HomeMy Public PortalAboutComprehensive Annual Financial Report Year Ended June 30, 2013Comprehensive Annual Financial Report
Year Ended
June 30, 2013
Town of Hillsborough,
North Carolina
Tom Stevens
Mayor
Eric J. Peterson
Town Manager
Carolyn J. Glasgow
Interim Finance Director
Town of Hillsborough Finance Department
Judy M. Root, Accounting Technician
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
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 ............................................................. 69
A-2 Schedule of Employer Contributions .................................................... 70
Notes to the Required Schedules ........................................................ 70
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 ............................................................. 71
B-2 Schedule of Employer Contributions .................................................... 72
Notes to the Required Schedules ......................................................... 72
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 .................................. 75
2 Combining Balance Sheet - Nonmajor Governmental Funds .............. 79
3 Combining Statement of Revenues, Expenditures and
Changes in Fund Balances - Nonmajor Governmental Funds ........... 80
4 Schedule of Revenues and Expenditures Compared with
Budget - Gold Park/Riverwalk Project Fund ....................................... 81
5 Schedule of Revenues and Expenditures Compared with
Budget - Riverwalk Phase II Capital Project Fund .............................. 82
6 Schedule of Revenues and Expenditures Compared with
Budget - Nash Street Sidewalk Capital Projects Fund ....................... 83
7 Schedule of Revenues and Expenditures Compared with
Budget - Riverwalk Phase III Capital Project Fund ............................. 84
8 Schedule of Revenues and Expenditures Compared with
Budget - Riverwalk CMAQ Capital Project Fund ................................ 85
9 Schedule of Revenues and Expenditures Compared with
Budget - Nonmajor General Capital Projects Fund ............................ 86
10 Schedule of Revenues and Expenditures Compared with
Budget - Nonmajor General Capital Reserve Fund ............................ 87
Enterprise Fund
11 Schedule of Revenues Compared with Budget (Non-GAAP) -
Water and Sewer Fund ....................................................................... 88
12 Schedule of Expenditures Compared with Budget (Non-
GAAP) - Water and Sewer Fund ........................................................ 89
13 Schedule of Revenues and Expenditures Compared with
Budget (Non-GAAP) - Water and Sewer Capital Projects
Fund.................................................................................................... 92
14 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.
15 Schedule of Ad Valorem Taxes Receivable ............................................. 97
16 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 Levies and Collections .................................................... 112
10 Principal Property Tax Payers .............................................................. 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
COMPLIANCE SECTION
Report on Compliance and on Internal Control over Financial
Reporting 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
Town of Hillsborough, North Carolina
TABLE OF CONTENTS (Continued)
Schedule Page No.
COMPLIANCE SECTION (Continued)
17 Schedule of Findings and Questioned Costs ........................................... 136
18 Schedule of Prior Year Audit Findings ..................................................... 137
19 Schedule of Expenditures of Federal and State Awards ......................... 138
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
Carolyn J. Glasgow, Interim Finance Director
Emily Bradford, Budget Officer
Kenneth P. Keel, Town Engineer
Donna F. Armbrister, Town Clerk/Personnel Officer
Duane Hampton, Police Chief
Margaret A. Hauth, Planning Director
Ken Hines, Public Works Director
David Wisely, Fleet Maintenance Supervisor
Jerry Wagner, Fire Marshal
David Moore, Safety Officer
Robert Hornik, Town Attorney
Town of Hillsborough, North Carolina
- ii -
ORGANIZATIONAL CHART
- iii -
January 23, 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, 2013, 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 2013. 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 6,295 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, non-partisan 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 General
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 1.152 MGD. The Town’s water system serves a total population of 13,565, 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 0.902 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 43.05% of Hillsborough’s tax
base is commercial in nature. 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
2013, was 6.5% for Orange County, while the state and national rates were 8.8% and 7.6%,
respectively.
The Town’s economy is expected to remain reasonably 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. 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.
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.
In recent years, the Town has experienced limited growth to its property tax base and
water/sewer usage, because very little new construction has occurred. Both of these factors
have resulted in stagnating bases for revenue in the General and Water/Sewer Funds. The
impact of the recession has magnified this problem, thus making preparation of the FY13 budget
a challenging task. With little new development occurring in FY12 and again in FY13, forecasts
for primary sources of revenue (e.g., property tax, sales tax, water, and sewer sales) were
calculated using little or no growth factor. Thus, in order to hold the line and/or minimize the
impact on the cost of services to citizens, expenses again were tightly controlled. Just like
individuals and businesses in recent years, the Town trimmed costs, improved efficiency, and
deferred less essential needs to balance its budget.
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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 fifteenth 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 completion is expected 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.
• Street repaving and repair ($612,640 in FY13 and almost $2 million from FYs13-16) - The
Town has about $150,000 in state gas tax funds available for street repaving each year.
The 2008 Pavement Condition Survey, produced in January 2009, included several key
findings:
o The Town’s streets were in overall good condition, with an average rating of 80.7.
The average rating for small North Carolina municipalities is 80.
o Town streets improved significantly from the 2004 rating of 70.
o Of the Town’s streets, 73 percent rated good/very good; 8.5 percent rated fair;
18.5 percent rated poor/very poor.
o 34 percent or 12.2 miles of the Town’s 36.2 lane miles needed some level of
repair.
o The January 2009 findings were: (1) $905,000 or $25,000 per lane mile of
repaving and repair needs should take place to address key needs and avoid
escalating repair costs. (2) Thereafter, $320,000 per year should be spent to
repair/repave 2.4 miles annually to maintain streets. This is a large increase,
almost doubling, the amount previously spent during annual repaving projects.
• Riverwalk Phase II ($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, ending near Cameron Street.
This assumes receiving a $425,000 Parks and Recreation Trust Fund grant, securing
financing through an installment-purchase agreement, and beginning construction in
2013.
• Congestion Mitigation and Air Quality (CMAQ) Grant Sidewalk, Pedestrian Safety &
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. FY13 cost of $124,000 to leverage $496,000 of CMAQ
funds.
- vii -
DEBT ADMINISTRATION
Hillsborough’s debt burden is below average, with net overall debt at $1,243 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 7.67% of General Fund
expenditures. All bonded debt is recorded in the Water and Sewer Fund and amounted to paid
$14,700 in FY13 - $0 outstanding as of June 30, 2013. Bond debt service costs make up less
than 1% (0.2%) of total expenditures in the Water and Sewer Fund, while overall debt payment is
17.10% of expenditures.
FINANCIAL POLICIES
The Town of Hillsborough has adopted a policy to maintain the General Fund fund balance level
between 20% to 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, 2012. 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 19 consecutive years (fiscal years ended 1994-
2012). We believe our current report continues to conform to the Certificate of Achievement
program requirements, and we are submitting 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,
Eric J. Peterson Carolyn Glasgow
Town Manager Interim 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, 2013, 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, 2013, 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.
Restatement
As discussed in Note 7 to the financial statements, the beginning net position was restated due
to the implementation of a new accounting pronouncement. Our opinion is not modified with
respect to this matter.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that
Management’s Discussion and Analysis and the Law Enforcement Officers’ Special Separation
Allowance and the Other Post-Employment Benefits Schedules of Funding Progress and
Employer Contributions on pages 5 through 16 and pages 69 through 72, 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, 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
January 23, 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.
January 23, 2014
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TOWN OF HILLSBOROUGH, NORTH CAROLINA
MANAGEMENT’S DISCUSSION AND ANALYSIS
June 30, 2013
- 5 -
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, 2013. 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 $45,638,363 (net position).
• The Town’s total net position increased by $2,931,049 primarily due to infrastructure
improvements 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 $6,429,024, a net increase of $542,771 in comparison to the prior year. This is
the result of increased revenues over budget. Approximately 28.6% of this total amount or
$1,836,047 is non-spendable, or restricted.
• At the end of the current fiscal year, unassigned fund balance for the General Fund was
$4,151,725 or 59.33% of total General Fund expenditures, including other financing uses, for
the fiscal year.
• The Town’s total debt increased by $9,359,984 during the current fiscal year. The Town
acquired $10,747,713 in new debt, for water and sewer plant upgrades, and retired
$1,387,729 in existing debt during the year.
• The Town maintained its A2 (Moody’s Investor Service) and A (Standard & Poor’s) bond
ratings for the 19th 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, 2013
- 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 8) 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 three parts to the Fund Financial
Statements: (1) the governmental funds statements; (2) the budgetary comparison statements; and
(3) the proprietary fund statements.
The next section of the basic financial statements is the notes 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, 2013
- 7 -
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. Measuring net
position is one way to evaluate the Town’s financial condition.
The government-wide statements are divided into two categories: (1) governmental activities and
(2) business-type activities. 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 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 two categories:
governmental funds and proprietary funds.
Governmental Funds - Governmental funds are used to account for those functions reported as
governmental activities in the government-wide financial statements. Most of the 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 government 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, 2013
- 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.
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 65 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 69 of this report.
TOWN OF HILLSBOROUGH, NORTH CAROLINA
MANAGEMENT’S DISCUSSION AND ANALYSIS
June 30, 2013
- 9 -
2013 2012 2013 2012 2013 2012
Current assets 7,183,439$ 6,718,232$ 8,657,753$ 8,204,653$ 15,841,192$ 14,922,885$
Capital assets, net 9,832,147 9,083,982 46,922,155 36,958,131 56,754,302 46,042,113
Total assets 17,015,586 15,802,214 55,579,908 45,162,784 72,595,494 60,964,998
Long-term liabilities
outstanding 2,929,625 3,324,937 20,205,653 10,463,963 23,135,278 13,788,900
Other liabilities 1,113,188 988,158 2,681,756 3,417,584 3,794,944 4,405,742
Total liabilities 4,042,813 4,313,095 22,887,409 13,881,547 26,930,222 18,194,642
Deferred inflows of
resources 26,909 63,042 - - 26,909 63,042
Net position:
Net investment in capital asset 6,723,808 5,870,981 26,017,050 26,632,441 32,740,858 32,503,422
Restricted 1,831,742 1,570,832 2,590,989 1,974,677 4,422,731 3,545,509
Unrestricted 4,390,314 3,984,264 4,084,460 2,674,119 8,474,774 6,658,383
Total net position 12,945,864$ 11,426,077$ 32,692,499$ 31,281,237$ 45,638,363$ 42,707,314$
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 $45,638,363 as of June 30, 2013. The Town’s net position increased by $2,931,049 for
the fiscal year ended June 30, 2013. However, the largest portion (71.74%) 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, $4,422,731 (9.69%), represents
resources that are subject to external restrictions on how they may be used. The remaining balance
of $8,474,774 (18.57%) is unrestricted and may be used to meet the Town’s ongoing obligation to
citizens and creditors.
TOWN OF HILLSBOROUGH, NORTH CAROLINA
MANAGEMENT’S DISCUSSION AND ANALYSIS
June 30, 2013
- 10 -
Several particular aspects of the Town’s financial operations positively influenced the total
unrestricted governmental net position:
• Continued diligence in the collection of property taxes by maintaining a tax collection
percentage of 97.3%, which is comparable to the 2012 statewide average of 97.5%.
• Numerous cost savings measures implemented by all departments.
• Many departments finishing the year with expenditures well under what was budgeted at the
beginning of the fiscal year.
• Increases to the property tax, water, and sewer rates yield stronger annual operat ing
revenues.
• Continued low cost of debt due to the Town’s good bond rating and low interest rates.
The Town of Hillsborough’s Changes in Net Position
Figure 3
2013 2012 2013 2012 2013 2012
Revenues:
Program revenues:
Charges for services 341,181$ 179,553$ 7,686,356$ 7,366,996$ 8,027,537$ 7,546,549$
Operating grants and contributions 175,347 228,457 - - 175,347 228,457
Capital grants and contributions 334,525 203,301 - 100,000 334,525 303,301
General revenues:
Property taxes 5,142,069 4,691,345 - - 5,142,069 4,691,345
Local option sales taxes 1,072,463 1,032,240 - - 1,072,463 1,032,240
Gross receipts on short-term rental
property 9,535 8,818 - - 9,535 8,818
Privilege licenses 96,469 44,925 - - 96,469 44,925
Motor vehicle license fees 47,054 34,427 - - 47,054 34,427
Solid waste disposal 3,904 4,286 - - 3,904 4,286
Unrestricted intergovernmental
revenues 734,401 651,381 - - 734,401 651,381
Other 30,263 20,998 4,177 6,869 34,440 27,867
Total revenues 7,987,211 7,099,731 7,690,533 7,473,865 15,677,744 14,573,596
Expenses:
General government 1,301,963 1,402,445 - - 1,301,963 1,402,445
Public safety 3,395,465 2,597,911 - - 3,395,465 2,597,911
Transportation 497,540 1,510,493 - - 497,540 1,510,493
Environmental protection 580,312 546,612 - - 580,312 546,612
Economic and physical development 485,977 243,163 - - 485,977 243,163
Community activities and projects 64,878 40,996 - - 64,878 40,996
Parks and recreation 36,267 51,500 - - 36,267 51,500
Interest on long-term debt 105,022 104,518 - - 105,022 104,518
Water and sewer - - 6,279,271 6,151,253 6,279,271 6,151,253
Total expenses 6,467,424 6,497,638 6,279,271 6,151,253 12,746,695 12,648,891
Transfers - (403,031) - 403,031 - -
Increase in net position 1,519,787 199,062 1,411,262 1,725,643 2,931,049 1,924,705
Beginning Net Position,
as previously reported 11,426,077 11,227,015 31,659,130 29,555,594 43,085,207 40,782,609
Prior period adjustment - - (377,893) - (377,893) -
Beginning Net Position, restated 11,426,077 11,227,015 31,281,237 29,555,594 42,707,314 40,782,609
Net position, June 30 12,945,864$ 11,426,077$ 32,692,499$ 31,281,237$ 45,638,363$ 42,707,314$
Business-Type Activities TotalGovernmental Activities
TOWN OF HILLSBOROUGH, NORTH CAROLINA
MANAGEMENT’S DISCUSSION AND ANALYSIS
June 30, 2013
- 11 -
Governmental Activities. Governmental activities increased the Town’s net position by $1,519,787,
thereby accounting for 51.85% of the total growth in the net position of the Town of Hillsborough. Key
elements of this increase are as follows:
• Increase in charges for services and property tax revenue.
• Cost savings measures, deferments and cuts made to reduce operating cost.
Business-Type Activities. Business-type activities increased the Town’s net position by
$1,411,262, accounting for 48.15% of the total growth in the government’s net position. Key
elements of this increase are as follows:
• An increase in water revenue resulting from a water rate increase of 5.9% and an increase in
sewer revenue resulting from a sewer rate increase of 8.8%.
• Cost savings measures, deferments and cuts taken to reduce operating costs.
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 $4,661,773, while total fund
balance reached $5,601,872. 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 66.6% of general fund expenditures, while total fund balance represents 80.1 % of
the same amount.
At June 30, 2013, the governmental funds of the Town reported a combined fund balance of
$6,429,024, with a net increase in fund balance of $542,771. This increase is the result of additional
revenues from increasing property tax rates.
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.
TOWN OF HILLSBOROUGH, NORTH CAROLINA
MANAGEMENT’S DISCUSSION AND ANALYSIS
June 30, 2013
- 12 -
The difference between the original budget and the final budget is attributed in part to the following:
• $232,381 to fund Riverwalk Phase III land acquisition.
• $30,000 was saved by delaying environmental assessment on rail station site.
• $68,229 was saved in property and liability and workers’ compensation premiums.
• $101,392 was saved with lower than anticipated street resurfacing costs
Actual operating revenues for the General Fund were more than the budgeted amount by $496,166.
Expenditures were $596,889 less than budgeted, primarily due to delayed hiring for vacant positions;
requesting that departments take action to reduce operating expenses, fuel usage, and
travel/training.
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 $4,084,460, a 33.83% or $1,032,448 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 $1,411,262. 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, 2013 totals $56,730,754 (net of accumulated depreciation). These assets
include buildings, land, machinery and equipment, park facilities and vehicles.
Major capital asset transactions during the year include the following:
• The partial construction of the Wastewater Treatment Plant ($5,222,326).
• The partial reconstruction of Elizabeth Brady Pump Station ($91,926).
• The partial reconstruction of Riverside and Crawford water lines ($137,075).
• Relined 5,308 feet of sewer lines and relined seven manholes that were deteriorated and
allowing significant inflow/infiltration ($278,910).
• Acquisition of Riverwalk Phase III land ($232,381).
TOWN OF HILLSBOROUGH, NORTH CAROLINA
MANAGEMENT’S DISCUSSION AND ANALYSIS
June 30, 2013
- 13 -
The Town of Hillsborough’s Capital Assets
(Net of Accumulated Depreciation)
Figure 4
2013 2012 2013 2012 2013 2012
Land 2,672,428$ 2,371,312$ 6,005,443$ 6,005,443$ 8,677,871$ 8,376,755$
Construction in progress 559,883 1,831,436 17,982,370 8,468,492 18,542,253 10,299,928
Buildings and improvements 2,951,288 3,086,734 2,163,115 2,211,822 5,114,403 5,298,556
Plant and distribution systems - - 19,992,834 19,500,875 19,992,834 19,500,875
Infrastructure 2,647,821 728,326 352,683 362,199 3,000,504 1,090,525
Equipment 100,053 103,291 322,361 369,348 422,414 472,639
Vehicles 877,126 962,883 103,349 39,952 980,475 1,002,835
Total 9,808,599$ 9,083,982$ 46,922,155$ 36,958,131$ 56,730,754$ 46,042,113$
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, 2013, the Town of Hillsborough had total bonded debt outstanding
of $14,000, all of which is backed by the full faith and credit of the Town. The remainder of the
Town’s debt represents revolving loans payable and installment purchases secured solely by
revenues of the project or specified purchases.
The Town of Hillsborough’s Outstanding Debt
General Obligation Bonds, Revolving Loans Payable and Installment Purchases
Figure 5
2013 2012 2013 2012 2013 2012
General obligation bonds -$ -$ -$ 14,000$ -$ 14,000$
Revolving loan payable - - 16,247,369 5,575,878 16,247,369 5,575,878
Deferred amount on
refundings - - (69,423) (84,570) (69,423) (84,570)
Installment purchases 3,084,791 3,440,001 4,914,368 5,871,812 7,999,159 9,311,813
Total 3,084,791$ 3,440,001$ 21,092,314$ 11,377,120$ 24,177,105$ 14,817,121$
Governmental Activities Business-Type Activities Total
The Town’s total debt increased by $9,359,984 during the current fiscal year, primarily due to the
$10,747,713 increase in revolving loans payable for water and sewer plant upgrades.
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, 2013
- 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 $57,900,392. The Town does not
have any bonds authorized, but unissued at June 30, 2013.
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 6.5% as of June 30, 2013, is
well below the state average of 8.8%.
• Water/sewer rate increase. In the new fiscal year, beginning July 1, 2013, the water rate
remained the same and the Town increased the sewer rate by 8.8%.
• Increase in property tax rate. The property tax rate will not increase in FY14.
• No general obligation debt in the General Fund.
Budget Highlights for the Fiscal Year Ending June 30, 2014
Governmental Activities: With little new development occurring in FY13 and only a slight increase
expected for FY14, forecasts for the primary sources of revenue (e.g., property and sales tax) were
calculated using little or no growth factor. Thus, in order to hold the line and minimize the cost of
services to citizens, expenses again will be tightly controlled. While the Town was able to make
sufficient cuts and deferments in spending, the budget 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 6.73% to
$7,583,110 over FY13 original budget. Appropriated fund balance of $330,206 was recommended to
balance the FY 2014 budget. The largest increments are in employee compensation, including
funding compensation and benefits adjustments, and street repair.
No position eliminations are planned after reductions of General Fund staff over the past two fiscal
years.
TOWN OF HILLSBOROUGH, NORTH CAROLINA
MANAGEMENT’S DISCUSSION AND ANALYSIS
June 30, 2013
- 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 2 of the plan, the Town anticipates
spending $594,000 to improve the highest priority streets.
Other budget highlights in brief:
• High-deductible health insurance alternative offered at no cost to employees, along with initial
monies for deposit to health savings account. Employees who elect to stay on existing health
plan continue to pay 5 percent of the cost.
• Merit system budgeted at one-half (50%) of full funding or 2.2% average raise for employees.
• Work to continue on Riverwalk Phase II.
Business-Type Activities: Water rates will not increase in 2014, 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
14.92% to $8,423,526 over FY 2013 original budget. Actual expenditures for FY 2013 were $1,671
over budget, primarily due to paying cash for the Lake Ben Johnston dredging and dam repairs
instead of financing as planned. 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 is scheduled for
completion in January 2014.
TOWN OF HILLSBOROUGH, NORTH CAROLINA
MANAGEMENT’S DISCUSSION AND ANALYSIS
June 30, 2013
- 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:
• Water system maintenance project ($950,000 over ten years).
• 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.
• Wetlands monitoring at the West Fork Eno Reservoir ($30,000) required for the next three
years.
• Merit system budgeted at one-half (50%) of full funding or a 2.2% average raise for
employees.
Requests for Information
This report is designed to provide an overview of the Town’s finances. Questions concerning any of
the information found in this report or requests for additional information should be directed to the
Director of Finance, Town of Hillsborough, 137 North Churton Street, Post Office Box 429,
Hillsborough, North Carolina 27278.
- 17 -
BASIC FINANCIAL STATEMENTS
- 18 -
THIS PAGE LEFT INTENTIONALLY BLANK.
Exhibit 1
The accompanying notes are an integral part of this statement.
- 19 -
Hillsborough
Tourism Hillsborough
Governmental Business-Type Development Tourism
ASSETS Activities Activities Total Authority Board
Current assets:
Cash and investments 5,333,920$ 4,794,267$ 10,128,187$ 47,094$ -$
Receivables:
Taxes receivable, net 172,676 - 172,676 - -
Accrued interest receivable, property
taxes 19,192 - 19,192 - -
Accounts receivable, net 30,432 1,080,607 1,111,039 - -
Due from other governments 727,018 - 727,018 - -
Due from primary government - - - 6,169 198,777
Prepaid expenses 4,305 4,681 8,986 - -
Restricted assets
Cash and investments 895,896 2,778,198 3,674,094 - -
Total current assets 7,183,439 8,657,753 15,841,192 53,263 198,777
Noncurrent assets:
Net pension asset 23,548 - 23,548 - -
Capital assets:
Land and construction-in-progress 3,232,311 23,987,813 27,220,124 - -
Other capital assets, net of
depreciation 6,576,288 22,934,342 29,510,630 - -
Total capital assets 9,808,599 46,922,155 56,730,754 - -
Total noncurrent assets 9,832,147 46,922,155 56,754,302 - -
Total assets 17,015,586 55,579,908 72,595,494 53,263 198,777
LIABILITIES
Current liabilities:
Accounts payable and accrued liabilities 330,692 1,074,791 1,405,483 - 14,401
Customer deposits - 386,494 386,494 - -
Accrued interest payable 33,381 40,495 73,876 - -
Due to component units 204,946 - 204,946 - -
Current portion of long-term liabilities 544,169 1,179,976 1,724,145 - -
Total current liabilities 1,113,188 2,681,756 3,794,944 - 14,401
Long-term liabilities:
Due in more than one year 2,929,625 20,205,653 23,135,278 - -
Total liabilities 4,042,813 22,887,409 26,930,222 - 14,401
DEFERRED INFLOWS OF RESOURCES
Unearned revenues 26,909 - 26,909 - -
NET POSITION
Net investment in capital assets 6,723,808 26,017,050 32,740,858 - -
Restricted for:
Stabilization by state statute 935,846 - 935,846 6,169 198,777
Streets 179,842 - 179,842 - -
Capital projects 716,054 - 716,054 - -
Water and sewer projects - 2,590,989 2,590,989 - -
Unrestricted 4,390,314 4,084,460 8,474,774 47,094 (14,401)
Total net position 12,945,864$ 32,692,499$ 45,638,363$ 53,263$ 184,376$
TOWN OF HILLSBOROUGH, NORTH CAROLINA
STATEMENT OF NET POSITION
June 30, 2013
Primary Governement Component Units
The accompanying notes are an integral part of this statement.
- 20 -
Operating Capital
Charges Grants and Grants and
Functions/Programs Expenses for Services Contributions Contributions
Primary governement:
Governmental activities:
General government 1,301,963$ 326,565$ 4,500$ 30,525$
Public safety 3,395,465 11,426 - -
Transportation 497,540 - 170,847 15,000
Environmental protection 580,312 - - -
Economic and physical development 485,977 - - -
Community activities and projects 64,878 - - -
Parks and recreation 36,267 3,190 - 289,000
Interest on long-term obligations 105,022 - - -
Total governmental activities 6,467,424 341,181 175,347 334,525
Business-type activities:
Water and sewer 6,279,271 7,686,356 - -
Total business-type activities 6,279,271 7,686,356 - -
Total primary government 12,746,695$ 8,027,537$ 175,347$ 334,525$
Component units:
Hillsborough Tourism Development Authority -$ -$ -$ -$
Hillsborough Tourism Board 248,338 - - -
Total component units 248,338$ -$ -$ -$
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 of year, previously reported
Prior period adjustment (Note 7)
Net position - beginning of year, restated
Net position - ending
Program Revenues
TOWN OF HILLSBOROUGH, NORTH CAROLINA
STATEMENT OF ACTIVITIES
Year Ended June 30, 2013
Exhibit 2
- 21 -
Tourism
Governmental Business-Type Development Tourism
Activities Activities Total Authority Board
(940,373)$ -$ (940,373)$
(3,384,039) - (3,384,039)
(311,693) - (311,693)
(580,312) - (580,312)
(485,977) - (485,977)
(64,878) - (64,878)
255,923 - 255,923
(105,022) - (105,022)
(5,616,371) - (5,616,371)
- 1,407,085 1,407,085
- 1,407,085 1,407,085
(5,616,371) 1,407,085 (4,209,286)
-$ -$
- (248,338)
- (248,338)
5,142,069 - 5,142,069 - -
1,072,463 - 1,072,463 - -
9,535 - 9,535 - -
96,469 - 96,469 - -
47,054 - 47,054 - -
3,904 - 3,904 - -
734,401 - 734,401 - -
3,874 4,177 8,051 - 21
- - - 53,263 263,355
26,389 - 26,389 - -
7,136,158 4,177 7,140,335 53,263 263,376
- - - - -
7,136,158 4,177 7,140,335 53,263 263,376
1,519,787 1,411,262 2,931,049 53,263 15,038
11,426,077 31,659,130 43,085,207 - 169,338
- (377,893) (377,893) - -
11,426,077 31,281,237 42,707,314 - 169,338
12,945,864$ 32,692,499$ 45,638,363$ 53,263$ 184,376$
Primary Government Component Units
Net (Expense) Revenue and Changes in Net Position
Exhibit 3
The accompanying notes are an integral part of this statement.
- 22 -
Total Total
Nonmajor Governmental
ASSETS General Funds Funds
Cash and investments 5,192,448$ 141,472$ 5,333,920$
Taxes receivable 172,676 - 172,676
Accounts receivable, net 30,432 - 30,432
Prepaid items 4,253 52 4,305
Due from other governments 727,018 - 727,018
Restricted assets
Cash and investments 179,842 716,054 895,896
Total assets 6,306,669$ 857,578$ 7,164,247$
LIABILITIES, DEFERRED INFLOWS OF
RESOURCES AND FUND BALANCES
LIABILITIES
Accounts payable and accrued liabilities 300,266$ 30,426$ 330,692$
Due to component units 204,946 - 204,946
Total liabilities 505,212 30,426 535,638
DEFERRED INFLOWS OF RESOURCES
Property tax receivable 172,676 - 172,676
Unearned revenue 26,909 - 26,909
Total deferred inflows of resources 199,585 - 199,585
FUND BALANCES
Nonspendable
Prepaid Items 4,253 52 4,305
Restricted for:
Stabilization by state statute 935,846 - 935,846
Streets 179,842 - 179,842
Capital projects - 716,054 716,054
Committed for:
Capital projects - 131,490 131,490
Assigned for:
Subsequent year’s expenditures 330,206 - 330,206
Unassigned 4,151,725 (20,444) 4,131,281
Total fund balances 5,601,872 827,152 6,429,024
Total liabilities, deferred inflows of
resources and fund balances 6,306,669$ 857,578$
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.9,808,599
Liabilities for earned but deferred revenues in fund
statements, including accrued interest receivable
on property taxes.191,868
Some assets, including net pension asset
are reported in governmental activities, but
not reported in the fund statements.23,548
Some liabilities, including accrued interest, are not
due and payable in the current period and
therefore are not reported in the funds.(3,507,175)
Net position of governmental activities 12,945,864$
TOWN OF HILLSBOROUGH, NORTH CAROLINA
BALANCE SHEET - GOVERNMENTAL FUNDS
June 30, 2013
Exhibit 4
Page 1 of 2
The accompanying notes are an integral part of this statement.
- 23 -
Total Total
Nonmajor Governmental
General Funds Funds
Revenues
General revenues
Ad valorem taxes 5,135,469$ -$ 5,135,469$
Other taxes and licenses 1,229,425 - 1,229,425
Unrestricted intergovernmental revenues 734,401 - 734,401
Restricted intergovernmental revenues 209,773 98,234 308,007
Investment earnings 3,488 386 3,874
Other general revenues 34,079 - 34,079
Total general revenues 7,346,635 98,620 7,445,255
Functionally related revenues
Use and rental fees 337,991 - 337,991
Total revenues 7,684,626 98,620 7,783,246
Expenditures
General government 1,122,514 - 1,122,514
Public safety 3,134,327 - 3,134,327
Transportation 793,656 217,901 1,011,557
Environmental protection 471,880 - 471,880
Economic and physical development 485,977 - 485,977
Community activities and projects 64,878 - 64,878
Parks and recreation 36,267 394,564 430,831
Debt service
Principal retirement 407,246 - 407,246
Interest and fiscal charges 111,265 - 111,265
Total expenditures 6,628,010 612,465 7,240,475
Revenues over (under) expenditures 1,056,616 (513,845) 542,771
Other financing sources (uses)
Transfer to Nash Street Sidewalk Fund (7,246) - (7,246)
Transfers from General Fund - 369,627 369,627
Transfer to Riverwalk Phase III Fund (238,381) - (238,381)
Transfer to Riverwalk - CMAC Fund (124,000) - (124,000)
Total other financing sources (uses)(369,627) 369,627 -
Net change in fund balances 686,989 (144,218) 542,771
Fund balances, beginning 4,914,883 971,370 5,886,253
Fund balances, ending 5,601,872$ 827,152$ 6,429,024$
Year Ended June 30, 2013
TOWN OF HILLSBOROUGH, NORTH CAROLINA
STATEMENT OF REVENUES, EXPENDITURES AND
CHANGES IN FUND BALANCE - GOVERNMENTAL FUNDS
Exhibit 4
Page 2 of 2
The accompanying notes are an integral part of this statement.
- 24 -
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 542,771$
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 ($997,107) exceeded depreciation ($538,085) in the current
period.459,022
The net effect of transactions involving capital asset donated to the Town.304,000
The net effect of transactions involving capital asset disposals is to decrease net
assets.(38,405)
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.6,600
Change in deferred revenues related to grants receivable.(106,635)
The repayment of the principal of long-term debt ($407,246) consumes the
current financial resources of governmental funds. This transaction has no effect
on net position.407,246
Some expenses reported in the statement of activities do not require the use of
current financial resources and, therefore, are not reported as expenditures in
governmental funds.
Change in accrued and prepaid interest on general long-term debt 6,244
Compensated absences (20,879)
Net pension obligation (4,328)
Net OPEB obligation (35,849)
Changes in net position of governmental activities 1,519,787$
TOWN OF HILLSBOROUGH, NORTH CAROLINA
STATEMENT OF REVENUES, EXPENDITURES AND
CHANGES IN FUND BALANCE - GOVERNMENTAL FUNDS
Year Ended June 30, 2013
Exhibit 5
The accompanying notes are an integral part of this statement.
- 25 -
Variance
Original Final Positive
Budget Budget Actual (Negative)
Revenues
General revenues
Ad valorem taxes 4,998,600$ 4,998,600$ 5,135,469$ 136,869$
Other taxes and licenses 1,061,500 1,061,500 1,229,425 167,925
Unrestricted intergovernmental revenues 530,000 530,000 734,401 204,401
Restricted intergovernmental revenues 165,150 247,254 209,773 (37,481)
Investment earnings 2,000 2,000 3,488 1,488
Other general revenues 6,000 11,115 34,079 22,964
Total general revenues 6,763,250 6,850,469 7,346,635 496,166
Functionally related revenues
Use and rental fees 127,500 187,500 337,991 150,491
Total revenues 6,890,750 7,037,969 7,684,626 646,657
Expenditures
General government 1,342,077 1,454,620 1,227,258 227,362
Public safety 3,248,613 3,475,968 3,260,380 215,588
Transportation 1,027,691 1,037,419 793,656 243,763
Environmental protection 619,352 634,450 585,561 48,889
Economic and physical development 225,000 250,000 485,977 (235,977)
Community activities and projects 246,858 200,143 124,405 75,738
Parks and recreation 295,307 172,299 150,773 21,526
Contingency 100,000 - - -
Total expenditures 7,104,898 7,224,899 6,628,010 596,889
Revenues over (under) expenditures (214,148) (186,930) 1,056,616 1,243,546
Other financing sources (uses)
Transfer to Riverwalk Phase II Fund - (1,858) - 1,858
Transfer to Nash Street Sidewalk Fund - (7,246) (7,246) -
Transfer from General Capital Reserve Fund 126,054 126,054 - (126,054)
Transfer to Riverwalk Phase III Fund - (238,381) (238,381) -
Transfer to Riverwalk - CMAC Fund - (124,000) (124,000) -
Total other financing sources (uses)126,054 (245,431) (369,627) (124,196)
Appropriated fund balance 88,094 432,361 - (432,361)
Net change in fund balance -$ -$ 686,989 686,989$
Fund balance, beginning 4,914,883
Fund balance, ending 5,601,872$
GENERAL FUND
Year Ended June 30, 2013
TOWN OF HILLSBOROUGH, NORTH CAROLINA
STATEMENT OF REVENUES, EXPENDITURES AND
CHANGES IN FUND BALANCE - BUDGET AND ACTUAL
Exhibit 6
The accompanying notes are an integral part of this statement.
- 26 -
Proprietary
Fund Type
ASSETS Enterprise
Current assets:
Cash and investments 4,794,267$
Accounts receivable, net 1,080,607
Prepaid expenses 4,681
Restricted assets
Cash and investments 2,778,198
Total current assets 8,657,753
Capital assets:
Land and construction-in-progress 23,987,813
Other capital assets, net of depreciation 22,934,342
Total capital assets 46,922,155
Total noncurrent assets 46,922,155
Total assets 55,579,908
LIABILITIES
Current liabilities:
Accounts payable and accrued liabilities 1,074,791
Customer deposits 386,494
Accrued interest payable 40,495
Current portion of long-term liabilities 1,179,976
Total current liabilities 2,681,756
Long-term liabilities:
Due in more than one year 20,205,653
Total liabilities 22,887,409
NET POSITION
Invested in capital assets, net of related debt 26,017,050
Restricted for:
Water and sewer projects 2,590,989
Unrestricted 4,084,460
Total net position 32,692,499$
TOWN OF HILLSBOROUGH, NORTH CAROLINA
STATEMENT OF NET POSITION - PROPERIETARY FUND
June 30, 2013
Exhibit 7
The accompanying notes are an integral part of this statement.
- 27 -
Proprietary
Fund Type
Enterprise
OPERATING REVENUES
Charges for services 7,343,714$
Other operating revenues 342,642
TOTAL OPERATING REVENUES 7,686,356
OPERATING EXPENSES
Personnel services 2,393,884
Depreciation 747,927
Other current charges 2,682,780
Loss on disposal of capital assets 222,574
TOTAL OPERATING EXPENSES 6,047,165
OPERATING INCOME 1,639,191
NONOPERATING REVENUES (EXPENSES)
Investment earnings 4,177
Interest and fees (232,106)
TOTAL NONOPERATING EXPENSES (227,929)
CHANGE IN NET POSITION 1,411,262
NET POSITION, BEGINNING OF YEAR, PREVIOUSLY
REPORTED 31,659,130
PRIOR PERIOD ADJUSTMENT (Note 7)(377,893)
NET POSITION, BEGINNING OF YEAR, RESTATED 31,281,237
NET POSITION, END OF YEAR 32,692,499$
Year Ended June 30, 2013
TOWN OF HILLSBOROUGH, NORTH CAROLINA
STATEMENT OF REVENUES, EXPENSES AND
CHANGES IN NET POSITION - PROPRIETARY FUND
Exhibit 8
Page 1 of 2
The accompanying notes are an integral part of this statement.
- 28 -
Proprietary
Fund-Type
Enterprise
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from customers 7,579,117$
Cash paid for goods and services (2,550,389)
Cash paid to or on behalf of employees for services (2,368,159)
NET CASH PROVIDED BY
OPERATING ACTIVITIES 2,660,569
CASH FLOWS FROM CAPITAL AND RELATED FINANCING
ACTIVITIES
Acquisition and construction of capital assets (11,870,759)
Proceeds from the issuance of long-term debt 10,747,714
Principal paid on bonds, notes and installment purchases (1,047,666)
Interest paid on bonds and installment purchases (190,977)
NET CASH USED BY CAPITAL AND
RELATED FINANCING ACTIVITIES (2,361,688)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of capital assets 11,118
Interest on investments 4,177
NET CASH PROVIDED BY
INVESTING ACTIVITIES 15,295
NET INCREASE IN CASH
AND CASH EQUIVALENTS 314,176
CASH AND CASH EQUIVALENTS, BEGINNING 7,258,289
CASH AND CASH EQUIVALENTS, ENDING 7,572,465$
CASH AND CASH EQUIVALENTS
Unrestricted 4,794,267$
Restricted 2,778,198
TOTAL CASH AND CASH EQUIVALENTS 7,572,465$
Year Ended June 30, 2013
TOWN OF HILLSBOROUGH, NORTH CAROLINA
STATEMENT OF CASH FLOWS - PROPRIETARY FUND
Exhibit 8
Page 2 of 2
The accompanying notes are an integral part of this statement.
- 29 -
Proprietary
Fund-Type
Enterprise
Year Ended June 30, 2013
TOWN OF HILLSBOROUGH, NORTH CAROLINA
STATEMENT OF CASH FLOWS - PROPRIETARY FUND
RECONCILIATION OF OPERATING INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES
Operating income 1,639,191$
Adjustments to reconcile operating income to net cash
provided by operating activities:
Depreciation 747,927
Provision for uncollectible accounts (140,728)
Loss on disposal of capital assets 222,574
Changes in assets and liabilities
Decrease in accounts receivable 1,519
Increase in prepaid expense 285
Increase in accounts payable and accrued liabilities 129,176
Increase in deposits 31,970
Increase in OPEB liability 24,819
Increase in compensated absences payable 3,836
NET CASH PROVIDED BY
OPERATING ACTIVITIES 2,660,569$
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES
Capital asset additions included in accounts payable and
accrued liabilities 925,116$
- 30 -
THIS PAGE LEFT INTENTIONALLY BLANK.
TOWN OF HILLSBOROUGH, NORTH CAROLINA
NOTES TO FINANCIAL STATEMENTS
June 30, 2013
- 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 council. 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 the 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, 2013
- 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 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, 2013
- 33 -
Note 1. Summary of Significant Accounting Policies (Continued)
B. Basis of Presentation (Continued)
The Town reports the following nonmajor governmental funds:
Nash Street Sidewalk Capital Project Fund - The project is designed to make the
Town a more walkable community by connecting the north side to the south by
constructing sidewalk, curb, gutter and drainage improvements to several streets.
Gold Park/Riverwalk Capital Project Fund - The Gold Park/Riverwalk Fund is for
Phase 1 planning and construction of a 24-acre park and one and one-half mile
walking trail. The project will be financed by North Parks and Recreation Trust Fund
Grant, installment financing, and general fund appropriations.
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.
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 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.
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 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.
TOWN OF HILLSBOROUGH, NORTH CAROLINA
NOTES TO FINANCIAL STATEMENTS
June 30, 2013
- 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, 2013
- 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 are
materially past due and are not considered to be an available resource to finance the
operations of the subsequent year. Also, as of January 1, 1993, state law altered the
procedures for the assessment and collection of property taxes on registered motor
vehicles in North Carolina. Effective with this change in the law, Orange County is
responsible for billing and collecting the property taxes on registered motor vehicles on
behalf of all municipalities and special tax districts in the County, including the Town of
Hillsborough. For motor vehicles registered under the staggered system, property taxes
are due the first day of the fourth month after the vehicles are registered. The billed taxes
are applicable to the fiscal year in which they become due. Therefore, the Town’s vehicle
taxes for vehicles registered in Orange County from March 2012 through February 2013
apply to the fiscal year ended June 30, 2013. Uncollected taxes which were billed during
this period 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, 2013
- 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 Gold Park/Riverwalk Capital Project Fund, Riverwalk Phase II Capital
Project Fund, Nash Street Sidewalk 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, 2013
- 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 General Fund has restricted assets amounting to $179,842 at year end, which
represent Powell Bill funds, which can only be expended for the purposes of
maintaining, repairing, constructing, reconstruction or widening of local streets per
G.S. 136-41.4.
The General Capital Projects Fund contains contributions from developers that are
restricted by Town ordinance and the developers for future general capital projects.
The unexpended cash amounts to $716,054 at year end and has been restricted in
the General Capital Reserve Fund, which is consolidated into the General Capital
Projects Fund.
The Enterprise Fund has restricted assets, which represent unexpended proceeds
from installment purchases, because their use is completely restricted to the purpose
for which the debt agreements were originally entered into. These unexpended
installment purchase proceeds amount to $187,209 at year end. The Enterprise Fund
also contains contributions from developers for capital facilities fees that are restricted
by Town ordinance and the contributing developer for future water and sewer capital
needs. The unexpended cash amounts to $2,149,851 at year end. In addition, cash
and investments in the Enterprise Fund amounting to $441,138 at year end has been
restricted by Town ordinance and the contributor for the perpetual maintenance of
pumping stations, and for future water and sewer capital projects.
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, 2012. 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.
TOWN OF HILLSBOROUGH, NORTH CAROLINA
NOTES TO FINANCIAL STATEMENTS
June 30, 2013
- 38 -
Note 1. Summary of Significant Accounting Policies (Continued)
E. Assets, Liabilities, Deferred Outflows/Inflows of Resources and Fund Equity (Continued)
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
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.
TOWN OF HILLSBOROUGH, NORTH CAROLINA
NOTES TO FINANCIAL STATEMENTS
June 30, 2013
- 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)
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 one item that meet the criterion for this
category: taxes receivable. In addition, the Town has unearned revenue items that
meet this criterion for this category: prepaid privilege licenses and other prepaid fees.
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 lif e of the debt.
TOWN OF HILLSBOROUGH, NORTH CAROLINA
NOTES TO FINANCIAL STATEMENTS
June 30, 2013
- 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 (Continued)
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 are
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.
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.
TOWN OF HILLSBOROUGH, NORTH CAROLINA
NOTES TO FINANCIAL STATEMENTS
June 30, 2013
- 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 (Continued)
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 - The portion of fund balance
representing unexpended contributions from developers 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 formal action
(Ordinances and Resolutions) at the highest level of decision making
authority (Board of Town Commissioners). These commitments can only be
overturned by a like action.
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, 2013
- 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
Council, 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, 2013
- 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 $ 1,122,514 $ 104,744 $ 1,227,258
Public safety 3,134,327 126,053 3,260,380
Environmental protection 471,880 113,681 585,561
Community activities and projects 64,878 59,527 124,405
Parks and recreation 36,267 114,506 150,773
Debt service
Principal retirement 407,246 (407,246) (1) -
Interest and fiscal charges 111,265 (111,265) (1) -
(1) Reclassification of debt service payments.
Note 3. Stewardship, Compliance and Accountability
A. Fund Deficits
For the fiscal year ended June 30, 2013, the Riverwalk Phase II Capital Projects Fund has a
deficit fund balance of $20,444. This deficit occurred due to the installment purchase
obligation not being issued as of June 30, 2013, which will fund expenditures of the project.
B. Excess of Expenditures Over Appropriations
For the fiscal year ended June 30, 2013, expenditures made in the Town’s General Fund
exceeded the authorized appropriations made by the governing board for economic and
physical development by $235,977. This over-expenditure occurred due to an under-
estimation of proceeds payable to the Hillsborough Tourism Development Authority and the
Hillsborough Tourism Board. 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, 2013
- 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, 2013, the Town’s deposits had a carrying amount of $6,037,163 and a
bank balance of $6,216,526. Of the bank balance, $500,000 was covered by federal
depository insurance and $5,716,526 in interest-bearing deposits were covered under
the Pooling Method. The Town had $1,050 in petty cash on hand at June 30, 2013.
At June 30, 2013, the Authority’s deposits had a carrying amount of $47,094 and a
bank balance of $4,174. All of the bank balance was covered by federal depository
insurance.
At June 30, 2013, the Board had no amounts held in a bank.
TOWN OF HILLSBOROUGH, NORTH CAROLINA
NOTES TO FINANCIAL STATEMENTS
June 30, 2013
- 45 -
Note 4. Detail Notes on All Funds (Continued)
A. Assets (Continued)
2. Investments
At June 30, 2013, the Town had $7,764,068 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 $ 299,524
Utilities franchise and
telecommunications tax 105,831
Sales tax refunds 321,663
$ 727,018
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, 2013 is net of the following allowances for doubtful accounts,
which are based on historical percentages of receivables not expected to be collected.
June 30,
2013
General Fund
Taxes receivable $ 85,842
Enterprise Fund $ 150,000
TOWN OF HILLSBOROUGH, NORTH CAROLINA
NOTES TO FINANCIAL STATEMENTS
June 30, 2013
- 46 -
Note 4. Detail Notes on All Funds (Continued)
A. Assets (Continued)
5. Capital Assets
Capital asset activity for the year ended June 30, 2013 was as follows:
Beginning Ending
Balances Increases Decreases Transfers Balances
Governmental
activities:
Capital assets not
being depreciated:
Land $ 2,371,312 $ 289,000 $ - $ 12,116 $ 2,672,428
Construction-in-
progress 1,831,436 627,396 - (1,898,949) 559,883
Total capital
assets not
being
depreciated $ 4,202,748 $ 916,396 $ - $ (1,886,833) $ 3,232,311
Capital assets
being depreciated:
Buildings and
improvements $ 4,160,980 $ - $ - $ - $ 4,160,980
Infrastructure 799,775 361,248 47,495 1,662,373 2,775,901
Equipment 508,449 23,462 11,907 - 520,004
Vehicles 2,589,708 - 20,040 224,460 2,794,127
Total capital
assets being
depreciated $ 8,058,912 $ 384,710 $ 79,442 $ 1,886,833 $ 10,251,012
Less accumulated
depreciation for:
Buildings and
improvements $ 1,074,246 $ 135,446 $ - $ - $ 1,209,692
Infrastructure 71,449 65,833 9,203 - 128,079
Equipment 405,158 26,589 11,796 - 419,951
Vehicles 1,626,825 310,217 20,040 - 1,917,002
Total
accumulated
depreciation $ 3,177,678 $ 538,085 $ 41,039 $ - $ 3,674,724
Total capital
assets being
depreciated,
net 4,881,234 6,576,288
Governmental
activity capital
assets, net $ 9,083,982 $ 9,808,599
Depreciation expense was charged to functions/programs of the primary government
as follows:
General government $ 123,463
Public safety 244,658
Transportation 64,718
Environmental protection 105,246
$ 538,085
TOWN OF HILLSBOROUGH, NORTH CAROLINA
NOTES TO FINANCIAL STATEMENTS
June 30, 2013
- 47 -
Note 4. Detail Notes on All Funds (Continued)
A. Assets (Continued)
5. Capital Assets (Continued)
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 8,468,492 10,796,094 195,110 (1,087,106) 17,982,370
Total capital
assets not
being
depreciated $ 14,473,935 $ 10,796,094 $ 195,110 $ (1,087,106) $ 23,987,813
Capital assets
being depreciated:
Buildings and
improvements $ 8,393,953 $ - $ - $ 47,987 $ 8,441,940
Plant and
distribution
systems 25,896,791 24,028 193,118 1,039,119 26,766,820
Infrastructure 380,626 - - - 380,626
Equipment 1,332,250 24,046 36,425 - 1,319,871
Vehicles 531,114 101,474 23,753 - 608,835
Total capital
assets being
depreciated $ 36,534,734 $ 149,548 $ 253,296 $ 1,087,106 $ 37,518,092
Less accumulated
depreciation for:
Buildings and
improvements $ 6,182,131 $ 96,694 $ - $ - $ 6,278,825
Plant and
distribution
systems 6,395,916 532,607 154,537 - 6,773,986
Infrastructure 18,427 9,516 - - 27,943
Equipment 962,902 71,032 36,424 - 997,510
Vehicles 491,162 38,077 23,753 - 505,486
Total
accumulated
depreciation $ 14,050,538 $ 747,927 $ 214,714 $ - $ 14,583,750
Total capital
assets being
depreciated,
net 22,484,196 22,934,342
Business-type
activity capital
assets, net $ 36,958,131 $ 46,922,155
TOWN OF HILLSBOROUGH, NORTH CAROLINA
NOTES TO FINANCIAL STATEMENTS
June 30, 2013
- 48 -
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, 2013 with the following
remaining commitments:
Remaining
Project Spent-to-Date Commitment
Riverside/Crawford water improvements $ 204,737 $ 90,263
Mayo BPS upgrade 349,802 200,198
Lake Ben Johnson dredging 177,569 232,731
Wastewater Treatment Facility Expansion 17,229,753 3,082,934
Total $ 17,961,861 $ 3,606,126
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, 2013
- 49 -
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 6.74% and 6.77%, 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, 2013, 2012 and 2011 were $298,865, $296,822,
and $275,754, 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, 2012, the Separation Allowance’s membership
consisted of:
Retirees receiving benefits 3
Terminated plan members entitled to,
but not yet receiving benefits -
Active plan members 28
Total 31
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, 2013
- 50 -
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, 2012 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 percentage of pay on a closed basis. The
remaining amortization period at December 31, 2012, was 18 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 $ 52,117
Interest on net pension asset (1,394)
Adjustment to annual required contribution 1,735
Annual pension cost 52,458
Contributions made 48,130
Decrease in net pension asset 4,328
Net pension asset, beginning of year (27,876)
Net pension asset, end of year $ (23,548)
TOWN OF HILLSBOROUGH, NORTH CAROLINA
NOTES TO FINANCIAL STATEMENTS
June 30, 2013
- 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)
Three-Year Trend Information:
Fiscal Annual Percentage Net Pension
Year Pension of APC Obligation
Ended Cost (APC) Contributed (Asset)
6/30/2011 $ 54,631 123.64% $ (17,275)
6/30/2012 53,076 119.97% (27,876)
6/30/2013 52,458 91.75% (23,548)
Funded Status and Funding Process: As of December 31, 2012, the most recent
actuarial valuation date, the plan was not funded. The actuarial accrued liability for
benefits and the unfunded actuarial accrued liability (“UALL”) was $417,455. The
covered payroll (annual payroll of active employees covered by the plan) was
$1,381,255, and the ratio of the UAAL to the covered payroll was 30.22%.
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, 2013
- 52 -
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 5.09% of each participating general employee’s salary. Also, the participants may
make voluntary contributions to the Plan. Contributions for the year ended June 30,
2013 were $303,138, which consisted of $217,228 from the Town and $85,910 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 plan provides post-
retirement health care benefits through age 65 to retirees of the Town who have at
least 20 years of creditable service and who were actively employed by the Town
before February 1, 2009. Employees hired after February 1, 2009, must complete 30
years of service 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 plan.
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, 2013
- 53 -
Note 4. Detail Notes on All Funds (Continued)
B. Liabilities (Continued)
2. Other Postemployment Benefit Obligations (Continued)
The current ARC rate is 2.71% of annual covered payroll. For the current year, the
Town contributed $56,840 or 1.31% 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 OPEB Cost and Net OPEB Obligation. The Town‘s annual OPEB cost
(expense) is calculated based on the annual required contribution of the employer
(“ARC”), an amount actuarially determined in accordance with the parameters of
GASB Statement 45. The ARC represents a level of funding that, if paid on an
ongoing basis, is projected to cover normal cost each year and amortize any unfunded
actuarial liabilities (or funding excess) over a period not to exceed 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 (56,840)
Increase in net OPEB obligation 60,668
Net OPEB obligation, beginning of year 227,811
Net OPEB obligation, end of year $ 288,479
The Town’s annual OPEB cost, the percentage of annual OPEB cost contributed to
the plan, and the net OPEB obligation for 2013, 2012, and 2011 were as follows:
For the Percentage of
Year Ended Annual OPEB Annual OPEB Net OPEB
June Cost (APC) Cost Contributed Obligation
2011 $ 119,002 38.3% $ 148,024
2012 128,907 38.1% 227,811
2013 117,508 48.3% 288,479
TOWN OF HILLSBOROUGH, NORTH CAROLINA
NOTES TO FINANCIAL STATEMENTS
June 30, 2013
- 54 -
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, 2013
- 55 -
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, 2013 were as follows:
Governmental Business-Type
Activities Activities Total
Payable to vendors and others $ 195,737 $ 1,020,301 $ 1,216,038
Accrued payroll and related
liabilities 134,955 54,490 189,445
Total accounts payable
and accrued liabilities $ 330,692 $ 1,074,791 $ 1,405,483
TOWN OF HILLSBOROUGH, NORTH CAROLINA
NOTES TO FINANCIAL STATEMENTS
June 30, 2013
- 56 -
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 $ 172,676 $ -
Prepaid privilege license - 25,377
Other prepaid receipts - 1,532
$ 172,676 $ 26,909
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
($30,322,232); 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 ($564,174); fine arts ($550,000); animal mortality ($34,800); 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, 2013
- 57 -
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 Authority and the Board did not have insurance coverage separate from the Town
as of June 30, 2013.
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. $ 817,333
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. 57,272
TOWN OF HILLSBOROUGH, NORTH CAROLINA
NOTES TO FINANCIAL STATEMENTS
June 30, 2013
- 58 -
Note 4. Detail Notes on All Funds (Continued)
B. Liabilities (Continued)
8. Long-Term Obligations (Continued)
a. Installment Purchases (Continued)
Governmental Activities:
Note payable to PNC, executed September
2008, in the amount of $619,600 for the
purchase of land for municipal operations.
The note is payable in 30 semi-annual
payments of $20,653 plus interest at
3.92%, and is secured by land. $ 433,720
Note payable to Bank of America, executed
August 2009, in the amount of $1,073,000
for the purchase of real property and a
building to be used as the fleet
maintenance facility. The note is payable
in 30 semi-annual payments of $35,767
plus interest at 3.79%, and is secured by
real property and a building. 822,633
Note payable to SunTrust, originally
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. 65,664
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. 182,929
TOWN OF HILLSBOROUGH, NORTH CAROLINA
NOTES TO FINANCIAL STATEMENTS
June 30, 2013
- 59 -
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, originally
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. $ 705,240
3,084,791
Less current portion 400,114
$ 2,684,677
The future minimum payments on the notes payable as of June 30, 2013 are
as follows:
Fiscal Year
Ending June 30, Principal Interest Total
2014 $ 400,114 $ 97,235 $ 497,349
2015 404,586 85,383 489,969
2016 379,264 73,701 452,965
2017 360,064 62,514 422,578
2018 315,924 52,008 367,932
2019-2020 513,163 74,510 587,673
2021-2025 711,676 57,840 769,516
$ 3,084,791 $ 503,191 $ 3,587,982
TOWN OF HILLSBOROUGH, NORTH CAROLINA
NOTES TO FINANCIAL STATEMENTS
June 30, 2013
- 60 -
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 PNC, executed December
2008, in the amount of $160,458 for the
purchase of sewer equipment. The note
is payable in ten semi-annual payments of
$17,528 with interest payable at 3.28%,
and is secured by the sewer equipment. $ 17,224
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. 230,823
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. 312,175
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 is
payable in 20 semi-annual payments of
varying amounts with interest payable at
3.69%, and is secured by improvements
(a). 3,408,000
TOWN OF HILLSBOROUGH, NORTH CAROLINA
NOTES TO FINANCIAL STATEMENTS
June 30, 2013
- 61 -
Note 4. Detail Notes on All Funds (Continued)
B. Liabilities (Continued)
8. Long-Term Obligations (Continued)
a. Installment Purchases (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. $ 946,146
4,914,368
Less current portion 975,061
$ 3,939,307
The long-term debt requirements to maturity for the Enterprise Fund are as
follows:
Fiscal Year
Ending June 30, Principal Interest Total
2014 $ 975,061 $ 146,078 $ 1,121,139
2015 969,219 114,887 1,084,106
2016 768,323 85,096 853,419
2017 723,127 59,796 782,923
2018 599,127 37,212 636,339
2019-2023 879,511 38,486 917,997
$ 4,914,368 $ 481,555 $ 5,395,923
a) The provisions of this loan agreement contain certain financial covenants
related to the maintenance of fund balance. At June 30, 2013, the Town
was in compliance with such covenants.
TOWN OF HILLSBOROUGH, NORTH CAROLINA
NOTES TO FINANCIAL STATEMENTS
June 30, 2013
- 62 -
Note 4. Detail Notes on All Funds (Continued)
B. Liabilities (Continued)
8. Long-Term Obligations (Continued)
b. General Obligation Indebtedness
During the year ended June 30, 2013 all general obligation bonds issued to
finance the construction of facilities utilized in the operations of the water and
sewer system were repaid.
The Town’s legal debt margin at June 30, 2013 was $57,900,392.
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, 2013 was $990,891.
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
2014 $ 76,222 $ 26,358 $ 102,580
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
2019-2023 228,667 42,578 271,245
2024-2027 381,114 30,413 411,527
$ 990,891 $ 184,505 $ 1,175,396
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 $15,256,478 at June 30, 2013. Repayment terms will be set
upon the completion of the project, which is expected to be completed in 2014. As
such, this amount is included in long-term liabilities.
TOWN OF HILLSBOROUGH, NORTH CAROLINA
NOTES TO FINANCIAL STATEMENTS
June 30, 2013
- 63 -
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, 2012 Increases Decreases 2013 Liabilities
Governmental activities:
Installment purchases $ 3,440,001 $ - $ 355,210 $ 3,084,791 $ 400,114
Compensated absences 200,069 144,056 123,179 220,946 144,055
Other postemployment
benefits 132,207 69,437 33,587 168,057 -
Net pension obligation
(asset) (27,876) (48,130) (52,458) (23,548) -
Reclassification of net
pension asset 27,876 48,130 52,458 23,548 -
$ 3,772,277 $ 213,493 $ 511,976 $ 3,473,794 $ 544,169
Business-type activities:
Installment purchases $ 5,871,812 $ - $ 957,444 $ 4,914,368 $ 975,061
Less deferred amount
for loss on defeasance (84,570) - (15,147) (69,423) (15,147)
Bonds payable 14,000 - 14,000 - -
Revolving loans payable 5,575,878 10,747,713 76,222 16,247,369 76,222
Other postemployment
benefits 95,604 48,071 23,253 120,422 -
Compensated absences 169,057 143,840 140,004 172,893 143,840
$ 11,641,781 $ 10,939,625 $ 1,195,776 $ 21,385,629 $ 1,179,976
Compensated absences for governmental activities have typically been liquidated in
the General Fund.
C. Interfund Balances and Activity
Transfers to/from other funds:
Transfers to/from other funds at June 30, 2013 consist of the following:
From the General Fund to the Nash Street Sidewalk
Fund for additional project construction $ 7,246
From the General Fund to the Riverwalk Phase III
Fund for project design, legal, and land acquisition 238,381
TOWN OF HILLSBOROUGH, NORTH CAROLINA
NOTES TO FINANCIAL STATEMENTS
June 30, 2013
- 64 -
Note 4. Detail Notes on All Funds (Continued)
C. Interfund Balances and Activity (Continued)
Transfers to/from other funds (Continued):
From the General Fund to the Riverwalk CMAQ
Fund for project design, legal, and land
acquisition $ 124,000
Total $ 369,627
D. 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 $ 5,601,872
Less:
Prepaid items 4,253
Stabilization by state statute 935,846
Streets - Powell Bill 179,842
Appropriated fund balance in 2014 budget 330,206
Working capital/fund balance policy 4,151,725
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 $ 178,396
Note 5. Jointly Governed Organization
The Town, in conjunction with seven counties and 37 other municipalities established the
Triangle J Council of Governments (Council). The participating governments established
the Council to coordinate various funding received from federal and state agencies. Each
participating government appoints one member to the Council’s governing board. The
Town paid membership fees of $2,384 to the Council during the fiscal year ended June 30,
2013.
TOWN OF HILLSBOROUGH, NORTH CAROLINA
NOTES TO FINANCIAL STATEMENTS
June 30, 2013
- 65 -
Note 6. Significant Effects of Subsequent Events
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. Scheduled
principal and interest payments occur each February through 2024 and interest only
payments occur each August through 2023. Interest accrues at a rate of 7.75%.
In July 2013, the Town refinanced the fleet maintenance facility with a note payable to
BB&T in the amount of $839,086. The note is payable in 23 semi-annual payments of
$36,482 plus interest and matures in August 2024. Interest is payable at 2.44% and the
note payable is secured by real property and a building. The previous note payable on the
fleet maintenance facility included interest at 3.79%.
In July 2013, the Town refinanced the land for municipal operations with a note payable to
BB&T in the amount of $438,057. The note is payable in 21 semi-annual payments of
$20,860 plus interest and matures in September 2023. Interest is payable at 2.22% and
the note payable is secured by land. The previous note payable on the land for municipal
operations included interest at 3.92%.
In August 2013, the Town entered into a note payable with BB&T in the amount of
$1,450,000 for the purchase of land for Riverwalk Phase 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.
Note 7. Restatement
The Town implemented Governmental Accounting Standards Board (GASB) Statement 63,
Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources,
and Net Position, and Statement 65, Items Previously Reported as Assets and Liabilities,
in the fiscal year ending June 30, 2013. In accordance with GASB Statement 63, the
Statement of Net Assets has been replaced with the Statement of Net Position. Items on
the Statement of Net Position are now classified into Assets, Deferred Outflows of
Resources, Liabilities, Deferred Inflows of Resources and Net Position. Additionally,
GASB Statement 65 requires that deferred debt issuance costs be recognized as an
expense in the period incurred. As a result of implementing GASB 65, $377,893 of
previously capitalized debt issuance costs were expensed, which reduced the beginning
net position for business-type activities and the Enterprise Fund from $31,659,130 to
$31,281,237. The change in net position for fiscal 2012 decreased from $2,103,536 to
$1,725,643 as a result of this change in accounting principle.
- 66 -
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- 67 -
REQUIRED SUPPLEMENTARY FINANCIAL DATA
This section contains additional information required by generally accepted accounting principles.
• Schedule of Funding Progress for the Law Enforcement Officers’ Special Separation
Allowance.
• Schedule of Employer Contributions for the Law Enforcement Officers’ Special Separation
Allowance.
• Notes to the Required Schedules for the Law Enforcement Officers’ Special Separation
Allowance.
• Schedule of Funding Progress for the Other Postemployment Benefits.
• Schedule of Employer Contributions for the Other Postemployment Benefits.
• Notes to the Required Schedules for the Other Postemployment Benefits.
- 68 -
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Exhibit A-1
- 69 -
Actuarial
Accrued UAAL as a
Actuarial Liability (AAL) -Unfunded Percentage
Actuarial Value of Projected AAL Funded Covered of Covered
Valuation Assets Unit Credit (UAAL)Ratio Payroll Payroll
Date (a)(b)(b) - (a)(a) ÷ (b)(c)((b) - (a)) ÷ (c)
12/31/2003 -$ 319,741$ 319,741$ 0.00%827,988$ 38.62%
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%
TOWN OF HILLSBOROUGH, NORTH CAROLINA
LAW ENFORCEMENT OFFICERS' SPECIAL SEPARATION ALLOWANCE
REQUIRED SUPPLEMENTARY INFORMATION
SCHEDULE OF FUNDING PROGRESS
Exhibit A-2
- 70 -
Year Annual Annual
Ended Required Percentage
June 30 Contribution Contributed
2004 31,892$ 80.30%
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%
NOTES TO THE REQUIRED SCHEDULES
Valuation date December 31, 2012
Actuarial cost method Projected unit credit
Amortization method Level percent of pay closed
Remaining amortization period 18 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
Exhibit B-1
- 71 -
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
Exhibit B-2
- 72 -
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%
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:
- 73 -
SUPPLEMENTARY INFORMATION
- 74 -
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Schedule 1
Page 1 of 4
- 75 -
2012
Variance
Positive
Budget Actual (Negative)Actual
Revenues
General revenues
Ad valorem taxes
Current 4,966,600$ 5,083,545$ 116,945$ 4,668,577$
Prior 17,000 30,743 13,743 25,097
Penalties and interest 15,000 21,181 6,181 22,786
4,998,600 5,135,469 136,869 4,716,460
Other taxes and licenses
Local option sales tax 985,000 1,072,463 87,463 1,032,240
Gross receipts on short-term rental property 1,000 9,535 8,535 8,818
Privilege licenses 30,000 96,469 66,469 44,925
Motor vehicle license fees 42,500 47,054 4,554 34,427
Solid waste disposal 3,000 3,904 904 4,286
1,061,500 1,229,425 167,925 1,124,696
Unrestricted intergovernmental revenues
Franchise tax 280,000 376,653 96,653 362,137
Beer and wine tax 25,000 25,190 190 26,486
Food and beverage tax 225,000 277,648 52,648 262,758
Occupancy tax - 54,910 54,910 -
530,000 734,401 204,401 651,381
Restricted intergovernmental revenues
Powell Bill 165,000 179,248 14,248 173,082
Other 82,254 30,525 (51,729) 37,862
247,254 209,773 (37,481) 210,944
Investment earnings 2,000 3,488 1,488 4,250
Other general revenues 11,115 34,079 22,964 69,669
Total general revenues 6,850,469 7,346,635 496,166 6,777,400
Functionally related revenues
Use and rental fees
Zoning permits 110,000 240,806 130,806 65,993
Cable franchise 37,000 53,493 16,493 54,791
Time Warner Cable PEG fees 33,000 32,266 (734) 40,206
Fire inspection fees 7,500 11,426 3,926 15,593
Total functionally related revenues 187,500 337,991 150,491 176,583
Total revenues 7,037,969 7,684,626 646,657 6,953,983
2013
TOWN OF HILLSBOROUGH, NORTH CAROLINA
GENERAL FUND
SCHEDULE OF REVENUES, EXPENDITURES AND
CHANGES IN FUND BALANCE - BUDGET AND ACTUAL
Year Ended June 30, 2013 with Comparative
Actual Amounts for Year Ended June 30, 2012
Schedule 1
Page 2 of 4
- 76 -
2012
Variance
Positive
Budget Actual (Negative)Actual
2013
TOWN OF HILLSBOROUGH, NORTH CAROLINA
GENERAL FUND
SCHEDULE OF REVENUES, EXPENDITURES AND
CHANGES IN FUND BALANCE - BUDGET AND ACTUAL
Year Ended June 30, 2013 with Comparative
Actual Amounts for Year Ended June 30, 2012
Expenditures
General government
Governing body
Personnel services $41,847$ $39,131$
Other services and charges 196,720 189,732
Reimbursement from enterprise fund (109,070) (94,174)
182,016 129,497 52,519 134,689
Ruffin-Roulhac
Other services and charges 40,703 67,846
Reimbursement from enterprise fund (30,196) (26,303)
33,004 10,507 22,497 41,543
Administration
Personnel services 373,107 408,391
Capital outlay - -
Other services and charges 291,154 355,062
Reimbursement from enterprise fund (376,114) (358,246)
344,956 288,147 56,809 405,207
Finance
Personnel services 314,617 294,418
Other services and charges 90,970 93,312
Reimbursement from enterprise fund (193,842) (202,006)
226,077 211,745 14,332 185,724
Planning
Personnel services 267,187 247,791
Other services and charges 55,095 66,460
377,868 322,282 55,586 314,251
Motor Pool
Personnel services 221,052 201,526
Other services and charges 154,035 178,537
Debt service payments 104,744 107,455
Reimbursement from enterprise fund (214,751) (226,370)
290,699 265,080 25,619 261,148
Total general government 1,454,620 1,227,258 227,362 1,342,562
Public Safety
Police department
Personnel services 1,958,269 1,988,361
Other services and charges 212,884 198,569
Capital outlay 16,967 10,495
2,342,894 2,188,120 154,774 2,197,425
Schedule 1
Page 3 of 4
- 77 -
2012
Variance
Positive
Budget Actual (Negative)Actual
2013
TOWN OF HILLSBOROUGH, NORTH CAROLINA
GENERAL FUND
SCHEDULE OF REVENUES, EXPENDITURES AND
CHANGES IN FUND BALANCE - BUDGET AND ACTUAL
Year Ended June 30, 2013 with Comparative
Actual Amounts for Year Ended June 30, 2012
Fire Inspections/Code Enforcement
Personnel services $106,157$ $103,068$
Other services and charges 12,512 18,587
Debt service payments 126,053 -
253,606 244,722 8,884 121,655
Safety
Personnel services 77,781 76,220
Other services and charges 100,247 160,810
Reimbursement from enterprise fund (92,610) (112,099)
129,856 85,418 44,438 124,931
Fire Protection
Other services and charges 742,120 720,350
749,612 742,120 7,492 720,350
Total public safety 3,475,968 3,260,380 215,588 3,164,361
Transportation
Street department/Powell Bill
Personnel services 183,372 178,879
Other services and charges 242,541 495,703
Capital outlay 367,743 8,332
Debt service payments - 15,690
1,037,419 793,656 243,763 698,604
Total transportation 1,037,419 793,656 243,763 698,604
Environmental Protection
Sanitation department
Personnel services 205,217 196,453
Other services and charges 144,838 140,603
Debt service payments 113,681 80,196
490,512 463,736 26,776 417,252
Cemetery
Other services and charges 18,255 20,952
33,030 18,255 14,775 20,952
Stormwater
Personnel services 43,534 -
Other services and charges 71,902 118,407
Reimbursement from enterprise fund (11,866) -
110,908 103,570 7,338 118,407
Total environmental protection 634,450 585,561 48,889 556,611
Schedule 1
Page 4 of 4
- 78 -
2012
Variance
Positive
Budget Actual (Negative)Actual
2013
TOWN OF HILLSBOROUGH, NORTH CAROLINA
GENERAL FUND
SCHEDULE OF REVENUES, EXPENDITURES AND
CHANGES IN FUND BALANCE - BUDGET AND ACTUAL
Year Ended June 30, 2013 with Comparative
Actual Amounts for Year Ended June 30, 2012
Economic and Physical Development
Tourism
Other services and charges $485,977$ $243,163$
250,000 485,977 (235,977) 243,163
Total economic and physical
development 250,000 485,977 (235,977) 243,163
Community activities and projects
Contributions 28,420 29,020
Other services and charges 36,458 11,976
Debt service payments 59,527 61,126
Capital outlay - 284,670
Total community activities and projects 200,143 124,405 75,738 386,792
Parks and recreation
Other services and charges 36,267 51,500
Debt service payments 114,506 117,555
Total parks and recreation 172,299 150,773 21,526 169,055
Total expenditures 7,224,899 6,628,010 596,889 6,561,148
Revenues over (under) expenditures (186,930) 1,056,616 1,243,546 392,835
Other financing sources (uses)
Transfer to Riverwalk Phase II Fund (1,858) - 1,858 (210,696)
Transfer to Nash Street Sidewalk Fund (7,246) (7,246) - (127,838)
Transfer from Goldpark/Riverwalk Project Fund - - - 101,875
Transfer from General Capital Reserve Fund 126,054 - (126,054) -
Transfer to Riverwalk Phase III Fund (238,381) (238,381) - -
Transfer to Riverwalk - CMAC Fund (124,000) (124,000) - -
Insurance recovery - - - 16,250
Total other financing sources (uses)(245,431) (369,627) (124,196) (220,409)
Appropriated fund balance 432,361 - (432,361) -
Net change in fund balance -$ 686,989 686,989$ 172,426
Fund balance, beginning 4,914,883 4,742,457
Fund balance, ending 5,601,872$ 4,914,883$
Schedule 2
- 79 -
Goldpark/Riverwalk Nash Street Riverwalk Riverwalk Consolidated
Riverwalk Phase II Sidewalk Phase III CMAQ General Total
Capital Capital Capital Capital Capital Capital Nonmajor
Project Project Project Project Project Projects Governmental
ASSETS Fund Fund Fund Fund Fund Fund Funds
Cash and investments -$ 9,982$ -$ 420$ 124,000$ 7,070$ 141,472$
Prepaid items - - - - - 52 52
Restricted assets
Cash and investments - - - - - 716,054 716,054
Total assets -$ 9,982$ -$ 420$ 124,000$ 723,176$ 857,578$
LIABILITIES AND FUND BALANCES
LIABILITIES
Accounts payable and accrued
liabilities -$ 30,426$ -$ -$ -$ -$ 30,426$
Total liabilities - 30,426 - - - - 30,426
FUND BALANCES
Nonspendable
Prepaid Items - - - - - 52 52
Restricted for
Capital projects - - - - - 716,054 716,054
Committed for
Capital projects - - - 420 124,000 7,070 131,490
Unassigned - (20,444) - - - - (20,444)
Total fund balances - (20,444) - 420 124,000 723,176 827,152
Total liabilities and fund
balances -$ 9,982$ -$ 420$ 124,000$ 723,176$ 857,578$
TOWN OF HILLSBOROUGH, NORTH CAROLINA
COMBINING BALANCE SHEET
NONMAJOR GOVERNMENTAL FUNDS
June 30, 2013
Schedule 3
- 80 -
Goldpark/Riverwalk Nash Street Riverwalk Riverwalk Consolidated
Riverwalk Phase II Sidewalk Phase III CMAQ General Total
Capital Capital Capital Capital Capital Capital Nonmajor
Project Project Project Project Project Projects Governmental
Fund Fund Fund Fund Fund Fund Funds
Revenues
Restricted intergovernmental
revenues -$ -$ 98,234$ -$ -$ -$ 98,234$
Investment earnings - - - - - 386 386
Total revenues - - 98,234 - - 386 98,620
Expenditures
Current
Transportation - - (6,558) - - 224,459 217,901
Parks and recreation 67 156,536 - 237,961 - - 394,564
Total expenditures 67 156,536 (6,558) 237,961 - 224,459 612,465
Revenues over (under)
expenditures (67) (156,536) 104,792 (237,961) - (224,073) (513,845)
Other financing sources
Transfer from General Fund - - 7,246 238,381 124,000 - 369,627
Total other financing sources - - 7,246 238,381 124,000 - 369,627
Net change in fund balances (67) (156,536) 112,038 420 124,000 (224,073) (144,218)
Fund balances (deficit), beginning 67 136,092 (112,038) - - 947,249 971,370
Fund balances (deficit),
ending -$ (20,444)$ -$ 420$ 124,000$ 723,176$ 827,152$
Amounts reported for Revenue,
Expenditures and Changes in Fund
Balance are different from the Budget/
Actual Statement due to consolidation
of the General Capital Reserve Fund:
Fund balance, ending
(General Capital Reserve Fund)(716,054)
Fund balance, ending
(General Capital Projects Fund)7,122$
TOWN OF HILLSBOROUGH, NORTH CAROLINA
COMBINING STATEMENT OF REVENUES,
EXPENDITURES AND CHANGES IN FUND BALANCES
NONMAJOR GOVERNMENTAL FUNDS
Year Ended June 30, 2013
Schedule 4
- 81 -
Variance
Project Prior Current Total Positive
Authorization Years Year To Date (Negative)
Revenues
Restricted intergovernmental revenues
Federal grant 500,000$ 500,000$ -$ 500,000$ -$
Interest on investments 14,516 14,516 - 14,516 -
Total revenues 514,516 514,516 - 514,516 -
Expenditures - Gold Park/River Walk 1,989,873 1,989,806 67 1,989,873 -
Revenues under expenditures (1,475,357) (1,475,290) (67) (1,475,357) -
Other financing sources (uses)
Installment purchase obligations
issued 1,226,000 1,226,000 - 1,226,000 -
Transfer to General Fund (101,875) (101,875) - (101,875) -
Transfer from General Fund 351,232 351,232 - 351,232 -
Total other financing sources 1,475,357 1,475,357 - 1,475,357 -
Net change in fund balance -$ 67$ (67) -$ -$
Fund balance, beginning 67
Fund balance, ending -$
BUDGET - GOLD PARK/RIVERWALK PROJECT FUND
From Project Inception and for the Year Ended June 30, 2013
Actual
TOWN OF HILLSBOROUGH, NORTH CAROLINA
NONMAJOR CAPITAL PROJECT FUND
SCHEDULE OF REVENUES AND EXPENDITURES COMPARED WITH
Schedule 5
- 82 -
Variance
Project Prior Current Total Positive
Authorization Years Year To Date (Negative)
Revenues
Restricted intergovernmental
revenues
State grants 1,055,766$ 432,000$ -$ 432,000$ (623,766)$
Local grants 20,000 10,000 - 10,000 (10,000)
Total revenues 1,075,766 442,000 - 442,000 (633,766)
Expenditures
Land acquisition 959,369 957,484 1,884 959,368 1
Legal and administrative 160,388 6,680 427 7,107 153,281
Design 346,280 160,591 154,225 314,816 31,464
Construction 1,447,371 - - - 1,447,371
Contingency 193,000 - - - 193,000
Total expenditures 3,106,408 1,124,755 156,536 1,281,291 1,825,117
Revenues under expenditures (2,030,642) (682,755) (156,536) (839,291) 1,191,351
Other financing sources
Transfer from General Fund 820,705 818,847 - 818,847 (1,858)
Installment purchase obligation
issued 1,209,937 - - - (1,209,937)
Total other financing sources 2,030,642 818,847 - 818,847 (1,211,795)
Net change in fund balance -$ 136,092$ (156,536) (20,444)$ (20,444)$
Fund balance, beginning 136,092
Fund deficit, ending (20,444)$
TOWN OF HILLSBOROUGH, NORTH CAROLINA
NONMAJOR 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, 2013
Actual
Schedule 6
- 83 -
Variance
Project Prior Current Total Positive
Authorization Years Year To Date (Negative)
Revenues
Restricted intergovernmental
revenues
State grants 714,651$ 608,016$ 98,234$ 706,250$ (8,401)$
Federal grant 319,459 319,459 - 319,459 -
Investment earnings 198 100 - 100 (98)
Total revenues 1,034,308 927,575 98,234 1,025,809 (8,499)
Expenditures
Construction 1,444,875 1,320,446 (9,674) 1,310,772 134,103
Contingency 317,933 309,930 3,116 313,046 4,887
1,762,808 1,630,376 (6,558) 1,623,818 138,990
Total expenditures 1,762,808 1,630,376 (6,558) 1,623,818 138,990
Revenues over (under)
expenditures (728,500) (702,801) 104,792 (598,009) 130,491
Other financing sources
Transfer from General Fund 728,500 590,763 7,246 598,009 (130,491)
Total other financing sources 728,500 590,763 7,246 598,009 (130,491)
Net change in fund balance -$ (112,038)$ 112,038 -$ -$
Fund deficit, beginning (112,038)
Fund deficit, ending -$
TOWN OF HILLSBOROUGH, NORTH CAROLINA
NONMAJOR CAPITAL PROJECT FUND
SCHEDULE OF REVENUES AND EXPENDITURES COMPARED WITH
BUDGET - NASH STREET SIDEWALK CAPITAL PROJECTS FUND
From Project Inception and for the Year Ended June 30, 2013
Actual
Schedule 7
- 84 -
Variance
Project Prior Current Total Positive
Authorization Years Year To Date (Negative)
Revenues
Restricted intergovernmental
revenues
State grants 240,000$ -$ -$ -$ (240,000)$
Total revenues 240,000 - - - (240,000)
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 55,000 - - - 55,000
Construction 148,000 - - - 148,000
Contingency 37,000 - - - 37,000
Total expenditures 478,381 - 237,961 237,961 240,420
Revenues under
expenditures (238,381) - (237,961) (237,961) 420
Other financing sources
Transfer from General Fund 238,381 - 238,381 238,381 -
Net change in fund
balance -$ -$ 420 420$ 420$
Fund balance, beginning -
Fund balance, ending 420$
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, 2013
Actual
Schedule 8
- 85 -
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 65,000 - - - (65,000)
Construction 585,000 - - - (585,000)
Total expenditures 650,000 - - - (650,000)
Revenues under
expenditures (124,000) - - - 124,000
Other financing uses
Transfer from General Fund 124,000 - 124,000 124,000 -
Net change in fund
balance -$ -$ 124,000 124,000$ 124,000$
Fund balance, beginning -
Fund balance, ending 124,000$
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, 2013
Actual
Schedule 9
- 86 -
Variance
Project Prior Current Total Positive
Authorization Years Year To Date (Negative)
Revenues
Investment earnings -$ 52$ 55$ 107$ 107$
Total revenues - 52 55 107 107
Expenditures
Capital equipment 919,000 911,914 - 911,914 7,086
Fleet maintenace facility 1,117,258 1,117,258 - 1,117,258 -
Garbage truck 250,000 - 224,459 224,459 25,541
Municipal operations site 655,623 655,622 - 655,622 1
Total expenditures 2,941,881 2,684,794 224,459 2,909,253 32,628
Revenues under
expenditures (2,941,881) (2,684,742) (224,404) (2,909,146) 32,735
Other financing sources
Installment purchase obligations
issued 2,861,600 2,838,621 - 2,838,621 (22,979)
Transfer from General Fund 80,281 77,647 - 77,647 (2,634)
Total other financing
sources 2,941,881 2,916,268 - 2,916,268 (25,613)
Net change in fund
balance -$ 231,526$ (224,404) 7,122$ 7,122$
Fund balance, beginning 231,526
Fund balance, ending 7,122$
TOWN OF HILLSBOROUGH, NORTH CAROLINA
NONMAJOR GENERAL CAPITAL PROJECTS FUND
SCHEDULE OF REVENUES AND EXPENDITURES
COMPARED WITH BUDGET
From Project Inception and for the Year Ended June 30, 2013
Actual
Schedule 10
- 87 -
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 13,754 331 14,085 374
Total revenues 1,118,711 1,118,754 331 1,119,085 374
Expenditures 715,680 - - - 715,680
Revenues over
expenditures 403,031 1,118,754 331 1,119,085 716,054
Other financing uses
Transfer to Water Sewer
Capital Reserve Fund (403,031) (403,031) - (403,031) -
Net change in fund
balance -$ 715,723$ 331 716,054$ 716,054$
Fund balance, beginning 715,723
Fund balance, ending 716,054$
BUDGET- GENERAL CAPITAL RESERVE FUND
From Project Inception and for the Year Ended June 30, 2013
Actual
TOWN OF HILLSBOROUGH, NORTH CAROLINA
NONMAJOR CAPITAL RESERVE FUND
SCHEDULE OF REVENUES AND EXPENDITURES COMPARED WITH
Schedule 11
- 88 -
2012
Variance
Positive
Budget Actual (Negative)Actual
Revenues
Operating revenues
Water charges 3,858,000$ 3,963,645$ 105,645$ 3,743,377$
Sewer charges 3,168,000 3,239,341 71,341 3,008,941
Other receipts 354,017 353,760 (257) 720,107
7,380,017 7,556,746 176,729 7,472,425
Nonoperating revenues
Interest on investments 3,000 3,419 419 5,066
Total revenues 7,383,017$ 7,560,165$ 177,148$ 7,477,491$
Year Ended June 30, 2013 with Comparative
2013
Actual Amounts for Year Ended June 30, 2012
TOWN OF HILLSBOROUGH, NORTH CAROLINA
ENTERPRISE FUND
SCHEDULE OF REVENUES COMPARED WITH
BUDGET (NON-GAAP) - WATER AND SEWER FUND
Schedule 12
Page 1 of 3
- 89 -
2012
Variance
Positive
Budget Actual (Negative)Actual
Expenditures
Engineering
Personnel services $361,159$ $347,516$
Other services and charges 1,080,693 1,096,263
Total engineering 1,471,079 1,441,852 29,227 1,443,779
Billing and collection
Personnel services 318,267 301,003
Other services and charges 93,720 115,702
Repairs and maintenance 515 515
Capital outlay - 20,212
Debt service payments 161,286 161,286
Total billing and collection 603,009 573,788 29,221 598,718
Water plant
Personnel services 468,419 457,012
Other services and charges 343,049 274,457
Repairs and maintenance 44,878 29,968
Capital outlay - 6,775
Debt service payments 121,285 106,635
Total water plant 1,123,043 977,631 145,412 874,847
Water distribution
Personnel services 347,758 342,690
Other services and charges 217,456 242,707
Repairs and maintenance 18,548 12,126
Capital outlay 109,023 38,078
Debt service payments 25,658 108,557
Total water distribution 814,895 718,443 96,452 744,158
Wastewater collection
Personnel services 346,131 342,016
Other services and charges 237,423 237,949
Repairs and maintenance 12,502 14,307
Capital outlay 75,051 110,742
Debt service payments 216,460 130,505
Total wastewater collection 973,599 887,567 86,032 835,519
2013
TOWN OF HILLSBOROUGH, NORTH CAROLINA
ENTERPRISE FUND
SCHEDULE OF EXPENDITURES COMPARED WITH
BUDGET (NON-GAAP) - WATER AND SEWER FUND
Year Ended June 30, 2013 with Comparative
Actual Amounts for Year Ended June 30, 2012
Schedule 12
Page 2 of 3
- 90 -
2012
Variance
Positive
Budget Actual (Negative)Actual
2013
TOWN OF HILLSBOROUGH, NORTH CAROLINA
ENTERPRISE FUND
SCHEDULE OF EXPENDITURES COMPARED WITH
BUDGET (NON-GAAP) - WATER AND SEWER FUND
Year Ended June 30, 2013 with Comparative
Actual Amounts for Year Ended June 30, 2012
Wastewater plant
Personnel services 523,495 517,365
Other services and charges 451,868 402,800
Repairs and maintenance 20,115 26,501
Capital outlay 23,474 -
Debt service payments 14,700 38,500
Total wastewater plant 1,199,032 1,033,652 165,380 985,166
Reservoir
Other services and charges $24,359$ $15,744$
Repairs and maintenance 12,357 12,802
Capital outlay - 294,255
Debt service payments 714,532 705,031
Total reservoir 757,030 751,248 5,782 1,027,832
Total expenditures 6,941,687 6,384,181 557,506 6,510,019
Revenues over expenditures 441,330 1,175,984 734,654 967,472
Other financing sources (uses)
Transfer to Water and Sewer Capital Reserve
Fund (515,547) (515,547) - (569,428)
Transfer to Water and Sewer Capital Projects
Fund (432,000) (432,000) - (377,893)
Total other financing uses (947,547) (947,547) - (947,321)
Excess of revenues and other
sources over (under) expenditures
and other uses (506,217) 228,437 734,654 20,151
Appropriated fund balance 506,217 - (506,217) -
Excess of revenues and other
sources over expenditures
and other uses -$ 228,437$ 228,437$ 20,151$
Schedule 12
Page 3 of 3
- 91 -
Reconciliation of budgetary basis (modified accrual) to full
accrual basis
Excess of revenues and other sources under expenditures
and other uses 228,437$
Reconciling items:
Interest income from Water and Sewer Capital Reserve Fund 758
Restricted intergovernmental revenue from Water and Sewer
Payment of principal on notes, bonds and installment
purchases 1,047,666
Capital outlay 207,548
Noncapitalizable capital project expenditures (125,297)
Capitalized interest on borrowings during construction period 15,280
Depreciation (747,927)
Loss on disposal of capital assets (222,574)
Proceeds from the sale of capital assets (11,118)
Interest expense accrual adjustment (25,984)
Vacation pay accrual adjustment (3,836)
Increase in OPEB liability (24,819)
Bad debts 140,728
Amortization of deferred loss on refunding (15,147)
Transfer to Water and Sewer Capital Projects Fund 432,000
Transfer to Water and Sewer Capital Reserve Fund 515,547
Change in net position 1,411,262$
TOWN OF HILLSBOROUGH, NORTH CAROLINA
ENTERPRISE FUND
SCHEDULE OF EXPENDITURES COMPARED WITH
BUDGET (NON-GAAP) - WATER AND SEWER FUND
Year Ended June 30, 2013 with Comparative
Actual Amounts for Year Ended June 30, 2012
Schedule 13
- 92 -
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 290,447 156,250 - 156,250 (134,197)
Interest on investments 5,219 5,021 - 5,021 (198)
Total revenues 787,666 653,271 - 653,271 (134,395)
Expenditures - Wastewater
Treatment Plant
Expansion Design 1,577,000 1,566,094 - 1,566,094 10,906
Legal and Administrative 1,436,926 745,902 359,329 1,105,231 331,695
Construction 16,779,674 5,222,326 9,471,864 14,694,190 2,085,484
Miscellaneous 519,087 4,101 5,696 9,797 509,290
20,312,687 7,538,423 9,836,889 17,375,312 2,937,375
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 1,374,581 800,187 487,856 1,288,043 86,538
Lawrence Road 1,160,000 583,703 270,979 854,682 305,318
Lake Ben Johnson 658,923 68,919 228,412 297,331 361,592
Water meter replacement 750,000 638,729 23,976 662,705 87,295
3,943,504 2,091,538 1,011,223 3,102,761 840,743
Total expenditures 24,660,256 10,032,395 10,848,112 20,880,507 3,779,749
Revenues under expenditures (23,872,590) (9,379,124) (10,848,112) (20,227,236) 3,645,354
Other financing sources (uses)
Proceeds from state revolving loan 18,894,640 4,508,764 10,747,714 15,256,478 (3,638,162)
Proceeds from installment purchases 2,292,504 2,252,243 - 2,252,243 (40,261)
Transfer from Water and Sewer
Capital Reserve Fund 1,044,553 879,553 - 879,553 (165,000)
Transfer from Water and Sewer Fund 1,840,893 1,408,893 432,000 1,840,893 -
Transfer to Water and Sewer Fund (200,000) (200,000) - (200,000) -
Total other financing sources 23,872,590 8,849,453 11,179,714 20,029,167 (3,843,423)
Excess of revenues and other
sources over (under)
expenditures and other uses -$ (529,671)$ 331,602$ (198,069)$ (198,069)$
BUDGET (NON-GAAP) - WATER AND SEWER CAPITAL PROJECTS FUND
From Project Inception and for the Year Ended June 30, 2013
Actual
TOWN OF HILLSBOROUGH, NORTH CAROLINA
ENTERPRISE FUND
SCHEDULE OF REVENUES AND EXPENDITURES COMPARED WITH
Schedule 14
- 93 -
Variance
Project Prior Current Total Positive
Authorization Years Year To Date (Negative)
Revenues
Interest on investments 262,942$ 263,013$ 758$ 263,771$ 829$
Expenditures 1,921,849 - - - 1,921,849
Revenues over (under) expenditures (1,658,907) 263,013 758 263,771 1,922,678
Other financing sources (uses)
Transfers from Water and Sewer Fund 2,999,239 2,545,865 515,547 3,061,412 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 (1,345,000)(1,345,000) - (1,345,000) -
Transfers to Water and Sewer Capital
Projects Fund (1,464,553) (1,299,553) - (1,299,553) 165,000
Total other financing sources (uses)1,658,907 1,370,533 515,547 1,886,080 227,173
Excess of revenues and other
sources over expenditures -$ 1,633,546$ 516,305$ 2,149,851$ 2,149,851$
BUDGET (NON-GAAP) - WATER AND SEWER CAPITAL RESERVE FUND
From Project Inception and for the Year Ended June 30, 2013
Actual
TOWN OF HILLSBOROUGH, NORTH CAROLINA
ENTERPRISE FUND
SCHEDULE OF REVENUES AND EXPENDITURES COMPARED WITH
- 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 15
- 97 -
Uncollected Uncollected
Balance Collections Balance
Fiscal Year July 1, 2012 Additions and Credits June 30, 2013
2012-2013 -$ 5,225,057$ 5,085,225$ 139,832$
2011-2012 113,659 - 73,899 39,760
2010-2011 46,320 - 17,385 28,935
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 9,044 - 8,506 538
2004-2005 5,755 - 5,755 -
224,231 5,225,057$ 5,190,770$ 258,518
Less allowance
for uncollectible
accounts:
General Fund (56,495) (85,842)
167,736$ 172,676$
Reconciliation of collections and credits with revenues:
Taxes - ad valorem - General Fund 5,135,469$
Motor vehicle license fees - General Fund 47,054
Penalties and interest (21,181)
Adjustments and refunds 29,428
5,190,770$
TOWN OF HILLSBOROUGH, NORTH CAROLINA
SCHEDULE OF AD VALOREM TAXES RECEIVABLE
June 30, 2013
Schedule 16
- 98 -
Property
Excluding
Registered Registered
Property Total Motor Motor
Valuation**Rate Levy*Vehicles Vehicles
Original levy
Property taxed at current year’s rate 746,991,165$ 0.6800 5,079,540$ 4,898,630$ 180,910$
Motor vehicle taxed at prior year rate 15,323,617 0.6200 95,007 - 95,007
Motor vehicle license fees - 698 698 -
Penalties and interest - 49,812 - 49,812
Total property valuation 762,314,782$ 5,225,057 4,899,328 325,729
Uncollected taxes at June 30, 2013 139,832 89,493 50,339
Current year’s taxes collected 5,085,225$ 4,809,835$ 275,390$
Current levy collection percentage 97.32%98.17%84.55%
** Property tax valuation prior to the discoveries and abatements.
Town-Wide
Total Levy
TOWN OF HILLSBOROUGH, NORTH CAROLINA
Year Ended June 30, 2013
ANALYSIS OF CURRENT TAX LEVY
* Total adjusted levy includes discoveries and abatements.
- 99 -
STATISTICAL SECTION
- 100 -
THIS PAGE LEFT INTENTIONALLY BLANK.
- 101 -
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.
- 102 -
Financial Trends Information:
Table 1
- 103 -
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Governmental activities
Net investment in capital assets 1,266,961$ 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$
Restricted 18,744 92,377 2,282 192,078 1,660,871 563,417 806,780 2,121,546 1,570,832 1,831,742
Unrestricted 3,349,989 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
Total governmental activities
net position 4,635,694$ 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$
Business-type activities
Net investment in capital assets 12,146,367$ 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$
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
Unrestricted 4,569,082 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
Total business-type activities
net position 16,715,449$ 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$
Primary government
Net investment in capital assets 13,413,328$ 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$
Restricted 18,744 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
Unrestricted 7,919,071 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
Total primary government
net position 21,351,143$ 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$
TOWN OF HILLSBOROUGH
NET POSITION BY COMPONENT
Last Ten Fiscal Years
(accrual basis of accounting)
Table 2
- 104 -
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Expenses
Governmental activities:
General government 776,622$ 600,763$ 967,939$ 990,096$ 1,153,096$ 1,341,151$ 1,511,119$ 1,353,757$ 1,402,445$ 1,301,963$
Public safety 2,513,144 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
Transportation 482,314 627,203 467,796 1,189,355 1,217,558 435,870 390,313 486,940 1,510,493 497,540
Environmental protection 386,249 394,738 638,351 49,052 63,118 546,472 534,476 595,447 546,612 580,312
Economic and physical
development 182,171 179,113 198,650 210,430 217,638 237,278 247,420 256,092 243,163 485,977
Community activities and
projects 41,630 56,115 62,521 54,100 227,721 105,026 40,961 49,505 40,996 64,878
Parks and recreation - - - - 12,801 31,657 60,629 36,844 51,500 36,267
Unallocated interest
expense 8,631 2,261 337 10,690 21,248 77,316 107,315 108,598 104,518 105,022
Total governmental
activities expenses 4,390,761 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
Business-type activities:
Water and sewer 4,906,984 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
Total business-type
activities expenses 4,906,984 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
Total primary government
expenses 9,297,745$ 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$
Program Revenues
Governmental activities:
Charges for services:
General government 67,488$ 95,542$ 99,131$ 140,920$ 159,868$ 113,738$ 131,750$ 149,790$ 160,990$ 326,565$
Public safety 10,728 4,693 24,573 21,036 15,290 14,453 10,825 10,273 15,593 11,426
Transportation - - - - - - 2,951 - - -
Environmental
protection 32,801 24,707 - - - - - - - -
Parks and recreation - - - - - - - 2,170 2,970 3,190
Operating grants and
contributions 245,415 196,913 195,675 254,312 337,166 309,510 202,067 183,874 228,457 175,347
Capital grants and
contributions 12,000 77,561 29,817 159,063 265,947 686,984 1,001,630 1,191,157 203,301 334,525
Total governmental
activities program revenues 368,432 399,416 349,196 575,331 778,271 1,124,685 1,349,223 1,537,264 611,311 851,053
Business-type activities:
Charges for services:
Water and sewer 5,253,344 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
Capital grants and
contributions 640,878 636,077 1,037,089 434,712 3,754,896 290,891 - 658,828 100,000 -
Total business-type
activities program revenues 5,894,222 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
Total primary government
program revenues 6,262,654$ 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$
Net (Expense) Revenue
Governmental activities (4,022,329)$ (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)$
Business-type activities 987,238 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
Total primary government
net expense (3,035,091)$ (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)$
General Revenues and
Other Changes in Net
Position
Governmental activities:
Taxes 3,811,746$ 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$
Unrestricted inter-
governmental revenues 472,642 486,084 516,245 544,091 575,308 625,798 615,770 635,907 651,381 734,401
Investment earnings,
unrestricted 26,565 74,974 161,770 219,162 196,325 109,920 29,889 10,838 4,748 3,874
Miscellaneous 61,138 4,784 7,159 21,826 12,508 15,621 35,327 24,141 16,250 26,389
Total governmental
activities 4,372,091 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
Business-type activities:
Investment earnings 35,505 91,026 190,372 246,246 233,136 107,104 27,967 14,568 6,869 4,177
Miscellaneous - - - 70 30,691 - - - - -
Total business-type
activities 35,505 91,026 190,372 246,316 263,827 107,104 27,967 14,568 6,869 4,177
Total primary government 4,407,596$ 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$
Change in Net Position
Governmental activities 349,762$ 547,259$ 264,062$ 747,852$ 532,121$ 1,103,428$ 1,646,701$ 1,749,898$ 199,062$ 1,519,787$
Business-type activities 1,022,743 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
Total primary government 1,372,505$ 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$
TOWN OF HILLSBOROUGH
CHANGES IN NET POSITION
Last Ten Fiscal Years
(accrual basis of accounting)
Table 3
- 105 -
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Governmental Funds
Reserved 876,861$ 1,054,154$ 626,383$ 743,476$ 852,658$ 904,063$ 1,430,710$ -$ -$ -$
Unreserved 2,643,290 2,850,044 3,451,245 3,826,566 5,333,079 4,606,586 4,472,052 - - -
Nonspendable - - - - - - - 477 68,649 4,305
Restricted - - - - - - - 2,121,546 1,797,832 1,831,742
Committed - - - - - - - 204,943 240,640 131,490
Assigned - - - - - - - 215,354 88,094 330,206
Unassigned - - - - - - - 3,153,904 3,691,038 4,131,281
Total Governmental Fund 3,520,151$ 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$
TOWN OF HILLSBOROUGH
FUND BALANCES, GOVERNMENTAL FUNDS
Last Ten Fiscal Years
(modified accrual basis of accounting)
Fiscal Year
Table 4
- 106 -
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Revenues
Ad valorem taxes 2,906,590$ 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$
Other taxes and licenses 925,860 976,728 1,067,530 1,197,964 1,216,236 1,178,406 1,131,562 1,163,501 1,124,696 1,229,425
Unrestricted intergovernmental 472,642 486,084 516,245 544,091 575,308 625,798 615,770 635,907 651,381 734,401
Restricted intergovernmental 252,485 225,520 221,614 257,092 364,818 755,912 306,662 1,234,870 453,755 308,007
Investment earnings 27,274 74,974 161,770 219,834 195,632 109,920 29,889 10,838 4,748 3,874
Capital contributions - - - 135,000 235,000 235,000 200,000 200,000 100,000 -
Use and rental 111,017 124,941 123,704 161,956 175,158 128,191 142,575 160,063 176,583 337,991
Other general revenues 65,360 11,330 11,038 42,440 30,733 31,106 31,518 67,071 69,669 34,079
Total revenues 4,761,228 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
Expenditures
Current
General government 795,102 808,069 1,055,473 1,090,839 1,255,061 1,986,459 2,552,912 1,232,665 1,235,107 1,122,514
Public safety 2,446,784 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
Transportation 485,721 603,152 677,493 843,439 633,474 408,258 720,627 1,718,386 1,693,664 1,011,557
Environmental protection 359,706 383,286 618,358 364,861 510,948 470,448 580,854 583,919 476,415 471,880
Economic and physical
development 182,171 179,113 198,650 210,430 217,638 237,278 247,420 256,092 243,163 485,977
Community activities and
projects 41,630 56,114 62,521 54,461 227,721 105,026 54,137 54,946 325,666 64,878
Parks and recreation - - - 109,096 102,046 1,722,062 344,499 791,184 239,105 430,831
Debt Service
Principal retirement 113,260 43,318 17,246 36,638 62,140 178,595 238,111 303,074 283,126 407,246
Interest and fiscal charges 8,631 2,673 900 7,972 11,938 68,762 93,874 107,928 98,896 111,265
Total expenditures 4,433,005 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
Excess of revenues over (under)
expenditures 328,223 384,047 (25,071) 422,914 265,996 (1,294,688) (818,287) (313,538) (462,211) 542,771
Other Financing Sources
Transfers in - - - 111,232 - 43,023 628,118 717,582 440,409 369,627
Transfers out - - - (111,232) - (43,023) (628,118) (717,582) (843,440) (369,627)
Sale of equipment - - - - - - - - - -
Insurance recovery - - - - - - - - 16,250 -
Proceeds from installment note - - 198,501 69,500 1,349,700 619,600 1,210,400 107,000 1,039,021 -
Total other financing sources - - 198,501 69,500 1,349,700 619,600 1,210,400 107,000 652,240 -
Net change in fund balances 328,223$ 384,047$ 173,430$ 492,414$ 1,615,696$ (675,088)$ 392,113$ (206,538)$ 190,029$ 542,771$
Capital outlay included in
functional expenditures above 95,739$ 220,500$ 416,105$ 484,601$ 313,810$ 2,491,483$ 1,907,332$ 2,280,672$ 1,501,851$ 997,107$
Debt service as a percentage of
noncapital expenditures 2.81%1.06%0.36%81.00%1.22%4.00%5.36%6.72%6.10%8.30%
TOWN OF HILLSBOROUGH
CHANGES IN FUND BALANCES, GOVERNMENTAL FUNDS
Last Ten Fiscal Years
(modified accrual basis of accounting)
- 107 -
Revenue Capacity Information:
Table 5
- 108 -
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Function/Program
Governmental activities:
General government 67,488$ 143,037$ 102,708$ 140,920$ 159,868$ 348,738$ 331,750$ 382,843$ 354,227$ 361,590$
Police 32,829 32,021 54,323 64,210 134,722 14,453 28,874 10,273 15,593 11,426
Transportation 235,314 183,954 185,394 192,890 216,544 274,275 543,741 848,978 228,521 185,847
Environmental protection 32,801 40,404 6,611 8,940 - - - - - -
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
Subtotal governmental activities 368,432 399,416 349,196 575,331 778,271 1,124,685 1,349,223 1,537,264 611,311 851,053
Business-type activities:
Water and sewer 5,331,539 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
Subtotal business-type activities 5,331,539 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
Total primary government 5,699,971$ 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$
TOWN OF HILLSBOROUGH
PROGRAM REVENUES BY FUNCTION/PROGRAM
Last Ten Fiscal Years
(accrual basis of accounting)
Table 6
- 109 -
Fiscal Ad Valorem
Year Taxes
2004 2,906,589$
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
Change b
2004 - 2013 56.60%
b Ad Valorem tax revenue increased by 56.60 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 2004 to 2013.
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.
Table 7
- 110 -
Total Assessed
Total Direct Value as a
Fiscal Real Personal Public-Service Assessed Tax Percent of
Year Property *Property Companies Value Rate Actual Value
2004 389,951,642$ 64,971,650$ 11,991,133$ 466,914,425$ 0.6200 100.00%
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%
Source: Annual County Report of Valuation and Property Tax Levies.
* Real Property values exclude tax exempt property.
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.
Table 8
- 111 -
Fiscal Basic Total Fire
Year Rate Direct District County
2004 0.620 0.620 -0.8450
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
Source: Orange County
TOWN OF HILLSBOROUGH
DIRECT AND OVERLAPPING PROPERTY TAX RATES
Last Ten Fiscal Years
(rate per $100 of assessed value)
The Fire District Tax applies to properties outside of the city limits.
Municipality Rates
Note: The Town's basic property tax rate may be increased only by a majority vote of the elected Town Board of Commissioners.
a Overlapping rates are those of local and county governments that apply to property owners within the Town of Hillsborough.
Overlapping Rates a
Table 9.
- 112 -
Fiscal
Year Taxes Levied Collections
Ended for the Percentage in Subsequent Percentage
June 30,Fiscal Year Amount of Levy Years Amount of Levy
2004 2,937,177$ 2,878,937$ 98.02%58,240$ 2,937,177$ 100.00%
2005 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%104,427 4,661,928 99.38%
2012 4,755,200 4,641,541 97.61%73,899 4,715,440 99.16%
2013 5,225,057 5,085,225 98.82%- 5,085,225 97.32%
Sources: Orange County Board of Equalization and Assessment and Orange County Department of Finance.
TOWN OF HILLSBOROUGH
PROPERTY TAX REVIEW AND COLLECTIONS
Last Ten Fiscal Years
Collected within the
Fiscal Year of the Levy Total Collections to Date
Table 10
- 113 -
Percentage Percentage
of Total City of Total City
Taxable Taxable Taxable Taxable
Assessed Assessed Assessed Assessed
Taxpayer Value Rank Value Value Rank Value
Hillsborough Apartments Partners LLC 16,213,700$ 1 2.18%
Walmart Real Estate Business Trust 13,675,468 2 1.84%6,494,107$ 4 1.40%
PHE Inc.9,748,480 3 1.31%7,324,024 1 1.57%
HD Development of Maryland INC 9,560,634 4 1.28%
Daniel Boone LTD 8,791,757 5 1.18%6,931,458 3 1.48%
SLF II NC Waterstone LLC 8,787,243 6 1.18%
Hillsborough Commons LTD 8,497,192 7 1.14%
MDCO LLC 8,453,567 8 1.13%6,391,488 5 1.37%
Brookshire, Inc 6,481,432 9 0.87%
Alcurt Hillsborough, LLC 6,363,970 10 0.85%
Flint Ridge, Ltd 7,048,446 2 1.51%
Parker-Hannifan Corp
R.T. Holdings, LLC 5,791,629 6 1.25%
CentralTelephone Co.5,710,726 7 1.22%
Stihl, Inc.5,126,513 8 1.10%
Fred B. Johnston Co.5,077,453 9 1.09%
Duke Energy Corp. 4,559,188 10 0.98%
Total 96,573,443$ 12.96%60,455,032$ 12.98%
Source: Orange County Property Assessment Division
20042013
TOWN OF HILLSBOROUGH
PRINCIPAL PROPERTY TAXPAYERS
Current Year and Nine Years Ago
Table 11
- 114 -
Type of Customer 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
In-Town Residential 100,948,735 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
Out-of-Town Residential 101,595,620 100,538,030 103,325,114 105,793,065 104,552,882 101,568,087 106,627,659 112,868,479 120,107,805 130,921,523
In-Town Commercial 76,086,830 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
Out-of-Town Commercial 23,277,515 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
Total Gallons Billed 301,908,700 306,455,840 310,788,346 317,531,209 309,363,538 301,182,082 309,448,245 309,429,587 314,849,556 328,454,584
Total Water and Sewer
Charges (Revenue)4,914,823$ 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$
Total average rate
per 1,000 gallons 16.28$ 15.95$ 16.78$ 17.95$ 18.57$ 20.07$ 20.02$ 20.00$ 22.00$ 22.11$
Source: Town of Hillsborough, Water Billing Office.
Revenue collected includes late payment penalties.
TOWN OF HILLSBOROUGH
WATER SOLD BY TYPE OF CUSTOMER AND
IN AND OUT OF TOWN
Last Ten Fiscal Years
Fiscal Year
Table 12
- 115 -
Rate per Rate per Rate per Rate per Rate per Rate per Rate per Rate per
Fiscal 0-3000 1,000 0-3000 1,000 0-3000 1,000 0-3000 1,000
Year Gallons Gallons Gallons Gallons Gallons Gallons Gallons Gallons
2004 *19.35$ 6.45$ 17.43$ 5.81$ 37.74$ 12.58$ 33.99$ 11.33$
2005 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
2007 19.95 6.65 20.52 6.84 38.91 12.97 40.02 13.34
2008 20.16 6.72 21.33 7.11 39.30 13.10 41.61 13.87
2009 21.75 7.25 22.74 7.58 42.40 14.13 44.36 14.79
2010 21.75 7.25 22.74 7.58 42.40 14.13 44.36 14.79
2011 21.75 7.25 23.88 7.96 42.42 14.14 46.56 15.52
2012 23.04 7.68 25.98 8.66 44.94 14.98 50.67 16.89
2013 24.21 8.07 28.26 9.42 47.22 15.74 55.11 18.37
Rate changes are effective with July 1 water usage unless otherwise stated.
The construction of a reservoir in 1998, and renovations of an aging water and wastewater treatment plant, has caused significant
increases in water and sewer rates over the past ten years.
A flat charge is billed for 0 to 3,000 gallons. Any usage over 3,000 gallons is billed per 1,000 gallons rate.
* rates effective October 1, 2003
^ rates effective September 1, 2005
TOWN OF HILLSBOROUGH
WATER AND SEWER RATES
Last Ten Fiscal Years
Out-of-Town Water Out-of-Town SewerIn-Town Water In-Town Sewer
- 116 -
Debt Capacity Information:
Table 13
- 117 -
Governmental
Activities
General Total
Fiscal Installment Obligation Revolving Installment Primary Per
Year Loans Bonds Loans Loans Government Capita a
2004 60,564$ 5,344,000$ 1,156,901$ 4,542,981$ 11,104,446$ 2,009$
2005 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
Note: Details regarding the Town's outstanding debt can be found in the notes to the financial statements.
TOWN OF HILLSBOROUGH
RATIOS OF OUTSTANDING DEBT BY TYPE
Last Ten Fiscal Years
Business-Type Activities
a See Table 17 for population data. These ratios are calculated using population for the prior calendar year.
Table 14
- 118 -
Percentage of
General Actual Taxable
Fiscal Obligation Value a of Per
Year Bonds Total Property Capita b
2004 5,344,000$ 5,344,000$ 1.14%964$
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%-
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
Table 15
.
- 119 -
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 86,205,000$ 4.742%4,087,841$
Town's overlapping debt 4,087,841
Town's direct debt 3,084,782
Total direct and overlapping debt 7,172,623$
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 city.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, 2013
Table 16
- 120 -
Assessed value 762,314,782$
Debt limit (8% of assessed value)60,985,183
Debt applicable to limit:
Installment loans (3,084,791)
Legal debt margin 57,900,392$
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Debt limit 37,353,154$ 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$
Total net debt
applicable to limit 60,564 17,246 198,501 231,363 1,518,923 1,959,928 2,932,216 2,736,142 3,440,001 3,084,791
Legal debt margin 37,292,590$ 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$
Total net debt
applicable to
the limit as a
percentage of
debt limit 0.16%0.04%0.43%0.46%3.02%3.81%4.87%4.57%5.67%5.06%
Note: Under state finance law, the Town's outstanding general obligation debt should not exceed 8 percent of total assessed property value.
TOWN OF HILLSBOROUGH
LEGAL DEBT MARGIN INFORMATION
Last Ten Fiscal Years
Fiscal Year
Legal Debt Margin Calculation for Fiscal Year 2013
- 121 -
Demographic and Economic Information:
Table 17
- 122 -
Personal Per
Income Capita
(thousands Personal Median School Unemployment
Year Population of dollars)Income Age Enrollment Rate
2004 5,541 4,506,277$ 38,227$ 33.00 1,095 3.0%
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 *32,912 33.99 1,433 5.3%
* Information not yet available
Note: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 the
census at the start of the school year.
TOWN OF HILLSBOROUGH
DEMOGRAPHIC AND ECONOMIC STATISTICS
Last Ten Calendar Years
Sources:Population and median age information provided by the State Library of North Carolina. Personal income information provided by the
Orange County Economic Development Office.Unemployment data provided by the Employment Security Commission. School enrollment data
provided 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 county
level. Unemployment is reported for the month of June of each year.
Table 18
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Percentage Percentage
of Total Town of Total Town
Employer Employees Population Employees Population
Orange County Schools 1,120 17.78%1,253 22.67%
Orange County Government 967 15.35%740 13.39%
Sports Endeavors, Inc. dba Eurosport 365 5.80%434 7.85%
PHE 342 5.43%369 6.68%
Walmart 277 4.40%195 3.53%
Brookshire Nursing Center 142 2.25%105 1.90%
The Home Depot 103 1.64%*
Piedmont Electric 86 1.37%95 1.72%
Food Lion 83 1.32%56 1.01%
Town of Hillsborough 61 0.97%80 1.45%
Total 3,546 56.30%3,327 60.20%
Source: Town Economic Development Division and Employment Security Commission.
Note: Information regarding Town's total employment is not available.
* Data Not Available
2013 2004
TOWN OF HILLSBOROUGH
PRINCIPAL EMPLOYERS
Current Year and Nine Years Ago
Table 19
- 124 -
Function/Program 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
General government
Administration 2 2 2 3 3 3 4 4 3 3
Finance 4 4 5 5 4 4 4 4 4 4
Planning 2 2 3 3 3 4 3 3 3 3
Safety - - - - 1 1 1 1 1 1
Police
Officers 25 25 25 26 29 29 26 26 25 27
Civilians 3 3 3 1 2 3 2 2 - -
Public Works
Streets 5 4 6 3 4 4 4 4 3 3
Sanitation 4 4 4 5 5 4 4 4 4 4
Motor Pool 3 3 3 3 3 3 3 3 3 3
Utilities
Engineering 2 2 2 3 3 4 4 4 4 4
Billing and Collection 6 6 7 6 6 7 6 5 5 5
Water 6 6 6 6 6 6 6 6 6 6
Wastewater 10 10 10 9 9 10 10 8 8 8
Water Distribution/
Wastewater Collection 10 10 11 10 11 7 8 8 11 11
Fire Inspections 1 - 1 1 1 1 1 1 1 1
Total 83 81 88 84 90 90 86 83 81 83
TOWN OF HILLSBOROUGH
FULL-TIME EQUIVALENT CITY GOVERNMENT EMPLOYEES
BY FUNCTION/PROGRAM
Last Ten Fiscal Years
Source: Town Finance Office. Positions reported at June 30th are positions filled.
Full-Time Equivalent Employees as of June 30
- 125 -
Operating Information:
Table 20
- 126 -
Function/Program 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Police
Physical arrests 630 609 748 792 562 524 546 475 560 538
Calls for service 7,751 8,198 8,247 7,273 11,181 12,490 9,619 12,889 15,039 14,569
Traffic citations 1,240 966 1,039 1,538 1,877 1,937 1,712 1,182 1,134 1,651
Number of policeman positions 27 27 27 27 29 29 29 29 29 26
Fire
Number of stations 1 1 1 1 1 1 1 1 1 1
Emergency responses (EMS and Fire)1,225 1,275 1,449 1,802 1,960 1,918 1,865 1,835 1,770 1,866
Fires extinguished 38 41 11 6 6 30 75 19 78 70
Number of paid firemen 14 15 20 19 23 23 24 24 25 24
Number of volunteers 24 26 19 15 15 12 15 12 14 19
Inspections 125 *297 387 289 269 213 211 258 177
Refuse collection
Refuse collected (tons per day)7.0 7.1 6.7 6.3 6.3 6.7 6.1 5.95 - 6.34
Recyclables collected (tons per day)**********
Other public works
Street resurfacing (miles)1.1 - 2.1 2.2 1.5 0.5 - - - 2.25
Potholes repaired 450 259 227 84 51 103 45 41 36 30
Parks and recreation
Number of parks 1 1 2 3 6 6 6 6 6 6
Library
Volumes in collection 76,615 79,998 86,272 94,273 84,465 78,770 75,506 86,526 97,536 93,421
Total volumes borrowed 109,956 152,435 167,000 178,911 184,301 209,023 203,450 287,938 351,216 397,379
Water
New connections 1,080 1,128 1,056 949 841 826 939 815 767 736
Water main breaks a *20 46 32 36 46 41 10 30 20
Average daily consumption
(million gallons per day)1.246 1.225 1.168 1.235 1.101 1.143 1.124 1.129 1.048 0.913
Peak daily consumption
(millions of gallons)2.000 2.291 1.721 1.770 1.770 1.938 1.626 1.653 1.576 1.653
Wastewater
Average daily sewage treatment
(millions of gallons)0.773 0.753 0.679 0.726 0.740 0.872 0.888 0.757 0.765 0.902
Education
Number of schools b 3 3 4 3 3 3 3 3 3 3
Number of teachers 112 117 117 113 105 105 111 111 113 113
Number of students 1,095 1,094 1,203 1,180 1,272 1,272 1,279 1,305 1,420 1,433
Number of classrooms c 107 110 112 110 95 95 95 65 65 65
Sources: Various city departments.* Data Not Available YTBD (Yet To Be Determined)a Partial Year Data For FY05
b Alternative school added for students who have not been successful in the traditional school setting in FY06 c Core Classes Only Reported in FY11, FY12 and FY13
Fiscal Year
TOWN OF HILLSBOROUGH
OPERATING INDICATORS BY FUNCTION/PROGRAM
Last Ten Fiscal Years
Table 21.
- 127 -
Function/Program 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Police
Stations 2 2 2 2 2 2 2 2 2 2
Patrol units 19 19 22 23 23 26 26 28 27 26
Fire stations 1 1 1 1 1 1 1 1 1 1
Refuse collection
Collection trucks >2 2 3 3 3 6 6 6 7 7
Other public works
Streets (miles) - paved 30.64 31.50 30.84 32.89 32.89 36.15 36.15 36.15 36.15 36.15
Streets (miles) - unpaved 0.86 0.86 0.86 0.86 0.86 0.73 0.73 0.73 0.73 0.73
Streetlights 615 618 620 621 623 623 633 633 633 633
Traffic signals (all state-owned)- - - - - - - - - -
Parks and recreation
Acreage b 29.48 29.48 30.23 30.24 72.62 72.62 72.62 72.62 74.10 74.10
Playgrounds 1 1 3 3 4 4 4 4 4 4
Water
Water mains (miles)118.0 120.0 121.0 126.0 146.8 146.8 147.0 147.0 148.0 148.0
Fire hydrants 572 ^583 ^600 ^612 ^622 ^656 ^597 614 663 c 621
Storage capacity (thousands of gallons) *2,200 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000
Wastewater
Sanitary sewers (miles)62.0 64.0 64.0 70.0 86.4 86.4 86.4 86.4 89.0 93.0
Storm sewers (miles) a - - - - 36.0 36.0 73.0 73.0 73.0 73.0
Treatment capacity (millions of gallons)3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0 - 3.0
Area (square miles)5.350 5.370 5.390 5.520 5.530 5.740 5.740 5.740 5.740 5.760
Sources: 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 tank.
> Includes brush and leaf trucks 2009 forward
Fiscal Year
Note: No capital asset indicators are available for the general government or library function.
TOWN OF HILLSBOROUGH
CAPITAL ASSET STATISTICS BY FUNCTION/PROGRAM
Last Ten Fiscal Years
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THIS PAGE LEFT INTENTIONALLY BLANK.
- 129 -
COMPLIANCE SECTION
- 130 -
THIS PAGE LEFT INTENTIONALLY BLANK.
- 131 -
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
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, 2013, and the
related notes to the financial statements, which collectively comprise the Town’s basic financial
statements, and have issued our report thereon dated January 23, 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.
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. 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.
Our consideration of internal control over financial reporting 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 financial reporting that might be material weaknesses or significant
deficiencies. Given these limitations, during our audit we did not identify any deficiencies in
internal control that we consider to be material weaknesses. However, material weaknesses
may exist that have not been identified.
- 132 -
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.
We noted certain matters that we reported to management of the Town of Hillsborough in a
separate letter dated January 23, 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.
January 23, 2014
- 133 -
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
To the Honorable Mayor, Members of the Board of
Town Commissioners and the Town Manager
Town of Hillsborough, North Carolina
Report on Compliance for Each 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, 2013. 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.
- 134 -
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, 2013.
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.
January 23, 2014
- 135 -
TOWN OF HILLSBOROUGH, NORTH CAROLINA Schedule 17
SCHEDULE OF FINDINGS AND QUESTIONED COSTS Page 1 of 2
Year Ended June 30, 2013
I. Summary of Auditors’ Results
Financial Statements
Type of auditors’ report issued: Unmodified
Internal control over financial reporting:
• Material weaknesses identified? Yes X 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
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TOWN OF HILLSBOROUGH, NORTH CAROLINA Schedule 17
SCHEDULE OF FINDINGS AND QUESTIONED COSTS Page 2 of 2
Year Ended June 30, 2013
II. Financial Statement Findings
There were no findings related to the financial statements for the fiscal year ended June 30,
2013.
III. Federal Awards Findings and Questioned Costs
There were no findings related to the federal awards for the fiscal year ended June 30, 2013.
IV. State Award Findings and Questioned Costs
Not applicable.
TOWN OF HILLSBOROUGH, NORTH CAROLINA Schedule 18
SCHEDULE OF PRIOR YEAR AUDIT FINDINGS
Year Ended June 30, 2013
- 137 -
Finding: 2012-1
Status: This finding has been corrected.
Finding: 2012-2
Status: This finding has been corrected.
Finding: 2012-3
Status: This finding has been corrected.
Schedule 19
- 138 -
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 NC Department of
Environmental and Natural Resources
Capitalization Grant for Clean Water State
Revolving Fund 66.458 E-SRF-T-10-0269 15,431,324$ -$ -$
Total U.S. Environmental Protection
Agency 15,431,324 - -
Total assistance - federal programs 15,431,324 - -
State grants:
NC Department of Transportation
Direct Programs
Powell Bill DOT 4 - 98,857 -
Total NC Department of Transportation - 98,857 -
Total assistance - state programs - 98,857 -
Total assistance 15,431,324$ 98,857$ -$
AWARDS
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 15,256,478$
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, 2013
The Town of Hillsborough had the following loan balances outstanding at June 30,2013.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 FINANCIAL