2012-Audit

2012-Audit

Document Date: January 1, 2012 Document: 2012-Audit.pdf

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COUNTY OF RUSSELL, VIRGINIA

ANNUAL FINANCIAL REPORT

FISCAL YEAR ENDED JUNE 30, 2012

CouNTY OF RUSSELL, VIRGINIA ANNUAL FINANCIAL REPORT

FISCAL YEAR ENDED JUNE 30, 2012

INTRODUCTORY SECTION

COUNTY OF RUSSELL, VIRGINIA ANNUAL FINANCIAL REPORT

FISCAL YEAR ENDED JUNE 30, 2012

TABLE OF CONTENTS

List of Elected and Appointed Officials … .

FINANCIAL SECTION

Independent Auditors’ Report … … … … … … … … … … … … … … … … 2-3 Management’s Discussion and Analysis… … … … … … 4-13

Exhibit Page Basic Financial Statements:

Government-wide Financial Statements: Statement of Net Assets … . 1 14 Statement of Activities … . 2 15

Fund Financial Statements: Balance Sheet- Governmental Funds … . 3 16 Reconciliation of the Balance Sheet of Governmental Funds to the Statement

of Net Assets … . 4 17 Statement of Revenues, Expenditures and Changes in Fund Balances-

Governmental Funds … . 5 18 Reconciliation of the Statement of Revenues, Expenditures, and Changes

in Fund Balances of Governmental Funds to the Statement of Activities … . 6 19 Statement of Net Assets- Proprietary Funds … . 7 22 Statement of Revenues, Expenses, and Changes in Fund Net Assets-

Proprietary Funds … . 8 21 Statement of Cash Flows- Proprietary Funds … . 9 22 Statement of Fiduciary Net Assets- Fiduciary Funds … . 10 23

Notes to Financial Statements … . 24-62

Required Supplementary Information:

Schedule of Revenues, Expenditures and Changes in Fund Balances- Budget and Actual General Fund … 11 63 Special Revenue Fund- Industrial Development… 12 64 Special Revenue Fund- Coal Road … … … … … … … … … … … 13 65 Special Revenue Fund- Workforce Investment Board… 14 66

Schedule of Pension and OPEB Funding Progress… 15 67

CouNTY OF RUSSELL, VIRGINIA ‘ANNUAL FINANCIAL REPORT FiscAL YEAR ENDED JUNE 30, 2012

TABLE OF CONTENTS INTRODUCTORY SECTION Page List of Elected and Appointed Officials… 1 FINANCIAL SECTION Independent Auditors’ Report …cccssccssssesusessnsesisesennesen 23 Management’s Discussion and Analysis… 443, Exhibit Page Basic Financial Statements: Government-wide Financial Statements: Statement of Net Assets 1 14 Statement of Activities 2 15 Fund Financial Statements: Balance Sheet ~ Governmental Funds … 3 16 Reconciliation of the Balance Sheet of Governmental Funds 'o ‘the ‘Statement Of Net Assets oo… 4 17 Statement of Revenues, Expenditures and Changes it in Fund Balances - Governmental Funds. 5 18 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities . 6 19 Statement of Net Assets — Proprietary Funds…» 7 2 Statement of Revenues, Expenses, and Changes in Fund Net Assets -

Proprietary Funds . est . 8 2 Statement of Cash Flows - Proprietary Funds… 9 22 Statement of Fiduciary Net Assets — Fiduciary Funds. 10 23

Notes to Financial Statements. sosescteen = 24-62 Required Supplementary Information: ‘Schedule of Revenues, Expenditures and Changes in Fund Balances — Budget and Actual General Fund… estinenstntaeneaetesnanesennes enneseensee . wf 63 Special Revenue Fund — Industrial Development… 12 64 Special Revenue Fund - Coal Road… 13 65 Special Revenue Fund - Workforce investment Board. 14 66 Schedule of Pension and OPEB Funding Progress… 18 67

FINANCIAL SECTION (CONTINUED)

COUNTY OF RUSSELL, VIRGINIA

ANNUAL FINANCIAL REPORT

FISCAL YEAR ENDED JUNE 30,2012

TABLE OF CONTENTS (CONTINUED)

Exhibit Page

Other Supplementary Information:

Statement of Changes in Assets and Liabilities- Agency Funds… 16 68

Discretely Presented Component Unit- School Board: Balance Sheet… 17 69 Statement of Revenues, Expenditures, and Changes in Fund Balances-

Governmental Funds… 18 70 Schedule of Revenues, Expenditures, and Changes in Fund Balances-

Budget and Actual… 19 71

Schedule Page Supporting Schedules:

Schedule of Revenues- Budget and Actual - Governmental Funds … . Schedule of Expenditures- Budget and Actual - Governmental Funds … …

Other Statistical Information:

Government-wide Information: Government-Wide Expenses by Function … . Government-Wide Revenues … .

Fund Information: General Governmental Expenditures by Function … . General Governmental Revenues by Source … . Property Tax Levies and Collections … . Assessed Value of Taxable Property … . Property Tax Rates … . Ratio of Net General Bonded Debt to Assessed Value and Net Bonded

Debt Per Capita … . Ratio of Annual Debt Service Expenditures for General Bonded Debt to

Total General Governmental Expenditures … .

1 72-77 2 78-81

1 2

3 4 5 6 7

82 83

84 85 86 87 88

COUNTY OF RUSSELL, VIRGINIA ANNUAL FINANCIAL REPORT FiscaL YEAR ENDED JUNE 30, 2012

TABLE OF CONTENTS (CONTINUED)

FINANCIAL SECTION (CONTINUED)

Other Supplementary Information:

Statement of Changes in Assets and Liabilities ~ Agency FUMES…

Discretely Presented Component Unit - School Board:

Balance Sheet 7 Statement of Re Governmental Funds… ses 18 Schedule of Revenues, Expenditures, and Changes ir in Fund | Balances - - Budget and Actual… sosonen nssansnsnersnsnsaneessesnsaniere 19 Schedule Supporting Schedules: Schedule of Revenues ~ Budget and Actual - Governmental Funds … 1 Schedule of Expenditures - Budget and Actual - Governmental Funds . 2 Other Statistical Information: Table ‘Government-wide Information: Government-Wide Expenses by Function… 1 Government-Wide REVEnUes …rssesceisse 2 Fund Information: General Governmental Expenditures by Function. 3 General Governmental Revenues by Source… 4 Property Tax Levies and Collections. 5 Assessed Value of Taxable Property 6 Property Tax Rates… 7 Ratio of Net General Bonded Debt to Assessed Value and Net Bonded Debt Per Capita. cso senna — 8 Ratio of Annual Debt Service Expenditures for General Bonded Debt ‘O Total General Governmental Expenditures … senna 9

69 70

Page

72-17 78-81

Page

82 83

84 85 86 87 88

89 90

COMPLIANCE SECTION

Compliance:

COUNTY OF RUSSELL, VIRGINIA ANNUAL FINANCIAL REPORT

FISCAL YEAR ENDED JUNE 30,2012

TABLE OF CONTENTS {CONTINUED)

Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards … .

Independent Auditors’ Report 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 … …

Schedule of Expenditures of Federal Awards … . Schedule of Findings and Questioned Costs … …

91-92

93-94

95-98 99-102

COUNTY OF RUSSELL, VIRGINIA ANNUAL FINANCIAL REPORT FisCAL YEAR ENDED JUNE 30, 2012

TABLE OF CONTENTS (CONTINUED)

COMPLIANCE SECTION Page Compliance: 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… se 91-92 Independent Auditors’ 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… . 93-94 ‘Schedule of Expenditures of Federal Awards, 95-98 99-102

Schedule of Findings and Questioned Costs.

INTRODUCTORY SECTION

COUNTY OF RUSSELL, VIRGINIA

Joseph Puckett, Vice Chairman Bob Gibson Rebecca Dye

Carl Jackson, Vice Chairman Fayrene Plaster Tom Griffith

Bill W. Wampler, Vice Chairman Bill Hale

BOARD OF SUPERVISORS

Jon Bowerbank, Chairman

COUNTY SCHOOL BOARD

Charlie Collins, Chairman

SOCIAL SERVICES BOARD

Harry Ferguson, Jr., Chairman

OTHER OFFICIALS

Larry Rasnake Earnest (Shy) Kennedy

Danny L. Brown

Bob Hillman Linda Cross

Roger Brown

Clerk of the Circuit Court… … Ann S. McReynolds Commonwealth’s Attorney … Brian Patton Commissioner of the Revenue … Randy N. Williams Treasurer … Patrick Thompson Sheriff … Steve Dye Superintendent of Schools … Mike Puckett Interim Director of Social Services … Carol Brunty County Administrator … Marycarol White County Attorney … Dennis Jones

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County OF RUSSELL, VIRGINIA

BOARD OF SUPERVISORS Jon Bowerbank, Chairman Joseph Puckett, Vie Chairman Larry Rasnake Bob Gibson Eamest (Shy) Kennedy Rebecca Dye Danny L. Brown COUNTY SCHOOL BOARD Charlie Colins, Chairman Cari Jackson, Viee Chairman Bob Hillman Fayrene Plaster Linda Cross Tom Griffith SOCIAL SERVICES BOARD Harry Ferguson, Jr., Chairman Bil W. Wampler, Vice Chairman Roger Brown Bil Hale OTHER OFFICIALS Clerk of the Circult Court. cus Ann §, MeReynolds

Commonwealth’s Attorney … sss Brian Patton Commissioner of the Revenue… Randy N. Williams: Treasurer… .Patrick Thompson Sherif… ssonnuome Stove Dye Superintendent of Schools… ovens Mike Puckett Interim Director of Social Services se Carol Brunty County Administrator. Marycarol White County Attorney… _…Dennis Jones

FINANCIAL SECTION

ROBINSON, FARMER, COX ASSOCIATES C!R 111 !lD P! !BLJC /1 CCOt TN 1 !L’V IS

Independent Auditors’ Report

To the Members of the Board of Supervisors County of Russell, Virginia Lebanon, Virginia

11 PRO/ L<::JONI!L L/,\1/Jl-D U~1Bllfl Y COAJPA,V}

We have audited the accompanying financial statements of the governmental activities, the business-type activities, the discretely presented component units (School Board and Russell County Industrial Development Authority), the major funds, and the aggregate remaining fund information of the County of Russell, Virginia, as of and for the year ended June 30, 2012, which collectively comprise the County’s basic financial statements as listed in the table of contents. These financial statements are the responsibility of the County of Russell, Virginia’s 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; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the Specifications for Audits of Counties, Cities, and Towns, issued by the Auditor of Public Accounts of the Commonwealth of Virginia. 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 the significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit and the report of other auditors provide a reasonable basis for our opinions.

The financial statements do not include financial data for the County’s legally separate component units (Russell County Public Service Authority and Castlewood Water and Sewage Authority). Accounting principles generally accepted in the United States of America require the financial data for those component units to be reported with the financial data of the County’s primary government unless the County also issues financial statements for the financial reporting entity that include the financial data for its component units. The County has not issued such reporting entity financial statements.

In our opinion, because of the omission of the discretely presented component units, as discussed previously, the financial statements referred to previously do not present fairly, in conformity with accounting principles generally accepted in the United States of America, the financial position of the aggregate discretely presented component units of the County of Russell, Virginia as of June 30, 2012, or the changes in financial position thereof for the year then ended.

In addition, in our opinion, the financial statements referred to previously present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, the discretely presented component units (School Board and Russell County Industrial Development Authority), the major funds, and the aggregate remaining fund information of the County of Russell, Virginia as of June 30, 2012, and the respective changes in financial position and cash flows, where applicable, thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.

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ROBINSON, FARMER, COX ASSOCIATES

CERI ID PUBLIC ACCOUNTANTS A PROFISSIONAL LIMITED LIABILITY COMPANY

Independent Auditors’ Report

To the Members of the Board of Supervisors County of Russell, Virginia Lebanon, Virginia

We have audited the accompanying financial statements of the governmental activities, the business-type activities, the discretely presented component units (School Board and Russell County Industrial Development Authority), the major funds, and the aggregate remaining fund information of the County of Russell, Virginia, as of and for the year ended June 30, 2012, which collectively comprise the County’s basic financial statements as listed in the table of contents. These financial statements are the responsibil of the County of Russell, Virginia’s 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: the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the Speoifications for Auoits of Counties, Cities, and Towns, issued by the Auditor of Public Accounts of the Commonwealth of Virginia, 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 the significant estimates made by management, as well as evaluating the overal financial statement presentation. We believe that our audit and the report of other auditors provide a reasonable basis for our opinions.

In our opinion, because of the omission of the discretely presented component units, as discussed previously, the financial statements referred to previously do not present fairly, in conformity with accounting principles generally accepted in the United States of America, the financial position of the aggregate discretely presented component Units of the County of Russel, Virginia as of June 30, 2012, or the changes in financial position thereof for the year then ended.

In addition, in our opinion, the financial statements referred to previously present fairy, in all material respects, the respective financial position of the governmental activities, the business-type activities, the discretely presented component units (School Board and Russell County Industrial Development Authority), the major funds, and the aggregate remaining fund information of the County of Russell, Virginia as of June 30, 2012, and the respective changes in financial position and cash flows, where applicable, thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.

In accordance with Government Auditing Standards, we have also issued our report dated December 19, 2012, on our consideration of the County of Russell, Virginia’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit.

Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis, budgetary comparison information, and schedules of pension and OPEB funding progress 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 management’s discussion and analysis and schedules of funding progress in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about 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 management’s discussion and analysis and schedules of funding progress because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. The budgetary comparison information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.

Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the County of Russell, Virginia’s, financial statements as a whole. The introductory section, other supplementary information, supporting schedules, and other statistical information are presented for purposes of additional analysis and are not a required part of the 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 financial statements. The other supplementary information, supporting schedules, and the schedule of expenditures of federal awards are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the financial statements. The information has been 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, based on our audit and the report of other auditors, the information is fairly stated in all material respects in relation to the financial statements as a whole. The introductory section and other statistical information have not been subjected to the auditing procedures applied by us and the other auditors in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them.

lf~d1/.1 ~~ '~tJa~ Blacksburg, Virginia December 19, 2012

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In accordance with Government Auditing Standards, we have also issued our report dated December 19, 2012, on our consideration of the County of Russell, Virginia’s internat control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of intemal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on intemal control over financial reporting ot on compliance, That report is an integral part of an audit performed in accordance with Goverment Auditing Standards and should be considered in assessing the results of our audit.

Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis, budgetary comparison information, and schedules of pension and OPEB funding progress 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 ito 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 management’s discussion and analysis and schedules of funding progress in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about 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 management’s discussion and analysis and schedules of funding progress because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. The budgetary comparison information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.

Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the County of Russell, Virginia’s, financial statements as a whole. The introductory section, other supplementary information, supporting schedules, and other statistical information are presented for purposes of additional analysis and are not a required part of the 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 financial statements, The other supplementary information, supporting schedules, and the schedule of expenditures of federal awards are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconcling 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, based on our audit and the report of other auditors, the information is fairly stated in all material respects in relation to the financial statements as a whole, The introductory section and other statistical information have not been subjected to the auditing procedures applied by us and the other auditors in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them.

Hateimoan, Sharan, by lhsccicttes-

Blacksburg, Virginia December 19, 2012

Management’s Discussion and Analysis

As management of the County of Russell, Virginia, we offer readers of the County of Russell’s financial statements this narrative overview and analysis of the financial activities of the County of Russell, Virginia for the fiscal year ended June 30, 2012.

Financial Highlights

• The assets of the County of Russell, Virginia exceeded its liabilities at the close of the most recent fiscal year by $16,271,527 (net assets). Of this amount, $5,140,399 (unrestricted net assets) may be used to meet the government’s ongoing obligations to citizens and creditors.

• The government’s total net assets decreased by $84,977. No single factor is responsible for this reduction in net assets, but is spread over a number of changes.

• As of the close of the current fiscal year, the County of Russell’s governmental funds reported combined ending fund balances of $8,178,009, a decrease of $1,219,476 in comparison with the prior year. Most of this total amount, $6,744,967 is available for spending at the government’s discretion (unassigned fund balance).

• At the end of the current fiscal year, unassigned fund balance for the general fund was $6,884,605, or 23.2% of total general fund expenditures.

• The County of Russell’s total long-term debt decreased by $1,894,241 (8.8%) during the current fiscal year. The key factors in this decrease were the principal payments on outstanding issues. The County of Russell’s only fiscal year 2012 issuance was a capital lease in the amount of $512,094 for school buses and other equipment.

Overview of the Financial Statements

This discussion and analysis are intended to serve as an introduction to the County of Russell’s basic financial statements. The County of Russell’s basic financial statements comprise three components: 1) government-side financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves.

Government-wide financial statements. The government-wide financial statements are designed to provide readers with a broad overview of the County of Russell’s finances, in a manner similar to a private-sector business.

The statement of net assets presents information on all of the County of Russell’s assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the County of Russell is improving or deteriorating.

The statement of activities presents information showing how the government’s net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of the related cashflows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned, but unused vacation leave).

Both of the government-wide financial statements distinguish functions of the County of Russell that are principally supported by taxes and intergovernmental revenues (governmental

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Management’s Discussion and Analysis

Financial Highlights

The assets of the County of Russell, Virginia exceeded its liabilities at the close of the most recent fiscal year by $16,271,527 (net assets). Of this amount, $5,140,399 (unrestricted net assets) may be used to meet the government’s ongoing obligations to citizens and creditors,
The government’s total net assets decreased by $84,977. No single factor is responsible for this reduction in net assets, but is spread over a number of changes.
As of the close of the current fiscal year, the County of Russell’s governmental funds reported combined ending fund balances of $8,178,009, a decrease of $1,219,476 in comparison with the prior year. Most of this total amount, $6,744,967 is available for spending at the government’s discretion (unassigned fund balance).

‘* At the end of the current fiscal year, unassigned fund balance for the general fund was $6,884,605, or 23.2% of total general fund expenditures.

The County of Russell’s total long-term debt decreased by $1,894,241 (8.8%) during the current fiscal year. The key factors in this decrease were the principal payments on outstanding issues. The County of Russell’s only fiscal year 2012 issuance was a capital lease in the amount of $512,094 for school buses and other equipment.

Overview of the Financial Statements

This discussion and analysis are intended to serve as an introduction to the County of Russell’s basic financial statements. The County of Russell’s basic financial statements comprise three components: 1) government-side financial statements, 2) fund financial statements, and 3) notes fo the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves.

The statement of activities presents information showing how the government’s net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of the related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned, but unused vacation leave),

Both of the government-wide financial statements distinguish functions of the County of Russell that are principally supported by taxes and intergovernmental revenues (governmental

activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the County of Russell include general government administration, judicial administration, public safety, public works, health and welfare, education (including the Russell County School Board), parks, recreation and cultural activities, community development and the Industrial Development Authority. The business-type activities of the County of Russell include the Russell County Public Service Authority and the Castlewood Water and Sewer Authority.

The government-wide financial statements include not only the County of Russell itself (known as the primary government), but also the legally separate Russell County School Board, Russell County Industrial Development Authority, Russell County Public Service Authority and the Castlewood Water and Sewer Authority for which the County of Russell is financially accountable. Financial information for these component units is reported separately from the financial information presented for the primary government itself.

The government-wide financial statements can be found on pages 14-15 of this report.

Fund financial statements. Afund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The County of Russell, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the County of Russell can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds.

Governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances o.f spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government’s near-term financing requirements.

Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government’s near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental(unds and governmental activities.

The County of Russell maintains five different governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the general fund, industrial development fund, coal road fund, workforce investment board fund and rental assistance fund, each of which are considered to be rnajor funds.

The basic governmental fund financial statements can be found on pages 16-19 of this report.

Proprietary funds. The County of Russell maintains two different types of proprietary funds. Enterprise funds are those used to report the same functions presented as business-type

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activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the County of Russell include general government administration, judicial administration, public safety, public works, health and welfare, education (including the Russell County Schoo! Board), parks, recreation and cultural activities, community development and the Industrial Development Authority. The business-type activities of the County of Russell include the Russell County Public Service Authority and the Castlewood Water and Sewer Authority.

The government-wide financial statements can be found on pages 14-15 of this report.

Fund financial statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The County of Russell, ike other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the County of Russell can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds.

Governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government’s near-term financing requirements.

Because the focus of governmental funds is narrower than that of the government-wide financial statements, itis useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements, By doing so, readers may better understand the long-term impact of the government’s near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities.

The basic governmental fund financial statements can be found on pages 16-19 of this report.

Proprietary funds, The County of Russell maintains two different types of proprietary funds. Enterprise funds are those used to report the same functions presented as business-type

activities in the government-wide financial statements. The County of Russell uses an enterprise fund to account for its water treatment system (in Dante). Internal service funds are an accounting device used to accumulate and allocate costs internally among the County of Russell’s various functions. The County of Russell uses an internal service fund to account for its health insurance. Because both of these services predominantly benefit governmental rather than business-type functions, they have been included within governmental activities in the government-wide financial statements. Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail.

The basic proprietary fund financial statements can be found on pages 20-22 of this report.

Fiduciary Funds. Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statement because the resources of those funds are not available to support the County of Russell’s own programs. The accounting used for fiduciary funds is much like that used for proprietary funds.

The basic fiduciary funds financial statements can be found on page 23 of this report.

Notes to the .financial statements. The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages 24-62 of this report.

Other information. In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information. The County of Russell adopts an annual appropriated budget for its general fund and special revenue funds. Budgetary comparison statements have been provided for the general fund and each of the special revenue funds to demonstrate compliance with this budget. Information concerning the County of Russell’s progress in funding its obligation to provide pension benefits to its employees. Required supplementary information can be found on pages 63-67 of this report.

Government-wide Financial Analysis

As noted earlier, net assets may serve over time as a useful indicator of a government’s financial position. In the case of the County of Russell, assets exceeded liabilities by $16,271 ,527 at the close of the most recent fiscal year.

A significant portion of the County of Russell’s net assets (60.5%) reflects its investment in capital assets (e.g., land, buildings, machinery, and equipment); less any related debt used to acquire those assets that is still outstanding. The County of Russell uses these assets to provide services to citizens; consequently, these assets are not available for future spending. Although the County of Russell’s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities.

An additional portion of the County of Russell’s net assets (8.0%) represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net assets ($5, 140,399) may be used to meet the government’s ongoing obligations to citizens and creditors.

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activities in the government-wide financial statements. The County of Russell uses an enterprise fund to account for its water treatment system (in Dante). Internal service funds are an accounting device used to accumulate and allocate costs internally among the County of Russell’s various functions. The County of Russell uses an intemal service fund to account for its health insurance. Because both of these services predominantly benefit governmental rather than business-lype functions, they have been included within governmental activities in the government-wide financial statements. Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail.

The basic proprietary fund financial statements can be found on pages 20-22 of this report.

The basic fiduciary funds financial statements can be found on page 23 of this report. Notes to the financial statements. The notes provide additional information that is essential to a

full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages 24-62 of this report.

Government-wide Financial Analysis

An additional portion of the County of Russell’s net assets (8.0%) represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net assets ($5,140,399) may be used to meet the government’s ongoing obligations to citizens and creditors.

At the end of the current fiscal year, the County of Russell is able to report positive balances in all three categories of net assets for the government as a whole. Within the governmental and business-type activities, positive balances are reported for each category except the unrestricted balance for the business-type activity which reported negative net assets of $15,118. In the prior fiscal year each separate category for both governmental and business type activities reported positive balances.

County of Russell’s Net Assets

Governmental activities Business-type activities Total

1012 1011 1011 1011 1011 1011 Current and other assets l 10,699,938 l 11,630,507 l 56,744 l 54,411 l 10,756,681 l 11,684,919 Capital assets 10,151,631 10,607,061 3,385,617 3,516,644 13,538,158 14,113,705

Total assets l 40,851,569 l 41,137,568 l 3,441,371 l 3,571,066 l 44,194,940 l 45,808,634

long-term liabilities outstanding l 19,811,686 l 11,705,917 l 731,955 l 751,555 l 10,544,641 l 11,457,481 Other liabilities 7,456,485 6,974,614 11,187 10,014 7,478,771 6,994,648

Total liabilities l 17,168,171 l 18,680,551 l 755,141 l 771,579 l 18,013,413 l 19,451,130

Net assets:

Invested in capital assets, net of related

debt l 7,183,413 l 6,031,847 l 1,651,671 l 1,765,089 l 9,836,085 l 8,797,936 Restricted 1,145,468 1,515,561 49,575 49,571 1,195,043 1,565,134 Unrestricted 5,155,517 5,008,608 (15,118) (15,174) 5,140,399 4,993,434

Total net assets l 13,584,398 l 13,557,017 l 1,687,119 l 1,799,487 l 16,171,517 l 16,356,504

There was an increase of $146,965 in unrestricted net assets reported in connection with the County of Russell’s governmental activities. Most of the change in net assets is attributable to a reduction in long-term debt.

Governmental activities. Governmental activities increased the County of Russell’s net assets by $27,381, which is a 0.2% change indicating the revenue was sufficient to cover the expenditures.

A notable change in expenditures was an increase in Public Works cost in the amount of $1,946,574 which is mainly due to coal road expenditures.

The remainder of this page is left blank intentionally.

-7-

County of Russell’s Net Assets

Goverment acts uses ype atts Total

io ‘ot For) Fy Fa on Curent and other assets $ 19989938 § DysansOT §§— STH § SHAN § NOS6R § — N1gR4ERD Capital ass 2052631 2060761 3.385627 __— SLB 23588258 24,123,705 Totelassels $ anssasey § azzvnsea $ Suman § 37106 $ a429NaW § saNRRRE longterm ibis outstanding —-«§ «1981686. $ DU RAIT § ~—THDSSS $ —TSNSSS § © TOSKBML $ 22457882 Ober abies 1486485 6974606 2287 too 74 _ 694688 Tot abities $_m2gin $ Besse § HIN $ TMS § 1803413 § —29452,130 Netasets Invested in capital asets, nt of related debt § TABRAIB $6 0R28K7 $ 2652672 $ 2765089 § 983508 $ 8797936 festicted 1Msase 2515862 44515 ayn 198508 1565,134 Unestcted 585517 5008608 (i518) (578) 5403994983 434 Total netassets $ 19884398 § 13557017 $ 268729 § 2799487 $ 16271527 $ _ 16356504

Governmental activities. Governmental activities increased the County of Russell’s net assets by $27,381, which is a 0.2% change indicating the revenue was sufficient to cover the expenditures.

A notable change in expenditures was an increase in Public Works cost in the amount of $1,946,574 which is mainly due to coal road expenditures.

The remainder of this page is left blank intentionally.

County of Russell Changes in Net Assets

Governmental activities Business-type activities Total

2012 2011 2012 2011 2012 2011

Revenues:

Program revenues:

Charges for services $ 428,699 $ 364,326 $ 59,709 $ 72,073 $ 488,408 $ 436,399

Operating grants and

contributions 9,677,480 10,635,876 9,677,480 10,635,876

Capital grants and contributions 761,738 761,738

General revenues:

Property taxes 13,142,777 13,683,476 13,142,777 13,683,476

Other taxes 6,881,302 6,340,919 6,881,302 6,340,919

Grants and contributions not

restricted to specific programs 2,445,435 2,638,202 2,445,435 2,638,202

Other 215,361 267,254 234 215,361 267,488

Total revenues 33,552,792 33,930,053 59 709 72 307 33,612,501 34,002,360

Expenses:

General government 2,267,145 1,691,031 2,267,145 1,691,031

Judicial administration 2,119,900 2,112,758 2,119,900 2,112,758

Public safety 5,296,188 5,091,612 5,296,188 5,091,612

Public works 6,060,973 4,003,987 6,060,973 4,003,987

Health and welfare 8,397,896 8,592,042 8,397,896 8,592,042

Education 4,589,631 5,681,243 4,589,631 5,681,243

Parks, recreation and cultural 539,126 563,123 539,126 563,123

Community development 3,493,655 3,191,256 3,493,655 3,191,256

Interest on long-term debt 522,300 756,064 522,300 756,064

Service Authority 410,664 423,945 410,664 423,945

Total expenses 33,286,814 31,683,116 410,664 423,945 33,697,478 32,107,061

Change in net assets before transfers 265,978 2,246,937 (350,955) (351,638) (84,977) 1,895,299

Transfers (238,597) (245,887) 238,597 245,887

Change in net assets 27,381 2,001,050 (112,358) (105,751) (84,977) 1,895,299

Net assets- July 1, 2011 as restated 13,557,017 11,555,967 2,799,487 2,905,238 16,356,504 14,461,205

Net assets- June 30, 2012 $ 13,584,398 $ 13,557,017 $ 2,687,129 $ 2,799,487 $ 16,271,527 $ 16,356,504

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County of Russell Changes in Net Assets

Governmental activites Business type activites Total wR au md mon wR au

Revenues:

Program revenues: Charges for services $ 4609 $ 364A $5979 $s TOT $ «ABHOR S485 399 Operating grantsand contributions 9677480 10,635,876 : - 9.67480 10635876 Copital grants and contributions 761,738 : 761,738

General revenues: - . Property taxes 13,142,777 13,683,476 - - 13,142,777 13,683,476 Other tares 6881302 6340.919 : - 6881302 © 46 MogI9

Grants and contributions not

restricted to specificprograms 2485438 2,638.202 : - 2085488 2,638202 Other 215,361 267,254 : Ba 215,361 267,488 Total revenues 33,552,792 __ 33,930,053 59709 nay __ seins 34002360

Expenses : - General government 2260051651081 - - 22S 169081 Judicial administration 21990 2.112 758 : : 210990 2,112,758 Publicsafety 5296188 5081612 - - 5295188 5,081,612 Publicworks eomgrs 4003987 : : eomg7s 4.03987 Health and welfare 83978 8.591, - : 839789 859,042 Education 4589631 5,681,208, : : 4580,681 5,681,208 Parks, recreation and cultural 539,126 563,123 - : 539,126 363,123 Community development 3493.655 3,191,256 : : 3498.65 3,191 256 Interest on long-term debt 512,300 736.064 : 522,300 755064 Service Authority : : 410,554 43.945 410,654 45

Total expenses 35286814 31,683,116, 410,664 43S 33,697.78 __ 32107061

Changeinnetassetsbefore transfers 265978 2,246,937 (350955) (351,638) (3477) 1.895299

Transfers (238597) (245,887) 238597 25,887

Change innet assets m38 2,001,060 (112358) ———(105751) (39977) 1.895209

Netassets-July 1, 20Ltasrestated _ 13,557,017 _11,555,967 _ 2,799,487 2,905,238 __ 1635650 __ 14,461,205 Net assets- June 30, 2012 $ 13584398 $ 13,557,017 $ 2,687,129 $ 2,799,487 § 16,271,577 $ _ 16,356,504

Expenses and Program Revenues- Governmental Activities

$9,000,000 $8,000,000 $7,000,000 $6,000,000 $5,000,000 $4,000,000 $3,000,000 $2,000,000 $1,000,000

11 Expenses i’l Program Revenues

Revenues by Source- Governmental Activities

11 Charges for services

1111 Operating grants and contributions

1!11 Capital grants and contributions

11 Property taxes

111 Other taxes

Grants and contributions not restricted to specific programs

"Other

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Expenses and Program Revenues - Governmental Activities

$9,000,000

$8,000,000

$7,000,000

$6,000,000

$5,000,000

3,000,000 $3,000,000 $2,000,000

$1,000,00¢ $ =

Expenses Program Revenues

Charges for services

@ Operating grants and contributions

Capital grants and contributions

1 Property taxes

Other taxes

Grants and contributions not restricted to specific programs

e Other

Business-type activities. Business-type activities decreased the County of Russell’s net assets by $112,358. The Dante Water Treatment System referred to as “the Service Authority,” incurred expenses of $410,664 and collected program revenue of $59,709. The Service Authority also received a General Fund subsidy of $238,597. By policy, the Dante Service Authority is not an enterprise activity and therefore is not expected to be self-supporting.

$450,000

$400,000

$350,000

$300,000

$250,000

$200,000

$150,000

$100,000

$50,000

Service Authority (Dante Water Treatment System)

Expenses Program Revenue

Revenues by Source - Business Type Activities

m1 Charges for services

i!l Other

-10-

Business-type activities. Business-type activities decreased the County of Russell’s net assets by $112,358. The Dante Water Treatment System referred to as “the Service Authority,” incurred expenses of $410,664 and collected program revenue of $59,709, The Service Authority also received a General Fund subsidy of $238,597. By policy, the Dante Service Authority is not an enterprise activity and therefore is not expected to be self-supporting.

Service Authority (Dante Water Treatment System)

$450,000 $400,000 + $350,000 $300,000 $250,000 +—— $200,000 $150,000 $100,000 +————} $50,000

Expenses Program Revenue

Revenues by Source - Business Type Activities

1 Charges for services

Other

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Financial Analysis of the Governmental Funds

As noted earlier, the County of Russell uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements.

Governmental funds. The focus of the County of Russell’s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the county of Russell’s financing requirements. In particular, unassigned fimd balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year.

As of the end of the current fiscal year, the County of Russell’s governmental funds reported combined ending fund balances of $8,178,009, a decrease of $1,219,476 in comparison with the prior year. The majority of this fund balance represents unassigned fund balance (6,884,605), which is available for spending at the government’s discretion. The remainder of fund balance is restricted or committed to indicate that it is not available for new spending because it has already been restricted for the Coal Road/Revenue Sharing projects or debt service and bond covenants.

The general fund is the chief operating fund of the County of Russell. At the end of the current fiscal year, unassigned fund balance was $6,884,605, while total fund balance was $6,884,605. As a measure of the general fund’s liquidity, it may be useful to compare both unassigned and total fund balance to total fund expenditures. Unassigned fund balance represents 23.2% of general fund expenditures, while total fund balance represents 23.2% of that same amount.

The fund balance of the County of Russell’s General Fund increased by $1 ,875,021 during the current fiscal year. The key factor in the increase is:

• A transfer from the Industrial Development Authority (IDA) in the amount of $1,852,814.

The IDA is the fund within the County’s accounting structure used primarily to pay the debt service incurred by the Russell County Industrial Development Authority on behalf of the County of Russell.

The Coal Road Fund provides the 50% match required for the Virginia Department of Transportation’s (VDOT) Revenue Sharing Program. Part of the coal and gas severance taxes collected are deposited into this fund and used to fund the approved projects. Several projects are approved and were in the planning stages at July 1, 2011. Construction on these projects, along with the related expenditures, occurred during fiscal year 2012. As a result, the fund balance in the Coal Road Fund decreased by approximately one million dollars during the fiscal year. The balance of $1,245,468 at the end of the year is committed for various projects.

The Workforce Investment Board Fund is a state and federal funded program. No County funds are used to support this program. The fund balance increased $24,878 during the year ended June 30, 2012. The entire fund balance of $47,936 is committed for future program support.

Proprietwy funds. The County of Russell’s proprietary funds provide the same type information found in the government-wide financial statements, but in more detail.

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Financial Analysis of the Governmental Funds

As noted earlier, the County of Russell uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements.

Governmental funds. The focus of the County of Russell’s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the county of Russell’s financing requirements. In particular, unassigned fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year.

The fund balance of the County of Russell’s General Fund increased by $1,875,021 during the current fiscal year. The key factor in the increase is:

A transfer from the Industrial Development Authority (IDA) in the amount of $1,852,814.

The Coal Road Fund provides the 50% match required for the Virginia Department of Transportation’s (VDOT) Revenue Sharing Program. Part of the coal and gas severance taxes. collected are deposited into this fund and used to fund the approved projects. Several projects ate approved and were in the planning stages at July 1, 2011. Construction on these projects, along with the related expenditures, occurred during fiscal year 2012. As a result, the fund balance in the Coal Road Fund decreased by approximately one million dollars during the fiscal year. The balance of $1,245,468 at the end of the year is committed for various projects.

‘The Workforce Investment Board Fund is a state and federal funded program. No County funds are used to support this program. The fund balance increased $24,878 during the year ended June 30, 2012. The entire fund balance of $47,936 is committed for future program support.

Proprietary funds, The County of Russell’s proprietary funds provide the same type information found in the government-wide financial statements, but in more detail

Unrestricted net assets of the Service Authority at the end of the year amounted to ($15, 118), and those for the Health Insurance Fund amounted to $2,404,656. The total growth or (decline) in the net assets for both funds was ($112,358) and ($620,399), respectively. Other factors concerning the finances of these two funds have been addressed in the discussion of the County of Russell’s business-type activities and proprietary funds.

General Fund Budgetary Highlights

For many years, management in Russell County simply adjusted the final budget at June 30 to equal the actual expenditures. In fiscal year 2011, this practice was stopped. Beginning with fiscal year 2012 proper procedures were followed in which the original budget was adjusted to reflect supplemental appropriations adopted by the Board of Supervisors throughout the year or during a public hearing to formally amend the budget. This provides a properly appropriated Final Budget for CAFR presentation.

Capital Asset and Debt Administration

Capital assets

The County of Russell’s investment in capital assets for its governmental and business-type activities as of June 30, 2012, amounts to $23,538,258 (net of accumulated depreciation). This investment in capital assets includes land, buildings, a utility plant, and machinery and equipment. The total investment in the County of Russell’s capital assets for the current fiscal year decreased by 2.5% (2.3% decrease for governmental activities and 3.9% decrease for business-type activities). The decrease in investment is due to additional accumulated depreciation. Due to the continued depressed economy, the County did not expend significant funds on capital assets in fiscal year 2012.

Governmental activities Business-type activities Total

2012 2011 2012 2011 2012 2011

Land $ 1,541,333 $ 1,541,333 $ - $ - $ 1,541,333 $ 1,541,333

Construction in Progress - 1,494,450 - - - $ 1,494,450

Buildings 17,007,601 16,390,487 - - $17,007,061 $16,390,487

Utility plant - - 3,385,627 3,516,644 $ 3,385,627 $ 3,516,644

Machinery and equipment 1 603 697 1 180 791 - - ~ 1,603,697 ~ 1,180,791

Total $ 2Q 152 631 $20 607 061 $3 385 627 $3516644 $23 538 258 $24 123 705

Additional information on the County of Russell’s capital assets can be found in note 10 on pages 50-51 of this report.

Long-term debt.

At the end of the current fiscal year, the County of Russell had total debt outstanding of $19,811,686. Of this total, $14,869,887 comprises general obligation and revenue bonds all backed by the full faith and credit of the County and $3,194,980 comprise Literary Fund Loans and Literary Anticipation Note on the financial statements of the component unit School Board.

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Unrestricted net assets of the Service Authority at the end of the year amounted to ($15,118), and those for the Health Insurance Fund amounted to $2,404,656. The total growth or (decline) in the net assets for both funds was ($112,358) and ($620,399), respectively. Other factors concerning the finances of these two funds have been addressed in the discussion of the County of Russell’s business-type activities and proprietary funds.

General Fund Budgetary Highlights

For many years, management in Russell County simply adjusted the final budget at June 30 to equal the actual expenditures. In fiscal year 2011, this practice was stopped, Beginning with fiscal year 2012 proper procedures were followed in which the original budget was adjusted to reflect supplemental appropriations adopted by the Board of Supervisors throughout the year or during a public hearing to formally amend the budget. This provides a properly appropriated Final Budget for CAFR presentation.

Capital Asset and Debt Administration Capital assets

Governmental activities Business-type activities Total 2012 201 2012 2011 2012 20it Land $ 1,541,333 | $ 1,541,333 | $ $ - $ 1,541,333 | $ 1,541,333 ‘Construction in Progress - 1,494,450, - - - $ 1,494,450 Buildings: 17,007,601 16,390,487, - $17,007,061 $16,390,487 Utility plant - - 3,385,627 | 3,516,644 | $ 3,385,627 | $ 3,516,644 ‘Machinery and equipment 1,603,697 1,180,791 = = $ 1,603,697 ‘$1,180,791 Total ‘$20,152,631 | $20,607,001 | $3,385,627 | $3.516,644 | $23,598,258 | $24,123,705

Additional information on the County of Russell’s capital assets can be found in note 10 on

pages 50-51 of this report

Long-term debt.

At the end of the current fiscal year, the County of Russell had total debt outstanding of $19,811,686. OF this total, $14,869,887 comprises general obligation and revenue bonds all backed by the full faith and credit of the County and $3,194,980 comprise Literary Fund Loans and Literary Anticipation Note on the financial statements of the component unit School Board

The remainder of Russell County’s debt represents lease purchase agreements, landfill post closure liabilities, OPEB obligations and compensated absences.

General i i , bonds Literary loans

bonds, as restated Literary i i i ’ note

Bone Lease,

~liability

OP1013_ i i

Total

2QJ2 $ 9,471,649

5,114,923 630,395

283,315 617,454 526,868

59~~

Requests for Information

I i i

357,060 1,100,175

'153

2QJ2 £Q1.1 $ $

732,955 751,555

5 17 $ 73< 955

Total

2QJ2 £Q1.1 $9,471.649 $1•

5,847, 78 6, )3,520 630,395

28: 15 61 ~ 454 52E 868

609 81>8

357,060 1,100,775

,153

$22.451 .482

This financial report is designed to provide a general overview of the County of Russell’s finances for all those with an interest in the government’s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to Rufus W. Hood, Interim County Administrator, County of Russell, P.O. Box 1208, 137 Highland Drive, Lebanon, VA 24266.

-13-

The remainder of Russell County’s debt represents lease purchase agreements, landfill post- closure liabilities, OPEB obligations and compensated absences.

i ‘Governmental Activites Business type Activities, Total

2012 2011 2012 201 De on ‘Geheral obligation bonds Saar g49_| ¥70.083.208 | S iB 0,471,649 | $10,083,228 Literary foans 2,564,585 | 2,990,863 2,564,585 | 2,900,863 Revenue bonds, as restated 5.114.923 | 5,351,965 | 750055 | 751.585 5,847,878| 6.103.520 Literary anticipation note, 630.395 992,638) 630,395, 992,638 Deferred amounts:

‘Bond premium PCa 3007 2S, BOTS Tease purchase agreements 617.454 357,060. 617.484 357,060, ‘losure/post-closure liabilt 526,868 | 1,100.75) 526,968 | 7,100,775) ‘OPEB obiigations 6,608 7.153, 6,609 7.163 ‘Compensated absences 305,888, 52228, 05.688 322.1285

Total Sidar.se6 | $21. 706.097 |S 7az968 |S Tar Bo sadeer | H2457 480

Requests for Information

Basic Financial Statements

Exhibit 1 County of Russell, Virginia

Statement of Net Assets June 30, 2012

Component Units Prima!I Government Industrial

Governmental Business-type Development Activities Activities Total School Board Authority

ASSETS Cash and cash equivalents $ 7,539,771 $ 658 $ 7,540,429 $ 342,189 $ 286,706 Receivables (net of allowance for uncollectibles):

Taxes receivable 8,745,550 8,745,550 Accounts receivable 325,616 6,511 332,127 52,840 Notes receivable 220,005 220,005 371,207 Grants receivable 8,200

Due from component unit 908,695 908,695 Due from other governmental units 1,840,602 1,840,602 1,785,603 Prepaid expenses 402,669 Other assets:

Bond issuance costs 16,306 Restricted assets:

Temporarily restricted: Cash and cash equivalents 1,119,699 49,575 1,169,274 196,523

Noncurrent assets: Lease purchase receivable - net of current portion

Capital assets (net of accumulated depreciation}: Land 1,541,333 1,541,333 4,643,707 1,864,397 Land improvements 386,410 Buildings and improvements 17,007,601 17,007,601 10,641,935 6,751,755 Machinery and equipment 1,603,697 1,603,697 2,113,158 445,042 Utility plant in service 3,385,627 3,385,627

Total assets $ 40,852,569 $ 3,442,371 $ 44,294,940 $ 19,929,261 $ 10,379,386

LIABILITIES Accounts payable $ 2,298,766 $ 20,510 $ 2,319,276 $ 297,543 $ 23,824 Accrued liabilities 774 774 1,054,270 Accrued interest payable 254,990 1,777 256,767 28,994 Due to primary government 708,695 200,000 Unearned revenue 4,901,955 4,901,955 Long-term liabilities:

Due within one year 2,071,399 19,371 2,090,770 589,734 2,391,849 Due in more than one year 17,740,287 713,584 18,453,871 290,905 6,068,180

Total liabilities $ 27,268,171 $ 755,242 $ 28,023,413 $ 2,941,147 $ 8,712,847

NET ASSETS Invested in capital assets, net of related debt $ 7,183,413 $ 2,652,672 $ 9,836,085 $ 17,398,800 $ 3,030,360 Restricted for:

Coal Road 1,245,468 1,245,468 Debt service and bond covenants 49,575 49,575 196,523

Unrestricled {deficil) 5,155,517 (15,118) 5,140,399 (410,686) (1,560,344) Total net assets $ 13,584,398 $ 2,687,129 $ 16,271,527 $ 16,988,114 $ 1,666,539

The accompanying notes to the financial statements are an integral part of this statement

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Exhibit County of Russel, Virginia

‘Statement of Net Assets June 30,2012 Component Units Primary Government Industria “Governmental Businesstype Development Activities Activities Total School Board Authority ASSETS Cash and cash equivalents $ 7538771 $ 658 § T5H0429$ 342,189. $ 206,708 Receivables (net of ellance for uncalectibes): Taos roceivatle 8,745,560 : 8,745,580 : Accounts recsvable 325,618 eatt 382,127 - 52,540 Noles receivable 720,005 - 20,005 : art207 rans receivable : : : : 8200 Due from component unit 908,695 : 906,695 : : Due from other governmental ur 1340 602 - 4540,602 4,785,603, : Prepaid expenses : : . 402,889 : Other asses: Bond issuance costs : : : : 18206 Resticled asses: Tempoatlyresticted: Cash and cash equivalents 41199699 49575 seg2re : 196.523 Noncurent assets: Lease purchase receiveble - net of curt partion : - - - - Capital esets (net of accumuisted depreciation} Land 4561 358 : 1541333 4983,107 1964,307 Lend improvements - : : : 365,410, Buikings end improvements ‘7.007.601 - 7,007,601 10.641,995, 6 751,755 Machinery and equipment 1603.697 : 11603,697 2,413,158 445 002 tity plentin service - 3.385.627 3,385,627 - - Total assets S___ Oe F SMS $M 294940_§ TOSTRTET STO sTa eS uasILiTiEs ‘Accounis payable 8 2,208,788 $ 20510 § 2318278 $ 27583 $ 2524 Acered lilies 7 : 7a 4,054,270 : ‘Accrued interes payable 254,990, am 256,767 : 28,904 Due to primary government - - : 706,695, 200,000, ‘Unearnd revenue 404,955 : 4,901,955, . : Longer bites: ‘ue within one year 2071;388 19371 2,080,770 580,734 2,391,869 ‘ue in more than one year s7740,287 713,584 48,453,871 200,905, 6,068,160 Total bites 527208, § 755282 $ 28,003.613_§ Zou 14S ari 847 NET ASSETS Invested in capital asses, net of related det 8 7.183.413. $ 2652872 $ 9a06085 § —17,098.000 § 3,030,260 Resbicled fr Coal Road 1248, 468 : 41285 468 . Debt sonice and bond covenants - 49575 49575 : 198,523 Unresticod (deficit) 5.155517 (15.118) 5,140,389 (410.686) (7,580,344) Total net assets S___13.584, 308 _F 7ee7.i09 §__ve.271 5278 688,114 _S 4,566,539,

The accompanying noles othe fancial statements are an integral part ofthis statement

ode

’ ~ ‘1’

Functions/Programs

PRIMARY GOVERNMENT: Governmental activities:

General government administration Judicial administration Public safety Public works Health and welfare Education Parks, recreation, and cultural Community development Interest on long-term debt

Total governmental activities

Business-type activities: SeNice Authority

Total primary government

COMPONENT UNITS: School Board Industrial Development Authority Total component units

County of Russell, Virginia Statement of Activities

For the Year Ended June 30, 2012

Expenses Charges for

Services

Program Revenues

Operating Grants and

Contributions

$ 2,267,145 $ 2,119,900 5,296,188 6,060,973 8,397,896 4,589,631

$ 340,675 $

$ $

539,126 3,493,655

522,300 33,286,814 $

410,664 $ 33,697,478 $

39,783,118 $ 874,175

40,657,293 $

9,110 123,173 253,521

13,958 28,937

428,699 $

59,709 $ 488,408 $

786,940 $

General revenues: General property taxes Other local taxes: local sales and use taxes Coal road and severence taxes Consumers’ utility taxes Motor vehicle licenses Other local taxes

586,923 1,663,369

10,844 6,996,715

78,954

9,677,480 $

$ 9,677,480 $

33,234,975 $ 3,872

33,238,847 $

Unrestricted revenues from use of money and property Miscellaneous Payments from the County of Russell, Virginia Grants and contributions not restricted to specific programs Transfers Total general revenues and transfers

Change in net assets Net assets- beginning, as restated Net assets -ending

Capital Grants and

Contributions

150,000

611,738

761,738

The accompanying notes to the financial statements are an integral part of this statement.

Net {Expense) Revenue and Changes in Net Assets

Primary Government

Governmental Business-type

Exhibit 2

Component Units

Industrial Development

Activities Activities Total School Board Authoritv

$ (1,926,470) $ (1,523,867) (3,359,646) (5,796,608) (1,401,181) (4,589,631)

(446,214) (2,852,980)

“Gl

County of Russel, Virglia ‘Statement of Actives Forthe Year Ended June 30,2012

exist

FunetionsPrograms

‘PRIMARY GOVERNMENT: (Goverment ects

‘General govemmment administration iia edition Pualeseely Publowerts Heath and wetare ucaton Paks, eceaon, and uta ‘Community development Interest on ong debt

Tota govormenta ectes

Business ype acts: Sonice Aubry Total primary govemmant

‘COMPONENT UNITS: ‘School Boar

Indusval Development Authority Toll component unis

‘Nt (Expense) Revenue and

Program Revenues ‘Changes in Not Assets Panay ‘Component Government sits Operating Capital Taal Charges for Gaantsand——_Granlsand Governmental Businoss-ypo Development Bxoenses —-—«“Serviews-—«<Contibulons- Gentowlons ——=—Aclviios Actes =Total School Board Authonty $2787.84 § - 3 Maer § ~ (92647) § : 2219.00 910 - ”(t825867) i 5296.188 3173 1s0000 (3.358648) 080873, 253521 ~ (796.608) 8397 896 : (aoe) +4569,631 : - (4589521) 599,128 13058 75954 : (a46.2ta) : 3.408.855 25937 - e473 (2,652,880) : 522,300 - - - (522,00) i FST $__aiogst g s0700 § -$ - 8 an ‘$B 0§ A$ TROT “SATE $ so7eas18 § —7ggu0 § © sazMETS § : 74.175 - 3572 7551 Fi ET

‘General revenues ‘Gane propery taxes Ober tea twos: Local sales and use taxes Coal ood and soveronce taxes Consus uty tes Noto etic boeses (the lca taxes avestcied revenues tom use of money and propery Mecobonaous Payments tom the County oF Russe, Vagina ‘Grants and contibusons ot ested o specie programs, Teanetors Tot general rvenves and vansios change in net assets "Net assets begining, 25 esta Netassts-endg

“The accorpanying notes ote ancl stalants ean eal pat of statment

$ nyMerT $ “8 ass731 : 4020.85 568,720 337.587 198 589 : -

7128 7128 1042 495300

138136 = 1881358522885 ° : = goanss9 4530208,

2.485 435 2485.35 : : (33557) 238507 : -

TBMG 7S __29507 5 Dea SSeS 7AM

S$ Has1 $a) FATT) § (2420.480) $1307 580 sas57017___279aeer__vog56504 taainsae 35879

Sia 8_$ Dur 10S 6.71527 816.03 11_F 668 599

Exhibit 3 County of Russell, Virginia

Balance Sheet Governmental Funds

June 30, 2012

Coal Workforce General Road Investment Board Total

ASSETS Cash and cash equivalents $ 4,543,543 $ $ 27,649 $ 4,571,192 Receivables (net of allowance for uncollectibles):

Taxes receivable 8,745,550 8,745,550 Accounts receivable 234,790 88,318 323,108 Notes receivable 220,005 220,005

Due from other funds 46,117 65,103 111,220 Due from component unit 908,695 908,695 Due from other governmental units 1,220,361 620,241 1,840,602 Restricted assets:

Temporarily restricted: Cash and cash equivalents 1,119,699 1,119,699 Total assets $ 15,919,061 $ 1,273,120 $ 647,890 $ 17,840,071

LIABILITIES AND FUND BALANCES Liabilities:

Accounts payable $ 1,215,949 $ 27,652 $ 488,734 $ 1,732,335 Accrued liabilities 774 774 Due to other funds 111,220 111,220 Deferred revenue 7,817,733 7,817,733

Total liabilities $ 9,034,456 $ 27,652 $ 599,954 $ 9,662,062

Fund balances: Restricted:

Coal Road $ $ 1,245,468 $ $ 1,245,468 Committed:

Special revenue funds 47,936 47,936 Unassigned: 6,884,605 6,884,605

Total fund balances $ 6,884,605 $ 1,245,468 $ 47,936 $ 8,178,009 Total liabilities and fund balances $ 15,919,061 $ 1,273,120 $ 647,890 $ 17,840,071

The accompanying notes to the financial statements are an integral part of this statement.

-16-

County of Russell, Virginia

Exhibit 3

Balance Sheet Governmental Funds June 30, 2012, Coal Workforce General Road Investment Board Total ASSETS Cash and cash equivalents S 4543,543. § -$ 27649 $4,571,192 Receivables (net of allowance for uncollectbes): Taxes receivable 8,745,550 : : 8,745,550 Accounts receivable 238,790 £8,318, : 323,108 Notes receivable 220,005 : : 220,005 Due from other funds 46,117 65,103 : 111,220 Due from component unit 908,695 - : 908,695 Due from other governmental units 1,220,361 : 620,241 1,840,602 Restricted assets: Temporarly restricted ‘Cash and cash equivalents : 41,119,699 - 4,119,699 Total assets 56 970,061_§ 7273,120_§ A780 17,840,077 LIABILITIES AND FUND BALANCES Lbiltes: ‘Accounts payable s 1.215943 § 27.852 § 488734 § 1,732,335 Accrued labiliies 7714 : : 774 Due to other funds : : 411,220 111,220 Deferred revenue 7817733 - - 7,817,733 Total isilties 5 9,034,456 § Pe S BOG. 954 FS 0,662,062 Fund balances: Restricted Coal Road 8 “38 1,245,468. $ “8 1,245 468 Committed Special revenue funds. : - 47,936 47,936 Unassigned! 6,884,605 - - 6,884,605 Total fund balances 5 6,884,605 725 A68§ 7995 $ 8,178,009 Total liabilties and fund balances 315 919.061_$ 1.273.120 § 47. 890_$ 17,840,071

‘The accompanying noles tothe financial statements are an integral part ofthis statement.

-16-

County of Russell, Virginia Reconciliation of the Balance Sheet of Governmental Funds

To the Statement of Net Assets June 30, 2012

Amounts reported for governmental activities in the statement of nel assets are different because:

Total fund balances per Exhibit 3- Balance Sheet- Governmental Funds

Capital assets used in govern menial activities are not financial resources and, therefore, are not reported in the funds.

Other long-term assets are not available to pay for current-period expenditures and, therefore, are deferred in the funds.

Internal service funds are used by management to charge the costs of certain activities, such as insurance and telecommunications, to individual funds. The assets and liabilities of the internal service funds are included in governmental activities in the statement of net assets.

Long-term liabilities, including bonds payable, are not due and payable in the current period and, therefore, are not reported in the funds.

Net assets of governmental activities

The accompanying notes to the financial statements are an integral part of this statement.

-17-

Exhibit 4

$ 8,178,009

20,152,631

2,915,778

2,404,656

(20,066,676)

$ 13,584,398

County of Russell, Virginia Reconciliation of the Balance Sheet of Governmental Funds To the Statement of Net Assets June 30, 2012

Exhibit 4

Amounts reported for governmental actives inthe statement of net assets are cifrent because: Total fund balances per Exhibit 3 - Balance Sheet - Governmental Funds

Capital assets used in governmental activities are not financial resources and, therefore, ‘are not reported in the funds.

Other long-term assets are not available to pay for current-petiod expenditures and, therefore, are deferred in the funds,

Internal service funds are used by management to charge the costs of certain activities, ‘such as insurance and telecommunications, to individual funds, The assets and

labiltes ofthe intemal service funds are included in governmental actives in the statement of net assets

Long-term lables, including bonds payable, are not due and payable in the current Period and, therefore, are not reported in the funds.

Net assets of governmental activities

“The accompanying notes tothe financial statements are an integral part ofthis statement

$8,178,009

20,162,631

2,915,778

2,404,856

(20,086,676)

13,584,398,

ExhibitS County of Russell, Virginia

Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds

For the Year Ended June 30, 2012

Industrial Coal Workforce General Develogment Road Investment Board Total

REVENUES General property taxes $ 12,813,407 $ $ $ $ 12,813,407 Other local taxes 4,870,985 2,010,317 6,881,302 Permits, privilege fees, and regulatory licenses 28,272 28,272 Fines and forfeitures 24,567 24,567 Revenue from the use of money and property 51,404 3,533 8,659 63,596 Charges for services 375,860 375,860 Miscellaneous 138,135 138,135 Recovered costs 327,727 327,727 Intergovernmental revenues:

Commonwealth 8,009,326 84,117 8,093,443 Federal 2,798,154 1,993,056 4,791,210

Total revenues $ 29,437,837 $ 3,533 $ 2,018,976 $ 2,077,173 $ 33,537,519

EXPENDITURES Current

General government administration $ 2,060,380 $ $ $ $ 2,060,380 Judicial administration 2,114,097 2,114,097 Public safety 5,509,998 5,509,998 Public works 3,226,082 3,289,070 6,515,152 Health and welfare 6,466,430 2,052,295 8,518,725 Education 2,831,068 2,831,068 Parks, recreation, and cultural 484,891 484,891 Community development 2,442,356 2,442,356 Nondepartmental 305,904 305,904

Capital projects 1,721,900 1,721,900 Debt service:

Principal retirement 1,888,842 1,888,842 Interest and other fiscal charges 637,179 637,179

Total expenditures $ 29,689,127 $ $ 3,289,070 $ 2,052,295 $ 35,030,492

Excess (deficiency) of revenues over (under) expenditures $ (251,290) $ 3,533 $ (1 ,270,094) $ 24,878 $ (1 ,492,973)

OTHER FINANCING SOURCES (USES) Transfers in $ 1,852,814 $ $ $ $ 1,852,814 Transfers out (238,597) (1,852,814) (2,091,411) Issuance of capital leases 512,094 512,094

Total other financing sources (uses) $ 2,126,311 $ (1,852,814) $ $ $ 273,497

Net change in fund balances $ 1,875,021 $ (1,849,281) $ (1 ,270,094) $ 24,878 $ (1,219,476) Fund balances- beginning, as restated 5,009,584 1,849,281 2,515,562 23,058 9,397,485 Fund balances- ending $ 6,884,605 $ $ 1,245,468 $ 47,936 $ 8,178,009

The accompanying notes to the financial statements are an integral part of this statement

-18-

Exhibit $ County of Russel, Virginia Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds Forthe Year Ended June 30, 2012

Industria Coal Workforce General Development Road investment Board Total REVENUES General property taxes S 12818407 § “8 “8 8 12e1407 Other local taxes 4,870,985 - 2010317 - 6,881,302 Pris, privilege fees, and cagultorytcenses 8212 : : 28.272 Fines and forfeitures 24.587 - - 24567 Revenue from the use of money and property 51,404 3933 8.50 : 63.598 Charges for services 375,880 . : . 375,860 Miscellaneous 138,195 - : - 136,135 Recovered costs 327727 . . art Intergovernmental revenues: Commorweath 3.008326 : 8407 8.083.443 Federal 2,798,156 - : 4,993,056. 4,791,210 Total revenues Swarts 355 20bse SDorr,i7s Sasa EXPENDITURES: Curent ‘General government administration S — 2060,380 § -8 8 - $2,080,380 <Juial administration 2.114097 - - 2414097 Public stoty 5,509,998 : - : 5.908.996 Public works 3,226,082 : 3269070 8.515.162 Health and welfare 6.486 490 - : 2,050,295 8.518.725 Education 281,088 : : 2,831,068 Parks, recreation, and cultural 484,891 - - ‘484,891 Community development 2.42;356 : 2,462,356 Nondepartmental 305,904 : : : 206,904 Capital projcts 1721,900 - - - 472100 Debt sence: : Princigal retirement 11888 842 . : 4,980,842 Interest and other fal charges 637,179 - - 637,179 Total expenditures Seo. 127_§ SE IE AL Excess (deficiency) of rovenues over (under expendiiues 8 (251 200) § 3833 $ (1.270094) $ 2asre $ (1.492973) OTHER FINANCING SOURCES (USES) Transfers in S 1gs28t § -8 8 +8 186284 Transfers out (238,597) (1.852814) - @ootaity |ssuance of capital eases 512,084 - : : 512,004 Tolal ater financing sources (uses) 528s (ASsaeTay S ~F ay WAT Not change in fund balances S 1875021 § (1.848.281) $ (1.270094 $ mare $ (1.219.476) Fund balances - beginning, as restated 5,000 584 4,849,281 2.515.562 73.058 9.397 485, Fund balances - ending S804 605 $ S128 68S 47936 _S 8.178008

“The accompanying noles tothe financial statements are en integral part ofthis statement

County of Russell, Virginia Reconciliation of Statement of Revenues,

Expenditures, and Changes in Fund Balances of Governmental Funds To the Statement of Activities

For the Year Ended June 30, 2012

Amounts reported for governmental aclivilies in the statement of aclivilies are different because:

Net change in fund balances- total governmental funds

Govern menial funds report capital outlays as expenditures. However, in lhe slalement of aclivilies lhe cosl of lhose assets is allocated over lheir estimated useful lives and reported as depreciation expense. This is lhe amounl by which lhe capital outlays exceeded depreciation in the current period.

The nel effecl of various miscellaneous transactions involving capital assels (I.e., sales, trade-ins, and donations) is to increase (decrease) net assets.

Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds.

The issuance of long-term obligations (e.g. bonds, leases) provides current financial resources to governmental funds, while the repayment of the principal of long-term obligations consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net assets. Also, governmental funds report the effect of issuance costs, premiums, discounts, and similar items when obligations is first issued, whereas these amounts are deferred and amortized in the statement of activities. This amount is the net effect of these differences in the treatment of long-term obligations and related items.

Some expenses reported in the statement of activities do not require the use of current financial resources and, therefore are not reported as expenditures in governmental funds.

Internal service funds are used by management to charge the costs of certain activities, such as insurance and telecommunications, to individual funds. The net revenue (expense) of certain internal service funds is reported \lOth governmental activities.

Change in net assets of governmental activities

The accompanying notes to the financial statements are an integral part of this statement.

-19-

Exhibit 6

$ (1,219,476)

(443,327)

(11 ,103)

329,370

1,950,655

41,661

(620,399)

$ 27,381

County of Russell, Virginia Reconciliation of Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds To the Statement of Activities For the Year Ended June 20, 2012

Exhibit 6

‘Amounts reported for governmental activites inthe statement of actiites are diferent because: Net change in und batances - total governmental funds

Governmental funds report capital outlays as expenditures. However, in the statement of actives the cost of those asses is allocated over their estimated useful lives and reported ‘as depreciation expense, This isthe amount by which the capital ouays exceeded depreciation inthe current period

The net effect of various miscellaneous transactions involving capital assets Le, sales, trade-ins, and donations) is to increase (decrease) net assets.

Revenues in the statement of activities that do not provide current financial resources are not reported 2s revenues in the funds.

‘The issuance of long-term obiigations (e.g, bonds, leases) provides current financial resources to ‘governmental funds, white the repayment ofthe principal of long-term obligations consumes the curent financial resources of governmental funds. Neither transaction, however, has any effect on net assets. Also, governmental funds report the effect of issuance costs, premiums, discounts, and similar tems when obigaions is fst issued, whereas these amounts are deferred and amortzed inthe statement of actives. This amount isthe net effect ‘ofthese ditferences in the treatment of longterm obligations and related ters

‘Some expenses reported inthe statement of activities do not require the use of current financial resouroes and, therefore ara not reported as expenditures in governmental funds

Internal service funds are used by management fo charge the costs of certain actives, such 2s insurance and telecommunications, to individual funds, The net revenue (expense) of certain internal service funds is reported with governmental activites.

Change in net assets of governmental atvitos

‘The accompanying notes to the financial statements are an integral part of this statement.

-19-

S$ (1,219,476)

(443,327)

(11,103)

329,370

1,950,655,

41,664

(620,399)

BEE

Exhibit 7 County of Russell, Virginia Statement of Net Assets

Proprietary Funds June 30, 2012

Enterprise Internal Fund Service Fund Dante Self Fund Health Insurance

ASSETS Current assets:

Cash and cash equivalents $ 658 $ 2,968,579 Interest receivable 235 2,508 Accounts receivable, net of allowance for uncollectibles 6,276

Total current assets $ 7,169 $ 2,971,087 Noncurrent assets:

Restricted assets: Cash and cash equivalents (in custody of others) $ 49,575 $

Capital assets: Utility plant in service $ 5,240,699 $ Less accumulated depreciation (1 ,855,072) Total capital assets $ 3,385,627 $ Total noncurrent assets $ 3,435,202 $ Total assets $ 3,442,371 $ 2,971,087

LIABILITIES Current liabilities:

Accounts payable $ 20,510 $ 566,431 Accrued interest payable 1,777 Bonds payable - current portion 19,371

Total current liabilities $ 41,658 $ 566,431

Noncurrent liabilities: Bonds payable - net of current portion $ 713,584 $

Total liabilities $ 755,242 $ 566,431

NET ASSETS Invested in capital assets, net of related debt $ 2,652,672 $ Restricted for debt service and bond covenants 49,575 Unrestricted (15,118) 2,404,656

Total net assets $ 2,687,129 $ 2,404,656

The accompanying notes to the financial statements are an integral part of this statement

-20-

Exhibit 7 County of Russell, Virginia

Statement of Net Assets Proprietary Funds June 30, 2012 Enterprise Internal Fund Service Fund Dante Self Fund Health Insurance ASSETS Current assets: Cash and cash equivalents 8 658 $2,968,579 Interest receivable 236 2,508 ‘Accounts receivable, net of alowance for uncollectbles 6276

69 $2,971,087

Total current assets Noncurrent assets:

Resticted assets: Cash and cash equivalents (in custody of others) S$ 49.575 § : Capital assets: Utity pant in service $5,240,699 § : Less accumulated depreciation 1,855,072) - Total capital assets 3 3,385,627 $ Total noncurrent assets 3__3435,202_§ Total assets S$ 3402371 _$ 2974,087 LIABILITIES Current labiltes: Accounts payable $ 20510 § 566,431 Accrued interest payable 4777 : Bonds payable - current portion 19,71 - Total curentlabtties 41,658$ 366,451 Noncurrent fabities: ‘Bonds payable - net of current portion $713,584 § - Total iabilties 3 755,242 $ 566,41 NET ASSETS Invested in capital assets, net of related debt $ 2952672 $ - Restricted for debt service and bond covenants 49,575 : Unrestricted 15,118) 2,404,656

Total net assets

‘The accompanying notes tothe financial statements are an Integral part of this statement

Exhibit 8 County of Russell, Virginia

Statement of Revenues, Expenses, and Changes in Fund Net Assets Proprietary Funds

OPERATING REVENUES Charges for services:

Sewer revenues Insurance premiums

Total operating revenues

OPERATING EXPENSES Salaries and benefits Professional services Utilities Materials and supplies Office expenses Repairs and maintenance Insurance claims and expenses Depreciation

Total operating expenses

Operating income (loss)

NONOPERATING REVENUES (EXPENSES) Investment earnings Interest expense

For the Year Ended June 30, 2012

Total nonoperating revenues (expenses) Income before transfers

Transfers in Change in net assets

Total net assets- beginning Total net assets- ending

$ $

The accompanying notes to the financial statements are an integral part of this statement.

-21-

Enterprise Fund

Internal Service Fund

Dante Fund

Self Health Insurance

59,709 $ 10,265,316

113,293 $ 15,489

638 16,280 83,390 17,752

10,899,345 131,016 377,858 $ 10,899,345

(318,149) $ (634,029)

$ 13,630 (32,806) (32,806) $ 13,630

(350,955) $ (620,399)

238,597 $ (112,358) $ (620,399)

2,799,487 $ 3,025,055 2,687,129 $ 2,404,656

‘County of Russell, Virginia

Exhibit 8

Statement of Revenues, Expenses, and Changes in Fund Net Assets

Proprietary Funds For the Year Ended June 30, 2012

OPERATING REVENUES Charges for services: Sewer revenues Insurance premiums Total operating revenues

OPERATING EXPENSES, Salaries and benefits Professional services Usitles Malerials and supplies Office expenses Repairs and maintenance Insurance claims and expenses Depreciation

Total operating expenses

‘Operating income (oss) NONOPERATING REVENUES (EXPENSES)

Investment earnings Interest expense

‘Total nonoperating revenues (expenses)

Income before transfers

Transfers in Change in net assets

Total net assets - beginning Total net assets - ending

Enterprise Fund Dante Fund

Health Insurance

$ 59,709 §

9709 -$

$ 113,293 $ 15,489 :

638 .

16,280 -

83,390 -

17,752 .

10,899,348

131,016 $ 377,858_$

$ (316,149) $ (634,029)

10,899,345

$ -3 13,630

32,806) : $ (32,806) $ 73,630 S (350,965) $ (620,399) $ 288,597 _$ - $ (112,358) $ (620,355)

$2,799,487 $3,025,055 $2,087.19 $2,404,056

The accompanying notes to the financial statements are an integral part ofthis statement

County of Russell, Virginia Statement of Cash Flows

Proprietary Funds For the Year Ended June 30, 2012

CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers and users Receipts for insurance premiums Payments to suppliers Payments to employees Payments for premiums

Net cash provided by (used for) operating activities

CASH FLOWS FROM NONCAPIT AL FINANCING ACTIVITIES Transfers from other funds

CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Principal payments on bonds Interest payments

Net cash provided by (used for) capital and related financing activities

CASH FLOWS FROM INVESTING ACTIVITIES Interest and dividends received

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents· beginning Cash and cash equivalents- ending

Reconciliation of operating income (loss) to net cash provided by (used for) operating activities: Operating income (loss) Adjustments to reconcile operating income (loss) to net cash

provided by (used for) operating activities: Depreciation expense (Increase) decrease in accounts receivable Increase (decrease) in accounts payable Total adjustments

Net cash provided by (used for) operating activities

$ $

Enterprise Fund

Exhibit 9

Internal Service Fund

Dante Fund

Self Health Insurance

57,907 $

(131,245) (113,293)

(186,631) $

238,597 $

(18,600) $ (32,847)

(51 ,447) $

139 $

658 $

49,575 $ 50,233 $

(318,149) $

131,016 $ (1,802) 2,304

131,518 $ (186,631) $

10,265,316

(10,672,536) (407,220)

14,591

(392,629)

3,361,208 2,968,579

(634,029)

226,809 226,809

(407,220)

The accompanying notes to the financial statements are an integral part of this statement.

-22-

County of Russell, Virginia Statement of Cash Flows Proprietary Funds For the Year Ended June 30, 2012

Exhibit 9

CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers and users Receipts for insurance premiums Payments to suppliers Payments to employees, Payments for premiums Net cash provided by (used for) operating activities

CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Transfers from other funds

‘CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES, Principal payments on bonds Interest payments Net cash provided by (used for) capital and related financing activities

‘CASH FLOWS FROM INVESTING ACTIVITIES. Interest and dividends received

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents - beginning Cash and cash equivalents - ending

Reconciliation of operating income (loss) to net cash provided by (used for) operating activities: Operating income (loss) Adjustments to reconcile operating income (loss) to net cash provided by (used for) operating activities: Depreciation expense (Increase) decrease in accounts receivable Increase (decrease) in accounts payable Total adjustments Net cash provided by (used for) operating activities

Enterprise Internal Fund Service Fund Dante Self

Fund Health insurance

S$ 57907 § : : 10,265,316

(131,248) : (113,293) :

(10,672,536)

3 (186,631) $ (407 220)

$ (18,600) $ : 32,847) :

$ (51.447) $ :

$ 139_$ 14,591 $ 858 $ (392629) $ 49,575 _$ 3,361,208 $60,233 $ 2,968,579

§ (318,149) $ (634,029)

$ 131,016 $

(1,802) -

2,304 226,809 THis 0 $ (186,631) $ (407,220)

‘The accompanying notes to the financial statements are an integral part ofthis statement

ASSETS Cash and cash equivalents

Total assets

LIABILITIES Amounts held for Social Services clients

Total liabilities

County of Russell, Virginia Statement of Fiduciary Net Assets

Fiduciary Fund June 30, 2012

The accompanying notes to the financial statements are an integral part of this statement.

-23-

$ $

Exhibit 10

Agency Funds

68,973 68,973

County of Russell, Virginia Statement of Fiduciary Net Assets Fiduciary Fund June 30, 2012

Exhibit 10

ASSETS Cash and cash equivalents Total assets,

LIABILITIES ‘Amounts held for Social Services clients Total iabilties

The accompanying notes tothe nancial statements are an integral part of his stalernent

-23-

Agency Funds

68, 68,973

68,973 68973

COUNTY OF RUSSELL, VIRGINIA

NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2012

Note 1-Summary of Significant Accounting Policies:

The financial statements of the County conform to generally accepted accounting principles (GAAP) applicable to governmental units promulgated by the Governmental Accounting Standards Board (GASB). The following is a summary of the more significant policies:

A. Financial Reporting Entity

The County of Russell, Virginia is a municipal corporation governed by an elected six-member Board of Supervisors. The accompanying financial statements present the government and its component units, entities for which the government is considered to be financially accountable. Blended component units, although legally separate entities, are, in substance, part of the government’s operations. Each discretely presented component unit is reported in a separate column in the government-wide financial statements (see note below for description) to emphasize that it is legally separate from the government.

Blended component units- None

Discretely Presented Component Units - The component unit columns in the financial statements include the financial data of the County’s discretely presented component units. They are reported in a separate column to emphasize that they are legally separate from the County.

The Russell County School Board operates the elementary and secondary public schools in the County. School Board members are popularly elected. The School Board is fiscally dependent upon the County because the County approves all debt issuances of the School Board and provides significant funding to operate the public schools since the School Board does not have separate taxing powers. The School Board is presented as a governmental fund type. The School Board does not issue separate financial statements.

The Russell County Industrial Development Authority (IDA) encourages and provides financing for industrial development in Russell County. The financial statements of the IDA have been included because the County appoints the governing body and has made moral obligation resolutions to finance deficits of any kind or nature that may occur each year subject to annual appropriation. Complete financial statements of the IDA can be obtained in writing at137 Highland Drive, Lebanon, VA 24266.

The Castlewood Water and Sewage Authority of Russell County provides water and sewer service to residents of Russell County. The Authority is fiscally dependent on the County because the County appoints the governing body and has financing guarantees involving the Authority. Complete financial statements of the Authority can be obtained in writing at P.O. Box 655, Castlewood, VA 24224 but were not available as of the report date.

The Russell County Public Service Authority (PSA) provides water and sewer service to residents of Russell County. The Authority is fiscally dependent on the County because the County appoints the governing body and has financing guarantees involving the Authority but were not available as of the report date.

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CouNTY OF RUSSELL, VIRGINIA

NOTES TO THE FINANCIAL STATEMENTS. JUNE 30, 2012

Note 1-Summary of Significant Accounting Polici

A, Financial Reporting Entity

The County of Russell, Virginia is a municipal corporation governed by an elected six-member Board of Supervisors. The accompanying financial statements present the government and its component units, entities for which the government is considered to be financially accountable. Blended component units, although legally separate entities, are, in substance, part of the government’s operations. Each discretely presented component unitis reported in a separate column in the government-wide financial statements (see note below for description) to emphasize that its legally separate from the government.

Blended component units - None

The Castlewood Water and Sewage Authority of Russell County provides water and sewer service to residents of Russell County. The Authority is fiscally dependent on the County because the County appoints the governing body and has financing guarantees involving the Authority. Complete financial statements of the Authority can be obtained in writing at P.O. Box 656, Castlewood, VA 24224 but were not available as of the report date

The Russell County Public Service Authority (PSA) provides water and sewer service to residents of Russell

County, The Authority is fisclly dependent on the County because the County appoints the governing body and has financing guarantees involving the Authority but were not available as of the report date.

“2h

COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

JUNE 30, 2012

Note 1-Summary of Significant Accounting Policies: (continued)

A. Financial Reporting Entity (continued)

Related Organizations -The County’s officials are also responsible for appointing the members of the boards of other organizations, but the county’s accountability for these organizations does not extend beyond making the appointment.

Jointly Governed Organizations- The County, in conjunction with other local jurisdictions, participates in supporting the Southwest Virginia Regional Jail and the Cumberland Mountain Community Services Board. The governing bodies of these organizations are appointed by the respective governing bodies of the participating jurisdictions. During the year, the County contributed $1,755,193 to the Regional Jail and $157,547 to the Community Services Board. The County does not have any ongoing financial responsibility for these Organizations.

B. Government-wide and Fund Financial Statements

The government-wide financial statements (i.e., the statement of net assets and the statement of activities) report information on all of the nonfiduciary activities of the primary government and its component units. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. Likewise, the primary government is reported separately from certain legally separate component units for which the primary government is financially accountable.

The statement of net assets is designed to display the financial position of the primary government (government and business-type activities). Governments report all capital assets, including infrastructure, in the government wide statement of net assets and report depreciation expense - the cost of “using up” capital assets - in the statement of activities. The net assets of a government will be broken down into three categories: 1) invested in capital assets, net of related debt; 2) restricted; and 3) unrestricted.

The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues.

Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds, even though the latter are excluded from the government-wide financial statements. Major individual governmental funds and major individual enterprise funds, if any, are reported as separate columns in the fund financial statements.

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2012

Note 1-Summary of Significant Accounting Policies: (continued)

A, Financial Reporting Entity (continued)

Related Organizations - The County’s officials are also responsible for appointing the members of the boards of other organizations, but the county’s accountability for these organizations does not extend beyond making the appointment.

Jointly Governed Organizations - The County, in conjunction with other local jurisdictions, participates in supporting the Southwest Virginia Regional Jail and the Cumberland Mountain Community Services Board. The governing bodies of these organizations are appointed by the respective governing bodies of the participating jurisdictions. During the year, the County contributed $1,755, 198 to the Regional Jail and $187,547 to the Community Services Board. The County does not have any ongoing financial responsibility for these Organizations.

B. Government-wide and Fund Financial Statements

The government-wide financial statements (ie., the statement of net assets and the statement of activities) report information on all of the nonfiduciary activities of the primary government and its component units. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-fype activities, which rely to a significant extent on fees and charges for support. Likewise, the primary government is reported separately from certain legally separate component units for which the primary government s financially accountable.

The statement of net assets is designed to display the financial position of the primary government (government and business-type activities). Governments report all capital assets, including infrastructure, in the government- wide statement of net assets and report depreciation expense - the cost of ‘using up" capital assets — in the statement of activities. The net assets of a government will be broken down into three categories: 1) invested in capital assets, net of related debt; 2) restricted; and 3) unrestricted

The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues, Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues.

funds and major individual enterprise funds, if any, are reported as separate columns in the fund financial statements.

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

JUNE 30, 2012

Note 1-Summary of Significant Accounting Policies: (continued)

C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation

The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund and fiduciary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related 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.

Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the government considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due.

Property taxes, franchise taxes, 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. Accordingly, real and personal property taxes are recorded as revenues and receivables when billed, net of allowances for un collectible amounts. Property taxes not collected within 60 days after year-end are reflected as deferred revenues.

Sales and utility taxes, which are collected by the state or utilities and subsequently remitted to the County, are recognized as revenues and receivables upon collection by the state or utility, which is generally in the month preceding receipt by the County.

Licenses, permits, fines and rents are recorded as revenues when received. Intergovernmental revenues, consisting primarily of federal, state and other grants for the purpose of funding specific expenditures, are recognized when earned or at the time of the specific expenditure. Revenues from general-purpose grants are recognized in the period to which the grant applies. All other revenue items are considered to be measurable and available only when the government receives cash.

The government reports the following major governmental funds:

The General Fund is the government’s primary operating fund. It accounts for and reports all financial resources of the general government, except those required to be accounted for in other funds. The General Fund includes the activities of the Social Services, E-911, Dog Tag, Damage Stamp, Revenue Anticipation Note, Law Library, and Knox Creek Funds. The aforementioned Funds have been merged with the General Fund for financial reporting purposes.

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2012

Note 1-Summary of Significant Accounting Policies: (continued)

C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation

The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund and fiduciary fund financial statements. Revenues are recorded when eamed and expenses are recorded when a liability is incurred, regardless of the timing of related 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.

Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available, Revenues are considered to be available when they are collectible within the current period or soon ‘enough thereafter to pay liabilities of the current period, For this purpose, the government considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due.

Property taxes, franchise taxes, 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 petiod. Accordingly, real and personal property taxes are recorded as revenues and receivables when billed, net of allowances for un- collectible amounts, Property taxes not collected within 60 days after year-end are reflected as deferred revenues.

Sales and utility taxes, which are collected by the state or utlties and subsequently remitted to the County, are recognized as revenues and receivables upon collection by the state or utlty, which is generally in the month preceding receipt by the County,

Licenses, permits, fines and rents are recorded as revenues when received. Intergovernmental revenues, consisting primarily of federal, state and other grants for the purpose of funding specific expenditures, are recognized when eamed or at the time of the specific expenditure. Revenues from general-purpose grants are recognized in the period to which the grant applies. All other revenue items are considered to be measurable and available only when the government receives cash.

The government repors the folowing major governmental funds:

The General Funds the government’s primary operating fund. It accounts for and reports all financial resources of the general government, except those required to be accounted forin other funds. The General Fund includes the activities of the Social Services, E-911, Dog Tag, Damage Stamp, Revenue Anticipation Note, Law Library, and Knox Creek Funds. The aforementioned Funds have been merged with the General Fund for financial reporting purposes.

COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

JUNE 30, 2012

Note 1-Summarv of Significant Accounting Policies: (continued)

C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation (continued)

The Industrial Development, Coal Road, Workforce Investment Board, and Rental Assistance Funds serve as the County’s major Special Revenue Funds. The Industrial Development Fund accounts for and reports financial resources to be used for industrial and community development benefiting the County. The Industrial Development Fund includes activities aimed at attracting and retaining industrial prospects in Russell County. The Coal Road Fund accounts for and reports financial resources to be used for improvements to roads used in conjunction with coal mining and other expenses allowable by the Code of Virginia, (1950), as amended. The Workforce Investment Board Fund accounts for and reports financial resources to be used for workforce development benefiting the County. The Rental Assistance Fund accounts for and reports the financial resources used to assist low income families with rental expenses.

The government reports the following major proprietary funds:

The County operates a water treatment system. The activities of the system are accounted for in the Dante System fund.

Additionally, the government reports the following fund types:

Internal Service Funds account for the financing of goods and services provided to other departments or agencies of the government, or to other governments, on a cost reimbursement basis. The Internal Service Funds consist of the Self Health Insurance Funds.

Fiduciary funds (Trust and Agency Funds) account for assets held by the government in a trustee capacity or as agent or custodian for individuals, private organizations, other governmental units, or other funds. Agency funds include the Special Welfare Account Fund and VASAP Fund. The Special Welfare Account Fund includes activity of the Title XX and the SSI Fund, which have all been merged for financial reporting purposes.

Private-sector standards of accounting and financial reporting issued prior to December 1, 1989, generally are followed in both the government-wide and proprietary fund financial statements to the extent that those standards do not conflict with or contradict guidance of the Governmental Accounting Standards Board. Governments also have the option of following subsequent private-sector guidance for their business-type activities and enterprise funds, subject to this same limitation. The government has elected not to follow subsequent private-sector guidance.

As a general rule, the effect of interfund activity has been eliminated from the government-wide financial statements. Exceptions to this general rule are other charges between the government’s functions. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned.

Amounts reported as program revenues include 1) charges to customers or applicants for goods, services, or privileges provided, 2) operating grants and contributions, and 3) capital grants and contributions, including special assessments. Internally dedicated resources are reported as general revenues rather than as program revenues. Likewise, general revenues include all taxes.

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2012

Note 1-Summary of Significant Accounting Policies: (continued)

C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation (continued)

‘The Industrial Development, Coal Road, Workforce Investment Board, and Rental Assistance Funds serve as the County’s major Special Revenue Funds, The Industrial Development Fund accounts for and reports financial resources to be used for industrial and community development benefiting the County. The Industrial Development Fund includes activities aimed at attracting and retaining industrial prospects in Russell County. The Coal Road Fund accounts for and reports financial resources to be used for improvements to roads used in conjunction with coal mining and other expenses allowable by the Code of Virginia, (1950), as amended. The Workforce Investment Board Fund accounts for and reports financial resources to be used for workforce development benefiting the County. The Rental Assistance Fund accounts for and reports the financial resources used to assist low income families with rental expenses.

‘The government reports the following major proprietary funds:

The County operates a water treatment system. The activities of the system are accounted for in the Dante System fund.

‘Additionally, the government reports the following fund types:

Intemal Service Funds account forthe financing of goods and services provided to other departments or agencies of the government, or to other governments, on a cost reimbursement basis. The Intemal Service Funds consist of the Self Health Insurance Funds.

Private-sector standards of accounting and financial reporting issued prior to December 1, 1989, generally are followed in both the government-wide and proprietary fund financial statements to the extent that those standards do not confict with or contradict guidance of the Governmental Accounting Standards Board. Governments also have the option of following subsequent private-sector guidance for their business-type activities and enterprise funds, subject to this same limitation, The goverment has elected not to follow subsequent private-sector guidance,

As a general rule, the effect of interfund activity has been eliminated from the govemment-wide financial statements, Exceptions to this general rule are other charges between the government’s functions. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned

Amounts reported as program revenues include 1) charges to customers or applicants for goods, services, ot privileges provided, 2) operating grants and contributions, and 3) capital grants and contributions, including special assessments. intemally dedicated resources are reported as general revenues ralher than as program revenues Likewise, general revenues include all taxes

COUNTY OF RUSSELL, VIRGINIA

NOTES TO fiNANCIAL STATEMENTS (CONTINUED)

JUNE 30,2012

Note 1-Summary of Significant Accounting Policies: (continued)

C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation (continued)

Proprietary Funds distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. The principal operating revenues of the County’s Internal Service Funds are charges to departments for health insurance. Operating expenses for Internal Service Funds include the cost of services and administrative expenses. 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 government’s policy to use restricted resources first, and then unrestricted resources as they are needed.

D. Assets, Liabilities, and Net Assets or Equity

Deposits and Investments

The government’s cash and cash equivalents are considered to be cash on hand, demand deposits, and short-term investments with original maturities of three months or less from the date of acquisition.

Investments for the government, as well as for its component units, are reported at fair value. The State Treasurer’s Local Government Investment Pool operates in accordance with appropriate state laws and regulations. The reported value of the pool is the same as the fair value of the pool shares.

Receivables and Payables

Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as either “due to/from other funds” (i.e., the current portion of interfund loans) or “advances to/from other funds” (i.e., the non-current portion of interfund loans). All other outstanding balances between funds are reported as “due to/from other funds.” Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as “internal balances.”

Advances between funds, as reported in the fund financial statements, are offset by nonspendable fund balance in applicable governmental funds to indicate that they are not available for appropriation and are not expendable available financial resources.

Property Taxes

Property is assessed at its value on January 1. Property taxes attach as an enforceable lien on property as of January 1. Real estate taxes are payable in installments on June 5th and December 5th Personal property taxes are due and collectible on December 5th. The County bills and collects its own property taxes.

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2012

Note 1-Summary of Significant Accounting Policies: (continued)

C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation (continued)

Proprietary Funds distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with proprietary fund’s principal ongoing operations. The principal operating revenues of the County’s Internal Service Funds are charges to departments for health insurance. Operating expenses for Internal Service Funds include the cost of services and administrative expenses. 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, itis the government’s policy to use restricted resources first, and then unrestricted resources as they are needed.

D. Assets, Liabilities, and Net Assets or Equity

Deposits and Investments

Investments for the government, as well as for its component units, are reported at fair value. The State Treasurer’s Local Government Investment Pool operates in accordance with appropriate state laws and regulations, The reported value ofthe poolis the same as the fair value ofthe pool shares.

Receivables and Payables

Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as either ‘due torfrom other funds” (ie., the current portion of interfund loans) or "advances toffrom other funds’ (ie., the non-current portion of interfund loans). All other outstanding balances between funds are reported as “due toffrom other funds.” Any residual balances outstanding between the governmental activities and business-fype actvilies are reported in the government-wide financial statements as “internal balances.”

Properly Taxes

Property is assessed ats value on January 1. Property taxes attach as an enforceable lien on property as of

January 1, Realestate taxes are payable in installments on June 6! and December 5%, Personal properly taxes are due and collectible on December 5. The County bills and collects its own property taxes.

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2012

Note 1-Summarv of Significant Accounting Policies: (continued)

D. Assets, Liabilities, and Net Assets or Equity (continued)

Allowance for Uncollectible Accounts

The County calculates its allowance for uncollectible accounts using historical collection data and, in certain cases, specific account analysis. The allowance amounted to approximately $760,377 at June 30, 2012 and is comprised solely of property taxes.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

Capital Assets

Capital assets, which include property, plant, equipment, and infrastructure assets (e.g., roads, bridges, sidewalks, and similar items), are reported in the applicable governmental column in the government-wide financial statements. Capital assets are defined by the government as assets with an initial, individual cost of more than $5,000 (amount not rounded) and an estimated useful life in excess of one year. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date of donation.

The cost of normal maintenance and repairs that do not add to the value of the asset or materially extend the asset’s life are not capitalized.

Major outlays for capital assets and improvements are capitalized as projects are constructed.

Property, plant, equipment, and infrastructure of the primary government, as well as the Component Unit School Board, are depreciated using the straight line method over the following estimated useful lives:

Assets Buildings Building improvements Structures, lines, and accessories Machinery and equipment

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Years 40 40

20-40 4-30

COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2012

Note 1-Summary of Significant Accounting Policies: (continued)

D. Assets, Liablities, and Net Assets or Equity (continued)

Allowance for Uncollectible Accounts

The County calculates its allowance for uncollectible accounts using historical collection data and, in certain cases, specific account analysis. The allowance amounted to approximately $760, 77 at June 30, 2012 and is comprised solely of property taxes.

Use of Estimates

The prepatation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

Capital Assets

Capital assets, which include property, plant, equipment, and infrastructure assets (¢.g., roads, bridges, sidewalks, and similar items), are reported in the applicable governmental column in the government-wide financial statements. Capital assets are defined by the government as assets with an inital, individual cost of more than $5,000 (amount not rounded) and an estimated useful life in excess of one year. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date of donation.

The cost of normal maintenance and repairs that do not add to the value of the asset or materially extend the asset’s life are not capitalized.

Major outlays for capital assets and improvements are capitalized as projects are constructed,

Property, plant, equipment, and infrastructure of the primary government, as well as the Component Unit — School Board, are depreciated using the straight line method over the following estimated useful lives:

Assets Years Buildings rr Building improvements 40 Structures, lines, and accessories 20-40 Machinery and equipment 4.30

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2012

Note 1-Summarv of Significant Accounting Policies: (continued)

D. Assets, Liabilities, and Net Assets or Equity (continued)

Compensated Absences

Vested or accumulated vacation leave that is expected to be liquidated with expendable available financial resources is reported as an expenditure and a fund liability of the governmental fund that will pay it In accordance with the provisions of Governmental Accounting Standards No. 16, Accounting for Compensated Absences, no liability is recorded for non-vesting accumulating rights to receive sick pay benefits. The County accrues salary-related payments associated with the payment of compensated absences. All vacation pay is accrued when incurred in the government-wide and proprietary fund financial statements.

Long-term Obligations

In the government-wide financial statements, and proprietary fund types in the fund financial statements, long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund type statement of net assets. Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of the applicable bond premium or discount Bond issuance costs are reported as deferred charges and amortized over the term of the related debt

In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures.

Fund Equity

Beginning with fiscal year 2011, the County implemented GASB Statement 54, Fund Balance Reporting and Governmental Fund Type Definitions. This Statement provides more clearly defined fund balance categories to make the nature and extent of the constraints placed on a government’s fund balance more transparent The following classifications describe the relative strength of the spending constraints placed on the purposes for which resources can be used:

• Nonspendable fund balance- amounts that are not in spendable form (such as inventory and prepaid expenditures) or are required to be maintained intact (corpus of a permanent fund);

• Restricted fund balance - amounts constrained to specific purposes by their providers (such as grantors, bondholders, and higher levels of government), through constitutional provisions, or by enabling legislation;

" Committed fund balance- amounts constrained to specific purposes by a government itself, using its highest level of decision-making authority; to be reported as committed, amounts cannot be used for any other purpose unless the government takes the same highest level action to remove or change the constraint;

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County OF RUSSELL, VIRGINIA

NoTEs TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2012

Note 1-Summary of Significant Accounting Policies: (continued) D. Assets, Liabilities, and Net Assets or Equity (continued)

Compensated Absences

Vested or accumulated vacation leave that is expected to be liquidated with expendable availabe financial resources is reported as an expenditure and a fund lability of the governmental fund that will pay it In ‘accordance with the provisions of Governmental Accounting Standards No. 16, Accounting for Compensated Absences, no labiliy is recorded for non-vesting accumulating rights to receive sick pay benefits. The County accrues salary-related payments associated with the payment of compensated absences. All vacation pays accrued when incurred in the government-wide and proprietary fund financial statements,

_Longeterm Obligations

in the government-wide financial statements, and proprietary fund types in the fund financial statements, long-term obligations are reported as labilies in the applicable governmental activities, business-type activities, or proprietary fund type statement of net assets. Bond premiums and discounts, as well as issuance cosis, are deferred and amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are reported as deferred charges and amortized over the term of the related debt.

in the und financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued s reported as other financing sources, Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds recelved, are reported as debt service expenditures.

Fund Equity

Beginning with fiscal year 2011, the County implemented GASB Statement 54, Fund Balance Reporting and Govemmental Fund Type Definitions. This Statement provides more clearly defined fund balance categories to make the nature and extent of the constraints placed on a government’s fund balance more transparent. The following classifications describe the relative strength of the spending constraints placed on the purposes for which resources can be used:

= Nonspendable fund balance — amounts that are not in spendable form (such as inventory and prepaid expenditures) or are required fo be maintained intact (corpus of a permanent fund);

= Restricted fund balance - amounts constrained to specific purposes by their providers (such as grantor, bondholders, and higher levels of government), through constitutional provisions, or by ‘enabling legislation;

= Committed fund balance — amounts constrained to specific purposes by a government itself, using its highest level of decision-making authority; to be reported as committed, amounts cannot be used for any other purpose unless the government takes the same highest level action to remove or change the constraint;

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2012

Note 1-Summarv of Significant Accounting Policies: (continued)

D. Assets, Liabilities, and Net Assets or Equity (continued)

Fund Equity (continued)

• Assigned fund balance- amounts a government intends to use for a specific purpose; intent can be expressed by the governing body or by an official or body to which the governing body delegates the authority;

• Unassigned fund balance - amounts that are available for any purpose; positive amounts are only reported in the general fund.

The Board of Supervisors is the highest level of decision-making authority and the formal action that is required to establish, modify or rescind a fund balance commitment is a resolution approved by the Board of Supervisors. The resolution must either be approved or rescinded as applicable, prior to the last day of the fiscal year for which the commitment is made. The amount subject to the constraint may be determined in the subsequent period.

The Board of Supervisors has authorized the County Administrator as the official authorized to assign fund balance to a specific purpose as approved by the fund balance policy.

The County of Russell will maintain an unassigned fund balance in the general fund equal to 16% of the expenditures/operating revenues (two months). The County considers a balance of less than 10% to be a cause for concern, barring unusual of deliberate circumstances.

The County considers restricted fund balance to be spent when an expenditure is incurred for purposes for which restricted and unassigned, assigned, or committed fund balances are available, unless prohibited by legal documents or contracts. When an expenditure is incurred for purposes for which committed, assigned or unassigned amounts are available, the County considers committed fund balance to be spent first, then assigned fund balance, and lastly unassigned fund balance.

Net Assets

Net assets are the difference between assets and liabilities. Net assets invested in capital assets represent capital assets, less accumulated depreciation less any outstanding debt related to the acquisition, construction or improvement of those assets.

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2012

Note 1-Summary of Significant Accounting Policies: (continued) D. Assets, Liabilities, and Net Assets or Equity (continued)

9, Fund Equity (continued)

= Assigned fund balance - amounts a government intends to use for a specific purpose; intent can be expressed by the governing body or by an official or body to which the governing body delegates the authority;

= Unassigned fund batance ~ amounts that are available for any purpose; positive amounts are only reported in the general fund,

The Board of Supervisors is the highest level of decision-making authority and the formal action that is required to establish, modify or rescind a fund batance commitment is a resolution approved by the Board of Supervisors. The resolution must either be approved or rescinded as applicable, prior to the last day of the fiscal year for which the commitment is made. The amount subject to the constraint may be determined in ihe subsequent period.

The Boatd of Supervisors has authorized the County Administrator as the official authorized to assign fund balance to a specific purpose as approved by the fund balance policy.

The County of Russell wil maintain an unassigned fund balance in the general fund equal to 16% of the expenditures/operating revenues (two months). The County considers a balance of less than 10% to be a cause for concem, barring unusual of deliberate circumstances.

The County considers restricted fund balance to be spent when an expenditure is incurred for purposes for which restricted and unassigned, assigned, or committed fund balances are available, unless prohibited by legal documents or contracts. When an expenditure is incurred for purposes for which committed, assigned of unassigned amounts are available, the County considers committed fund balance to be spent first, then assigned fund balance, and lastly unassigned fund balance.

Net Assets

Net assets are the difference between assets and liabilities, Net assets invested in capital assets represent capital assets, less accumulated depreciation less any outstanding debt related to the acquisition, construction or improvement of those assets,

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-31-

COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2012

Note 2-Reconciliation of Government-Wide and Fund Financial Statements:

A. Explanation of certain differences between the governmental fund balance sheet and the government-wide statement of net assets

The governmental fund balance sheet includes a reconciliation between fund balance-total governmental funds and net assets-governmental activities as reported in the government-wide statements of net assets. One element of that reconciliation explains that long-term liabilities, including bonds payable, are not due and payable in the current period and therefore are not reported in the funds. The details of these $(20,066,676) and $(880,639) differences for the primary government and discretely presented component unit-School Board, respectively, are as follows:

Bonds and literary loans

Capital leases

Unamortized premium

Accrued interest payable

Landfill accrued closure and postclosure monitoring costs

Early Retirement Incentive

Net OPEB Obligation

Compensated absences

Net adjustment to reduce fund balance-total governmental funds

Primary

Government

(17,781,552) $ (617,454)

(283,315)

(254,990)

(526,868)

(6,609)

(595,888)

to arrive at net assets-governmental activities $ (20,066,676) $

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-32-

School

Board

(94,833)

(44,828)

(740,978)

(880,639)

COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2012

Note 2-Reconciliation of Government-Wide and Fund Financial Statements:

Explanation of certain differences between the governmental fund balance sheet and the government-wide statement of net assets

The governmental fund balance sheet includes a reconciliation between fund balance-tofal governmental funds and net assets-governmental activities as reported in the government-wide statements of net assets. One element of that reconciliation explains that long-term liabilities, including bonds payable, are not due and payable in the current period and therefore are not reported in the funds. The details of these $20,066,676) and $(880,639) differences for the primary government and discretely presented component unit-School Board, respectively, are as follows:

Primary School Government Board

Bonds and literary loans $ (17,781,552) § -

Capital leases (617,454) -

Unamortzed premium (283,315)

Accrued interest payable (254,990)

Landfill accrued closure and postclosure monitoring costs (526,868) -

Early Retirement Incentive - (94,833)

Net OPEB Obiigation (6,609) (44,828)

Compensated absences (595,888) (740,978)

‘Net adjustment to reduce fund balance-total governmental funds

to arrive at net assets-governmental activities $ (20,066,676) $ (880,639)

The remainder ofthis page lft blank intentionally.

-32-

COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2012

Note 2-Reconciliation of Government-Wide and Fund Financial Statements: (continued)

B. Explanation of certain differences between the governmental fund statement of revenues, expenditures, and changes in fund balances and the government-wide statement of activities

The governmental fund statement of revenues, expenditures, and changes in fund balances includes a reconciliation between net changes in fund balances-total governmental funds and changes in net assets of governmental activities as reported in the government-wide statement of activities. One element of that reconciliation explains, “Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense.” The details of these $(443,327) and $46,911 differences for the primary government and discretely presented component unit-School Board, respectively, are as follows:

Capital outlays Transfer of capital assets to School Board, net Depreciation expense

Net adjustment to increase (decrease) net changes in fund balances - total governmental funds to arrive at changes in

Primary Government

1,150,216

(430,484)

(1,163,059)

Component Unit

School Board

$ 84,206 430,484

(467,779)

net assets of governmental activities $ (443,327) $ ===46;;,;,9=11=

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-33-

COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2012

Note 2-Reconciliation of Government-Wide and Fund Financial Statements: (continued)

B. Explanation of certain differences between the govemmental fund statement of revenues, expenditures, and changes in fund balances and the government-wide statement of activities

The governmental fund statement of revenues, expenditures, and changes in fund balances includes a reconciliation between net changes in fund balances-total governmental funds and changes in net assets of governmental activities as reported in the government-wide statement of activities. One element of that reconciliation explains, “Governmental funds report capital outlays as expenditures. However, in he statement of activities the cost of those assets is allocated over their estimated useful ives and reported as depreciation expense.” The details of these $(443,327) and $46,941 differences for the primary government and discretely presented component unit-School Board, respectively, are as follows:

‘Component Unit Primary School Government Board Capital outlays $1,150,216 $ 84,206 Transfer of capital assets to School Board, net (430,484) 430,484 Depreciation expense (1,163,059) (487,779)

Net adjustment to increase (decrease) nef changes in fund balances - total governmental funds to arrive at changes in net assets of govemmental activities

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2012

Note 2-Reconciliation of Government-Wide and Fund Financial Statements: (continued)

B. Explanation of certain differences between the governmental fund statement of revenues, expenditures, and changes in fund balances and the government-wide statement of activities (continued)

Another element of that reconciliation states “the issuance of long-term debt (e.g., bonds, leases) provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net assets. Also, governmental funds report the effect of issuance costs, premiums, discounts, and similar items when debt is first issued, whereas these amounts are deferred and amortized in the statement of activities.” The details of this $1,950,655 difference in the primary government are as follows:

Debt Issued or Incurred: Lease purchase agreements

Principal Payments: Accrued landfill closure/postclosure Bonds, literary loans, and notes Lease purchase agreements

Net adjustment to increase (decrease) net changes in fund balances

total governmental funds to arrive at changes in net assets of

Primary Government

(512,094)

573,907 1,637,142

251,700

governmental activities $ 1,950,655 __ ;;

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-34-

COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2012

Note 2-Reconciliation of Government-Wide and Fund Financial Statements: (continued)

B. Explanation of certain differences between the governmental fund statement of revenues, expenditures, and changes in fund balances and the government-wide statement of activities (continued)

Another element of that reconciliation states ‘the issuance of long-term debt (e.9., bonds, leases) provides current financial resources to govermmental funds, while the repayment of the principal of long-term debt consumes the urtent financial resources of governmental funds. Neither transaction, however, has any effect on net assets. Also, governmental funds report the effect of issuance costs, premiums, discounts, and similaritems when debtis first issued, whereas these amounts are deferred and amortized in the statement of activities.” The details of this $1,950,655 difference in the primary goverment are as follows:

Primary Government Debt Issued or Incurred: Lease purchase agreements $ (612,094) Principal Payments: Accrued landfill closure/postelosure 573,907 Bonds, literary loans, and notes 1,637,142 Lease purchase agreements 251,700 Net adjustment to increase (decrease) net changes in fund balances

tofal governmental funds to arrive at changes in net assets of governmental activities $1,950,655

The remainder of tis page let blank intentionaly,

COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2012

Note 2-Reconciliation of Government-Wide and Fund Financial Statements: (continued)

B. Explanation of certain differences between the governmental fund statement of revenues, expenditures, and changes in fund balances and the government-wide statement of activities (continued)

Another element of that reconciliation states, “Some expenses reported in the statement of activities do not require the use of current financial resources and therefore are not reported as expenditures in governmental funds.” The details of this $41,661 and $148,246 difference for the primary government and discretely presented component unit-School Board, respectively, are as follows:

(Increase) decrease in compensated absences (Increase) decrease in accrued interest (Increase) decrease in early retirement incentive (Increase) decrease in net OPEB obligation Amortization of bond premium

Net adjustment to increase (decrease) net changes in fund balances-total governmental funds to arrive

Primary Government

(73,762) $ 98,075

544

16,804

Component Unit School Board

189,530

(44,833)

3,549

at changes in net assets of governmental activities $ 41,661 $ 148,246 ------'–

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-35-

COUNTY OF RUSSELL, VIRGINIA

NoTEs TO FINANCIAL STATEMENTS (CONTINUED)

JUNE 30, 2012

Note 2-Reconciliation of Government-Wide and Fund Financial Statements: (continued)

B. Explanation of certain differences between the governmental fund statement of revenues, expenditures, and changes in fund balances and the government-wide statement of activities (continued)

Another element ofthat reconciliation states, “Some expenses reported in the statement of activiies do not require the use of current financial resources and therefore are not reported as expenditures in governmental funds.” The details of this $41,661 and $148,246 difference forthe primary govemment and discretely presented component unit-School Board, respectively, ae as follows:

Primary Government

(Increase) decrease in compensated absences. $ (73,762) $ (Increase) deorease in acorued interest 98.075 (Increase) decrease in early retirement incentive - (Increase) deorease in net OPEB obligation 544 Amortization of bond premium 16,804 Net adjustment to increase (decrease) net changes in fund balances-total govemmental funds to arrive at changes in net assets of govemmental activities § 41661 §

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-35-

‘Component Unit School Board

189,530

(44,833) 3,549

148,246

COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

JUNE 30, 2012

Note 3-Stewardship, Compliance, and Accountability:

A. Budgetary Information

The following procedures are used by the County in establishing the budgetary data reflected in the financial statements:

Prior to March 30, the County Administrator submits to the Board of Supervisors a proposed operating and capital budget for the fiscal year commencing the following July 1. The operating and capital budget includes proposed expenditures and the means of financing them. All Funds of the County have legally adopted budgets with the exception of the Industrial Development Authority Fund and Agency Funds.
Public hearings are conducted to obtain citizen comments.
Prior to June 30, the budget is legally enacted through passage of an Appropriations Resolution.
The Appropriations Resolution places legal restrictions on expenditures at the function level. Only the Board of Supervisors can revise the appropriation for each department or category. The County Administrator is authorized to transfer budgeted amounts within general government departments; however, the School Board is authorized to transfer budgeted amounts within the school system’s categories.
Formal budgetary integration is employed as a management control device during the year for the General Fund, and the Special Revenue Funds (except the School Fund). The School Fund is integrated only at the level of legal adoption.
All budgets are adopted on a basis consistent with generally accepted accounting principles (GAAP).
Appropriations lapse on June 30, for all County units.
Encumbrance accounting, under which purchase orders, contracts, and other commitments for the expenditure of monies are recorded in order to commit that portion of the applicable appropriations, is not part of the County’s accounting system.

B. Excess of expenditures over appropriations

The County had numerous departments and funds that had excess expenditures over appropriations in the current year. Those departments can be found on Schedule 2 starting on page 78 of this report.

C. Deficit fund equity

At June 30, 2012, there were no funds which had deficit fund equity.

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COUNTY OF RUSSELL, VIRGINIA

NoTEs TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2012

Note 3-Stewardship, Compliance, and Accountability:

Budgetary Information

The following procedures are used by the County in establishing the budgetary data reflected in the financial ‘statements:

Prior to March 30, the County Administrator submits to the Board of Supervisors a proposed operating and capital budget for the fiscal year commencing the folowing July 1. The operating and capital budget includes proposed expenditures and the means of financing them. All Funds of the County have legally adopted budgets with the exception ofthe Industrial Development Authority Fund and Agency Funds.

Public hearings are conducted fo obtain citizen comments.

Prior to June 30, the budget is legally enacted through passage of an Appropriations Resolution

The Appropriations Resolution places legal restrictions on expenditures at the function level. Only the Board of Supervisors can revise the appropriation for each department or category. The County Administrator is authorized to transfer budgeted amounts within general government departments; however, the School Board is authorized to transfer budgeted amounts within the school system’s categories.

Formal budgetary integration is employed as a management control device during the year for the General Fund, and the Special Revenue Funds (except the School Fund). The Schoo! Fund is integrated only at the level of legal adoption.

All budgets are adopted on a basis consistent with generally accepted accounting principles (GAAP). Appropriations lapse on June 30, for all County units.

Encumbrance accounting, under which purchase orders, contracts, and other commitments for the

expenditure of monies are recorded in order to commit that portion ofthe applicable appropriations, isnot part of the County’s accounting system.

Excess of expenditures over appropriations

The County had numerous departments and funds that had excess expenditures over appropriations in the current year. Those departments can be found on Schedule 2 starting on page 78 of this report.

Deficit fund equity

At June 30, 2012, there were no funds which had deficit fund equity.

COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

JUNE 30,2012

Note 4-Deposits and Investments:

Deposits: Deposits with banks are covered by the Federal Deposit Insurance Corporations (FDIC) and collateralized in accordance with the Virginia Security for Public Deposits Act (the “Act”) Section 2.2-4400 et. seq. of the Code of Virginia. Under the Act, banks and savings institutions holding public deposits in excess of the amount insured by the FDIC must pledge collateral to the Commonwealth of Virginia Treasury Board. Financial Institutions may choose between two collateralization methodologies and depending upon that choice, will pledge collateral that ranges in the amounts from 50% to 130% of excess deposits. Accordingly, all deposits are considered fully collateralized.

Investments: Statutes authorize local governments and other public bodies to invest in obligations of the United States or agencies thereof, obligations of the Commonwealth of Virginia or political subdivisions thereof, obligations of the International Bank for Reconstruction and Development (World Bank), the Asian Development Bank, the African Development Bank, “prime quality” commercial paper and certain corporate notes, banker’s acceptances, repurchase agreements, and the State Treasurer’s Local Government Investment Pool (LGIP). At June 30, 2012, the County had no investments.

Note 5-Due from Other Governmental Units:

The following amounts represent receivables from other governments at year-end:

Primary Component Unit Government School Board

Workforce Investment Board: Workforce Investment funds $ 620,241 $

Commonwealth of Virginia: Local sales tax 302,799

State sales tax 658,015

Non-categorical aid 181,236

Categorical aid-shared expenses 182,866

Categorical aid-Virginia Public Assistance funds 146,469

Categorical aid-education payments 163,408

Categorical aid-other 21,770

Categorical aid-Comprehensive Services Act funds 177,279

Federal Government: Categorical aid-Virginia Public Assistance funds 158,626

School federal programs 964,180

Categorical aid-other 49,316

Total Amount Due from Other Governmental Units $ 1,840,602 $ 1,785,603

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2012

Note 4-Deposits and Investments:

Deposits

Deposits with banks are covered by the Federal Deposit Insurance Corporations (FDIC) and collateralized in accordance with the Virginia Security for Public Deposits Act (the “Act’) Section 2.2-4400 et. seq, of the Code of Virginia. Under the Act, banks and savings institutions holding public deposits in excess of the amount insured by the FDIC must pledge collateral to the Commonwealth of Virginia Treasury Board. Financial Institutions may choose between two collateralization methodologies and depending upon that choice, will pledge collateral that ranges in the amounts from 50% to 130% of excess deposits. Accordingly, all deposits are considered fully collateralized.

Investments: Statutes authorize local governments and other public bodies to invest in obligations of the United States or agencies thereof, obligations of the Commonwealth of Virginia or political subdivisions thereof, obligations of the International Bank for Reconstruction and Development (World Bank), the Asian Development Bank, the African Development Bank, “prime quality’ commercial paper and certain corporate notes, banker’s acceptances, repurchase agreements, and the State Treasurer’s Local Government Investment Pool (LGIP). At June 30, 2012, the County had no investments

Note 5-Due from Other Governmental Unit

The following amounts represent receivables from other governments at year-end:

Primary Component Unit Government School Board Workforce Investment Board Workforce Investment funds $ 620,241 $ Commonwealth of Virginia: Local sales tax 302,799 = State sales tax : 658,015 Non-categorical aid 181,236 - Categorical aid-shared expenses 182,866 Categorical aid-Virginia Public Assistance funds 146,469 - Categorical aid-education payments - 163,408 Categorical aid-other 21,770 - Categorical aid-Comprehensive Services Act funds 177,279 : Federal Government Categorical aid-Virgnia Public Assistance funds 158,626 - ‘School federal programs - 964,180 Categorical aid-other 49,316 - Total Amount Due from Other Governmental Units $1,840,602 § 1,785,603

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

JUNE 30, 2012

Note 6-lnterfund/Component-Unit Obligations:

Fund

Primary Government: General Fund

Component Unit: School Board IDA

Total

Due to Primary Government/

Component Unit

Due from Primary Government/

Component Unit

$ 908,695

708,965 $ 200,000

908,965 $

=====

lnterfund transfers and remaining balances for the year ended June 30, 2012, consisted of the following:

Fund

Primary Government: General Fund Industrial Development Dante Fund Total

Primary Government: General Fund Coal Road Fund Workforce Investment Fund

Total

Transfers In

$ 1,852,814

238,597 $ 2,091 ,411

Due From $ 46,117

65,103

$ 111,220

Transfers Out

$ 238,597 1,852,814

$ 2,091,411

Due To $

111 ,220 $ 111,220

Transfers are used to (1) move revenues from the fund that statute or budget requires to collect them to the fund that statute or budget requires to expend them and (2) use unrestricted revenues collected in the General Fund to finance various programs accounted for in other funds in accordance with budgeting authorization.

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-38-

COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2012

Note 6-Interfund/Component-Unit Obligati

Due to Primary Due from Primary

Government/ Government! Fund Component Unit_ _ Component Unit Primary Goverment; General Fund $ 8 908,695 Component Unit School Board $ 708,965 $ IDA 200,000 - Total $ 908,965 $

Interfund transfers and remaining balances for the year ended June 30, 2012, consisted of the following:

Fund Transfers In__Transfers Out Primary Government: General Fund $ 1.852814 $ 238,597 Industrial Development - 1,852,814 Dante Fund 238,597 - Total 5 2001411 “$2,097,417 Primary Government: Due From Due To General Fund $ 4617 S - Coal Road Fund 65,103 - Workforce Investment Fund : 111,220

Total

Transfers are used to (1) move revenues from the fund that statute or budget requires to collec them to the fund that statute or budget requires to expend them and (2) use unrestricted revenues collected in the General Fund to finance various programs accounted for in other funds in accordance with budgeting authorization

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2012

Note 7-Long-Term Obligations:

Primary Government. Governmental Activity Indebtedness

The following is a summary of long-term obligation transactions of the County for the year ended June 30, 2012:

Balance Increases/ Decreases/ Balance

July 1, 2011 Issuances Retirements June 30, 2012

General obligation bonds $ 10,083,228 $ $ (611 ,579) $ 9,471,649

Literary loans 2,990,863 (426,278) 2,564,585

Revenue bonds, as restated 5,351,965 (237,042) 5,114,923

Literary anticipation note 992,638 (362,243) 630,395

Deferred Amounts:

Bond premiums 300,119 (16,804) 283,315

Capital leases 357,060 512,094 (251,700) 617,454

Landfill closure/

postclosure liability 1,100,775 (573,907) 526,868

Net OPEB obligation 7,153 42,754 (43,298) 6,609

Compensated absences 522,126 465,356 (391 ,594) 595,888

Total $ 21,705,927 $ 1,020,204 $ (2,914,445) $ 19,811,686

Annual requirements to amortize long-term obligations and related interest are as follows:

Year Ending General Obligation Bonds Literary Loans Revenue Bonds

June 30, Principal Interest Principal Interest Principal Interest

2013 $ 717,972 $ 437,035 $ 375,977 $ 59,016 $ 237,463 $ 2014 611,026 403,830 375,977 50,054 237,463

2015 627,696 372,805 375,977 41,092 237,463

2016 644,976 340,870 375,977 32,130 237,463

2017 647,901 308,788 375,977 23,167 237,463

2018-2022 3,343,527 997,974 672,200 27,597 1,187,317

2023-2027 2,113,551 465,780 12,500 250 1 '152,870 2028-2032 765,000 87,583 1,101,198

2033-2037 486,223

Totals $ 9,471,649 $ 3,414,665 $ 2,564,585 $ 233,306 $ 5,114,923 $

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2012

Note 7-Long-Term Obligations:

Primary Government - Governmental Activity Indebtedness

The following is a summary of long-term obligation transactions of the County for the year ended June 30, 2012

Balance Increases! Decreases! Balance July 1, 2014 Issuances Retirements _June 30, 2012 General obligation bonds, $ 10,083,228 $ -$ (611,579) $ 9,471,849 Literary loans 2,990,863 (426,278) 2,564,585 Revenue bonds, as restated 5,351,965 (237,042) 5,114,923, Literary anticipation note 992,638 - (362,243) 630,395 Deferred Amounts:

Bond premiums 300,119 - (16,804) 283,315 Capital leases 357,060 512,094 (251,700) 617,454 Landfill closure/

postclosure liability 1,100,775, a (673,907) 526,868 Net OPEB obligation 7,153 42,754 (43,298) 6,609 Compensated absences 522,126 465,356 (391,594) 595,888

Total $_ 21,705,927 $ 1,020,204 $ (2,914,445) $19,811,686

Annual requirements to amortize long-term obligations and related interest are as follows

Year Ending General Obligation Bonds Literary Loans Revenue Bonds June 30, Principal Interest Principal Interest Principal Interest 213 «$ ~=—«TH7.972-$ ©~—««437,085-$ ~=—«BTHAT? «$= «59016 $ 237.483. $ 2014 611,026 403,830 375977 50,054 237,463

2015 627,696 372,805 315817 41,092 237,463

2016 644,976 340,870 375,977 32,130 237 463

2017 647,901 308,788 375,977 23,167 237,463 2018-2022 3,343,527 997,974 672,200 21,897 1.187.317 2023-2027 2,113,551 465,780 12,500 250 1,152,870 2028-2032 765,000 87,583 - - 1,101,198 2033-2037 - : : - 486,223,

Totals §_ 9471649 $3,414,005 $2,564,585 $ 233,006 $__5,114923 §

COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2012

Note 7-Long-Term Obligations: (continued)

Primary Government- Governmental Activity Indebtedness (continued)

Details of long-term indebtedness:

Final Amount of Balance Amount Interest Date Maturity Original Governmental Due Within Rates Issued Date Issue Activities One Year

General Obligation and Revenue Bonds: General obligation bond 4.90%-6.35% 1992 2013 $ 1,812,215 $ 122,268 $ 122,268 General obligation bond 5.10%-6.10% 1995 2016 325,000 60,000 15,000 General obligation bond 5.10%-6.10% 1997 2016 140,000 30,000 5,000 General obligation bond 4.10%-5.23% 1999 2019 510,000 200,000 25,000 General obligation bond 4.98%-5.10% 2000 2021 1,802,210 932,119 92,571 General obligation bond 2.35%-5.10% 2002 2023 4,382,954 2,628,587 209,326 General obligation bond 4.60%-5.10% 2006 2027 3,205,190 2,538,675 143,807 General obligation bond 4.60%-5.10% 2009 2030 1,485,000 1,390,000 50,000 General obligation bond 3.05%-5.05% 2010 2031 1,620,000 1,570,000 55,000 General obligation/Revenue bond 0.00% 11/28/2001 2033 935,690 623,793 31,190 General obligation/Revenue bond 0.00% 11/28/2001 2033 1,678,400 1,136,028 55,946 General obligation/Revenue bond 0.00% 11/28/2001 2025 344,477 223,910 17,224 General obligation/Revenue bond 0.00% 11/1/2002 2033 822,366 561,950 27,412 General obligation/Revenue bond 0.00% 3/10/2005 2036 556,538 435,955 18,551 General obligation/Revenue bond 0.00% 10/14/2005 2036 91,439 73,151 3,048 General obligation/Revenue bond 0.00% 10/14/2005 2037 1,906,717 1 ,557,152 63,557 General obligation/Revenue bond 0.00% 4/28/2006 2037 415,513 339,335 13,851 General obligation/Revenue bond 0.00% 3/30/2007 2037 197,179 163,649 6,684

Subtotal General Obligation and Revenue Bonds $ 14,586,572 $ 955,435 Plus: Unamortized Premium $ 283,315 $ 16,804

Total General Obligation and Revenue Bonds $ 14,869,887 $ 972,239

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

JUNE 30, 2012

Note 7-Long-Term Obligations: (continued)

Primary Government - Governmental Activity Indebtedness (continued)

Details of long-term indebtedness:

General Obligation and Revenue Bonds:

General obigation bond General obigation bond General obligation bond General obigation bond General obigation bond General obigation bond General obigation bond General obigation bond General obigation bond General obligation/Revenue bond General obigation/Revenue bond General obigation/Revenue bond General obiigation/Revenue bond General obigation’Revenue bond General obigation’Revenue bond General obigation/Revenue bond General obigation’Revenue bond General obigation/Revenue bond

Subtotal General Obligation and Revenue Bonds

Plus: Unamortized Premium

Final ‘Amount of Balance Amount

Interest Date Maturity Original ~—=—= Governmental Due Within

Rates Issued Date Issue Activities One Year 4.90%-6.35% 1992 213 «$1,812.25 § 122,288 § 122,268 5.10%6.10% 1995 2016 325,000, 60,000 15,000 5.10%-6.10% 1997 2016 140,000 30,000 5,000 4.10%-5.23% 1999 2019 510,000 200,000 25,000 4.98%-5.10% 2000 2021 1,802,210 992,119 92571 2.35%-5.10% 2002 2023 4,382,954 2,628,587 209,326 4.60%-5.10% 2006 2027 3,206,190 2,538,675 143,807 4.60%-5.10% 2008 2030 1,485,000 1,300,000 50,000 3.05%-5.05% 2010 2031 1620,000 1,570,000 55,000 0.00% © 11/28/2001 2033 935,690 623,793 31,190 0.00% 1128/2001 2083 1,678,400 1,196,028 55,946 0.00% © 11/28/2001 2025 344,477 223.910 17,224 0.00% © 14/1/2002 2033 822,386 561,950 27a12 0.00% 30/2005 2038 556,538, 435,955, 18.51 0.00% to/ta2005 (2038 91,438 73,151 3.048 0.00% 10/14/2005 (2087 4,906,717 1,557,182 63,557 0.00% 4/28/2008 (2037 415,513, 330,335 13,851 0.00% 3/30/2007 «2037 197,179 163,649 6,684 Se6572 $965 435 $ 283,315 § 16,804 BO0887_§ 972,250

Total General Obligation and Revenue Bonds

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2012

Note 7-Long-Term Obligations: (continued)

Primary Government- Governmental Activity Indebtedness (continued)

Details of long-term indebtedness: (continued)

Final Amount of Balance Amount Interest Date Maturity Original Governmental Due Within Rates Issued Date Issue Activities One Year

Literary loans: Literary loan 3.00% 7/15/1986 2017 $ 960,000 $ 151,110 $ 30,222 Literary loan 3.00% 7/15/1986 2017 2,000,000 314,815 62,963 Literary loan 3.00% 2/1/1988 2018 530,999 111,132 18,522 Literary loan 3.00% 2/1/1988 2018 358,151 75,486 12,581 Literary loan 3.00% 2/1/1988 2018 84,805 18,030 3,005 Literary loan 3.00% 2/1/1988 2018 281,079 59,970 9,995 Literary loan 3.00% 2/1/1988 2018 196,873 41,934 6,989 Literary loan 2.00% 1/1/2000 2020 1,155,140 462,056 57,757 Literary loan 2.00% 3/15/1999 2019 1 '114,086 389,986 55,700 Literary loan 2.00% 3/15/1999 2019 161,449 54,849 8,200 Literary loan 200% 6/15/1999 2019 422,680 147,938 21,134 Literary loan 2.00% 6/15/1999 2019 880,411 308,151 44,020 Literary loan 2.00% 11/15/2000 2021 493,789 222,210 24,689 Literary loan 3.00% 12/15/2000 2021 154,118 69,418 7,700 Literary loan 2.00% 7/1/2003 2023 250,000 137,500 12,500 Total Literary loans $ 2,564,585 $ 375,977

Literary anticipation note 4.10% 9/4/2008 9/4/2013 $ 992,638 $ 630,395 $

Other Obligations: Capital Leases (Note 8) $ 617,454 $ 276,267 Landfill Closure and Postclosure Liability 526,868 Net OPEB Obligation 6,609 Compensated Absences 595,888 446,916

Total Other Obligations $ 1,746,819 $ 723,183

Total Long-Term Obligations $ 19,811,686 $ 2,071,399

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2012

Note 7-Long-Term Obligations: (continued)

Primary Government - Governmental Activity Indebtedness (continued)

Details of long-term indebtedness: (continued)

Final Amount of Balance Amount Interest Date Maturity Original «Governmental Due Within Rates Issued Date Issue Activities One Year Literary toans: Literary loan 3.00% 75/1986 «2017, $980,000 $154,110 § 30,222 Literary loan 300% © 75/1986 2017 2,000,000 314,815 62,963 Literary oan 3.00% 2/1988 «2018 530,999 114,132 18,522 Literary toan 3.00% 2988 2018 358,151 75,486 12,581 Literary loan 3.00% ges 2018 84,805 18,030 3,005, Literary loan 300% = 988 2018 281,079 59,970 9,995 Literary loan 3.00% 2988 = 2018 196,873 41,934 6,989 Literary loan 200% 1/1/2000 = 2020 1,185,140 462,056 57,757 Literary oan 200% — 3itsfigga 2019 4,114,086 389,986 55,700 Literary loan 200% — aitsttg99 2019 161.449 54,849 8,200 Literary loan 200% — sits/t999 2019 422,680 147,938 21,134 Literary loan 200% — @ft5/1999 2019 880,411 308,151 44,020 Literary toan 200% — 11/15/2000 2021 493,789 222,210 24,689 Literary loan 3.00% 12/15/2000 2021 154,118 69,418 7,700 Literary loan 200% 71812003» 2023 250,000 137,500 42,500 Total Literary ans ,585_§ 375.977 Literary anticipation note 440% 9/4/2008 9/2013 $ © 992,638 _$ 690,305 Other Obligations Capital Leases (Note 8) $ 617454 $ 276,267 Landfil Closure and Postclosure Liability 526,868 : Net OPEB Obiigaton 6,609 - Compensated Absences 595,888 446,916

Total Other Obligations 1746819 $723,183,

Total Long-Term Obligations $19811,686$ 2,071,399

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“Ate

COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

JUNE 30, 2012

Note 7-Lonq-Term Obligations: (continued)

Primary Government- Enterprise Activity Indebtedness:

The following is a summary of long-term obligation transactions of the Enterprise Fund for the year ended June 30, 2012.

July 1, 2011 Issuances Retirements June 30, 2012

Revenue bonds $ 751,555 $ - $ (18,600) $ __ 7_32…;,9_55

Annual requirements to amortize long-term obligations and related interest are as follows:

Year Ending June 30,

2013

2014 2015 2016 2017

2018-2022 2023-2027 2028-2032

2033-2036

Totals

Details of long-term indebtedness:

Revenue Bonds: Revenue bond Revenue bond

Total Revenue Bonds

Interest Rates

0.00% 4.50%

Revenue Bonds Principal Interest

19,371 $ 32,076 20,175 31,272 21,015 30,432 21,895 29,553 22,814 28,633

122,852 127,820 150,265 97,595 188,102 59,758 166,466 14,335

732,955 $ 451,474

Final Amount of Balance Date Maturity Original Governmental Issued Date Issue Activities

3/24/1999 2019 $ 37,500 $ 12,188 4/10/1996 2036 900,000 720,767

$ 732,955

-42-

Amount Due Within One Year

$ 1,875 17,496

$ 19,371

COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2012

Note 7-Long-Term Obligations: (continued)

Primary Government — Enterprise Activity Indebtedness:

The following is a summary of long-term obligation transactions of the Enterprise Fund for the year ended June 30, 2012.

July 1, 2011 Issuances Retirements _ June 30, 2012

Revenue bonds $751,555 $ -$ (18,600) $ 732,955

Annual requirements to amortize long-term obligations and related interest are as follows:

Year Ending Revenue Bonds June 30, Principal Interest 2013 $ 19371 «$32,076 2014 20,175 31,272 2015 24,015 30,432 2016 21,895 29,553 2017 22,814 28,633 2018-2022 122,852 127,820 2023-2027 150,265, 97,595 2028-2032 188,102 59,758 2033-2036 14,335, Totals $ 451,474 Details of long-term indebtedness: Final Amount of Balance Amount Interest Date Maturity Original Governmental Due Within Rates Issued Date Issue Actviies One Yeer Revenue Bonds: Revenue bond 0.00% «= siaanigso mt $37,800 $12,188 $1875 Revenue bond 450% 4019962036 900,000 720,767 17,496 Total Revenue Bonds ZT 732855S19,371_

COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

JUNE 30,2012

Note 7-Long-Term Obligations: (continued)

Component Unit- School Board Indebtedness

The following is a summary of long-term obligation transactions of the discretely presented component unit for the year ended June 30, 2012:

Balance Balance July 1, 2011 Increases Decreases June 30, 2012

Net OPEB obligation $ 48,377 $ 278,829 $ (282,378) $ 44,828 Early retirement incentive 50,000 44,833 94,833 Compensated absences 930,508 508,351 (697,881) 740,978

Total $ 1,028,885 $ 832,013 $ (980,259) $ 880,639

Details of long-term indebtedness:

Amount Total Due Within

Amount One Year Other Obligations:

Early retirement incentive $ 94,833 $ 34,000 Net OPES Obligation 44,828 Compensated Absences 740,978 555,734

Total Other Obligations $ 880,639 $ 589,734

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‘COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2012

Note 7-Long-Term Obligations: (continued) Component Unit - School Board Indebtedness

The following is a summary of long-term obligation transactions of the discretely presented component unit for the year ended June 30, 2012:

Belance Balance July 1, 2011 __ Increases Decreases June 30, 2012 NetOPEBobligation § 48,377 $ 278,829 $ —(282,378) $ 44,828 Early retirement incentive 50,000 44,833 : 94,833 Compensated absences 930,508 508,354 (697,881) 740,978 Total $_ 1028885 $ 832,013 $ (980,259) $ 880,639 Details of long-term indebtedness: Amount Total ‘Due Within Amount One Year, Other Objigations TO Early rettement incentive $ 94833 § 34,000 Net OPEB Obligation 828 - Compensated Absences 740,978 555,734 Total Other Obligations $880,639 § 580,734

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

JUNE 30, 2012

Note 8-Capital Leases:

Primary Government The County has entered into lease agreements to finance the acquisition of school buses, a bucket truck, and other vehicles and equipment for the School Board. These lease agreements qualify as capital leases for accounting purposes and, therefore, have been recorded at the present value of minimum lease payments at the date of inception.

The assets acquired through capital leases are as follows:

Machinery and equipment Less: Accumulated depreciation

Net Asset

Machinery & Equipment

1,069,069 (130,784)

$ __ 9::…::.328,2::…::.85=-

The future minimum lease obligations and the net present value of minimum lease payments as of June 30, 2012, were as follows:

Year Ending June 30,

2013 2014 2015

Subtotal Less, amount

representing interest

Present Value of Lease Agreement

Capital Leases

284,997 176,476 176,476

637,949

(20,495)

617,454

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2012

Note 8-Capital Leases:

Primary Government

The County has entered into lease agreements to finance the acquisition of school buses, a bucket truck, and other vehicles and equipment for the School Board. These lease agreements qualify as capital leases for accounting purposes and, therefore, have been recorded at the present value of minimum lease payments at the date of inception

The assets acquired through capital leases are as follows:

Machinery & Equipment Machinery and equipment $ 1,069,069 Less: Accumulated depreciation (130,784) Net Asset $ 938,285

The future minimum lease obligations and the net present value of minimum lease payments as of June 30, 2012, were as follows

Year Ending Capital June 30, Leases 2013 284,997 2014 176,476 2015 176,476 ‘Subtotal $ 637,949 Less, amount representing interest (20,495) Present Value of Lease Agreement $ 617,454

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

JUNE 30,2012

Note 9-Employee Retirement System and Defined Benefit Pension Plans:

A. Plan Description

Name of Plan: Identification of Plan: Administering Entity:

Virginia Retirement System (VRS) Agent and Cost-Sharing Multiple-Employer Defined Benefit Pension Plan Virginia Retirement System (System)

All full-time, salaried permanent (professional) employees of public school divisions and employees of participating employers are automatically covered by VRS upon employment. Benefits vest after five years of service credit. Members earn one month of service credit for each month they are employed and their employer is paying into the VRS. Members are eligible to purchase prior public service, active duty military service, certain periods of leave, and previously refunded VRS service as credit in their plan.

VRS administers two defined benefit plans for local government employees- Plan 1 and Plan 2: • Members hired before July 1, 2010 and who have service credits before July 1, 2010 are

covered under Plan 1. Non-hazardous duty members are eligible for an unreduced retirement benefit beginning at age 65 with at least five years of service credit or age 50 with at least 30 years of service credit. They may retire with a reduced benefit early at age 55 with at least five years of service credit or age 50 with at least 10 years of service credit.

• Members hired or rehired on or after July 1, 2010 and who have no service credits before July 1, 2010 are covered under Plan 2. Non-hazardous duty members are eligible for an unreduced benefit beginning at their normal Social Security retirement age with at least five years of service credit or when the sum of their age and service equals 90. They may retire with a reduced benefit as early as age 60 with at least five years of service credit.

• Eligible hazardous duty members in Plan 1 and Plan 2 are eligible for an unreduced benefit beginning at age 60 with at least 5 years of service credit or age 50 with at least 25 years of service credit. These members include sheriffs, deputy sheriffs and hazardous duty employees of political subdivisions that have elected to provide enhanced coverage for hazardous duty service. They may retire with a reduced benefit as early as age 50 with at least five years of service credit. All other provisions of the member’s plan apply.

The VRS Basic Benefit is a lifetime monthly benefit based on a retirement multiplier as a percentage of the member’s average final compensation multiplied by the member’s total service credit. Under Plan 1, average final compensation is the average of the member’s 36 consecutive months of highest compensation. Under Plan 2, average final compensation is the average of the member’s 60 consecutive months of highest compensation. The retirement multiplier for non-hazardous duty members is 1.70 %. The retirement multiplier for sheriffs and regional jail superintendents is 1.85%. The retirement multiplier for eligible political subdivision hazardous duty employees other than sheriffs and jail superintendents is 1.70% or 1.85% as elected by the employer. At retirement, members can elect the Basic Benefit, the Survivor Option, a Partial Lump-Sum Option Payment (PLOP) or the Advance Pension Option. A retirement reduction factor is applied to the Basic Benefit amount for members electing the Survivor Option, PLOP or Advance Pension Option or those retiring with a reduced benefit.

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2012

Note 9-Employee Retirement System and Defined Benefit Pension Plans:

Plan Description

Name of Pan Virginia Retirement System (VRS) Identification of Plan; Agent and Cost-Shating Muliple-Employer Defined Benefit Pension Plan Administering Entity: Virginia Retirement System (System)

All fulltime, salaried permanent (professional) employees of public school divisions and employees of paticipating employers are automatically covered by VRS upon employment. Benefits vest after five years of service credit, Members eam one month of service credit for each month they are employed and their employer is paying into the VRS. Members are eligible to purchase prior public service, active duty military service, certain periods of leave, and previously refunded VRS service as credit in their plan

VRS administers two defined benefit plans for local government employees ~ Plan 1 and Plan 2:

© Members hired before July 1, 2010 and who have service credits before July 1, 2010 are covered under Plan 1. Non-hazardous duly members are eligible for an unreduced retirement benefit beginning at age 65 with at least five years of service credit or age 50 with atleast 30 years of service credit. They may retire with @ reduced benefit early at age 55 with at least five years of service credit or age 50 with at east 10 years of service credit.

© Members hired or rehired on or after July 1, 2010 and who have no service credits before July 1, 2010 are covered under Plan 2, Non-hazardous duty members are eligible for an unreduced benefit beginning at their normal Social Security retirement age with at least five years of service credit or when the sum of their age and service equals 90. They may retire with a reduced benefit as early as age 60 with atleast five years of service credit

© Eligible hazardous duty members in Plan 1 and Plan 2 are eligible for an unreduced benefit beginning at age 60 with atleast 5 years of service creditor age 50 with atleast 25 years of service credit. These members include sheriffs, deputy sheriffs and hazardous duly employees of political subdivisions that have elected to provide enhanced coverage for hazardous duty service. They may retire with a reduced benefit as early as age 50 with at least five years of service credit. All other provisions of the member’s plan apply.

The VRS Basic Benefits a lifetime monthly benefit based on a retirement multiplier as @ percentage of the member’s average final compensation multiplied by the member’s total service credit. Under Plan 1, average final compensation is the average of the member’s 36 consecutive months of highest compensation. Under Pian 2, average final compensation is the average of the member’s 60 consecutive months of highest ‘compensation. The retirement mulliplier for non-hazardous duty members is 1.70 %. The retirement multiplier for sheriffs and regional jail superintendents is 1.85%. The retirement mutiplier for eligible poitcal subdivision hazardous duly employees other than sheriffs and jail superintendents is 1.70% or 1.85% as elected by the employer. Atretirement, members can elect the Basic Benefi, the Survivor Option, a Partial Lump-Sum Optton Payment (PLOP) or the Advance Pension Option. A retirement reduction factor is applied to the Basic Benefit amount for members electing the Survivor Option, PLOP or Advance Pension Option or those retiring with a reduced benefit.

AB.

COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

JUNE 30, 2012

Note 9-Employee Retirement System and Defined Benefit Pension Plans: (continued)

A. Plan Description (continued)

Retirees are eligible for an annual cost-of-living adjustment (COLA) effective July 1 of the second calendar year of retirement. Under Plan 1, the COLA cannot exceed 5.00%; under Plan 2, the COLA cannot exceed 6.00%. During years of no infiation or deflation, the COLA is 0.00%. The VRS also provides death and disability benefits. Title 51.1 of the Code of Virginia (1950), as amended, assigns the authority to establish and amend benefit provisions to the General Assembly of Virginia.

The system issues a publicly available comprehensive annual financial report that includes financial statements and required supplementary information for VRS. A copy of the most recent report may be obtained from the VRS Web site at http://www.varetire.org/Pdf/Publications/2011-annual-report.pdf or by writing to the System’s Chief Financial Officer at P.O. Box 2500, Richmond, VA, 23218-2500

B. Funding Policy

Primary Government: Plan members are required by Title 51.1 of the Code of Virginia (1950), as amended, to contribute 5.00% of their compensation toward their retirement. All or part of the 5.00% member contribution may be assumed by the employer. In addition, the County of Russell, Virginia is required to contribute the remaining amounts necessary to fund its participation in the VRS using the actuarial basis specified by the Code of Virginia and approved by the VRS Board of Trustees. The County of Russell, Virginia’s contribution rate for the fiscal year ended 2012 was 10.52% of annual covered payroll.

Discretely Presented Component Unit- School Board (Non-Professional Employees): Plan members are required by Title 51.1 of the Code of Virginia (1950), as amended, to contribute 5.00% of their compensation toward their retirement. All or part of the 5.00% member contribution may be assumed by the employer. In addition, the School Board is required to contribute the remaining amounts necessary to fund its participation in the VRS using the actuarial basis specified by the Code of Virginia and approved by the VRS Board of Trustees. The School Board’s contribution rate for the fiscal year ended 2012 was 14.07% of annual covered payroll.

C. Annual Pension Cost

For fiscal year 2012, the County of Russell, Virginia’s annual pension cost of$576,628 and $386,243 was equal to the County of Russell, Virginia’s required and actual contributions for the County and the School Board Non Professionals, respectively.

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2012

Note 9-Employee Retirement System and Defined Benefit Pension Plans: (continued)

Plan Description (continued)

Retirees are eligible for an annual cost-of ving adjustment (COLA) effective July 1 of the second calendar year of retirement. Under Plan 1, the COLA cannot exceed 5.00%; under Plan 2, the COLA cannot exceed 6.00%. During years of no inflation or defiation, the COLA is 0.00%, The VRS also provides death and disability benefits. Title 51.1 of the Code of Virginia (1950), as amended, assigns the authority to establish and amend benefit provisions to the General Assembly of Virginia

The system issues a publicly available comprehensive annual financial report thatincludes financial statements and required supplementary information for VRS. A copy of the most recent report may be obtained from the VRS Web site at hitp:/waw.veretie ora/PdfPublications/20/1-annual-report.pdi or by writing to the System’s Chief Financial Officer at P.O. Box 2500, Richmond, VA, 23218-2500

Funding Policy

Primary Government:

Pian members are required by Title 51.1 of the Code of Virginia (1950), as amended, to contribute 5.00% of their compensation toward their retirement. All or part of the 5.00% member contribution may be assumed by the employer. In addition, the County of Russell, Virginia is required to contribute the remaining amounts necessary to fund its participation in the VRS using the actuarial basis specified by the Code of Virginia and approved by the VRS Board of Trustees. The County of Russell, Virginia’s contribution rate for the fiscal year ended 2012 was 10.52% of annual covered payroll.

Discretely Presented Component Unit - School Board (Non-Professional Employees):

Plan members are required by Title 51.1 of the Code of Virginia (1950), as amended, to contribute 5.00% of their compensation toward their retirement. All or part of the 5.00% member contribution may be assumed by the employer. In addition, the School Board is required to contribute the remaining amounts necessary to fund its participation in the VRS using the actuarial basis specified by the Code of Virginia and approved by the VRS Board of Trustees. The School Board’s contribution rate for the fiscal year ended 2012 was 14.07% of annual covered payroll.

Annual Pension Cost

For fiscal year 2012, the County of Russell, Virginia’s annual pension cost of $576,628 and $386,243 was equal to the County of Russell, Virginia’s required and actual contributions for the County and the School Board Non- Professionals, respectively.

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

JUNE 30, 2012

Note 9-Employee Retirement System and Defined Benefit Pension Plans: (continued)

C. Annual Pension Cost (continued)

Three-Year Trend Information

Fiscal Annual Percentage Net Year Pension of APC Pension

Ending Cost (APC) 1 Contributed Obligation

Primary Government: County 6/30/2010 $ 437,791 100.00% $

6/30/2011 579,314 100.00% 6/30/2012 576,628 100.00%

Discretely Presented-Component Unit: School Board Non-Professional 6/30/2010 $ 412,281 100.00% $

6/30/2011 384,524 100.00% 6/30/2012 386,243 100.00%

1 Employer portion only

Primary Government: The FY 2012 required contribution was determined as part of the June 30, 2009 actuarial valuation using the entry age actuarial cost method. The actuarial assumptions at June 30, 2009 included (a) an investment rate of return (net of administrative expenses) of 7.50%, (b) projected salary increases ranging from 3.75% to 5.60% per year for general government employees and 3.50% to 4.75% for employees eligible for enhanced benefits available to law enforcement officers, firefighters, and sheriffs, and © a cost-of-living adjustment of 2.50% per year. Both the investment rate of return and the projected salary increases include an inflation component of 2.50%. The actuarial value of the County’s assets is equal to the modified market value of assets. This method uses techniques that smooth the effects of short-term volatility in the market value of assets over a five-year period. The County’s unfunded actuarial accrued liability is being amortized as a level percentage of projected payrolls on an open basis. The remaining amortization period at June 30, 2009 was 20 years.

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COUNTY OF RUSSELL, VIRGINIA

NoTEs 10 FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2012

Note 9-Employee Retirement System and Defined Benefit Pension Plans: (continued)

C. Annual Pension Cost (continued)

Three-Year Trend Information

Fiscal Annual Percentage Net Year Pension of APC Pension Ending Cost(APC)’ Contributed Obligation Primary Government County sooo = $437,791 10.00% $ 6130/2011 979,314 100.00% 6/30/2012 578,628 100.0% Discretely Presented-Component Unit: School Board Non-Professional soo = «$412,281 10.00% $ 6/30/2011 384,524 100.00% : 6/80/2012 386,243 100.00% :

‘Employer portion only

Primary Government

The FY 2012 required contribution was determined as part ofthe June 30, 2009 actuarial valuation using the entry age actuarial cost method, The actuarial assumptions at June 30, 2009 included (a) an investment rate of return (net of administrative expenses) of 7.50%, (b) projected salary increases ranging from 3.75% to 5.60% per year for general government employees and 3.50% to 4.75% for employees eligible for enhanced benefits available o law enforcement officers, firefighters, and sheriffs, and © a cost-of-living adjustment of 2.50% per year. Both the investment rate of retum and the projected salary increases include an inflation component of 2.50%. The actuarial value of the County’s assets is equal to the modified market value of assets. This method uses techniques that smooth the effects of short-term volatility in the market value of assets over a five-year petiod, The County’s unfunded actuarial accrued libilly is being amorlized as a level percentage of projected payrolls on an open basis. The remaining amortization period at June 30, 2009 was 20 years.

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

JUNE 30, 2012

Note 9-Employee Retirement System and Defined Benefit Pension Plans: (continued)

C. Annual Pension Cost (continued)

Discretely Presented-Component Unit School Board. Non-Professional: The FY 2012 required contribution was determined as part of the June 30, 2009 actuarial valuation using the entry age actuarial cost method. The actuarial assumptions at June 30, 2009 included (a) an investment rate of return (net of administrative expenses) of 7.50%, (b) projected salary increases ranging from 3.75% to 5.60% per year for general government employees and 3.50% to 4.75% for employees eligible for enhanced benefits available to law enforcement officers, firefighters, and sheriffs, and © a cost-of-living adjustment of 2.50% per year. Both the investment rate of return and the projected salary increases include an inflation component of 2.50%. The actuarial value of the School Board’s assets is equal to the modified market value of assets. This method uses techniques that smooth the effects of short-term volatility in the market value of assets over a five year period. The School Board’s unfunded actuarial accrued liability is being amortized as a level percentage of projected payrolls on an open basis. The remaining amortization period at June 30, 2009 was 20 years.

D. Funded Status and Funding Progress

Primarv Government: As of June 30, 2011, the most recent actuarial valuation date, the plan was 73.04% funded. The actuarial accrued liability for benefits was $27,499,897, and the actuarial value of assets was $20,084,643, resulting in an unfunded actuarial accrued liability (UAAL) of $7,415,254. The covered payroll (annual payroll of active employees covered by the plan) was $5,413,452, and ratio of the UAAL to the covered payroll was 136.98%.

Discretely Presented Component Unit- School Board (Non-Professional Employees): As of June 30, 2011, the most recent actuarial valuation date, the plan was 64.28% funded. The actuarial accrued liability for benefits was $16,067,146, and the actuarial value of assets was $10,328,276, resulting in an unfunded actuarial accrued liability (UAAL) of $5,738,870. The covered payroll (annual payroll of active employees covered by the plan) was $2,693,695, and ratio of the UAAL to the covered payroll was 213.05%.

The schedule of funding progress, presented as Required Supplementary Information (RSI) following the notes to the financial statements, presents multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liability (AAL) for benefits.

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-48-

COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2012

Note 9-Employee Retirement System and Defined Benefit Pension Plans: (continued)

Cc.

Annual Pension Cost (continued)

Discretely Presented-Component Unit School Board - Non-Professional:

The FY 2012 required contribution was determined as part of the June 30, 2008 actuarial valuation using the entry age actuarial cost method. The actuarial assumptions at June 30, 2009 included (a) an investment rate of return (net of administrative expenses) of 7.50%, (b) projected salary increases ranging from 3.75% t0 5.60% per year for general government employees and 3.50% to 4.75% for employees eligible for enhanced benefits available to law enforcement officers, firefighters, and sheriffs, and © a cost-of-living adjustment of 2.50% pet year. Both the investment rate of return and the projected salary increases include an inflation component of 2.50%. The actuarial value of the School Board’s assets is equal to the modified market value of assets. This method uses techniques that smooth the effects of short-term volatility in the market value of assets over a five- year period. The School Board’s unfunded actuarial accrued liability is being amortized as a level percentage of projected payrolls on an open basis. The remaining amortization period at June 30, 2009 was 20 years.

Funded Status and Funding Progress

Primary Government: As of June 30, 2011, the most recent actuarial valuation date, the plan was 73.04% funded. The actuarial

accrued liabilty for benefits was $27,499,897, and the actuarial value of assets was $20,084,643, resulting in an unfunded actuarial acerued liablity (UAAL) of $7,415,254. The covered payroll (annual payroll of active employees covered by the plan) was $5,413,452, and ratio of the UAAL to the covered payroll was 136.98%.

Discretely Presented Component Unit - School Board (Non-Professional Employees):

As of June 30, 2011, the most recent actuarial valuation date, the plan was 64.28% funded. The actuarial accrued liability for benefits was $16,067,146, and the actuarial value of assets was $10,328,276, resulting in an unfunded actuarial accrued liability (VAAL) of $5,738,870. The covered payroll (annual payroll of active employees covered by the plan) was $2,693,695, and ratio of the UAAL to the covered payroll was 213.05%.

The schedule of funding progress, presented as Required Supplementary Information (RS!) following the notes to the financial statements, presents multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing over ime relative to the actuarial accrued liability (AL) for benefits,

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

JUNE 30, 2012

Note 9-Employee Retirement System and Defined Benefit Pension Plans: (continued)

E. Discretely Presented Component Unit School Board

Professional Employees:

Plan Description The Russell County School Board contributes to the Virginia Retirement System (VRS), a cost-sharing multiple employer defined benefit pension plan administered by the Virginia Retirement System. VRS provides retirement and disability benefits, annual cost-of-living adjustments, and death benefits to plan members and beneficiaries. Title 51.1 of the Code of Virginia (1950), as amended, assigns the authority to establish and amend benefit provisions to the General Assembly of Virginia. The system issues a publicly available comprehensive annual financial report that includes financial report that includes financial statements and required supplementary information for VRS. A copy of the most recent report may be obtained from the VRS Web site at http://www.varetire.org/Pdf/Publications/2011-annual-report.pdf or by writing to the System’s Chief Financial Officer at P.O. Box 2500, Richmond, VA, 23218-2500.

Funding Policy Plan members are required by Title 51.1 of the Code of Virginia (1950), as amended, to contribute 5.00% of their compensation toward their retirement. All or part of the 5.00% member contribution may be assumed by the employer. In addition, the School Board is required to contribute the remaining amounts necessary to fund its participation in the VRS using the actuarial basis specified by the statute and approved by the VRS Board of Trustees. The School Board’s contribution to the statewide cost sharing pool for professional employees was $1,164,108, $700,575, and $1,202,914 for the fiscal years ended 2012, 2011, and 2010, respectively. Employer contributions represented 6.33%, 3.93%, and 8.81% of covered payroll for the fiscal years ended 2012, 2011, and 2010, respectively.

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-49-

COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2012

Note 9-Employee Retirement System and Defined Benefit Pension Plans: (continued)

Discretely Presented Component Unit School Board

Professional Employees:

Plan Description The Russell County School Board contributes fo the Virginia Retirement System (VRS), a cost-sharing multiple-

employer defined benefit pension plan administered by the Virginia Retirement System. VRS provides retirement and disability benefits, annual cost-of-living adjustments, and death benefits fo plan members and beneficiaries. Title 51.1 of the Code of Virginia (1950), as amended, assigns the authority to establish and amend benefit provisions to the General Assembly of Virginia. The system issues a publicly available comprehensive annual financial report that includes financial report that includes financial statements and required supplementary information for VRS. A copy of the most recent report may be obtained from the VRS Web site at http:/hwww.varetire,ora/Paf/Publications/20‘1-annual-repor.pdf or by writing tothe System’s Chief Financial Officer at P.O. Box 2500, Richmond, VA, 23218-2500.

Funding Policy Plan members are required by Title 51.1 of the Code of Virainia (1950), as amended, to contribute 5.00% of their compensation toward their retirement. All or part ofthe 5.00% member contribution may be assumed by the employer. In addition, the Schoo! Board is required to contribute the remaining amounts necessary to fund its participation in the VRS using the actuarial basis specified by the stalute and approved by the VRS Board of Trustees. The School Board’s contribution to the statewide cost sharing pool for professional employees was $1,164,108, $700,575, and $1,202,944 for the fiscal years ended 2012, 2011, and 2010, respectively. Employer contributions represented 6.33%, 3.93%, and 8.81% of covered payroll forthe fiscal years ended 2012, 2011, and 2010, respectively

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30,2012

Note 10-Capital Assets:

Capital asset activity for the year ended June 30, 2012 was as follows:

Primary Government:

Beginning

Balance

Governmental Activities:

Capital assets, not being depreciated:

Land $ 1,541,333 $ Construction in progress 1,494,450

Total capital assets not being depreciated $ 3,035,783 $

Capital assets, being depreciated:

Buildings and improvements $ 28,409,513 $ Machinery and equipment 3,539,588

Total capital assets being depreciated $ 31,949,101 $

Less: accumulated depreciation for:

Buildings and improvements $ (12,019,026) $

Machinery and equipment (2,358,797)

Total accumulated depreciation $ (14,377,823) $

Total capital assets being depreciated, net $ 17,571,278 $

Governmental activities capital assets, net $ 20,607,061 $

Increases

$ 90,571

90,571 $

1,684,896 $

959,770

2,644,666 $

(723,480) $ (439,579)

(1,163,059) $

1,481,607 $

1 ,572,178 $

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-50-

Ending

Decreases Balance

$ 1,541,333

(1 ,585,021)

(1 ,585,021) $ 1,541,333

(1,684,791) $ 28,409,618

(662,312) 3,837,046

(2,347,103) $ 32,246,664

1,340,489 $ (11 ,402,017)

565,027 (2,233,349)

1,905,516 $ (13,635,366)

(441 ,587) $ 18,611,298

(2,026,608) $ 20,152,631

CouNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2012

Note 10-Capital Assets:

Capital asset activity forthe year ended June 30, 2012 was as follows:

Primary Government: Beginning Ending Balance increases Decreases Balance Governmental Activites: Capital assets, not being depreciated: Land $1,541,333 § -8 - $1,541,333 Construction in progress 1,494,450 90,571 (1,585,021) - Total capital assets not being depreciated «§—=—«3, 036,783. § 90.571 $ (1,585,021) $1,541,333 Capital assets, being depreciated: Buildings and improvements $ 28,400,513 $ 1,684,896 $ (1,684,791) $ 28,409,618, Machinery and equipment 3,530,588 959,770 (662,312) 3,887,046 Total capital assets being depreciated $__31,949,101 $2,644,668 $ (2,947,103) $ 32,246,664 Less: accumulated depreciation for: Buildings and improvements $ (12,019,026) § (723,480) § 1,340,489 $ (11,402,017) Machinery and equipment (2,368,797) (439,579) 565,027 _(2,233,349) Total accumulated depreciation $ (14,377,823) $ (1,163,080) § 1,005,516 $ (13,635,266)

Total capital assets being depreciated, net «$17,571,278 $ 1,481,607 $ (441,587) $18,611,298

Governmental activities capital assets, net $20,607,061 $ 1,572,178 $__ (2,026,608) $ 20,152,631

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2012

Note 10-Capital Assets: (continued)

Primary Government: (continued)

Business-Type Activities

Capital assets, being depreciated:

Utility plant $ Machinery and equipment

Beginning

Balance

5,240,699 $

75,470

Increases

Decreases

Ending

Balance

$ 5,240,699 (75,470)

Total capital assets being depreciated $ 5,316,169 $ ____ $ (75,470) $ 5,240,699

Less: accumulated depreciation for:

Utility plant

Machinery and equipment

Total accumulated depreciation

Total capital assets being depreciated, net

Business-Type activities capital assets, net

(1 ,724,056) $ (131,016) $

(75,470) 75,470 (1 ,799,526) $ (131,016) $ 75,470

3,516,643 $ (131,016) $

Depreciation expense was charged to functions/programs of the primary government as follows:

Governmental activities:

General government administration

Judicial administration

Public safety

Public works

Health and welfare

Education

Parks, recreation, and cultural

Community development

Total depreciation expense-governmental activities

Business-Type activities:

Sewer Authority

-51-

$ 3,244

4,642

207,018

49,978

25,673

828,279

36,411

7,814

$ ==1,;, 1~63,;,0~59,;,.

$ 131,016

$ (1 ,855,072)

$ 3,385,627

COUNTY OF RUSSELL, VIRGINIA

NoTEs TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2012

Note 10-Capital Assets: (continued)

Primary Government: (continued)

Beginning Ending Balance Increases Decreases Belance Business-Type Activities Capital assets, being depreciated sity plant $ 5,240,699 $ -$ = $ 5,240,699 Machinery and equipment 75,470 (75,470) : Total capital assets being depreciated $___ 5,316,169 $ = $ (75,470) $5,240,609 Less: accumulated depreciation for: Utility plant $ (1,724,056) $ (131,016) $ = $ (1,885,072) Machinery and equipment (75,470) : 75,470 : Total accumulated depreciation $(1799,526) $(131,016) $ 75470 $__ (1,855,072) Total capital assets being depreciated, net $3,516,643 $—_—*(134,016) $ ~ $ 3,385,627 Business-Type activities capital assets,net_ — $—«3,516,643 $__——(131,016) $ $__3,385,627

Depreciation expense was charged to functions/programs of the primary government as follows

Governmental activities: General government administration Judicial administration Public safety Public works Health and welfare Education Parks, recreation, and cultural Community development

Total depreciation expense-govemmental activities

Business-Type activites: Sewer Authority

3,244 4,642 207,018 49,978 25,673 828,279 36,411

COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2012

Note 10-Capital Assets: (continued)

Capital asset activity for the School Board for the year ended June 30, 2012 was as follows:

Discretely Presented Component Unit- School Board:

Capital assets, not being depreciated:

Land

Construction in progress

Beginning

Balance

4,643,707 $ 90,571

Increases Decreases

$ (90,571)

Ending

Balance

4,643,707

Total capital assets not being depreciated $ 4,734,278 $ ___ _ $ (90,571) $ __ 4;.:.;,6:…;.43::.:;, 7_07_

Capital assets, being depreciated:

Buildings and improvements

Machinery and equipment

Total capital assets being depreciated

Less: accumulated depreciation for:

Buildings and improvements

Machinery and equipment

Total accumulated depreciation

Total capital assets being depreciated, net

Governmental activities capital assets, net

Note 11-Risk Management:

$ 18,713,922 $ 5,715,771

$ 24,429,693 $

$ (7,837,332) $

(3,974,750) $ (11,812,082) $

$ 12,617,611 $

$ 17,351,889 $

1,684,791 $ $ 20,398,713

605,685 6,321,456

2,290,476 $ $ 26,720,169

(1 ,919,446) $ (233,548)

(2,152,994) $ ___ _

137,482 $ ___ _

$ (9,756,778)

(4,208,298)

$ (13,965,076)

$ 12,755,093

137,482 $ (90,571) $ 17,398,800 =========

The County and its Component Unit - School Board are exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; and natural disasters. The County and the related Component Unit- School Board participate with other localities in a public entity risk pool for their coverage of general liability, property, crime and auto insurance with the Virginia Association of Counties Risk Pool. Each member of this risk pool jointly and severally agrees to assume, pay and discharge any liability. The County and the School Board pay the Risk Pool contributions and assessments based upon classification and rates into a designated cash reserve fund out of which expenses of the pool, claims and awards are to be paid. In the event of a loss, deficit, or depletion of all available excess insurance, the pool may assess all members in the proportion to which the premium of each bears to the total premiums of all members in the year in which such deficit occurs. The County and its Component Unit School Board continue to carry commercial insurance for all other risks of loss. Settled claims resulting from these risks have not exceeded commercial insurance coverage in any of the past three fiscal years.

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2012

Note 10-Capital Assets: (continued) Capital asset activity for the School Board for the year ended June 30, 2012 was as follows:

Discretely Presented Component Unit ~ School Board:

Beginning Ending Balance Increases Decreases Belance

Capital assets, not being depreciated

Land $4,643,707 $ -$ - $4,643,707

Construction in progress 90571 : (90,574) : Total capital assets not being depreciated = $_—=—« 734,278. § _§ (0571) $4,643,707 Capital assets, being depreciated:

Buildings and improvernents $ 18713922 § 1,684,791 $ - $ 20,398,713

Machinery and equipment 5,715,771 605,685 : 6,321,456 Tolal capital assets being depreciated $24,423,693 $ 2200476 § = $_ 2,720,169 Less: accumulated depreciation for:

Buldings and improvements $ (7,887,332) $ (1,919,446) $ - $ (9,756,778)

Machinery and equipment (3,974,750) (233,548) : (4,208,296) Total accumulated depreciation $__ (17,812,062) $__ (2,152,994) $ = $__ (13,965,078) Total capital assets being depreciated, net = $—1ZIZ611 $——«137.482 $ = $_ 12,755,093 Governmental activities capital assets, net «$17,351,889 «$ —*137,402 *$ (90,571) $ 17,398,800

Note 1 ik Management:

The County and its Component Unit ~ School Board are exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; and natural disasters. The County and the related Component Unit - School Board participate with other localtes in a public entity risk pool for their coverage of general liabilty, property, crime and auto insurance with the Virginia Association of Counties Risk Pool. Each member of this risk poo! jointly and severally agrees to assume, pay and discharge any liablty. The County and the Schoo! Board pay the Risk Pool contributions and assessments based upon classification and rates into a designated cash reserve fund ‘out of which expenses ofthe pool, claims and awards are to be paid. In the event of a loss, deficit, o depletion of al available excess insurance, the pool may assess all members in the proportion to which the premium of each bears to the total premiums of all members in the year in which such deficit occurs. The County and its Component Unit - School Board continue to carry commercial insurance forall other risks of oss. Settled claims resulting from these risks have not exceeded commercial insurance coverage in any of the past three fiscal years.

COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2012

Note 12-Contingent Liabilities:

Federal programs in which the County and its component units participate were audited in accordance with the provisions of U.S. Office of Management and Budget Circular A-133, Audits of States. Local Governments. and Non Profit Organizations. Pursuant to the provisions of this circular all major programs and certain other programs were tested for compliance with applicable grant requirements. While matters of noncompliance were disclosed by the audit, the Federal Government may subject grant programs to additional compliance tests, which may result in disallowed expenditures. In the opinion of management, any future disallowances of current grant program expenditures, if any, would be immaterial.

Note 13-Surety Bonds:

Fidelity & Deposit Company of Maryland-Surety: Ann McReynolds, Clerk of the Circuit Court Patrick Thompson, Treasurer Randy N. Williams, Commissioner of the Revenue Steve Dye, Sheriff All constitutional officers’ employees: blanket bond

Hartford Company- Surety: Tammy Gilbert- Clerk of the School Board All school employees: blanket bond

USF&G Insurance Co. - Surety: All Social Services employees-blanket bond

Note 14-Landfill Closure and Postclosure Care Cost:

$ 1,010,000 400,000

3,000 30,000 50,000

$ 10,000 10,000

$ 100,000

State and federal laws and regulations require the County to place a final cover on its landfill site when it stops accepting waste and to perform certain maintenance and monitoring functions at the site after closure. $526,868 is the total estimated closure and postclosure care liability at June 30, 2012. This represents the cumulative amount based on the use of 100% of the estimated capacity of the landfill and is based on what it would cost to perform all remaining closure and postclosure in 2012. Actual costs for closure and postclosure monitoring may change due to inflation, deflation, changes in technology or changes in regulations. The County uses the Commonwealth of Virginia’s financial assurance mechanism to meet the Department of Environmental Quality’s assurance requirements for landfill closure and postclosure costs.

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2012

Note 12-Contingent Liabilities:

Federal programs in which the County and its component units participate were audited in accordance with the provisions of U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non= Profit Organizations. Pursuant to the provisions of this circular all major programs and certain other programs were {ested for compliance with applicable grant requirements. While matters of noncompliance were disclosed by the audit, the Federal Government may subject grant programs to additional compliance tests, which may result in disallowed expenditures. In the opinion of management, any future disallowances of current grant program expenditures, if any, would be immaterial

Note 13-Surety Bonds:

Fidelity & Deposit Company of Maryland-Surety

‘Ann McReynolds, Clerk of the Circuit Court $ 1,010,000 Patrick Thompson, Treasurer 400,000 Randy N. Williams, Commissioner of the Revenue 3,000 Steve Dye, Sheriff 30,000 A\l constitutional officers’ employees: bianket bond 0,000 Hartford Company - Surety

Tammy Gilbert - Clerk of the School Board $ 10,900 All schoo! employees: blanket bond 10,000

USF&G Insurance Co. - Surety: ‘All Social Services employees-blanket bond $ 100,000

Note 14-Landfill Closure and Postclosure Care Cost:

State and federal laws and regulations require the County to place a final cover on its landfill site when it stops accepting waste and to perform certain maintenance and monitoring functions at the site after closure. $526,868 is the total estimated closure and postclosure care liability at June 30, 2012. This represents the cumulative amount based on the use of 100% of the estimated capacity of the landfill and is based on what it would cost to perform all remaining closure and postclosure in 2012, Actual costs for closure and postclosure monitoring may change due to inflation, deflation, changes in technology or changes in regulations. The County uses the Commonwealth of Virginia’s financial assurance mechanism to meet the Department of Environmental Quality’s assurance requirements for landfill closure and postclosure costs.

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53-

COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

JUNE 30, 2012

Note 15-Deferred (Unearned) Revenue:

Governmental funds report deferred revenue in connection with receivables for revenues not considered to be available to liquidate liabilities of the current period. Governmental funds also defer revenue recognition in connection with resources that have been received, but not yet earned. At the end of the current fiscal year, the various components of deferred revenue and unearned revenue reported in the governmental funds were as follows:

Delinquent property taxes receivable Prepaid taxes

Total deferred/unearned revenue for governmental funds

Note 16-Self Health Insurance:

Unavailable 7,730,240 $

87,493 7,817,733 $

Unearned 4,814,462

87,493 4,901,955

The County of Russell, Virginia established a limited risk management program for health insurance. Premiums are paid into the health plan fund from the County and School Board and are available to pay claims, and administrative costs of the program. During the fiscal year 2012, a total of $10,899,345 was paid in benefits and administrative costs. The risk assumed by the County and School Board is based on the number of participants in the program. The risk varies by the number of participants and their specific plan type. As of June 30, 2012, the County and School Board were exposed to risk which represents the difference between the claims to date and the ceiling liability as calculated based on enrollment levels and health plan coverage. Additional costs in excess of the ceiling liability are covered as part of the contract with the County. Incurred but not reported claims of $566,431 have been accrued as a liability based primarily on actual cost incurred prior to June 30 but paid after year-end. lnterfund premiums are based primarily upon the insured funds’ claims experience and are reported as quasi-external interfund transactions. Changes in the claims liability during fiscal year 2012 were as follows:

Current Year Balance at Claims and Balance at

Beginning of Changes in Claim End of Fiscal Year Fiscal Year Estimates Payments Fiscal Year

2011-12 $ 339,622 $ 11,126,154 $ (10,899,345) $ 566,431

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-54-

COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2012

Note 15-Deferred (Unearned) Revenue:

Governmental funds report deferred revenue in connection with receivables for revenues not considered to be available to liquidate liabilities of the current period. Governmental funds also defer revenue recognition in connection with resources that have been received, but not yet eamed. At the end of the current fiscal year, the various components of deferred revenue and unearned revenue reported in the governmental funds were as follows:

Unavailable Uneared Delinquent property taxes receivable $ 7,730,240 $ 4,814,462 Prepaid taxes 87,493 87,493 Total deferrediuneamed revenue for govermmental funds $7,817,733 $ 4,901,955

Note 16-Self Health Insurance:

The County of Russell, Virginia established a limited risk management program for health insurance. Premiums are paid into the health plan fund from the County and School Board and are available to pay claims, and administrative costs of the program. During the fiscal year 2012, a total of $10,809,345 was paid in benefits and administrative costs. The risk assumed by the County and Schoo! Board is based on the number of participants in the program. The risk varies by the number of participants and their specific plan type. As of June 30, 2012, the County and School Board were exposed to risk which represents the difference between the claims to date and the ceiling liability as calculated based on enrollment levels and health plan coverage. Additional costs in excess of the ceiling liability are covered as part of the contract with the County. Incurred but not reported claims of $566,431 have been accrued as a liability based primarily on actual cost incurred prior to June 30 but paid after year-end. Interfund premiums are based primarily upon the insured funds’ claims experience and are reported as quasi-external interfund transactions. Changes in the claims liability during fiscal year 2012 were as follows:

Current Year

Balance at Claims and Balance at Beginning of Changes in Claim End of Fiscal Year Fiscal Year Estimates Payments Fiscal Year

2011-12 § 339,622 $ 11,126,154 $ _ (10,899,345) $ 566,431

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

JUNE 30, 2012

Note 17-0ther Post-Employment Benefits-Health Insurance:

A. Plan Description

The County of Russell and Russell County’s Component Unit- School Board administer a single-employer healthcare plan (“the Plan”). The Plan provides for participation by eligible retirees and their dependents in the health insurance programs available to County and School Board employees. The Plan will provide retiring employees the option to continue health insurance offered by the County and School Board. Any County or School Board eligible retiree may receive this benefit until he/she has reached sixty five years of age.

To be eligible for this benefit a retiree must meet the following criteria: attained age 50 and 15 years of service and not eligible for Medicare and the last 10 years must be with the County or School Board prior to retirement. The benefits, employee contributions and the employer contributions are governed by the Board of Supervisors and the School Board and can be amended through the Board of Supervisors and the School Board action respectively. The Plan does not issue a publicly available financial report.

B. Funding Policy

The County and School Board currently pay for the post-retirement health care benefits on a pay-as-you-go basis. The County and School Board currently have 496 employees that are eligible, respectively, for the program. In addition, 100 percent of premiums are the responsibility of the retiree.

Health benefits include Medical, Dental, and Vision coverage for retirees and eligible spouses/dependents. Retirees are eligible to choose one of the following medical options through the County and School Board. The rates are as follows:

Medical & Rx Retiree Spouse

Under 65 $ 8,600 $ 8,600

COBRA Retiree Family

Under65 $ 5,880 $ 13,842

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2012

Note 17-Other Post-Employment Benefits-Health Insurance:

A. Plan Description

The County of Russell and Russell County’s Component Unit- School Board administer a single-employer healtheare plan ("the Plan’). The Plan provides for participation by eligible relirees and their dependents in the health insurance programs available to County and School Board employees. The Plan will provide retiring employees the option to continue health insurance offered by the County and Schoo! Board. Any County or School Board eligible retiree may receive this benefit unt he/she has reached sixty five years of age.

To be eligible for this benefit a retiree must meet the following criteria: attained age 60 and 15 years of service and not eligible for Medicare and the last 10 years must be with the County or School Board prior to retirement. The benefits, employee contributions and the employer contributions are govemed by the Board of Supervisors and the School Board and can be amended through the Board of Supervisors and the Schoo! Board action respectively. The Plan does not issue a publicly available financial report.

B. Funding Policy

The County and School Board currently pay for the post-retirement health care benefits on a pay-as-you-go basis. The County and School Board currently have 496 employees that are eligible, respectively, forthe program, In addition, 100 percent of premiums are the responsibility of the retiree.

Medical & Rx Retiree Spouse Under 65 $ 8600 $ 8,600 COBRA Retiree Family Under 65 5880 $

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

JUNE 30, 2012

Note 17-0ther Post-Employment Benefits-Health Insurance: (continued)

C. Annual OPEB Cost and Net OPEB Obligation

The County’s annual other postemployment benefit (OPEB) cost (expense) is calculated based on the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with the parameters of GASB Statement 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years. The following table shows the components of the County’s annual OPEB cost for the year, the amount actually contributed to the plan, and changes in the County’s net OPEB obligation:

Annual required contribution $ 42,919

Interest on net OPEB obligation Adjustment to annual required contribution

Annual OPEB cost (expense) Contributions made

Increase (decrease) in net OPEB obligation Net OPEB obligation- beginning of year

361

(526)

42,754

(43,298)

(544)

7,153

Net OPEB obligation - end of year $ 6,609

The County’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for 2012 and the two preceding years were as follows:

Percentage of Fiscal Annual Annual OPEB Cost Net OPEB Year Ended OPEB Cost Contributed Obligation

6/30/2010 $ 42,981 99.99% $ 4,949

6/30/2011 42,373 94.80% 7,153

6/30/2012 42,754 101.27% 6,609

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Counry OF RUSSELL, VIRGINIA

NoTes 70 FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2012

Note 17-Other Post-Employment Benefits-Health Insurance: (continued)

C. Annual OPEB Cost and Net OPEB Obligation

The County’s annual other postemployment benefit (OPEB) cost (expense) is calculated based on the annual required contribution of the employer (ARC), an amount actuatially determined in accordance with the parameters of GASB Statement 46. The ARC represents a level of funding that, if pald on an ongoing basis, is projected to cover normal ost each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thiry years

The following table shows the components of the County’s annual OPEB cost for the year, the amount actually contributed to the plan, and changes in the County’s net OPEB obligation:

‘Annual required contribution $ 42919 Interest on net OPEB obligation 361 Adjustment to annual required contribution (526) ‘Annual OPEB cost (expense) 42,754 Contributions made (43,298) Increase (decrease) in net OPEB obligation 644) Net OPEB obligation - beginning of year 7,153 Net OPEB obligation - end of year $6609

The County’s annual OPEB cost, the percentage of annual OPEB cost coniributed to the plan, and the net OPEB obligation for 2012 and the two preceding years were as follows:

Percentage of

Fiscal Annual Annual OPEB Cost Net OPEB

YearEnded OPEB Cost_ Contributed Obligation 61302010 $ 42,984 99.99% $ 4,949 6/30/2011 42373 94.80% 7,153 6/30/2012 42,754 101.27% 6,609

The remainder ofthis page is left blank intentionally.

COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2012

Note 17 -Other Post-Employment Benefits-Health Insurance: (continued)

C. Annual OPEB Cost and Net OPEB Obligation (continued)

The School Board’s annual other postemployment benefit (OPEB) cost (expense) is calculated based on the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with the parameters of GASB Statement 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years. The following table shows the components of the School Board’s annual OPEB cost for the year, the amount actually contributed to the plan, and changes in the School Board’s net OPEB obligation:

Annual required contribution Interest on net OPEB obligation Adjustment to annual required contribution

Annual OPEB cost (expense) Contributions made

Increase (decrease) in net OPEB obligation Net OPEB obligation - beginning of year Net OPEB obligation - end of year

$ 279,908

2,353

(3,432)

278,829

(282,378)

(3,549)

48,377

$ 44,828

The School Board’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for 2012 and the two preceding years were as follows:

Percentage of Fiscal Annual Annual OPEB Cost Net OPEB Year Ended OPEB Cost Contributed Obligation

6/30/2010 $ 295,287 88.04% $ 34,000

6/30/2011 276,346 94.80% 48,377

6/30/2012 278,829 101.27% 44,828

D. Funded Status and Funding Progress

The funded status of the Plan for the County as of July 1, 2010, the most recent actuarial valuation date, is as follows:

Actuarial accrued liability (AAL) $ 464,748

Actuarial value of plan assets $ Unfunded actuarial accrued liability (UAAL) $ 464,748

Funded ratio (actuarial value of plan assets I AAL) 0.00%

Covered payroll (active plan members) $ 5,581,443

UAAL as a percentage of covered payroll 8.33%

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2012

Note 17-Other Post-Employment Benefits-Health Insurance: (continued) C. Annual OPEB Cost and Net OPEB Obligation (continued)

The School Boar’s annual other postemployment benefit (OPEB) cost (expense) is calculated based on the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with the parameters of GASB Staternent 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amorize any unfunded actuarial abilities (or funding excess) over a period not to exceed thirty years, The following table shows the components of the School Board’s annual OPEB cost for the year, the ‘amount actually contributed tothe pan, and changes in the School Board’s net OPEB obligation:

‘Annual required contribution $ Interest on net OPEB obligation Adjustment to annual required contribution ‘Annual OPEB cost (expense) Contributions made Increase (decrease) in net OPEB obligation Net OPEB obligation - beginning of year Net OPEB obligation - end of year $

279,908 2,353 (3.432) 278,829 (282,378) 2549) 48,377 44,828

The School Board’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB

obligation for 2012 and the two preceding years were as follows;

Percentage of

Fiscal ‘Annual Annual OPEB Cost Net OPEB

YearEnded OPEB Cost_ Contributed Obligation 61302010 $ 295,287 86.04% $ 34,000 6/30/2011 276,346 94.80% 48,37 6302012 (278,829 10.27% © 44,828

D. Funded Status and Funding Progress

The funded status of the Plan for the County as of July 1, 2010, the most recent actuarial valuation date, is as follows:

Actuarial accrued lability (AAL)

Actuarial value of plan assets

Unfunded actuarial accrued lability (UAL) Funded ratio (actuarial value of plan assets / AAL) Covered payroll active plan members)

UAAL as a percentage of covered payroll

57-

464,748 464,748 0.00% 5,581,443 8.33%

COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

JUNE 30, 2012

Note 17-0ther Post-Employment Benefits-Health Insurance: (continued)

D. Funded Status and Funding Progress (continued)

The funded status of the Plan for the School Board as of July 1, 2010, the most recent actuarial valuation date, is as follows·.

Actuarial accrued liability (AAL) $ 3,030,967 Actuarial value of plan assets $ Unfunded actuarial accrued liability (UAAL) $ 3,030,967

Funded ratio (actuarial value of plan assets I AAL) 0.00%

Covered payroll (active plan members) $ 20,559,274

UAAL as a percentage of covered payroll 14.74%

Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far in the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future.

The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, will present multiyear trend information, as it becomes available, about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits.

E. Actuarial Methods and Assumptions

Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point.

The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations.

As of July 1, 2010, the most recent actuarial valuation date, the projected unit of credit actuarial cost method was used. Under this method, future benefits are projected and the present value of such benefits is allocated from date of hire to date of eligibility the actuarial assumptions included: inflation at 2.50 percent, plus productivity component of 1.25 percent, investment rate of return at 4.00 percent, and a health care trend rate of 10.00 percent graded to 5.00 percent over 8 years. The UAAL is being amortized as a level percentage over the remaining amortization period, which at June 30, 2011 was 20 years.

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Counry oF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2012

Note 17-Other Post-Employment Benefits-Health Insurance: (continued)

D. Funded Status and Funding Progress (continued)

The funded status of the Plan for the School Board as of July 1, 2010, the most recent actuarial valuation date, is as follows:

Actuarial accrued liabilty (AAL) $ 3,030,967 ‘Actuarial value of plan assets $ :

Unfunded actuarial accrued labilty (VAAL) $ 3,030,967 Funded ratio (actuarial value of plan assets / AAL) 0.00% Covered payroll (ative plan members) $ 20,559,274 UAAL as a percentage of covered payroll 14.74%

Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far in the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend, Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future.

The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, will present multiyear trend information, as becomes available, about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits.

E. Actuarial Methods and Assumptions

The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued labilties and the actuarial value of assets, consistent with the long-term perspective of the calculations.

As of July 1, 2010, the most recent actuarial valuation date, the projected unit of credit actuarial cost method was used. Under this method, future benefits are projected and the present value of such benefits is allocated from date of hire to date of eligibility the actuarial assumptions included: inflation at 2.50 percent, plus productivity component of 1.25 percent, investment rate of return at 4.00 percent, and a health care trend rate of 10.00 percent graded to 5.00 percent ‘over 8 years. The UAAL is being amortized as a level percentage over the remaining amortization period, which at June 30, 2011 was 20 years.

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2012

Note 18-0ther Post-Employment Benefits-VRS Health Insurance Credit:

A. Plan Description

The County participates in the Health Insurance Credit Program, a plan designed to assist retirees with the cost of health insurance coverage. This program is an agent and cost sharing, multiple-employer defined benefit plan administered by the Virginia Retirement System (VRS). The Virginia General Assembly establishes the dollar amount of the health insurance credit for each year of creditable service. The credit amount and eligibility differs for state, school division, political subdivision, local officer, local social services department and general registrar retirees.

An employee of the County, who retires under VRS with at least 15 years of total creditable service under the System and is enrolled in a health insurance plan, is eligible to receive a monthly health insurance credit of $1.50 per year of creditable service up to a maximum monthly credit of $45. However, such credit shall not exceed the health insurance premium for the retiree. Disabled retirees automatically receive the maximum monthly health insurance credit of $45.

Benefit provisions and eligibility requirements are established by Title 51.1, Chapter 14 of the Code of Virginia. The VRS actuarially determines the amount necessary to fund all credits provided, reflects the cost of such credits in the applicable employer contribution rate pursuant to §51.1-145, and prescribes such terms and conditions as are necessary to carry out the provisions of the health insurance credit program. VRS issues separate financial statements as previously discussed in Note 9.

B. Funding Policy

As a participating local political subdivision, the County is required to contribute the entire amount necessary to fund participation in the program using the actuarial basis specified by the Code of Virginia and the VRS Board of Trustees. The County’s contribution rate for the fiscal year ended 2012 was 0.06% of annual covered payroll.

C. OPEB Cost and Net OPEB Obligation

The annual cost of OPEB under Governmental Accounting Standards Board (GASB) 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other than Pensions, is based on the annual required contribution (ARC). The County is required to contribute the ARC, an amount actuarially determined in accordance with the parameters of GASB Statement 45. The ARC represents a level offunding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years.

The remainder of this page is left blank intentionally.

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2012

Note 18-Other Post-Employment Benefits-VRS Health Insurance Credit:

A. Plan Descriotion

The County participates in the Health Insurance Credit Program, a plan designed to assist retirees with the cost of health insurance coverage. This program is an agent and cost sharing, mulliple-employer defined benefit plan administered by the Virginia Retirement System (VRS). The Virginia General Assembly establishes the dollar amount ofthe health insurance credit for each year of creditable service. The credit amount and eligibility differs for state, school division, poliical subdivision, local officer, local social services department and general registrar retirees,

Benefit provisions and eligibility requirements are established by Title 51.1, Chapter 14 of the Code of Virginia. The VRS actuarially determines the amount necessary to fund all credits provided, reflects the cost of such credits in the applicable employer contribution rate pursuant to §51.1-145, and prescribes such terms and conditions as are necessary 10 catty out the provisions of the health insurance credit program. VRS issues separate financial statements as previously discussed in Note 9.

B. Funding Policy

As a participating local poltical subdivision, the County is required to contribute the entire amount necessary to fund participation in the program using the actuarial basis specified by the Code of Virginia and the VRS Board of Trustees. The County’s contribution rate for the fiscal year ended 2012 was 0.06% of annual covered payroll

C, OPEB Cost and Net OPEB Obligation

The annual cost of OPEB under Governmental Accounting Standards Board (GASB) 45, Accounting and Financial Reporiing by Employers for Postemployment Benefits Other than Pensions, is based on the annual required contribution (ARC). The Countyis required to contribute the ARC, an amount actuarially determined in accordance with the parameters of GASB Statement 45. The ARC represents a level of funding that, i paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years.

The remainder of this page is left blank intentionally

59-

COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2012

Note 18-0ther Post-Employment Benefits-VRS Health Insurance Credit: (continued)

C. OPEB Cost and Net OPEB Obligation (continued)

For 2012, the County’s contribution of $3,289 was equal to the ARC and OPEB cost. The County’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for 2012 and the two preceding years are shown below:

Fiscal Annual Percentage Net Year OPEB of ARC OPEB

Ending Cost (ARC) Contributed Obligation Primary Government:

County 6/30/2010 $ 996 100.00% $ 6/30/2011 3,304 100.00% 6/30/2012 3,289 100.00%

D. Funded Status and Funding Progress

The funded status of the plan as of June 30, 2011, the most recent actuarial valuation date, is as follows:

Actuarial accrued liability (AAL) $ 100,667 Actuarial value of plan assets $ 82,852 Unfunded actuarial accrued liability (UAAL) $ 17,815 Funded ratio (actuarial value of plan assets/AAL) 82.30% Covered payroll (active plan members) $ 1 ,523,173 UAAL as a percentage of covered payroll 1.17%

Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future and reflect a long-term perspective. Examples include assumptions about future employment, mortality, and the health care cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future.

The schedule of funding progress, presented as required supplementary information following the notes to the financial statements presents multi-year trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liability for benefits. The projection of benefits for financial reporting purposes does not explicitly incorporate the potential effects of legal or contractual funding limitations.

The remainder of this page is left blank intentionally.

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2012

Note 18-Other Post-Employment Benefits-VRS Health Insurance Credit: (continued)

C. OPEB Cost and Net OPEB Obligation (continued)

For 2012, the County’s contribution of $3,289 was equal to the ARC and OPEB cost. The County’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obiigation for 2012 and the two preceding years are shown below:

Fiscal Annuat Percentage Net Year OPEB of ARC OPEB Ending Cost (ARC) Contributed Obligation Primary Government: County 6/30/2010 $ 996 100,00% $ 6/30/2011 3,304 10.00% - 6/30/2012 3,289 100.00% -

D. Funded Status and Funding Progress

The funded status of the plan as of June 30, 2011, the most recent actuarial valuation date, is as follows:

Actuarial acerued liabity (AAL) $ 100,867 Actuarial value of plan assets $ 82,852 Unfunded actuarial accrued liability (UAAL) $ 17815 Funded ratio (actuarial value of plan assets/AAL) 82.30% Covered payroll (active plan members) $ 1,823,173 UAAL as a percentage of covered payroll 1.417%

Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future and reflect a long-term perspective. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status ofthe plan and the annual required contributions of the employer are subject to continual revision 2s actual results are compared with past expectations and new estimates are made about the future

The schedule of funding progress, presented as required supplementary information following the notes to the financial statements presents mulf-year trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liability for benefits. The projection of benefits for

financial reporting purposes does not explicitly incorporate the potential effects of legal or contractual funding limitations.

The remainder of this page is left blank intentionally.

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2012

Note 18-0ther Post-Employment Benefits-VRS Health Insurance Credit: (continued)

E. Actuarial Methods and Assumptions

Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used included techniques that are designed to reduce short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations.

The entry age normal cost method was used to determine the plan’s funding liabilities and costs. The actuarial assumptions included a 7.00% investment rate of return, compounded annually, including an inflation component of 2.50%, and a payroll growth rate of 3.00%. The UAAL is being amortized as a level percentage of payrolls on an open basis. The remaining open amortization period at June 30, 2011 was 30 years.

F. Professional Employees- Discretely Presented Component Unit School Board

The School Board participates in the Health Insurance Credit Program, a plan designed to assist retirees with the cost of health insurance coverage. This program is a cost sharing, multiple-employer defined benefit plan adm’1nistered by the Virginia Retirement System (VRS). The Virginia General Assembly establishes the dollar amount of the health insurance credit for each year of creditable service.

A teacher, who retires under VRS with at least 15 years of total creditable service under the System and is enrolled in a health insurance plan, is eligible to receive a monthly health insurance credit of $4 per year of creditable service. However, such credit shall not exceed the health insurance premium for the retiree. Disabled retirees automatically receive a monthly health insurance credit of $4 multiplied by the smaller of (i) twice the amount of their creditable service or (ii) the amount of creditable service they would have completed at age 60 if they had remained in service to that age.

The School Board is required to contribute, at an actuarially determined rate, the entire amount necessary to fund participation in the program. The School Board’s contribution to VRS was $110,342 and $165,875 for the fiscal years ended 2012 and 2011, respectively. The School Board’s contributions represented 0.60% and 1.08% of covered payroll for the fiscal years ended 2012 and 2011, respectively.

Note 19-Moral Obligations

The County has signed support agreements that back certain debt obligations of the Russell County Industrial Development Authority (a component unit of the County). In these agreements, the Board of Supervisors has a non binding (moral obligation) to fund the Russell County Industrial Development Authority in amounts sufficient to cover debt service on referenced obligations. To date, the County of Russell, Virginia has provided funds sufficient to cover such debt service. As of June 30, 2011, the outstanding balance such loans was $7,834,623. During fiscal year 2011, the County paid $1,058,677 in debt service for the Russell County Industrial Development Authority. No such payments were made during fiscal year 2012.

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COUNTY OF RUSSELL, VIRGINIA

NoTEs TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2012

Note 18-Other Post-Employment Benefits-VRS Health Insurance Credit: (continued)

E. Actuarial Methods and Assumptions

Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used included techniques that are designed to reduce short-term volaiilty in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations,

The entry age normal cost method was used to determine the plan’s funding liabilities and costs. The actuarial assumptions included a 7.00% investment rate of return, compounded annually, including an inflation component of 2.50%, and a payroll growth rate of 3.00%. The UAAL is being amortized as a level percentage of payrolls on an ‘open basis, The remaining open amortization period at June 30, 2011 was 30 years.

F. Professional Employees — Disoretely Presented Component Unit School Board

The School Board participates in the Health Insurance Credit Program, a plan designed to assist retirees with the cost of health insurance coverage. This program is @ cost sharing, multiple-employer defined benefit plan administered by the Virginia Retirement System (VRS). The Virginia General Assembly establishes the dollar amount of the health insurance credit for each year of creditable service

A teacher, who retires under VRS with at least 15 years of total creditable service under the System and is enrolled in ahealth insurance plan, is eligible to receive a monthly health insurance credit of $4 per year of creditable service, However, such credit shall not exceed the health insurance premium for the retiree. Disabled retirees automatically receive a monthly health insurance credit of $4 multiplied by the smaller of (i) twice the amount of their creditable service or (i) the amount of creditable service they would have completed at age 60 if they had remained in service to that age.

The School Board is required to contribute, at an actuarially determined rate, the entire amount necessary to fund participation in the program. The School Board’s contribution to VRS was $110,342 and $165,875 forthe fiscal years ended 2012 and 2011, respectively. The School Soard’s contributions represented 0,60% and 1.08% of covered payroll forthe fiscal years ended 2012 and 2011, respectively

Note 19-Moral Obligations

The County has signed support agreements that back certain debt obligations of the Russell County Industrial Development Authority (a component unit of the County). In these agreements, the Board of Supervisors has a non- binding (moral obligation} to fund the Russell County Industrial Development Authority in amounts sufficient to cover debt service on referenced obligations, To date, the County of Russell, Virginia has provided funds sufficient to cover such debt service, As of June 30, 2011, the outstanding balance such loans was $7,834,623. During fiscal year 2011, the County paid $1,058,677 in debt service for the Russell County Industrial Development Authority. No such payments were made during fiscal year 2012

COUNTY OF RUSSELL, VIRGINIA

NOTES TO fiNANCIAL STATEMENTS (CONTINUED) JUNE 30, 2012

Note 20-Restatement

Fund Balance as Previously Reported 6/30/11 Solid Waste Charges Fund Balance as Restated 6/30/11

Net Assets as Previously Reported 6/30/11 Change in Fund Balance (above) Additional Debt Obligations’ Net Assets as Restated 6/30/11

Primary Government General Fund

$ 4,910,249 99,335

$ 5,009,584

Governmental Activities

$ 14,164,287 99,335

(706,605) $ 13,557,017

'Restatement is due to the discovery of two revenue bonds which were issued in 2001 and 2005 for $344,477 and $556,538, respectively, and a $10,965 restatement to a previously recorded revenue bond issued in 2001 for $1,678,400.

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2012

Note 20-Restatement

Primary Government General Fund

Fund Balance as Previously Reported 6/30/11 § 4,910,249 Solid Waste Charges 99,335 Fund Balance as Restated 6/30/11 $ 5,009,584 Governmental Activities Net Assets as Previously Reported 6/30/11 $ 14,164,287

Change in Fund Balance (above) Additional Debt Obligations* Net Assets as Restated 6/30/11

‘Restatement is due to the discovery of two revenue bonds which were issued in 2001 and 2005 for $344,477 and $556,538, respectively, and a $10,965 restatement to a previously recorded revenue bond issued in 2001 for $1,678,400.

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Required Supplementary Information

Exhibit 11 County of Russell, Virginia

General Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual

For the Year Ended June 30, 2012

Variance with Budgeted Amounts Final Budget-

Actual Positive Original Final Amounts (Negative)

REVENUES General property taxes $ 13,721,072 $ 13,721,072 $ 12,813,407 $ (907,665) Other locallaxes 4,888,337 4,888,337 4,870,985 (17,352) Permits, privilege fees, and regulatory licenses 45,100 45,100 28,272 (16,828) Fines and forfeitures 1,000 1,000 24,567 23,567 Revenue from the use of money and property 50,000 50,000 51,404 1,404 Charges for services 275,150 275,150 375,860 100,710 Miscellaneous 1,717,522 1,717,522 138,135 (1 ,579,387) Recovered costs 150,000 150,000 327,727 177,727 Intergovernmental revenues:

Commonweallh 6,781,397 6,785,949 8,009,326 1,223,377 Federal 2,162,047 2,164,463 2,798,154 633,691

Total revenues $ 29,791,625 $ 29,798,593 $ 29,437,837 $ (360,756)

EXPENDITURES Current:

General government administration $ 2,107,307 $ 2,190,553 $ 2,060,380 $ 130,173 Judicial administration 2,156,973 2,173,094 2,114,097 58,997 Public safety 4,887,394 4,795,298 5,509,998 (714,700) Public works 3,346,313 3,335,729 3,226,082 109,647 Health and welfare 5,164,514 5,092,416 6,466,430 (1 ,374,014) Education 5,271,204 5,271,204 2,831,068 2,440,136 Parks, recreation, and cultural 513,902 467,913 484,891 (16,978) Community development 3,426,330 3,432,608 2,442,356 990,252 Nondepartmental 448,056 723,088 305,904 417,184

Capital projects 401,000 438,261 1 ,721,900 (1 ,283,639) Debt service:

Principal retirement 1,453,358 1,453,358 1,888,842 (435,484) Interest and other fiscal charges 490,274 490,274 637,179 (146,905)

Total expenditures $ 29,666,625 $ 29,863,796 $ 29,689,127 $ 174,669

Excess (deficiency) of revenues over (under) expenditures $ 125,000 $ (65,203) $ (251,290) $ (186,087)

OTHER FINANCING SOURCES (USES) Transfers in $ $ $ 1,852,814 $ 1,852,814 Transfers out (125,000) (125,000) (238,597) (113,597) Issuance of capital leases 512,094 512,094

Tolal other financing sources (uses) $ (125,000) $ (125,000) $ 2,126,311 $ 2,251,311

Net change in fund balances $ $ (190,203) $ 1,875,021 $ 2,065,224 Fund balances- beginning, as restated 190,203 5,009,584 4,819,381 Fund balances- ending $ $ $ 6,884,605 $ 6,884,605

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County of Russell, Virginia ‘Goneral Fund

Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual

Fortho Year Ended June 30, 2012

Exhibit 14

REVENUES General property taxes Other local faxes Permits, privilege fees, and regulatory licenses Fines and forfeures Revenue from the use of money and property Charges for services Niscelaneous Recovered cosis Intergovermental revenues:

‘Commonwealth

Federal

Total revenues

EXPENDITURES: Current General goverment administration Juicial administration Public safaty Public works Health and welfare Etducation Pats, recreation, and cultural ‘Community development ‘Nondepartmental Capital projects Debt service: Principal retrement Interest and other fiscal charges Tolal expenditures

Excess (deficiency) of revenues over (under) expenditures

OTHER FINANCING SOURCES (USES) Transfrs in Transfers oul Issuance of capital leases Total cher financing sources (uses)

Net change in fund balances Fund balances - beginning, as restated Fund balances -endiag

Variance with

Budgeted Amounts Final Budget -

Actual Positive

‘Original Final Amounts: {Negative} § 13721072 § 13721072 § 12813407 § (907.665) 4,888,337 4,888,337 4.870.985 (17,352) 45,100 45,100 28.272 (16.828) 1,000 4000 24567 B567 50,000 50000 51404 1404 275,180 278,150 375.860 100,710 ANT 522 1717522 138,135 (1,579,387) 460,000 150,000 cae Te 6,781,397 6,785, 949 8,000,328 1,223,377 2.162047 2,464,453 2,798,154 633,691 5 Dara 625 §20,708593 § 20497 837 § (360,754) $ 2107307 § 2.190.553 § 2,080,380 § 130.173 2,186,973 2,173,096 2,114,097 58,997 4,887,394 4,795,298 5.509.998 (714,700) 3,348,313 3,335,729 3,226,082 109,547 5.164514 5,092,418 6,486 430 (1,374,014) 5,271,208 5,271,206 2,831,068 2,440,198 513,902 467 313 484,891 (16.978) 3,426,330 3.432.608 2,842,356 9e0,252 448,058, 723,088 906,904 497.184 407,000 438,251 4,724,900 (1,283,639) 1,453,358 1,453,358 1,808,842 (435,484) 490.274 490,774 637,179 (146,905) Wess F7963,796 FP689.127—F 7a 669 $ 125000 $ (65203) §__(251,200) $(186,087) 8 -8 - § 1882814 § 1,862.81 (125,000) (125,000) (238,897) (113,397)

- 512,084 512.094 E__ (io) Fas) Fas. S Bast sti 8 + § (190,203) $ 1.875.021 $2,005,228
90.203, 5,009 584 4.819.381 g 3 6.884.605 § 6.884.605

63-

County of Russell, Virginia Special Revenue Fund- Industrial Development Fund

Schedule of Revenues, Expenditures, and Changes in Fund Balances- Budget and Actual For the Year Ended June 30,2012

Bud~eted Amounts Actual

Original Final Amounts REVENUES Revenue from the use of money and property $ $ $ 3,533 $

Excess (deficiency) of revenues over (under) expenditures $ $ $ 3,533 $

OTHER FINANCING SOURCES (USES) Transfers out $ $ $ (1 ,852,814) $

Net change in fund balances $ $ $ (1 ,849,281) $ Fund balances -beginning 1,849,281 Fund balances- ending $ $ $ - $

-64-

Exhibit 12

Variance with Final Budget-

Positive (Negative}

3,533

(1,852,814)

(1,849,281) 1,849,281

Exhibit 12 County of Russell, Virginia Special Revenue Fund - Industrial Development Fund ‘Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Forthe Year Ended June 30, 2012

Variance with

Budgeted Amounts Final Budget - Actuat Positive Original Final Amounts (Negative)

REVENUES

Revenue from he use of money and property 8 s 8 3533 35%

Exc2ss (deficiency) of revenues over (under) expenditures $ _$ 18 3535 3533,

OTHER FINANCING SOURCES (USES)

Transfers out 8 _8 3 (1.852814) $1,852,814)

Net change i fund balances 8 “8 - S (1849281) $ (1,849,281),

Fund balances - beginning - - 4,849,284 1,849,284

Fund balances - ending $ ~s = z

County of Russell, Virginia Special Revenue Fund. Coal Road Fund

Schedule of Revenues, Expenditures, and Changes in Fund Balances· Budget and Actual For the Year Ended June 30, 2012

REVENUES Other locallaxes Revenue from the use of money and property

Total revenues

EXPENDITURES Current:

Public works

Excess (deficiency) of revenues over (under) expenditures

Net change in fund balances Fund balances . beginning Fund balances- ending

-65-

Budgeted Amounts

Original Final

3,575,750 $ 3,575,750

Actual Amounts

$ 2,010,317 $ 8,659

$ 2,018,976 $

$ 3,289,070 $

$ (1,270,094) $

$ (1 ,270,094) $ 2,515,562

$ 1,245,468 $

Exhibit 13

Variance with Final Budget·

Positive (Negative I

(1 ,565,433) 8,659

(1,556,774)

286,680

(1 ,270,094)

(1 ,270,094) 2,515,562 1,245,468

Special Revenue Fund - Coal Road Fund

County of Russel, Virginia

Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual

For the Year Ended June 30, 2012

Exhibit 13,

REVENUES

Other local taxes

Revenue from the use of money and property Total revenues

EXPENDITURES: Current Public works

Excess (deficienay) of revenues aver (under) expencitures Net change in fund balances

Fund balances - begining Fund balances - ending

Variance with Budgeted Amounts Final Budget - ‘Actual Positive Original Final Amounts (Negative) $375,750 3.575.750 $§ 2010317 $ (1,585,433)

- 8,659 8,659 S__ 3575750 SHTETEO_S 2018S § (1.556.774) S__3.575,750 3.576750 § 3.280.070 § 286,680 $ : = 8 (1270094) §___ (1,270,094) 8 : + $ (4.270084) § (1,270,004) : 2,515,582 2518562 3 zi = 5 1245468 $1,245,468

REVENUES Intergovernmental revenues:

Commonwealth Federal

Total revenues

EXPENDITURES Current:

Health and welfare

County of Russell, Virginia Special Revenue Fund- Workforce Investment Board Fund

Schedule of Revenues, Expenditures, and Changes in Fund Balances- Budget and Actual For the Year Ended June 30, 2012

Budgeted Amounts Actual

Original Final Amounts

$ $ $ 84,117 2,053,185 2,053,185 1,993,056

$ 2,053,185 $ 2,053,185 $ 2,077,173

$ 2,053,185 $ 2,053,185 $ 2,052,295

Excess (deficiency) of revenues over (under) expenditures $ $ $ 24,878

Net change in fund balances Fund balances- beginning Fund balances- ending

-66-

$ $ 24,878 23,058

$ $ 47,936

Exhibit 14

Variance with Final Budget-

Positive (Negative)

$ 84,117 (60,129)

$ 23,988

$ 890

$ 24,878

$ 24,878 23,058

$ 47,936

County of Russell, Virginia

Special Revenue Fund - Workforce Investment Board Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual For the Yeat Ended June 30, 2012

Exhibit 14

REVENUES Intergovernmental revenues: ‘Commonwealth Federal Total revenues

EXPENDITURES. Current: Health and welfare

Excess (deficiency) of revenues over (under) expenditures Net change in fund balances

Fund batanoes - beginning Fund balances - ending

Variance with

Budgeted Amounts Final Budget -

Actual Positive

Original Final ‘Amounts Negative 8 -8 : 84,17 et? 2,053,185 2,053,185 1,993,056 (60,129) S_2053,165 $2,053,185 2,070,173 23,988 $2,053,195 _§ 2.053.105 2,052,295 890 8 8 - 24878 24878 $ -8 : 24878 24878

: 23,058 23,058 3 = = 47,206 47.536,

-66-

Exhibit 15 County of Russell, Virginia

Schedules of Pension and OPEB Funding Progress For the Year Ended June 30, 2012

Primary Government

County Retirement Plan:

Actuarial Actuarial Unfunded Funded Ralio Annual UAAL as a Valuation Value of Accrued AAL {UAAL) Assets as% Covered %of Covered

as of Assets Liabilit~ (AAL) 13)-12) of AAL {2)1{3) Pa~roll Pa~rolf {4 )1{6) {1) {2) {3) {4) (5) (6) {7)

June 30, 2011 $ 20,084,643 $ 27,499,897 $ 7,415,254 73.04% $ 5,413,452 136.98% June 30,2010 19,759,376 26,221,057 6,461,681 75.36% 5,581,443 115.77% June 30, 2009 19,933,712 23,803,518 3,869,806 83.74% 5,559,094 69.61%

County Other Postemployment Benefits-Health Insurance:

Actuarial Actuarial Unfunded Funded Ratio Annual UAAL as a Valuation Value of Accrued AAL {UAAL) Assets as% Covered %of Covered as of(') Assets Liabilit~ {AAL) 13) -12) of AAL 12)113) Pa~roll Pa~rolll4)/{6)

{1) {2) (3) {4) {5) (6) {7)

July 1, 2010 s $ 464,748 $ 464,748 0.00% s 5,581,443 8.33% July 1, 2008 546,570 546,570 0.00% 4,198,697 13.02%

County Other Postemployment Benefits-VRS Health Insurance Credit:

Actuarial Actuarial Unfunded Funded Ratio Annual UAAL as a Valuation Value of Accrued AAL {UAAL) Assets as% Covered %of Covered

as of Assets Liabilit~ (AAL) 13) -12) of AAL 12)113) Pa~roll Pa~rolll4)116) {1) (2) (3) {4) {5) (6) {7)

June 30, 2011 $ 82,852 $ 100,667 s 17,815 82.30% $ 1,523,173 1.17% June 30,2010 71,521 76,866 5,345 93.05% 5,581,443 0.10% June 30, 2009 60,586 72,718 12,132 83.32% 5,559,094 0.22%

Discretely Presented Component Unit:

School Board Non-Professional Retirement Plan:

Actuarial Actuarial Unfunded Funded Ratio Annual UAAL as a Valuation Value of Accrued AAL {UAAL) Assets as% Covered %of Covered

as of Assets Liability {AAL) (3) -12) of AAL 12)113) Pa~roll Pa~roll {4)1{6) {1) (2) {3) {4) {5) {6) {7)

June 30,2011 $10,328,276 s 16,067,146 s 5,738,870 64.28% $ 2,693,695 213.05% June 30, 2010 10,392,200 15,863,210 5,471,010 65.51% 2,838,654 192.73% June 30, 2009 10,588,117 14,751,035 4,162,918 71.78% 2,878,696 144.61%

School Board Other Postemployment Benefits-Health Insurance:

Actuarial Actuarial Unfunded Funded Ratio Annual UAAL as a Valuation Value of Accrued AAL {UAAL) Assets as% Covered %of Covered as of(') Assets Liabili~ (AAL) 13) -12) of AAL 12)1(3) Pa~roll Pa~rolll4)1161

{1) {2) (3) {4) {5) (6) {7)

July 1, 2010 $ $ 3,030,967 $ 3,030,967 0.00% $ 20,559,274 14.74% July 1, 2008 3,755,059 3,755,059 0.00% 24,186,441 15.53%1

*Only two valuations available

-67-

County of Russel, Viginia ‘Schedules of Pension and OPEB Funding Progress

Exhibit 5

For the Year Ended June 30, 2012 Primary Government ‘Count Reterent Pian Actuarial etuaid Untunded Funded Ratio Arua UAALas@ Valuation Value of Accrued AAL(UAAL) Assets 35% Covered ot Covered esoh Basels Lib (RAL) (2) _ofAAL (238) Para Poyrol (46) 0) @ i @ @ 6 a June 30,2011 § 20084843 $ 27.490R07 «$$ «7415254 «THA «= §«BATBABZ 135.860 sione 30,2010 19,759,376 25.201.087 6aste81 758%, SsBias 115 77% ‘Jone 30,2008 19.838712 73803,518 3860808 83744 555908 6067%% County Other Postempyment Benefits Heath Insurance: eal tua Ununded Funded Ratio Annual UAALas@ Valuation Value of ‘Accrued ABL(UAAL) Assets 28% Covered Sof Covered aol) Assets Luabiay (AAL) -@)——otAAL (23) aye aye yt) a a co) @ cy) @ a duy1,2010 S 484748 -§ 84748 OOS SBTAES 88 sy 2008 546.570 5485700 aigees7 13.02% County Other Postemgloyment Benes VRS Heath insurance Credit Aaah Actuarial Untunded Funded Ratio Annus UAALes@ Valuation Value of Acewued AAL(UAAL) Asta as Covered Sof Covered eof seis Lsbiy (AL) @)-Q) ot AAL 3) Payra Payot 6) 0) @ i) a co} @ a) June 30,2011 $ #2852 $= «(00887 « STB ZA $1 528,178, 117% Sune 30,2010 T1821, 78.855, 53t 93.05% 5581463 0.10% ‘Je 30,2008 60.586 778 12192 &332% 5550008 022%, Discrtely Presented Component Unt: ‘Schoo! Board Non Profesional Relioment Pan: Actuarial Actua Unfunded Funded Ratio Anna Valuation Value of Accued AAL(UAAL) Assets a Covered asf Assels Liaity (RAL) ()-@) of AAL ye) Payro aro (46) a a ® 6 eo c) a sine 90,2011 $10328.276 $1807.05 «$ 579B870 AIH «—«§—— UREN. «213.0544 sone 30,2010 19,2200, 15868210 Sa7to1 65.51% 2538654 192734 une 30,2009 19,888,117 14,751,035 4162918 71.78% 2878606 446I% ‘School Boar Other Pastemeloyment Benefits Heath Insurance: Actuarial Actual Untstded Funded Ratio nol AKL asa Vahation Value of ‘coved AAL(UAAL) Assos 8 % Covered ot Coverod soll) Assets Lay (RAL) =) _ofAAL ua) Payal Payro (46) co) @ 8 @ @ @ 7 uy 1,200 § S 3030957 $$ 30a0967 gum asHZTA 14.74% say 2008 3,755,058 3755059 0.00% 2agaae1 155396 “Only two valuations avaiable

67-

Other Supplementary Information

Assets Current Assets

Cash and cash equivalents Special Welfare Fund VASAP Fund

Total Assets

Liabilities

County of Russell, Virginia Statement of Changes in Assets and Liabilities

Agency Funds For the Year Ended June 30, 2012

Balance Beginning

of Year

$ 62,816

Additions

$ 165,080 252,356

$ 417,436

Amounts held for social services clients $ 62,816 $ 165,080 Amounts held for VASAP 252,356

Total Liabilities $ 62,816 $ 417,436

-68-

Deletions

$ (158,923) $ (252,356)

$ (411,279) $

$ (158,923) $ (252,356)

$ (411,279) $

Exhibit 16

Balance End

of Year

68,973

Exhibit 16 County of Russell, Virginia Statement of Changes in Assets and Liabilities Agency Funds For the Year Ended June 30, 2012

Balance Belance Beginning End of Year Additions Deletions of Year

Assets

Current Assets

Cash and cash equivalents ‘Special Welfare Fund $ 62,816 $ 165,080 $ (158,923) $ 68,973 VASAP Fund - 252,356, (252,356) = Total Assets 5 eee STS ST) “STS Liabitties ‘Amounts held for social services cients. «$62,816 «$165,080 ——$ (188.923) $88,973 ‘Amounts held for VASAP - 252,356 (252,356) - Total Libilties 3 ee | S47 HZ) © S_BBNTS

DISCRETELY PRESENTED COMPONENT UNIT- SCHOOL BOARD

MAJOR GOVERNMENTAL FUNDS

School Operating Fund- The School Operating Fund accounts for and reports the operations of the County’s school system. Financing is provided by the State and Federal governments as well as contributions from the General Fund.

DISCRETELY PRESENTED COMPONENT UNIT - SCHOOL BOARD.

MAJOR GOVERNMENTAL FUNDS

School Operating Fund - The School Operating Fund accounts for and reports the operations of the County’s school system. Financing is provided by the State and Federal governments as well as contributions from the General Fund.

ASSETS Cash and cash equivalents Due from other governmental units Prepaid items

Total assets

LIABILITIES AND FUND BALANCES Liabilities:

Accounts payable Salaries payable Due lo primary government

Total liabilities

Fund balances: Nonspendable:

Prepaid items Committed:

Textbook purchases Regional Adult Education

Unassigned: Total fund balances

County of Russell, Virginia Balance Sheet

Discretely Presented Component Unit . School Board June 30, 2012

Total liabilities and fund balances

Amounts reported for governmental activities in the statement of net assets (Exhibit 1) are different because:

Total fund balances per above

Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds.

Long-term liabilities, including early retirement incentives, are not due and payable in the current period and, therefore, are not reported in the funds.

Net assets of governmental activities

-69-

$ $

Exhibit 17

School Operating

Fund

342,189 1,785,603

402,669 2,530,461

297,543 1,054,270

708,695 2,060,508

402,669

32,325 437,628

(402,669) 469,953

2,530,461

469,953

17,398,800

(880,639)

16,988,114

Exhibit 17 County of Russell, Virginia

Balance Sheet Discretely Presented Component Unit - Schoo! Board June 30, 2012 Schoo! Operating Fund ASSETS Cash and cash equivalents $ 342,188 Due from other governmental units 1,785,603 Prepaid items 402,669 Total assels 2,530,461 LIABILITIES AND FUND BALANCES Liabilities ‘Accounts payable 8 297,543 Salaries payable 1,054,270 Due to primary government 708,695 Total labillies Fund balances: ‘Nonspendable: Prepaid items 8 402,669 Committed Textbook purchases 32,925 Regional Aduit Education 437,628 Unassigned (402,669 Total fund balances 5 469,953 Total bilities and fund balances s 530,461

‘Amounts reported for governmental actives in the statement of net assets (Exhibit 1} are different because:

‘otal fund belances per above 8 469,953 Capital assets used in governmental activities are not financial resources and, therefore,

are not reported in the funds, 17,398,800 Long-term lables, including early rtrement incentives, are not due and payable in the current

period and, therefore, are not reported in the funds. (880.639) Net assets of governmental activities 7,986,118

County of Russell, Virginia Statement of Revenues, Expenditures, and Changes in Fund Balances

Governmental Funds · Discretely Presented Component Unit· School Board For the Year Ended June 30, 2012

REVENUES Revenue from the use of money and property Charges for services Miscellaneous Recovered costs Intergovernmental revenues:

Local government Commonwealth Federal

Total revenues

EXPENDITURES Current:

Education

Excess (deficiency) of revenues over (under) expendilures

Net change in fund balances Fund balances· beginning Fund balances· ending

Amounts reported for governmental activities in the statement of activilies (Exhibit 2) are different because:

Net change in fund balances • total governmental funds • per above

Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which the capital outlays exceeded depreciation in the current period.

Sorne expenses reported in the statement of activities do not require the use of current financial resources and, therefore are not reported as expenditures in governmental funds.

Change in net assets of governmental activities

-70-

Exhibit 18

School Operating

Fund

1,642 786,940 256,522 811,343

2,740,646 26,393,251 6,841,724

37,832,068

40,449,705

(2,617,637)

(2,617,637) 3,087,590

469,953

(2,617,637)

46,911

148,246

(2,433,583)

County of Russel, Virginia Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds - Discretely Presented Component Unit - School Board For the Year Ended June 30, 2012

Exhibit 18

REVENUES Revenue from the use of money and property Charges for services, Miscellaneous Recovered costs Intergovernmental revenues:

Local government

‘Commonwealth

Federal

Total revenues

EXPENDITURES Current Education

Excess (deficienoy) of revenues over (under) expenditures

‘Net change in fund balances Fund balances - beginning Fund balances - ending ‘Amounts reported for governmental activities in the statement of activities (Exhibit 2) are different because: Net change in fund balances - total governmental funds - per above ‘Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful ives and reported as depreciation expense. This is the amount by which the capital outlays exceeded deprecation in the current pesiod,

‘Some expenses reported in the statement of activities do not require the use of current financial resources and, therefore are not reported as expenditures in governmental funds.

Change in net assets of governmental activities

‘School Operating Fund

$ 1,842 786,940 256,522 811,343

2,740,646 26,393,251

6,841,724 37,832,068,

S__ant9 705,

17,637)

$ (267,637) 3,087,590 $ 469,953,

$3 (2617,637)

46911

148,246

County of Russell, Virginia Schedule of Revenues, Expenditures, and Changes in Fund Balances • Budget and Actual

Discretely Presented Component Unit. School Board

REVENUES Revenue from the use of money and property Charges for services Miscellaneous Recovered costs Intergovernmental revenues:

Local government Commonwealth Federal

Total revenues

EXPENDITURES Current:

Education

Excess (deficiency) of revenues over (under) expenditures

Net change in fund balances Fund balances· beginning Fund balances· ending

For the Year Ended June 30, 2012

School Operatina Fund

Budgeted Amounts Original Final Actual

$ 11,500 $ 11,500 $ 1,642 $ 793,344 793,344 786,940 190,000 190,000 256,522 552,902 552,902 811,343

5,180,782 5,180,782 2,740,646 25,758,445 25,758,445 26,393,251 7,127,397 7,127,397 6,841,724

$ 39,614,370 $ 39,614,370 $ 37,832,068 $

$ 39,614,370 $ 39,614,370 $ 40,449,705 $

$ $ $ (2,617,637) $

$ $ s (2,617,637) $ 3,087,590

$ $ $ 469,953 $

-71·

Exhibit 19

Variance with Final Budget

Positive (Negative)

(9,858) (6,404) 66,522

258,441

(2,440, 136) 634,806

(285,673) (1 ,782,302)

(835,335)

(2,617,637)

(2,617,637) 3,087,590

469,953

Exhibit 19 County of Russell, Virginia ‘Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Discretely Presented Component Unit - Schoo! Board For the Year Ended June 30, 2012

‘School Operating Fund

Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) REVENUES Revenue from the use of money and property $ 11,500 $ 11,500 § 1.642 § (9.858) Charges for services 793,344 793,344 786,940 (6404) Miscellaneous 0,000 190,000 286,522 66.522 Recovered costs 562.902 552,902 811,343 258.481 Intergovermental revenues: Loca! government 5,180,782 5,180,782 2,740,646 (2,440,138) Commonsveatth 25,758,445 25,758,445 26,393,251 634,606 Federal 7.127.397 7,127,397 6,841,724 (285,673) Total revenues F__39614570_§ _39.614,570 § 37,852,068 § (1,782,302) EXPENDITURES Curent: Education $ 39614370 $ 39614370 $ 40449705 § (835,336)

Excess (deficiency) of revenues over (under)

expenditures $ $8 - 8 (2617637) $__(2617,637) ‘Net change in fund balances $ -$ -$ (2,617,637) $ (2,817,637) Fund balances - beginning : : 3.087 590 3,087,590 Fund balances - ending $ -$ -$ 469,953$ 489,953

Supporting Schedules

County of Russell, Virginia Schedule 1 Schedule of Revenues· Budget and Actual Page 1 of 6

Governmental Funds For the Year Ended June 30, 2012

Variance with Final Budget-

Original Final Positive Fund. Major and Minor Revenue Source Budget Budget Actual fNegativel

General Fund: Revenue from local sources:

General property taxes: Real Property Tax $ 6,336,641 $ 6,336,641 $ 7,177,390 $ 840,749 Real and Personal PSC Tax 2,179,431 2,179,431 973,606 (1,205,825) Personal Property Tax 2,200,000 2,200,000 2,482,201 282,201 Mobile Home Tax 105,000 105,000 114,123 9,123 Machinery and Tools Tax 1,575,000 1,575,000 1,149,211 (425,789) Merchants Capital 25,000 25,000 31,664 6,664 Mineral Tax 1,000,000 1,000,000 543,983 (456,017) Penalties 100,000 100,000 116,843 16,843 Interest 200,000 200,000 224,386 24,386

Total general property taxes $ 13,721,072 $ 13,721,072 $ 12,813,407 $ 1907,665)

Other local taxes: Local Sales and Use Tax $ 2,057,982 $ 2,057,982 $ 1,755,731 $ (302,251) Consumers’ Utility Tax 600,000 600,000 568,780 (31,220) Consumption Taxes 95,000 95,000 83,246 (11,754) Franchise License Tax 18,000 18,000 11,742 (6,258) Coal Severance Tax 1,675,000 1,675,000 2,010,318 335,318 Grantee tax 100,000 100,000 79,759 (20,241) Motor Vehicle Licenses 300,000 300,000 337,567 37,567 Taxes on Recordation and Wills 42,355 42,355 23,842 lf8,513)

Total other local taxes $ 4,888,337 $ 4,888,337 $ 4,870,985 $ lf7,352)

Permits, privilege fees, and regulatory licenses: Animal licenses $ 1,800 $ 1,800 $ 1,435 $ (365) Transfer fees 800 800 940 140 Building permits 37,500 37,500 23,831 (13,669) Other permits and other licenses 5,000 5,000 2,066 12,934)

Total permits, privilege fees, and regulatory licenses $ 45,100 $ 45,100 $ 28,272 $ lf6,828)

Fines and forfeitures: Court fines and forfeitures $ 1,000 $ 1,000 $ 24,567 $ 23,567

Revenue from use of money and property: Revenue from use of money $ 50,000 $ 50,000 $ 51,404 $ 1,404

Charges for services: Charges for law enforcement and traffic control $ 2,000 $ 2,000 $ 3,446 $ 1,446 Charges for Commonwealth’s Attorney 2,000 2,000 5,668 3,668 Miscellaneous jail and inmate fees 3,000 3,000 4,053 1,053 District court fees 3,000 3,000 2,615 (385) Clerk’s collections 900 900 827 (73) Charges for sanitation and waste removal 200,000 200,000 240,683 40,683 Charges for library 19,500 19,500 13,958 (5,542) Courthouse maintenance fees 7,000 7,000 12,838 5,838 Courthouse security fees 37,000 37,000 40,776 3,776 Cannery charges 27,997 27,997 Other charges for services 750 750 22,999 22,249

Total charges for services $ 275,150 $ 275,150 $ 375,860 $ 100,710

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County of Russell, Virginia Schedule 1 Schedule of Revenues - Budget and Actual Page tof 6 ‘Governmental Funds Forthe Year Ended June 30,2012

Variance with Final Budget Original Finat Positive und, Major and Minor Revenue Source Budget usget Actual eaative) General Fund: Revenue rom local sources: General property axe: Real Property Tax 3 ea386H § Gaesar § TATA $ — eHO.7ED Real and Personal PSC Tax 2479431 2.179.431 ‘973.605 (1.206185) Personal Property Tax 200000 2200000 2482,201, 82201, Nobile Home Tax 105000 105,000 114,128, 9128 Nachinoy and Tools Tax 1.575.000 4875000 1,494 (425,789), Morchanis Capital 25,000 25,000 34,684 6684 Merl Tax ‘.000.000 1,900,000, 549,983 6017) Penabios 00,000 00,000 116843 18843 Interest 200,000 200,000 224385 24,388 Total gaera property axes Serio FB ore F— Batsor_S wor ses) ther local taxes: Local Seles and Use Tax S 2057,962 § 2057982 § 1755731 $ (802251) Consumers’ Ui Tae 90,000 00,000 968,780 (31220), Consumption Taxes 95,000 95,000 83,246 (11754), Franchise License Tax 19000, 18.000 14742 (6.258) (al Severance Tax 1.875.000 po 010 318 235,318 Grantee tax ‘00,000 009 79,759 (20,241) Noir Vetice Licenses 300,000 300,000 337,587 37,567 Taxes on Reootdation and Was 42.355 42.355 23.842 (18513) Total ober local taxes Saaee.sa_S 488,307 -S arose $1735) Perma, rviege fes, and regulatory licenses ‘nial conse 5 1800 § 1800 $ 1035 $ (265) Trastor fees 800 800 940 40 Buiing pais 7500 37,500 23831 (13689), (tor permis and oer eases 5000 8,000 2.066 2334) otal parmis,priloge fos, and reguatory censes 5 #6,f00 $45,100 F827 F688) Fines and foots: CCoutnes and forties 8 1000 $ 1o00 $mse7§ 23587 Revenue rom use of money and property: Revenve from use of money S____s0000 $50.00 stad § 1404, (Charges for senvces ‘Charges foriau enforcement and afc contro 8 200 § 2000 $ 3446 § 1846 Charges for Commoneath’s Atorey 2000 2000 5888 3588 ‘Miscalneous jai and inate fees 3,000 3,000 4053 41053 Dist cout ees 3.000 3.000 2615 (205) Clerks colons 900 00 ear a) Charges for sian and waste moval 200,000 200,000 240,683 40683 (Charges for leary 49.500 19300 13.958, (6542) CCourtouse maintonance feos 7900 7.000 12838 588 Courtouse secuty fees 37.000 37,000 40776 376 ‘Cannery charges - - 27997 args ther charges for senices 750, 70 22.999 2219 Total charges or servioes E_ Wa 150 S78 SOS TOO.

County of Russell, Virginia Schedule 1 Schedule of Revenues- Budget and Actual Page 2 of6

Governmental Funds For the Year Ended June 30,2012

Variance with Final Budget •

Original Final Positive Fund. Major and Minor Revenue Source Budget Budget Actual fNegativel

General Fund: (Continued) Revenue from local sources: (Continued)

Miscellaneous revenue: Donations $ $ $ 27,278 $ 27,278 Miscellaneous other 1,654,522 1,654,522 97,238 (1,557,284) Sheriffs Department 63,000 63,000 13,619 (49,381)

Total miscellaneous revenue $ 1,717,522 $ 1,717,522 $ 138,135 $ (1,579,387)

Recovered costs: Telephone $ $ $ 2,576 $ 2,576 Recovered Cost- Social Services 85,096 85,096 Recovered Cost- Health Department 30,375 30,375 Recovered Cost- Sheriff 117,240 117,240 Insurance recoveries 23,628 23,628 Restitution 1,148 1,148 Recovered Cost- Regional Jail 65,082 65,Q82 Other Recovered Costs 150,000 150,000 2,582 (147,418)

Total recovered costs $ 150,000 $ 150,000 $ 327,727 $ 177,727

Total revenue from local sources $ 20,848,181 $ 20,848,181 $ 18,630,357 $ (2.217,824)

Intergovernmental Revenues: Revenue from the Commonwealth:

Noncategorical aid: Motor vehicles carriers’ tax $ 205,000 $ 205,000 $ 126,037 $ (78,963) Mobile home titling tax 125,000 125,000 131,309 6,309 Motor vehicle rental tax 2,500 2,500 3,696 1,196 State budget reduction (162,481) (162,481) (161,510) 971 Communications tax 901,430 901,430 878,740 (22,690) State recordation tax 30,000 30,000 30,160 160 Personal property tax relief act funds 1,437,003 1,437,003 1,437,003

Total noncategorical aid $ 2,538,452 $ 2,538,452 $ 2,445,435 $ (93,017)

Categorical aid: Shared expenses:

Commonwealth’s attorney $ 313,793 $ 313,793 $ 314,122 $ 329 Shenff 1,324,624 1,324,624 1,334,522 9,898 Commissioner of revenue 104,287 104,287 162,140 57,853 Treasurer 107,278 107,278 103,364 (3,914) Medical examiner 400 400 (400) Registrar/electoral board 65,000 65,000 63,771 (1,229) Clerk of the Circuit Court 253,102 253,102 249,418 (3,684) Total Shared Expenses $ 2,168,484 $ 2,168,484 $ 2,227,337 $ 58,853

Other categorical aid: Community development block grant $ $ $ 22,486 $ 22,486 GIS 1,401 1,401 E911 capital grant 150,000 150,000 E911 state funds 120,000 120,000 40,000 (80,000) Law enforcement grants 50,000 50,000 1,811 (48,189) Asset forfeiture funds 78,921 78,921

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County of Russel, Virginia Schedule 1 Schedule of Revenues - Budget and Actual Page 20f6 Governmental Funds For the Year Ended June 30,2012 lance with

Fund, Morand nor Revenve Source

General Fund: (Continued) Revenue rom cal sources: (Continued) Misoetaneous revenue: Donations iscalanoous cher ‘She’s Deparment Tota miscallaneousrovenue

Recovered costs Telephone Recovered Cost- Socal Series Recavered Cost - Heath Department Recovered Cost - Sherif Insurance recoveries Resituton Recovered Cost - Regional Jal ‘Ole Reoovered Costs

Total recovered costs

Total revenue fem local sources

Integovernment Revenues Reverue rom tte Commaneath Noncalegoca ic:

olor vehicis caro tax

Mobile home sing tax

‘Motor vetil ent ax

Slate budget reduction

Communications tx

‘Slat recordation tax

‘Personal property tax elle act funds

Total noncatepoical ad

Cetegorcal it ‘Shared expanses:

Conmonsesth’s atlomey Shi Commissioner of rvenue Treasurer Medical examiner Rogistaelctoral boat Clerc ol the Creat Court Total Shared Expenses

‘Ober categorical at CCommuny development block grant is 911 capital grant E911 state funds Lew enforcement grants Asset reli funds

Originat Finat Budget Budget ‘Actual -8 -8 RB 2178 654s22 4.854522 97736 (4857-288) 63,000 63,000 13619 (49.364) rinse SASF 138.195 F (879.387) $ 8 2576 2576

- 85,095 85,096, 30375 30375, 117240 an7.240
- 23,628 23608 : 18 418 : : 65,082 65,082 50,000 150,000 2.582 (047 418) 150,000 $160,000 § 327,727 ERE 2i8.1e1$ 20848181 $ 1869057 $ (217824) 205000 $ 205000 $ 128037 (78,983), 25,000 126,000 431,309 6208 2500 2.500 3,696 1196 (162481) (162481) (161,510) or 901,430 901430 979,740 (228690) 30.000 30,000 30,160 180 437.003 44370031437 03, - 2506452 92,506,662 $ 2.405 435 wa 313793 3 913,709 $344,120 38 sszesze 42424 1.334520 9.898 106.267 04.287 162.140, 97.853 107278 07.278 103.366 eta) “400 ‘00 : (400) 5,000 5,000 e771 (1.223) 253.102 253,102 249,418 G.s84) Zieadee SZ ieades §_ a777.337 38.853 8 - 8 22486 22486 : : 4401 1408
- 190.000 10,000 ‘20,900 ‘20000 40000 (@o,000) 0,000 50,000 4Btt (4,189), : : 7921 73821

County of Russell, Virginia Schedule 1 Schedule of Revenues· Budget and Actual Page 3 of 6

Governmental Funds For the Year Ended June 30,2012

Variance with Final Budget·

Original Final Positive Fund. Major and Minor Revenue Source Budget Budget Actual (Negative)

General Fund: (Continued) Intergovernmental Revenues: (continued) Revenue from the Commonwealth: {Continued)

Categorical aid: (Continued) Other categorical aid: {Continued)

EMS grants $ 12,000 $ 12,000 $ 30,018 $ 18,018 Fire Program Funds 35,000 35,000 67,682 32,682 Library grants 82,340 82,340 78,954 (3,386) Litter control grants 13,500 13,500 10,844 (2,656) Clerk of the circuit court grants 10,000 14,552 23,383 8,831 Public assistance 1,751,621 1,751,621 1,735,812 (15,809) Comprehensive services act 1,065,211 1,065,211 School resource officer grants 22,095 22,095 Emergency management grants 7,936 7,936 Total other categorical aid $ 2,074,461 $ 2,079,013 $ 3,336,554 $ 1,257,541

Total categorical aid $ 4,242,945 $ 4,247,497 $ 5,563,891 $ 1,316,394

Total revenue from the Commonwealth $ 6,781,397 $ 6,785,949 $ 8,009,326 $ 1,223,377

Revenue from the federal government: Categorical aid:

CDBG grants $ $ $ 589,252 $ 589,252 Electoral Board 11,400 11,400 Violence against women 22,222 24,638 20,688 (3,950) Emergency management grants 38,827 38,827 Law enforcement grants 2,012 2,012 6,746 4,734 DMV ground transportation safety grant 12,722 12,722 Public assistance 2,137,813 2,137,813 2,118,519 (19,294)

Total categorical aid $ 2,162,047 $ 2,164,463 $ 2,798,154 $ 633,691

Total revenue from the federal government $ 2,162,047 $ 2,164,463 $ 2,798,154 $ 633,691

Total General Fund $ 29,791,625 $ 29,798,593 $ 29,437,837 $ (360,756)

Special Revenue Funds: Industrial Development Fund: Revenue from local sources:

Revenue from use of money and property; Revenue from the use of money $ $ $ 3,533 $ 3,533

Total Industrial Development Fund $ $ $ 3,533 $ 3,533

Coal Road Fund: Revenue from local sources:

Other local taxes: Coal road taxes $ 3,575,750 $ 3,575,750 $ 2,010,317 $ 11.565,433)

Revenue from use of money and property: Revenue from the use of money $ $ $ 8,659 $ 8,659

Total revenue from local sources $ 3,575,750 $ 3,575,750 $ 2,018,976 $ (1,556,774)

Total Coal Road Fund $ 3,575,750 $ 3,575,750 $ 2,018,976 $ (1,556,774)

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County of Russoll, Virginia

‘Schedule

Schedule of Revenues - Bdgt and Actual Page 30 ‘Covernmental Funds Forthe Year Ended June 30,2012 Vatance wth Final Budget Final Positive und, Malor and Minor Revenue Source Budoet Actual agate) General Fund: (Continued) ‘rargovormertal Revenues (ontoues) ‘Revertve from the Commonwealth: (Continued) Categorical ac Conte) ‘her calgon as (Continued) EMS gents $s 12000 12000 sone $8018 Fa Progam Funds 235000 235000, ore sesn (Library grants 82,340 82,40 78.954 (G,388) Litter control grants 13,500 13,800 10,84 (2,666) Clr he oat cour grans ‘0.000, 1452 23308, east Pubic assistance apsisat = 17stazt 1738812 15809) Comprehensive series at - = ssi 965210 School esouee of granis : 72988 72088 Emargoncy managament grants : 7508 7838 Total oer categoria sid 571 ETEK Toll categorical ald S$ azinoss § azure _§ _s563801 $ 131604 Toalevene fom he Commonwealth S$ 576197 § G7e599 § 509% $ 1208877 Revenue fromthe fede government Categorical ai: ‘CDBG gras $ $ sig82 Etec Goad : : 11400 Violence against women 22,222 24,638 8,950) Emergency management grants - weer Law enforoementgrens zoe zon 6746 anh OMY round wenspranseaty grant ° - 272 272 Pubic assistance aisrats _2a7ais___at6 sta 9239 Tefal entgoral at S__216n067 § 2.186403 § 2,706,154 Be35601 ‘Tost revenue rom the federal govern S__2162007 § 2164463 § 270ee4 § sanger Toll Genera Fund $ 29791625 § 70780503 § 29437837 § (360756) Special Revenue Funds: Industral Development Fund: Revenue rom loa sous: Revenue fom woof money and propery Reverue fomthe use of money 8 - 3533 $5508 Tota ndustia Devopmant Fun $ : 3531 $5555 Coal Road Fund: Reveruefomlacal sources: Other oc aes ‘eal aa axes $ 3575750 $ _a57e760 $ 2010317 § (1.565439 Revenue fom use of money an propery Revenue fom bese of money 8 asso s_a6s0 Total venue fom al sources $__as75750 $_asre7e0 $ 2018976 § (1Ss6774 Tota Goal Read Fund $3518250§ 3576780 $ 2010976 11555774)

County of Russell, Virginia Schedule 1 Schedule of Revenues· Budget and Actual Page 4 of 6

Governmental Funds For the Year Ended June 30, 2012

Variance with Final Budget·

Original Final Positive Fund. Major and Minor Revenue Source Budget Budget Actual {Negative)

Special Revenue Funds: (Continued) Workforce Investment Board Fund: Intergovernmental Revenues: Revenue from the Commonwealth:

Categorical aid: Workforce Investment $ $ $ 84,117 $ 84,117

Total revenue from the Commonwealth $ $ $ 84,117 $ 84,117

Revenue from the federal government: Categorical aid:

Workforce Investment $ 2,053,185 $ 2,053,185 $ 1,993,056 $ 160,129)

Total revenue from the federal government $ 2,053,185 $ 2,053,185 $ 1,993,056 $ 160,129)

Total Workforce Investment Board Fund $ 2,053,185 $ 2,053,185 $ 2,077,173 $ 23,988

Total Primary Government $ 35,420,560 $ 35,427,528 $ 33,537,519 $ 11 ,890,009)

Discretely Presented Component Unit· School Board: School Operating Fund: Revenue from local sources:

Revenue from use of money and property: Revenue from the use of money $ 10,000 $ 10,000 $ 142 $ (9,858) Revenue from the use of property 1,500 1,500 1,500

Total revenue from use of money and property $ 11,500 $ 11,500 $ 1,642 $ 19,858)

Charges for services: Cafeteria sales $ 683,714 $ 683,714 $ 597,693 $ (86,021) Tuition payments 2,583 2,583 Drivers Ed fees 14,000 14,000 13,140 (860) Regional Adult Education 85,630 85,630 170,889 85,259 GED Testing fees 10,000 10,000 2,635 17,365)

Total charges for services $ 793,344 $ 793,344 $ 786,940 $ 16,404)

Miscellaneous revenue: Other miscellaneous $ 190,000 $ 190,000 $ 256,522 $ 66,522

Recovered costs: Insurance recoveries $ $ $ 123,401 $ 123,401 Extra duties revenue 23,000 23,000 33,967 10,967 Dual Enrollment 200,000 200,000 487,636 287,636 Sale of Equipment and Supplies 42,000 42,000 2,935 (39,065) Reimburse Health Services 45,000 45,000 57,742 12,742 Other recovered costs 242,902 242,902 105,662 (137,240)

Total recovered costs $ 552,902 $ 552,902 $ 811,343 $ 258,441

Total revenue from local sources $ 1,547,746 $ 1,547,746 $ 1,856,447 $ 308,701

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County of Russell, Virginia Schedule 1 ‘Schedule of Revenues - Budget and Actual Page 4of6 Governmental Funds. For the Year Ended June 30,2012 Variance with Final Budget - Original Finat Positive Fund, Major and Minor Revenue Sou Bud Budget ‘Actual egative) ‘Specia! Rovenue Funds: (Continued) Workforce Investment Board Fund: Intergovermental Revenves: Revenue fom the Commonweath Caegorcal at: Workorce Investment 8 .$ an seat Toll revenue fom the Gonmonweath 8 -$ ans eaair Revenue rom the fedora government Categorical ai Workorce Inestiont § 2053,185 § 2063.185 $ 1.903056 $ (60,129) Toll revenue from the ederl government $ 2053,185 § 2053185 § 1903056 $ (60,129) Total Wortorce Investment Board Fund $2053,185 § 2053185 § 2077,173 $2988 Toll Friary Goverment $_ 35420580 § s54z7sz8 § _aasarsig $ (890,009), Discrately Presented Component Unit Schoo! Board: School Operating Fund: Revenve from lal sources: Revenue fom use of money and property Revenue rom the use of maney $ 19,00 10.000 $ 42$ (9868) Revenue ro the use of roporty 4500 4500. 4.500, - “Total revenue fom use of money and property 7500 Tis § 15t2§ Rss) Charges for senvicas: Caleta sales S eaarit 683714 $5070 $821) uion payments - 2553 2583 rivers Ed fees +4000 14000 13.40 (660) Regional Adult Education 85,620 85,690 70.888 85,259 GED Tesing foes 10,000, +0000, 2635, 7.365), Total charges for services REKII 7e3.384 7a. 940_F a0) ‘Miscelaneous revenue: ‘thor miscetaneous $190,000 ign $ 256502 § 65522 Recovered costs: Insurance recoveries 8 : 1341 § — tz40t xta dtos revenue 23,000 33.967 10367 Dual Enrobment 200,000 487.538 287,898 Sele of Equipment and Suopties| 42000 2935 (23065), Reimbursa Heath Sonvicos 45,000 sre 12742 Other recovered costs 242,902 105,562 (137240), Tote recovered costs 52900 BHF 258. Total revenve for local sources S_sser74e § 1587746 § 1gs84e7 § 308701

County of Russell, Virginia Schedule 1 Schedule of Revenues- Budget and Actual Page 5 of6

Governmental Funds For the Year Ended June 30, 2012

Variance with Final Budget -

Original Final Positive Fund. Major and Minor Revenue Source Budget Budget Actual

Discretely Presented Component Unit- School Board: (Continued) School Operating Fund: (Continued) Intergovernmental revenues: Revenues from local governments:

Contribution from County of Russell, Virginia $ 5,180,782 $ 5,180,782 $ 2,740,646 $ (2,440,136) Total revenues from local governments $ 5,180,782 $ 5,180,782 $ 2,740,646 $ (2,440,136)

Revenue from the Commonwealth: Categorical aid:

Share of state sales tax $ 3,283,377 $ 3,283,377 $ 3,402,919 $ 119,542 Basic Aid 13,689,938 13,689,938 14,076,152 386,214 Remedial summer education 180,612 180,612 174,833 (5,779) Regular foster care 19,358 19,358 11,634 (7,724) Gifted and talented 143,643 143,643 147,143 3,500 Remedial education 462,850 462,850 474,128 11,278 Special education 1,841,822 1,841,822 1,886,702 44,880 Textbook payment 130,471 130,471 132,624 2,153 Career and Technical Education 115,982 115,982 34,680 (81,302) Alternative education 749,679 749,679 749,679 Elementary Alternative Education 2,500 2,500 Algebra readiness 63,856 63,856 71,164 7,308 Mentor teacher program 8,080 8,080 3,659 (4,421) Social security fringe benefits 877,818 877,818 899,208 21,390 Group life 31,921 31,921 32,698 777 Retirement fringe benefits 794,824 794,824 814,192 19,368 Supplemental support 413,756 413,756 179,894 (233,862) Early reading intervention 98,252 98,252 79,081 (19,171) Adult Education 6,338 6,338 34,655 28,317 Homebound education 62,481 62,481 27,120 (35,361) Vocation education 536,267 536,267 592,058 55,791 At risk payments 535,388 535,388 548,615 13,227 Primary class size 591,084 591,084 578,302 (12,782) Technology 414,000 414,000 314,655 (99,345) Jobs for Virginia Graduates 22,500 22,500 21,000 (1,500) Industry Certification Costs 3,349 3,349 At risk four-year olds 525,274 525,274 525,274 School Food 36,010 36,010 36,348 338 English as a second language 22,147 22,147 11,291 (10,856) Project graduation 7,869 7,869 GED prep programs 15,717 15,717 90,709 74,992 Lottery payments 243,944 243,944 Tobacco Commission 89,233 89,233 Adult literacy 85,000 85,000 95,939 10,939

Total categorical aid $ 25,758,445 $ 25,758,445 $ 26,393,251 $ 634,806

Total revenue from the Commonwealth $ 25,758,445 $ 25,758,445 $ 26,393,251 $ 634,806

Revenue from the federal government: Categorical aid:

Basic Adult Education $ 453,160 $ 453,160 $ 444,681 $ (8,479) Title I 1,661,212 1,661,212 1,731,003 69,791 ARRA- Title I 90,000 90,000 100,000 10,000 Special Education 1,190,890 1,190,890 1,183,568 (7,322) Title VI-B, preschool 35,822 35,822 35,770 (52) ARRA -Title VI-B, preschool 30,058 30,058 Vocational education 97,462 97,462 93,778 (3,684) School Food Program 1,125,000 1,125,000 1,323,790 198,790

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County of Russell, Virginia Schedule t ‘Schedule of Revenues - Budget and Actual Page 5016 Governmental Funds

For the Year Ended June 30, 2012 Variance with Final Budget Original Positive Fund, Major and Minor Revenve Sou Budoet Budget Aetual ‘Magative) Discretely resented Component Unit- Schoo! Boar: (Continued) School Operating Fund: (Continued) Intergovermental evetues: Revenues rom loca goverment ‘Contin rom County of Russe, Vigiis S$ s1807e2 $ 51a 76 § 2740646 § _(2440,136) Total evenues fom lel governments S_5,f00,f62 $5 100.702 § 2740648 $ (2.440.196) Revenue from the Conmanweath Categoria ait ‘Share of stat sales lax $ 3263877 § 328337 § 34ezs19 § «119.542 Basic aid 13689998 13685938 14076,152 386.216 Remedial sumer education ‘0.612 ‘aos? 174893 (6779) Regular foster care 19,88 19358, 11834 (72) (ited and iene 143648 143668 147.48 3300 Remedial education 482880 462850, 474.128 12168 ‘Special edvcaton vpnaze gang 5.6702 44380 Textbook payment ‘20471 ‘0471 13264 23153 (Career and Techical Education 15.982 115,982 24.680, (61.302) ‘Aematve education 749673 749679, - iementary Atematve Education : : 2800 2900 -igbra readiness 63.856, 63.856 71184 7308 ertor teacher program 83080 8080 3158 ean) ‘Soci secur tinge berets er7ai8 e788 299,208, 21390 ‘Groupie 31921 31924 32898 m7 Retrent finge benefits 73482 roeaze 814.192 19388 Supplemental supoot. 413,756 413.756 179894 (233,862) Ely reading intervention 98.252 98.252, 73,081 (18.171) ‘Adult cation 6:58 6398 34.855, 28317 Homebound education 62481 6248s 27.120 (25.361) Vocation education $36,267 596,267 382058, 55791 ‘Ak payments 535,368, 535,388 545,615, 13207 Primary lass size 504,088 591,084 578,302 (12.782) Technology 414900 14000 318855, (9935) Jobs or Viginia Graduates 72200 22.500 21000 (5500), industry Certifaton Costs - - 3319 3348 Ati fouryear ds sa5278 525214 905.274 - Schoo! Feed 36010 36010 35oME 38 English s second language 22.47 247 1201 (10.886) Projet raduation : : 7269 7889 GED prep progams 18717 5717 90708, 74992 Lote payments : : 243.946 243.944 Tobaow Commission - - 09.258, 9.239, Adult irecy 85000, 85,000, 95.988, 10838 oll categorical id SB 78A5§_W575H.405 § 753932513 BOAO “Total coven om the Consnorweath S_25750445 § 25758445 $ 26585251 5 634.806 Revenue tom he federal goverment Categorical ai Basic Adult Education S$ 453,60 $458,160 $aaaBt $47, Titel 16122 4881212 1794.008, 65791 ARPA Titel 30.000, 9,000, ‘00.000, ‘000 Special Education 19089 1190880 1.184588 (7322) Tite V8, preschoot 35822 35.822 36770 (62) ARRA Tale VIB, preschool - - 30058, 30058, Vocational education 97462 97.62 93778 (33884) Scio Food Progra 175000 290004323780, 198790

-T6-

County of Russell, Virginia Schedule 1 Schedule of Revenues· Budget and Actual Page 6 of6

Governmental Funds For the Year Ended June 30, 2012

Variance with Final Budget-

Original Final Positive Fund. Major and Minor Revenue Source Budget Budget Actual fNegativel

Discretely Presented Component Unit· School Board: (Continued) School Operating Fund: (Continued) Intergovernmental revenues: (Continued) Revenue from the federal government: (Continued)

Categorical aid: (Continued) ARRA -Educational Jobs program $ 637,472 $ 637,472 $ 80,948 $ (556,524) Fresh fruit and vegetable program 29,189 29,189 WIA adult activities 38,000 38,000 Improving teacher quality 316,793 316,793 294,856 (21,937) Even start 307,869 307,869 259,316 (48,553) 21st century grant 1,074,320 1,074,320 967,797 (106,523) Learn and serve America 25,000 25,000 23,723 (1,277) Rural and tow income schools 102,767 102,767 203,452 100,685 Educational technology

Total categorical aid

Total revenue from the federal government $ 7,127,397 $ 7,127,397 $ 6,841,724 $ (285,673)

Total Discretely Presented Component Unit- School Board $ 39,614,370 $ 39,614,370 $ 37,832,068 $ (1,782,302)

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County of Rusel, Virginia Schedule 1 ‘Schedule of Revenues - Budget and Actual Page 6 0f6 Governmental Funds For the Year Ended June 30,2012

Variance with Final Budget - Original Final Fund, Major and Minor Revenue Source Budget Budget ‘Actual Discretaly Presented Component Unit - School Board: (Continued) ‘School Operating Fund: (Continued) (nteqovernmontal revenues: (Continued) Revenue frm te federal goverment: (Continued) Categorical at: (Continued) "ARRA -Educafonal Jobs program $ GB7A72 $ —«BITATZ. $B. § (558824) Fresh iui and vegelabe proaram - - 29,109 29,188 WIA ad actos : : 3.000 38.000 Improving teacher quatty 318,793 316798 206,806 (21937) Even stat 207,869 207,868 259,316 (48,353), 2st cont grant soreaa0 4.074.300, 987.797 (106,523), Leam and sere America 25,000 25,000 23728 (127) Rural and low income schools 102767 102767 703.452 100,688 Educatlona tachnotoy 9,630 91820 4.795 7.835) Total categorical aid Eis S Targa) TS 8 673) Total revenue from the federal goverment $ _73e7307 § _7Aargo7 § _agei724 $ (285,673) Tota Disrlely Presented Component Unit- School Board $_sastas7a_g 29614370 $s _a7832060 811782309)

County of Russell, Virginia Schedule 2 Schedule of Expenditures - Budget and Actual Page 1 of4

Governmental Funds For the Year Ended June 30, 2012

Variance with Final Budget-

Original Final Positive Fund, Function, Activity and Element Budget Budget Actual (Negative)

General Fund: General government administration:

Legislative: Board of supervisors $ 200,999 $ 200,999 $ 196,444 $ 4,555

General and financial administration: County administrator $ 367,396 $ 434,997 $ 443,070 $ (8,073) Independent auditor 72,000 72,000 59,950 12,050 Commissioner of the revenue 286,594 319,522 325,409 (5,887) Real estate assessor 416,585 413,011 290,514 122,497 Treasurer 415,387 407,914 378,011 29,903 Data processing 93,891 92,244 90,259 1,985

Total general and financial administration $ 1,651,853 $ 1,739,688 $ 1,587,213 $ 152,475

Board of elections: Electoral Board $ 128,970 $ 128,647 $ 142,400 $ (13,753) General Registrar 125,485 121,219 134,323 (13,104)

Total board of elections $ 254,455 $ 249,866 $ 276,723 $ (26,857)

Total general government administration $ 2,107,307 $ 2,190,553 $ 2,060,380 $ 130,173

Judicial administration: Courts:

Circuit Court $ 130,275 $ 120,144 $ 131,598 $ (11 ,454) General District Court 11,000 11,000 10,052 948 Special Magistrates 10,400 10,400 8,666 1,734 Clerk’s Office 382,032 389,435 375,648 13,787 Sheriff Courts 1,128,114 1,155,145 1,051,330 103,815 Victim and Witness Assistance 24,960 27,054 32,813 (5,759) Law Library 620 620

Total courts $ 1,686,781 $ 1,713,178 $ 1,610,727 $ 102,451

Commonwealth’s attorney: Commonwealth’s Attorney $ 470,192 $ 459,916 $ 503,370 $ (43,454)

Total judicial administration $ 2,156,973 $ 2,173,094 $ 2,114,097 $ 58,997

Public safety: Law enforcement and traffic control:

Sheriff $ 1,507,143 $ 1,471,422 $ 1,907,502 $ (436,080) Alcohol Safety Action Program 13,165 (13,165)

Total law enforcement and traffic control $ 1,507,143 $ 1,471,422 $ 1,920,667 $ (449,245)

Fire and rescue services: Volunteer Fire Departments $ 242,391 $ 242,391 $ 264,728 $ (22,337) Ambulance Rescue Squad 170,575 170,575 159,802 10,773

Total fire and rescue services $ 412,966 $ 412,966 $ 424,530 $ (11,564)

Correction and detention: Operation of Jail $ 1.781,902 $ 1,781,902 $ 1,755,193 $ 26,709 Probation Office 237,988 237,988 242,632 (4,644)

Total correction and detention $ 2,019,890 $ 2,019,890 $ 1,997,825 $ 22,065

Inspections: Building inspector $ 121,011 $ 117,084 $ 123,983 $ (6,899)

-78-

County of Russel, Virginia Schedule? ‘Schedule of Expenditures - Budget and Actual Page 1 of Governmontal Funds

For the Year Ended June 30,2012

Variance with Final Budget - Original Final Positive nd Ek ‘Budget Budget Actual egative) Goneral Fund: General goverment administration Legislative Board of supeisors Smo § 20008 § S455 Gover and fnncial emia County emitter eC ee er) Independent auior 72000 72,000 59.960 12060 Commissioner ofthe revenue 208,534 319522 325409 (6887) Real esa assessor 416,585 ago 290814 12.497 Tressuer 416387 aorta a78011 73.908, Data processing 93,801 92.288 90.250, 4,986 Toll general end ancl admiisvation 37st 86s S rasa Sa IS Sear ‘Board of elections: Electoral Sard $ 178970 $ —taBsAT Ss tazdg $13,753) Goneral Regisvar 125495 171219 134,33 (19.108) Toll boa of elections TT 3267s) Toll general government eaminitaion $ 2107507 § 2190853 § 2060880 § 190.173 Ji edison outs: Creuit Gout S 190275 § NaOH S135 SIA) General Distt Court ‘11/000 11,000 10052 co Spocil Maistre 10400 10400 8.60 14 Cat’s Ofce 382.082 389495, 75648 13787 Sherif Couts 1128.14 1456,145 1061330 103815 ‘Victim and Witness Assistance 24.360, Ect 32813, (6759) Law Library - - 620 (620) Tall cours ara Sass CCommonveats atney Commonweats Atorey $_4noier § 50916 § 503370 §45.4sep Toll judi adit $__2188.973 § 2173004 § Zaha $__s5g97 Pubic safety Law enforemont ad raf conta ‘Sherif $ 1g07as $—NaTIae2 $ © 1807802 $ ARB.) ‘Alea Safty Acton Prog - - 13:65, (13,168) Talla enforcemect end te contrl EAL AT Fre and rescue sence: ‘Volunter Fre Departments $ — mingor § manga $ © Beh728 § ——(2e837) ‘Ambulsnce Rescue Squad 70575, 170575 1503802, ‘10773 Toll rear reseve services T4265 42988 aa 590] CConecton and dterton Operation of a $ 1781902 $ 1781902 $ 1.785.199 $25,700 Probation Ofc 237 988 25788 2a0.632 sta) Total corecton and detention $__Zpigge0 Sig god 1807.25 S728 Inspections Buln inspactor S$ rior $7088 § tgs 6899)

-78-

County of Russell, Virginia Schedule 2 Schedule of Expenditures- Budget and Actual Page 2 of4

Governmental Funds For the Year Ended June 30, 2012

Variance with Final Budget -

Original Final Positive Fund. function. Activity and Element Budget Budget Actual fNegatlvel

General Fund: (Continued) Public safety: (Continued)

Other protection: Forestry Service $ 12,100 $ 12,100 $ 12,098 $ 2 Enhanced 911 541,740 461,300 683,709 (222,409) Medical Examiner 1,000 1,000 380 620 Emergency Services 85,986 137,749 131,286 6,463 Animal Control 185,558 161,787 215,520 153,733)

Total other protection $ 826,384 $ 773,936 $ 1,042,993 $ 1269,057)

Total public safety $ 4,887,394 $ 4,795,298 $ 5,509,998 $ 1714,700)

Public works: Sanitation and waste removal:

Landfill $ 2,610,596 $ 2,607,403 $ 2,434,849 $ 172,554 Refuse collection 75,000 175,000)

Total sanitation and waste removal $ 2,610,596 $ 2,607,403 $ 2,509,849 $ 97,554

Maintenance of general buildings and grounds: General properties $ 735,717 $ 728,326 $ 716,233 $ 12,093

Total public works $ 3,346,313 $ 3,335,729 $ 3,226,082 s 109,647

Health and welfare: Health:

Health Department $ 343,506 $ 343,506 $ 343,506 $

Mental health and mental retardation: Cumbe~and Mountain Community Services Board $ 157,547 $ 157,547 $ 157,547 $

WelfarefSocial Services: Health and welfare $ $ $ 7,278 $ (7,278) Social services 4,484,451 4,414,451 4,308,790 105,661 Comprehensive Services Act 81,512 79,414 1,551,176 (1,471,762) Appalachian Agency for Senior Citizens 86,560 86,560 87,195 (635) Lebanon Speech and Hearing 10,938 10,938 10,938

Total welfare $ 4,663,461 $ 4,591,363 $ 5,965,377 $ 11,374,014)

Total health and welfare $ 5,164,514 $ 5,092,416 $ 6,466,430 $ 11 ,374,014)

Education: Contributions to County School Board $ 5,180,782 $ 5,180,782 $ 2,740,646 $ 2,440,136 SVCC Contribution 90,422 90,422 90,422

Total education $ 5,271,204 $ 5,271,204 $ 2,831,068 $ 2,440,136

Parks, recreation, and cultural: Parks and recreation:

Recreation Park $ 103,437 $ 103,136 $ 106,179 $ 13,043)

Library: Public Library $ 410,465 $ 364,777 $ 378,712 $ 113,935)

Total parks, recreation, and cultural $ 513,902 $ 467,913 $ 484,891 $ (16,978)

-79-

County of Russel, Vieginia Schedule 2 Schedule of Expenditures» Budget and Actual Page 20f4 ‘Governmontal Funds | For the Year Ended June 30,2012

Variance with Final Budget - iginat Fat Positive ‘Eund. Function, Activity and Element Budaet Budget Actual (Monat) Goveral Fund: (Continued) Publ safety: (Continued) ‘er protection: Forest Senice S 12100 § 1100 $ 12008 § 2 Entancod 911 st740 461300 689,700 (22408) Medical Examiner 41000, #000 380 220 Emergency Sevieos 85,906 s31749 131,286 6.463 ‘ial Coil 105,58 161.787 2155500, (93733) Total other protection Seg S 7796S 1047 608-8 __(69.057) Total pai safely S$ 4887304 § 4.705208 $ S500908 $ (14,700) Pub wort: ‘Saritation and waste moval: and $ 2810596 $§ 2607403 § © 2A4BKeM0 $ 172854 tse clection - - 75,000 75,000) “otal saan and waste removal S__250S6$ PRT Tah. eto S97 55h aitonance of general buldngs and grounds: General properties $_ms77 § masa § 7929 $1208. Total pub works $3919 $___3935728 § azmom § 109647 Heoth and wel: Heat: Heath Deparment S_343506 § 443506 8 4eas08 § - ‘Menta heath nd mental tarda: Cubes Mountain Community Senioes Boaré S$ 197847 § _ss7ge7 $s 1675H7 § WlterSocal Sees: Heath and woe 8 -8 “8 78 $ 278) Social sonicos 44851 4ateast ——— 4908°700 105.651 Compreersive Sonices Act 81512 Taatd 551178 (1471782) ‘Appalachian Agency foe Senior Gitzens 88.560 86,560, 87,195 (635) Lebanon Speech and Hearing 10938 10928 10938 Total wel Sap 61g ASS S Sma a7? STATA Toll heath and were S 5164514 $ 50946 $6488.43 $ (1374014) Education Consitions o County Schoc Board $ 5480782 § — sye0782 §— 27HngMe $ — 2840,196 ‘SVCC Contribution 90.422 90422 90422 - Tota education © Sarg STi SDN aS. Pers, recreaon, and cla Parks and rereaton: Recreation Park S$ 103437 § 08198 § 108.178 $0) Uber Public Libary Sass § sear? § varia § (13935) “Total pak, ereation, and utr S$ sigote § _sergia §_aaasor s (16978)

-19-

County of Russell, Virginia Schedule 2 Schedule of Expenditures - Budget and Actual Page 3 of4

Governmental Funds For the Year Ended June 30, 2012

Variance with Final Budget·

Original Final Positive Fund. Function, Activity and Element Budget Budget Actual (Negative!

General Fund: (Continued) Community development:

Planning and community development: Planning Commission $ 47,500 $ 47,500 $ 43,274 $ 4,226 Community Development 64,075 72,075 100,499 (28,424) Industrial Development 2,166,289 2,166,289 1,858,389 307,900 PSA Contributions 928,480 928,480 121,864 806,616 Cumberland Plateau 35,000 35,000 35,000 Regional Housing 15,000 15,000 15,000 Highway Safety Commission 2,400 2,400 1,764 636 Canneries 123,844 (123,844) Tourism 68,566 66,844 66,277 567

T ota! planning and community development $ 3,327,310 $ 3,333,588 $ 2,365,911 $ 967,677

Environmental management: Soil and Water Conservation $ 34,236 $ 34,236 $ 34,453 $ 1217)

Cooperative extension program: VPI Extension $ 64,784 $ 64,784 $ 41,992 $ 22,792

Total community development $ 3,426,330 $ 3,432,608 $ 2,442,356 $ 990,252

Nondepartmental: Nondepartmental $ 448,056 $ 723,088 $ 305,904 $ 417,184

Capital projects: Water projects $ $ $ 1,020,999 $ (1,020,999) Other capital projects 401,000 438,261 137,361 300,900 School projects 563,540 1563,540)

Total capital projects $ 401,000 $ 438,261 $ 1,721,900 $ 11 ,283,639)

Debt service: Principal payments $ 1,453,358 $ 1,453,358 $ 1,888,842 $ (435,484) Interest Expense 490,274 490,274 637,179 1146,905)

Total debt service $ 1,943,632 $ 1,943,632 $ 2,526,021 $ 1582,389)

Total General Fund $ 29,666,625 $ 29,863,796 $ 29,689,127 $ 174,669

Special Revenue Funds: Coal Road Fund: Public Works:

Maintenance of highways, streets, bridges and sidewalks: Maintenance of highways, streets, bridges and sidewalks $ 3,000,750 $ 3,000,750 $ 2,678,614 $ 322,136 Virginia coalfield 575,000 575,000 610,456 (35,456)

Total Public Works $ 3,575,750 $ 3,575,750 $ 3,289,070 $ 286,680

Total Coal Road Fund $ 3,575,750 $ 3,575,750 $ 3,289,070 $ 286,680

-80-

County of Russel, Virgina ‘Schedule2 Schedule of Expenditures - Budget and Actual Page of Governmental Funds For the Year Ended June 30,2042

Variance with Final Budget Origin Final Positive und, Function, Activity and Element Buulgot Budget Actual ‘Weaative) General Fund: (Continued) Community development: Panning and conmrunity development: Planing Commission 8 4750 § 7300 $a Saw ‘Comment Development 84075, 7295 100 499 (28424) Industit Development 2,186,289 208269 1.858.380 sor 300 PSA Contributions 908.400, 925.490, 121,884 Boe.6 Cambertand Pltecu 35,000 35,000, 36000, : Regional Houseg 15,000 15,000 15000 - Highuay Seley Commission 2400 2400 1758 638 Cannaties - . ra (123444) Tourism 88,588 fa 66.277, 887 Toll planning and community development 3 Aaer 30S as ESI S_“ SETI Evironment management: Sel and Water Conservation S$ uz8 § 320 $4450 S fan Cooperative extension program: PI Extension Sours § saree § anges 2a. Toll comsrunty development $3463 § _susene § 2.440.356 $ 990.252 Nondepanment Nondeparimenta $4056 § 7230aa§ __gosgu §__ar7.te4 Copal projects: Water projects $ “8 = $ 1920999 $ (1.020990) Other capil projets 401,000 428,201 137,81 ‘30.900 School projects - - 563.540 (563,540) Tota cari projacts S000 TST 6H) Debt service: aig payments $ 1453358 § 1459350 § faa $ 435.494) Interest Expense 490.274 490274 637.179 (146,908) Toll det serie Ea FTF 7e06.001_S __(580.309) Total Generel Fund $__70908.675 $ _20883,796 _s zoeay.197$ 174,660 ‘Special Revenue Funds: (Goal Road Fund: Puble Works: Maintenance of highways, streets, bidges and stews: Nainienance of highways, sets, bridges ard sidewalls $ Sou0750 § — gom750 § © ZarRBE $320,196 Vigiia coal 575,000, 575,000, 510.455, (95,456) Total Publ Works F_Bs75.750_S B57 1503709070 _F _—_7a5 500 Total Coal Road Funé $__3575,750 33575780 § 3789070 $285,680

-80-

County of Russell, Virginia Schedule of Expenditures- Budget and Actual

Governmental Funds For the Year Ended June 30, 2012

Fund. Function. Activity and Element Original Budget

Special Revenue Funds: (Continued) Workforce Investment Board Fund: Health and Welfare

Welfare Workforce Investment

Total Primary Government

Discretely Presented Component Unit - School Board: School Operating Fund: Education:

Administration of schools: Administration and health services

Instruction costs: Instructional costs Technology

Total instruction costs

Operating costs: Pupil transportation Operation and maintenance of school plant Food service and non-instructional

Total operating costs

Total education

Total School Operating Fund

Total Discretely Presented Component Unit- School Board

$ 2,053,185 $

$ 35,295,560 $

$ 1,291,909 $

$ 28,540,305 $ 479,897

$ 29,020,202 $

$ 2,746,166 $ 4,691,749 1,864,344

$ 9,302,259 $

$ 39,614,370 $

-81-

Final Budget

Schedule 2 Page 4 of 4

Variance with Final Budget

Positive !Negative)

2,053,185 $ 2,052,295 $ 890

35,492,731 $ 35,030,492 $ 462,239

1,291,909 $ 1,338,724 $ (46,815)

28,540,305 s 29,756,511 $ (1,216,206) 479,897 480,328 (431)

29,020,202 $ 30,236,839 $ (1,216,637)

2,746,166 $ 2,754,359 $ (8,193) 4,691,749 4,010,904 680,845 1,864,344 2,108,879 (244,535) 9,302,259 $ 8,874,142 $ 428,117

39,614,370 $ 40,449,705 $ (835,335)

County of Russel, Virginia Schedule 2 ‘Scheiule of Expenditures - Budget and Actual Page dot Governmental Funds Forthe Year Ended June 30,2012 Variance wth Fina Budget Original Final Posiive ‘Fund. Function, Activity ané Element Bud Buraot ‘Actual Megatv) Special Revenve Fonds: (Continued) Workforce investment Board Fund: Heath and welere Welare Wore ivestrent 2053195 $ 2053185 § 2052205 § 80 Toll Primary Goverment 3.205500 $ 5.400701 _$ 36030402 § 450250 Disreoly Presented Component Unt School Bort: School Operating Fund: Edvcaon ‘Aministrabon of schools: ‘Adnitaton and heath senices 1201go9 $1010 _s 1gua7a1 $s (46.5 Instucon costs: Inston cots masa $ 540805 § ZezEEST1 § (1.216206) Technology 479897. 79357 480,328 (431) Toll insrction costs Bwaow02 § 200.22 § —ERH SABA) Operating oss Pupt transportation 2749908 $246.18 $ 2754359 § (8.183) Operaion and mailanance of schol ent 401748 7 410.904 a0 Food service and norinstucionl 1 pb 34 saci 2108878 244 535) Total operaing costs 3300258 8 9m S OST MS BAT Total edveaton 39514370 $ 39614370 § 40440705 _§ (635598) ‘otal Schoo! Operating Fund 39514370 $ 39614570 _§ 40449705 § (635,538) “Tota Discrtly Presenied Component U- Scho! Board or4s70$ _s06r4g70 $ _ 4aee7os $s _ (835,55)

Other Statistical Section

c’o "’ ’

General Fiscal Government Judicial Public Year Administration Administration Safe~

2011-12 $ 2,267,145 $ 2,119,900 $ 5,296,188 $ 2010-11 1,691,031 2,112,758 5,091,612 2009-10 1,828,631 2,219,866 4,234,145 2008-09 1,706,342 2,243,005 4,013,947 2007-08 1,411,595 2,070,008 4,025,383 2006-07 1,465,480 1,710,751 3,667,580

(1) lnfonnation has only been available for 6 years. (2) 2010-2011 is the first year the Workforce Investment Board is included. (3) In 2010-2011 the County paid $1,508,677 towards the IDA debt

Public Works

County of Russell, Virginia Government-Wide Expenses by Function

Last Ten Fiscal Years (1)

Health and Welfare (2) Education

6,060,973 $ 8,397,896 $ 4,589,631 $ 4,003,987 8,592,042 5,681,243 5,549,934 6,070,091 5,897,486 6,055,397 5,982,456 5,471,573 5,386,506 5,395,294 4,508,131 2,867,007 4,880,408 3,884,301

Table 1

Parks, Interest Recreation, Community on Long- Service and Cultural Deveroement (3) Tenn Debt Authoritx Total

539,126 $ 3,493,655 $ 522,300 $ 410,664 $ 33,697,478 563,123 3,191,256 756,064 423,945 32,107,061 560,735 1,491,257 728,202 434,552 29,014,899 541,087 4,826,721 758,753 407,145 32,006,426 433,946 5,549,375 827,965 388,949 29,997,152 477,515 3,246,100 852,493 422,425 23,474,060

Tablet

County of Russel, Virginia Governmont Wide Expenses by Function Last Ten Fiscal Years (1) General Pats, Interest

Fiscal Goverment cit Pablc Puslie Healt and Reeeation, Community on Long Service Year ___Adminsation __Adiistaton Salety orks Witre (2) Eqwalon and Culural_Deveiopnent(3)__TermDebt_Authory Tol aoii-t2 2287.45 $ 2.119800 § $296.18 $ —SHTGTS § — 307.8 $ 4AM § 530128 $3400.55, 5300 § 41064 § © s3.a7478 zi0-1 ‘goog 2.112758, Soster2 4,003,987 8.7002 5681.23 563123 3191.256, 7am06¢ 423.945 32,107.081 7000-10 11828, 2.219888 4286185 8.549934 so70.091 5897 406 580735 1491,257 73202 «434.552 73.014,808 7008.08 1708342 2.283,005 4issH7 6.055397 5982455, SA7t873 541987 © 4825,721 758753 407,148 32,006 428 2007-08 1411595, 2,970,008 4025383 5.386508 5,395,208 508.131 a3gai 5510375 arses 88.9 29.997, 152 206.07 11485,480 1710751 3067.80 ©2867, 007 400408 3.884.301 47755 3.246.100 asnaga = az2405 234.060

(1) Iforation has only been avalabl for 6 yeas, {2) 2010-2018 is the est year the Werkorce Investment Boards ince. {@) In 2010-2011 the County pald $108,677 towards he IDA det.

Co yo

County of Russell, Virginia Government-Wide Revenues

Last Ten Fiscal Years (1)

PROGRAM REVENUES GENERAL REVENUES

Operating Capital Charges Grants Grants General Other Unrestricted

Fiscal for and and Property Local Investment Year Services Contributions Contributions Taxes Taxes (2) Earnings

2011-12 $ 488,408 $ 9,677,480 $ 761,738 $ 13,142,777 $ 6,881,302 $ 77,226 $ 2010-11 337,064 10,635,876 13,683,476 6,340,919 89,819 2009-10 393,362 7,473,127 13,004,381 6,123,807 106,848 2008-09 481,092 7,376,521 12,889,357 7,779,265 153,807 2007-08 505,428 7,780,609 12,279,583 7,976,046 529,827 2006-07 527,092 8,235,960 802,191 13,239,976 5,467,574 808,979

(1) Information has only been available for 6 years. (2) 2009-10 is the first year State Communications tax is classified as grants and contributions not restricted to specific programs.

Table 2

Grants and Contributions Not Restricted

to Specific Miscellaneous Programs (2) Total

138,135 $ 2,445,435 $ 33,612,501 177,669 2,638,202 33,903,025 173,322 2,465,451 29,740,298 346,880 1,771,674 30,798,596 55,649 1,711,485 30,838,627

252,756 1,881,802 31,216,330

Table 2 County of Russell, Virginia Government-Wide Revenues Last Ten Fiscal Years (1)

PROGRAM REVENUES GENERAL REVENUES Granis and Operating Capital Contibutions Charges Grants Grants General Other Unrestricted Not Restricted Fiscal for and and Property Local Investment to Specific Year Services Contributions __ Contributions Taxes Taxes (2) Earnings Miscellaneous __ Programs (2) Total mora § 488408 $ 9,677,480 $ 761738 $ 13,1427 § 6.881.302 S$ 77,288 $ ~=—138,135 $ © 2445,435 § © «33,612,501 2010-11 337,084 10,635,876 - 13,683,476 6,340,919 89.819 177,868 2,638,202 33,903,025 2009-10 398,362 7.473,127 - 13,004,381 6,123,807 106,848 173,322 2.485.451 29,740,298 2008-09 481,092 7,376,521 - 12,889,357 7,779,265 153,807 346,880 ATT 874 30,798,596 2007-08, 505.428 7,780,609 - 12,279,583 7,976,046 529.827 55,649 1711485 30,838,627 2006-07 527.092 8,235,960 802,191 13,239,976 5,407,574 808,979 252,756 1,881,802 31,216,330

$8 (1) Information has only been avaliable or 6 yeas. (2) 2009-10 the fist year State Communications taxis classified 2s grants and contributions not restricted to spectic programs.

a, -"’ ’

General Fiscal Government Judicial Public Year Administration Administration Safe~

2011-12 $ 2,060,380 $ 2,114,097 $ 5,509,998 $ 2010-11 1,712,850 2,106,641 5,226,797 2009-10 1,837,926 2,213,724 4,100,376 2008-09 1,702,193 2,236,691 4,383,789 2007-08 1,745,817 2,070,455 4,057,495 2006-07 1,547,966 1,805,418 3,863,960 2005-06 1,810,230 1,814,649 4,022,185 2004-05 1,471,043 1,059,566 3,977,841 2003-04 1,216,960 957,320 3,585,934 2002-03 1,267,146 977,540 3,651,469

County of Russell, Virginia General Governmental Expenditures by Function (1)

Last Ten Fiscal Years

Parks, Public Health and Recreation, Works Welfare (3) Education (2) and Cultural

6,515,152 $ 8,518,725 $ 40,540,127 $ 484,891 4,102,279 8,662,052 40,273,694 556,723 5,491,432 6,906,934 41,066,362 497,417 6,093,232 6,672,387 42,452,183 547,104 5,083,514 5,398,035 39,724,130 433,946 3,205,718 5,126,034 41,346,518 493,366 3,605,915 5,003,511 39,574,345 438,198 3,434,569 4,948,270 33,030,292 339,244 3,100,508 4,893,329 33,016,616 367,686 3,067,788 4,910,495 27,683,380 378,365

Community Non- Develoement {4) deeartmental

$ 2,442,356 $ 305,904 $ 2,311,048 103,820 1,557,445 9,095 3,925,736 56,093 5,549,375 45,503 5,699,361 7,653,814 5,186,187 2,843,672 4,133,801

(1) Includes General and Special Revenue funds of the Primary Government and the operating fund of its Discretely Presented Component Unit- School Board. Excludes Capital Projects. (2) Excludes contribution from Primary Government to Discretely Presented Component Unit- School Board. (3) 2010-2011 is the first year the Workforce Investment Board is included. (4) In 2010-20111he County paid $1 ,508,677towards the IDA debt

Table 3

Debt Service Total

2,526,021 $ 71,017,651 2,537,376 67,593,280 2,504,631 66,185,342 2,547,424 70,616,832 2,669,081 66,777,351 2,429,487 65,517,828 2,546,073 66,468,920 2,704,665 56,151,677 2,497,309 52,479,334 2,111,104 48,181,088

County of Russol, Virginia General Governmental Expaniturs by Function (1) Last Ten Fiscal Years

Table

Genel Pes,

Fiscal Government Susi Pate Pate Heath and Recreation, Communty Non Dest

Year Adminstration Adminstration Safety Worts Wille (3) Education 2)__and Cultural Development (8) departmental Service Tote 2142 $§ 2060380 $ 2 1140RT § SSNS $ 4 HIE ASA § AntBTIS § ANSE TZT § aay S — 2HIDIBB § © — OSSD § §—2828O § THOTT OST 201041 12850 2,106,641 5206797 402279882052 aoavses 5857032311048 1038202537376 67.593 280 200010 11837 928 2.218728 4.100378 8491432 6,608,904 1063824074171 857445 90s (2604 834 68,185,242 20808 1.702,193 2.236601 438,780, sosz2 |g 872387 42852183 47.104 «3,925 738 00247428 7o6i6, 832 2007-08 s7asat? 200704855, 4057 £95 5083514 5,898,035, 39724190 438.0885 540,375 45503 2.669081 66,777,381, 2006.07 1547 388 1.205.418 969.800, 3z0sz18 128.034 aimeo18 493266 899,361 242087 65,517,828 7005.08 310230, 1814640, 4022,185 3605915 5003.511 39574345 438.198 7653,814, 2546,073 8.468020 200806 varias 1058.86 977i 3434569 4.948.270, 83.030282 se. 8.186, 187 5 2704885 58,1516877 mmo.04 1216 860 957.320 358594 3100508 .403:329, saoteere = 367688 §=— 283672 2497,208 52.479,334 200203 1267.6 e740 3.651.450, 306778 = agn0.495 yresaged 378,365 4.193801, - Rane 49,181,088

({)lnctudes General and Special Raven funds of ne Paar Government andthe operaing fund of ts Decoy Presented Component Unt -Scheal Board, Excludes Cail Projects (2) Excludes contro tom Prmary Govertmert fo Dscetly Presented Component Unt - Schl Bear, (2) 2010-2015 the fest year the Workforce Investment Boards ince. (4) In20%0-2084 the County palé $1,508,677 towards he IDA deb.

Permits, General Other Privilege Fees,

Fiscal Property Local Regulatory Year Taxes Taxes (31 Licenses

County of Russell, Virginia General Governmental Revenues by Source (1)

Last Ten Fiscal Years

Revenue lrom !he

Fines Use of Charges and Money and for

Forfeitures Pro~ert~ Services Recovered Inter-

Miscellaneous Costs governmenlal(21, (31

2011-12 $ 12,813,407 $ 6,881,302 $ 28,272 $ 24,567 $ 65,238 $ 1,162,800 $ 394,657 $ 1,139,070 $ 46,119,628 $ 2010-11 13,548,896 6,340,919 22,834 1,206 73,514 1,101,993 416,883 898,399 2009-10 12,841,457 6,123,807 45,877 1,049 74,279 998,548 293,467 1,732,861 2008-09 12,540,392 7,779,265 39,662 1,168 117,983 1 '148,414 643,861 1,884,165 2007-08 11,826,325 7,976,046 44,933 321 501,144 1,023,848 510,972 796,913 2006-07 11,566,874 6,869,060 144,452 7,547 794,365 1,122,223 289,980 276,806 2005-06 12,337,123 6,713,063 52,707 8,181 660,142 878,017 310,534 187,855 2004-05 12,204,466 5,981,937 35,700 9,430 231,701 755,446 192,958 266,232 2003-04 10,148,719 4,820,255 38,906 9,938 74,324 892,392 209,598 283,077 2002-03 10,025,380 4,785,938 45,294 19,552 89,715 764,203 209,160 145,776

a, Cf! (1) Includes General and Special Revenue funds of the Primary Government and its Discretely Presented Component Unit- School Board. Excludes Capital Projects.

(2) Excludes contribution from Primary Government to Discretely Presented Component Unit- School Board. (3) 2009-10 is the first year State Communications tax is classified as noncategorical slate aid.

47,717,709 43,856,378 45,438,632 43,519,497 48,149,588 42,906,554 38,060,020 35,517,991 36,381,448

Table 4

Total

68,628,941 70,122,353 65,967,723 69,593,542 66,199,999 69,220,895 64,054,176 57,737,890 51,995,200 52,466,466

County of Russell, Virginia

General Governmental Revenues by Source (1) Last Ten Fiscal Years

Table 4

Revenue

Peimits, from the

Genera Other Privilege Fees, Fines Use of Charges Fiscal Property Local Regulatory and Money and for Recovered Inter Your Taxes. Taxes (3) Licenses Forfoitures __ Proper Services __Mscallaneous__Costs _ governmental (2), (3) Total

Dorit? $ 12813407 $ 6.881.302 § BT2 $ SST § HAW $ — 1.462800 $ BHAT $ 1,158070 $46,119,628 68,628,941 21041 13,548,895 6.340.919 22834 4206 73514 4,101,993 416,883 898,309 177,108 70,422:358 2008-10 12841457 6.123.807 45877 41069 14273 998,548 203467 1,732,864 43,856,378 85.967,723 208-09 12580392 1779265 39,662 4,168 117.683 1.108.404 ea3e51 1,884,165 45,428,652 469,593,542 207-08 11,828,325, 7,976,046 44,993 321 sot 14s 1023,848, 510.972 796,913 43519497 66,199,999 206.07 11,988,874 6,868,060 144452 7587 734,365 1,422,223, 289,980 276,808 48,189,588 69,220,895 2005-08 12397,123, 6,713,063 52707 8,181 660,142 878,017 310.534 187,855, 42:308,554 64,054,178 2004-05 12,204,466 5,981,937 36,700 9.490 231,70 755.448 192.958 266,282 38,060,020 57,737,890 2008-04 10,148,719 4,920,255 38,906 9.938 rage 092,392 209,598 23,077 35,517,991 51,995,200 7002.03 10,028,380 4,785,938 45,254 19.982 80715 764,203 709.180 145,76 36,981,448 52,406,466

(1) Includes General and Special Revenue funds ofthe Primary Government and is Discretely Presented Component Unit - School Board. Excludes Capital Projects. (2) Excludes conibution from Primary Government to Disretely Presented Component Unit - School Boar, (8) 2009-10 the frst year Slate Communications taxis classtied as noncategorical state al.

Total Current Fiscal Tax Tax Year Levy(1) Collections (1)

2011-12 $ 14,681,089 $ 13,185,991 2010-11 14,682,949 13,329,182 2009-10 14,169,807 13,038,906 2008-09 14,091,178 13,212,582 2007-08 13,784,900 12,618,969 2006-07 12,104,262 8,435,607 2005-06 11,360,623 11,118,399

a, 2004-05 10,576,870 9,740,619 0> 2003-04 9,070,812 8,274,805 ,

2002-03 8,989,461 8,106,975

(1) Exclusive of penalties and interest.

County of Russell, Virginia Property Tax Levies and Collections

Last Ten Fiscal Years

Percent Delinquent Total of Levy Tax Tax

Collected Collections (1) Collections

89.82% $ 723,190 $ 13,909,181 90.78% 1,330,697 14,659,879 92.02% 886,480 13,925,386 93.76% 496,787 13,709,369 91.54% 411,887 13,030,856 69.69% 863,735 9,299,342 97.87% 797,364 11,915,763 92.09% 537,362 10,277,981 91.22% 324,217 8,599,022 90.18% 361,604 8,468,579

Table 5

Percent of Percent of Total Tax Outstanding Delinquent

Collections Delinquent Taxes to to Tax Levy Taxes (1) Tax Levy

94.74% $ 4,693,121 31.97% 99.84% 3,847,456 26.20% 98.28% 3,624,318 25.58% 97.29% 3,506,132 24.88% 94.53% 3,234,367 23.46% 76.83% 1,628,182 13.45%

104.89% 1,854,243 16.32% 97.17% 1 ,849,194 17.48% 94.80% 1,772,141 19.54% 94.21% 1,853,569 20.62%

-9g-

County of Russell, Virginia Property Tax Levies and Collections.

Last Ten Fiscal Years

Table 5

Percent of Percent of

Total Curent Petoent Delinquent Total Total Tax Outstanding Delinquent

Fiscal Tax Tax ofLevy Tax Tax Collections Delinquent Taxes to

Year Lew (1) Collections (1) _Collected Collections (1)__Collections to TaxLewy Taxes (1) Tax Lew 2011-12 14,681,089 13,185,991 89.82% § 723,190 $ 13,909,181 94.74% § 4,693,121 31.97% 2010-11 14,682,949 13,329,182, 90.78% 1,330,697 14,659,879 99.84% 3,847,456 26.20% 2009-10 14,169,807 13,038,906 92.02% 886,480 13,925,386 98.28% 3,624,318 25.58% 2008-09 14,091,178 13,212,582 93.76% 496,787 13,709,369 97.29% 3,506,132 24.88% 2007-08 43,784,900 12,618,969 91.54% 41,887 13,030,858 459% © 3,234,967 23.46% 2006-07 12,104,262 8,435,607 69.69% 863,735 9,299,342 76.83% 1,628,182 13.45% 2005-06 11,380,623, 11,118,399 97.87% 797,364 11,915,763 104.89% 1,854,243, 16.32% 2004-05 10,576,870 9,740,619 92.09% 537,362 10,277,981 7.17% 1,849, 194 17.48% 2003-04 9,070,812 8,274,805 91.22% 324,217 8,599,022 94.80% 41,772,144 19.54% 2002-03 8,989,461 8,106,975 90.18% 361,604 8,468,579 94.21% 1,853,569 20.62%

(1) Exclusive of penalties and interest

Co -;-’

Fiscal Real Personal Year Estate (1) Properly

2011-12 $ 1,214,673,535 $ 251,383,699 $ 2010-11 1 '197, 720,260 235,114,151 2009-10 1,181,352,276 224,871,200 2008-09 1 '153,488,246 239,254,757 2007-08 1 '130,643, 127 243,837,948 2006-07 931,095,586 152,418,7 44 2005-06 927,558,386 241,849,424 2004-05 905,496,7 46 220,786,936 2003-04 885,323,887 205,377,101 2002-03 842,179,548 114,427,984

(1) Real estate is assessed al100% of fair market value.

County of Russell, Virginia Assessed Value of Taxable Property

Last Ten Fiscal Years

Machinery and Merchant’s

Tools Capital

60,747,073 $ 5,340,902 $ 82,948,411 5,136,529 96,552,183 5,402,115 93,960,621 5,501,882

107,205,468 5,742,600 99,124,678 4,954,226 92,859,770 5,113,134

102,287,891 4,160,621 77,287,167 3,438,802 78,930,645 3,051,245

(2) Assessed values are established by the State Corporation Commission-includes all property types.

Table 6

Mobile Public Homes Service (2) Total

23,401,571 $ 269,503,982 $ 1 ,825,050, 762 23,320,148 326,871 ,285 1,871,110,784 22,864,821 253,750,196 1 '784,792, 791 23,139,220 234,196,018 1,749,540,744 23,608,064 231,981,492 1,743,018,699 23,802,666 199,922,460 1,411,318,360 26,020,997 206,306,945 1,499,708,656 24,774,536 222,627,640 1 ,480,134,370 23,763,122 226,411 ,983 1,421,602,062 24,231,179 226,477,438 1,289,298,039

County of Russell, Virginia ‘Assessed Value of Taxable Property Last Ten Fiscal Years

Table 6

Machinery Fiscal Real Personal and Merchant’s Mobile Public Year Estate (1) Property Tools Capital Homes Service (2) Total

2011-12 4,214,873,595 $ 251,383,699 § 60,747,073 $ 5,340,902 $ 23.401.571 $ 269,503,982 $ _1,825,050,762 2010-11 1,197,720,260 235,114,181 82,948,441 5,136,529 23,320,148 326,871,285 1,871,110,784 2009-10 1,181,352,276 224,871,200 96,552,183 5,402,116 22,864,824 253,750,196 41,784,792,791 2008-08 1,153,488,246 289,254,757 99,960,621 5,501,882 23,199,200 234,196,018 1,749,540, 744 2007-08 1,130,643,127 243,837,048 107,205,468 5,742,600 23,608,064 231,981,492 1,743,018,699 2006-07 931,095,586 182,418,744 99,124,678 4,954,226 23,802,668, 199,922,460 1,811,318,360 2005-06 927,558,386 241,849,424 92,859,770 5,113,134 26,020,997 206,306,045 1,499,708 656 2004-05 905,496,746 220,786,936 102,287,891 4,160,621 24,774,536 222,627,640 41,480,134,370 2008-04 885,923,887 205,377,101 77,287,167 3,498,802 23,763,122 228,411,983 4,421,602,062 2002-03 842,179,548 114,427,984 78,930,645 3,081,245, 24,231,179 228,477,438 1,289,208,038

(1) Realestate is assessed at 100% of fair market value. (2) Assessed values are established by the State Corporation Commission-includs all property types.

Fiscal Real Year Estate

2011-12 (4) $ 0.61/0.70 $ 2010-11 0.61 2009-10 0.61 2008-09 0.61

2007-08(3) 0.56/0.61 2006-07(2) 0.65/0.56

2005-06 0.65 2004-05 0.60 2003-04 0.60 2002-03 0.55

(1) Per $100 of assessed value. (2) 2nd half 2006/1 st half 2007 (3) 2nd half 2007/1st half 2008 (4) 2nd half 2011/1st half 2012

County of Russell, Virginia Property Tax Rates (1) Last Ten Fiscal Years

Personal Machinery Property & Tools

1.65 $ 1.65 1.65 1.65 1.65 1.65 1.65 1.65 1.65 1.65 1.65 1.65 1.65 1.65 1.45 2.45 1.45 1.45 1.45 1.45

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Table 7

Merchant’s Mobile Capital Homes

$ 0.65 $ 0.61 0.65 0.61 0.65 0.61 0.65 0.61 0.65 0.56

NA 0.64 NA 0.64 NA NA NA NA NA NA

Table7 County of Russell, Virginia

Property Tax Rates (1)

Last Ten Fiscal Years

Fiscal Real Personal Machinery Merchant’s Mobile Year Esiate Property & Tools Capital Homes 2011-12(4) $ 0610.70 § 1.85 $ 165 § 085 $ ost 2010-11 061 1.85 1.85 0.65 ost 2009-10 ost 1.85 1.65 0.65 ost 2008-08 0st 1.85 165 0.85 ost 2007-08(3) 0.5610.61 1.85 185 0.65 0.56 2006-07(2) 0.65/0.58 1.85 1.65 NA 0.64 2005-06 0.85 1.65 1.65 NA 0.64 2004-05 0.60 1.45 2.45 NA NA 2003-04 0.80 1.45 1.45 NA NA 2002-03 0.55 1.45 1.45 NA NA (1) Per $100 of assessed value (2) 2nd haf 2006/tst half 2007 (3) 2nd haf 2007/1st half 2008 (4) 2nd hatf 2014/1st half 2012

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Table 8 County of Russell, Virginia

Ratio of Net General Bonded Debt to Assessed Value and Net Bonded Debt Per Capita

Last Ten Fiscal Years

Ratio of Net Bonded Net

Assessed Gross Net Debt to Bonded Fiscal Value (in Bonded Bonded Assessed Debt per Year Population (1) thousands) (2) Debt (3) Debt Value Capita

2011-12 28,897 $ 1,825,051 $ 12,666,629 $ 12,666,629 0.69% $ 438 2010-11 28,897 1,871,111 14,066,729 14,066,729 0.75% 487 2009-10 28,790 1 ,784,793 15,315,245 15,315,245 0.86% 532 2008-09 28,790 1,749,541 14,878,819 14,878,819 0.85% 517 2007-08 28,790 1,743,019 14,584,265 14,584,265 0.84% 507 2006-07 28,790 1,411,318 14,836,861 14,836,861 1.05% 515 2005-06 28,790 1,499,709 12,594,094 12,594,094 0.84% 437 2004-05 28,830 1 ,480,134 13,633,304 13,633,304 0.92% 473 2003-04 28,795 1,421,602 14,670,561 14,670,561 1.03% 509 2002-03 28,940 1,289,298 15,770,006 15,770,006 1.22% 545

(1) Bureau of the Census. (2) Real property assessed at 100% of the fair market value. (3) Includes all long-term general obligation bonded debt, bonded anticipation notes, and literary fund loans.

Excludes revenue bonds, landfill closure/post-closure care liability, capital leases, and compensated absences.

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Table 8 County of Russell, Virginia Ratio of Net General Bonded Debt to ‘Assessed Value and Net Bonded Debt Per Capita Last Ten Fiscal Years

Ratio of Net Bonded Net

Assessed Gross Net Debt to Bonded

Fiscal Value (in Bonded Bonded Assessed Debt per

Year Population (1) thousands) (2) Debi (3) Debt Value. Capita 2011-12 28007 $ 1,825,051 $ 12,686,629 § ©~——12,686,629 069% $ 438 2010-11 28.897 1871411 14,086,728 14,066,729 0.75% 487 2009-10 28,790 1,784,793 16,315,266 15,315,245 0.86% 532 2008-09 28,790 1,749,541 14,878,819 14,878,819 0.85% sir 2007-08, 28,790 1,743,018 14,584,265 14,584,265, 0.84% 507 2006-07 28,790 1,411,318 14,836,861 14,836,861 1.05% 515 2006-06, 28,790 1,499,709 12,594,094 12,594,094 0.84% 437 2004-05, 28,830 1,480,134 13,633,304 13,633,304 0.92% 3 2008-04 28,795 1,421,602 14,670,561 14,670,564 1.03% 509 2002-03, 28,940 41,289,298 16,770,006 18,770,006 1.22% 545

(1) Bureau of the Census.

(2) Real property assessed at 100% of the far market value.

{@) Includes at long-term general obligation bonded debt, bonded anticipation notes, and literary fund toans. Excludes revenue bonds, andfil closurelpostclosure care liability, capital leases, and compensated absences,

Table 9 County of Russell, Virginia

Ratio of Annual Debt Service Expenditures for General Bonded Debt to Total General Governmental Expenditures (1)

Last Ten Fiscal Years

Ratio of Total Debt Service

Total General to General Fiscal Debt Governmental Governmental Year Service Expenditures Expenditures

2011-12 $ 2,526,021 $ 71,017,651 3.56% 2010-11 2,537,376 67,593,280 3.75% 2009-10 2,504,631 66,185,342 3.78% 2008-09 2,547,424 70,616,832 3.61% 2007-08 2,669,081 66,777,351 4.00% 2006-07 2,429,487 65,517,828 3.71% 2005-06 2,546,073 66,468,920 3.83% 2004-05 1,775,036 56,151,677 3.16% 2003-04 1,742,481 52,479,334 3.32% 2002-03 1,658,923 48,181,088 3.44%

(1) Includes all governmental funds of the Primary Government and funds of the Discretely Presented Component Unit-School Board.

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Table 9 County of Russell, Vir Ratio of Annual Debt Service Expenditures for General Bonded Debt to Total General Governmental Expenditures (1) Last Ten Fiscal Years

Ratio of Total Debt Service Total General to General

Fiscal Debt Governmental Governmental

Year Sewice Expenditures __ Expenditures 2ott-t2 $ 2526021 $ 71,017,851 3.56% 2010-11 2,587,376 87,593,280 3.75% 2009-10 2,504,631 66,185,342 3.78% 2008-09 2,547,424 70,816,832 361% 2007-08 2,868,081 66,777,361 4.00% 2008-07 2,429,487 65.517.828 3.71% 2005-08 2,546,073 66,468,920 3.83% 2004-05 4,775,036 $6,151,877 3.16% 2003-04 1.742.481 52,879,384 3.32% 2002-08 4,658,923 48,181,088 3.44%

(1) Includes al governmental funds ofthe Primary Government and funds of the Discretely Presented Component Unit-School Board.

COMPLIANCE SECTION

ROBINSON, F ARMJER, Cox ASSOCIATES ClR 1 if ILD PUBLJC tiCCOfl/V 1 !ltV IS 11 PROJLSSJONAL L!Mll LD Lli1BJLJJ Y CO!I1P!lNY

REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN

AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS

To the Members of the Board of Supervisors County of Russell, Virginia Lebanon, Virginia

We have audited the financial statements of the governmental activities, the business-type activities, the discretely presented component units (School Board and Russell County Industrial Development Authority), each major fund, and the aggregate remaining fund information of the County of Russell, Virginia, as of and for the year ended June 30, 2012, which collectively comprise the County of Russell, Virginia’s basic financial statements and have issued our report thereon dated December 19, 2012. The report on the aggregate discretely presented component units was qualified because of the omission of the discretely presented component units (Russell County Public Service Authority and Castlewood Water and Sewage Authority). We conducted our audit in accordance with auditing standards generally accepted in the United States of America; the Specifications for Audits of Counties, Cities, and Towns, issued by the Auditor of Public Accounts of the Commonwealth of Virginia; 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

Management of the County of Russell, Virginia is responsible for establishing and maintaining effective internal control over financial reporting. In planning and performing our audit, we considered the County of Russell, Virginia’s 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 County of Russell, Virginia’s internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the County of Russell, Virginia’s internal control over financial reporting.

Our consideration of internal control over financial reporting was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control over financial reporting 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 described in the accompanying schedule of findings and questioned costs, we identified certain deficiencies in internal control over financial reporting that we consider to be material weaknesses.

A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. We consider the deficiencies 2012-1 and 2012-2 described in the accompanying schedule of findings and questioned costs to be material weaknesses.

-91-

ROBINSON, FARMER, COX ASSOCIATES

CUR IW ILD PUBLIC ACCOUNTANTS A PROFESSIONAL LIMITED LIABILITY COMPANY

REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS

To the Members of the Board of Supervisors County of Russell, Virginia Lebanon, Virginia

We have audited the financial statements of the govemmental activities, the business-ype activities, the discretely presented component units (School Board and Russell County Industrial Development Authority), each major fund, and the aggregate remaining fund information of the County of Russell, Virginia, as of and for the year ended June 30, 2012, which collectively comprise the County of Russel, Virginia’s basic financial statements and have issued ‘our report thereon dated December 19, 2012. The report on the aggregate disoretely presented component units was qualified because of the omission of the discretely presented component units (Russell County Public Service Authority and Castlewood Water and Sewage Authority). We conducted our audit in accordance with auditing standards generally accepted in the United States of America; the Specifications for Audits of Counties, Cities, and Towns, issued by the Auditor of Public Accounts of the Commonwealth of Virginia; and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States.

{intemal Control Over Financial Reporting

Management of the County of Russell, Virginia is responsible for establishing and maintaining effective intemal control over financial reporting. In planning and performing our audit, we considered the County of Russell, Virginia’s intemal 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 County of Russell, Virginia’s internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the County of Russell, Virginia’s internal control over financial reporting,

ur consideration of internal control over financial reporting was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control over financial reporting 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 described in the accompanying schedule of findings and questioned costs, we identified certain deficiencies in internal control over financial reporting that we consider to be material weaknesses

A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis, A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. We consider the deficiencies 2012-1 and 2012-2 described in the accompanying schedule of findings and questioned costs to be material weaknesses,

Compliance and Other Matters

As part of obtaining reasonable assurance about whether the County of Russell, Virginia’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 instances of noncompliance or other matters that are required to be reported under Government Auditing Standards and which are described in the accompanying schedule of findings and questioned costs as items 2012- 3and 2012-4.

We noted certain matters that we reported to management of the County of Russell, Virginia, in a separate letter dated December 19, 2012.

The County of Russell, Virginia’s responses to the findings identified in our audit are described in the accompanying schedule of findings and questioned costs. We did not audit the County of Russell, Virginia’s responses and, accordingly, we express no opinion on them.

This report is intended solely for the information and use of management, the Board of Supervisors, others within the entity, 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.

if’~tnz_, ~~ Cttiuaa~ Blacksburg, Virginia December 19,2012

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Compliance and Other Matters

As part of obtaining reasonable assurance about whether the County of Russell, Virginia’s financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracis, 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 instances of noncompliance or other matters that are required to be reported under Government Auditing Standards and which are described in the accompanying schedule of findings and questioned costs as items 2012- 3 and 20124

We noted certain matters that we reported to management of the County of Russell, Virginia, in a separate letter dated December 19, 2012.

The County of Russel, Virginia’s responses to the findings identified in our audit are described in the accompanying schedule of findings and questioned costs. We did not audit the County of Russell, Virginia’s responses and, accordingly, we express no opinion on them.

This repor is intended solely for the information and use of management, the Board of Supervisors, others within the entity, 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.

Hatemaon., Saumur, ly, lhsccicter

Blacksburg, Virginia December 19, 2012

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ROBINSON, fARMER, COX ASSOCIATES ClR 111 liD PI !JJLJC ACCOUN /;1N 15 A PROJ-LSS!Oi’L1L LIM/liD LfllBILIJY COAfPAl’d’

Independent Auditors’ 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

To the Members of the Board of Supervisors County of Russell, Virginia Lebanon, Virginia

Compliance

We have audited the County of Russell, Virginia’s compliance with the types of compliance requirements described in the OMB Circular A-133 Compliance Supplement that could have a direct and material effect on each of the County of Russell, Virginia’s major federal programs for the year ended June 30, 2012. The County of Russell, Virginia’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 of Russell, Virginia’s management. Our responsibility is to express an opinion on the County of Russell, Virginia’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 of Russell, Virginia’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 of the County of Russell, Virginia’s compliance with those requirements.

As described in item 2012-5 in the accompanying schedule of findings and questioned costs, the County of Russell, Virginia did not comply with requirements regarding allowable costs that are applicable to its Adult Education program. Compliance with such requirements is necessary, in our opinion, for the County of Russell, Virginia to comply with the requirements applicable to that program.

In our opinion, except for the noncompliance described in the preceding paragraph, the County of Russell, Virginia 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, 2012.

Internal Control Over Compliance

Management of the County of Russell, Virginia is responsible for establishing and maintaining effective internal control over compliance with the requirements of laws, regulations, contracts, and grants applicable to federal programs. In planning and performing our audit, we considered the County of Russell, Virginia’s internal control over compliance with the requirements that could have a direct and material effect on a major federal program to

-93-

ROBINSON, FARMER, COX ASSOCIATES

CERTIIED PUBLIC ACCOUNTANTS 11 PROFESSIONAL LIMITED LIABILIT > COMPANY

Independent Auditors’ 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

To the Members of the Board of Supervisors County of Russell, Virginia Lebanon, Virginia

Compliance

We have audited the County of Russell, Virginia’s compliance with the types of compliance requirements described in the OMB Circular A-133 Compliance Supplement that could have a direct and material effect on each of the County of Russell, Virginia’s major federal programs for the year ended June 30, 2012. The County of Russell, Virginia’s mejor 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 of Russell, Virginia’s management. Our responsibilty is to express an opinion on the County of Russell, Virginia’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 fo 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 of Russell, Virginia’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 of the County of Russell, Virginia’s compliance with those requirements.

‘As described in item 2012-6 in the accompanying schedule of findings and questioned costs, the County of Russell, Virginia did not comply with requirements regarding allowable costs that are applicable to its Adult Education program. Compliance with such requirements is necessary, in our opinion, for the County of Russell, Virginia to comply with the requirements applicable to that program.

In our opinion, except for the noncompliance described in the preceding paragraph, the County of Russell, Virginia complied, in all material respects, with the compliance requirements referred to above that could have a direct and material effect on each ofits major federal programs for the year ended June 30, 2012.

Internal Control Over Compliance

Management of the County of Russell, Virginia is responsible for establishing and maintaining effective intemal control over compliance with the requirements of laws, regulations, contracts, and grants applicable to federal programs. In planning and performing our audit, we considered the County of Russell, Virginia’s internal control over compliance with the requirements that could have a direct and material effect on a mejor federal program to

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determine the auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with OMB Circular A-133, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the County of Russell, Virginia’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 2012-5 to be a material weakness.

The County of Russell, Virginia’s response to the finding identified in our audit is described in the accompanying schedule of findings and questioned costs. We did not audit the County of Russell, Virginia’s response and, accordingly, we express no opinion on the response.

R~~~~,d,c~oa~ Blacksburg, Virginia December 19, 2012

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determine the auditing procedures for the purpose of expressing our opinion on compliance and to test and report cn internal control over compliance in accordance with OMB Circular A-133, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the County of Russell, Virginia’s internal control over compliance.

AA 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 contro! over compliance is @ 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 2012-5 to be a material weakness.

This report is intended solely for the information and use of management, the Board of Supervisors, others within the entity, federal awarding agencies, and pass-through enlilies and is not intended to be and should not be used by anyone other than these specified partes.

Halsinaon, Gaumer, ly Lescciates

Blacksburg, Virginia December 19, 2012

County of Russell, Virginia Page 1 of 4 Schedule of Expenditures of Federal Awards

For the Year Ended June 30,2012

Pass-through Federal Entity

Federal Grantor/State Pass· Through Grantor/ CFDA Identifying Federal Program Cluster or Title Number Number Expenditures

Department of Health and Human Services: Pass Through Payments:

Department of Social Services: Promoting Safe and Stable Families 93.556 0950111,0950112 $ 24,912 Temporary Assistance for Needy Families 93.558 0400111,0400112 419,053 Refugee and Entrant Assistance· State Administered Programs 93.566 0500t11,0500112 504 Low-Income Home Energy Assistance 93.568 0600411,0600412 34,013 Child Care and Development Fund Cluster:

Child Care and Development Block Grant 93.575 0770110,0770111 11,659 Child Care Mandatory and Matching Funds of the 93.596 0760111,0760112 72,318

Child Care and Development Fund Stephanie Tubbs Jones Child Welfare Services Program 93.645 0900111,0900112 1,346 Foster Care· Tille IV-E 93.658 1100111,1100112 413,488 Adoption Assistance 93.659 1120111, 1120112 320,174 Social Services Block Grant 93.667 1000111,1000112 269,259 Chafee Foster Care Independence Program 93.674 9150111,9150112 12,340 Children’s Health Insurance Program 93.767 0540111,0540112 9,528 Medical Assistance Program 93.778 1200111,1200112 200,229

Total Department of Health and Human Services $ 1,788,823

Department of Agriculture: Pass Through Payments:

Department of Agriculture: Child Nutrition Cluster:

Food Distribution-Schools (Note 3) 10.555 Not applicable $ 88,581

Department of Education: Child Nutrition Cluster:

National School Lunch Program 10.555 40623 919,243 National School Lunch Program Subtotal $ 1,007,824

Department of Education: Child Nutrition Cluster:

School Breakfast Program 10.553 40591 315,966 Fresh Fruit and Vegetable Program 10.582 40599 29,189

Department of Social Services: Slate Administrative Matching Grants for the Supplemental 10.561 0010111,0010112 $ 329,696

Nutrition Assistance Program 0040111,0040112

Total Department of Agriculture $ 1,682,675

U.S. Election Assistance Commission Pass Through Payments:

Virginia Board of Elections: Help America Vote Act Requirements Payments 90.401 40040 $ 11 ,400

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County of Russol, Virginia Page 1 of 4 ‘Schedule of Expenditures of Federal Awards For the Year Ended June 30, 2012

Pass-through Federal Entity Federal GrantoriState Pass - Through Grantor! CFDA Iontitying Federal Program Cluster or Title Number Number Expenditures Department of Heath and Human Services: ass Through Payments Deparment of Sacal Series Promoting Safe and Stable Farias 93.558 ogsortt,casor12 $24.2 Temporary Assistance fr Neody Farias 93.558 0400111, 0400112 419,058 Refugee end Entrant Assistance - State Administered Programs 93.586 0600111, 0500112 504 Low-income Home Energy Assistance 93.568 oso04, 0600412 34.018 ‘Child Care and Development Fund Cluster: Child Care and Development Block Grant 93.575 770110, 0770111 11.658 Child Care Mandatory and Maing Funds ofthe 93.596 76014, o7eott2 72318 Chile Care and Development Fund Stephanie Tubbs Jones Child Weare Services Program 93.645 0900111, g00t12 1346 Foster Care - Tile W-E 98658 sn0ottt, 1400112 413,488 ‘Adoption Assisiznce 93,659 siaontt, 1120112 oT Social Services Block Grant 93.887 1000114, 1000112 269,259 Chafee Foster Care Independence Program 93.674 9160141, g150112 1200 Ciéen’s Heath insurance Program 93.787 sort, 0540112 9528 Medical Assistance Program 93.778 ‘200%, 1200112 200,228 Total Department of Heath and Human Services $__1708.625 Department of Agriculture: Pass Through Payments: Depariment of Agriculture: Cig Netti Closter Food Distribution Schools (Note 3) 10.585 Not appticable $68.58 ‘Department of Education: Chi Nation Custer: National School Lunch Program 101885 i) National School Lunch Program Subtotal Department of Education Cid Nutriion Guster Schoo! Breakfast Program 10.559 40601 316,986 Fresh Ful and Vegoible Program 10582 40599 29,188 Department of Social Services State Administrative Metcing Gren forthe Supplemental 10564 10141, 10112 32900 Nation Assistznce Program oo4ot tt, ondort2 Total Deparment of Agriculture 1,982,675, U.S, Election Assistance Commission ess Through Payments Virginia Board of Etctions Hel Ameria Vote Act Requirements Payments 90401 40040

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County of Russell, Virginia Page 2 of 4 Schedule of Expenditures of Federal Awards

For the Year Ended June 30,2012

Pass-through Federal Entity

Federal Grantor/State Pass· Through Grantor/ CFDA Identifying Federal Program Cluster or Title Number Number Expenditures

Department of Justice: Direct Payments:

Bulletproof Vest Partnership Program 16.607 Not applicable $ 6,746

Pass Through Payments: Department of Criminal Justice Services: Violence Against Women Formula Grants 16.588 10WFAX0041 20,688

T olaf Department of Justice $ 27,434

Department of Transportation: Pass Through Payments:

Department of Motor Vehicles: State and Community Highway Safety 20.600 SC-2012 52260 4638 $ 12,722

SC-2011 51346 4288

Department of Education: Pass Through Payments: Department of Education: Adult Education - Basic Grants to Stales 84.002 42801 $ 444,681 Tille I Cluster:

Title 1: Grants to Local Educational Agencies 84.010 42901 1,731,003 ARRA ·Title 1: Grants to Local Educational Agencies 84.389 42913 100,000

Special Education Cluster: Special Education- Grants to States 84.027 43071 1,183,568 Special Education- Preschool Grants 84.173 62521 35,770 ARRA ·Special Education- Preschool Grants 84.392 61247 30,058

Career and Technical Education: Basic Grants to States 84.048 61095 93,778 Even Start - State Educational Agencies 84.213 42950 259,316 Twenty-First Century Community Learning Centers 84.287 60565 967,797 Education Technology State Grants 84.318 61600 1,795 Rural Education 84.358 43481 203,452 ARRA. Education Jobs Funds 84.410 62700 80,948 Improving Teacher Quality State Grants 84.367 61480 294,856

Total Department of Education $ 5,427,022

Department of Housing and Urban Development: Pass Through Payments: Department of Housing and Community Development: Community Development Block GranUState’s Program and Non-entitlement 14.228 50791 $ 589,252

Grants in Hawaii

Corporation on National and Community Service: Pass Through Payments: Department of Education:

Learn and Serve America- School and Community Based Programs 94.004 60185 $ 23,723

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County of Russel, Vis Page 2 of 4 ‘Schedule of Expenditures of Federal Awards For the Year Ended June 30, 2012 Pass-through Federal Entity Federal GrantoriState Pass - Through Grantor! CFDA Identifying Federal Program Cluster or Tile Number Number Expenditures Department of Justo: sect Payments: ‘Bulleiproot Vest Partnership Program 16607 ‘Not applicable $ are Pess Through Payments: Deparment of Criminal Juice Services Vilenoe Against Women Fomula Grants 16588 ‘OWFAXOO¢1 20.808 Total Department of stioe 27434 Deparment of Trensprtaton: ass Through Payments Department of Motor Vehicles: ‘State and Community Highway Safety 20.600 ‘SC-2012 52260 4698 80-2011 519464288 Deparment of Education Pass Through Paymenis: Departmen of Edaton: ‘Adult Education - Basic Grants to States 4.002 42801 $444.68 Tie | Custer Tite | Grants to Local Educational Agencies 84010 42201 4731,003 ARRA Tie |: Grants to Local Educational Agencies 84.368 423 100.000 ‘Special Education Custer: ‘Special Education - Grants to States 24.027 sort 1,183,568 ‘Special Education - Preschool Grants 84173 62521 35770 ‘ARPA - Special Education - Preschool Grants 84.392 6107 30,088 Career and Technical Eoucaton: Basic Granls to States 24.048 81085 978 Even Stet Siete Edvcational Agencies 213 42950 259316 “Twonly-Fist Century Community Leeming Centors 84.287 60865 967,797 Education Technology State Grants este 6600 1795 Rural Education 84.358 4381 703.452 |ARRA - Education Jobs Funds 84.410 62700 Improving Teacher Gualty State Grants 84.67 61460 “Total Department of Education Department of Housing and Urban Development Pss Through Payments: Department of Housing and Community Development ‘Community Development Block Gren¥State’s Program and Norenttlement 4208 50791 S$ 589.252 Granisin Hawai Corporation on National and Community Servic: Pss Through Payments: Department of Educaton: Loam and Serve America - School and Communily Besed Programs 94.004 60185 23723

County of Russell, Virginia Schedule of Expenditures of Federal Awards

For the Year Ended June 30,2012

Federal Grantor/State Pass- Through Grantor/ Program Cluster or Title

Federal CFDA

Number

Department of Labor: Pass Through Payments: Department of Education: Workforce Investment Acl Cluster:

WIA Adult Program

Virginia Community College System: Workforce Investment Act Cluster:

WIA Adult Program WIA Adult Program Total

WIA Youth Activities WIA Dislocated Workers

Total Department of Labor

U.S. Department of Homeland Security: Pass Through Payments: Department of Emergency Management: Stale Homeland Security Program Emergency Management Performance Grant Homeland Security Grant Program

Total U.S. Department of Homeland Security

Total Expenditures of Federal Awards

Note 1 – Basis of Presentation

17.258

17.258 17.258

17.259 17.260

97.073 97.Q42 97.053

Pass-through Entity

Identifying Number

53427

53427 53427

527 41 146

52727

Page 3 of 4

Federal Expenditures

38,000

768,424 806,424

987,669 236,963

$ 2,031,056

$ 16,767 14,060 8,000

$ 38,827

$ 11,632,934

The accompan~ng schedule of expenditures of federal awards (the Schedule) includes lhe federal grant acl’lvity of Russell County, Virginia under programs of lhe federal government for the year ended June 30, 2012. The information in lhis Schedule is presented in accordance with lhe requirements of OMB Circular A-133, Audffs of States, Local Governments, and Non-Profit Organizations. Because the Schedule presents only a selected portion of lhe operations of Russell County, Virginia, it is not intended to and does not present the financial position, changes in net assets, or cash flows of Russell County, Virginia.

Nole 2 --Summary of Significant Accounting Policies (1) Expenditures reported on the Schedule are reported on lhe accrual basis of accounting. Such expenditures are recognized following the cosl principles contained in OMB Circular A-87, Cost Principles for State, Local, and Indian Tribal Governments, wherein certain types of expenditures are not allowable or are limited as to reimbursement. (2) Pass-through entity identifying numbers are presented where available.

Nole 3 – Food Dislnbulion Nonmonetary assistance is reported in the schedule at lhe fair market value of the commodities received and disbursed. At June 30, 2012 Russell County, Virginia had food commodities totaling $0 in inventory.

Note 4 – Subrecipients Of lhe federal expenditures presented in the Schedule, Russell County, Virginia provided federal awards lo subrecipients as follows:

CFDA Number Program Name Amount 14.228 Community Development Block Grant $ 589,252

17.258, 17.259, 17.260 Workforce Investment Act Cluster 1,993,056

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County of Russel, Virginia Page 30f 4 ‘Schedule of Expenditures of Federal Awards For the Year Ended June 20, 2012

Passhrough Federal Entity Fedora GrantorState Pass-Through Grantor! CFDA entitying Federal Program Cluster or Title Number Number Expenditures Department of Labor: Pass Through Paynents Deparment of Education ‘Workforce investment Act Custer: WIA Adu Program 17.2058 swat $s 38000 Vigiia Communty Colege System ‘Wortorce Imesiment Act Custer: WU Adit Program 17258 sar 788,404 WU Aut Program Total 17258 5327 5m 424 \WIA Youth Activites 17259 suaT WIA Dislocated Workers 47260 5327 Toll Department of Labor U.S, Deparment of Homeland Secu Pass Through Payments Deparment of Emergency Management Slate Homeland Senuly Program 97.073 2707, 82741 3 16767 Emerganey Management Perermance Grant sr 146 +4080 Homeland Secuty Grant Program 97.053 sum 8000

Total US. Department of Homeland Security

‘Total Expenditures of Federal Awards

Note + ~ Bass of Presentation ‘Te accompenying schedule of expenditures of federal awards (the Schedule) includes the federal gent ecivty of Russell Coun, Virginia under programs ‘ofthe federal goverment far the year ended June 20, 2012, The information inthis Schedule is presented in accordance with the requirements of OMB Circular A193, Audits of States, Local Governments, and Non-Proft Organizations. Because the Schedule presents only @ selected portion of the ‘operations of Russel County, Virginia, itis not intended to and does not present the financial poston, changes in nat asses, or cash flows of Russell County, Vegi

Note 2 ~- Summary of Significant Accounting Potiies

(1) Expenditures reported onthe Schedule ae reported on the accrual basis of aocounting. Such expenditures are recognized folowing the cost princigtes ‘contained in OMB Circular A‘7, Cost Prnooles for Stat, Local, end indian Tribal Governments , wherein certain types of expencttures are not allowable or ate Brite 2 to reimbursement

(2) Pass-through enity identifying numbers ae presected wire avaiable.

Note 3 Food Distribution [Norwmonetary assistance is reported in the schedule atthe fir market value of the commodities roceived and disbursed, AL June $0, 2012 Russell County, Virginia had food commodities toting $0 in inventory.

Note 4 ~ Subreciplents ‘Ofte federal expenditures presented inthe Schedule, Russell Couniy, Vigna provided federal awards to subrecipients as flows:

CEDA Numer Program Name ‘Amount 14228 Cominunity Development Bock Grant $589,252 1.258, 17.259, 17.280 Worsorce Investment Act Custer 1,908,056

Note 5 – Relationship to the Financial Slalemenls

County of Russell, Virginia Schedule of Expenditures of Federal Awards

For the Year Ended June 30,2012

Federal expenditures, revenues and capital contributions are reported in the County’s basic financial statements as follows:

Intergovernmental federal revenues per the basic financial statements: Primary government: General Fund Workforce Investment Board Fund

Total primary government:

Component Unit Schools: School Operating Fund

Total federal expenditures per the Schedule of Expenditures of Federal Awards

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Page 4 of 4

$ 2,798,154 1,993,056

$ 4,791,210

$ 6,841,724

$ 11,632,934

County of Russell, Virginia, Schedule of Expenditures of Federal Awards For the Year Ended June 30, 2012

Page dof 4

‘Note 6 ~ Relationship fo the Financial Statements Federal expenditures, revenues and capital contributions are reported inthe County’ basic nancial statements as flows:

Intergovornmental federal revonves per the basic financial stalements: Primary government General Fund Workforce Investment Board Fund

Total pimary government

‘Component Unit Schools: ‘School Operating Fund

‘Total federal expenditures per the Schedule of Expenditures of Federal Awards

8 $ 4791210 Seas 7o4

County of Russell, Virginia

Schedule of Findings and Questioned Costs Year Ended June 30, 2012

Section I . Summary of Auditor’s Results

Financial Statements

Type of auditor’s report issued:

Internal control over financial reporting: Material weakness(es) identified?

Significant deficiency(ies) identified?

Noncompliance material to financial statements noted?

Federal Awards

Internal control over financial reporting: Material weakness(es) identified?

Significant deficiency(ies) identified?

Type of auditor’s report issued on compliance for major programs:

Any audit findings disclosed that are required to be reported in accordance with Circular A-133, Section .510 (a)?

Identification of major programs:

CFDA# Name of Federal Program or Cluster

84.173/84.027/84.392 84.010184.389 10.553110 555

14.228

Special Education Cluster Title 1: Part A Cluster Child Nutrition Cluster Community Development Block Grant

84.002 84.287

Adult Education - Basic Grants to States Twenty-first Century Community Learning Centers

Dollar threshold used to distinguish between Type A and Type B programs:

Auditee qualified as low-risk auditee?

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Qualified

Yes

Qualified

Yes

$348,988

County of Russell, Virginia

‘Schedule of Findings and Questioned Costs Year Ended June 30, 2012

Section |- Summary of Auditor’s Results

Financial Statements Type of auditor’s repor issued Quelied Internal control over financial reporting Material weakness(es)identiied”? Yes Significant deficiencyies) identified? No Noncompliance materia to financial statements noted? Yes Federal Awards Internat control over financial reporting ‘Material weakness(es)identtiod? Yes Significant deficiency(ies) identified? No ‘Type of auditors report issued on compliance for major programs: ‘Qualified

Any aucit findings disclosed that are required to be

‘reported in accordance with Circular A-133,

Section .510 (a)? Yes Identification of major programs:

CFDA Name of Federal Program or Cluster

84.173184,027184.392 Special Education Cluster 84.010/84.389 Title: Part A Cluster

10.553/10.585 Child Nutrition Cluster 14.228 Community Development Block Grant 84.002 Adult Education - Basic Grants to States 84.287 Twenty-first Century Community Learning Centers

Dolar threshold used to distinguish between Type A and Type B programs: $348,988

Auditee qualified as low-risk auditee? No

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County of Russell, Virginia

Schedule of Findings and Questioned Costs Year Ended June 30, 2012

Section II • Financial Statement Findings

2012·1

Criteria:

Condition:

Cause of Condition:

Effect of Condition:

Recommendation:

Management’s Response:

2012·2

Criteria:

Condition:

Cause of Condition:

Effect of Condition:

Recommendation:

Management’s Response:

Per Statement on Auditing Standards 115 (SAS 115), identification of a material adjustment to the financial statements lhat was not detected by the entity’s internal controls indicates that a material weakness exists.

The financial statements, as presented for audit, did not contain all necessary adjustments to comply with generally accepted accounting principles (GMP). As such, the auditor proposed adjustments that were material to the financial statements.

The County does not have proper controls in place to detect and correct errors in closing their year end financial statements.

There is more than a remote likelihood that a misstatement of the County’s financial statements that is more than inconsequential will not be prevented or detected by the County’s internal controls over financial reporting.

The County should review the auditors’ proposed audit adjustments for 2012 and develop a plan to ensure the tr’1al balances and related schedules are accurately presented for audit.

The County will review the auditors’ proposed audit adjustments for 2012 and will develop a plan of action to ensure that all adjusting entries are made prior to final audit fieldwork next year.

A key concept of internal controls is the segregation of duties. No one employee should have access to both accounting records and related assets.

The School Board lacks proper segregation of duties over payroll.

The School Board lacks the funding to fully support a completely segregated finance department.

Management should further try to segregate duties amongst current staff to help alleviate risk created by improper segregation of duties.

Management acknowledges that internal controls over School Board payroll lacks proper segregation of duties and has hired a Finance Director that should reduce the risk due to segregagtion of duties. The new Director was hired at the end of fiscal year 2012 which should alleviate the issue for fiscal year 2013.

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County of Russell, Virginia

‘Schedule of Findings and Questioned Costs Year Ended June 30, 2012

‘Section Il - Financial Statement Findings

20124

Criteria: Per Statement on Auditing Standards 115 (SAS 115), identification of a material adjustment to the financial statements that was not detected by the entity’s intemal controls indicates that a material weakness exists

Coneiton: ‘The financial statements, as presented for audit, did not contain all necessary axjustments to

comply with generally accepted accounting principles (GAAP). As such, the auditor proposed adjustments that were material tothe Financial statements,

Cause of Condition: The County does not have proper controls in place to detect and correct errors in closing their year end financial statements

Effect of Condition: There is more than a remote likelihood that a misstatement of the County’s financial statements that is more than inconsequential wil not be prevented or detected by the County’s internal controls ‘over financial reporting.

Recommendation: The County should review the auditors’ proposed audit adjustments for 2012 and develop a plan to ensure the tial balances and related schedules are accurately presented for audit

Management’s ‘The County will review the auditors’ proposed audit adjustments for 2012 and will develop a plan of Response action to ensure that all adjusting entries are made prior to final aut fieldwork next year 2012-2 Criteria AA key concept of intemal controls is the segregation of duties. No one employee should have

‘access fo both accounting records and related assets. Condition: ‘The Schoo! Board lacks proper segregation of duties over payroll

Cause of Condition: The School Board lacks the funding to fully support a completely segregated finance department.

Effect of Condition: There is more than a remote likelihood that a misstatement of the County financial statements that is more than inconsequential wil not be prevented or detected by the County’s internal contols ‘over financial reporting

Recommendation: Management should further try to segregate duties amongst current staff to help alleviate risk ‘created by improper segregation of duties,

Management’s Management acknowledges that internal controls over School Board payroll lacks proper Response: segregation of duties and has hired @ Finance Director that should reduce the risk due to segregagtion of duties. The new Ditector was hired at the end of fiscal year 2012 which should

alleviate the issue for fiscal year 2013,

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County of Russell, Virginia

Schedule of Findings and Questioned Costs Year Ended June 30,2012

Section II • Financial Statement Findings (continued) 2012·3

Criteria:

Condition:

Cause of Condition:

Effect of Condition:

Recommendation:

Management’s Response:

2012-4

Criteria:

Condition:

Context:

Cause of Condition:

Effect of Condition:

Recommendation:

Management’s Response:

The Code Qf Virginia, (1950), as amended requires that an appropriation exists prior to the expenditure of funds.

The IDA Debt Reduction Fund, VPA Expenditures Fund, Cannery Fund, Textbook Fund, Workforce Investment Fund and Law Library Fund overspent the budget. Numerous departments within the General fund also overspent their budget.

The County has never posted supplemental appropriations to the accounting system.

The County has not met the requirements of the Code of Virginia, (1950), as amended.

The County should budget to include appropriations for all necessary expenditures.

Management will post additional appropriations to the accounting system and pay closer attention to budgeted and actual expenditures.

The Code Qf Virginia, (1950), requires that GSA pool expenditures be related to public or private nonresidential or residential services for troubled youths and families. The Auditor of Public Accounts (APA) requires that requests for these expenditures be supported with written contracts, service agreements, or invoices.

The County requested and received reimbursement for one month of GSA pool expenditures twice.

Reimbursement requests exceeded annual expenditures by $125,649.

Staff turnover and job responsibility transitions.

The County received a duplicate reimbursement for expenses totaling $125,649 resulting in an overpayment from the Commonwealth.

The County should closely monitor expenses that are requested for reimbursement.

Management will closely review all expenses that are requested for reimbursement and ensure that transfers of job responsibilities go smoother in the future.

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County of Russell, Virginia

‘Schedule of Findings and Questioned Costs,

Year Ended June 30, 2012

‘Section lI - Financial Statement Findings (continued)

2012-3

Criteria:

Condition:

Cause of Condition:

The Code of Virginia, (1950), as amended requires that an appropriation exists prior to the expenditure of funds,

‘The County has never posted supplemental appropriations tothe accounting system.

Effect of Condition: The County has not met the requirements ofthe Code of Virainia, (1950), as amended. Recommendation: The County should budget to include appropriations for all necessary expenditures. Management’s Management will post additional appropriations tothe accounting system and pay closer attention Response: to budgeted and actual expenditures. 202-4 Criteria: ‘The Code of Virginia, (1950), requires that CSA pool expensitures be retated to public or private nonresidential or residential services for troubled youths and families. The Auditor of Pubéc Accounts (APA) requires that requests for these expenditures be supported with written contracts, service agreements, or invoices. Condition ‘The County requested and received reimbursement for one month of CSA pool expenditures twice. Context Reimbursement requests exceeded annul expenditures by $125,649. Cause of Condition: Staff turnover and job responsibilty transitions, Effect of Condition: The County received a duplicate reimbursement for expenses totaling $125,649 resulting in an ‘overpayment from the Commonwealth Recommendation: The County should closely monitor expenses that are requested for reimbursement Management’s Management wil closely review all expenses that are requested for reimbursement and ensure that Response: transfers of ob responsibilities go smoother inthe future.

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County of Russell, Virginia

Schedule of Findings and Questioned Costs Year Ended June 30, 2012

Section Ill · Federal Award Findings and Questioned Costs

Statement of Condition:

Criteria:

Context:

Cause:

Effect:

Questioned Costs:

Recommendation:

Management’s Response and

Planned Corrective Actions:

Adult Education • Basic Grants to States -CFDA 84.002 Award Number V002A10047, Award Year 2010 and V002A110047, Award Year 2011

Allowable costs: The School Board charged a number of bills to the Program based on budgeted amounts and not actual amounts spent. In addition, a large portion of these expenditures were paid in advance of receiving the goods or services.

Expenditures submitted for reimbursement should be traced to an exact cost and documented appropriately.

Eighteen invoices were selected for review. The above instances of noncompliance were noted in six of the invoices.

Desire to use up money prior to losing it.

Reimbursement requests are not supported by documentation specifically related to the program.

The School Board has $35,450 in questioned costs.

The School Board should review each reimbursement request to verify that it is supported appropriately by allowable expenditures.

The School Board will review each reimbursement request to verify that it is supported appropriately by allowable expenditures.

Section IV · Status of Prior Audit Findings and Questioned Costs

Financial Statement Findings 2011-1, 2011-2, and 2011-3 recurred during fiscal year 2012. Federal Award Findings and Questioned Costs 2011-5 recurred during fiscal year 2012 but was not material to the Financial Statements. Federal Award Findings and Questioned Costs 2011-6 was corrected during fiscal year 2012.

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County of Russell, Virginia

Schedule of Findings and Questioned Costs Year Ended June 30, 2012

Section lll - Federal Award Findings and Questioned Costs

20125 ‘Adult Education - Basic Grants to States -CFDA 84.002 Award Number V002A10047, Award Year 2010 and V002A110047, Award Year 2011 Statement of Allowable costs: The School Board charged a number of bls to the Program based on budgeted Coneition ‘amounts and not actual amounts spent. In addlion, a lage portion of these expenditures were paid in advance of receiving the goods or services. Criteria Expenditures submitted for reimbursement should be traced to an exact cost and documented appropriately

Eighteen invoices were selected for review. The above instances of noncompliance were noted in

Context six f the invoices. Cause Desire to use up money prior to losing It Effect Reimbursement requests are not supported by documentation specficaly related to the program.

‘Questioned Costs: The School Board has $35,450 in questioned costs,

The School Board should review each reimbursement request to verify that it is. supported

Recommendation: ar cropriately by allowable expenditures, Management’s Response and ‘The School Board wil review each reimbursement request (0 very that itis supported Planned Corrective appropriately by allowable expenditures. Actions

‘Section IV - Status of Prior Audit Findings and Questioned Costs

Financial Statement Findings 2011-1, 2011-2, and 2011-3 recurred during fiscal year 2012. Federal Award Findings and ‘Questioned Costs 2011-5 recurred during fiscal year 2012 but was not material to the Financial Statements. Federal Award Findings and Questioned Costs 2011-6 was corrected during fiscal year 2012.

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