TOWN OF FORT MILL, SOUTH CAROLINA TABLE OF CONTENTS YEAR ENDED SEPTEMBER 30, 2007 INTRODUCTORY SECTION Page Table of Contents i Principal Officials iii FINANCIAL SECTION Independent Auditors' Report 1 Management's Discussion and Analysis 3 Basic Financial Statements Government-Wide Financial Statements Statement of Net Assets 12 Statement of Activities 13 Fund Financial Statements Balance Sheet - Governmental Funds 14 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Assets 15 Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds 16 Reconciliation of the Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balance to the Statement of Activities 17 Statement of Net Assets - Proprietary Fund 18 Statement of Revenues, Expenses, and Changes in Net Assets - Proprietary Fund 19 Statement of Cash Flows - Proprietary Fund 20 Notes to the Basic Financial Statements 21 Required Supplementary Information Budgetary Comparison Schedule - General Fund Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budgets and Actual 42 Other Supplementary Information Other Budgetary Schedule - General Fund Schedule of Detailed Revenues, Expenditures, and Changes in Fund Balance - 44 Final Budget and Actual Combining and Individual Fund Schedules Combining Balance Sheet - Non-Major Funds 48 Combining Schedule of Revenues, Expenditures, and Changes in Fund Balance - Non-Major Funds 49 (Continued) TOWN OF FORT MILL, SOUTH CAROLINA TABLE OF CONTENTS YEAR ENDED SEPTEMBER 30, 2007 FINANCIAL SECTION (CONTINUED) Other Supplementary Information (Continued) Other Supplemental Schedules Schedule of Detailed Revenues, Expenses, and Changes in Fund Net Assets - Final Budget and Actuals - Proprietary Fund 50 Schedule of Municipal Court Fines, Assessments, and Surcharges 53 COMPLIANCE SECTION Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Basic Financial Statements Performed in Accordance with Government Auditing Standards 55 Schedule of Findings and Responses 57 TOWN OF FORT MILL, SOUTH CAROLINA LISTING OF PRINCIPAL OFFICIALS YEAR ENDED SEPTEMBER 30, 2007 Established 1873 MAYOR Charles E. Powers TOWN COUNCIL MEMBERS Mayor Pro-Tem – Danny Funderburk Grady Ervin Waddell Gibson Guynn Savage Ken Starnes Larry Huntley TOWN MANAGER David E. Hudspeth FINANCE DIRECTOR Chantay F. Bouler Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Town’s basic financial statements. The introductory section and other supplementary information, as listed in the table of contents, are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual fund schedules and the schedule of municipal court fines, assessments, and surcharges have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. The introductory section, other budgetary schedule – general fund, and the schedule of detailed revenues, expenses, and changes in fund net assets – final budget and actual – proprietary fund have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we express no opinion on them. Greene, Finney & Horton, LLP February 19, 2008 TOWN OF FORT MILL, SOUTH CAROLINA MANAGEMENT’S DISCUSSION AND ANALYSIS YEAR ENDED SEPTEMBER 30, 2007 As management of the Town of Fort Mill (“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 September 30, 2007. The intent of this discussion and analysis is to look at the Town’s financial performance as a whole. We would encourage readers to not only consider the information presented here but also the information provided in the basic financial statements, the notes to the basic financial statements, and the supplementary information to enhance their understanding of the Town’s overall financial performance. FINANCIAL HIGHLIGHTS • The assets of the Town exceeded its liabilities at the close of the fiscal year by approximately $20,618,000 (net assets). Of this amount, approximately $2,799,000 (unrestricted net assets) may be used to meet the government’s ongoing obligations to citizens and creditors. • The government’s total net assets increased by approximately $2,060,000 (an increase of approximately $842,000 from governmental activities and an increases of approximately $1,218,000 from business-type activities), as total revenues of approximately $12,740,000 exceeded total expenses of approximately $10,680,000. • As of the close of the current fiscal year, the Town’s governmental funds reported combined ending fund balances of approximately $1,975,000, an increase of approximately $499,000 from the prior year. Of this total amount, 83%, or approximately $1,639,000, is available for spending at the government’s discretion (unreserved undesignated fund balance). • At the end of the current fiscal year, unreserved undesignated fund balance for the General Fund was approximately $1,530,000, or 26% of total General Fund expenditures for the year ended September 30, 2007. • The Town’s total capital assets increased by approximately $1,011,000 (4%) during the current fiscal year, due to capital additions of approximately $2,161,000, partially offset by depreciation expense and net disposals of approximately $1,150,000. • The Town’s long-term obligations decreased by approximately $28,000 (less than 1%) during the current fiscal year, due to approximately $677,000 in principal payments, partially offset by a new capital lease of approximately $635,000 and an increase in compensated absences of approximately $14,000. • During the prior year, the Town approved a new hospitality tax that became effective October 1, 2006. During 2007, the Town collected approximately $103,000 in hospitality tax revenue. These funds are restricted for tourism related costs. OVERVIEW OF THE FINANCIAL STATEMENTS This annual report consists of three parts – Introductory Section, Financial Section (which includes management’s discussion and analysis, the basic financial statements, required supplementary information, and other supplementary information), and the Compliance Section. Basic Financial Statements This discussion and analysis is intended to serve as an introduction to the Town’s basic financial statements. The Town’s basic financial statements comprise three components; 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. The basic financial statements present two different views of the Town through the use of government-wide and fund basic financial statements. In addition to the basic financial statements, this report contains supplementary information that will enhance the reader’s understanding of the financial condition of the Town. Government-Wide Basic Financial Statements The basic financial statements include two kinds of statements that present different views of the Town. The governmentwide basic financial statements are designed to provide readers with a broad overview of the Town’s finances in a manner similar to a private-sector business. The statement of net assets presents information on all of the Town’s assets and liabilities, with the differences between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the Town is improving or deteriorating. TOWN OF FORT MILL, SOUTH CAROLINA MANAGEMENT’S DISCUSSION AND ANALYSIS YEAR ENDED SEPTEMBER 30, 2007 OVERVIEW OF THE FINANCIAL STATEMENTS (CONTINUED) Government-Wide Basic Financial Statements (Continued) The statement of activities presents information showing how the government’s net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods. The government-wide basic financial statements are divided into two categories: 1) governmental activities; and 2) businesstype activities. The governmental activities include most of the Town’s basic services such as general government, judicial, public works, public safety, culture and recreation, and community development. Property taxes, business licenses and permits, and state and federal grant funds finance most of these activities. The business-type activities are water and sewer services that the Town charges customers to provide. The government-wide basic financial statements can be found as listed in the table of contents of this report. Fund Basic Financial Statements The fund basic financial statements 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, like all other governmental entities in South Carolina, uses fund accounting to ensure and reflect compliance with finance-related legal requirements, such as the General Statutes or the Town’s budget ordinance. All of the funds of the Town can be divided into two categories: governmental funds and proprietary funds. Governmental Funds – Governmental funds are used to account for those functions reported as governmental activities in the government-wide financial statements. Most of the Town’s basic services are accounted for in governmental funds. These funds focus on how assets can readily be converted into cash flow in and out, and what monies are left at year-end that will be available for spending in the next year. Governmental funds are reported using an accounting method called modified accrual accounting which provides a short-term spending focus. As a result, the governmental fund financial statements give the reader a detailed short-term view that helps him or her determine if there are more or less financial resources available to finance the Town’s programs. The relationship between government activities (reported in the Statement of Net Assets and the Statement of Activities) and governmental funds is described in a reconciliation that is a part of the fund basic financial statements. The Town maintains four individual governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenue, expenditures, and changes in fund balances for the General Fund and the Capital Projects Fund. Data from the other two governmental funds are combined into aggregated presentations. Individual fund data for each of these non-major governmental funds is provided in the form of combining schedules elsewhere in this report. The governmental fund basic financial statements can be found as listed in the table of contents of this report. Proprietary Funds – The Town maintains one type of proprietary funds. Enterprise Funds are used to report the same functions presented as business-type activities in the government-wide basic financial statements. The Town uses an enterprise fund to account for its Water and Sewer system operations. The proprietary fund basic financial statements can be found as listed in the table of contents of this report. Notes to the Basic Financial Statements – The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund basic financial statements. The notes to the basic financial statements can be found as listed in the table of contents of this report. Other Information – In addition to the basic financial statements and accompanying notes, this report also includes supplementary information. Regarding the Town’s major funds, the Town adopts an annual budget for its General Fund, Capital Projects Fund, and Gross Revenue Fund. A required budgetary comparison schedule has been provided for the General Fund as listed in the table of contents to demonstrate compliance with its budget. In addition, the Town has provided other budgetary and supplemental schedules for the remaining funds as listed in the table of contents of this report. TOWN OF FORT MILL, SOUTH CAROLINA MANAGEMENT’S DISCUSSION AND ANALYSIS YEAR ENDED SEPTEMBER 30, 2007 OVERVIEW OF THE FINANCIAL STATEMENTS (CONTINUED) Figure A-1 - Major Features of the Town’s Government-Wide and Fund Basic Financial Statements Fund Basic Financial Statements Government-Wide Basic Financial Statements Governmental Funds Proprietary Funds Scope Entire Town (except fiduciary funds) and the Component Unit. The activities of the Town that are not proprietary. Activities the Town operates similar to private businesses. Required financial statements .. Statement of net assets. .. Statement of activities. .. Balance sheet. .. Statement of revenues, expenditures, and changes in fund balances. .. Statement of net assets. .. Statement of revenues, expenses, and changes in net assets. .. Statement of cash flows. Accounting basis and measurement focus Accrual accounting and economic resources focus. Modified accrual accounting and current financial resources focus. Accrual accounting and economic resources focus. Type of asset/liability Information All assets and liabilities, both financial and capital, and short-term and longterm. Only assets expected to be used up and liabilities that come due during the year or soon, thereafter; no capital assets included. All assets and liabilities, both financial and capital, and short-term and long-term. Type of inflow/outflow Information All revenues and expenses during year, regardless of when cash is received or paid. Revenues for which cash is received during or soon after the end of the year; expenditures when goods or services have been received and payment is due during the year or soon thereafter. All revenues and expenses during the year, regardless of when cash is received or paid. GOVERNMENT-WIDE FINANCIAL ANALYSIS As noted earlier, net assets may serve over time as a useful indicator of a government’s financial position. The following table provides a summary of the Town’s net assets for 2007 compared to 2006: Town’s Net Assets 2007 2006 2007 2006 2007 2006 Current and Other Assets $ 2,460,283 1,852,825 3,951,227 3,291,089 6,411,510 $ 5,143,914 Capital Assets 6,801,959 6,046,050 20,949,108 20,693,860 27,751,067 26,739,910 Total Assets 9,262,242 7,898,875 24,900,335 23,984,949 34,162,577 31,883,824 Long-Term Liabilities 2,205,501 1,805,705 10,148,777 10,576,374 12,354,278 12,382,079 Other Liabilities 460,879 339,028 728,980 604,396 1,189,859 943,424 Total Liabilities 2,666,380 2,144,733 10,877,757 11,180,770 13,544,137 13,325,503 Net Assets: Invested in Capital Assets, Net of Related Debt 4,907,584 4,418,236 11,067,056 10,398,520 15,974,640 14,816,756 Restricted Assets 179,353 103,031 1,665,219 1,474,966 1,844,572 1,577,997 Unrestricted 1,508,925 1,232,875 1,290,303 930,693 2,799,228 2,163,568 Total Net Assets $ 6,595,862 5,754,142 14,022,578 12,804,179 20,618,440 $ 18,558,321 Governmental Activities Business-Type Activities Total TOWN OF FORT MILL, SOUTH CAROLINA MANAGEMENT’S DISCUSSION AND ANALYSIS YEAR ENDED SEPTEMBER 30, 2007 GOVERNMENT-WIDE FINANCIAL ANALYSIS (CONTINUED) The Town’s assets increased by approximately $2,279,000, or 7%, over the prior year. This increase was primarily due to an increase in cash and investments of approximately $1,061,000 (which was attributable to the strong operating performance of the Town’s water/sewer operations). In addition, the Town’s capital assets at September 30, 2007 increased by approximately $1,011,000 from the prior year, due to capital asset additions of approximately $2,161,000, partially offset by depreciation expense and net disposals of approximately $1,150,000. Total liabilities at September 30, 2007 increased by approximately $219,000 from the prior year; this is primarily due an increase in accounts payable related to several significant invoices submitted near year end. In addition, the Town had scheduled principal payments of approximately $677,000 for long-term obligations partially offset by a new capital lease of approximately $635,000 and an increase in compensated absences of approximately $14,000. The government’s net assets increased by approximately $2,060,000 during the current fiscal year, which is the result of current year revenues exceeding current year expenses. Please see discussion following the next table regarding this increase. As noted earlier, net assets may serve over time as a useful indicator of a government’s financial position. The Town’s assets exceeded liabilities by approximately $20,618,000 at the close of the most recent fiscal year. By far the largest portion of the Town’s net assets (approximately $15,975,000 or 77%) reflects its investment in capital assets (i.e., land, buildings, furniture and equipment, infrastructure, etc.) less any related outstanding debt used to acquire those assets. 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 related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. An additional portion of the Town’s net assets (approximately $1,844,000 or 9%) represents resources that are subject to external restrictions on how they may be used. These net assets are restricted primarily for victims services, tourism related costs, and future debt service payments. The remaining balance is unrestricted net assets of approximately $2,799,000 which may be used to meet the government’s ongoing obligations to citizens and creditors. At the end of the current fiscal year, the Town is able to report positive balances in all three categories of net assets, both for the government as a whole, as well as for its separate governmental and business-type activities. The same situation held true for the prior fiscal year. TOWN OF FORT MILL, SOUTH CAROLINA MANAGEMENT’S DISCUSSION AND ANALYSIS YEAR ENDED SEPTEMBER 30, 2007 GOVERNMENT-WIDE FINANCIAL ANALYSIS (CONTINUED) The following table shows the changes in net assets for fiscal year 2007 compared to 2006. Town’s Changes in Net Assets 2007 2006 2007 2006 2007 2006 Revenues: Program Revenues: Charges for Services $ 2,946,515 2,449,958 5,540,481 4,896,116 8,486,996 $ 7,346,074 Operating Grants and Contributions 340,378 482,554 - - 340,378 482,554 Capital Grants and Contributions 170,406 - 627,857 616,403 798,263 616,403 General Revenues: Property Taxes 2,546,195 2,222,507 - - 2,546,195 2,222,507 Hospitality Taxes 102,944 - - - 102,944 - Intergovernmental Revenue 245,745 235,518 - - 245,745 235,518 Other Revenue 132,407 309,798 86,721 62,278 219,128 372,076 Total Revenues 6,484,590 5,700,335 6,255,059 5,574,797 12,739,649 11,275,132 Expenses: General Government 941,685 630,475 - - 941,685 630,475 Judicial 46,868 42,790 - - 46,868 42,790 Public Works 1,204,612 2,260,273 - - 1,204,612 2,260,273 Public Safety 2,839,462 2,307,008 - - 2,839,462 2,307,008 Culture and Recreation 220,397 239,245 - - 220,397 239,245 Community Development 306,054 444,075 - - 306,054 444,075 Interest and Fiscal Charges 83,792 69,393 - - 83,792 69,393 Water/Sewer - - 5,036,660 4,282,529 5,036,660 4,282,529 Total Expenses 5,642,870 5,993,259 5,036,660 4,282,529 10,679,530 10,275,788 Change in Net Assets 841,720 (292,924) 1,218,399 1,292,268 2,060,119 999,344 Net Assets, Beginning of Year 5,754,142 6,047,066 12,804,179 11,511,911 18,558,321 17,558,977 Net Assets, End of Year $ 6,595,862 5,754,142 14,022,578 12,804,179 20,618,440 $ 18,558,321 Total Governmental Business-Type Activities Activities Governmental Activities: Revenues exceeded expenses by approximately $842,000 for 2007 for the governmental activities. Revenues increased by approximately $784,000 (14%) to approximately $6,485,000 from the prior year, due primarily to an increase in program revenue (primarily due to privilege licenses, permits, and operating grants), and hospitality tax revenues of approximately $103,000 (which were collected for the first time in 2007). Property taxes increased significantly as well (approximately $324,000 or 15%) from the prior year due to an increase in current real tax revenue. Expenses decreased by approximately $350,000 (6%) to approximately $5,643,000 from the prior year, due primarily to decreases in public works expenses related to a large volume of repairs and maintenance expense recorded in the prior fiscal year. General Government expenses increased approximately $311,000 (49%) due to new salaries/fringes and comprehensive plan. In addition, Public Safety expenses increased approximately $532,000 (23%) primarily due to significant increases in salary related expenses. Overall, governmental activities operations increased the Town’s net assets by approximately $842,000 in 2007. TOWN OF FORT MILL, SOUTH CAROLINA MANAGEMENT’S DISCUSSION AND ANALYSIS YEAR ENDED SEPTEMBER 30, 2007 GOVERNMENT-WIDE FINANCIAL ANALYSIS (CONTINUED) Business-Type Activities: Revenues exceeded expenses by approximately $1,218,000 for 2007 for the business-type activities. Revenues increased by approximately $680,000 (12%) to approximately $6,255,000 from the prior year due to new construction in the area. Expenses increased by approximately $754,000 (18%) to approximately $5,037,000, due primarily to increased cost in the purchase of wholesale water. Overall, business-type activities increased the Town’s net assets by approximately $1,218,000. FINANCIAL ANALYSIS OF THE TOWN’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 to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the Town’s financing requirements. In particular, unreserved fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year. As of the end of the current fiscal year, the Town’s governmental funds reported combined ending fund balance of approximately $1,975,000, an increase of approximately $499,000 from the prior year. Approximately 83% of this total amount (approximately $1,639,000) constitutes unreserved, undesignated fund balances, which is available for spending at the government’s discretion. The remainder of the fund balances is designated or reserved for either tourism related costs, capital lease purchases, victims services, or capital projects. The General Fund is the chief operating fund of the Town. At the end of the current fiscal year, the total fund balance was approximately $1,703,000. As a measure of the General Fund’s liquidity, it may be useful to compare total unreserved fund balance to total General Fund expenditures. Total unreserved, undesignated fund balance of the General Fund represents approximately 26% of total General Fund expenditures. The net increase in the fund balance of the General Fund was approximately $464,000 during the current year. Highlights for the General Fund were as follows: • General Fund revenues exceeded budgeted expectations by approximately $340,000 or 6% primarily due to fines, fees, licenses and permits exceeding budgeted revenue by approximately $324,000. Actual tax revenue was slightly lower than expected (approximately $79,000 or 3%), but higher than the prior year tax revenue by approximately $385,000. • General Fund expenditures exceeded budgeted expectations by approximately 8% or $425,000. Primarily due higher capital outlay associated with the new capital lease. • Other financing sources (uses) for 2007 consisted of the proceeds from the new capital lease of $635,000 (which was used for the purchase of Town equipment), proceeds received from the disposal of capital assets of approximately $21,000, and transfers to the Capital Projects Fund (to fund current and future construction projects) and the Community Development Fund of approximately $82,000 and $15,000, respectively. In addition, the fund balances of the remaining Special Revenue and Capital Project Funds increased by approximately $35,000. Highlights for all of the remaining Special Revenue and Capital Project Funds were as follows: • The Town incurred capital outlay expenditures in the Capital Projects Fund of approximately $351,000 primarily related to a new soccer field. TOWN OF FORT MILL, SOUTH CAROLINA MANAGEMENT’S DISCUSSION AND ANALYSIS YEAR ENDED SEPTEMBER 30, 2007 FINANCIAL ANALYSIS OF THE TOWN’S FUNDS (CONTINUED) Proprietary Funds: The Town’s proprietary fund provides the same type of information found in the government-wide basic financial statements but in more detail. Net assets of the Town’s Gross Revenue Fund (an enterprise fund) at the end of the fiscal year amounted to approximately $14,023,000. Factors concerning the operation of this fund have already been addressed in the discussion of the Town’s business-type activities. Budgetary Highlights The Town’s budget is prepared according to South Carolina law and is based on accounting for certain transactions on a basis of cash receipts, disbursements and encumbrances. The most significant budgeted funds are the General Fund, Capital Projects Fund, and the Gross Revenue Fund (enterprise fund). There were no significant budget amendments made during fiscal year 2007. CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets: The Town’s investment in capital assets for its governmental and business–type activities as of September 30, 2007, was approximately $6,802,000 and $20,949,000, respectively (net of accumulated depreciation). These capital assets include land, infrastructure, buildings and improvements, equipment, and vehicles. The capital assets (net of accumulated depreciation) as of September 30, 2007 and 2006, were as follows: Town’s Capital Assets (Net of depreciation) 2007 2006 2007 2006 2007 2006 Land $ 669,610 650,215 305,505 305,505 975,115 $ 955,720 Land Improvements 251,488 - - - 251,488 - Infrastructure 958,841 544,001 20,055,862 19,943,991 21,014,703 20,487,992 Buildings & Improvements 3,007,762 3,105,850 292,600 301,864 3,300,362 3,407,714 Equipment 638,662 689,667 265,479 121,250 904,141 810,917 Vehicles 1,275,596 1,056,317 29,662 21,250 1,305,258 1,077,567 Total $ 6,801,959 6,046,050 20,949,108 20,693,860 27,751,067 $ 26,739,910 Governmental Activities Business-Type Activities Total Major capital asset events during the current year include: • Construction of a ball field for approximately $257,000. • Purchase of a new equipment, and vehicles for approximately $668,000. • Purchased and donated infrastructure capital assets of approximately $608,000 and $628,000, respectively. • Disposal of capital assets of approximately $3,000. • Depreciation expense of approximately $1,147,000. Additional information on the Town’s capital assets can be found in Notes I and III of the Basic Financial Statements. TOWN OF FORT MILL, SOUTH CAROLINA MANAGEMENT’S DISCUSSION AND ANALYSIS YEAR ENDED SEPTEMBER 30, 2007 CAPITAL ASSETS AND DEBT ADMINISTRATION (CONTINUED) Long-Term Obligations: As of September 30, 2007, the Town had total bonded indebtedness outstanding of approximately $9,126,000, of which approximately $893,000 in general obligation debt is backed by the full faith and credit of the Town. The Town had approximately $2,999,000 in capital leases outstanding at year end. Additional information regarding the Town’s long-term debt can be found in Note III in the Notes to the Basic Financial Statements. Town’s Long-Term Obligations 2007 2006 2007 2006 2007 2006 General Obligation Bonds $ 893,434 1,024,868 - - 893,434 $ 1,024,868 Revenue Bonds/State Revolving Fund - - 8,232,845 8,566,036 8,232,845 8,566,036 Capital Leases 1,120,826 602,946 1,878,313 1,973,686 2,999,139 2,576,632 Compensated Absences 191,241 177,891 37,619 36,652 228,860 214,543 Total $ 2,205,501 1,805,705 10,148,777 10,576,374 12,354,278 $ 12,382,079 Governmental Activities Business-Type Activities Total The Town’s total debt decreased by approximately $465,000 during the past fiscal year as a result of scheduled principal payments of approximately $465,000. The Town’s capital leases increased approximately $423,000 due to a new capital lease for approximately $635,000, partially offset by principal payments of $212,000. The State of South Carolina limits 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 Town’s statutory debt limit at September 30, 2007 was approximately $2,141,000. The legal debt margin was approximately $1,248,000. ECONOMIC FACTORS The Southeast region of the United States has experienced tremendous growth and prosperity over the past decade, particularly the Charlotte Metropolitan Area. Located within this area, Fort Mill has also experienced significant growth within the period. The growth rate is expected to accelerate over the next decade, but may suffer some short term lag because of the nationwide housing down turn. Fort Mill has been home to the corporate headquarters one of the nation’s largest textile manufacturers for over a century. Recently, the town began attracting many other corporate headquarters and commercial offices. Fort Mill now enjoys a diverse employment base that has grown with our residential population. The Town’s climate, natural assets, and economic diversity have combined to reinforce its role within this region for both the state of South Carolina and the Southeastern region of the United States. The Town is recognized as one of the Southeast’s most progressive local governments and has amassed a notable record of success. It is characterized by active involvement in support of economic development, provision of high quality services, and a pro-business attitude. NEXT YEAR’S BUDGETS AND RATES FOR THE TOWN The adopted FY 2007-08 General Fund operating budget is $5,910,929. The General Fund budget is balanced without an increase in the Town’s millage rate or the rates associated with the Town’s franchise fees or business licenses. The budget does call for a nominal increase in solid waste fees to adequately fund the related services. REQUESTS FOR TOWN INFORMATION This report is designed to provide an overview of the Town’s finances for those with an interest in this area. Questions concerning any of the information found in this report or requests for additional information should be directed to the Finance Director, 112 Confederate Street, Fort Mill, South Carolina, 29715. BASIC FINANCIAL STATEMENTS TOWN OF FORT MILL, SOUTH CAROLINA STATEMENT OF NET ASSETS SEPTEMBER 30, 2007 PRIMARY GOVERNMENT Governmental Business-Type Activities Activities Totals ASSETS Cash and Cash Equivalents 1,268,518 $ 1,651,115 $ 2,919,633 Cash and Cash Equivalents, Restricted 267,751 620,311 888,062 Investments, Restricted - 1,177,947 1,177,947 Receivables, Net: Property Taxes 106,082 - 106,082 Accounts 59,264 710,272 769,536 Other 256,401 - 256,401 Internal Balances 437,524 (437,524) - Due From: State Government 64,743 - 64,743 Bond Issuance Costs, Net - 229,106 229,106 Capital Assets: Non-Depreciable 669,610 305,505 975,115 Depreciable, Net 6,132,349 20,643,603 26,775,952 TOTAL ASSETS 9,262,242 24,900,335 34,162,577 LIABILITIES Accounts Payable 287,653 419,469 707,122 Accrued Interest Payable 46,633 133,039 179,672 Accrued Salaries and Fringe Benefits 107,700 2 6,077 133,777 Other Liabilities 9,899 - 9,899 Unearned Revenues 8,994 150,395 159,389 Non-Current Liabilities: Due Within One Year 578,625 513,375 1,092,000 Due in More Than One Year 1,626,876 9,635,402 11,262,278 TOTAL LIABILITIES 2,666,380 10,877,757 13,544,137 NET ASSETS Invested in Capital Assets, Net of Related Debt 4,907,584 11,067,056 15,974,640 Restricted For: Debt Service - 1,665,219 1,665,219 Tourism Related 94,762 - 94,762 Victims Services 53,104 - 53,104 Narcotics 31,487 - 31,487 Unrestricted 1,508,925 1,290,303 2,799,228 TOTAL NET ASSETS $ 6,595,862 14,022,578 $ 20,618,440 TOWN OF FORT MILL, SOUTH CAROLINA STATEMENT OF ACTIVITIES YEAR ENDED SEPTEMBER 30, 2007 NET (EXPENSE) REVENUE AND PROGRAM REVENUES CHANGE IN NET ASSETS FUNCTIONS/PROGRAMS Operating Capital Primary Government Charges for Grants and Grants and Governmental Business-Type PRIMARY GOVERNMENT Expenses Services Contributions Contributions Activities Activities Total Governmental Activities: General Government 941,685 $ 2,219,528 - - 1,277,843 $ 1,277,843 Judicial 46,868 109,097 - - 62,229 62,229 Public Works 1,204,612 380,207 - - (824,405) (824,405) Public Safety 2,839,462 176,840 40,378 - (2,622,244) (2,622,244) Culture and Recreation 220,397 60,843 - 170,406 10,852 10,852 Community Development 306,054 - 300,000 - (6,054) (6,054) Interest and Fiscal Charges 83,792 - - - (83,792) (83,792) Total Governmental Activities 5,642,870 2,946,515 340,378 170,406 (2,185,571) (2,185,571) Business-Type Activities: Water/Sewer 5,036,660 5,540,481 - 627,857 1,131,678 1,131,678 Total Business-Type Activities 5,036,660 5,540,481 - 627,857 1,131,678 1,131,678 TOTAL - PRIMARY GOVERNMENT $ 10,679,530 8,486,996 340,378 798,263 (2,185,571) 1,131,678 (1,053,893) General Revenues: Taxes: Property Taxes Levied for General Purposes 2,546,195 - 2,546,195 Hospitality Taxes 102,944 - 102,944 Intergovernmental Revenue - Unrestricted 245,745 - 245,745 Investment Income 38,846 74,721 113,567 Miscellaneous 75,092 12,000 87,092 Gain on Sale of Capital Assets 18,469 - 18,469 Total General Revenues 3,027,291 86,721 3,114,012 CHANGE IN NET ASSETS 841,720 1,218,399 2,060,119 NET ASSETS, Beginning of Year 5,754,142 12,804,179 18,558,321 NET ASSETS, End of Year 6,595,862 14,022,578 $ 20,618,440 TOWN OF FORT MILL, SOUTH CAROLINA BALANCE SHEET - GOVERNMENTAL FUNDS SEPTEMBER 30, 2007 TOTAL CAPITAL NON-MAJOR GOVERNMENTAL GENERAL PROJECTS FUNDS FUNDS ASSETS Cash and Cash Equivalents 1,047,797 $ 104,163 116,558 $ 1,268,518 Cash and Cash Equivalents, Restricted 172,989 94,762 - 267,751 Receivables, Net: Property Taxes 106,082 - - 106,082 Accounts 59,264 - - 59,264 Other 223,101 30,987 2,313 256,401 Due From: Other Funds 517,080 82,000 - 599,080 State Government 64,743 - - 64,743 TOTAL ASSETS 2,191,056 311,912 118,871 2,621,839 LIABILITIES AND FUND BALANCES LIABILITIES Accounts Payable 130,772 148,820 8 ,061 287,653 Accrued Salaries and Fringe Benefits 107,700 - - 107,700 Accrued Expenses - - - - Due to Other Funds 161,556 - - 161,556 Deferred and Unearned Revenues 77,679 - 2 ,313 79,992 Other Liabilities 9,899 - - 9,899 TOTAL LIABILITIES 487,606 148,820 10,374 646,800 FUND BALANCES Reserved For: Tourism Related Costs - 94,762 - 94,762 Capital Lease Purchases 119,885 - - 119,885 Victims Services 53,104 - - 53,104 Unreserved: Designated for Capital Projects - 68,330 - 68,330 Undesignated, Reported In: General Fund 1,530,461 - - 1,530,461 Special Revenue Funds - - 108,497 108,497 TOTAL FUND BALANCES 1,703,450 163,092 108,497 1,975,039 TOTAL LIABILITIES AND FUND BALANCES $ 2,191,056 311,912 118,871 $ 2,621,839 TOWN OF FORT MILL, SOUTH CAROLINA RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS SEPTEMBER 30, 2007 TOTAL FUND BALANCES - GOVERNMENTAL FUNDS 1,975,039 $ Amounts reported for the governmental activities in the Statement of Net Assets are different because of the following: Property taxes in the Statement of Net Assets will be collected in the future, but are not available soon enough to pay for the current period's expenditures and therefore are deferred in the funds. 70,998 Capital assets used in governmental activities are not financial resources and therefore are not reported as assets in governmental funds. The cost of the assets was $9,319,977, and the accumulated depreciation was $2,518,018. 6,801,959 Accrued interest on bonds in governmental accounting was not due and payable in the current period and therefore has not been reported as a liability in the funds. (46,633) Long-term liabilities, including debt premiums, are not due or payable in the current period, and therefore are not reported as liabilities in the funds. Governmental fund long-term liabilities at year-end consisted of the following: Long-Term Debt (Including Capital Leases) (2,014,260) Compensated Absences (191,241) TOTAL NET ASSETS - GOVERNMENTAL ACTIVITIES $ 6,595,862 TOWN OF FORT MILL, SOUTH CAROLINA STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS YEAR ENDED SEPTEMBER 30, 2007 TOTAL CAPITAL NON-MAJOR GOVERNMENTAL GENERAL PROJECTS FUNDS FUNDS REVENUES Taxes 2,541,120 $ 1 02,944 - $ 2,644,064 Fines, Fees, Licenses and Permits 2,272,506 - - 2,272,506 Charges for Service 395,744 - - 395,744 Grants 23,815 1 10,406 300,000 434,221 Intergovernmental 306,587 - - 306,587 Miscellaneous 277,122 82,805 9,151 369,078 Investment Earnings 35,822 2 ,446 578 38,846 TOTAL REVENUES ALL SOURCES 5,852,716 2 98,601 309,729 6,461,046 EXPENDITURES Current: General Government 844,102 - - 844,102 Judicial 45,527 - - 45,527 Public Works 1,551,581 - - 1,551,581 Public Safety 2,631,249 - 13,361 2,644,610 Culture and Recreation 136,428 - - 136,428 Community Development - - 306,054 306,054 Capital Outlay 424,762 3 51,154 - 775,916 Debt Service: Principal Retirement 248,716 - - 248,716 Interest and Fiscal Charges 65,730 - - 65,730 TOTAL EXPENDITURES 5,948,095 351,154 319,415 6,618,664 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES (95,379) (52,553) (9,686) (157,618) OTHER FINANCING SOURCES (USES) Proceeds from the Disposal of Capital Assets 21,050 - - 21,050 Capital Lease 635,162 - - 635,162 Transfers In - 82,000 89,648 171,648 Transfers Out ( 97,000) - (74,648) (171,648) TOTAL OTHER FINANCING SOURCES (USES) 559,212 82,000 15,000 656,212 NET CHANGE IN FUND BALANCES 463,833 29,447 5,314 498,594 FUND BALANCES, Beginning of Year 1,239,617 133,645 103,183 1,476,445 FUND BALANCES, End of Year $ 1,703,450 163,092 108,497 $ 1,975,039 TOWN OF FORT MILL, SOUTH CAROLINA RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES YEAR ENDED SEPTEMBER 30, 2007 TOTAL NET CHANGE IN FUND BALANCES - GOVERNMENTAL FUNDS 498,594 $ Amounts reported for the governmental activities in the Statement of Activities are different because of the following: Revenues in the Statement of Activities that do not provide current financial resources are not reported as revenues in the funds. This amount represents the change in deferred revenues for the year. 5,075 Repayment of bond principal is an expenditure or other financing use in the governmental funds, but the repayment reduces long-term liabilities in the Statement of Net Assets. 248,716 Bond and capital lease proceeds provide current financial resources to governmental funds, but issuing debt or entering into capital leases increases long-term liabilities in the Statement of Net Assets. This is the proceeds received in the current year. (635,162) Interest on long-term debt in the Statement of Activities differs from the amount reported in the governmental funds because interest is recognized as an expenditure in the funds when it is due and payable and thus requires the use of current financial resources. In the Statement of Activities, however, interest expense is recognized as the interest accrues, regardless of when it is due and payable. The interest reported in the Statement of Activities is the change in the interest accrued. (18,062) Some expenses reported in the Statement of Activities do not require the use of current financial resources and are not reported as expenditures in the governmental funds. (13,350) Governmental funds report only proceeds received from the sale of capital assets, without any consideration for the net book value of the asset(s) that were sold. The Statement of Activities reports gains or losses based on the proceeds and the net book value of the asset(s) sold. (2,581) Governmental funds report capital outlays as expenditures. However, in the Statement of Activities, the cost of those assets that are considered capital asset additions is allocated over their estimated useful lives as depreciation expense. This is the amount by which capital asset additions exceeded depreciation expense in the current period. 758,490 TOTAL CHANGE IN NET ASSETS OF GOVERNMENTAL ACTIVITIES $ 841,720 TOWN OF FORT MILL, SOUTH CAROLINA STATEMENT OF NET ASSETS - PROPRIETARY FUND SEPTEMBER 30, 2007 GROSS REVENUE ASSETS Current Assets: Cash and Cash Equivalents 1,651,115 $ Cash and Cash Equivalents, Restricted 620,311 Investments, Restricted 1,177,947 Receivables, Net: Accounts 710,272 Due From: Other Funds 79,556 Total Current Assets 4,239,201 Non-Current Assets: Bond Issuance Costs, Net 229,106 Capital Assets: Non-Depreciable 305,505 Depreciable, Net 20,643,603 Total Non-Current Assets 21,178,214 TOTAL ASSETS 25,417,415 LIABILITIES Current Liabilities: Accounts Payable 419,469 Accrued Interest Payable 133,039 Accrued Salaries and Fringe Benefits 26,077 Due to Other Funds 517,080 Unearned Revenues 150,395 Compensated Absences 30,000 Debt and Capital Leases 483,375 Total Current Liabilities 1,759,435 Non-Current Liabilities: Compensated Absences 7,619 Debt and Capital Leases 9,627,783 Total Non-Current Liabilities 9,635,402 TOTAL LIABILITIES 11,394,837 NET ASSETS Invested in Capital Assets, Net of Related Debt 11,067,056 Restricted For: Debt Service 1,665,219 Unrestricted 1,290,303 TOTAL NET ASSETS $ 14,022,578 TOWN OF FORT MILL, SOUTH CAROLINA STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET ASSETS - PROPRIETARY FUND YEAR ENDED SEPTEMBER 30, 2007 GROSS REVENUE OPERATING REVENUES Water Revenue and Penalties 1,523,000 $ Sewer Revenues 1,687,056 York County Water Sales 1,217,951 Riverview Water Sales 147,129 Tega Cay Water Sales 255,323 Water Taps 282,825 Sewer Taps 426,600 Other Revenues 597 TOTAL OPERATING REVENUES 5,540,481 OPERATING EXPENSES Water 2,987,782 Sewer 816,334 Other Operating Expenses 1,690 Depreciation 739,868 TOTAL OPERATING EXPENSES 4,545,674 OPERATING INCOME (LOSS) 994,807 NON-OPERATING REVENUES (EXPENSES) Donated Capital Assets 627,857 Investment Earnings 74,721 Interest Expense and Fiscal Charges (490,986) Tega Cay Water Line Payment 12,000 TOTAL NON-OPERATING REVENUES (EXPENSES) 223,592 CHANGE IN NET ASSETS 1,218,399 NET ASSETS, Beginning of Year 12,804,179 NET ASSETS, End of Year $ 14,022,578 TOWN OF FORT MILL, SOUTH CAROLINA STATEMENT OF CASH FLOWS - PROPRIETARY FUND YEAR ENDED SEPTEMBER 30, 2007 GROSS REVENUE CASH FLOWS FROM OPERATING ACTIVITIES Receipts from Charges for Fees and Services 5,397,120 $ Receipts from Other Revenues 597 Payments for Personal Services (980,353) Payments for Goods and Services (2,585,876) NET CASH PROVIDED BY OPERATING ACTIVITIES 1,831,488 CASH FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES Transfers To Other Funds 288,406 Other Non-Operating Receipts (Payments) 12,000 NET CASH PROVIDED BY NON-CAPITAL FINANCING ACTIVITIES 300,406 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Acquisition of Capital Assets (367,259) Bond and Note Payments (428,564) Interest Paid on Bonds (479,265) NET CASH USED IN CAPITAL AND RELATED FINANCING ACTIVITIES (1,275,088) CASH FLOWS FROM INVESTING ACTIVITIES Purchase of Investments, Net (1,177,947) Income Received on Investments 74,721 NET CASH USED IN INVESTING ACTIVITIES (1,103,226) NET DECREASE IN CASH AND CASH EQUIVALENTS (246,420) CASH AND CASH EQUIVALENTS (INCLUDING RESTRICTED), Beginning of Year 2,517,846 CASH AND CASH EQUIVALENTS (INCLUDING RESTRICTED), End of Year $ 2,271,426 Reconciliation of Operating Income to Net Cash Provided by Operating Activities: Operating Income $ 994,807 Adjustments to Reconcile Operating Income to Net Cash Provided by Operating Activities Depreciation Expense 739,868 (Increase) Decrease in Current Assets: Receivables (222,053) Due from Federal Government 186,984 Prepaid Expenses 2,776 Increase (Decrease) in Current Liabilities: Accounts Payable 230,517 Accrued Salaries & Fringe Benefits 5,317 Deferred and Unearned Revenues (107,695) Compensated Absences 967 Net Cash Provided by Operating Activities $ 1,831,488 Non-Cash Investing, Capital and Financing Activities: Donated Capital Assets $ 627,857 TOWN OF FORT MILL, SOUTH CAROLINA NOTES TO THE BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2007 The Town of Fort Mill, South Carolina (the “Town”) was initially incorporated on February 12, 1873 under the general law for government of municipalities of the State of South Carolina. The original charter was surrendered on October 11, 1907 and the Town accepted incorporation under the provisions of Article II, Chapter XLIX, Code of 1902 and amendments thereto. The Town operates under the Council-Manager form of government pursuant to the Home Rule Statute, Act No. 283 of 1975. I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. The Reporting Entity The basic financial statements of the Town have been prepared in conformity with accounting principles generally accepted in the United States of America, (“GAAP”), as applied to governmental units. The Governmental Accounting Standards Board (“GASB”) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. The more significant of the Town’s accounting policies are described below. All activities, including component units, for which the Town is considered financially accountable, have been incorporated into the basic financial statements to form the reporting entity. The Town’s basic financial statements include the accounts of all operations, including, but not limited to, general operations and support services, capital projects, and special revenue. The primary criterion for determining inclusion or exclusion of a legally separate entity is financial accountability, which is presumed to exist if the Town both appoints a voting majority of the entity’s governing body, and either 1) the Town is able to impose its will on the entity or, 2) there is a potential for the entity to provide specific financial benefits to, or impose specific financial burdens on, the Town. In order to be considered fiscally independent, an entity must have the authority to do all three of the following: 1. Determine its budget without the Town having the authority to approve or modify that budget; 2. Levy taxes or set rates or charges without approval by the Town; and 3. Issue bond debt without approval by the Town. Finally, an entity could be a component unit even if it met all the conditions described above if excluding it would cause the Town’s basic financial statements to be misleading or incomplete. There were no component units required to be included in the Town’s basic financial statements. Related Organizations Fort Mill Housing Authority The Fort Mill Housing Authority (the “Authority”) is administered by a five member Board of Directors (the “Board”). Members of the Board which are appointed by the Mayor for a five year fixed term are made up of community leaders (who are not Town officials). The Town’s responsibility does not extend beyond the Mayor making these appointments. The Authority does not have a significant operational or financial relationship with the Town. Major Operations The Town’s major governmental operations include general government, judicial, public works, public safety (police and fire protection), culture and recreation, and community development. In addition, the Town provides water and sewer services through its enterprise fund (business-type activity). TOWN OF FORT MILL, SOUTH CAROLINA NOTES TO THE BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2007 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) B. Measurement Focus, Basis of Accounting, and Basis of Presentation The government-wide basic financial statements (i.e., the Statement of Net Assets and the Statement of Activities) report information on all of the non-fiduciary activities of the Town (the “Primary Government”). The effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. The Statement of Activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues. The comparison of direct expenses with program revenues identifies the extent to which each business segment or governmental function is self-financing or draws from the general revenues of the Town. The government-wide basic financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as is the Proprietary Fund’s basic financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Non-exchange transactions, in which the Town gives or receives value without directly receiving or giving equal value in exchange, includes property taxes, grants and donations. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenues as soon as all eligibility requirements imposed by the provider have been met. The government-wide basic financial statements are prepared using a different measurement focus from the manner in which governmental fund basic financial statements are prepared (see further detail below). Governmental fund basic financial statements, therefore, include reconciliations with brief explanations to better identify the relationship between the government-wide statements and the statements for governmental funds. Governmental fund basic financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. Property taxes, intergovernmental revenues, franchise taxes, licenses, and interest associated with the current fiscal period are all considered to be measurable and susceptible to accrual and so have been recognized as revenues of the current fiscal period. For this purpose, the government considers property taxes to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payments are due and payable. General capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of general long-term debt and acquisitions under capital leases are reported as other financing sources. Fund basic financial statements report detailed information about the Town. The focus of governmental and enterprise fund basic financial statements is on major funds rather than reporting funds by type. Each major fund is presented in a separate column. Non-major funds are aggregated and presented in a single column. When both restricted and unrestricted resources are available for use, it is the Town’s practice to use restricted resources first, then unrestricted resources as they are needed. TOWN OF FORT MILL, SOUTH CAROLINA NOTES TO THE BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2007 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) B. Measurement Focus, Basis of Accounting, and Basis of Presentation (Continued) The accounts of the government are organized and operated on the basis of funds. A fund is an independent fiscal and accounting entity with a self-balancing set of accounts. Fund accounting segregates funds according to their intended purpose and is used to aid management in demonstrating compliance with finance-related legal and contractual provisions. The minimum number of funds maintained is consistent with legal and managerial requirements. The following major funds and fund types are used by the Town. Governmental fund types are those through which most governmental functions of the Town are financed. The Town's expendable financial resources and related assets and liabilities (except for those accounted for in the Proprietary Funds) are accounted for through governmental funds. Governmental funds are accounted for using the current financial resources measurement focus and the modified accrual basis of accounting. The Town’s major and non-major governmental fund types are as follows: The General Fund, a major fund, is the general operating fund of the Town and accounts for all revenues and expenditures of the Town, except those required to be accounted for in another fund. All general tax revenues and other receipts that are not allocated by law or contractual agreement to other funds are accounted for in the General Fund. General operating expenditures and the capital improvement costs that are not paid through other funds are paid from the General Fund. This is a budgeted fund, and any unreserved fund balance is generally considered a resource available for use. The Capital Projects Fund, a major fund, is used to account for financial resources expended for the acquisition or construction of major capital facilities (other than those financed by the Proprietary Funds). These funds are also used to carry on specified ongoing major improvement projects or major equipment acquisitions usually spanning more than one fiscal year. This is a budgeted fund. The Special Revenue Funds, non-major funds, are used to account for the proceeds of designated specific revenue sources (other than major capital projects) that are restricted by law or administrative actions to expenditures for specified purposes. These funds do not have a legally adopted budget and any remaining fund balance is generally reserved for the purpose of the specific revenue source. Narcotics Fund Community Development Proprietary Fund Types are accounted for based on the flow of economic resources measurement focus and use the accrual basis of accounting. Under this method, revenues are recorded when earned and expenses are recorded at the time liabilities are incurred. The Town applies all applicable GASB pronouncements, as well as the requirements of Financial Accounting Standards Board (“FASB”) Statements and Interpretations, Accounting Principles Board (“APB”) Opinions, and Accounting Research Bulletins (“ARBs”), issued on or before November 30, 1989, unless they conflict with or contradict GASB pronouncements. The Town has elected not to follow the aforementioned guidance issued after November 30, 1989, as allowed by GAAP. Proprietary funds distinguish operating revenues and expenses from non-operating 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 enterprise funds are primarily charges for services and fees. Operating expenses for enterprise funds include the expense for providing goods and services, administrative expenses, maintenance, and depreciation of capital assets. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses. Proprietary Fund types include the following funds: TOWN OF FORT MILL, SOUTH CAROLINA NOTES TO THE BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2007 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) B. Measurement Focus, Basis of Accounting, and Basis of Presentation (Continued) Enterprise Funds are used to account for operations (a) that are financed and operated in a manner similar to private business enterprises — where the intent of the governing body is that the costs (expenses, including depreciation) of providing goods or services to the general public on a continuing basis be financed or recovered primarily through user charges; or (b) where the governing body has decided that periodic determination of revenues earned, expenses incurred, and/or net income is appropriate for capital maintenance, public policy, management control, accountability, or other purposes. The Town has one major Enterprise Fund: The Gross Revenue Fund, a budgeted fund, is used to account for the Town’s water and sewer operations. C. Assets, Liabilities, and Equity 1. Cash, Cash Equivalents, and Investments Cash and Cash Equivalents The Town considers all highly liquid investments (including restricted assets) with original maturities of three months or less when purchased to be cash equivalents. Investments The Town’s investment policy is designed to operate within existing statutes (which are identical for all funds, fund types and component units within the State of South Carolina) that authorize the Town to invest in the following: (a) Obligations of the United States and agencies thereof; (b) General obligations of the State of South Carolina or any of its political units; (c) Savings and Loan Associations to the extent that the same are insured by an agency of the Federal Government; (d) Certificates of Deposit and funds in deposit accounts with banking institutions provided that such certificates and funds in deposit accounts are collaterally secured by securities of the type described in (a) and (b) above, held by a third party as escrow agent, or custodian of a market value, not less than the amount of the certificates or funds in deposit accounts so secured, including interest; provided, however, such collateral shall not be required to the extent the same are insured by an agency of the federal government; (e) Collateralized repurchase agreements when collateralized by securities as set forth in (a) and (b) above and held by the governmental entity or a third party as escrow agent or custodian; and TOWN OF FORT MILL, SOUTH CAROLINA NOTES TO THE BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2007 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) C. Assets, Liabilities, and Equity (Continued) 1. Cash, Cash Equivalents, and Investments (Continued) Investments (Continued) (f) No load open-end or closed-end management type investment companies or investment trusts registered under the Investment Company Act of 1940, as amended, where the investment is made by a bank or trust company or savings and loan association or other financial institution when acting as trustee or agent for a bond or other debt issue of that local government unit, political subdivision, or county treasurer if the particular portfolio of the investment company or investment trust in which the investment is made (i) is limited to obligations described in items (a), (b), and (e) of this subsection, and (ii) has among its objectives the attempt to maintain a constant net asset value of one dollar a share and to that end, value its assets by the amortized cost method. The Town’s cash investment objectives are preservation of capital, liquidity, and yield. The Town reports its cash and investments at fair value which is normally determined by quoted market prices. The Town currently or in the past year has used the following investments: • Open ended mutual funds which are primarily invested in money market funds which invest in short term obligations of the United States and related agencies. Certain cash, cash equivalents, and investments of the Town may be legally restricted from time to time. The major type of restrictions were (a) those imposed by the revenue source (victims services, hospitality tax, narcotics, etc.) and (b) bond indenture requirements which require the establishment of accounts/funds for (1) maximum annual principal and interest payments (unless a surety bond was provided) and (2) the next succeeding principal and accrued interest payment. 2. Receivables and Payables During the course of its operations, the Town has numerous transactions occurring between funds. These transactions include expenditures and transfers of resources to provide services, construct assets, and service debt. The accompanying financial statements generally reflect such transactions as transfers. Subsidies are also recorded as transfers. Town management determines the classification of amounts recorded as subsidies or advances. To the extent that certain transactions between funds had not been paid or received as of September 30, 2007, balances of interfund amounts or payables have been recorded. Internal service funds are used to record charges to all Town departments as operating revenue. All Town funds record these payments to the internal service funds as operating expenditures or expenses. All trade and property taxes receivable are shown net of an allowance for uncollectible amounts. Trade receivables are comprised of amounts due from entities and individuals for a variety of types of fees, charges and services, including franchise fees, hospitality taxes, sanitation, sewer, parking, and other fees and charges. 3. Inventories and Prepaids Inventories and prepaid items in the governmental funds are accounted for using the purchase method (expensed when paid). If significant amounts of inventories or prepaid items exist in the governmental funds, the Town records these amounts in the balance sheet. TOWN OF FORT MILL, SOUTH CAROLINA NOTES TO THE BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2007 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) C. Assets, Liabilities, and Equity (Continued) 4. Capital Assets General capital assets are those assets not specifically related to activities reported in the Proprietary Funds. These assets generally result from expenditures in the governmental funds. These assets are reported in the governmental activities column of the government-wide Statement of Net Assets, but are not reported in the fund basic financial statements. Capital assets utilized by the Proprietary Funds are reported both in the business-type activities column of the government-wide Statement of Net Assets and in the respective fund basic financial statements. All capital assets are valued at historical cost or estimated historical cost, if actual historical cost is not available. Donated capital assets are valued at their estimated fair market value on the date donated. Because the Town was a phase III entity (governments with total annual revenue of less than $10 million based on a government's total annual revenues in the first fiscal year ending after June 15, 1999) it was not required to report infrastructure retroactively by GASB #34. In accordance with GASB #34, the Town has recorded all infrastructure assets since implementing GASB #34 in fiscal year 2004. These assets are reported at cost. The cost of normal maintenance and repairs that do not add to the value of the asset or materially extend capital assets’ lives are not capitalized. The Town maintains a minimum capitalization threshold of $5,000 for all capital assets. Interest costs during construction are not capitalized in the Town’s governmental funds but are capitalized for qualified property in the Town’s proprietary fund (if material). Interest costs on tax-exempt borrowings are capitalized net of related investment earnings on the proceeds. Interest costs are not capitalized on assets acquired or constructed with gifts and grants that are restricted by the donor or grantor to acquisition of those capital assets. Interest costs are not capitalized for small projects or those for which the construction period is less than six months. Capital assets are depreciated using the straight-line method over the following estimated useful lives: Governmental Activities/ Description Business-Type Activities Infrastructure 10-50 years Buildings and Improvements 10-50 years Equipment 5-10 years Vehicles 5-20 years 5. Compensated Absences The Town’s vacation policy allows the accumulation of leave between 10 and 25 days annually, based upon length of service. Employees terminating or retiring are paid for accumulated vacation up to a maximum of 30 days based on their hourly rate of pay earned at the time of termination or retirement as well as accumulated compensatory time. The Town does not have a policy limiting the amount of compensatory time an employee can accumulate and be paid out. The Town reports compensated absences in accordance with the provisions of GASB Statement No. 16, “Accounting for Compensated Absences.” The entire compensated absence liability and expense is reported in the government-wide basic financial statements. The portion applicable to the Proprietary Funds is also recorded in the Proprietary Fund basic financial statements. Governmental funds will only recognize compensated absences liability if they have matured, for example, as a result of employee resignations or terminations. TOWN OF FORT MILL, SOUTH CAROLINA NOTES TO THE BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2007 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) C. Assets, Liabilities, and Equity (Continued) 6. Accrued Liabilities and Long-Term Obligations All payables, accrued liabilities and long-term obligations are reported in the government-wide basic financial statements, and all payables, accrued liabilities and long-term obligations payable from proprietary funds are reported on the Proprietary Fund basic financial statements. In general, payables and accrued liabilities that will be paid from governmental funds are reported on the governmental fund basic financial statements regardless of whether they will be liquidated with current resources. However, claims and judgments, non-current portion of capital leases, compensated absences, contractually required pension contributions, special termination benefits and other miscellaneous long-term obligations that will be paid from governmental funds are reported as a liability in the fund basic financial statements only to the extent that they are due and payable. In the government-wide basic financial statements long-term debt and other long-term obligations are reported as liabilities on the Statement of Net Assets. Bond premiums and discounts (if any), as well as bond issuance costs, are deferred and amortized over the life of the bonds using the straight-line method that approximates the effective interest method. Bonds payable are reported net of the applicable bond premiums or discount. Bond issuance costs are amortized over the term of the related debt. In the fund basic financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service premiums. 7. Fund Balance In the fund basic financial statements, the Town reserves those portions of fund balance which are legally segregated for a specific future use or which do not represent available expendable resources and therefore are not available for appropriation or expenditure. Designations of fund balance represent tentative management plans that are subject to change and ultimately may not be legally authorized or result in an expenditure. Fund balance reserves can be established for, but not limited to the following: prepaids, inventory, non-current receivables, prior year appropriations, grant projects, debt service, capital projects and special revenue programs. Unreserved fund balance indicates that portion of fund equity which is available for appropriation in future periods. 8. Net Assets Net assets represent the difference between assets and liabilities in the statement of net assets. Net assets are classified as invested in capital assets net of related debt; restricted; and unrestricted. Net assets invested in capital assets, net of related debt, consist of capital assets, net of accumulated depreciation, reduced by the outstanding balances of any borrowings used for the acquisition, construction or improvement of those assets. Outstanding debt/capital leases which has not been spent is included in the same net assets component as the unspent proceeds. Net assets are reported as restricted when there are limitations imposed on their use either through enabling legislation or through external restrictions imposed by creditors, grantors, contributors, or laws or regulations of other governments. TOWN OF FORT MILL, SOUTH CAROLINA NOTES TO THE BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2007 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) C. Assets, Liabilities, and Equity (Continued) 9. Encumbrances Encumbrance accounting, under which purchase orders, contracts, and other commitments for expenditures are recorded to reflect the use of the applicable spending appropriations, is used by the General Fund during the year to control expenditures. Encumbrances do not constitute expenditures or liabilities. For budget purposes encumbrances and unused expenditure appropriations lapse at year end. 10. Accounting Estimates The preparation of basic financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions. Those estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the basic financial statements. In addition, they affect the reported amounts of revenues and expenditures/expenses during the reporting period. Actual results could differ from those estimates and assumptions. 11. Comparative Data Comparative data (i.e. presentation of prior year totals by fund type) has not been presented in each of the statements since their inclusion would make the statements unduly complex and difficult to read. II. STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY A. Budgetary Information The Town follows these procedures in establishing the budgetary data reflected in the financial statements: 1. In early August, the Town Manager submits to the Town Council a proposed operating budget for the fiscal year commencing October 1. The operating budget includes proposed expenditures and the means of financing them. 2. Public hearings and Council meetings are conducted to inform and obtain taxpayer comments. 3. The budget is legally enacted through passage of an ordinance by October 1. Any supplemental budgetary appropriations made are subject to the same procedures as the original budget ordinance. 4. The Town Manager is authorized to administer the budget and may transfer appropriated funds between accounts within and between each department without Town Council's prior approval provided the transfer does not alter the total appropriations for either fund. Town Council must approve any revisions that alter the total appropriations of a fund. Department heads are responsible for managing their respective budgets. Department heads are not allowed to make transfers of appropriated funds. The legal level of budgetary authority is at the departmental level. 5. Legally adopted budgets are employed as a management control device during the year for the General Fund, Capital Projects Fund, and Gross Revenue Fund. Expenditures/expenses may not legally exceed appropriations on the fund level. The remaining Special Revenue Funds are not formally budgeted but effective budgetary control is achieved through the various grant documents and appropriate state law. TOWN OF FORT MILL, SOUTH CAROLINA NOTES TO THE BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2007 II. STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY (CONTINUED) A. Budgetary Information (Continued) 6. The budgets for the governmental funds are legally adopted on a basis consistent with GAAP. The proprietary fund (Gross Revenue Fund) is legally adopted on the cash basis (which is not consistent with GAAP). 7. The budgets at the end of the year for these funds represent the budgets adopted and amended by the Town Council plus encumbrances and funds designated for continuing projects carried over from the preceding year. 8. Encumbrances do not lapse but are brought forward to the new year and added to the budget adopted by Town Council for that year. It is Town policy to close out all encumbrances possible before year-end. The Town had no encumbrances at September 30, 2007. 9. All unencumbered appropriations, except those designated as continuing projects by the Town Manager, lapse at year-end. III. DETAILED NOTES ON ALL FUNDS AND ACTIVITIES A. Deposits and Investments Deposits Custodial Credit Risk for Deposits: Custodial credit risk for deposits is the risk that, in the event of a bank failure, the Town’s deposits might not be recovered. The Town does not have a deposit policy for custodial credit risk but follows the investment policy statutes of the State of South Carolina. As of September 30, 2007, approximately $3,711,000 of the Town’s bank balances of approximately $4,011,000 (which had a carrying value of $3,807,695) were uninsured but collateralized with securities held by the pledging financial institution’s trust department or agent, but not in the name of the Town. Investments As of September 30, 2007, the Town had the following investments and maturities: Credit Fair Weighted Average Investment Type Rating ^ Value Maturity (Years) Treasury Money Market Fund - Open Ended AAAm, Aaa $ 1,177,947 less than 90 days ^ If available, credit ratings are for Standard & Poor’s, Moody’s Investors Service and Fitch Ratings. Interest Rate Risk: The Town does not have a formal policy limiting investment maturities that would help manage its exposure to fair value losses from increasing interest rates. Custodial Credit Risk for Investments: Custodial credit risk for investments is the risk that, in the event of a bank failure, the government will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. The Town does not have an investment policy for custodial credit risk but follows the investment policy statutes of the State of South Carolina. As of September 30, 2007, none of the Town’s investments were exposed to custodial credit risk. TOWN OF FORT MILL, SOUTH CAROLINA NOTES TO THE BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2007 III. DETAILED NOTES ON ALL FUNDS AND ACTIVITIES (CONTINUED) A. Deposits and Investments (Continued) Investments (Continued) Credit Risk for Investments: Credit risk for investments is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The Town does not have an investment policy for credit risk but follows the investment policy statutes of the State of South Carolina. Concentration of Credit Risk for Investments: The Town places no limit on the amount the Town may invest in any one issuer. Investments issued by or explicitly guaranteed by the U.S. Government and investments in mutual funds, external investment pools, and other pooled investments are exempt from concentration of credit risk disclosures. Certain cash, cash equivalents, and investments of the Town are legally restricted for specified purposes. The major types of restrictions at September 30, 2007 were related to (a) bond agreements ($1,798,258), (b) victim’s services ($53,104), (c) narcotics ($33,546), (d) capital lease purchases ($119,885), and (e) hospitality taxes ($94,762). B. Property Taxes and Other Receivables Property Taxes Real Property taxes are levied on October 1 on the assessed valuations of property located in York County as of the preceding January 1, and are due and payable at that time. All unpaid taxes levied October 1 become delinquent January 15 of the following year, and property taxes attach as an enforceable lien if not paid by March 16 of the following year. Penalties are added to taxes depending on the date paid as follows: January 16-February 1 3% of tax February 2-March 16 10% of tax March 17 and thereafter 15 % of tax plus collection costs Motor vehicle taxes are levied on the first day of the month in which the motor vehicle license expires and is due by the end of the month. Property taxes are billed and collected by York County. Property tax revenue is recognized when collected by the County Treasurer's Office. Assessed values for real estate are established annually by the York County Tax Assessor at 4% of market value for legal residence and 6% of market value for rental and other real property. For the year ended September 30, 2007, millage was set at 81.0 mills to cover general Town services and uses. Based on information provided by the York County Treasurer’s Office, the Town has recorded uncollected, property taxes at September 30, 2007 of $106,082 (net of allowance for uncollectible portion of $3,084) for the General Fund. Delinquent property taxes of $3,023 have been recognized as revenue at December 31, 2006 because it is expected to be collected within 60 days of year end. The remaining amount of $70,998 has been recorded as deferred revenue on the governmental fund basic financial statements because it is not expected to be collected within 60 days of year end. Other Receivables The Town has other receivables primarily related to its garbage services and water/sewer operations of $59,264 (net of allowance for uncollectible portion of $36,258) and $709,971 (net of allowance for uncollectible portion of $161,236), respectively. The services that generate the garbage and water/sewer receivables are provided and billed each month and are considered due as of September 30, 2007 (garbage service receivables are considered available as they are expected to be collected within 60 days of year end). TOWN OF FORT MILL, SOUTH CAROLINA NOTES TO THE BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2007 III. DETAILED NOTES ON ALL FUNDS AND ACTIVITIES (CONTINUED) C. Interfund Receivables, Payables, and Transfers Interfund Receivables and Payables The interfund balances at September 30, 2007, consisted of the following net individual fund receivables and payables (all of which are expected to be paid within one year): Net Net Fund Receivables Payables General Fund $ 517,080 $ 161,556 Gross Revenue Fund 79,556 517,080 Capital Projects Fund 82,000 - Totals $ 678,636 $ 678,636 The interfund receivables and payables are primarily the result of the General Fund financing operating expenses for the Gross Revenue Fund. The outstanding receivable in the Capital Projects Fund was due to Town Council approving a transfer from the General Fund of monies to finish projects such as the new soccer fields. Interfund Transfers Interfund transfers for the year ended September 30, 2007, consisted of the following: Fund Transfers In Transfers Out Major Funds: General Fund $ - $ 9 7,000 Capital Projects Fund 8 2,000 - Other Non-Major Funds: Special Revenue Fund - Narcotics Fund 3 5,118 3 9,530 Special Revenue Fund - Community Development Fund 5 4,530 3 5,118 Totals $ 1 71,648 $ 1 71,648 During the course of normal operations and in order to support the numerous functions of the Town, transactions between funds may occur. The Town uses transfers to move unrestricted receipts so that they may be used for various programs in other funds. Town Council approved a transfer of $82,000 at year end to fund the final costs associated with the new soccer fields. TOWN OF FORT MILL, SOUTH CAROLINA NOTES TO THE BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2007 III. DETAILED NOTES ON ALL FUNDS AND ACTIVITIES (CONTINUED) D. Capital Assets Capital asset activity for the Town’s governmental activities for the year ended September 30, 2007, was as follows: Beginning Ending Balance Increases Decreases Balance Governmental Activities: Capital Assets, Non-Depreciable: Land $ 650,215 19,395 - $ 669,610 Total Capital Assets, Non-Depreciable 650,215 19,395 - 669,610 Capital Assets, Depreciable: Land Improvements - 257,485 - 257,485 Infrastructure 569,242 430,808 - 1,000,050 Buildings and Improvements 3,923,509 - - 3,923,509 Equipment 1,094,618 6 4,855 1 2,666 1,146,807 Vehicles 1,950,784 3 93,032 21,300 2,322,516 Total Capital Assets Depreciable 7,538,153 1,146,180 33,966 8,650,367 Less: Accumulated Depreciation for: Land Improvements - 5,997 - 5,997 Infrastructure 25,241 15,968 - 41,209 Buildings and Improvements 817,659 98,088 - 915,747 Equipment 404,951 113,279 10,085 508,145 Vehicles 894,467 173,753 21,300 1,046,920 Total Accumulated Depreciation 2,142,318 407,085 31,385 2,518,018 Total Capital Assets, Depreciable, Net 5,395,835 739,095 2,581 6,132,349 Governmental Activities Capital Assets, Net $ 6,046,050 758,490 2,581 $ 6,801,959 The cost of equipment recorded under capital lease was approximately $1,405,000. Accumulated amortization was approximately $293,000 at September 30, 2007. Amortization of assets recorded under capital lease obligations has been included with depreciation expense. Depreciation expense for the Town’s Governmental Activities was charged to functions/programs as follows: Functions/Programs Amount Governmental Activities: General Government $ 1 20,178 Public Safety 1 33,475 Public Works 7 0,922 Recreation 8 2,510 Total Depreciation Expense - Governmental Activities $ 4 07,085 TOWN OF FORT MILL, SOUTH CAROLINA NOTES TO THE BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2007 III. DETAILED NOTES ON ALL FUNDS AND ACTIVITIES (CONTINUED) D. Capital Assets (Continued) Capital asset activity for the Town’s business-type activities for the year ended September 30, 2007, was as follows: Beginning Ending Balance Increases Decreases Balance Business-Type Activities: Capital Assets, Non-Depreciable Land $ 305,505 - - $ 305,505 Construction in Progress - - - - Total Capital Assets, Non-Depreciable 305,505 - - 305,505 Capital Assets, Depreciable Infrastructure 26,462,380 805,148 - 27,267,528 Buildings and Improvements 370,542 - - 370,542 Equipment 304,109 170,970 - 475,079 Vehicles 128,209 18,998 - 147,207 Total Capital Assets, Depreciable 27,265,240 995,116 - 28,260,356 Less: Accumulated Depreciation for: Infrastructure 6,518,389 693,277 - 7,211,666 Buildings and Improvements 68,678 9,264 - 77,942 Equipment 182,859 26,741 - 209,600 Vehicles 106,959 10,586 - 117,545 Total Accumulated Depreciation 6,876,885 739,868 - 7,616,753 Total Capital Assets, Depreciable, Net 20,388,355 255,248 - 20,643,603 Business-Type Activities Capital Assets, Net $ 20,693,860 255,248 - $ 20,949,108 The cost of capital assets that was purchased under capital lease was approximately $3,122,000. Accumulated amortization was approximately $1,152,000 at September 30, 2007. Amortization of assets recorded under capital lease obligations has been included with depreciation expense. The Town receives from time to time donated infrastructure for new subdivisions/projects that are given to the Town from various developers. In 2007, the Town received approximately $628,000 in donated infrastructure primarily related to several new subdivisions. The value of the infrastructure was based on actual cost provided to the Town by the contractor. TOWN OF FORT MILL, SOUTH CAROLINA NOTES TO THE BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2007 III. DETAILED NOTES ON ALL FUNDS AND ACTIVITIES (CONTINUED) E. Long-Term Obligations The Town issues bonds to provide funds for the acquisition and construction of major capital facilities. General Obligation Bonds (“GOB”) are direct obligations and pledge the full faith and credit of the Town. Capital Lease obligations are special obligations of the Town payable from the general revenues of the Town. The full faith, credit and taxing powers of the Town are not pledged for the payment of capital lease obligations nor the interest thereon. Details on the Town’s governmental activities outstanding debt issues and capital leases as of September 30, 2007 are as follows: General Obligation Bonds Principal Outstanding at Year End $657,300 general obligation serial bond issued in December, 1994 (“Series 1995”), due in annual installments of $53,837 beginning December 2, 1995 through December 2, 2014 which includes interest at 5.251%. The proceeds of this issue were primarily used to build the Town’s fire station. $344,683 $1,000,000 general obligation refunding serial bonds issued in July, 2002 (“Series 2002”), due in annual installments of $123,230 beginning July 2, 2003 through July 2, 2012 which includes interest at 3.990%. The proceeds from this issue were used to defray the cost of constructing additions and renovations to the Fort Mill Town Hall. 548,751 Total Outstanding General Obligation Bonds $893,434 Capital Lease Obligations $735,823 capital lease was entered into in June 2003, with annual installments of $87,764 beginning June 17, 2004 through June 17, 2013 which includes interest at 3.340%. The proceeds from this capital lease obligation were primarily used to fund the acquisition of a ladder truck (“Ladder Truck”). $ 470,124 $45,000 capital lease was entered into in July 2005, with annual installments of $16,108 beginning July 19, 2006 through June 19, 2008 which includes interest at 3.650%. The proceeds from this capital lease obligation were primarily used to fund the acquisition of a dump truck (“Dump Truck”). 15,540 $635,162 capital lease was entered into in December 2006, with annual installments of $227,925 beginning December 20, 2007 through December 20, 2009 which includes interest at 3.780%. The proceeds from this capital lease obligation were primarily used to fund the acquisition of equipment/vehicles (“Equipment/Vehicles Lease”). 635,162 Total Outstanding Capital Lease Obligations $1,120,826 TOWN OF FORT MILL, SOUTH CAROLINA NOTES TO THE BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2007 III. DETAILED NOTES ON ALL FUNDS AND ACTIVITIES (CONTINUED) E. Long-Term Obligations (Continued) Presented below is a summary of changes in long-term obligations for the year ended September 30, 2007, for the Town’s governmental activities: Beginning Ending Due Within Long-Term Obligations Balance Additions Reductions Balance One Year Governmental Activities: Debt: GOB - Series 1995 $ 3 78,671 - 3 3,988 3 44,683 $ 3 5,773 GOB - Series 2002 6 46,197 - 9 7,446 5 48,751 1 01,334 Total Debt 1 ,024,868 - 1 31,434 8 93,434 1 37,107 Capital Leases: Ladder Truck 5 39,857 - 6 9,733 4 70,124 7 2,062 Recycling Truck 3 2,555 - 3 2,555 - - Dump Truck 3 0,534 - 1 4,994 1 5,540 1 5,540 Equipment/Vehicles Lease - 6 35,162 - 6 35,162 2 03,916 Total Capital Leases 6 02,946 6 35,162 1 17,282 1 ,120,826 2 91,518 Compensated Absences 1 77,891 2 03,165 1 89,815 1 91,241 1 50,000 Total Governmental Activities $ 1 ,805,705 8 38,327 4 38,531 2 ,205,501 $ 5 78,625 Resources from the General Fund have been used to liquidate the governmental activities debt, capital lease obligations, and compensated absence liabilities. Article Eight, Section Seven of the South Carolina Constitution of 1895, as amended, provides that no City or Town shall incur any bonded debt which shall exceed eight percent (8%) of the assessed value of the property therein and no such debt shall be created without the electors of such City or Town voting in favor of such further bonded debt. Prior to Home Rule Act of July 1, 1976, the bonded debt exemption was thirty five percent (35%). In 1976, the General Assembly reduced the general obligation debt limit without voter approval to eight percent (8%) of assessed valuation; whereas, with a referendum any amount can be floated. As of September 30, 2007, the Town had approximately $893,000 of bonded debt subject to the 8% limit of approximately $2,141,000 resulting in an unused legal debt margin of approximately $1,248,000. Details on the Town’s business-type activities outstanding debt issues and capital leases as of September 30, 2007 are as follows: Revenue Bonds Principal Outstanding at Year End $6,375,000 waterworks and sewer refunding and improvement revenue bonds issued in June, 1998 (“1998 Revenue Bonds”), due in annual installments of $80,000 to $360,000 beginning December 1, 1998 through December 1, 2022, plus interest at approximately 4.966% due semiannually. The proceeds from this issue were used to advance refund the 1988 and 1991 bonds and to provide funding for further expansion and improvement of the water/sewer system. $4,955,000 TOWN OF FORT MILL, SOUTH CAROLINA NOTES TO THE BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2007 III. DETAILED NOTES ON ALL FUNDS AND ACTIVITIES (CONTINUED) E. Long-Term Obligations (Continued) Resources from the Gross Revenue Fund have been used to liquidate business-type activities debt, capital leases, and compensated absence liabilities. Certain proceeds from the issuance of the Revenue Bonds as well as revenues generated by water/sewer operations are restricted by the bond ordinance for construction, payment of operating, and other expenses, or are set aside as reserves to ensure repayment of the bonds. Certain other assets are accumulated and restricted in accordance with the bond ordinance for the purposes of paying interest and principal payments and for the purpose of maintaining reserve funds at the required levels. In addition, the bond ordinance also contains various negative, affirmative, and administrative covenants as defined in the bond ordinance. Of particular importance is the requirement that the Town maintain a rate covenant (net earnings to annual principal and interest requirements for qualified debt for the each fiscal year as defined) of 120%. The Town met the rate covenant for the year ended September 30, 2007. Debt Service Requirements to Maturity Presented below is a summary of debt service requirements to maturity by year for the Town’s governmental and business-type activities as of September 30, 2007: Year Ended September 30, Principal Interest Principal Interest Totals Governmental Activities 2008 $ 1 37,107 3 9,995 2 91,518 4 0,278 $ 5 08,898 2009 1 43,029 3 4,074 2 86,093 2 9,596 4 92,792 2010 1 49,211 2 7,892 2 96,579 1 9,110 4 92,792 2011 1 55,664 2 1,439 7 9,527 8 ,238 2 64,868 2012 1 62,401 1 4,702 8 2,183 5 ,581 2 64,867 2013 - 2015 1 46,022 1 5,598 8 4,926 2 ,837 2 49,383 Totals $ 8 93,434 1 53,700 1 ,120,826 1 05,640 $ 2 ,273,600 Business-Type Activities 2008 $ 3 81,890 3 52,378 1 01,485 1 03,079 $ 9 38,832 2009 4 02,678 3 36,208 1 06,965 9 7,023 9 42,874 2010 4 18,236 3 19,208 1 13,058 9 0,644 9 41,146 2011 4 39,003 3 01,174 1 19,833 8 3,906 9 43,916 2012 4 54,987 2 82,078 1 26,632 7 6,789 9 40,486 2013 - 2017 2 ,587,889 1 ,087,531 7 51,527 2 64,293 4 ,691,240 2018 - 2022 2 ,651,835 4 95,804 5 58,813 4 8,468 3 ,754,920 2023 - 2025 8 96,327 3 8,216 - - 9 34,543 Totals $ 8 ,232,845 3 ,212,597 1 ,878,313 7 64,202 $ 14,087,957 Debt Capital Lease Obligations TOWN OF FORT MILL, SOUTH CAROLINA NOTES TO THE BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2007 IV. OTHER INFORMATION A. Risk Management Participation in Public Entity Risk Pools for Property and Casualty Insurance The Town is exposed to various risks of loss related to torts, theft of, damage to, and destruction of assets, errors and omissions, and natural disasters. The Town has joined together with other municipalities in the state to form the South Carolina Municipal Insurance and Risk Financing Fund (“SCMIRF”), which is a public entity risk pool currently operating as a common risk management and insurance program. The Town obtains its general risk insurance through SCMIRF. It pays an annual premium for this coverage. For the year ended September 30, 2007, the Town made premium payments totaling approximately $151,767. SCMIRF is self-sustaining through member premiums and reinsures through commercial companies. SCMIRF’s net assets from its most recently issued audited financial statements at December 31, 2006, totaled approximately $16,798,000. There were no significant reductions in coverage in the past fiscal year and there were no settlements exceeding insurance coverage in the past three fiscal years. The Town has also joined together with other municipalities in the state to form the South Carolina Municipal Insurance Trust (“SCMIT”), a public entity risk pool operating as a common risk management and insurance program for worker’s compensation. The Town pays an annual premium to SCMIT. In the year ended September 30, 2007, the Town made premium payments totaling approximately $88,633. The Trust uses reinsurance agreements to reduce its exposure to large workers’ compensation losses. SCMIT’s net assets from its most recently issued audited financial statements at December 31, 2006, totaled approximately $6,049,000. There were no significant reductions in coverage in the past fiscal year and there were no settlements exceeding insurance coverage in the past three fiscal years. Health Plan The Town maintains a fully insured health insurance program for Town employees. The Town pays a premium each month to the insurer and the insurance provider pays all covered claims. B. Contingent Liabilities and Commitments Grants Amounts received or receivable from grant agencies are subject to audit and adjustment by grantor agencies, principally the federal government. Any disallowed claims, including amounts already collected, may constitute a liability of the applicable funds. The amount, if any, of expenditures that may be disallowed by the grantor cannot be determined at this time, although the Town expects such amounts, if any, to be immaterial. C. Deferred Compensation Plan The Town offers its employees the option to participate in the South Carolina 401(k) Deferred Compensation Plan (“401(k) Plan”), a defined contribution plan. The 401(k) Plan is administered by the South Carolina Deferred Compensation Commission (“Commission”). All amounts of compensation contributed under the 401(k) Plan, all income, and rights attributable to such amounts remain the sole property of the participating employee. Current year payroll covered under the 401(k) Plan was approximately $3,023,488 of the Town’s $3,225,400 total payroll (for all Town employees). Employees can contribute a minimum of $10 of gross salary per paycheck, up to a maximum of $15,000 per year. TOWN OF FORT MILL, SOUTH CAROLINA NOTES TO THE BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2007 IV. OTHER INFORMATION (CONTINUED) C. Deferred Compensation Plan (Continued) Contributions are not available to employees until termination of employment, retirement, death, or unforeseeable emergency, with the exceptions of education and purchase or improvement of a primary residence. There are no eligibility or vesting requirements. The Town contributes five dollars per week to each employee chosen to participate. Employer and Employee contributions were approximately $21,695 and $82,595 respectively for the year ended September 30, 2007. There were no significant changes in plan provisions during the current year. D. Retirement Plans South Carolina Retirement and Police Officer’s Retirement System Full time employees of the Town are covered under two different retirement plans. Town employees, except for fire and police department employees participate in the South Carolina Retirement System (“SCRS”), a cost-sharing multiple-employer defined benefit pension plan. Town police officers and firemen participate in the South Carolina Police Officers’ Retirement System (“SCPORS”), a cost-sharing multiple-employer defined benefit pension plan. Both the SCRS and the SCPORS offer retirement and disability benefits, cost of living adjustments on an ad-hoc basis, life insurance benefits, and survivor benefits. The Plans’ provisions are established under Title 9 of the South Carolina Code of Laws and thus only the State of South Carolina has authority to establish and amend benefits and funding policy. A comprehensive annual financial report containing financial statements and required supplementary information for the SCRS and SCPORS is issued and publicly available by writing to the South Carolina Retirement System, P.O. Box 11960, Columbia, SC 29211-1960. The SCRS was established by the South Carolina state legislature on July 1, 1945, for the benefit of teachers and employees of the State and its political subdivisions. The PORS was established by the South Carolina state legislature on July 1, 1962, for the benefit of police officers and firemen. Group life insurance benefits equal to one year’s salary may be paid to a beneficiary after one year of service and a lump sum payment of up to $6,000 based upon years of service. Both employees and the Town are required to contribute to the Plans at rates established under authority of Title 9 of the South Carolina Code of Laws. The Town’s contributions are actuarially determined, but are communicated to and paid by the Town as a percentage of the employees’ annual earnings. Employees covered under PORS are required to contribute 6.5% of salary. Employees covered under SCRS are required to contribute 6.5% of salary as of year end. The Town is required to contribute 10.3% of gross earnings under PORS and 8.05% under SCRS as of year end. Employees have the option of not participating in the retirement plans. Current year payrolls covered under both systems are as follows: PORS SCRS $ 1 ,298,850 $ 1 ,795,281 Total payroll for 2007 for all Town employees was approximately $3,198,083. The Town's contributions equaled the amount required. The retirement contributions made by the Town for the current year and each of the two preceding years are as follows: Year Ended September 30, Required % Contributed Required % Contributed 2007 $ 1 52,609 100% $ 1 39,779 100% 2006 1 27,477 100% 1 11,894 100% 2005 $ 108,634 100% $ 100,575 100% SCRS Contributions SCPORS Contributions TOWN OF FORT MILL, SOUTH CAROLINA NOTES TO THE BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2007 IV. OTHER INFORMATION (CONTINUED) E. Other Postemployment Benefits Upon retirement from the Town, employees who meet certain eligibility requirements have the option to retain health and dental insurance through the Town by paying 100% of the employee premium. To be eligible, an employee must retire and qualify for full retirement with the SCRS or PORS, or a combination of both with a minimum of 10 years of service with the Town. The Town’s retiree health insurance coverage is established and can only be changed by Town Council. The cost of this benefit is financed on a pay-as-you-go basis. Current expenditures are included in the overall health care costs of the Town and cannot be reasonably separated or estimated. Presently there is one participant. In 2004, GASB issued Statement No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions (“Statement”). This Statement establishes standards for the measurement, recognition and display of Other Post Employment Benefits (“OPEB”) expenditures and related liabilities (assets), note disclosures, and, if applicable, required supplementary information in the financial reports of state and local governmental employers. The Town is required to adopt this Statement in fiscal year 2010 and is in the process of determining the impact of adopting this Statement will have on the Town. Management is not able at this present time to quantify the Town’s OPEB liability under this Statement. F. Economic Dependency The Town’s Gross Revenue Fund purchases all its water, used for resale, from the City of Rock Hill, South Carolina. The Town entered into an agreement with the City of Rock Hill whereby the City of Rock Hill will sell the Town through the year 2014 at the City of Rock Hill’s prevailing wholesale rate. One water customer accounted for approximately 28% of total water sales for the year ended September 30, 2007. In December 1998, the Town entered into a water service agreement with this customer whereby this customer will purchase a minimum of 200,000 gallons of water per day through the year 2008. REQUIRED SUPPLEMENTARY INFORMATION TOWN OF FORT MILL, SOUTH CAROLINA REQUIRED SUPPLEMENTARY INFORMATION - BUDGETARY COMPARISON SCHEDULE - GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGETS AND ACTUAL YEAR ENDED SEPTEMBER 30, 2007 GENERAL FUND BUDGETED AMOUNTS ORIGINAL FINAL ACTUAL VARIANCE REVENUES Taxes 2,620,000 $ 2,620,000 2,541,120 $ (78,880) Fines, Fees, Licenses and Permits: 1,948,400 1,948,400 2,272,506 324,106 Charges For Services 397,000 397,000 395,744 (1,256) Grants - - 23,815 2 3,815 Intergovernmental 311,795 311,795 306,587 (5,208) Miscellaneous 225,580 225,580 277,122 5 1,542 Investment Earnings 10,000 1 0,000 35,822 2 5,822 TOTAL REVENUES ALL SOURCES 5,512,775 5,512,775 5,852,716 339,941 EXPENDITURES Current: General Government 804,905 804,905 844,102 (39,197) Judicial 42,920 42,920 45,527 (2,607) Public Works 1,501,830 1,501,830 1,551,581 (49,751) Public Safety 2,617,605 2,617,605 2,631,249 (13,644) Culture and Recreation 140,266 140,266 136,428 3,838 Capital Outlay 83,650 8 3,650 424,762 ( 341,112) Debt Service: Principal Retirement 331,799 331,799 248,716 8 3,083 Interest and Fiscal Charges - - 65,730 (65,730) TOTAL EXPENDITURES 5,522,975 5,522,975 5,948,095 ( 425,120) EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES (10,200) (10,200) (95,379) (85,179) OTHER FINANCING SOURCES (USES) Proceeds from the Disposal of Capital Assets 10,000 1 0,000 21,050 1 1,050 Capital Lease - - 635,162 635,162 Transfers Out (15,000) (15,000) (97,000) (82,000) TOTAL OTHER FINANCING SOURCES (USES) (5,000) (5,000) 559,212 564,212 NET CHANGE IN FUND BALANCE (15,200) (15,200) 463,833 479,033 FUND BALANCE, Beginning of Year 1,239,617 1,239,617 1,239,617 - FUND BALANCE, End of Year $ 1 ,224,417 1,224,417 1,703,450 $ 479,033 Note: The budget is presented on the modified accrual basis of accounting, which is consistent with accounting principles generally accepted in the United States of America. The original and revised budget reflects the use of $15,200 of accumulated fund balance from prior years, appropriated for current year expenditures. OTHER SUPPLEMENTARY INFORMATION TOWN OF FORT MILL, SOUTH CAROLINA GENERAL FUND SCHEDULE OF DETAILED REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - FINAL BUDGET AND ACTUAL YEAR ENDED SEPTEMBER 30, 2007 FINAL BUDGET ACTUAL VARIANCE REVENUES Taxes: Current Property Taxes 2,225,000 $ 2,129,111 $ (95,889) Current Vehicle Taxes 360,000 338,276 (21,724) Delinquent Taxes 2,000 33,741 3 1,741 Prior Years, Including Penalties and Execution Fees 5,000 11,278 6 ,278 Housing Authority in Lieu of Taxes 28,000 28,714 7 14 Total Taxes 2 ,620,000 2,541,120 (78,880) Fines, Fees, Licenses, and Permits: Privilege Licenses 1 ,400,000 1,652,290 252,290 Duke Power in Lieu of Taxes 135,000 156,835 2 1,835 York Electric in Lieu of Taxes 38,000 47,962 9 ,962 Fines and Penalties 75,000 109,097 3 4,097 Permits 300,400 306,322 5 ,922 Total Fines, Fees, Licenses, and Permits 1 ,948,400 2,272,506 324,106 Charges for Services: Garbage Revenue 365,000 363,977 (1,023) Cemetery Lots 4,000 4,800 8 00 Grave Openings 22,000 16,230 (5,770) Assembly Center Fees 6,000 10,737 4 ,737 Total Charges for Services 397,000 395,744 (1,256) Grant Revenues: Forensics Grant - 23,815 2 3,815 Total Grant Revenues - 23,815 2 3,815 Intergovernmental Revenues: State Shared Revenue 228,826 230,109 1 ,283 Manufacturer's Depreciation Reimbursement 7,500 166 (7,334) Merchants Inventory Tax 15,469 15,469 - Parks 60,000 60,843 8 43 Total Intergovernmental Revenues 311,795 306,587 (5,208) Miscellaneous: York County Natural Gas Authority 40,000 40,583 5 83 School Resource Officers 155,000 167,689 1 2,689 York County Fire Protection 15,580 16,563 9 83 Other 15,000 52,287 3 7,287 Total Miscellaneous $ 2 25,580 277,122 $ 5 1,542 (Continued) TOWN OF FORT MILL, SOUTH CAROLINA GENERAL FUND SCHEDULE OF DETAILED REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - FINAL BUDGET AND ACTUAL YEAR ENDED SEPTEMBER 30, 2007 FINAL BUDGET ACTUAL VARIANCE Investment Earnings: Investment Earnings 10,000 $ 35,822 $ 2 5,822 Total Investment Earnings 10,000 35,822 2 5,822 TOTAL REVENUES ALL SOURCES 5 ,512,775 5,852,716 339,941 EXPENDITURES General Government: Town Council: Personnel Services 4,894 (1,174) 6 ,068 Operating Expenditures 221,866 233,971 (12,105) Community Promotions 1,500 1,601 (101) Miscellaneous 500 265 2 35 Total Town Council 228,760 234,663 (5,903) Administration: Personnel Services 312,447 282,574 2 9,873 Operating Expenditures 263,698 326,865 (63,167) Capital Outlay - 59,167 (59,167) Total Administration 576,145 668,606 (92,461) Total General Government 804,905 903,269 (98,364) Judicial: Municipal Court: Personnel Services 18,479 30,678 (12,199) Operating Expenditures 24,441 14,849 9 ,592 Capital Outlay 3,500 1,341 2 ,159 Total Judicial 46,420 46,868 (448) Public Works: Administration: Personnel Services 90,533 84,215 6 ,318 Operating Expenditures 35,086 35,629 (543) Total Administration 125,619 119,844 5 ,775 Sanitation: Personnel Services 178,923 173,566 5 ,357 Operating Expenditures 234,648 244,333 (9,685) Capital Outlay - 123,581 (123,581) Total Sanitation $ 4 13,571 541,480 $ (127,909) (Continued) TOWN OF FORT MILL, SOUTH CAROLINA GENERAL FUND SCHEDULE OF DETAILED REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - FINAL BUDGET AND ACTUAL YEAR ENDED SEPTEMBER 30, 2007 FINAL BUDGET ACTUAL VARIANCE Public Works (Continued): Building and Grounds: Personnel Services 424,465 $ 404,014 $ 2 0,451 Operating Expenditures 85,596 79,930 5 ,666 Total Building and Grounds 510,061 483,944 2 6,117 Street Department: Personnel Services 139,285 144,431 (5,146) Operating Expenditures 215,627 292,810 (77,183) Capital Outlay - 18,550 (18,550) Total Street Department 354,912 455,791 (100,879) Garage and Vehicle: Personnel Services 48,668 48,877 (209) Operating Expenditures 48,999 43,776 5 ,223 Total Garage and Vehicle 97,667 92,653 5 ,014 Total Public Works 1 ,501,830 1,693,712 (191,882) Public Safety: Police Department: Personnel Services 1 ,714,587 1,681,236 3 3,351 Operating Expenditures 331,332 337,953 (6,621) Capital Outlay 25,200 130,896 (105,696) Total Police Department 2 ,071,119 2,150,085 (78,966) Fire Department: Personnel Services 429,458 442,693 (13,235) Operating Expenditures 142,228 169,367 (27,139) Capital Outlay 17,450 62,942 (45,492) Total Fire Department 589,136 675,002 (85,866) Total Public Safety 2 ,660,255 2,825,087 (164,832) Cultural and Recreation: Recreation: Personnel Services 58,121 60,162 (2,041) Operating Expenditures 82,145 76,266 5 ,879 Capital Outlay 37,500 28,285 9 ,215 Total Cultural and Recreation $ 1 77,766 164,713 $ 1 3,053 (Continued) TOWN OF FORT MILL, SOUTH CAROLINA GENERAL FUND SCHEDULE OF DETAILED REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - FINAL BUDGET AND ACTUAL YEAR ENDED SEPTEMBER 30, 2007 FINAL BUDGET ACTUAL VARIANCE Debt Service: Principal Retirement 331,799 $ 248,716 $ 8 3,083 Interest and Fiscal Charges - 65,730 (65,730) Total Debt Service 331,799 314,446 1 7,353 TOTAL EXPENDITURES 5 ,522,975 5,948,095 (425,120) EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES (10,200) (95,379) (85,179) OTHER FINANCING SOURCES (USES) Proceeds from the Disposal of Capital Assets 10,000 21,050 1 1,050 Capital Lease - 635,162 635,162 Transfers Out (15,000) (97,000) (82,000) TOTAL OTHER FINANCING SOURCES (USES) (5,000) 559,212 564,212 NET CHANGE IN FUND BALANCE (15,200) 463,833 479,033 FUND BALANCE, Beginning of Year 1 ,239,617 1,239,617 - FUND BALANCE, End of Year $ 1,224,417 1,703,450 $ 4 79,033 TOWN OF FORT MILL, SOUTH CAROLINA COMBINING BALANCE SHEET - NON-MAJOR FUNDS SEPTEMBER 30, 2007 TOAL SPECIAL REVENUE FUNDS COMMUNITY NON-MAJOR NARCOTICS DEVELOPMENT FUNDS ASSETS Cash and Cash Equivalents 33,546 $ 8 3,012 $ 1 16,558 Cash and Cash Equivalents, Restricted - - - Receivables, Net: Other - 2 ,313 2 ,313 TOTAL ASSETS 3 3,546 8 5,325 1 18,871 LIABILITIES AND FUND BALANCES LIABILITIES Accounts Payable 2 ,059 6 ,002 8 ,061 Deferred and Unearned Revenues - 2 ,313 2 ,313 TOTAL LIABILITIES 2 ,059 8 ,315 1 0,374 FUND BALANCES Unreserved - Undesignated 3 1,487 7 7,010 1 08,497 TOTAL FUND BALANCES 3 1,487 7 7,010 1 08,497 TOTAL LIABILITIES AND FUND BALANCES $ 3 3,546 8 5,325 $ 1 18,871 TOWN OF FORT MILL, SOUTH CAROLINA COMBINING SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - NON-MAJOR FUNDS YEAR ENDED SEPTEMBER 30, 2007 TOTAL SPECIAL REVENUE FUNDS COMMUNITY NON-MAJOR NARCOTICS DEVELOPMENT FUNDS REVENUES Grants - $ 3 00,000 $ 3 00,000 Miscellaneous 9 ,151 - 9 ,151 Investment Earnings 5 78 - 5 78 TOTAL REVENUES ALL SOURCES 9 ,729 3 00,000 3 09,729 EXPENDITURES Current: Public Safety 1 3,361 - 1 3,361 Community Development - 3 06,054 3 06,054 TOTAL EXPENDITURES 1 3,361 3 06,054 3 19,415 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES (3,632) (6,054) (9,686) OTHER FINANCING SOURCES (USES) Transfers In 3 5,118 5 4,530 8 9,648 Transfers Out (39,530) (35,118) (74,648) TOTAL OTHER FINANCING SOURCES (USES) (4,412) 1 9,412 1 5,000 NET CHANGE IN FUND BALANCES (8,044) 1 3,358 5 ,314 FUND BALANCES, Beginning of Year 3 9,531 6 3,652 1 03,183 FUND BALANCES, End of Year $ 3 1,487 7 7,010 $ 1 08,497 TOWN OF FORT MILL, SOUTH CAROLINA PROPRIETARY FUND SCHEDULE OF DETAILED REVENUES, EXPENSES, AND CHANGES IN FUND NET ASSETS - FINAL BUDGET AND ACTUALS YEAR ENDED SEPTEMBER 30, 2007 GROSS REVENUE FINAL BUDGET (Budgetary Basis) ACTUAL (Budgetary Basis) GAAP Adjustments ACTUAL (GAAP) VARIANCE (Budgetary Basis) OPERATING REVENUES Water Revenue and Penalties 1,221,500 $ 1,523,000 - 1,523,000 $ 301,500 Sewer Revenues 1,550,000 1,687,056 - 1,687,056 137,056 York County Water Sales 718,200 1,217,951 - 1,217,951 499,751 Riverview Water Sales 119,900 147,129 - 147,129 27,229 Tega Cay Water Sales 206,000 255,323 - 255,323 49,323 Water Taps 250,000 282,825 - 282,825 32,825 Sewer Taps 300,000 426,600 - 426,600 126,600 Other Revenues 2,000 597 - 597 (1,403) TOTAL OPERATING REVENUES 4,367,600 5,540,481 - 5,540,481 1,172,881 OPERATING EXPENSES Water: Water Purchases 1,308,413 1,802,936 - 1,802,936 (494,523) Salaries 574,224 576,261 - 576,261 (2,037) Fringe Benefits 117,311 103,765 - 103,765 13,546 Material and Supplies 75,700 120,473 - 120,473 (44,773) Electricity 2,500 1,283 - 1,283 1,217 Permits 12,500 10,519 - 10,519 1,981 Insurance 8,012 8,012 - 8,012 - Water Meter Replacement 25,000 84,291 - 84,291 (59,291) Equipment Repairs 7,500 4,636 - 4,636 2,864 Other Repairs 4,000 - - - 4,000 Postage 10,000 13,216 - 13,216 (3,216) Gas, Oil, and Grease 11,000 11,840 - 11,840 (840) Street Maintenance 90,000 96,837 - 96,837 (6,837) Miscellaneous 2,000 8,525 - 8,525 (6,525) Auto Repairs 6,500 4,762 - 4,762 1,738 Uniforms 6,800 6,523 - 6,523 277 Water and Heat 1,000 - - - 1,000 Telephone 9,500 10,475 - 10,475 (975) Travel/Training 2,500 504 - 504 1,996 Transportation - 18,998 (18,998) - (18,998) Membership/Dues 1,200 1,188 - 1,188 12 Advertising 1,000 2,166 - 2,166 (1,166) Professional Services 22,500 69,575 - 69,575 (47,075) Hydrant Repairs 20,000 13,225 - 13,225 6,775 Pre-Employment Expense 3,000 224 - 224 2,776 Contracted services 5,000 11,482 - 11,482 (6,482) Employee Assistance 230 216 - 216 14 Building Maintenance 1,500 1,166 - 1,166 334 Capital Outlay 71,400 43,813 (20,131) 23,682 27,587 $ 2,400,290 3,026,911 (39,129) 2,987,782 $ (626,621) (Continued) TOWN OF FORT MILL, SOUTH CAROLINA PROPRIETARY FUND SCHEDULE OF DETAILED REVENUES, EXPENSES, AND CHANGES IN FUND NET ASSETS - FINAL BUDGET AND ACTUALS YEAR ENDED SEPTEMBER 30, 2007 GROSS REVENUE FINAL BUDGET (Budgetary Basis) ACTUAL (Budgetary Basis) GAAP Adjustments ACTUAL (GAAP) VARIANCE (Budgetary Basis) Sewer: Salaries 224,565 $ 224,992 - 224,992 $ (427) Fringe Benefits 79,766 81,619 - 81,619 (1,853) Electricity 60,000 64,145 - 64,145 (4,145) Equipment Repairs 17,500 13,996 - 13,996 3,504 Material and Supplies 50,000 42,528 - 42,528 7,472 Electricity Lift Station 30,000 28,211 - 28,211 1,789 Alum 25,000 20,270 - 20,270 4,730 Professional Services 32,000 53,582 - 53,582 (21,582) Insurance 21,990 21,990 - 21,990 - Contract Labor 13,500 31,490 - 31,490 (17,990) Chemicals 15,000 14,435 - 14,435 565 Lab Supplies 4,000 2,429 - 2,429 1,571 Gas, Oil, and Grease 14,500 14,306 - 14,306 194 Service Contracts 4,000 3,691 - 3,691 309 Natural Gas 10,000 121 - 121 9,879 Auto Repairs 5,500 5,184 - 5,184 316 Telephone 5,000 4,334 - 4,334 666 Uniforms 7,500 6,902 - 6,902 598 Travel/Training 4,200 1,726 - 1,726 2,474 Transportation 33,450 7,378 (7,378) - 26,072 Miscellaneous 348,855 376,688 (300,621) 76,067 (27,833) Water and Heat 3,500 938 - 938 2,562 Building Maintenance 12,500 2,028 - 2,028 10,472 Lime 17,000 12,029 - 12,029 4,971 Membership/Dues 1,000 250 - 250 750 Landfill Fees 70,000 44,511 - 44,511 25,489 Permits 3,500 2,280 - 2,280 1,220 Pump Station Repairs 25,000 40,750 - 40,750 (15,750) Machinery and Equipment - 20,131 (20,131) - (20,131) Pump Station Monitoring 7,500 1,390 - 1,390 6,110 Employee Assistance 250 140 - 140 110 1,146,576 1,144,464 (328,130) 816,334 2,112 Other Operating Expenses 5,517 1,690 - 1,690 3,827 Depreciation - - 739,868 739,868 - TOTAL OPERATING EXPENSES 3,552,383 4,173,065 372,609 4,545,674 (620,682) OPERATING INCOME (LOSS) $ 815,217 1,367,416 (372,609) 994,807 $ 552,199 (Continued) TOWN OF FORT MILL, SOUTH CAROLINA PROPRIETARY FUND SCHEDULE OF DETAILED REVENUES, EXPENSES, AND CHANGES IN FUND NET ASSETS - FINAL BUDGET AND ACTUALS YEAR ENDED SEPTEMBER 30, 2007 GROSS REVENUE FINAL BUDGET (Budgetary Basis) ACTUAL (Budgetary Basis) GAAP Adjustments ACTUAL (GAAP) VARIANCE (Budgetary Basis) NON-OPERATING REVENUES (EXPENSES) Donated Capital Assets - $ - 627,857 627,857 $ - Investment Earnings 20,000 74,721 - 74,721 54,721 Debt Service (944,217) (62,422) (428,564) (490,986) 881,795 Tega Cay Water Line Payment 12,000 12,000 - 12,000 - Gain (Loss) on Sale of Capital Assets 1,000 - - - (1,000) TOTAL NON-OPERATING REVENUES (EXPENSES) (911,217) 24,299 199,293 223,592 935,516 CHANGE IN NET ASSETS (96,000) 1,391,715 (173,316) 1,218,399 1,487,715 NET ASSETS, Beginning of Year 12,804,179 12,804,179 - 12,804,179 - NET ASSETS, End of Year $ 12,708,179 14,195,894 (173,316) 14,022,578 $ 1,487,715 Note: The above budgetary information has been prepared on the Town's budgetary basis (cash basis), which is not consistent with accounting principles generally accepted in the United States of America ("GAAP"). The actual budgetary basis results have been adjusted to reflect GAAP adjustments to tie to the basic financial statements as follows: - Depreciation Expense $ (739,868) - Capital Asset Additions 367,259 - Donated Capital Assets (Infrastructure) 627,857 - Principal Payments on Debt and Capital Leases (428,564) Total GAAP Adjustments $ (173,316) TOWN OF FORT MILL, SOUTH CAROLINA SCHEDULE OF MUNICIPAL COURT FINES, ASSESSMENTS, AND SURCHARGES YEAR ENDED SEPTEMBER 30, 2007 Court Fines and Assessments Court Fines and Assessments Collected 285,121 $ Court Fines and Assessments Retained by the City (126,026) Total Court Fines and Assessments Remitted to the State Treasurer 159,095 Victim Assistance Fund Funds Available for Carryforward, Beginning of Year 63,500 Court Assessments Allocated to Victim Assistance Fund 18,085 Victim Assistance Fund Expenditures (Primarily Salaries and Benefits) ( 28,480) Funds Available for Carryforward, End of Year $ 53,105 (This page intentionally left blank.) REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF BASIC FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Members of Town Council Town of Fort Mill Fort Mill, South Carolina We have audited the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the Town of Fort Mill, South Carolina, (the “Town”) as of and for the year ended September 30, 2007, which collectively comprise the Town’s basic financial statements, and have issued our report thereon dated February 19, 2008. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Internal Control Over Financial Reporting In planning and performing our audit, we considered the Town’s internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinions on the basic financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Town’s internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Town’s internal control over financial reporting Our consideration of internal control over financial reporting was for the limited purpose described in the preceding paragraph and would not necessarily identify all deficiencies in internal control over financial reporting that might be significant deficiencies or material weaknesses. However, as discussed below, we identified certain weaknesses in internal control over financial reporting that we consider to be significant deficiencies. A control deficiency exists when the design or operation of a control does not allow management or employees, in the n