HomeMy Public PortalAboutComprehensive Annual Financial Report Year Ended June 30, 2021TOWN OF
HILLSBOROUGH
NORTH CAROLINA
Annual Financial Report
For Fiscal year ended June 30, 2021
Presented by the Financial Services Department
Melissa Bishop, Interim Finance Director
Richard Duke, Financial Analyst
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TOWN OF HILLSBOROUGH, NORTH CAROLINA
Annual Financial Report
Fiscal Year Ended June 30, 2021
Prepared by the Financial Services Department
Town of Hillsborough, North Carolina
Table of Contents
Introductory Section
Letter of Transmittal i
List of Principal Officials x
Organization Chart xi
GFOA Certificate of Achievement xii
Financial Section
Report of Independent Auditor 1
Management's Discussion and Analysis 3
Basic Financial Statements
Exhibit Government -Wide Financial Statements:
1 Statement of Net Position 12
2 Statement of Activities 13
Fund Financial Statements:
3 Balance Sheet - Governmental Funds 15
4 Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental
Funds 17
5 Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and
Actual - General Fund 19
6 Statement of Net Position - Proprietary Funds 20
7 Statement of Revenues, Expenses and Changes in Net Position - Proprietary Funds 21
8 Statement of Cash Flows - Proprietary Funds 22
9 Statement of Fiduciary Net Position — Fiduciary Fund 24
10 Statement of Changes in Fiduciary Net Position - Fiduciary Fund 25
Notes to Financial Statements 26
Required Supplementary Financial Data
Schedule
Law Enforcement Officers' Special Separation Allowance Required Supplementary
Information:
RSI-1 Schedules of Changes in Total Pension Liability 59
RSI-2 Schedules of Total Pension Liability as a Percentage of Covered Payroll 60
OPEB Retirement Plan Required Supplementary Information:
RSI-3 Schedules of Changes in the Total OPEB Liability and Related Ratios 61
Local Government Employees' Retirement System Required Supplementary
Information:
RSI-4 Schedules of Proportionate Share of Net Pension Liability (Asset) 62
RSI-5 Schedules of Contributions 63
Town of Hillsborough, North Carolina
Supplementary Information:
Combining and Individual Fund Financial Statements Section
Schedule
Governmental Funds:
1 Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and
Actual - General Fund 64
2 Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and
Actual — Restricted Revenue Fund 69
3 Combining Balance Sheet - Nonmajor Governmental Funds 70
4 Combining Statement of Revenues, Expenditures and Changes in Fund Balances
Nonmajor Governmental Funds 72
5 Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and
Actual - General Capital Projects Fund 74
6 Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and
Actual - General Capital Reserve Fund 75
7 Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and
Actual - Riverwalk CMAQ Capital Project Fund 76
8 Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and
Actual - Rail Station Capital Project Fund 77
9 Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and
Actual - Public Works Building Capital Project Fund 78
10 Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and
Actual - Public Safety Building Capital Project Fund 79
Enterprise Funds:
11 Schedule of Revenues, Expenditures, and Other Financing Sources - Budget and
Actual (Non-GAAP) - Water and Sewer Fund 80
12 Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and
Actual (Non-GAAP) — Utilities Capital Improvements Fund 83
13 Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and
84
85
86
87
88
(Non-GAAP) - Stormwater Fund 89
90
14
15
16
17
18
19
Actual (Non-GAAP) — West Fork ENO Reservoir Project Fund
Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and
Actual (Non-GAAP) — Mill Creek Road Project Fund
Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and
Actual (Non-GAAP) - Water and Sewer Capital Reserve Fund
Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and
Actual (Non-GAAP) - Water System Development Reserve Fund
Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and
Actual (Non-GAAP) - Sewer System Development Reserve Fund
Schedule of Revenues, Expenditures and Other Financing Uses - Budget and Actual
Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and
Actual (Non-GAAP) - Stormwater Capital Improvements Fund
Other Schedules
20 Schedule of Ad Valorem Taxes Receivable 91
21 Analysis of Current Tax Levy 92
Compliance Section
Independent Auditors' 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 93
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Introductory Section
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January 12, 2023
Honorable Mayor Weaver,
Board of Town Commissioners,
and Citizens of Hillsborough
Hillsborough, North Carolina 27278
The Annual Financial Report of the Town of Hillsborough, North Carolina for the fiscal year ended June 30,
2021, 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. Unfortunately, due to a variety of circumstances, including losing a significant number of
key staff, including two finance directors over the past 18 months, production of the financial statements
has been delayed a little over 14 months. Outside accounting and finance experts with significant local
government experience were contracted to help the town complete the 2021 audit, as well as work on and
complete the 2022 audit, conduct a SWOT (strengths, weaknesses, opportunities, and threats) review to
identify potential improvements such as adding staff and redundancy with the department, streamlining
inefficient processes, building staff experience as many are relatively new to government finance, and assist
with the selection of a new Finance Director. We are optimistic that focusing in these areas will prevent a
repeat of having the audit process significantly delayed, as well as making the Town's financial services
operations more effective, efficient, and resilient during times of employee turnover in the future.
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 an 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 Cherry Bekaert LLP, a firm of licensed certified public accountants,
was selected and awarded the contract for the Fiscal Year 2021. 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
JOT E. Orange St. PO Box 429, Hillsborough, NC 27278
9I9 -732-I270 www.hillsboroughnc.gov a JHillsboroughGov
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 report of the independent
auditor.
COVID-19
Fiscal year 2021 was challenging due to the continued impacts of COVID-19. The Town closed its offices
to the public on March 16, 2020. This closure continued through all Fiscal Year 2021. Many employees of
the Town continued to work remotely during this time. All town departments had to make continual
adjustments to deal with the evolving challenges brought on by COVID.
Profile of the Government
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 7,809 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 many tourists.
The Town is operated under the council-manager form of
government. Commissioners on the five -member,
nonpartisan board serve four-year staggered terms and
are elected at large. The mayor, also elected at large,
serves a two-year term, chairs the board meetings, and
votes when a tie occurs.
The Town provides a full range of municipal services,
including police, fire inspection and protection, parks,
planning, public spaces, street maintenance, solid waste
collection, stormwater, and cemetery. The Town provides
financial support to certain boards, agencies, and
commissions to assist their efforts in serving citizens. The Town has evaluated its relationship with each of
these entities according to criteria established by Governmental Accounting Standards Board Statement
14 and has determined that the Hillsborough Tourism Development Authority and Hillsborough Tourism
Board are required to be included in the financial report.
Historic to vn
clock atthe oId courthouse in downtown
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 about 1.6
MGD. The Town's water system serves approximately 6,500 customers, 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 treated discharge of approximately 0.8 MGD.
The Town offers a seven -week course, The Citizen's Academy, aimed at helping citizens increase their
knowledge of town government, as well as their interest and ability in influencing and participating in town
decisions. The 2020 and 2021 courses were canceled due to COVID-19.
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Environmental Initiatives
The town government mission statement charges personnel with enhancing the quality of life for the living
beings and land within our town. Strategic objectives include conserving natural resources and expanding
recreation, walkability, and connectivity.
Below are some of the environmental initiatives of the town government.
➢ Updating and expanding the long-term visioning and planning document (Comprehensive Plan)
and combining it with long-term sustainability and climate change initiatives. Work continued on the
Comprehensive-Sustainability Plan that is expected to be completed in late 2022 or early 2023.
➢ Orange County Climate Council member. The council was formed in 2019 by Orange County and
the towns of Carrboro, Chapel Hill, and Hillsborough as a collaborative effort among the municipal
governments, the school systems, the University of North Carolina, non-profit organizations, and
residents. The council's mission is to accelerate joint action addressing the climate emergency by
sharing successful strategies and identifying equitable opportunities to reduce greenhouse gas
emissions, provide stewardship of the natural world, and protect all county residents from climate
impacts.
➢ The Town has adopted a resolution supporting the goal of using 100 percent clean energy by 2050
and fostering a resilient and sustainable community.
➢ As a designated Tree City USA, the town's Public Space Division and Tree Board work to protect
the town's trees and educate citizens about the importance of urban forestry.
➢ Hillsborough is a Bee City USA. The town works to raise awareness of the role pollinators play in
sustaining more than 75 percent of the world's plant species and helps expand pollinator -friendly
practices and environments in town. The town's Public Space Division and Tree Board are working
in partnership with the Hillsborough Garden Club to develop the program and educational materials,
including actions residents can take.
➢ The Town's Stormwater and Environmental Services Division was created to comply with many
state and federal mandates for environmental stewardship.
➢ The town has partnered with Orange County for curbside collections of recyclables throughout the
town and to provide collection bins for recyclables downtown and along the Riverwalk greenway.
The town has invested in a battery -powered cart for use by Public Works Department employees
when collecting trash and recyclables along Riverwalk. Additionally, the town collects appliances
and scrap metal for recycling.
➢ The Water Distribution and Wastewater Collection Division works to prevent sanitary sewer
overflows and environmental damage they cause. The division's fats, oil, and grease program
included educational presentations at schools and public events about keeping these blockage -
causing substances out of the Town's sewer system.
Cates Creek Park Pollinator Garden
Local Economy
The Town of Hillsborough, Orange
County, and the Research Triangle
Park area are 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, education, healthcare,
wholesale and retail businesses, as
well as numerous service providers.
Approximately 40% of
Hillsborough's tax base is
commercial in nature - this is a
strong indicator of a healthy and
diverse property tax base.
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The Town's unemployment rate has been below state and national rates throughout recent history.
Traditionally, Orange County has the lowest unemployment rate in North Carolina. While there were
concerns about the economy due to COVID-19, the issuance of building permits and for residential and
commercial developments, as well as frequent inquiries from developers continued to be exceptionally
strong through June 2021.
Government, Education, and Healthcare
Orange County government is a major employer in Hillsborough. Many of the county's administrative
buildings are located within town limits. One of those buildings is the Old Orange County Courthouse (c.
1844) is a Greek -revival building designed and built by local builder John Berry. The courthouse is still in
use for county judicial business and is open to the public for free visits. The courthouse lawn is home to
many outdoor musical performances and festivals and acts as a "town square" in many respects.
The Orange County Board of Education is in Hillsborough and serves thirteen schools throughout the
county. Three of the thirteen schools are within the town limits and seven more are served by Hillsborough's
water and sewer system.
Durham Tech has a 20 -acre campus in Hillsborough. The college occupies a 40,000 square -foot brick
structure that holds 22 instructional spaces, including classrooms, computer and science labs, a library,
flexible use space, instructional and student support services areas, and faculty and student lounges. The
facility has many "green" buildings features that contribute to energy efficiency and cost savings.
University of North Carolina (UNC) Medical Center operates a UNC Health Care Hillsborough Campus,
which is a 68 -bed community hospital. The facility includes a Medical Office Building, Emergency
Department, Outpatient Surgery, and Inpatient Services. The hospital is the first in North Carolina to receive
the Geriatric Emergency Department Accreditation (GEDA) from the American College of Emergency
Physicians (ACEP). This certifies that staff has been specially trained to assess older patients more
comprehensively. UNC is one of about 20 hospitals accredited nationwide. Even though the hospital
recently opened in 2015, expansion plans have been submitted and going through the development review
process. The expansion will add an estimated 100 jobs, 30 rehabilitation beds, 50 acute care beds, and a
dialysis unit.
Recreational, Visitor, and Cultural Events
The Town's three percent hotel/motel and one percent prepared food and beverage taxes have provided a
dedicated resource for promoting Hillsborough as a destination for arts and culture, unique cuisine, outdoor
recreation, and historical landmarks. While many events were cancelled between July 1, 2020 and June
30, 2021, there were far more public events during this period than the previous year.
The Tourism Development Authority (TDA), a component unit of the town, promotes travel, tourism, and
conventions; sponsors tourism -related events, and finances tourism -related capital projects. The Tourism
Board drives economic development by promoting travel, tourism, and visitor services. It sponsors
programs and activities designed to improve Hillsborough's attractiveness to visitors. The Tourism Board
has contracted with the Alliance for Historic Hillsborough to operate the Hillsborough Visitors Center. The
center offers a gift shop, tours, exhibits, and gardens.
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Hillsborough has many festivals and events throughout the year, such
➢ Art in the Heart of Hillsborough
➢ Last Fridays Concert Series
➢ Hillsborough Garden Tour
➢ Last Fridays Artwalk
➢ Carolina Tarwheels Bikefest
➢ Farm Fare Tasting Event
➢ Hillsborough Hog Day BBQ Festival
➢ Moorefields Bluegrass Festival
➢ River Park Concert
➢ Historic Hillsborough Half Marathon & 5K
➢ Handmade Parade
➢ Hillsborough Halloween Spirits Tours
➢ Solstice Celebration Lantern Walk
➢ Hillsborough Holiday Parade and Tree
Lighting
➢ Candlelight Holiday Home Tour
as:
Ayr Mount is a Federal -era plantation house built in 1815 in Hillsborough by
William Kirkland.
Hillsborough is rich with museums and historical sites.
➢ Alexander Dickson House (late 18th -
century)
➢ Ayr Mount (1800's Federal -era
plantation house)
➢ Burwell School Historic Site (1800's)
➢ Hillsborough Presbyterian Church
(c.1816)
➢ Margaret Lane Cemetery (c.1885)
➢ Moorefields (c.1785)
➢ Occaneechi Village Replica Site
➢ Old Orange County Courthouse
(c.1844)
➢ Dickerson's Chapel AME Church
(1790)
➢ First Baptist Church (c.1860/1868)
➢ Hillsborough United Methodist Church
(c.1860)
➢ Old Town Cemetery (c.1757)
➢ Orange County Historical Museum
➢ Ruffin-Roulhac House (c.1821)
➢ St. Matthew's Episcopal Church (c.
1825/1826)
Recreation, sports, and leisure opportunities abound in Hillsborough.
➢ Cates Creek Park
➢ Mayo Park
➢ Murray Street Park
➢ Gold Park
➢ Hillsborough Heights Park
➢ Kings Highway Park
➢ Calvin Street Greenway
➢ Riverwalk
➢ Historic Occoneechee Speedway Trail
➢ Turnip Patch Park
➢ Exchange Park
➢ Fairview Park
➢ Hillsborough Youth Athletic Association
baseball fields
➢ River Park
➢ Cates Creek Greenway
➢ Occoneechee Mountain State Natural
Area
➢ Kings Highway Park
V
➢ Duke Forest
➢ Ayr Mount
➢ Occoneechee Golf Club
➢ Central Recreation Center
➢ Triangle Area Polo Club & Arena
➢ Orange County Sportsplex
Residential Growth
Hillsborough's population will increase significantly
over the next few years. The Town continues to
receive commercial inquires and experience
expansion of existing businesses. The following
neighborhoods are under development or will be in the
near future.
➢ The Waterstone, Forest Ridge, and Fiori Hills
developments are near completion. When
finished they will have added about 1,000
residential units to Hillsborough.
➢ The Collins Ridge master plan includes 950
dwellings (houses, townhouses, and
apartments) and 88 affordable rental units.
The first homes were sold in June 2021.
Long -Term Financial Planning
For quite a few years the town's approach to building its budget and a multi -year financial plan has been:
1) take care of what we've got, 2) invest for the future, and 3) minimize rate impacts on the community.
COVID-19 is a health and economic crisis that needs no further explanation as everyone is acutely aware
of its impacts. It's further complicated due to the difficulty in forecasting the length and severity of the
financial impacts on global, national, and local economies, especially if there is a second or third wave of
infections.
Revenue assumptions are critical as they are the primary factor in determining expenditure limits for the
budget. Assumptions from local governments across North Carolina varied wildly as budgets were being
developed for the fiscal year 2021, with far greater ranges than anyone on the budget team has ever
seen. There were no common baselines when it came to projecting key revenue sources, such as property
tax collection rates, sales taxes, Powell Bill (state gas tax), food and beverage, accommodations tax, water
and sewer revenues, and many others.
The fiscal year 2021 budget was the first budget presented to Hillsborough's town board in the last 23 years
that was not in a multi -year format. Hillsborough is one of the only local governments in the state that uses
a multi -year format. During budget development while in the early stages of COVID-19, it was difficult to
accurately project for three months, much less three years. To minimize wasted time and help everyone
focus attention on the most pressing issues, the document was prepared in a traditional one-year format.
Hopefully, the situation will stabilize going into the fiscal year 2022 and staff can resume with the multi -year
format that's been so successful.
Due to the uncertainty, the following approaches were used in developing the FY22 budget: 1) simplify and
prioritize, 2) increase options and 3) prepare for more tight budgets ahead.
vi
1. Simplify and prioritize by focusing on the basics: core service delivery, asset maintenance, and retaining
employees since skill, experience, and know-how are a service organization's most important resource.
Most everything else will need to wait until the situation stabilizes, then financial condition and priorities can
be reassessed.
2. Increase options to have the financial flexibility to deal with the unexpected issues that will arise,
especially if FY21 turned out to be difficult year. Increasing options was achieved through conservative
projections on the revenue side and trimming expenses to protect the town's financial reserves. Many
requests, even those that have been planned for some time have been cut, delayed, or reduced. Most
vacant positions that were frozen in late FY20 remained frozen through much or all FY21. Making tough
decisions early in the pandemic and during FY21 budget adoption (June 2020) provided more options for
the town to weather unexpected challenges. Underestimating potential financial impacts creates significant
risks for the organization and its ability to serve our community. Being overly optimistic with revenue
estimates means potentially having to make significant mid -year cuts- this narrows options and
unnecessarily makes the situation more complicated. If things turn out to be better than projected, then it's
a relatively easy adjustment to add unfunded items back into the budget.
3. Prepare for more tight budgets ahead. While everyone hopes the recovery will be quick and robust it's
important to remember that during recessions governments are often the last to feel the impact, compared
to businesses, but also last to recover. After emerging from the recession there is usually a backlog of
deferred vehicle and equipment replacements, and other maintenance projects to address before high
priority projects can be funded, thus further extending the length of the recovery. Figuring out how to pay
for backlogged needs, implementing priorities from the Comprehensive-Sustainability Plan, paying for
significant maintenance needs on the aging water and sewer system, and other needs will be a major
challenge exiting the pandemic and in future years.
Fortunately, the conservative approach in developing the FY21 budget worked as the town ended the year
with a substantial boost to the General Fund balance of $1.97M. Again, these funds will be needed to pay
for high priority needs and ensure sufficient money is saved for emergency situations that's more important
than ever with weather events becoming more frequent and severe. The Water and Sewer Fund end the
year with an increase in net position of $1.85M.
Major Initiatives
The Town's future capital plans are established in a seven-year Capital Improvement Plan which is revised
during the yearly budget preparation. During the year, the Town funded and managed many significant
projects including the following:
General Government
➢ Street Repaving — Annual re -paving and road maintenance is funded without debt and uses the
Town's Powell Bill (gas tax allocation) and General Fund revenues to pay for the improvements.
No re -paving was performed this year to help pay for the expensive repair project on Valley Forge
Road, due to the road crossing being washed out during a storm.
➢ Valley Forge Stormwater Project — The purpose of this project that may exceed $1.0 million is to
replace three 90" pipes crossing under Valley Forge Road and rebuild the road. The road has
washed out twice in recent years and temporary repairs are having to be monitored weekly until
the reconstruction project is complete. The town is eligible for 75% emergency funding assistance
through the State of North Carolina to help pay for this project, but the town must pay for the repairs
first, then seek reimbursement.
Water and Sewer Fund
➢ Reservoir Phase II -To address long-term water supply needs and accommodate the type of growth
that matches the Town's vision, Phase 2 expansion of the West Fork Eno River Reservoir began
construction in April 2018. Revenue bonds were sold on May 9, 2018, providing over $11.1 million
in funding for the project. The remaining funds were raised through a bank placement in February
2020 to pay for the remaining road project required to finish the project. Debt payments for the
vii
project are $840,550 for FY21, $839,828 in FY22 and $840,374 in FY23. Phase 2 will yield an
additional 1.2 million gallons per day of water capacity. Phase 2 construction is expected to be
completed by late 2021.
Piano key weir at the West Fork Reservoir during construction
➢ Wastewater Collection. The process was started of developing a detailed evaluation of the system's
condition and capacity to allow utilities staff to prioritize the most important needs in future years
and to determine how much development Hillsborough's system can safely accommodate. Funds
are included to address other problem areas, such as "inflow & infiltration," line capacity, pump
stations, etc. It's anticipated that approximately $40 million alone will be needed to address
wastewater collection system needs over the next 19 years.
Debt Administration
Hillsborough's current debt burden is above the North Carolina state average and below the national
average for municipalities, with net overall debt at $3,227 per capita. The largest part of the outstanding
debt is for the wastewater treatment plant and the reservoir. Additional debt incurred over recent years will
ensure has sufficient water supply, especially during dry and drought conditions. Hillsborough suffered from
severe water shortages for decades and has since been self-sufficient since Phase 1 of the reservoir was
completed in 2000. Debt funding for water and sewer projects will also allow for projected growth and
economic development. Responsible financial planning and revenues resulting from growth will ensure the
Town maintains a stable financial position.
There has been no new general bonded debt over the last 23 fiscal years, and no debt service expenditures
on general obligation bonded debt have been incurred in the General Fund during the last 23 fiscal years.
The Town has avoided a heavy debt load, which has plagued many municipalities, in its General Fund.
Revenue bonds were issued for the first time to fund the expansion of the West Fork Eno Reservoir for
$11.1 million in FY18. A second revenue bond issue for $3.7 million was issued in FY20. Debt payments
on a non-GAAP basis account for 25.7% of Water and Sewer Fund expenditures. The debt payments are
a significant expense for a relatively small utility system especially when coupled with very expensive
projects like the wastewater treatment plant upgrade in 2014 that accounts for about $1.0 million per year
of debt. Using debt financing is the most practical way to pay for expensive maintenance needs on the
system.
viii
Financial Policies
The Town of Hillsborough has adopted a policy to maintain a General Fund balance level between 20%
and 60% of operating expenditures, with a target of 33% or the equivalent of four months of operating
expenditures. The Town has diversified its investment by security type to avoid incurring unreasonable risks
inherent in over -investing in specific instruments, or maturities. Without exception, no more than 50% of the
Town's total investment portfolio will be invested in a single security type.
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 annual
comprehensive financial report (ACFR) for the fiscal year ended June 30, 2020. The Certificate of
Achievement is a prestigious national award recognizing conformance with the highest standards for the
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 26 consecutive years (fiscal years ended 1994 through 2020).
Unfortunately, that long consecutive streak will come to an end due to the audit submission being
significantly late and thus not eligible for submission.
Acknowledgments
We appreciate the assistance and dedication of the Finance Department staff throughout the year,
especially during the preparation of this report. During this short period, the staff has worked with at least
six finance directors (two full-time and four interims). They've worked exceptionally hard and been patient
as we've worked through several challenging situations over the past 18 months. We would like to thank
all members of the department who contributed to its preparation and the independent Certified Public
Accountants, Cherry Bekaert LLP, for their assistance. A special thanks goes to the staff of the Greg Isley,
CPA firm who has provided tremendous assistance and frequently gone over and above to help during
these challenging times. 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 responsibly and progressively.
Respectfully submitted,
Eric J. Peterson
Town Manager
Melissa Bishop
Interim Finance Director
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Town of Hillsborough Board of Commissioners 2020-2021
From left: Commissioners Evelyn Lloyd and Mark Bell, Mayor Jenn Weaver,
Mayor Pro Tem Matt Hughes, and Commissioners Kathleen Ferguson and Robb English
Jenn Weaver — Mayor
Matt Hughes — Mayor Pro Tern
Evelyn Lloyd — Commissioner
Mark Bell — Commissioner
Kathleen Ferguson - Commissioner
Robb English — Commissioner
Town Officials
Eric J. Peterson, Town Manager
Melissa Bishop, Interim Finance Director
Emily Bradford, Budget Director
Jen Della Valle, Administrative Services Director
Margaret Hauth, Assistant Town Manager/Planning Director
Marie Strandwitz, Utilities Director
Sarah Kimrey, Town Clerk
Duane Hampton, Police Chief
Robert Hornik, Town Attorney
x
X.
ORGANIZATION CHART
Town Attorney
PUBLIC
May or
and Board
of C ommissi on ers
MCIEL.
Orang e Rural
Fire Department
Administrative Services
Budget
L
Fleet Maintenance
— Communications
— Human Resources
L
Safe ty and
Risk Management
Info rmation
Technolo gy
To wn Clerk
immunity Services
Planning
and Economic
Development
Public Space
and Sustainability
Public Works
Stormwater
— and Enviro nmental
Serv ices
Financial Service
Acc ounting
Billing
and Collecti ons
— Administration
— Investigations and
Community Service
Patrol
Administration
Water Distribution
and Wastewater
C ollection
Wastewater
Treatment Plant
Water Treatment
Plant
0
Government Finance Officers Association
Certificate of
Achievement
for Excellence
in Financial
Reporting
Presented to
Town of Hillsborough
North Carolina
For its Comprehensive Annual
Financial Report
For the Fiscal Year Ended
June 30, 2020
Executive Director/CEO
xii
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Financial Section
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`1/4 Cherry BekaertLLP
Your Guide Forward
Report of Independent Auditor
To the Honorable Mayor and Town Council
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 (the "Town"), as of and for the year ended June 30, 2021, and the
related notes to the financial statements, which collectively comprise the Town'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.
Auditor's 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 from material misstatement. The financial statements
of the Hillsborough Tourism Board and Hillsborough Tourism and Development Authority 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 Town'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 Town'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
presentation of the financial statements.
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 respective
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 as of June 30,
2021, and the respective changes in financial position, and, where applicable, cash flows 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.
cbh.com
1
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the management's
discussion and analysis and the required supplementary financial data, as listed in the table of contents, be
presented to supplement the basic financial statements. Such information, although not a required part of the
basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be
an essential part of 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
consisted 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 provide 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's basic financial statements of the Town. The introductory section, combining and individual
fund statements and schedules, and other schedules are presented for purposes of additional analysis and are
not a required part of the basic financial statements.
The combining and individual fund statements and schedules and other schedules 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, based
on our audit, the information is fairly stated, in all material respects, in relation to the basic financial statements
as a whole.
The introductory section has 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 assurance on it.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated January 12, 2023 on
our consideration of the Town's internal control over financial reporting and our tests of its compliance with
certain provisions of laws, regulations, contracts, grants agreements, and other matters. The purpose of the
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's internal control over financial reporting and compliance.
O
Raleigh, North Carolina
January 12, 2023
2
Town of Hillsborough, North Carolina
Management's Discuss and Analysis
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, 2021.
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 and deferred outflows of resources of the Town exceeded its liabilities and deferred
inflows of resources at the close of the fiscal year by $85,590,827 which consisted of $28,472,946
from governmental activities and $57,117,881 from business -type activities.
• The Town's total net position increased by $4,218,985 which consisted of $2,252,800 from
governmental activities and $1,966,185 from business -type activities.
• As of the close of the current fiscal year, the Town's governmental funds reported ending fund
balances of $11,424,738 which consisted primarily of $10,445,599 of fund balance in the General
Fund.
• At the end of the current fiscal year, fund balance available for appropriation in the General Fund
was $8,470,067, or 89.14% of total General Fund expenditures.
• The Town's total debt decreased by $1,910,226 during the current fiscal year. No new bonds
were issued in FY21; however, the Town executed an installment purchase contract in the
amount of $300,000.
• The Town obtained an AA bond rating from S&P (Standard & Poors) on May 2, 2018.
Overview of the Financial Statements
This discussion and analysis are intended to serve as an introduction to the Town'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 using 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.
Required Components of Annual Financial Report
Figure 1
Management's
Discussion and
Analysis
Basic
Financial
Statements
Government -Wide
Financial
Statements
Fund
Financial
Statements
Notes to the
Financial
Statements
Summary ► Detail
3
Town of Hillsborough, North Carolina
Management's Discuss and Analysis
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 10) are Fund Financial Statements. These statements focus on the
activities of the individual parts of the Town's government. These statements provide more detail than the
government -wide statements. There are four parts to the Fund Financial Statements: (1) the governmental funds
statements; (2) the budgetary comparison statements; (3) the proprietary fund statements; and (4) the fiduciary
fund statements.
The next section of the basic financial statements is the notes section. The notes to the financial statements explain
in detail some of the data contained in those statements. After the notes, supplemental information is provided
to show details about the Town's individual funds. Budgetary information required by the General Statutes also can
be found in this part of the statements.
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 deferred outflows of resources and total liabilities and deferred
inflows of resources. Measuring net position is one way to evaluate the Town's financial condition.
The government -wide statements are divided into three categories: (1) governmental activities; (2) business -type
activities; and (3) component units. The governmental activities include most of the Town's basic services such as
public safety, fire, street maintenance, solid waste collection, planning, public spaces, parks, 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 stormwater as well as the water and
sewer services offered by the Town. The final category is the component units. Although legally separate from the
Town, the Tourism Development Authority and the Tourism Board are important to the Town. The Town exercises
control over these entities by appointing its members and remits a percentage of taxes collected to each of these
entities. The government -wide financial statements are on pages 12 through 14 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 the funds of the Town can be divided into three
categories: governmental funds, proprietary funds and fiduciary funds.
Governmental Funds - Governmental funds are used to account for those functions reported as governmental
activities in the government -wide financial statements. Most of the Town's basic services are accounted for in
governmental funds. These funds focus on how assets can readily be converted into cash flow in and out, and what
monies are left at year end that will be available for spending in the next year. Governmental funds are reported
using an accounting method called modified accrual accounting that provides a short-term spending focus. As a
result, the governmental fund financial statements give the reader a detailed short-term view that helps him or her
determine if there are more or less financial resources available to finance the Town's programs. The relationship
between governmental activities (reported in the Statement of Net Position and the Statement of Activities) and
governmental funds is described in a reconciliation that is a part of the fund financial statements.
4
Town of Hillsborough, North Carolina
Management's Discuss and Analysis
The Town adopts an annual budget for its General Fund, as required by North Carolina General Statutes. The
budget is a legally adopted document that incorporates input from the citizens of the 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
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 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 and stormwater activity. These funds are the same as
those functions shown in the business -type activities in the Statement of Net Position and the Statement of
Activities.
Fiduciary Funds - Fiduciary funds are used to account for resources held for the benefit of parties outside of the
government. The Town has one fiduciary fund, which is an agency fund. This fund accounts for the Special
Assessment Revenue Bonds used to finance the construction of public infrastructure in the Waterstone District.
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 26 through 58 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, as well as information related to the total OPEB liability and related ratios. Required
supplementary information can be found beginning on page 59 of this report.
Interdependence with other entities - The Town depends on financial resources flowing from, or associated with,
both the federal government and the State of North Carolina. Because of this dependency, the Town is subject to
changes in specific flows of intergovernmental revenues based on modifications to federal and state laws and
federal and state appropriations.
Government -wide financial analysis
Net position may serve over time as one useful indicator of a government's financial condition. Table 1 provides a
summary of the Town's net position. The Town's assets and deferred outflows of resources exceeded its liabilities
and deferred inflows of resources at the close of the fiscal year by $85,590,827 as of June 30, 2021. The Town's
net position increased by $4,218,985 for the fiscal year ended June 30, 2021.
The largest portion of net position (68.12%) 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's net position, $11,743,008 (13.72%) represents resources that are subject to external restrictions on how
they may be used. The remaining balance of $15,545,581 (18.16%) is unrestricted and may be used to meet the
Town's ongoing obligation to citizens and creditors.
5
Town of Hillsborough, North Carolina
Management's Discuss and Analysis
TOWN OF HILLSBOROUGH, NORTH CAROLINA
Condensed Statements of Net Position
Table 1
Governmental Activities Business -type Activities Total
2021 2020 2021 2020 2021 2020
ASSETS
Current assets and
other assets
Capital assets, net
$ 12, 291,198 $ 9,707,979 $ 24, 393,053 $ 24,187, 465 $ 36, 684, 251 $ 33, 895, 444
23,358,683 23,573,145 63,049,803 62,459,019 86,408,486 86,032,164
Total assets 35,649,881 33,281,124 87,442,856 86,646,484 123,092,737 119,927,608
DEFERRED OUTFLOWS
OF RESOURCES
LIABILITIES
Long-term liabilities
Other liabilities
Total liabilities
DEFERRED INFLOWS
OF RESOURCES
NET POSITION
1,785,856 1,182,611
693,975 489,909
7,903,503
746,134
7,303,538
537,216
29, 582, 030
1,255,198
30, 574, 754
1,232,365
2,479,831 1,672,520
37, 485, 533
2,001,332
37, 878, 292
1,769,581
8,649,637 7,840,754 30,837,228 31,807,119 39,486,865 39,647,873
313,154 402,835
181,722 177,578
494,876 580,413
Net investment in
capital assets 20,301,129 19,779,745 38,001,109 38,149,486 58,302,238 57,929,231
Restricted 1,975,532 1,851,081 9,767,476 5,857,366 11,743,008 7,708,447
Unrestricted 6,196,285 4,589,320 9,349,296 11,144,844 15,545,581 15,734,164
Total net position $ 28,472,946 $ 26,220,146 $ 57,117,881 $ 55,151,696 $ 85,590,827 $ 81,371,842
Several aspects of the Town's financial operations positively influenced the total unrestricted net position:
• Continued diligence in the collection of property taxes by maintaining a tax collection percentage
in excess of 99%.
• Many departments finishing the year with expenditures under budget.
• Revenues in the General Fund and Water and Sewer Fund exceeded expenditures and expenses in the
respective funds.
• Continued low cost of debt due to low interest rates.
6
Town of Hillsborough, North Carolina
Management's Discuss and Analysis
TOWN OF HILLSBOROUGH, NORTH CAROLINA
Condensed Statements of Net Activities
Table 2
Governmental Activities Business -type Activities Total
2021 2020 2021 2020 2021 2020
REVENUES
Program revenues:
Charges for services $ 89,611 $ 316,812 $ 11,533,337 $ 10,936,743 $ 11,622,948 $ 11,253,555
Operating grants and
contributions 245,914 267,790 245,914 267,790
Capital grants and
contributions 34,432 236,211 289,872 996,128 324,304 1,232,339
General revenues:
Property taxes 7,944,778 7,389,956 7,944,778 7,389,956
Local option sales
taxes 2,048,982 1,719,865 2,048,982 1,719,865
Other taxes 30,986 - - 30,986
Unrestricted inter-
governmental 1,239,258 1,055,076 1,239,258 1,055,076
Other revenues 97,008 315,031 51,590 92,368 148,598 407,399
Total revenues 11,699,983 11,331,727 11,874,799 12,025,239 23,574,782 23,356,966
EXPENSES
Governmental:
General government 2,076,073 2,391,829 2,076,073 2,391,829
Public safety 5,018,883 5,559,342 - - 5,018,883 5,559,342
Transportation 721,153 1,024,817 721,153 1,024,817
Environmental
protection 482,107 558,337 - - 482,107 558,337
Economic and physical
development 382,397 557,378 382,397 557,378
Community activities 181,859 166,373 181,859 166,373
Parks and recreation 479,281 511,512 479,281 511,512
Interest on long-term
debt 105,430 121,076 - - 105,430 121,076
Business -type:
Water and Sewer 9,326,153 8,807,373 9,326,153 8,807,373
Stormwater 582,461 527,372 582,461 527,372
Total expenses 9,447,183 10,890,664 9,908,614 9,334,745 19,355,797 20,225,409
TRANSFERS 197,852 (197, 852)
Change in net position 2,252,800 638,915 1,966,185 2,492,642 4,218,985 3,131,557
NET POSITION
Beginning balances 26,220,146 25,581,231 55,151,696 52,659,054 81,371,842 78,240,285
Ending balances $ 28,472,946 $ 26,220,146 $ 57,117,881 $ 55,151,696 $ 85,590,827 $ 81,371,842
Governmental activities. Governmental activities increased the Town's net position by $2,252,800, thereby
accounting for 53.4% of the growth in Town's total net position.
7
Town of Hillsborough, North Carolina
Management's Discuss and Analysis
Key elements of this increase are as follows:
• Property taxes revenue increased over $554,822.
• Sales tax revenue increased over $329,117.
Business -type activities. Business -type activities increased the Town's net position by $1,966,185, accounting
for 46.6% of the growth in the Town's total net position.
Key elements of this increase are as follows:
• The Water and Sewer Fund experienced a slight decrease in charges for services due to COVID-
19. The Town also delayed several expenses due to the pandemic that were still not fully
expended as of the end of the year thereby generating a favorable increase in net position for
the year.
• The Water and Sewer Fund received capital contributions for dedications and Water and Sewer
development in the amount of $289,872.
Financial analysis of the Town of Hillsborough's funds
As noted earlier, the Town 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's combined
assigned and unassigned fund balance available in the General Fund was $8,470,067, while total fund balance was
$10,445,599. The governing body of the Town has determined that the Town should maintain a 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 89.14% of General Fund expenditures.
On June 30, 2021, the governmental funds of the Town reported a combined fund balance of $11,424,738, with a
net increase in fund balance of $2,382,691. This increase is primarily related revenues exceeding expenditures in
the General Fund as the Town implemented measures to control expenditures resulting from the pandemic.
General fund budgetary highlights. During the fiscal year, the Town revised the budget at least once a month.
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.
Actual operating revenues for the General Fund were more than the budgeted amount by $1,834,861 as tax
revenues exceeded expectations. Expenditures were $1,483,202 less than budgeted, primarily due to the impacts
of COVID-19, delaying of purchases and managing personnel expenses through vacancies.
Proprietary funds. The Town's proprietary funds provide the same type of information found in the government -
wide statements, but in more detail. The Town's major enterprise fund (Water and Sewer) increased its net position
by $1,846,120 ending the year with total net position of $54,384,795. The largest portion of its net position is
invested in capital assets ($36,204,129) while $9,767,476 is restricted for current and future water and sewer
projects. The remaining $8,423,190 is unrestricted which is a decrease from the prior year because of the Town's
8
Town of Hillsborough, North Carolina
Management's Discuss and Analysis
reassessment of its capital reserves. Capital reserves consist primarily of system development fees which are
assessed on new development to fund capital improvements necessitated by and attributable to that new
development or to recoup the costs of existing facilities that serve the new development.
The Town's nonmajor enterprise fund (Stormwater) increased its net position by $120,065 ending the year with total
net position of $2,733,086. The largest portion of its net position is invested in capital assets ($1,796,980) while
unrestricted net position amounted to $936,106, a 23.24% or $176,556 increase from the previous year. The
increase is largely attributed to expenses being less than expected.
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, 2021, totals $86,408,486 (net of accumulated depreciation). These assets include buildings, land,
machinery and equipment, infrastructure, park facilities and vehicles.
Major capital asset transactions during the year include the following:
• Police Building Improvements ($249,033)
• ORFD Land Exchange ($212,208)
Major developer -dedicated capital asset transactions during the year include the following:
• Daphine Drive Water & Sewer ($114,910)
• Waterstone Senior Housing Water & Sewer ($135,433)
• Waterstone Medical Office Building Sewer ($39,529)
TOWN OF HILLSBOROUGH, NORTH CAROLINA
Condensed Capital Assets, Net of Accumulated Depreciation
Table 3
Governmental Activities Business -type Activities Total
2021 2020 2021 2020 2021 2020
Nondepreciable:
Land $ 4,879,989 $ 4,657,781 $ 6,133,088 $ 6,133,088 $ 11,013,077 $10,790,869
Construction in
progress 253,140 145,692 2,404,404 11, 067,121 2,657,544 11, 212, 813
Depreciable, net:
Buildings and improve-
ments 6,156,301 6,200,611 26,805,428 16,922,750 32,961,729 23,123,361
Plant and distribution
systems - - 24,935,499 25,299,114 24,935,499 25,299,114
Infrastructure 11,371,209 11,653,410 2,338,495 2,395,631 13,709,704 14,049,041
Equipment 363,621 325,571 301,522 407,414 665,143 732,985
Vehicles 334,423 590,080 131,367 233,901 465,790 823,981
$ 23,358,683 $ 23,573,145 $ 63,049,803 $ 62,459,019 $ 86,408,486 $ 86,032,164
Additional information on the Town's capital assets can be found in Note 3.A.6. of the basic financial statements.
9
Town of Hillsborough, North Carolina
Management's Discuss and Analysis
Long-term debt. As of June 30, 2021, the Town had outstanding bonded debt of $13,109,000 which represents
bonds secured solely by specified revenue sources (revenue bonds). 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's total debt decreased by $1,910,226 during the current fiscal year due to debt repayments which were
partially offset by $300,000 in additional installment purchases.
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 was approximately $96,370,000.
TOWN OF HILLSBOROUGH, NORTH CAROLINA
Condensed Long -Term Debt
Table 4
Governmental Activities Business -type Activities Total
2021 2020 2021 2020 2021 2020
Long-term debt:
Revolving loans
Special revenue bonds
Premium on bonds
Direct placement -install-
ment purchases
$13,275,323 $14,336,167 $13,275,323 $14,336,167
13,109, 000 13, 426, 000 13,109, 000 13, 426, 000
864,186 913,641 864,186 913,641
3,357,562 3,793,400 376,744 423,833 3,734,306 4,217,233
$ 3,357,562 $ 3,793,400 $27,625,253 $29,099,641 $30,982,815 $32,893,041
Additional information regarding the Town's long-term debt can be found in Note 3.B.9 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:
• Low unemployment. Orange County's unemployment rate of 4.1% as of June 30, 2021, is
below the state average of 5.0%.
• Effective tax rate increase of 2.0 cents per $100
• No general obligation debt in the General Fund.
Budget highlights for the fiscal year ending June 30, 2022
Governmental Activities - The Town increased its property tax rate by two cents (58.7 cents per $100 property
value) in the fiscal 2022 budget to fund climate and sustainability priorities. Orange County's property re -valuation
was effective beginning in fiscal 2022 resulting in a revenue neutral tax rate of 56.7 cents. Other budget highlights
in brief:
• Climate and sustainability initiatives - $150,000
• Design funds for the Public Works facility and relocation - $200,000
• Public works equipment - $1,034,000
• Downtown fire station "ramp up" funding - $75,000
10
Town of Hillsborough, North Carolina
Management's Discuss and Analysis
Business -type Activities - The Town increased water and sewer rates by 4.5 percent and 2.0 percent for fiscal year
ending 2022. The water rate increases are intended to provide funding for existing debt service requirements and
self -funding of future capital improvements. The sewer rate increases are intended to provide for future capital
improvements. Other budget highlights in brief:
• River sewer pump station land acquisition ($200,000)
• Adron Thompson facility repairs and upgrades design funds ($250,000)
• Infrastructure Rehabilitation ($1,406,000)
The Town did not adjust its stormwater rates in FY22. The Town is continuing work on improving water quality in
the area as well as in the Upper Neuse River Basin. With increased frequency and severity of rain events, drainage
is becoming an increasing concern throughout town, therefore funds are included for analysis, planning,
engineering, as well as actual maintenance work.
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 Finance Director, Town of
Hillsborough,105 East Corbin Street, Post Office Box 429, Hillsborough, North Carolina 27278 or
Finance@hillsboroughnc.gov.
11
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Basic Financial Statements
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Exhibit 1
Town of Hillsborough, North Carolina
Statement of Net Position
June 3O, 2021
Primary Government Component Units
Hillsborough
Tourism Hillsborough
Governmental Business -Type Development Tourism
Activities Activities Total Authority Board
ASSETS
Cash and investments:
Unrestricted $ 10,389,454 $ 12,127,949 $ 22,517,403 $ 261,409 $ 334,824
Restricted 742,945 10, 523, 895 11,266,840
Receivables:
Taxes receivable, net 141,526 - 141,526 -
Accounts receivable, net 90,981 1,741,209 1,832,190 -
Due from other governments 901,792 - 901,792 87 16
Due from primary government - - 25,860 102,676
Accrued interest receivable 24,500 24,500
Capital assets:
Non -depreciable 5,133,129 8,537,492 13,670,621
Depreciable, net 18,225,554 54,512,311 72,737,865
Total assets
DEFERRED OUTFLOWS OF
RESOURCES
Pension and OPEB deferrals
35, 649, 881 87, 442, 856 123, 092, 737
1,785,856 693,975
LIABILITIES
Accounts payable and accrued
liabilities 511,324
Payable from restricted assets -
Other current liabilities 60,574
Accrued interest payable 45,700
Due to component units 128,536
Long-term liabilities:
Due within one year 740,492
Due in more than one year 7,163,011
Total liabilities 8,649,637
DEFERRED INFLOWS OF
RESOURCES
Pension and OPEB deferrals
NET POSITION
Net investment in capital assets
Restricted for:
Stabilization by state statute
Streets
Restricted revenues
Capital projects
Perpetual maintenance
Unrestricted
286,338
756,419
29,541
182,900
1,614,142
27, 967, 888
287,356 437,516
2,479,831 -
797,662
756,419
90,115
228,600
128,536
2,354,634
35,130,899
2,282 6,474
30,837,228 39,486,865
313,154 181,722
20, 301,129 38, 001,109
2,282 6,474
494,876 -
58,302,238 -
1,532,595 - 1,532,595
395,581 - 395,581
47,356 - 47,356
- 8,853,357 8,853,357
- 914,119 914,119
6,196,285 9,349,296 15,545,581
25,947 102,692
259,127
328,350
Total net position $ 28,472,946 $ 57,117,881 $ 85,590,827 $ 285,074 $ 431,042
The notes to the financial statements are an integral part of this statement. 12
Exhibit 2
Town of Hillsborough, North Carolina
Statement of Activities
Year Ended June 30, 2021
Program Revenues
Operating Capital
Charges Grants and Grants and
Functions/Programs Expenses for Services Contributions Contributions
PRIMARY GOVERNMENT
Governmental activities:
General government $ 2,076,073 $ 72,843 $ 7,471 $ -
Public safety 5,018,883 13,343 11,636 20,000
Transportation 721,153 - 197,962 14,432
Environmental protection 482,107 730 5,845 -
Economic and physical development 382,397 - 23,000 -
Community activities and projects 181,859 - - -
Parks and recreation 479,281 2,695 - -
Interest on long-term obligations 105,430 - - -
Total governmental activities
9,447,183 89,611
245,914 34,432
Business -type activities:
Water and sewer 9,326,153 10,830,811 - 289,872
Sto rmwate r 582,461 702,526
Total business -type activities 9,908,614
Total primary government
11,533,337 - 289,872
$ 19,355,797 $ 11,622,948 $ 245,914 $ 324,304
COMPONENT UNITS
Hillsborough Tourism
Development Authority $ 52,913 $ - $ - $
Hillsborough Tourism Board 343,210 -
Total component units
$ 396,123 $ -
GENERAL REVENUES
Taxes:
Property taxes, levied for general purposes
Local option sales taxes
Other Miscellaneous taxes
Gross receipts on short-term rental property
Unrestricted intergovernmental revenues
Investment earnings, unrestricted
Miscellaneous
Total general revenues
Change in net position
Net position, beginning of year
Net position, end of year
The notes to the financial statements are an integral part of this statement. 13
Exhibit 2
Net Revenue (Expense) and Changes in Net Position
Primary Government Component Units
Governmental Business -Type
Activities Activities
Total
Tourism
Development Tourism
Authority Board
$ (1,995,759) $ $ (1,995,759) $
(4,973,904) (4,973,904)
(508,759) (508,759)
(475,532) (475,532)
(359,397) (359,397)
(181,859) (181,859)
(476,586) (476,586)
(105,430) (105,430)
(9,077,226)
1,794, 530
120,065
$
(9,077,226) -
1,794,530
120,065
- 1,914,595 1,914,595 -
(9,077,226) 1,914,595
(7,162, 631) -
- - (52,913) -
- (343,210)
- - (52,913) (343,210)
7,944,778
2,048,982
9,510
1,239,258
3,295
84,203
11, 330, 026
2,252,800
26, 220,146
2,230
49,360
7,944,778
2,048,982
9,510
1,239,258
5,525
133,563
51,590 11,381,616
1,966,185 4,218,985
55,151,696 81,371,842
71,412
370,443
71,412 370,443
18,499 27,233
266,575 403,809
$ 28, 472, 946 $ 57,117, 881 $ 85, 590, 827 $ 285,074 $ 431,042
The notes to the financial statements are an integral part of this statement. 14
Town of Hillsborough, North Carolina
Balance Sheet
Governmental Funds
June 3O, 2021
Exhibit 3
(2 pages)
Non major Total
General Governmental Governmental
Fund Funds Funds
ASSETS
Cash and investments $ 9,402,433 $ 987,021 $ 10,389,454
Receivables:
Taxes receivable, net 141,526 - 141,526
Accounts receivable, net 90,981 - 90,981
Due from other governments 901,792 - 901,792
Restricted assets:
Cash and investments 742,945 - 742,945
Total assets
$ 11,279,677 $ 987,021 $ 12,266,698
LIABILITIES
Accounts payable $ 260,871 $ 7,882 $ 268,753
Accrued liabilities 242,571 - 242,571
Due to component units 128,536 - 128,536
Unearned revenue 52,469 - 52,469
Other liabilities 8,105 - 8,105
Total liabilities 692,552
DEFERRED INFLOWS OF RESOURCES
Taxes receivable, net
7,882 700,434
141,526 - 141,526
FUND BALANCES
Restricted for:
Stabilization by state statute 1,532,595 - 1,532,595
Streets 395,581 - 395,581
Restricted revenues 47,356 - 47,356
Committed for:
Capital projects 979,139 979,139
Assigned for:
Subsequent year's expenditures 280,311 - 280,311
Unassigned 8,189,756 - 8,189,756
Total fund balances 10,445,599
Total liabilities, deferred inflows of resources
and fund balances
979,139 11,424,738
$ 11,279,677 $ 987,021 $ 12,266,698
The notes to the financial statements are an integral part of this statement. 15
Town of Hillsborough, North Carolina
Balance Sheet
Governmental Funds
June 3O, 2021
Exhibit 3
(2 pages)
RECONCILIATION OF THE GOVERNMENTAL FUNDS' BALANCE SHEET TO
THE STATEMENT OF NET POSITION
Total fund balances, governmental funds
Reconciliation of amounts reported for governmental activities in the Statement
of Net Position (Exhibit 1) are different because:
$ 11,424,738
Capital assets used in governmental activities are not financial resources
and therefore not reported in the funds:
Non -depreciable assets:
Land 4,879,989
Construction in progress 253,140
Depreciable assets:
Cost 27,755,214
Accumulated deprecation (9,529,660)
Capital assets, net of accumulated depreciation 23,358,683
Deferred outflows of resources are not financial resources; therefore, the
amounts are not reported in the funds:
Local Government Employees' Retirement System ("LGERS") 1,173,125
Law Enforcement Officers' Special Separation Allowance ("LEO") 486,377
Other post employment benefits ("OPEB") 126,354
Total deferred outflows of resources 1,785,856
Certain assets are not available to pay for current period expenditures;
therefore, the balances are deferred in the funds:
Property taxes receivable 141,526
Certain assets are not considered financial resources; therefore, the
balances are not recorded in the funds:
Accrued interest receivable on unpaid property taxes 24,500
Deferred inflows of resources are not financial resources; therefore, the
amounts are not reported in the funds:
Local Government Employees' Retirement System ("LGERS")
Law Enforcement Officers' Special Separation Allowance ("LEO")
Other post employment benefits ("OPEB")
Total deferred inflows of resources
(15,777)
(37, 091)
(260,286)
(313,154)
Long-term liabilities are not due and payable in the current period; therefore,
the liabilities are not recognized or accrued in the funds:
Installment purchase contracts (3,357,562)
Net pension liability - LGERS (2,166,736)
Total pension liability - LEO (1,316,618)
Total OPEB liability (791,204)
Compensated absences payable (271,383)
Total long-term liabilities (7,903,503)
Other accrual adjustments that do not require the use of current financial
resources; therefore, the liabilities are not recognized or accrued in the funds:
Accrued interest payable (45,700)
Net position of governmental activities $ 28,472,946
The notes to the financial statements are an integral part of this statement. 16
Town of Hillsborough, North Carolina
Statement of Revenues and Expenditures and Changes in
Fund Balances - Governmental Funds
Year Ended June 30, 2021
Exhibit 4
(2 pages)
REVENUES
Ad valorem taxes
Other taxes and licenses
Unrestricted intergovernmental revenues
Restricted intergovernmental revenues
Use and rental fees
Contributions and donations
Investment earnings
Miscellaneous revenues
Nonmajor Total
General Governmental Governmental
Fund Funds Funds
$ 7,957,352 $
16,410
3,147,950
322,756
142,740
8,722
3,295
85,674
Total revenues 11,684,899
$ 7,957,352
16,410
3,147,950
322,756
142,740
8,000 16,722
3,295
85,674
8,000 11,692,899
EXPENDITURES
Current:
General government 1,753,937 2,385 1,756,322
Public safety 4,878,848 57,347 4,936,195
Transportation 490,634 - 490,634
Environmental protection 426,205 - 426,205
Economic and physical development 445,666 48,252 493,918
Community activities and projects 181,859 - 181,859
Parks and recreation 479,281 - 479,281
Debt service:
Principal retirement 735,838 - 735,838
Interest and fiscal charges 109,956 - 109,956
Total expenditures 9,502,224 107,984 9,610,208
Revenues over (under) expenditures 2,182,675
(99,984) 2,082,691
OTHER FINANCING SOURCES (USES)
Transfers to other funds (513,500) (24,693) (538,193)
Transfers from other funds 5,403 532,790 538,193
Installment purchase obligations issued 300,000 - 300,000
Other financing sources (uses), net (208,097) 508,097 300,000
Net change in fund balances 1,974,578 408,113 2,382,691
Fund balances, beginning of year 8,471,021 571,026 9,042,047
Fund balances, end of year $ 10,445,599 $ 979,139 $ 11,424,738
The notes to the financial statements are an integral part of this statement. 17
Town of Hillsborough, North Carolina
Statement of Revenues and Expenditures and Changes in
Fund Balances - Governmental Funds
Year Ended June 30, 2021
Exhibit 4
(2 pages)
RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES,
EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF
ACTIVITIES
Net change in fund balances - total governmental funds $ 2,382,691
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 as follows:
Capital outlay 735,929
Depreciation expense (965,377)
Net book value adjustment (5,014)
Non -cash contribution of capital assets is not a current financial resource and
therefore, is not reported in the governmental fund statements. 20,000
Revenues in the Statement of Activities that do not provide current financial
resources are not reported as revenues in the funds.
Net change in property taxes receivable. (12,159)
Net change in accrued interest on property taxes. (757)
The issuance of long-term debt provides current financial resources to governmental
funds while the repayment of the principal on long-term debt consumes current
financial resources of governmental funds:
Installment purchase obligations issued (300,000)
Principal retirement 735,838
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 interest on long-term debt 4,526
Change in accrued compensated absences 50,583
Pension expense - LGERS (423,496)
Pension expense - LEOSSA (34,702)
OPEB expense 64,738
Changes in net position of governmental activities $ 2,252,800
The notes to the financial statements are an integral part of this statement. 18
Exhibit 5
Town of Hillsborough, North Carolina
Statement of Revenues and Expenditures and Changes in
Fund Balance - Budget and Actual
General Fund
Year Ended June 30, 2021
Variance
Original Final Positive
Budget Budget Actual (Negative)
REVENUES
Ad valorem taxes $ 6,849,000 $ 7,038,557 $ 7,957,352 $ 918,795
Other taxes and licenses 12,200 12,392 16,410 4,018
Unrestricted intergovernmental revenues 2,310,000 2,350,852 3,147,950 797,098
Restricted intergovernmental revenues 151,000 257,449 291,881 34,432
Use and rental fees 104,700 104,925 142,740 37,815
Investment earnings 24,000 2,940 3,295 355
Miscellaneous revenues 21,500 43,326 85,674 42,348
Total revenues
9,472,400 9,810,441 11, 645, 302 1,834,861
EXPENDITURES
Current:
General government 2,167,706 2,348,687 1,929,038 419,649
Public safety 5,016,453 5,337,166 5,028,767 308,399
Transportation 996,879 689,188 531,652 157,536
Environmental protection 743,352 792,558 458,460 334,098
Economic and physical development 370,879 593,879 445,666 148,213
Community activities and projects 224,474 340,645 258,542 82,103
Parks and recreation 728,207 739,243 715,200 24,043
Contingency 250,000 9,161 - 9,161
Total expenditures 10,497,950 10,850,527 9,367,325 1,483,202
Revenues over (under) expenditures (1,025,550) (1,040,086)
2,277,977 3,318,063
OTHER FINANCING SOURCES (USES)
Transfers to other funds (34,000) (533,500) (533,500) -
Transfers from other funds - 5,403 5,403
Installment purchase obligations issued 310,000 297,388 300,000 2,612
Other financing sources (uses), net 276,000 (236,112) (228,097) 8,015
APPROPRIATED FUND BALANCE 749,550 1,276,198 - (1,276,198)
Net change in fund balance $ $ - 2,049,880 $ 2,049,880
Fund balance, beginning of year 8,348,363
Fund balance, end of year 10,398,243
LEGALLY BUDGETED FUNDS THAT ARE CONSOLIDATED
INTO THE GENERAL FUND FOR REPORTING PURPOSES:
Restricted Revenues Fund:
Fund balance, beginning 122,658
Total revenues 39,597
Total expenditures (134,899)
Transfer from other funds 20,000
Fund balance, ending (Exhibit 4) $ 10,445,599
The notes to the financial statements are an integral part of this statement. 19
Exhibit 6
Town of Hillsborough, North Carolina
Statement of Net Position
Proprietary Funds
June 30, 2021
ASSETS
Current assets:
Cash and investments - Unrestricted
Cash and investments - Restricted
Accounts receivable, net
Water and Non major
Sewer Fund Fund
$ 11,124, 873
10, 523, 895
1,710,702
Total current assets 23,359,470
Noncurrent assets:
Capital assets:
Land and construction -in -progress
Depreciable assets, net
8,503,679
52, 749,144
Capital assets, net 61,252,823
Total
$ 1,003,076 $ 12,127, 949
10, 523, 895
30,507 1,741,209
1,033,583 24, 393, 053
33,813 8,537,492
1,763,167 54,512,311
1,796,980 63, 049, 803
Total assets 84,612,293 2,830,563 87,442,856
DEFERRED OUTFLOWS OF RESOURCES
Pension and OPEB deferrals 635,742 58,233 693,975
LIABILITIES
Current liabilities:
Accounts payable and accrued liabilities
Payable from restricted assets:
Accounts payable - capital projects
Customer deposits
Other current liabilities
Accrued interest payable
Current portion of long-term liabilities
Total current liabilities
Long-term liabilities:
Long-term debt
Other long-term liabilities
Total noncurrent liabilities
276,028
10,310 286,338
161,291 161,291
595,128 595,128
29,541 29,541
182,900 182,900
1,605, 542 8,600 1,614,142
2,850,430 18,910 2,869,340
26,150, 210 26,150, 210
1,690,280 127,398 1,817,678
27, 840, 490 127,398 27, 967, 888
Total liabilities 30,690,920 146,308 30,837,228
DEFERRED INFLOWS OF RESOURCES
Pension deferrals 7,473 726 8,199
OPEB deferrals 164,847 8,676 173,523
Pension and OPEB deferrals 172,320 9,402 181,722
NET POSITION
Net investment in capital assets 36,204,129 1,796,980 38,001,109
Restricted for water and sewer projects 8,853,357 8,853,357
Restricted for perpetual maintenance 914,119 914,119
Unrestricted 8,413,190 936,106 9,349,296
Total net position $ 54,384,795
$ 2,733,086 $ 57,117, 881
The notes to the financial statements are an integral part of this statement. 20
Town of Hillsborough, North Carolina
Statement of Revenues, Expenses and Changes in Net Position
Proprietary Funds
Year Ended June 3O, 2021
Exhibit 7
Water and Nonmajor
Sewer Fund Fund
Total
OPERATING REVENUES
Charges for services $ 9,844,005 $ 702,276 $ 10,546,281
System Development Fees 590,332 - 590,332
Other operating revenues 396,474 250 396,724
Total operating revenues 10,830,811
702,526 11, 533, 337
OPERATING EXPENSES
Personnel services 3,074,534 288,294 3,362,828
Operating expenses 3,766,354 237,677 4,004,031
Depreciation 1,685,728 56,490 1,742,218
Total operating expenses 8,526,616
Operating income 2,304,195
NON -OPERATING REVENUES (EXPENSES)
Investment earnings
Amortization of premium on bonds payable
Insurance proceeds
Interest and fees
Non -operating revenues (expenses), net
2,230
49,455
49,360
(848,992)
582,461 9,109, 077
120,065 2,424,260
2,230
49,455
49,360
(848,992)
(747,947) - (747,947)
Income before capital contributions 1,556,248
120,065 1,676,313
CAPITAL CONTRIBUTIONS
Capital contributions 289,872 - 289,872
Change in net position 1,846,120 120,065 1,966,185
Net position, beginning of year 52,538,675 2,613,021 55,151,696
Net position, end of year $ 54,384,795 $ 2,733,086 $ 57,117,881
The notes to the financial statements are an integral part of this statement. 21
Town of Hillsborough, North Carolina
Statement of Cash Flows
Proprietary Funds
Year Ended June 30, 2021
Exhibit 8
(2 pages)
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from customers
Cash paid for goods and services
Cash paid to employees
Water and Nonmajor
Sewer Fund Fund
Total
$ 10, 793, 638 $ 703,938 $ 11, 497, 576
(3,726,164) (237,187) (3,963,351)
(2,828,031) (267, 539) (3,095,570)
Net cash provided by operating activities 4,239,443
CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES
Acquisition and construction of capital assets
Principal payments on long-term debt
Interest payments on long-term debt
Cash received from insurance claims
Net cash used by capital and related
financing activities
CASH FLOWS FROM INVESTING ACTIVITIES
Interest on investments
(2,063,213)
(1,424,933)
(856,218)
49,360
199,212 4,438,655
(2,063,213)
(1,424,933)
(856,218)
49,360
(4,295,004) (4,295,004)
2,230 2,230
Net increase (decrease) in cash and cash
equivalents (53,331) 199,212 145,881
Cash and cash equivalents, beginning of year 21,702,099
803,864 22, 505, 963
Cash and cash equivalents, end of year $ 21,648,768 $ 1,003,076 $ 22,651,844
CASH AND CASH EQUIVALENTS
Unrestricted $ 11,124,873 $ 1,003,076 $ 12,127,949
Restricted 10, 523, 895 10, 523, 895
Total cash and cash equivalents $ 21,648,768 $ 1,003,076 $ 22,651,844
The notes to the financial statements are an integral part of this statement. 22
Town of Hillsborough, North Carolina
Statement of Cash Flows
Proprietary Funds
Year Ended June 30, 2021
Exhibit 8
(2 pages)
Water and Nonmajor
Sewer Fund Fund
Total
Reconciliation of operating income to net cash
provided by operating activities
Operating income $ 2,304,195 $ 120,065 $ 2,424,260
Adjustments to reconcile operating income to net
cash provided by operating activities:
Depreciation 1,685, 728 56,490 1,742,218
Changes in assets, deferred outflows of resources,
liabilities and deferred inflows of resources:
Accounts receivable (61,334) 1,412 (59,922)
Prepaid expense 215 - 215
Deferred outflows of resources for pensions (126,951) (19,992) (146,943)
Deferred outflows of resources for OPEB (55,366) (1,757) (57,123)
Accounts payable and accrued liabilities 25,828 153 25,981
Deposits 11,517 11,517
Other current liabilities 12,644 12,644
Total OPEB liability 60,094 5,812 65,906
Net pension liability 305,140 39,070 344,210
Deferred inflows of resources for pensions (2,159) (60) (2,219)
Deferred inflows of resources for OPEB 11,882 (5,519) 6,363
Compensated absences payable 68,010 3,538 71,548
Net cash provided by operating activities
$ 4,239,443 $ 199,212 $ 4,438,655
Supplemental schedule of noncash investing and
financing activities
Capital asset additions included in accounts
payable and accrued liabilities $ 54,408 $ $ 54,408
Capital contribution from developer
$ 289,872 $ $ 289,872
The notes to the financial statements are an integral part of this statement. 23
Exhibit 9
Town of Hillsborough, North Carolina
Statement of Fiduciary Net Position
Fiduciary Fund
June 30, 2021
Custodial
Fund
ASSETS
Cash and investments - restricted
Receivables:
Due from other governments
$
12,114
Total assets 12,114
LIABILITIES
Payable to third -party trustee 629
NET POSITION
Restrictued for:
Individuals, organizations and other governments $ 11,485
The notes to the financial statements are an integral part of this statement. 24
Exhibit 10
Town of Hillsborough, North Carolina
Statement of Changes in Fiduciary Net Position
Fiduciary Fund
Year Ended June 3O, 2021
Custodial
Fund
ADDITIONS
Special assessment revenue
DEDUCTIONS
Payment to third party trustee
$ 509,820
498,335
Change in fiduciary net position 11,485
Fiduciary net position, beginning of year
Fiduciary net position end of year $ 11,485
The notes to the financial statements are an integral part of this statement. 25
Town of Hillsborough, North Carolina
Notes to Financial Statements
Notes to Financial Statements
1. Summary of Significant Accounting Policies
The accounting policies of the Town of Hillsborough (the "Town") conform to accounting principles generally
accepted in the United States of America ("GAAP") as applicable to governments. The Governmental Accounting
Standards Board ("GASB") is the accepted standard -setting body for establishing governmental accounting and
financial reporting principles. The following is a summary of the more significant accounting policies:
A. Reporting entity
The Town of Hillsborough is a municipal corporation which is governed by an elected mayor and a five -member
board. As required by GAAP, these financial statements present the Town and its component units, which are
legally separate entities for which the Town is financially accountable. The discretely presented component units
presented below are reported in separate columns in the Town's financial statements in order to emphasize that
they are legally separate from the Town.
Hillsborough Tourism Development Authority (the "Authority")
The Authority was created on April 9, 2012 by resolution of the Town, under the authority of the North Carolina
General Assembly. The Authority is responsible for promoting travel and tourism in the Hillsborough area. The
Authority receives revenue from a three percent occupancy tax, which is levied, collected and remitted by the Town
net of administration fees. The members of the Authority are appointed by the Town's Board of Commissioners.
Hillsborough Tourism Board (the "Tourism Board")
The Tourism Board was created on November 8, 1993, by resolution of the Town, under the authority of the North
Carolina General Assembly. The Tourism Board is responsible for promoting tourism within the Town of
Hillsborough. The Tourism Board receives revenues through a one percent prepared food and beverage tax, which
is levied and collected by the Town and remitted net of administration fees. The Tourism 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,
do Hillsborough Tourism Development Authority or do Hillsborough Tourism Board, Hillsborough, North Carolina,
or by telephone at (919) 296-9451.
B. Basis of presentation
Government -wide statements: The Statement of Net Position and the Statement of Activities display information
about the primary government and its component unit. These statements 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.
26
Town of Hillsborough, North Carolina
Notes to Financial Statements
Fund financial statements: The fund financial statements provide information about the Town's funds, including
the fiduciary fund. Separate statements for each fund category — governmental, proprietary, and fiduciary - 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
non major funds.
Proprietary fund operating revenues, such as charges for services, result from exchange transactions associated
with the principal activity of the fund. Exchange transactions are those in which each party receives and gives up
essentially equal values. Nonoperating revenues, such as subsidies result from nonexchange transactions. Other
nonoperating revenues are ancillary activities such as investment earnings.
The Town reports the following major governmental fund:
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. The Town also uses a restricted revenue fund to account for certain revenues. It is not required
to be reported as a special revenue fund and is therefore combined with the General Fund.
The Town reports the following nonmajor governmental funds:
Consolidated 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.
Riverwalk CMAQ Capital Project Fund. Three important sidewalk components are grouped for funding
purposes through the Congestion Mitigation and Air Quality program within the Department of
Transportation. Riverwalk provides a viable alternative to driving by allowing many residents of Hillsborough
to walk or bike into downtown, whether for work, shopping, or recreation. These sidewalk connections are
along Eno Mountain Road and provide access into the Occoneechee State natural area (connecting to
Gold Park); South Nash Street near the commercial area and the rail trestle, and Calvin Street, connecting
to Gold Park and Riverwalk.
Rail Station Capital Project Fund. This fund will account for design, engineering, construction and
construction oversight of the passenger rail station which is approximately 6,000 square foot building with
about 100 parking spaces, utilities, and site access.
Public Works Building Capital Project Fund. This fund will account for design, project management,
construction, construction inspection, and water and sewer utilities for a new Public Works Building.
Public Safety Building Capital Project Fund. This fund will account for construction costs for the renovation
of the Public Safety Building.
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, several water and sewer capital project funds ("WS Capital Projects Funds")
and three capital reserve funds have been consolidated with the Water and Sewer Fund.
The Town reports the following nonmajor enterprise fund:
Stormwater Fund. This fund is used to account for the operations of the Town's stormwater management
department. For financial reporting purposes the Stormwater Capital Improvements Fund has been
consolidated with the Stormwater Fund.
27
Town of Hillsborough, North Carolina
Notes to Financial Statements
C. Measurement focus and basis of accounting
In accordance with North Carolina General Statutes ("NCGS" or "G.S."), all funds of the Town are maintained during
the year using the modified accrual basis of accounting.
Government -wide, proprietary, and fiduciary fund financial statements. The government -wide, proprietary,
and fiduciary 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. Issuance of general long-term debt and acquisitions under capital leases are
reported as other financing sources.
The Town considers all revenues available if they are collected within 90 days after year-end, except for property
taxes. Ad valorem taxes receivable are not accrued as a revenue, because the amount is not susceptible to accrual.
At June 30, taxes receivable for property other than motor vehicles are materially past due and are not considered
to be an available resource to finance the operations of the subsequent year. Also, as of September 1, 2013, state
law altered the procedures for the assessment and collection of property taxes on registered motor vehicles in North
Carolina. Effective with this change in the law, the state of North Carolina is responsible for billing and collecting
the property taxes on registered motor vehicles on behalf of all municipalities and special tax districts. Property
taxes are due when vehicles are registered. The billed taxes are applicable to the fiscal year in which they are
received. Uncollected taxes that were billed in periods prior to September 1, 2013 and for limited registration plates
are shown as a receivable in these financial statements and are offset by deferred inflows of resources.
Sales taxes and certain intergovernmental revenues, such as utilities franchise tax, collected and held by the state
at year-end on behalf of the Town, are recognized as revenue. Sales taxes are considered a shared revenue for
the Town because the tax is levied by Orange County and then remitted to and distributed by the State. Most
intergovernmental revenues and sales and services are not susceptible to accrual, because generally they are not
measurable until received in cash. All taxes, including those dedicated for specific purposes are reported as general
revenues rather than program revenues. 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.
28
Town of Hillsborough, North Carolina
Notes to Financial Statements
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, the Water and Sewer Fund, and the Stormwater Fund. All annual
appropriations lapse at the fiscal year-end. Project ordinances are adopted for all governmental capital project
funds, the WS Capital Project Funds, the water and sewer capital reserve funds, and the Stormwater Capital
Improvements Fund. The WS Capital Project Funds and capital reserve funds are consolidated with the Water and
Sewer Fund for reporting purposes. The Stormwater Capital Improvements Fund is consolidated with the
Stormwater 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
(I) 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.
G.S. 159-30(c) authorizes the Town to invest in obligations of the U.S. Treasury; obligations of any agency of the
United States of America, provided the payment of interest and principal of such obligations is fully guaranteed by
the United States; obligations of the state of North Carolina; bonds and notes of any North Carolina local government
or public authority; obligations of certain non -guaranteed federal agencies; certain high quality issues of commercial
paper and bankers' acceptances; and the North Carolina Capital Management Trust ("NCCMT"), an SEC registered
mutual fund dedicated to serving North Carolina public units. The securities of the NCCMT Government Portfolio,
a SEC -registered (2a-7) money market mutual fund, are measured at fair value. Because the NCCMT Government
Portfolio has a weighted average maturity of less than 90 days, they are presented as an investment with a maturity
of less than six months.
(2) Cash and cash equivalents
The Town pools most money from all funds to facilitate disbursement and investment and maximize investment
income. Exceptions of non -pooled funds may include, but are not limited to, unspent bond proceeds, certain capital
project funds and escrowed or endowed funds restricted for specific purposes. For purposes of the Statement of
Cash Flows, the Town's enterprise funds consider equity in pooled cash and investments to be cash equivalents
as they are essentially demand deposit accounts and short-term investments. Investment income is allocated based
on each fund's monthly balance in relation to the total pooled cash balance. Non -pooled investment income is
allocated to the specific beneficiary fund holding those assets.
(3) Restricted assets
The General Fund and the Water and Sewer Fund have unexpended debt proceeds that are classified as restricted
assets because their use is completely restricted to the purpose for which the debt agreements were originally
issued. Customer deposits held by the Town before any services are supplied are restricted to the service for which
the deposit was collected. Powell Bill funds are also classified as restricted cash because they can only be expended
for the purposes of maintaining, repairing, constructing, reconstruction or widening of local streets per
G.S. 136-41.4. In addition, contributions from developers that are restricted by Town ordinance are restricted to the
purpose of the donation.
29
Town of Hillsborough, North Carolina
Notes to Financial Statements
Town of Hillsborough Restricted Cash
Governmental activities:
General Fund:
Streets $ 395,581
Unspent debt proceeds - garbage truck 300,008
Restricted revenues 47,356
Total governmental activities 742,945
Business -type activities:
Water and Sewer Fund:
Unspent debt proceeds 2,737,850
Customer deposits 595,128
Perpetual maintenance 914,119
Water and sewer capital needs 6,276,798
Total business -type activities
Total restricted cash
10,523,895
$ 11,266,840
(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, 2020. As allowed by state law, the Town has established a schedule of discounts that apply to taxes
that are paid prior to the due date. In the Town's General Fund, ad valorem tax revenues are reported net of such
discounts.
(5) Allowances for doubtful accounts
All receivables that historically experience uncollectible accounts are shown net of an allowance for doubtful
accounts. This amount is estimated by analyzing the percentage of receivables written off in prior years.
(6) Prepaid items
Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items
in both government -wide and fund statements, and expensed as items are used.
(7) Capital assets
Capital assets, which include property, plant, equipment, and infrastructure assets (e.g., roads, bridges, sidewalks,
and similar items) are reported in the applicable governmental or business -type activities columns in the
government -wide financial statements. Capital assets are defined by the government as assets with an initial,
individual cost of more than a certain cost and an estimated useful life in excess of two years. Minimum capitalization
costs are as follows:
Cost
Land and easements $ 1
Buildings, improvements 10,000
Distribution system 15,000
Vehicles, furniture and equipment 5,000
Infrastructure 35,000
30
Town of Hillsborough, North Carolina
Notes to Financial Statements
Donated capital assets received prior to July 1, 2015 are recorded at their estimated fair value at the date of
donation. Donated capital assets received after July 1, 2015 are recorded at acquisition value. All other purchased
or constructed assets are recorded at cost or estimated historical cost. The cost of normal maintenance and repairs
that do not add to the value of the asset or materially extend assets' lives are not capitalized.
Capital assets are depreciated using the straight-line method over the following estimated useful lives:
Asset Class Estimated Useful Lives
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 Net 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 two items that meet this criterion: pension deferrals and OPEB deferrals. In
addition to liabilities, the Statement of Net 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 three
items that meet the criterion for this category: taxes receivable, pension deferrals and OPEB deferrals.
(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 and discounts
are deferred and amortized over the life of the debt using the straight-line method that approximates the effective
interest method. Long-term debt is reported net of the applicable premiums or discounts. Debt issuance costs,
except for prepaid insurance costs, are expensed in the reporting period in which they are incurred. Prepaid
insurance costs are expensed over the life of the debt.
In fund financial statements, governmental fund types recognize debt premiums and discounts, as well as debt
issuance costs, during the current period. The face amount of debt issued is reported as other financing sources.
Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances
are reported as other financing uses. Issuance costs, whether withheld from the actual debt proceeds received or
not, are reported as debt service expenditures.
(io) 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. Any vacation leave accumulated over 240 hours at December 31st is
converted to sick leave. 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.
31
Town of Hillsborough, North Carolina
Notes to Financial Statements
(ii) Net position/fund balances
Net position
Net position in government -wide and proprietary fund financial statements is classified as net investment in capital
assets, restricted, and unrestricted. Restricted net position represent constraints on resources that are either
externally imposed by creditors, grantors, contributors, or laws or regulations of other governments, or imposed by
law through state statute.
Fund balances
In the governmental fund financial statements, fund balance is comprised of five classifications designed to disclose
the hierarchy of constraints placed on how the fund balance can be spent.
The governmental fund types classify fund balances as follows:
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 — North Carolina G.S. 159-8 prohibits units of government from
budgeting or spending a portion of their fund balance. This is one of several statutes enacted by the North
Carolina State Legislature in the 1930's that were designed to improve and maintain the fiscal health of
local government units. Restricted by State statute ("RSS"), is calculated at the end of each fiscal year for
all annually budgeted funds. The calculation in G.S. 159-8(a) provides a formula for determining what
portion of fund balance is available for appropriation. The amount of fund balance not available for
appropriation is what is known as "restricted by State statute". Appropriated fund balance in any fund shall
not exceed the sum of cash and investments minus the sum of liabilities, encumbrances, and deferred
revenues arising from cash receipts, as those figures stand at the close of the fiscal year next preceding
the budget. Per GASB guidance, RSS is considered a resource upon which a restriction is "imposed by law
through constitutional provisions or enabling legislation." RSS is reduced by inventories and prepaids as
they are classified as nonspendable. Outstanding Encumbrances are included within RSS. RSS is included
as a component of Restricted Net position and Restricted fund balance on the face of the balance sheet.
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 revenues - Portion of fund balance representing unexpended grants and contributions from
external sources restricted for specific projects.
Committed fund balance - Portion of fund balance that can only be used for specific purposes imposed by the
government through majority vote of the Town's governing body - the Board of Town Commissioners (highest level
of decision -making authority). The Board of Town Commissioners can, by adoption of an ordinance prior to the end
of the fiscal year, commit fund balance. Once adopted, the limitation imposed by the ordinance remains in place
until a similar action is taken (the adoption of another ordinance) to remove or revise the limitation.
Committed for capital projects - Portion of fund balance that can only be used for the construction of capital
projects.
Assigned fund balance - Portion of fund balance the Town intends to use for specific purposes that are considered
neither restricted nor committed. Unassigned fund balances may be assigned by the Town Board, Town Manager,
or Finance Director for specific purposes through the budget process or agenda items. Although managed as
dedicated to specific areas, amounts are available for appropriation by the Town Board.
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.
32
Town of Hillsborough, North Carolina
Notes to Financial Statements
Unassigned fund balance - Portion of fund balance that has not been restricted, committed, or assigned to specific
purposes or other funds. Unassigned fund balance is the residual classification for the General Fund. Other
governmental funds cannot report positive unassigned fund balance but can report negative unassigned fund
balance if expenditures incurred for specific purposes exceeded the amounts restricted, committed, or assigned to
those purposes.
The Town 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 has adopted a minimum fund balance policy for the General Fund which instructs management to
conduct the business of the Town in such a manner that available fund balance is between 20% and 60% of
operating expenditures, with a target of 33%, or the equivalent of four months of operating expenditures.
(12) Defined benefit cost -sharing plans
For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources
related to pensions, and pension expense, information about the fiduciary net position of the Local Governmental
Employee's Retirement System ("LGERS") and additions to/deductions from LGERS' fiduciary net position have
been determined on the same basis as they are reported by LGERS. For this purpose, plan member contributions
are recognized in the period in which the contributions are due. The Town's employer contributions are recognized
when due and the Town has a legal requirement to provide the contributions. Benefits and refunds are recognized
when due and payable in accordance with the terms of LGERS. Investments are reported at fair value purposes.
2. Stewardship, Compliance and Accountability
A. Significant Violations of Finance -Related Legal and Contractual Provisions
• Contractual Violation
The "Contract to Audit Accounts", for all local units of government in North Carolina, states that all audits
are to be performed and the report of audit submitted to the State and Local Government Finance Division
within four months of the fiscal year-end. In other words, the audited financial statements for the fiscal
year ended June 30, 2021 is due on October 31, 2021. The submission of the Town's audited financial
statements is substantially late in violation of the "Contract to Audit Accounts". The Town believes this
was an isolated situation due to turnover in the Town's Finance staff and the assignment of sufficient
resources from the external audit firm engaged to perform the audit. The Town has engaged additional
contractual resources to assist the Town and its component units with the preparation of year-end
financial information in a timely manner in order to submit audited financial statements in accordance with
the "Contract to Audit Accounts".
33
Town of Hillsborough, North Carolina
Notes to Financial Statements
3. Detail Notes on All Funds
A. Assets
(1) Deposits and Investments
All of the deposits of the Town, the Authority, and the Tourism 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 Tourism 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 Tourism 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 Tourism
Board, or the escrow agent. Because of the inability to measure the exact amounts of collateral pledged for the
Town, the Authority, or the Tourism 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 Tourism Board have no formal policy regarding
custodial credit risk for deposits.
The Town's deposits had a carrying amount of $3,696,071 and a bank balance of $4,014,140 at June 30, 2021. Of
the bank balance, $328,593 was covered by federal depository insurance and $3,685,547 in interest -bearing
deposits were covered under the Pooling Method. The Town had $1,050 in petty cash on hand at June 30, 2021.
The Authority's deposits had a carrying amount and bank balance of $261,409 at June 30, 2021. Of the bank
balance, $250,000 was covered by federal depository insurance and $11,409 in interest -bearing deposits were
covered under the Pooling Method.
The Tourism Board's deposits had a carrying amount of $334,824 and a bank balance of $335,526 at June 30,
2021. Of the bank balance, $250,000 was covered by federal depository insurance, and $85,526 of demand
deposits were covered under the Pooling Method.
Investments
The following table summarizes the Town's investment balances at June 30, 2021:
Valuation Book
Measurement Value at
Investments by Type Method 6/30/2021 Maturity Rating
First American Funds, Inc. - Government
Obligations Fund Class D Level 1 $ 300,008 N/A AAAm
North Carolina Capital Management
Trust - Governmental Portfolio Level 1 29,787,114 N/A AAAm
$ 30,087,122
All investments are measured using the market approach: using prices and other relevant information generated by
market transactions involving identical or comparable assets of a group of assets.
34
Town of Hillsborough, North Carolina
Notes to Financial Statements
Level of fair value hierarchy:
Level 1 - Debt securities are valued using directly observable, quoted prices (unadjusted) in active markets
for identical assets.
The Town does not have a formal investment policy.
Credit Risk. The Town has no formal policy regarding credit risk, but has internal management procedures that
limits the Town's investments to the provisions of G.S. 159-30 and restricts the purchase of securities to the highest
possible ratings whenever particular types of securities are rated. The Town's investment in the NCCMT -
Government Portfolio and First American Funds, Inc. - Government Obligations Fund Class D carried credit ratings
of AAAm by Standard & Poor's as of June 30, 2021.
(3) Due from other governments
Amounts due from other governments consist of the following:
Governmental
Activities
General Fund:
Sales and use tax distribution $ 527,167
Utilities franchise and telecommunications tax 141,202
Sales tax refunds 148,434
Other government agencies 84,989
Total due from other governments $ 901,792
(4) Receivables - allowances for doubtful accounts
The amounts presented in the Balance Sheet and the Statement of Net Position for the year ended June 30, 2021
are net of the following allowances for doubtful accounts:
Governmental
Activities
General Fund:
Property taxes receivable
Water and Sewer Fund:
Accounts receivable
Stormwater Fund:
Accounts receivable
$ 43,000
Business -type
Activities
$ 178,000
4,000
Total allowance for doubtful accounts $ 182,000
(5) Due from primary government
Amounts due from the primary government consist of $25,860 in occupancy taxes and $102,676 in food and
beverage taxes collected by the Town and remitted to the Authority and the Board, respectively.
35
Town of Hillsborough, North Carolina
Notes to Financial Statements
(6) Capital assets
Governmental capital asset activity for the year ended June 30, 2021 was as follows:
Beginning Ending
Balances Additions Deletions Balances
Governmental activities:
Capital assets not depreciated:
Land $ 4,657,781 $ 222,208 $ $ 4,879,989
Construction -in -progress 145,692 356,481 249,033 253,140
4,803,473 578,689 249,033 5,133,129
Capital assets being depreciated:
Buildings and improvements 8,931,637 249,033
Infrastructure 13,062,862 45,086
Equipment 971,364 126,637
Vehicles 4,368,092 5,517
5,014
9,180,670
13,107, 948
1,092,987
4,373,609
27,333,955 426,273
5,014 27,755,214
Less accumulated depreciation for:
Buildings and improvements 2,731,026 293,343 3,024,369
Infrastructure 1,409,452 327,287 1,736,739
Equipment 645,793 83,573 729,366
Vehicles 3,778,012 261,174 4,039,186
8,564,283 965,377 9,529,660
Capital assets being depreciated, net 18,769,672 (539,104)
5,014 18,225,554
Capital assets, net $ 23,573,145 $ 39,585 $ 254,047 $ 23,358,683
Depreciation expense was charged to the following functions:
General government $ 236,666
Public safety 283,530
Transportation 328,671
Economic and physical development 81,363
Environmental protection 35,147
$ 965,377
Business -type capital asset activity for the year ended June 30, 2021 was as follows:
Beginning Ending
Balances Additions Deletions Balances
Business -type activities:
Water and sewer:
Capital assets not depreciated:
Land $ 6,099,275 $ - $ - $ 6,099,275
Construction -in -progress 11,067,121 2,029,569 10,692,286 2,404,404
17,166,396 2,029,569 10,692,286 8,503,679
36
Town of Hillsborough, North Carolina
Notes to Financial Statements
Beginning Ending
Balances Additions Deletions Balances
Business -type activities:
Water and sewer (continued):
Capital assets being depreciated:
Buildings and improvements $ 27,927,519 $ 10,692,286 $ $ 38,619,805
Plant and distribution systems 35,835,150 289,872 36,125,022
Infrastructure 739,873 13,561 753,434
Equipment 1,861,646 1,861,646
Vehicles 1,036,413 1,036,413
67,400,601
10, 995, 719 78, 396, 320
Less accumulated depreciation for:
Buildings and improvements 11,004,769 809,608 11,814,377
Plant and distribution systems 10,536,036 653,487 11,189,523
Infrastructure 135,730 17,368 153,098
Equipment 1,482,401 102,731 1,585,132
Vehicles 802,512 102,534 905,046
23,961,448
1,685,728 25,647,176
Capital assets being depreciated, net
43,439,153 9,309,991 52,749,144
Capital assets, net $ 60,605,549 $ 11,339,560 $ 10,692,286 $ 61,252,823
Beginning Ending
Balances Additions Deletions Balances
Business -type activities:
Stormwater:
Capital assets not depreciated:
Land $ 33,813 $ $ $ 33,813
33,813 33,813
Capital assets being depreciated:
Infrastructure 2,133,177 2,133,177
Equipment 31,606 31,606
Vehicles 20,762 20,762
2,185,545 2,185,545
Less accumulated depreciation for:
Infrastructure 341,689 53,329 395,018
Equipment 3,437 3,161 6,598
Vehicles 20,762 20,762
365,888 56,490 422,378
Capital assets being depreciated, net 1,819,657
Capital assets, net
(56,490) 1,763,167
$ 1,853,470 $ (56,490) $ $ 1,796,980
37
Town of Hillsborough, North Carolina
Notes to Financial Statements
(7) Construction commitments
The Town has active construction projects as of June 30, 2021 with the following remaining commitments:
Estimated
Remaining
Spent to Date Commitment
Governmental Projects:
Transportation Improvement Project ("TIP") $ 3,834 $ 1,075,000
Valley Forge Road Project 44,418 511,000
Public Works Building Project 25,982 128,000
Business -type Projects:
Mill Creek Road Project 2,166,918 1,111,000
Various water and sewer projects 587,658 2,109,000
$ 2,828,810 $ 4,934,000
B. Liabilities
(1) Pension plans and postemployment obligations
(a) Local Governmental Employees' Retirement System
Plan description. The Town is a participating employer in 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 membership is comprised of general employees and local law enforcement officers (`LEDs") of
participating local governmental entities. Article 3 of G.S. Chapter 128 assigns the authority to establish and amend
benefit provisions to the North Carolina General Assembly. Management of the plan is vested in the LGERS Board
of Trustees, which consists of 13 members - nine appointed by the Governor, one appointed by the State Senate,
one appointed by the House of Representatives, and the State Treasurer and State Superintendent, who serve as
ex -officio members. The Local Governmental Employees' Retirement System is included in the Annual
Comprehensive Financial Report ("ACFR") for the state of North Carolina. The State's ACFR 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.
Benefits provided. LGERS provides retirement and survivor benefits. Retirement benefits are determined as 1.85%
of the member's average final compensation times the member's years of creditable service. A member's average
final compensation is calculated as the average of a member's four highest consecutive years of compensation. Plan
members are eligible to retire with full retirement benefits at age 65 with five years of creditable service, at age 60
with 25 years of creditable service, or at any age with 30 years of creditable service. Plan members are eligible to
retire with partial retirement benefits at age 50 with 20 years of creditable service or at age 60 with five years of
creditable service. Survivor benefits are available to eligible beneficiaries of members who die while in active service
or within 180 days of their last day of service and who have either completed 20 years of creditable service regardless
of age or have completed five years of service and have reached age 60. Eligible beneficiaries may elect to receive
a monthly Survivor's Alternate Benefit for life or a return of the member's contributions. The plan does not provide
for automatic post -retirement benefit increases. Increases are contingent upon actuarial gains of the plan.
LGERS plan members who are LEOs are eligible to retire with full retirement benefits at age 55 with five years of
creditable service as an officer, or at any age with 30 years of creditable service. LEO plan members are eligible
to retire with partial retirement benefits at age 50 with 15 years of creditable service as an officer. Survivor benefits
are available to eligible beneficiaries of LEO members who die while in active service or within 180 days of their
last day of service and who also have either completed 20 years of creditable service regardless of age, or have
completed 15 years of service as a LEO and have reached age 50, or have completed five years of creditable
service as a LEO and have reached age 55, or have completed 15 years of creditable service as a LEO if killed in
the line of duty. Eligible beneficiaries may elect to receive a monthly Survivor's Alternate Benefit for life or a return
of the member's contributions.
38
Town of Hillsborough, North Carolina
Notes to Financial Statements
Contributions. Contribution provisions are established by G.S. 128-30 and may be amended only by the North
Carolina General Assembly. Town employees are required to contribute 6% of their compensation. Employer
contributions are actuarially determined and set annually by the LGERS Board of Trustees. The Town's
contractually required contribution rate for the year ended June 30, 2021 was 10.9% of compensation for law
enforcement officers and 10.15% for general employees, actuarially determined as an amount that, when combined
with employee contributions, is expected to finance the costs of benefits earned by employees during the year.
Contributions to the pension plan from the Town were $632,182 for the year ended June 30, 2021.
Refunds of contributions. Town employees who have terminated service as a contributing member of LGERS, may
file an application for a refund of their contributions. By state law, refunds to members with at least five years of
service include 4% interest. State law requires a 60 -day waiting period after service termination before the refund
may be paid. The acceptance of a refund payment cancels the individual's right to employer contributions or any
other benefit provided by LGERS.
Pension liabilities, pension expense, and deferred outflows of resources and deferred inflows of resources
related to pensions
The Town reported a liability, at June 30, 2021, of $3,292,912 for its proportionate share of the net pension liability.
The net pension liability was measured as of June 30, 2020. The total pension liability used to calculate the net pension
liability was determined by an actuarial valuation as of December 31, 2019. The total pension liability was then rolled
forward to the measurement date of June 30, 2020 utilizing update procedures incorporating the actuarial
assumptions. The Town's proportion of the net pension liability was based on a projection of the Town's long-term
share of future payroll covered by the pension plan, relative to the projected future payroll covered by the pension plan
of all participating LGERS employers, actuarially determined. The Town's proportion, at June 30, 2020 (measurement
date), was 0.09215%, which was a increase of 0.0016% from its proportion measured as of June 30, 2019.
For the year ended June 30, 2021, the Town recognized pension expense of $1,138,547. The Town reported, at
June 30, 2021, deferred outflows of resources and deferred inflows of resources related to pensions from the
following sources:
Deferred Deferred
Outflows of Inflows of
Resources Resources
Differences between expected and actual experience $ 415,837 $
Changes in assumptions and/or other inputs 245,057
Net difference between projected and actual earnings
on pension plan investments 463,389
Changes in proportion and differences between employer
contributions and proportionate share of contributions 26,400
Contributions subsequent to the measurement date 632,182
23,976
Total deferrals $ 1,782,865 $ 23,976
$632,182 of the amount reported as deferred outflows of resources related to the Town's contributions subsequent
to the measurement date that will be recognized as a decrease of the net pension liability in the year ended June 30,
2022. Other amounts reported as deferred outflows and inflows of resources related to pensions will be recognized
in pension expense as follows:
Years ending June 30:
2022 $ 317,591
2023 422,382
2024 249,595
2025 137,139
Total $ 1,126,707
39
Town of Hillsborough, North Carolina
Notes to Financial Statements
Actuarial assumptions. The total pension liability in the December 31, 2019 actuarial valuation was determined
using the following actuarial assumptions, applied to all periods included in the measurement:
Inflation 3.00%
Salary increases 3.50 to 8.10%, including inflation and productivity factor
Investment rate of return 7.00%, net of pension plan investment expense, including inflation
The plan currently uses mortality tables that vary by age, gender, employee group (i.e., general, law enforcement
officer etc.) and health status (i.e., disabled and healthy). The current mortality rates are based on published tables
and based on studies that cover significant portions of the U.S. population. The healthy mortality rates also contain
a provision to reflect future mortality improvements.
The actuarial assumptions used in the December 31, 2019 valuation were based on the results of an actuarial
experience study as of December 31, 2014.
Future ad hoc COLA amounts are not considered to be substantively automatic and are therefore not included in
the measurement.
The projected long-term investment returns and inflation assumptions are developed through review of current and
historical capital markets data, sell -side investment research, consultant whitepapers, and historical performance
of investment strategies. Fixed income return projections reflect current yields across the U.S. Treasury yield curve
and market expectations of forward yields projected and interpolated for multiple tenors and over multiple year
horizons. Global public equity return projections are established through analysis of the equity risk premium and
the fixed income return projections. Other asset categories and strategies' return projections reflect the foregoing
and historical data analysis. These projections are combined to produce the long-term expected rate of return by
weighting the expected future real rates of return by the target asset allocation percentage and by adding expected
inflation. The target allocation and best estimates of arithmetic real rates of return for each major asset class as of
June 30, 2020 are summarized in the following table:
Asset Class
Long -Term
Expected
Target Real Rate
Allocation of Return
Fixed Income 29.0% 1.4%
Global Equity 42.0% 5.3%
Real Estate 8.0% 4.3%
Alternatives 8.0% 8.9%
Credit 7.0% 6.0%
Inflation Protection 6.0% 4.0%
Total 100.0%
The information above is based on 30 -year expectations developed with the consulting actuary for the 2019 asset,
liability, and investment policy study for the North Carolina Retirement Systems, including LGERS. The long-term
nominal rates of return underlying the real rates of return are arithmetic annualized figures. The real rates of return
are calculated from nominal rates by multiplicatively subtracting a long-term inflation assumption of 3.0 percent. All
rates of return and inflation are annualized.
40
Town of Hillsborough, North Carolina
Notes to Financial Statements
Discount rate. The discount rate used to measure the total pension liability was 7.00 percent. The projection of cash
flows used to determine the discount rate assumed that contributions from plan members will be made at the current
contribution rate and that contributions from employers will be made at statutorily required rates, actuarially
determined. Based on these assumptions, the pension plan's fiduciary net position was projected to be available to
make all projected future benefit payments of the current plan members. Therefore, the long-term expected rate of
return on pension plan investments was applied to all periods of projected benefit payments to determine the total
pension liability.
Sensitivity of the Town's proportionate share of the net pension liability to changes in the discount rate. The following
presents the Town's proportionate share of the net pension liability calculated using the discount rate of 7.00%, as
well as what the Town's proportionate share of the net pension asset or net pension liability would be if it were
calculated using a discount rate that is one percentage point lower (6.00 percent) or one percentage point higher
(8.00 percent) than the current rate:
1% Discount 1%
Decrease Rate Increase
(6.00%) (7.00%) (8.00%)
Town's proportionate share of the
net pension liability $ 6,680,960
$ 3,292,912 $ 477,206
Pension plan fiduciary net position. Detailed information about the pension plan's fiduciary net position is available
in the separately issued ACFR for the state of North Carolina.
(b) Law Enforcement Officers' Special Separation Allowance
(i) Plan description.
The Town 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 under
the age of 62 who have completed at least 30 years of creditable service or have attained 55 years of age and have
completed five or more years of creditable service. The Separation Allowance is equal to 0.85 percent 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.
All full-time law enforcement officers of the Town are covered by the Separation Allowance. The Separation
Allowance's membership, at December 31, 2019 (valuation date), consisted of:
Retirees receiving benefits
Terminated plan members entitled to, but not yet receiving benefits
Active plan members
3
29
Total 32
41
Town of Hillsborough, North Carolina
Notes to Financial Statements
(ii) 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.
Benefits are recognized when due and payable in accordance with the terms of the plan.
The Separation Allowance has no assets accumulated in a trust that meets the criteria which are outlined in GASB
Statement 73.
(iii) Actuarial assumptions:
The entry age actuarial cost method was used in the December 31, 2019 valuation. The total pension liability in the
December 31, 2019 actuarial valuation was determined using the following actuarial assumptions, applied to all
periods included in the measurement:
Inflation 2.50 percent
Salary increases 3.25 to 7.75 percent (includes inflation at 2.50%
Discount rate 1.93 percent (includes inflation at 2.50%)
The discount rate used to measure the total pension liability is the S&P Municipal Bond 20 Year High Grade Rate
Index.
All mortality rates use Pub -2010 amount -weighted tables and are projected from 2010 using generational
improvement with Scale MP -2019.
(iv) Change in actuarial assumptions:
Based on the results of an Experience Study completed by the Actuary for the LGERS for the five-year period
ending December 31, 2019 several assumptions were updated including mortality rates, salary increase rates, real
wage growth, etc.
The Municipal Bond Index Rate decreased from 3.26 percent to 1.93 percent.
(v) 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. Administration costs of the Separation
Allowance are financed through investment earnings. The Town paid $28,760 as benefits came due for the reporting
period.
(vi) Pension liabilities, pension expense, and deferred outflows of resources and deferred inflows of resources
related to pensions:
At June 30, 2021, the Town reported a total pension liability of $1,316,618. The total pension liability was measured
as of December 31, 2020 based on a December 31, 2019 actuarial valuation. The total pension liability was then
rolled forward to the measurement date of December 31, 2020 utilizing update procedures incorporating the
actuarial assumptions. For the year ended June 30, 2021, the Town recognized pension expense of $173,538.
42
Town of Hillsborough, North Carolina
Notes to Financial Statements
Deferred Deferred
Outflows of Inflows of
Resources Resources
Differences between expected and actual experience
Changes in assumptions and/or other inputs
Benefit payments and administrative costs made sub-
sequent to the measurement date
Total deferrals
$ 120,870 $ 19,124
348,140 17,967
17,367
$ 486,377 $ 37,091
The $17,367 paid as benefits came due subsequent to the measurement date have been reported as deferred
outflows of resources. Other amounts reported as deferred outflows and deferred inflows of resources related to
pensions will be recognized in pension expense as follows:
Years ending June 30:
2022 $ 93,020
2023 94,484
2024 87,861
2025 79,863
2026 76,691
Total $ 431,919
(vii) Sensitivity of the Town's total pension liability to changes in the discount rate:
The following presents the Town's total pension liability calculated using the discount rate of 1.93 percent, as well
as what the Town's total pension liability would be if it were calculated using a discount rate that is 1 -percentage -
point lower (0.93 percent) or 1 -percentage -point higher (2.93 percent) than the current rate:
1% Discount 1%
Decrease Rate Increase
(0.93%) (1.93%) (2.93%)
Total pension liability $ 1,433,439
$ 1,316,618 $ 1,210,208
Schedule of Changes in Total Pension Liability
Law Enforcement Officers' Special Separation Allowance
2021
Beginning balance $ 783,583
Service cost 54,522
Interest on the total pension liability 25,173
Differences between expected and actual experience
in the measurement of the total pension liability 96,611
Changes in assumptions and/or other inputs 379,515
Benefit payments (22,786)
Ending balance $ 1,316,618
43
Town of Hillsborough, North Carolina
Notes to Financial Statements
The plan currently uses mortality tables that vary by age, and health status (i.e., disabled and healthy). The current
mortality rates are based on published tables and based on studies that cover significant portions of the U.S.
population. The healthy mortality rates also contain a provision to reflect future mortality improvements.
The actuarial assumptions used in the December 31, 2019 valuation were based on the results of an experience
study completed by the Actuary for the Local Government Employees' Retirement System for the five-year period
ending December 31, 2019.
(c) Total expense, liabilities and deferred outflows and inflows of resources related to pensions
Following is information related to the proportionate share and pension expense for all pension plans:
LGERS
LEOSSA Total
Pension expense $ 1,138,547 $ 173,538 $ 1,312,085
Pension liabilities 3,292,912 1,316,618 4,609,530
Proportionate share of net pension liability 0.09215% N/A N/A
Deferred outflows of resources:
Differences between expected and actual
experience
Changes in assumptions and/or other inputs
Net difference between projected and actual
earnings on plan investments
Changes in proportion and differences
between contributions and proprotionate
share of contributions
Contributions, benefit payments, and admini-
strative costs paid subsequent to the
measurement date
Deferred inflows of resources:
Differences between expected and actual
experience
Changes in assumptions and/or other inputs
Changes in proportion and differences
between contributions and proprotionate
share of contributions
415,837
245,057
463,389
26,400
632,182
120,870
348,140
536,707
593,197
463,389
26,400
17,367 649,549
19,124 19,124
17,967 17,967
23,976 23,976
(d) Supplemental Retirement Income Plan
Plan description. The Town 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 ACFR for the state of North
Carolina. The State's ACFR 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.
44
Town of Hillsborough, North Carolina
Notes to Financial Statements
Funding policy. Article 12E of G.S. Chapter 143 requires the Town to contribute each month an amount equal to
5% of each officer's salary, and all amounts contributed are vested immediately. The Town has elected to contribute
each month an amount equal to 5.0% of each participating general employee's salary. Also, the participants may
make voluntary contributions to the Plan. Contributions for the year ended June 30, 2021 were $537,964, which
consisted of $322,726 from the Town and $215,238 from employees.
(2) Other postemployment benefit
Healthcare Benefits
Plan description. According to a town resolution, the Town administers a single -employer defined benefit Healthcare
Plan (the "HC Plan"). The HC Plan provides post -retirement healthcare benefits until they become eligible for
Medicare to retirees of the Town who were hired before February 9, 2009, who have at least 20 years of creditable
service, and who attain age 55 for regular employees and age 52 for law enforcement employees. Employees hired
on or after February 9, 2009, must complete 30 years of service and attain age 60 for regular employees and age
57 for law enforcement employees before becoming eligible for post -retirement benefits. The Town pays the full
cost of coverage for these benefits. The Town's governing board may amend the benefit provisions. A separate
report was not issued for the HC Plan.
Law Enforcement Non -Law Enforcement
Retired Employees' Years
of Creditable Service
Less than 20 years' continuous service
20 or more years' continuous service:
Before age 52
Age 52 to 55
Age 55 until eligible for Medicare
30 or more years' continuous service:
Before age 57
Age 57 to 60
Age 60 until eligible for Medicare
Hired Before
February 9,
2009
Not eligible for
coverage
Not eligible for
coverage
Full coverage
paid for by Town
Full coverage
paid for by Town
Full coverage
paid for by Town
Full coverage
paid for by Town
Full coverage
paid for by Town
Hired On
or After
February 9,
2009
Not eligible for
coverage
Not eligible for
coverage
Not eligible for
coverage
Not eligible for
coverage
Not eligible for
coverage
Full coverage
paid for by Town
Full coverage
paid for by Town
Hired Before
February 9,
2009
Not eligible for
coverage
Not eligible for
coverage
Not eligible for
coverage
Full coverage
paid for by Town
Full coverage
paid for by Town
Full coverage
paid for by Town
Full coverage
paid for by Town
Hired On
or After
February 9,
2009
Not eligible for
coverage
Not eligible for
coverage
Not eligible for
coverage
Not eligible for
coverage
Not eligible for
coverage
Not eligible for
coverage
Full coverage
paid for by Town
Membership of the HC Plan consisted of the following at June 30, 2019, the date of the latest actuarial valuation:
Retirees and dependents receiving benefits
Active plan members
Total
General
Employees
3
74
77
Law
Enforcement
Officers
2
31
33
45
Town of Hillsborough, North Carolina
Notes to Financial Statements
Total OPEB liability
The Town's total OPEB liability of $1,318,673 was measured as of June 30, 2020 and was determined by an
actuarial valuation as of June 30, 2019.
Actuarial assumptions and other inputs. The total OPEB liability in the June 30, 2019 actuarial valuation was
determined using the following actuarial assumptions and other inputs, applied to all periods included in the
measurement unless otherwise specified:
Inflation and wage inflation
Real wage growth
Salary increases
Discount rate
Healthcare cost trend rates
2.50 percent and 3.50 percent, respectively
1.00%
3.50 to 7.75 percent, including inflation and productivity factor
2.21 percent
7.00% decreasing to an ultimate rate of 4.50% by 2026
The discount rate is based on the June average of the Bond Buyer General Obligation 20 -year Municipal Bond
Index published weekly by The Bond Buyer.
Changes in the total OPEB liability
2021
Beginning balance $ 1,175,291
Service cost 35,773
Interest on the total pension liability 40,828
Differences between expected and actual experience
in the measurement of the total pension liability 33,091
Changes in assumptions and/or other inputs 123,589
Net benefit payments and implicit subsidy credit (89,899)
Ending balance $ 1,318,673
The net benefit payments shown above include $19,700 due to the implicit subsidy. Changes in assumptions and
other inputs reflect a change in the discount rate from 3.50% to 2.21%.
Mortality rates were based on the RP -2014 mortality tables, with adjustments for LGERS experience and
generational mortality improvements using Scale MP -2015.
The demographic actuarial assumptions for retirement, disability incidence, withdrawal, and salary increases used
in the June 30, 2019 valuation were based on the results of an actuarial experience study for the period January 1,
2010 through December 31, 2014, adopted by the LGERS Board.
The remaining actuarial assumptions (e.g., initial per capita costs, health care cost trends, rate of plan participation,
rates of plan election, etc.) used in the June 30, 2019 valuation were based on a review of recent plan experience
done concurrently with the June 30, 2019 valuation.
Sensitivity of the total OPEB liability to changes in the discount rate. The following presents the total OPEB liability
of the Town, as well as what the Town's total OPEB liability would be if it were calculated using a discount rate that
is 1 percentage point lower (1.21 percent) or 1 percentage point higher (3.21 percent) than the current rate:
1% Discount 1%
Decrease Rate Increase
(1.21%) (2.21%) (3.21%)
Total OPEB liability $ 1,423,288
$ 1,318,673 $ 1,221,766
46
Town of Hillsborough, North Carolina
Notes to Financial Statements
Sensitivity of the total OPEB liability to changes in the healthcare cost trend rates. The following presents the total
OPEB liability of the Town, as well as what the Town's total OPEB liability would be if it were calculated using a
discount rate that is 1 percentage point lower or 1 percentage point higher than the current rate:
Current
1% Healthcare 1%
Decrease Trend Rate Increase
Total OPEB liability $ 1,183,047
$ 1,318,673 $ 1,475,351
OPEB expense and deferred outflows of resources and deferred inflows of resources related to OPEB
The Town recognized OPEB expense of $33,813 for the year ended June 30, 2021. The Town reported, at June
30, 2021, deferred outflows of resources and deferred inflows of resources related to OPEB from the following
sources:
Deferred Deferred
Outflows of Inflows of
Resources Resources
Differences between expected and actual experience $ 35,202 $ 361,084
Changes in assumptions and/or other inputs 131,134 72,725
Benefit payments and administrative costs made sub-
sequent to the measurement date 44,252
Total deferrals $ 210,588 $ 433,809
$44,252 reported as deferred outflows of resources related to OPEB resulting from benefit payments made and
administrative expenses incurred subsequent to the measurement date will be recognized as a decrease of the
total OPEB liability in the year ended June 30, 2022. Other amounts reported as deferred inflows of resources
related to OPEB will be recognized in OPEB expense as follows:
Years ending June 30:
2022 $ (43, 959)
2023 (43, 959)
2024 (43, 959)
2025 (43, 959)
2026 (41,647)
Thereafter (49, 990)
Total $ (267,473)
47
Town of Hillsborough, North Carolina
Notes to Financial Statements
(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.
Contributions are determined as a percentage of monthly payroll based upon rates established annually by the
State. Separate rates are set for employees not engaged in law enforcement and for law enforcement officers. The
Town considers these contributions to be immaterial.
(4) Accounts payable and accrued liabilities
Accounts payable and accrued liabilities at June 30, 2021 were as follows:
Governmental Activities
Accounts payable to vendors
Accrued payroll and related liabilities
Other
Other
General Governmental
Fund Funds
Total
$ 260,871 $ 7,882 $ 268,753
242,571 242,571
$ 503,442 $ 7,882 $ 511,324
Business -type Activities
Water and
Sewer Stormwater
Fund Fund
Total
Accounts payable to vendors $ 357,394 $ 1,905 $ 359,299
Accrued payroll and related liabilities 77,806 8,405 86,211
Other 2,119 2,119
Accounts payable to vendors
Accrued payroll and related liabilities
Other
$ 437,319 $ 10,310 $ 447,629
Component Units
The The
Authority Tourism Board Total
$ 2,282 $ 6,474 $ 8,756
$ 2,282 $ 6,474 $ 8,756
48
Town of Hillsborough, North Carolina
Notes to Financial Statements
(5) Due to component units
Amounts due to component units consist of $25,860 in occupancy taxes and $102,676 in food and beverage taxes
collected by the Town and remitted to the Authority and the Tourism Board, respectively.
(6) Deferred outflows and inflows of resources
Deferred outflows of resources at year-end is comprised of the following:
Modified Full
Accrual Accrual
Governmental activities:
Pension - LGERS
Pension - LEOSSA
OPEB
Total
$ 1,173,125
486,377
126,354
$ $ 1,785,856
Business -type activities:
Pension - LGERS $ 609,740
OPEB 84,235
Total $ 693,975
Deferred inflows of resources at year-end is comprised of the following:
Modified Full
Accrual Accrual
Governmental activities:
Unavailable revenue:
Property taxes receivable $ 141,526 $
Pension - LGERS 15,777
Pension - LEOSSA 37,091
OPEB 260,286
Total governmental activities $ 141,526 $ 313,154
Business -type activities:
Pension - LGERS $ 8,199
OPEB 173,523
Total business -type activities $ 181,722
(7) 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 $5 million per occurrence; auto liability coverage of $5 million per occurrence; property
coverage up to the total insurance values of the property policy; and workers' compensation coverage up to statutory
limits. 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 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.
49
Town of Hillsborough, North Carolina
Notes to Financial Statements
The Town carries commercial insurance for all other risks of loss, including property ($61,764,807); general liability
($5 million per occurrence); law enforcement liability ($5 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 ($786,100); municipal equipment ($985,307); fine arts
($500,000); and public officials' liability ($5 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.
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 Tourism Board carried commercial coverage for Public Officials Liability with coverage of
$5,000,000 for all claims. Both the Authority and the Tourism Board do not carry flood insurance nor have any
employees.
(8) 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.
(9) 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 2.22%, and is secured by such assets. $ 163,467
Note payable to BB&T, executed in July 2013, in the amount of
$438,057 for the refinance of a note payable for the purchase of
land for municipal operations. The note is payable in 21 semi-
annual payments of $20,860 plus interest at 2.22%, and is secured
by land. The previous note payable on the land for municipal
operations included interest at 3.92%. 104,299
Note payable to BB&T, executed in July 2013, in the amount of
$839,086 for the refinance of a note payable for the purchase of
real property and a building to be used as the fleet maintenance
facility. The note is payable in 23 semi-annual payments of $36,482
plus interest at 2.44%, and is secured by real property and a
building. The previous note payable on the fleet maintenance
facility included interest at 3.79%. 255,374
Note payable to BB&T, executed August 2013, in the amount of
$1,450,000 for the purchase of land for Riverwalk Phases II and III.
The note is payable in 20 semi-annual payments of $72,500 plus
interest and matures in August 2023. Interest is payable at 2.35%
and the note payable is secured by land. 69,803
50
Town of Hillsborough, North Carolina
Notes to Financial Statements
Note payable to BB&T, executed August 2014, in the amount of
$615,368 for the purchase of land for municipal operations. The
note is payable in 30 semi-annual payments of $20,512 plus
interest and matures in August 2029. Interest is payable at 2.88%
and the note payable is secured by the land.
Note payable to BB&T, executed December 2016, in the amount of
$317,000 for the purchase of a dump truck and knuckle boom truck.
The note is payable in nine semi-annual payments of $36,637 with
interest payable at 1.57%, and is secured by the trucks.
Note payable to BB&T, executed September 2017, in the amount of
$465,522 for the purchase of police vehicles. The note is payable
in nine semi-annual payments of $54,509 with interest payable at
1.86%, and is secured by the vehicles.
Note payable to Capital One, executed April 2018, in the amount of
$2,770,000 to finance renovations for the Town's North Campus
location and the Town Barn. The note is payable in fifteen annual
payments of $239,296 with interest payable at 3.56%, and is
secured by the mortgaged property. This note is allocated 83.65%
to governmental activities, and 16.35% to business -type activities,
and accordingly, the annual payments made out of the general fund
will be $200,171, which commenced on January 1, 2019.
Note payable to U.S. Bancorp, executed December 2020, in the
amount of 300,000 to finance the purchase of a garbage truck. The
note is payable in five annual payments of $62,617 with interest
payable at 1.44%, and is secured by the garbage truck.
Less current portion
$ 348,708
27,874
160,531
1,927,506
300,000
3,357,562
(631,492)
$ 2,726,070
The future minimum payments on the notes payable as of June 30, 2021 are as follows:
Years ending June 30:
2022
2023
2024
2025
2026
2027-2031
2032-2033
Principal Interest Total
$ 631,492
486,819
335,922
284,464
254,062
984,868
379,935
$ 97,263
83,010
71,556
62,476
54,772
166,841
20,407
$ 728,755
569,829
407,478
346,940
308,834
1,151,709
400,342
$ 3,357,562 $ 556,325 $ 3,913,887
51
Town of Hillsborough, North Carolina
Notes to Financial Statements
Business -type activities:
Enterprise fund - Water/Sewer Fund:
Note payable to Capital One, executed April 2018, in the amount
of $2,770,000 to finance renovations for the Town's North
Campus location and the Town Barn. The note is payable in
15 annual payments of $239,296 with interest payable at 3.56%,
and is secured by the mortgaged property. This note is allocated
83.65% to governmental activities, and 16.35% to business -type
activities, and accordingly, the annual payments made out of the
general fund will be $200,171, which commenced on January 1,
2019. $ 376,744
Less current portion
376,744
(25,713)
$ 351,031
The long-term debt requirements to maturity as of June 30, 2021 for the Enterprise Fund are as follows:
Principal Interest Total
Years ending June 30:
2022 $ 25,713 $ 13,412 $ 39,125
2023 26,628 12,497 39,125
2024 27,576 11,549 39,125
2025 28,558 10,567 39,125
2026 29,574 9,550 39,124
2027-2031 164,434 31,190 195,624
2032-2033 74,261 3,989 78,250
$ 376,744 $ 92,754 $ 469,498
a. The provisions of these loan agreements contain certain financial covenants related to the maintenance of
fund balance. At June 30, 2021, the Town was in compliance with such covenants.
b. General obligation indebtedness
The Town is subject to the Local Government Bond Act of North Carolina which limits the amount of debt it can
issue to 8 percent of the appraised value of property subject to taxation. The Town's statutory debt limit at June
30, 2021 was approximately $99,729,000 and a legal debt margin of approximately $96,371,000 after deducting
certain outstanding debt balances.
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. 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, 2021 was $381,113.
52
Town of Hillsborough, North Carolina
Notes to Financial Statements
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 were used for a Wastewater Treatment
Plant Upgrade and Expansion Project. In 2014, the Town was approved for a maximum loan in the amount of
$17,810,007 plus interest 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. The loan is
repayable in equal principal payments of $890,500 plus interest of 2.455% through fiscal year ending 2034. The
total amount outstanding at June 30, 2021 was $11,576,504.
On October 6, 2014, the Town was approved for a maximum loan amount of $2,029,398 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. The loan proceeds are being used for the Waterstone
Elevated Water Tank Project. The first payment was made on the note in April 2016. The loan is repayable in a
principal payment of $72,078 due on May 1, 2019, followed by equal principal payments of $94,122 annually on
May 1st, with no interest, through fiscal year ending 2035. The total amount outstanding at June 30, 2021 was
$1,317,706.
Annual debt service requirements to maturity for the above revolving loans as of June 30, 2021 are as follows:
Business -Type Activities
Principal Interest Total
Years ending June 30:
2022
2023
2024
2025
2026
2027-2031
2032-2035
$ 1,060,844
1,060,845
1,060,845
1,060,845
1,060,845
4,923,112
3,047,987
$ 294,341
270,451
246,563
222,672
198,784
655,853
131,171
$ 1,355,185
1,331,296
1,307,408
1,283,517
1,259,629
5,578,965
3,179,158
$13,275,323 $ 2,019,835 $15,295,158
d. Special revenue bonds payable
On May 24, 2018, the City issued $10,155,000 of special revenue bonds secured by water and sewer utility
revenues for improvements to the water and sewer system, including renovation and expansion of the Town's West
Fork of the Eno Reservoir; $6,500,000 were issued as serial bonds and $3,655,000 were issued as term bonds.
The purchase price of the bonds was $11,180,846, resulting in a premium upon issuance of $1,025,846. The serial
bonds carry interest rates of 4.00% to 5.00% and mature between October 1, 2020, and October 1, 2038. The term
bonds were divided into two lots with $1,765,000 paying 3.375% due between October 1, 2039 and October 1,
2040, and $1,890,000 paying 3.50% due between October 1, 2041 and October 1, 2042. All term bonds are subject
to mandatory redemption in prescribed amounts before the maturity dates. $10,130,000 remains outstanding at
June 30, 2021.
53
Town of Hillsborough, North Carolina
Notes to Financial Statements
Annual debt service requirements to maturity for these special revenue bonds payable as of June 30, 2021 are as
follows:
Business -Type Activities
Principal Interest Total
Years ending June 30:
2022 $ 25,000 $ 448,844 $ 473,844
2023 30,000 447,469 477,469
2024 30,000 445,969 475,969
2025 30,000 444,469 474,469
2026 30,000 442,969 472,969
Business -Type Activities
Principal Interest Total
Years ending June 30:
2027-2031
2032-2036
2037-2041
2042-2043
$ 710,000
3,245,000
4,140,000
1,890,000
$ 2,175,094
1,644,218
751,321
66,675
$ 10,130,000 $ 6,867,028
$ 2,885,094
4,889,218
4,891,321
1,956,675
$ 16,997,028
e. Combined Utility Systems Revenue Bond, Series 2020
On February 12, 2020, the City issued $3,271,000 of special revenue bonds secured by water and sewer utility
revenues for road improvements near the Town's water reservoir, as part of the comprehensive plan to improve
and expand the reservoir. The bonds carry an interest rate of 1.98% and mature April 1, 2030. $2,979,000 remains
outstanding at June 30, 2021.
Annual debt service requirements to maturity for these special revenue bonds payable as of June 30, 2021 are as
follows:
Years ending June 30:
2022
2023
2024
2025
2026
2027-2030
Business -Type Activities
Principal
$ 307,000
310,000
317,000
325,000
333,000
1,387,000
Interest Total
$ 58,984
52,906
46,768
40,490
34,056
69,320
$ 365,984
362,906
363,768
365,490
367,056
1,456,320
$ 2,979,000 $ 302,524 $ 3,281,524
54
Town of Hillsborough, North Carolina
Notes to Financial Statements
f. Debt Covenant
The Town is in compliance with the covenants as to rates, fees, rentals and charges in Section 4 of the Master
Trust Agreement, authorizing the issuance of the Water and Sewer Revenue Bonds, Series 2018. Section 4.03 of
the Master Trust Agreement requires the sum of the income available for debt service and 15% of the system fund
balance to be no less than 120% of the long-term debt service requirement for parity indebtedness and the income
available for debt service will be not less than the sum of the long-term debt service requirement for parity
indebtedness and subordinate indebtedness and the debt service on all installment debt and system general
obligation debt.
The debt service coverage ratio calculation is as follows:
Operating revenues
Operating expenses (2)
$ 10, 830, 811
(6,840,888)
Operating income 3,989,923
Nonoperating revenues (expenses) (747,947)
Income available for debt service
15% of Unrestricted Net Position (1)
3,241,976
1,261,979
Total Balance for 120% Parity $ 4,503,955
Debt service, principal and interest (Revenue bond only) $ 840,550
Debt service coverage ratio on first -lien debt 5.36
Debt service all debt (total balance for 100%) $ 2,281,151
Debt service coverage ratio on all debt together 1.42
(1) - System Fund Balance
(2) - Depreciation excluded from operating expenses
55
Town of Hillsborough, North Carolina
Notes to Financial Statements
g.
Changes in long-term debt
Beginning
Balances Increases
Ending Due Within
Decreases Balances One Year
Governmental activities:
Direct placement installment
purchases $ 3,793,400 $ 300,000 $ 735,838 $ 3,357,562 $ 631,492
Compensated absences 321,966 58,804 109,387 271,383 109,000
Total OPEB liability 713,705 77,499 791,204
Net pension liability - LGERS 1,690,884 475,852 2,166,736
Total pension liability - LEOSSA 783,583 533,035 1,316,618
Total Governmental activites $ 7,303,538 $ 1,445,190 $ 845,225 $ 7,903,503 $ 740,492
Beginning
Balances Increases
Business -type activities:
Water and sewer:
Direct placement installment
purchases $ 423,833 $
Revolving loans payable 14,336,167
Special revenue bonds payable 13,426,000
Premium on bonds payable 913,641
Compensated absences 225,272
Total OPEB liability 441,002
Net pension liability - LGERS 721,261
Total - water and sewer
Stormwater:
Compensated absences
Total OPEB liability
Net pension liability - LGERS
Total - stormwater
198,552
60,094
305,140
Ending Due Within
Decreases Balances One Year
$ 47,089
1,060,844
317,000
49,455
130,541
$ 376,744
13,275,323
13,109,000
864,186
293,283
501,096
1,026,401
$ 25,713
1,060,844
332,000
56,485
130,500
30,487,176 563,786 1,604,929 29,446,033 1,605,542
6,312
20,561
60,705
12,137
5,812
39,070
87,578 57,019
8,599
9,850
26,373
99,775
8,600
8,599 135,998 8,600
Total business -type activites $30,574,754 $ 620,805 $ 1,613,528 $29,582,031 $ 1,614,142
Compensated absences, the total pension liability (LEOSSA), the net pension liability (LGERS) and the total OPEB
liability for governmental activities have typically been liquidated in the General Fund.
h. Special assessment debt
In October 2013, the Town issued $4,630,000 of Special Assessment Revenue Bonds to finance the construction
of public infrastructure in the Waterstone District. The Town is in no manner obligated to repay this special
assessment debt and functions only as a custodial for the property owners by remitting collections of special
assessments to the Trustee. The outstanding balance of special assessment debt at June 30, 2021 was $1,965,000.
56
Town of Hillsborough, North Carolina
Notes to Financial Statements
C. Interfund balances and activity
Transfers to/from other funds
Fund
General Fund
Rail Station Capital Project
Riverwalk CMAQ Capital Project
Transfers from other funds
Consolidated
General Transfers
General Capital to other
Fund Projects Funds
5,403
$ 513,500
19,290
$ 513,500
19,290
5,403
$ 5,403 $ 532,790 $ 538,193
The transfers from the General Fund were for various capital projects. The transfer from the Rail Station Capital
Project was to move the project into the General Capital Projects Fund. The transfer from the Riverwalk CMAQ
Capital project was to close out the project.
D. Net investment in capital assets
Business -type Activities
Governmental Water and
Activities Sewer
Capital assets, net $ 23,358,683 $ 61,252,823
Less:
Capital related debt (3,357,562) (27,625,253)
Accounts payable from restricted
assets (161, 291)
Add:
Unspent debt proceeds 300,008 2,737,850
$ 20, 301,129 $ 36, 204,129
E. Fund balance
Stormwater
$ 1,796,980
$ 1,796,980
The following schedule provides management and citizens with information on the portion of General Fund balance
that is available for appropriation.
General Fund:
Total fund balance $ 10,445,599
Less:
Stabilization by state statute 1,532,595
Restricted for streets 395,581
Restricted revenues 47,356
Appropriated in next year's budget 280,311
Fund balance policy - 33% of operating
expenditures 3,135,734
Available fund balance $ 5,054,022
The outstanding encumbrances, reflected in stabilization by state statute, are amounts needed to pay any
commitments related to purchase orders and contracts that remain unperformed at year-end. Outstanding
encumbrances in the General Fund at June 30, 2021 were $539,822.
57
Town of Hillsborough, North Carolina
Notes to Financial Statements
4. Jointly Governed Organization
The Town, in conjunction with seven counties and 37 other municipalities, established the Triangle J Council of
Governments (the "Council"). The participating governments established the Council to coordinate various funding
received from federal and state agencies. Each participating government appoints one member to the Council's
governing board.
5. Contingencies
During 2020, an outbreak of a novel strain of coronavirus ("COVID-19") emerged globally. As a result of the spread
of COVID-19, economic uncertainties have arisen that could negatively impact the Town's revenue and operations
for an indeterminable period of time. Other financial impacts could occur that are unknown at this time.
6. Subsequent Events
The Town evaluates subsequent events up through the date this report is made available. The TDA and Tourism
Board evaluated subsequent events through January 12, 2023. The Town has extended consideration of additional
subsequent events that could potentially affect the TDA's and Tourism Board's financial statements. While no
additional disclosures were noted for the TDA and Tourism Board, the following significant events relate to the Town:
a. Prior to year-end the federal government enacted the American Rescue Plan Act of 2021. Included in this
legislation is $2,282,192 of funding allocated to the town. In August of 2021, the town received the first half
of this funding, $1.14 million and as of the date of this report the town has not spent any of this funding.
The town has allocated these funds to water and sewer system improvements.
b. The Town increased its property tax rate by two cents (58.7 cents per $100 property value) in the fiscal
2022 budget to fund climate and sustainability priorities. Orange County's property re -valuation was
effective beginning in fiscal 2022 resulting in a revenue neutral tax rate of 56.7 cents.
c. The Town increased water and sewer rates by 4.5 percent and 2.0 percent for fiscal years ending 2022 and
2023, respectively. The water rate increases are intended to provide funding for existing debt service
requirements and self -funding of future capital improvements. The sewer rate increases are intended to
provide for future capital improvements.
7. Change in Accounting Principle
The Town implemented GASB Statement No. 84, Fiduciary Activities (effective July 1, 2020). This statement
establishes criteria for identifying fiduciary activities of all state and local governments and provides guidance on
how to report fiduciary activities within the financial statements. The focus of the criteria generally is on (1) whether
a government is controlling the assets of the fiduciary activity and (2) the beneficiaries with whom a fiduciary
relationship exists. Separate criteria are included to identify fiduciary component units and postemployment benefit
arrangements that are fiduciary activities. The statement also describes four fiduciary funds that should be reported
if criteria outlined in the statement are met: (1) pension (and other employee benefit) trust funds, (2) investment
trust funds, (3) private -purpose trust funds, and (4) custodial funds. The use of agency funds was eliminated. The
statement also provides for recognition of a liability to the beneficiaries in a fiduciary fund when an event has
occurred that compels the government to disburse fiduciary resources. The cumulative effect of this change had
no effect on fund balances or net position.
58
Required Supplementary Financial Data
This section contains additional information required by generally accepted accounting principles.
• Schedule of Changes in Total Pension Liability for the Law Enforcement Officers' Special Separation Allowance.
• Schedule of Total Pension Liability as a Percentage of Covered Payroll for the Law Enforcement Officers'
Special Separation Allowance.
• Schedules of Changes in the Total OPEB Liability and Related Ratios.
• Schedule of Proportionate Share of Net Pension Liability (Asset) for Local Government Employees' Retirement
System.
• Schedule of Contributions to Local Government Employees' Retirement System.
Schedule RSI-i
Town of Hillsborough, North Carolina
Schedule of Changes in Total Pension Liability
Law Enforcement Officers' Special Separation Allowance
Required Supplementary Information
Last Ten Fiscal Years
2021 2020 2019 2018 2017
Beginning balance $ 783,583 $ 727,333 $ 641,574 $ 566,336 $ 556,718
Service cost 54,522 46,881 49,048 37,358 36,956
Interest on the total pension liability 25,173 26,226 19,749 21,303 19,286
Change of benefit terms - - - -
Difference between expected and actual
experience in the measurement of the
total pension liability 96,611 (28,494) 80,147 (520) -
Changes of assumptions or other inputs 379,515 25,289 (29,947) 45,993 (13,621)
Benefit payments (22,786) (13,652) (33,238) (28,896) (33,003)
Other changes - - - -
Ending balance $ 1,316,618 $ 783,583 $ 727,333 $ 641,574 $ 566,336
2016 2015 2014 2013 2012
Beginning balance N/A N/A N/A N/A N/A
Service cost N/A N/A N/A N/A N/A
Interest on the total pension liability N/A N/A N/A N/A N/A
Change of benefit terms N/A N/A N/A N/A N/A
Difference between expected and actual
experience in the measurement of the
total pension liability N/A N/A N/A N/A N/A
Changes of assumptions or other inputs N/A N/A N/A N/A N/A
Benefit payments N/A N/A N/A N/A N/A
Other changes N/A N/A N/A N/A N/A
Ending balance N/A N/A N/A N/A N/A
Notes to the Schedule:
N/A - Information prior to the implementation of GASB Statement No. 73 does not exist. This schedule is
building to be a ten year schedule as information becomes available.
The amounts presented for each fiscal year were determined as of the prior fiscal year ending December 31.
59
Schedule RSI-2
Town of Hillsborough, North Carolina
Schedule of Total Pension Liability as a Percentage of Covered Payroll
Law Enforcement Officers' Special Separation Allowance
Required Supplementary Information
Last Ten Fiscal Years
2021 2020 2019 2018 2017
Total pension liability $ 1,316,618 $ 783,583 $ 727,333 $ 641,574 $ 566,336
Covered payroll 1,914,214 1,831,895 1,830,296 1,670,805 1,650,937
Total pension liability as a percentage of
covered payroll 68.78%
Total pension liability
Covered payroll
42.77% 39.74%
38.40% 34.30%
2016 2015 2014 2013 2012
N/A N/A N/A N/A N/A
N/A N/A N/A N/A N/A
Total pension liability as a percentage of
covered payroll N/A N/A N/A N/A N/A
Notes to the Schedule:
N/A - Information prior to the implementation of GASB Statement No. 73 does not exist. This schedule is
building to be a ten year schedule as information becomes available.
The amounts presented for each fiscal year were determined as of the prior fiscal year ending December 31.
60
Schedule RSI-3
Town of Hillsborough, North Carolina
Schedule of Changes in the Total OPEB Liability and Related Ratios
OPEB Retirement Plan
Required Supplementary Information
Last Five Fiscal Years *
2021 2020 2019 2018 2017
Total OPEB Liability
Service cost $ 35,773 $ 55,105 $ 56,731 $ 60,886 N/A
Interest 40,828 60,865 56,550 48,567 N/A
Changes of benefit terms - - - N/A
Difference between expected and actual
experience 33,091 (461,361) 8,747 (2,066) N/A
Changes of assumptions or other inputs 123,590 27,076 (45,522) (78,864) N/A
Net benefit payments and implicit subsidy
credit (1) (89,899) (140,756) (60,738) (46,470) N/A
Net change in total OPEB liability 143,383 (459,071) 15,768 (17,947) N/A
Total OPEB liability:
Beginning balance
Ending balance
Covered -employee payroll
Total OPEB liability as a percentage of
covered -employee payroll
1,175,290 1,634,361 1,618,593 1,636,540 N/A
$ 1,318,673 $ 1,175,290 $ 1,634,361 $ 1,618,593 N/A
$ 5,736,330 $ 5,736,330 $ 5,180, 570 $ 5,180, 570 N/A
22.99% 20.49% 31.55% 31.24% N/A
Notes to the Schedules:
N/A - Information prior to the implementation of GASB Statement No. 75 does not exist. This schedule
is building to be a ten year schedule as information becomes available.
(1) - Net benefit payments shown above include $19,700 due to the implicit subsidy.
Changes of assumptions and other inputs reflect the effects of changes in the
discount rate of each period. The following are the discount rates used in
each period:
Fiscal year Rate
2021 2.21%
2020 3.50%
2019 3.89%
2018 3.56%
61
Schedule RSI-4
Town of Hillsborough, North Carolina
Schedule of Proportionate Share of Net Pension Liability (Asset)
Local Government Employees' Retirement System
Required Supplementary Information
Last Ten Fiscal Years
2021 2020 2019 2018 2017
Hillsborough's proportion of the net
pension liability (asset) (%) 0.0922% 0.0906% 0.0931% 0.0919% 0.0924%
Hillsborough's proportion of the net
pension liability (asset) ($) $ 3,292,912 $ 2,472,850 $ 2,209,362 $ 1,404,436 $ 1,961,038
Hillsborough's covered payroll $ 6,389,923 $ 5,936,460 $ 5,695,125 $ 5,750,308 $ 5,235,777
Hillsborough's proportionate share of the
net pension liability (asset) as a
percentage of its covered payroll
51.53%
41.66% 38.79%
24.42% 37.45%
Plan fiduciary net position as a percentage
of the total pension liability (1) 88.61% 91.63% 94.18% 91.47% 98.09%
Hillsborough's proportion of the net
pension liability (asset) (%)
Hillsborough's proportion of the net
pension liability (asset) ($)
Hillsborough's covered payroll
2016 2015 2014 2013 2012
0.0838% 0.0809% 0.0797% N/A N/A
$ 376,224 $ (477,164) $ 960,691 N/A N/A
$ 4,861,624 $ 4,672,868 $ 4,428,097 N/A N/A
Hillsborough's proportionate share of the
net pension liability (asset) as a
percentage of its covered payroll 7.74% -10.21% 21.70% N/A N/A
Plan fiduciary net position as a percentage
of the total pension liability (1)
99.07% 102.64% 94.35% N/A N/A
Notes to the Schedule:
N/A - Information prior to the implementation of GASB Statement No. 68 does not exist. This schedule is
building to be a ten year schedule as information becomes available.
The amounts presented for each fiscal year were determined as of the prior fiscal year ending June 30.
(1) - This information was obtained from the State of North Carolina's Annual Comprehensive Financial Report.
62
Schedule RSI-5
Town of Hillsborough, North Carolina
Schedules of Contributions
Local Government Employees' Retirement System
Required Supplementary Information
Last Ten Fiscal Years
2021 2020 2019 2018 2017
Contractually required contribution $ 632,182 $ 587,827 $ 478,756 $ 440,572 $ 429,432
Contributions in relation to the
contractually required contribution 632,182
587,827 478,756
440,572 429,432
Contribution deficiency (excess) $ - $ - $ - $ - $
Hillsborough's covered payroll $ 6,495,627 $ 6,389,923 $ 5,936,460 $ 5,695,125 $ 5,750,308
Contributions as a percentage of
covered payroll 9.73% 9.20% 8.06% 7.74% 7.47%
2016 2015 2014 2013 2012
Contractually required contribution $ 356,396 $ 357,402 $ 333,343 N/A N/A
Contributions in relation to the
contractually required contribution 356,396 357,402 333,343 N/A
N/A
Contribution deficiency (excess) $ - $ - $ - N/A
Hillsborough's covered payroll
Contributions as a percentage of
covered payroll
N/A
$ 5,235,777 $ 4,861,624 $ 4,672,868 N/A N/A
6.81% 7.35% 7.13% N/A N/A
Notes to the Schedule:
N/A - Information prior to the implementation of GASB Statement No. 68 does not exist. This schedule is
building to be a ten year schedule as information becomes available.
63
Supplementary Information
This page was intentionally left blank.
Town of Hillsborough, North Carolina
Schedule of Revenues, Expenditures, and Changes in Fund Balance
Budget and Actual - General Fund
Year Ended June go, 2021 (with Comparative Actual Amounts for 2020)
Schedule 1
(5 pages)
2021 2020
Final
Budget
Actual
Variance
Positive
(Negative)
Actual
REVENUES
Ad valorem taxes:
Current $ 7,020,557 $ 7,934,385 $ 913,828 $ 7,402,989
Penalties and interest 18,000 22,967 4,967 19,874
7,038,557 7,957,352
918,795 7,422,863
Other taxes and licenses:
Gross receipts on short-term
rental property 8,000 9,510 1,510 11,517
Privilege licenses 100 713 613 878
Motor vehicle license fees 292 342 50 674
Solid waste disposal 4,000 5,845 1,845 5,663
12,392 16,410
4,018 18,732
Unrestricted intergovernmental revenues:
Local option sales tax 1,448,010 2,048,982 600,972 1,719,865
Franchise tax 510,000 596,383 86,383 585,296
Beer and wine tax 25,000 32,615 7,615 32,185
Food and beverage tax 305,212 397,198 91,986 399,918
Occupancy tax 62,460 72,042 9,582 62,107
Other 170 730 560 1,532
2,350,852 3,147,950
797,098 2,800,903
Restricted intergovernmental revenues:
Powell Bill 151,000 197,962 46,962 202,395
Federal grants 32,487
Covid Relief Funding 86,449 86,448 (1) 79,973
Other 20,000 7,471 (12,529) 2,357
257,449 291,881 34,432 317,212
Use and rental fees:
Zoning permits 50,000 72,843 22,843 215,487
Cable franchise 40,000 53,859 13,859 52,742
Time Warner Cable PEG fees 27,353
Fire inspection fees and permits 10,225 13,323 3,098 15,310
Park usage fees 4,500 2,695 (1,805)
Parking fines 200 20 (180)
104,925 142,740 37,815 310,892
Investment earnings 2,940 3,295 355 170,325
Miscellaneous revenues 43,326 85,674 42,348 35,597
Total revenues 9,810,441 11,645,302 1,834,861 11,076,524
64
Town of Hillsborough, North Carolina
Schedule of Revenues, Expenditures, and Changes in Fund Balance
Budget and Actual - General Fund
Year Ended June 3O, 2021 (with Comparative Actual Amounts for 2020)
Schedule 1
(5 pages)
2021 2020
Final
Budget
Actual
Variance
Positive
(Negative)
Actual
EXPENDITURES
General government:
Governing body:
Personnel services $ 48,165 $ 48,549
Other services and charges 184,186 240,211
Reimbursement from enterprise
funds (120,826) (118,289)
$ 150,796
111,525 $ 39,271 170,471
Ruffin-Roulhac:
Other services and charges 17,877 53,551
Debt Service Payments 200,171 200,171
Reimbursement from enterprise
funds (90,949) (158,148)
129,789 127,099
2,690 95,574
Administration:
Personnel services 959,074 1,041,880
Other services and charges 369,506 456,965
Capital outlay 37,433
Reimbursement from enterprise
funds (701,964) (691,268)
Finance:
Personnel services
Other services and charges
Reimbursement from enterprise
funds
Planning:
Personnel services
Other services and charges
808,126 664,049
367,559
153,684
(271,046)
333,527 250,197
144,077 807,577
420,707
82,064
(236,069)
83,330 266,702
362,084 386,393
122,170 65,094
546,974 484,254
62,720 451,487
Motor pool:
Personnel services 291,665 290,759
Other services and charges 128,803 122,417
Capital outlay 5,516 82,311
Debt service payments 80,530
Reimbursement from enterprise
funds (214,600) (141,277)
Total general government
379,475 291,914
2,348,687 1,929,038
87,561 354,210
419,649 2,146, 021
65
Town of Hillsborough, North Carolina
Schedule of Revenues, Expenditures, and Changes in Fund Balance
Budget and Actual - General Fund
Year Ended June 3O, 2021 (with Comparative Actual Amounts for 2020)
Schedule 1
(5 pages)
2021 2020
Final
Budget
Actual
Variance
Positive
(Negative)
Actual
Public safety:
Police department:
Personnel services $ 2,694,133 $ 2,828,278
Other services and charges 344,153 285,085
Capital outlay 44,069
Debt service payments 109,017 127,206
Fire inspections/code enforcement:
Personnel services
Other services and charges
Debt service payments
Safety:
Personnel services
Other services and charges
Reimbursement from enterprise
funds
Fire protection:
Other services and charges
Capital outlay
Debt service payments
Total public safety
$ 3,304,221
3,147, 303 $ 156,918 3,284,638
92,293
5,094
184,151 97,387
245,683
395,368
(334,146)
368,306 306,905
1,214,763
212,208
50,201
1,480,488 1,477,172
5,337,166 5,028,767
151,411
20,389
100,402
86,764 272,202
164,626
502,636
(150,399)
61,401 516,863
1,122, 806
3,316 1,122, 806
308,399 5,196, 509
Transportation:
Street department/Powell Bill:
Personnel services 265,077 307,219
Other services and charges 200,471 147,052
Capital outlay 25,086 230,040
Debt service payments 41,018 41,018
Total transportation
Environmental protection:
Sanitation department:
Personnel services
Other services and charges
Capital outlay
Debt service payments
689,188 531,652
689,188 531,652
269,339
153,532
32,255
785,208 455,126
157,536 725,329
157,536 725,329
276,391
145,965
32,758
76,323
330,082 531,437
66
Town of Hillsborough, North Carolina
Schedule of Revenues, Expenditures, and Changes in Fund Balance
Budget and Actual - General Fund
Year Ended June 3O, 2021 (with Comparative Actual Amounts for 2020)
Schedule 1
(5 pages)
Cemetery:
Other services and charges
Total environmental protection
Economic and physical development:
Tourism:
Personnel Services
Other services and charges
2021 2020
Final
Budget
Actual
Variance
Positive
(Negative)
Actual
$ 3,334 $ 7,015
$ 7,350 3,334 $ 4,016
792,558 458,460
7,015
334,098 538,452
34,097 38,550
411,569 434,944
593,879 445,666
148,213 473,494
Total economic and physical
development 593,879 445,666 148,213 473,494
Community activities and projects:
Contributions
Other services and charges
Debt service payments
Total community activities
and projects
161,859 159,336
96,683 98,791
340,645 258,542
82,103 258,127
Parks and recreation:
Personnel services 163,933 161,376
Other services and charges 307,762 375,936
Capital Outlay 20,954
Debt service payments 235,919 241,141
Reimbursement from enterprise
funds (13,368) (25,800)
Total parks and recreation 739,243 715,200 24,043 752,653
Contingency 9,161 9,161
Total expenditures
Revenues over (under) expenditures
10,850,527 9,367,325
(1,040,086) 2,277,977
1,483,202 10, 090, 585
3,318,063 985,939
67
Town of Hillsborough, North Carolina
Schedule of Revenues, Expenditures, and Changes in Fund Balance
Budget and Actual - General Fund
Year Ended June 3O, 2021 (with Comparative Actual Amounts for 2020)
Schedule 1
(5 pages)
2021 2020
Final
Budget
Actual
Variance
Positive
(Negative)
OTHER FINANCING SOURCES (USES)
Transfer to other funds:
General Capital Improvements Fund $ (149,263) $ (149,263) $
Restricted Revenue Fund (20,000) (20,000)
General Capital Improvements Fund (325,737) (325,737)
Riverwalk - CMAQ Fund - -
General Capital Improvements Fund (4,500) (4,500)
Rail Station Capital Project (34,000) (34,000)
Transfer from other funds:
Riverwalk - CMAQ Fund 5,403
General Capital Improvements Fund
Downtown Improvements Capital
Project Fund
Installment purchase obligations
issued 297,388
Other financing sources (uses), net
APPROPRIATED FUND BALANCE
Net change in fund balance
Fund balance, beginning
Fund balance, ending
5,403
300,000 2,612
(236,112) (228,097)
Actual
$ (80,000)
(176,560)
(50,343)
55,368
36,487
8,015 (215,048)
1,276,198 (1,276,198)
2,049,880
8,348,363
$ 10,398,243
$ 2,049,880
770,891
7,577,472
$ 8,348,363
68
Schedule 2
Town of Hillsborough, North Carolina
Schedule of Revenues, Expenditures, and Changes in Fund Balance
Budget and Actual - Restricted Revenue Fund
From inception and for the year ended June 3O, 2021
Actual
Variance
Project Prior Current Total Positive
Authorization Years Year To Date (Negative)
REVENUES
Restricted intergovernmental revenues $ 1,007,600 $ 173,153 $ 30,875 $ 204,028 $ (803,572)
Contributions and donations 79,197 70,475 8,722 79,197
Total revenues 1,086,797 243,628 39,597 283,225 (803,572)
EXPENDITURES
Current:
General government:
Administration 4,610 - - 4,610
Planning 1,014,931 76,000 105,600 181,600 833,331
Public safety:
Police 21,820 9,299 9,299 12,521
Community Activity and Projects:
Affordable housing projects 64,970 44,970 20,000 64,970 -
Parks and recreation 466 - - 466
Total expenditures 1,106,797 120,970 134,899 255,869 850,928
Revenues over (under) expenditures (20,000)
122,658 (95,302) 27,356 47,356
OTHER FINANCING SOURCES
Transfer from other funds:
Transfer from General Fund 20,000 20,000 20,000 -
Total other financing sources 20,000 20,000 20,000 -
Net change in fund balance $ - $ 122,658 (75,302) $ 47,356 $ 47,356
Fund balance, beginning 122,658
Fund balance, ending $ 47,356
69
Town of Hillsborough, North Carolina
Combining Balance Sheet
Nonmajor Governmental Funds
June 30, 2021
Schedule 3
(2 pages)
Capital Project Funds
Consolidated Riverwalk Rail
General CMAQ Station
Capital Capital Capital
Projects Project Project
ASSETS
Cash and investments $ 797,208 $ $ -
Due from other governments - -
Total assets
LIABILITIES
Accounts payable and accrued liabilities
Total liabilities
$ 797,208 $ $
$ 7,882 $ $
7,882 -
FUND BALANCES
Committed for:
Capital projects 789,326
Total fund balances
789,326 -
Total liabilities and fund balances $ 797,208 $ $
70
Schedule 3
(2 pages)
Capital Project Funds
Public Works
Building
Capital
P roiect
$ 128,200
$ 128,200
$
128,200
128,200
Public Safety
Building
Capital
P roiect
$ 61,613
$ 61,613
$
Total
Non major
Governmental
Funds
$ 987,021
$ 987,021
$
7,882
7,882
61,613 979,139
61,613 979,139
$ 128,200 $ 61,613 $ 987,021
71
Town of Hillsborough, North Carolina
Combining Statement of Revenues, Expenditures, and Changes in
Fund Balances - Nonmajor Governmental Funds
Year Ended June 3O, 2021
Schedule 4
(2 pages)
Capital Project Funds
Consolidated Riverwalk Rail
General CMAQ Station
Capital Capital Capital
Projects Project Project
REVENUES
Restricted intergovernmental revenues $ - $ $ -
Contributions and donations 8,000 -
Investment earnings - -
Total revenues
8,000 -
EXPENDITURES
Current:
General government 2,385 -
Public safety - -
Economic and physical development 48,252 -
Total expenditures
Revenues under expenditures
50,637 -
(42,637) -
OTHER FINANCING SOURCES (USES)
Transfer to other funds - (5,403) (19,290)
Transfer from other funds 532,790 -
Other financing sources (uses), net 532,790 (5,403) (19,290)
Net change in fund balances 490,153 (5,403) (19,290)
Fund balances, beginning 299,173 5,403 19,290
Fund balances, ending $ 789,326 $ $ -
72
Schedule 4
(2 pages)
Capital Project Funds
Public Works
Building
Capital
P roiect
128,200
Public Safety
Building
Capital
P roiect
Total
Non major
Governmental
Funds
$ - $
57,347
8,000
8,000
2,385
57,347
48,252
57,347 107,984
(57,347) (99,984)
(24,693)
532,790
508,097
(57,347) 408,113
118,960 571,026
$ 128,200 $ 61,613 $ 979,139
73
Schedule 5
Town of Hillsborough, North Carolina
Schedule of Revenues, Expenditures, and Changes in Fund Balance
Budget and Actual - General Capital Projects
From inception and for the year ended June 30, 2021
Actual Variance
Project Prior Current Total Positive
Authorization Years Year To Date (Negative)
REVENUES
Transportation Improvement project:
Restricted intergovernmental $ 986,000 $ - $ - $ - $ (986,000)
Connectivity projects:
Contributions and donations 8,000 11,146 8,000 19,146 11,146
Total revenues 994,000 11,146 8,000 19,146 (974,854)
EXPENDITURES
General government:
Connectivity projects 52,500 5,955 2,385 8,340 44,160
Fiber loop 150,000 - - - 150,000
Economic and physical development:
Transportation improvement
project (TIP) 1,079,000 - 3,834 3,834 1,075,166
Valley Forge Road project 555,000 - 44,418 44,418 510,582
Construction 91,146 - 91,146 (91,146)
Total expenditures 1,836,500 97,101 50,637 147,738 1,688,762
Revenues under expenditures (842,500) (85,955) (42,637) (128,592) 713,908
OTHER FINANCING SOURCES
Transfer from General Fund:
Connectivity projects 44,500 40,000 4,500 44,500 -
Fiber Loop project 150,000 150,000 - 150,000 -
Valley Forge Road project 555,000 80,000 475,000 555,000 -
Transportation Improvement project 93,000 - 34,000 34,000 (59,000)
Transfer from Rail Station project - 19,290 19,290 19,290
Total other financing sources 842,500 270,000 532,790 802,790 (39,710)
Net change in fund balance $ $ 184,045 490,153 $ 674,198 $ 674,198
Fund balance, beginning 184,045
Fund balance, ending 674,198
Amounts reported for Revenue, Expenditures and Changes in
Fund Balance are different for the Budgeted/Actual Statement
due to the consolidation of the General Capital Reserve Fund
Fund balance, beginning (Capital Reserve Fund)
Investment earnings
Transfers to other funds
115,128
Fund balance, ending (Consolidated General
Capital Projects Fund) $ 789,326
74
Schedule 6
Town of Hillsborough, North Carolina
Schedule of Revenues, Expenditures, and Changes in Fund Balance
Budget and Actual - General Capital Reserve Fund
From inception and for the year ended June 3O, 2021
Actual Variance
Project Prior Current Total Positive
Authorization Years Year To Date (Negative)
REVENUES
Capital contributions -Police $ 105,000 $ - $ $ $ (105,000)
Capital contributions -Fire 600,000 - (600,000)
Investment earnings 12,034 - (12,034)
Total revenues
EXPENDITURES
Public Safety:
Waterstone Police
Total expenditures
Revenues over expenditures
OTHER FINANCING SOURCES
(USES)
Transfer to other funds
Residual from closed projects
Other financing sources
(uses), net
717,034 - (717,034)
108,010 - 108,010
108,010 - 108,010
609,024 - (609,024)
(609,024) - 609,024
115,128 115,128 115,128
(609,024) 115,128
Net change in fund balance $
Fund balance, beginning
Fund balance, ending
115,128 724,152
$ 115,128 $ 115,128 $ 115,128
115,128
$ 115,128
75
Schedule 7
Town of Hillsborough, North Carolina
Schedule of Revenues, Expenditures, and Changes in Fund Balance
Budget and Actual - Riverwalk CMAQ Capital Project
From inception and for the year ended June 3O, 2021
Actual Variance
Project Prior Current Closed Out Total Positive
Authorization Years Year Projects To Date (Negative)
REVENUES
Restricted intergovernmental
revenues:
Federal grants
$ 1,006,850 $ 931,572 $ - $ (931,572) $ - $(1,006,850)
Total revenues 1,006,850 931,572
EXPENDITURES
Economic and physical development:
Design 131,778 131,778
Construction 1,021,240 944,692
Administration 105,545 101,412
Total expenditures 1,258,563 1,177,882
- (931,572) - (1,006,850)
(131,778)
(944,692)
(101,412)
131,778
1,021,240
105,545
(1,177,882) 1,258,563
Revenues under expenditures (251,713) (246,310)
OTHER FINANCING SOURCES (USES)
Transfer to General Fund
Transfer from General Fund
Other financing sources
(uses), net
246,310 251,713
251,713 251,713
(5,403) 5,403
- (251,713) (251,713)
251,713 251,713 (5,403) (246,310) (251,713)
Net change in fund balance balance $
Fund balance, beginning
Fund balance, ending
$ 5,403 (5,403) $ - $ $
5,403
76
Schedule 8
Town of Hillsborough, North Carolina
Schedule of Revenues, Expenditures, and Changes in Fund Balance
Budget and Actual - Rail Station Capital Project
From inception and for the year ended June 3O, 2021
Actual Variance
Project Prior Current Total Positive
Authorization Years Year To Date (Negative)
REVENUES
Restricted intergovernmental
revenues:
State grants
Transit taxes (Article 43)
Total revenues
$ 870,000 $
116,000
$ - $ $ (870,000)
(116,000)
986,000 - - (986,000)
EXPENDITURES
Economic and Physical Development:
Design 891,000 13,865 - 13,865 877,135
Legal 27,500 25,845 - 25,845 1,655
Miscellaneous 126,500 - - 126,500
Total expenditures
Revenues under expenditures
OTHER FINANCING SOURCES
Transfer from other funds
General Fund
Transfer to other funds:
General Capital Projects Fund
Other financing sources
(uses), net
Net change in fund balance
Fund balance, beginning
Fund balance, ending
1,045,000 39,710 - 39,710 1,005,290
(59,000) (39,710) - (39,710) 19,290
59,000 59,000 - 59,000
- - (19,290) (19,290) (19,290)
59,000 59,000 (19,290) 39,710 (19,290)
$ 19,290 (19,290) $ $
19,290
77
Schedule 9
Town of Hillsborough, North Carolina
Schedule of Revenues, Expenditures, and Changes in Fund Balance
Budget and Actual - Public Works Building Capital Project
From inception and for the year ended June 3O, 2021
Actual Variance
Project Prior Current Total Positive
Authorization Years Year To Date (Negative)
EXPENDITURES
Environmental protection:
Design $ 75,000 $ 25,982 $ - $ 25,982 $ 49,018
Construction 79,182 - - 79,182
Total expenditures 154,182 25,982 - 25,982 128,200
Revenues under expenditures (154,182) (25,982) - (25,982) 128,200
OTHER FINANCING SOURCES
Transfer from General Fund 154,182 154,182 - 154,182
Net change in fund balance $ - $ 128,200 - $ 128,200 $ 128,200
Fund balance, beginning 128,200
Fund balance, ending $ 128,200
78
Schedule 10
Town of Hillsborough, North Carolina
Schedule of Revenues, Expenditures, and Changes in Fund Balance
Budget and Actual - Public Safety Building Capital Project
From inception and for the year ended June 3O, 2021
Actual Variance
Project Prior Current Closed Out Total Positive
Authorization Years Year Projects To Date (Negative)
EXPENDITURES
Public safety:
Construction $ 222,855 $ 180,991 $ 5,656 $ (186,647) $ - $ 222,855
Miscellaneous 84,145 12,049 51,691 (62,386) 1,354 82,791
Contingency 5,000 - - - - 5,000
Total expenditures
Revenues under expenditures
OTHER FINANCING SOURCES
Transfer from General Fund -
Restricted Revenue
Transfer from General Fund
312,000 193,040
57,347 (249,033)
1,354 310,646
(312,000) (193,040) (57,347) 249,033 (1,354) 310,646
135,440 135,440
176,560 176,560
(135,440)
(113,593)
62,967
(135,440)
(113,593)
Total other financing sources 312,000 312,000 - (249,033) 62,967 (249,033)
Net change in fund balance $ - $ 118,960 (57,347) $ $ 61,613 $ 61,613
Fund balance, beginning 118,960
Fund balance, ending $ 61,613
79
Town of Hillsborough, North Carolina
Schedule of Revenues, Expenditures, and Other Financing Sources
Budget and Actual (Non-GAAP) - Water and Sewer Fund
Year Ended June 30, 2021 (with Comparative Actual Amounts for 2020)
Schedule 11
(3 pages)
2021 2020
Variance
Favorable
Budget Actual (Unfavorable)
Actual
REVENUES
Operating revenues:
Water charges $ 4,634,394 $ 4,942,081 $ 307,687 $ 4,980,554
Sewer charges 4,639,608 4,901,924 262,316 4,974,432
System development fees 1,000,000 590,332 (409,668) 456,628
Other receipts 195,439 396,474 201,035 310,880
Total operating revenues
Non -operating revenues:
Investment earnings
Total revenues
EXPENDITURES
Engineering:
Personnel services
Other services and charges
Total engineering
Billing and collection:
Personnel services
Other services and charges
Debt service payments
Total billing and collection
10, 469, 441 10, 830, 811
361,370 10, 722,494
361 375 14 35,144
10,469, 802 10, 831,186
445,091
2,280,947
410,691
1,883,541
2,726,038 2,294,232
330,719
434,686
39,125
312,566
348,294
39,125
804,530 699,985
361,384 10, 757,638
34,400
397,406
363,968
1,547,134
431,806 1,911,102
18,153
86,392
305,356
282,098
39,125
104,545 626,579
Water plant:
Personnel services 631,220 592,720 38,500 636,084
Other services and charges 346,079 280,674 65,405 366,440
Repairs and maintenance 267,307 144,167 123,140 58,209
Capital outlay - - - 41,413
Debt service payments 91,315 91,314 1 104,378
Total water plant
Water distribution:
Personnel services
Other services and charges
Repairs and maintenance
Capital outlay
Debt service payments
Total water distribution
1,335,921 1,108, 875
541,523
258,046
65,197
55,941
105,973
504,850
207,782
46,024
13,561
98,624
1,026,680 870,841
227,046 1,206,524
36,673
50,264
19,173
42,380
7,349
495,595
223,125
32,617
11,647
115,604
155,839 878,588
80
Town of Hillsborough, North Carolina
Schedule of Revenues, Expenditures, and Other Financing Sources
Budget and Actual (Non-GAAP) - Water and Sewer Fund
Year Ended June 30, 2021 (with Comparative Actual Amounts for 2020)
Schedule 11
(3 pages)
2021 2020
Variance
Favorable
Budget Actual (Unfavorable)
Actual
EXPENDITURES (Continued)
Wastewater collection:
Personnel services $ 503,973 $ 490,130 $ 13,843 $ 485,206
Other services and charges 371,037 255,024 116,013 280,395
Repairs and maintenance 232,219 75,875 156,344 147,293
Capital outlay 243,680 - 243,680 198,983
Debt service payments 15,083 15,082 1 71,966
Total wastewater collection
Wastewater plant:
Personnel services
Other services and charges
Repairs and maintenance
Capital outlay
Debt service payments
Total wastewater plant
1,365,992 836,111
529,881 1,183, 843
518,066 502,927 15,139 494,701
400,227 314,200 86,027 245,657
238,741 178,517 60,224 159,923
- - - 86,200
1,196, 566 1,196, 565 1 1,218,427
2,353,600 2,192,209
161,391 2,204, 908
Reservoir:
Other services and charges 29,935 22,027 7,908 21,412
Repairs and maintenance 16,850 9,904 6,946 6,440
Debt service payments 840,550 840,441 109 449,908
Total reservoir
Total expenditures
Revenues over (under) expenditures
887,335 872,372
10, 500, 096 8,874,625
(30,294) 1,956,561
14,963 477,760
1,625,471 8,489,304
1,986,855 2,268,334
OTHER FINANCING SOURCES
(USES)
Transfer to Utilities Capital
Improvements Fund (1,074,404) (150,000) 924,404 (119,695)
Transfer to Water System
Development Reserve Fund (500,000) (333,054) 166,946 (263,129)
Transfer to Sewer System
Development Reserve Fund (500,000) (257,278) 242,722 (193,499)
Transfer from Water and
Sewer Capital Projects Fund - - - 349,643
Transfer from Water Capital
Reserve Fund 899,404 175,000 (724,404) 97,492
Transfer from Sewer Capital
Reserve Fund 200,000 - (200,000) -
Transfer from North Campus Project - - - 10,822
Transfer from Utilities Capital
Improvements Fund - 2,388 2,388 -
81
Town of Hillsborough, North Carolina
Schedule of Revenues, Expenditures, and Other Financing Sources
Budget and Actual (Non-GAAP) - Water and Sewer Fund
Year Ended June 30, 2021 (with Comparative Actual Amounts for 2020)
Schedule 11
(3 pages)
OTHER FINANCING SOURCES
(USES) (Continued)
Transfer from Water and Sewer
Capital Reserve Fund
Insurance proceeds
Contingency
Other financing sources (uses), net
Revenues and other financing sources
(uses) over (under) expenditures
2021 2020
Variance
Favorable
Budget Actual (Unfavorable)
Actual
$ - $ 3,761 $ 3,761 $
49,360 49,360 -
(688) - 688
(926,328) (509,823)
(956,622) 1,446,738
APPROPRIATED FUND BALANCE 956,622
Revenues and other financing sources
416,505 (118,366)
2,403,360 2,149, 968
(956,622) -
(uses) over (under) expenditures $ - $ 1,446,738 $ 1,446,738 $ 2,149,968
Reconciliation from budgetary basis (modified accrual)
to the full accrual basis of accounting:
Revenues and other financing sources
(uses) over(under) expenditures $ 1,446,738 $ 2,149,968
Reconciling items:
Revenue activity:
Investment earnings - enterprise capital projects 524 46,437
Investment earnings - enterprise capital reserves 1,331 37,481
Personnel activity:
Pension expense - LGERS (176,030) (156,873)
OPEB expense (16,610) 26,754
Payroll accrual - compensated absences (68,010) (4,838)
Capital outlay activity:
Capital outlay 13,561 338,241
Depreciation (1,685, 728) (1,695, 988)
Loss on disposal of capital assets - (83,384)
Contributed capital 289,872 539,500
Noncapitalized expenditures - enterprise capital projec (325) -
Long-term debt activity:
Payment of principal on notes, bonds and installment I 1,424,933 1,189,949
Interest expense accrual adjustment 7,226 (15,314)
Amortization of premium on bonds payable 49,455 56,690
Internal transfer activity:
Transfer to General Fund - (208,674)
Transfer to Water and Sewer Capital Projects 740,332 576,323
Transfer from Water and Sewer Capital Projects (181,149) (447,135)
Change in net position
$ 1,846,120 $ 2,349,137
82
Schedule 12
Town of Hillsborough, North Carolina
Schedule of Revenues, Expenditures, and Changes in Fund Balance
Budget and Actual (Non-GAAP) - Utilities Capital Improvements Fund
From inception and for the year ended June 30, 2021
Actual Variance
Project Prior Current Total Positive
Authorization Years Year to Date (Negative)
REVENUES
Investment earnings
EXPENDITURES
Capital outlay:
EDD water line extension
Churton Street main replacement
Orange Gr/Churton sewer proj
16" Water connection under 1-40
Booster pump station
Churton Street sewer replacement
River pump station
Wastewater system rehab
Total expenditures
509,404 27,438
430,000 -
40,000 26,595
565,000 47,150
182,388 31,576
500,000 278,494
233,800 6,760
235,895 25,385
2,696,487 443,398
112,391
1,518
5,001
25,350
27,438 481,966
430,000
26,595 13,405
159,541 405,459
33,094 149,294
283,495 216,505
32,110 201,690
25,385 210,510
144,260 587,658 2,108,829
Revenues under expenditures (2,696,487) (443,398) (144,260) (587,658) 2,108,829
OTHER FINANCING SOURCES
Transfer from other funds:
Water and Sewer Operating Fund 2,696,487 1,622,083 1,072,016 2,694,099 (2,388)
Revenues and other financing
sources over expenditures $ - $ 1,178,685 $ 927,756 $ 2,106,441 $ 2,106,441
83
Schedule 13
Town of Hillsborough, North Carolina
Schedule of Revenues, Expenditures, and Changes in Fund Balance
Budget and Actual (Non-GAAP) - West Fork ENO Reservoir Project Fund
From inception and for the year ended June 30, 2021
Actual
Project Prior Current Closed Out Total
Authorization Years Year Projects to Date
REVENUES
Investment earnings
$ 213,793 $ 213,205 $ - $ - $ 213,205
EXPENDITURES
West Fork Eno Reservoir:
Design 1,811,063 1,671,352 - (1,671,352) -
Construction 9,580,936 8,984,588 325 (8,984,913) -
Land acquisition 42,304 42,304 - (42,304) -
Total expenditures 11,434,303 10,698,244 325 (10,698,569) -
Revenues over (under) expenditures (11,220,510) (10,485,039) (325) 10,698,569 213,205
OTHER FINANCING SOURCES
(USES)
Issuance of revenue bonds
Premium on revenue bonds issued
Transfer from other funds
Transfer to other funds
10,155, 000 10,155, 000
1,025,846 1,025,846
2,248,117 2,248,117
(2,208,453) (2,208,453)
Other financing sources
(uses), net 11,220,510 11,220,510
Revenues and other financing
- (10,155,000) -
- (1,025,846) -
- (1,726,176) 521,941
- 2,208,453 -
- (10,698,569) 521,941
sources over (under) expenditures $ - $ 735,471 $ (325) $ - $ 735,146
84
Schedule 14
Town of Hillsborough, North Carolina
Schedule of Revenues, Expenditures, and Changes in Fund Balance
Budget and Actual (Non-GAAP) - Mill Creek Road Project Fund
From inception and for the year ended June 30, 2021
Actual Variance
Project Prior Current Total Positive
Authorization Years Year To Date (Negative)
REVENUES
Investment earnings
$ 6,796 $ 6,120 $ 524 $ 6,644 $ (152)
EXPENDITURES
Design 150,000 120,690 120,690 29,310
Land Aquisition 5,500 5,202 5,202 298
Construction Administration 310,000 49,292 216,940 266,232 43,768
Construction 2,440,791 - 1,663,369 1,663,369 777,422
Miscellaneous 371,505 106,425 5,000 111,425 260,080
Total expenditures 3,277,796
Revenues under expenditures (3,271,000)
OTHER FINANCING SOURCES
Issuance of installment purchase
agreement
3,271,000
Total other financing sources 3,271,000
281,609 1,885,309
(275,489) (1,884,785)
2,166, 918 1,110, 878
(2,160,274) 1,110,726
3,271,000 3,271,000
3,271,000 3,271,000
Revenues and other other financing
sources over (under) expenditures $ - $ 2,995,511 $ (1,884,785) $ 1,110,726 $ 1,110,726
85
Schedule 15
Town of Hillsborough, North Carolina
Schedule of Revenues, Expenditures, and Changes in Fund Balance
Budget and Actual (Non-GAAP) - Water and Sewer Capital Reserve Fund
From inception and for the year ended June 3O, 2021
Actual Variance
Project Prior Current Total Positive
Authorization Years Year To Date (Negative)
REVENUES
Capital contributions
Investment earnings
$ 1,066,190 $ 1,066,190 $
300,868 388,140
- $ 1,066,190 $ -
1,331 389,471
88,603
Total revenues 1,367,058
1,454,330 1,331
1,455,661 88,603
EXPENDITURES
Capital improvements -water 794,415 - - 794,415
Capital improvements - sewer 1,949,845 - - 1,949,845
Capital improvements - water tower - - - -
Total expenditures
Revenues over (under) expenditures
2,744,260 - - 2,744,260
(1,377,202) 1,454,330 1,331 1,455,661 2,832,863
OTHER FINANCING SOURCES (USES)
Transfers from other funds:
Water operating fund 12,261,329 12,261,329 12,261,329
Sewer operating fund 403,031 403,031 403,031
Transfers to other funds:
Water and sewer operating fund (7,866,980) (7,863,219) (3,761) (7,866,980)
Water and sewer capital project funds (1,299,553) (1,299,553) - (1,299,553)
Water System Development Fund (1,106,017) (1,106,017) - (1,106,017)
Sewer System Development Fund (1,014,608) (1,014,608) - (1,014,608)
Other financing sources (uses), net
1,377,202 1,380,963 (3,761) 1,377,202 -
Revenues and other financing sources
over expenditures and other
financing uses $ - $ 2,835,293 $ (2,430) $ 2,832,863 $ 2,832,863
86
Schedule i6
Town of Hillsborough, North Carolina
Schedule of Revenues, Expenditures, and Changes in Fund Balance
Budget and Actual (Non-GAAP) - Water System Development Reserve Fund
From inception and for the year ended June 3O, 2021
Actual Variance
Project Prior Current Total Positive
Authorization Years Year To Date (Negative)
REVENUES
Capital contributions $ - $ - $ $ - $ -
Investment earnings - - - -
Total revenues
EXPENDITURES
Capital improvements - water
Total expenditures - -
Revenues over expenditures - - - -
OTHER FINANCING SOURCES (USES)
Transfers from other funds:
Water and sewer capital reserve 1,069,404 1,106,017 1,106,017 36,613
Water and sewer operating fund 604,998 263,129 333,054 596,183 (8,815)
Transfers to other funds:
Utility Capital Project - EDD water line (259,404) - (259,404) (259,404) -
Utility Capital Project - 16" water connect. (465,000) - (465,000) (465,000) -
Utility Capital Project - U.S. 70 Design (345,000) - - 345,000
Utility Capital Project - U.S. 70 Phase 1 (429,998) - - 429,998
Water and sewer operating fund - debt sere (175,000) - (175,000) (175,000) -
Other financing sources (uses), net
1,369,146 (566,350) 802,796
802,796
Revenues and other financing sources
over expenditures and other
financing uses $ - $ 1,369,146 $ (566,350) $ 802,796 $ 802,796
87
Schedule 17
Town of Hillsborough, North Carolina
Schedule of Revenues, Expenditures, and Changes in Fund Balance
Budget and Actual - Sewer System Development Reserve Fund
From inception and for the year ended June go, 2021
Actual Variance
Project Prior Current Total Positive
Authorization Years Year To Date (Negative)
REVENUES
Investment earnings $ $ - $
EXPENDITURES
Capital outlay:
Future capital improvements
Revenues over expenditures
OTHER FINANCING SOURCES (USES)
Transfers from other funds:
Water and Sewer Capital Project fund 1,249,170 1,008,107 257,278 1,265,385 16,215
Water and Sewer Capital Project fund 200,000 200,000 - 200,000 -
Transfers to other funds:
River Pump upgrade project (200,000) - (200,000) (200,000) -
Collection sysytem rehab project (1,249,170) - - 1,249,170
Other financing sources (uses), net
1,208,107 57,278 1,265,385 1,265,385
Revenues and other financing sources
over expenditures and other
financing uses $ - $ 1,208,107 $ 57,278 $ 1,265,385 $ 1,265,385
88
Schedule i8
Town of Hillsborough, North Carolina
Schedule of Revenues, Expenditures, and Other Financing Uses
Budget and Actual (Non-GAAP) - Stormwater Fund
Year Ended June 30, 2021 (with Comparative Actual Amounts for 2020)
2021 2020
Variance
Favorable
Budget Actual (Unfavorable) Actual
REVENUES
Operating revenues:
Stormwater charges $ 701,847 $ 702,276 $ 429 $ 666,355
Other operating revenues 250 250 - 4,522
Total revenues 702,097 702,526 429 670,877
EXPENDITURES
Operating expenditures:
Personnel services
Other services and charges
Repairs and maintenance
Capital outlay
272,142 267,202 4,940 265,927
275,393 177,178 98,215 167,175
85,991 60,499 25,492 24,593
- - 33,813
Total expenditures 633,526 504,879 128,647 491,508
Revenues over expenditures 68,571 197,647 129,076 179,369
OTHER FINANCING USES
Transfers to other funds (100,000) (100,000)
APPROPRIATED FUND BALANCE 31,429 - (31,429)
97,647 $ 97,647
179,369
Reconciliation from budgetary basis (modified accrual)
to the full accrual basis of accounting:
Capital outlay - 33,813
Depreciation expense (56,490) (56,645)
Payroll accrual - compensated absences (3,538) (75)
Pension expense - LGERS (19,018) (15,614)
OPEB expense 1,464 2,657
Stormwater capital projects fund:
Transfer from Stormwater operating fund 100,000
Change in net position
$ 120,065 $ 143,505
89
Schedule 19
Town of Hillsborough, North Carolina
Schedule of Revenues, Expenditures, and Changes in Fund Balance
Budget and Actual (Non-GAAP) - Stormwater Capital Improvements Fund
From inception and for the year ended June 3O, 2021
Actual Variance
Project Prior Current Total Positive
Authorization Years Year To Date (Negative)
REVENUES
Investment earnings $ - $ - $ $ $
EXPENDITURES
Capital outlay:
Valley Forge Rd. infrastructurE 100,000 - 100,000
Revenues over expenditures
OTHER FINANCING SOURCES
Transfer from other funds:
Stormwater operating fund
(100,000) - 100,000
100,000
100,000 100,000
Net change in fund balance $ - $ - 100,000 $ 100,000 $ 100,000
Fund balance, beginning of year
Fund balance, end of year $ 100,000
90
Additional Financial Data
This section contains additional information on property taxes.
• Schedule of Ad Valorem Taxes Receivable
• Analysis of Current Tax Levy
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Schedule 20
Town of Hillsborough, North Carolina
Schedule of Ad Valorem Taxes Receivable
Year ended June 3O, 2021
Fiscal Year
2020-2021
2019-2020
2018-2019
2017-2018
2016-2017
2015-2016
2014-2015
2013-2014
2012-2013
2011-2012
2010-2011
Beginning
Balance
Additions
Collections Ending
and Credits Balance
$ 7,956,993 $ 7,883,890 $ 73,103
61,315 - 32,383 28,932
35,118 - 11,611 23,507
29,445 - 14,999 14,446
14,896 - 5,155 9,741
9,484 - 3,684 5,800
7,899 - 2,021 5,878
11,020 - 2,515 8,505
12,082 - 2,048 10,034
7,689 - 3,109 4,580
8,405 - 8,405 -
$ 197,353 $ 7,956,993 $ 7,969,820
184,526
Less: alowance for uncollectible accounts (43,000)
Ad valorem taxes receivable, net
$ 141,526
RECONCILIATION OF COLLECTIONS AND CREDITS TO
RECORDED REVENUE
Ad valorem taxes - General Fund $ 7,957,352
Penalties and interest (22,967)
Statutory write-off after 10 years 8,405
Other adjustments 27,030
$ 7,969,820
91
Town of Hillsborough, North Carolina
Analysis of Current Tax Levy
Year Ended June 3O, 2021
Schedule 21
ORIGINAL LEVY
Property taxed at current
year's rate
Motor vehicle license fees,
tax and tag together
Town -Wide
(1)
Property
Valuation
Rate
Total Levy
Property
Excluding
(2) Registered Registered
Total Motor Motor
Levy Vehicles Vehicles
$ 1,155, 210,161 0.62 $ 7,162, 303 $ 7,162, 303 $
91, 741, 294
Total property valuation $ 1,246,951,455
794,690 - 794,690
Net levy 7,956,993
Uncollected taxes at year-end
7,162, 303 794,690
73,103 73,103
Current year's taxes collected $ 7,883,890 $ 7,089,200 $ 794,690
Collection percentage 99.08% 98.98% 100.00%
Notes to Schedule:
(1) - Total adjusted levy includes discoveries and abatements.
(2) - Property tax valuation prior to the discoveries and abatements.
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Compliance Section
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`1/4 Cherry BekaertLLP
Your Guide Forward
Report of Independent Auditor on Internal Control over Financial Reporting
and Compliance and Other Matters Based on an Audit of Financial Statements
Performed in Accordance with Government Auditing Standards
To the Honorable Mayor and Town Council
Town of Hillsborough
Hillsborough, North Carolina
We have audited, in accordance with the 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,
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 (the "Town"), as of and for the
year ended June 30, 2021, 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 12, 2023. The financial
statements of the Hillsborough Tourism Board and the Hillsborough Tourism and Development Authority were
not audited in accordance with Government Auditing Standards.
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") as a basis for designing audit procedures that are appropriate in the
circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of
expressing an opinion on the effectiveness of the 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 a 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 was for the limited purpose described in the first paragraph of this section
and was not designed to identify all deficiencies in internal control 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 material weaknesses. However, material weaknesses may exist that have not been
identified.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the Town'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 financial statements.
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.
cbh.com
93
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 result of that testing, and not to provide an opinion on the effectiveness of the Town'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 Town's internal control and compliance. Accordingly, this communication is not
suitable for any other purpose.
CzvAA, ..27,..,,,t-.L6f)
Raleigh, North Carolina
January 12, 2023
94