2016-Audit

2016-Audit

Document Date: January 1, 2016 Document: 2016-Audit.pdf

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COUNTY OF RUSSELL, VIRGINIA

ANNUAL FINANCIAL REPORT

FOR THE YEAR ENDED JUNE 30, 2016

COUNTY OF RUSSELL, VIRGINIA ANNUAL FINANCIAL REPORT

FOR THE YEAR ENDED JUNE 30, 2016

COUNTY OF RUSSELL, VIRGINIA ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED JUNE 30, 2016

TABLE OF CONTENTS

INTRODUCTORY SECTION

Page List of Elected and Appointed Officials … 1

FINANCIAL SECTION

Independent Auditors’ Report … 2-4

Exhibit Page Basic Financial Statements:

Government-wide Financial Statements: Statement of Net Position … 1 5-6 Statement of Activities … 2 7

Fund Financial Statements: Balance Sheet – Governmental Funds … 3 8

Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position … 4 9 Statement of Revenues, Expenditures and Changes in Fund Balances –

     Governmental Funds ...........................................................................  5 10

Reconciliation of the Statement of Revenues, Expenditures, and Changes

     in Fund Balances of Governmental Funds to the Statement of Activities  .............  6 11

Statement of Net Position – Proprietary Funds … 7 12

Statement of Revenues, Expenses, and Changes in Net Position – Proprietary Funds … 8 13

Statement of Cash Flows – Proprietary Funds … 9 14 Statement of Fiduciary Net Position – Fiduciary Funds … 10 15

Notes to the Financial Statements … 16-75

Required Supplementary Information:

Schedule of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual General Fund … 11 76 Special Revenue Fund – Coal Road Fund … 12 77 Special Revenue Fund – Workforce Investment Board Fund … 13 78 Schedule of OPEB Funding Progress … 14 79 Schedule of Employer’s Proportionate Share of Net Pension Liability … 15 80 Schedule of Components of and Changes in Net Pension Liability and Related Ratios – Component Unit School Board (nonprofessional) … 16 81 Schedule of Employer Contributions … 17 82 Notes to Required Supplementary Information … 18 83

CouNrTY OF RUSSELL, VIRGINIA ANNUAL FINANCIAL REPORT For THE YEAR ENDED JUNE 30, 2016

TABLE OF CONTENTS

INTRODUCTORY SECTION Page List of Elected and Appointed Officials… 1 FINANCIAL SECTION Independent Auditors’ Report … 24 Exhibit Page Basic Financial Statements: Government-wide Financial Statements: Statement of Net Position . 1 56 Statement of Activities 2 7 Fund Financial Statemen Balance Sheet - Governmental Funds … 3 8 Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position … 4 9 Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental Funds … 5 10 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities . 6 ot Statement of Net Position - Proprietary Funds … 7 2 Statement of Revenues, Expenses, and Changes in Net Position - Proprietary Funds 8B Statement of Cash Flows - Proprietary Funds. 9 14 Statement of Fiduciary Net Position - Fiduciary Funds 1015 Notes to the Financial Statements … 16-75 Required Supplementary Information: Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual

General Fund . 7%

Special Revenue Fund - Coal Road Fund Rn 77

Special Revenue Fund - Workforce Investment Boar 3 (7B Schedule of OPEB Funding Progress . 14 «79 Schedule of Employer’s Proportionate Share of Net Pension Liability. 1580 Schedule of Components of and Changes in Net Pension Liability

and Related Ratios - Component Unit School Board (nonprofessional) . 16 81

Schedule of Employer Contributions … 17 82 Notes to Required Supplementary Information 18 83

COUNTY OF RUSSELL, VIRGINIA ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED JUNE 30, 2016

TABLE OF CONTENTS (CONTINUED)

FINANCIAL SECTION (CONTINUED)

Exhibit Page Other Supplementary Information:

Combined Statement of Changes in Assets and Liabilities – Agency Funds … 19 84

Discretely Presented Component Unit – School Board:

Balance Sheet … 20 85 Statement of Revenues, Expenditures, and Changes in Fund Balances –

Governmental Funds … 21 86 Schedule of Revenues, Expenditures, and Changes in Fund Balances –

Budget and Actual … 22 87

Schedule Page Supporting Schedules:

Schedule of Revenues – Budget and Actual - Governmental Funds … 1 88-92

Schedule of Expenditures – Budget and Actual - Governmental Funds … 2 93-95

Other Statistical Information: Table Page

Government-wide Information: Government-Wide Expenses by Function … 1 96 Government-Wide Revenues … 2 97

Fund Information:
General Governmental Expenditures by Function … 3 98 General Governmental Revenues by Source … 4 99 Property Tax Levies and Collections … 5 100

Assessed Value of Taxable Property … 6 101 Property Tax Rates … 7 102 Ratio of Net General Bonded Debt to Assessed Value and Net Bonded Debt Per Capita … 8 103 Ratio of Annual Debt Service Expenditures for General Bonded Debt to
Total General Governmental Expenditures … 9 104

COUNTY OF RUSSELL, VIRGINIA ANNUAL FINANCIAL REPORT For THE YEAR ENDED JUNE 30, 2016

TABLE OF CONTENTS (CONTINUED)

FINANCIAL SECTION (CONTINUED)

Exhibit Other Supplementary Information: Combined Statement of Changes in Assets and Liabilities - Agency Funds … 19 Discretely Presented Component Unit - School Board Balance Sheet … 20 Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds a Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual . 2 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 . 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… 8 Ratio of Annual Debt Service Expenditures for General Bonded Debt to Total General Governmental Expenditures. 9

85 86 87

Page

88-92 93-95

Page

96 97

98 99 100 101 102

103

104

COUNTY OF RUSSELL, VIRGINIA ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED JUNE 30, 2016

TABLE OF CONTENTS (CONTINUED)

COMPLIANCE SECTION

Page

Independent Auditors’ Report on Internal Control over Financial Reporting and on

Compliance and Other Matters Based on an Audit of Financial Statements Performed
in Accordance with Government Auditing Standards … 105-106

Independent Auditors’ Report on Compliance for Each Major Program and on Internal
Control over Compliance Required by Uniform Guidance … 107-108

Schedule of Expenditures of Federal Awards … 109-110 Schedule of Findings and Questioned Costs … 111-113

CouNTY OF RUSSELL, VIRGINIA ANNUAL FINANCIAL REPORT For THE YEAR ENDED JUNE 30, 2016

TABLE OF CONTENTS (CONTINUED)

COMPLIANCE SECTION

Independent Auditors’ Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed

in Accordance with Government Auditing Standards …

Independent Auditors’ Report on Compliance for Each Major Program and on Internal Control over Compliance Required by Uniform Guidance

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

105-106

107-108

109-110 111-113

INTRODUCTORY SECTION

COUNTY OF RUSSELL, VIRGINIA

BOARD OF SUPERVISORS

Steve Breeding, Chairman David Eaton, Vice Chairman Tim Lovelace Lou Wallace Carl Rhea Rebecca Dye Mark Mitchell

COUNTY SCHOOL BOARD

Donnie Ramey, Chairman Cynthia Compton, Vice Chairman Jeff Cook Wayne Bostic Linda Garrett
Charlie Collins Alex Zachwieja, Jr.

SOCIAL SERVICES BOARD

Laurel Rasnick, Chairman Roger Brown, Vice Chairman Rebecca Dye Bill Hale Brian Ferguson

OTHER OFFICIALS

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 … Dr. Brenda Hess Director of Social Services … Patrick Brunty County Administrator … Lonzo Lester County Attorney … Matthew Crum

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COUNTY OF RUSSELL, VIRGINIA

BOARD OF SUPERVISORS Steve Breeding, Chairman David Eaton, Vice Chairman Tim Lovelace Lou Wallace Carl Rhea Rebecca Dye Mark Mitchell COUNTY SCHOOL BOARD Donnie Ramey, Chairman Cynthia Compton, Vice Chairman Jeff Cook Wayne Bostic Linda Garrett Charlie Collins Alex Zachwieja, Jr.

SOCIAL SERVICES BOARD

Laurel Rasnick, Chairman Roger Brown, Vice Chairman Rebecca Dye Bill Hale Brian Ferguson

OTHER OFFICIALS

Clerk of the Circuit Court Commonwealth’s Attorney . Commissioner of the Revenue Treasurer Sheriff. Superintendent of Schools . Director of Social Services . County Administrator County Attorney…

Ann S. McReynolds … Brian Patton -Randy N. Williams «Patrick Thompson “Steve Dye Dr. Brenda Hess Patrick Brunty Lonzo Lester Matthew Crum

FINANCIAL SECTION

ROBINSON, FARMER, COX ASSOCIATES

A PROFESSIONAL LIMITED LIABILITY COMPANY CERTIFIED PUBLIC ACCOUNTANTS

Independent Auditors’ Report

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

Report on the Financial Statements

We have audited the accompanying financial statements of the governmental activities, the business-type activities, the discretely presented component units, each major fund, and the aggregate remaining fund information of the County of Russell, Virginia, as of and for the year ended June 30, 2016, and the related notes to the financial statements, which collectively comprise the County’s basic financial statements as listed in the table of contents.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express opinions on these financial statements based on our audit. We did not audit the financial statements of Russell County Public Service Authority. Those statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for the Russell County Public Service Authority, is based solely on the reports of the other auditors. 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 from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

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ROBINSON, FARMER, COX ASSOCIATES

A PROFESSIONAL LIMITED LIABILITY COMPANY CERTIFIED PUBLIC ACCOUNTANTS

Independent Auditors’ Report

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

Report on the Financial Statements

Management’s Responsibility for the Financial Statements

Auditors’ Responsibility

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

Basis for Qualified Opinion on the Aggregate Discretely Presented Component Units

The financial statements referred to above do not include the financial data of the County’s legally separate Component unit - The Industrial Development Authority of Russell County, Virginia (IDA), which accounting principles generally accepted in the United States of America require to be reported with the financial data of the primary government. As a result, the primary government financial statements do not purport to, and do not, present fairly the financial position of the reporting entity of the County of Russell, Virginia as of June 30, 2016, and the changes in its financial position for the year then ended in conformity with accounting principles generally accepted in the United States of America.

Qualified Opinion

In our opinion, except for the possible effects of the matter described in the “Basis for Qualified Opinion on the Aggregate Discretely Presented Component Units” paragraph, the financial statements referred to above present fairly, in all material respects, the financial position of the aggregate discretely presented component units of the County of Russell, Virginia, as of June 30, 2016, and the changes in financial position thereof for the year then eneded in accordance with accounting principles generally accepted in the United States of America.

Unmodified Opinions

In our opinion, based on our audit and the report of other auditors, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the County of Russell, Virginia, as of June 30, 2016, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Change in Accounting Principle

As described in Note 20 to the financial statements, in 2016, the County adopted new accounting guidance, GASB Statement No. 82 Pension Issues – an amendment of GASB Statements No. 67, No. 68, and No. 73. Our opinion is not modified with respect to this matter.

Other Matters

Required Supplementary Information

Accounting principles generally accepted in the United States of America require that the budgetary comparison information and schedules related to pension and OPEB funding on pages 76-78 and 79-83 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 and other auditors have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. 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.

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Basis for Qualified Opinion on the Aggregate Discretely Presented Component Units

Qualified Opinion

Unmodified Opinions

Change in Accounting Principle

As described in Note 20 to the financial statements, in 2016, the County adopted new accounting guidance, GASB Statement No. 82 Pension Issues - an amendment of GASB Statements No. 67, No. 68, and No. 73. Our opinion is not modified with respect to this matter.

Other Matters Required Supplementary Information

Required Supplementary Information (continued)

Management has omitted management’s discussion and analysis that accounting principles generally accepted in the United States of America require to be presented to supplement the basic financial statements. Such missing 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. Our opinion on the basic financial statements is not affected by this missing information.

Other Information

Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the County of Russell, Virginia’s basic financial statements. The other supplementary information and other statistical information are presented for purposes of additional analysis and are not a required part of the basic financial statements. The schedule of expenditures of federal awards is presented for purposes of additional analysis as required by Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, and is also not a required part of the basic financial statements.

The other supplementary information 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 basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America by us and other auditors. In our opinion, based on our audit, the procedures performed as described above, and the report of the other auditors, the other supplementary information and the schedule of expenditures of federal awards are fairly stated in all material respects in relation to the basic financial statements as a whole.

The other statistical information has not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them.

Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated February 15, 2017, 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 in considering the County of Russell, Virginia’s internal control over financial reporting and compliance.

Blacksburg, Virginia February 15, 2017

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Required Supplementary Information (continued)

Management has omitted management’s discussion and analysis that accounting principles generally accepted jin the United States of America require to be presented to supplement the basic financial statements. Such missing 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. Our opinion on the basic financial statements is not affected by this missing information.

Other Information

Other Reporting Required by Government Auditing Standards

Holeimoon, Samar, log lbscciates-

Blacksburg, Virginia February 15, 2017

Basic Financial Statements

Exhibit 1 Page 1 of 2

Governmental Business-type Activities Activities Total

ASSETS Cash and cash equivalents 6,333,268$ -$ 6,333,268$
Receivables (net of allowance for uncollectibles):

Taxes receivable 8,147,744 - 8,147,744
Accounts receivable 576,142 7,391 583,533
Grants receivable - - -

Due from component unit 2,301,066 - 2,301,066
Due from other governmental units 2,594,586 - 2,594,586
Inventories - - -
Prepaid items - - -
Restricted assets:

Cash and cash equivalents 45,033 49,575 94,608
Noncurrent assets: Capital assets (net of accumulated depreciation):

Land 568,695 - 568,695
Land rights - - -
Land improvements - - -
Buildings and improvements 13,290,217 - 13,290,217
Machinery and equipment 1,382,311 - 1,382,311
Utility plant in service - 2,861,558 2,861,558
Construction in progress - - -
Accumulated Depreciation - - -

Total assets 35,239,062$ 2,918,524$ 38,157,586$

DEFERRED OUTFLOWS OF RESOURCES Pension contributions subsequent to measurement date 800,654$ 7,030$ 807,684$
Differences between expected and actual experience - - -

Total deferred outflows of resources 800,654$ 7,030$ 807,684$

LIABILITIES Accounts payable 1,608,985$ 24,270$ 1,633,255$
Accrued liabilities 1,805 - 1,805
Customer deposits - - -
Accrued interest payable 153,570 1,592 155,162
Line of credit - - -
Due to primary government - - -
Long-term liabilities:

Due within one year 1,859,760 22,814 1,882,574
Due in more than one year 17,545,790 669,521 18,215,311

Total liabilities 21,169,910$ 718,197$ 21,888,107$

DEFERRED INFLOWS OF RESOURCES Deferred revenue - property taxes 5,236,491$ -$ 5,236,491$
Differences between expected and actual experience 225,390 1,590 226,980
Items related to measurement of net pension liability 635,816 4,486 640,302

Total deferred inflows of resources 6,097,697$ 6,076$ 6,103,773$

NET POSITION Net investment in capital assets 7,245,255$ 2,211,049$ 9,456,304$
Restricted:

Coal Road 115,224 - 115,224
Construction - - -
Debt service and bond covenants - 49,575 49,575
Other - - -

Unrestricted (deficit) 1,411,630 (59,343) 1,352,287
Total net position 8,772,109$ 2,201,281$ 10,973,390$

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

Primary Government

County of Russell, Virginia Statement of Net Position

June 30, 2016

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Exhibit 4

“of 2 County of Russell, Virginia Statement of Net Position ‘June 30, 2016 “Governmental Business-type ‘tivities Activities Total

ASSETS Cash and cash equivalents Ss 6,333,268 § $6,333,268 Receivables (net of allowance for uncollectibes}

Taxes receivable 8,147,744 8,147,744

‘Accounts receivable 576,142 7391 583,533

Grants receivable : : Due from component unit 2,301,066 2,301,066 Due from other governmental units 2/394)586 71394586 Inventories ° Prepaid items : Restricted assets:

‘Cash and cash equivalents 45,03 49575 94,608 Noncurrent assets: Capital assets (net of accumulated depreciation)

Land 568,695, 508,695,

Land rights :

Land improvements :

Bullngs ane improvements 13,290,217 13,290,217

Machinery and equipment 1382;311 4382,311

Uttity plant in service

Construction in progress ‘Accumulated Depreciation Total assets

DEFERRED OUTFLOWS OF RESOURCES Pension contributions subsequent to measurement date Differences between expected and actual experience

“Total deterred outflows of resources

asiLes Accounts payable ‘Accrued abilities Customer deposits Accrued interest payable Line of ereit| Due to primary government Long-term abilities:

Due within ane year

Due in more than one year

“Total liabilities

DEFERRED INFLOWS OF RESOURCES Deferred revenue - property taxes Differences between expected and actual experience: Items related to measurement of net pension lability “Total deterred inflows of resources

NET POSITION Net investment in capital assets Restricted

Coal Road

onstruction

Debt service and bond covenants

Other Unrestricted (deficit)

Total net position

2,861,558 2,861,558

BDO _S TIES Se TTS

S 00654 $7,030 $807,684 OSA 030 uA

5 1608,985 § 24,270 $1,633,255, 1,805 1805 153,570 1592 155,162 1,859,760 rai 1,882,574 17/545,796 09521 18.215,311 521,169,510 718,197 $71,888,107 5 9,236.491 § 55,236,491 225,390, 1,590 226,986 635,816 4,436 40,302 6,097,697 0765 6.103,73.

5S 7,245,255 $ 2,211,049 $ 9,456,304 115,224 195,224 9,575 49575

1,411,630 59,343) 1,352,287 8270 a 9 NI

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

Exhibit 1 Page 2 of 2

Russell County Castlewood Public Service Water and Sewage

School Board Authority Authority

ASSETS Cash and cash equivalents 1,739,428$ 100,253$ 195,118$
Receivables (net of allowance for uncollectibles):

Taxes receivable - - -
Accounts receivable 14,612 304,610 171,338
Grants receivable - 17,768 251,800

Due from component unit - - -
Due from other governmental units 1,476,236 - 16,928
Inventories - 31,675 -
Prepaid items 373,568 - -
Restricted assets:

Cash and cash equivalents - 168,893 120,398
Noncurrent assets: Capital assets (net of accumulated depreciation):

Land 5,636,345 106,332 130,080
Land rights - - 13,004
Land improvements - - -
Buildings and improvements 9,941,263 107,097 253,485
Machinery and equipment 2,096,958 - 106,083
Utility plant in service - 22,723,820 11,946,931
Construction in progress 17,071 547,776 701,922
Accumulated Depreciation - (6,452,353) -

Total assets 21,295,481$ 17,655,871$ 13,907,087$

DEFERRED OUTFLOWS OF RESOURCES Pension contributions subsequent to measurement date 2,968,507$ 26,200$ 32,902$
Differences between expected and actual experience 14,330 70,234 -

Total deferred outflows of resources 2,982,837$ 96,434$ 32,902$

LIABILITIES Accounts payable 126,885$ 210,763$ 423,957$
Accrued liabilities 928,567 56,769 6,022
Customer deposits - 10,420 71,749
Accrued interest payable - 11,732 7,641
Line of credit - - 232,656
Due to primary government 2,101,066 - -
Long-term liabilities:

Due within one year 537,806 179,007 221,023
Due in more than one year 36,140,063 6,370,453 5,647,556

Total liabilities 39,834,387$ 6,839,144$ 6,610,604$

DEFERRED INFLOWS OF RESOURCES Deferred revenue - property taxes -$ -$ -$
Items related to measurement of net pension liability 3,415,155 6,908 14,766
Differences between expected and actual experience - - -

Total deferred inflows of resources 3,415,155$ 6,908$ 14,766$

NET POSITION Net investment in capital assets 17,691,637$ 10,503,827$ 6,991,662$
Restricted:

Coal Road - - -
Construction - 1,059 -
Debt service and bond covenants - 97,975 120,398
Other - 69,859 -

Unrestricted (deficit) (36,662,861) 233,533 202,559
Total net position (18,971,224)$ 10,906,253$ 7,314,619$

County of Russell, Virginia Statement of Net Position

June 30, 2016

Component Units

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Exhibit 1

Page 2 of 2 County of Russell, Virginia Statement of Net Position June 30, 2016 Castlewood

ASSETS Cash and cash equivalents Receivables (net of allowance for uncollectibles) “Taxes receivable ‘Accounts receivable Grants receivable Due from component unit Due from other governmental units Inventories Prepaid items Restricted assets: ‘Cash and cash equivalents Noncurrent assets: Capital assets (net of accumulated depreciation) Land Land eights Land improvements Buildings and improvements Machinery and equipment Uaiity plant in service Construction in progress ‘Accumulated Depreciation Total assets

DEFERRED OUTFLOWS OF RESOURCES Pension contributions subsequent to measurement date Differences between expected and actual experience

Total deferred outflows of resources

uasiLimies Accounts payable ‘Accrued Ulabilties Customer deposits Accrued interest payable Une of creat Due to primary government Long-term liabilities:

Due within ane year

Due in more than one year

Total liabilities

DEFERRED INFLOWS OF RESOURCES Deferred revenue - property taxes Items related to measurement of net pension lability Differences between expected and actual experience Total deterred inflows of resources

NET POSITION Net investment in capital assets Restricted

‘Coal Road

Construction

Debt service and bond covenants

Other Unrestricted (deficit)

‘otal net position

Public Service Water and Sewage

‘Authority ‘Authority $1739.98 § 100,253 § 195,118 14612 304,610, 171,338

: 17.768 251/600

1,476,236 16,928

: 31,675 :

373,568, : 168,093, 120,98

5,636,345, 106,322 130,080 13,004

9,941,263, 107,097 253,485 7,086,958 106,083 22,723,820 11,946,931

wort 547.776 "701/922 (6,452,353), -

STDS ABS 17,655,871 313,907 087 S 2,968,507 $26,200 $ 32,902

14,330, 70244 :

7 96.434 3,902

S$ 126,985 $ 210,763 § 423,957 928,567 56,769 6,022 . 10,420, 71789

W732 Tat

232,656

2,101,066

537,806 179,007 221,003 36,140,063, 6,370,453, 5.647.556 39,834,387 6.839.144 6,610,604 5 5 5 - 3,415,155 6,908 14,766

$17,691,637 $10,503,827 $6,991,662 1,059 : 97.975 120,398 691859 -

(36,662,861) 233,533, 202,558, “efit ri a) 5 gt —5 —

Exhibit 2

Operating Capital Russell County Castlewood Charges for Grants and Grants and Governmental Business-type Public Service Water and Sewerage

Functions/Programs Expenses Services Contributions Contributions Activities Activities Total School Board Authority Authority

PRIMARY GOVERNMENT: Governmental activities:

General government administration 2,099,001$ -$ 336,465$ -$ (1,762,536)$ -$ (1,762,536)$
Judicial administration 2,080,921 60,133 704,510 - (1,316,278) - (1,316,278)
Public safety 5,999,917 97,621 1,801,305 61,200 (4,039,791) - (4,039,791)
Public works 3,547,942 143,454 14,264 - (3,390,224) - (3,390,224)
Health and welfare 8,926,570 - 7,667,428 - (1,259,142) - (1,259,142)
Education 7,744,464 - - - (7,744,464) - (7,744,464)
Parks, recreation, and cultural 481,145 6,821 93,017 - (381,307) - (381,307)
Community development 1,025,246 31,219 - - (994,027) - (994,027)
Interest on long-term debt 342,729 - - - (342,729) - (342,729)

Total governmental activities 32,247,935$ 339,248$ 10,616,989$ 61,200$ (21,230,498)$ -$ (21,230,498)$

Business-type activities: Service Authority 441,642$ 91,341$ -$ -$ -$ (350,301)$ (350,301)$

Total primary government 32,689,577$ 430,589$ 10,616,989$ 61,200$ (21,230,498)$ (350,301)$ (21,580,799)$

COMPONENT UNITS: School Board 39,060,350$ 381,790$ 32,247,645$ -$ (6,430,915)$ -$ -$
Russell County Public Service Authority 1,987,080 1,345,414 - 585,032 - (56,634) -
Castlewood Water and Sewer Authority 1,493,173 1,329,627 - 399,145 - - 235,599
Total component units 42,540,603$ 3,056,831$ 32,247,645$ 984,177$ (6,430,915)$ (56,634)$ 235,599$

General revenues: General property taxes 15,198,122$ -$ 15,198,122$ -$ -$ -$
Other local taxes: Local sales and use taxes 2,013,659 - 2,013,659 - - -
Coal road and severence taxes 514,382 - 514,382 - - -
Consumers’ utility taxes 527,491 - 527,491 - - -
Motor vehicle licenses 518,092 - 518,092 - - -
Other local taxes 208,301 - 208,301 - - -
Unrestricted revenues from use of money and property 223,008 - 223,008 8,030 1,008 -
Miscellaneous 180,343 - 180,343 246,281 132,777 -
Payments from the County of Russell, Virginia - - - 6,871,177 283,936 -
Grants and contributions not restricted to specific programs 2,501,627 - 2,501,627 - - -
Transfers (248,016) 248,016 - - - -
Total general revenues and transfers 21,637,009$ 248,016$ 21,885,025$ 7,125,488$ 417,721$ -$
Change in net position 406,511$ (102,285)$ 304,226$ 694,573$ 361,087$ 235,599$
Net position - beginning, as restated 8,365,598 2,303,566 10,669,164 (19,665,797) 10,545,166 7,079,020
Net position - ending 8,772,109$ 2,201,281$ 10,973,390$ (18,971,224)$ 10,906,253$ 7,314,619$

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

County of Russell, Virginia Statement of Activities

For the Year Ended June 30, 2016

Net (Expense) Revenue and

Component UnitsGovernment

Program Revenues Changes in Net Position Primary

-7-

extibie 2

‘County of Russell, Virginia Statement of Activities For the Year Ended June 30, 2016

‘Net (Expense) Revenve and

Program Revenues ‘Changes in Net Position Primary Component Government ‘Unite operating Capita Russell County Castlewood Charges for Grants and Grants and Governmental Busines-type Public Service Water and Sewerage unctons/Programs Expenses Services” Contributions Contributions ——aetivitles~—~—ctivitles Total School Board Authority ‘authority PRIMARY GOVERNMENT: ‘Governmental activities: ‘Genera government administration 5 2,099,001 $ Ss 36.465 § S (1,762,536) § S762.) Judital administration 2,080,921 60,133 704,510 (1316,278) (1:316,278 uate safety 5,999,917 s721 1,801,305 1,200 14,039,791) (039,79 ble wore 31547 982 354 4264 (3,390,224) (3.390.224) Health and welfare 3,926,570 7.667 408 (1,259,122) (1259,14 Education 7.748464 : : Gpastaee) (7748-468) Park, recreation, and cultrat 81.185 oat 93.017 (381,307) (331,307) Community development 1,005,246 sn219 (994,027) (994027) Interest on long-term debt wns (30,79) 30,77) “Total governmental activites ETH TES OEE eygoo. “5 2304498) Si. 220-8) Business type activities: Service Authority Ss aen sian s s $e) so ‘otal primary government PART 0, 589$ OTE Brno SIH, $50.30) 500.799) ‘COMPONENT UNITS: ‘School Board $39,000,350 $381,790 $32,247,645 s_6.430,015) § s . Russell County Pubic Service Authority 1,987,080 1,345,414 986,032 (95,64) - Castlewood Water and Sewer Authority 4.493.173 1.329,627, 390.165, 235,500, ‘otal component units “50.603 S$ —3,056,031_$ SET, 577 T6ABOSTST 6.654 235.558

General revenues:

‘General property taxes $15,198,122 § 5 15198,02 § 5 5 : Other local taxes

Local sales and use taxes 2,013,659 2.013.659

eal road and severence taxes 514.382 314.382 :

Consumers’ tity taxes surat 527.881 : Motor vehicle icenses 518,092 518.082 : ‘Other local taxes 208,301 208,301 : Unrestricted revenues from use of money and property 223,008, 223,008 3,030 1,008 : scollaneous 180.368 180,343 246.281 12,77

Payments from the County of Russel, Virginia ° oarii77 283,938

Grants and contribution not restricted 10 speci programs 2,501,607 2,501,627 : Transfers (248.016) 248,016 - - Total general revenues and transfers $—Ti,657.009 32a. 016 5S SS TEST TE = change fn net position 406,511 $102,288) $304,226 94573 1087 Tae Net pesition- beginning, as restated 8,365,598 "2,303,566 10,669,164 _ (19,665,797) 10,545,166 7.079.000 Net psttion- ending 8,772,109 $2,101,781 $10,973,390 S(1, 971,224) $10,906,255 sas

“The accompanying notes to the Financial statement are an integral part ofthis statement.

Exhibit 3

Coal Workforce General Road Investment Board Total

ASSETS Cash and cash equivalents 3,328,865$ -$ -$ 3,328,865$
Receivables (net of allowance for uncollectibles):

Taxes receivable 8,147,744 - - 8,147,744
Accounts receivable 92,390 11,425 - 103,815

Due from other funds 111,220 65,105 - 176,325
Due from component unit 2,301,066 - - 2,301,066
Due from other governmental units 2,316,572 - 278,014 2,594,586
Restricted assets:

Cash and cash equivalents - 45,033 - 45,033
Total assets 16,297,857$ 121,563$ 278,014$ 16,697,434$

LIABILITIES Accounts payable 730,426$ 6,339$ 188,900$ 925,665$

Reconciled overdraft - - 24,230 24,230
Accrued liabilities 1,805 - - 1,805
Due to other funds 65,105 - 111,220 176,325

Total liabilities 797,336$ 6,339$ 324,350$ 1,128,025$

DEFERRED INFLOWS OF RESOURCES Unavailable revenue - property taxes 8,023,191$ -$ -$ 8,023,191$

FUND BALANCES Restricted:

Coal Road -$ 115,224$ -$ 115,224$
Committed: Unassigned: 7,477,330 - (46,336) 7,430,994

Total fund balances 7,477,330$ 115,224$ (46,336)$ 7,546,218$
Total liabilities, deferred inflows of resources, and fund balances 16,297,857$ 121,563$ 278,014$ 16,697,434$

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

County of Russell, Virginia Balance Sheet

Governmental Funds June 30, 2016

-8-

County of Russell, Virginia

Balance Sheet

Governmental Funds

June 30, 2016

Exhibit 3

Coat Workforce General Road Investment Board Total ASSETS Cash and cash equivalents S 3,328,865 s 3,328,865 Receivables (net of allowance for uncollectibies): Taxes receivable 8,147,744 : 8,147,744 Accounts receivable 92,390 11,005 103,815, Due from other funds 114,220 65,105, 176,325 Due from component unit 2,301,066 : 2,301,066 Due from other governmental units 2,316,572 278,014 2,594,586 Restricted assets: Cash and cash equivalents, : 45,033 45,033 Total assets $16,297,857 721,563 S 778014 $16,697,434 LIABILITIES ‘Accounts payable $730,426 6,339 $ 188,900 925,665 Reconciled overdralt - . 24,230 24,230 Accrued liabilities 1,805 : 1,805 Due to other funds 65,105, - 11,220 176,325 Total liabilities 797,336 530 324.3505 1,128,025 DEFERRED INFLOWS OF RESOURCES Unavailable revenue - property taxes S$ 8,023,191 s 8,023,191 FUND BALANCES Restricted: Coal Road s : 115,224 § 115,224 Committed: Unassigned 7,477,330 . (46,336) 7,430,994 Total fund balances 3_ 7477.30 Ts, _S (46,336) 5 7,546,218 Total liabilities, deferred inflows of resources, and fund balances. $16,297,857 121.5635 278,014 $16,697,434

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

Exhibit 4

Amounts reported for governmental activities in the statement of net position are different because:

Total fund balances per Exhibit 3 - Balance Sheet - Governmental Funds 7,546,218$

Land 568,695$
Buildings and improvements 13,290,217
Machinery and equipment 1,382,311 15,241,223

Unavailable revenue - property taxes 2,786,700$
Items related to measurement of net pension liability (861,206) 1,925,494

800,654

2,817,640

Bonds and literary loans (12,097,866)$
Capital leases (113,469)
Unamortized premium (216,099)
Accrued interest payable (153,570)
Landfill accrued closure and postclosure liability (278,220)
Net OPEB obligation (146,725)
Compensated absences (624,908)
Net pension liability (5,928,263) (19,559,120)

Net position of governmental activities 8,772,109$

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

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 position.

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

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

To the Statement of Net Position June 30, 2016

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-period expenditures and, therefore, are deferred in the funds.

Pension contributions subsequent to the measurement date will be a reduction to the net pension liability in the next fiscal year and, therefore, are not reported in the funds.

-9-

Exhibit 4 County of Russell, Virginia Reconciliation of the Balance Sheet of Governmental Funds To the Statement of Net Position June 30, 2016

Amounts reported for governmental activities in the statement of net position are different because: Total fund balances per Exhibit 3 - Balance Sheet - Governmental Funds $7,546,218

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

Land $ 568,695, Buildings and improvements 13,290,217 ‘Machinery and equipment. 4,382,311 15,241,223

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

Unavailable revenue - property taxes $2,786,700

Items related to measurement of net pension liability (861,206) 1,925,494

Pension contributions subsequent to the measurement date will be a reduction to the net pension Uiability in the next fiscal year and, therefore, are not reported in the funds. 800,654

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

Bonds and literary toans 5 (12,097,866)

Capital leases (113,469)

Unamortized premium (216,099)

Accrued interest payable (153,570)

Landfill accrued closure and postclosure liability (278,220)

Net OPEB obligation (146,725)

Compensated absences (624,908)

Net pension liability (5,928,263) (19,559,120) Net position of governmental activities $8772, 109

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

Exhibit 5

Coal Workforce General Road Investment Board Total

REVENUES General property taxes 15,071,101$ -$ -$ 15,071,101$
Other local taxes 3,524,734 257,191 - 3,781,925
Permits, privilege fees, and regulatory licenses 30,258 - - 30,258
Fines and forfeitures 14,136 - - 14,136
Revenue from the use of money and property 214,695 1,047 - 215,742
Charges for services 294,854 - - 294,854
Miscellaneous 180,343 - - 180,343
Recovered costs 1,076,504 - 6,101 1,082,605
Intergovernmental:

Commonwealth 8,447,216 - - 8,447,216
Federal 2,629,600 - 2,103,000 4,732,600

Total revenues 31,483,441$ 258,238$ 2,109,101$ 33,850,780$

EXPENDITURES Current:

General government administration 1,787,592$ -$ -$ 1,787,592$
Judicial administration 2,193,822 - - 2,193,822
Public safety 6,914,427 - - 6,914,427
Public works 2,899,065 630,555 - 3,529,620
Health and welfare 7,071,353 - 2,137,788 9,209,141
Education 6,729,363 - - 6,729,363
Parks, recreation, and cultural 468,670 - - 468,670
Community development 1,048,554 - - 1,048,554
Nondepartmental 515,527 - - 515,527

Debt service: -
Principal retirement 1,369,256 - - 1,369,256
Interest and other fiscal charges 378,465 - - 378,465

Total expenditures 31,376,094$ 630,555$ 2,137,788$ 34,144,437$

Excess (deficiency) of revenues over (under) expenditures 107,347$ (372,317)$ (28,687)$ (293,657)$

OTHER FINANCING SOURCES (USES) Transfers in (248,016)$ -$ -$ (248,016)$

Total other financing sources (uses) (248,016)$ -$ -$ (248,016)$

Net change in fund balances (140,669)$ (372,317)$ (28,687)$ (541,673)$
Fund balances - beginning 7,617,999 487,541 (17,649) 8,087,891
Fund balances - ending 7,477,330$ 115,224$ (46,336)$ 7,546,218$

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

County of Russell, Virginia Statement of Revenues, Expenditures, and Changes in Fund Balances

Governmental Funds For the Year Ended June 30, 2016

-10-

Tim Lovelace Rectangle

Tim Lovelace Oval

County of Russell, Virginia

‘Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds For the Year Ended June 30, 2016

Exhibit 5

Coal Workforce General Road Investment Board Total REVENUES ‘eneral property taxes $15,071,101 § “8 $15,071,101 Other local taxes 3,524,734 257,191 3,781,925 Permits, privilege fees, and regulatory licenses 30,258, : 30,258 Fines and forfeitures 14.136 : 14.136 Revenue from the use of money and property 214,695 1,047 215,72 Charges for services 294,854 : 294,854 Miscellaneous 180,343 : 180,343 Recovered costs 1,076,504 6101 1,082,605 Intergovernmental: ‘Commonwealth 8,447,216 - 8.447.216 Federal 2,629,600 : 2,103,000 __4,732,600 Total revenues $31,483,441 5758 258 S 7,109, 101 $33,850,780 Curren ‘General government administration $1,787,592 § s $1,787,592 Judicial administration 2/193,822 2,193,822 Public safety 6,914,427 : 6,914,027 Public works 2,899,065 630,555 = 315291620 Health and welfare OTIS : 2,137,788 9,209,141 Education 6.729/363 = 6,729,363 Parks, recreation, and cultural 468,670 468,670 Community development 1,048,554 1,048,554 Nondepartmental 515,527 515,527 Debt service: Principal retirement 1,369,256 1,369,256 Interest and other fiscal charges 378,465 : : 378,465 Total expenditures $57,376,094 5830 555,773 34,148,457 Excess (deficiency) of revenues over (under) expenditures s Cron 072,317) § (28,687) § (293,657) OTHER FINANCING SOURCES (USES) Transfers in $ (248,016) § $ $248,016) Total other financing sources (uses) $248,016) $ 5 $248,076) Net change in fund balances $ (140,669) $872,317) § (28,687) $ (541,673) Fund balances - beginning 7,617,999 487,541 (17,649) 8,087,891 Fund balances - ending T7477. 30 715,224$ (46,336) 5 7,546,218

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

Exhibit 6

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

Net change in fund balances - total governmental funds (541,673)$

Capital outlay 431,728$
Reversion of assets back to the School Board (net) (238,977)
Removal of capital asset (net) (9,121)
Depreciation expense (930,037) (746,407)

Property taxes 127,021$
Change in deferred inflows of resources related to the measurement of the net pension liability 591,857 718,878

Issuance of long-term obligations: Landfill closure and postclosure liability (2,482)$

Principal Payments: Bonds, literary loans, and notes 1,257,881
Capital leases 111,375 1,366,774

(Increase) decrease in compensated absences (25,318)$
(Increase) decrease in accrued interest payable 18,932
(Increase) decrease in net OPEB obligation (35,264)
Amortization of bond premiums 16,804
(Increase) decrease in net pension liability (185,938)
Change in deferred outflows of resources related to pension payments subsequent to the measurement date 9,599 (201,185)

(189,876)

Change in net position of governmental activities 406,511$

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

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 position. Also, governmental funds report the effect of 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 with governmental activities.

For the Year Ended June 30, 2016

County of Russell, Virginia Reconciliation of Statement of Revenues,

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

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 depreciation exceeded capital outlays in the current period.

-11-

Exhibit 6 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, 2016

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

Net change in fund balances - total governmental funds S (641,673)

Governmental tunds report capital outlays as expenditures. However, inthe statement of actwities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which depreciation exceeded capital outlays in the current period.

Capital outlay $431,728 Reversion of assets back to the School Board (net) (238,977) Removal of capital asset (net) (9,121) Depreciation expense (930,037) (746,407)

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

Property taxes $17,001

Change in deferred inflows of resources related to the measurement of the net pension liability 591,857 718,878

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 position. Also, governmental funds report the effect of premiums, discounts, and similar items when obligations is frst 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.

Issuance of long-term obligations:

Landfill closure and postelosure liability $ (2,482) Principal Payments:

Bonds, literary loans, and notes 1,257,881

Capital teases 111,375 1,366,774

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.

(Increase) decrease in compensated absences S (25,318) (increase) decrease in accrued interest payable 18,932 (Increase) decrease in net OPEB obligation (35,264) “Amortization of bond premiums 16,804 (Increase) decrease in net pension liability (185,938) Change in deferred outflows of resources related to pension payments subsequent to the measurement date 9,599 (201,185)

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

with governmental activities. (189,876) Change in net position of governmental activities ses

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

11-

Exhibit 7

Enterprise Internal Fund Service Fund Dante Self Fund Health Insurance

ASSETS Current assets:

Cash and cash equivalents -$ 3,028,633$
Interest receivable 48 1,266 Accounts receivable, net of allowance for uncollectibles 7,343 471,061

Total current assets 7,391$ 3,500,960$

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 (2,379,141) -
Total capital assets 2,861,558$ -$
Total noncurrent assets 2,911,133$ -$
Total assets 2,918,524$ 3,500,960$

DEFERRED OUTFLOWS OF RESOURCES Pension contributions subsequent to measurement date 7,030$ -$

LIABILITIES Current liabilities:

Accounts payable 24,270$ 683,320$
Accrued interest payable 1,592 -
Revenue bonds - current portion 22,814 -

Total current liabilities 48,676$ 683,320$

Noncurrent liabilities: Revenue bonds - net of current portion 627,695$ -$
Net Pension Liability 41,826 -

Total noncurrent liabilities 669,521$ -$
Total liabilities 718,197$ 683,320$

DEFERRED INFLOWS OF RESOURCES Differences between expected and actual experience 1,590$ -$
Items related to measurement of net pension liability 4,486 -

Total deferred inflows of resources 6,076$ -$

NET POSITION Net investment in capital assets 2,211,049$ -$
Restricted for debt service and bond covenants 49,575 -
Unrestricted (59,343) 2,817,640

Total net position 2,201,281$ 2,817,640$

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

County of Russell, Virginia Statement of Net Position

Proprietary Funds June 30, 2016

-12-

Exhibit 7

County of Russell, Virginia

Statement of Net Position

Proprietary Funds June 30, 2016

ASSETS Current assets: Cash and cash equivalents Interest receivable Accounts receivable, net of allowance for uncollectibles Total current assets

Noncurrent assets:

Restricted assets:

Cash and cash equivalents (in custody of others) Capital assets:

Utility plant in service

Less accumulated depreciation

Total capital assets

Total noncurrent assets

Total assets

DEFERRED OUTFLOWS OF RESOURCES Pension contributions subsequent to measurement date

LIABILITIES Current liabilities: ‘Accounts payable ‘Accrued interest payable Revenue bonds - current portion Total current liabilities

Noncurrent liabilities: Revenue bonds - net of current portion Net Pension Liability Total noncurrent liabilities Total liabilities

DEFERRED INFLOWS OF RESOURCES Differences between expected and actual experience Items related to measurement of net pension liability Total deferred inflows of resources

NET POSITION Net investment in capital assets Restricted for debt service and bond covenants Unrestricted

Total net position

Enterprise Taternal Fund Service Fund Dante ‘Self Fund Health Insurance $ - $ 3,028,633 48 1,266 7,343 471,061 73915 3,500,960 $ 49,575_$ : $ 5,240,699 $ - (2,379,141) - 3S 2,361,558 5 $ 2,911,133 $

5 2,918,524 $ 3,500,960,

$ 7,030_$ :

$ 24,270 $ 683,320 1,592 - 22,814 -

48,676 $ ———«OB3, 320

$ 627,695 $ - 41,826 : 669,521_§ =

3s 718,197_$ 683,320_

$ 1,590 $ - 4,486

5 6,076 5 =

$ 2,211,049 $ -

49,575 : (59,343) 2,817,640 5 7,201,281 _$ 2,817,640

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

Exhibit 8

Enterprise Internal Fund Service Fund Dante Self Fund Health Insurance

OPERATING REVENUES Charges for services:

Sewer revenues 91,341$ -$
Insurance premiums - 5,763,984

Total operating revenues 91,341$ 5,763,984$

OPERATING EXPENSES Salaries and benefits 137,170$ -$
Professional services 8,260 -
Utilities 6,242 -
Materials and supplies 40,899 -
Office expenses 40,602 -
Repairs and maintenance 21,340 -
Insurance claims and expenses - 5,961,126 Depreciation 131,018 -

Total operating expenses 385,531$ 5,961,126$

Operating income (loss) (294,190)$ (197,142)$

NONOPERATING REVENUES (EXPENSES) Investment income -$ 7,266$
Contribution to Castlewood PSA (26,491) -
Interest expense (29,620) -

Total nonoperating revenues (expenses) (56,111)$ 7,266$
Income before transfers (350,301)$ (189,876)$

Transfers in 248,016$ -$
Change in net position (102,285)$ (189,876)$

Total net position - beginning 2,303,566 3,007,516
Total net position - ending 2,201,281$ 2,817,640$

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

County of Russell, Virginia Statement of Revenues, Expenses, and Changes in Net Position

Proprietary Funds For the Year Ended June 30, 2016

-13-

Exhibit 8

County of Russell, Virginia Statement of Revenues, Expenses, and Changes in Net Position Proprietary Funds For the Year Ended June 30, 2016

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 income Contribution to Castlewood PSA Interest expense Total nonoperating revenues (expenses) Income before transfers

Transfers in Change in net position

Total net position - beginning Total net position - ending

Enterprise Internal Fund Service Fund Dante Self Fund Health Insurance

$ 91,341 $ -

5,763,984 3 1341S 5,763,984 $ 137,170 $ 8,260 6,242 40,899 40,602 21,340 : : 5,961,126 131,018 - 3 385,531 5 961, 126 $ (294,190) $ (197,142) $ - $ 7,266 (26,491) - (29,620) - $ (56,111) $ 7,266 $ (350,301) $ (189,876) $ 248,016 $ - 3 (102,285) $ (189,876) 2,303,566 3,007,516 3 2,201,281 _$ 2,817,640

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

Exhibit 9

Enterprise Internal Fund Service Fund Dante Self Fund Health Insurance

CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers and users 91,532$ -$
Receipts for insurance premiums - 5,753,941
Payments to suppliers (120,126) -
Payments to employees (141,483) -
Payments for premiums - (6,166,056)

Net cash provided by (used for) operating activities (170,077)$ (412,115)$

CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Transfers from other funds 248,016$ -$

CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Principal payments on bonds (21,892)$ -$
Contribution to Castlewood PSA (26,491) -
Interest payments (29,556) -

Net cash provided by (used for) capital and related financing activities (77,939)$ -$

CASH FLOWS FROM INVESTING ACTIVITIES Interest income -$ 7,260$

Net increase (decrease) in cash and cash equivalents -$ (404,855)$

Cash and cash equivalents - beginning 49,575 3,433,488
Cash and cash equivalents - ending 49,575$ 3,028,633$

Reconciliation of operating income (loss) to net cash provided by (used for) operating activities: Operating income (loss) (294,190)$ (197,142)$
Adjustments to reconcile operating income (loss) to net cash

provided by (used for) operating activities: Depreciation 131,018$ -$
(Increase) decrease in accounts receivable 191 (10,043)
(Increase) decrease in Pension contributions subsequent to measurement date (1,449) -
Increase (decrease) in accounts payable (2,783) (204,930)
Increase (decrease) in items related to measurement of net pension liability (4,176) -
Increase (decrease) net pension liability 1,312 -
Total adjustments 124,113$ (214,973)$

Net cash provided by (used for) operating activities (170,077)$ (412,115)$

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

County of Russell, Virginia Statement of Cash Flows

Proprietary Funds For the Year Ended June 30, 2016

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Exhibit 9 County of Russell, Virginia Statement of Cash Flows Proprietary Funds For the Year Ended June 30, 2016

Enterprise Internal Fund Service Fund Dante Self Fund Health Insurance ‘CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers and users $ 91,532 $ : Receipts for insurance premiums : 5,753,941 Payments to suppliers (120,126) : Payments to employees (141,483) : Payments for premiums (6,166,056) Net cash provided by (used for) operating activities (170,077) $ (412,115) CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Transfers from other funds $ 248,016 $ - CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Principal payments on bonds $ (21,892) $ : Contribution to Castlewood PSA (26,491) . Interest payments (29,556) : Net cash provided by (used for) capital and related financing activities (77,939) $ : CASH FLOWS FROM INVESTING ACTIVITIES Interest income $ _ 3 7,260 Net increase (decrease) in cash and cash equivalents $ -$ (404,855) Cash and cash equivalents - beginning 49,575 3,433,488 Cash and cash equivalents - ending $ 49,575 _$ 3,028,633,

Reconciliation of operating income (loss) to net cash provided by (used for) operating activities: Operating income (loss) $ (294,190) $ (197,142) ‘Adjustments to reconcile operating income (loss) to net cash provided by (used for) operating activities:

Depreciation $ 131,018 $ -

(Increase) decrease in accounts receivable 191 (10,043) (Increase) decrease in Pension contributions subsequent

to measurement date (1,449) -

Increase (decrease) in accounts payable (2,783) (204,930) Increase (decrease) in items related to measurement of

net pension liability (4,176) :

Increase (decrease) net pension liability 1,312 :

Total adjustments 3 724,113 _5 (214,973)

Net cash provided by (used for) operating activities $ (170,077)_$ (412,115)

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

“14.

Exhibit 10

Agency Funds

ASSETS Cash and cash equivalents 60,248$

Total assets 60,248$

LIABILITIES Amounts held for Social Services clients 67,837$
Amounts held for VASAP (7,589)

Total liabilities 60,248$

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

County of Russell, Virginia Statement of Fiduciary Net Position

Fiduciary Funds June 30, 2016

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Exhibit 10 County of Russell, Virginia Statement of Fiduciary Net Position Fiduciary Funds June 30, 2016

Agency Funds

ASSETS

Cash and cash equivalents $ 60,248 Total assets $ 60,248

LIABILITIES

Amounts held for Social Services clients $ 67,837

Amounts held for VASAP (7,589) Total liabilities $ 60,248

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

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2016

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 Industrial Development Authority of Russell County, Virginia (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 at 137 Highland Drive, Lebanon, VA 24266. As of the release date of this report, the IDA’s report was not available.

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. Complete financial statements of the PSA can be obtained in writing at 7341 Swords Creek Road, Swords Creek, VA 24649.

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.

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO THE FINANCIAL STATEMENTS JuNE 30, 2016

Note 1-Summary of Significant Accounting Policies:

‘A. Financial Reporting Entity

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 ina separate column to emphasize that they are legally separate from the County.

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

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 $2,964,953 to the Regional Jail and $39,996 to the Community Services Board. The County does not have any ongoing financial responsibility for these Organizations.

B. Government-wide and Fund Financial Statements

Government-wide financial statements - The reporting model includes financial statements prepared using full accrual accounting for all of the government’s activities. This approach includes not just current assets and liabilities but also capital assets and long-term liabilities (such as buildings and general obligation debt).

The government-wide financial statements (i.e., the statement of net position 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.

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

Statement of Activities - The government-wide Statement of Activities reports expenses and revenues in a format that focuses on the cost of each of the government’s functions. The expense of individual functions is compared to the revenues generated directly by the function (for instance, through user charges or intergovernmental grants).

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.

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

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

Financial Reporting Entity (Continued)

Government-wide and Fund Financial Statements

Government-wide financial statements - The reporting model includes financial statements prepared using full accrual accounting for all of the government ’s activities. This approach includes not just current assets and liabilities but also capital assets and long-term liabilities (such as buildings and general obligation debt).

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

“A7-

COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

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

B. Government-wide and Fund Financial Statements (Continued)

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.

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.

The government-wide Statement of Activities reflects both the gross and net cost per functional category (public safety, public works, health and welfare, etc.) which are otherwise being supported by general government revenues (property, sales and use taxes, certain intergovernmental revenues, fines, permits and charges, etc.) The Statement of Activities reduces gross expenses (including depreciation) by related program revenues, operating and capital grants, and contributions. The program revenues must be directly associated with the function (public safety, public works, health and welfare, etc.) or a business-type activity.

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 unavailable 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.

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

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

Government-wide and Fund Financial Statements (Continued)

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 inthe 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.

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.

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

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

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

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.

The Coal Road and Workforce Investment Board Funds serve as the County’s major Special Revenue Funds. 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 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 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 Fund consists of the Self Health Insurance Fund.

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 Fund and VASAP Fund. The Special Welfare Fund includes activity of the Title XX and the SSI Fund, which have all been merged for financial reporting purposes.

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.

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

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

Measurement Focus, Basis of Accounting, and Financial Statement Presentation (Continued)

The government reports the following major governmental funds:

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 fund.

Additionally, the government reports the following fund types:

Asa 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.

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

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

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

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.

Proprietary Funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. The principal operating revenues of the 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 nonoperating revenues and expenses.

D. Assets, deferred outflows/inflows of resources, liabilities, and net position/fund balance:

Cash and Cash Equivalents

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.

Deposits with banks are covered by the Federal Deposit Insurance Corporation (FDIC) and Collateralized in accordance with the Virginia Security for Public Deposits Act (the “Act”).

Investments

Money market investments, participating interest-earning investment contracts (repurchase agreements) that have a remaining maturity at time of purchase of one year or less, nonparticipating interest-earning investment contracts (nonnegotiable certificates of deposit (CDs)) and external investment pools are measured at amortized cost. All other investments are reported at fair value.

Receivables and Payables

Activities between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as “due to/from other funds” (i.e. the current portion of interfund loans). All other outstanding balances between funds are reported as “advances to/from other funds” (i.e. the noncurrent portion of interfund loans).

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 a fund balance nonspendable account in applicable governmental funds to indicate that they are not available for appropriation and are not expendable available financial resources.

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

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

Measurement Focus, Basis of Accounting, and Financial Statement Presentation (Continued)

Proprietary Funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. The principal operating revenues of the 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 nonoperating revenues and expenses.

Assets, deferred outflows/ inflows of resources, liabilities, and net position/fund balance:

Cash and Cash Equivalents

Deposits with banks are covered by the Federal Deposit Insurance Corporation (FDIC) and Collateralized in accordance with the Virginia Security for Public Deposits Act (the “Act”).

Investments

Receivables and Payables

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 a fund

balance nonspendable account in applicable governmental funds to indicate that they are not available for appropriation and are not expendable available financial resources.

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

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

D. Assets, deferred outflows/inflows of resources, liabilities, and net position/fund balance:

(Continued)

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.

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 $1,058,736 at June 30, 2016 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 acquisition 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 40

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, 2016

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

D. Assets, deferred outflows/inflows of resources, liabilities, and net position/fund balance: (Continued)

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 5t” and December 5". Personal property taxes are due and collectible on December 5’". The County bills and collects its own property taxes.

Allowance for Uncollectible Accounts

Use of Estimates

Capital Assets

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 40 Building improvements 40 Structures, lines, and accessories 20-40 ‘Machinery and equipment 4330

“2

COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

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

D. Assets, deferred outflows/inflows of resources, liabilities, and net position/fund balance:

(Continued)

Prepaid Items

Certain payments to vendors represent costs applicable to future accounting periods and are recorded as prepaid items in both the government-wide and fund financial statements. The cost of prepaid items is recorded as expenditures/expenses when consumed rather than when purchased.

Deferred Outflows/Inflows of Resources

In addition to assets, the statement of financial position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period(s) and so will not be recognized as an outflow of resources (expenditure/expense) until then. The County only has one item that qualifies for reporting in this category. It is comprised of certain items related to the measurement of the net pension liability. These include differences between projected and actual earnings on pension plan investments and contributions to the pension plan made during the current year and subsequent to the net pension liability measurement date, which will be recognized as a reduction of the net pension liability next fiscal year. For more detailed information on these items, reference the pension note.

In addition to liabilities, the statement of financial position will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. The County has two types of items that qualify for reporting in this category. Under a modified accrual basis of accounting, unavailable revenue representing property taxes receivable is reported in the governmental funds balance sheet. This amount is comprised of uncollected property taxes due prior to June 30th, 2nd half installments levied during the fiscal year but due after June 30th, and amounts prepaid on the 2nd half installments and is deferred and recognized as an inflow of resources in the period that the amount becomes available. Under the accrual basis, 2nd half installments levied during the fiscal year but due after June 30th and amounts prepaid on the 2nd half installments are reported as deferred inflows of resources. In addition, certain items related to the measurement of the net pension liability are reported as deferred inflows of resources. These include differences between expected and actual experience, change in assumptions, and the net difference between projected and actual earnings on pension plan investments. For more detailed information on these items, reference the pension note.

The remainder of this page left blank intentionally.

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

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

D. Assets, deferred outflows/inflows of resources, liabilities, and net position/fund balance: (Continued)

Prepaid Items

Deferred Outflows/Inflows of Resources

The remainder of this page left blank intentionally.

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

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

D. Assets, deferred outflows/inflows of resources, liabilities, and net position/fund balance:

(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.

Pensions

For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the County’s Retirement Plan and the additions to/deductions from the County’s Retirement Plan’s net fiduciary position have been determined on the same basis as they were reported by the Virginia Retirement System (VRS). For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value.

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 position. Bond premiums and discounts, 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.

In the fund financial statements, governmental fund types recognize bond premiums and discounts, 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.

Fund Equity

The County reports fund balance in accordance with GASB Statement 54, Fund Balance Reporting and Governmental Fund Type Definitions. 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);

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

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

D. Assets, deferred outflows/inflows of resources, liabilities, and net position/fund balance: (Continued)

Compensated Absences

Pensions

Long-term Obligations

Fund Equity

The County reports fund balance in accordance with GASB Statement 54, Fund Balance Reporting and Governmental Fund Type Definitions. 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);

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

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

D. Assets, deferred outflows/inflows of resources, liabilities, and net position/fund balance:

(Continued)

Fund Equity (Continued)

 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;

 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 Position

Net position is the difference between a) assets and deferred outflows of resources and (b) liabilities and deferred inflows of resources. Net investment in capital assets represents capital assets, less accumulated depreciation, less any outstanding debt related to the acquisition, construction or improvement of those assets. Deferred outflows of resources and deferred inflows of resources that are attributable to the acquisition, construction, or improvement of those assets or related debt are also included in this component of net position.

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

JUNE 30,

2016

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

D. Assets, deferred outflows/inflows of resources, liabilities, and net position/fund balance: (Continued)

14,

Fund Equity (Continued)

= 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;

= 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 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.

Net Position

COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

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

D. Assets, deferred outflows/inflows of resources, liabilities, and net position/fund balance:

(Continued)

Net Position Flow Assumption

Sometimes the County will fund outlays for a particular purpose from both restricted (e.g., restricted bond or grant proceeds) and unrestricted resources. In order to calculate the amounts to report as restricted – net position and unrestricted – net position in the government- wide and proprietary fund financial statements, a flow assumption must be made about the order in which the resources are considered to be applied. It is the County’s policy to consider restricted – net position to have been depleted before unrestricted – net position is applied.

Note 2-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. 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.

-25-

COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

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

D. Assets, deferred outflows/inflows of resources, liabilities, and net position/fund balance: (Continued)

Net Position Flow Assumption

Sometimes the County will fund outlays for a particular purpose from both restricted (e.g., restricted bond or grant proceeds) and unrestricted resources. In order to calculate the amounts to report as restricted - net position and unrestricted - net position in the government- wide and proprietary fund financial statements, a flow assumption must be made about the order in which the resources are considered to be applied. It is the County’s policy to consider restricted - net position to have been depleted before unrestricted - net position is applied.

Note 2-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. 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.

-25-

COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 2-Stewardship, Compliance, and Accountability: (Continued)

B. Excess of expenditures over appropriations

The Social Services Fund, CSA Fund, Cannery Fund, Litter Fund, and Law Library Fund had excess expenditures over appropriations in the current year.

C. Deficit fund equity

At June 30, 2016, the Workforce Investment Board Fund and VASAP Fund had deficit fund equity.

Note 3-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, 2016, the County had no investments.

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-26-

COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 2-Stewardship, Compliance, and Accountability: (Continued)

B. Excess of expenditures over appropriations

The Social Services Fund, CSA Fund, Cannery Fund, Litter Fund, and Law Library Fund had excess expenditures over appropriations in the current year.

C. Deficit fund equity

At June 30, 2016, the Workforce Investment Board Fund and VASAP Fund had deficit fund equity.

Note 3-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, 2016, the County had no investments.

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 4-Due from Other Governmental Units:

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

Primary Component Unit Government School Board

Local Government: Southwest Virginia Regional Jail $ 702,537 $ -

Commonwealth of Virginia: Local sales tax 310,222 -
State sales tax - 726,590
Non-categorical aid 296,179 -
Categorical aid-shared expenses 208,388 -
Categorical aid-Virginia Public Assistance funds 175,765 -
Categorical aid-other 55,884 -
Categorical aid-Comprehensive Services Act funds 308,193 -

Federal Government: Categorical aid-Virginia Public Assistance funds 194,057 -
Categorical aid-Workforce Investment funds 278,014 -
Categorical aid-Other 65,347 -
School federal programs - 749,646

Total Amount Due from Other Governmental Units $ 2,594,586 $ 1,476,236

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-27-

COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 4-Due from Other Governmental Units:

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

Local Government: ‘Southwest Virginia Regional Jail Commonwealth of Virgin Local sales tax State sales tax Non-categorical aid Categorical aid-shared expenses Categorical aid-Virginia Public Assistance funds Categorical aid-other Categorical aid-Comprehensive Services Act funds Federal Government Categorical aid-Virginia Public Assistance funds Categorical aid-Workforce Investment funds Categorical aid-Other School federal programs

Total Amount Due from Other Governmental Units

Primary

Government

702,537 310,222

296,179 208,388 175,765

55,884 308,193

194,057 278,014 65,347

2,594,586

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“27

Component Unit

School Board

726,590

749,646

1,476,236

COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 5-Interfund/Component-Unit Obligations:

Due to Primary Due from Primary Government/ Government/

Component Unit Component Unit

Primary Government: General Fund $ - $ 2,301,066

Component Unit: School Board $ 2,101,066 $ -
IDA 200,000 -

Total $ 2,301,066 $ 2,301,066

Fund

Interfund transfers and remaining balances for the year ended June 30, 2016, consisted of the following:

Transfers In Transfers Out

Primary Government: General Fund -$ 248,016$
Dante Fund 248,016 -
Total 248,016$ 248,016$

Primary Government: Due From Due To General Fund 111,220$ 65,105$
Coal Road Fund 65,105 -
Workforce Investment Board Fund - 111,220
Total 176,325$ 176,325$

Fund

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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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 5-Interfund/Component-Unit Obligations:

Due to Primary Due from Primary

Government/ Government/ Fund Component Unit _Component Unit

Primary Government:

General Fund Ss _$ 2,301,066 Component Unit:

School Board s 2,101,066 $

IDA 200,000

Total $___ 2,301,066 $ 2,301,066

Interfund transfers and remaining balances for the year ended June 30, 2016, consisted of the following:

Fund Transfers In Transfers Out

Primary Government:

General Fund $ - $ 248,016 Dante Fund 248,016 - Total 3 248,016 5 248,076 Primary Government: Due From Due To General Fund > 1,220 «|S —«S 10 Coal Road Fund 65,105, : Workforce Investment Board Fund : 111,220 Total $176,325. “5 176,325

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, 2016

Note 6-Long-Term Obligations:

Primary Government - Governmental Activities Indebtedness

The following is a summary of long-term obligation transactions of the County for the year ended June 30, 2016:

Balance Increases/ Decreases/ Balance June 30, 2015 Issuances Retirements June 30, 2016

General obligation bonds $ 7,514,955 $ - $ (644,976) $ 6,869,979
Literary loans 1,436,654 - (375,977) 1,060,677
Revenue bonds 4,404,138 - (236,928) 4,167,210
Deferred Amounts:

Bond premiums 232,903 - (16,804) 216,099
Capital leases 224,844 - (111,375) 113,469
Landfill closure/

postclosure liability 275,738 2,482 - 278,220
Net OPEB obligation 111,461 37,164 (1,900) 146,725
Compensated absences 599,590 475,011 (449,693) 624,908
Net pension liability 5,742,325 2,649,950 (2,464,012) 5,928,263

Total $ 20,542,608 $ 3,164,607 $ (4,301,665) $ 19,405,550

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

Year Ending

June 30, Principal Interest Principal Interest Principal Interest

2017 $ 647,901 $ 308,788 $ 375,977 $ 23,167 $ 236,928 $ -
2018 670,770 277,286 282,792 14,205 236,928 -
2019 678,680 245,292 229,246 8,038 236,928 -
2020 702,345 212,615 102,646 3,453 236,928 -
2021 696,035 180,411 45,016 1,400 236,928 -

2022-2026 2,311,790 519,960 25,000 750 1,167,419 -
2027-2031 1,162,458 115,772 - - 1,098,522 -
2032-2036 - - - - 674,590 -

2037 - - - - 42,039 -

Totals $ 6,869,979 $ 1,860,124 $ 1,060,677 $ 51,013 $ 4,167,210 $ -

General Obligation Bonds Literary Loans Revenue Bonds

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 6-Long-Term Obligation:

Primary Government - Governmental Activities Indebtedness

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

30, 2016: Balance Increases/ Decreases/ Balance June 30,2015 _Issuances__Retirements _June 30, 2016 General obligation bonds $ 7,514,955 $ S (644,976) $ 6,869,979 Literary loans 1,436,654 (375,977) 1,060,677 Revenue bonds 4,404,138 (236,928) 4,167,210 Deferred Amounts:

Bond premiums 232,903 (16,804) 216,099 Capital leases 224,844 (111,375) 113,469 Landfill closure/

postclosure liability 275,738 2,482 : 278,220 Net OPEB obligation 111,461 37,164 (1,900) 146,725 Compensated absences 599,590 475,011 (449,693) 624,908 Net pension liability 5,742,325 2,649,950 (2,464,012) 5,928,263

Total $__ 20,542,608 $3,164,607 $ (4,301,665) $__19,405,550

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 2017 $ 647,901 $ 308,788 $375,977 $23,167 $236,928 $ 2018 670,770 277,286 282,792 14,205 236,928 2019 678,680 245,292 229,246 8,038 236,928 2020 702,345 212,615 102,646 3,453 236,928 2021 696,035 180,411 45,016 1,400 236,928 2022-2026 2,311,790 519,960 25,000 750 1,167,419 2027-2031 1,162,458 115,772 : - 1,098,522 2032-2036 - - 674,590 2037 42,039 Totals $ 6,869,979 $ 1,860,124 $ 1,060,677 $51,013 $ 4,167,210 $

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 6-Long-Term Obligations: (Continued)

Primary Government - Governmental Activities Indebtedness (Continued)

Details of long-term indebtedness:

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

General Obligation Bonds: General obligation bond 5.10%-6.10% 1997 2016 $5,000 a+ 140,000$ 10,000$ 5,000$
General obligation bond 4.10%-5.23% 1999 2019 $25,000 a+ 510,000 100,000 25,000
General obligation bond 4.98%-5.10% 2000 2021 $94,999-115,952 a+ 1,802,210 546,750 103,076
General obligation bond 2.35%-5.10% 2002 2023 $213,799-272,702 a+ 4,382,954 1,761,034 231,221
General obligation bond 4.60%-5.10% 2006 2027 $147,228-197,458 a+ 3,205,190 1,942,195 158,604
General obligation bond 4.60%-5.10% 2009 2030 $55,000-110,000 a+ 1,485,000 1,175,000 60,000
General obligation bond 3.05%-5.05% 2010 2031 $55,000-120,000 a+ 1,620,000 1,335,000 65,000

Total General Obligation Bonds 6,869,979$ 647,901$

Revenue Bonds: Revenue bond 0.00% 11/28/2001 2033 $15,595 sa 935,690$ 499,035$ 31,190$
Revenue bond 0.00% 11/28/2001 2033 $27,708 sa 1,678,400 914,364 55,416
Revenue bond 0.00% 11/28/2001 2025 $8,612 sa 344,477 155,015 17,224
Revenue bond 0.00% 11/1/2002 2033 $13,707 sa 822,366 452,301 27,412
Revenue bond 0.00% 3/10/2005 2036 $9,276 sa 556,538 361,750 18,551
Revenue bond 0.00% 10/14/2005 2036 $1,524 sa 91,439 60,959 3,048
Revenue bond 0.00% 10/14/2005 2037 $31,779 sa 1,906,717 1,302,923 63,557
Revenue bond 0.00% 4/28/2006 2037 $6,925 sa 415,513 283,933 13,851
Revenue bond 0.00% 3/30/2007 2037 $3,340 sa 197,179 136,930 6,679

Total Revenue Bonds 4,167,210$ 236,928$

Plus: Unamortized Premium 216,099$ 16,804$

Total General Obligation and Revenue Bonds 11,253,288$ 901,633$

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 6-Long-Term Obligations: (Continued)

Primary Government - Governmental Activities Indebtedness (Continued)

Details of long-term indebtedness:

Final Amount of Balance Amount Interest. Date. Maturity Installment Original Governmental__Due Within Rates Issued Date ‘Amounts Issue ‘Activities One Year

General Obligation Bonds: General obligation bond 5A0%-6.10% 1997 2016 $5,000a $140,000 $10,000 $5,000, General obligation bond 410%-5.23% 1999 2019 $25,000 a+ 510,000 100,000 25,000 General obligation bond 4.98%-5.10% 2000 201 $94,999-115,952a+ 1,802,210 546,750 103,076 General obligation bond 2.35%-5.10% 2002, 2023 $213,799-272,702 a+ 4,382,954 1,761,034 231,221 General obligation bond 4.60%-5.10% 2006 2027 $147,228-197,458 ax 3,205,190 1,947,195 158,604 General obligation bond 4.60%-5.10% 2009 2030 $55,000-110,000 a+ 1,485,000. 1,175,000 60,000 General obligation bond 3.05%-5.05% 2010 2031 $55,000-120,000 a+ 1,620,000__1,335,000 65,000 Total General Obligation Bonds $6,869,979 $647,901 Revenue Bond: Revenue bond 0.00% 11/28/2001 2033 515,595 sa «$935,690 $499,035 $31,190, Revenue bond 0.00% 11/28/2001 2033 $27,708 sa 1,678,400 914,364 55,416 Revenue bond 0.00% 11/28/2001 2025 $8,612 sa 344,477 155,015, 17,224 Revenue bond 0.00% 11/1/2002 2033 $13,707 sa 822,366 42,301 7,412 Revenue bond 0.00% 3/10/2005 2036 $9,276 sa 556,538 361,750 18,551 Revenue bond 0.00% 10/14/2005 2036 $1,524 5a 91,439 60,959 3,048 Revenue bond 0.00% 10/14/2005 2037 $31,779 sa 1,906,717 1,302,923 63,557 Revenue bond 0.00% 4/28/2008 2037 96,925 sa 415,513 283,933 13,851 Revenue bond 0.00% 3/30/2007 2037 $3,340 sa 197,179 136,930 6,679 Total Revenue Bonds $ Plus:

Unamortized Premium $216,099 $16,804 Total General Obligation and Revenue Bonds $ $901,633

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 6-Long-Term Obligations: (Continued)

Primary Government - Governmental Activities Indebtedness (Continued)

Details of long-term indebtedness: (Continued)

Final Amount of Balance Amount

Interest Date Maturity Installment Original Governmental Due Within Rates Issued Date Amounts Issue Activities One Year

Literary loans: Literary loan 3.00% 7/15/1986 2017 $30,222 a+ 960,000$ 30,222$ 30,222$
Literary loan 3.00% 7/15/1986 2017 $62,693 a+ 2,000,000 62,963 62,963
Literary loan 3.00% 2/1/1988 2018 $18,522 a+ 530,999 37,044 18,522
Literary loan 3.00% 2/1/1988 2018 $12,581 a+ 358,151 25,162 12,581
Literary loan 3.00% 2/1/1988 2018 $3,005 a+ 84,805 6,010 3,005
Literary loan 3.00% 2/1/1988 2018 $9,995 a+ 281,079 19,990 9,995
Literary loan 3.00% 2/1/1988 2018 $6,989 a+ 196,873 13,978 6,989
Literary loan 2.00% 1/1/2000 2020 $57,757 a+ 1,155,140 231,028 57,757
Literary loan 2.00% 3/15/1999 2019 $55,700 a+ 1,114,086 167,186 55,700
Literary loan 2.00% 3/15/1999 2019 $8,200 a+ 161,449 22,049 8,200
Literary loan 2.00% 6/15/1999 2019 $21,134 a+ 422,680 63,402 21,134
Literary loan 2.00% 6/15/1999 2019 $44,020 a+ 880,411 132,071 44,020
Literary loan 2.00% 11/15/2000 2021 $24,689 a+ 493,789 123,454 24,689
Literary loan 3.00% 12/15/2000 2021 $7,700 a+ 154,118 38,618 7,700
Literary loan 2.00% 7/1/2003 2023 $12,500 a+ 250,000 87,500 12,500

Total Literary Loans 1,060,677$ 375,977$

Other Obligations: Capital Leases (Note 7) 113,469$ 113,469$
Landfill Closure and Postclosure Liability 278,220 -
Net OPEB Obligation 146,725 -
Compensated Absences 624,908 468,681
Net Pension Liability 5,928,263 -

Total Other Obligations 7,091,585$ 582,150$

Total Long-term Obligations 19,405,550$ 1,859,760$

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 6-Long-Term Obligations: (Continued)

Primary Government - Governmental Activities Indebtedness (Continued)

Details of long-term indebtedness: (Continued)

Final Amount of Balance ‘Amount Interest Date ‘Maturity Installment Original -—-Governmental__Due Within Rates Issued Date Amounts sue Activities One Year Literary loans Literary loan 3.00% 7/15/1986 —2017-——«$30,222 ar $ 960,000 $ 30,222 § © 30,222 Literary loan 3.00% 7/15/1986 2017 $62,693 ar 2,000,000 62,963 62,963 Literary loan 3.00% «2/1/1988 —-2018-«18,522a+ 530,999 37,044 18,522 Literary loan 3.008 2/1/1988 2018 812,581.ar 358,151 25,162 12,581 Literary loan 3.00% 2/1/1988 2018.——$3,005 a+ 84,805, 6,010 3,005 Literary loan 3.00% «2/1/1988 2018——$9,995.a+ 281,079 19,990 9,995 Literary loan 3.00% 2/1/1988 2018——$6,989. a+ 196,873 13,978 6,989 Literary loan 2.00% 1/1/2000 2020 SS7,757ar 1,155,140 231,028 57,757 Literary loan 2.00% 3/15/1999 2019 $55,700a+ 1,114,086, 167,186 55,700 Literary loan 2.00% 3/15/1999 2019 $8,200 ar 161,449 22,049 8,200 Literary loan 2.00% 6/15/1999 2019 S21,134.ar 422,680 63,402, 21,134 Literary loan 2.00% 6/15/1999 2019 $44,020a+ 880,411 132,071 44,020 Literary loan 2.00% 11/15/2000 2021. $24,689 ar 493,789 123,454 24,689 Literary loan 3.00% 12/15/2000 2021 $7,700 a+ 154,118 38,618 7,700 Literary loan 2.00% 7/1/2003 2023-«$12,500a+ 250,000 87,500 12,500

Total Literary Loans

060,677 _$ _ 375,977

Other Obtigations: Capital Leases (Note 7) S 113,469 $113,469 Landfill Closure and Postclosure Liability 278,220 : Net OPEB Obligation 146,725, : Compensated Absences 624,908 468,681 Net Pension Liability 5,928,263 : Total Other Obligations $7,091,585 $ 582,150

Total Long-term Obligations

19,405,550_$

760

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 6-Long-Term Obligations: (Continued)

Primary Government – Business-type Activities Indebtedness:

The following is a summary of long-term obligation transactions of the Enterprise Fund for the year ended June 30, 2016:

Balance Balance June 30, 2015 Issuances Retirements June 30, 2016

Revenue bonds $ 672,401 $ - $ (21,892) $ 650,509
Net pension liability 40,514 18,696 (17,384) 41,826

Total $ 712,915 $ 18,696 $ (39,276) $ 692,335

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

Year Ending June 30, Principal Interest

2017 22,814$ 28,633$
2018 23,776 27,671
2019 23,845 26,665
2020 23,960 25,612
2021 25,060 24,512

2022-2026 143,665 104,195
2027-2031 179,840 68,020
2032-2036 207,549 22,833

Totals 650,509$ 328,141$

Revenue Bonds

Details of long-term indebtedness:

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

Revenue Bonds: Revenue bond 0.00% 3/24/1999 2019 37,500$ 4,687$ 1,875$
Revenue bond 4.50% 4/10/1996 2036 900,000 645,822 20,939
Total Revenue Bonds 650,509$ 22,814$

Other Obligations: Net pension liability 41,826$ -$

Total Long-term Obligations 692,335$ 22,814$

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 6-Long-Term Obligations: (Continued)

Primary Government - Business-type Activities Indebtedness:

The following is a summary of long-term obligation transactions of the Enterprise Fund for the year

ended June 30, 2016:

Balance Balance

June 30,2015 _Issuances__Retirements _June 30, 2016

Revenue bonds $672,401 § $ (21,892) $ 650,509 Net pension liability 40,514 18,696 (17,384) 41,826 Total $712,915 $ 18,696 $__(39,276) $ 692,335

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

Year Ending Revenue Bonds June 30, Principal Interest 2017 $22,814 $ 28,633 2018 23,776 27,671 2019 23,845 26,665 2020 23,960 25,612 2021 25,060 24,512 2022-2026 143,665 104,195 2027-2031 179,840 68,020 2032-2036 207,549 22,833 Totals $650,509 $ 328,141 Details of long-term indebtedness: Final Amount of Balance ‘Amount Interest Date Maturity Original__Business-Type Due Within Rates Issued Date Issue Activities One Year Revenue Bonds: Revenue bond 0.00% 3/24/1999 2019 $37,500 $ 4,687 $1,875 Revenue bond 4.50% 4/10/1996 2036 900,000 645,822 20,939 Total Revenue Bonds 650,509 $ 22,814 Other Obligation: Net pension liability 41,826 $ Total Long-term Obligations S$ 692,335$

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 6-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, 2016:

Balance Balance June 30, 2015 Increases Decreases June 30, 2016

Net OPEB obligation $ 966,949 $ 935,368 $ (728,600) $ 1,173,717
Early retirement incentive 19,500 - (11,500) 8,000
Compensated absences 787,935 509,424 (590,951) 706,408
Net pension liability 33,283,625 8,622,781 (7,116,662) 34,789,744

Total $ 35,058,009 $ 10,067,573 $ (8,447,713) $ 36,677,869

Details of long-term indebtedness:

Amount Total Due Within

Amount One Year Other Obligations:

Early retirement incentive 8,000$ 8,000$
Net OPEB Obligation 1,173,717 -
Compensated Absences 706,408 529,806
Net pension liability 34,789,744 -

Total Other Obligations 36,677,869$ 537,806$

The remainder of this page left blank intentionally.

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 6-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, 2016:

Balance Balance June 30, 2015 Increases Decreases June 30, 2016 Net OPEB obligation $ 966,949 $ 935,368 $ (728,600) $1,173,717 Early retirement incentive 19,500 : (11,500) 8,000 Compensated absences 787,935 509,424 (590,951) 706,408 Net pension liability 33,283,625 8,622,781 (7,116,662) 34,789,744 Total $_ 35,058,009 $ 10,067,573 $ (8,447,713) $__36,677,869 Details of long-term indebtedness: Amount Total Due Within Amount ___One Year Other Obligation Early retirement incentive $ 8,000 $ 8,000 Net OPEB Obligation 1,173,717 - Compensated Absences 706,408 529,806 Net pension liability 34,789,744 a Total Other Obligations $ 36,677,869 $ 537,806

The remainder of this page left blank intentionally.

-33-

COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 7-Capital Leases:

Primary Government The County has entered into lease agreements to finance the acquisition of school buses 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 dates of inception.

The capital assets acquired through capital leases are as follows:

Buses

Machinery and equipment $ 434,164
Less: Accumulated depreciation (119,395)

Net capital asset $ 314,769

The future minimum lease obligations and the net present value of minimum lease payments as of June 30, 2016, were as follows:

Year Ending Capital June 30, Leases

2017 $ 115,602

Less, amount representing interest (2,133)

Present Value of Lease Agreement $ 113,469

The remainder of this page left blank intentionally.

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 7-Capital Leases:

Primary Government The County has entered into lease agreements to finance the acquisition of school buses 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 dates of inception.

The capital assets acquired through capital leases are as follows:

Buses ‘Machinery and equipment S 434,164 Less: Accumulated depreciation (119,395) Net capital asset $314,769

The future minimum lease obligations and the net present value of minimum lease payments as of June 30, 2016, were as follows:

Year Ending Capital June 30, Leases 2017 $115,602

Less, amount representing interest (2,133)

Present Value of Lease Agreement $__ 113,469

The remainder of this page left blank intentionally.

“34.

COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 8-Pension Plan:

Plan Description

All full-time, salaried permanent employees of the County and (nonprofessional) employees of the public school divisions are automatically covered by the VRS Retirement Plan upon employment. This is an agent multiple-employer plan administered by the Virginia Retirement System (the System) along with plans for other employer groups in the Commonwealth of Virginia. However, several entities whose financial information is not included in the primary government report, participate in the VRS plan through County of Russell, Virginia and the participating entities report their proportionate information on the basis of a cost-sharing plan.

All full-time, salaried permanent (professional) employees of public school divisions are automatically covered by the VRS Teacher Retirement Plan upon employment. This is a cost-sharing multiple employer plan administered by the Virginia Retirement System (the system).

Members earn one month of service credit for each month they are employed and for which they and their employer pay contributions to VRS. Members are eligible to purchase prior service, based on specific criteria as defined in the Code of Virginia, as amended. Eligible prior service that may be purchased includes prior public service, active military service, certain periods of leave, and previously refunded service.

The System administers three different benefit structures for covered employees – Plan 1, Plan 2, and, Hybrid. Each of these benefit structures has a different eligibility criteria. The specific information for each plan and the eligibility for covered groups within each plan are set out in the table below:

RETIREMENT PLAN PROVISIONS

PLAN 1 PLAN 2 HYBRID RETIREMENT PLAN

About Plan 1
Plan 1 is a defined benefit plan. The retirement benefit is based on a member’s age, creditable service and average final compensation at retirement using a formula. Employees are eligible for Plan 1 if their membership date is before July 1, 2010, and they were vested as of January 1, 2013.

About Plan 2
Plan 2 is a defined benefit plan. The retirement benefit is based on a member’s age, creditable service and average final compensation at retirement using a formula. Employees are eligible for Plan 2 if their membership date is on or after July 1, 2010, or their membership date is before July 1, 2010, and they were not vested as of January 1, 2013.

About the Hybrid Retirement Plan
The Hybrid Retirement Plan combines the features of a defined benefit plan and a defined contribution plan. Most members hired on or after January 1, 2014 are in this plan, as well as Plan 1 and Plan 2 members who were eligible and opted into the plan during a special election window. (see “Eligible Members”)

• The defined benefit is based on a member’s age, creditable service and average final compensation at retirement using a formula.

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 8-Pension Plan: Plan Description

AlLfull-time, salaried permanent employees of the County and (nonprofessional) employees of the public school divisions are automatically covered by the VRS Retirement Plan upon employment. This is an agent multiple-employer plan administered by the Virginia Retirement System (the System) along with plans for other employer groups in the Commonwealth of Virginia. However, several entities whose financial information is not included in the primary government report, participate in the VRS plan through County of Russell, Virginia and the participating entities report their proportionate information on the basis of a cost-sharing plan.

‘Members earn one month of service credit for each month they are employed and for which they and their employer pay contributions to VRS. Members are eligible to purchase prior service, based on specific criteria as defined in the Code of Virginia, as amended. Eligible prior service that may be purchased includes prior public service, active military service, certain periods of leave, and previously refunded service.

The System administers three different benefit structures for covered employees - Plan 1, Plan 2, and, Hybrid. Each of these benefit structures has a different eligibility criteria. The specific information for each plan and the eligibility for covered groups within each plan are set out in the table below:

RETIREMENT PLAN PROVISIONS.

PLAN 1 PLAN 2 HYBRID RETIREMENT PLAN About Plan 1 ‘About Plan 2 About the Hybrid Retirement Plan Plan 1 is a defined Plan 2 is a defined benefit plan. | The Hybrid Retirement Plan combines benefit plan. The The retirement benefit is based | the features of a defined benefit plan retirement benefit is ona member’s age, creditable | and a defined contribution plan. Most based onamember’s _| service and average final members hired on or after January 1, age, creditable service | compensation at retirement __| 2014 are in this plan, as well as Plan 1 and average final using a formula, Employees are | and Plan 2 members who were eligible compensation at eligible for Plan 2 if their and opted into the plan during a retirement using a membership date is on or after | special election window. (see “Eligible formula. Employees are | July 1, 2010, or their Members”)

eligible for Plan 1 if their | membership date is before July - ; membership date is 1, 2010, and they were not + The defined benefit is based on a before July 1, 2010, and | vested as of January 1, 2013. member’s age, creditable service they were vested ag of and average final compensation at January 1, 2013. retirement using a formula.

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 8-Pension Plan: (Continued)

Plan Description (Continued)

RETIREMENT PLAN PROVISIONS (CONTINUED)

PLAN 1 PLAN 2 HYBRID RETIREMENT PLAN

About Plan 1 (Cont.)

About Plan 2 (Cont.)

About the Hybrid Retirement Plan (Cont.)

 The benefit from the defined contribution component of the plan depends on the member and employer contributions made to the plan and the investment performance of those contributions.

• In addition to the monthly benefit payment payable from the defined benefit plan at retirement, a member may start receiving distributions from the balance in the defined contribution account, reflecting the contributions, investment gains or losses, and any required fees.

Eligible Members
Employees are in Plan 1 if their membership date is before July 1, 2010, and they were vested as of January 1, 2013.

Hybrid Opt-In Election
VRS non-hazardous duty covered Plan 1 members were allowed to make an irrevocable decision to opt into the Hybrid Retirement Plan during a special election window held January 1 through April 30, 2014.

Eligible Members
Employees are in Plan 2 if their membership date is on or after July 1, 2010, or their membership date is before July 1, 2010, and they were not vested as of January 1, 2013.

Hybrid Opt-In Election
Eligible Plan 2 members were allowed to make an irrevocable decision to opt into the Hybrid Retirement Plan during a special election window held January 1 through April 30, 2014.

Eligible Members
Employees are in the Hybrid Retirement Plan if their membership date is on or after January 1, 2014. This includes:

• Political subdivision employees*

• School division employees • Members in Plan 1 or Plan 2

who elected to opt into the plan during the election window held January 1-April 30, 2014; the plan’s effective date for opt-in members was July 1, 2014.

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

JUNE 30, 2016

Note 8-Pension Plan: (Continued)

Plan Description (Continued)

RETIREMENT PLAN PROVISIONS (CONTINUED)

PLAN 1

PLAN 2

HYBRID RETIREMENT PLAN

About Plan 1 (Cont.)

Eligible Members Employees are in Plan 1 if their membership date is before July 1, 2010, and they were vested as of January 1, 2013.

Hybrid Opt-In Election VRS non-hazardous duty covered Plan 1 members were allowed to make an irrevocable decision to opt into the Hybrid Retirement Plan during a special election window held January 1 through April 30, 2014.

About Plan 2 (Cont.)

Eligible Members Employees are in Plan 2 if their membership date is on or after July 1, 2010, or their membership date is before July 1, 2010, and they were not vested as of January 1, 2013.

Hybrid Opt-In Election

Eligible Plan 2 members were allowed to make an irrevocable decision to opt into the Hybrid Retirement Plan during a special election window held January 1 through April 30, 2014.

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About the Hybrid Retirement Plan (Cont.)

« The benefit from the defined

contribution component of the plan depends on the member and employer contributions made to the plan and the investment performance of __ those contributions. In addition to the monthly benefit payment payable from the defined benefit plan at retirement, a member may start receiving distributions from the balance in the defined contribution account, reflecting the contributions, investment gains or losses, and any required fees.

Eligible Members Employees are in the Hybrid Retirement Plan if their membership date is on or after January 1, 2014. This includes:

Political subdivision employees*
School division employees
Members in Plan 1 or Plan 2 who elected to opt into the plan during the election window held January 1-April 30, 2014; the plan’s effective date for opt-in members was July 1, 2014,

COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 8-Pension Plan: (Continued)

Plan Description (Continued)

RETIREMENT PLAN PROVISIONS (CONTINUED)

PLAN 1 PLAN 2 HYBRID RETIREMENT PLAN

Hybrid Opt-In Election (Cont.) The Hybrid Retirement Plan’s effective date for eligible Plan 1 members who opted in was July 1, 2014.

If eligible deferred members returned to work during the election window, they were also eligible to opt into the Hybrid Retirement Plan. Members who were eligible for an optional retirement plan (ORP) and had prior service under Plan 1 were not eligible to elect the Hybrid Retirement Plan and remain as Plan 1 or ORP.

Hybrid Opt-In Election (Cont.) The Hybrid Retirement Plan’s effective date for eligible Plan 2 members who opted in was July 1, 2014.

If eligible deferred members returned to work during the election window, they were also eligible to opt into the Hybrid Retirement Plan.

Members who were eligible for an optional retirement plan (ORP) and have prior service under Plan 2 were not eligible to elect the Hybrid Retirement Plan and remain as Plan 2 or ORP.

*Non-Eligible Members Some employees are not eligible to participate in the Hybrid Retirement Plan. They include:

• Political subdivision employees who are covered by enhanced benefits for hazardous duty employees.

Those employees eligible for an optional retirement plan (ORP) must elect the ORP plan or the Hybrid Retirement Plan. If these members have prior service under Plan 1 or Plan 2, they are not eligible to elect the Hybrid Retirement Plan and must select Plan 1 or Plan 2 (as applicable) or ORP.

Retirement Contributions
Employees contribute 5% of their compensation each month to their member contribution account through a pre-tax salary reduction. Some political subdivisions and school divisions elected to phase in the required 5% member contribution but all employees will be paying the full 5% by July 1, 2016. Member contributions are tax-deferred until they are withdrawn as part of a retirement benefit or as a refund. The employer makes a separate actuarially determined contribution to VRS for all covered employees. VRS invests both member and employer contributions to provide funding for the future benefit payment.

Retirement Contributions
A member’s retirement benefit is funded through mandatory and voluntary contributions made by the member and the employer to both the defined benefit and the defined contribution components of the plan. Mandatory contributions are based on a percentage of the employee’s creditable compensation and are required from both the member and the employer. Additionally, members may choose to make voluntary contributions to the defined contribution component of the plan, and the employer is required to match those voluntary contributions according to specified percentages.

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

JUNE 30, 2016

Note 8-Pension Plan: (Continued)

Plan Description (Continued)

RETIREMENT PLAN PROVISIONS (CONTINUED)

PLAN 1

PLAN 2

HYBRID RETIREMENT PLAN

Hybrid Opt-In Election (Cont.) The Hybrid Retirement Plan’s effective date for eligible Plan 1 members who opted in was July 1, 2014,

Hybrid Opt-In Election (Cont.) The Hybrid Retirement Plan’s effective date for eligible Plan 2 members who opted in was July 1, 2014.

If eligible deferred members returned to work during the election window, they were also eligible to opt into the Hybrid Retirement Plan.

Members who were eligible for an optional retirement plan (ORP) and have prior service under Plan 2 were not eligible to elect the Hybrid Retirement Plan and remain as Plan 2 or ORP.

*Non-Eligible Members

Some employees are not eligible to participate in the Hybrid Retirement Plan. They include:

Political subdivision employees who are covered by enhanced benefits for hazardous duty employees.

Retirement Contributions Employees contribute 5% of their compensation each month to their member contribution account through a pre-tax salary reduction. Some political subdivisions and school divisions elected to phase in the required 5% member contribution but all employees will be paying the full 5% by July 1, 2016. Member contributions are tax-deferred until they are withdrawn as part of a retirement benefit or as a refund. The employer makes a separate actuarially determined contribution to VRS for all covered employees. VRS invests both member and employer contributions to provide funding for the future benefit payment.

Retirement Contributions A member’s retirement benefit is funded through mandatory and voluntary contributions made by the member and the employer to both the defined benefit and the defined contribution components of the plan, Mandatory contributions are based on a percentage of the employee’s creditable compensation and are required from both the member and the employer. Additionally, members may choose to make voluntary contributions to the defined contribution component of the plan, and the employer is required to match those voluntary contributions according to specified percentages.

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 8-Pension Plan: (Continued)

Plan Description (Continued)

RETIREMENT PLAN PROVISIONS (CONTINUED)

PLAN 1 PLAN 2 HYBRID RETIREMENT PLAN

Creditable Service
Creditable service includes active service. Members earn creditable service for each month they are employed in a covered position. It also may include credit for prior service the member has purchased or additional creditable service the member was granted. A member’s total creditable service is one of the factors used to determine their eligibility for retirement and to calculate their retirement benefit. It also may count toward eligibility for the health insurance credit in retirement, if the employer offers the health insurance credit.

Creditable Service
Same as Plan 1.

Creditable Service
Defined Benefit Component:
Under the defined benefit component of the plan, creditable service includes active service. Members earn creditable service for each month they are employed in a covered position. It also may include credit for prior service the member has purchased or additional creditable service the member was granted. A member’s total creditable service is one of the factors used to determine their eligibility for retirement and to calculate their retirement benefit. It also may count toward eligibility for the health insurance credit in retirement, if the employer offers the health insurance credit.

Defined Contributions Component:
Under the defined contribution component, creditable service is used to determine vesting for the employer contribution portion of the plan.

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

JUNE 30, 2016

Note 8-Pension Plan: (Continued)

Plan Description (Continued)

RETIREMENT PLAN PROVISIONS (CONTINUED)

PLAN 1

PLAN 2

HYBRID RETIREMENT PLAN

Creditable Service

Creditable service includes active service. Members earn creditable service for each month they are employed in a covered position. It also may include credit for prior service the member has purchased or additional creditable service the member was granted. A member’s total creditable service is one of the factors used to determine their eligibility for retirement and to calculate their retirement benefit. It also may count toward eligibility for the health insurance credit in retirement, if the employer offers the health insurance credit.

Creditable Service Same as Plan 1.

Creditable Service Defined Benefit Component: Under the defined benefit component of the plan, creditable service includes active service. Members earn creditable service for each month they are employed in a covered position. It also may include credit for prior service the member has purchased or additional creditable service the member was granted. A member’s total creditable service is one of the factors used to determine their eligibility for retirement and to calculate their retirement benefit. It also may count toward eligibility for the health insurance credit in retirement, if the employer offers the health insurance credit.

Defined Contributions

Comp. Under the defined contribution component, creditable service is used to determine vesting for the employer contribution portion of the plan.

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 8-Pension Plan: (Continued)

Plan Description (Continued)

RETIREMENT PLAN PROVISIONS (CONTINUED)

PLAN 1 PLAN 2 HYBRID RETIREMENT PLAN

Vesting
Vesting is the minimum length of service a member needs to qualify for a future retirement benefit. Members become vested when they have at least five years (60 months) of creditable service. Vesting means members are eligible to qualify for retirement if they meet the age and service requirements for their plan. Members also must be vested to receive a full refund of their member contribution account balance if they leave employment and request a refund.

Members are always 100% vested in the contributions that they make.

Vesting
Same as Plan 1.

Vesting
Defined Benefit Component:
Defined benefit vesting is the minimum length of service a member needs to qualify for a future retirement benefit.
Members are vested under the defined benefit component of the Hybrid Retirement Plan when they reach five years (60 months) of creditable service.
Plan 1 or Plan 2 members with at least five years (60 months) of creditable service who opted into the Hybrid Retirement Plan remain vested in the defined benefit component.

Defined Contributions Component:
Defined contribution vesting refers to the minimum length of service a member needs to be eligible to withdraw the employer contributions from the defined contribution component of the plan.

Members are always 100% vested in the contributions that they make.

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

JUNE 30, 2016

Note 8-Pension Plan: (Continued)

Plan Description (Continued)

RETIREMENT PLAN PROVISIONS (CONTINUED)

PLAN 1

PLAN 2

HYBRID RETIREMENT PLAN

Vesting Vesting Same as Plan 1.

Vesting is the minimum length of service a member needs to qualify for a future retirement benefit. Members become vested when they have at least five years (60 months) of creditable service. Vesting means members are eligible to qualify for retirement if they meet the age and service requirements for their plan. Members also must be vested to receive a full refund of their member contribution account balance if they leave ‘employment and request a refund.

Members are always 100% vested in the contributions that they make.

Vesting

Defined Benefit Component: Defined benefit vesting is the minimum length of service a member needs to qualify for a future retirement benefit. Members are vested under the defined benefit component of the Hybrid Retirement Plan when they reach five years (60 months) of creditable service. Plan 1 or Plan 2 members with at least five years (60 months) of creditable service who opted into the Hybrid Retirement Plan remain vested in the defined benefit component.

Component: Defined contribution vesting

refers to the minimum length of service a member needs to be eligible to withdraw the employer contributions from the defined contribution component of the plan,

Members are always 100% vested in the contributions that they make.

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 8-Pension Plan: (Continued)

Plan Description (Continued)

RETIREMENT PLAN PROVISIONS (CONTINUED)

PLAN 1 PLAN 2 HYBRID RETIREMENT PLAN

Vesting (Cont.)

Vesting (Cont.) Defined Contributions Component: (Cont.) Upon retirement or leaving covered employment, a member is eligible to withdraw a percentage of employer contributions to the defined contribution component of the plan, based on service.

• After two years, a member is 50% vested and may withdraw 50% of employer contributions.

• After three years, a member is 75% vested and may withdraw 75% of employer contributions.

• After four or more years, a member is 100% vested and may withdraw 100% of employer contributions.

Distribution is not required by law until age 70½.

Calculating the Benefit
The Basic Benefit is calculated based on a formula using the member’s average final compensation, a retirement multiplier and total service credit at retirement. It is one of the benefit payout options available to a member at retirement.

Calculating the Benefit
See definition under Plan 1.

Calculating the Benefit
Defined Benefit Component:
See definition under Plan 1

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

JUNE 30, 2016

Note 8-Pension Plan: (Continued)

Plan Description (Continued)

RETIREMENT PLAN PROVISIONS (CONTINUED)

PLAN 1

PLAN 2

HYBRID RETIREMENT PLAN

Vesting (Cont.)

Defined Contributions Component: (Cont.)

Upon retirement or leaving covered employment, a member is eligible to withdraw a percentage of employer contributions to the defined contribution component of the plan, based on service.

After two years, a member is 50% vested and may withdraw 50% of employer contributions.

+After three years, a member is 75% vested and may withdraw 75% of employer contributions.

After four or more years, a member is 100% vested and may withdraw 100% of employer contributions.

Distribution is not required by law until age 707%.

Calculating the Benefit

The Basic Benefit is calculated | See definition under Plan 1.

based on a formula using the member’s average final compensation, a retirement multiplier and total service credit at retirement. It is one of the benefit payout options available to a member at retirement.

Calculating the Benefit

Defined Benefit Component: See definition under Plan 1

COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 8-Pension Plan: (Continued)

Plan Description (Continued)

RETIREMENT PLAN PROVISIONS (CONTINUED)

PLAN 1 PLAN 2 HYBRID RETIREMENT PLAN

Calculating the Benefit (Cont.) An early retirement reduction factor is applied to the Basic Benefit if the member retires with a reduced retirement benefit or selects a benefit payout option other than the Basic Benefit.

Calculating the Benefit (Cont.)

Calculating the Benefit (Cont.) Defined Contribution Component:
The benefit is based on contributions made by the member and any matching contributions made by the employer, plus net investment earnings on those contributions.

Average Final Compensation
A member’s average final compensation is the average of the 36 consecutive months of highest compensation as a covered employee.

Average Final Compensation
A member’s average final compensation is the average of their 60 consecutive months of highest compensation as a covered employee.

Average Final Compensation
Same as Plan 2. It is used in the retirement formula for the defined benefit component of the plan.

Service Retirement Multiplier
VRS: The retirement multiplier is a factor used in the formula to determine a final retirement benefit. The retirement multiplier for non-hazardous duty members is 1.70%.

Sheriffs and regional jail superintendents: The retirement multiplier for sheriffs and regional jail superintendents is 1.85%.

Political subdivision hazardous duty employees: The retirement multiplier of eligible political subdivision hazardous duty employees other than sheriffs and regional jail superintendents is 1.70% or 1.85% as elected by the employer.

Service Retirement Multiplier
VRS: Same as Plan 1 for service earned, purchased or granted prior to January 1, 2013. For non-hazardous duty members the retirement multiplier is 1.65% for creditable service earned, purchased or granted on or after January 1, 2013.

Sheriffs and regional jail superintendents: Same as Plan 1.

Political subdivision hazardous duty employees: Same as Plan 1.

Service Retirement Multiplier
Defined Benefit Component:
VRS: The retirement multiplier for the defined benefit component is 1.00%.

For members who opted into the Hybrid Retirement Plan from Plan 1 or Plan 2, the applicable multipliers for those plans will be used to calculate the retirement benefit for service credited in those plans.

Sheriffs and regional jail superintendents: Not applicable.

Political subdivision hazardous duty employees: Not applicable.

Defined Contribution Component:
Not applicable.

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

JUNE 30, 2016

Note 8-Pension Plan: (Continued)

Plan Description (Continued)

RETIREMENT PLAN PROVISIONS (CONTINUED)

PLAN 1

PLAN 2

HYBRID RETIREMENT PLAN

Calculating the Benefit (Cont.)

Calculating the Benefit (Cont.) Defined Contribution Component: The benefit is based on contributions made by the member and any matching contributions made by the employer, plus net investment earnings on those contributions.

Average Final Compensation Amember’s average final compensation is the average of the 36 consecutive months of highest compensation as a covered employee.

Average Final Compensation A member’s average final compensation is the average of their 60 consecutive months of highest compensation as a covered employee.

Average Final Compensation Same as Plan 2. It is used in the retirement formula for the defined benefit component of the plan.

Service Retirement Multiplier VRS: The retirement multiplier is a factor used in the formula to determine a final retirement benefit. The retirement multiplier for non-hazardous duty members is 1.70%.

Sheriffs and regional jail superintendents: The retirement multiplier for sheriffs and regional jail superintendents is 1.85%.

Service Retirement Multiplier

VRS: Same as Plan 1 for service earned, purchased or granted prior to January 1, 2013. For non-hazardous duty members the retirement multiplier is 1.65% for creditable service earned, purchased or granted on or after January 1, 2013.

Sheriffs and regional jail superintendents: Same as Plan 1.

Political subdivision hazardous duty employees: Same as Plan 1.

Service Retirement Multiplier

VRS: The retirement multiplier for the defined benefit component is 1.00%.

Sheriffs and regional jail superintendents: Not applicable.

Political subdivision hazardous duty employees: Not applicable.

Defined Contribution Component: Not applicable.

-A1-

COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 8-Pension Plan: (Continued)

Plan Description (Continued)

RETIREMENT PLAN PROVISIONS (CONTINUED)

PLAN 1 PLAN 2 HYBRID RETIREMENT PLAN

Normal Retirement Age
VRS: Age 65.

Political subdivisions hazardous duty employees: Age 60.

Normal Retirement Age
VRS: Normal Social Security retirement age.

Political subdivisions hazardous duty employees: Same as Plan 1.

Normal Retirement Age
Defined Benefit Component:
VRS: Same as Plan 2.

Political subdivisions hazardous duty employees: Not applicable.

Defined Contribution Component:
Members are eligible to receive distributions upon leaving employment, subject to restrictions.

Earliest Unreduced Retirement Eligibility
VRS: Age 65 with at least five years (60 months) of creditable service or at age 50 with at least 30 years of creditable service.

Political subdivisions hazardous duty employees: Age 60 with at least five years of creditable service or age 50 with at least 25 years of creditable service.

Earliest Unreduced Retirement Eligibility
VRS: Normal Social Security retirement age with at least five years (60 months) of creditable service or when their age and service equal 90.

Political subdivisions hazardous duty employees: Same as Plan 1.

Earliest Unreduced Retirement Eligibility
Defined Benefit Component:
VRS: Normal Social Security retirement age and have at least five years (60 months) of creditable service or when their age and service equal 90.

Political subdivisions hazardous duty employees: Not applicable.

Defined Contribution Component:
Members are eligible to receive distributions upon leaving employment, subject to restrictions.

Earliest Reduced Retirement Eligibility VRS: Age 55 with at least five years (60 months) of creditable service or age 50 with at least 10 years of creditable service.

Earliest Reduced Retirement Eligibility VRS: Age 60 with at least five years (60 months) of creditable service.

Earliest Reduced Retirement Eligibility Defined Benefit Component:
VRS: Members may retire with a reduced benefit as early as age 60 with at least five years (60 months) of creditable service.

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

JUNE 30, 2016

Note 8-Pension Plan: (Continued)

Plan Description (Continued)

RETIREMENT PLAN PROVISIONS (CONTINUED)

PLAN 1

PLAN 2

HYBRID RETIREMENT PLAN

Normal Retirement Age VRS: Age 65.

Political subdivisions hazardous duty employees: Age 60.

Normal Retirement Age VRS: Normal Social Security retirement age.

Political subdivisions hazardous duty employees: Same as Plan 1.

Normal Retirement Age

Defined Benefit Component: VRS: Same as Plan 2.

Political subdivisions hazardous duty employees: Not applicable.

Defined Contribution Component: Members are eligible to receive

distributions upon leaving employment, subject to restrictions.

Earliest Unreduced Retirement Eligibility

VRS: Age 65 with at least five years (60 months) of creditable service or at age 50 with at least 30 years of creditable service.

Political subdivisions hazardous duty employees: Age 60 with at least five years of creditable service or age 50 with at least 25 years of creditable service.

Earliest Unreduced Retirement Eligibility

VRS: Normal Social Security retirement age with at least five years (60 months) of creditable service or when their age and service equal 90.

Political subdivisions hazardous duty employees: Same as Plan 1.

Earliest Unreduced Retirement Eligibility

Defined Benefit Component: VRS: Normal Social Security retirement age and have at least five years (60 months) of creditable service or when their age and service equal 90.

Political subdivisions hazardous duty employees: Not applicable.

Defined Contribution Component: Members are eligible to receive

distributions upon leaving employment, subject to restrictions.

Earliest Reduced Retirement Eligibility

VRS: Age 55 with at least five years (60 months) of creditable service or age 50 with at least 10 years of creditable service.

Earliest Reduced Retirement Eligibility

VRS: Age 60 with at least five years (60 months) of creditable service.

Earliest Reduced Retirement Eligibility

Defined Benefit Component: VRS: Members may retire with a reduced benefit as early as age 60 with at least five years (60 months) of creditable service.

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 8-Pension Plan: (Continued)

Plan Description (Continued)

RETIREMENT PLAN PROVISIONS (CONTINUED)

PLAN 1 PLAN 2 HYBRID RETIREMENT PLAN

Earliest Reduced Retirement Eligibility (Cont.)

Political subdivisions hazardous duty employees: 50 with at least five years of creditable service.

Earliest Reduced Retirement Eligibility (Cont.)

Political subdivisions hazardous duty employees: Same as Plan 1.

Earliest Reduced Retirement Eligibility (Cont.)

Political subdivisions hazardous duty employees: Not applicable.

Defined Contribution Component:
Members are eligible to receive distributions upon leaving employment, subject to restrictions.

Cost-of-Living Adjustment (COLA) in Retirement
The Cost-of-Living Adjustment (COLA) matches the first 3% increase in the Consumer Price Index for all Urban Consumers (CPI-U) and half of any additional increase (up to 4%) up to a maximum COLA of 5%.

Eligibility:
For members who retire with an unreduced benefit or with a reduced benefit with at least 20 years of creditable service, the COLA will go into effect on July 1 after one full calendar year from the retirement date.

For members who retire with a reduced benefit and who have less than 20 years of creditable service, the COLA will go into effect on July 1 after one calendar year following the unreduced retirement eligibility date.

Cost-of-Living Adjustment (COLA) in Retirement
The Cost-of-Living Adjustment (COLA) matches the first 2% increase in the CPI-U and half of any additional increase (up to 2%), for a maximum COLA of 3%.

Eligibility:
Same as Plan 1.

Cost-of-Living Adjustment (COLA) in Retirement
Defined Benefit Component:
Same as Plan 2.

Defined Contribution Component:
Not applicable.

Eligibility:
Same as Plan 1 and Plan 2.

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

JUNE 30, 2016

Note 8-Pension Plan: (Continued)

Plan Description (Continued)

RETIREMENT PLAN PROVISIONS (CONTINUED)

PLAN 1

PLAN 2

HYBRID RETIREMENT PLAN

Earliest Reduced Retirement Eligibility (Cont.)

Political subdivisions hazardous duty employees: 50 with at least five years of creditable service.

Earliest Reduced Retirement Eligibility (Cont.)

Political subdivisions hazardous duty employees: Same as Plan 1.

Earliest Reduced Retirement Eligibility (Cont.)

Political subdivisions hazardous duty employees: Not applicable.

Defined Contribution Component:

Members are eligible to receive distributions upon leaving employment, subject to restrictions.

Cost-of-Living Adjustment (COLA) in Retirement

The Cost-of-Living Adjustment (COLA) matches the first 3% increase in the Consumer Price Index for all Urban Consumers (CPI-U) and half of any additional increase (up to 4%) up to a maximum COLA of 5%.

For members who retire with an unreduced benefit or with a reduced benefit with at least 20 years of creditable service, the COLA will go into effect on July 1 after one full calendar year from the retirement date.

Cost-of-Living Adjustment (COLA) in Retirement

The Cost-of-Living Adjustment (COLA) matches the first 2% increase in the CPI-U and half of any additional increase (up to 2%), for a maximum COLA of 3%.

Eligibility: Same as Plan 1.

Cost-of-Living Adjustment (COLA) in Retirement

Defined Benefit Component: Same as Plan 2.

Defined Contribution

Component: Not applicable.

Eligibility: Same as Plan 1 and Plan 2.

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 8-Pension Plan: (Continued)

Plan Description (Continued)

RETIREMENT PLAN PROVISIONS (CONTINUED)

PLAN 1 PLAN 2 HYBRID RETIREMENT PLAN

Cost-of-Living Adjustment (COLA) in Retirement (Cont.)

Exceptions to COLA Effective Dates:
The COLA is effective July 1 following one full calendar year (January 1 to December 31) under any of the following circumstances:

• The member is within five years of qualifying for an unreduced retirement benefit as of January 1, 2013.

• The member retires on disability.

• The member retires directly from short-term or long-term disability under the Virginia Sickness and Disability Program (VSDP).

• The member is involuntarily separated from employment for causes other than job performance or misconduct and is eligible to retire under the Workforce Transition Act or the Transitional Benefits Program.

• The member dies in service and the member’s survivor or beneficiary is eligible for a monthly death-in-service benefit. The COLA will go into effect on July 1 following one full calendar year (January 1 to December 31) from the date the monthly benefit begins.

Cost-of-Living Adjustment (COLA) in Retirement (Cont.)

Exceptions to COLA Effective Dates:
Same as Plan 1.

Cost-of-Living Adjustment (COLA) in Retirement (Cont.)

Exceptions to COLA Effective Dates:
Same as Plan 1 and Plan 2.

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

JUNE 30, 2016

Note 8-Pension Plan: (Continued)

Plan Description (Continued)

RETIREMENT PLAN PROVISIONS (CONTINUED)

PLAN 1

PLAN 2

HYBRID RETIREMENT PLAN

Cost-of-Living Adjustment (COLA) in Retirement (Cont.)

Exceptions to COLA Effective

Cost-of-Living Adjustment (COLA) in Retirement (Cont.)

Exceptions to COLA Effective

Cost-of-Living Adjustment (COLA) in Retirement (Cont.)

Exceptions to COLA Effective

Dates:

The COLA is effective July 1 following one full calendar year (January 1 to December 31) under any of the following circumstances:

+The member is within five years of qualifying for an unreduced retirement benefit as of January 1, 2013.

+The member retires on disability.

The member retires directly from short-term or long-term disability under the Virginia Sickness and Disability Program (VSDP).
The member is involuntarily separated from employment for causes other than job performance or misconduct and is eligible to retire under the Workforce Transition Act or the Transitional Benefits Program.
The member dies in service and the member’s survivor or beneficiary is eligible for a monthly death-in-service benefit. The COLA will go into effect on July 1 following one full calendar year (January 1 to December 31) from the date the monthly benefit begins.

Dates: Same as Plan 1.

Dates: Same as Plan 1 and Plan 2.

COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 8-Pension Plan: (Continued)

Plan Description (Continued)

RETIREMENT PLAN PROVISIONS (CONTINUED)

PLAN 1 PLAN 2 HYBRID RETIREMENT PLAN

Disability Coverage
Members who are eligible to be considered for disability retirement and retire on disability, the retirement multiplier is 1.7% on all service, regardless of when it was earned, purchased or granted.

VSDP members are subject to a one-year waiting period before becoming eligible for non-work- related disability benefits.

Disability Coverage
Members who are eligible to be considered for disability retirement and retire on disability, the retirement multiplier is 1.65% on all service, regardless of when it was earned, purchased or granted.

VSDP members are subject to a one-year waiting period before becoming eligible for non-work related disability benefits.

Disability Coverage
Employees of political subdivisions and School divisions (including Plan 1 and Plan 2 opt-ins) participate in the Virginia Local Disability Program (VLDP) unless their local governing body provides an employer-paid comparable program for its members.

Hybrid members (including Plan 1 and Plan 2 opt-ins) covered under VLDP are subject to a one-year waiting period before becoming eligible for non-work-related disability benefits.

Purchase of Prior Service
Members may be eligible to purchase service from previous public employment, active duty military service, an eligible period of leave or VRS refunded service as creditable service in their plan. Prior creditable service counts toward vesting, eligibility for retirement and the health insurance credit. Only active members are eligible to purchase prior service. When buying service, members must purchase their most recent period of service first. Members also may be eligible to purchase periods of leave without pay.

Purchase of Prior Service
Same as Plan 1.

Purchase of Prior Service
Defined Benefit Component:
Same as Plan 1, with the following exceptions:

 Hybrid Retirement Plan members are ineligible for ported service.

 The cost for purchasing refunded service is the higher of 4% of creditable compensation or average final compensation.

 Plan members have one year from their date of hire or return from leave to purchase all but refunded prior service at approximate normal cost. After that one-year period, the rate for most categories of service will change to actuarial cost.

Defined Contribution Component:
Not applicable.

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

JUNE 30, 2016

Note 8-Pension Plan: (Continued)

Plan Description (Continued)

RETIREMENT PLAN PROVISIONS (CONTINUED)

PLAN 1

Disability Coverage Members who are eligible to be considered for disability retirement and retire on disability, the retirement. multiplier is 1.7% on all service, regardless of when it was earned, purchased or granted.

VSDP members are subject to a one-year waiting period before becoming eligible for non-work- related disability benefits.

Purchase of Prior Service Members may be eligible to purchase service from previous public employment, active duty military service, an eligible period of leave or VRS refunded service as creditable service in their plan. Prior creditable service counts toward vesting, eligibility for retirement and the health insurance credit. Only active members are eligible to purchase prior service. When buying service, members must purchase their most recent period of service first. Members also may be eligible to purchase periods of leave without pay.

PLAN 2

Disability Coverage Members who are eligible to be considered for disability retirement and retire on disability, the retirement. multiplier is 1.65% on all service, regardless of when it was earned, purchased or granted.

VSDP members are subject to a one-year waiting period before becoming eligible for non-work related disability benefits.

Purchase of Prior Service Same as Plan 1.

HYBRID RETIREMENT PLAN

Disability Coverage

Employees of political subdivisions and School divisions (including Plan 1 and Plan 2 opt-ins) participate in the Virginia Local Disability Program (VLDP) unless their local governing body provides an employer-paid comparable program for its members.

Hybrid members (including Plan 1 and Plan 2 opt-ins) covered under VLOP are subject to a one-year waiting period before becoming eligible for non-work-related

| disability benefits.

Purchase of Prior Service

Defined Benefit Component: Same as Plan 1, with the following

exceptions:

Hybrid members are ported service.

*The cost for _ purchasing refunded service is the higher of 4% of -—_ creditable compensation or average final compensation.

*Plan members have one year from their date of hire or return from leave to purchase all but refunded prior service at approximate normal cost. After that one-year period, the rate for most categories of service will change to actuarial cost.

Defined Contribution Component: Not applicable.

Retirement Plan ineligible for

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 8-Pension Plan: (Continued)

Plan Description (Continued)

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 website at http://www.varetire.org/Pdf/Publications/2015-annual-report.pdf or by writing to the System’s Chief Financial Officer at P.O. Box 2500, Richmond, VA, 23218-2500.

Contributions

The contribution requirement for active employees is governed by §51.1-145 of the Code of Virginia, as amended, but may be impacted as a result of funding options provided to political subdivisions by the Virginia General Assembly. Employees are required to contribute 5.00% of their compensation toward their retirement. Prior to July 1, 2012, all or part of the 5.00% member contribution may have been assumed by the employer. Beginning July 1, 2012, new employees were required to pay the 5% member contribution. In addition, for existing employees, employers were required to begin making the employee pay the 5.00% member contribution. This could be phased in over a period of up to 5 years and the employer is required to provide a salary increase equal to the amount of the increase in the employee- paid member contribution.

The County’s contractually required contribution rate for the year ended June 30, 2016 was 14.84% of covered employee compensation. This rate was based on an actuarially determined rate from an actuarial valuation as of June 30, 2013.

This rate, when combined with employee contributions, was expected to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. Contributions to the pension plan from the County were $807,684 and $794,360 for the years ended June 30, 2016 and June 30, 2015, respectively.

Net Pension Liability

At June 30, 2016, the County reported a liability of $5,970,089 for its proportionate share of the net pension liability. The County’s net pension liability was measured as of June 30, 2015. The total pension liability used to calculate the net pension liability was determined by an actuarial valuation performed as of June 30, 2014, using updated actuarial assumptions, applied to all periods included in the measurement and rolled forward to the measurement date of June 30, 2015. In order to allocate the net pension liability to all employers included in the plan, the County is required to determine its proportionate share of the net pension liability. Credible compensation as of June 30, 2015 and 2014 was used as a basis for allocation to determine the County’s proportionate share of the net pension liability.
At June 30, 2015 and 2014, the County’s proportion was 99.1179%.

The remainder of this page is left blank intentionally.

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 8-Pension Plan: (Continued) Plan Description (Continued)

website at http: //www.varetire.org/ Pdf /Publications/2015-annual-report.pdf or by writing to the System’s Chief Financial Officer at P.O. Box 2500, Richmond, VA, 23218-2500.

Contributions

The contribution requirement for active employees is governed by §51.1-145 of the Code of Virginia, as. amended, but may be impacted as a result of funding options provided to political subdivisions by the Virginia General Assembly. Employees are required to contribute 5.00% of their compensation toward their retirement. Prior to July 1, 2012, all or part of the 5.00% member contribution may have been assumed by the employer. Beginning July 1, 2012, new employees were required to pay the 5% member contribution. In addition, for existing employees, employers were required to begin making the employee pay the 5.00% member contribution. This could be phased in over a period of up to 5 years and the employer is required to provide a salary increase equal to the amount of the increase in the employee- paid member contribution.

Net Pension Liability

At June 30, 2016, the County reported a liability of $5,970,089 for its proportionate share of the net pension liability. The County’s net pension liability was measured as of June 30, 2015. The total pension liability used to calculate the net pension liability was determined by an actuarial valuation performed as of June 30, 2014, using updated actuarial assumptions, applied to all periods included in the measurement and rolled forward to the measurement date of June 30, 2015. In order to allocate the net pension liability to all employers included in the plan, the County is required to determine its proportionate share of the net pension liability. Credible compensation as of June 30, 2015 and 2014 was sed as a basis for allocation to determine the County’s proportionate share of the net pension liability. At June 30, 2015 and 2014, the County’s proportion was 99.1179%.

The remainder of this page is left blank intentionally.

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 8-Pension Plan: (Continued)

Actuarial Assumptions – General Employees

The total pension liability for General Employees in Russell County’s Retirement Plan and the Russell County Public Schools Retirement Plan was based on an actuarial valuation as of June 30, 2014, using the Entry Age Normal actuarial cost method and the following assumptions, applied to all periods included in the measurement and rolled forward to the measurement date of June 30, 2015.

Inflation 2.5%

Salary increases, including inflation 3.5% – 5.35%

Investment rate of return 7.0%, net of pension plan investment expense, including inflation*

Administrative expenses as a percent of the market value of assets for the last experience study were found to be approximately 0.06% of the market assets for all of the VRS plans. This would provide an assumed investment return rate for GASB purposes of slightly more than the assumed 7.0%. However, since the difference was minimal, and a more conservative 7.0% investment return assumption provided a projected plan net position that exceeded the projected benefit payments, the long-term expected rate of return on investments was assumed to be 7.0% to simplify preparation of pension liabilities.

Mortality rates: 14% of deaths are assumed to be service related

Largest 10 – Non-LEOS:
Pre-Retirement:

RP-2000 Employee Mortality Table Projected with Scale AA to 2020 with males set forward 4 years and females set back 2 years

Post-Retirement:
RP-2000 Combined Mortality Table Projected with Scale AA to 2020 with males set forward 1 year

Post-Disablement:

RP-2000 Disability Life Mortality Table Projected to 2020 with males set back 3 years and no provision for future mortality improvement

All Others (Non 10 Largest) – Non-LEOS:

Pre-Retirement:
RP-2000 Employee Mortality Table Projected with Scale AA to 2020 with males set forward 4 years and females set back 2 years

Post-Retirement:

RP-2000 Combined Mortality Table Projected with Scale AA to 2020 with males set forward 1 year

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 8-Pension Plan: (Continued) Actuarial Assumptions - General Employees

Inflation 2.5% Salary increases, including inflation 3.5% - 5.35% Investment rate of return 7.0%, net of pension plan investment

expense, including inflation*

Administrative expenses as a percent of the market value of assets for the last experience study were found to be approximately 0.06% of the market assets for all of the VRS plans. This would provide an assumed investment return rate for GASB purposes of slightly more than the assumed 7.0%. However, since the difference was minimal, and a more conservative 7.0% investment return assumption provided a projected plan net position that exceeded the projected benefit payments, the long-term expected rate of return on investments was assumed to be 7.0% to simplify preparation of pension liabilities.

Mortality rates: 14% of deaths are assumed to be service related

Largest 10 - Non-LEOS: Pre-Retirement: RP-2000 Employee Mortality Table Projected with Scale AA to 2020 with males set forward 4 years and females set back 2 years

Post-Retirement: RP-2000 Combined Mortality Table Projected with Scale AA to 2020 with males set forward 1 year

Post-Disablement: RP-2000 Disability Life Mortality Table Projected to 2020 with males set back 3 years and no provision for future mortality improvement

All Others (Non 10 Largest) - Non-LEOS: Pre-Retirement: RP-2000 Employee Mortality Table Projected with Scale AA to 2020 with males set forward 4 years and females set back 2 years

Post-Retirement:

RP-2000 Combined Mortality Table Projected with Scale AA to 2020 with males set forward 1 year

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 8-Pension Plan: (Continued)

Actuarial Assumptions – General Employees (Continued)

Post-Disablement:
RP-2000 Disability Life Mortality Table Projected to 2020 with males set back 3 years and no provision for future mortality improvement

The actuarial assumptions used in the June 30, 2014 valuation were based on the results of an actuarial experience study for the period from July 1, 2008 through June 30, 2012. Changes to the actuarial assumptions as a result of the experience study are as follows:

Largest 10 – Non-LEOS:

Update mortality table
Decrease in rates of service retirement
Decrease in rates of disability retirement
Reduce rates of salary increase by 0.25% per year

All Others (Non 10 Largest) – Non-LEOS:

Update mortality table
Decrease in rates of service retirement
Decrease in rates of disability retirement
Reduce rates of salary increase by 0.25% per year

Actuarial Assumptions – Public Safety Employees

The total pension liability for Public Safety employees in Russell County’s Retirement Plan was based on an actuarial valuation as of June 30, 2014, using the Entry Age Normal actuarial cost method and the following assumptions, applied to all periods included in the measurement and rolled forward to the measurement date of June 30, 2015.

Inflation 2.5%

Salary increases, including inflation 3.5% – 4.75%

Investment rate of return 7.0%, net of pension plan investment expense, including inflation*

Administrative expenses as a percent of the market value of assets for the last experience study were found to be approximately 0.06% of the market assets for all of the VRS plans. This would provide an assumed investment return rate for GASB purposes of slightly more than the assumed 7.0%. However, since the difference was minimal, and a more conservative 7.0% investment return assumption provided a projected plan net position that exceeded the projected benefit payments, the long-term expected rate of return on investments was assumed to be 7.0% to simplify preparation of pension liabilities.

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 8-Pension Plan: (Continued)

Actuarial Assumptions - General Employees (Continued)

Post-Disablement: RP-2000 Disability Life Mortality Table Projected to 2020 with males set back 3 years and no provision for future mortality improvement

Largest 10 - Non-LEOS:

Update mortality table
Decrease in rates of service retirement
Decrease in rates of disability retirement
Reduce rates of salary increase by 0.25% per year

All Others (Non 10 Largest) - Non-LEOS:

Update mortality table
Decrease in rates of service retirement
Decrease in rates of disability retirement
Reduce rates of salary increase by 0.25% per year

Actuarial Assumptions - Public Safety Employees

Inflation 2.5% Salary increases, including inflation 3.5% - 4.75% Investment rate of return 7.0%, net of pension plan investment

expense, including inflation*

Administrative expenses as a percent of the market value of assets for the last experience study were found to be approximately 0.06% of the market assets for all of the VRS plans. This would provide an assumed investment return rate for GASB purposes of slightly more than the assumed 7.0%. However, since the difference was minimal, and a more conservative 7.0% investment return assumption provided a projected plan net position that exceeded the projected benefit payments, the long-term expected rate of return on investments was assumed to be 7.0% to simplify preparation of pension liabilities.

-48-

COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 8-Pension Plan: (Continued)

Actuarial Assumptions – Public Safety Employees (Continued)

Mortality rates: 60% of deaths are assumed to be service related

Largest 10 – Non-LEOS:
Pre-Retirement:

RP-2000 Employee Mortality Table Projected with Scale AA to 2020 with males set back 2 years and females set back 2 years

Post-Retirement:
RP-2000 Combined Mortality Table Projected with Scale AA to 2020 with males set forward 1 year

Post-Disablement:

RP-2000 Disability Life Mortality Table Projected to 2020 with males set back 3 years and no provision for future mortality improvement

All Others (Non 10 Largest) – Non-LEOS:

Pre-Retirement:
RP-2000 Employee Mortality Table Projected with Scale AA to 2020 with males set back 2 years and females set back 2 years

Post-Retirement:

RP-2000 Combined Mortality Table Projected with Scale AA to 2020 with males set forward 1 year

Post-Disablement:
RP-2000 Disability Life Mortality Table Projected to 2020 with males set back 3 years and no provision for future mortality improvement

Largest 10 – LEOS:

Update mortality table
Decrease in male rates of disability

All Others (Non 10 Largest) – LEOS:

Update mortality table
Adjustments to rates of service retirement for females
Increase in rates of withdrawal
Decrease in male and female rates of disability

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 8-Pension Plan: (Continued) Actuarial Assumptions - Public Safety Employees (Continued) Mortality rates: 60% of deaths are assumed to be service related

Largest 10 - Non-LEOS: Pre-Retirement: RP-2000 Employee Mortality Table Projected with Scale AA to 2020 with males set back 2 years and females set back 2 years

Post-Retirement: RP-2000 Combined Mortality Table Projected with Scale AA to 2020 with males set forward 1 year

Post-Disablement: RP-2000 Disability Life Mortality Table Projected to 2020 with males set back 3 years and no provision for future mortality improvement

All Others (Non 10 Largest) - Non-LEOS: Pre-Retirement: RP-2000 Employee Mortality Table Projected with Scale AA to 2020 with males set back 2 years and females set back 2 years

Post-Retirement: RP-2000 Combined Mortality Table Projected with Scale AA to 2020 with males set forward 1 year

Post-Disablement: RP-2000 Disability Life Mortality Table Projected to 2020 with males set back 3 years and no provision for future mortality improvement

Largest 10 - LEOS:

Update mortality table
Decrease in male rates of disability

All Others (Non 10 Largest) - LEOS:

Update mortality table
Adjustments to rates of service retirement for females
Increase in rates of withdrawal
Decrease in male and female rates of disability

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 8-Pension Plan: (Continued)

Long-Term Expected Rate of Return

The long-term expected rate of return on pension System investments was determined using a log-normal distribution analysis in which best-estimate ranges of expected future real rates of return (expected returns, net of pension System investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target asset allocation and best estimate of arithmetic real rates of return for each major asset class are summarized in the following table:

Weighted Arithmetic Average Long-Term Long-Term

Target Expected Expected Asset Class (Strategy) Allocation Rate of Return Rate of Return

U.S. Equity 19.50% 6.46% 1.26% Developed Non U.S. Equity 16.50% 6.28% 1.04% Emerging Market Equity 6.00% 10.00% 0.60% Fixed Income 15.00% 0.09% 0.01% Emerging Debt 3.00% 3.51% 0.11% Rate Sensitive Credit 4.50% 3.51% 0.16% Non Rate Sensitive Credit 4.50% 5.00% 0.23% Convertibles 3.00% 4.81% 0.14% Public Real Estate 2.25% 6.12% 0.14% Private Real Estate 12.75% 7.10% 0.91% Private Equity 12.00% 10.41% 1.25% Cash 1.00% -1.50% -0.02%

Total 100.00% 5.83%

Inflation 2.50%

*Expected arithmetic nominal return 8.33%

Using stochastic projection results provides an expected range of real rates of return over various time horizons. Looking at one year results produces an expected real return of 8.33% but also has a high standard deviation, which means there is high volatility. Over larger time horizons the volatility declines significantly and provides a median return of 7.44%, including expected inflation of 2.50%.

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 8-Pension Plan: (Continued) Long-Term Expected Rate of Return

Weighted Arithmetic Average Long-Term Long-Term Target Expected Expected Asset Class (Strategy) Allocation _Rate of Return _ Rate of Return

Total 100.00%

Inflation “Expected arithmetic nominal return

Using stochastic projection results provides an expected range of real rates of return over various time horizons. Looking at one year results produces an expected real return of 8.33% but also has a high standard deviation, which means there is high volatility. Over larger time horizons the volatility dectines significantly and provides a median return of 7.44%, including expected inflation of 2.50%.

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 8-Pension Plan: (Continued)

Discount Rate

The discount rate used to measure the total pension liability was 7.00%. The projection of cash flows used to determine the discount rate assumed that System member contributions will be made per the VRS Statutes and the employer contributions will be made in accordance with the VRS funding policy at rates equal to the difference between actuarially determined contribution rates adopted by the VRS Board of Trustees and the member rate. Through the fiscal year ending June 30, 2018, the rate contributed by the employer for the Russell County Retirement Plan, Russell County School Board Retirement Plan, and the VRS Teacher Retirement Plan will be subject to the portion of the VRS Board- certified rates that are funded by the Virginia General Assembly. From July 1, 2018 on, participating employers are assumed to contribute 100% of the actuarially determined contribution rates. Based on those assumptions, the pension plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current active and inactive employees. Therefore the long-term expected rate of return was applied to all periods of projected benefit payments to determine the total pension liability.

Sensitivity of the County’s Proportionate Share of the Net Pension Liability to Changes in the Discount Rate

The following presents County’s proportionate share of the net pension liability using the discount rate of 7.00%, as well as what the County’s proportionate share of the net pension liability would be if it were calculated using a discount rate that is one percentage point lower (6.00%) or one percentage point higher (8.00%) than the current rate:

(6.00%) (7.00%) (8.00%)

County’s proportionate share of the County Retirement Plan Net Pension Liability $ 9,860,249 $ 5,970,089 $ 2,739,619

Rate

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 8-Pension Plan: (Continued) Discount Rate

Sensitivity of the County’s Proportionate Share of the Net Pension Liability to Changes in the Discount Rate

Rate (6.00%) (7.00%) (8.00%) County’s proportionate share of the County Retirement Plan Net Pension Liability $ 9,860,249 $ 5,970,089 $ 2,739,619

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 8-Pension Plan: (Continued)

Pension Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions

For the year ended June 30, 2016, the County recognized pension expense of $385,576. At June 30, 2016, the County reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Deferred Deferred Outflows of Inflows of Resources Resources

Differences between expected and actual experience $ - $ 226,980

Net difference between projected and actual earnings on pension plan investments - 640,302

Employer contributions subsequent to the measurement date 807,684 -

Total $ 807,684 $ 867,282

Primary Government

$807,684 reported as deferred outflows of resources related to pensions resulting from the County’s contributions subsequent to the measurement date will be recognized as a reduction of the Net Pension Liability in the fiscal year ended June 30, 2017. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense in future reporting periods as follows:

Primary Year ended June 30 Government

2017 $ (352,860)
2018 (352,860)
2019 (274,557)
2020 112,995

Thereafter -

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 8-Pension Plan: (Continued)

Pension Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions

Primary Government Deferred Deferred Outflows of —_ Inflows of Resources _ Resources

Differences between expected and actual

experience $ - $226,980 Net difference between projected and actual

earnings on pension plan investments, : 640,302 Employer contributions subsequent to the

measurement date 807,684

Total $___ 807,684 $867,282

$807,684 reported as deferred outflows of resources related to pensions resulting from the County’s Contributions subsequent to the measurement date will be recognized as a reduction of the Net Pension Liability in the fiscal year ended June 30, 2017. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense in future reporting periods as follows:

Primary

Year ended June 30 Government 2017 $ (352,860) 2018 (352,860) 2019 (274,557) 2020 112,995

Thereafter -

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 8-Pension Plan: (Continued)

Component Unit School Board (nonprofessional)

Plan Description

Additional information related to the plan description, plan contribution requirements, actuarial assumptions, long-term expected rate of return, and discount rate is included in the first section of this note.

Employees Covered by Benefit Terms

As of the June 30, 2014 actuarial valuation, the following employees were covered by the benefit terms of the pension plan:

Component Unit School Board

Nonprofessional Inactive members or their beneficiaries currently

receiving benefits 138

Inactive members: Vested inactive members 5

Non-vested inactive members 15

Inactive members active elsewhere in VRS 10

Total inactive members 30

Active members 124

Total covered employees 292

Contributions

The Component Unit School Board’s contractually required contribution rate for nonprofessional employees for the year ended June 30, 2016 was 17.55% of covered employee compensation. This rate was based on an actuarially determined rate from an actuarial valuation as of June 30, 2013. This rate, when combined with employee contributions, was expected to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. Contributions to the pension plan from the Component Unit School Board’s nonprofessional employees were $464,892 and $425,544 for the years ended June 30, 2016 and June 30, 2015, respectively.

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 8-Pension Plan: (Continued)

Component Unit School Board (nonprofessional)

Plan Description

Employees Covered by Benefit Terms

As of the June 30, 2014 actuarial valuation, the following employees were covered by the benefit terms of the pension plan:

Component Unit School Board

Nonprofessional Inactive members or their beneficiaries currently receiving benefits 138 Inactive members: Vested inactive members 5 Non-vested inactive members 15 Inactive members active elsewhere in VRS 10 Total inactive members 30 Active members 124 Total covered employees 292

Contributions

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 8-Pension Plan: (Continued)

Component Unit School Board (nonprofessional) (Continued)

Net Pension Liability

The Component Unit School Board’s (nonprofessional) net pension liability was measured as of June 30, 2015. The total pension liability used to calculate the net pension liability was determined by an actuarial valuation performed as of June 30, 2014, using updated actuarial assumptions, applied to all periods included in the measurement and rolled forward to the measurement date of June 30, 2015.

Changes in Net Pension Liability

Total Plan Net Pension Fiduciary Pension Liability Net Position Liability

(a) (b) (a) - (b)

Balances at June 30, 2014 $ 16,781,228 $ 11,726,603 $ 5,054,625

Changes for the year: Service cost $ 261,697 $ - $ 261,697
Interest 1,132,997 - 1,132,997
Differences between expected

and actual experience 20,402 - 20,402
Contributions - employer - 425,544 (425,544)
Contributions - employee - 120,010 (120,010)
Net investment income - 515,108 (515,108)
Benefit payments, including refunds

of employee contributions (1,191,112) (1,191,112) -
Administrative expenses - (7,577) 7,577
Other changes - (108) 108

Net changes $ 223,984 $ (138,135) $ 362,119

Balances at June 30, 2015 $ 17,005,212 $ 11,588,468 $ 5,416,744

Increase (Decrease) Component Unit-School Board (nonprofessional)

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 8-Pension Plan: (Continued)

Component Unit School Board (nonprofessional) (Continued)

Net Pension Liability

Changes in Net Pension Liability

Component Unit-School Board (nonprofessional) Increase (Decrease)

Total Plan Net Pension Fiduciary Pension Liability Net Position Liability (a) (b) (a) - (b) Balances at June 30, 2014 $ 16,781,228 $ 11,726,603. $ 5,054,625 Changes for the year: Service cost $ 261,697 $ 7 $ 261,697 Interest 1,132,997 - 1,132,997 Differences between expected and actual experience 20,402 : 20,402 Contributions - employer : 425,544 (425,544) Contributions - employee : 120,010 (120,010) Net investment income : 515,108 (515,108) Benefit payments, including refunds of employee contributions (1,191,112) (1,191,112) : Administrative expenses : (7,57) 7,577 Other changes : (108) 108 Net changes $ 223,984 § (138,135) $ 362,119 Balances at June 30, 2015 $ 17,005,212$ 11,588,468 $ 5,416,744

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 8-Pension Plan: (Continued)

Component Unit School Board (nonprofessional) (Continued)

Sensitivity of the Net Pension Liability to Changes in the Discount Rate

The following presents the net pension liability of the Component Unit School Board (nonprofessional) using the discount rate of 7.00%, as well as what the Component Unit School Board’s (nonprofessional) net pension liability would be if it were calculated using a discount rate that is one percentage point lower (6.00%) or one percentage point higher (8.00%) than the current rate:

(6.00%) (7.00%) (8.00%)

Component Unit School Board (nonprofessional) Net Pension Liability (Asset) 7,259,583 5,416,744 3,855,893

Rate

Pension Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions

For the year ended June 30, 2016, the Component Unit School Board (nonprofessional) recognized pension expense of $366,199. At June 30, 2016, the Component Unit School Board (nonprofessional) reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Deferred Deferred Outflows of Inflows of Resources Resources

Differences between expected and actual experience $ 14,330 $ -

Net difference between projected and actual earnings on pension plan investments - 316,155

Employer contributions subsequent to the measurement date 464,892 -

Total $ 479,222 $ 316,155

Board (nonprofessional)

Component Unit School

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 8-Pension Plan: (Continued)

Component Unit School Board (nonprofessional) (Continued)

Sensitivity of the Net Pension Liability to Changes in the Discount Rate

Rate (6.00%) (7.00%) (8.00%) Component Unit School Board (nonprofessional) Net Pension Liability (Asset) 7,259,583 5,416,744 3,855,893

Pension Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions

Component Unit School Board (nonprofessional)

Deferred Deferred Outflows of Inflows of Resources _ Resources Differences between expected and actual experience $ 14,330 $ Net difference between projected and actual earnings on pension plan investments : 316,155 Employer contributions subsequent to the measurement date 464,892 Total $479,222 §__316,155

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 8-Pension Plan: (Continued)

Component Unit School Board (nonprofessional) (Continued)

Pension Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions (Continued)

$464,892 reported as deferred outflows of resources related to pensions resulting from the Component Unit School Board’s (nonprofessional) contributions subsequent to the measurement date will be recognized as a reduction of the Net Pension Liability in the fiscal year ended June 30, 2017. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense in future reporting periods as follows:

Component Unit School Board

Year ended June 30 (nonprofessional)

2017 $ (118,172)
2018 (118,172)
2019 (122,059)
2020 56,578

Thereafter -

Component Unit School Board (professional)

Plan Description

Additional information related to the plan description, plan contribution requirements, long-term expected rate of return, and discount rate is included in the first section of this note.

Contributions

Each School Division’s contractually required contribution rate for the year ended June 30, 2015 was 14.06% of covered employee compensation. This rate was based on an actuarially determined rate from an actuarial valuation as of June 30, 2013 adjusted for the transfer in June 2015 of $192,884,000 as an accelerated payback of the deferred contribution in the 2010-12 biennium. The actuarial rate for the Teacher Retirement Plan was 18.20%, however, it was reduced to 17.64% as a result of the transfer. The actuarially determined rate, when combined with employee contributions, was expected to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. Based on the provisions of §51.1-145 of the Code of Virginia, as amended the contributions were funded at 79.69% of the actuarial rate for the year ended June 30, 2016.
Contributions to the pension plan from the School Board were $2,503,615 and $2,509,000 for the years ended June 30, 2016 and June 30, 2015, respectively.

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 8-Pension Plan: (Continued)

Component Unit School Board (nonprofessional) (Continued)

Pension Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions (Continued)

Component Unit School Board

Year ended June 30 (nonprofessional)

2017 $ (118,172)

2018 (118,172)

2019 (122,059)

2020 56,578 Thereafter :

Component Unit School Board (professional)

Plan Description

Additional information related to the plan description, plan contribution requirements, long-term expected rate of return, and discount rate is included in the first section of this note.

Contributions

Each School Division’s contractually required contribution rate for the year ended June 30, 2015 was 14,06% of covered employee compensation. This rate was based on an actuarially determined rate from an actuarial valuation as of June 30, 2013 adjusted for the transfer in June 2015 of $192,884,000 as an accelerated payback of the deferred contribution in the 2010-12 biennium. The actuarial rate for the Teacher Retirement Plan was 18.20%, however, it was reduced to 17.64% asa result of the transfer. The actuarially determined rate, when combined with employee contributions, was expected to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. Based on the provisions of §51.1-145 of the Code of Virginia, as amended the contributions were funded at 79.69% of the actuarial rate for the year ended June 30, 2016. Contributions to the pension plan from the School Board were $2,503,615 and $2,509,000 for the years ended June 30, 2016 and June 30, 2015, respectively.

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 8-Pension Plan: (Continued)

Component Unit School Board (professional) (Continued)

Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions

At June 30, 2016, the school division reported a liability of $29,373,000 for its proportionate share of the Net Pension Liability. The Net Pension Liability was measured as of June 30, 2015 and the total pension liability used to calculate the Net Pension Liability was determined by an actuarial valuation as of that date. The school division’s proportion of the Net Pension Liability was based on the school division’s actuarially determined employer contributions to the pension plan for the year ended June 30, 2015 relative to the total of the actuarially determined employer contributions for all participating employers. At June 30, 2015, the school division’s proportion was 0.23337% as compared to 0.23360% at June 30, 2014.

For the year ended June 30, 2016, the school division recognized pension expense of $1,893,000. Since there was a change in proportionate share between measurement dates, a portion of the pension expense was related to deferred amounts from changes in proportion and from differences between employer contributions and the proportionate share of employer contributions.

At June 30, 2016, the school division reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Deferred Outflows Deferred Inflows of Resources of Resources

Differences between expected and actual experience $ - $ 404,000

Net difference between projected and actual earnings on pension plan investments - 1,799,000

Changes in proportion and differences between employer contributions and proportionate share of contributions - 896,000

Employer contributions subsequent to the measurement date 2,503,615 -

Total $ 2,503,615 $ 3,099,000

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 8-Pension Plan: (Continued)

Component Unit School Board (professional) (Continued)

Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred inflows of Resources Related to Pensions

‘At June 30, 2016, the school division reported a liability of $29,373,000 for its proportionate share of the Net Pension Liability. The Net Pension Liability was measured as of June 30, 2015 and the total pension liability used to calculate the Net Pension Liability was determined by an actuarial valuation as of that date. The school division’s proportion of the Net Pension Liability was based on the school division’s actuarially determined employer contributions to the pension plan for the year ended June 30, 2015 relative to the total of the actuarially determined employer contributions for all participating employers. ‘At June 30, 2015, the school division’s proportion was 0.23337% as compared to 0.23360% at June 30, 2014.

At June 30, 2016, the school division reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Deferred Outflows Deferred Inflows

of Resources of Resources

Differences between expected and actual experience $ - $ 404,000 Net difference between projected and actual

earnings on pension plan investments - 1,799,000 Changes in proportion and differences between

employer contributions and proportionate

share of contributions : 896,000 Employer contributions subsequent to the

measurement date 2,503,615,

Total $ 2,503,615 _$

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 8-Pension Plan: (Continued)

Component Unit School Board (professional) (Continued)

Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions

$2,503,615 reported as deferred outflows of resources related to pensions resulting from the school division’s contributions subsequent to the measurement date will be recognized as a reduction of the Net Pension Liability in the fiscal year ended June 30, 2017. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense in future reporting periods as follows:

Year ended June 30

2017 $ (1,055,000)
2018 (1,055,000)
2019 (1,055,000)
2020 110,000

Thereafter (44,000)

Actuarial Assumptions

The total pension liability for the VRS Teacher Retirement Plan was based on an actuarial valuation as of June 30, 2014, using the Entry Age Normal actuarial cost method and the following assumptions, applied to all periods included in the measurement and rolled forward to the measurement date of June 30, 2015.

Inflation 2.5%

Salary increases, including inflation 3.5% – 5.95%

Investment rate of return 7.0%, net of pension plan investment expense, including inflation*

Administrative expenses as a percent of the market value of assets for the last experience study were found to be approximately 0.06% of the market assets for all of the VRS plans. This would provide an assumed investment return rate for GASB purposes of slightly more than the assumed 7.0%. However, since the difference was minimal, and a more conservative 7.0% investment return assumption provided a projected plan net position that exceeded the projected benefit payments, the long-term expected rate of return on investments was assumed to be 7.0% to simplify preparation of pension liabilities.

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 8-Pension Plan: (Continued)

Component Unit School Board (professional) (Continued)

Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred inflows of Resources Related to Pensions

Year ended June 30

2017 $s (1,055,000) 2018 (1,055,000) 2019 (1,055,000) 2020 110,000 Thereafter (44,000)

Actuarial Assumptions

Inflation 2.5% Salary increases, including inflation 3.5% - 5.95% Investment rate of return 7.0%, net of pension plan investment

expense, including inflation*

Administrative expenses as a percent of the market value of assets for the last experience study were found to be approximately 0.06% of the market assets for all of the VRS plans. This would provide an assumed investment return rate for GASB purposes of slightly more than the assumed 7.0%. However, since the difference was minimal, and a more conservative 7.0% investment return assumption provided a projected plan net position that exceeded the projected benefit payments, the long-term expected rate of return on investments was assumed to be 7.0% to simplify preparation of pension liabilities.

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 8-Pension Plan: (Continued)

Component Unit School Board (professional) (Continued)

Mortality rates:

Pre-Retirement:
RP-2000 Employee Mortality Table Projected with Scale AA to 2020 with males set back 3 years and females set back 5 years

Post-Retirement:
RP-2000 Combined Mortality Table Projected with Scale AA to 2020 with males set back 2 years and females set back 3 years

Post-Disablement:
RP-2000 Disability Life Mortality Table Projected to 2020 with males set back 1 year and no provision for future mortality improvement

Update mortality table
Adjustments to the rates of service retirement
Decrease in rates of withdrawals for 3 through 9 years of service
Decrease in rates of disability
Reduce rates of salary increase by 0.25% per year

Sensitivity of the School Division’s Proportionate Share of the Net Pension Liability to Changes in the Discount Rate

The following presents the school division’s proportionate share of the net pension liability using the discount rate of 7.00%, as well as what the school division’s proportionate share of the net pension liability would be if it were calculated using a discount rate that is one percentage point lower (6.00%) or one percentage point higher (8.00%) than the current rate:

(6.00%) (7.00%) (8.00%)

School division’s proportionate share of the VRS Teacher Employee Retirement Plan Net Pension Liability 42,984,000 29,373,000 18,168,000

Rate

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 8-Pension Plan: (Continued)

Component Unit School Board (professional) (Continued)

Mortality rates:

Pre-Retirement: RP-2000 Employee Mortality Table Projected with Scale AA to 2020 with males set back 3 years and females set back 5 years

Post-Retirement: RP-2000 Combined Mortality Table Projected with Scale AA to 2020 with males set back 2 years and females set back 3 years

Post-Disablement: RP-2000 Disability Life Mortality Table Projected to 2020 with males set back 1 year and no provision for future mortality improvement

Update mortality table
Adjustments to the rates of service retirement
Decrease in rates of withdrawals for 3 through 9 years of service
Decrease in rates of disability
Reduce rates of salary increase by 0.25% per year

Sensitivity of the School Di the Discount Rate

ion’s Proportionate Share of the Net Pension Liability to Changes in

Rate (6.00%) (7.00%) (8.00%) School division’s proportionate share of the VRS Teacher Employee Retirement Plan Net Pension Liability 42,984,000 29,373,000 18,168,000

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 8-Pension Plan: (Continued)

Component Unit School Board (professional) (Continued)

Pension Plan Fiduciary Net Position

Detailed information about the VRS Teacher Retirement Plan’s Fiduciary Net Position is available in the separately issued VRS 2015 Comprehensive Annual Financial Report (CAFR). A copy of the 2014 VRS CAFR may be downloaded from the VRS website at http://www.varetire.org/Pdf/Publications/2015-annual- report.pdf, or by writing to the System’s Chief Financial Officer at P.O. Box 2500, Richmond, VA, 23218- 2500.

Note 9-Capital Assets:

Capital asset activity for the year ended June 30, 2016 was as follows:

Primary Government:

Beginning Ending Balance Increases Decreases Balance

Governmental Activities: Capital assets, not being depreciated:

Land $ 568,695 $ - $ - $ 568,695

Capital assets, being depreciated: Buildings and improvements $ 24,881,115 $ 15,980 $ - $ 24,897,095
Machinery and equipment 4,277,702 415,748 (573,178) 4,120,272

Total capital assets being depreciated $ 29,158,817 $ 431,728 $ (573,178) $ 29,017,367

Accumulated depreciation: Buildings and improvements $ (11,007,381) $ (599,497) $ - $ (11,606,878)
Machinery and equipment (2,732,501) (330,540) 325,080 (2,737,961)

Total accumulated depreciation $ (13,739,882) $ (930,037) $ 325,080 $ (14,344,839)

Total capital assets being depreciated, net $ 15,418,935 $ (498,309) $ (248,098) $ 14,672,528

Governmental activities capital assets, net $ 15,987,630 $ (498,309) $ (248,098) $ 15,241,223

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

JUNE 30, 2016

Note 8-Pension Plan: (Continued)

Component Unit School Board (professional) (Continued)

Pension Plan Fiduciary Net Position

Detailed information about the VRS Teacher Retirement Plan’s Fiduciary Net Position is available in the separately issued VRS 2015 Comprehensive Annual Financial Report (CAFR). A copy of the 2014 VRS CAFR may be downloaded from the VRS website at http: //www.varetire.org/Pdf /Publications/2015-annual- report.pdf, or by writing to the System’s Chief Financial Officer at P.O. Box 2500, Richmond, VA, 23218-

Note 9-Capital Asset:

Capital asset activity for the year ended June 30, 2016 was as follows:

Primary Government:

Governmental Activities:

Capital assets, not being depreciated: Land

Capital assets, being depreciated: Buildings and improvements Machinery and equipment

Total capital assets being depreciated

‘Accumulated depreciation: Buildings and improvements Machinery and equipment

Total accumulated depreciation

Total capital assets being depreciated, net

Governmental activities capital assets, net

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Ss $

Beginning Ending Balance Increases Decreases Balance 568,695 $ : $ 568,695 24,881,115 $ 15,980 = $24,897,095 4,277,702 415,748 (873,178) 4,120,272 29,158,817 $ 431,728 (573,178) $29,017,367 (11,007,381) $ (599,497) = $ (11,606,878) (2,732,501) (330,540) 325,080 (2,737,961) (13,739,882) $~ (930,037) 325,080 $~ (14,344,839) 15,418,935 $ (498,309) (248,098) $14,672,528 15,987,630 $___ (498,309) (248,098) $__ 15,241,223

COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 9-Capital Assets: (Continued)

Primary Government: (Continued)

Beginning Ending Balance Increases Decreases Balance

Business-type Activities Capital assets, being depreciated:

Utility plant $ 5,240,699 $ - $ - $ 5,240,699

Accumulated depreciation: Utility plant $ (2,248,123) $ (131,018) $ - $ (2,379,141)

Total capital assets being depreciated, net $ 2,992,576 $ (131,018) $ - $ 2,861,558

Business-type activities capital assets, net $ 2,992,576 $ (131,018) $ - $ 2,861,558

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

Governmental activities: General government administration $ 16,113
Judicial administration 965
Public safety 179,989
Public works 64,840
Health and welfare 24,667
Education 608,553
Parks, recreation, and cultural 32,648
Community development 2,262

Total depreciation expense-governmental activities $ 930,037

Business-type activities: Sewer Authority $ 131,018

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 9-Capital Assets: (Continued)

Primary Government: (Continued)

Beginning Ending Balance Increases Decreases Balance Business-type Activities Capital assets, being depreciated: Utility plant S___ 5,240,699. $ $ = S$ _ 5,240,699 ‘Accumulated depreciation: Utility plant S_ (2,248,123) $__(131,018) $ = $_ 2,379,141)

Total capital assets being depreciated, net $2,992,576 $ (131,018) $

= $_ 2,861,558

Business-type activities capital assets,net_ $2,992,576 $___(131,018) $

$__2,861,558

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 Ss

Business-type activities: Sewer Authority $

16,113 965 179,989 64,840 24,667 608,553 32,648

2,262

131,018

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 9-Capital Assets: (Continued)

Capital asset activity for the School Board for the year ended June 30, 2016 was as follows:

Discretely Presented Component Unit – School Board:

Beginning Ending Balance Increases Decreases Balance

Capital assets, not being depreciated: Land $ 5,636,345 $ - $ - $ 5,636,345
Construction in progress - 17,071 - 17,071

Total capital assets not being depreciated $ 5,636,345 $ 17,071 $ - $ 5,653,416

Capital assets, being depreciated: Buildings and improvements $ 24,471,954 $ 23,900 $ - $ 24,495,854
Machinery and equipment 6,652,545 1,148,609 (337,761) 7,463,393

Total capital assets being depreciated $ 31,124,499 $ 1,172,509 $ (337,761) $ 31,959,247

Accumulated depreciation: Buildings and improvements $ (13,888,679) $ (665,912) $ - $ (14,554,591)
Machinery and equipment (5,019,548) (684,648) 337,761 (5,366,435)

Total accumulated depreciation $ (18,908,227) $ (1,350,560) $ 337,761 $ (19,921,026)

Total capital assets being depreciated, net $ 12,216,272 $ (178,051) $ - $ 12,038,221

Governmental activities capital assets, net $ 17,852,617 $ (160,980) $ - $ 17,691,637

Note 10-Risk 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 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, 2016

Note 9-Capital Assets: (Continued)

Capital asset activity for the School Board for the year ended June 30, 2016 was as follows:

Discretely Presented Component Unit - School Board:

Beginning Ending Balance Increases Decreases Balance

Capital assets, not being depreciated:

Land S 5,636,345 § - 3 = $5,636,345

Construction in progress - 47,071 : 17,071 Total capital assets not being depreciated $__—5,636,345. S_—«TT,OTT_ SS = $5,653,416 Capital assets, being depreciated:

Buildings and improvements $24,471,954 $ 23,900 § - $24,495,854

Machinery and equipment 6,652,545 1,148,609 (337,761) 7,463,393 Total capital assets being depreciated $31,124,499 $1,172,509, $__(337,761) $31,959,247 ‘Accumulated depreciation:

Buildings and improvements S$ (13,888,679) $ (665,912) $ - $ (14,554,591)

Machinery and equipment (6,019,548) (684,648) 337,761 (6,366,435) Total accumulated depreciation $11,908,227) $ (7,350,560) $ 337,761 $_ (19,921,026) Total capital assets being depreciated, net $12,216,272 $__(178,051) $ = $12,038,221 Governmental activities capital assets, net $17,852,617 $(160,980) $ = $__17,691,637

Note 10-Risk 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 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, 2016

Note 11-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 Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Pursuant to the provisions of this circular all major programs and certain other programs were tested for compliance with applicable grant requirements. While no matters of noncompliance were disclosed by 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 12-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

All constitutional officers’ employees: blanket bond 50,000

Hartford Company - Surety: Tammy Caldwell - Clerk of the School Board 10,000$
All school employees: blanket bond 10,000

USF&G Insurance Co. - Surety:

All Social Services employees-blanket bond 100,000$

Note 13-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. $278,220 is the total estimated closure and postclosure care liability at June 30, 2016. 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 2016. 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.

The County demonstrated financial assurance requirements for closure, post-closure care, and corrective action costs through the submission of a Local Government Financial Test to the Virginia Department of Environmental Quality in accordance with Section 9VA C20-70 of the Virginia Administrative Code.

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 11-Contingent Liabilities:

Note 12-Surety Bond:

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 All constitutional officers’ employees: blanket bond 50,000

Hartford Company - Surety: Tammy Caldwell - Clerk of the School Board $ 10,000 All school employees: blanket bond 10,000

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

Note 13-Landfill Closure and Postclosure Care Cost:

The County demonstrated financial assurance requirements for closure, post-closure care, and corrective action costs through the submission of a Local Government Financial Test to the Virginia Department of, Environmental Quality in accordance with Section 9VA C20-70 of the Virginia Administrative Code.

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 14-Deferred/Unavailable Revenue:

Deferred revenue/unavailable revenue represent amounts for which asset recognition criteria have been met, but for which revenue recognition criteria have not been met. Under the modified accrual basis of accounting, such amounts are measurable, but not available. Under the accrual basis, assessments for future periods are deferred.

Government-wide Statements Balance Sheet

Governmental Activities Governmental Funds 2nd half taxes due December 2016 $ 5,017,870 $ 5,017,870
Delinquent taxes due prior to June 30, 2016 - 2,694,841
Prepaid taxes 193,949 193,949
Prorated tax 24,672 24,672
Special assessment - 91,859
Total deferred/unavailable revenue for governmental funds $ 5,236,491 $ 8,023,191

Note 15-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 2016, a total of $5,961,126 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, 2016, 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 $683,320 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 2016 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

2015-16 $ 888,250 $ 5,756,196 $ (5,961,126) $ 683,320

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 14-Deferred/Unavailable Revenue:

Government-wide

Statements Balance Sheet Governmental Activities _ Governmental Funds 2nd half taxes due December 2016 $ 5,017,870 $ 5,017,870 Delinquent taxes due prior to June 30, 2016 : 2,694,841 Prepaid taxes 193,949 193,949 Prorated tax 24,672 24,672 Special assessment : 91,859 Total deferred/unavailable revenue for governmental funds $ 5,236,491 $ 8,023,191

Note 15-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 2016, a total of $5,961,126 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, 2016, 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 $683,320 have been accrued asa 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 2016 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

2015-16 $ 888,250 $ 5,756,196 $ (5,961,126) $ 683,320

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 16-Other Postemployment 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 138 and 523 employees that are eligible, respectively, for the program. In addition, 100 percent of premiums are the responsibility of the retiree.

Health benefits include Medical 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:

County:

Retiree

Retiree & Spouse

Retiree & Child

Retiree & Family

PPO 421$ 1,103$ 1,030$ 1,180$

Medicare 135 270 N/A N/A

Medical & Rx

Schools Board:

Retiree

Retiree & Spouse

Retiree & Child

Retiree & Family

PPO 505$ 1,324$ 1,236$ 1,416$

Medicare 135 135 N/A N/A

Medical & Rx

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 16-Other Postemployment 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.

B. Funding Policy

County: Medical & Rx Retiree & Retiree @ Retiree & Retiree Spouse Child Family PPO $ 421 $1,103 $ 1,030 § 1,180 Medicare 135 270 (N/A N/A ‘Schools Board: Medical & Rx Retiree @ Retiree@ Retiree @ Retiree Spouse Child Family PPO $ 505 $ 1,324 $ 1,236 $ 1,416 Medicare 135 13500 NIA N/A

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 16-Other Postemployment 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 fiscal year 2016, the amount actually contributed to the plan, and changes in the County’s net OPEB obligation during fiscal year 2016.

Annual required contribution $ 39,300

Interest on net OPEB obligation 3,901

Adjustment to annual required contribution (6,037)

 Annual OPEB cost (expense) $ 37,164

Contributions made (1,900)

 Increase (decrease) in net OPEB obligation $ 35,264

Net OPEB obligation - beginning of year 111,461

Net OPEB obligation - end of year $ 146,725

The County’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for 2016 and the two preceding years were as follows:

Percentage of

Fiscal Annual Annual OPEB Cost Net OPEB

Year Ended OPEB Cost Contributed Obligation

6/30/2014 $ 37,852 7.13% 76,673

6/30/2015 39,988 13.00% 111,461

6/30/2016 37,164 5.11% 146,725

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 16-Other Postemployment Benefits-Health Insurance: (Continued)

C. Annual OPEB Cost and Net OPEB Obligation

Annual required contribution $39,300 Interest on net OPEB obligation 3,901 Adjustment to annual required contribution (6,037) Annual OPEB cost (expense) $37,164 Contributions made (1,900) Increase (decrease) in net OPEB obligation $35,264 Net OPEB obligation - beginning of year 111,461 Net OPEB obligation - end of year $146,725

The County’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for 2016 and the two preceding years were as follows:

Percentage of

Fiscal Annual Annual OPEB Cost Net OPEB Year Ended __OPEB Cost Contributed Obligation 6/30/2014 $ 37,852 7.13% 76,673 6/30/2015 39,988 13.00% 111,461 6/30/2016 37,164 5.11% 146,725

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 16-Other Postemployment 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 $ 953,900

Interest on net OPEB obligation 33,843

Adjustment to annual required contribution (52,375)

 Annual OPEB cost (expense) $ 935,368

Contributions made (728,600)

 Increase (decrease) in net OPEB obligation $ 206,768

Net OPEB obligation - beginning of year 966,949

Net OPEB obligation - end of year $ 1,173,717

The School Board’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for 2016 and the two preceding years were as follows:

Fiscal Annual Annual OPEB Cost Net OPEB

Year Ended OPEB Cost Contributed Obligation

6/30/2014 $ 910,457 69.34% $ 706,693

6/30/2015 920,856 71.74% 966,949

6/30/2016 935,368 77.89% 1,173,717

D. Funded Status and Funding Progress

The funded status of the Plan for the County as of July 1, 2015, the most recent actuarial valuation date, is as follows:

Actuarial accrued liability (AAL) $ 304,800

Actuarial value of plan assets $ -

Unfunded actuarial accrued liability (UAAL) $ 304,800

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

Covered payroll (active plan members) $ 5,435,900

UAAL as a percentage of covered payroll 5.61%

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 16-Other Postemployment Benefits-Health Insurance: (Continued)

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

Annual required contribution $ 953,900 Interest on net OPEB obligation 33,843, Adjustment to annual required contribution (52,375) Annual OPEB cost (expense) $ 935,368 Contributions made (728,600) Increase (decrease) in net OPEB obligation $ 206,768 Net OPEB obligation - beginning of year 966,949 Net OPEB obligation - end of year $7 1173717

The School Board’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for 2016 and the two preceding years were as follows:

Fiscal Annual Annual OPEB Cost —_Net OPEB Year Ended OPEB Cost Contributed Obligation 6/30/2014 $ 910,457 69.34% $ 706,693 6/30/2015 920,856 71.74% 966,949 6/30/2016 935,368 77.89% 1,173,717

D. Funded Status and Funding Progress

The funded status of the Plan for the County as of July 1, 2015, the most recent actuarial valuation date, is as follows:

Actuarial accrued liability (AL) $ 304,800 Actuarial value of plan assets $ :

Unfunded actuarial accrued liability (UAL) $ 304,800 Funded ratio (actuarial value of plan assets / AL) 0.00% Covered payroll (active plan members) S 5,435,900 UAAL as a percentage of covered payroll 5.61%

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 16-Other Postemployment 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, 2014, the most recent actuarial valuation date, is as follows:

Actuarial accrued liability (AAL) $ 9,357,000

Actuarial value of plan assets $ -

Unfunded actuarial accrued liability (UAAL) $ 9,357,000

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

Covered payroll (active plan members) $ 18,961,700

UAAL as a percentage of covered payroll 49.35%

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.

Primary Government As of July 1, 2015, 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: investment rate of return at 3.50 percent and a health care trend rate of 7.40 percent graded to 4.10 percent over 60 years. The UAAL is being amortized as a level percentage over the remaining amortization period, which at July 1, 2015 was 20 years.

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 16-Other Postemployment 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, 2014, the most recent actuarial valuation date, is as follows:

‘Actuarial accrued liability (AAL) $ 9,357,000 Actuarial value of plan assets $ :

Unfunded actuarial accrued liability (UAL) $ 9,357,000 Funded ratio (actuarial value of plan assets / AL) 0.00% Covered payroll (active plan members) $ 18,961,700 UAAL as a percentage of covered payroll 49.35%

E. Actuarial Methods and Assumptions

Primary Government As of July 1, 2015, 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: investment rate of return at 3.50 percent and a health care trend rate of 7.40 percent graded to 4.10 percent over 60 years. The UAAL is being amortized as a level percentage over the remaining amortization period, which at July 1, 2015 was 20 years.

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 16-Other Postemployment Benefits-Health Insurance: (Continued)

E. Actuarial Methods and Assumptions (Continued)

Discretely Presented Component Unit – School Board: As of July 1, 2014, 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: investment rate of return at 3.50 percent and a health care trend rate of 5.60 percent graded to 4.50 percent over 80 years. The UAAL is being amortized as a level percentage over the remaining amortization period, which at July 1, 2014 was 20 years.

Note 17-Other Postemployment Benefits-VRS Health Insurance Credit:

A. Plan Description

The County and School Board participate 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 or School Board, 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 8.

B. Funding Policy

Primary Government: 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 2016 was 0.07% of annual covered payroll.

Discretely Presented Component Unit - School Board (Non-Professional Employees): As a participating local political subdivision, the Covington School Board 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 School Board’s contribution rate for the fiscal year ended 2016 was 0.95% of annual covered payroll.

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 16-Other Postemployment Benefits-Health Insurance: (Continued)

E, Actuarial Methods and Assumptions (Continued)

Discretely Presented Component Unit - School Board:

As of July 1, 2014, 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: investment rate of return at 3.50 percent and a health care trend rate of 5.60 percent graded to 4.50 percent over 80 years. The UAAL is being amortized as a level percentage over the remaining amortization period, which at July 1, 2014 was 20 years.

Note 17-Other Postemployment Benefits-VRS Health Insurance Credit:

A. Plan Description

‘An employee of the County or School Board, 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 851.1-145, 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 8.

B. Funding Policy

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

As a participating local political subdivision, the Covington School Board 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 School Board’s contribution rate for the fiscal year ended 2016 was 0.95% of annual covered payroll.

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 17-Other Postemployment Benefits-VRS Health Insurance Credit: (Continued)

C. Annual OPEB Cost and Net OPEB Obligation

Primary Government: 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 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.

For 2016, the County’s contribution of $3,571 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 2016 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 6/30/2014 $ 778 100.00% $ -
6/30/2015 3,321 100.00% -
6/30/2016 3,571 100.00% -

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

For 2016, the School Board’s contribution of $25,165 was equal to the ARC and OPEB cost. The School Board’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for 2016 and the two preceding years are shown below:

Fiscal Annual Percentage Net Year OPEB of ARC OPEB

Ending Cost (ARC) Contributed Obligation Discretely Presented Component Unit

School Board 6/30/2014 $ 13,320 100.00% $ -
6/30/2015 23,128 100.00% -
6/30/2016 25,165 100.00% -

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 17-Other Postemployment Benefits-VRS Health Insurance Credit: (Continued)

C. Annual OPEB Cost and Net OPEB Obligation

Primary Government 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 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.

Fiscal Annual Percentage Net Year OPEB of ARC OPEB Ending Cost (ARC) Contributed _ Obligation Primary Government: County 6/30/2014 $ 778 100.00% $ 6/30/2015 3,321 100.00% 6/30/2016 3,571 100.00%

Fiscal Annual Percentage Net Year OPEB of ARC OPEB Ending Cost (ARC) Contributed _ Obligation Discretely Presented Component Unit School Board 6/30/2014 § 13,320 100.00% § 6/30/2015 23,128 100.00% 6/30/2016 25,165, 10.00%

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 17-Other Postemployment Benefits-VRS Health Insurance Credit: (Continued)

D. Funded Status and Funding Progress

Primary Government:
The funded status of the plan as of June 30, 2015, the most recent actuarial valuation date, is as follows:

Actuarial accrued liability (AAL) $ 106,243
Actuarial value of plan assets $ 83,531
Unfunded actuarial accrued liability (UAAL) $ 22,712
Funded ratio (actuarial value of plan assets/AAL) 78.62% Covered payroll (active plan members) $ 1,227,848
UAAL as a percentage of covered payroll 1.85%

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 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.

Discretely Presented Component Unit - School Board (Non-Professional Employees): The funded status of the plan as of June 30, 2015, the most recent actuarial valuation date, is as follows:

Actuarial accrued liability (AAL) $ 389,279
Actuarial value of plan assets $ (24,715)
Unfunded actuarial accrued liability (UAAL) $ 413,994
Funded ratio (actuarial value of plan assets/AAL) -6.35% Covered payroll (active plan members) $ 2,437,539
UAAL as a percentage of covered payroll 16.98%

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 17-Other Postemployment Benefits-VRS Health Insurance Credi

(Continued)

D. Funded Status and Funding Progress

Primary Government The funded status of the plan as of June 30, 2015, the most recent actuarial valuation date, is as follows:

Actuarial accrued liability (AAL) S$ 106,243 Actuarial value of plan assets $ 83,531 Unfunded actuarial accrued liability (UAL) 5 2,712 Funded ratio (actuarial value of plan assets/AAL) 78.62% Covered payroll (active plan members) $1,227,848 UAAL as a percentage of covered payroll 1.85%

Discretely Presented Component Unit - School Board (Non-Professional Employees): The funded status of the plan as of June 30, 2015, the most recent actuarial valuation date, is as follows:

Actuarial accrued liability (AL) $ 389,279 Actuarial value of plan assets $ (24,715) Unfunded actuarial accrued liability (UAAL) $413,994 Funded ratio (actuarial value of plan assets/AAL) 6.35% Covered payroll (active plan members) $2,437,539 UAAL as a percentage of covered payroll 16.98%

o7e

COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 17-Other Postemployment Benefits-VRS Health Insurance Credit: (Continued)

D. Funded Status and Funding Progress (Continued)

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

E. Actuarial Methods and Assumptions

Primary Government: 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, 2015 was 19-28 years.

Discretely Presented Component Unit - School Board (Non-Professional Employees):
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 payroll on an open basis. The remaining open amortization period at June 30, 2015 was 19-28 years.

F. Professional Employees – Discretely Presented Component Unit School Board

Plan Description

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 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.

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 17-Other Postemployment Benefits-VRS Health Insurance Credit: (Continued)

D. Funded Status and Funding Progress (Continued)

E. Actuarial Methods and Assumptions

Primary Government 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.

Discretely Presented Component Unit - School Board (Non-Professional Employees): 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 payroll on an open basis. The remaining open amortization period at June 30, 2015 was 19-28 years.

F. Professional Employees - Discretely Presented Component Unit School Board

Plan Description

T-

COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 17-Other Postemployment Benefits-VRS Health Insurance Credit: (Continued)

F. Professional Employees – Discretely Presented Component Unit School Board (Continued)

Funding Policy

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 $189,895, $184,055, and $189,624 for the fiscal years ended 2016, 2015, and 2014, respectively. The School Board’s contributions represented 1.06%, 1.06%, and 1.11%, of covered payroll for the fiscal years ended 2016, 2015, and 2014, respectively.

Note 18-Moral Obligation:

The County has signed a support agreement that backs certain debt obligations of the Russell County Public Service Authority (a component unit of the County). In the agreement, the Board of Supervisors has a moral obligation to fund the Russell County Public Service Authority in amounts sufficient to cover debt service issued during fiscal year 2014 in the amount of $700,843. To date, the County of Russell, Virginia has provided funds sufficient to cover such debt service.

Note 19-Operating Lease:

The County has signed a lease agreement with The Industrial Development Authority of Russell County to pay rent equivalent to the required debt service as it relates to the Russell County Government Center. To date, the County of Russell, Virginia has provided funds sufficient to cover such debt service. As of June 30, 2016, the outstanding balance of the loan was $4,144,400. Future required rent payments are as follows:

Year Ending

June 30, Principal Interest 2017 372,100$ 92,744$
2018 381,000 83,925
2019 390,000 74,898
2020 399,100 65,825
2021 408,700 56,199

2022-2026 2,193,500 131,111
Totals 4,144,400$ 504,702$

Operating Lease

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 17-Other Postemployment Benefits-VRS Health Insurance Credit: (Continued)

F. Professional Employees - Discretely Presented Component Unit School Board (Continued)

Funding Policy

Note 18-Moral Obligation:

Note 19-Operating Lease:

Year Ending Operating Lease

June 30, Principal Interest 2017 3 372, 100 92,744 2018 381,000 83,925, 2019 390,000 74,898 2020 399,100 65,825, 2021 408,700 56,199

2022-2026 2,193,500 131,111 Totals $

“PB

COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 20-Adoption of Accounting Principle:

Governmental Accounting Standards Board Statement No. 82, Pension Issues – an amendment of GASB Statements No. 67, No. 68, and No. 73

The County early implemented provisions of the above Statement during the fiscal year ended June 30, 2016. The objective of this Statement is to address certain issues that have been raised with respect to Statements No. 67, Financial Reporting for Pension Plans, No. 68, Accounting and Financial Reporting for Pensions, and No. 73, Accounting and Financial Reporting for Pensions and Related Assets That Are Not within the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASB Statements 67 and 68. Specifically, this Statement addresses issues regarding (1) the presentation of payroll-related measures in required supplementary information, (2) the selection of assumptions and the treatment of deviations from the guidance in an Actuarial Standard of Practice for financial reporting purposes, and (3) the classification of payments made by employers to satisfy employee (plan member) contribution requirements. No restatement was required as a result of this implementation.

Note 21-Upcoming Pronouncements:

Statement No. 74, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans, improves the usefulness of information about postemployment benefits other than pensions (other postemployment benefits or OPEB) included in the general purpose external financial reports of state and local governmental OPEB plans for making decisions and assessing accountability. This Statement replaces Statements No. 43, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans, as amended, and No. 57, OPEB Measurements by Agent Employers and Agent Multiple Employer Plans. It also includes requirements for defined contribution OPEB plans that replace the requirements for those OPEB plans in Statement No. 25, Financial Reporting for Defined Benefit Pension Plans and Note Disclosures for Defined Contribution Plans, as amended, Statement 43, and Statement No. 50, Pension Disclosures. This Statement is effective for financial statements for fiscal years beginning after June 15, 2016.

Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pension, improves accounting and financial reporting by state and local governments for postemployment benefits other than pensions (other postemployment benefits or OPEB). This Statement replaces the requirements of Statements No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions, as amended, and No. 57, OPEB Measurements by Agent Employers and Agent Multiple Employer Plans, for OPEB. Statement No. 74, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans, establishes new accounting and financial reporting requirements for OPEB plans. This Statement is effective for fiscal years beginning after June 15, 2017. Statement No. 77, Tax Abatement Disclosures, will increase the disclosure of tax abatement agreements to disclose information about the agreements. The requirements of this Statement improve financial reporting by giving users of financial statements essential information that is not consistently or comprehensively reported to the public at present. The requirements of this Statement are effective for financial statements for periods beginning after December 15, 2015.

The remainder of this page is left blank intentionally.

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 20-Adoption of Accounting Principl

Governmental Accounting Standards Board Statement No. 82, Pension Issues - an amendment of GASB Statements No. 67, No. 68, and No. 73

Note 21-Upcoming Pronouncements:

Statement No. 77, Tax Abatement Disclosures, will increase the disclosure of tax abatement agreements to disclose information about the agreements. The requirements of this Statement improve financial reporting by giving users of financial statements essential information that is not consistently or comprehensively reported to the public at present. The requirements of this Statement are effective for financial statements for periods beginning after December 15, 2015.

The remainder of this page is left blank intentionally.

The

COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 21-Upcoming Pronouncements: (Continued)

Statement No. 78, Pensions Provided through Certain Multiple-Employer Defined Benefit Pension Plans, addresses a practice issue regarding the scope and applicability of Statement No. 68, Accounting and Financial Reporting for Pensions. This issue is associated with pensions provided through certain multiple-employer defined benefit pension plans and to state or local governmental employers whose employees are provided with such pensions. The requirements of this Statement are effective for reporting periods beginning after December 15, 2015.

Statement No. 80, Blending Requirements for Certain Component Units—an amendment of GASB Statement No. 14, improves financial reporting by clarifying the financial statement presentation requirements for certain component units. This Statement amends the blending requirements established in paragraph 53 of Statement No. 14, The Financial Reporting Entity, as amended. The requirements of this Statement are effective for reporting periods beginning after June 15, 2016.

Statement No. 81, Irrevocable Split-Interest Agreements, improves accounting and financial reporting for irrevocable split-interest agreements by providing recognition and measurement guidance for situations in which a government is a beneficiary of the agreement. The requirements of this Statement are effective for financial statements for periods beginning after December 15, 2016, and should be applied retroactively.

Management is currently evaluating the impact these standards will have on the financial statements when adopted.

Note 22-Litigation:

As of June 30, 2016, there were no matters of litigation involving the County which would materially affect the County’s financial position should court decisions on pending matters not be favorable.

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COUNTY OF RUSSELL, VIRGINIA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

Note 21-Upcoming Pronouncements: (Continued)

Statement No. 81, Irrevocable Split-interest Agreements, improves accounting and financial reporting for irrevocable split-interest agreements by providing recognition and measurement guidance for situations in which a government is a beneficiary of the agreement. The requirements of this Statement are effective for financial statements for periods beginning after December 15, 2016, and should be applied retroactively.

Management is currently evaluating the impact these standards will have on the financial statements when adopted.

Note 22-Litigati

-T5-

Required Supplementary Information

Exhibit 11

Variance with Final Budget -

Actual Positive Original Final Amounts (Negative)

REVENUES General property taxes 15,538,862$ 15,538,862$ 15,071,101$ (467,761)$
Other local taxes 4,343,000 4,302,368 3,524,734 (777,634)
Permits, privilege fees, and regulatory licenses 48,600 48,600 30,258 (18,342)
Fines and forfeitures 27,000 27,000 14,136 (12,864)
Revenue from the use of money and property 340,000 340,000 214,695 (125,305)
Charges for services 293,300 293,300 294,854 1,554
Miscellaneous 216,600 216,600 180,343 (36,257)
Recovered costs 398,500 398,500 1,076,504 678,004
Intergovernmental:

Commonwealth 8,185,064 8,185,064 8,447,216 262,152
Federal 2,536,612 2,536,612 2,629,600 92,988

Total revenues 31,927,538$ 31,886,906$ 31,483,441$ (403,465)$

EXPENDITURES Current:

General government administration 1,743,819$ 1,762,019$ 1,787,592$ (25,573)$
Judicial administration 2,034,692 2,182,469 2,193,822 (11,353)
Public safety 6,649,932 6,847,419 6,914,427 (67,008)
Public works 3,378,559 3,027,227 2,899,065 128,162
Health and welfare 6,700,566 6,802,206 7,071,353 (269,147)
Education 7,528,431 7,536,431 6,729,363 807,068
Parks, recreation, and cultural 471,275 476,375 468,670 7,705
Community development 991,683 957,583 1,048,554 (90,971)
Nondepartmental 481,098 929,375 515,527 413,848

Debt service: Principal retirement 1,369,256 1,369,256 1,369,256 -
Interest and other fiscal charges 378,227 378,227 378,465 (238)

Total expenditures 31,727,538$ 32,268,587$ 31,376,094$ 892,493$

Excess (deficiency) of revenues over (under) expenditures 200,000$ (381,681)$ 107,347$ 489,028$

OTHER FINANCING SOURCES (USES) Transfers in (200,000)$ (245,900)$ (248,016)$ (2,116)$

Total other financing sources (uses) (200,000)$ (245,900)$ (248,016)$ (2,116)$

Net change in fund balances -$ (627,581)$ (140,669)$ 486,912$
Fund balances - beginning - 627,581 7,617,999 6,990,418
Fund balances - ending -$ -$ 7,477,330$ 7,477,330$

Budgeted Amounts

County of Russell, Virginia General Fund

Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual For the Year Ended June 30, 2016

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County of Russell, Virginia

General Fund

‘Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual For the Year Ended June 30, 2016

Exhibit 11

REVENUES General property taxes Other local taxes Permits, privilege fees, and regulatory licenses Fines and forfeitures Revenue from the use of money and property Charges for services Miscellaneous Recovered costs Intergovernmental:

‘Commonwealth

Federal

Total revenues

EXPENDITURES Current: General government administration Judicial administration Public safety Public works Health and welfare Education Parks, recreation, and cultural ‘Community development Nondepartmental Debt service: Principal retirement Interest and other fiscal charges Total expenditures

Excess (deficiency) of revenues over (under) ‘expenditures

OTHER FINANCING SOURCES (USES) Transfers in Total other financing sources (uses)

Net change in fund balances Fund balances - beginning Fund balances - ending

Variance with

Budgeted Amounts, Final Budget -

Actual Positive

Original Final Amounts (Negative $ 15,538,862 $ 15,538,862 $ 15,071,101 $ (467,761) 4,343,000 4,302,368 3,524,734 (777,634) 48,600 48,600 30,258 (18,342) 27,000 27,000 14,136 (12,864) 340,000 340,000 214,695, (125,305) 293,300 293,300 294,854 1,554 216,600 216,600 180,343 (36,257) 398,500 398,500 1,076,504 678,004 8,185,064 8,185,064 8,447,216 262,152 2,536,612 2,536,612 2,629,600 92,988 31,927,538 $31,886,906 _$ 31,483,441 (403,465) S$ 1,743,819 $1,762,019 $1,787,592 $ (25,573) 2,034,692 2,182,469 2,193,822 (11,353) 6,649,932 6,847,419 6,914,427 (67,008) 3,378,559 3,027,227 2,899,065, 128,162 6,700,566 6,802,206 7,071,353 (269,147) 7,528,431 7,536,431 6,729,363 807,068 471,275 476,375 468,670 7,705 991,683 957,583, 1,048,554 (90,971) 481,098 929,375 515,527 413,848 1,369,256 1,369,256 1,369,256 : 378,227 378,227 378,465, (238) 31,727,538 $32,268,587 _$ 31,376,094 892,493 $200,000 $ (381,681) $107,347$ 489,028 $ (200,000) $ (245,900) $__(248,016) $ (2,116) (200,000) $ (245,900) (248,016) (2,116)

$ = $ (627,581) $ (140,669) $486,912 : 627,581 7,617,999 6,990,418

= = 7,477,330. 7,477,330,

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Exhibit 12

Variance with Final Budget -

Actual Positive Original Final Amounts (Negative)

REVENUES Other local taxes 900,000$ 900,000$ 257,191$ (642,809)$
Revenue from the use of money and property - - 1,047 1,047

Total revenues 900,000$ 900,000$ 258,238$ (641,762)$

EXPENDITURES Current:

Public works 900,000$ 900,000$ 630,555$ 269,445$

Excess (deficiency) of revenues over (under) expenditures -$ -$ (372,317)$ (372,317)$

Net change in fund balances -$ -$ (372,317)$ (372,317)$
Fund balances - beginning - - 487,541 487,541
Fund balances - ending -$ -$ 115,224$ 115,224$

Budgeted Amounts

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, 2016

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County of Russell, Special Revenue Fund - Coal Road Fund

rginia

‘Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual

For the Year Ended June 30, 2016

Exhibit 12

REVENUES

Other local taxes

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

Variance with Budgeted Amounts Final Budget - Actual Positive Original Final Amounts (Negative) $900,000 900,000 § 257,191 § (642,809)

- 1,047 1,047 3 900,000 '900,000_$ 758,238 $_ (641,762) $900,000 900,000 $ 630,555 _$ 269,445 s : = $372,317) $__G72,317) $ $ (872,317) $ (372,317) : : 487,541 487,541 115,224 115,224

Exhibit 13

Variance with Final Budget -

Actual Positive Original Final Amounts (Negative)

REVENUES Recovered costs -$ -$ 6,101$ 6,101$
Intergovernmental:

Federal 2,746,846 2,746,846 2,103,000 (643,846)
Total revenues 2,746,846$ 2,746,846$ 2,109,101$ (637,745)$

EXPENDITURES Current:

Health and welfare 2,746,846$ 2,746,846$ 2,137,788$ 609,058$

Excess (deficiency) of revenues over (under) expenditures -$ -$ (28,687)$ (28,687)$

Net change in fund balances -$ -$ (28,687)$ (28,687)$
Fund balances - beginning - - (17,649) (17,649)
Fund balances - ending -$ -$ (46,336)$ (46,336)$

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, 2016

Budgeted Amounts

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Exhibit 13 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, 2016

Variance with

Budgeted Amounts Final Budget - Actual Positive Original Final ‘Amounts Negative) REVENUES Recovered costs s -$ $ 6,101 § 6,101 Intergovernmental: Federal 2,746,846 2,746,846 __2,103,000 (643,846) Total revenues 2,746,846 $2,746,846 $2,109,101 (637,745) EXPENDITURES Current:

Health and welfare $2,746,846 $2,746,846 $2,137,788 § 609,058 Excess (deficiency) of revenues over (under) expenditures $ s _ S$ (28,687) $___(28,687) Net change in fund balances $ $ - $ (28,687) § (28,687) Fund balances - beginning : (17,649) (17,649). Fund balances - ending = (46,336), (46,336)

Exhibit 14

Primary Government

County Other Postemployment Benefits-Health Insurance:

Actuarial Actuarial Actuarial Unfunded UAAL as a Valuation Value of Accrued AAL (UAAL) Funded Ratio Covered % of Covered

as of Assets Liability (AAL) (3) - (2) (2)/(3) Payroll Payroll (4)/(6) (1) (2) (3) (4) (5) (6) (7)

July 1, 2015 -$ 304,800$ 304,800$ 0.00% 5,435,900$ 5.61% July 1, 2012 - 198,600 198,600 0.00% 5,576,300 3.56% July 1, 2010 - 464,748 464,748 0.00% 5,581,443 8.33%

County Other Postemployment Benefits-VRS Health Insurance Credit:

Actuarial Actuarial Actuarial Unfunded UAAL as a Valuation Value of Accrued AAL (UAAL) Funded Ratio Covered % of Covered

as of Assets Liability (AAL) (3) - (2) (2)/(3) Payroll Payroll (4)/(6) (1) (2) (3) (4) (5) (6) (7)

June 30, 2015 83,531$ 106,243$ 22,712$ 78.62% 1,227,848$ 1.85% June 30, 2014 84,614 123,274 38,660 68.64% 1,182,479 3.27% June 30, 2013 81,083 118,770 37,687 68.27% 1,110,563 3.39%

Discretely Presented Component Unit:

School Board Other Postemployment Benefits-Health Insurance:

Actuarial Actuarial Actuarial Unfunded UAAL as a Valuation Value of Accrued AAL (UAAL) Funded Ratio Covered % of Covered

as of Assets Liability (AAL) (3) - (2) (2)/(3) Payroll Payroll (4)/(6) (1) (2) (3) (4) (5) (6) (7)

July 1, 2014 -$ 9,357,000$ 9,357,000$ 0.00% 18,961,700$ 49.35% July 1, 2012 - 8,991,400 8,991,400 0.00% 21,181,100 42.45% July 1, 2010 - 3,030,967 3,030,967 0.00% 20,559,274 14.74%

School Board Other Postemployment Benefits-VRS Health Insurance Credit:

Actuarial Actuarial Actuarial Unfunded UAAL as a Valuation Value of Accrued AAL (UAAL) Funded Ratio Covered % of Covered as of (*) Assets Liability (AAL) (3) - (2) (2)/(3) Payroll Payroll (4)/(6)

(1) (2) (3) (4) (5) (6) (7)

June 30, 2015 (24,715)$ 389,279$ 413,994$ -6.35% 2,437,539$ 16.98% June 30, 2014 (15,285) 382,648 397,933 -3.99% 2,639,711 15.07% June 30, 2013 379 376,778 376,399 0.10% 2,666,329 14.12%

(*) - June 30, 2012 was the initial valuation as the School Board recently joined this plan.

County of Russell, Virginia Schedule of OPEB Funding Progress For the Year Ended June 30, 2016

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County of Russell,

rginia

Schedule of OPEB Funding Progress For the Year Ended June 30, 2016

Exhibit 14

Primary Government

County Other Postemployment Benefits-Health Insurance:

Actuarial Actuarial Actuarial Unfunded UAAL asa Valuation Value of Accrued AAL(UAAL) Funded Ratio Covered % of Covered as of Assets Liability (AL) (3)- (2) (2)/(3) Payroll Payroll (4)/(6) (a @ @) @ 6) @ i) July 1, 2015, s - s 304,800 $ 304,800 0.00% $5,435,900 5.61% “uly 1, 2012 : 198,600 198,600 0.00% 5,576,300 356% July 1, 2010 : 464,748 464,748 0.00% 5,581,443 8.33% County Other Postemployment Benefits-VRS Health Insurance Credit: Actuarial Actuarial Actuarial Unfunded UAAL asa Valuation Value of ‘Accrued AAL(UAAL) Funded Ratio Covered % of Covered as of Assets Liability (AAL) (3) - (2) (2)/(3) Payroll Payroll (4)/(6) ay 2) eB (4 (5) (6) a) June 30, 2015, $ 83,531 s 106,243, $ 22,712 78.62% $1,227,848 1.85% ‘June 30, 2014 84614 103,274 38,660 68.64% 1;182,479 3.27% ‘June 30, 2013 81,083 118,770 37,687 68.27% 13110,563 339% Discretely Presented Component Unit: School Board Other Postemployment Benefits-Health Insurance: Actuarial Actuarial Actuarial Unfunded UAAL asa Valuation Value of ‘Accrued AAL (UAL) Funded Ratio Covered % of Covered as of Assets Liability (AL) (3)- (2) (2)/3) Payroll Payroll (4)/(6) a (2) 3) (4) (5) (6) 7) July 1, 2014, s - $ 9,357,000 $ 9,357,000 0.00% $ 18,961,700 49.35% “uly 1, 2012 - 8,991,400 8,991,400 0.00% 21,181,100 42.45% July 1, 2010 : 3,030,967 3,030,967 0.00% 20)559,274 14.74% School Board Other Postemployment Benefits-VRS Health Insurance Credit: Actuarial Actuarial Actuarial Unfunded UAAL asa Valuation Value of ‘Accrued AAL(UAAL) Funded Ratio Covered % of Covered as of () Assets Liability (MAL) __@)- 2) 2/8) Payroll Payroll (4)/(6) wy @ By @ @) 6 7 June 30,2015 $24,715) $389,279 $413,994 6.35% $2,437,539 16.98% June 30, 2014 (15,285) 382,648 397,933 3.99% 2,639,711 15.07% ‘June 30, 2013 379 376,778 376,399 0.10% 21666,329 14.12%

(°)- June 30, 2012 was the initial valuation as the School Board recently joined this plan.

Exhibit 15

Proportionate Pension Plan’s Share of the NPL Fiduciary Net

Proportion of as a Percentage of Position as a the Net Pension Proportionate Covered Covered Payroll Percentage of Total

Date Liability (NPL) Share of the NPL Payroll (3)/(4) Pension Liability (1) (2) (3) (4) (5) (6)

Primary Government - County Retirement Plan 2015 99.1179% 5,970,089$ 5,368,165$ 111.21% 80.39% 2014 99.1179% 5,782,839 5,440,419 106.29% 80.53%

Component Unit School Board (professional) 2015 0.23337% 29,373,000$ 17,363,701$ 169.16% 70.68% 2014 0.23360% 28,229,000 17,083,236 165.24% 70.88%

County of Russell, Virginia Schedule of Employer’s Proportionate Share of the Net Pension Liability

June 30, 2016

Schedule is intended to show information for 10 years. Information prior to the 2014 valuation is not available. However, additional years will be included as they become available.

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Exhibit 15

County of Russell, Virginia Schedule of Employer’s Proportionate Share of the Net Pension Liability June 30, 2016

Proportionate Pension Plan’s Share of the NPL Fiduciary Net Proportion of asa Percentage of __—Position as a the Net Pension Proportionate Covered Covered Payroll Percentage of Total Date Liability (NPL) Share of the NPL Payroll aay Pension Liability mn @ @) w 6) (6) Primary Government - County Retirement Plan 2015 99.1179% § 5,970,089 $ 5,368,165 11.21% 80.39% 2014 99.1179% 5,782,839 5,440,419 106.29% 80.53% Component Unit School Board (professional) 2015 0.23337% § 29,373,000 § 17,363,701 169.16% 70.68% 2014 0.23360% 28,229,000 17,083,236 165.24% 70.88%

Schedule is intended to show information for 10 years. Information prior to the 2014 valuation is not available, However, additional years will be included as they become available.

Exhibit 16

2015 2014 Total pension liability Service cost $ 261,697 $ 263,958
Interest 1,132,997 1,116,022
Changes of benefit terms - -
Differences between expected and actual experience 20,402 -
Changes in assumptions - -
Benefit payments, including refunds of employee contributions (1,191,112) (1,083,833)
Net change in total pension liability $ 223,984 $ 296,147
Total pension liability - beginning 16,781,228 16,485,081
Total pension liability - ending (a) $ 17,005,212 $ 16,781,228

Plan fiduciary net position Contributions - employer $ 425,544 $ 423,435
Contributions - employee 120,010 130,388
Net investment income 515,108 1,629,758
Benefit payments, including refunds of employee contributions (1,191,112) (1,083,833)
Administrative expense (7,577) (9,166)
Other (108) 86
Net change in plan fiduciary net position $ (138,135) $ 1,090,668
Plan fiduciary net position - beginning 11,726,603 10,635,935
Plan fiduciary net position - ending (b) $ 11,588,468 $ 11,726,603

School Division’s net pension liability - ending (a) - (b) $ 5,416,744 $ 5,054,625

Plan fiduciary net position as a percentage of the total pension liability 68.15% 69.88%

Covered payroll $ 2,434,577 $ 2,612,301

School Division’s net pension liability as a percentage of covered payroll 222.49% 193.49%

Schedule is intended to show information for 10 years. Information prior to the 2014 valuation is not available. However, additional years will be included as they become available.

County of Russell, Virginia Schedule of Components of and Changes in Net Pension Liability and Related Ratios

Component Unit School Board (nonprofessional) For the Year Ended June 30, 2016

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Exhibit 16 County of Russell, Virginia Schedule of Components of and Changes in Net Pension Liability and Related Ratios Component Unit School Board (nonprofessional) For the Year Ended June 30, 2016

20s 0 Total pension liability Service cost $ 261,697 $ 263,958 Interest 1,132,997 1,116,022 Changes of benefit terms : : Differences between expected and actual experience 20,402 : Changes in assumptions : . Benefit payments, including refunds of employee contributions (1,191,112) (1,083,833) Net change in total pension liability $ 223,984 $ 296,147 Total pension liability - beginning 16,781,228 16,485,081 Total pension liability - ending (a) $

Plan fiduciary net position

Contributions - employer $ 425,544 423,435 Contributions - employee 120,010 130,388 Net investment income 515,108 1,629,758 Benefit payments, including refunds of employee contributions (1,191,112) (1,083,833) Administrative expense (7,577) (9,166) Other (108) 86 Net change in plan fiduciary net position $ (738,135) $ 7,090,668 Plan fiduciary net position - beginning 11,726,603 10,635,935 Plan fiduciary net position - ending (b) $ 11,588,468 School Division’s net pension liability - ending (a) - (b) $ 5,416,744 $ 5,054,625, Plan fiduciary net position as a percentage of the total

pension liability 68.15% 69.88% Covered payroll $ 2,434,577 $ 2,612,301

School Division’s net pension liability as a percentage of covered payroll 22.49% 193.49%

Schedule is intended to show information for 10 years. Information prior to the 2014 valuation is not available. However, additional years will be included as they become available.

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Exhibit 17

Contributions in Relation to Contributions

Contractually Contractually Contribution Employer’s as a % of Required Required Deficiency Covered Covered

Contribution Contribution (Excess) Payroll Payroll Date (1) (2) (3) (4) (5)

Primary Government 2016 $ 807,684 $ 807,684 $ - $ 5,467,426 14.77% 2015 794,360 794,360 - 5,368,165 14.80%

Component Unit School Board (nonprofessional) 2016 $ 464,892 $ 464,892 $ - $ 2,648,956 17.55% 2015 425,544 425,544 - 2,434,577 17.48% 2014 424,238 424,238 - 2,612,301 16.24% 2013 434,345 434,345 - 2,674,538 16.24% 2012 386,243 386,243 - 2,745,156 14.07% 2011 384,524 384,524 - 2,732,933 14.07% 2010 412,281 412,281 - 2,823,842 14.60% 2009 422,641 422,641 - 2,894,798 14.60% 2008 416,704 416,704 - 2,624,078 15.88% 2007 398,543 398,543 - 2,509,714 15.88%

Component Unit School Board (professional) 2016 $ 2,503,615 $ 2,503,615 $ - $ 17,914,579 13.98% 2015 2,509,000 2,509,000 - 17,363,701 14.45% 2014 1,991,484 1,991,484 - 17,083,236 11.66% 2013 2,037,610 2,037,610 - 17,475,216 11.66% 2012 1,164,108 1,164,108 - 18,390,325 6.33% 2011 700,575 700,575 - 17,826,341 3.93% 2010 1,685,523 1,685,523 - 19,131,926 8.81% 2009 1,766,705 1,766,705 - 20,053,407 8.81% 2008 1,853,860 1,853,860 - 17,998,643 10.30%

County of Russell, Virginia Schedule of Employer Contributions For the Year Ended June 30, 2016

Current year contributions are from County records and prior year contributions are from the VRS actuarial valuation performed each year.

Schedule is intended to show information for 10 years. The 10th year of data was unavailable for the Component Unit School Board’s professional schedule. Also, prior to 2015, VASAP’s information was consolidated in the County’s totals and presented in the County report. Therefore, sufficient information to allocate the prior year balances is not available. Additional years will be included as they become available.

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Exhibit 17 County of Russell, Virginia Schedule of Employer Contributions For the Year Ended June 30, 2016

Contributions in

Relation to Contributions Contractually Contractually Contribution Employer’s as a% of Required Required Deficiency Covered Covered Contribution Contribution (Excess) Payroll Payroll Date (1) () @) (4) (5) Primary Government 2016 $ 807,684 $ 807,684 $ - $5,467,426 14.77% 2015 794,360 794,360 : 5,368,165 14.80% Component Unit School Board (nonprofessional) 2016 464,892 $ 464,892 $ - $2,648,956 17.55% 2015 425,544 425,544 : 2,434,577 17.48% 2014 424,238 424,238 : 2,612,301 16.24% 2013 434,345, 434,345 : 2,674,538 16.24% 2012 386,243 386,243 : 2,745,156 14.07% 2011 384,524 384,524 : 2,732,933 14.07% 2010 412,281 412,281 : 2,823,842 14.60% 2009 422,641 422,641 : 2,894,798 14.60% 2008 416,704 416,704 : 2,624,078 15.88% 2007 398,543 398,543, : 2,509,714 15.88% Component Unit School Board (professional) 2016 «= $ ~——2,503,615 $ 2,503,615 - $17,914,579 13.98% 2015 2,509,000 2,509,000 : 17,363,701 14.45% 2014 1,991,484 1,991,484 : 17,083,236 11.66% 2013 2,037,610 2,037,610 - 17,475,216 11.66% 2012 1,164,108 1,164,108 - 18,390,325 6.33% 2011 700,575 700,575 : 17,826,341 3.93% 2010 1,685,523 1,685,523 : 19,131,926 8.81% 2009 1,766,705 1,766,705 : 20,053,407 8.81% 2008 1,853,860 1,853,860 : 17,998,643 10.30%

Current year contributions are from County records and prior year contributions are from the VRS actuarial valuation performed each year.

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Exhibit 18

Largest 10 – Non-LEOS:

Update mortality table
Decrease in rates of service retirement
Decrease in rates of disability retirement
Reduce rates of salary increase by 0.25% per year

Largest 10 – LEOS:

Update mortality table
Decrease in male rates of disability

All Others (Non 10 Largest) – Non-LEOS:

Update mortality table
Decrease in rates of service retirement
Decrease in rates of disability retirement
Reduce rates of salary increase by 0.25% per year

All Others (Non 10 Largest) – LEOS:

Update mortality table
Adjustments to rates of service retirement for females
Increase in rates of withdrawal
Decrease in male and female rates of disability

Component Unit School Board - Professional Employees

Update mortality table
Adjustments to the rates of service retirement
Decrease in rates withdrawals for 3 through 9 years of service
Decrease in rates of disability retirement
Reduce rates of salary increase by 0.25% per year

Changes of benefit terms – There have been no actuarially material changes to the System benefit provisions since the prior actuarial valuation. The 2014 valuation includes Hybrid Retirement Plan members for the first time. The hybrid plan applies to most new employees hired on or after January 1, 2014 and not covered by enhanced hazardous duty benefits. Because this was a new benefit and the number of participants was relatively small, the impact on the liabilities as of the measurement date of June 30, 2015 are not material.

Changes of assumptions – The following changes in actuarial assumptions were made effective June 30, 2013 based on the most recent experience study of the System for the four-year period ending June 30, 2012:

County of Russell, Virginia Notes to Required Supplementary Information

For the Year Ended June 30, 2016

In 2015, Covered Employee Payroll (as defined by GASB 68) included the total payroll for employees covered under the pension plan whether that payroll is subject to pension coverage or not. This definition was modified in GASB Statement No. 82 and now is the payroll on which contributions to a pension plan are based. The ratios presented use the same measure.

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Exhibit 18 County of Russell, Virginia Notes to Required Supplementary Information For the Year Ended June 30, 2016

Changes of benefit terms - There have been no actuarially material changes to the System benefit provisions since the prior actuarial valuation. The 2014 valuation includes Hybrid Retirement Plan members for the first time. The hybrid plan applies to most new employees hired on or after January 1, 2014 and not covered by enhanced hazardous duty benefits. Because this was a new benefit and the number of participants was relatively small, the impact on the liabilities as of the measurement date of June 30, 2015 are not material.

Changes of assumptions - The following changes in actuarial assumptions were made effective June 30, 2013 based on the most recent experience study of the System for the four-year period ending June 30, 2012:

Largest 10 - Non-LEOS:

Update mortality table
Decrease in rates of service retirement
Decrease in rates of disability retirement
Reduce rates of salary increase by 0.25% per year

Largest 10 - LEOS:

Update mortality table
Decrease in male rates of disability

All Others (Non 10 Largest) - Non-LEOS:

Update mortality table
Decrease in rates of service retirement
Decrease in rates of disability retirement
Reduce rates of salary increase by 0.25% per year

All Others (Non 10 Largest) - LEOS:

Update mortality table
Adjustments to rates of service retirement for females
Increase in rates of withdrawal
Decrease in male and female rates of disability

Component Unit School Board - Professional Employees

Update mortality table
Adjustments to the rates of service retirement
Decrease in rates withdrawals for 3 through 9 years of service
Decrease in rates of disability retirement
Reduce rates of salary increase by 0.25% per year

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Other Supplementary Information

FIDUCIARY FUNDS

Special Welfare – The Special Welfare fund accounts for those funds belonging to individuals entrusted to the local social services agency, such as foster care children.

FIDUCIARY FUNDS

Special Welfare - The Special Welfare fund accounts for those funds belonging to individuals entrusted to the local social services agency, such as foster care children.

Exhibit 19

Balance Balance Beginning End of Year Additions Deletions of Year

Assets Current Assets Cash and cash equivalents Special Welfare Fund 57,383$ 102,897$ (92,443)$ 67,837$
VASAP Fund 1,049 212,265 (220,903) (7,589)
Total Assets 58,432$ 315,162$ (313,346)$ 60,248$

Liabilities Amounts held for social services clients 57,383$ 102,897$ (92,443)$ 67,837$
Amounts held for VASAP 1,049 212,265 (220,903) (7,589)
Total Liabilities 58,432$ 315,162$ (313,346)$ 60,248$

County of Russell, Virginia Combined Statement of Changes in Assets and Liabilities

Agency Funds For the Year Ended June 30, 2016

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Exhibit 19 County of Russell, Virginia Combined Statement of Changes in Assets and Liabilities ‘Agency Funds For the Year Ended June 30, 2016

Balance Balance Beginning End ofYear Additions Deletions of Year Assets Current Assets Cash and cash equivalents Special Welfare Fund $ 57,383 $ 102,897 $ (92,443) $ 67,837 VASAP Fund 1,049 212,265 (220,903) (7,589) Total Assets 58,432 315,162 (313,346) 60,248 Liabilities Amounts held for social services clients $ 57,383 $ 102,897 $ (92,443) $ 67,837 Amounts held for VASAP 1,049 212,265 (220,903) (7,589) Total Liabilities 58,432 315,162 (313,346) 60,248

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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:

Exhibit 20

School Operating

Fund

ASSETS Cash and cash equivalents 1,739,428$
Receivables (net of allowance for uncollectibles):

Accounts receivable 14,612 Due from other governmental units 1,476,236
Prepaid items 373,568

Total assets 3,603,844

LIABILITIES AND FUND BALANCES Liabilities:

Accounts payable 126,885
Salaries payable 928,567 Due to primary government 2,101,066

Total liabilities 3,156,518

Fund balances: Nonspendable:

Prepaid items 373,568$
Committed:

Textbook purchases 345,940
Regional Adult Education 287,676

Unassigned: (559,858)
Total fund balances 447,326$
Total liabilities and fund balances 3,603,844$

Amounts reported for governmental activities in the statement of net position (Exhibit 1) are different because:

Total fund balances per above 447,326$

Construction in progress 17,071
Land 5,636,345
Buildings and improvements 9,941,263
Machinery and equipment 2,096,958 17,691,637

Items related to measurement of net pension liability (3,415,155)

2,968,507

Compensated absences (706,408)
Early retirement incentive (8,000)
Net OPEB obligation (1,173,717)
Net pension liability (34,789,744)
Deferred outflows related to measurement of net pension liability 14,330 (36,663,539)

Net position of governmental activities (18,971,224)$

County of Russell, Virginia Balance Sheet

Discretely Presented Component Unit - School Board June 30, 2016

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.

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

Pension contributions subsequent to the measurement date will be a reduction to the net pension liability in the next fiscal year and, therefore, are not reported in the funds.

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County of Russell, Virginia Balance Sheet

Discretely Presented Component Unit - School Board June 30, 2016

Exhibit 20

ASSETS: Cash and cash equivalents Receivables (net of allowance for uncollectibles): ‘Accounts receivable Due from other governmental units Prepaid items Total assets

LIABILITIES AND FUND BALANCES Liabilities: ‘Accounts payable Salaries payable Due to primary government Total liabilities

Fund balances: Nonspendable: Prepaid items Committed: Textbook purchases Regional Adult Education Unassigned: Total fund balances Total liabilities and fund balances

School Operating Fund

S$ 1,739,428

14,612 1,476,236

373,568 3,603,844

126,885, 928,567 2,101,066 3,156,518

S 373,568

345,940 287,676 (559,858) 447,326

‘Amounts reported for governmental activities in the statement of net position (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.

‘Construction in progress Land

Buildings and improvements ‘Nachinery and equipment

Other long-term assets are not available to pay for current-period expenditures and, therefore, are deferred in the funds. Items related to measurement of net pension liability

Pension contributions subsequent to the measurement date will be a reduction to the net pension Liability in the next fiscal year 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.

‘Compensated absences Early retirement incentive

Net OPEB obligation

Net pension liability

Deferred outflows related to measurement of net pension liability

Net position of governmental activities

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$447,326

17,071 5,636,345, 9,941,263,

2,096,958 17,691,637

(3,415,155)

2,968,507

(706,408) (8,000) (1,173,717) (34,789,744)

44,330_ (36,663,539)

Exhibit 21

School Operating

Fund REVENUES Revenue from the use of money and property 8,030$
Charges for services 381,790
Miscellaneous 246,281
Recovered costs 524,716
Intergovernmental:

Local government 6,632,200
Commonwealth 27,002,101
Federal 4,795,544

Total revenues 39,590,662$

EXPENDITURES Current:

Education 39,776,952$

Excess (deficiency) of revenues over (under) expenditures (186,290)$

Net change in fund balances (186,290)$
Fund balances - beginning 633,616
Fund balances - ending 447,326$

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 (186,290)$

Capital outlays 677,486
Reversion of assets back to the School Board (net) 238,977
Depreciation expense (1,077,443) (160,980)

Change in deferred inflows of resources related to the measurement of the net pension liability 2,615,134

(Increase) decrease in compensated absences 81,527
(Increase) decrease in early retirement incentive 11,500
(Increase) decrease in net OPEB obligation (206,768)
(Increase) decrease in net pension liability (1,506,119)
Change in deferred outflows of resources related to pension payments subsequent to the measurement date 32,239
Change in deferred outflows of resources related to difference between expected and actual experience 14,330 (1,573,291)

Change in net position of governmental activities 694,573$

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, 2016

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

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.

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

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County of Russell, Virginia Statement of Revenues, Expenditures, and Changes in Fund Balance: Governmental Funds - Discretely Presented Component Unit - School Boarc For the Year Ended June 30, 2016

School Operating Fund REVENUES Revenue from the use of money and property 5 8,030 Charges for services 381,790 Miscellaneous 246,281 Recovered costs 524,716 Intergovernmental: Local government 6,632,200 Commonwealth 27,002,101 Federal 4,795,544 Total revenues 339,590,662 EXPENDITURES Current: Education $39,776,952 Excess (deficiency) of revenues over (under) expenditures (186,290) Net change in fund balances (186,290) Fund balances - beginning 633,616 Fund balances - ending, AAT. 316, ‘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 S (186,290) Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over thelr estimated useful lives and reported as depreciation expense. This is the amount by which capital outlays exceeded depreciation in the current period. Capital outlays 677,486 Reversion of assets back to the School Board (net) 238,97 Depreciation expense (1,077,443) (160,980) Revenues in the statement of activities that do not provide current financial resources are not reported as revenues {in the funds. Change in deferred inflows of resources related to the measurement of the net pension liability 2,615,134 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. (increase) decrease in compensated absences 81,527 (increase) decrease in early retirement incentive 11,500 (increase) decrease in net OPEB obligation (206,768) (increase) decrease in net pension liability (1,506,119) Change in deferred outflows of resources related to pension payments subsequent to the measurement date 32,239 Change in deferred outflows of resources related to difference between expected and actual experience 14,330 (1,573,291)

Change in net position of governmental activities

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Exhibit 22

Variance with Final Budget

Positive Original Final Actual (Negative)

REVENUES Revenue from the use of money and property 1,500$ 1,500$ 8,030$ 6,530$
Charges for services 559,554 559,554 381,790 (177,764)
Miscellaneous 165,000 165,000 246,281 81,281
Recovered costs 571,914 571,914 524,716 (47,198)
Intergovernmental:

Local government 7,439,178 7,439,178 6,632,200 (806,978)
Commonwealth 27,157,733 27,157,733 27,002,101 (155,632)
Federal 5,270,117 5,270,117 4,795,544 (474,573)

Total revenues 41,164,996$ 41,164,996$ 39,590,662$ (1,574,334)$

EXPENDITURES Current:

Education 41,164,996$ 41,164,996$ 39,776,952$ 1,388,044$

Excess (deficiency) of revenues over (under) expenditures -$ -$ (186,290)$ (186,290)$

Net change in fund balances -$ -$ (186,290)$ (186,290)$
Fund balances - beginning - - 633,616 633,616
Fund balances - ending -$ -$ 447,326$ 447,326$

County of Russell, Virginia Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual

Discretely Presented Component Unit - School Board For the Year Ended June 30, 2016

School Operating Fund

Budgeted Amounts

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County of Russell, Virginia

Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual

Discretely Presented Component Unit - School Board

For the Year Ended June 30, 2016

Exhibit 22

REVENUES Revenue from the use of money and property Charges for services ‘Miscellaneous Recovered costs Intergovernmental:

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

School Operating Fund

Variance with

Final Budget Positive Actual (Negative) $ 1,500 $ 1,500 8,030 § 6,530 559,554 559,554 381,790 (177,764) 165,000 165,000 246,281 81,281 571,914 571,914 524,716 (47,198) 7,439,178 7,439,178 6,632,200 (806,978) 27,157,733 27,157,733 27,002,101 (155,632) 5,270,117 5,270,117 4,795,544 (474,573) 341,164,996 5 41,164,996 _$ 39,590,662 _$ (1,574,334) $41,164,996 _$ 41,164,996 $ 39,776,952$ _ 1,388,044 $ _$ : (186,290) $ (186,290) $ -$ - (186,290) $ (186,290) : : 633,616 633,616 = = 447,326 447,326

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Supporting Schedules

Schedule 1 Page 1 of 5

Variance with Final Budget

Original Final Positive Budget Budget Actual (Negative)

General Fund: Revenue from local sources:

General property taxes: Real Property Tax 8,000,000$ 8,000,000$ 7,844,288$ (155,712)$
Real and Personal PSC Tax 1,650,000 1,650,000 1,535,390 (114,610) Personal Property Tax 2,990,000 2,990,000 3,525,961 535,961 Mobile Home Tax 114,000 114,000 119,251 5,251 Machinery and Tools Tax 1,250,000 1,250,000 631,063 (618,937) Merchants Capital 36,000 36,000 35,299 (701) Mineral Tax 1,050,000 1,050,000 928,889 (121,111) Penalties 145,000 145,000 134,850 (10,150) Interest 303,862 303,862 316,110 12,248

Total general property taxes 15,538,862$ 15,538,862$ 15,071,101$ (467,761)$

Other local taxes: Local Sales and Use Tax 1,873,100$ 1,832,468$ 2,013,659$ 181,191$
Consumers’ Utility Tax 550,000 550,000 527,491 (22,509)
Consumption Taxes 85,000 85,000 73,656 (11,344)
Coal Severance Tax 800,000 800,000 257,191 (542,809)
Bank Stock Tax 10,900 10,900 23,936 13,036
Grantee tax 94,000 94,000 89,785 (4,215)
Motor Vehicle Licenses 900,000 900,000 518,092 (381,908)
Taxes on Recordation and Wills 30,000 30,000 20,924 (9,076)

Total other local taxes 4,343,000$ 4,302,368$ 3,524,734$ (777,634)$

Permits, privilege fees, and regulatory licenses: Animal licenses 2,300$ 2,300$ 2,113$ (187)$
Building permits 45,000 45,000 24,393 (20,607) Other permits and other licenses 1,300 1,300 3,752 2,452

Total permits, privilege fees, and regulatory licenses 48,600$ 48,600$ 30,258$ (18,342)$

Fines and forfeitures: Court fines and forfeitures 27,000$ 27,000$ 14,136$ (12,864)$

Revenue from use of money and property: Revenue from use of money 25,000$ 25,000$ 37,782$ 12,782$
Revenue from use of property 315,000 315,000 176,913 (138,087)

Total revenue from use of money and property 340,000$ 340,000$ 214,695$ (125,305)$

Charges for services: Charges for sanitation and waste removal 185,000$ 185,000$ 135,073$ (49,927)$
Charges for courthouse security 51,000 51,000 48,557 (2,443)
Charges for cannery operations 30,000 30,000 27,467 (2,533)
Charges for commonwealth attorney 5,600 5,600 56,488 50,888
Charges for courthouse maintenance 10,000 10,000 8,381 (1,619)
Charges for jail and inmate fees 4,000 4,000 5,030 1,030
Charges for district court - - 2,784 2,784
Charges for library 2,200 2,200 6,821 4,621
Other charges for services 5,500 5,500 4,253 (1,247)

Total charges for services 293,300$ 293,300$ 294,854$ 1,554$

Miscellaneous: Other miscellaneous revenue 206,600$ 206,600$ 144,031$ (62,569)$

Sale of property/surplus 10,000 10,000 - (10,000)

Valley Heights revenue - - 36,312 36,312

Total miscellaneous 216,600$ 216,600$ 180,343$ (36,257)$

County of Russell, Virginia Schedule of Revenues - Budget and Actual

Governmental Funds For the Year Ended June 30, 2016

Fund, Major and Minor Revenue Source

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County of Russell, Virginia Schedule 1 Schedule of Revenues - Budget and Actual Page 1 of 5 Governmental Funds For the Year Ended June 30, 2016

Variance with Final Budget Original Final Positive Fund, Major and Minor Revenue Source Budget Budget tual (Negative) General Fund: Revenue from local sources: General property taxes Real Property Tax S 8,000,000 $ 8,000,000 $ 7,844,288 $ (196,712) Real and Personal PSC Tax 1,650,000 1,650,000 1,535,390, (114,610) Personal Property Tax 2/990,000 2,990,000 3,525,961 535,961 ‘Mobile Home Tax 114,000 114,000 119,251 5,251 ‘machinery and Toots Tax 1,250,000 1,250,000, 631,063, (618,937) ‘Merchants Capital 36,000 36,000 35,299 01) ‘Mineral Tax 1,050,000 1,050,000 928,889 canny Penalties 145,000 145,000 134,850 (10,159) Interest 303,862 303,862 316,110 12.248, Total general property taxes $15,536,862 $15,538,862 $15,071,101 $467,761) Other local taxes: Local Sales and Use Tax S 1,873,100 $1,832,468 $ 2,013,659 $181,191 Consumers Utility Tax 580,000 350,000 527,491 (22,509) Consumption Taxes 85,000 85,000 73,656 (113348) Coal Severance Tax 800,000 800,000 257,191 (642,809) Bank Stock Tax 10,900 10,900 23,936 13,036 Grantee tax 94,000 94,000 89,785 4,215) ‘Motor Vehicle Licenses 00,000 900,000 518,092 (281,908), Taxes on Recordation and Will 30,000 30,000. 20,924 (9,076) Total other local taxes S_4343,000_$ 4,302,368 $3,524,734 $ (777,634) Permits, privilege fees, and regulatory licenses “Ania censes S 2,30 $ 2,300 $ 2,13 § (187) Building permits 45,000 45,000 24,393 (20,607) (Other permits and other licenses 1,300 1300 3,752 2,452 Total permits, privilege fees, and regulatory licenses S_8600_$48,600-§ 30,258 $118,342) Fines and foreltures: Court fines and forfeitures $27,000 $ 27,000 § 14.136 $112,864) Revenue from use of money and property: Revenue from use of money S 25,00 $ 25,00 $37,782 § 12,782 Revenue from use of property 315,000. 315,000. 763913, (138,087) Total revenue from use of money and property S_¥40,000_$340,000§ 714,695 (125,305) Charges for services Charges for sanitation and waste removal S 185,000 $ 185,000 $135,073 $149,927) Charges for courthouse security 51,000 51,000 48,557 (2483) Charges for cannery operations 30,000 30,000 27,467 2,533) Charges for commonwealth attorney 5,600, 5,600 56,488 50,888 Charges for courthouse maintenance 10,000 10,000 8,381 (1,619) Charges for jail and inmate fees 4,000, 4,000 5,030 1,030 Charges for district court : : 2784 2784 Charges for brary 2,200 2,200 sat 4621 Other charges for services 51500, 5500 4253, (1.247) Total charges for services S_793,300_$ 793,300 794,854 1.554 ‘Miscellaneous: Other miscellaneous revenue S 206,600 $ 206,600 $144,031 § (62,569) Sale of property/surplus 10,000 10,000 : (10,000) Valley Heights revenue : - 36,312 36,312 Total miscellaneous S_216,600 $216,600 $180,348 $36,257)

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Schedule 1 Page 2 of 5

Variance with Final Budget

Original Final Positive Budget Budget Actual (Negative)

County of Russell, Virginia Schedule of Revenues - Budget and Actual

Governmental Funds For the Year Ended June 30, 2016

Fund, Major and Minor Revenue Source

General Fund: (Continued) Revenue from local sources: (Continued)

Recovered costs: Social services 246,000$ 246,000$ 97,866$ (148,134)$
Health department 50,000 50,000 40,500 (9,500)
School resource officer 48,000 48,000 60,949 12,949
Insurance recoveries - - 34,308 34,308
Regional jail - - 702,537 702,537
Industrial development 20,000 20,000 11,858 (8,142)
Other Recovered Costs 34,500 34,500 128,486 93,986

Total recovered costs 398,500$ 398,500$ 1,076,504$ 678,004$

Total revenue from local sources 21,205,862$ 21,165,230$ 20,406,625$ (758,605)$

Intergovernmental: Revenue from the Commonwealth:

Noncategorical aid: Motor vehicles carriers’ tax 157,000$ 157,000$ 135,095$ (21,905)$
Mobile home titling tax 60,000 60,000 68,137 8,137
Motor vehicle rental tax 10,500 10,500 1,119 (9,381)
Communications tax 900,000 900,000 833,095 (66,905)
State recordation tax 25,000 25,000 27,178 2,178
Personal property tax relief act funds 1,437,003 1,437,003 1,437,003 -

Total noncategorical aid 2,589,503$ 2,589,503$ 2,501,627$ (87,876)$

Categorical aid: Shared expenses:

Commonwealth’s attorney 349,000$ 349,000$ 408,008$ 59,008$
Sheriff 1,376,000 1,376,000 1,397,127 21,127
Commissioner of revenue 179,650 179,650 167,322 (12,328)
Treasurer 111,000 111,000 110,112 (888)
Medical examiner 400 400 - (400)
Registrar/electoral board 43,000 43,000 40,996 (2,004)
Clerk of the Circuit Court 265,300 265,300 289,008 23,708
Total Shared Expenses 2,324,350$ 2,324,350$ 2,412,573$ 88,223$

Other categorical aid: Victim witness grant 35,000$ 35,000$ 7,494$ (27,506)$

E911 Grant - - 29,344 29,344
GIS - - 3,500 3,500
E911 state funds 45,000 45,000 43,617 (1,383)
Law enforcement grants - - 11,431 11,431
Asset forfeiture funds - - 51,642 51,642
EMS grants - - 29,984 29,984
Fire Program Funds 71,000 71,000 75,201 4,201
Library grants 98,000 98,000 93,017 (4,983)
Litter control grants 30,000 30,000 14,264 (15,736)
Public assistance 1,903,480 1,903,480 1,936,914 33,434
Comprehensive services act 1,088,731 1,088,731 1,083,766 (4,965)
School resource officer grants - - 109,565 109,565

Election administration services - - 11,035 11,035

Electoral board - - 3,500 3,500

Health department - - 28,742 28,742
Total other categorical aid 3,271,211$ 3,271,211$ 3,533,016$ 261,805$

Total categorical aid 5,595,561$ 5,595,561$ 5,945,589$ 350,028$

Total revenue from the Commonwealth 8,185,064$ 8,185,064$ 8,447,216$ 262,152$

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County of Russell, Virginia Schedule 1 Schedule of Revenues - Budget and Actual Page 2 of 5 Governmental Funds For the Year Ended June 30, 2016

Variance with Final Budget Original Final Positive Fund, Major and Minor Revenue Source Budget Budget tual (Negative) General Fund: (Continued) Revenue from local sources: (Continued) Recovered costs: Social services S 246,000 $ 246,000 $97,866 $ (148,134) Health department 50,000 50,000 40,500 (9,500) School resource officer 8,000 48,000 60,949 12,949 Insurance recoveries : : 34,308 34,308, Regional jit : : 702537 702,537 Industrial development 20,000 20,000 11,858 (8,142) Other Recovered Costs 34,500 34,500 128,486 93,986 Total recovered costs $398,500 398, 500_$ —7,076,508_S 678,004 Total revenue from local sources $21,205,862 $21,165,230 $ 20,406,625$ (758,605) Intergovernmental: Revenue from the Commonwealth: Noncategorical ai: ‘Motor vehicles carriers tax S 157,000 $ 157,000 $ 135,095 $21,905) ‘Mobile home titling tax 60,000 60,000 68,137 8137 ‘Motor vehicle rental tax 10,500 10,500 1119 (9.381) Communications tax 900000 900,000, 833,095 (66,905) State recordation tax 25,000 25,000 27,178 2,178 Personal property tax relief act funds 41,437,003 1,437,003 1,437,003, : Total noncategorical aid S_Z:569,503_S 7,589,503 $7,501,627 $ (67,876) Categorical até: Shared expenses: Commonwealths attorney S 249,000 $ 349,000 $ 408,008 $59,008, Sheriff 1,376,000 1,376,000 1,397,127 21,127 Commissioner of revenue 179,650 179,650 167,322 (12,328) Treasurer 111,000 111,000 110,112 (88) ‘Medical examiner 400 "400 : (400) Registrar/etectoral board 23,000 43,000 40,996 (2,008) Clerk of the Circuit Court 265/300 265,300 289,008 23,708 Total Shared Expenses 3 Z304,350_$ 7,324,350 7412573 S88 Other categorical aid: Victim witness grant S 35,000 $ 35,00 $7,494 $27,506) E911 Grant : 29,348 29,344 ais : : 3,500 3,500 E911 state funds 45,000 45,000 43.617 (1,383) Law enforcement grants : : 11431 1133 ‘Asset forfeiture funds : : 51642 51,682 EMS grants : : 29,984 29,984 Fire Program Funds 71,000 71,000 75,201 4201 Library grants 98,000 98,000 93,017 (4/983) Litter contrat grants 30,000 30,000 14.264 (15,736) Public assistance 1,903,480 1,903,480 1,936,914 Bad Comprehensive services act 1,088,731 1,088,731 1,083,766 (4:965) School resource officer grants : : 109,565 109,565 Election administration services . : 11,035 11,035 Electoral board : : 3,500 3,500 Health department : : 26,742 28,742 Total other categorical aid SSI a SSID 3533016 261,805 Total categorical ald S 5,595,561 $5,595,561 $5,945,589 $350,028 Total revenue from the Commonwealth S 8,185,064 $ 8,185,064 $ 8,447,216 $262,152

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Schedule 1 Page 3 of 5

Variance with Final Budget

Original Final Positive Budget Budget Actual (Negative)

County of Russell, Virginia Schedule of Revenues - Budget and Actual

Governmental Funds For the Year Ended June 30, 2016

Fund, Major and Minor Revenue Source

General Fund: (Continued) Intergovernmental: (continued) Revenue from the federal government:

Categorical aid: Emergency management grants 114,000$ 114,000$ 79,151$ (34,849)$
Violence against women - - 22,810 22,810
DMV ground transportation safety grant - - 12,633 12,633
Public assistance 2,422,612 2,422,612 2,515,006 92,394

Total categorical aid 2,536,612$ 2,536,612$ 2,629,600$ 92,988$

Total revenue from the federal government 2,536,612$ 2,536,612$ 2,629,600$ 92,988$

Total General Fund 31,927,538$ 31,886,906$ 31,483,441$ (403,465)$

Special Revenue Funds: Coal Road Fund: Revenue from local sources:

Other local taxes: Coal road taxes 900,000$ 900,000$ 257,191$ (642,809)$

Revenue from use of money and property: Revenue from the use of money -$ -$ 1,047$ 1,047$

Total revenue from local sources 900,000$ 900,000$ 258,238$ (641,762)$

Total Coal Road Fund 900,000$ 900,000$ 258,238$ (641,762)$

Workforce Investment Board Fund:

Revenue from local sources:

Recovered costs:

Other recovered costs -$ -$ 6,101$ 6,101$

Total recovered costs -$ -$ 6,101$ 6,101$

Intergovernmental: Revenue from the federal government:

Categorical aid: Workforce Investment 2,746,846$ 2,746,846$ 2,103,000$ (643,846)$

Total revenue from the federal government 2,746,846$ 2,746,846$ 2,103,000$ (643,846)$

Total Workforce Investment Board Fund 2,746,846$ 2,746,846$ 2,109,101$ (637,745)$

Total Primary Government 35,574,384$ 35,533,752$ 33,850,780$ (1,682,972)$

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 property 1,500$ 1,500$ 8,030$ 6,530$

Total revenue from use of money and property 1,500$ 1,500$ 8,030$ 6,530$

Charges for services: Cafeteria sales 400,000$ 400,000$ 318,177$ (81,823)$
Tuition payments 5,000 5,000 - (5,000)
Drivers Ed fees 14,000 14,000 14,700 700
Other charges for services - - 75 75
Regional Adult Education 138,554 138,554 48,364 (90,190)
GED Testing fees 2,000 2,000 474 (1,526)

Total charges for services 559,554$ 559,554$ 381,790$ (177,764)$

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County of Russell, Virginia Schedule 1 Schedule of Revenues » Budget and Actual Page 3 of 5 Governmental Funds For the Year Ended June 30, 2016

Variance with Final Budget Original Final Positive Fund, Major and Minor Revenue Source Budget Budget tual (Negative) General Fund: (Continued) Intergovernmental: (continued) Revenue from the federal government: Categorical aid: Emergency management grants S 114,000 $ 114,000 $ 79,151 $34,849) Violence against women 22,810 22,810 DY ground transportation safety grant 12,633, 12,633, Public assistance 2,422,612 __2,422,612__2,515,006 92,394 “Total categorical aid 3 2,536,612_S 2,536,612 $2,629,600 92.98 ‘Total revenue from the federal government $2,536,612 $2,536,612 _$ 2,629,600 $ 92,988, ‘Total General Fund $31,927,538 $31,886,906 _$ 31,483,441 _$ (403.465) Special Revenue Funds: Coal Road Fund: Revenue from local sources: Other local taxes: Coal road taxes $900,000 _$ 900,000 _$ 257.191$ (642,809) Revenue from use of money and property: Revenue from the use of money 8 8 S107 $1,087 “otal revenue from local sources $900,000 _$ 900,000 $ 258,238 $ (641,762) ‘Total Coal Road Fund $900,000 _$ 900,000 $258,238 $ (641,762) Workforce Investment Board Fund: Revenue from local sources: Recovered costs: Other recovered costs 8 s S611 s 6,101 Total recovered costs s s S611 $6,101 Intergovernmental Revenue from the federal government: Categorical aié: “Workforce Investment $2,746,846 $2,746,846 $ 2,103,000 $ (643,846) ‘Total revenue from the federal government $2,746,846 $2,746,846 $ 2,103,000 $ (643,846) ‘Total Workforce Investment Board Fund $2,746,846 $2,746,846 $ 2,109,101$ (637.745) ‘Total Primary Government $35,574,384 _$35,533,752$ 33,850,780$ (1,682,972) 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 property S150 $1,500 $ 8,030 $6,530 “Total revenue from use of money and property S500 $5007 8,030 6.530 Charges for services: Cafeteria sales S 400,000 $ 400,000 $318,177 $ (81,823) “Tuition payments 5,000, 5,000, (6,000) Drives Ed fees 14,000 14,000 14,700 "700 Other charges for services % % Regional Adult Education 138,554 138,554 48,364 (90,190) GED Testing fees 2,000, 2,000, ‘74 1,526) “Total charges for services 3 559,554 5 559.554 387,790 17,764)

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Schedule 1 Page 4 of 5

Variance with Final Budget

Original Final Positive Budget Budget Actual (Negative)

County of Russell, Virginia Schedule of Revenues - Budget and Actual

Governmental Funds For the Year Ended June 30, 2016

Fund, Major and Minor Revenue Source

Discretely Presented Component Unit - School Board: (Continued) School Operating Fund: (Continued)

Miscellaneous: Other miscellaneous 165,000$ 165,000$ 246,281$ 81,281$

Recovered costs: Insurance recoveries -$ -$ 13,325$ 13,325$
Extra duties revenue 23,000 23,000 31,700 8,700
Dual Enrollment 300,000 300,000 359,661 59,661
Sale of Equipment and Supplies 10,000 10,000 6,654 (3,346)
Reimburse Health Services 187,414 187,414 84,922 (102,492)
Other recovered costs 51,500 51,500 28,454 (23,046)

Total recovered costs 571,914$ 571,914$ 524,716$ (47,198)$

Total revenue from local sources 1,297,968$ 1,297,968$ 1,160,817$ (137,151)$

Intergovernmental: Revenues from local governments:

Contribution from County of Russell, Virginia 7,439,178$ 7,439,178$ 6,632,200$ (806,978)$
Total revenues from local governments 7,439,178$ 7,439,178$ 6,632,200$ (806,978)$

Revenue from the Commonwealth: Categorical aid:

Share of state sales tax 4,105,826$ Basic Aid 13,226,782 Remedial summer education 87,828 Gifted and talented 137,345 Remedial education 526,002 Special education 2,016,340 Textbook payment 281,177 Career and Technical Education 89,373 Alternative education 844,492 Algebra readiness 65,883 Mentor teacher program 1,581 Social security fringe Group life 52,600 Retirement fringe benefits 1,694,895 Supplemental support 233,723 Early reading intervention 88,151 Adult Education 31,563 Homebound education 26,650 Vocation education 365,132 At risk payments 580,694 Primary class size 639,738 Technology 466,800 Jobs for Virginia Graduates 25,000 Industry Certification Costs 3,344 At risk four-year olds 495,924 School Food 31,437 English as a second language 3,265 Project graduation - GED prep programs 15,717 Tobacco Commission 56,550 Adult literacy 99,595 Special education-foster care - Other state funds 775 4,105,826$ 4,116,907$ 11,081$
13,226,782 13,075,105 (151,677)
87,828 144,808 56,980
137,345 135,965 (1,380)
526,002 520,717 (5,285)
2,016,340 1,996,084 (20,256)
281,177 278,352 (2,825)
89,373 35,573 (53,800)
844,492 844,492 -
65,883 70,887 5,004
1,581 4,202 2,621
benefits 856,214 856,214 847,612 (8,602)
52,600 52,072 (528)
1,694,895 1,677,867 (17,028)
233,723 231,419 (2,304)
88,151 88,151 -
31,563 31,563 -
26,650 25,614 (1,036)
365,132 415,642 50,510
580,694 574,894 (5,800)
639,738 631,003 (8,735)
466,800 411,770 (55,030)
25,000 25,000 -
3,344 4,629 1,285
495,924 495,924 -
31,437 25,166 (6,271)
3,265 7,725 4,460
- 15,751 15,751
15,717 78,096 62,379
56,550 24,550 (32,000)
99,595 99,595 -
- 9,338 9,338
775 1,073 298

Total categorical aid 27,157,733$ 27,157,733$ 27,002,101$ (155,632)$

Total revenue from the Commonwealth 27,157,733$ 27,157,733$ 27,002,101$ (155,632)$

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County of Russell, Virginia Schedule 1 Schedule of Revenues - Budget and Actual Page 4 of 5 Governmental Funds For the Year Ended June 30, 2016

Variance with Final Budget Original Final Positive Fund, Major and Minor Revenue Source Budget Budget tual (Negative) Discretely Presented Component Unit - School Board: (Continued) School Operating Fund: (Continued) ‘Miscellaneous Other miscellaneous S 165,000 $165,000 $ 246,281 $81,281 Recovered costs: Insurance recoveries s -$ + S$ 13,25 $13,325 Extra duties revenue 23,000 23,000 31,700 8,700, Dual Enroliment 300,000 300,000 359,661 59,661 Sale of Equipment and Supplies 10,000 10,000 6,654 8,346) Relmburse Health Services, 187,414 187,414 84.922 (102,492) Other recovered costs 51,500 51,500 28,454 (23,046) Total recovered costs Sosa S571, 914 SF 524716 S47, 198) Total revenue from local sources $1,297,968 $1,297,968 $1,160,817 $137,151) Intergovernmentat: Revenues from local governments: Contribution from County of Russell, Virginia $7,439,178 $7,439,178 $ 6,632,200 $ (806,978) Total revenues from local governments S7,439,178$ —7,439,178_§ 6,632,200_§ (806,978) Revenue from the Commonwealth: Categorical aid: Share of state sales tax S 4,105,826 $4,105,826 $ 4,116,907 $11,081 Basic Aid 13,226,782 "13,226,782 13,075,105 (151,677) Remedial summer education 87,828, 87,828 14,808 56,980 Gifted and talented 137.345, 137,345, 135,965 (1,380) Remedial education 526,002 526,002 520,717 (6,285) Special education 2,016,340 2,016,340 1,996,084 (20,256) Textbook payment 281,177 281,177 278,352 (2,825) Career and Technical Education 89,373, 89,373, 35,573 (63,800) Alternative education 844,492 844,492 844,492 : ‘Algebra readiness 65,883 65,883, 70,887 5,004 ‘Mentor teacher program 1,581 1/581 4202 221 Social security fringe benefits 856,214 856,214 847,612 (6,602) Group ite 52,600 52,600 52,072 (528) Retirement fringe benefits 1,694,895 1,694,895. 1,677,867 (17,028) Supplemental support 233,723 233,723, 231,419 2,304) Early reading intervention 88,151 88,151 3851 : ‘Adult Education 31,563, 31,563, 31,563, : Homebound education 26,650 26,650 25,614 (1,036) Vocation education 365,132 365,132 15,682 50,510 At risk payments 580,694 580,694 574,894 (6,800) Primary class size 639,738 9.738 631,003, 6.735) Technology 466,200 466,800 an1,770 (65,030) Jobs for Virginia Graduates, 25,000 25,000 25/000 - industry Certification Costs 3344 3,344 4629 1,285 ‘Av risk four-year olds 495,924 495,924 495,924 : School Food 31497 31,837 25,166 (6.271) English asa second language 3,265 3,265 7,725 4,460 Project graduation : : 15,751 15,751 GED prep programs 15,717 18.717 78,096 62,379 Tobacco Commission 56,550 56,550 24,550 (22,000) ‘Adult Ueracy 99,595, 99,595, 99,595 - Special education-foster care : : 91338 9,338 Other state funds m5 ms 1073 298 Total categorical ald SPAT TSS PAST TS $77,002,101 $155,632) Total revenue from the Commonwealth S_27,187,733_$ 27,157,733 $ 27,002,101_$ (195,632)

Schedule 1 Page 5 of 5

Variance with Final Budget

Original Final Positive Budget Budget Actual (Negative)

County of Russell, Virginia Schedule of Revenues - Budget and Actual

Governmental Funds For the Year Ended June 30, 2016

Fund, Major and Minor Revenue Source

Discretely Presented Component Unit - School Board: (Continued) School Operating Fund: (Continued) Intergovernmental: (Continued) Revenue from the federal government:

Categorical aid: Basic Adult Education 325,848$ 325,848$ 243,994$ (81,854)$
Title I 1,041,043 1,041,043 987,175 (53,868)
Special Education 1,178,218 1,178,218 1,064,936 (113,282)
Title VI-B, preschool 34,335 34,335 - (34,335)
Vocational education 76,191 76,191 60,115 (16,076)
School Food Program 1,195,000 1,195,000 1,294,255 99,255
Improving teacher quality 275,276 275,276 203,278 (71,998)
21st century grant 902,678 902,678 791,911 (110,767)
Rural and low income schools 85,378 85,378 149,880 64,502
Other federal funds 156,150 156,150 - (156,150)

Total categorical aid 5,270,117$ 5,270,117$ 4,795,544$ (474,573)$

Total revenue from the federal government 5,270,117$ 5,270,117$ 4,795,544$ (474,573)$

Total Discretely Presented Component Unit - School Board 41,164,996$ 41,164,996$ 39,590,662$ (1,574,334)$

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County of Russell, Virginia Schedule 1 Schedule of Revenues - Budget and Actual Page 5 of 5 Governmental Funds For the Year Ended June 30, 2016 Variance with Final Budget Original Final Positive Fund, Major and Minor Revenue Source Budget Budget tual (Negative) Discretely Presented Component Unit - School Board: (Continued) School Operating Fund: (Continued) Intergovernmental: (Continued) Revenue from the federal government: Categorical aid: Basic Adult Education 325,848 $325,848 $243,994 § (81,854) Title | 1,041,048 1,041,043 987,175 (63,868) Special Education 1178218 1.178218 1,064,936 (183,282) Title VIB, preschool 34335, 34.335, : (34;335) Vocational education 76,191 76,191 60,115 (16,076) School Food Program 1,195,000 1,195,000 1,294,255 99,255 Improving teacher quality 275,276 275,276 203,278 (71,998) 2st century grant 902,678 902,678 7191 (10,767) Rural and tow income schools 85,378, 85,378 149,880 64,502 Other federal funds 156,150 156,150 . (156,159) Total categorical ald S207 $5,270,117 $475,544 $474,573) Total revenue from the federal government 5270117 $5,270,117 $4,795,544 $ (474,573) “Tota Discretely Presented Component Unit - School Boare 41,164,996_S_41,164,996_$39,590,662$ _ (1,574,334)

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Schedule 2 Page 1 of 3

Variance with Final Budget

Original Final Positive Budget Budget Actual (Negative)

General Fund: General government administration:

Legislative: Board of supervisors 195,652$ 209,152$ 208,876$ 276$

General and financial administration: County administrator 330,436$ 301,536$ 304,239$ (2,703)$
Independent auditor 65,000 67,500 71,270 (3,770)
Commissioner of the revenue 303,958 307,758 309,585 (1,827)
Real estate assessor 141,507 135,607 139,023 (3,416)
Treasurer 392,488 415,588 434,405 (18,817)
Data processing - 4,800 4,735 65

Procurement 123,831 129,131 130,540 (1,409) Total general and financial administration 1,357,220$ 1,361,920$ 1,393,797$ (31,877)$

Board of elections: Electoral Board 77,383$ 78,583$ 75,547$ 3,036$
General Registrar 113,564 112,364 109,372 2,992

Total board of elections 190,947$ 190,947$ 184,919$ 6,028$

Total general government administration 1,743,819$ 1,762,019$ 1,787,592$ (25,573)$

Judicial administration: Courts:

Circuit Court 123,580$ 128,980$ 131,442$ (2,462)$
General District Court 9,800 11,700 11,654 46
Special Magistrates 9,400 9,800 9,739 61
Clerk’s Office 406,311 392,111 406,032 (13,921)
Sheriff Courts 922,670 929,570 939,635 (10,065)
Victim and Witness Assistance 34,703 60,080 39,905 20,175
Law Library - - 728 (728)

Total courts 1,506,464$ 1,532,241$ 1,539,135$ (6,894)$

Commonwealth’s attorney: Commonwealth’s Attorney 528,228$ 650,228$ 654,687$ (4,459)$

Total judicial administration 2,034,692$ 2,182,469$ 2,193,822$ (11,353)$

Public safety: Law enforcement and traffic control:

Sheriff 1,928,474$ 2,153,165$ 2,192,255$ (39,090)$
Dare program 3,000 3,300 3,216 84

Total law enforcement and traffic control 1,931,474$ 2,156,465$ 2,195,471$ (39,006)$

Fire and rescue services: Volunteer Fire Departments 274,200$ 209,200$ 285,832$ (76,632)$
Ambulance Rescue Squad 186,875 156,875 156,870 5

Total fire and rescue services 461,075$ 366,075$ 442,702$ (76,627)$

Correction and detention: Operation of Jail 2,964,954$ 2,964,954$ 2,964,953$ 1$
Probation Office 300,949 307,949 307,919 30

Total correction and detention 3,265,903$ 3,272,903$ 3,272,872$ 31$

Inspections: Building inspector 105,299$ 107,999$ 108,842$ (843)$

Other protection: Forestry Service 11,804$ 4$ -$ 4$
Enhanced 911 574,250 583,950 614,941 (30,991)
Medical Examiner - 500 460 40

County of Russell, Virginia Schedule of Expenditures - Budget and Actual

Governmental Funds For the Year Ended June 30, 2016

Fund, Function, Activity and Element

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County of Russell, Virginia Schedule 2 Schedule of Expenditures - Budget and Actual Page 1 of 3 Governmental Funds For the Year Ended June 30, 2016 Varance with Final Budget Original Final Positive Fund, Function, Activity and Elemé Budget ‘Actual (Negative) General Fund: General government administration: Legisative: Board of supervisors 195,652_$ 209,152 208,876 $ 276 General and financial administration County administrator 330,46 $301,536 304239 § (2,703) Independent auditor 65,000 67,500 71,270 3,770) Commissioner of the revenue 303,958 307,758, 309,585 (1827) Real estate assessor 141,507 435,607 139,003, 3.416) Treasurer 392488 415,588 434,405 13.817) Data processing 4,800 4735 6 Procurement 123,831 129,131 130,540 (1,408) Total general and financal administration 7,357,220 $1,361,920 S 1,393,797 S177) Board of elections: Electoral Board 7383 $78,583 75547 $3,036 General Registrar 113,564 112,364 109,372, 2,992 Total board of elections 190,947 $190,947 184.919 56.008 Total general government administration 1,743,819 $1,762,019 § 1,787,592 $25,573) Judicial administration: Courts: Circuit Court 123,580 $128,980 131,42 $ (2.462) General District Court 9,800 41,70 i658 6 Special Magistrates 9,400 9,800 91739 6 Clerks ortice 406,311 sein 406032 (13,921) Sheriff Courts 922,670 929/570 939,635 (10,065) Victim and Witness Assistance 34,703, 60,080 39,905 20,175, Law Library - 78 (728) Total courts 7506464$ 1 SIL74 5,539,135 516,894) Commonweatths attorney: ‘Commonwealth Attorney 528,228 § 650,228 654,687 S (4.459) Total judicial administration 2,034,692 $2,162,469 $2,193,822 $§ (11,353) Public safety: Law enforcement and traffic control: Sheriff 1,928,474 $2,153,165 $2,192,255 $ (39,080) Dare program 3,000 31300 3216 84 Total law enforcement and traffic control TRIAS 7156,465 5 ,195,471 5 (09,006) Fire and rescue services: Volunteer Fire Departments 274,200 $ 208,200 285,832 $ (76,632) Ambulance Rescue Squad 186,875 156,875, 456,870 5 Total fire and rescue services 61,0758 366,075 42,7023 (TOT, Correction and detention: Operation of Jail. 2,964,954 $2,964,954 $2,964,953 S 1 Probation fice 300,949 307,949, 307,919 30 Total correction and detention 3,265,903 $3,272,903 § —3.272,872_S 31 Inspections: Building inspector 105,299 $107,999 103,882 _$ (243) Other protection: Forestry Service 11,804 $ 4 a 4 Enhanced 911 574,250 583,950 614.941 (20,991) Medical Examiner 500 460 0

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Schedule 2 Page 2 of 3

Variance with Final Budget

Original Final Positive Budget Budget Actual (Negative)

County of Russell, Virginia Schedule of Expenditures - Budget and Actual

Governmental Funds For the Year Ended June 30, 2016

Fund, Function, Activity and Element

General Fund: (Continued) Public safety: (Continued)

Other protection: (Continued) Emergency Services 113,325$ 186,675$ 131,519$ 55,156$
Animal Control 186,802 172,848 147,620 25,228

Total other protection 886,181$ 943,977$ 894,540$ 49,437$

Total public safety 6,649,932$ 6,847,419$ 6,914,427$ (67,008)$

Public works: Sanitation and waste removal:

Landfill 2,121,970$ 1,932,670$ 1,864,802$ 67,868$
Refuse collection 254,113 92,081 25,956 66,125
Litter Coordinator - - 72,248 (72,248)

Total sanitation and waste removal 2,376,083$ 2,024,751$ 1,963,006$ 61,745$

Maintenance of general buildings and grounds: General properties 1,002,476$ 1,002,476$ 936,059$ 66,417$

Total public works 3,378,559$ 3,027,227$ 2,899,065$ 128,162$

Health and welfare: Health:

Health Department 340,000$ 340,000$ 340,000$ -$

Mental health and mental retardation: Cumberland Mountain Community Services Board 42,000$ 42,000$ 39,996$ 2,004$

Welfare: Social services 4,851,092$ 4,851,092$ 4,877,552$ (26,460)$
Comprehensive Services Act 1,382,449 1,481,789 1,726,637 (244,848)
Appalachian Agency for Senior Citizens 85,025 87,325 87,168 157

Total welfare 6,318,566$ 6,420,206$ 6,691,357$ (271,151)$

Total health and welfare 6,700,566$ 6,802,206$ 7,071,353$ (269,147)$

Education: Contributions to County School Board 7,439,178$ 7,439,178$ 6,632,200$ 806,978$
SVCC Contribution 89,253 97,253 97,163 90

Total education 7,528,431$ 7,536,431$ 6,729,363$ 807,068$

Parks, recreation, and cultural: Parks and recreation:

Recreation Park 157,966$ 159,266$ 142,816$ 16,450$
TV Translator - - 990 (990)

Total parks and recreation 157,966$ 159,266$ 143,806$ 15,460$

Library: Public Library 313,309$ 317,109$ 324,864$ (7,755)$

Total parks, recreation, and cultural 471,275$ 476,375$ 468,670$ 7,705$

Community development: Planning and community development:

Planning Commission 18,250$ 14,450$ 12,550$ 1,900$
Community Development 22,250 13,950 12,500 1,450
Industrial Development 504,930 504,930 545,123 (40,193)
PSA Contributions 264,519 261,169 281,516 (20,347)
Cumberland Plateau 30,000 33,800 33,750 50
Highway Safety Commission 2,000 2,650 2,650 -
Canneries 30,000 30,000 58,322 (28,322)
Tourism 6,000 6,000 686 5,314

Total planning and community development 877,949$ 866,949$ 947,097$ (80,148)$

-94-

County of Russell, Virginia Schedule 2 Schedule of Expenditures - Budget and Actual Page 2 of 3 Governmental Funds For the Year Ended June 30, 2016 Varance with Final Budget Original Final Positive Fund, Function, Activity and Elemé Budget Actual (Negative) General Fund: (Continued) Public safety: (Continued) (Other protection: (Continued) Emergency Services S 113,325 § 186,675 $131,519 $55,156 Animal Control 186,802 172,848 147,620 25.208 Total other protection S_—a66, 18S 988,977 _S884540_S 48.437 Total public safety $6,649,932 § 6847419 $6,914,427 $ (67,008) Public works: Sanitation and waste removal Landfill $2,121,970 $1,932,670 $1,864,802 $67,868 Refuse collection 254,113 92,081 25,956 66,125, Litter Coordinator : 72.248, (72.248) Total sanitation and waste removal SEW 03S TWAS $7,963,006 $61,745 Naintenance of general buildings and grounds: General properties $1,002,476 $1,002,476 $936,059 $66,417 Total public works $3,378,559 $3,027,207 $2,899,065 $128,162 Health and welfare: Health: Health Department $340,000 $ 340,000 $ 340,000 Mental health and mental retardation ‘Cumberland Mountain Community Services Board $42,000 § 42,000 § 39,996 $2,004 Weta Social services $4,851,092 $§ 4,851,092 $4,877,552 $ (26,460) Comprehensive Services Act 1,382,449 1,481,789 1,726,637 244,848) Appalachian Agency for Senior Citizens 85,005 87,325, 87,168, 197 Total welfare $0318, 566 5 6,420,206 $6,691,357 S__O7H,TSI) Total health and welfare $6,700,566 $ 6,802,206 $ 7,071,353 $ (269,147) Education: Contributions to County School Board $7,439,178 $7,438,178 $6,632,200 $806,978 ‘VCC Contribution 89,253 97,253 97,163 90 Total education 5 7508.431_S 7536431 S —6799,363_S 607,068 Parks, recreation, and cultural Parks and recreation: Recreation Park S 197,966 $159,266 $142,816 $16,450 TV Translator : 90 (930) Total parks and recreation $157,365 T5R, TGS 148,806 S15. 460 brary Public Library $313,309 § 317,109 $324,864 $17,755) Total parks, recreation, ané cultural $_471275 $476,375 $468,670 $7,705 Community development: Planning and community development: Planning Commission S 18250 $ 14450 $12,550 $1,900 Community Development 22,250 13,950, 12,500 1,450 Industrial Development 504,930 504,930 545,123, (40,193), SA Contributions 264,519 261,169 281/516 (20,347) ‘Cumberland Plateau 30,000, 33,800, 33,750 50 Highway Safety Commission 27,000 2,650 21650 : Canneries 30,000, 30,000 58,322 (28,322) Tourism 6,000 6,000 686 5314 Total planning and community development 877,949 806,549 $947,097 S180, 148)

-94-

Schedule 2 Page 3 of 3

Variance with Final Budget

Original Final Positive Budget Budget Actual (Negative)

County of Russell, Virginia Schedule of Expenditures - Budget and Actual

Governmental Funds For the Year Ended June 30, 2016

Fund, Function, Activity and Element

General Fund: (Continued) Environmental management:

Soil and Water Conservation 35,236$ 35,236$ 33,236$ 2,000$

Cooperative extension program: VPI Extension 78,498$ 55,398$ 68,221$ (12,823)$

Total community development 991,683$ 957,583$ 1,048,554$ (90,971)$

Nondepartmental: Nondepartmental 481,098$ 929,375$ 515,527$ 413,848$

Debt service: Principal payments 1,369,256$ 1,369,256$ 1,369,256$ -$
Interest Expense 378,227 378,227 378,465 (238)

Total debt service 1,747,483$ 1,747,483$ 1,747,721$ (238)$

Total General Fund 31,727,538$ 32,268,587$ 31,376,094$ 892,493$

Special Revenue Funds: Coal Road Fund: Public Works:

Maintenance of highways, streets, bridges and sidewalks: Maintenance of highways, streets, bridges and sidewalks 750,000$ 750,000$ 500,000$ 250,000$
Virginia coalfield 150,000 150,000 130,555 19,445

Total Public Works 900,000$ 900,000$ 630,555$ 269,445$

Total Coal Road Fund 900,000$ 900,000$ 630,555$ 269,445$

Workforce Investment Board Fund: Health and Welfare:

Welfare: Workforce Investment 2,746,846$ 2,746,846$ 2,137,788$ 609,058$

Total Primary Government 35,374,384$ 35,915,433$ 34,144,437$ 1,770,996$

Discretely Presented Component Unit - School Board: School Operating Fund: Education:

Administration of schools: Administration and health services 1,811,395$ 1,811,395$ 1,760,298$ 51,097$

Instruction costs: Instructional costs 29,225,186$ 29,225,186$ 28,313,520$ 911,666$
Technology 806,620 806,620 847,027 (40,407)

Total instruction costs 30,031,806$ 30,031,806$ 29,160,547$ 871,259$

Operating costs: Pupil transportation 2,980,867$ 2,980,867$ 2,791,446$ 189,421$
Operation and maintenance of school plant 4,515,280 4,515,280 4,305,938 209,342
Food service and non-instructional 1,825,648 1,825,648 1,758,723 66,925

Total operating costs 9,321,795$ 9,321,795$ 8,856,107$ 465,688$

Total education 41,164,996$ 41,164,996$ 39,776,952$ 1,388,044$

Total School Operating Fund 41,164,996$ 41,164,996$ 39,776,952$ 1,388,044$

Total Discretely Presented Component Unit - School Board 41,164,996$ 41,164,996$ 39,776,952$ 1,388,044$

-95-

County of Russell, Virginia Schedule 2 Schedule of Expenditures - Budget and Actual Page 3 of 3 Governmental Funds For the Year Ended June 30, 2016 Varance with Final Budget Original Final Positive Fund, Function, Activity and Elemé Budget Actual (Negative) General Fund: (Continued) Enviconmental management: Soll and Water Conservation S$ 35.2% $35,236 332% $2,000, Cooperative extension program: ‘VPI Extension S$ 73498 $95,398, ea201 $112,823) Total community development $991,683 $957,583 $1,048,554 $ (90,971) Nondepartmental: Nondepartmental $481,098 $929,375 515,507 $413,848 Debt servic: Principal payments $1,369,256 $1,369,256 $1,369,256 $ . Interest Expense 378,227 ya 378,465; 238) Total debt service 517474831 747,483 1 747,721_S (238) Total General Fund $31,727,538 $32,268,587 _$ 31,376,094 $892,493 Special Revenue Funds: Coal Road Funs Public Works: Naintenance of highways, streets, bridges and sidewalls: Naintenance of highways, streets, bridges and sidewalks $750,000 $§ 750,000 500,000 $ 250,000 Virginia coalfield 150,000, 150,000 130,555, 19.45 Total Public Works $900,000 900,000 30,5555 269,485 Total Coal Road Fund $900,000 _$ __ 900,000 630,555 5 269,445 Workforce Investment Board Fund: Health and Welfare: Weita Workforce Investment $2,746,846 _§ 2,746,846 _$ 2.137,788$ 609,058 Total Primary Government $35,374,384 _§ 35,915,433 $34,144,437 $ 1,770,996 Discretely Presented Component Unit - School Board: ‘School Operating Fund: Education: ‘Administration of schools: ‘Administration and health services $1,811,395 $1,811,395 $1,760,298 $51,097 Instruction costs: Instructional costs $29,225,186 $ 29,225,186 $ 28,313,520 $911,666 Technology 806,620 806,620 ‘847,027 (40,407) Total instruction costs $30,031,806 $30,031,806 $29,100,547 S&71,759. Operating costs: Pupil transportation $2,980,867 $ 2,980,867 $ 2,791,446 § 189,421 Operation and maintenance of school plant 41515,280 4,515,280 4,305,938, 209,342 Food service and non-instructional 1,825,648 1,895,648 1,758,723 66,925, Total operating costs 5 9.321,795 $9,321,795 _S 6,856,107 5 465,088 Total education $41,164,996 $41,164,996 $39,776,952 $1,388,044 Total Schoo! Operating Fund $41,164,996 _$ 41,164,996 $39,776,952$ 1,388,044 Total Discretely Presented Component Unit - School Board $41,164,996 $ 41,164,996 $39,776,952$ 1,388,044

-95-

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Table 4

County of Russell, Virginia General Governmental Revenues by Source (1) Last Ten Fiscal Years

Revenue from the

General Other Fines Use of Charges Fiscal Property Local ‘and Money and for Recovered Year Taxes Taxes (3) Licenses __Forfeitures___Property Services Miscellaneous ___ Costs.

Total

136 $ 223,772 $ 676,644 $426,624 $66,809,242

251.962 716,757 42339

352,852 307,398 352,993

394,657

2015-16 $ 3,781,925 $30,258 § 4,635,407 40,342 40,292, 34,152 28,272 22,834 45,87 39,662

69,220,895

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County of Russell, Virginia Property Tax Levies and Collections Last Ten Fiscal Years

Table 5

Fiscal Year

Total Tax Levy (1)

Current Tax

Collections (1)

Percent of Levy Collected

Delinquent

Tax

Collections (1)

Total Tax Collections

Percent of Total Tax Collections to Tax Levy

Outstanding Delinquent Taxes (1)

Percent of Delinquent Taxes to Tax Levy

2015-16 $ 2014-15 2013-14 2012-13 2011-12 2010-11 2009-10 2008-09 2007-08 2006-07

17,361,249 17,704,326 17,616,878 16,328,495, 14,681,089 14,682,949 14,169,807 14,091,178 13,784,900 12,104,262

14,744,908 15,716,165, 16,022,072 14,812,738 13,185,991 13,329,182 13,038,906 13,212,582 12,618,969

8,435,607

(1) Exclusive of penalties and interest.

84.93% $ 88.77% 90.95% 90.72% 89.82% 90.78% 92.02% 93.76% 91.54% 69.69%

1,312,236 994,555 895,532 953,671 723,190

1,330,697 886,480 496,787 411,887 863,735

16,057,144 16,710,720 16,917,604 15,766,409 13,909,181 14,659,879 13,925,386 13,709,369 13,030,856

9,299,342

92.49% $ 94.39% 96.03% 96.56% 94.74% 99.84% 98.28% 97.29% 94.53% 76.83%

4,096,565, 3,823,404 3,914,585 4,786,523 4,693,121 3,847,456 3,624,318 3,506,132 3,234,367 1,628,182

23.60% 21.60% 22.22% 29.31% 31.97% 26.20% 25.58% 24.88% 23.46% 13.45%

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County of Russell, Virginia

Assessed Value of Taxable Property Last Ten Fiscal Years

Table 6

Fiscal Year

Real Estate (1)

Personal Property

Machinery

and Merchant’s

Tools

Capital

Mobile Homes

Public. Service (2)

Total

2015-16 $ 2014-15 2013-14 2012-13 2011-12 2010-11 2009-10 2008-09 2007-08 2006-07

1,435,763,539 $ 1,426,948,990 1,420,301 ,334 1,323,141 ,655 1,214,673,535 1,197,720,260 1,181,352,276 1,153,488,246 1,130,643,127 931,095,586

298,654,470 300,976,802 297,609,286 292,809,049 251,383,699 235,114,151 224,871,200 239,254,757 243,837,948 152,418,744

$ 58,791,092 $ 71,451,300 92,212,643 86,317,454 60,747,073 82,948,411 96,552,183 93,960,621 107,205,468 99,124,678

(1) Real estate is assessed at 100% of fair market value.

(2) Assessed values are established by the State Corporation Commission-includes all property types.

5,876,008 $ 21,377,908 $ 243,897,231

6,084,205 6,061,014 5,631,601 5,340,902, 5,136,529 5,402,115 5,501,882 5,742,600 4,954,226

21,500,580 21,820,581 23,486,868 23,401,571 23,320,148 22,864,821 23,139,220 23,608,064 23,802,666

240,244,298 315,700,293 230,027,520 269,503,982 326,871,285 253,750,196 234,196,018 231,981,492 199,922,460

$ 2,064,360,248 2,067,206, 175 2,153,705, 151 1,961,414,147 1,825,050,762 1,871,110,784 1,784,792,791 1,749,540,744 1,743,018,699 1,411,318,360

Table 7

Fiscal Real Personal Machinery Merchant’s Mobile Year Estate (2) Property & Tools Capital Homes

2015-16 $ 0.63 $ 1.65 $ 1.65 $ 0.65 $ 0.63
2014-15 0.63 1.65 1.65 0.65 0.63
2013-14 0.56/0.63 1.65 2.00 0.65 0.56
2012-13 0.70/0.56 1.65 1.65 0.65 0.70
2011-12 0.61/0.70 1.65 1.65 0.65 0.61
2010-11 0.61 1.65 1.65 0.65 0.61
2009-10 0.61 1.65 1.65 0.65 0.61
2008-09 0.61 1.65 1.65 0.65 0.61
2007-08 0.56/0.61 1.65 1.65 0.65 0.56
2006-07 0.65/0.56 1.65 1.65 NA 0.64

(1) Per $100 of assessed value. (2) 2nd half due December/1st half due June of fiscal year.

County of Russell, Virginia Property Tax Rates (1) Last Ten Fiscal Years

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Table 7 County of Russell, Virginia Property Tax Rates (1) Last Ten Fiscal Years

Fiscal Real Personal Machinery Merchant’s Mobile Year Estate (2) Property & Tools Capital Homes

2015-16 $ 0.63 $ 1.65 $ 1.65 $ 0.65 $ 0.63 2014-15 0.63 1.65 1.65 0.65 0.63 2013-14 0.56/0.63 1.65 2.00 0.65 0.56 2012-13 0.70/0.56 1.65 1.65 0.65 0.70 2011-12 0.61/0.70 1.65 1.65 0.65 0.61 2010-11 0.61 1.65 1.65 0.65 0.61 2009-10 0.61 1.65 1.65 0.65 0.61 2008-09 0.61 1.65 1.65 0.65, 0.61 2007-08 0.56/0.61 1.65 1.65 0.65 0.56 2006-07 0.65/0.56 1.65 1.65 NA 0.64

(1) Per $100 of assessed value. (2) 2nd half due December/1st half due June of fiscal year.

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Table 8

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

2015-16 28,897 2,064,360$ 7,930,656$ 7,930,656$ 0.38% 274$
2014-15 28,897 2,067,206 8,951,609 8,951,609 0.43% 310
2013-14 28,897 2,153,705 9,955,282 9,955,282 0.46% 345
2012-13 28,897 1,961,414 10,865,788 10,865,788 0.55% 376
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

(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.

County of Russell, Virginia Ratio of Net General Bonded Debt to

Last Ten Fiscal Years Assessed Value and Net Bonded Debt Per Capita

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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 2015-16 28,897 § 2,064,360 $ 7,930,656 $ 7,930,656 0.38% $ 274 2014-15 28,897 2,067,206 8,951,609 8,951,609 0.43% 310 2013-14 28,897 2,153,705 9,955,282 9,955,282 0.46% 345 2012-13 28,897 1,961,414 10,865,788 10,865,788 0.55% 376 2011-12 28,897 1,825,051 12,666,629 12,666,629 0.69% 438 2010-11 28,897 4,871,111 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

(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 9

Ratio of Total Debt Service

Total General to General Fiscal Debt Governmental Governmental Year Service Expenditures Expenditures

2015-16 1,747,721$ 67,289,189$ 2.60% 2014-15 1,946,577 65,792,171 2.96% 2013-14 1,810,023 64,636,204 2.80% 2012-13 2,869,820 68,943,068 4.16% 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%

(1) Includes all governmental funds of the Primary Government and funds of the Discretely Presented Component Unit-School Board.

County of Russell, Virginia Ratio of Annual Debt Service Expenditures for General Bonded

Debt to Total General Governmental Expenditures (1) Last Ten Fiscal Years

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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 2015-16 = $ 1,747,721 $ 67,289,189 2.60% 2014-15 1,946,577 65,792,171 2.96% 2013-14 1,810,023 64,636,204 2.80% 2012-13 2,869,820 68,943,068 4.16% 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%

(1) Includes all governmental funds of the Primary Government and funds of the Discretely Presented Component Unit-School Board.

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COMPLIANCE SECTION

ROBINSON, FARMER, COX ASSOCIATES

A PROFESSIONAL LIMITED LIABILITY COMPANY CERTIFIED PUBLIC ACCOUNTANTS

Independent Auditors’ Report on Internal Control over Financial Reporting and on

Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards

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

We have audited, in accordance with the 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, the financial statements of the governmental activities, the business-type activities, the discretely presented component units, each major fund, and the aggregate remaining fund information of the County of Russell, Virginia as of and for the year ended June 30, 2016, and the related notes to the financial statements, which collectively comprise the County of Russell, Virginia’s basic financial statements and have issued our report thereon dated February 15, 2017, which was qualified due to the omission of The Industrial Development Authority of Russell County, Virgina’s financial data. Our report includes a reference to other auditors who audited the financial statements of Russell County Public Service Authority, as described in our report on the County of Russell, Virginia’s financial statements. This report does not include the results of the other auditors’ testing of internal control over financial reporting or compliance and other matters that are reported on separately by those auditors.

Internal Control over Financial Reporting

In planning and performing our audit of the financial statements, we considered the County of Russell, Virginia’s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the County of Russell, Virginia’s internal control. Accordingly, we do not express an opinion on the effectiveness of the County of Russell, Virginia’s internal control.

A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.

Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified. However, as described in the accompanying schedule of findings and questioned costs, we identified certain deficiencies in internal control that we consider to be material weaknesses [2016-001].

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ROBINSON, FARMER, COX ASSOCIATES

A PROFESSIONAL LIMITED LIABILITY COMPANY CERTIFIED PUBLIC ACCOUNTANTS

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

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

Internal Control over Financial Reporting

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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 from 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 [2016-002].

County of Russell, Virginia’s Response to Findings

County of Russell, Virginia’s response to the findings identified in our audit is described in the accompanying schedule of findings and questioned costs. County of Russell, Virginia’s response was not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on it.

Purpose of this Report

The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

Blacksburg, Virginia February 15, 2017

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Compliance and Other Matters

County of Russell, Virginia’s Response to Findings

Purpose of this Report

Hetsinen, Saumur, ly lucciats Blacksburg, Virginia February 15, 2017

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ROBINSON, FARMER, COX ASSOCIATES

A PROFESSIONAL LIMITED LIABILITY COMPANY CERTIFIED PUBLIC ACCOUNTANTS

Independent Auditors’ Report on Compliance For Each Major Program and on
Internal Control over Compliance Required by the Uniform Guidance

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

Report on Compliance for Each Major Federal Program

We have audited the County of Russell, Virginia’s compliance with the types of compliance requirements described in the OMB 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, 2016. County of Russell, Virginia’s major federal programs are identified in the summary of auditors’ results section of the accompanying schedule of findings and questioned costs.

Management’s Responsibility

Management is responsible for compliance with federal statutes, regulations, and the terms and conditions of its federal awards applicable to its federal programs.

Auditors’ Responsibility

Our responsibility is to express an opinion on compliance for each of the County of Russell, Virginia’s major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance 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 on compliance for each major federal program. However, our audit does not provide a legal determination of the County of Russell, Virginia’s compliance.

Opinion on Each Major Federal Program

In our opinion, the County of Russell, Virginia complied, in all material respects, with the types of 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, 2016.

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ROBINSON, FARMER, COX ASSOCIATES

A PROFESSIONAL LIMITED LIABILITY COMPANY CERTIFIED PUBLIC ACCOUNTANTS

Independent Auditors’ Report on Compliance For Each Major Program and on Internal Control over Compliance Required by the Uniform Guidance

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

Report on Compliance for Each Major Federal Program

Management’s Responsibility

Management is responsible for compliance with federal statutes, regulations, and the terms and conditions of its federal awards applicable to its federal programs.

Auditors’ Responsibility

Opinion on Each Major Federal Program

In our opinion, the County of Russell, Virginia complied, in all material respects, with the types of

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, 2016.

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Report on Internal Control over Compliance

Management of the County of Russell, Virginia is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the County of Russell, Virginia’s internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with the Uniform Guidance, 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.

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. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance.

Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.

The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose.

Blacksburg, Virginia February 15, 2017

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Report on Internal Control over Compliance

Management of the County of Russell, Virginia is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the County of Russell, Virginia’s internal control cover compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with the Uniform Guidance, 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.

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. significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance.

Hatemson, Srursr, ly, Lhscaicttes-

Blacksburg, Virginia February 15, 2017

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Page 1 of 2

Pass-through Federal Entity

Federal Grantor/State Pass - Through Grantor/ CFDA Identifying Federal Expenditures to Program Cluster or Title Number Number Expenditures Subrecipients

Department of Health and Human Services: Pass Through Payments: Department of Social Services: Promoting Safe and Stable Families 93.556 0950114, 0950115 27,919$ -$
Temporary Assistance for Needy Families 93.558 0400115, 0400116 354,247 -
Refugee and Entrant Assistance - State Administered Programs 93.566 0500115, 0500116 387 -
Low-Income Home Energy Assistance 93.568 0600415, 0600416 39,075 -
Child Care Mandatory and Matching Funds of the 93.596 0760115, 0760116 54,544 -
Child Care and Development Fund Stephanie Tubbs Jones Child Welfare Services Program 93.645 0900115, 0900116 1,588 -
Foster Care - Title IV-E 93.658 1100115, 1100116 455,239 -
Adoption Assistance 93.659 1120115, 1120116 453,786 -
Social Services Block Grant 93.667 1000115, 1000116 401,212 -
Chafee Foster Care Independence Program 93.674 9150115, 9150116 7,034 -
Children’s Health Insurance Program 93.767 0540115, 0540116 12,811 -
Medical Assistance Program 93.778 1200115, 1200116 392,955 -

Total Department of Health and Human Services 2,200,797$ -$

Department of Agriculture: Pass Through Payments: Child Nutrition Cluster: Department of Agriculture: Food Distribution-Schools (Note 3) 10.555 Not available 102,406$

    Department of Education:
      National School Lunch Program 10.555 40623, 40254 943,210     1,045,616$   

      School Breakfast Program 10.553 40591, 40253 248,639       1,294,255$         -$                      

Department of Social Services:
      State Administrative Matching Grants for the Supplemental 10.561 0010115, 0010116 314,209             -                        
          Nutrition Assistance Program 0040115, 0040116

Total Department of Agriculture 1,608,464$ -$

Department of Justice: Pass Through Payments: Department of Criminal Justice Services: Violence Against Women Formula Grants 16.588 46500 22,810$ -$

Department of Transportation: Pass Through Payments: Department of Motor Vehicles: Alcohol Open Container Requirements 20.607 154AL-15-55273 12,633$ -$

Department of Education: Pass Through Payments: Department of Education: Adult Education - Basic Grants to States 84.002 42801 243,994$ -$
Title I: Grants to Local Educational Agencies 84.010 42901 987,175 -
Special Education - Grants to States 84.027 43071, 61134 979,585 -
Career and Technical Education: Basic Grants to States 84.048 61095 60,115 -
Twenty-First Century Community Learning Centers 84.287 60565, 61111 877,262 -
Rural Education 84.358 43481 149,880 -
Supporting Effective Instruction State Grant (formerly Improving Teacher Quality State Grants) 84.367 61480 203,278 -

Total Department of Education 3,501,289$ -$

Department of Labor: Pass Through Payments: Virginia Community College System: Workforce Investment Act Cluster: WIA/WIOA Adult Program 17.258 LWA 1-14-02, 1-15-02 653,865$ 415,995$
WIA/WIOA Youth Activities 17.259 LWA 1-14-02, 1-15-02 752,394 550,925
WIA/WIOA Dislocated Worker Formula Grants 17.278 LWA 1-14-02, 1-15-02 687,998 552,976
Workforce Investment Act Cluster Total 2,094,257$ 1,519,896$

      WIOA National Dislocated Worker Grants/WIA National Emergency Grants 17.277 Not available 8,743                 -

Total Department of Labor 2,103,000$ 1,519,896$

Department of Homeland Security: Pass Through Payments: Department of Emergency Management: Emergency Management Performance Grants 97.042 62744, 52703 17,951$ -$
Homeland Security Grant Program 97.067 Not available 61,200 -

Total Department of Homeland Security 79,151$ -$

Total Expenditures of Federal Awards 9,528,144$         1,519,896$

County of Russell, Virginia Schedule of Expenditures of Federal Awards

For the Year Ended June 30, 2016

-109-

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-109-

Page 2 of 2

County of Russell, Virginia Schedule of Expenditures of Federal Awards

For the Year Ended June 30, 2016

Notes to Schedule of Expenditures of Fedaral Awards:

Note 1 – Basis of Presentation

Note 2 – Summary of Significant Accounting Policies

Note 3 – Food Distribution

Note 4 – Relationship to the Financial Statements 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 2,629,600$
Workforce Investment Board Fund 2,103,000

Total primary government: 4,732,600$         

Component Unit School Board:
  School Operating Fund 4,795,544$

Total expenditures of federal awards per the basic financial statements 9,528,144$

(1) Expenditures reported on the Schedule are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in Uniform Guidance , wherein certain types of expenditures are not allowable or are limited as to reimbursement.

Nonmonetary assistance is reported in the schedule at the fair market value of the commodities received and disbursed. At June 30, 2016, Russell County, Virginia had food commodities totaling $0 in inventory.

(2) Pass-through entity identifying numbers are presented where available.

The accompanying schedule of expenditures of federal awards (the Schedule) includes the federal grant activity of County of Russell, Virginia under programs of the federal government for the year ended June 30, 2016. The information in this Schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Because the Schedule presents only a selected portion of the operations of County of Russell, Virginia, it is not intended to and does not present the financial position, changes in net position, or cash flows of County of Russell, Virginia.

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creat oneciermen ara

Notes to Schl of pees of Fecal Amr:

‘The sccangayg sched of expndre ede wares he Schea) utes the er gansta Canty of ul, Vg under rogram fh eer aperant ot {esr oad une 3,206. The eformatnn thse rested in acorcnce wih the reqrens Tle Cade of Federal Regstos Part 20, UMarmhaminrste equrenenis, Cs Prices, Ast Reuter Fert ors (Oo Gea}. Reese thee eset ey selected orton a the epratins of Cauy Rs, ‘i,t no tend wo an oes rt presente rnc poston, hag net pos, fash laws Coy sel ahi

Not 2 Summary of Spear Account Paice

‘sy expenses eats on he sede are eee on te acu as of acing. Sch expences ae ecepnae elon the cst res eta n Uno Gee where rain yes of expends fe at allow ae inte so reteset. (2 Pon tha ety sere umber are rested where stl,

ermonetany stance repre nthe cea a the fe market value of he cameos rcehed ab bud AC Ane 30,206, sel Cut, Vga had fat credits ang

Feseral expen, eves ed cal conibtns re feprtd he Cay bas ancl sate ows:

"error er een eh i rc ate ‘Gort one 5 2409.00

Sot Operstog Fn. sass Tex expenres federal ava per he bas tract sates Same

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Section I - Summary of Auditors’ Results

Financial Statements

Type of auditors’ report issued: Modified

Internal control over financial reporting: Material weakness(es) identified? Yes

Significant deficiency(ies) identified? None reported

Noncompliance material to financial statements noted? Yes

Federal Awards

Internal control over financial reporting: Material weakness(es) identified? No

Significant deficiency(ies) identified? None reported

Type of auditors’ report issued on compliance for major programs: Unmodified

Any audit findings disclosed that are required to be reported in accordance with 2 CFR section 200.516(a)? No

Identification of major programs:

CFDA # Name of Federal Program or Cluster

10.553/10.555 Child Nutrition Cluster 93.659 Adoption Assistance

17.258/17.259/17.278 Workforce Investment Act Cluster

Dollar threshold used to distinguish between Type A and Type B programs: $750,000

Auditee qualified as low-risk auditee? No

County of Russell, Virginia

Schedule of Findings and Questioned Costs For The Year Ended June 30, 2016

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County of Russell, Virginia

Schedule of Findings and Questioned Costs For The Year Ended June 30, 2016

Section | - Summary of Auditors’ Results

Financial Statements

Type of auditors’ report issued: Modified Internal control over financial reporting: Material weakness(es) identified? Yes Significant deficiency(ies) identified? None reported Noncompliance material to financial statements noted? Yes Federal Awards Internal control over financial reporting: Material weakness(es) identified? No Significant deficiency(ies) identified? None reported Type of auditors’ report issued on compliance for major programs: Unmodified

‘Any audit findings disclosed that are required to be reported in accordance with 2 CFR section 200.516(a)? No

Identification of major programs:

CFDA # Name of Federal Program or Cluster 10.553/10.555 Child Nutrition Cluster 93.659 Adoption Assistance

17.258/17.259/17.278 Workforce Investment Act Cluster

Dollar threshold used to distinguish between Type A and Type B programs: $750,000

Auditee qualified as low-risk auditee? No

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Section II - Financial Statement Findings

2016-001

Criteria:

Condition:

Cause of Condition:

Effect of Condition:

Recommendation:

Management’s
Response:

2016-002

Criteria:

Condition:

Cause of Condition:

Effect of Condition:

Recommendation:

Management’s
Response:

The County does not consistently monitor appropriations. The County Administrator or each department head should be in charge of monitoring spending versus appropriations.

The County will review the auditors’ proposed audit adjustments for 2016 and will develop a plan of action to ensure that all adjusting entries are made prior to final audit fieldwork next year.

The Code of Virginia, (1950), as amended requires that an appropriation exists prior to the expenditure of funds.

For The Year Ended June 30, 2016

The County has not met the requirements of the Code of Virginia, (1950), as amended.

The Social Services Fund, CSA Fund, Cannery Fund, Litter Fund, and Law Library Fund overspent the budget.

The financial statements, as presented for audit, did not contain all necessary adjustments to comply with generally accepted accounting principles (GAAP). As such, the auditor proposed adjustments that were material to the financial statements.

Management will post additional appropriations to the accounting system and pay closer attention to budgeted and actual expenditures.

The County should budget to include appropriations for all necessary expenditures.

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.

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 internal controls indicates that a material weakness exists.

The County should review the auditors’ proposed audit adjustments for 2016 and develop a plan to ensure the trial balances and related schedules are accurately presented for audit.

County of Russell, Virginia

Schedule of Findings and Questioned Costs (Continued)

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County of Russell, Virginia

Schedule of Findings and Questioned Costs (Continued) For The Year Ended June 30, 2016

Section II - Financial Statement Findings

2016-001

Criteria:

Conditi

Cause of Condition:

Effect of Condition:

Recommendation:

Management’s Response:

2016-002

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 internal controls over financial reporting.

The County should review the auditors’ proposed audit adjustments for 2016 and develop a plan to ensure the trial balances and related schedules are accurately presented for audit.

‘The County will review the auditors’ proposed audit adjustments for 2016 and wilt develop a plan of action to ensure that all adjusting entries are made prior to final audit fieldwork next year.

Criteria:

Cause of Condition:

Effect of Condition:

Recommendation:

Management’s Response:

The Code of Virginia, (1950), as amended requires that an appropriation exists prior to the expenditure of funds.

The Social Services Fund, CSA Fund, Cannery Fund, Litter Fund, and Law Library Fund overspent the budget.

The County does not consistently monitor appropriations. The County Administrator or each department head should be in charge of monitoring spending versus appropriations.

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.

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Section III - Federal Award Findings and Questioned Costs

None

Section IV - Status of Prior Audit Findings and Questioned Costs

Schedule of Findings and Questioned Costs (Continued)

County of Russell, Virginia

There were no Federal Fundings in the prior year.

For The Year Ended June 30, 2016

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County of Russell, Virginia

Schedule of Findings and Questioned Costs (Continued) For The Year Ended June 30, 2016

Section Ill - Federal Award Findings and Questioned Costs

None

Section IV - Status of Prior Audit Findings and Questioned Costs

‘There were no Federal Fundings in the prior year.

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