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AUDIT: 2010 AUDIT REPORT cp- COUNTY G L E F-1 K ° RE R 0 E R r ' Box H Boulder, P,1on'Lana 59632 ' JEFFERSON COUNTY, MONTANA Fiscal Year Ended June 30, 2010 ' AUDIT REPORT 1 1 1 1 1 ' Denning, Downey & Associates, P.C. ' CERTIFIED PUBLIC ACCOUNTANTS t JEFFERSON COUNTY, MONTANA tFiscal Year Ended June 30, 2010 TABLE OF CONTENTS Organization I ' Management Discussion and Analysis 2-7 Independent Auditor's Report 8-9 ' Financial Statements ' Government-wide Financial Statements Statement of Net Assets 10 Statement of Activities 11 ' Fund Financial Statements Balance Sheet—Governmental Funds 12 ' Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Assets 13 Statement of Revenues, Expenditures and Changes in Fund Balance— Governmental ' Funds 14 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities 15 ' Balance Sheet—Proprietary Funds 16 Statement of Revenues, Expenses, and Changes in Net Assets—Proprietary Funds 17 Statement of Cash Flows—Proprietary Fund Types 18 ' Fiduciary Funds— Statement of Fiduciary Net Assets 19 Fiduciary Funds—Statement of Changes in Fiduciary Net Assets 20 ' Notes to Financial Statements 2141 ' Required Supplemental Information Budgetary Comparison Schedule 42-44 Schedule of Funding Progress—Other Post Employment Benefits Other Than Pensions 45 ' Single Audit Section Schedule of Expenditures of Federal Awards 46 ' Notes to the Schedule of Expenditures of Federal Awards 47 Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 48-49 -i- JEFFERSON COUNTY, MONTANA ' TABLE OF CONTENTS—Continued Independent Auditor's Report on Compliance with Requirements that could have a ' Direct and Material Effect on Each Major Program and on Internal Control Over Compliance in Accordance with OMB Circular A-133 50-51 ' Schedule of Findings and Questioned Costs 52-56 Report on Other Compliance, Financial, and Internal Accounting Control Matters 57 Report on Prior Audit Recommendations 58 ' Auditee's Response to Findings 59-61 1 1 _ii_ ' JEFFERSON COUNTY, MONTANA ' ORGANIZATION ' Fiscal Year Ended June 30, 2010 ' BOARD OF COUNTY COMMISSIONERS Tom Lythgoe Chairperson ' Leonard Wortman Commissioner David H. Kirsch Commissioner ' COUNTY OFFICIALS ' Mathew Johnson County Attorney/Public Administrator Patty O'Neill Treasurer Bonnie Ramey Clerk and Recorder/Assessor Marilyn Craft Clerk of District Clerk Dennis H. Giulio Justice of the Peace Garry A. Pace School Superintendent ' Craig Doolittle Sheriff/Coroner -1- Jefferson County ' Management's Discussion and Analysis Fiscal Year Ended June 30,2010 ' The financial management of Jefferson County Montana offer this discussion and analysis of the financial statements as a narrative to provide an easy to read and understand over view of the Jefferson County financial documents, which are also included. The public is encouraged to read ' this analysis, and the corresponding financial reports. The Financial Statements ' The financial statements presented herein include all of the activities of Jefferson County Montana using the integrated approach as prescribed by GASB Statement No. 34. The calculation of annual required contributions for post employee benefits as required by GASB 45 is on file at the Jefferson County Clerk& Recorders office. The Government-wide Financial Statements present the financial picture of the County from the economic resources measurement focus using the accrual basis of accounting. They present ' governmental activities and business-type activities separately. These statements include all assets of the County as well as all liabilities (including long term debt). Additionally, certain eliminations have occurred as prescribed by the statement in regards to inter-fund activity, ' payables and receivables. The Fund Financial Statement includes statements for each of the three categories of activities; ' governmental, business-type and fiduciary. The governmental activities are prepared using the current financial resources measurement focus and modified accrual basis of accounting. The business-type activities are prepared using the economic resources measurement focus and the ' accrual basis of accounting. The fiduciary activities are agency funds, which only report a balance sheet and do not have a measurement focus. Reconciliation of the Fund Financial Statements to the Government-Wide Financial Statements is provided to explain the differences ' created by the integrated approach. In abbreviated terms the Government-wide Financial Statements deal with Mill Levy funded ' activities, such as the General Fund. The Business Type Activity Funds deal with enterprise funds, such as Solid Waste. The Fiduciary Balance Sheet is the Medical Flex Account. ' Financial Highlights • The Governmental Activities net assets of Jefferson County exceed its liabilities at the ' close of the most recent fiscal year by$12,406,375. • The Business-type Activities net assets of Jefferson County exceed its liabilities at the ' close of the most recent fiscal year by$928,948. • Governmental Activities unrestricted net assets in the amount of $1,806,487 and Business-type Activities unrestricted net assets in the amount of$568,060 may be used to meet the government's ongoing obligations to citizens and creditors in accordance with the county's fund designations and fiscal policies. -2- • The County's Governmental Activities net assets increased by $473,393. ' • The County's Business-type Activities net assets increased by $198,069. , • Cash reserves remained at the same level as in 2008 and 2009. Analysis of Financial Highlights ' Jefferson County's financial position remains solid. The cash on hand has decreased in the ' amount of$79,084.95. A contributing factor was the county's expenditure of$90,489.52 for the water/sewer project for the Montana Developmental Center's South Campus location. The project was financed in conjunction with Jefferson Local Development Corp. (JLDC) through ' Stimulus Project Fund 4990. The unrestricted net assets of$1,806,487 for Government Activities and $568,060 for Business- ' type Activities may be used to meet the government's ongoing obligations to citizens and creditors in accordance with the county's fund designations. The increase in the Business-type Activities Fund was due in part to reimbursement by the , insurance company for the theft from the Enterprise Solid Waste Fund 5410 of the previous year. Jefferson County has continued in offering competitive salaries to our employees and quality ' services to our residents while bettering our cash for the year. The governing body will need to closely watch the budget as the financial condition of the country continues to oscillate. Jefferson , County will continue to work towards bettering our cash position while safe guarding the services provided to county residents. Analysis of Significant Changes Federal PILT money was received by Jefferson County in the amount of$886,716. ' The voters of Jefferson County voted in levies of approximately $267,460 for Health Fund 2270, and $401,190 for Public Safety Fund 2300. ' Jefferson County created several RSIDs. The purpose of the RSIDs is to improve existing roads with an asphalt surface. The RSIDs have allowed Jefferson County to add services to residents ' that are willing to partner with the county. These improvements also help Jefferson County improve it's cash position. The increase of the Business-type Activities Fund was in part due to Jefferson County's ' insurance carrier's reimbursement of the stolen funds from the previous year in the amount of $37,630.27. , -3- , tJefferson County has created two Tax Increment Financing (TIF) Districts. One is located in the northern end of the county and the other in the southern end. The districts are a proactive ' measure to help diversify the Jefferson County economy away from the over dependence on natural resources. The purpose of the TIF is to get public infrastructure developed in an area currently without infrastructure to set the stage for future value added industrial development. ' This is a good tool for local governments with limited resources to bring infrastructure using the tax increment from new development. TIF is for 15-years or could be longer if a bond is sold to finance the infrastructure. ' Analysis of Significant General Fund Variations ' There were no major variations in the General Fund budget. Analysis of Significant Capital Assets and Long Term Debt ' Jefferson County continues to pursue the creation of new RSIDs. These RSIDs cause long term debt, but allow Jefferson County to improve infrastructure with payment from residents who are ' benefitted by the improvements. This local partnership strategy has been very well received and will be an on-going program for Jefferson County. ' The Intercap Loan assumed by the county financed the completion of the following projects: recarpeting of the Courthouse; drainage/sidewalk repair; furniture for Justice Court; furniture and equipment for the Treasurers office; electrical upgrades, and cover for handicap ramp. ' The debt assumed by Jefferson County this fiscal year increased by $65,092.24. A total of $115,000.00 was paid on RSID #2505, $3,905.40 was paid on RSID #2507, $24,413.37 was paid ' on the Qwest 911 Lease, $5,617.83 was paid on General Fund 1000, leaving $1,832,729.69 owed. Account RSID bonds Debt Paid Owed payable/Intercap Loan 07/01/2009 06/30/2010 ' 231400 RSID #2503 700,000.00 0.00 700,000.00 231401 RSID #2505 520,000.00 115,000.00 405,000.00 235301 RSID # 2507 74,229.04 3,905.40 70,323.64 235302 RSID #2511 0.00 0.00 226,345.93 235306 RSID 4 2517 0.00 0.00 172,374.81 ' 235305 Qwest 911 Lease 125,088.69 24,413.37 100,675.32 235000 General Fund 1000 163,627.82 5,617.83 158,009.99 -4- Infrastructure Assets ' The Quaintance Lane Bridge was booked as a major infrastructure asset this fiscal year in the amount of$200,149.77. ' Future Projects Mining operations have fluctuated in Jefferson County causing the net and gross proceeds to go ' down for fiscal year 2011, thus affecting the taxable valuation. However, Jefferson County has many future projects which will provide better service to our residents, and county departments: , Jefferson County continues to pursue the creation of new RSIDs. This provides a vehicle for county residents to partner with the county to improve roads which residents use to ' access their homes and businesses. The resources the county has for improving roads and staying within the budget are limited, and the RSID process will allow us to continue to ' expand our capabilities. Jefferson County is now in the process of establishing a Water/Sewer District in the ' northern end of Jefferson County located in Clancy. It is a process similar to the establishment of an RSID. The rapid growth in the northern end has the potential to create water quality issues for people and their water supply wells. ' With funds from the Intercap loan Jefferson County continues to pursue the expansion of our building infrastructure. Jefferson County is experiencing exponential population , growth, and this has caused us to run short of space. Many of our goals have been accomplished. Remaining projects that are in the process of being addressed are the replacement of the roof and the building of additional storage space for the Justice Dept. , building. All of the projects accomplished through the use of the Intercap Loan funds have the potential to impact Jefferson County's bonding authority, as well as our long term debt. The projects will help us to provide continued excellence in services to our , county residents. Jefferson County has applied for additional Treasure State Endowment Program (TSEP) , funds to improve or replace the Basin Creek Bridge over Basin Creek, Dunn Lane Bridge over the Boulder River, and the Cottonwood Canyon Bridge over Cottonwood Creek. Previous projects have been successfully completed bringing integrity to a structurally sound Jefferson County bridge system county wide. Jefferson County continues the process of negotiating with the National Forest Service ' and Bureau of Land Management for vacated land and buildings located in Boulder. The buildings would help the county address office space needs. The land would enable us to move forward with plans to develop an animal shelter, dealing with the ever growing ' problem of animal control. Due to economic impacts, Jefferson County is assisting Elkhorn Goldfields Inc. in their ' endeavor to open two of their permitted gold mines within the county through the procurement of American Recovery and Reinvestment Act (ARRA) Bonds. The ARRA allows for the issuance of bonds for economic development. The dollars are Federal ' dollars allocated to Montana's Governor's Office of Economic Development. The -5- , ' Governor's Office has issued $60,000,000.00 in bonds with Jefferson County being the conduit for the funds to assist Tunnels (an existing mine now closed), and the Sourdough Mine (a new mine) in opening. Jefferson county acts solely as a pass-through agent for ' the $60 million dollars and has no financial liability if the mining ventures are not successful. In addition to the $60 million dollars in bonds the mine owners must raise an additional $20,000,000.00 in private capital for both mines to open. This must be ' accomplished by December 31, 2010. If that does not come to fruition the ARRA bonds disappear forever. • The Community Transportation Enhancement Program(CTEP)provides money allocated through the Montana Department of Transportation (MDT) for the purpose of improving communities. Through the program money has been allocated to the Montana City ' Bike/Pedestrian Trail, and that trail will be completed next summer. Additionally, the Town of Whitehall will be allocated any remaining funds left on deposit with the State, and possibly some future years of MDT allocations to the county. Jefferson County's ' yearly allocation is approximately$46,000.00 in CTEP Funds. Signature Date ' Tomas E. Lythgoe, Chair Jefferson County Board of Commissioners ' Jefferson County,Montana MD&A Comparisons June 30,2010 Table 1 -Net Assets ' Governmental Business-type Activities Activities ' Change Change FY10 FY09 Inc(Dee) FY10 FY09 Inc (Dee) Current and other assets $10,775,188 $10,431,134 $ 344,054 $ 673,982 $ 458,091 $ 215,891 ' Capital assets 4,143,629 3,613,126 530,503 290,900 311,357 (20,457) Total assets $14,918,817 $14,044,260 $ 874,557 $ 964,882 $ 769,448 $ 195,434 ' Long-tern debt outstanding $ 2,512,442 $ 1,932,688 $ 579,754 $ 35,934 $ 25,734 $ 10,200 Other liabilities 178,590 (178,590) 12,835 (12,835) Total liabilities $2,512,442 $ 2,111,278 $ 401,164 $ 35,934 $ 38,569 $ (2,635) Net assets: Invested in capital assets, net of debt $ 2,310,898 $ 2,095,272 $ 215,626 $ 290,900 $ 311,357 $ (20,457) Restricted 8,288,990 69,241 8,219,749 69,988 69,968 20 Unrestricted(deficit) 1,806,487 9,768,469 (7,961,982) 568,060 349,554 218,506 Total net assets $12,406,375 $11,932,982 $ 473,393 $ 928,948 $ 730,879 $ 198,069 Table 2- Changes in Net Assets ' Governmental Business-type Activities Activities , Change Change Revenues FY10 FY09 Inc Dec FY10 FY09 Inc Dec ,Program revenues (by major source): Charges for services $ 841,775 $ 682,899 $ 158,876 $ 21,499 $ 668,922 $(647,423) Operating grants and contributions 1,743,727 940,738 802,989 _ Capital grants and contributions 30,150 - 30,150 - _ _ General revenues (by major source): Property taxes for general ' purposes 4,725,671 4,654,913 70,758 776,740 7,535 769,205 Miscellaneous 128,513 42,299 86,214 79,935 - 79,935 Interest/investment earnings 94,225 142,439 (48,214) 20 99 (79) , PILT 886,716 - 886,716 - State entitlement 654,606 - 654,606 Grants and entitlements not , restricted to specific programs 544 2,622,501 (2,621,957) Local Option Tax 442,219 431,235 10,984 Licenses and Permits 136,283 1,747 134,536 , Contributions& donations 206,136 - 206,136 Total revenues $9,890,565 $9,518,771 $ 371,794 $ 878,194 $ 676,556 $2-1 638 Program expenses General government $3,056,626 $2,641,234 $ 415,392 ' Public safety 2,332,824 1,988,251 344,573 Public works 2,401,146 1,794,580 606,566 Public health 519,586 402,561 117,025 ' Social and economic services 154,877 153,085 1,792 Culture and recreation 468,238 410,077 58,161 Housing and community ' development 250,880 275,631 (24,751) Conservation of natural resources 148,723 - 148,723 ' Debt service - interest 66,672 54,256 12,416 Miscellaneous - 178,337 (178,337) Solid Waste $ 700,125 $ 720 668 $ (20,543) Total expenses $9,399,572 $7,898,012 $ 1,501,560 $ 700 125 $ 720,668 $ (20 543) , Excess(deficiency) before special items and transfers $ 490,993 $1,620,759 $(1,129,766) $178,069 $(44,112) $ 222,181 Gain (loss)on sale of capital , assets $ 2,400 $ (7,375) $ 9,775 $ - $ $ _ Transfers-net $ (20,000) $ - $ (20,000) $ 20,000 $ $ 20,000 ' Increase(decrease)in net assets $ 473,393 $1,613,384 $(1,139,991) $198,069 $(44,112) $ 242,181 Denning, Downey & Associates, P.C. ' CERTIFIED PUBLICACCOUNTANTS 1740 U.S. Hwy 93 South, P.D. Box 1957, Kalispell, MT 59903-1957 INDEPENDENT AUDITOR'S REPORT ' Board of County Commissioners Jefferson County ' Boulder, Montana We have audited the accompanying financial statements of the governmental activities, business- ' type activities, each major fund, and the aggregate remaining fund information of Jefferson County, Montana, as of and for the year ended June 30, 2010, which collectively comprise the County's basic financial statements as listed in the table of contents. These financial statements are the responsibility of Jefferson County management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards ' require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also ' includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that ' our audit provides a reasonable basis for our opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, business-type activities, each major fund, and the aggregate remaining fund information of the Jefferson County, Montana, as of June 30, 2010, and the respective changes in financial position, and cash flows thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. ' As described in Note 1, the County has implemented the Post Retirement Benefits other than Pensions, as required by the provisions of GASB Statement No. 45, as of June 30, 2010. ' In accordance with Government Auditing Standards, we have also issued our report dated March 28, 2011, on our consideration of the Jefferson County's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts, and grant ' agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing and not to provide an opinion on the internal control over financial reporting or on compliance. That ' report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. -8- ' Robert K. Denning, CPA Kim ALL Downey, CPA Accounting principles generally accepted in the United States of America require that the , management's discussion and analysis, budgetary comparison information, and schedule of funding for other post employment benefits other than pensions on pages 2 through 7, 42 through 44, and 45 be presented to supplement the basic financial statements. Such information, ' although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We ' have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of Americas, which consisted of inquiries of management about the methods of preparing the information and comparing the , information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited ' procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Our audit was conducted for the purpose of forming opinions on the financial statements that ' collectively comprise the County's basic financial statements. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by ' U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, and is also not a required part of the basic financial statements of Jefferson County, Jefferson County, Montana. The schedule of expenditures of federal awards is the responsibility of management and was derived from and relate directly to the underlying accounting and other records used to prepare the financial statements. The information has be subjected to the auditing procedures applied in the audit of the financial statements and certain ' additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing , standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole. �, c Q aaer: o CPA 5Pc. ' March 28, 2011 U 1 ' Jefferson County,Montana Statement of Net Assets ' June 30,2010 Governmental Business-type Activities Activities Total ASSETS Current assets: Cash and investments $ 8,527,216 $ 484,202 $ 9,011,418 ' Taxes and assessments receivable,net 900,927 119,642 1,020,569 Special assessments receivable deferred 1,105,000 1,105,000 Accounts receivable-net - 150 150 Notes and loans receivable 145,112 - 145,112 Due from other governments 96,933 - 96,933 Total current assets $ 10,775,188 $ 603,994 $ 11,379,182 ' Noncurrent assets Restricted cash and investments S - $ 69,988 $ 69,988 Capital assets-land 114,230 59,399 173,629 Capital assets-depreciable,net 4,029,399 231,501 4,260,900 ' Total noncurrent assets $ 4,143,629 $ 360,888 $ 4,504,517 Total assets $ 14,918,817 $ 964,882 $ 15,883,699 LIABILITIES Current liabilities Current portion of long-term liabilities $ 49,786 $ - $ 49,786 Current portion of long-term capital liabilities 36,930 - 36,930 Current portion of compensated absences payable 329,452 16,969 346,421 Total current liabilities $ 416,16a $ 16,969 $ 433,137 Noncurrent liabilities Noncurrent portion of long-term liabilities $ 1,745,240 $ 13,308 $ 1,758,548 Noncurrent portion of long-term capital liabilities 221,756 221,756 Noncurrent portion of compensated absences 129,278 5,657 134,935 ' Total noncurrent liabilities $ 2,096,274 $ 18,965 $ 2,115,239 Total liabilities $ 2,512,442 $ 35,934 $ 2,548,376 NET ASSETS ' Invested in capital assets,net of related debt $ 3,884,943 $ 2909900 $ 4,175,843 Restricted for capital projects 65,249 65,249 Restricted for debt service 207,722 - 207,722 ' Restricted for special projects 8,016,019 - 8,016,019 Restricted for other purposes 69,988 69,988 Unrestricted 232,442 568,060 800,502 Total net assets $ 12,406,375 $ 928,948 $ 13,335,323 ' Total liabilities and net assets $ 14,918,817 $ 964,882 $ 15,883,699 ' See accompanying Notes to the Financial Statements _10- Jefferson County,Montana Statement of Activities For the Fiscal Year Ended June 30,2010 Net(Expenses)Revenues and Changes in Net Assets Program Revenues Primary Government Operating Capital Business- Functions/Program Chargmfor Grants and Grants and Governmental type Primary government: Ex e>� Services Contributions Contributiore Activities Activities Total Primary government: Governmental activities: General government S 3,056,626 $ 451,934 $ 272,060 $ 30,150 $ (2,302,482) $ - $ (2302,482) Public safety 2,332,824 329,732 660,362 - (1342,730) - (1,342,730) Public works 2,401,146 - 665,993 - (1,735,153) - (1,735,153) Public health 519,586 39,949 143,628 (336008) - (336,009) Social and economic services 154,877 154,877 Culture and recreation 468,238 20,160 1,684 - (446,394) - (446,394) Housing and community development 250,880 (250,880) - 250,880 Conservation of natural resources 148,723 ( ) (148,723) - (148,723) Debt service -imerest 66,672 (66,672) - (66672) Total governmental activities $ 9,399,572 S 841,775 $ 1 743 727 $ 30,150 S (6,783,920) $ - $ (6,783,920) Business-type activities: Solid Waste $ 700,125 $ 21,499 $ - $ - $ _ S (678626) S (678626) Total busianss-type activities S 700,125 S 21,499 $ - $ - S - S (678,626) $ (678626) Total primary government $ 10,099,697 $ 863,274 $ 1,743,727 S 30,150 $ (6,783920) $ (678,626) S (7,462,546) General Revenues- ' Property taxes for general purposes S 4,725,671 $ 776,740 $ 5,502,411 Miscellaneous 128,513 79,935 208,448 Interest/invesbnent earnings 94,225 20 94,245 PIT 886,716 - 896,716 State entitlement 654,606 - 654,606 Grants and entitlements not restricted to specific programs 544 - 544 Local Option Tax 442,219 - 442,219 Licenses and Permits 136,283 - 136,283 Contributions&donations 206,136 - 206,136 Gain(loss)on We of capital assets 2,400 - 2,400 Transfers-net (20,000) 20,000 Total general revenues,special items and transfers $ 7,257,313 S 876,695 $ 8,134,008 Change in net assets $ 473,393 $ 198,069 $ 671,462 Net assets-beginning $ 11,932,982 $ 730,879 $ 12,663,861 Net assets-end $ 12,406,375 S 928,948 $ 13,335,323 See accompanying Notes to the Financial Statements JeRenoo Comp,Monnaun Bahme Sbmt G,,.mental Funds June 30,2010 Other Tau] Hard Rock Mine Saddle Metronome Gov.conlel Gave-mental ASSETS Genewl Fund Road Public Safety Trust Account PMT South HIM RSID RSm Fuoda Funds Cu.-4 asse.. Cub endinmtmmu S 412,954 S 212,400 $ 309,256 S 3,305,975 S 1938,640 S 105,324 S 24,597 S 2,20],]]5 f 8,516,911 T.and asscssmm.rce�wble,net 132,170 89,045 326,154 - 4,0]9 204 348,6]5 900,92] Spmiol..ant-.receivable defend _ _ Now ord loam rv.ivable 145,112 - ] 000 405,000 1,105,000 Due fiom edw Ponds 18,065 109,515 ]1,946 - - 145,112 Due fie.other Bove-nwn. 57.012 1 2125 - - 199,526 Tout avxu - - 27,796 %933 S 602,]36 f 301445 S 665,600 S 3560,602 T ?010586 S 809,403 S 429,791 S 2,584246 $ 109,4409 LIABILITIES Cu.,lubifi0m Due m ollar finds S - $ - S 199,536 S 199,526 Defendrtlmin 132]]0 99p45 326,154 ]04019 405304 3486]5 2,005,92] Soul lubilities S 132,]10 S _ 89045 f 326,154 S - S - S ]040]9 S 405204 S 548,201 T 2,205.453 FUND BALANCES Resuved for debt sernco $ - S - S - S p3 - _ 10524 S Rnnvd for wiul msm 24,587 T ]1,811 $ 101,123 uor.ccved'"nodin Smpal fund 469,966 - - - - 65,249 65,249 Unreaetved nponed in sp-W revenue funds - 469 966 312,400 4 33946 3560,602 _ 3,010.586 1892985 8,016,019 Total fiend baWCe $ 469,966 S 212,4W $ 339,446 S 1,560 602 S 2,010,586 f 105 324 S 24,597 S 2,036,045 S 8.158 956 Toullabilitim ad Pond Mlmco S 602,136 T 301.445 S _ 665,600 S 3,560,602 S _ 2,010,586 S _ 809,403 S 429,191 S 2,584,246 S 10964,409 See accompanying Not.m rho Financial Stoner-. N Jefferson County,Montana ' Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Assets , June 30,2010 Total fund balances-governmental funds $ 8,758,956 ' Capital assets used in governmental activities are not financial resources and,therefore,are not reported in , the funds. (Does not inlude$275,216 of capital assets relating to the Internal Serivice Fund) 3,868,413 Property taxes receivable will be collected this year,but are not available soon enough to pay for the current period's expenditures,and therefore are deferred in the funds. 2,005,927 ' An internal service fund is used by management to charge the costs of providing services within the government. The assets and liabilities of the internal service funds are included in governmental activities , in the government-wide statement of net assets 268,852 Long-term liabilities are not due and payable in the current period and therefore are not reported as , liabilities in the funds.(Does not include$16,669 of long-term debt relating to the Internal Service Fund) (2,495,773) Total net assets-governmental activities $ 12,406,375 , See accompanying Notes to the Financial Statements -13- 1 xrtemoo C.1y,M.Y Smeemml oSReaenusN Eapeodil. a,nod Cb M a]Lod 8alaow Go.,-.ml Food. Far MK Fi l Vert Ended Jo 30,2010 Oth r Taw )lard Rx4 Mioe Snddk MaunWia GavemmenW GovemouoW f rat Fund Raad Poblir SMely Tlwe Attoune PILT SwW Dille RSID REVENUES RSID Funds FuMa Taxes ud assessmmis $ I,M."9 S 392,671 S 1,477.515 f S - T 76.659 S 42,860 Lawe.nd pmn,i6; 2360 - 450 $ 1,654,813 $ 4,737,167 M1F8O°anN w 315,892 541,636 - 8,795 11,605 00,656 153,646 886,)16 1,021,6)1 3391,217 Chu86.Wr wvicm 16]241 2.855 112,459 Pig W W.W. 145,286 - _ - - - 334,249 716,803 Miarellwmiu S,561 35,293 38,370 - - 145186 41,371 165,595 ynnM4camnyi d1500 50681 207 3,163 95,835 Tad rtSVlue. - - - - 284 S _ 1819489 f _ 972655 T ;199450 $ 20432] f 886716 S )2.943 S 41.067 S 3.065061 f 926)508 EXPENDITURES Gm..al8overmnn S 2,170,911 S 1,669 I Puble vfery 65,925 - 1,991676 5 S 9,09] S 401,623 $ 2,583,302 Pu kwk. - - 390,]98 2,248,399 PubOchdd - 1,1]9.81] _ 46,061 _ 2'� - 1,145,539 2,328,006 Social M 7,980 - - - - 473,739 518,801 CWaae ud rmead9n - - - - 146,897 154,871 Flmumg ad mnm0uiN dmdomoml - _ - - - - d58,998 458,998 C. 6],150 Oebl semce pn-,W! 6 r u� Id5, 1 _ - 83,]10 250,880 538 8 818 115, 28,118 148,916 Debt xrvia-mmen 2. - - - 000 E�IW OmbY - - 30,657 19,6]0 13,4'3) 66,6)2 _ 116612 ]9996 279,7% 22].000 )11)28 TOW .(&dlmrm $ 25646]1 S 1,261493 S 21)9796 $ 169]90 S 9097 S 3068) S 134.670 S 3.169119 $ 9619322 Ea FIN(d CINC SOURCE1 (U ,expeWnoes T 045182) S (28901)) S (80346) S 14.53] S BYl619 S 42,256 f (91603) S (104.058) S (155814) OTHER FINANCING SOURCES(USES) Prorsds o(Bme.J 3milmndeM S 65,092 S f - $ $ - f S - f 398,]21 S 463,813 Rmeeds fiam do sde o68mma1 W.W a..N Mo . - _ _ " T'.w.and 763,81] 143,20] 63,554 - 500 - 3400 3400 148,633 1,119]11 To o0,u .mums(„-- (81494) - - (149326) (118426]) � n8 ) S RB 909 S 143,207 f 43554 S - 5 NN C (814 443) 00 S S - S 2 .425 $ 401,657 h.age Fwd Educe u f 8172] f (1456301 $ (36]92) S 34.53] S 63178 $ 42,256 S (91603) S 96370 5 _ 45843 Fmd ba600c-bginwg $ 386,D9 $ 369,408 $ 376,238 S 3,526,065 S 1,953055 $ 63068 S 116,190 R... (11,178) _ S 1,922,850 f 8,713,113 Fud bd.rcss-beg0oung,ramtM S 386339 S (560) - 16,325 358230 S 376238 S 3526065 S 194]408 S 63,068 $ 116.190 $ 1,939,675 S 8,713,113 Pud balmre"Q�18 5 469,%6 S X400 S 339.446 S 1560602 S _2,010,586 f 105,724 S 24,587 S 1,036.015 S _ 8,758956 Sm amnmpnryNg Nona b do FiwcW SoRm Jefferson County,Montana Reconciliation of the Statement of Revenues,Expenditures , and Changes in Fund Balances of Governmental Funds to the Statement of Activities For the Fiscal Year Ended June 30,2010 Amounts reported for governmental activities in the statement of ' activities are different because: Net change in fund balances-total governmental funds $ 45,843 ' Governmental funds report capital outlays as expenditures while governmental activities report ' depreciation expense to allocate those expenditures over the life of the assets: -Capital assets purchased 711,728 -Depreciation expense (204,584) Revenues in the Statement of Activities that do not provide current financial resources are not reported as ' revenues in the funds: -Donated capital assets 30,150 ' -Long-term receivables(deferred revenue) 472,547 The change in compensated absences is shown as an expense in the Statement of Activities (43,901) ' Repayment of debt principal is an expenditures in the governmental funds,but the repayment reduces long• term debt in the Statement of Net Assets: -Long-term debt principal payments 148,936 , Long term debt proceeds provide current financial resources to the governmental funds,but issuing debt increases long-term liabilities in the Statement of Net Assets: ' -Proceeds from the sale of long-term debt (463,813) Termination benefits are shown as an expense in the Statement of Activities and not reported on the ' Statement of Revenues,Expenditures and Changes in Fund Balance: Other post employment benefits-annual required contribtuion (220,981) Internal service funds are used by management to share the costs of certain activities,to individual funds. ' The net revenue of the internal service funds is reported with the governmental activities of the Government-Wide Statement of Activities net of the amounts allocated to business-type activities and depreciation expense. (2,532) , Change in net assets-Statement of Activities $ 473,393 See accompanying Notes to the Financial Statements ' -15- , Jefferson County,Montana Balance Sheet t Proprietary Funds June 30,2010 ' Business-Type Activities- Governmental Enterprise Funds Activities ' Internal Service Solid Waste Funds ASSETS Current assets: Cash and investments $ 484,202 $ 10,305 Taxes and assessments receivable,net 119,642 - ' Accounts receivable-net 150 - Total current assets $ 603,994 $ 10,305 Noncurrent assets: Restricted cash and investments $ 69,988 $ Capital assets -land 59,399 - Capital assets-depreciable, net 231,501 275,216 Total noncurrent assets $ 360,888 $ 275,216 Total assets $ 964,882 $ 285,521 LIABILITIES Current liabilities: ' Current portion of compensated absences payable $ 16,969 $ 11,168 Total current liabilities $ 16,969 $ 11,168 ' Noncurrent liabilities: Noncurrent portion of long-term liabilities $ 13,308 $ Noncurrent portion of compensated absences 5,657 5,501 ' Total noncurrent liabilities $ 18,965 $ 5,501 Total liabilities $ 35,934 $ 16,669 ' NET ASSETS Invested in capital assets, net of related debt $ 290,900 $ 275,216 Restricted for other purposes 69,988 - t Unrestricted 568,060 (6,364) Total net assets $ 928,948 $ 268,852 Total liabilities and net assets $ 964,882 $ 285,521 ' See accompanying Notes to the Financial Statements -16- Jefferson County,Montana ' Statement of Revenues,Expenses,and Changes in Net Assets ' Proprietary Funds For the Fiscal Year Ended June 30,2010 Business-Type ' Activities- Governmental ' Enterprise Funds Activities Internal Service Solid Waste Funds ' OPERATING REVENUES Charges for services $ 21,498 $ 106,204 Miscellaneous revenues 79,936 18,156 ' Special assessments 770,123 - Total operating revenues $ 871,557 $ 124,360 OPERATING EXPENSES ' Personal services $ 323,335 $ 126,157 Supplies 68,537 21,324 ' Purchased services 248,849 17,176 Fixed charges 22,902 - Depreciation 36,502 6,791 ' Total operating expenses $ 700,125 $ 171,448 Operating income(loss) $ 171,432 $ (47,088) NON-OPERATING REVENUES(EXPENSES) ' Taxes/assessments revenue $ 6,617 $ Interest revenue 20 Total non-operating revenues(expenses) $ 6,637 $ ' Income(loss)before contributions and transfers $ 178,069 $ (47,088) Transfers in 20,000 44,556 Change in net assets $ 198,069 $ (2,532) ' Net Assets-Beginning of the year $ 730,879 $ 271,384 Net Assets-End of the year $ 928,948 $ 268,852 ' See accompanying Notes to the Financial Statements ' -17- tJefferson County, Montana Statement of Cash Flows Proprietary Funds June 30,2010 ' Business-Type Activities- Governmental Enterprise Funds Activities ' Internal Service Solid Waste Fund Cash Bows from operating activities: ' Cash received from providing services $ 739,115 $ - Cash received from interfund services provided 106,204 Cash received from miscellaneous sources 79,936 18,156 Cash payments to suppliers (340,288) (38,500) Cash payments to employees (325,970) (130,954) Net cash provided(used) by operating activities $ 152,793 $_ (45,094) ' Cash flows from capital and related financing activities: Acquisition and construction of capital assets $ (16,045) $ Net cash provided(used) by capital and related financing activities $ (16,045) $ Cash flows from non-capital financing activities: ' Tax levies and contributions from the County $ 6,617 $ _ Transfers between funds 20,000 44,556 Net cash provided(used) from non-capital financing activities $ 26,617 $ 44,556 ' Cash flows from investing activities: Interest on investments $ 20 $ Net cash provided(used)by investing activities $ 20 $ ' Net increase(decrease)in cash and cash equivalents $ 163,385 $ (538) ' Cash and cash equivalents at beginning 390,805 10,843 Cash and cash equivalents at end $ 554,190 $ 10,305 Reconciliation of operating income(loss)to net cash provided (used)by operating activities: Operating income(loss) $ 171,432 $ (47,088) ' Adjustments to reconcile operating income to net cash provided(used)by operating activities: Depreciation 36,502 6,791 ' Other post employment benefits 13,308 Changes in assets and liabilities: Accounts receivable 710 Taxes and assessments receivable (53,216) _ Compensated absences (3,108) (5) Accrued payables (12,835) (4,792) ' Net cash provided(used)by operating activities $ 152,793 $ (45,094) See accompanying Notes to the Financial Statements -18- Jefferson County,Montana Statement of Fiduciary Net Assets Fiduciary Funds June 30,2010 Pension Investment Private Purpose Agency ASSETS Trust Funds Trust Funds Trust Funds Funds Cash and short-term investments $ 50 $ 5,222,138 $ 24,094 $ 2,842,583 Receivables: Taxes _ Total receivables I,67Q 329 1,670,329 Total assets $ 50 $ 5,222,138 $ 24,094 $ 4,512,912 LIABILITIES Warrants payable $ $ $ - $ 1,415,746 Accounts payable 50 Refunds payable and others 50,501 Due to other governments - 20,460 3,046,665 Total liabilities $ 50 $ $ 20,460 $ 4,512,912 Assets held in trust $ - $ 5,222,138 $ 3,634 See accompanying Notes to the Financial Statements f 1 Jefferson County,Montana Statement of Changes in Fiduciary Net Assets Fiduciary Funds For the Fiscal Year Ended June 30,2010 1 Investment Trust Private Purpose Funds Trust Funds ADDITIONS 1 Contributions to Investment Trust Fund $ 6,514,730 $ 20,245 Investment earnings: Interest and change in fair value of investments 24,128 - 1 Total additions $ 6,538,858 $ 20,245 DEDUCTIONS 1 Distributions from investment trust fund $ 6,402,287 $ 14,280 Total deductions $ 6,402,287 $ 14,280 Change in net assets $ 136,571 $ 5,965 1 Net Assets-Beginning of the year $ 5,085,567 $ (2,331) Net Assets-End of the year $ 5,222,138 $ 3,634 1 See accompanying Notes to the Financial Statements 1 1 1 i 1 ` 1 1 ' 1 1 1 -20- 1 ' JEFFERSON COUNTY, MONTANA NOTES TO THE FINANCIAL STATEMENTS June 30, 2010 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ' The County complies with generally accepted accounting principles (GAAP). GAAP includes all relevant Governmental Accounting Standards Board (GASB) ' pronouncements. In the government-wide financial statements and the fund financial statements for the proprietary funds, Financial Accounting Standards Boards (FASB) ' pronouncements and Accounting Principles Board (APB) opinions issued on or before November 30, 1989, have been applied unless those pronouncements conflict with or contradict GASB pronouncements, in which case GASB prevails. For enterprise funds ' GASB statement Nos. 20 and 34 provide the County the option of electing apply FASB pronouncements issued after November 30, 1989. The County has elected not to apply those pronouncements. ' The government adopted the provisions of Governmental Accounting Standards Board Statement No. 45 Accounting and Financial Reporting by Employers for ' Postemployment Benefits Other than Pensions. Financial Reporting Entity ' In determining the financial reporting entity, the County complies with the provisions of GASB statement No, 14, The Financial Reporting Entity, and includes all component ' units of which the County appointed a voting majority of the units' board; the County is either able to impose it's will on the unit or a financial benefit or burden relationship exists. ' Primary Government Jefferson County is a political subdivision of the State of Montana governed by an elected, three-member Board of County Commissioners. The County is considered a primary government because it is a general purpose local government. Further, it meets ' the following criteria: (a) It has a separately elected governing body (b) It is legally separate and (c) It is fiscally independent from the State and other local governments. ' Basis of Presentation, Measurement Focus and Basis of Accounting. Government-wide Financial Statements: Basis of Presentation The Government-wide Financial Statements (the Statement of Net Assets and the ' Statement of Activities) display information about the reporting government as a whole and its component units. They include all funds of the reporting County except fiduciary funds. The statements distinguish between governmental and business-type activities. ' Governmental activities generally are financed through taxes, intergovernmental revenues, and other non-exchange revenues. Business-type activities are financed in whole or in part by fees charged to external parties for goods or services. Eliminations ' have been made to minimize the double-counting of business-type activities. -21- JEFFERSON COUNTY, MONTANA ' NOTES TO THE FINANCIAL STATEMENTS ' June 30, 2010 The Statement of Activities presents a comparison between direct expenses and program ' revenues for each function of the County's governmental activities. Direct expenses are those that are specifically associated with a program or function. The County does not charge indirect expenses to programs or functions. The types of transactions reported as ' 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 activity and 2) operating grants and contributions, and 3) capital grants and contributions. ' Revenues that are not classified as program revenues, including all property taxes, are presented as general revenues. Certain eliminations have been made as prescribed by GASB 34 in regards to inter-fund ' activities, payables and receivables. All internal balances in the Statement of Net Assets have been eliminated except those representing balances between the governmental , activities and the business-type activities, which are presented as internal balances and eliminated in the total primary government column. In the Statement of Activities, internal service fund transactions have been eliminated; however, those transactions ' between governmental and business-type activities have not been eliminated. Measurement Focus and Basis of Accounting ' On the government-wide Statement of Net Assets and the Statement of Activities, both governmental and business-type activities are presented using the economic resources measurement focus and the accrual basis of accounting. Under the accrual basis of ' accounting, revenues are recognized when earned and expenses are recorded when the liability is incurred regardless of the timing of the cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items ' are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. The County generally applies restricted resources to expenses incurred before using unrestricted resources when both restricted and unrestricted net assets are ' available. Fund Financial Statements: ' Basis of Presentation Fund financial statements of the reporting County are organized into funds, each of which , is considered to be separate accounting entities. Each fund is accounted for by providing a separate set of self-balancing 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 is maintained consistent with legal and managerial requirements. Funds are organized into three categories: governmental, proprietary, and fiduciary. An emphasis is placed on 1 major funds within the governmental and proprietary categories. Each major fund is displayed in a separate column in the governmental funds statements. All of the remaining funds are aggregated and reported in a single column as non-major funds. A , fund is considered major if it is the primary operating fund of the County or meets the following criteria: -22- ' JEFFERSON COUNTY, MONTANA NOTES TO THE FINANCIAL STATEMENTS ' June 30, 2010 ' a. Total assets, liabilities, revenues, or expenditures/expenses of that individual governmental or enterprise fund are at least 10 percent of the corresponding total for all funds of that category or type; and b. Total assets, liabilities, revenues, or expenditures/expenses of that individual governmental or enterprise funds are at least 5 percent of the corresponding total for all governmental and enterprise funds combined. ' Measurement Focus and Basis of Accounting ' Governmental Funds All governmental funds are accounted for using the modified accrual basis of accounting. Under the modified accrual basis of accounting, revenues are recorded when susceptible to accrual; i.e., both measurable and available. "Measurable" means the amount of the transaction can be determined. "Available" means collectible within the current period or ' soon enough thereafter to be used to pay liabilities of the current period. The County defined the length of time used for "available" for purposes of revenue ' recognition in the governmental fund financial statements to be upon receipt. Expenditures are recorded when the related fund liability is incurred, except for unmatured interest on general long-term debt which is recognized when due, and certain ' compensated absences and claims and judgments which are recognized when the obligations are expected to be liquidated with expendable available financial resources. General capital asset acquisitions are reported as expenditures in governmental funds and ' proceeds of general long-term debt and acquisitions under capital leases are reported as other financing sources. ' Property taxes, franchise fees, licenses, and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. Only the portion of special assessments receivable ' due within the current fiscal period is considered to be susceptible to accrual as revenue of the current period. Expenditure-driven grants are recognized as revenue when the qualifying expenditures have been incurred and all other grant requirements have been ' met. Entitlements and shared revenues are recorded at the time of receipt or earlier if the susceptible to accrual criteria are met. All other revenue items are considered to be measurable and available only when cash is received by the government. ' Major Funds: The County reports the following major governmental funds: ' General Fund — This is the County's primary operating fund and it accounts for all financial resources of the County except those required to be accounted for in ' other funds. Road Fund—A special revenue fund which its' purpose is maintenance and repair of county roads. -23- JEFFERSON COUNTY, MONTANA ' NOTES TO THE FINANCIAL STATEMENTS June 30, 2010 Public Safety — A special revenue fund created to provide safety for the residents ' of Jefferson County. Hard Rock Mines Trust — A special revenue fund that accounts for taxes on ' mining for Hard Rock in Jefferson County. PILT—A special revenue fund used to account for the payments in lien of taxes. , South Hills RSID — A debt service fund used to service the debt payments on the South Hills construction. ' Saddle Mountain RSID — A debt service fund used to service the debt payments on the Saddle Mountain construction. Proprietary Funds: All proprietary funds are accounted for using the accrual basis of accounting. These funds , account for operations that are primarily financed by user charges. The economic resource focus concerns determining costs as a means of maintaining the capital investment and management control. Revenues are recognized when earned and ' expenses are recognized when incurred. Allocations of costs, such as depreciation, are recorded in proprietary funds. 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 connections with a proprietary fund's principal ongoing ' operations. The principal operating revenues for enterprise funds are charges to customers for sales and services. Operating expenses for enterprise funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. ' All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses. When both restricted and unrestricted resources are available for use, it is the County's policy to use restricted resources first, then unrestricted resources , as they are needed. Maior Funds: ' The County reports the following major proprietary funds: Solid Waste Fund — An enterprise fund that accounts for the activities of the ' Jefferson County's garbage collection operations. Fiduciary Funds , Fiduciary funds account for assets held by the government in a trustee capacity or as an agent on behalf of others. Trust funds account for assets held by the County under the terms of a formal trust agreement. ' -24- JEFFERSON COUNTY, MONTANA NOTES TO THE FINANCIAL STATEMENTS ' June 30, 2010 The investment trust fund is accounted for in essentially the same manner as the ' proprietary funds, using the same measurement focus and basis of accounting. The investment trust fund is used to account for the external portion of the investment pool held by the sponsoring government. The agency fund is custodial in nature and does not present results of operations of have a measurement focus. Agency funds are accounted for using the modified accrual basis of ' accounting. This fund is used to account for assets that the County holds for others in an agency capacity. NOTE 2. CASH, CASH EQUIVALENTS, AND INVESTMENTS Cash Composition Composition of cash, deposits and investments at fair value on June 30, 2010, are as follows: Primary ' Government Cash on hand and Deposits: Petty Cash $ 2,064 ' Cash in Banks: Demand Deposits 632,980 Savings Deposits 1,064,001 ' Time Deposits 2,226,313 Investments: State Short-Term Investment Pool (STIP) 12,942,550 ' Repurchase Agreement 302,363 Total $ 7.170 271 ' Repurchase Agreements An agreement in which a governmental entity (buyer-lender) transfers cash to a broker dealer or financial institution (seller-borrower); the broker-lender or financial institution transfers securities to the entity and promises to repay cash plus interest in exchange for the same securities. ' Credit Risk Section 7-6-202, MCA, limits investments of public money of a local government in the following eligible securities: ' (a) United States government treasury bills, notes and bonds and in the United States treasury obligations, such as state and local government series (SLGLS), separate ' trading of registered interest and principal of securities (STRIPS), or similar United States treasury obligations; (b) United States treasury receipts in a form evidencing the holder's ownership of ' future interest or principal payments on specific United States treasury obligations that, in the absence of payment default by the United States, are held in a special custody account by an independent trust company in a certificate or book entry form with the federal reserve bank of New York; or -25- JEFFERSON COUNTY, MONTANA ' NOTES TO THE FINANCIAL STATEMENTS , June 30, 2010 (c) Obligations of the following agencies of the United States, subject to the ' limitations in subsection 2 (not included): (i) federal home loan bank; (ii) federal national mortgage association; (iii) federal home mortgage corporation; and ' (iv) federal farm credit bank. With the exception of the assets of a local government group self-insurance program, ' investments may not have a maturity date exceeding 5 years except when the investment is used in an escrow account to refund an outstanding bond issue in advance. Section 7-6-205 and Section 7-6-206, MCA, state that demand deposits may be placed only in banks and Public money not necessary for immediate use by a county, city, or ' town that is not invested as authorize in Section 7-6-202 may be place in time or savings deposits with a bank, savings and loan association, or credit union in the state or place in repurchase agreements as authorized in Section 7-6-213. ' Section 7-6-202, MCA, as amended, now limits authorized investments in certain securities that previously were permissible investments. The amendment does not apply , to and does not require the sale of securities that were legal investments before the effective date of this act. However, the investments reported as collateralized mortgage obligations above are not authorized investments at the current time. ' The government has no investment policy that would further limit its investment choices. The government has no investments that require credit risk disclosure. , Short Term Investment Pool (STIP) Credit Quality ratings by the NRSRO as of June 30, ' 2010 (unaudited): Weiehted Credit Averaee , Amortized Oualit Maturity Security Investment Tvne Cost Ratine in Days Asset Backed Commercial Paper $ 368,299,047 Al 23 Corporate Commercial Paper 196,596,245 Al+ 31 Corporate Variable-Rate 206,328,268 A2 35 ' Certificates of Deposit Fixed 105,006,272 A3 71 Certificates of Deposit Variable-Rate 235,000,000 A2 42 U.S. Government Agency Fixed 100,306,188 Al+ 174 ' U.S. Government Agency Variable-Rate 760,102,766 Al+ 40 Money Market Funds (Unrated) 181,695,137 NR 1 Money Market Funds (Rated) 10,000,000 A 1+ 1 ' Structured Investment Vehicles (SIV) 85.617,544 D NA Total Investments $ 248.951.467 Al 39 Securities Lending Collateral Investment Pool $ 6.635.985 NR 20 ' 26 ' JEFFERSON COUNTY, MONTANA NOTES TO THE FINANCIAL STATEMENTS ' June 30, 2010 Audited financial statements for the State of Montana's Board of Investments are ' available at 555 Fuller Avenue in Helena, Montana. Custodial Credit Risk Custodial credit risk is the risk that, in the event of a bank failure, the government's deposits may not be returned to it. The government does not have a deposit policy for custodial credit risk. All deposits are carried at cost plus accrued interest. As of June 30, ' 2010 the government's bank balance was exposed to custodial credit risk as follows: Depository Account Balance ' Insured $ 1,668,905 Collateralized - Collateral held by the pledging bank's trust 853,606 department in the County's name. Uninsured and uncollateralized 1,270.305 Total Deposits and Investments $ .792.816 ' Deposit Security Section 7-6-207, MCA, states (1) The local governing body may require security only for ' that portion of the deposits which is not guaranteed or insured according to law and, as to such unguarameed or uninsured portion, to the extent of (a) 50% of such deposits if the institution in which the deposit is made has a net ' worth of total assets ratio of 6%or more; or (b) 100% if the institution in which the deposit is made has a net worth of total assets ration of less than 6%. 1 The amount of collateral held for County deposits at June 30, 2010, equaled or exceeded the amount required by State statutes. Interest Rate Risk The government does not have a formal investment policy that limits investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates. The following is a list of individual investments as of June 30, 2010 alone with their related interest rates and maturity dates. ' Interest Maturity Investment rate dates Amount Rocky Mt Bank Repurchase Agreement .600% N/A $�_ Q Concentration of Credit Risk The government places no limit on the amount the County may invest in any one issuer. The government's concentration of credit risk percentages follow for each investment issued that is not issued or explicitly guaranteed by the U.S. government and investments ' in mutual funds, external investment pools and other pooled investments: % of credit risk Repurchase Agreements 1.77% -27- JEFFERSON COUNTY, MONTANA ' NOTES TO THE FINANCIAL STATEMENTS , June 30, 2010 Cash and Investment Pool ' The government maintains a cash and investment pool that is available for use by all funds. Each fund type's portion of this pool is displayed on the combined balance sheet ' as "Cash and investments." In addition, investments are separately held by several of the government's funds. Investment in the Treasurer's Pools ' The County Treasurer invests on behalf of most funds of the County and external participants in accordance with the County's investment policy and Montana law. The , County's pools are managed by the County Treasurer. The external portion of the County's investment pools are accounted for as investment trust funds. There are two types of investment trust funds reported by the County, pooled and individually directed ' investment trust funds. The County has one pooled investment trust fund which is invested in STIP. The pooled , funds invested in STIP are carried at fair value. The County invests funds for Cardwell School District and Jefferson High School. These , investments are reported in an individually directed investment trust fund. The investments are non-negotiable certificates of deposit, cash and money market accounts carried at cost which approximates fair value. ' Non-pooled investments are also carried at fair value. The fair value of non-pooled investments is determined annually and is based on current market prices. , The County has not provided nor obtained any legally binding guarantees during the fiscal year ended June 30, 2010 to support the value of the shares in the pool. ' As noted below State statutes limit the type of investments but provide no other regulatory oversight. ' Investment Income Income from pooled investments is allocated to the individual funds or external ' participants based on the fund or participant's month end cash balance in relation to total pooled investments. Condensed statements of investments pools ' The following represents a condensed statement of net assets and changes in net assets for the Treasurer's Pool as of June 30, 2010. Statement of Net Assets Net assets held in trust for all pool participants: ' Equity of internal pool participants $ 8,096,577 Equity of external pool participants 5,222,138 Total equity $ 13.318.715 ' -28- ' JEFFERSON COUNTY, MONTANA ' NOTES TO THE FINANCIAL STATEMENTS June 30, 2010 ' Condensed Statement of Changes in Net Assets External Internal Investment Earnings $ 24,128 $ 24,702 Contributions to Trust 6,514,730 9,637,093 ' Distributions Paid (6,402,287) (11,444,114) Net change in net assets $ 136,571 (1,782,319) Net assets at beginning of year 5.085,567 9,878,896 ' Net assets at end of year $ 5.222.13$ $ ,096.577 Cash equivalents For purposes of the statement of cash flows, the enterprise and internal services funds consider all funds (including restricted assets) held in the County's cash management pool to be cash equivalents. ' NOTE 3. RECEIVABLES ' An allowance for uncollectible accounts was not maintained for real and personal property taxes receivable. The direct write-off method is used for these accounts. ' Property tax levies are set on or before the second Monday in August, in connection with the budget process. Real property (and certain attached personal property) taxes are billed within ten days after the third Monday in October and are due in equal installments ' on November 30 and the following May 31. After those dates, they become delinquent (and a lien upon the property). After three years, the County may exercise the lien and take title to the property. Special assessments are either billed in one installment due ' November 30 or two equal installments due November 30 and the following May 31, Personal property taxes (other that those billed with real estate) are generally billed no later then the second Monday in July (normally in May or June), based on the prior ' November's levies. Personal property taxes, other than mobile homes, are due thirty days after billing. Mobile home taxes are billed in two halves, the first due thirty days after billing; the second due September 30. The tax billings are considered past due after the ' respective due dates and are subject to penalty and interest charges. NOTE 4. INVENTORIES ' The cost of inventories are recorded as an expenditure when purchased. NOTE 5. CAPITAL ASSETS The County's assets are capitalized at historical cost or estimated historical cost. ' County policy has set the capitalization threshold for reporting capital assets at $5,000. Gifts or contributions of capital assets are recorded at fair market value when received. The costs of normal maintenance and repairs are charged to operations as ' incurred. Improvements are capitalized and depreciated over the remaining useful lives of the related fixed assets, as applicable. Depreciation is recorded on a straight- line basis over the useful lives of the assets as follows: 1 ' -29- JEFFERSON COUNTY, MONTANA NOTES TO THE FINANCIAL STATEMENTS , June 30, 2010 Buildings .................................... 50 years ' Building Improvements,,,,,,,,,,,,,,, 50 years Equipment other than Vehicles,., 25 years Vehicles..... . .. . . ........................ 7 years ma ' Public Domain Infrastructure,,,,,, 40 years System Infrastructure................... 25 years Office Equipment 5 years ' Computer Equipment,,,,,,,,,,,,,,,,,,, 3 years In June 1999, the Governmental Accounting Standards Board (GASB) issued ' Statement No. 34 which requires the inclusion of infrastructure capital assets in local governments' basic financial statements. In accordance with Statement No. 34, the County has included the value of all infrastructure into the 2010 Basic Financial ' Statements. The government has elected not to retroactively report general infrastructure assets. A summary of changes in governmental capital assets was as follows: Balance Deletions/ Balance , July 1, 2009 Additions Adjustments June 30.2010 Capital assets not being depreciated: Land $ 84.080 $ 30.150 $ $ 114.230 ' Other Capital Assets: Buildings $ 3,489,700 $ 38,336 $ (16,035) $ 3,512,001 Improvements Other than Buildings 36,865 263,325 300,190 ' Machinery and Equipment 2,865.214 410.067 (192,198 3.083,083 Total other Capital Assets at historical cost $ 6.391,779 $ 711.728 $(208,233) $ 6.895,274 Less Accumulated Depreciation $(3,144,740) $(204584 $ 208.233 $(3,141,091) ' Total $ 3331.119 $ 537.294 $ $ 3.868-413 The following is a summary of business-type capital assets were as follows: Balance Balance ' July 1, 2009 Additions June 30,2010 Capital assets not being depreciated: ' Land $ 59.399 $ $ 59 399 Other Capital Assets: Improvements Other than Buildings $ 364,588 $ - $ 364,588 ' Machinery and Equipment 367.256 16.045 383.301 Total other Capital Assets at historical cost $ 731.844 $ 16.045 $ 747,889 Less Accumulated Depreciation $(479,886) $ 3( 6.502) $(516,388) 'Total $ 311357 $(20.4571 $ 2,9�_ ..90 1 -30- ' JEFFERSON COUNTY, MONTANA NOTES TO THE FINANCIAL STATEMENTS ' June 30, 2010 A summary of changes in governmental internal service capital assets was as follows: ' Balance Balance July 1, 2009 Additions June 30,2010 ' Capital assets being depreciated: Buildings $ 316,695 $ $ 316,695 Machinery and Equipment 24.900 24.900 ' Total other Capital Assets at historical cost $ 341.595 $ $ 341.595 Less Accumulated Depreciation $ (59,588) $-(6,7911 $ (66,379 Total $ 2 $ (6.7911 $� ' Governmental activities capital assets expense was charged to functions as follows: Governmental Activities: General Government $ 36,994 Public Safety 84,425 ' Public Works 73,140 Public Health 785 Culture and Recreation 9.240 ' Total governmental activities depreciation expense $�Q4 $�4 NOTE 6. LONG TERM DEBT OBLIGATIONS ' In the governmental-wide and proprietary financial statements, outstanding debt is reported as liabilities. ' The governmental fund financial statements recognize the proceeds of debt and premiums as other financing sources of the current period. Issuance costs are reported as ' expenditures. Changes in Long-Term Debt Liabilities - During the year ended June 30, 2010, the ' following changes occurred in liabilities reported in long-term debt: Governmental Activities: Balance Balance Due within July 1, 2009 Additions Deletions June 30,2010 one year Special Assessment Bond $ 1,220,000 $ - $(115,000) $1,105,000 $ 80,000 ' Compensated Absences 414,834 43,901 (5) 458,730 329,452 Intercap Loans 172,765 463,813 (9,523) 627,055 44,260 Capital Leases 125,089 - (24,413) 100,676 22,456 Other Post Employment Benefits * 220.981 220.981 ' Total $1.932 6 $ $!148.941) $2.512.442 gg7 * See Note 10 ' In prior years the general fund was used to liquidate compensated absences and claims and judgments. -31- JEFFERSON COUNTY, MONTANA ' NOTES TO THE FINANCIAL STATEMENTS ' June 30, 2010 Business Type Activities: ' Balance Balance Due within July 1, 2009 Additions Deletions June 30. 2010 one year Compensated Absences $ 25,734 $ - $(3,108) $22,626 $16,969 , Other Post Employment Benefits * 13.308 13,308 Total $=ZLM $A ${3.108) $35,934 $� 2 * See Note 10 Special Assessment Debt - Special assessment bonds are payable from the collection of ' special assessments levied against benefited property owners within defined special ' improvement districts. The bonds are issued with specific maturity dates, but must be called and repaid earlier, at par plus accrued interest, if the related special assessments are collected. Rural special improvement districts bonds were issued with revolving fund ' backing. The County is obligated to levy and collect a general property tax on all taxable property in the County to provide additional funding for the debt service payments. The cash balance in the Revolving Fund must equal at least 5% of the ' principal amount of bonds outstanding. Special assessment bonds outstanding as of June 30, 2010 were as follows: Origination Interest Bond Maturity Bonds Annual Balance , Purpose Date Rate Term Date Amount Payment June 30.2010 Saddle Mountain RSID 11/15/2007 3-6% 20 yrs 07/01/2028 $ 537,000 varies $ 405,000 ' South Hills RSID 08/14/2007 3-6.5% 20 yrs 07/01/2027 783.000 varies 700.000 Reported in the governmental activities. Annual requirement to amortize debt: , For Fiscal ' Year Ended Principal Interest 2011 $ 20,000 $ 47,763 2012 30,000 47,163 ' 2013 30,000 45,863 2014 30,000 45,363 2015 40,000 44,463 , 2016 60,000 43,251 2017 60,000 41,346 2018 65,000 39,421 ' 2019 65,000 36,126 2020 70,000 35,626 2021 75,000 31,846 2022 75,000 28,713 , 2023 80,000 25,413 2024 85,000 21,763 2025 90,000 17,775 , 2026 90,000 13,175 2027 100,000 8,300 2028 40,000 2.400 Total $ LQL 5..44Q $SZZZO 32 ' JEFFERSON COUNTY,MONTANA NOTES TO THE FINANCIAL STATEMENTS ' June 30, 2010 Intercap Loans Intercap loans have variable interest rates. Interest rates are subject to change annually. Interest rates to the borrower are adjusted on February 16`h of each year and are based on ' a spread over the interest paid on one-year term, tax-exempt bonds which are sold to fund the loans. Intercap loans outstanding as of June 30, 2010 were as follows: Origination Interest Maturity Principal Balance ' Pu ose Date Rate Term Date Amount June 30, 2010 Big Dipper Road 09/19/2008 1.95-4.25% 15 yrs 08/15/2023 $ 80,000 $ 70,324 Improvement Building Purchase/Office 05/15/2009 1.95-3.25% 10 yrs 08/15/2019 300,000 158,010 Remodel Moonlight Ridge Road 12/24/2009 1.95-3.25% 15 yrs 02/15/2025 249,221 226,346 Improvement ' Martinez Gulch Road 11/20/2009 1.95-3.25% 14 yrs 08/15/2024 217.333 172.375 Improvement Total $846,554 $621455 Reported in the governmental activities. ' Annual requirement to amortize debt: For Fiscal ' Year Ended Principal Interest 2011 $ 44,260 $12,330 2012 45,045 11,164 ' 2013 45,867 10,281 2014 46,720 9,383 2015 47,602 8,467 2016 48,514 7,534 2017 49,458 6,584 2018 50,707 5,615 2019 51,448 4,621 2020 42,575 3,615 2021 33,045 2,879 2022 34,085 2,227 2023 34,572 1,561 2024 30,858 1,161 ' 2025 22,299 274 Total $627.055 $ -33- JEFFERSON COUNTY, MONTANA ' NOTES TO THE FINANCIAL STATEMENTS , June 30, 2010 Capital Leases The County has entered into a lease which meets the criteria of a capital lease as defined ' by Statement of Financial Accounting Standards No. 13, "Accounting for Leases," which defines a capital lease generally as one which transfers benefits and risks of ownership to the lessee when all terms of the lease agreements are met. Capital lease obligations ' outstanding as of June 30, 2010 were as follows: Origination Interest Maturity Principal Balance ' Purpose Date Rate Term Date Amount June 30, 2010 Qwest Comm- 12%17/2008 8.4060/. 5 yrs 12/17/2013 $ ESQ $100,76 911 Emergency ' Reported in the governmental activities. Annual requirement to amortize debt: For Fiscal ' Year Ended Principal Interest 2011 $ 26,547 $ 7,455 2012 28,866 5,136 ' 2013 31,388 2,614 2014 13.875 293 Total $1QQ $1 ' Compensated Absences It is the County's policy and state law to permit employees to accumulate a limited ' amount of earned but unused vacation benefits, which will be paid to employees upon separation from County service. Employees are allowed to accumulate and carry over a maximum of two times their annual accumulation of vacation, but no more than 90 days into the new calendar year. There is no restriction on the amount of sick leave that may be accumulated. Upon separation, employees are paid 100 percent of accumulated vacation and 25 percent of accumulated sick leave. The liability associated with I governmental fund-type employees is reported in the governmental activities, while the liability associated with proprietary fund-type employees is recorded in the business-type activities/respective fund. t NOTE 7. DEFICIT FUND BALANCES/NET ASSETS ' Fund Name Amount Reason for Deficit How Deficit will be eliminated Extension Service $ (4,979) Delinquent taxes Tax collections , Jack Mtn.Estates RSID $ (1,979) Creating RSID Special Assessments Moonlight Ridge RMD $ (1,980) Creating RMD Special Assessments Forest Part Estates RSID $ (8,431) Creating RSID Special Assessments ' Martinez Gulch RMD $(990) Creating RMD Special Assessments Montana City W&S District $(76,771) Creating W&S District Special Assessments HB 645-Stimulus Project $(40,407) Pending State agency payments Grant Revenue , -34- ' JEFFERSON COUNTY,MONTANA NOTES TO THE FINANCIAL STATEMENTS ' June 30, 2010 NOTE 8. INTERFUND RECEIVABLES AND PAYABLES ' The composition of interfund balances as of June 30, 2010, were as follows: Due to/from other funds: PI ose Receivable Fund Payable Fund Amount Cover negative PILT- Fair- $ 507 balance Major Governmental Nonmajor Governmental Cover negative PILT- Planning- 5,437 balance Major Governmental Nonmajor Governmental Cover negative PILT- Extension Service- 4,979 balance Major Governmental Nonmajor Governmental Cover negative PILT- Jack Mtn. Estates RSID- 1,979 ' balance Major Governmental Nonmajor Governmental Cover negative PILT- Moonlight Rdg. Est./Jackson 5,961 balance Major Governmental Cr. Rd. RSID- Nonmajor Governmental Cover negative PILT- Moonlight Rdg. RMD - 1,980 balance Major Governmental Nonmajor Governmental ' Cover negative PILT- Forest ParkEstates, RSID- 8,431 balance Major Governmental Nonmajor Governmental Cover negative PILT- Martinez Gulch RID- 1,275 ' balance Major Governmental Nonmajor Governmental Cover negative PILT- Martinez Gulch RMD- 990 balance Major Governmental Nonmajor Governmental ' Cover negative Hard Rock Mine Trust Account- Clacy W&S District- 32,744 balance Major Governmental Nonmajor Governmental Cover negative Hard Rock Mine Trust Account- Montana City W&S District- 76,771 balance Major Governmental Nonmajor Governmental Cover negative Public Safety- Strat. Prev. Incentive Grant- 18,065 balance Major Governmental Nonmajor Governmental Cover negative PILT- HB 645 Stimulus Money- 40.407 balance Major Governmental Nonmajor Governmental $12 2¢ Interfund Transfers The following is an analysis of operating transfers in and out during fiscal year 2010: Purpose Receivable fund Payable fund Amount ' Library No. Jefferson Library District Library- $ 1,148 operations Nonmajor Governmental Nonmajor Governmental ' Capital projects Capital Improvement- Public Safety- 20,000 Nonmajor Governmental Major Governmental Operating General- PILT- 601,003 Major Governmental Major Governmental Operating Road- PILT- 63,647 -35- JEFFERSON COUNTY, MONTANA ' NOTES TO THE FINANCIAL STATEMENTS ' June 30, 2010 Major Governmental Major Governmental ' Operating Planning—Nonmajor Economic Development— 15,056 Governmental-type Nonmajor Governmental Operating Health and Sanitation— Junk Vehicle— 5,000 Nonmajor Governmental Nonmajor Governmental Operating PILT—Major Governmental Historical Preservation Grant— 500 Nonmajor Governmental Operating Central shop— PILT— 44,556 , Nonmajor Governmental Major Governmental Operating General— Employer Contribution Group 4,636 Major Governmental Health Insurance—Nonmajor ' Governmental Operating General— Permissive Medical Levy— 158,178 Major Governmental Nonmajor Governmental ' Operating Road— Land Use Planning— 4,046 Major Governmental Nonmajor Governmental Operating Road— Permissive Medical Levy— 49,093 Major Governmental Nonmajor Governmental ' Operating Bridge— Permissive Medical Levy— 2,098 Nonmajor Governmental Nonmajor Governmental Operating District Court— Permissive Medical Levy— 13,985 ' Nonmajor Governmental Nonmajor Governmental Operating Planning— Permissive Medical Levy— 18,031 Nonmajor Governmental Nonmajor Governmental ' Operating Extension services— Permissive Medical Levy— 10,488 Nonmajor Governmental Nonmajor Governmental Operating Public Safety—Major Permissive Medical Levy— 50,743 ' Governmental Nonmajor Governmental Operating Economic Development— Permissive Medical Levy— 3,513 Nonmajor Governmental Nonmajor Governmental Distribution of Solid Waste— PILT— 20,000 , PILT Major Business-type Major Governmental Distribution of Mosquito District#1 — PILT— 10,000 PILT Nonmajor Governmental Major Governmental , Distribution of Mosquito District#1 Fee— PILT— 10,000 PILT Nonmajor Governmental Major Governmental Distribution of Road— PILT— 26,421 ' PILT Major Governmental Major Governmental Distribution of District Court— PILT— 423 PILT Nonmajor Governmental Major Governmental ' Distribution of Planning— PILT— 28,531 PILT Nonmajor Governmental Major Governmental Distribution of Economic Development— PILT— 10,360 PILT Nonmajor Governmental Major Governmental Operating Public Safety— Strat Prev. Incentive Grant— 12.811 Major Governmental Nonmajor Governmental $1 -36- JEFFERSON COUNTY, MONTANA NOTES TO THE FINANCIAL STATEMENTS ' June 30, 2010 NOTE 9. STATE-WIDE RETIREMENT PLANS ' All full-time County employees are covered under one of the following retirement plans: Montana Public Employees Retirement System (PERS) or Sheriffs Retirement ' System (SRS). The plans are established by State law and administered by the State of Montana. The plans are cost-sharing multiple-employer defined benefit plans that provide retirement, disability and death benefits to plan members and beneficiaries, ' with amounts determined by the State. Contribution rates are required and determined by State law. The contribution rates, ' expressed as a percentage of covered payroll for the fiscal year ended June 30, 2010, were: PERS SRS Employer 7.070% 10.115% Employee 6.90% 9.245% ' State 0.10% - The State contribution qualifies as an on-behalf payment. These amounts have not ' been recorded in the County's financial statements and were considered immaterial. Publicly available financial reports that include financial statements and required ' supplementary information may be obtained for the plans by writing or calling: Public Employees Retirement Division, P.O. Box 200131, Helena, Montana 59620- 0131 Phone: 1-406-444-3154. ' The County's contributions for the years ended June 30, 2008, 2009, and 2010, as listed below, were equal to the required contributions for each year. ' PERS SRS 2008 $179,378 $ 62,395 ' 2009 $192,570 $ 68,576 2010 $210,234 $ 81,226 ' NOTE 10. POSTEMPLOYMENT HEALTHCARE PLAN Plan Description. The healthcare plan provides for, and Montana State Law (2-18-704) ' requires local governments to allow employees with at least 5 years of service and who are at least age 50 along with surviving spouses and dependents to stay on the government's health care plan as long as they pay the same premium. Since retirees are ' usually older than the average age of the plan participants they receive a benefit of lower insurance rates. This benefit is reported as the Other Post Employment Benefits (OPEB) liability. The government has less than 100 plan members and thus qualifies to use the "Alternative Measurement Method" for calculating the liability. The above described OPEB plan does not provide a stand-alone financial report. -37- JEFFERSON COUNTY, MONTANA ' NOTES TO THE FINANCIAL STATEMENTS , June 30, 2010 Funding Policy. The government pays OPEB liability costs on a pay-as-you-go basis. A ' trust fund for future liabilities has not been established. Funding Status and funding Progress. The funded status of the plan as of June 30, 2010, ' was as follows: Actuarial Accrued Liability (AAL) $1,342,567 Actuarial value of plan assets $ Unfunded Actuarial Accrued Liability (UAAL) $1,342,567 Funded ratio (actuarial value of plan assets/AAL) 0% Covered payroll (active plan members) $2,757,093 ' UAAL as a percentage of covered payroll 49% Annual OPEB Cost and Net OPEB Obligation. The government's annual other post , employment benefit (OPEB) cost (expense) is calculated based on the annual required contribution of the employer (ARC), an amount determined in accordance with the parameter of GASB statement 45. The ARC represents a level of funding that, if paid on ' an ongoing basis, is projected to cover normal cost each year and amortize any unfunded acurarial liabilities (or funding excess) over a period not to exceed thirty (30) years. The following table shows the components of the government's annual OPEB cost for the ' year, the amount actually contributed to the plan, and changes in the government's net OPEB obligation. Annual Required Contribution(ARC) $234,289 ' Interest on net OPEB obligation $ - Adjustment to ARC $ - ' Annual OPEB cost(expense) $234,289 Contributions made $ - Increase in net OPEB obligation $234,289 ' Net OPEB obligation-beginning of year $ - Net OPEB obligation- end of year $234,289 Actuarial Methods and Assumptions. The following actuarial methods and assumptions ' were used: Actuarial cost method Unit Credit Cost Method , Average age of retirement (based on historical data) 62 Discount rate (average anticipated rate) 0.34% , Average salary increase 2.80% Health care cost rate trend(Federal Office of the Actuary) ' Year % Increase 2010 3.90% 2011 5.20% ' 2012 5.50% 2013 6.10% 2014 6.60% ' 2015 6.70% -38- JEFFERSON COUNTY, MONTANA NOTES TO THE FINANCIAL STATEMENTS ' June 30, 2010 2016 7.00% ' 2017 6.80% 2018 6.80% 2019 and after 6.60% NOTE 11. RESTRICTED CASH/INVESTMENTS ' The following restricted cash/investments were held by the County as of June 30, 2010. These amounts are reported within the cash/investment account on the Statement of Net Assets. Fund Description Amount Solid Waste Future equipment and replacement $64,Q$- NOTE 12. FUND EQUITY ' Reservations of equity show amounts that are not appropriate for expenditure or are legally restricted for specific uses. The purpose for each is indicated below: ' Fund Name Amount Purpose SID Revolving $ 77,811 Reserved for debt service South Hills RSID 105,324 Reserved for debt service ' Saddle Mountain RSID 24,587 Reserved for debt service Capital Improvement Fund 65.249 Reserved for capital asset purchases NOTE 13. RESTATEMENTS ' During the current fiscal year, the following adjustments relating to prior years' transactions were made to fund balance and net assets. ' Fund Amount Reason for Adiustment Road $(11,178) Prior year correction of expenditures South Hills RMD $ 8,788 Prior year correction of expenditures ' Saddle Mountain RMD $ 2,200 Prior year correction of expenditures Big Dipper RMD $ 190 Prior year correction of expenditures PILT $ (5,647) Prior year correction of loan ' South Holmes Gulch Road RMD $ 5,647 Prior year correction of loan ' NOTE 14. SERVICES PROVIDED TO OTHER Jefferson County provides various financial services to other governmental entities located within the County. The County serves as the billing agent, cashier and treasurer for tax and assessment collections for various taxing jurisdictions. The County also serves as a bank for such agencies as school districts, irrigation districts, rural fire ' districts, and other special purpose districts. The funds collected and held by the County for other entities are accounted for in agency funds. Funds collected for incorporated -39- 1 JEFFERSON COUNTY, MONTANA ' NOTES TO THE FINANCIAL STATEMENTS ' June 30, 2010 cities and towns are periodically remitted to those entities by the County Treasurer. The , County has not recorded any service charges for the services it provides other governmental entities. NOTE 15. RISK MANAGEMENT ' The County faces considerable number of risks of loss, including (a) damage to and loss ' of property and contents, (b) employee torts, (c) professional liability, i.e., errors and omissions, (d) environmental damage, (e) workers' compensation, i.e., employee injuries, and (f) medical insurance costs of employees. Settled claims resulting from these risks ' have not exceeded commercial insurance coverage in any of the past three fiscal years. Insurance Polices: ' Commercial policies transferring all risks of loss, except for relatively small deductible amounts are purchased for property and content damage, employees torts, and professional liabilities. Employee medical insurance is provided for by a commercial ' carrier. And, given the lack of coverage available, the County has no coverage for potential losses from environmental damages. Insurance Pools: ' Jefferson County has joined with other Montana counties to form a self-insurance pool offering workers' compensation coverage. This pool, named the Montana Association of t Counties Workers' Compensation Trust, has entered into an agreement with a private management firm to provide claim administrative services. The Trust has also entered into an agreement with the Montana Association of Counties to provide general , administrative services. The Counties do not exercise specific control over the budgeting and financing of the Trust's activities. Audited financial statements for fiscal year ended September 30, 2010, are available from ' the Montana Association of Counties Workers'Compensation Trust. The County's share of these assets, liabilities, and changes in net assets is not available. ' The County has joined with 28 other Montana Counties to form a self-insurance pool ' offering liability and general insurance coverage. This pool, named the Montana Association of Counties Joint Powers Insurance Authority Trust, provides for property, liability, public officials errors and omissions, and crime coverage in the amount of ' $50,000 each. The Trust also provides for additional coverage's for the above areas through excess insurance lines for varying amounts. The Trust has entered into an agreement with a private insurance agency to provide claim administrative services. The ' Trust has also entered into an agreement with the Montana Association of Counties to provide general administrative services. The counties do not exercise control over the budgeting and financing of the Trust's activities. ' The County's share of assets, liabilities, and changes in net assets is not available. -40- JEFFERSON COUNTY, MONTANA NOTES TO THE FINANCIAL STATEMENTS ' June 30, 2010 Audited financial statements for the fiscal year ended September 30, 2010, are available ' from the Montana Association of Counties Join Powers Insurance Trust. NOTE 16. PENDING LITIGATION ' The following is a list of litigation pending against the County and the amount of damages claimed by the Plaintiff. The County Attorney has made no evaluation as to the ' outcome of each case. Damages Potential Case Requested of Loss ' Schmaus v. Jefferson County Not stated Not stated Gilmer v. Jefferson County Not stated Not stated Hustad v. Jefferson County Not stated Not stated ' LaVigne v. Jefferson County Not stated Not stated Robert Anderson v. Jefferson County Not stated Not stated Jefferson County v DEQ Not stated Not stated ' Stately v. Jefferson County Not stated Not stated NOTE 17. SUBSEQUENT EVENTS The South End TIFD District will be loaned up to $655,000 from Metal Mines Trust Dollars for infrastructure. ' The North End TIFD District will receive a short term loan from Metal Mines Trust Dollars for infrastructure pending sale of bonds or capital loans. Boulder Hill Tower/Communication Site project anticipated expenditures of ' approximately$482,000.00. Bid was let in November, 2010. No bids were received. We anticipate re-bidding the project. -41- 1 ' REQUIRED SUPPLEMENTAL INFORMATION 1 lelremon County,Montana ButlMuotl omr Enkonumo M,2 For We p7en1 Year Ended June b,3010 Genenl Food Road ACTUAL AMAL AMOUNTS VAMNCE AMOUNTS VARWSCT: BUDGETEDAMOUNTS (BUDGETARY WITH MAL BUDGETED AMOUNTS (BU�UARY W FNT AL SURCE (WFLOWS): O FINAL BASSSe NoleA BUDGET Fl AL ¢ASIS)S s mole A BU xe T..001 e°q'uaW I 1,170,372 3 1,171.W2 S 1,096,649 S (74.453) S 451,048 3 449,626 S 192,671 S 6,955) laceeq W Pef°"n 1100 1,300 2,360 1,060 Inwg'..w 181,799 330,522 315,892 (14,630) 58],799 587,]99 541,636 C".kr 4erim (46,163) 1)8,660 178,660 161,241 (11,419) 3.400 3p00 2,855 (545) Firer W for(d0uea 141.740 141,740 145,386 3,546 MnodW.. 11.888 11.989 50,561 38,673 33,730 33,730 35,293 1,563 Inrmtrrom Gn9ngr Wow 60000 41.500 (18.50) 115 115 - _ (315) ,bnoumsav4ikbk for 4ppmpru0on I 1,145,759 S 1895,212 S _ 1.819A89 $ (75723) 3 1,076.092 3 LOA 610 S 972,455 S (102,215) CHARGES TO APPROPRIATIONS(OUT WS); GRmw go9mn nw S 2,495.002 S 2,443,939 3 2,170,913 S 273,026 S 2,597 3 2,587 S 1,669 S 918 Nbk Wet)' 80,732 90,977 65,925 15452 WMa WOE 1.031 1,031 1,031 1,264,811 1,260,312 1,179,827 80,505 PubOrhWh %,945 50,945 46,062 4,981 Sorial uW erommictmicu 6.800 6,800 7980 (1,180) - - - UommgOW mmmuWryd do mm - - C.MoonofwwWrro. - 148,723 143,723 ftl7'k°-p'ir'eiPW 7.000 7,000 5,618 1,382 Debtr°vw-unmet 3,000 3,000 3,838 162 - Capitaomlry - 51A63 116.612 (65549) 49600 80300 79,996 504 Tow lhm to opw rutoo. S 2.644.510 3 2.793478 $ 1564,671 S 228807 $ 1,316,998 S 1,343,419 S 1,261,492 $ 81927 OTRER FINANCWG SOURCES(USES) P,os orgma9W loos umu debr $ 201,464 $ 201,464 S 65,092 S (136,372) $ - s S - 3 T.I.T 816,521 916,521 763,817 (52,704) 116786 143207 143,207 .I ow A ToW o6m fine1ri11gmwm(urm) $ IA 1i 985 S 1.017,985 3 828.909 $ (189076) S 116,786 S 143,207 3 143.207 S N ' NO ,^ 4 f 93,727 S (145830) FooO ucx1 -begirmvrg of Or Sear S )86,2]9 S 369,408 FuOl bWa -be10m1m8 of 0e or mou,o 386.239 (11178) Fund tOSnm.- ora,o fear $$ 469,966 $ 358230 s 21z4M Jefferson county,monan. BudvUq ComPH.k WWe For We Fircel Yenr Ended June 30,2010 Pumie Sef w RAW Rock Mine Trust Account ACTUAL ACTUAL AMOUNT$ VARIANCE AMOIIN]S VARIANCE BUDGETED AMOUNTS (RUDGLTARY WITH FINAL BUDGETED AMOUNTS (BUDGETARY WITH FINAL RESOVRCUONF WS): OMGmAI FINAL RASIS)Sm NOIeA BUDGE ORIGINAL MAL BASIS)S,,No* BUDGET T.and ararmmt5 S 1,70 AS4 S 1696,012 S 1,47]515 $ (218.497) f - S Ucmuer and pamro 450 450 450 - - Inut'vemmmW 270,232 460,160 470,656 10,496 378,399 378,399 153,646 (224,753) Ch18a(or eervica 194,147 194,14 Fm And forfeiWa - ) 111,459 18,312 - - - MircdlBmoa Y,765 9,765 38,370 28,605 - - InvaaoNwurgs 400 400 - (400) 65.100 65,100 50,681 (14419) AnowD eveikhk for eppmpm0on S 2.175,448 5 2,360934 5 2.199450 S (161484) S 443,499 S 443.499 S 204327 f (239172) CHARGES TO APPROPRIATIONS(OUTFIA3WSh Garerd pvanman S - S - 5 - $ $ public reRly 2,074,890 2,038,996 1,991,676 97,32D _ public nnft - - pu6iic SaIN 2.640 12.640) SocW W emmak rervica - - - HoaiOp end commwry developmm3 - - - Cnn mon of namY ramuna 1,465,240 1,465,210 167,150 1,298,090 Debi savior-pmupY - - - - Debt sari.-unarm . GpiW Oaay 98.500 274.322 288.120 (11799) - - ToW ciwo ct a ep,no mYOm S 2.171]90 f 1363 318 S 2,279.7% S 93,522 S _ 1465 240 S 1465 240 S 169 790 S 1.295 450 OTHER FINANCING SOURCES(USES) Psaazd5 of8aRW lonearm deM S - f - 5 S S 3 S S Triufcr bi 50,743 50,743 63,554 12,811 m _ Tefmout (20000) (20000) A ToW ODwf in8 so.fora) S 50,743 f 50.743 S 43554 S (7189) S f S S W Na dum e a find bAl. 3 (36,792) S 34.537 Fay bdace-beeindil of A,yur Raieamaa $ 376,238 S 3,526065 Foroj SofU )oor- AuAM S 176238 S 3.526065 Fund WAnce-md of lbe Mr S 339446 $ 3,560,602 JMmon Counly,MonUm BudFDW mrEdwnS M,2 Par VD Fieul Ynr Ended Jwe b,2010 PELT ACTUAL AMOUNTS VARIANCE BUDGETEDAMOUNTS (BUDGETARY WITH FINAL ORIGINAL FINAL BASIS)S N A BUDGET RESOURCFS(INFLOWS): Ta.m and..D S - S - S - f - m an e ervviw 1D -- ,-mvmmw I m,ow 886,7 ,284)C1vBm Wr _ I.W forfe0ura Mrccdlmpp�D _- -_ - NvestmuamMic:s - AmoWSevvUbkforeppropriWOn S 1000.000 $ 1000000 $ 886.116 S (111284) CHARGES TO APPROPRIATIONS(OUTFLOWS, C'rM'd BOVemmpu 5 - $ - S 9,097 S (9,099) Public a D Public wr5a _ - PublkbWU - - - Soad W ew is fervicm - _ - Howp W mUmwpdmebpmmt - - - Commviwafwunlrmourcc - _ - 061 sv.ire-pnnLpd Debt serviu-Ulam( - CaNw!omlq - - - - Tow d.,gr b eppwpne09n f - S 3 9 091 5 (9,097) OTHER FMANCING SOURCES(USES) Proceeds of gaRrd bry krm deb, f S S 5 Trenfmb 300 500 500 Trmalay°�n (709206) (824039) (814941) 9098 ? Tow odor fuumnp wurn(m) S (708,706) S (923,539) $ (814 441) 5 9,093 No duneek fvd bWrce 5 63.178 Fud 6dmn-begmisR o(11u axv 5 (953,055 Ra .0 (5.6411 Fud bdvitt-bgi�min8 of N.5r-reswed 5 1 947 408 Fund twUn -rod of We Tnr 5 2,010,586 Jefferson County,Montana REQUIRED SUPPLEMENTAL INFORMATION Schedule of Funding Progress For the Year Ended June 30,2010 Actuarial UAAL as a Accrued Unfunded Percentage Actuarial Liability(AAL) AAL Funded Covered of Covered Actuarial Value of Assets Unit Credit Cost Method (UAAL) Ratio Payroll Payroll Valuation Date (a) (b) (b-a) (a/b) (c ) ((b-a)/(c) July 1, 2009 $ $ 1,342,567 $ 1,342,567 0% $ 2,757,093 49% A ' SINGLE AUDIT SECTION 1 This page intentionally left blank Jefferson county,Montane SCHEDULE OF EUJE DITURES OF FEDERAL AWARDS For FisW Year Ended Jun l0,2010 Federal Pan-nnuge Program or Begivoiag EMivg Federal Gnotor/hu-nnug6 CFDA Gnator'r A.ard B.U. Federal MateL/Other Federal Match/Other lWan[e Granmr/Pfornnt Ti Ly Number Number Amount July 1.2009 Revean Bevmue Espvdimrm Eavevditurm June M,2010 U.S.Dmanment of AVrie.11, Pa[[rd UuoughM aaoo lk;aoorem of.4dmoa.,un.: Schools and ROW-Grams m Stator 10.665 N/A S 397560 S - S 20,837 S - S 243,837 $ - S Srimob mad EoW-Gram,to Slum(Tide HI Frojem) 10.665 WA N/A 7,108 31,987 - 5,500 - 33,595 51M.1a tad AOW-Granta to SWes(TWe III Projmn) 10.665 WA N/A 37,417 - 3].41] ToW U.S Rpnmmt of AgrkWmae S 44.525 S 275.824 - S 249,337 - $ 71012 U.S.Demnm[vt of j.lkl Din": BultorawfVeto Pam'uYUp Program 16607 N/A S 3,516 S - S 2,516 $ - $ 2,516 S - S - ARRA-Edward Byrn Memwkl Junks Aatinmae Grant(JAG),Grants to Loral GOVmn W 16.804 2009-$B-B9-1465 $ 14,106 - 14,106 14,106 Pma[d Bhrough MO9rwo BomdarCrfarc Coma: - - CnunVt"anAmnmee 16.S7S 09-V02.%i% S 36,712 36712 9.176 36.9@ 0,176 TOW U.S-Depmnmmt of Janke Y - S 53,334 9176 $ 53,334 9,176 S U.Devanmemt of Troavonulav po-f rhrwgh Afn Dcpmrmaru of]Fm pmrmkv: lbsh -y Planuting W Covnmction 20301 STPE 23(36) $ 26,500 3 - S 15,330 S 2,376 $ 15,330 S 2,376 S Stara aM Community MO.,Salary 20600 2009-08-08-27 S 14,760 - 14,760 14,760 State and Comtruwity Highway Safety 20.600 2010x-04-16 $ 5,000 - 4,391 - 4,391 - StateWCommuniryHighweySefery 20.602 2009-x#16 S 5,500 1,001 3,066 4067 - TeW US-l3epat4mea[ofTnnpmtian _ _ S IMI S 3].54] $ 2.376 S 38548 S 2176 $ US Deva"halal of ,Ith and Hemav Sxrrkd Pmard through Mmrsmro Oepwon a o/Heo a AHmmnu Scr.v�xs: t Public H kh E.,,onor Prepmcd. 93069 NIA S 166,719 S 31)."1 S 105,67] S - $ 57,580 $ - S 80,088 p. Smbtoamce Above ad MadW HWth S[unites-Proj["s of Regioml and N[tiOml Sigaifinns 93.243 08-332-74412 S 681,386 - 190,716 _ IW,716 Immunimtieo Gum - t 93.WI 09-07-01-0 21 $ 4,025 - 4,025 - 4,025 Pmmwive HWrA tad HmOh Savicm BbrA Gad 93.991 09-0]-01-004 N/A 9,195 9,614 - 9,614 9,395 bW W Chil HWrh Smvicn-Bloch Grmlro the Statea 93.994 10-07-5-01-1122 S e 12,13] 12,137 9,619 12.137 9,619 TuWU.5 I5apanmeat of Healh tad HUmaa Snicm S 40,386 S 123,169 S 9.619 S 274072 S 9,619 S 89,483 US_Demnmmt of Homd.m Seaen Po cad dvwgh Movmn pepmntrru ofMih[my Af/tifr: Enm6emy 6dmmemant Peefomune.Grants 91042 S -2010 $ 29,775 $ - $ 34,424 S 16,3% $ 34.424 S 16,396 S Hontel[uW Sco my Crum Progrmm 97.067 2M7-GE.T)-001 S 223,610 223,610 223.610 TOW U.S.D m epanea of Homeland Homeland Smariry $ - S 256.034 S 16.396 $ 258,034 S _ 16.396 S Total Fccl"Fimavcial Amhtance S 85,912 S 90908 S 3]567 $ 873,325 S _ 37,567 S 160,495 N/A.Nol Atgtr�k rt Nq Availrlk JEFFERSON COUNTY, MONTANA ' NOTES TO THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS ' Fiscal Year Ended June 30, 2010 Basis of Presentation The accompanying Schedule of Expenditures of Federal Awards includes the federal grant ' activity of Jefferson County, Jefferson County, Montana, and is presented on the modified accrual basis of accounting. The information in this schedule is presented in accordance with the ' requirements of OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Therefore, some amounts presented in this schedule may differ from amounts presented in, or used in preparation of, the basic financial statements. ' 47 ' Denning, Downey & Associates, P.C. ' CERTIFIED PUBLIC A CCO UNTANTS 1740 U.S. llwy 93 South, P.D. Box 1957, Kalispell, MT 59903-1957 REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENTAUDITING STANDARDS ' Board of County Commissioners Jefferson County Boulder, Montana We have audited the financial statements of the governmental activities, business-type activities, each major fund, and the aggregate remaining fund information of Jefferson County, Montana, as of and for the year ended June 30, 2010, which collectively comprise the Jefferson County's basic financial statements and have issued our report thereon dated March 28, 2011. 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 Jefferson County internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing ' our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Jefferson County's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Jefferson County's internal control over ' financial reporting. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable ' possibility that a material misstatement of the entity's financial statement will not be prevented, or detected and corrected on a timely basis. ' Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in ' internal control over financial reporting that might be deficiencies, significant deficiencies, or material weaknesses. However, we identified certain deficiencies in internal control over financial reporting, described in the accompanying schedule of findings and questioned costs as ' items 10-1, 10-2, and 10-3, that we consider to be material weaknesses and other deficiencies that we consider to be significant deficiencies in internal control over financial reporting as item 10-4. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. ' -48- Robert K. Denning, CPA Kim M Downey, CPA Compliance and Other Matters ' As part of obtaining reasonable assurance about whether the Jefferson County's financial statements are free of material misstatement, we performed tests of its compliance with certain , provisions of laws,regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, ' accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. ' Jefferson County's response to the findings identified in our audit is described in the Auditee's Response to Findings. We did not audit Jefferson County's response, and accordingly, we ' express no opinion on it. This report is intended solely for the information and use of the audit committee, management, ' the Board of County Commissioners, the Montana Department of Administration, the Montana Office of Public Instruction, and federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. , 4,X/V1, 4,� CPA 5, Pc. ' March 28, 2011 -49- ' Denning, Downey & Associates, P.C. ' CERTIFIED PUBLICACCOUNTANTS 1740 U.S. Hwy 93 Sousk P.O.Box 1957, Kalispell,MT 59903-1957 INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE WITH REQUIREMENTS ' THAT COULD HAVE A DIRECT AND MATERIAL EFFECT ON EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133 ' Board of County Commissioners Jefferson County Boulder, Montana Compliance ' We have audited Jefferson County, Montana, compliance with the types of compliance requirements described in the U.S. Office of Management and Budget (OMB) Circular A-133 ' Compliance Supplement that could have a direct and material effect on each of Jefferson County's major federal programs for the year ended June 30, 2010. The County's major federal programs are identified in the summary of auditor's results section of the accompanying ' schedule of findings and questioned costs. Compliance with the requirements of laws, regulations, contracts, and grants applicable to each of its major federal programs is the responsibility of the County's management. Our responsibility is to express an opinion of the ' County's compliance based on our audit. We conducted our audit of compliance in accordance with auditing standards generally accepted ' in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments and Non-Profit Organizations. ' Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program ' occurred. An audit includes examining, on a test basis, evidence about the County's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit ' does not provide a legal determination on the County's compliance with those requirements. In our opinion, Jefferson County complied, in all material respects, with the compliance ' requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended June 30, 2010. Internal Control Over Compliance The management of the County is responsible for establishing and maintaining effective internal control over compliance with requirements of laws, regulations, contracts and grants applicable ' to federal programs. In planning and performing our audit, we considered the County's internal control over compliance with requirements that could have a direct and material effect on a major federal program in order to determine our auditing procedures for the purpose of expressing an opinion on compliance and report on internal control over compliance in -50- ' Robert K. Denning, CPA Kim M Downey, CPA 1 accordance with OMB Circular A433, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the County's internal control over compliance. Our consideration of internal control over compliance was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control over compliance that might be significant deficiencies or material weaknesses and therefore, there can ' be no assurance that all deficiencies, significant deficiencies, or material weaknesses have been identified. However, as discussed below, we identified certain deficiencies in internal control over compliance that we consider to be material weaknesses. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. We consider the deficiency in internal control over compliance described in the accompanying schedule of findings and questioned costs as item 10-5 to be a material weakness. Jefferson County's response to the findings identified in our audit are described in the Auditee's Response to Findings. We did not audit Jefferson County's response and, accordingly, we express no opinion on it. This report is intended for the information of the audit committee, management, the Board of County Commissioners, the Montana Department of Administration, and federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. , 0 L"j, CPa 5Pc. March 28, 2011 1 1 1 51 , 1 JEFFERSON COUNTY, MONTANA SCHEDULE OF FINDINGS AND QUESTIONED COSTS Fiscal Year Ended June 30, 2010 ' Section I—Summary of Auditor's Results ' Financial Statements ' Type of auditor's report issued Unqualified Internal control over financial reporting: Material weakness(es) identified? Yes ' Significant deficiency(s) identified not considered to be material weaknesses Yes ' Noncompliance material to financial statements noted? No Federal Awards Internal control over major programs: ' Material weakness(es) identified? Yes Significant deficiency(s)identified not considered to be material weaknesses None Reported Type of auditor's report issued on compliance for major programs: Unqualified ' Any audit findings disclosed that are required to be reported in accordance with Circular A-133, Section .510(a)? Yes Identification of major programs: ' CFDA Number Name of Federal Program or Cluster 97.067 Homeland Security Grant Program ' 93.243 Substance Abuse and Mental Health Services—Projects of Regional and National Significance 10.665 Schools and Roads—Grants to States Dollar threshold used to distinguish between Type A and Type B programs: $ 300.000 Auditee qualified as low-risk auditee? No -52- SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) , Section II—Financial Statement Findings ' 10-1 Warrants Payable-School Districts ' Condition: ' Warrants payable for the School District funds were not balanced to the general ledger. Criteria: , In order to verify the accuracy of the information entered into the school accounting system the County should review the general ledger to verify that it agrees with the amounts reported by the School Districts. , Effect: Warrants payable for School District funds was reported as $(1,041,416). We have not ' determined the amount that should have been reported by the School Districts at the time of the audit. This amount has been netted with Due to Governments on the Statement of Fiduciary Net Assets. ' Cause: Because the School Districts do not keep adequate track of claims due, there is currently ' no support for tying the amounts reported on the general ledger to the amounts that should be reported. This finding has been repeated from the prior year. Recommendation: , We recommend that the County balance the School Districts' warrants payable monthly. 10-2 Inadequate Pledged Securities Condition: ' The County had cash balances that were not insured by either FDIC insurance or backed by pledged securities as required by Montana Code Annotated(MCA). Criteria: MCA, Section 7-6-207(1) states in part "the local governing body may require security only for that portion of the deposits which is not guaranteed or insured according to law ' and, as to such un-guaranteed or uninsured portion, to the extent of (a) 50% of such deposits if the institution in which the deposit is made has a net worth to total assets ratio of 6% or more; or(b) 100% if the institution in which the deposit is made has a net worth ' to total assets ratio of less than 6%." Effect: ' As of June 30, 2010, deposits held by Jefferson Co. in various institutions were under- collateralized by $254,416. Cause: , Inadequate pledged securities were held to completely cover all financial institutions ' where cash is held. This finding is repeated from the prior year. -53- ' ' SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Recommendation: The County should require additional pledged securities or invest in other financial ' institutions in the State of Montana. 10-3 Solid Waste Fund Internal Controls ' Condition: Jefferson County identified a fraud in the Solid Waste Department in fiscal year 2010. ' The County's controls required that the landfill attendants collect money and then turn in the collections to the secretary for recounting and depositing with the County Treasurer. It was determined by the County, that the secretary was able to obtain $39,031 from the ' solid waste landfill collections. The County's insurance carrier has covered the loss. Criteria: ' Internal controls structure suggests that procedures be reviewed on a periodic basis and determine if they are adequately operating as designed. ' Effect: The secretary was able to identify a weakness in the internal control structure and acquire $39,031 of County money. During fiscal year 2011, the County implemented a number ' of new controls which have addressed where the weaknesses were located. Cause: ' County personnel were not regularly reviewing the internal controls of this collection point to ensure it was operating as designed. ' Recommendation: The County should continue to review current internal control policy and implement additional control procedures to ensure all receipts are deposited with the County ' Treasurer. 10-4 Weed Department Internal Control ' Condition: The current weed supervisor does not have an adequate database program or training to ' maintain proper internal controls in the weed department. The database program is set up to produce invoices, purchase orders, and maintain names of county residents authorized to buy product under the cost sharing program. The current database program has a technical glitch which causes it to work only part of the time. During these times, customer invoices are prepared by hand, bypassing the internal controls in place in the database program. Additionally, when the software is fully functional, the weed ' supervisor does not have adequate training to fully utilize the invoices and purchase orders. Criteria: Adequate internal controls are required to ensure that inventory is properly tracked and revenues and expenses are properly reported. To maintain proper internal controls, ' controls should not be bypassed at any time. Also, employees should have adequate training to follow all internal control procedures in place. ' -54- SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) , Effect: ' Bypassing and not utilizing internal controls could result in errors going undetected. Cause: , The former weed supervisor was terminated and the current weed supervisor does not have adequate training. Also, the database program does not have adequate technical ' support. Recommendation: , We recommend that all employees receive adequate training to be able to perform their assigned duties and that computer programs have adequate technical support so that related internal controls are utilized. ' Section III—Federal Award Findings and Questioned Costs ' 10-5 Cash Management—Health Grants CFDA Title: Preventive Health and Health Services Block Grant; ' Public Health Emergency Preparedness CFDA Number: 93.991; 93.069 Federal Award Number: Unknown ' Federal Agency: U.S. Department of Health and Human Services Pass-through Entity: Montana Department of Public Health and Human Services ' Condition: During our review for completeness of the Schedule of Expenditures of Federal Awards ' we noted the Preventive Health and Health Services Block Grant and the Public Health Emergency Preparedness Grant were displaying $9,395 and $80,088 respectively of excess cash receipts. Our understanding of these grants is the County is to incur costs ' and then request reimbursements. We also understand the grants could also have maintained emergency reserves and there was no documentation to support the emergency reserves is the amount of cash remaining for these grants. ' Criteria: Federal grant compliance requirements found in OMB Circular A-133 and U. S. , Department of the Treasury (Treasury) regulations at 31 CFR part 205 indicate that when entities are funded on a reimbursement basis, program costs must be paid for by entity funds before reimbursement is requested from the Federal Government. When funds are ' advanced, recipients must follow procedures to minimize the time elapsing between the transfer of funds from the U.S. Treasury and disbursement. When advance payment procedures are used, recipients must establish reasonable procedures to ensure cash ' balances and cash disbursements are sufficient in time to minimize the time elapsing between the receipt of funds and its related expenditure. ' -55- ' SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect: For Health Department grants there appears to be approximately $90,000 of excess grant ' funds requested. Cause: ' Grant files to do not include a spreadsheet showing the activity of the grant and the remaining balance to be spent. Recommendation: We recommend the County go back through its grant files and verify that correct reporting of costs was reported to the State. Once this process is done contact the State to determine if any funding needs to be returned or if any excess funding can be re- appropriated for current year costs. -56- Denning, Downey & Associates, P.C. ' CERTIFIED PUBLICACCOUNTANTS ' 1740 U.S. Hwy 93 South, P.O. Box 1957, Kalispell, ,MT 59903-1957 REPORT ON OTHER COMPLIANCE,FINANCIAL, AND INTERNAL ACCOUNTING ' CONTROL MATTERS Board of County Commissioners ' Jefferson County Boulder, Montana There were no other compliance, financial, or internal accounting matters. try Q,umotoy , CPR 's Pc. ' March 28, 2011 ' -57- Robert K. Denning, CPA Kim M Downey, CPA 1 ' Denning, Downey & Associates, P.C. ' CERTIFIED PUBLICACCOUNTANTS 1740 U.S. Hwy 93 South,P.O.Box 1957, Kalispell,MT 59903-1957 t REPORT ON PRIOR AUDIT REPORT RECOMMENDATIONS ' Board of County Commissioners Jefferson County Jefferson County Boulder, Montana The prior audit report contained eight recommendations. The action taken on each recommendation is as follows: ' Recommendation Action Taken Check Signers Implemented Warrants Payable—School Districts Repeated Annual Financial Report Preparation Implemented Special Assessments Receivable Implemented Unrecorded Capital Assets and Long-term Debt Implemented Solid Waste Fund Repeated Pledged Securities Repeated Missing Minutes Implemented ' Timesheet Approval Process and Overtime Implemented lJ a,.J, lLcarao CoR sPC. March 28, 2011 1 ' -58- Robert K Denning, CPA Kim M Downey, CPA ' `SGO�gRED 1N8FT Jefferson County Commission 118 W. Centennial s A Post Office Box H ' Boulder, Montana 59632-0249 (406)225.4025 Voice / (406)225-4148 Fax Leonard Wortman, Chair Dave Kirsch, Commissioner Tom Lythgoe, Commissioner �F�RSON COU��'Gt' ' February 14, 2011 ' Denning, Downey&Associates, P.C. ' Attn: Tom Hayes, CPA 1361 Elm Street, Ste H4 Helena, MT 69601 ' Dear Tom, Here are the responses to your audit findings for Jefferson County. ' Warrants payable for the school district funds were not balances to the general ledger. t The Treasurer will balance the warrants payable for the School Districts to the General Ledger on a monthly basis. The Treasurer will also meet with the Clerk and Recorder to make sure it is done properly. We have created a form letter that ' will be mailed out to the Schools with their Trial Balances each month so they can report the outstanding warrants they have back to our office. ' The County had cash balances that were not insured by either FDIC insurance or backed by pledged securities as required by Montana Code Annotated (MCA). ' The Treasurer has contacted First Boulder Valley Bank and talked with Lee Swanson and has increased the amount pledged for Jefferson County. The Treasurer will also check with the bank at June 2011 month end to make sure there is a sufficient amount pledged. ' -59- 1 February 1t, 2011 ' Page 2 Jefferson County's internal control structure identifed a fraud in the Solid Waste , Department. The County's controls required the landfill attendants collect money and then turn in the collections to the secretary for recounting and depositing with the County Treasurer. It was determined by the County, the secretary was able to obtain $39,031 from ' the solid waste landfill collections. The County' insurance carrier has covered the loss. Procedures are now in place to regularly review internal controls to ensure they ' are operating as designed. Current weed supervisor does not have an adequate database program or training to , maintain proper internal controls in the weed department. The database program is set up to produce invoices,purchase orders, and maintain names of county residents authorized to buy product under the cost sharing program. The current program has a bug which , causes it to work only part of the time. During these times, customer invoices are prepared by hand, bypassing the internal controls in place in the database program. When the software is fully functional, the weed supervisor does not have adequate training to fully ' utilize the invoices and purchase orders. The weed district will hire a programmer to construct a new data base for ' herbicide inventory and sales, as recommended by Carl Purdy, Information Technology Manager. Red locking cash bags will be used to secure cash and checks acquired by the district each day until deposited at the County Treasurer's ' office. During our review for completeness of the Schedule of Expenditures of Federal Awards we ' noted the Preventive Health and Health Services Block Grant and the Public Health Emergency Preparedness grants were displaying $9,395 and $80,088 of excess cash receipts. Our understanding of these grants is the County is to incur costs and then request ' reimbursements. We also understand the grants county also have maintained emergency reserves and there was no documentation to support the emergency reserves is the amount of cash remaining for these grants. ' Response is attached. Sincerely, ' Leonard Wortman, Chair Dave Kirsch Tomas E. Lythgoe , Jefferson County Board of Commissioners COM/ha , cc: reading file Clerk & Recorder 1 -60- ' tY�,�{ Jefferson County Public Health Department (PHD) Administrative Office ' 214 South Main- P O Box 872, Boulder, MT 59632 ff Phone(406)225-4007 or 287-3249 Fax(406) 225-4108 Public Healt Prevent. Promote. prrt, January 18, 2011 ' To:Bonnie Ramey,Jefferson County Clerk and Recorder. Regarding:Plan for dealing with report of"under spending"of MLC,PHEP and,unspent PHER funds. 1. Montana Learning Collaborative(N%Q Funds: ($23,015.29) A. SEC. 4, Para. A. of the MLC Grant outlines appropriate uses of the grant funds. (Attachment A). B. This grant requires extensive hours to administer. The PHD has not had funds utilized from the Grant to cover time spent administering and working on this grant. Funds for its operation which should have been taken from the grant were evidently taken from the regular department salary budget. C. In addition to required meetings/conferences/[mining,at least 16 hours per week are required for research,collaboration,telephone consults,document preparation i.e.over 38 Standard Operating ' Procedures(SOP'S)for Immunizations were written with over 30 SOP supporting documents and numerous other related requirements for this Grant. 1 D. The PHD has reviewed work time records for time/costs spent meeting grant requirements. If grant funds are adjusted it appears this accounts for$22, 095 dollars that should have come out of this grant E. After budget adjustments,the Grant should show about a one thousand dollar balance. (Attachment B)_ ' 2. Unspent Public Health Emergency Response Funds. ($3,122.20) A. These funds will be used to provide additional hands free,hand washing/hygiene supplies in the County. They will be expended by March 15,2011. 3. Public Health Emergency Preparedness(PHEP)unspent funds. ($103,211.61) A. The contract reports a 0.5 and 1.0 FTE is required to administer this grant[Attachment Q. Contract SEC. 2: PARA.A, Item 5)). This Grant requires an estimated average of 18 to 20 hours per week. B. Administrative costs for the past three years came from the regular PHD budget, not the PHEP Grant. ' C. After adjustment of funds for hours spent there does not appear to be funds remaining to provide emergency preparedness requirements beyond that already committed. If sufficient funds do remain however I plan to initiate a committee composed of the PH Director,PH Officer, Disaster and Emergency Services Coordinator,Sherritfs Office and Environmental Health Officer will be ' convened to determine the best use of funds for Public Health Emergency Preparedness, D. FHEP Funds currently committed from this grant include: ' (1) $30,000 to Contract a company to conduct Community Health Assessment. (2) $4,000(approved October 2010 by the Health Board)for an Environmental Health storage shed for emergency equipment and supplies. Environmental Health is currently obtaining bids. ' Noel Mathis RN,MSN Director -61-