMT’s share price.
TOWN OF HILLSBOROUGH, NORTH CAROLINA
NOTES TO FINANCIAL STATEMENTS
June 30, 2014
- 37 -
Note 1. Summary of Significant Accounting Policies (Continued)
E. Assets, Liabilities, Deferred Outflows/Inflows of Resources and Fund Equity (Continued)
2. Cash and Cash Equivalents
The Town 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.
For purposes of the statement of cash flows, the Enterprise Fund considers all short-
term and long-term fixed-income investments (including restricted assets) to be cash
equivalents.
3. Restricted Assets
The Water and Sewer Fund, Riverwalk Phase II Fund, and Riverwalk Phase III Fund
have unexpended debt proceeds that are classified as restricted assets because their
use is completely restricted to the purpose for which the debt agreements were
originally issued. Customer deposits held by the Town before any services are
supplied are restricted to the service for which the deposit was collected. Powell Bill
funds are also classified as restricted cash because they can only be expended for the
purposes of maintaining, repairing, constructing, reconstruction or widening of local
streets per G.S. 136-41.4. In addition, contributions from developers that are
restricted by Town ordinance are restricted to the purpose of the donation.
Town of Hillsborough Restricted Cash
Governmental Activities
General Fund
Streets $ 190,494
Customer deposits 103,942
Riverwalk Phase II Fund
Unspent debt proceeds 223,236
Riverwalk Phase III
Unspent debt proceeds 221,337
General Capital Projects Fund
Developer donations - future capital projects 590,074
Total Governmental Activities 1,329,083
Business-Type Activities
Water and Sewer Fund
Unspent debt proceeds 187,209
Customer deposits 394,523
Developer donations - perpetual maintenance 441,138
Developer donations - water and sewer needs 2,150,073
Total Business-Type Activities 3,172,943
Total Restricted Cash $ 4,502,026
TOWN OF HILLSBOROUGH, NORTH CAROLINA
NOTES TO FINANCIAL STATEMENTS
June 30, 2014
- 38 -
Note 1. Summary of Significant Accounting Policies (Continued)
E. Assets, Liabilities, Deferred Outflows/Inflows of Resources and Fund Equity (Continued)
4. Ad Valorem Taxes Receivable
In accordance with state law [G.S. 105-347 and G.S. 159-13(a)], the Town levies ad
valorem taxes on property other than motor vehicles on July 1, the beginning of the
fiscal year. The taxes are due on September 1 (lien date); however, interest does not
accrue until the following January 6. These taxes are based on the assessed values
as of January 1, 2013. As allowed by state law, the Town has established a schedule
of discounts that apply to taxes that are paid prior to the due date. In the Town’s
General Fund, ad valorem tax revenues are reported net of such discounts.
5. Allowances for Doubtful Accounts
All receivables that historically experience uncollectible accounts are shown net of an
allowance for doubtful accounts. This amount is estimated by analyzing the
percentage of receivables written off in prior years.
6. Prepaid Items
Certain payments to vendors reflect costs applicable to future accounting periods and
are recorded as prepaid items in both government-wide and fund statements, and
expensed as items are used.
7. Capital Assets
Capital assets, which include property, plant, equipment, and infrastructure assets
(e.g., roads, bridges, sidewalks, and similar items) are reported in the applicable
governmental or business-type activities columns in the government-wide financial
statements. 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:
Cost
Land and easements $ 1
Buildings, improvements 10,000
Distribution system 15,000
Vehicles, furniture and equipment 5,000
Infrastructure 35,000
TOWN OF HILLSBOROUGH, NORTH CAROLINA
NOTES TO FINANCIAL STATEMENTS
June 30, 2014
- 39 -
Note 1. Summary of Significant Accounting Policies (Continued)
E. Assets, Liabilities, Deferred Outflows/Inflows of Resources and Fund Equity (Continued)
7. Capital Assets (Continued)
Assets are recorded at historical cost or estimated historical cost, if purchased or
constructed. Donated capital assets are recorded at their estimated fair value at time of
donation. 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 their estimated useful
lives:
Useful Life
Buildings and building improvements 30 years
Infrastructure 40 years
Plant and distribution systems 50 years
Furnishings, fixtures, equipment and
computers 5 to 10 years
Vehicles 3 to 5 years
8. Deferred Outflows/Inflows of Resources
In addition to assets, the statement of financial position will sometimes report a separate
section for deferred outflows of resources. This separate financial statement element,
Deferred Outflows of Resources, represents a consumption of net position that applies
to a future period and so will not be recognized as an expense or expenditure until then.
The Town has no items that meet this criterion. In addition to liabilities, the statement of
financial position will sometimes report a separate section for deferred inflows of
resources. This separate financial statement element, Deferred Inflows of Resources,
represents an acquisition of net position that applies to a future period and so will not be
recognized as revenue until then. The Town has two items that meet the criterion for
this category: taxes receivable and grants receivable. In addition, the Town has
unearned revenue items that meet this criterion for this category: prepaid privilege
licenses and other prepaid fees.
TOWN OF HILLSBOROUGH, NORTH CAROLINA
NOTES TO FINANCIAL STATEMENTS
June 30, 2014
- 40 -
Note 1. Summary of Significant Accounting Policies (Continued)
E. Assets, Liabilities, Deferred Outflows/Inflows of Resources and Fund Equity (Continued)
9. Long-Term Obligations
In the government-wide financial statements and the proprietary fund types in the fund
financial statements, long-term debt and other long-term obligations are reported as
liabilities in the applicable governmental activities or business-type activities, or
proprietary fund-type statement of net position. Long-term debt premiums, discounts
and loss on defeasance are deferred and amortized over the life of the debt using the
straight-line method that approximates the effective interest method. Long-term debt is
reported net of the applicable premiums or discounts. Debt issuance costs, except for
prepaid insurance costs, are expensed in the reporting period in which they are
incurred. Prepaid insurance costs are expensed over the life of the debt.
In fund financial statements, governmental fund types recognize debt premiums and
discounts, as well as debt issuance costs, during the current period. The face amount
of debt issued is 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 Town provides for the accumulation of up to 240 hours
earned vacation leave, with such leave being fully vested when earned. For the
Town’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 Town 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 and included in the long-term
liabilities due within one year on the government-wide financial statements.
The Town’s sick leave policy provides for an unlimited accumulation of earned sick
leave. Sick leave does not vest, but any unused sick leave accumulated at the time of
retirement may be used in determination of length of service for retirement benefit
purposes. Since the Town has no obligation for the accumulated sick leave until it is
actually taken, no accrual for sick leave has been made.
11. Net Position/Fund Balances
Net Position
Net position in government-wide and proprietary fund financial statements is
classified as net investment in capital assets, restricted, and unrestricted.
Restricted net position 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.
TOWN OF HILLSBOROUGH, NORTH CAROLINA
NOTES TO FINANCIAL STATEMENTS
June 30, 2014
- 41 -
Note 1. Summary of Significant Accounting Policies (Continued)
E. Assets, Liabilities, Deferred Outflows/Inflows of Resources and Fund Equity (Continued)
11. Net Position/Fund Balances (Continued)
Fund Balances
In the governmental fund financial statements, fund balance is comprised of five
classifications designed to disclose the hierarchy of constraints placed on how the
fund balance can be spent.
The governmental fund types classify fund balances as follows:
Nonspendable Fund Balance - This classification includes amounts that
cannot be spent because they are either (a) not in spendable form, or
(b) legally or contractually required to be maintained intact.
Prepaid items - Portion of fund balance that is not available for
appropriation because it represents the year-end fund balance of
prepaid items, which are not expendable, available resources.
Restricted Fund Balance - This classification includes amounts that are
restricted to specific purposes externally imposed by creditors or imposed by
law.
Restricted for Stabilization by State Statute - Portion of fund balance
that is restricted by state statute [G.S. 159-8(a)].
Restricted for Streets - Powell Bill portion of fund balance that is
restricted by revenue source for street construction and maintenance
expenditures. This amount represents the balance of the total
unexpended Powell Bill funds.
Restricted for Capital Projects - Portion of fund balance representing
unexpended contributions from developers and debt proceeds that are
restricted by Town ordinance and the developers for future general
capital projects.
Committed Fund Balance - Portion of fund balance that can only be used
for specific purposes imposed by the government through majority vote of the
Town’s governing body – the Board of Town Commissioners (highest level of
decision-making authority). Any changes or removal of specific purpose
requires majority action by the governing body.
Committed for Capital Projects - Portion of fund balance that can
only be used for the construction of capital projects.
TOWN OF HILLSBOROUGH, NORTH CAROLINA
NOTES TO FINANCIAL STATEMENTS
June 30, 2014
- 42 -
Note 1. Summary of Significant Accounting Policies (Continued)
E. Assets, Liabilities, Deferred Outflows/Inflows of Resources and Fund Equity (Continued)
11. Net Position/Fund Balances (Continued)
Fund Balances (Continued)
Assigned Fund Balance - Portion of fund balance the Town of Hillsborough
intends to use for specific purposes that are considered neither restricted nor
committed. Unassigned fund balances may be assigned by the Town Board,
Town Manager, or Finance Director for specific purposes through the budget
process or agenda items.
Assigned for Subsequent Year’s Expenditures - Portion of fund
balance that is appropriated in the next year’s budget that is not already
classified in restricted or committed. The governing body approves the
appropriation.
Unassigned Fund Balance - Portion of fund balance that has not been
restricted, committed, or assigned to specific purposes or other funds.
The Town of Hillsborough has a revenue-spending policy that provides guidance
for programs with multiple revenue sources. The Finance Officer will use
resources in the following hierarchy: bond and installment financing proceeds,
federal funds, state funds, local non-town funds, and town funds. For purposes of
fund balance classification, expenditures are to be spent from restricted fund
balance first, followed in order by committed fund balance, assigned fund balance
and, finally, unassigned fund balance. The Finance Officer has the authority to
deviate from this policy, if it is in the best interest of the Town.
The Town of Hillsborough has adopted a policy to maintain the General Fund
fund balance level between 20% and 60% of operating expenditures, with a target
of 33%, or the equivalent of four months of operating expenditures.
TOWN OF HILLSBOROUGH, NORTH CAROLINA
NOTES TO FINANCIAL STATEMENTS
June 30, 2014
- 43 -
Note 2. Reconciliation of GAAP and Budgetary Basis Expenditures
The accompanying schedule reconciles certain General Fund transactions, which are
treated differently on Exhibit 4 (GAAP basis) and Exhibit 5 (budgetary basis). These
differences relate to capital lease transactions and are summarized below:
Increase
Exhibit 4 (Decrease) Exhibit 5
General government $ 1,354,095 $ 115,563 $ 1,469,658
Public safety 3,455,438 126,054 3,581,492
Environmental protection 806,210 99,902 906,112
Community activities and projects 119,251 59,328 178,579
Parks and recreation 55,850 192,322 248,172
Debt service
Principal retirement 474,458 (474,458) (1) -
Interest and fiscal charges 118,711 (118,711) (1) -
(1) Reclassification of debt service payments.
Note 3. Stewardship, Compliance and Accountability
A. Contract Violations
The Trust Agreement between the Town and Regions Bank, as Trustee, for the Series 2013
Special Revenue Bonds, requires the Town to pay any revenues it receives to the Trustee
within five business days of receipt. At June 30, 2014, the Town had revenues in the
amount of $171,082 that had not been remitted to the Trustee within the required time
period. These amounts are included as cash in the Agency Fund at June 30, 2014.
B. Excess of Expenditures over Appropriations
For the fiscal year ended June 30, 2014, expenditures made in the Town’s General Fund
exceeded the authorized appropriations made by the governing board for environmental
protection by $63,430; economic and physical development by $92,089; and debt service -
principal on refunding by $1,256,353. The over-expenditure of environmental and protection
occurred because the Town took possession of $129,998 of recycling carts earlier than
anticipated. The over-expenditure of economic and physical development occurred due to
an under-estimation of proceeds payable to the Hillsborough Tourism Development Authority
and the Hillsborough Tourism Board. The over-expenditure of debt-service principal on
refunding occurred because the Town budgeted the related debt service expenditures net of
proceeds of refunding installment purchases. Management and the board will more closely
review the budget to actual reports to ensure compliance in future years.
TOWN OF HILLSBOROUGH, NORTH CAROLINA
NOTES TO FINANCIAL STATEMENTS
June 30, 2014
- 44 -
Note 4. Detail Notes on All Funds
A. Assets
1. Deposits
All of the deposits of the Town, the Authority, and the Board 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 Town’s, the Authority’s, or the Board’s agents in the entities’
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
Town, the Authority, and the Board, these deposits are considered to be held by their
agents in the entities’ names. The amount of the pledged collateral is based on an
approved averaging method for noninterest-bearing deposits and the actual current
balance for interest-bearing deposits. Depositories using the Pooling Method report to
the State Treasurer the adequacy of their pooled collateral covering uninsured
deposits. The State Treasurer does not confirm this information with the Town, the
Authority, the Board, or the escrow agent.
Because of the inability to measure the exact amounts of collateral pledged for the
Town, the Authority, or the Board 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 Town has no formal policy regarding custodial credit risk for deposits,
but relies on the State Treasurer to enforce standards of minimum capitalization for all
pooling method financial institutions and to monitor them for compliance. The Town
complies with the provisions of G.S. 159-31 when designating official depositories and
verifying that deposits are properly secured. The Authority and the Board have no
formal policy regarding custodial credit risk for deposits.
At June 30, 2014, the Town’s deposits had a carrying amount of $7,590,537 and a
bank balance of $8,148,899. Of the bank balance, $500,000 was covered by federal
depository insurance and $7,648,899 in interest-bearing deposits were covered under
the Pooling Method. The Town had $1,050 in petty cash on hand at June 30, 2014.
At June 30, 2014, the Authority’s deposits had a carrying amount of $80,015 and a
bank balance of $80,015. All of the bank balance was covered by federal depository
insurance.
At June 30, 2014, the Board’s deposits had a carrying amount of $183,436 and a bank
balance of $183,436. All of the bank balance was covered by federal depository
insurance.
TOWN OF HILLSBOROUGH, NORTH CAROLINA
NOTES TO FINANCIAL STATEMENTS
June 30, 2014
- 45 -
Note 4. Detail Notes on All Funds (Continued)
A. Assets (Continued)
2. Investments
At June 30, 2014, the Town had $8,942,741 invested with the North Carolina Capital
Management Trust’s Cash Portfolio, which carried a credit rating of AAAm by
Standard and Poor’s. The Town has no policy regarding credit risk of its investments.
3. Due from Other Governments
Amounts due from other governments consist of the following:
Governmental
Activities
General Fund
Sales and use tax distribution $ 318,048
Utilities franchise and telecommunications
tax 111,827
Other government agencies 359,492
Sales tax refunds 187,166
976,533
Riverwalk Phase II Capital Project Fund
Grant receivable 42,456
$ 1,018,989
4. Receivables - Allowance for Doubtful Accounts
The amounts presented in the Balance Sheet and the Statement of Net Position for
the year ended June 30, 2014 is net of the following allowances for doubtful accounts,
which are based on historical percentages of receivables not expected to be collected.
General Fund
Taxes receivable $ 77,417
Enterprise Fund $ 245,000
TOWN OF HILLSBOROUGH, NORTH CAROLINA
NOTES TO FINANCIAL STATEMENTS
June 30, 2014
- 46 -
Note 4. Detail Notes on All Funds (Continued)
A. Assets (Continued)
5. Capital Assets
Governmental capital asset activity for the year ended June 30, 2014 was as follows:
Beginning Ending
Balances Increases Decreases Transfers Balances
Governmental
activities:
Capital assets not
being depreciated:
Land $ 2,672,428 $ - $ - $ - $ 2,672,428
Construction-in-
progress 559,883 1,619,307 - - 2,179,190
Total capital
assets not
being
depreciated 3,232,311 $ 1,619,307 $ - $ - 4,851,618
Capital assets
being depreciated:
Buildings and
improvements 4,160,980 $ - $ - $ - 4,160,980
Infrastructure 2,775,901 3,483,756 - - 6,259,657
Equipment 520,004 10,605 - - 530,609
Vehicles 2,794,127 183,197 115,419 - 2,861,905
Total capital
assets being
depreciated 10,251,012 $ 3,677,558 $ 115,419 $ - 13,813,151
Less accumulated
depreciation for:
Buildings and
improvements 1,209,692 $ 135,446 $ - $ - 1,345,138
Infrastructure 128,079 128,416 - - 256,495
Equipment 419,951 25,860 - - 445,811
Vehicles 1,917,002 311,097 115,419 - 2,112,681
Total
accumulated
depreciation 3,674,724 $ 600,819 $ 115,419 $ - 4,160,125
Total capital
assets being
depreciated,
net 6,576,288 9,653,026
Governmental
activity capital
assets, net $ 9,808,599 $ 14,504,644
TOWN OF HILLSBOROUGH, NORTH CAROLINA
NOTES TO FINANCIAL STATEMENTS
June 30, 2014
- 47 -
Note 4. Detail Notes on All Funds (Continued)
A. Assets (Continued)
5. Capital Assets (Continued)
Depreciation expense was charged to functions/programs of the primary government
as follows:
General government $ 157,157
Public safety 241,185
Transportation 109,452
Environmental protection 93,025
$ 600,819
TOWN OF HILLSBOROUGH, NORTH CAROLINA
NOTES TO FINANCIAL STATEMENTS
June 30, 2014
- 48 -
Note 4. Detail Notes on All Funds (Continued)
A. Assets (Continued)
5. Capital Assets (Continued)
Business-type capital asset activity for the year ended June 30, 2014 was as follows:
Beginning Ending
Balances Increases Decreases Transfers Balances
Business-type
activities:
Capital assets not
being depreciated:
Land $ 6,005,443 $ - $ - $ - $ 6,005,443
Construction-in-
progress 17,982,370 2,240,142 - (425,709) 19,796,803
Total capital
assets not
being
depreciated 23,987,813 $ 2,240,142 $ - $ (425,709) 25,802,246
Capital assets
being depreciated:
Buildings and
improvements 8,441,940 $ 12,300 $ - $ - 8,454,240
Plant and
distribution
systems 26,766,820 875,481 - 425,709 28,068,010
Infrastructure 380,626 152,690 - - 533,316
Equipment 1,319,871 2,760 - - 1,322,631
Vehicles 608,835 34,097 - - 642,932
Total capital
assets being
depreciated 37,518,092 $ 1,077,328 $ - $ 425,709 39,021,129
Less accumulated
depreciation for:
Buildings and
improvements 6,278,825 $ 96,763 $ - $ - 6,375,588
Plant and
distribution
systems 6,773,986 569,187 - - 7,343,173
Infrastructure 27,943 12,697 - - 40,640
Equipment 997,510 67,485 - - 1,064,995
Vehicles 505,486 41,302 - - 546,788
Total
accumulated
depreciation 14,583,750 $ 787,434 $ - $ - 15,371,184
Total capital
assets being
depreciated,
net 22,934,342 23,649,945
Business-type
activity capital
assets, net $ 46,922,155 $ 49,452,191
TOWN OF HILLSBOROUGH, NORTH CAROLINA
NOTES TO FINANCIAL STATEMENTS
June 30, 2014
- 49 -
Note 4. Detail Notes on All Funds (Continued)
A. Assets (Continued)
5. Capital Assets (Continued)
Construction Commitments
The Town has active construction projects as of June 30, 2014 with the following
remaining commitments:
Project Spent-to-Date Commitment
Riverside/Crawford water improvements $ 209,272 $ 85,728
Riverwalk Phase II 1,389,059 211,172
Riverwalk Phase III 15,200 161,520
Riverwalk CMAQ-Sidewalk 17,895 82,897
West Fork Eno Reservoir 152,622 45,100
Lake Ben Johnson dredging 355,965 30,718
Waterstone Water Tank 125,745 68,615
Wastewater Treatment Facility Expansion 20,164,929 1,403,058
Total $ 22,430,687 $ 2,088,808
B. Liabilities
1. Pension Plan and Postemployment Obligations
Local Governmental Employees’ Retirement System
Plan Description. The Town of Hillsborough contributes to the statewide Local
Governmental Employees’ Retirement System (“LGERS”), a cost-sharing, multiple-
employer defined benefit pension plan administered by the state of North Carolina.
LGERS provides retirement and disability benefits to plan members and beneficiaries.
Article 3 of G.S. Chapter 128 assigns the authority to establish and amend benefit
provisions to the North Carolina General Assembly. The 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.
TOWN OF HILLSBOROUGH, NORTH CAROLINA
NOTES TO FINANCIAL STATEMENTS
June 30, 2014
- 50 -
Note 4. Detail Notes on All Funds (Continued)
B. Liabilities (Continued)
1. Pension Plan and Postemployment Obligations (Continued)
Funding Policy. Plan members are required to contribute 6% of their annual covered
salary. The Town is required to contribute at an actuarially determined rate. The
current rate for employees not engaged in law enforcement and for law enforcement
officers is 7.07% and 7.28%, respectively, of annual covered payroll. The contribution
requirements of members and of the Town of Hillsborough are established and may
be amended by the North Carolina General Assembly. The Town’s contributions to
LGERS for the years ended June 30, 2014, 2013, and 2012 were $334,884,
$298,865, and $296,822, respectively. The contributions made by the Town equaled
the required contributions for each year.
Law Enforcement Officers’ Special Separation Allowance
Plan Description. The Town of Hillsborough administers a public employee retirement
system (the “Separation Allowance”), a single-employer defined benefit pension plan
that provides retirement benefits to the Town’s qualified sworn law enforcement
officers. The Separation Allowance is equal to 0.85% of the annual equivalent of the
base rate of compensation most recently applicable to the officer for each year of
creditable service. The retirement benefits are not subject to any increases in salary
or retirement allowances that may be authorized by the General Assembly.
Article 12D of G.S. Chapter 143 assigns the authority to establish and amend benefit
provisions to the North Carolina General Assembly. A stand-alone financial statement
has not been issued for this plan.
All full-time law enforcement officers of the Town are covered by the Separation
Allowance. At December 31, 2013, the Separation Allowance’s membership
consisted of:
Retirees receiving benefits 3
Terminated plan members entitled
to, but not yet receiving benefits -
Active plan members 27
Total 30
Summary of Significant Accounting Policies:
Basis of Accounting. The Town 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.
TOWN OF HILLSBOROUGH, NORTH CAROLINA
NOTES TO FINANCIAL STATEMENTS
June 30, 2014
- 51 -
Note 4. Detail Notes on All Funds (Continued)
B. Liabilities (Continued)
1. Pension Plan and Postemployment Obligations (Continued)
Law Enforcement Officers’ Special Separation Allowance (Continued)
Contributions:
The Town 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 Town’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, 2013 actuarial valuation using the projected unit credit actuarial cost
method. The actuarial assumptions included (a) a 5.00% investment rate of return
and (b) projected salary increases ranging from 4.25% to 7.85% per year. Both
(a) and (b) included an inflation component of 3.00%. The unfunded actuarial accrued
liability is being amortized as a level of dollar of pay on a closed basis. The remaining
amortization period at December 31, 2013, was 17 years. The assumptions did not
include postretirement benefit increases.
Annual Pension Cost and Net Pension Obligation. The Town’s annual pension cost
and net pension obligation to the Separation Allowance for the current year were as
follows:
Annual required contribution $ 52,791
Interest on net pension asset (1,177)
Adjustment to annual required contribution 1,919
Annual pension cost 53,533
Contributions made 49,658
Decrease in net pension asset 3,875
Net pension asset, beginning of year (23,548)
Net pension asset, end of year $ (19,673)
TOWN OF HILLSBOROUGH, NORTH CAROLINA
NOTES TO FINANCIAL STATEMENTS
June 30, 2014
- 52 -
Note 4. Detail Notes on All Funds (Continued)
B. Liabilities (Continued)
1. Pension Plan and Postemployment Obligations (Continued)
Law Enforcement Officers’ Special Separation Allowance (Continued)
Three-Year Trend Information:
Fiscal Annual Percentage Net Pension
Year Pension of APC Obligation
Ended Cost (APC) Contributed (Asset)
6/30/2012 $ 53,076 119.97% $ (27,876)
6/30/2013 52,458 91.75% (23,548)
6/30/2014 53,533 92.76% (19,673)
Funded Status and Funding Process: As of December 31, 2013, the most recent
actuarial valuation date, the plan was not funded. The actuarial accrued liability for
benefits and the unfunded actuarial accrued liability (“UALL”) were $405,686. The
covered payroll (annual payroll of active employees covered by the plan) was
$1,397,887, and the ratio of the UAAL to the covered payroll was 29.02%.
The schedule of funding progress, presented as required supplementary information
following the notes to the financial statements, presents multiyear trend information
about whether the actuarial value of plan assets are increasing or decreasing over
time relative to the actuarial accrued liability for benefits.
Supplemental Retirement Income Plan
Plan Description. The Town of Hillsborough contributes to the Supplemental
Retirement Income Plan (the “Plan”), a defined contribution pension plan administered
by the Department of State Treasurer and a board of trustees. The Plan provides
retirement benefits to law enforcement officers employed by the Town. Article 5 of
G.S. Chapter 135 assigns the authority to establish and amend benefit provisions to
the North Carolina General Assembly. The Supplemental Retirement Income Plan for
Law Enforcement Officers is included in the CAFR for the state of North Carolina. The
state’s CAFR includes the pension trust fund financial statements for the Internal
Revenue Section 401(k) plan that includes the Supplemental Retirement Income Plan
for Law Enforcement Officers. That report may be obtained by writing to the Office of
the State Controller, 1410 Mail Service Center, Raleigh, North Carolina 27699-1410,
or by calling (919) 981-5454. Additionally, the Town has elected to include all
permanent, full-time employees under this plan.
TOWN OF HILLSBOROUGH, NORTH CAROLINA
NOTES TO FINANCIAL STATEMENTS
June 30, 2014
- 53 -
Note 4. Detail Notes on All Funds (Continued)
B. Liabilities (Continued)
1. Pension Plan and Postemployment Obligations (Continued)
Supplemental Retirement Income Plan (Continued)
Funding Policy. Article 12E of G.S. Chapter 143 requires the Town to contribute each
month an amount equal to 5% of each officer’s salary, and all amounts contributed are
vested immediately. The Town has elected to contribute each month an amount equal
to 5.0% of each participating general employee’s salary. Also, the participants may
make voluntary contributions to the Plan. Contributions for the year ended June 30,
2014 were $320,626, which consisted of $228,498 from the Town and $92,128 from
employees.
2. Other Postemployment Benefit Obligations
Plan Description. According to a Town resolution, the Town administers a single-
employer defined benefit Healthcare Plan (the “HC Plan”). The HC Plan provides
post-retirement healthcare benefits until they become eligible for Medicare to retirees
of the Town who were hired before February 1, 2009, who have at least 20 years of
creditable service, and who attain age 55 for regular employees and age 52 for law
enforcement employees. Employees hired on or after February 1, 2009, must
complete 30 years of service and attain age 60 for regular employees and age 57 for
law enforcement employees before becoming eligible for post-retirement benefits.
The Town pays the full cost of coverage for these benefits. The Town’s Board of
Commissioners may amend the benefit provisions. A separate report was not issued
for the HC Plan.
TOWN OF HILLSBOROUGH, NORTH CAROLINA
NOTES TO FINANCIAL STATEMENTS
June 30, 2014
- 54 -
Note 4. Detail Notes on All Funds (Continued)
B. Liabilities (Continued)
2. Other Postemployment Benefit Obligations (Continued)
Law Enforcement Non-Law Enforcement
Retired Employees’
Years of Hired Before Hired On or After Hired Before Hired On or After
Creditable Service February 9, 2009 February 9, 2009 February 9, 2009 February 9, 2009
Less than 20 years’
continuous service Not eligible for Not eligible for Not eligible for Not eligible for
coverage coverage coverage coverage
20 or more years’
continuous service:
Before age 52 Not eligible for Not eligible for Not eligible for Not eligible for
coverage coverage coverage coverage
Age 52 to 55 Full coverage Not eligible for Not eligible for Not eligible for
paid for by Town coverage coverage coverage
Age 55 until
eligible for
Medicare Full coverage Not eligible for Full coverage Not eligible for
paid for by Town coverage paid for by Town coverage
30 or more years’
continuous service:
Before age 57 Not eligible for Not eligible for Not eligible for Not eligible for
coverage coverage coverage coverage
Age 57 to 60 Full coverage Full coverage Not eligible for Not eligible for
paid for by Town paid for by Town coverage coverage
Age 60 until
eligible for
Medicare Full coverage Full coverage Full coverage Full coverage
paid for by Town paid for by Town paid for by Town paid for by Town
Membership of the HC Plan consisted of the following at December 31, 2011, the date
of the latest actuarial valuation:
Law
General Enforcement
Employees Officers
Retirees and dependents receiving benefits - 5
Active plan members 59 28
Total 59 33
Funding Policy. The Town pays the cost of coverage for the healthcare benefits paid
to qualified retirees under a Town resolution that can be amended by the Board of
Commissioners. The Town’s members pay up to $1,431 per month for full family
coverage. The Town has chosen to fund the healthcare benefits on a pay-as-you-go
basis.
TOWN OF HILLSBOROUGH, NORTH CAROLINA
NOTES TO FINANCIAL STATEMENTS
June 30, 2014
- 55 -
Note 4. Detail Notes on All Funds (Continued)
B. Liabilities (Continued)
2. Other Postemployment Benefit Obligations (Continued)
The current annual required contribution of the employer (“ARC”) rate is 2.71% of
annual covered payroll. For the current year, the Town contributed $58,800 or 1.36%
of annual covered payroll. The Town obtains healthcare coverage through private
insurers. The Town’s obligation to contribute to the plan is established and may be
amended by the Board of Commissioners.
Summary of Significant Accounting Policies. Postemployment expenditures are made
from the General Fund, which is maintained on the modified accrual basis of
accounting. No funds are set aside to pay benefits and administration costs. These
expenditures are paid as they come due.
Annual Other Postemployment Benefits (“OPEB”) Cost and Net OPEB Obligation.
The Town‘s annual OPEB cost (expense) is calculated based on the ARC, an amount
actuarially determined in accordance with the parameters of GASB Statement 45.
The ARC represents a level of funding that, if paid on an ongoing basis, is projected to
cover normal costs each year and amortize any unfunded actuarial liabilities (or
funding excess) over a period not to exceed 30 years. The following table shows the
components of the Town’s annual OPEB cost for the year, the amount actually
contributed to the plan, and changes in the Town’s net OPEB obligation for the
healthcare benefits:
Annual required contribution $ 116,258
Interest on net OPEB obligation 9,112
Adjustment to annual required contribution (7,862)
Annual OPEB cost 117,508
Contributions made (58,800)
Increase in net OPEB obligation 58,708
Net OPEB obligation, beginning of year 288,479
Net OPEB obligation, end of year $ 347,187
The Town’s annual OPEB cost, the percentage of annual OPEB cost contributed to
the plan, and the net OPEB obligation for 2014, 2013, and 2012 were as follows:
For the Percentage of
Year Ended Annual OPEB Annual OPEB Net OPEB
June Cost (APC) Cost Contributed Obligation
2012 $ 128,907 38.1% $ 227,811
2013 117,508 48.3% 288,479
2014 117,508 50.04% 347,187
TOWN OF HILLSBOROUGH, NORTH CAROLINA
NOTES TO FINANCIAL STATEMENTS
June 30, 2014
- 56 -
Note 4. Detail Notes on All Funds (Continued)
B. Liabilities (Continued)
2. Other Postemployment Benefit Obligations (Continued)
Funded Status and Funding Progress. As of December 31, 2011, the most recent
actuarial valuation date, the plan was not funded. The actuarial accrued liability for
benefits and, thus, the UAAL was $1,169,128. The covered payroll (annual payroll of
active employees covered by the plan) was $4,337,051, and the ratio of the UAAL to
the covered payroll was 27.0%. Actuarial valuations of an ongoing plan involve
estimates of the value of reported amounts and assumptions about the probability of
occurrence of events far into the future. Examples include assumptions about future
employment, mortality, and healthcare trends. Amounts determined regarding the
funded status of the plan and the annual required contributions of the employer are
subject to continual revision, as actual results are compared with past expectations
and new estimates are made about the future. The schedule of funding progress,
presented as required supplementary information following the notes to the financial
statements, presents multiyear trend information about whether the actuarial value of
plan assets is increasing or decreasing over time relative to the actuarial accrued
liabilities for benefits.
Actuarial Methods and Assumptions. Projections of benefits for financial reporting
purposes are based on the substantive plan (the plan as understood by the employer
and the plan members) and include the types of benefits provided at the time of each
valuation, and the historical pattern of sharing of benefit costs between the employer
and plan members at that point. The actuarial methods and assumptions used include
techniques that are designed to reduce the effects of short-term volatility in actuarial
accrued liabilities and the actuarial value assets, consistent with the long-term
perspective of the calculations.
In the December 31, 2011 actuarial valuation, the projected unit credit actuarial cost
method was used. The actuarial assumptions included a 4% investment rate of return
(net of administrative expenses), which is the expected long-term investment returns
on the employer’s own investments calculated, based on the funded level of the plan
at the valuation date, and an annual medical cost trend increase of 9.50% to 5.00%
annually. The investment rate included a 3.00% inflation assumption. The assumed
rate of return reflects the fact that no assets are set aside with the Town that are
legally held exclusively for retiree health benefits. The UAAL is being amortized as a
level percentage of pay on an open basis. The remaining amortization period at
December 31, 2011 was 30 years.
TOWN OF HILLSBOROUGH, NORTH CAROLINA
NOTES TO FINANCIAL STATEMENTS
June 30, 2014
- 57 -
Note 4. Detail Notes on All Funds (Continued)
B. Liabilities (Continued)
3. Other Employment Benefit
The Town has also 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 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 Town has no
liability beyond the payment of monthly contributions. The contributions to the Death
Benefit Plan cannot be separated between the post-employment benefit amount and
the other benefit amount. The Town considers these contributions to be immaterial.
4. Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities at June 30, 2014 were as follows:
Governmental Business-Type
Activities Activities Total
Payable to vendors and others $ 530,576 $ 205,036 $ 735,612
Accrued payroll and related
liabilities 185,581 68,190 253,771
Total accounts payable
and accrued liabilities $ 716,157 $ 273,226 $ 989,383
TOWN OF HILLSBOROUGH, NORTH CAROLINA
NOTES TO FINANCIAL STATEMENTS
June 30, 2014
- 58 -
Note 4. Detail Notes on All Funds (Continued)
B. Liabilities (Continued)
5. Deferred Inflows of Resources
Deferred inflows of resources at year end is comprised of the following:
Unavailable Unearned
Revenue Revenue
Taxes receivable $ 158,716 $ -
Prepaid privilege license - 14,115
Grant receivable 234,990 -
Other prepaid receipts - 13,691
$ 393,706 $ 27,806
6. Risk Management
The Town 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 Town participates in three self-funded risk financing pools administered
by the North Carolina League of Municipalities. Through these pools, the Town
obtains general liability coverage of $3 million per occurrence; auto liability coverage
of $2 million per occurrence; property coverage up to the total insurance values of the
property policy; workers’ compensation coverage up to statutory limits; and employee
health coverage with lifetime limit. The property/liability and workers compensation
pools are reinsured through commercial companies for single occurrence claims
against general liability and auto liability in excess of $1 million, property in excess of
$500,000, and $1 million up to statutory limits for workers’ compensation. The health
pool is reinsured for annual employee health claims in excess of $350,000. The
property liability pool has an aggregate limit for the total property losses in a single
year, with the reinsurance limit based upon a percentage of the total insurance values.
The Town carries commercial insurance for all other risks of loss, including property
($47,961,142); general liability ($3 million per occurrence); law enforcement liability
($2 million per occurrence); public employees scheduled bond ($60,000 - includes
$50,000 for the finance director and $10,000 for the deputy tax collector), public
employees blanket bond/crime ($10,000); computer equipment ($290,000); municipal
equipment ($556,174); fine arts ($550,000); animal mortality ($32,800); and public
officials’ liability ($1 million per occurrence). There have been no significant
reductions in insurance coverage in the prior year, and settled claims resulting from
these risks have not exceeded commercial insurance coverage in any of the past
three fiscal years.
TOWN OF HILLSBOROUGH, NORTH CAROLINA
NOTES TO FINANCIAL STATEMENTS
June 30, 2014
- 59 -
Note 4. Detail Notes on All Funds (Continued)
B. Liabilities (Continued)
6. Risk Management (Continued)
The old motor pool facility is in an area of the state that has been mapped and
designated an “A” area (an area close to a river) by the Federal Emergency
Management Agency. Flood coverage on the old, dilapidated facility has been
discontinued since the building is now used for storage only. Other town structures
are designated as “B, C and X” areas (low-risk areas) and are insured for flood
damage through the Interlocal Risk Financing Fund of North Carolina pool for
$5 million per occurrence and aggregate with a $50,000 deductible. There is no
coverage through the Interlocal Fund for structures in any flood zone other than “B, C,
and X.”
The Board carried commercial coverage for Non-profit Organization Directors and
Officers Liability with coverage of $1,000,000 for all claims. The Authority did not have
insurance coverage separate from the Town. Both the Board and the Authority do not
carry flood insurance nor have any employees.
7. Claims and Contingent Liabilities
The Town has elected to pay the direct cost of employment security benefits in lieu of
paying unemployment taxes. A liability for such payments could accrue in the period
following the discharge of an employee.
8. Long-Term Obligations
a. Installment Purchases
Governmental Activities:
Note payable to BB&T, executed April 2008,
in the amount of $1,226,000 for the
construction of a Town Park and
Improvements. The note is payable in 30
semi-annual payments of $40,867 plus
interest at 3.73%, and is secured by such
assets. $ 735,600
Note payable to BB&T, executed March
2010, in the amount of $137,400 for the
purchase of a garbage truck. The note is
payable in ten semi-annual payments of
$14,813 with interest payable at 2.79%,
and is secured by the truck. 29,048
TOWN OF HILLSBOROUGH, NORTH CAROLINA
NOTES TO FINANCIAL STATEMENTS
June 30, 2014
- 60 -
Note 4. Detail Notes on All Funds (Continued)
B. Liabilities (Continued)
8. Long-Term Obligations (Continued)
a. Installment Purchases (Continued)
Governmental Activities (Continued):
Note payable to BB&T, executed in July
2013, in the amount of $438,057 for the
refinance of a note payable for the
purchase of land for municipal operations.
The note is payable in 21 semi-annual
payments of $20,860 plus interest at
2.22%, and is secured by land. The
previous note payable on the land for
municipal operations included interest at
3.92%. $ 396,337
Note payable to BB&T, executed in July
2013, in the amount of $839,086 for the
refinance of a note payable for the
purchase of real property and a building
to be used as the fleet maintenance
facility. The note is payable in 23 semi-
annual payments of $36,482 plus interest
at 2.44%, and is secured by real property
and a building. The previous note
payable on the fleet maintenance facility
included interest at 3.79%. 766,122
Note payable to SunTrust, executed August
2010, in the amount of $107,000 for the
purchase of a brush truck. The note is
payable in five annual payments of
$23,007 with interest payable at 2.5%,
and is secured by the truck. 44,321
Note payable to BB&T, executed May 2012,
in the amount of $227,000 for the
purchase of a garbage truck. The note is
payable in six semi-annual payments of
$23,634 with interest payable at 1.48%,
and is secured by the truck. 138,203
TOWN OF HILLSBOROUGH, NORTH CAROLINA
NOTES TO FINANCIAL STATEMENTS
June 30, 2014
- 61 -
Note 4. Detail Notes on All Funds (Continued)
B. Liabilities (Continued)
8. Long-Term Obligations (Continued)
a. Installment Purchases (Continued)
Governmental Activities (Continued):
Note payable to SunTrust, executed
November 2011, in the amount of
$812,021 for the purchase of a fire truck.
The note is payable in 14 semi-annual
payments of $63,027 with interest
payable at 2.185%, and is secured by the
truck. $ 537,455
Note payable to BB&T, executed August
2013, in the amount of $1,450,000 for the
purchase of land for Riverwalk Phases II
and III. The note is payable in 20 semi-
annual payments of $72,500 plus interest
and matures in August 2023. Interest is
payable at 2.35% and the note payable is
secured by land. 1,377,500
4,024,586
Less current portion 494,894
$ 3,529,692
The future minimum payments on the notes payable as of June 30, 2014 are
as follows:
Fiscal Year
Ending June 30, Principal Interest Total
2015 $ 494,894 $ 94,403 $ 589,297
2016 526,107 87,487 613,594
2017 506,909 74,515 581,424
2018 462,768 62,226 524,994
2019 465,434 50,396 515,830
2020 - 2024 1,531,990 105,622 1,637,612
2025 36,484 445 36,929
$ 4,024,586 $ 475,094 $ 4,499,680
TOWN OF HILLSBOROUGH, NORTH CAROLINA
NOTES TO FINANCIAL STATEMENTS
June 30, 2014
- 62 -
Note 4. Detail Notes on All Funds (Continued)
B. Liabilities (Continued)
8. Long-Term Obligations (Continued)
a. Installment Purchases (Continued)
Business-Type Activities:
Enterprise Fund - Water/Sewer Fund
Note payable to SunTrust, executed August
2010, in the amount of $450,000 for a
sewer main rehabilitation project. The
note is payable in ten semi-annual
payments of $47,724 with interest
payable at 2.2%, and is secured by the
property. $ 140,030
Note payable to BB&T, executed April 2010,
in the amount of $750,000 for the
purchase and installation of water meters.
The note is payable in ten semi-annual
payments of $80,643 with interest
payable at 2.69%, and is secured by the
water meters. 158,258
Note payable to BB&T, executed May 2009,
in the amount of $5,525,000 for the
advance refunding of debt of the 1998
Water serial bonds and the Cedar Grove
Reservoir installment debt. The note was
payable in 20 semi-annual payments of
varying amounts with interest payable at
3.69%. The note was modified on
July 15, 2013. The modifications
separated the debt into two tranches.
The first tranche in the amount of
$1,939,000 has varying annual principal
payments through October 2017 with
interest at 1.66%. The second tranche in
the amount of $1,469,000 has varying
annual principal payments through
October 2019 with interest at 1.88%. The
note is secured by improvements (a). 2,800,000
TOWN OF HILLSBOROUGH, NORTH CAROLINA
NOTES TO FINANCIAL STATEMENTS
June 30, 2014
- 63 -
Note 4. Detail Notes on All Funds (Continued)
B. Liabilities (Continued)
8. Long-Term Obligations (Continued)
a. Installment Purchases (Continued)
Business-Type Activities (Continued):
Enterprise Fund - Water/Sewer Fund (Continued)
Note payable to BB&T, executed March
2012, in the amount of $1,051,273 for the
construction of water tanks and lines.
The note is payable in 20 semi-annual
payments of $52,564 plus interest at
2.26%, and is secured by the water tanks
and lines. $ 841,019
3,939,307
Less current portion 969,219
$ 2,970,088
The long-term debt requirements to maturity for the Enterprise Fund are as
follows:
Fiscal Year
Ending June 30, Principal Interest Total
2015 $ 969,219 $ 74,638 $ 1,043,857
2016 768,323 51,824 820,147
2017 723,127 38,292 761,419
2018 599,127 26,293 625,420
2019 330,127 17,539 347,666
2020 - 2022 549,384 16,873 566,257
$ 3,939,307 $ 225,459 $ 4,164,766
a) The provisions of this loan agreement contain certain financial covenants
related to the maintenance of fund balance. At June 30, 2014, the Town
was in compliance with such covenants.
TOWN OF HILLSBOROUGH, NORTH CAROLINA
NOTES TO FINANCIAL STATEMENTS
June 30, 2014
- 64 -
Note 4. Detail Notes on All Funds (Continued)
B. Liabilities (Continued)
8. Long-Term Obligations (Continued)
b. General Obligation Indebtedness
The Town’s legal debt margin at June 30, 2014 was $58,836,614.
c. Revolving Loans Payable
On May 7, 2002, the Town was approved for a maximum loan amount of
$1,802,952 from the U.S. Environmental Protection Agency passed through the
North Carolina Department of Environmental and Natural Resources under the
Drinking Water State Revolving Fund Program. The loan proceeds were used to
upgrade the water plant. The loan is repayable in equal principal payments of
$76,222 plus interest of 2.66% through fiscal year ending 2026. The total amount
outstanding at June 30, 2014 was $914,669.
Annual debt service requirements to maturity for this Revolving Loan Payable are
as follows:
Fiscal Year Ending Business-Type Activities
June 30, Principal Interest Total
2015 $ 76,222 $ 24,330 $ 100,552
2016 76,222 22,303 98,525
2017 76,222 20,275 96,497
2018 76,222 18,248 94,470
2019 76,222 16,220 92,442
2020 - 2024 381,112 50,688 431,800
2025 - 2026 152,447 6,083 158,530
$ 914,669 $ 158,147 $ 1,072,816
On October 6, 2011, the Town was approved for a maximum loan amount of
$18,894,640 from the U.S. Environmental Protection Agency passed through the
North Carolina Department of Environmental and Natural Resources under the
Clean Water State Revolving Fund. The loan proceeds are being used for the
Wastewater Treatment Plant Upgrade and Expansion Project. Project-to-date
drawdowns were $17,729,408 at June 30, 2014. Repayment terms will be set
upon the completion of the project, which is expected to be completed in fiscal
2015. As such, this amount is included in long-term liabilities.
TOWN OF HILLSBOROUGH, NORTH CAROLINA
NOTES TO FINANCIAL STATEMENTS
June 30, 2014
- 65 -
Note 4. Detail Notes on All Funds (Continued)
B. Liabilities (Continued)
8. Long-Term Obligations (Continued)
d. Changes in Long-Term Debt
Current
Balance Portion of
Balance June 30, Long-Term
July 1, 2013 Increases Decreases 2014 Liabilities
Governmental activities:
Installment purchases $ 3,084,791 $ 2,727,143 $ 1,787,348 $ 4,024,586 $ 494,894
Compensated absences 220,946 126,303 128,414 218,835 126,303
Other postemployment
benefits 168,057 69,685 34,870 202,872 -
Net pension obligation
(asset) (23,548) (49,658) (53,533) (19,673) -
Reclassification of net
pension asset 23,548 49,658 53,533 19,673 -
$ 3,473,794 $ 2,923,131 $ 1,950,632 $ 4,446,293 $ 621,197
Business-type activities:
Installment purchases $ 4,914,368 $ - $ 975,061 $ 3,939,307 $ 969,219
Less deferred amount
for loss on defeasance (69,423) - (15,146) (54,277) (15,147)
Revolving loans payable 16,247,369 2,472,930 76,222 18,644,077 76,222
Other postemployment
benefits 120,422 47,823 23,930 144,315 -
Compensated absences 172,893 145,216 139,987 178,122 145,216
$ 21,385,629 $ 2,665,969 $ 1,200,054 $ 22,851,544 $ 1,175,510
Compensated absences for governmental activities have typically been liquidated in
the General Fund.
e. Refunding
In July 2013, the Town refinanced two installment purchase agreements with new
debt with BB&T. The refinance amount approximated the net carrying amount of the
old debt. This refinance was undertaken to reduce total debt service payments by
$65,265 and resulted in an economic gain of $60,798.
f. Special Assessment Debt
In October 2013, the Town issued $4,630,000 of Special Assessment Revenue
Bonds to finance the construction of public infrastructure in the Waterstone District.
The Town is in no manner obligated to repay this special assessment debt and
functions only as an agent for the property owners by remitting collections of special
assessments to the Trustee. At June 30, 2014, $4,215,000 of special assessment
debt remained outstanding.
TOWN OF HILLSBOROUGH, NORTH CAROLINA
NOTES TO FINANCIAL STATEMENTS
June 30, 2014
- 66 -
Note 4. Detail Notes on All Funds (Continued)
C. Interfund Balances and Activity
Transfers to/from other funds:
Transfers to/from other funds at June 30, 2014 consist of the following:
From the General Fund to the Riverwalk
Phase III Fund for partial funding of
construction costs $ 43,000
From the General Capital Reserve Fund to
the General Fund for debt service payments (126,054)
$ (83,054)
D. Net Investment in Capital Assets
Governmental Business-type
Capital assets $ 14,504,644 $ 49,452,191
Less: related debt
Installment purchases (4,024,586) (3,885,030)
Revolving loans payable - (18,644,077)
Add: unexpended debt proceeds 444,573 187,209
Net investment in capital assets $ 10,924,631 $ 27,110,293
E. Fund Balance
The following schedule provides management and citizens with information on the portion
of General Fund fund balance that is available for appropriation.
Total fund balance General Fund $ 6,117,466
Less:
Prepaid items 72,156
Stabilization by state statute 920,240
Streets - Powell Bill 190,494
Appropriated fund balance in 2014 budget 782,995
Working capital/fund balance policy 4,151,581
Remaining fund balance General Fund $ -
The outstanding encumbrances are amounts needed to pay any commitments related to
purchase orders and contracts that remain unperformed at year end.
General
Fund
Encumbrances $ 92,333
TOWN OF HILLSBOROUGH, NORTH CAROLINA
NOTES TO FINANCIAL STATEMENTS
June 30, 2014
- 67 -
Note 5. Jointly Governed Organization
The Town, in conjunction with seven counties and 37 other municipalities, established the
Triangle J Council of Governments (the “Council”). The participating governments
established the Council to coordinate various funding received from federal and state
agencies. Each participating government appoints one member to the Council’s governing
board. The Town paid membership fees of $2,433 to the Council during the fiscal year
ended June 30, 2014.
Note 6. Significant Effects of Subsequent Events
In August 2014, the Town entered into a note payable with BB&T in the amount of
$599,000 for the purchase of a document management system, garbage truck and leaf
truck. The note is payable in ten semi-annual payments of $62,257, which includes
interest at 1.5% and matures in July 2019. The note payable is secured by the related
equipment.
In August 2014, the Town entered into a note payable with BB&T in the amount of
$615,368 for the purchase of land and buildings. The note is payable in 30 semi-annual
payments of $20,512 plus interest at 2.88% and matures in August 2029. The note
payable is secured by certain real property.
- 68 -
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- 69 -
REQUIRED SUPPLEMENTARY FINANCIAL DATA
This section contains additional information required by generally accepted accounting principles.
Schedule of Funding Progress for the Law Enforcement Officers’ Special Separation
Allowance.
Schedule of Employer Contributions for the Law Enforcement Officers’ Special Separation
Allowance.
Notes to the Required Schedules for the Law Enforcement Officers’ Special Separation
Allowance.
Schedule of Funding Progress for the Other Postemployment Benefits.
Schedule of Employer Contributions for the Other Postemployment Benefits.
Notes to the Required Schedules for the Other Postemployment Benefits.
- 70 -
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Exhibit A-1
Actuarial
Accrued UAAL as a
Actuarial Liability (AAL) - Unfunded Percentage
Actuarial Value of Projected AAL Funded Covered of Covered
Valuation Assets Unit Credit (UAAL) Ratio Payroll Payroll
Date (a) (b) (b) - (a)(a) (b)(c)((b) - (a)) (c)
12/31/2004 -$ 341,964$ 341,964$ 0.00% 977,961$ 34.97%
12/31/2005 - 428,649 428,649 0.00% 1,104,377 38.81%
12/31/2006 - 429,075 429,075 0.00% 1,229,480 34.90%
12/31/2007 - 478,258 478,258 0.00% 1,275,715 37.49%
12/31/2008 - 484,358 484,358 0.00% 1,466,263 33.03%
12/31/2009 - 515,994 515,994 0.00% 1,373,891 37.56%
12/31/2010 - 460,998 460,998 0.00% 1,371,368 33.62%
12/31/2011 - 431,911 431,911 0.00% 1,358,876 31.78%
12/31/2012 - 417,455 417,455 0.00% 1,381,255 30.22%
12/31/2013 - 405,686 405,686 0.00% 1,397,887 29.02%
TOWN OF HILLSBOROUGH, NORTH CAROLINA
LAW ENFORCEMENT OFFICERS' SPECIAL SEPARATION ALLOWANCE
REQUIRED SUPPLEMENTARY INFORMATION
SCHEDULE OF FUNDING PROGRESS
- 71 -
Exhibit A-2
Year Annual Annual
Ended Required Percentage
June 30 Contribution Contributed
2005 33,740$ 84.37%
2006 37,461 130.81%
2007 41,898 129.86%
2008 44,968 166.93%
2009 46,154 186.67%
2010 50,211 171.59%
2011 54,616 127.66%
2012 52,909 120.35%
2013 52,117 92.35%
2014 52,791 94.07%
NOTES TO THE REQUIRED SCHEDULES
Valuation date December 31, 2013
Actuarial cost method Projected unit credit
Amortization method Level dollar closed
Remaining amortization period 17 years
Asset valuation method Market value
Actuarial assumptions:
Investment rate of return * 5.00%
Projected salary increases * 4.25% - 7.85%
* Includes inflation at: 3.00%
Cost of living adjustments N/A
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:
TOWN OF HILLSBOROUGH, NORTH CAROLINA
LAW ENFORCEMENT OFFICERS' SPECIAL SEPARATION ALLOWANCE
REQUIRED SUPPLEMENTARY INFORMATION
SCHEDULE OF EMPLOYER CONTRIBUTIONS
- 72 -
Exhibit B-1
Actuarial
Accrued UAAL as a
Actuarial Liability (AAL) -Unfunded Percentage
Actuarial Value of Projected AAL Funded Covered of Covered
Valuation Assets Unit Credit (UAAL) Ratio Payroll Payroll
Date (a) (b) (b) - (a)(a) (b)(c)((b) - (a)) (c)
12/31/2008 -$ 1,167,518$ 1,167,518$ 0.00% 4,590,807$ 25.4%
12/31/2011 - 1,169,128 1,169,128 0.00% 4,337,051 27.0%
TOWN OF HILLSBOROUGH, NORTH CAROLINA
SCHEDULE OF FUNDING PROGRESS
REQUIRED SUPPLEMENTARY INFORMATION
OTHER POSTEMPLOYMENT BENEFITS
- 73 -
Exhibit B-2
Year Annual Annual
Ended Required Percentage
June 30 Contribution Contributed
2011 119,002$ 38.34%
2012 128,907 38.10%
2013 117,508 48.37%
2014 117,508 50.04%
NOTES TO THE REQUIRED SCHEDULES
Valuation date December 31, 2011
Actuarial cost method Projected unit credit
Amortization method Level percent of pay, open
Remaining amortization period 30 years
Asset valuation method Market value
Actuarial assumptions:
Investment rate of return * 4.00%
Medical cost trend rate 9.5% - 5.0%
Year of ultimate trend rate 2018
* Includes inflation at: 3.00%
TOWN OF HILLSBOROUGH, NORTH CAROLINA
OTHER POSTEMPLOYMENT BENEFITS
REQUIRED SUPPLEMENTARY INFORMATION
SCHEDULE OF EMPLOYER CONTRIBUTIONS
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:
- 74 -
- 75 -
SUPPLEMENTARY INFORMATION
- 76 -
THIS PAGE LEFT INTENTIONALLY BLANK.
Schedule 1
Page 1 of 4
2013
Variance
Positive
Budget Actual (Negative)Actual
Revenues
General revenues
Ad valorem taxes
Current 5,095,000$ 5,354,006$ 259,006$ 5,083,545$
Prior 20,000 35,968 15,968 30,743
Penalties and interest 17,000 39,140 22,140 21,181
5,132,000 5,429,114 297,114 5,135,469
Other taxes and licenses
Local option sales tax 988,284 1,114,306 126,022 1,072,463
Gross receipts on short-term rental property 2,500 7,117 4,617 9,535
Privilege licenses 35,000 43,891 8,891 96,469
Motor vehicle license fees 43,000 31,420 (11,580) 47,054
Solid waste disposal 3,700 2,451 (1,249) 3,904
1,072,484 1,199,185 126,701 1,229,425
Unrestricted intergovernmental revenues
Franchise tax 330,000 399,167 69,167 376,653
Beer and wine tax 25,000 27,536 2,536 25,190
Food and beverage tax 259,664 315,932 56,268 277,648
Occupancy tax 45,300 66,555 21,255 54,910
659,964 809,190 149,226 734,401
Restricted intergovernmental revenues
Powell Bill 165,000 182,284 17,284 179,248
Local grants - 129,998 129,998 -
Other 39,814 73,890 34,076 30,525
204,814 386,172 181,358 209,773
Investment earnings 2,500 1,854 (646) 3,488
Other general revenues 16,545 48,337 31,792 34,079
Total general revenues 7,088,307 7,873,852 785,545 7,346,635
Functionally related revenues
Use and rental fees
Zoning permits 30,000 41,196 11,196 240,806
Cable franchise 50,000 51,620 1,620 53,493
Time Warner Cable PEG fees 35,000 34,093 (907) 32,266
Fire inspection fees 8,000 13,893 5,893 11,426
Total functionally related revenues 123,000 140,802 17,802 337,991
Total revenues 7,211,307 8,014,654 803,347 7,684,626
2014
TOWN OF HILLSBOROUGH, NORTH CAROLINA
GENERAL FUND
SCHEDULE OF REVENUES, EXPENDITURES AND
CHANGES IN FUND BALANCE - BUDGET AND ACTUAL
Year Ended June 30, 2014 with Comparative
Actual Amounts for Year Ended June 30, 2013
- 77 -
Schedule 1
Page 2 of 4
2013
Variance
Positive
Budget Actual (Negative)Actual
2014
TOWN OF HILLSBOROUGH, NORTH CAROLINA
GENERAL FUND
SCHEDULE OF REVENUES, EXPENDITURES AND
CHANGES IN FUND BALANCE - BUDGET AND ACTUAL
Year Ended June 30, 2014 with Comparative
Actual Amounts for Year Ended June 30, 2013
Expenditures
General government
Governing body
Personnel services $ 38,836$ $ 41,847$
Other services and charges 166,903 196,720
Reimbursement from enterprise fund (115,477) (109,070)
165,883 90,262 75,621 129,497
Ruffin-Roulhac
Other services and charges 62,054 40,703
Reimbursement from enterprise fund (24,606) (30,196)
39,144 37,448 1,696 10,507
Administration
Personnel services 446,141 373,107
Other services and charges 347,948 291,154
Reimbursement from enterprise fund (386,041) (376,114)
475,071 408,048 67,023 288,147
Finance
Personnel services 366,490 314,617
Other services and charges 100,519 90,970
Reimbursement from enterprise fund (201,252) (193,842)
271,753 265,757 5,996 211,745
Planning
Personnel services 288,807 267,187
Other services and charges 96,578 55,095
424,359 385,385 38,974 322,282
Motor pool
Personnel services 227,859 221,052
Other services and charges 169,135 154,035
Debt service payments 115,563 104,744
Reimbursement from enterprise fund (229,799) (214,751)
295,542 282,758 12,784 265,080
Total general government 1,671,752 1,469,658 202,094 1,227,258
Public safety
Police department
Personnel services 2,067,837 1,958,269
Other services and charges 277,121 212,884
Capital outlay 84,818 16,967
2,556,117 2,429,776 126,341 2,188,120
- 78 -
Schedule 1
Page 3 of 4
2013
Variance
Positive
Budget Actual (Negative)Actual
2014
TOWN OF HILLSBOROUGH, NORTH CAROLINA
GENERAL FUND
SCHEDULE OF REVENUES, EXPENDITURES AND
CHANGES IN FUND BALANCE - BUDGET AND ACTUAL
Year Ended June 30, 2014 with Comparative
Actual Amounts for Year Ended June 30, 2013
Fire inspections/code enforcement
Personnel services $ 108,374$ $ 106,157$
Other services and charges 18,593 12,512
Capital outlay 7,845 -
Debt service payments 126,054 126,053
265,452 260,866 4,586 244,722
Safety
Personnel services 81,105 77,781
Other services and charges 148,020 100,247
Reimbursement from enterprise fund (102,377) (92,610)
143,444 126,748 16,696 85,418
Fire protection
Other services and charges 764,102 742,120
770,900 764,102 6,798 742,120
Total public safety 3,735,913 3,581,492 154,421 3,260,380
Transportation
Street department/Powell Bill
Personnel services 196,344 183,372
Other services and charges 212,535 242,541
Capital outlay 442,623 367,743
1,082,226 851,502 230,724 793,656
Total transportation 1,082,226 851,502 230,724 793,656
Environmental protection
Sanitation department
Personnel services 225,899 205,217
Other services and charges 340,847 144,838
Capital outlay 1,380 -
Debt service payments 99,902 113,681
591,218 668,028 (76,810) 463,736
Cemetery
Other services and charges 22,715 18,255
Capital outlay 69,597 -
99,177 92,312 6,865 18,255
Stormwater
Personnel services 85,945 43,534
Other services and charges 54,275 71,902
Capital outlay 20,762 -
Reimbursement from enterprise fund (15,210) (11,866)
152,287 145,772 6,515 103,570
Total environmental protection 842,682 906,112 (63,430) 585,561
- 79 -
Schedule 1
Page 4 of 4
2013
Variance
Positive
Budget Actual (Negative)Actual
2014
TOWN OF HILLSBOROUGH, NORTH CAROLINA
GENERAL FUND
SCHEDULE OF REVENUES, EXPENDITURES AND
CHANGES IN FUND BALANCE - BUDGET AND ACTUAL
Year Ended June 30, 2014 with Comparative
Actual Amounts for Year Ended June 30, 2013
Economic and physical development
Tourism
Other services and charges $ 367,389$ $ 485,977$
275,300 367,389 (92,089) 485,977
Total economic and physical
development 275,300 367,389 (92,089) 485,977
Community activities and projects
Contributions 28,420 28,420
Other services and charges 90,831 36,458
Debt service payments 59,328 59,527
Total community activities and projects 908,524 178,579 729,945 124,405
Parks and recreation
Other services and charges 55,850 36,267
Debt service payments 192,322 114,506
Total parks and recreation 287,583 248,172 39,411 150,773
Total expenditures 8,803,980 7,602,904 1,201,076 6,628,010
Revenues over (under) expenditures (1,592,673) 411,750 2,004,423 1,056,616
Other financing sources (uses)
Transfer to Nash Street Sidewalk Fund - - - (7,246)
Transfer to Riverwalk Phase III Fund (43,000) (43,000) - (238,381)
Transfer to Riverwalk - CMAC Fund - - - (124,000)
Transfer from General Capital Reserve Fund 126,054 126,054 - -
Installment purchase obligations issued 615,370 - (615,370) -
Proceeds of refunding installment purchases - 1,277,143 1,277,143 -
Debt service - principal - (1,256,353) (1,256,353) -
Total other financing sources (uses) 698,424 103,844 (594,580) (369,627)
Appropriated fund balance 894,249 - (894,249) -
Net change in fund balance -$ 515,594 515,594$ 686,989
Fund balance, beginning 5,601,872 4,914,883
Fund balance, ending 6,117,466$ 5,601,872$
- 80 -
Schedule 2
Variance
Project Prior Current Total Positive
Authorization Years Year To Date (Negative)
Revenues
Restricted intergovernmental
revenues
State grants 1,055,766$ 432,000$ 382,544$ 814,544$ (241,222)$
Local grants 20,000 10,000 - 10,000 (10,000)
Interest earned - - 234 234 234
Total revenues 1,075,766 442,000 382,778 824,778 (250,988)
Expenditures
Land acquisition 959,369 959,368 - 959,368 1
Legal and administrative 164,826 7,107 126,457 133,564 31,262
Design 346,455 314,816 27,523 342,339 4,116
Construction 1,477,843 - 1,382,195 1,382,195 95,648
Contingency 157,915 - - - 157,915
Total expenditures 3,106,408 1,281,291 1,536,175 2,817,466 288,942
Revenues under expenditures (2,030,642) (839,291) (1,153,397) (1,992,688) 37,954
Other financing sources
Transfer from General Fund 820,705 818,847 - 818,847 (1,858)
Installment purchase obligation
issued 1,209,937 - 1,210,000 1,210,000 63
Total other financing sources 2,030,642 818,847 1,210,000 2,028,847 (1,795)
Net change in fund balance -$ (20,444)$ 56,603 36,159$ 36,159$
Fund deficit, beginning (20,444)
Fund balance, ending 36,159$
TOWN OF HILLSBOROUGH, NORTH CAROLINA
MAJOR CAPITAL PROJECT FUND
SCHEDULE OF REVENUES AND EXPENDITURES COMPARED WITH
BUDGET - RIVERWALK PHASE II CAPITAL PROJECT FUND
From Project Inception and for the Year Ended June 30, 2014
Actual
- 81 -
Schedule 3
Variance
Project Prior Current Total Positive
Authorization Years Year To Date (Negative)
Revenues
Investment earnings -$ 107$ -$ 107$ 107$
Total revenues - 107 - 107 107
Expenditures
Capital equipment 919,000 911,914 - 911,914 7,086
Fleet maintenance facility 1,117,258 1,117,258 - 1,117,258 -
Garbage truck 250,000 224,459 52 224,511 25,489
Municipal operations site 655,623 655,622 - 655,622 1
Construction 4,630,000 - 1,445,207 1,445,207 3,184,793
Total expenditures 7,571,881 2,909,253 1,445,259 4,354,512 3,217,369
Revenues under
expenditures (7,571,881) (2,909,146) (1,445,259) (4,354,405) 3,217,476
Other financing sources
Installment purchase obligations
issued 2,861,600 2,838,621 - 2,838,621 (22,979)
Contribution from property owners 4,630,000 - 1,445,207 1,445,207 (3,184,793)
Transfer from General Fund 80,281 77,647 - 77,647 (2,634)
Total other financing
sources 7,571,881 2,916,268 1,445,207 4,361,475 (3,210,406)
Net change in fund
balance -$ 7,122$ (52) 7,070$ 7,070$
Fund balance, beginning 7,122
Fund balance, ending 7,070
Amounts reported for Revenue, Expenditures and Changes in Fund Balance
are different for the Budgeted/Actual Statement due to consolidation of the
74
(126,054)
716,054
597,144$
General Capital Reserve Fund
Transfers out - Capital Reserve Fund
(Consolidated General Capital Projects Fund)
TOWN OF HILLSBOROUGH, NORTH CAROLINA
MAJOR GENERAL CAPITAL PROJECTS FUND
SCHEDULE OF REVENUES AND EXPENDITURES
COMPARED WITH BUDGET
From Project Inception and for the Year Ended June 30, 2014
Actual
Interest on investments
Fund balance, beginning (Capital Reserve Fund)
Fund balance, ending
- 82 -
Schedule 4
Variance
Project Prior Current Total Positive
Authorization Years Year To Date (Negative)
Revenues
Capital contributions 1,105,000$ 1,105,000$ -$ 1,105,000$ -$
Interest on investments 13,711 14,085 74 14,159 448
Total revenues 1,118,711 1,119,085 74 1,119,159 448
Expenditures 589,626 - - - 589,626
Revenues over
expenditures 529,085 1,119,085 74 1,119,159 590,074
Other financing uses
Transfer to General Fund (126,054) - (126,054) (126,054) -
Transfer to Water Sewer
Capital Reserve Fund (403,031) (403,031) - (403,031) -
Total other financing
sources (529,085) (403,031) (126,054) (529,085) -
Net change in fund
balance -$ 716,054$ (125,980) 590,074$ 590,074$
Fund balance, beginning 716,054
Fund balance, ending 590,074$
BUDGET- GENERAL CAPITAL RESERVE FUND
From Project Inception and for the Year Ended June 30, 2014
Actual
TOWN OF HILLSBOROUGH, NORTH CAROLINA
GENERAL CAPITAL RESERVE FUND
SCHEDULE OF REVENUES AND EXPENDITURES COMPARED WITH
- 83 -
Schedule 5
Riverwalk Riverwalk
Phase III CMAQ Total
Capital Capital Nonmajor
Project Project Governmental
ASSETS Fund Fund Funds
Cash and investments -$ 106,105$ 106,105$
Restricted assets:
Cash and investments 221,337 - 221,337
Total assets 221,337$ 106,105$ 327,442$
LIABILITIES, DEFERRED INFLOWS OF
RESOURCES AND FUND BALANCES
LIABILITIES
Accounts payable and accrued liabilities 3,106$ -$ 3,106$
Total liabilities 3,106 - 3,106
FUND BALANCES
Restricted for:
Capital projects 218,231 - 218,231
Committed for:
Capital projects - 106,105 106,105
Total fund balances 218,231 106,105 324,336
Total liabilities and fund balances 221,337$ 106,105$ 327,442$
TOWN OF HILLSBOROUGH, NORTH CAROLINA
COMBINING BALANCE SHEET
NONMAJOR GOVERNMENTAL FUNDS
June 30, 2014
- 84 -
Schedule 6
Riverwalk Riverwalk
Phase III CMAQ Total
Capital Capital Nonmajor
Project Project Governmental
Fund Fund Funds
Revenues
Investment earnings 47$ -$ 47$
Total revenues 47 - 47
Expenditures
Current
Parks and recreation 65,236 17,895 83,131
Total expenditures 65,236 17,895 83,131
Revenues under expenditures (65,189) (17,895) (83,084)
Other financing sources
Installment purchase obligations issued 240,000 - 240,000
Transfer from General Fund 43,000 - 43,000
Total other financing sources 283,000 - 283,000
Net change in fund balances 217,811 (17,895) 199,916
Fund balances, beginning 420 124,000 124,420
Fund balances, ending 218,231$ 106,105$ 324,336$
TOWN OF HILLSBOROUGH, NORTH CAROLINA
COMBINING STATEMENT OF REVENUES,
EXPENDITURES AND CHANGES IN FUND BALANCES
NONMAJOR GOVERNMENTAL FUNDS
Year Ended June 30, 2014
- 85 -
Schedule 7
Variance
Project Prior Current Total Positive
Authorization Years Year To Date (Negative)
Revenues
Interest on investments -$ -$ 47$ 47$ 47$
Total revenues - - 47 47 47
Expenditures
Land acquisition 232,381 232,381 - 232,381 -
Legal and administrative 3,000 2,830 - 2,830 170
Engineering 3,000 2,750 - 2,750 250
Design 58,000 - 44,036 44,036 13,964
Construction 201,000 - 21,200 21,200 179,800
Contingency 24,000 - - - 24,000
Total expenditures 521,381 237,961 65,236 303,197 218,184
Revenues under
expenditures (521,381) (237,961) (65,189) (303,150) 218,231
Other financing sources
Installment purchase obligations
issued 240,000 - 240,000 240,000 -
Transfer from General Fund 281,381 238,381 43,000 281,381 -
Total other financing sources 521,381 238,381 283,000 521,381 -
Net change in fund balance -$ 420$ 217,811 218,231$ 218,231$
Fund balance, beginning 420
Fund balance, ending 218,231$
TOWN OF HILLSBOROUGH, NORTH CAROLINA
NONMAJOR CAPITAL PROJECT FUND
SCHEDULE OF REVENUES AND EXPENDITURES COMPARED WITH
BUDGET- RIVERWALK PHASE III CAPITAL PROJECT FUND
From Project Inception and for the Year Ended June 30, 2014
Actual
- 86 -
Schedule 8
Variance
Project Prior Current Total Positive
Authorization Years Year To Date (Negative)
Revenues
Restricted intergovernmental
revenues
State grants 25,000$ -$ -$ -$ (25,000)$
Federal grants 496,000 - - - (496,000)
Capital contributions 5,000 - - - (5,000)
Total revenues 526,000 - - - (526,000)
Expenditures
Design 101,000 - 17,895 17,895 (83,105)
Construction 549,000 - - - (549,000)
Total expenditures 650,000 - 17,895 17,895 (632,105)
Revenues under
expenditures (124,000) - (17,895) (17,895) 106,105
Other financing sources
Transfer from General Fund 124,000 124,000 - 124,000 -
Net change in fund
balance -$ 124,000$ (17,895) 106,105$ 106,105$
Fund balance, beginning 124,000
Fund balance, ending 106,105$
TOWN OF HILLSBOROUGH, NORTH CAROLINA
NONMAJOR CAPITAL PROJECT FUND
SCHEDULE OF REVENUES AND EXPENDITURES COMPARED WITH
BUDGET- RIVERWALK CMAQ CAPITAL PROJECT FUND
From Project Inception and for the Year Ended June 30, 2014
Actual
- 87 -
Schedule 9
2013
Variance
Positive
Budget Actual (Negative)Actual
Revenues
Operating revenues
Water charges 3,825,600$ 3,880,029$ 54,429$ 3,963,645$
Sewer charges 3,302,547 3,619,154 316,607 3,239,341
Other receipts 1,478,499 1,621,424 142,925 353,760
8,606,646 9,120,607 513,961 7,556,746
Nonoperating revenues
Interest on investments 3,000 2,379 (621) 3,419
Total revenues 8,609,646$ 9,122,986$ 513,340$ 7,560,165$
Year Ended June 30, 2014 with Comparative
2014
Actual Amounts for Year Ended June 30, 2013
TOWN OF HILLSBOROUGH, NORTH CAROLINA
ENTERPRISE FUND
SCHEDULE OF REVENUES COMPARED WITH
BUDGET (NON-GAAP) - WATER AND SEWER FUND
- 88 -
Schedule 10
Page 1 of 3
2013
Variance
Positive
Budget Actual (Negative)Actual
Expenditures
Engineering
Personnel services $ 377,345$ $ 361,159$
Other services and charges 1,134,402 1,080,693
Total engineering 1,552,696 1,511,747 40,949 1,441,852
Billing and collection
Personnel services 330,383 318,267
Other services and charges 105,323 93,720
Repairs and maintenance 2,967 515
Debt service payments 161,286 161,286
Total billing and collection 627,949 599,959 27,990 573,788
Water plant
Personnel services 494,037 468,419
Other services and charges 293,697 343,049
Repairs and maintenance 25,524 44,878
Debt service payments 118,949 121,285
Total water plant 1,094,460 932,207 162,253 977,631
Water distribution
Personnel services 376,167 347,758
Other services and charges 234,929 217,456
Repairs and maintenance 17,870 18,548
Capital outlay 48,222 109,023
Debt service payments 25,183 25,658
Total water distribution 963,244 702,371 260,873 718,443
Wastewater collection
Personnel services 375,722 346,131
Other services and charges 291,226 237,423
Repairs and maintenance 8,268 12,502
Capital outlay 24,579 75,051
Debt service payments 197,306 216,460
Total wastewater collection 977,848 897,101 80,747 887,567
2014
TOWN OF HILLSBOROUGH, NORTH CAROLINA
ENTERPRISE FUND
SCHEDULE OF EXPENDITURES COMPARED WITH
BUDGET (NON-GAAP) - WATER AND SEWER FUND
Year Ended June 30, 2014 with Comparative
Actual Amounts for Year Ended June 30, 2013
- 89 -
Schedule 10
Page 2 of 3
2013
Variance
Positive
Budget Actual (Negative)Actual
2014
TOWN OF HILLSBOROUGH, NORTH CAROLINA
ENTERPRISE FUND
SCHEDULE OF EXPENDITURES COMPARED WITH
BUDGET (NON-GAAP) - WATER AND SEWER FUND
Year Ended June 30, 2014 with Comparative
Actual Amounts for Year Ended June 30, 2013
Wastewater plant
Personnel services $ 513,206$ $ 523,495$
Other services and charges 402,335 451,868
Repairs and maintenance 27,680 20,115
Capital outlay - 23,474
Debt service payments - 14,700
Total wastewater plant 1,072,659 943,221 129,438 1,033,652
Reservoir
Other services and charges 17,958 24,359
Repairs and maintenance 11,097 12,357
Debt service payments 678,604 714,532
Total reservoir 764,057 707,659 56,398 751,248
Total expenditures 7,052,913 6,294,265 758,648 6,384,181
Revenues over expenditures 1,556,733 2,828,721 1,271,988 1,175,984
Other financing uses
Transfer to Water and Sewer Capital Reserve
Fund (2,020,699) (2,020,699) - (515,547)
Transfer from Water and Sewer Capital Reserve
Fund 338,128 - (338,128) -
Transfer to Water and Sewer Capital Projects
Fund (822,063) (483,935) 338,128 (432,000)
Total other financing uses (2,504,634) (2,504,634) - (947,547)
Excess of revenues and other
uses over (under) expenditures
and other uses (947,901) 324,087 1,271,988 228,437
Appropriated fund balance 947,901 - (947,901) -
Excess of revenues and other
uses over expenditures and other
uses -$ 324,087$ 324,087$ 228,437$
- 90 -
Schedule 10
Page 3 of 3
Reconciliation of budgetary basis (modified accrual) to full
accrual basis
Excess of revenues and other sources over expenditures and
other uses 324,087$
Reconciling items:
Interest income from Water and Sewer Capital Reserve Fund 222
Payment of principal on notes, bonds and installment
purchases 1,051,283
Capital outlay 72,801
Noncapitalizable capital project expenditures (299,752)
Capitalized interest on borrowings during construction period 11,686
Depreciation (787,434)
Interest expense accrual adjustment 18,639
Vacation pay accrual adjustment (5,229)
Increase in OPEB liability (23,893)
Bad debts (95,000)
Capital contributions - donated property 1,028,171
Amortization of deferred loss on refunding (15,147)
Transfer to Water and Sewer Capital Projects Fund 483,935
Transfer to Water and Sewer Capital Reserve Fund 2,020,699
Change in net position 3,785,068$
TOWN OF HILLSBOROUGH, NORTH CAROLINA
ENTERPRISE FUND
SCHEDULE OF EXPENDITURES COMPARED WITH
BUDGET (NON-GAAP) - WATER AND SEWER FUND
Year Ended June 30, 2014 with Comparative
Actual Amounts for Year Ended June 30, 2013
- 91 -
Schedule 11
Variance
Project Prior Current Total Positive
Authorization Years Year to Date (Negative)
Revenues
Restricted intergovernmental
revenues
State grant 492,000$ 492,000$ -$ 492,000$ -$
Federal grant 156,000 156,250 - 156,250 250
Interest on investments 5,219 5,021 - 5,021 (198)
Total revenues 653,219 653,271 - 653,271 52
Expenditures - wastewater
treatment plant
Expansion design 1,578,595 1,566,094 12,501 1,578,595 -
Legal and administrative 1,435,430 1,105,231 276,535 1,381,766 53,664
Construction 17,262,728 14,694,190 1,519,719 16,213,909 1,048,819
Miscellaneous 60,934 9,797 26,137 35,934 25,000
20,337,687 17,375,312 1,834,892 19,210,204 1,127,483
Expenditures - sewer outfall
Construction 402,300 402,279 - 402,279 21
Miscellaneous 1,765 155 - 155 1,610
404,065 402,434 - 402,434 1,631
Expenditures - capital improvements
Sewer Outfall Phase II 1,374,581 1,288,043 - 1,288,043 86,538
Lawrence Road 1,084,488 854,682 125,488 980,170 104,318
Lake Ben Johnson 2,557,178 297,331 311,312 608,643 1,948,535
Water meter replacement 750,000 662,705 42,178 704,883 45,117
Other improvements 100,000 - 38,074 38,074 61,926
5,866,247 3,102,761 517,052 3,619,813 2,246,434
Expenditures - West Fork Eno Reservoir
Services and charges 200,000 - 152,622 152,622 47,378
200,000 - 152,622 152,622 47,378
Total expenditures 26,807,999 20,880,507 2,504,566 23,385,073 3,422,926
Revenues under expenditures (26,154,780) (20,227,236) (2,504,566) (22,731,802) 3,422,978
Other financing sources (uses)
Proceeds from state revolving loan 18,894,640 15,256,478 2,472,930 17,729,408 (1,165,232)
Proceeds from installment purchases 3,752,631 2,252,243 - 2,252,243 (1,500,388)
Transfer from Water and Sewer
Capital Reserve Fund 1,044,553 879,553 - 879,553 (165,000)
Transfer from Water and Sewer Fund 2,662,956 1,840,893 483,935 2,324,828 (338,128)
Transfer to Water and Sewer Fund (200,000) (200,000) - (200,000) -
Total other financing sources 26,154,780 20,029,167 2,956,865 22,986,032 (3,168,748)
Excess of revenues and other
sources over (under)
expenditures and other uses -$ (198,069)$ 452,299$ 254,230$ 254,230$
BUDGET (NON-GAAP) - WATER AND SEWER CAPITAL PROJECTS FUND
From Project Inception and for the Year Ended June 30, 2014
Actual
TOWN OF HILLSBOROUGH, NORTH CAROLINA
ENTERPRISE FUND
SCHEDULE OF REVENUES AND EXPENDITURES COMPARED WITH
- 92 -
Schedule 12
Variance
Project Prior Current Total Positive
Authorization Years Year To Date (Negative)
Revenues
Interest on investments 262,942$ 263,771$ 222$ 263,993$ 1,051$
Expenditures 3,604,420 - - - 3,604,420
Revenues over (under) expenditures (3,341,478) 263,771 222 263,993 3,605,471
Other financing sources (uses)
Transfers from Water and Sewer Fund 5,019,938 3,061,412 2,020,699 5,082,111 62,173
Transfers from General Capital Reserve
Fund 403,031 403,031 - 403,031 -
Capital contributions 1,066,190 1,066,190 - 1,066,190 -
Transfers to Water and Sewer Fund (1,683,128) (1,345,000) - (1,345,000) 338,128
Transfers to Water and Sewer Capital
Projects Fund (1,464,553) (1,299,553) - (1,299,553) 165,000
Total other financing sources 3,341,478 1,886,080 2,020,699 3,906,779 565,301
Excess of revenues and other
sources over expenditures -$ 2,149,851$ 2,020,921$ 4,170,772$ 4,170,772$
BUDGET (NON-GAAP) - WATER AND SEWER CAPITAL RESERVE FUND
From Project Inception and for the Year Ended June 30, 2014
Actual
TOWN OF HILLSBOROUGH, NORTH CAROLINA
ENTERPRISE FUND
SCHEDULE OF REVENUES AND EXPENDITURES COMPARED WITH
- 93 -
- 94 -
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- 95 -
ADDITIONAL FINANCIAL DATA
This section contains additional information on property taxes.
Schedule of Ad Valorem Taxes Receivable
Analysis of Current Tax Levy
- 96 -
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Schedule 13
Uncollected Uncollected
Balance Collections Balance
Fiscal Year July 1, 2013 Additions and Credits June 30, 2014
2013-2014 -$ 5,418,579$ 5,315,921$ 102,658$
2012-2013 139,832 - 88,924 50,908
2011-2012 39,760 - 16,989 22,771
2010-2011 28,935 - 19,130 9,805
2009-2010 11,836 - - 11,836
2008-2009 15,344 - - 15,344
2007-2008 15,149 - - 15,149
2006-2007 7,124 - - 7,124
2005-2006 538 - - 538
258,518 5,418,579$ 5,440,964$ 236,133
Less allowance
for uncollectible
accounts:
General Fund (85,842) (77,417)
172,676$ 158,716$
Reconciliation of collections and credits with revenues:
Taxes - ad valorem - General Fund 5,429,114$
Motor vehicle license fees - General Fund 31,420
Penalties and interest (39,140)
Adjustments and refunds 19,570
5,440,964$
TOWN OF HILLSBOROUGH, NORTH CAROLINA
SCHEDULE OF AD VALOREM TAXES RECEIVABLE
June 30, 2014
- 97 -
Schedule 14
Property
Excluding
Registered Registered
Property Total Motor Motor
Valuation** Rate Levy* Vehicles Vehicles
Original levy
Property taxed at current year’s rate 778,290,000$ 0.6800 5,292,372$ 4,950,713$ 341,659$
Motor vehicle taxed at prior year rate 7,475,000 0.6800 50,830 - 50,830
Motor vehicle license fees - 64,572 - 64,572
Penalties and interest - 10,805 10,805 -
Total property valuation 785,765,000$ 5,418,579 4,961,518 457,061
Uncollected taxes at June 30, 2014 102,658 80,340 22,318
Current year’s taxes collected 5,315,921$ 4,881,178$ 434,743$
Current levy collection percentage 98.11% 98.38% 95.12%
** Property tax valuation prior to the discoveries and abatements.
Town-Wide
Total Levy
TOWN OF HILLSBOROUGH, NORTH CAROLINA
Year Ended June 30, 2014
ANALYSIS OF CURRENT TAX LEVY
* Total adjusted levy includes discoveries and abatements.
- 98 -
- 99 -
STATISTICAL SECTION
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THIS PAGE LEFT INTENTIONALLY BLANK.
Statistical Section
Contents Page
Financial Trends Information 102
These schedules contain trend information to help the reader understand how the
Town's financial performance and well-being have changed over time.
Revenue Capacity Information 107
These schedules contain information to help the reader assess the Town's most
significant local revenue sources, property taxes, and water and sewer charges.
Debt Capacity Information 116
These schedules present information to help the reader assess the affordability
of the Town's current levels of outstanding debt and the Town's ability to issue
additional debt in the future.
Demographic and Economic Information 121
These schedules offer demographic and economic indicators to help the reader
understand the environment within which the Town's financial activities take
place.
Operating Information 125
These schedules contain service and infrastructure data to help the reader
understand how the information in the Town's financial report relates to the
services the Town provides and the activities it performs.
This part of the Town of Hillsborough'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 Town's overall financial
health.
Sources:Unless otherwise noted, the information in these schedules is derived from the comprehensive
annual financial reports for the relevant year. The Town implemented GASB Statement 34 in 2004;
schedules presenting government-wide information include information beginning in that year.
- 101 -
Financial Trends Information
- 102 -
Table 12005 2006 2007 2008 2009 2010 2011 2012 2013 2014Governmental activitiesNet investment in capital assets 1,443,364$ 1,536,427$ 1,774,382$ 1,736,635$ 2,375,505$ 3,268,065$ 5,338,508$ 5,870,981$ 6,723,808$ 10,924,631$ Restricted 92,377 2,282 192,078 1,660,871 563,417 806,780 2,121,546 1,570,832 1,831,742 1,700,808 Unrestricted 3,647,212 3,908,306 4,228,407 3,329,482 4,891,494 5,402,272 3,766,961 3,984,264 4,390,314 4,832,103 Total governmental activities net position 5,182,953$ 5,447,015$ 6,194,867$ 6,726,988$ 7,830,416$ 9,477,117$ 11,227,015$ 11,426,077$ 12,945,864$ 17,457,542$ Business-type activitiesNet investment in capital assets 13,758,384$ 14,310,390$ 15,946,393$ 20,174,460$ 21,590,822$ 21,736,659$ 24,316,110$ 26,632,441$ 26,017,050$ 27,110,293$ Restricted - 1,834,599 1,607,258 2,011,464 2,438,955 2,128,459 1,721,067 1,974,677 2,590,989 2,591,211 Unrestricted 4,442,662 3,685,563 4,031,059 4,268,347 3,495,837 4,020,580 3,518,417 2,674,119 4,084,460 6,776,063 Total business-type activities net position 18,201,046$ 19,830,552$ 21,584,710$ 26,454,271$ 27,525,614$ 27,885,698$ 29,555,594$ 31,281,237$ 32,692,499$ 36,477,567$ Primary governmentNet investment in capital assets 15,201,748$ 15,846,817$ 17,720,775$ 21,911,095$ 23,966,327$ 25,004,724$ 29,654,618$ 32,503,422$ 32,740,858$ 38,034,924$ Restricted 92,377 1,836,881 1,799,336 3,672,335 3,002,372 2,935,239 3,842,613 3,545,509 4,422,731 4,292,019 Unrestricted 8,089,874 7,593,869 8,259,466 7,597,829 8,387,331 9,422,852 7,285,378 6,658,383 8,474,774 11,608,166 Total primary government net position 23,383,999$ 25,277,567$ 27,779,577$ 33,181,259$ 35,356,030$ 37,362,815$ 40,782,609$ 42,707,314$ 45,638,363$ 53,935,109$ TOWN OF HILLSBOROUGHNET POSITION BY COMPONENTLast Ten Fiscal Years(accrual basis of accounting)- 103 -
Table 2
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Expenses
Governmental activities:
General government 600,763$ 967,939$ 990,096$ 1,153,096$ 1,341,151$ 1,511,119$ 1,353,757$ 1,402,445$ 1,301,963$ 1,524,025$
Public safety 2,557,909 2,801,042 3,165,228 3,320,666 3,477,812 3,389,490 3,379,456 2,597,911 3,395,465 3,619,529
Transportation 627,203 467,796 1,189,355 1,217,558 435,870 390,313 486,940 1,510,493 497,540 500,491
Environmental protection 394,738 638,351 49,052 63,118 546,472 534,476 595,447 546,612 580,312 833,623
Economic and physical
development 179,113 198,650 210,430 217,638 237,278 247,420 256,092 243,163 485,977 367,389
Community activities and
projects 56,115 62,521 54,100 227,721 105,026 40,961 49,505 40,996 64,878 119,251
Parks and recreation - - - 12,801 31,657 60,629 36,844 51,500 36,267 55,849
Unallocated interest
expense 2,261 337 10,690 21,248 77,316 107,315 108,598 104,518 105,022 126,250
Total governmental
activities expenses 4,418,102 5,136,636 5,668,951 6,233,846 6,252,582 6,281,723 6,266,639 6,497,638 6,467,424 7,146,407
Business-type activities:
Water and sewer 4,873,478 5,153,557 5,120,765 5,472,746 5,616,181 6,093,635 5,758,760 6,151,253 6,279,271 6,271,311
Total business-type
activities expenses 4,873,478 5,153,557 5,120,765 5,472,746 5,616,181 6,093,635 5,758,760 6,151,253 6,279,271 6,271,311
Total primary government
expenses 9,291,580$ 10,290,193$ 10,789,716$ 11,706,592$ 11,868,763$ 12,375,358$ 12,025,399$ 12,648,891$ 12,746,695$ 13,417,718$
Program Revenues
Governmental activities:
Charges for services:
General government 95,542$ 99,131$ 140,920$ 159,868$ 113,738$ 131,750$ 149,790$ 160,990$ 326,565$ 126,909$
Public safety 4,693 24,573 21,036 15,290 14,453 10,825 10,273 15,593 11,426 13,893
Transportation - - - - - 2,951 - - - -
Environmental
protection 24,707 - - - - - - - - -
Parks and recreation - - - - - - 2,170 2,970 3,190 4,140
Operating grants and
contributions 196,913 195,675 254,312 337,166 309,510 202,067 183,874 228,457 175,347 316,576
Capital grants and
contributions 77,561 29,817 159,063 265,947 686,984 1,001,630 1,191,157 203,301 334,525 3,741,958
Total governmental
activities program revenues 399,416 349,196 575,331 778,271 1,124,685 1,349,223 1,537,264 611,311 851,053 4,203,476
Business-type activities:
Charges for services:
Water and sewer 5,631,972 5,555,602 6,193,895 6,320,471 6,292,642 6,425,750 6,755,260 7,366,996 7,686,356 9,025,607
Capital grants and
contributions 636,077 1,037,089 434,712 3,754,896 290,891 - 658,828 100,000 - 1,028,171
Total business-type
activities program revenues 6,268,049 6,592,691 6,628,607 10,075,367 6,583,533 6,425,750 7,414,088 7,466,996 7,686,356 10,053,778
Total primary government
program revenues 6,667,465$ 6,941,887$ 7,203,938$ 10,853,638$ 7,708,218$ 7,774,973$ 8,951,352$ 8,078,307$ 8,537,409$ 14,257,254$
Net (Expense) Revenue
Governmental activities (4,018,686)$ (4,787,440)$ (5,093,620)$ (5,455,575)$ (5,127,897)$ (4,932,500)$ (4,729,375)$ (5,886,327)$ (5,616,371)$ (2,942,931)$
Business-type activities 1,394,571 1,439,134 1,507,842 4,602,621 967,352 332,115 1,655,328 1,315,743 1,407,085 3,782,467
Total primary government
net expense (2,624,115)$ (3,348,306)$ (3,585,778)$ (852,954)$ (4,160,545)$ (4,600,385)$ (3,074,047)$ (4,570,584)$ (4,209,286)$ 839,536$
General Revenues and
Other Changes in Net
Position
Governmental activities:
Taxes 4,000,103$ 4,366,328$ 5,056,393$ 5,203,555$ 5,479,986$ 5,898,215$ 5,808,387$ 5,816,041$ 6,371,494$ 6,603,311$
Unrestricted inter-
governmental revenues 486,084 516,245 544,091 575,308 625,798 615,770 635,907 651,381 734,401 809,190
Investment earnings,
unrestricted 74,974 161,770 219,162 196,325 109,920 29,889 10,838 4,748 3,874 2,209
Miscellaneous 4,784 7,159 21,826 12,508 15,621 35,327 24,141 16,250 26,389 39,899
Total governmental
activities 4,565,945 5,051,502 5,841,472 5,987,696 6,231,325 6,579,201 6,479,273 6,488,420 7,136,158 7,454,609
Business-type activities:
Investment earnings 91,026 190,372 246,246 233,136 107,104 27,967 14,568 6,869 4,177 2,601
Miscellaneous - - 70 30,691 - - - - - -
Total business-type
activities 91,026 190,372 246,316 263,827 107,104 27,967 14,568 6,869 4,177 2,601
Total primary government 4,656,971$ 5,241,874$ 6,087,788$ 6,251,523$ 6,338,429$ 6,607,168$ 6,493,841$ 6,495,289$ 7,140,335$ 7,457,210$
Change in Net Position
Governmental activities 547,259$ 264,062$ 747,852$ 532,121$ 1,103,428$ 1,646,701$ 1,749,898$ 199,062$ 1,519,787$ 4,511,678$
Business-type activities 1,485,597 1,629,506 1,754,158 4,866,448 1,074,456 360,084 1,669,896 1,725,643 1,411,262 3,785,068
Total primary government 2,032,856$ 1,893,568$ 2,502,010$ 5,398,569$ 2,177,884$ 2,006,785$ 3,419,794$ 1,924,705$ 2,931,049$ 8,296,746$
TOWN OF HILLSBOROUGH
CHANGES IN NET POSITION
Last Ten Fiscal Years
(accrual basis of accounting)
- 104 -
Table 32005 2006 2007 2008 2009 2010 2011 2012 2013 2014Governmental fundsReserved 1,054,154$ 626,383$ 743,476$ 852,658$ 904,063$ 1,430,710$ -$ -$ -$ -$ Unreserved 2,850,044 3,451,245 3,826,566 5,333,079 4,606,586 4,472,052 - - - - Nonspendable - - - - - - 477 68,649 4,305 72,156 Restricted - - - - - - 2,121,546 1,797,832 1,831,742 1,955,198 Committed - - - - - - 204,943 240,640 131,490 106,105 Assigned - - - - - - 215,354 88,094 330,206 782,995 Unassigned - - - - - - 3,153,904 3,691,038 4,131,281 4,158,651 Total governmental funds 3,904,198$ 4,077,628$ 4,570,042$ 6,185,737$ 5,510,649$ 5,902,762$ 5,696,224$ 5,886,253$ 6,429,024$ 7,075,105$ TOWN OF HILLSBOROUGHFUND BALANCES, GOVERNMENTAL FUNDSLast Ten Fiscal Years(modified accrual basis of accounting)- 105 -
Table 42005 2006 2007 2008 2009 2010 2011 2012 2013 2014RevenuesAd valorem taxes 3,028,512$ 3,291,685$ 3,863,679$ 3,843,372$ 4,317,508$ 4,819,371$ 4,610,003$ 4,716,460$ 5,135,469$ 5,429,114$ Other taxes and licenses 976,728 1,067,530 1,197,964 1,216,236 1,178,406 1,131,562 1,163,501 1,124,696 1,229,425 1,199,185 Unrestricted intergovernmental 486,084 516,245 544,091 575,308 625,798 615,770 635,907 651,381 734,401 809,190 Restricted intergovernmental 225,520 221,614 257,092 364,818 755,912 306,662 1,234,870 453,755 308,007 768,716 Investment earnings 74,974 161,770 219,834 195,632 109,920 29,889 10,838 4,748 3,874 2,209 Capital contributions - - 135,000 235,000 235,000 200,000 200,000 100,000 - - Use and rental 124,941 123,704 161,956 175,158 128,191 142,575 160,063 176,583 337,991 140,802 Other general revenues 11,330 11,038 42,440 30,733 31,106 31,518 67,071 69,669 34,079 48,337 Total revenues 4,928,089 5,393,586 6,422,056 6,636,257 7,381,841 7,277,347 8,082,253 7,297,292 7,783,246 8,397,553 ExpendituresCurrentGeneral government 808,069 1,055,473 1,090,839 1,255,061 1,986,459 2,552,912 1,232,665 1,235,107 1,122,514 2,799,302 Public safety 2,468,317 2,788,016 3,281,406 3,349,295 3,499,641 3,263,200 3,347,597 3,164,361 3,134,327 3,455,438 Transportation 603,152 677,493 843,439 633,474 408,258 720,627 1,718,386 1,693,664 1,011,557 851,502 Environmental protection 383,286 618,358 364,861 510,948 470,448 580,854 583,919 476,415 471,880 806,262 Economic and physical development 179,113 198,650 210,430 217,638 237,278 247,420 256,092 243,163 485,977 367,389 Community activities and projects 56,114 62,521 54,461 227,721 105,026 54,137 54,946 325,666 64,878 119,251 Parks and recreation - - 109,096 102,046 1,722,062 344,499 791,184 239,105 430,831 1,675,156 Debt servicePrincipal retirement 43,318 17,246 36,638 62,140 178,595 238,111 303,074 283,126 407,246 474,458 Interest and fiscal charges 2,673 900 7,972 11,938 68,762 93,874 107,928 98,896 111,265 118,711 Total expenditures 4,544,042 5,418,657 5,999,142 6,370,261 8,676,529 8,095,634 8,395,791 7,759,503 7,240,475 10,667,469 Excess of revenues over (under) expenditures 384,047 (25,071) 422,914 265,996 (1,294,688) (818,287) (313,538) (462,211) 542,771 (2,269,916) Other financing sources (uses)Transfers in - - 111,232 - 43,023 628,118 717,582 440,409 369,627 169,054 Transfers out - - (111,232) - (43,023) (628,118) (717,582) (843,440) (369,627) (169,054) Sale of equipment - - - - - - - - - - Insurance recovery - - - - - - - 16,250 - - Contribution from property owners - - - - - - - - - 1,445,207 Debt service - principal on refunding - - - - - - - - - (1,256,353) Proceeds from installment notes - 198,501 69,500 1,349,700 619,600 1,210,400 107,000 1,039,021 - 2,727,143 Total other financing sources - 198,501 69,500 1,349,700 619,600 1,210,400 107,000 652,240 - 2,915,997 Net change in fund balances384,047$ 173,430$ 492,414$ 1,615,696$ (675,088)$ 392,113$ (206,538)$ 190,029$ 542,771$ 646,081$ Capital outlay included in functional expenditures above 220,500$ 416,105$ 484,601$ 313,810$ 2,491,483$ 1,907,332$ 2,280,672$ 1,501,851$ 997,107$ 2,083,826$ Debt service as a percentage of noncapital expenditures 1.06% 0.36% 81.00% 1.22% 4.00% 5.36% 6.72% 6.10% 8.30% 6.91%CHANGES IN FUND BALANCES, GOVERNMENTAL FUNDSLast Ten Fiscal Years(modified accrual basis of accounting)TOWN OF HILLSBOROUGH- 106 -
Revenue Capacity Information
- 107 -
Table 52005 2006 2007 2008 2009 2010 2011 2012 2013 2014Function/programGovernmental activities:General government 143,037$ 102,708$ 140,920$ 159,868$ 348,738$ 331,750$ 382,843$ 354,227$ 361,590$ 1,388,937$ Police 32,021 54,323 64,210 134,722 14,453 28,874 10,273 15,593 11,426 13,893 Transportation 183,954 185,394 192,890 216,544 274,275 543,741 848,978 228,521 185,847 312,282 Environmental protection 40,404 6,611 8,940 - - - - - - 2,059,224 Economic and physical development - - 16,302 1,190 235 - - - - - Community activities and projects - 160 - - - - - - - - Parks and recreation - - 152,069 265,947 486,984 444,858 295,170 12,970 292,190 429,140 Subtotal governmental activities 399,416 349,196 575,331 778,271 1,124,685 1,349,223 1,537,264 611,311 851,053 4,203,476 Business-type activities:Water and sewer 6,268,049 6,592,691 6,628,607 10,075,367 6,583,533 6,425,750 7,414,088 7,466,996 7,686,356 10,053,778 Subtotal business-type activities 6,268,049 6,592,691 6,628,607 10,075,367 6,583,533 6,425,750 7,414,088 7,466,996 7,686,356 10,053,778 Total primary government 6,667,465$ 6,941,887$ 7,203,938$ 10,853,638$ 7,708,218$ 7,774,973$ 8,951,352$ 8,078,307$ 8,537,409$ 14,257,254$ TOWN OF HILLSBOROUGHPROGRAM REVENUES BY FUNCTION/PROGRAMLast Ten Fiscal Years(accrual basis of accounting)- 108 -
Table 6
Fiscal Ad Valorem
Year Taxes
2005 3,028,512$
2006 3,291,685
2007 3,863,679
2008 3,843,372
2009 4,317,508
2010 4,819,371
2011 4,610,003
2012 4,716,460
2013 5,135,469
2014 5,429,114
Change b
2005 - 2014 79.27%
b Ad Valorem tax revenue increased by 79.29 percent in the past ten years. This is primarily due to property
values being re-evaluated every four years. During the last ten years, there were two re-evaluation periods
2005 and 2009. The four-year re-evaluation period along with increasing property values and steady growth
has caused a significant increase in Ad Valorem Revenue from 2005 to 2014.
TOWN OF HILLSBOROUGH
TAX REVENUES BY SOURCE, GOVERNMENTAL FUNDS a
Last Ten Fiscal Years
(modified accrual basis of accounting)
a This table presents the Town's most significant source of revenues. All other taxes and revenues are either
comparatively insignificant or levied by a governmental entity other than the Town of Hillsborough.
- 109 -
Table 7
Total Assessed
Total Direct Value as a
Fiscal Real Personal Public-Service Assessed Tax Percent of
Year Property *Property Companies Value Rate Actual Value
2005 406,242,350$ 68,875,306$ 11,632,900$ 486,750,556$ 0.6200 100.00%
2006 498,764,816 69,532,409 11,634,060 579,931,285 0.5660 100.00%
2007 532,148,273 78,065,817 12,257,142 622,471,232 0.6200 100.00%
2008 535,719,952 81,267,458 11,297,072 628,284,482 0.6350 100.00%
2009 552,914,553 77,727,711 11,612,614 642,254,878 0.6700 100.00%
2010 657,426,788 83,569,294 11,954,916 752,950,998 0.6200 100.00%
2011 653,238,545 84,168,694 10,825,503 748,232,742 0.6200 100.00%
2012 661,688,578 85,866,250 11,371,703 758,926,531 0.6200 100.00%
2013 667,581,857 83,022,657 11,710,268 762,314,782 0.6800 100.00%
2014 674,676,352 99,378,379 11,710,269 785,765,000 0.6800 100.00%
TOWN OF HILLSBOROUGH
ASSESSED VALUE AND ACTUAL VALUE OF TAXABLE PROPERTY
Last Ten Fiscal Years
Note:Property in the city is reassessed each year. Property is assessed at actual value; therefore, the assessed values are
equal to actual value. Tax rates are per $100 of assessed value.
Source: Annual County Report of Valuation and Property Tax Levies.
* Real property values exclude tax-exempt property.
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Table 8
Fiscal Basic Total Fire
Year Rate Direct District b County
2005 0.620 0.620 - 0.8800
2006 0.566 0.566 - 0.8430
2007 0.620 0.620 - 0.9030
2008 0.635 0.635 - 0.9500
2009 0.670 0.670 - 0.9980
2010 0.620 0.620 - 0.8580
2011 0.620 0.620 - 0.8580
2012 0.620 0.620 - 0.8580
2013 0.680 0.680 - 0.8580
2014 0.680 0.680 - 0.8780
Source: Orange County
TOWN OF HILLSBOROUGH
DIRECT AND OVERLAPPING PROPERTY TAX RATES
Last Ten Fiscal Years
(rate per $100 of assessed value)
b The Fire District Tax applies to properties outside of the city limits.
Municipality Rates
Note:The Town's basic property tax rate may be increased only by a majority vote of the elected Town
Board of Town Commissioners.
a Overlapping rates are those of local and county governments that apply to property owners within the
Town of Hillsborough.
Overlapping Rates a
- 111 -
Table 9.FiscalYear Taxes Levied CollectionsEnded for the Percentage in Subsequent PercentageJune 30, Fiscal Year Amount of Levy Years Amount of Levy2005 3,071,757$ 3,017,398$ 98.23% 48,604$ 3,066,002$ 99.81%2006 3,333,473 3,274,376 98.23% 50,053 3,324,429 99.73%2007 3,893,091 3,833,657 98.47% 52,310 3,885,967 99.82%2008 4,035,215 3,828,830 94.89% 191,236 4,020,066 99.62%2009 4,380,999 4,295,618 98.05% 70,037 4,365,655 99.65%2010 4,732,461 4,641,581 98.09% 79,044 4,720,625 99.75%2011 4,690,863 4,557,501 97.16% 123,557 4,681,058 99.79%2012 4,755,200 4,641,541 97.61% 90,888 4,732,429 99.52%2013 5,225,057 5,085,225 98.82% 88,924 5,174,149 99.03%2014 5,418,579 5,315,921 98.11% - 5,315,921 98.11%Sources: Orange County Board of Equalization and Assessment, and Orange County Department of Finance.Fiscal Year of the Levy Total Collections to DateTOWN OF HILLSBOROUGHPROPERTY TAX REVIEW AND COLLECTIONSLast Ten Fiscal YearsCollected within the- 112 -
Table 10Percentage Percentageof Total City of Total CityTaxable Taxable Taxable TaxableAssessed Assessed Assessed AssessedTaxpayer Value Rank Value Value Rank ValueHillsborough Apartments Partners LLC 16,213,700$ 1 2.06%Walmart Real Estate Business Trust 13,675,468 2 1.74% 12,758,748$ 1 2.62%PHE Inc. 9,455,194 4 1.20% 7,419,828 3 1.52%HD Development of Maryland INC 9,560,634 3 1.21%Daniel Boone LTD 8,791,758 5 1.12% 8,343,619 2 1.71%SLF II NC Waterstone LLC 8,787,243 6 1.12%Hillsborough Commons LTD 8,497,192 7 1.08% 6,562,050 7 1.35%MDCO LLC 8,453,597 8 1.07%Brookshire, Inc. 6,812,774 9 0.86%Alcurt Hillsborough, LLC 6,353,971 10 0.81%Flint Ridge, Ltd.4,807,691 10 0.99%Parker-Hannifan Corp.7,161,208 4 1.47%R.T. Holdings, LLC6,587,606 6 1.35%Central Telephone Co.4,991,435 9 1.03%Stihl, Inc.5,680,180 8 1.17%Fred B. Johnston Co.6,975,686 5 1.43%Total 96,601,531$ 12.26% 71,288,051$ 14.64%Source: Orange County Property Assessment Division2014TOWN OF HILLSBOROUGHPRINCIPAL PROPERTY TAXPAYERSCurrent Year and Nine Years Ago2005- 113 -
Table 11Type of Customer2005 2006 2007 2008 2009 2010 2011 2012 2013 2014In-town residential 94,229,920 94,742,851 92,359,968 90,776,263 88,082,088 91,194,583 103,459,804 102,937,205 102,755,771 111,836,111 Out-of-town residential 100,538,030 103,325,114 105,793,065 104,552,882 101,568,087 106,627,659 112,868,479 120,107,805 130,921,523 111,241,276 In-town commercial 86,181,370 82,678,001 90,080,216 85,878,132 88,318,823 89,569,350 74,881,598 73,507,962 76,624,165 78,590,500 Out-of-town commercial 25,506,520 30,042,380 29,297,960 28,156,261 23,213,084 22,056,653 18,219,706 18,296,584 18,153,125 17,908,575 Total gallons billed 306,455,840 310,788,346 317,531,209309,363,538301,182,082 309,448,245309,429,587 314,849,556 328,454,584 319,576,462 Total water and sewer charges (revenue) 4,887,937$ 5,215,333$ 5,699,410$ 5,743,722$ 6,043,820$ 6,194,638$ 6,405,307$ 6,928,835$ 7,262,510$ 7,359,481$ Total average rate per 1,000 gallons 15.95$ 16.78$ 17.95$ 18.57$ 20.07$ 20.02$ 20.00$ 22.00$ 22.11$ 23.03$ Source: Town of Hillsborough, Water Billing Office.Revenue collected includes late payment penalties.TOWN OF HILLSBOROUGHIN AND OUT OF TOWNWATER SOLD BY TYPE OF CUSTOMER ANDLast Ten Fiscal Years- 114 -
Table 12Rate perRate perRate per Rate perRate per Rate perRate per Rate perFiscal 0-30001,0000-30001,0000-30001,0000-30001,000YearGallons Gallons Gallons GallonsGallons Gallons Gallons Gallons2005 * 19.35$ 6.45$ 17.43$ 5.81$ 37.74$ 12.58$ 33.99$ 11.33$ 2006 ^ 19.35 6.45 19.02 6.34 37.74 12.58 37.11 12.37 200719.95 6.65 20.52 6.84 38.91 12.97 40.02 13.34 200820.16 6.72 21.33 7.11 39.30 13.10 41.61 13.87 200921.75 7.25 22.74 7.58 42.40 14.13 44.36 14.79 201021.75 7.25 22.74 7.58 42.40 14.13 44.36 14.79 201121.75 7.25 23.88 7.96 42.42 14.14 46.56 15.52 201223.04 7.68 25.98 8.66 44.94 14.98 50.67 16.89 201324.21 8.07 28.26 9.42 47.22 15.74 55.11 18.37 201421.79 8.07 30.11 11.15 42.50 15.74 58.70 21.74 Rate changes are effective with July 1 water usage unless otherwise stated.Prior to 7/1/14, a flat charge was billed for 0 to 3,000 gallons. Any usage over 3,000 gallons was billed per 1,000 gallons rate.Beginning 7/1/14, a flat charge is billed for 0 to 2,700 gallons. Any usage over 2,700 gallons is billed per 1,000 gallons rate.* Rates effective October 1, 2003 ^ Rates effective September 1, 2005 The construction of a reservoir in 1998 and renovations of an aging water and wastewater treatment plant have caused significant increases in water and sewerrates over the past ten years. TOWN OF HILLSBOROUGHWATER AND SEWER RATESLast Ten Fiscal YearsOut-of-Town WaterOut-of-Town SewerIn-Town WaterIn-Town Sewer- 115 -
Debt Capacity Information
- 116 -
Table 13GovernmentalActivitiesGeneral TotalFiscal Installment Obligation Revolving Installment Primary PerYearLoans Bonds Loans Loans GovernmentCapita a2005 17,246$ 4,960,000$ 1,182,224$ 4,156,325$ 10,315,795$ 1,862$ 2006 198,501 4,575,000 1,524,446 3,781,350 10,079,297 1,777 2007 231,363 4,189,000 1,448,224 3,388,902 9,257,489 1,502 2008 1,518,923 3,803,000 1,372,001 2,978,369 9,672,293 1,550 2009 1,959,928 122,000 1,295,779 6,172,366 9,550,073 1,450 2010 2,932,216 86,000 1,219,557 6,258,012 10,495,785 1,572 2011 2,736,142 50,000 1,143,336 5,741,602 9,671,080 1,582 2012 3,440,001 14,000 5,575,878 5,871,812 14,901,691 2,388 2013 3,084,791 - 16,247,369 4,914,368 24,246,528 3,850 2014 4,024,586 - 18,644,077 3,939,307 26,607,970 4,170 Note: Details regarding the Town's outstanding debt can be found in the notes to the financial statements.TOWN OF HILLSBOROUGHRATIOS OF OUTSTANDING DEBT BY TYPELast Ten Fiscal YearsBusiness-Type Activitiesa See Table 17 for population data. These ratios are calculated using population for the prior calendar year.- 117 -
Table 14
Percentage of
General Actual Taxable
Fiscal Obligation Value a of Per
Year Bonds Total Property Capita b
2005 4,960,000$ 4,960,000$ 1.02% 875$
2006 4,575,000 4,575,000 0.79% 742
2007 4,189,000 4,189,000 0.67% 671
2008 3,803,000 3,803,000 0.61% 578
2009 122,000 122,000 0.00% 18
2010 86,000 86,000 0.00% 13
2011 50,000 50,000 0.00% 8
2012 14,000 14,000 0.00% 2
2013 - - 0.00% -
2014 - - 0.00% -
a See Table 7 for property value data.
b Population data can be found in Table 17.
General Bonded Debt Outstanding
Note: Details regarding the Town's outstanding debt can be found in the notes to the financial statements.
TOWN OF HILLSBOROUGH
RATIOS OF GENERAL BONDED DEBT OUTSTANDING
Last Ten Fiscal Years
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Table 15
.
Town's
Orange Co. Estimated
G.O. Bonds Estimated Share of
Outstanding Percentage Overlapping
Governmental Unit Debt Applicable a Debt
Debt repaid with property taxes 77,150,000$ 4.778% 3,686,227$
Town's overlapping debt 3,686,227
Town's direct debt 2,156,977
Total direct and overlapping debt 5,843,204$
Sources:Assessed value data used to estimate applicable percentages provided by the Orange
County Property Assessment Division. Debt outstanding data provided by each governmental unit.
Note:Overlapping governments are those that coincide, at least in part, with the geographic boundaries
of the Town. This schedule estimates the portion of the outstanding debt of those overlapping
governments that is borne by the residents and businesses of Hillsborough. This process recognizes
that, when considering the Town's ability to issue and repay long-term debt, the entire debt burden
borne by the residents and businesses should be taken into account. However, this does not imply that
every taxpayer is a resident, and therefore responsible for repaying the debt of each overlapping
government.
a For debt repaid with property taxes, the percentage of overlapping debt applicable is estimated using
taxable assessed property values. Applicable percentages were estimated by determining the portion of
another governmental unit's taxable assessed value that is within the Town's boundaries and dividing it
by each unit's total taxable assessed value.
TOWN OF HILLSBOROUGH
DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT
June 30, 2014
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Table 16Assessed value 785,765,000$ Debt limit (8% of assessed value) 62,861,200 Debt applicable to limit:Installment loans (4,024,586) Legal debt margin 58,836,614$ 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014Debt limit 38,940,044$ 46,394,503$ 49,797,699$ 50,262,759$ 51,380,390$ 60,236,080$ 59,858,619$ 60,714,122$ 60,985,183$ 62,861,200 Total net debt applicable to limit 17,246 198,501 231,363 1,518,923 1,959,928 2,932,216 2,736,142 3,440,001 3,084,791 4,024,586 Legal debt margin 38,922,798$ 46,196,002$ 49,566,336$ 48,743,836$ 49,420,462$ 57,303,864$ 57,122,477$ 57,274,121$ 57,900,392$ 58,836,614$ Total net debt applicable to the limit as a percentage of debt limit 0.04% 0.43% 0.46% 3.02% 3.81% 4.87% 4.57% 5.67% 5.06% 6.40%TOWN OF HILLSBOROUGHLEGAL DEBT MARGIN INFORMATIONLast Ten Fiscal YearsLegal Debt Margin Calculation for Fiscal Year 2014Note: Under state finance law, the Town's outstanding general obligation debt should not exceed 8 percent of total assessed property value. - 120 -
Demographic and Economic Information
- 121 -
Table 17Personal PerIncome Capita(thousandsPersonal Median School UnemploymentYearPopulationof dollars)Income Age Enrollment Rate 2005 5,671 4,807,305$ 40,184$ 32.41 1,094 4.3%2006 6,162 5,205,261 42,637 32.30 1,203 3.6%2007 6,240 5,772,365 46,279 33.00 1,180 3.9%2008 6,584 6,107,990 48,100 33.10 1,272 4.6%2009 6,677 6,186,352 47,925 33.30 1,272 7.0%2010 6,751 6,268,886 46,713 33.18 1,279 6.6%2011 6,113 * * 33.42 1,305 7.3%2012 6,239 * * 33.62 1,420 7.1%2013 6,298 * * 33.99 1,433 5.3%2014 6,381 4,905,216 34,949 33.10 1,3704.8%* Information not yet availableNote:Population, median age, and education level information are based on surveys conducted during the last quarter of the calendar year.Personal income information is a total for the year. Unemployment rate information is an adjusted yearly average. School enrollment is based on thecensus at the start of the school year.TOWN OF HILLSBOROUGHDEMOGRAPHIC AND ECONOMIC STATISTICSLast Ten Calendar YearsSources:Population and median age information provided by the State Library of North Carolina. Personal income information provided by theOrange County Economic Development Office. Unemployment data provided by the Employment Security Commission. School enrollment dataprovided by the Orange County Board of Education.Note:Personal income, per capita personal income, median age, and unemployment are not available at the town level and is reported at the countylevel. Unemployment is reported for the month of June of each year.- 122 -
Table 18Percentage ofPercentage ofTotal Town Total Town EmployerEmployees Population Employees PopulationOrange County Schools 1,259 19.73% 961 16.95%Orange County Government 900 14.10% 830 14.64%Sports Endeavors, Inc. dba Eurosport 325 5.09% 500 8.82%PHE 350 5.49% 325 5.73%McDonald's 70 1.10% 38 0.67%Brookshire Nursing Center 100 1.57% 130 2.29%Piedmont Electric 113 1.77% 115 2.03%Builders First 100 1.57% 95 1.68%Triangle Sportsplex 80 1.25% 90 1.59%Town of Hillsborough 84 1.32% 83 1.46%Total 3,381 53.68% 3,167 55.85%Source: Town Economic Development Division and Employment Security Commission.Note: Information regarding Town's total employment is not available. * Data not available2014TOWN OF HILLSBOROUGHPRINCIPAL EMPLOYERSCurrent Year and Nine Years Ago2005- 123 -
Table 19
Function/Program 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
General government
Administration 2 2 3 3 3 4 4 3 3 5
Finance 4 5 5 4 4 4 4 4 4 4
Planning 2 3 3 3 4 3 3 3 3 4
Safety - - - 1 1 1 1 1 1 1
Stormwater - - - - - - - - - 1
Police
Officers 25 25 26 29 29 26 26 25 27 24
Civilians 3 3 1 2 3 2 2 - - -
Public works
Streets 4 6 3 4 4 4 4 3 3 3
Sanitation 4 4 5 5 4 4 4 4 4 4
Motor pool 3 3 3 3 3 3 3 3 3 3
Utilities
Engineering 2 2 3 3 4 4 4 4 4 4
Billing and collection 6 7 6 6 7 6 5 5 5 5
Water 6 6 6 6 6 6 6 6 6 6
Wastewater 10 10 9 9 10 10 8 8 8 7
Water distribution/
wastewater collection 10 11 10 11 7 8 8 11 11 11
Fire inspections - 1 1 1 1 1 1 1 1 1
Total 81 88 84 90 90 86 83 81 83 83
Source: Town Finance Office. Positions reported at June 30th are positions filled.
TOWN OF HILLSBOROUGH
FULL-TIME EQUIVALENT CITY GOVERNMENT EMPLOYEES
BY FUNCTION/PROGRAM
Last Ten Fiscal Years
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Operating Information
- 125 -
Table 20Function/Program 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014PolicePhysical arrests 609 748 792 562 524 546 475 560 538 521Calls for service 8,198 8,247 7,273 11,181 12,490 9,619 12,889 15,039 14,569 12279Traffic citations 966 1,039 1,538 1,877 1,937 1,712 1,182 1,134 1,651 1212Number of policeman positions 27 27 27 29 29 29 29 29 26 26.5FireNumber of stations 1 1 1 1 1 1 1 1 1 1Emergency responses (EMS and fire) 1,275 1,449 1,802 1,960 1,918 1,865 1,835 1,770 1,866 1950Fires extinguished 41 11 6 6 30 75 19 78 70 45Number of paid firemen 15 20 19 23 23 24 24 25 24 24Number of volunteers 26 19 15 15 12 15 12 14 19 15Inspections * 297 387 289 269 213 211 258 177 132Refuse collection Refuse collected (tons per day) 7.1 6.7 6.3 6.3 6.7 6.1 5.95 - 6.34 5.90Recyclables collected (tons per day)*********0.02Other public worksStreet resurfacing (miles) - 2.1 2.2 1.5 0.5 - - - 2.25 2.13Potholes repaired 259 227 84 51 103 45 41 36 30 36Parks and recreationNumber of parks 1 2 3 6 6 6 6 6 6 6LibraryVolumes in collection 79,998 86,272 94,273 84,465 78,770 75,506 86,526 97,536 93,421 93,886 Total volumes borrowed 152,435 167,000 178,911 184,301 209,023 203,450 287,938 351,216 397,379 396,164 WaterNew connections 1,128 1,056 949 841 826 939 815 767 736 799Water main breaks a20 46 32 36 46 41 10 30 20 15Average daily consumption (millions of gallons per day) 1.225 1.168 1.235 1.101 1.143 1.124 1.129 1.048 0.913 1.103Peak daily consumption (millions of gallons) 2.291 1.721 1.770 1.770 1.938 1.626 1.653 1.576 1.653 1.685WastewaterAverage daily sewage treatment (millions of gallons) 0.753 0.679 0.726 0.740 0.872 0.888 0.757 0.765 0.902 1.133EducationNumber of schools b3 4 3 3 3 3 3 3 3 3Number of teachers 117 117 113 105 105 111 111 113 113 112Number of students 1,094 1,203 1,180 1,272 1,272 1,279 1,305 1,420 1,433 1,370 Number of classrooms c110 112 110 95 95 95 65 65 65 65Sources: Various city departments.aPartial year data for FY05b Alternative school added for students who have not been successful in the traditional school setting in FY06Last Ten Fiscal YearsOPERATING INDICATORS BY FUNCTION/PROGRAMTOWN OF HILLSBOROUGHYTBD (Yet to be determined)c Core classes only reported in FY11, FY12 and FY13- 126 -
Table 21.Function/Program 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014PoliceStations 2 2 2 2 2 2 2 2 2 2Patrol units 19 22 23 23 26 26 28 27 26 27Fire stations 1 1 1 1 1 1 1 1 1 1Refuse collectionCollection trucks >2 3 3 3 6 6 6 7 7 8Other public worksStreets (miles) - paved 31.50 30.84 32.89 32.89 36.15 36.15 36.15 36.15 36.15 36.15Streets (miles) - unpaved 0.86 0.86 0.86 0.86 0.73 0.73 0.73 0.73 0.73 0.91Streetlights 618 620 621 623 623 633 633 633 633 678Traffic signals (all state-owned) - - - - - - - - - - Parks and recreationAcreage b29.48 30.23 30.24 72.62 72.62 72.62 72.62 74.10 74.10 74.10 Playgrounds 1 3 3 4 4 4 4 4 4 4 WaterWater mains (miles) 120.0 121.0 126.0 146.8 146.8 147.0 147.0 148.0 148.0 150Fire hydrants 583 ^600 ^612 ^622 ^656 ^597 614 663 c621 619Storage capacity (thousands of gallons) *3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3000WastewaterSanitary sewers (miles) 64.0 64.0 70.0 86.4 86.4 86.4 86.4 89.0 93.0 93Storm sewers (miles) a- - - 36.0 36.0 73.0 73.0 73.0 73.0 75Treatment capacity (millions of gallons) 3.0 3.0 3.0 3.0 3.0 3.0 3.0 - 3.0 3Area (square miles) 5.370 5.390 5.520 5.530 5.740 5.740 5.740 5.740 5.760 5.80Sources: Various city departments.a Storm sewer data not available.b Includes two parks owned by the Town but are located outside of the city limits. c 2012 figure included private hydrants - 2013 actual number of hydrants from GIS^ Estimated* Added one million-gallon underground clear water storage tank in FY05 which took the place of a 200,000 gallon tank.> Includes brush and leaf trucks 2009 forwardNote: No capital asset indicators are available for the general government or library function.TOWN OF HILLSBOROUGHCAPITAL ASSET STATISTICS BY FUNCTION/PROGRAMLast Ten Fiscal Years- 127 -
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COMPLIANCE SECTION
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REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT
OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH
GOVERNMENT AUDITING STANDARDS
INDEPENDENT AUDITORS’ REPORT
To the Honorable Mayor, Members of the Board
of Town Commissioners, and the Town Manager
Town of Hillsborough, North Carolina
We have audited, 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 accompanying financial
statements of the governmental activities, business-type activities, the aggregate discretely
presented component units, each major fund and the aggregate remaining fund information of
the Town of Hillsborough (the “Town”) as of and for the year ended June 30, 2014, and the
related notes to the financial statements, which collectively comprise the Town’s basic financial
statements, and have issued our report thereon dated December 5, 2014.
Internal Control over Financial Reporting
In planning and performing our audit of the financial statements, we considered the Town’s
internal control over financial reporting (internal control) to determine the audit procedures that
are appropriate in the circumstances for the purpose of expressing our opinions on the financial
statements, but not for the purpose of expressing an opinion on the effectiveness of the Town’s
internal control. Accordingly, we do not express an opinion on the effectiveness of the Town’s
internal control.
Our consideration of internal control over financial reporting was for the limited purpose
described in the preceding paragraph and was not designed to identify all deficiencies in internal
control that might be material weaknesses or significant deficiencies, and therefore material
weaknesses or significant deficiencies may exist that were not identified. However, as
described in the accompanying schedule of findings and responses, we identified a certain
deficiency in internal control that we consider to be a material weakness.
A deficiency in internal control 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 and correct misstatements on a timely basis. A material weakness is a
deficiency or combination of deficiencies in internal control, such that there is a reasonable
possibility that a material misstatement of the entity’s financial statements will not be prevented
or detected and corrected on a timely basis. We consider the deficiency described in the
accompanying schedule of findings and responses to be a material weakness: 2014-1.
- 132 -
A significant deficiency is a deficiency or a combination of deficiencies in internal control that is
less severe than a material weakness, yet important enough to merit attention by those charged
with governance.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the Town of Hillsborough’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.
Town of Hillsborough’s Response to Finding
The Town of Hillsborough’s response to the findings identified in our audit is described in the
accompanying schedule of findings and responses. The Town’s response was not subjected to
the auditing procedures applied in the audit of the financial statements and, accordingly, we
express no opinion on it.
We noted certain matters that we reported to management of the Town of Hillsborough in a
separate letter dated December 5, 2014.
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and
compliance and the results of that testing, and not to provide an opinion on the effectiveness of
the entity’s internal control or on compliance. This report is an integral part of an audit
performed in accordance with Government Auditing Standards in considering the entity’s
internal control and compliance. Accordingly, this communication is not suitable for any other
purpose.
High Point, North Carolina
December 5, 2014
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REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE
TO ITS MAJOR FEDERAL PROGRAM AND INTERNAL CONTROL
OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133
AND THE STATE SINGLE AUDIT IMPLEMENTATION ACT
INDEPENDENT AUDITORS’ REPORT
To the Honorable Mayor, Members of the Board
of Town Commissioners, and the Town Manager
Town of Hillsborough, North Carolina
Report on Compliance for Its Major Federal Program
We have audited the Town of Hillsborough’s (“the Town”) compliance with the types of
compliance requirements described in the OMB Circular A-133 Compliance Supplement and the
Audit Manual for Governmental Auditors in North Carolina, issued by the Local Government
Commission, that could have a direct and material effect on the Town’s major federal program
for the year ended June 30, 2014. The Town’s major federal program is identified in the
summary of auditors’ results section of the accompanying schedule of findings and questioned
costs.
Management’s Responsibility
Management is responsible for compliance with the requirements of laws, regulations, contracts
and grants applicable to its federal program.
Auditors’ Responsibility
Our responsibility is to express an opinion on compliance for the Town’s major federal program
based on our audit of the types of compliance requirements referred to above. 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; 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 Town’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 on compliance for the
major federal program. However, our audit does not provide a legal determination on the
Town’s compliance.
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Opinion on the Major Federal Program
In our opinion, the Town complied, in all material respects, with the types of compliance
requirements referred to above that could have a direct and material effect on its major federal
program for the year ended June 30, 2014.
Report on Internal Control over Compliance
Management of the Town is responsible for establishing and maintaining effective internal
control over compliance with the types of compliance requirements referred to above. In
planning and performing our audit, we considered the Town’s internal control over compliance
with requirements that could have a direct and material effect on a major federal program to
determine the auditing procedures for the purpose of expressing our opinion on compliance for
each major federal program and to test and report on internal control over compliance in
accordance with OMB Circular A-133, 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 Town’s internal control over compliance.
A deficiency in internal control over compliance exists when the design or operation of a control
over compliance does not allow management or employees, in the normal course of performing
their assigned functions, to prevent or detect and correct noncompliance with a type of
compliance requirement of a federal program on a timely basis. A material weakness in internal
control over compliance is a deficiency or a combination of deficiencies in internal control over
compliance, such that there is a reasonable possibility that material noncompliance with a type
of compliance requirement of a federal program will not be prevented or detected and corrected
on a timely basis. A significant deficiency in internal control over compliance is a deficiency or
combination of deficiencies in internal control over compliance with a type of compliance
requirement of a federal program that is less severe than a material weakness in internal control
over compliance, yet important enough to merit attention by those charged with governance.
Our consideration of internal control over compliance was for the limited purpose described in
the first paragraph of this section and was not designed to identify all deficiencies in internal
control over compliance 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. However, material weaknesses may exist that have not been identified.
The purpose of this report on internal control over compliance is solely to describe the scope of
our testing of internal control over compliance and the results of that testing based on the
requirements of OMB Circular A-133. Accordingly, this report is not suitable for any other
purpose.
High Point, North Carolina
December 5, 2014
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REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE
TO ITS MAJOR STATE PROGRAM AND INTERNAL CONTROL
OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133
AND THE STATE SINGLE AUDIT IMPLEMENTATION ACT
INDEPENDENT AUDITORS’ REPORT
To the Honorable Mayor, Members of the Board
of Town Commissioners, and the Town Manager
Town of Hillsborough, North Carolina
Report on Compliance for Its Major State Program
We have audited the Town of Hillsborough’s (the “Town”) compliance with the types of
compliance requirements described in the Audit Manual for Governmental Auditors in North
Carolina, issued by the Local Government Commission, which could have a direct and material
effect on the Town’s major state program for the year ended June 30, 2014. The Town’s major
state program is identified in the summary of auditors’ results section of the accompanying
schedule of findings and questioned costs.
Management’s Responsibility
Management is responsible for compliance with the requirements of laws, regulations, contracts
and grants applicable to its federal program.
Auditors’ Responsibility
Our responsibility is to express an opinion on compliance for the Town’s major state program
based on our audit of the types of compliance requirements referred to above. 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; OMB Circular A-
133, Audits of States, Local Governments, and Non-Profit Organizations; 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 Town’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 on compliance for the
major state program. However, our audit does not provide a legal determination on the Town’s
compliance.
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Opinion on the Major State Program
In our opinion, the Town complied, in all material respects, with the types of compliance
requirements referred to above that could have a direct and material effect on its major state
program for the year ended June 30, 2014.
Report on Internal Control over Compliance
Management of the Town is responsible for establishing and maintaining effective internal
control over compliance with the types of compliance requirements referred to above. In
planning and performing our audit, we considered the Town’s internal control over compliance
with requirements that could have a direct and material effect on a major state program to
determine the auditing procedures for the purpose of expressing our opinion on compliance for
each major state program, and to test and report on internal control over compliance in
accordance with applicable sections of OMB Circular A-133 and the State Single Audit
Implementation Act, 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 Town’s internal control over compliance.
A deficiency in internal control over compliance exists when the design or operation of a control
over compliance does not allow management or employees, in the normal course of performing
their assigned functions, to prevent or detect and correct noncompliance with a type of
compliance requirement of a federal program on a timely basis. A material weakness in internal
control over compliance is a deficiency or a combination of deficiencies in internal control over
compliance, such that there is a reasonable possibility that material noncompliance with a type
of compliance requirement of a state program will not be prevented or detected and corrected
on a timely basis. A significant deficiency in internal control over compliance is a deficiency or
combination of deficiencies in internal control over compliance with a type of compliance
requirement of a state program that is less severe than a material weakness in internal control
over compliance, yet important enough to merit attention by those charged with governance.
Our consideration of internal control over compliance was for the limited purpose described in
the first paragraph of this section and was not designed to identify all deficiencies in internal
control over compliance 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. However, material weaknesses may exist that have not been identified.
The purpose of this report on internal control over compliance is solely to describe the scope of
our testing of internal control over compliance and the results of that testing based on the
requirements of applicable sections of OMB Circular A-133 and the State Single Audit
Implementation Act. Accordingly, this report is not suitable for any other purpose.
High Point, North Carolina
December 5, 2014
TOWN OF HILLSBOROUGH, NORTH CAROLINA Schedule 15
SCHEDULE OF FINDINGS AND QUESTIONED COSTS Page 1 of 4
Year Ended June 30, 2014
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I. Summary of Auditors’ Results
Financial Statements
Type of auditors’ report issued: Unmodified
Internal control over financial reporting:
Material weaknesses identified? X Yes No
Significant deficiencies 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
program:
Material weaknesses identified? Yes X No
Significant deficiencies identified that
are not considered to be material
weaknesses? Yes X None reported
Noncompliance material to federal
awards? Yes X No
Type of auditors’ report issued on
compliance for major federal programs: Unmodified
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 program:
CFDA Number Name of Federal Program or Cluster
66.458 Capitalization Grants for Clean Water
State Revolving Funds
Dollar threshold used to distinguish between
Type A and Type B programs: $ 300,000
Auditee qualified as low-risk auditee? Yes X No
TOWN OF HILLSBOROUGH, NORTH CAROLINA Schedule 15
SCHEDULE OF FINDINGS AND QUESTIONED COSTS Page 2 of 4
Year Ended June 30, 2014
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I. Summary of Auditors’ Results (Continued)
State Awards
Internal control over major state program:
Material weaknesses identified? Yes X No
Significant deficiencies identified that
are not considered to be material
weaknesses? Yes X None reported
Noncompliance material to state awards? Yes X No
Type of auditors’ report issued on
compliance for major state programs: Unmodified
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 state programs:
State Number Name of Program
DENR 23 PART F
TOWN OF HILLSBOROUGH, NORTH CAROLINA Schedule 15
SCHEDULE OF FINDINGS AND QUESTIONED COSTS Page 3 of 4
Year Ended June 30, 2014
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II. Financial Statement Findings
MATERIAL WEAKNESS
Finding 2014-1: Financial Accounting Closing Procedures
Criteria: Certain asset and liability accounts were not reconciled and adjusted as of June 30.
Condition: Monthly, quarterly, and annual account reconciliations were not being performed
and reviewed in a timely manner.
Effect: The lack of reconciliation of certain asset and liability accounts resulted in the
identification of several adjusting journal entries during the audit process.
Cause: The Town did not have a formalized review and reconciliation process for certain
balance sheet accounts.
Recommendation: We recommend the Town establish more effective review and
reconciliation policies and procedures such as reconciliations of all accounts on a routine
basis, whether monthly, quarterly or annually, based on the specific accounts and the nature
of activity during the year. Certain areas where we noted the need for more effective review
and reconciliation policies and procedures include the following balance sheet accounts:
Cash
Property taxes
Water and Sewer Fund accounts receivable and allowance for doubtful accounts
Miscellaneous receivables
Due from other governments
Capital assets retainage payable
Accrued liabilities
Long-term debt
View of Responsible Official and Planned Corrective Action: The Town is in the process of
formalizing its policies and procedures to ensure timely and accurate reconciliations are being
performed. The Town is also considering hiring additional accounting staff to be able to
implement a more formal process.
III. Federal Awards Findings and Questioned Costs
There were no findings related to the federal awards for the fiscal year ended June 30, 2014.
TOWN OF HILLSBOROUGH, NORTH CAROLINA Schedule 15
SCHEDULE OF FINDINGS AND QUESTIONED COSTS Page 4 of 4
Year Ended June 30, 2014
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IV. State Award Findings and Questioned Costs
There were no findings related to the state awards for the fiscal year ended June 30, 2014.
TOWN OF HILLSBOROUGH, NORTH CAROLINA Schedule 16
SCHEDULE OF PRIOR YEAR AUDIT FINDINGS
Year Ended June 30, 2013
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There were no prior year audit findings.
Schedule 17
Federal Federal
CFDA/ (Direct and
State Pass-Through) State Local
Grantor/Program Title Number Grant Number Expenditures Expenditures Expenditures
Federal grants:
U.S. Environmental Protection Agency
Passed through the NC Department of
Environmental and Natural Resources
Capitalization Grant for Clean Water State
Revolving Fund 66.458 E-SRF-T-10-0269 18,390,316$ -$ -$
Total U.S. Environmental Protection Agency 18,390,316 - -
U.S. Department of Homeland Security
Passed through the NC Department of
Public Safety - Division of Emergency Assistance
Federal Emergency Management Agency
Public Assistance Program 97.036 101,646 33,527 -
Total U.S. Department of Homeland Security 101,646 33,527 -
Total assistance - federal programs 18,491,962 33,527 -
State grants:
NC Department of Transportation
Direct Programs
Powell Bill DOT 4 - 182,284 -
Total NC Department of Transportation - 182,284 -
NC Department of Environmental and Natural Resources
Direct Programs
Solid Waste Management Outreach Program 5823 - 58,425 64,267
PART F DENR 23 4848 - 425,000 425,000
Total NC Department of Environmental and
Natural Resources - 483,425 489,267
Total assistance - state programs - 665,709 489,267
Total assistance 18,491,962$ 699,236$ 489,267$
Basis of Presentation
Loans Outstanding
Pass-Through
CFDA Grantor's Amount
Program Title Number Number Outstanding
Capitalization Grant for State Revolving Fund 66.458 E-SRF-T-10-0269 17,729,408$
The accompanying schedule of expenditures of federal and state awards includes the federal and
state grant activity of the Town of Hillsborough 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.
TOWN OF HILLSBOROUGH, NORTH CAROLINA
SCHEDULE OF EXPENDITURES OF
FEDERAL AND STATE AWARDS
Year Ended June 30, 2014
The Town of Hillsborough had the following loan balances outstanding at June 30, 2014. These
loan balances outstanding are also included in the federal expenditures presented in the schedule.
NOTES TO THE SCHEDULE OF EXPENDITURES OF FEDERAL AND STATE AWARDS
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