SOUTH CAROLINA APPALACHIAN COUNCIL OF GOVERNMENTS AUDITED FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2012 SOUTH CAROLINA APPALACHIAN COUNCIL OF GOVERNMENTS AUDITED FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2012 TABLE OF CONTENTS ________________________________ PAGE Independent Auditor's Report 1-2 Management’s Discussion and Analysis 3-7 Basic Financial Statements Government-wide Financial Statements Statement of Net Assets 8 Statement of Activities 9 Fund Financial Statements Balance Sheet – Governmental Funds 10-11 Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental Funds 12 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of the Governmental Funds to the Statement of Activities 13 Statement of Revenues, Expenditures and Changes in Fund Balance – Budget and Actual – General Fund and Annually Budgeted Major Special Revenue Fund 14 Notes to Financial Statements 15-26 Supplementary Information Individual Program Schedules Schedule of Revenues and Expenditures – Transportation Programs 27 Schedule of Revenues and Expenditures – Aging Programs 28-29 Governmental Auditing Reports Schedule of Expenditures of Federal Awards 30-32 Notes to the Schedule of Expenditures of Federal Awards 33-35 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 36-37 Report on Compliance that Could have a Direct and Material Effect on Each Major Federal Program and Internal Control Over Compliance in Accordance with OMB Circular A-133 38-39 Schedule of Findings and Questioned Costs 40-41 Schedule of Prior Audit Findings 42 INDEPENDENT AUDITOR’S REPORT The Board of Directors South Carolina Appalachian Council of Governments Greenville, South Carolina We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the South Carolina Appalachian Council of Governments as of and for the year ended June 30, 2012, which collectively comprise the Council’s basic financial statements as listed in the table of contents. These financial statements are the responsibility of South Carolina Appalachian Council of Governments’ management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the South Carolina Appalachian Council of Governments as of June 30, 2012, and the respective changes in financial position thereof and the budgetary comparison for the general fund and the annually budgeted major special revenue fund for the year then ended, in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued our report dated November 15, 2012, on our consideration of the South Carolina Appalachian Council of Government’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 the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. South Carolina Appalachian Council of Governments Greenville, South Carolina November 15, 2012 Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of 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. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the South Carolina Appalachian Council of Governments’ financial statements as a whole. The supplemental schedules are presented for purposes of additional analysis and are not a required part of the financial statements. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments and Non-Profit Organizations, and is also not a required part of the financial statements. The supplemental schedules and the schedule of expenditures of federal awards are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects, in relation to the financial statements as a whole. November 15, 2012 2 Management’s Discussion and Analysis Management of the South Carolina Appalachian Council of Governments presents the following overview of the financial performance of the Council for the year ended June 30, 2012. This information should be read in conjunction with the audited financial statements and the accompanying notes. Financial Highlights • The Council’s assets exceeded its liabilities at June 30, 2012, by $2,424,297 (shown as total net assets). • As of the close of the fiscal year, the Council’s governmental funds reported combined ending fund balances of $1,735,544, an increase of $26,773 from the prior year. A total of $688,088 is nonspendable or assigned, resulting in a balance of $1,047,456 available for spending at the Council’s discretion (shown as unassigned fund balance). • The Council’s fiscal obligation for accumulated annual leave and salary-related fringe benefits was $120,350. Overview of the Financial Statements The Council’s basic financial statements consist of three parts: government-wide financial statements, fund financial statements, and notes to the financial statements. Government-wide Financial Statements The government-wide statements present a view of the Council’s finances as a whole. There are two government-wide financial statements: Statement of Net Assets: This statement presents information on all of the Council’s assets and liabilities, both short-term (current) and long-term (non-current). It also reports the differences between assets and liabilities as net assets. Over time, increases or decreases in net assets may indicate whether the Council’s financial position is improving or deteriorating. Statement of Activities: This statement presents information showing how the Council’s overall net assets changed during the year. The government-wide financial statements are shown on pages 8-9 of this report. Fund Financial Statements The fund financial statements provide more detailed information about the Council’s funds, focusing on its most significant or “major” funds – not the entity as a whole. Funds are accounting devices used to keep track of specific sources of funding and spending for particular purposes. Governmental funds are used to account for the same Council activities reported in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on how money flows in and out of the funds and the balances left at yearend that are available for spending. These funds are reported based on the modified accrual method of accounting, which measures cash and all other financial assets that can readily be converted to cash. Governmental fund statements provide a short-term view of the Council’s financial operations. 3 Because the focus of governmental funds is narrower than that of government-wide financial statements, it may be useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. Both the governmental fund balance and statement of revenues, expenditures, and changes in funds balances provide a reconciliation to facilitate this comparison. The Council’s governmental funds consist of the General Fund and Special Revenue Fund, which are reported as major funds. The General Fund is the general operating fund used to account for all financial resources except those required to be accounted for in another fund. The Special Revenue Fund is used to account for the proceeds of specific revenue sources that are restricted to specific purposes. Information is presented separately in the governmental balance sheet and statement of revenues, expenditures, and changes in fund balances for each of these funds. The fund financial statements are shown on pages 10-14 of this report. Notes to Financial Statements The notes to the financial statements provide required disclosures and other information that are essential to a full understanding of material data provided in the statements. These notes present information about the accounting policies, significant account balances and activities of the Council. Other Information In addition to the financial statements and accompanying notes, this report also presents certain supplementary information. Government-wide Financial Analysis The government-wide financial statements are condensed in the following two tables: Table 1: Condensed Statement of Net Assets Table 2: Change in Net Assets Table 1 Condensed Statement of Net Assets Year Ended June 30, 2012 Governmental Activities 2012 2011 Current and other assets $ 2,880,599 $ 3,651,796 Capital assets 966,589 1,073,972 Total assets 3,847,188 4,725,768 Current liabilities 1,190,534 1,988,504 Long-term liabilities 232,357 269,774 Total liabilities 1,422,891 2,258,278 Investment in capital assets, net of related debt 707,908 769,812 Unrestricted net assets 1,716,389 1,697,678 Total net assets $ 2,424,297 $ 2,467,490 4 As noted earlier, net assets may serve over time as one useful indicator of a government’s financial condition. The assets of the Council exceeded liabilities by $2,424,297 as of June 30, 2012. The Council’s net assets decreased by $43,193 for the fiscal year ended June 30, 2012. Table 2 Change in Net Assets Year Ended June 30, 2012 Governmental Activities 2012 2011 General revenues Intergovernmental Federal $ 7,323,210 $ 8,760,778 State 1,010,051 1,270,321 Local 435,687 435,687 Interest and other 72,144 12,103 Program revenues Contracts and fees 941,293 696,569 Total revenues 9,782,385 11,175,458 Expenses Administration 112,390 89,529 Administrative services 317,733 590 Government services 386,546 378,978 Grant services 321,102 341,066 Aging services 4,485,369 4,503,250 Information services 379,696 378,463 Planning services 319,701 352,014 Workforce services 3,442,753 5,077,598 Loan services 60,288 51,523 Total expenses 9,825,578 11,173,011 Increase (decrease) in net assets (43,193) 2,447 Beginning net assets 2,467,490 2,465,043 Ending net assets $ 2,424,297 $ 2,467,490 Financial Analysis of Council’s Funds As noted earlier, the Council uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental Funds: The focus of the Council’s governmental funds is to provide information on near-term inflows, outflows and balances of usable resources. Such information is useful in assessing the Council’s financing requirements. Specifically, unreserved fund balance can be a useful measure of a government’s net resources available for spending at the end of the fiscal year. The General Fund is the chief operating fund of the Council. At the end of the current fiscal year, total fund balance of the General Fund was $1,735,544, of which $60,609 is nonspendable, $627,479 has been assigned for equipment replacement, debt retirement, unemployment, future expansion, building maintenance and repair, and salary increases, and $1,047,456 is unassigned. 5 General Fund Budgetary Highlights: During the fiscal year, the Council revised the budget to adjust the estimates used to prepare the original budget, to add or delete funding sources used in the original budget, and to add or delete projected expenditures based on changing funding sources. Revenues exceeded expenditures by $26,773, an increase of $19,672 over the final budget projection of $7,101. Capital Assets The Council’s capital assets, net of accumulated depreciation, consisted of the following at June 30, 2012 and 2011: 2012 2011 Land $ 400,961 $ 400,961 Land improvements 18,145 21,763 Buildings 466,980 524,109 Franchise and equipment 12,756 22,272 Grant funded assets 23,618 95,486 Automobiles 44,129 9,381 Total capital assets $ 966,589 $ 1,073,972 Major capital asset transactions during the year included additions of $41,164 and disposals of $62,092. The additions consisted of an automobile and miscellaneous furniture and equipment. The deletions consisted of miscellaneous items of furniture and equipment. The gain on assets which were sold during the year was $195. Long-term Obligations The Council’s long-term obligations are made up of the following at June 30, 2012 and 2011: 2012 2011 Accrued compensated absences $ 139,505 $ 132,845 Notes payable 258,681 304,160 398,186 437,005 Less: current portion (165,829) (167,231) Total long-term obligations $ 232,357 $ 269,774 Budget Highlights for the Fiscal Year Ending June 30, 2013 The Council has a conservative budget for the upcoming fiscal year. In response to projected budget cuts facing the state of South Carolina and the continuation of significant fiscal challenges facing member local governments, the Council’s budgeted revenue and expenditure figures for FY 2013 are approximately 5 percent lower than those final figures for FY 2012. The Council continues to seek new and additional revenue sources and ways to cut costs. 6 Requests for Financial Information This report is designed to provide a general overview of the Council’s finances and to show accountability for the money it receives. Questions concerning any of the information provided in this report or requests for additional information should be directed to: Steve Pelissier, Executive Director or Don Zimmer, Finance Director South Carolina Appalachian Council of Governments 30 Century Circle Greenville, SC 29607 7 SOUTH CAROLINA APPALACHIAN COUNCIL OF GOVERNMENTS STATEMENT OF NET ASSETS JUNE 30, 2012 Primary Government Governmental Activities Assets Current assets Cash $ 919,418 Cash equivalents 647,065 Due from other governments Federal, state, and local 1,251,947 Due from other sources 1,560 Prepaid items 60,609 Total current assets 2,880,599 Capital assets Land 400,961 Property and equipment, net of depreciation 565,628 Total capital assets 966,589 Total assets 3,847,188 Liabilities Current liabilities Accounts payable and accrued expenses 868,377 Due to other governments 46,708 Current portion of compensated absences and related benefits 120,350 Current portion of notes payable 45,479 Deferred revenue 109,620 Total current liabilities 1,190,534 Noncurrent liabilities Compensated absences and related benefits 19,155 Notes payable 213,202 Total noncurrent liabilities 232,357 Total liabilities 1,422,891 Net assets Invested in capital assets, net of related debt 707,908 Unrestricted 1,716,389 Total net assets $ 2,424,297 The accompanying notes are an integral part of these financial statements. 8