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Report on the

Madison County Commission

Madison County, Alabama

October 1, 2007 through September 30, 2008

Filed: December 11, 2009

Department of

Examiners of Public Accounts 50 North Ripley Street, Room 3201

P.O. Box 302251 Montgomery, Alabama 36130-2251

Ronald L. Jones, Chief Examiner 09-583

Website: www.examiners.alabama.gov

Table of Contents Page


Summary A Contains items pertaining to state and local legal compliance, Commission operations, and other matters. Independent Auditor’s Report C Reports on whether the financial information constitutes a fair presentation of the financial position and results of financial operations in accordance with generally accepted accounting principles (GAAP). Management’s Discussion and Analysis F Provides information required by the Governmental Accounting Standards Board (GASB) that is prepared by management of the Commission introducing the basic financial statements and providing an analytical overview of the Commission’s financial activities for the year. This information has not been audited, and no opinion is provided about the information. Basic Financial Statements 1 Provides the minimum combination of financial statements and notes to the financial statements that is required for the fair presentation of the Commission’s financial position and results of operations in accordance with GAAP. Exhibit #1 Statement of Net Assets 2 Exhibit #2 Statement of Activities 4 Exhibit #3 Balance Sheet – Governmental Funds 6 Exhibit #4 Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Assets 8 Exhibit #5 Statement of Revenues, Expenditures and Changes in Fund

Balances – Governmental Funds 9 Exhibit #6 Reconciliation of the Statement of Revenues, Expenditures and

Changes in Fund Balances of Governmental Funds to the Statement of Activities 11



Exhibit #7 Statement of Net Assets – Proprietary Funds 12 Exhibit #8 Statement of Revenues, Expenses and Changes in Fund Net Assets Proprietary Funds 16 Exhibit #9 Statement of Cash Flows – Proprietary Funds 18 Exhibit #10 Statement of Fiduciary Net Assets 22 Exhibit #11 Statement of Changes in Fiduciary Net Assets 23 Notes to the Financial Statements 24 Required Supplementary Information 54 Provides information required by the GASB to supplement the basic financial statements. This information has not been audited and no opinion is provided about the information. Exhibit #12 Schedule of Revenues, Expenditures and Changes in Fund

Balances – Budget and Actual – General Fund 55 Exhibit #13 Schedule of Revenues, Expenditures and Changes in Fund

Balances – Budget and Actual – Public Buildings, Roads and Bridges Fund 59

Exhibit #14 Schedule of Funding Progress 63 Supplementary Information 64 Contains financial information and notes relative to federal financial assistance. Exhibit #15 Schedule of Expenditures of Federal Awards 65 Notes to the Schedule of Expenditures of Federal Awards 69



Additional Information 70 Provides basic information related to the Commission, including reports and items required by generally accepted government auditing standards and/or U. S. Office of Management and Budget (OMB) Circular A-133 for federal compliance audits. Exhibit #16 Commission Members and Administrative Personnel – a listing

of the Commission members and administrative personnel. 71 Exhibit #17 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 – a report on internal controls related to the financial statements and on whether the Commission complied with laws and regulations which could have a direct and material effect on the Commission’s financial statements. 72

Exhibit #18 Report on Compliance With Requirements Applicable to Each Major Program and on Internal Control Over Compliance in

Accordance With OMB Circular A-133 – a report on internal controls over compliance with requirements of laws, regulations, contracts, and grants applicable to major federal programs and an opinion on whether the Commission complied with laws, regulations, and the provisions of contracts or grant agreements which could have a direct and material effect on each major program. 74

Exhibit #19 Schedule of Findings and Questioned Costs – a schedule

summarizing the results of audit findings relating to the financial statements as required by Government Auditing Standards and findings and questioned costs for federal awards as required by OMB Circular A-133. 76 __________________________________________________

Department of Examiners of Public Accounts

SUMMARY

Madison County Commission October 1, 2007 through September 30, 2008

The Madison County Commission (the “Commission”) is a seven-member body elected by the citizens of Madison County. The members and administrative personnel in charge of governance of the Commission are listed on Exhibit 16. The Commission is the governmental agency that provides general administration, public safety, construction and maintenance of county roads and bridges, sanitation services, health and welfare services and educational services to the citizens of Madison County. This report presents the results of an audit the objectives of which were to determine whether the financial statements present fairly the financial position and results of financial operations and whether the Commission complied with applicable laws and regulations, including those applicable to its major federal financial assistance programs. The audit was conducted 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 as well as the requirements of the Department of Examiners of Public Accounts under the authority of the Code of Alabama 1975, Section 41-5-14. An unqualified opinion was issued on the financial statements, which means that the Commission’s financial statements present fairly, in all material respects, its financial position and the results of its operations for the fiscal year ended September 30, 2008. Test performed during the audit did not disclose any significant instances of noncompliance with applicable state and local laws and regulations.

09-583 A

09-583 B

The following officials/employees were invited to an exit conference to discuss the contents of this report: Mike Gillespie, Chairman of the Madison County Commission; Commission Members: Roger Jones, Faye Dyer, Jerry Craig, Dale Strong, Morris Brooks, and Robert Harrison; Howard Baites, County Administrator; and Judy Teague, Chief Financial Director. The following individuals attended the exit conference, held at the offices of the Madison County Commission: Mike Gillespie, Chairman of the Madison County Commission; Commission Members: Roger Jones, Faye Dyer, Jerry Craig, Dale Strong, and Morris Brooks; Julian Butler, County Attorney; Jeff Rich, County Attorney; Judy Teague, Chief Financial Director; and representatives of the Department of Examiners of Public Accounts: Kathy Wren, Audit Manager; Greg Terry, Examiner of Public Accounts and Harriet Haughton, Examiner of Public Accounts.

C

Independent Auditor’s Report

Independent Auditor’s Report

We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the Madison County Commission, as of and for the year ended September 30, 2008, which collectively comprise the basic financial statements of the Madison County Commission as listed in the table of contents as Exhibits 1 through 11. These financial statements are the responsibility of the Madison County Commission’s management. Our responsibility is to express opinions on these financial statements based on our audit. We did not audit the financial statements of the Madison County Water Department, which represents 91% and 50%, respectively, of the assets and revenues of the Enterprise Funds, business-type activities. Those financial statements were audited by other auditors whose report thereon has been furnished to us, and our opinion, insofar as it relates to the amounts included for the Madison County Water Department, is based on the report of the other auditors. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, 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 Madison County Commission, as of September 30, 2008, and the respective changes in financial position and cash flows, where applicable, thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued our report dated November 10, 2009 on our consideration of the Madison County Commission’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.

09-583 D

This Page Intentionally Blank

F

Management’s Discussion and Analysis (Required Supplementary Information)

MADISON COUNTY COMMISSION MANAGEMENT’S DISCUSSION AND ANALYSIS

This section in the Annual Financial Report has been developed in accordance with the Governmental Accounting Standards Board (GASB) Statement Number 34. It is intended to provide the readers of this report with a general overview of the financial activities of the County during FY 2008. The information in this section should be considered only in the context of the financial statements and notes to financial statements to follow. Financial Highlights The following are the highlights of financial activity for the fiscal year ending September 30, 2008:

• The County’s total assets exceeded its liabilities at September 30, 2008 by $256.17 million (net assets). Of this amount, $211.35 million was from governmental activities and $44.82 million was from business-type activities. Note: The County has fully implemented GASB Statement Number 34 with respect to retroactively reporting infrastructure assets acquired in prior years.

• Net assets increased for Governmental Activities by $13.4 million.

• Net assets for Business-Type Activities increased by $1.5 million. The County is reporting under the GASB 34 reporting model. Management’s Discussion and Analysis is only a portion of the features of this format.

G

Basic Financial Statements

Management’s Discussion and Analysis

Required Supplementary Information

Government-Wide Fund Statements Notes to the Financial Statements

The basic financial statements are comprised of government-wide statements that offer a summary of financial activity and more specific fund statements that present more detailed information. The Government-Wide Statements (Exhibit #1 and #2) include the statement of net assets and statement of activities. They are designed to provide a broad overview of the County as a whole similar to private sector financial statements. The statement of net assets shows the total assets and liabilities for the County with the difference being net assets. The change in net assets over time may be an indicator of the County’s financial health. The statement of activities provides a breakdown of revenues and expenditures by functions.

H

Most of the County’s basic services are reported as Governmental activities. These include general government, public safety, highways and roads, health, welfare and culture and recreation. Those functions that are primarily funded through user fees and charges are identified as business-type activities. In Madison County these include the Water System, Solid Waste Department and Building Inspection Department. The Fund Financial Statements begin with Exhibit #3 and provide more detailed information about the Commission’s most significant funds – not the Commission as a whole. The Commission uses fund accounting to track specific sources of funding and spending for special purposes. The Commission categorizes funds into three basic fund types: governmental funds, proprietary funds, and fiduciary funds. Governmental Funds are used to account for essentially the same functions reported as governmental activities in the government-wide statements. However, unlike the previous statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government’s near-term financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. This comparison highlights the long-term impact of the County’s near term financial decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances offer a reconciliation to assist with this comparison. These reconcilements are reflected in Exhibits #4 and #6. Proprietary Funds Enterprise funds are the equivalent of business-type activities in the government-wide statements. These include the Water System, Solid Waste Department and Building Inspection Department. These funds are intended to be self supporting through user fees charged for services. Fiduciary Funds are used to account for resources held by the County in a trustee capacity for the benefit of other parties. Fiduciary Funds, which are not included in the government-wide statements, are presented in Exhibits #10 and #11.

I

Analysis of the County as a Whole The following tables present condensed financial information for governmental and business-type activities for the year ended September 30, 2008, with comparative data for the fiscal year ended September 30, 2007.

Madison County Commission Net Assets (in Thousands)

Governmental Activities Business-type Activities Total Total Percentage

Change 2008 2007 2008 2007 2008 2007 Current and other assets 74,041 72,626 18,465 19,843 92,506 92,469 0.04% Capital Assets (Net) 191,098 178,848 41,223 39,607 232,321 218,455 6.35%

Total Assets 265,139 251,474 59,688 59,450 324,827 310,924 4.47% Current liabilities 45,893 43,657 1,718 2,009 47,611 45,666 4.26% Other Liabilities 7,895 9,869 13,150 14,115 21,045 23,984 -12.25%

Total Liabilities 53,788 53,526 14,868 16,124 68,656 69,650 -1.43% Net Assets: Invested in capital assets, net of related debt 185,746 172,221 29,179 26,107 214,925 198,328 8.37%

Restricted 9,066 9,345 716 722 9,782 10,067 -2.83% Unrestricted 16,539 16,382 14,925 16,497 31,464 32,879 -4.31% Total Net Assets 211,351 197,948 44,820 43,326 256,171 241,274 6.17%

Changes in Net Assets

(in Thousands) Governmental Activities Business-type Activities Total Total

Percentage Change 2008 2007 2008 2007 2008 2007

Revenues Program Revenues:

Charges for Services 20,697 19,230 17,645 18,453 38,342 37,683 -1.75% Operating Grants and Contributions 9,390 7,542 37 36 9,427 7,578 24.40% Capital Grants and Contributions 11,451 16,832 11,451 16,832 -31.97%

General Revenues: Property Taxes 38,815 34,979 38,815 34,979 10.97% County Gasoline Taxes 4,866 5,079 4,866 5,079 -4.19% Miscellaneous Taxes 6,836 7,594 6,836 7,594 -9.98% TVA in Lieu of Taxes 1,673 1,697 1,673 1,697 -1.41% Miscellaneous Revenues 2,643 3,189 1,063 1,619 3,706 4,808 -22.92% Interest Revenue 1,537 2,198 483 626 2,020 2,824 -28.47%

Transfers 307 450 (307) (450) Total Revenue and Transfers 98,215 98,790 18,921 20,284 117,136 119,074 -1.63%

Expenses

General Government 30,437 27,913 30,437 27,913 9.20% Public Safety 26,686 23,569 26,686 23,569 13.29% Highways and Roads 21,754 17,966 21,754 17,966 20.96% Sanitation 938 1,159 938 1,159 -19.07% Health 2,090 2,497 2,090 2,497 -16.30% Welfare 332 315 332 315 5.40% Culture and Recreation 2,242 2,237 2,242 2,237 0.00% Education 62 70 62 70 -11.43% Interest on Long-Term Debt 258 311 258 311 -17.04% Water System 8,771 8,554 8,771 8,554 2.54% Solid Waste Department 7,751 7,174 7,751 7,174 8.03% Building Inspection 905 826 905 826 9.56% Intergovernmental 13 13 13 13 0.00%

Total Expenses 84,812 76,050 17,427 16,554 102,239 92,604 10.44% Increase (decrease) in net assets 13,403 22,740 1,494 3,730 14,897 26,4700 -43.78% Net Assets beginning of year, as restated 197,948 175,208 43,326 39,596 241,274 214,804 12.32% Net Assets end of year 211,351 197,948 44,820 43,326 256,171 241,274 6.16%

Governmental Funds Revenue highlights for the fiscal year ended September 30, 2008 are as follows:

Charges for Services increased from the collection of fees and commissions for Taxing Officials. The City of Huntsville paid additional jail operating assistance payments of $703,000 due to the city having inmates housed at the jail in excess of the amount allowed by the Intergovernmental Agreement (See Note 14). Business Privilege Licenses and Probate Judges Fees decreased in this year.

• Operating Grants and Contributions had several changes as follows: General Government Purposes:

Increase in Election Revenue from the State. New Grant for BRAC (Defense Base Closure and Realignment) Community Planning

Public Safety Purposes: Increase in Federal Grants for Fire Prevention and Law Enforcement Technology For Highways and Roads: Increase due to Reclassification of State Funds for Bridge Replacement Increase in State Oil and Gas Funds for Capital Projects Decreases in State Shared Gasoline Taxes

Subdivision Acceptances were down $4 Million as a result of the economic decline in housing.

• Property Taxes have increased due to state mandated appraisal updates. • County Gasoline Taxes decreased due to increased gasoline cost and decreased

consumption. • Miscellaneous Taxes decreased for Mortgage and Deed Filing Taxes and Severed Material

taxes. • Miscellaneous Revenues decreased from collections of Financial Institution Excise Taxes. • Interest Revenue decreased due to the overall economic decline.

Revenues by Source for Fiscal Year ended September 30, 2008.

J

Governmental Funds Expenditure highlights for the fiscal year ended September 30, 2008 are as follows: General Government Expenditures increased for healthcare claims, salary and fringe benefits, indigent psychiatric care, legal fees, election costs and federal grants for BRAC Community Planning.

• Public Safety expenditures increased due to the following: Operation of the Madison County / City of Huntsville Jail (See Notes to the Financial Statement #14.) $ 1,735,000 Operation of the Sheriff’s Department 367,000

Fire Prevention and COPS Technology Grants 450,000 • Expenditures for Highways and Roads increased for specific projects of the Commissioners. • Expenditures for Health decreased for the prior year direct appropriation to the Alabama

Public Health Care Authority. Expenditures by function for the fiscal year ended September 30, 2008.

K

L

Business-Type Activities The following information compares the revenues and expenses for all business-type activities for the fiscal years ended September 30, 2008 and 2007.

2008 2007 Change Operating Revenues

Charges for Services 9,478,432 10,319,132 (840,700)Water Sales 8,064,928 8,035,251 29,677Miscellaneous 188,764 196,556 (7,792)Late Fees 101,768 98,581 3,187

Totals 17,833,891 18,649,520 (815,629) Operating Expenses

Salaries and Benefits 7,639,178 7,309,591 329,587Contractual and Professional 1,143,179 895,821 247,358Materials and Supplies 1,430,663 1,192,424 238,239Repairs and Maintenance 859,993 884,614 (24,621)Utilities 606,841 551,127 55,714Communications 24,612 24,661 (49)Office Expense 11,721 9,860 1,861Depreciation 1,933,745 1,809,672 124,073Landfill Expenses 2,362,879 2,296,340 66,539Purchase of Water 412,190 536,677 (124,487)Billing Fees 356,751 347,389 9,362Miscellaneous 59,978 52,503 7,475

Totals 16,841,730 15,910,679 931,051 The decrease in revenues for the Water and Building Inspection Departments was due to the general economic downturn in the housing sector. Expenses increased for general wages and fringe benefits. Materials and contractual labor for water system renovations also increased. Fuel costs were up significantly for the Solid Waste Fund. FINANCIAL ANALYSIS OF THE COUNTY’S FUNDS Major funds (the General and Public Buildings Roads and Bridges Funds) changes in fund balances are reflected in Exhibit #5. The General Fund had a minimal increase in fund balance of $393,000. The Public Buildings, Roads and Bridges Fund decreased fund balance by $334,000.

M

BUDGETARY HIGHLIGHTS General Fund Major budget increases for revenues were as follows: General Fund

Ad Valorem Taxes Real & Personal Prop. 933,679 Sales Tax Administrative Costs 33,700 State Reimbursement for Elections 83,000 City of Huntsville Jail Payments 650,000 Otter Federal, State and Local Grants 311,145 Financial Institution Excise Tax (130,000) Tax Assessor Fees and Commissions 566,500 Rural Landfill Fees 78,000 Other Fees 32,457 Other Misc Revenues 30,274

Total 2,588,755

General Fund Material budget increases for expenditures were as follows:

General Government Carryover 534,045 Purchase Orders Prior Year 78,815 Psychiatric Hospital Care 149,000 Legal Fees 283,700 Other General Government 125,300 Public Safety Purchase Orders Prior Year- Capital Items Jail 328,280 Jail Overtime 650,000 Grants 281,791 Sheriff Deputies Overtime/Fuel 184,679 Purchase Order Carryover 64,366 Highways and Roads Carryover 646,250 Debt Service Casual Sales Tax Settlement 1,000,000

Total 4,326,226

N

Public Buildings, Roads and Bridges Fund Major budget increases for revenues and other sources were as follows:

Ad Valorem Taxes 532,545 Private Work Revenue 207,086 State Cost Sharing Bridges 1,807,435 Misc Taxes and Fees 67,841 Transfers In from Unrestricted 315,840 Sale of Equipment 595,786

Total 3,526,533

Material Budget increases for Expenditures and Other Uses were as follows:

** Carryover of Unused Appropriations 2,519,981 Purchase of Equipment (including lease purchases) 595,786 Transfer Out to More Restrictive Funds 569,287 Prior Period Expenditure (33,748) State Cost Sharing Bridges 1,807,435 Reduce Fund Balance Budgeted (432,545) 5,026,196

** Carryover of unused Appropriations – In 1997, the Commission established a provision whereby County Commissioners may carryover unused appropriations to the next fiscal year budget. The County Commission usually votes on the carryover of funds at the annual budget meeting. CAPITAL ASSETS AND DEBT ADMINISTRATION At September 30, 2008 the County had investments in capital assets, net of accumulated depreciation of $191.098 million in governmental activities and $41.223 million in business-type activities. These capital assets include land, infrastructure, building and improvements, equipment and furniture, vehicles and construction equipment and construction in progress. See Exhibit #1 and Notes to the Financial Statements #5. The County’s outstanding debt as of September 30, 2008, is reflected in the Notes to the Financial Statements #’s 8,9 & 10.

O

ECONOMIC FACTORS AND DECISIONS The General Fund budget for the 2008-2009 year included budgeting Fund reserves of $1.55 million. Budgets were increased for the following: Health Care Costs Cost of Living Adjustment for Retirees Renovations for the Courthouse Emergency Communication System Cost of living adjustment for employees Accumulate Funding for Communication a System for Emergency Personnel in Fire and Law Enforcement Funding for Software for the Commission Office Budgets for the fiscal year 2009 will remain essentially level funded with the exception of increases reflected above. Budgets will include increases in revenues from Ad Valorem taxes. The Commission also approved Carryover (as mentioned above) for the Commissioners. The Water Department budget for the 2008-2009 year included budgeting Fund reserves of $2 million for system renovations. The Building Inspection Department budget for the 2008-2009 year included budgeting Fund reserves of $240 thousand for department operations. The economic downturn in 2008-09 resulted in the Commission instituting conservation measures at midyear including the following: Hiring Freeze, limiting Raises to Probationary Raises; limiting overtime; restricting employee travel and requiring Commission approval of Capital Purchases.

1

Basic Financial Statements

Statement of Net AssetsSeptember 30, 2008

Governmental Business-Type Activities Activities Total

Assets Current Assets

Cash and Cash Equivalents 30,580,047.42$ 8,580,014.79$ 39,160,062.21$ Cash with Fiscal Agent 237.67 237.67 Investments 1,000,000.00 4,326,478.46 5,326,478.46 Receivables (Note 4) 7,512,747.23 1,495,193.40 9,007,940.63 Ad Valorem Taxes Receivable 34,155,129.04 34,155,129.04 Internal Balances 331,694.50 (331,694.50) Inventories 321,880.81 2,101,394.00 2,423,274.81 Prepaid Item 67,154.17 67,543.18 134,697.35 Deferred Charges 6,003.67 6,884.50 12,888.17

Total Current Assets 73,974,894.51 16,245,813.83 90,220,708.34 Noncurrent Assets

Restricted Cash with Fiscal Agent 716,116.14 716,116.14 SRF Warrants Escrow 1,413,861.00 1,413,861.00 Deferred Charges 66,316.98 89,498.28 155,815.26 Capital Assets (Note 5):

Nondepreciable 5,543,455.09 574,180.30 6,117,635.39 Depreciable, Net 185,554,970.75 40,649,297.70 226,204,268.45

Total Capital Assets, Net of Depreciation 191,098,425.84 41,223,478.00 232,321,903.84 Total Noncurrent Assets 191,164,742.82 43,442,953.42 234,607,696.24

Total Assets 265,139,637.33 59,688,767.25 324,828,404.58 Liabilities Current Liabilities

Payables (Note 8) 657,490.54 97,099.70 754,590.24 Deferred Revenue 37,767,115.63 98,450.45 37,865,566.08 Accrued Wages Payable 1,834,235.15 266,617.42 2,100,852.57 Accrued Interest Payable 83,800.04 86,758.30 170,558.34 Deposits Payable 5,000.00 5,000.00 Capital Leases Payable 342,368.16 117,038.52 459,406.68 Settlement Payable - Casual Sales Tax 1,000,000.00 1,000,000.00 Warrants Payable 895,000.00 920,000.00 1,815,000.00 Add: Unamortized Premium 385.81 3,050.11 3,435.92 Less: Loss - Early Extinguishment of Debt (21,370.43) (21,370.43) Compensated Absences 2,329,514.77 150,615.13 2,480,129.90 Claims Costs Payable 978,024.00 978,024.00

Total Current Liabilities 45,892,934.10$ 1,718,259.20$ 47,611,193.30$

The accompanying Notes to the Financial Statements are an integral part of this statement.

Madison CountyCommission 2 Exhibit #1

Governmental Business-Type Activities Activities Total

Noncurrent Liabilities Capital Leases Payable 1,436,655.68$ $ 1,436,655.68$ Settlement Payable - Casual Sales Tax 1,000,000.00 1,000,000.00 Warrants Payable 2,745,000.00 12,475,000.00 15,220,000.00 Add: Unamortized Premium 5,015.63 39,651.48 44,667.11 Less: Loss - Early Extinguishment of Debt (85,481.68) (85,481.68) Compensated Absences 2,239,579.68 721,445.85 2,961,025.53 Claims Costs Payable 469,625.48 469,625.48

Total Noncurrent Liabilities 7,895,876.47 13,150,615.65 21,046,492.12

Total Liabilities 53,788,810.57 14,868,874.85 68,657,685.42 Net Assets Invested in Capital Assets, Net of Related Debt 185,746,321.21 29,178,981.65 214,925,302.86 Restricted for:

Capital Projects 88,637.95 88,637.95 Debt Service 128,661.26 716,116.14 844,777.40 Road Projects 5,118,145.03 5,118,145.03 Other Purposes 3,729,347.97 3,729,347.97

Unrestricted 16,539,713.34 14,924,794.61 31,464,507.95 Total Net Assets 211,350,826.76$ 44,819,892.40$ 256,170,719.16$


Statement of ActivitiesFor the Year Ended September 30, 2008

Charges Operating GrantsFunctions/Programs Expenses for Services and Contributions Primary Government Governmental Activities

General Government 30,437,313.69$ 13,668,632.65$ 1,180,607.69$ Public Safety 26,686,245.05 5,456,594.35 1,322,570.57 Highways and Roads 21,753,751.05 281,306.35 6,684,586.27 Sanitation 937,442.33 1,122,244.75 Health 2,090,181.55 73,869.26 Welfare 331,875.31 181,106.85 Culture and Recreation 2,242,578.83 93,894.24 21,500.00 Education 61,526.00 Interest on Long-Term Debt 258,083.74 Intergovernmental 13,584.38

Total Governmental Activities 84,812,581.93 20,696,541.60 9,390,371.38 Business-Type Activities

Waste Control 7,750,507.58 8,246,162.23 Water Department 8,771,095.54 8,652,755.97 36,883.20 Building Inspection 905,425.59 746,208.76

Total Business-Type Activities 17,427,028.71 17,645,126.96 36,883.20

Total Primary Government 102,239,610.64$ 38,341,668.56$ 9,427,254.58$

General Revenues:Taxes:

Property Taxes for General PurposesProperty Taxes for Specific PurposesCounty Gasoline Sales TaxMiscellaneous Taxes

Interest RevenueMiscellaneous RevenueTVA in Lieu of Taxes

TransfersTotal General Revenues and Transfers

Change in Net Assets

Net Assets - Beginning of Year Net Assets - End of Year


Program Revenues


Capital Grants Governmental Business-Typeand Contributions Activities Activities Total

$ (15,588,073.35)$ $ (15,588,073.35)$

(19,907,080.13) (19,907,080.13) 11,451,489.72 (3,336,368.71) (3,336,368.71)

184,802.42 184,802.42 (2,016,312.29) (2,016,312.29)

(150,768.46) (150,768.46) (2,127,184.59) (2,127,184.59)

(61,526.00) (61,526.00) (258,083.74) (258,083.74) (13,584.38) (13,584.38)

11,451,489.72 (43,274,179.23) (43,274,179.23) 495,654.65 495,654.65 (81,456.37) (81,456.37) (159,216.83) (159,216.83)

254,981.45 254,981.45

11,451,489.72$ (43,274,179.23) 254,981.45 (43,019,197.78) 22,157,541.96 22,157,541.96 16,657,527.05 16,657,527.05 4,866,409.50 4,866,409.50

6,836,155.62 6,836,155.62 1,536,981.02 483,164.00 2,020,145.02 2,642,639.52 1,063,029.94 3,705,669.46

1,672,687.17 1,672,687.17 307,000.00 (307,000.00) 56,676,941.84 1,239,193.94 57,916,135.78

13,402,762.61 1,494,175.39 14,896,938.00

197,948,064.15 43,325,717.01 241,273,781.16

211,350,826.76$ 44,819,892.40$ 256,170,719.16$

Net (Expenses) Revenues and Changes in Net AssetsPrimary Government


Balance SheetGovernmental FundsSeptember 30, 2008

PublicBuildings,

General Roads and Fund Bridges Fund Assets

Cash and Cash Equivalents 14,086,758.28$ 5,481,128.61$ Cash with Fiscal Agent Investments 1,000,000.00 Ad Valorem Taxes Receivable 19,340,523.67 10,804,813.37 Due from Other Funds 688,273.72 261,301.02 Receivables (Note 4) 5,585,160.90 912,623.73 Inventories 24,346.73 297,534.08 Prepaid Item 30,413.90 15,170.00

Total Assets 40,755,477.20 17,772,570.81 Liabilities and Fund Balances Liabilities

Payables (Note 8) 132,212.02 185,057.81 Due to Other Funds 128,581.78 42,275.87 Deferred Revenue 20,746,934.14 11,589,827.82 Accrued Wages Payable 1,308,971.66 282,754.86 Compensated Absences 121,118.82 22,765.43 Deposits Payable 5,000.00 Claims Costs Payable 978,024.00

Total Liabilities 23,415,842.42 12,127,681.79 Fund Balances

Reserved for: Inventories 24,346.73 297,534.08 Prepaid Items 30,413.90 15,170.00 Debt Service Capital Projects Encumbrances 460,256.09 111,047.98

Unreserved, Reported in: General Fund 16,824,618.06 Special Revenue Funds 5,221,136.96

Total Fund Balances 17,339,634.78 5,644,889.02 Total Liabilities and Fund Balances 40,755,477.20$ 17,772,570.81$ The accompanying Notes to the Financial Statements are an integral part of this statement.


Other TotalGovernmental Governmental

Funds Funds

11,012,160.53$ 30,580,047.42$ 237.67 237.67

1,000,000.00 4,009,792.00 34,155,129.04

23,206.04 972,780.78 1,014,962.60 7,512,747.23

321,880.81 21,570.27 67,154.17

16,081,929.11 74,609,977.12

340,220.71 657,490.54 470,228.63 641,086.28

5,430,353.67 37,767,115.63 242,508.63 1,834,235.15 38,182.55 182,066.80

5,000.00 978,024.00

6,521,494.19 42,065,018.40 321,880.81

21,570.27 67,154.17 212,461.30 212,461.30 88,637.95 88,637.95 12,677.77 583,981.84

16,824,618.06

9,225,087.63 14,446,224.59 9,560,434.92 32,544,958.72

16,081,929.11$ 74,609,977.12$


Reconciliation of the Balance Sheet of Governmental Funds to theStatement of Net AssetsSeptember 30, 2008

Total Fund Balances - Governmental Funds (Exhibit 3) 32,544,958.72$

Amounts reported for governmental activities in the Statement of Net Assets (Exhibit 1) are different because:

Capital assets used in governmental activities are not financial resources, and thereforeare not reported as assets in governmental funds. These assets consist of:

Capital Assets - Nondepreciable 5,543,455.09$ Capital Assets - Depreciable 185,554,970.75

Total Capital Assets 191,098,425.84

Deferred issue costs are reported as current expenditures in the funds. However,deferred issue costs are amortized over the life of the bonds and are includedin the governmental activities in the Statement of Net Assets.

Current NoncurrentAssets Assets

Deferred Charges 6,003.67$ 66,316.98 72,320.65

Certain liabilities are not due and payable in the current period and therefore are notreported as liabilities in the funds. These liabilities at year-end consist of:

Current NoncurrentLiabilities Liabilities

Warrants Payable 895,000.00 2,745,000.00 Unamortized Premium 385.81 5,015.63 Settlement Payable 1,000,000.00 1,000,000.00 Capital Leases Payable 342,368.16 1,436,655.68 Accrued Interest Payable 83,800.04 Claims Costs Payable 469,625.48 Compensated Absences 2,147,447.97 2,239,579.68

Total Long-Term Liabilities 4,469,001.98$ 7,895,876.47$ (12,364,878.45)

Total Net Assets - Governmental Activities (Exhibit 1) 211,350,826.76$



Statement of Revenues, Expenditures and Changes in Fund BalancesGovernmental FundsFor the Year Ended September 30, 2008

PublicBuildings,

General Roads and Fund Bridges Fund Revenues

Taxes 26,151,416.53$ 17,109,849.04$ Licenses and Permits 995,678.15 Intergovernmental 5,467,055.47 2,046,146.33 Charges for Services 10,628,929.52 39,700.00 Fines and Forfeits 31,485.69 Miscellaneous 4,709,942.29 460,415.25

Total Revenues 47,984,507.65 19,656,110.62 Expenditures Current:

General Government 21,361,654.88 Public Safety 24,688,740.55 Highways and Roads 3,186,304.96 10,162,987.73 Sanitation 937,442.33 Health 578,408.00 Welfare 183,148.54 Culture and Recreation 840,412.85 Education 61,526.00

Capital Outlay 813,210.00 4,325,586.91 Debt Service:

Principal Retirement 1,002,395.04 184,095.91 Interest and Fiscal Charges 412.94 76,084.41

Intergovernmental 13,584.38 Total Expenditures 53,653,656.09 14,762,339.34

Excess (Deficiency) of Revenues Over Expenditures (5,669,148.44) 4,893,771.28 Other Financing Sources (Uses)

Transfers In 7,613,287.04 315,840.00 Sale of Capital Assets 261,089.09 595,786.71 Transfers Out (1,811,883.72) (6,138,898.88)

Total Other Financing Sources (Uses) 6,062,492.41 (5,227,272.17)

Net Change in Fund Balances 393,343.97 (333,500.89) Fund Balances - Beginning of Year 16,946,290.81 5,978,389.91 Fund Balances - End of Year 17,339,634.78$ 5,644,889.02$ The accompanying Notes to the Financial Statements are an integral part of this statement.


Other TotalGovernmental Governmental

Funds Funds

5,674,632.58$ 48,935,898.15$ 216,985.00 1,212,663.15

7,869,732.50 15,382,934.30 5,345,447.86 16,014,077.38

31,485.69 369,736.03 5,540,093.57

19,476,533.97 87,117,152.24

8,161,283.52 29,522,938.40 888,832.43 25,577,572.98

6,092,403.92 19,441,696.61 937,442.33

1,503,669.33 2,082,077.33 148,106.85 331,255.39

1,315,294.79 2,155,707.64 61,526.00

886,799.45 6,025,596.36

1,094,144.36 2,280,635.31 199,625.42 276,122.77

13,584.38 20,290,160.07 88,706,155.50

(813,626.10) (1,589,003.26)

2,144,231.15 10,073,358.19 29,428.51 886,304.31

(1,815,575.59) (9,766,358.19) 358,084.07 1,193,304.31

(455,542.03) (395,698.95)

10,015,976.95 32,940,657.67

9,560,434.92$ 32,544,958.72$


Reconciliation of the Statement of Revenues, Expenditures and Changesin Fund Balances of Governmental Funds to the Statement of ActivitiesFor the Year Ended September 30, 2008

Net Change in Fund Balances - Total Governmental Funds (Exhibit 5) (395,698.95)$

Amounts reported for governmental activities in the Statement of Activities (Exhibit 2) are different because:

Governmental funds report capital outlay as an expenditure. However, in the Statement of Activities, the cost of these assets is allocated over their estimated useful lives as depreciation expense. This is the amount by which capital outlay($6,025,596.36) exceeded depreciation ($3,680,091.12) in the current period. 2,345,505.24

In the Statement of Activities, only the gain on the sale of capital assets is reported, whereas in the governmental funds, the proceeds from the sale increase financial resources. Thus the changes in net assets differs from the change in fund balance by the book value of the capital assets sold.

Proceeds from the Sale of Capital Assets 886,304.31$ Gain on Sale of Capital Assets 93,763.12 (792,541.19)

Repayment of bond principal is an expenditure in the governmental funds, but the repayment reduces long-term liabilities in the Statement of Net Assets and doesnot affect the Statement of Activities. 2,280,635.31

Some items reported in the Statement of Activities do not require the use of currentfinancial resources, and therefore are not reported as expenditures in the governmental funds. These items consist of:

Net Increase in Compensated Absences (775,406.86)$ Net Decrease in Claims Costs Payable 30,804.52 Amortization of Bond Premium 385.81 Amortization of Deferred Issuance Costs (6,003.67) Net Decrease in Accrued Interest Payable 17,653.22

Total Additional Expenditures (732,566.98)

In the Statement of Activities, donation of capital assets is recorded as revenue,whereas in the governmental funds it is not recorded.

Donated Assets 10,697,429.18

Change in Net Assets of Governmental Activities (Exhibit 2) 13,402,762.61$



Statement of Net AssetsProprietary FundsSeptember 30, 2008

Solid Water Waste Fund Department Fund Assets Current Assets

Cash and Cash Equivalents 1,085,901.80$ 6,785,280.28$ Investments 4,326,478.46 Receivables (Note 4) 755,591.89 738,725.07 Due from Other Funds 16,607.99 Inventories 2,101,394.00 Deferred Charges 6,884.50 Prepaid Expenses 29,461.07 38,082.11

Total Current Assets 1,887,562.75 13,996,844.42 Noncurrent Assets

Restricted Cash with Fiscal Agent 716,116.14 SRF Warrants Escrow 1,413,861.00 Deferred Charges 89,498.28 Capital Assets (Note 5):

Nondepreciable 574,180.30 Depreciable, Net 2,194,928.51 38,142,027.82

Total Noncurrent Assets 2,194,928.51 40,935,683.54

Total Assets 4,082,491.26 54,932,527.96 Liabilities Current Liabilities

Payables (Note 8) 344.00 96,708.87 Due to Other Funds 322,281.76 22,842.00 Deferred Revenue 11,425.00 Accrued Wages Payable 106,671.43 131,247.58 Capital Leases Payable 117,038.52 Warrants Payable 920,000.00 Add: Unamortized Premium 3,050.11 Less: Loss - Early Retirement of Debt (21,370.43) Accrued Interest Payable 225.30 86,533.00 Compensated Absences 115,496.51

Total Current Liabilities 662,057.52$ 1,250,436.13$

Major Funds


Other Fund TotalBuilding Enterprise

Inspection Fund Funds

708,832.71$ 8,580,014.79$ 4,326,478.46

876.44 1,495,193.40 16,607.99 2,101,394.00 6,884.50

67,543.18 709,709.15 16,594,116.32

716,116.14 1,413,861.00 89,498.28 574,180.30

312,341.37 40,649,297.70 312,341.37 43,442,953.42

1,022,050.52 60,037,069.74

46.83 97,099.70 3,178.73 348,302.49

87,025.45 98,450.45 28,698.41 266,617.42

117,038.52 920,000.00 3,050.11 (21,370.43) 86,758.30

35,118.62 150,615.13 154,068.04$ 2,066,561.69$


Statement of Net AssetsProprietary FundsSeptember 30, 2008

Solid Water Waste Fund Department Fund

Noncurrent Liabilities Warrants Payable $ 12,475,000.00$ Add: Unamortized Premium on Warrants Payable 39,651.48 Less: Loss - Early Extinguishment of Debt (85,481.68) Compensated Absences 171,085.67 492,402.25

Total Noncurrent Liabilities 171,085.67 12,921,572.05

Total Liabilities 833,143.19 14,172,008.18

Net Assets Invested in Capital Assets, Net of Related Debt 2,077,889.99 26,788,750.29 Restricted for Debt Service 716,116.14 Unrestricted 1,171,458.08 13,255,653.35 Total Net Assets 3,249,348.07$ 40,760,519.78$ The accompanying Notes to the Financial Statements are an integral part of this statement.

Major Funds




$ 12,475,000.00$ 39,651.48 (85,481.68)

57,957.93 721,445.85 57,957.93 13,150,615.65

212,025.97 15,217,177.34

312,341.37 29,178,981.65

716,116.14 497,683.18 14,924,794.61

810,024.55$ 44,819,892.40$


Statement of Revenues, Expenses and Changes in Fund Net AssetsProprietary FundsFor the Year Ended September 30, 2008

Solid Water Waste Fund Department Fund Operating Revenues

Charges for Services 8,144,484.67$ 587,828.47$ Water Sales 8,064,927.50 Miscellaneous 188,735.56 Late Payment Fees 101,677.56

Total Operating Revenues 8,246,162.23 8,841,491.53 Operating Expenses

Salaries and Benefits 3,219,615.77 3,624,013.40 Contractual and Professional Services 267,423.55 875,755.43 Materials and Supplies 763,539.83 635,196.11 Repairs and Maintenance 618,468.43 230,021.40 Utilities 605,641.22 Communications 13,464.17 Office Expense 5,230.05 2,046.00 Depreciation 478,573.37 1,412,668.69 Landfill Expenses 2,362,878.74 Purchase of Water 412,190.15 Billing Fees 7,057.20 349,694.01 Miscellaneous 284.46 52,542.39

Total Operating Expenses 7,736,535.57 8,199,768.80

Operating Income (Loss) 509,626.66 641,722.73 Nonoperating Revenues (Expenses)

Interest Revenue 25,590.20 436,080.07 Donated Assets 911,811.62 Gain/(Loss) on Sale of Equipment (662.04) (25,348.93) Interest Expense (13,972.01) (545,977.81)

Total Nonoperating Revenues (Expenses) 10,956.15 776,564.95

Income (Loss) Before Transfers 520,582.81 1,418,287.68

TransfersTransfers In 143,000.00 Transfers Out (400,000.00)

Total Transfers 143,000.00 (400,000.00)

Changes in Net Assets 663,582.81 1,018,287.68 Net Assets - Beginning of Year 2,585,765.26 39,742,232.10 Net Assets - End of Year 3,249,348.07$ 40,760,519.78$ The accompanying Notes to the Financial Statements are an integral part of this statement.

Major Funds




746,118.76$ 9,478,431.90$ 8,064,927.50

28.00 188,763.56 90.00 101,767.56

746,236.76 17,833,890.52

795,548.88 7,639,178.05 1,143,178.98

31,926.89 1,430,662.83 11,502.99 859,992.82 1,199.40 606,840.62

11,147.84 24,612.01 4,445.24 11,721.29

42,503.09 1,933,745.15 2,362,878.74 412,190.15 356,751.21

7,151.26 59,978.11 905,425.59 16,841,729.96

(159,188.83) 992,160.56

21,493.73 483,164.00 911,811.62

(26,010.97) (559,949.82)

21,493.73 809,014.83

(137,695.10) 1,801,175.39

143,000.00 (50,000.00) (450,000.00) (50,000.00) (307,000.00)

(187,695.10) 1,494,175.39

997,719.65 43,325,717.01 810,024.55$ 44,819,892.40$


Statement of Cash FlowsProprietary FundsFor the Year Ended September 30, 2008

Solid WaterWaste Fund Department Fund

Cash Flows from Operating ActivitiesReceipts from Customers 8,225,314.45$ 8,947,776.86$ Payments to Suppliers (4,038,445.69) (3,289,567.96) Payments to Employees (3,169,705.23) (3,568,094.32)

Net Cash Provided (Used) by Operating Activities 1,017,163.53 2,090,114.58

Cash Flows from Noncapital Financing ActivitiesAdvances to Other Funds (305,108.01) 11,390.73 Transfers 143,000.00 (400,000.00)

Net Cash Provided (Used) by Noncapital Financing Activities (162,108.01) (388,609.27)

Cash Flows from Capital and Related Financing ActivitiesDisposal of Capital Assets 17,962.50 Purchase of Capital Assets (514,862.47) (2,167,880.13) Principal Paid on Capital Debt (573,499.59) (885,000.00) Interest Paid on Capital Debt (16,933.25) (532,040.00)

Net Cash Provided (Used) by Capitaland Related Financing Activities (1,105,295.31) (3,566,957.63)

Cash Flows from Investing ActivitiesPurchase of Investments (228,018.39) Interest and Dividends 25,590.20 436,080.07

Net Cash Provided (Used) by Investing Activities 25,590.20 208,061.68

Net Increase/(Decrease) in Cash and Cash Equivalents (224,649.59) (1,657,390.64)

Cash and Cash Equivalents - Beginning of Year 1,310,551.39 9,158,787.06

Cash and Cash Equivalents - End of Year 1,085,901.80$ 7,501,396.42$

Major Funds




765,488.09$ 17,938,579.40$ (71,037.53) (7,399,051.18)

(777,753.36) (7,515,552.91) (83,302.80) 3,023,975.31

939.47 (292,777.81) (50,000.00) (307,000.00) (49,060.53) (599,777.81)

1,259.33 19,221.83 (1,298.96) (2,684,041.56)

(1,458,499.59) (548,973.25)

(39.63) (4,672,292.57)

(228,018.39) 21,493.73 483,164.00 21,493.73 255,145.61

(110,909.23) (1,992,949.46)

819,741.94 11,289,080.39

708,832.71$ 9,296,130.93$


Statement of Cash FlowsProprietary FundsFor the Year Ended September 30, 2008

Solid WaterWaste Fund Department Fund

Reconciliation of Operating Income (Loss) to Net CashProvided (Used) by Operating Activities

Operating Income (Loss) 509,626.66$ 641,722.73$

Adjustments to Reconcile Operating Income to NetCash Provided (Used) by Operating Activities

Depreciation Expense 478,573.37 1,412,668.69 Change in Assets and Liabilities:

Receivables, Net (20,847.78) 107,295.33 Prepaid Items (38,082.11) Inventories (149,021.07) Accounts and Other Payables (99.26) 60,621.93 Deferred Revenue (1,010.00) Wages Payable 23,756.69 24,946.79 Employee Benefits 26,153.85 30,972.29

Net Cash Provided by Operating Activities 1,017,163.53$ 2,090,114.58$

Noncash Investing, Capital and Financing Activities:During the year, the Water Department Fund received donated assets totaling $911,811.62.


Major Funds




(159,188.83)$ 992,160.56$

42,503.09 1,933,745.15

(510.00) 85,937.55 (38,082.11)

(149,021.07) (3,663.91) 56,858.76 19,761.33 18,751.33 5,703.54 54,407.02

12,091.98 69,218.12

(83,302.80)$ 3,023,975.31$


Statement of Fiduciary Net AssetsSeptember 30, 2008

Private-Purpose Agency Trust Funds Funds Assets Current Assets

Cash and Cash Equivalents 2,761,138.44$ 9,459,445.95$ Ad Valorem Taxes Receivable 1,545,942.62 Receivables (Note 4) 2,236.00 2,542,230.45 Prepaid Items 27,023.49

Total Current Assets 4,336,340.55 12,001,676.40 Noncurrent Assets

Capital Assets: Depreciable, Net (Note 5) 2,255,684.09

Total Noncurrent Assets 2,255,684.09

Total Assets 6,592,024.64 12,001,676.40 Liabilities Current Liabilities

Payables (Note 8) 9,785.65 11,483,247.42 Deferred Revenue 1,545,942.62 Accrued Wages Payable 3,664.07 Employee Benefits Payable 518,428.98 Capital Leases Payable 224,473.67 Warrant PayableAccrued Interest Payable 2,466.34 Compensated Absences 2,996.02

Total Current Liabilities 1,789,328.37 12,001,676.40

Noncurrent Liabilities Capital Leases Payable 1,402,517.27 Warrant Payable Compensated Absences 145.58

Total Noncurrent Liabilities 1,402,662.85

Total Liabilities 3,191,991.22 12,001,676.40$ Net Assets Invested in Capital Assets, Net of Related Debt 628,693.15 Held in Trust for Other Purposes 2,771,340.27

Total Net Assets 3,400,033.42$



Statement of Changes in Fiduciary Net AssetsFor the Year Ended September 30, 2008

Private-Purpose Trust Funds Additions Contributions from:

Taxes 1,406,292.16$ Intergovernmental 110,000.00 Court Fees 97,225.02 Law Library Fees 115,480.78 Excess Land Sales 809,503.43 Miscellaneous 53,587.31 Interest 3,380.19

Total Additions 2,595,468.89 Deductions

Law Library 107,905.83 Land Redemption 733,619.80 Public Safety 952,750.16 Welfare 56,489.80 Interest and Fiscal Charges 5,493.63 Depreciation Expense 432,148.44

Total Deductions 2,288,407.66

Changes in Net Assets 307,061.23 Net Assets - Beginning of Year 3,092,972.19 Net Assets - End of Year 3,400,033.42$ The accompanying Notes to the Financial Statements are an integral part of this statement.


Notes to the Financial Statements For the Year Ended September 30, 2008


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Note 1 – Summary of Significant Accounting Policies The financial statements of the Madison County Commission (the “Commission”) have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP) as applied to governmental units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. The more significant of the government’s accounting policies are described below. A. Reporting Entity The Madison County Commission is a general purpose local government governed by separately elected commissioners. The accompanying financial statements present the activities of the Madison County Commission, (the primary government). Generally accepted accounting principles (GAAP) require that the financial statements present the Commission (the primary government) and its component units. Component units generally are legally separate entities for which a primary government is financially accountable. Financial accountability ordinarily involves meeting the following criteria: 1) the primary government appoints a voting majority of the organization’s governing body and the primary government is able to impose its will upon the potential component unit, or there is a possibility that the potential component unit may provide specific financial benefits or impose specific financial burdens on the primary government or 2) the potential component unit is fiscally dependent on the primary government. Based on the application of the above criteria, there are no component units which are required to be included in the reporting entity. B. Government-Wide and Fund Financial Statements Government-Wide Financial Statements The statement of net assets and the statement of activities display information about the Commission. These statements include the financial activities of the primary government, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. These statements distinguish between the governmental and business-type activities of the Commission. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions. Business-type activities are financed in whole or in part by fees charged to external parties.



25

The statement of activities presents a comparison between direct expenses and program revenues for each segment of the business-type activities of the Commission and for each function of the Commission’s governmental activities. Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. The Commission does not allocate indirect expenses to the various functions. Program revenues include (a) charges to customers or applicants who purchase, use or directly benefit from goods, services, or privileges provided by a given function or program and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues. Fund Financial Statements The fund financial statements provide information about the Commission’s funds, including fiduciary funds. Separate statements for each fund category – governmental, proprietary, and fiduciary – are presented. The emphasis of fund financial statements is on major governmental and enterprise funds, each displayed in a separate column. All remaining governmental and enterprise funds are aggregated and reported as nonmajor funds. The Commission reports the following major governmental funds: ♦ General Fund – The general fund is the primary operating fund of the Commission. It is

used to account for all financial resources except those required to be accounted for in another fund. The Commission primarily received revenues from collections of property taxes and revenues collected by the State of Alabama and shared with the Commission. Also, accounted for in the general fund are workers’ compensation benefits and employee health insurance to self-insure the Commission against liability claims.

♦ Public Buildings, Roads and Bridges Fund – This fund is used to account for the

expenditures of special county property taxes for building and maintaining public buildings, roads and bridges.

The Commission reports the following major enterprise funds: ♦ Solid Waste Fund – This fund is used to account for cost of providing solid waste service to

county residents. ♦ Water Department Fund – This fund is used to account for the cost of providing water

service to residents within the unincorporated areas of Madison County, with the exception of the Harvest-Monrovia Community in northwest Madison County.



26

The Commission reports the following fund types in the other governmental funds’ column: Governmental Fund Types ♦ Special Revenue Funds – These funds are used to account for the proceeds of specific

revenue sources (other than those derived from special assessments or dedicated for major capital projects) requiring separate accounting because of legal or regulatory provisions or administrative action.

♦ Debt Service Funds – These funds are used to account for the accumulation of resources for,

and the payment of, the Commission’s principal and interest on governmental bonds. ♦ Capital Projects Funds – These funds are used to account for financial resources to be used

for the acquisition or construction of major capital facilities (other than those financed by proprietary funds).

Proprietary Fund Types ♦ Other Enterprise Funds – These funds report the activities for which fees are charged to

external users for goods or services. This fund type is also used when the activity is financed with debt that is secured by a pledge of the net revenues from the fees.

The Commission reports the following fiduciary fund types: Fiduciary Fund Types ♦ Private-Purpose Trust Funds – These funds are used to report all trust agreements under

which principal and income benefit individuals, private organizations, or other governments. ♦ Agency Funds – These funds are used to report assets held by the Commission in a purely

custodial capacity. The Commission collects these assets and transfers them to the proper individual, private organizations, or other government.

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 at the time liabilities are incurred, regardless of the timing of related cash flows. Nonexchange transactions, in which the Commission gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, grants, entitlements, and donations. On an accrual basis, revenue from grants, entitlements, and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied. Revenue from property taxes is recognized in the fiscal year for which the taxes are levied.



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As a general rule the effect of interfund activity has been eliminated from the government-wide financial statements. Exceptions to the general rule are charges between the government’s water system, solid waste function, building inspection functions and various other functions of the government. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. 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 Commission considers revenues to be available if they are collected within sixty (60) days of the end of the current fiscal year. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt, claims and judgments and compensated absences, which are recognized as expenditures to the extent they have matured. General capital asset acquisitions are reported as expenditures in governmental funds. General long-term debt issued and acquisitions under capital leases are reported as other financing sources. 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 Commission’s enterprise funds are charges to customers for sales and services. Operating expenses for enterprise funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. Under the terms of grant agreements, the Commission funds certain programs by a combination of specific cost-reimbursement grants, categorical block grants, and general revenues. Thus, when program expenses are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the Commission’s policy to first apply cost-reimbursement grant resources to such programs, followed by general revenues. Private-sector standards of accounting and financial reporting issued prior to December 1, 1989, generally are followed in both the government-wide and proprietary fund financial statements to the extent that those standards do not conflict with or contradict guidance of the Governmental Accounting Standards Board. Governments also have the option of following subsequent private-sector guidance for their business-type activities and enterprise funds, subject to this same limitation. The Commission has not elected to follow subsequent private-sector guidance.



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D. Assets, Liabilities, and Net Assets/Fund Balances 1. Deposits and Investments Cash and cash equivalents include cash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition. For purposes of the statement of cash flows, the proprietary fund type considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. State statutes authorize the County Commission to invest in obligations of the U. S. Treasury and securities of federal agencies and certificates of deposit. Investments are reported at fair value, based on quoted market prices. 2. Receivables All ad valorem tax and sales tax receivables are shown at gross amounts. Sales tax receivables are based on the amounts collected within 60 days after year-end. Sales tax receivables consist of taxes that have been paid by consumers in September. This tax is normally remitted to the Commission within the next 60 days. Millage rates for property taxes are levied at the first regular meeting of the Commission in February of each year. Property taxes are assessed for property as of October 1 of the preceding year based on the millage rates established by the County Commission. Property taxes are due and payable the following October 1 and are delinquent after December 31. Amounts receivable, net of estimated refunds and estimated uncollectible amounts, are recorded for the property taxes levied in the current year. However, since the amounts are not available to fund current year operations, the revenue is deferred and recognized in the subsequent fiscal year when the taxes are both due and collectible and available to fund operations. Receivables due from other governments include amounts due from grantors for grants issued for specific programs and capital projects. Receivables from external parties are amounts that are being held in a trustee or agency capacity by the fiduciary funds. 3. Inventories Inventories are valued at cost, which approximates market, using the first-in/first-out (FIFO) method. Inventories of governmental funds are recorded as expenditures when consumed rather than when purchased.



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4. Prepaid Items Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government-wide and fund financial statements. 5. Restricted Assets Certain resources set aside for the repayment of general obligation warrants and water revenue warrants outstanding are classified as restricted assets on the balance sheet because their use is limited by applicable bond covenants. The SRF Warrants Escrow account is used to report proceeds on hand that are restricted for use in water department construction. The “2003 General Obligation Warrant Fund” and the “Water Department Fund” accounts are used to segregate resources accumulated for debt service. 6. Capital Assets Capital assets, which include property, equipment, and infrastructure assets (e.g., roads, bridges, water and sewer systems, and similar items), are reported in the applicable governmental and business-type activities columns in the government-wide financial statements. Such assets are valued at cost where historical records are available and at an estimated historical cost where no historical records exist. Donated fixed assets are valued at their estimated fair market value on the date received. Additions, improvements and other capital outlays that significantly extend the useful life of an asset are capitalized. Other costs incurred for repairs and maintenance are expensed as incurred. Major outlays of capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase of capital assets of business-type activities is included as part of the capitalized value of the assets constructed. Depreciation on all assets is provided on the straight-line basis over the assets estimated useful life. Capitalization thresholds (the dollar values above which asset acquisitions are added to the capital asset accounts) and estimated useful lives of capital assets reported in the governmental activities portion of the government-wide statements are as follows:

Capitalization

Threshold Estimated Useful Life

Buildings $ 50,000 20 – 40 years Equipment and Furniture $ 5,000 10 years Roads $250,000 20 years Bridges $ 50,000 40 years



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Capitalization thresholds and estimated useful lives of capital assets reported in the business-type activities portion of the government-wide statements and proprietary funds are as follows:

Capitalization

Threshold Estimated Useful Life

Buildings $100 40 – 50 years Equipment and Furniture $100 5 – 7 years Water Systems Assets $100 40 – 50 years

The Commission began retroactively reporting its major general infrastructure assets (assets that were acquired between October 1, 1980 to September 30, 2002 or that received major renovations, restorations or improvements during that period) as of the fiscal year ending September 30, 2007. The majority of governmental activities infrastructure assets are roads and bridges. The Association of County Engineers has determined that due to the climate and materials used in road construction, the base of the roads in the county will not deteriorate and therefore should not be depreciated. The remaining part of the roads, the surface, will deteriorate and will be depreciated. The entire costs of bridges in the county will be depreciated. 7. Long-Term Obligations In the government-wide financial statements, and proprietary fund types in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund type statement of net assets. Warrant premiums, as well as issuance costs, are deferred and amortized over the life of the bonds. Warrants payable are reported net of the applicable warrant premium or discount. Warrant issuance costs are reported as deferred charges and amortized over the term of the related debt. In the fund financial statements, governmental fund types recognize bond premiums, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. Bond issuance costs for the Series 2003 General Obligation Warrants in the amount of $61,420.00 are being amortized over 20 years. At September 30, 2008, the amount due within one year is $3,071.00.



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Bond issuance costs for the Series 2003 Water Revenue Refunding and Capital Improvement Warrants in the amount of $137,689.72 are being amortized over 20 years. At September 30, 2008, the amount due within the next year is $6,884.50. Issuance costs associated with the financing for the Monrovia Community Center Project, totaling $43,990.00, are being amortized over 15 years. At September 30, 2008, the amount due within the next year is $2,932.67. 8. Compensated Absences The Commission has a standard leave policy for its full-time employees as to sick, annual and compensatory leave. Annual Leave For the first year through the fifth year, all non-probationary employees are credited 1 day of annual leave for each month of continuous employment. Upon the completion of the fifth year and each year thereafter, in addition to the 1 day per month, an employee’s leave account is credited with 1 additional day of leave for each year of continuous employment after the fifth year, to a maximum of 13 days additional leave over and above the basic 12 days. Unused annual leave credits may be accumulated and carried over into successive years by employees up to a maximum of 60 days. Upon separation or retirement, employees are paid, up to the maximum, for accrued annual leave. Sick Leave Sick leave benefits with pay are provided for permanent full-time employees in the amount of 12 workdays per fiscal year. Sick leave benefits are accrued by all non-probationary permanent full-time employees at a rate of 1 workday per month of continuous employment and credited each month. Unused sick leave credits may be accumulated and carried over into successive fiscal years by employees. There is no limit on the number of hours an employee may accrue. All unused sick leave is forfeited upon separation and is not compensated to the employee. Compensatory Leave Compensatory leave is provided to permanent full-time employees in accordance with the Fair Labor Standards Act. The maximum accrual for regular employees is 240 hours. The maximum accrual for law enforcement personnel (excluding those covered under the Code of Alabama 1975, Section 36-21-4.1) is 480 hours. According to the Fair Labor Standards Act, employees should be paid for compensatory leave in excess of the maximum hours stipulated. Compensatory leave is calculated at one and one-half times the regular hours.



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At September 30, 2008, no liability for unpaid sick leave is accrued in the financial statements since employees do not receive termination payments for sick leave balances. As of September 30, 2008, the liability for accrued annual and compensatory leave is approximately $5,444,297.03. Of this amount, $4,569,094.45 is reported in the governmental activities and $872,060.98 is reported in the business-type activities. There is an additional liability for compensated absences of $3,141.60 reported in the fiduciary activities. 9. Net Assets/Fund Equity Net assets are reported on the government-wide and proprietary fund financial statements and are required to be classified for accounting and reporting purposes into the following net asset categories: ♦ Invested in Capital Assets, Net of Related Debt – Capital assets, net of accumulated

depreciation and outstanding principal balances of debt attributable to the acquisition, construction or improvement of those assets. Any significant unspent related debt proceeds at year-end related to capital assets are not included in this calculation.

♦ Restricted – Constraints imposed on net assets by external creditors, grantors, contributors,

laws or regulations of other governments, or law through constitutional provision or enabling legislation.

♦ Unrestricted – Net assets that are not subject to externally imposed stipulations. Unrestricted

net assets may be designated for specific purposes by action of the Commission. Fund equity is reported in the fund financial statements. Governmental funds report reservations of fund balance for amounts that are not available for appropriation or are legally restricted by outside parties for use for a specific purpose. Note 2 – Stewardship, Compliance, and Accountability Budgets Budgets are adopted on a basis of accounting consistent with accounting principles generally accepted in the United States of America (GAAP) for the General Fund with the exception of motor vehicle ad valorem taxes, which are budgeted only to the extent expected to be received rather than on the modified accrual basis of accounting. The Public Buildings, Roads and Bridges Fund budgets on a basis of accounting consistent with GAAP with the exception of motor vehicle ad valorem taxes, which are budgeted only to the extent expected to be received rather than on the modified accrual basis of accounting. Capital projects funds adopt project-length budgets. All appropriations lapse at fiscal year-end.



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The present statutory basis for county budgeting operations is the County Financial Control Act of 1935, as amended by Act Number 2007-488, Acts of Alabama. According to the terms of the law, at some meeting in September of each year, but in any event not later than October 1, the Commission must estimate the anticipated revenues, estimated expenditures and appropriations for the respective amounts that are to be used for each of such purposes. The appropriations must not exceed the total revenues available for appropriation plus any balances on hand. Expenditures may not legally exceed appropriations. Budgets may be adjusted during the fiscal year when approved by the County Commission. Any changes must be within the revenues and reserves estimated to be available. Note 3 – Deposits The custodial credit risk for deposits is the risk that, in the event of a bank failure, the Commission will not be able to cover deposits or will not be able to recover collateral securities that are in the possession of an outside party. The Commission’s deposits at year-end were entirely covered by federal depository insurance or by the Security for Alabama Funds Enhancement Program (SAFE Program). The SAFE Program was established by the Alabama Legislature and is governed by the provisions contained in the Code of Alabama 1975, Sections 41-14A-1 through 41-14A-14. Under the SAFE Program all public funds are protected through a collateral pool administered by the Alabama State Treasurer’s Office. Under this program, financial institutions holding deposits of public funds must pledge securities as collateral against those deposits. In the event of failure of a financial institution, securities pledged by that financial institution would be liquidated by the State Treasurer to replace the public deposits not covered by the Federal Depository Insurance Corporation (FDIC). If the securities pledged fail to produce adequate funds, every institution participating in the pool would share the liability for the remaining balance. All of the Commission’s investments were in certificates of deposit. These certificates of deposit are classified as “Deposits” in order to determine insurance and collateralization. However, they are classified as “Investments” on the financial statements.



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Note 4 – Receivables On September 30, 2008, receivables for the Commission’s individual major funds and nonmajor funds in the aggregate are as follows:

Governmental Funds Proprietary Funds

General Fund

Public Buildings, Roads and

Bridges Fund

Other Governmental

Funds

Solid Waste Fund

Water Department

Fund

Other Enterprise

Funds Totals Due From Other Governments $1,643,096.08 $472,516.56 $ 952,982.00

$ $ $ $3,068,594.64

Accounts Receivable – Customer 755,591.89 721,097.00 1,476,688.89 Other Receivables 61,560.45 437,842.60 61,980.60 17,628.07 876.44 579,888.16 External Parties 3,880,504.37 2,264.57 3,882,768.94 Total $5,585,160.90 $912,623.73 $1,014,962.60 $755,591.89 $738,725.07 $876.44 $9,007,940.63

On September 30, 2008, receivables for the Commission’s fiduciary funds are as follows:

Agency Fund

Private-PurposeTrust Fund

Total Fiduciary

Funds Due From Other Governments $2,180,742.64 $2,236.00 $2,182,978.64 Other Receivables 361,487.81 361,487.81 Total $2,542,230.45 $2,236.00 $2,544,466.45



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Governmental and fiduciary funds report deferred revenues in connection with receivables for revenues that are not considered to be available to liquidate liabilities of the current period. Governmental, proprietary and fiduciary funds also defer revenue recognition in connection with resources that have been received, but not yet earned. At September 30, 2008, the various components of deferred revenue and unearned revenue reported in the governmental, proprietary and fiduciary funds were as follows:

Unavailable Unearned Ad Valorem Taxes Receivable $34,155,129.04 $ Motor Vehicle Ad Valorem Taxes 2,191,424.92 Unearned Revenues 1,420,561.67 Total Deferred/Unearned Revenue for Governmental Funds 34,155,129.04 3,611,986.59 Proprietary Funds – Customer Deposits $ 98,450.45 Fiduciary Funds – Ad Valorem Taxes Receivable $ 1,545,942.62

Note 5 – Capital Assets Capital asset activity for the year ended September 30, 2008, was as follows:

Balance

10/01/2007 Additions (*) Retirements Balance

09/30/2008 Governmental Activities: Capital Assets, Not Being Depreciated: Land $ 5,617,907.09 $ $ (74,452.00) $ 5,543,455.09 Construction in Progress 300,328.05 111,523.13 (411,851.18) Total Capital Assets, Not Being Depreciated 5,918,235.14 111,523.13 (486,303.18) 5,543,455.09 Capital Assets Being Depreciated: Infrastructure 156,466,801.19 12,907,447.16 169,374,248.35 Land Improvements 29,881.00 29,881.00 Buildings 20,750,581.57 411,851.18 21,162,432.75 Equipment and Furniture 20,214,122.78 3,929,055.25 (2,050,500.37) 22,092,677.66 Equipment Under Capital Lease 1,386,363.00 (225,000.00) 1,161,363.00 Total Capital Assets Being Depreciated 198,847,749.54 17,248,353.59 (2,275,500.37) 213,820,602.76 Less Accumulated Depreciation for: Infrastructure (7,847,245.95) (927,978.17) (8,775,224.12) Land Improvements (1,992.00) (1,494.00) (3,486.00) Buildings (7,033,393.24) (518,763.00) (7,552,156.24) Equipment and Furniture (10,634,196.12) (2,171,969.83) 1,332,411.18 (11,473,754.77) Equipment Under Capital Lease (401,124.76) (116,136.12) 56,250.00 (461,010.88) Total Accumulated Depreciation (25,917,952.07) (3,736,341.12) 1,388,661.18 (28,265,632.01) Total Capital Assets Being Depreciated, Net 172,929,797.47 13,512,012.47 (886,839.19) 185,554,970.75 Governmental Activities Capital Assets, Net $178,848,032.61 $13,623,535.60 $(1,373,142.37) $191,098,425.84 (*) The additions column for depreciation includes reclassifications for a reduction in equipment under capital lease in the amount of $56,250.00 for equipment paid off during the 2008 fiscal year.



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Balance

10/01/2007

Additions

Retirements Balance

09/30/2008 Business-Type Activities: Capital Assets, Not Being Depreciated: Land $ 144,890.25 $ $ $ 144,890.25 Construction in Progress 1,170.00 429,290.05 (1,170.00) 429,290.05 Total Capital Assets, Not Being Depreciated 146,060.25 429,290.05 (1,170.00) 574,180.30 Capital Assets Being Depreciated: Land Improvements 138,454.78 138,454.78 Buildings 19,240,520.94 13,026.93 (500.00) 19,253,047.87 Infrastructure 30,383,892.38 2,165,899.57 (60,207.00) 32,489,584.95 Equipment and Furniture 9,084,699.34 987,636.63 (309,677.76) 9,762,658.21 Equipment Under Capital Lease 1,636,155.00 1,636,155.00 Total Capital Assets Being Depreciated 60,483,722.44 3,166,563.13 (370,384.76) 63,279,900.81 Less Accumulated Depreciation for: Buildings (4,192,046.34) (451,120.92) (4,643,167.26) Land Improvements (20,587.43) (6,922.44) (27,509.87) Infrastructure (9,619,706.07) (741,143.55) 29,113.16 (10,331,736.46) Equipment and Furniture (6,563,648.48) (570,943.04) 297,208.80 (6,837,382.72) Equipment Under Capital Lease (627,191.60) (163,615.20) (790,806.80) Total Accumulated Depreciation (21,023,179.92) (1,933,745.15) 326,321.96 (22,630,603.11) Total Capital Assets Being Depreciated, Net 39,460,542.52 1,232,817.98 (44,062.80) 40,649,297.70 Business-Type Activities Capital Assets, Net $ 39,606,602.77 $ 1,662,108.03 $ (45,232.80) $ 41,223,478.00

Balance

10/1/2007 Additions Retirements Balance

09/30/2008 Fiduciary Activities: Capital Assets Being Depreciated: Buildings $ 53,672.00 $ $ $ 53,672.00 Equipment and Furniture 3,807,768.66 (2,450,198.06) 1,357,570.60 Equipment Under Capital Lease 500,316.50 2,450,198.06 2,950,514.56 Total Capital Assets Being Depreciated 4,361,757.16 2,450,198.06 (2,450,198.06) 4,361,757.16 Less Accumulated Depreciation for: Buildings (4,360.59) (1,341.72) (5,702.31) Equipment and Furniture (1,369,037.24) (135,756.12) 825,057.44 (679,735.92) Equipment Under Capital Lease (300,526.80) (1,120,108.04) (1,420,634.84) Total Accumulated Depreciation (1,673,924.63) (1,257,205.88) 825,057.44 (2,106,073.07) Private-Purpose Trust Activities Capital Assets, Net $ 2,687,832.53 $ 1,192,992.18 $(1,625,140.62) $ 2,255,684.09 (*) Fire trucks listed under equipment were reclassified to equipment under capital lease due to refinancing. The depreciation was also reclassified.



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

Current Year Depreciation

Expense Governmental Activities: General Government $ 898,401.81 Public Safety 424,768.65 Highways and Roads 2,264,464.77 Health 7,153.17 Welfare 619.92 Culture and Recreation 84,682.80 Total Depreciation Expense – Governmental Activities $3,680,091.12


Expense Business-Type Activities: Solid Waste $ 478,573.37 Building Inspection 42,503.09 Water Department 1,412,668.69 Total Depreciation Expense – Business-Type Activities $1,933,745.15


Expense Fiduciary Activities: General Government $ 5,082.48 Public Safety 427,065.96 Total Depreciation Expense – Fiduciary Activities $432,148.44

Note 6 – Defined Benefit Pension Plan A. Plan Description The Commission contributes to the Employees’ Retirement System of Alabama, an agent multiple-employer public employee retirement system that acts as a common investment and administrative agent for the various state agencies and departments.



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Substantially all employees of the Commission are members of the Employees’ Retirement System of Alabama. Membership is mandatory for covered or eligible employees of the Commission. Benefits vest after 10 years of creditable service. Vested employees may retire with full benefits at age 60 or after 25 years of service. Retirement benefits are calculated by two methods with the retiree receiving payment under the method which yields the highest monthly benefit. The methods are (1) Minimum Guaranteed, and (2) Formula, of which the Formula method usually produces the highest monthly benefit. Under this method retirees are allowed 2.0125% of their average final salary (best three of the last ten years) for each year of service. Disability retirement benefits are calculated in the same manner. Pre-retirement death benefits in the amount of the annual salary for the fiscal year preceding death is provided to plan members. The Employees’ Retirement System was established as of October 1, 1945, under the provisions of Act Number 515, Acts of Alabama 1945, for the purpose of providing retirement allowances and other specified benefits for State employees, State police, and on an elective basis to all cities, counties, towns and quasi-public organizations. The responsibility for general administration and operation of the Employees’ Retirement System is vested in the Board of Control. Benefit provisions are established by the Code of Alabama 1975, Sections 36-27-1 through 36-27-103, as amended, Sections 36-27-120 through 36-27-139, as amended, and Sections 36-27B-1 through 36-27B-6. Authority to amend the plan rests with the Legislature of Alabama. However, the Legislature has granted the Commission authority to accept or reject various Cost-Of-Living-Adjustments (COLAs) granted to retirees. The Retirement Systems of Alabama issues a publicly available financial report that includes financial statements and required supplementary information for the Employees’ Retirement System of Alabama. That report may be obtained by writing to The Retirement Systems of Alabama, 135 South Union Street, Montgomery, Alabama 36130-2150. B. Funding Policy Employees of the Commission, with the exception of full-time law enforcement officers, are required by statute to contribute 5 percent of their salary to the Employees’ Retirement System. As of January 1, 2001, full-time law enforcement officers are required by statute to contribute 6 percent of their salary to the Employees’ Retirement System. The Commission is required to contribute the remaining amounts necessary to fund the actuarially determined contributions to ensure sufficient assets will be available to pay benefits when due. The contribution requirements of the Commission are established by the Employees’ Retirement System based on annual actuarial valuations. The employer’s contribution rate for the year ended September 30, 2008, was 7.35 percent based on the actuarial valuation performed as of September 30, 2006.



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C. Annual Pension Cost For the year ended September 30, 2008, the Commission’s annual pension cost of $2,886,911.87 was equal to the Commission’s required and actual contribution. The required contribution was determined using the “entry age normal” method. The actuarial assumptions as of September 30, 2007, the latest actuarial valuation date, were: (a) 8 percent investment rate of return on present and future assets, and (b) projected salary increases ranging from 7.75 percent at age 20 to 4.61 percent at age 65. Both (a) and (b) include an inflation component of 4.5 percent. The actuarial value of assets was determined using techniques that smooth the effects of short-term volatility in the market value of investments over a five-year period. The unfunded actuarial accrued liability is being amortized as a level percentage of projected payroll on an open basis. The remaining amortization period as of September 30, 2007, was 20 years. The following is three-year trend information for the Commission:

Fiscal Year Ended

Annual Pension Cost (APC)

Percentage of APC

Contributed Net Pension Obligation

9/30/2008 $2,886,911.87 100% $0 9/30/2007 $2,653,717.00 100% $0 9/30/2006 $2,192,129.00 100% $0

D. Funded Status and Funding Progress As of September 30, 2007, the most recent actuarial valuation date, the plan was 83.3 percent funded. The actuarial accrued liability for benefits was $114,833,490 and the actuarial value of assets was $95,599,870, resulting in an unfunded actuarial accrued liability (UAAL) of $19,233,620. The covered payroll (annual payroll of active employees covered by the plan) was $38,704,300, and the ratio of the UAAL to the covered payroll was 49.7 percent. Note 7 – Other Postemployment Benefits (OPEB) On November 20, 1987, the Commission approved a motion to allow retired employees and officials to continue to participate in the County’s health insurance plan. At this time, the retirees paid the full health insurance premium and the County did not share in the cost. Then on May 16, 1988, the Commission passed a motion to pay 25% of the retirees’ health insurance premiums for those who wished to participate. On October 9, 1998, the Commission approved a motion to allow retired employees with 20 or more years of service to participate in the County’s health insurance plan at no cost to the retiree.



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On September 22, 2004, the Commission modified the contribution rates based on years of service and age. The Commission approved a motion to modify retiree insurance contribution rates as follows:

Years of Service Age Category Rate

10-14 Years Service Employee or Dependent Under Age 65 $70 Each per Month 10-14 Years Service Employee or Dependent Age 65 and Over $60 Each per Month 15-19 Years Service Employee or Dependent Under Age 65 $60 Each per Month 15-19 Years Service Employee or Dependent Age 65 and Over $50 Each per Month 20-24 Years Service Employee or Dependent Under Age 65 $40 Each per Month 20-24 Years Service Employee or Dependent Age 65 and Over $30 Each per Month 25+ Years Service Employee – Any Age $0 25+ Years Service Dependent Under Age 65 $25 per Month 25+ Years Service Dependent Age 65 and Over $0

The Commission’s contributions are on a pay-as-you-go basis, and for the year ended September 30, 2008, the Commission’s expenditures to cover approximately 233 participants totaled $1,813,508.50. Note 8 – Payables On September 30, 2008, payables for the Commission’s individual major funds and nonmajor and fiduciary funds in the aggregate are as follows:

Accounts Payables –

Vendors Due to OtherGovernments

Payable to External Parties Total

General Fund $111,254.60 $ 20,957.42 $ $132,212.02 Public Buildings, Roads and Bridges Fund 80,620.96 104,436.85 185,057.81 Other Governmental Funds 75,263.48 264,957.23 340,220.71 Total Governmental Funds 267,139.04 285,914.65 104,436.85 657,490.54 Solid Waste Fund 344.00 344.00 Building Inspection Fund 46.83 46.83 Water Department Fund 64,514.08 32,194.79 96,708.87 Total Proprietary Funds 64,904.91 32,194.79 97,099.70 Total $332,043.95 $318,109.44 $104,436.85 $754,590.24



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Accounts Payables –

Vendors Due to Other Governments

Payable to External Parties Total

Agency Funds $ $7,427,942.88 $4,055,304.54 $11,483,247.42 Private-Purpose Trust Funds 7,330.54 2,454.71 9,785.25 Total $7,330.54 $7,427,942.88 $4,057,759.25 $11,493,032.67

Note 9 – Lease Obligations Capital Leases The Commission is obligated under certain leases accounted for as capital leases. Assets under capital leases totaled $1,161,363.00 for governmental activities and $1,636,155.00 for business-type activities at September 30, 2008. If the Commission completes the lease payments according to the schedules below, which is the stated intent of the Commission, ownership of the leased equipment will pass to the Commission. The lease-purchase contracts give the Commission the right to cancel the lease with 30 days written notice and payment of a pro rata share of the current year’s lease payments. A private-purpose trust fund, the Volunteer Fire Department Fund, is obligated under a certain lease accounted for as a capital lease. Equipment under capital lease totaled $2,950,514.56 for fiduciary activities at September 30, 2008. If the Volunteer Fire Department completes the lease payments according to the schedule below, which is the stated intent of the Volunteer Fire Department, ownership of the leased equipment will pass to the Volunteer Fire Department. The lease-purchase contract gives the Volunteer Fire Department the right to cancel the lease with 30 days written notice and payment of a pro rata share of the current year’s lease payments. The following is a schedule of future minimum lease payments under capital leases, together with the net present value of the minimum lease payments as of September 30.

Fiscal Year Ending Governmental

Activities Business-Type

Activities Fiduciary-Type

Activities September 30, 2009 $ 415,921.13 $117,844.27 $ 287,422.44

2010 186,117.76 287,422.452011 180,819.78 283,511.452012 180,351.80 261,861.522013 180,351.80 238,817.52

2014-2018 901,759.00 524,983.692019-2020 180,351.82

Total Minimum Lease Payments 2,225,673.09 117,844.27 1,884,019.07Less: Amount Representing Interest (446,649.25) (805.75) (257,028.13)Present Value of Net Minimum Lease Payments $1,779,023.84 $117,038.52 $1,626,990.94



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Note 10 – Long-Term Debt The Commission issues General Obligation Warrants to provide funds for the acquisition and construction of major capital facilities, and to refund debt previously issued. In May 2003, the Commission issued $3.7 million in General Obligation Warrants with interest rates ranging from 1.2% t0 4.3%. These warrants were issued to purchase equipment, construct a public safety building, and refund certain equipment debt. $1.1 million of the proceeds were allocated to refund equipment debt in the Enterprise Fund – Solid Waste, and the remainder was allocated to equipment purchase and construction of a public safety building. In November 2000, the Commission issued $7,810,000 in General Obligation Warrants for the purpose of refunding the Commission’s General Obligation Series 1990A and 1990B Warrants. In May 2003, the Commission issued $6.7 million in Special Obligation “Water Revenue Refunding and Capital Improvement Warrants.” The proceeds were used to refund the Series 1993 Special Obligation Water Revenue Warrants and to acquire and/or construct certain capital improvements consisting primarily of fire hydrants and water lines. In September 1999, the Commission issued Special Obligation Water System Revenue Warrants in the amount of $12,645,000 to construct a water treatment plant and two water storage tanks. In April 2008, a mediator appointed by the Madison County Circuit Court mediated between the County Commission and the Madison County Board of Education, Huntsville City Board of Education and Madison City Board of Education with regards to the casual sales tax error. As a result of the mediation, the Commission entered into a settlement with the Board’s of Education with regard to casual sales taxes collected for public school purposes. The casual sales taxes had been paid to the Commission in error for a number of years beginning in 1989. The Boards of Education had received all monies due them from October 1, 2004 forward. The Boards of Education had sought $5,439,824 plus compound interest for the casual sales tax error. The mediated settlement provides that the Commission will pay the three Boards of Education a total of $3,000,000 over a three year period. In addition to the settlement, the Madison County Commission had provided in excess of $6,000,000 in direct cash appropriations and services to the Boards of Education between October 1, 1997 and June 30, 2007. The services provided included site preparation work for new schools, paving and other related work on parking lots, tennis courts, playgrounds, athletic fields and walking tracks.



43

The following is a summary of long-term debt transactions for the Commission for the year ended September 30, 2008:

Balance

10/1/2007 Issued/

Increased Repaid/

Decreased

Debt Outstanding 9/30/2008

Amounts Due Within One Year

Governmental Activities: Bonds Payable: General Obligation Bonds $ 4,495,000.00 $ $ (855,000.00) $ 3,640,000.00 $ 895,000.00Deferred Amounts: Unamortized Premium 5,787.25 (385.81) 5,401.44 385.81 Total Bonds Payable 4,500,787.25 (855,385.81) 3,645,401.44 895,385.81Other Liabilities: Note Payable 3,000,000.00 (1,000,000.00) 2,000,000.00 1,000,000.00 Capital Leases 2,204,659.15 (425,635.31) 1,779,023.84 342,368.16 Compensated Absences 3,749,041.03 820,053.42 4,569,094.45 2,329,514.77 Estimated Claims Costs 1,253,649.00 194,000.48 1,447,649.48 978,024.00 Total Other Liabilities 10,207,349.18 1,014,053.90 (1,425,635.31) 9,795,767.77 4,649,906.93 Total Governmental Activities Long-Term Liabilities 14,708,136.43 1,014,053.90 (2,281,021.12) 13,441,169.21 5,545,292.74 Business-Type Activities: General Obligation Warrants 230,000.00 (230,000.00) Water Department Warrants 14,280,000.00 (885,000.00) 13,395,000.00 920,000.00 Total 14,510,000.00 (1,115,000.00) 13,395,000.00 920,000.00 Deferred Amount on Refunding (128,222.54) 21,370.43 (106,852.11) (21,370.43) Unamortized Premium 45,751.70 (3,050.11) 42,701.59 3,050.11 Total Bonds Payable, Net 14,427,529.16 (1,096,679.68) 13,330,849.48 901,679.68Other Liabilities: Capital Leases 460,538.11 (343,499.59) 117,038.52 117,038.52 Compensated Absences 802,842.86 69,218.12 872,060.98 150,615.13 Business-Type Activities Long-Term Liabilities 15,690,910.13 69,218.12 (1,440,179.27) 14,319,948.98 1,169,333.33 Fiduciary-Type Activities: Warrant Payable 1,787,405.63 (1,787,405.63)Other Liabilities: Capital Leases 189,556.65 1,745,106.67 (307,672.38) 1,626,990.94 224,473.67 Compensated Absences 3,758.77 (617.17) 3,141.60 2,996.02 Fiduciary-Type Activities Long-Term Liabilities $ 1,980,721.05 $1,745,106.67 $ (2,095,695.18) $ 1,630,132.54 $ 227,469.69



44

Payments on the warrants payable that pertain to the Commission’s governmental activities are made by the Public Buildings, Roads and Bridges Fund and Debt Service Funds. The capital lease liability for the governmental activities will be liquidated by the Public Buildings, Roads and Bridges Fund (71%) and Other Governmental Funds (29%). The compensated absences liability attributable to the governmental activities will be liquidated by several of the Commission’s governmental funds. In the past, approximately 59% has been paid by the General Fund, 18% by the Public Buildings, Roads and Bridges Fund, and the remainder by the other governmental funds. The worker’s compensation liability will generally be liquidated through the Commission’s General Fund. The warrants payable that pertain to the Commission’s business-type activities are paid by the Water Department Fund and the Solid Waste Fund. In accordance with the 2003 Water Revenue Warrants bond indenture, the Water Department is required to establish (i) a debt service reserve fund in an amount equal to the maximum annual net debt service requirement, (ii) a bond fund that is funded monthly with an amount equal to one-sixth of the semi-annual interest due at the next payment date plus one-twelfth of the principal due to mature. The required balances are as follows as of September 30, 2008:

Debt Service Reserve Fund $519,741.09 Bond Fund $196,375.05

The capital lease payable, the limited obligation warrants payable and the compensated absences liability attributable to the fiduciary activities will be paid by the Volunteer Fire Department Fund.



45

The following is a schedule of debt service requirements to maturity:

Governmental Activities General Obligation Warrants General Obligation Warrants Series 2000 Series 2003 Fiscal Year Ending Principal Interest Principal Interest

September 30, 2009 $ 780,000.00 $ 76,410.00 $ 115,000.00 $ 70,882.502010 820,000.00 39,360.00 125,000.00 68,295.002011 130,000.00 65,045.002012 130,000.00 61,340.002013 140,000.00 57,440.00

2014-2018 775,000.00 215,230.002019-2023 625,000.00 79,390.00

Total $1,600,000.00 $115,770.00 $2,040,000.00 $617,622.50

Business-Type Activities Series 1999 Series 2003

Revenue Warrants Payable Revenue Warrants Payable Fiscal Year Ending Principal Interest Principal Interest

September 30, 2009 $ 605,000.00 $ 303,937.50 $ 315,000.00 $ 194,165.002010 630,000.00 281,250.00 325,000.00 181,565.002011 655,000.00 257,625.00 340,000.00 168,565.002012 680,000.00 233,062.50 350,000.00 158,875.002013 705,000.00 207,562.50 360,000.00 148,375.00

2014-2018 3,950,000.00 620,625.00 1,675,000.00 572,075.002019-2023 880,000.00 33,000.00 1,925,000.00 244,350.00

Total $8,105,000.00 $1,937,062.50 $5,290,000.00 $1,667,970.00



46

Governmental Activities Total Principal

Settlement and Interest Payable Capital Leases Requirements Principal Principal Interest to Maturity

$1,000,000.00 $ 342,368.16 $ 73,552.97 $2,458,213.63

1,000,000.00 122,293.94 63,823.82 2,238,772.76122,347.95 58,471.83 375,864.78127,307.19 53,044.61 371,691.80132,972.36 47,379.44 377,791.80759,066.13 142,692.87 1,891,989.00172,668.11 7,683.71 884,741.82

$2,000,000.00 $1,779,023.84 $446,649.25 $8,599,065.59

Business-Type Activities Total Principal and Interest

Capital Leases Requirements Principal Interest to Maturity

$117,038.52 $805.75 $ 1,535,946.77

1,417,815.001,421,190.001,421,937.501,420,937.506,817,700.003,082,350.00

$117,038.52 $805.75 $17,117,876.77



47

Fiduciary Type Activities Total Principal and Interest

Capital Leases Payable Requirements Fiscal Year Ending Principal Interest to Maturity

September 30, 2009 $ 224,473.67 $ 62,948.77 $ 287,422.442010 233,527.91 53,894.54 287,422.452011 239,039.76 44,471.69 283,511.452012 226,361.43 35,500.09 261,861.522013 211,402.23 27,415.29 238,817.52

2014-2016 492,185.94 32,797.75 524,983.69 Total $1,626,990.94 $257,028.13 $1,884,019.07

As of September 30, 2008, $1,413,861.00 of the Water Revenue Warrants, Series 1999 had not been issued. This amount is reflected as a noncurrent asset on the financial statements. Warrant Issuance Costs, Premiums and Loss on Early Extinguishment of Debt The Commission has warrant issuance costs as well as warrant premiums in connection with the issuance of its Series 2003 General Obligation Warrants. The issuance costs and premium are being amortized using the straight-line method over a period of twenty years. The Commission had issuance costs in connection with the 2004 General Obligation Lease. The issuance costs are being amortized using the straight-line method over a period of fifteen years.

Governmental Activities Issuance

Costs Premium Total Issuance Costs and Premium $105,410.00 $7,716.30 Amount Amortized in Prior Years 27,085.68 1,929.05 Balance, Issue Costs 78,324.32 5,787.25 Current Amount Amortized 6,003.67 385.81 Balance Issuance Costs and Premium $ 72,320.65 $5,401.44



48

The Commission has warrant issuance costs, a loss on early extinguishment of debt as well as a premium in connection with the Series 2003 Water Revenue Warrants. The issuance costs and premium are being amortized using the straight-line method over a period of twenty years. The loss on early extinguishment of debt is to be amortized over the original remaining life of the refunded debt (11 years).

Business-Type Activities Issuance

Costs

Loss: Early Extinguishment

of Debt Premium Total Issuance Costs, Loss: Early Extinguishment and Premium $103,267.28 $128,222.54 $45,751.70 Current Amount Amortized 6,884.50 21,370.43 3,050.11 Balance Issuance Costs, Loss: Early Extinguishment and Premium $ 96,382.78 $106,852.11 $42,701.59

Pledged Revenues The Commission issued Series 2003 Special Obligation “Water Revenue Refunding and Capital Improvement Warrant” which are pledged to be repaid from the proceeds of water revenues derived from the operation by the Madison County Water Department of its water works plant and distribution system. The warrant proceeds were used to refund the Series 1993 Special Obligation Water Revenue Warrants and to acquire and/or construct certain capital improvements consisting primarily of fire hydrants and water lines. Future revenues in the amount of $6,957,970.00 are pledged to repay the principal and interest on the bonds at September 30, 2008. Proceeds of the water revenues in the amount of $8,841,491.53 were received by the Commission during the fiscal year ended September 30, 2008, of which $506,165.00 was used to pay principal and interest on the warrants. The Series 2003 Special Obligation “Water Revenue Refunding and Capital Improvement Warrant” will mature in fiscal year 2023. The Commission issued Series 1999 Special Obligation Water System Revenue Warrants which are pledged to be repaid from the proceeds of water revenues derived from the operation by the Madison County Water Department of its water works plant and distribution system. The warrant proceeds were used to construct a water treatment plant and two water storage tanks. Future revenues in the amount of $10,042,062.50 are pledged to repay the principal and interest on the bonds at September 30, 2008. Proceeds of the water revenues in the amount of $8,841,491.53 were received by the Commission during the fiscal year ended September 30, 2008, of which $910,875.00 was used to pay principal and interest on the warrants. The Series 1999 Special Obligation Water System Revenue Warrants will mature in fiscal year 2019.



49

Defeased Debt In January 2008, a private-purpose trust fund entered into a capital lease in the amount of $1,745,106.67 with an interest rate of 3.62 percent to refund on a current basis $1,745,106.67 of outstanding Warrants Payable issued on March 29, 2006 with an interest rate of 5.610 percent. The net proceeds of $1,745,106.67 (after payment of $0 in underwriting fees, insurance, and other issuance costs) were used to refund the 2006 Warrants. As a result, the Warrant Payable dated March 29, 2006 is legally defeased and the liability for the 2006 Warrant has been removed. The current refunding resulted in a difference between the reacquisition price and the net carrying amount of the old debt of $0. As a result of the current refunding, the private-purpose trust fund decreased its total debt service requirements by $771,527.02, which resulted in an economic gain (difference between the present value of the debt service payments on the old and new debt) of approximately $539,370.04. Prior Year Defeasance of Debt In prior years, the Commission defeased certain revenue warrants by placing the proceeds of the new warrants in an irrevocable trust to provide for all future debt service payments of the old warrants. Accordingly, the trust account assets and liability for the defeased debt are not included on the Commission’s financial statements. The following schedule summarizes the refunded issues and the outstanding balances on the defeased warrants:

Balance

Outstanding September 30, 2008

Series 1981 Water Authority Revenue Bonds $ 723,000.00 Series 1982-KC Water Authority Revenue Bonds 642,000.00 Series 1982-CS Water Authority Revenue Bonds 471,000.00 Total Defeased Debt $1,836,000.00

All defeased warrants are revenue warrants whereby the Commission pledged water system revenue to pay the debt service on the warrants.



50

Note 11 – Risk Management The Commission is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The Commission has purchased general liability insurance through a commercial insurance carrier. Coverage is provided up to $1,000,000 per claim for a maximum total coverage of $3,000,000. The Commission also purchased commercial insurance for other risks of loss, including property and casualty insurance. Settled claims resulting from these claims have not exceeded commercial insurance coverage in any of the past three years. The Commission is self-insured with regard to worker’s compensation coverage. The Commission retains the risk of loss of $300,000 per occurrence and also has an aggregate limit of indemnity of $1,000,000 for the liability period. The Commission purchases insurance for claims in excess of the specific and aggregate limits. An estimate of the short-term claims liability is reported in the General Fund. The entire long-term estimated liability is included in the government-wide financial statements. These liabilities are based on estimates utilizing historical loss experience and current trends on a case-by-case review. The Commission uses the discounted amount to report claim costs. The Commission is self-insured with regard to employee health insurance. The Commission purchases insurance for claims in excess of the aggregate stop loss basis. The aggregate stop loss basis is determined annually based on the Commission’s claim experience. An estimate of the claims liability is reported in the General Fund. The entire long-term liability is included in the government-wide financial statements. These liabilities are based on estimates utilizing past experience.



51

The schedule below presents the changes in claims liabilities for the past two years for the two types of self-insured activities: workers’ compensation and employee health insurance.

Workers' Compensation Employee Health Insurance Total 2008 2007 2008 2007 2008 2007

Unpaid Claims and Claim Adjustment Expenses at Beginning of Fiscal Year $ 26,113.15 $120,324.00 $ 654,000.00 $ 615,000.00 $ 680,113.15 $ 735,324.00 Incurred Claims and Claim Adjustment Expenses: Provision for Insured Events of Current Fiscal Year 505,605.50 364,825.57 10,532,326.66 9,653,199.27 11,037,932.16 10,018,024.84 Increases/(Decrease) in Provision for Insured Events of Prior Fiscal Years 98,771.30 (94,210.85) 194,000.48 39,000.00 292,771.78 (55,210.85) Total Incurred Claims and Claim Adjustment Expenses 604,376.80 270,614.72 10,726,327.14 9,692,199.27 11,330,703.94 9,962,813.99 Payments: Claims and Claim Adjustment Expenses Attributable to Insured Events of Current Fiscal Year 345,472.13 303,463.50 10,532,326.66 9,653,199.27 10,877,798.79 9,956,662.77 Claims and Claim Adjustment Expenses Attributable to Insured Events of Prior Fiscal Year 160,133.37 61,362.07 160,133.37 61,362.07 Total Payments 505,605.50 364,825.57 10,532,326.66 9,653,199.27 11,037,932.16 10,018,024.84 Total Unpaid Claim and Claim Adjustment Expenses at End of Fiscal Year 124,884.45 26,113.15 848,000.48 654,000.00 972,884.93 680,113.15 IBNR (Incurred But Not Reported) Estimate (100% 2006 Recommended Reserve) (Recommended Actuarial Reserve) 330,308.00 330,308.00 N/A N/A 330,308.00 330,308.00 Total Liability as Shown on Exhibit 1 599,649.00 599,649.00 848,000.48 654,000.00 1,447,649.48 1,253,649.00 Short-Term (General Fund) 130,023.52 99,219.00 848,000.48 654,000.00 978,024.00 753,219.00 Long-Term (Long-Term Debt) 469,625.48 500,430.00 469,625.48 500,430.00 Total $599,649.00 $599,649.00 $ 848,000.48 $ 654,000.00 $ 1,447,649.48 $ 1,253,649.00



52

Note 12 – Interfund Transactions Due To/From Other Funds The amounts due to/from other funds at September 30, 2008, were as follows:

Due From Other Funds

General Fund


Bridges Fund

Other Governmental

Funds

Solid Waste Fund Totals

Due to Other Funds: General Fund $ $128,241.78 $ 340.00 $ $128,581.78 Public Building, Roads and Bridges Fund 2,801.84 22,866.04 16,607.99 42,275.87 Other Governmental Funds 457,428.87 12,799.76 470,228.63 Solid Waste Fund 227,430.57 94,851.19 322,281.76 Water Department Fund 547.96 22,294.04 22,842.00 Building Inspection Fund 64.48 3,114.25 3,178.73 Total $688,273.72 $261,301.02 $23,206.04 $16,607.99 $989,388.77

Interfund Transfers The amounts of interfund transfers during the fiscal year ended September 30, 2008, were as follows: Transfers Out

General Fund


Bridges Fund

Other Governmental

Funds

Water Department

Fund

Building Inspection

Fund Totals Transfers In: General Fund $ $5,618,711.45 $1,544,575.59 $400,000.00 $50,000.00 $ 7,613,287.04 Public Buildings, Roads and Bridges Fund 44,840.00 271,000.00 315,840.00 Other Governmental Funds 1,624,043.72 520,187.43 2,144,231.15 Solid Waste Fund 143,000.00 143,000.00 Totals $1,811,883.72 $6,138,898.88 $1,815,575.59 $400,000.00 $50,000.00 $10,216,358.19



53

Note 13 – Related Organizations A majority of the board members of the following organizations are appointed by the Madison County Commission: Madison County Board of Building Inspection Appeals, Public Building Authority, Harvest-Monrovia Water Authority, Owens Cross Roads Water Authority, and the Executive Airport Authority. The Commission, however, is not financially accountable for these organizations because it does not impose its will or have a financial benefit or burden relationship for these organization and the organizations are not considered part of the Commission’s financial reporting entity. These organizations are considered related organizations of the County Commission. The following organizations are separate legal entities which are jointly governed by the City of Huntsville and Madison County in which neither government appoints a voting majority of the Board. The organizations were created for the benefit of city and county residents and generally receive financial assistance from both governments: Huntsville/Madison County Marina and Port Authority, Huntsville/Madison County Railroad Authority, Huntsville/Madison County Airport Authority, Madison County Communications District, Madison County Mental Retardation Board, Huntsville-Madison County Mental Health Board and Madison County Human Resources Board. Note 14 – Joint Ventures The Madison County Commission is a participant with the City of Huntsville and the Public Building Authority of the City of Huntsville in a joint venture to construct and operate the “Huntsville-Madison County Jail.” The Public Building Authority of the City of Huntsville will, throughout the term of the contract, hold title to all property deemed necessary for the project’s construction. At the expiration of the contract between these entities, Madison County has the option to purchase all rights, title and interest to any real property conveyed to the Public Building Authority of the City of Huntsville for the purpose of this project. The daily operations of the Huntsville-Madison County Jail will be managed by the Madison County Sheriff and funded by the Madison County Commission. Additionally, the City of Huntsville is required to remit to the county the difference between its current operating costs for the City Jail and the Debt Service for the revenue bonds to help defray current operating costs. This stipulation extends through January 31, 2010. The City of Huntsville will maintain the physical plant and structural integrity. Funds for the maintenance of the physical plant and structural integrity will be provided by the City of Huntsville. Funds for construction are provided by the Public Building Authority of the City of Huntsville. It is expected that no net income will be generated by this joint venture. The expenditures for the daily operations of the Huntsville-Madison County Jail will be recorded in the County’s General Fund. The expenditures for the renovation/construction of the facility will be recorded in the records of the Public Building Authority of the City of Huntsville, and the expenditures for maintaining the physical plant and structural integrity will be recorded in the accounting records of the City of Huntsville. This information will be available at the respective offices.


54

Required Supplementary Information

Schedule of Revenues, Expenditures and Changes in Fund BalancesBudget and Actual - General FundFor the Year Ended September 30, 2008

Actual AmountsOriginal Final Budgetary Basis

Revenues Taxes 24,879,000.00$ 25,846,379.00$ 26,205,483.99$ Licenses and Permits 1,446,783.00 1,446,783.00 995,678.15 Intergovernmental 6,076,690.00 6,990,835.13 5,467,055.47 Charges for Services 9,747,318.00 10,424,275.00 11,873,395.48 Fines and Forfeits 31,485.69 Miscellaneous 2,526,042.00 2,556,316.05 3,465,476.33

Total Revenues 44,675,833.00 47,264,588.18 48,038,575.11 Expenditures Current:

General Government 24,384,478.00 25,631,048.63 21,361,654.88 Public Safety 23,627,337.00 24,781,438.87 24,688,740.55 Highways and Roads 200,000.00 846,250.00 3,186,304.96 Sanitation 993,160.00 984,520.00 937,442.33 Health 573,058.00 581,308.70 578,408.00 Welfare 214,941.00 239,928.02 183,148.54 Culture and Recreation 572,841.00 595,798.00 840,412.85 Education 61,526.00 61,526.00 61,526.00

Capital Outlay 702,435.00 1,180,672.90 813,210.00 Debt Service:

Principal Retirement 2,809.00 1,002,809.00 1,002,395.04 Interest and Fiscal Charges 412.94

Total Expenditures 51,332,585.00 55,905,300.12 53,653,656.09

Excess (Deficiency) of RevenuesOver Expenditures (6,656,752.00) (8,640,711.94) (5,615,080.98)

Other Financing Sources (Uses)

Transfers In 13,596,747.00 14,155,006.69 7,613,287.04 Sale of Capital Assets 21,448.09 261,089.09 Transfers Out (8,464,219.00) (8,724,059.00) (1,811,883.72)

Total Other Financing Sources (Uses) 5,132,528.00 5,452,395.78 6,062,492.41

Net Change in Fund Balances (1,524,224.00) (3,188,316.16) 447,411.43 Fund Balances - Beginning of Year 16,946,290.81 16,946,290.81 18,298,633.82

Fund Balances - End of Year 15,422,066.81$ 13,757,974.65$ 18,746,045.25$

Budgeted Amounts


Budget to GAAP Actual AmountsDifferences GAAP Basis

(1) (54,067.46)$ 26,151,416.53$

995,678.15 5,467,055.47

11,873,395.48 31,485.69

3,465,476.33 (54,067.46) 47,984,507.65

21,361,654.88 24,688,740.55 3,186,304.96

937,442.33 578,408.00 183,148.54 840,412.85 61,526.00

813,210.00

1,002,395.04 412.94

53,653,656.09

(54,067.46) (5,669,148.44)

7,613,287.04 261,089.09

(1,811,883.72) 6,062,492.41

(54,067.46) 393,343.97

(2) (1,352,343.01) 16,946,290.81

(1,406,410.47)$ 17,339,634.78$


Schedule of Revenues, Expenditures and Changes in Fund BalancesBudget and Actual - General FundFor the Year Ended September 30, 2008

Explanation of differences:

(1) The Commission budgets motor vehicle ad valorem tax as it is received rather than on modified accrual basis.

Net Decrease in Fund Balance - Budget to GAAP

(2) The amount reported as "fund balance" on the budgetary basis of accounting derives from the basis of accounting used in preparing the Commission's budget. This amount differs from the fund balance reported in the Statement of Revenues, Expenditures and Changes in Fund Balances because of the cumulative effect of transactions such as those described above.


(54,067.46)$

(54,067.46)$


Schedule of Revenues, Expenditures and Changes in Fund BalancesBudget and Actual - Public Buildings, Roads and Bridges FundFor the Year Ended September 30, 2008

Actual Amounts Original Final Budgetary Basis Revenues

Taxes 16,634,500.00$ 17,167,045.00$ 17,139,878.83$ Intergovernmental 226,700.00 2,034,135.47 2,046,146.33 Charges for Services 39,220.00 39,700.00 Fines and ForfeitsMiscellaneous 220,000.00 455,707.37 460,415.25

Total Revenues 17,081,200.00 19,696,107.84 19,686,140.41 Expenditures Current:

Highways and Roads 11,254,184.50 12,116,034.77 10,162,987.73 Sanitation

Capital Outlay 415,837.50 4,564,922.36 4,325,586.91 Debt Service:

Principal Retirement 260,183.00 260,183.00 184,095.91 Interest and Fiscal Charges 76,084.41

Intergovernmental 13,584.38 Total Expenditures 11,930,205.00 16,941,140.13 14,762,339.34

Excess (Deficiency) of RevenuesOver Expenditures 5,150,995.00 2,754,967.71 4,923,801.07

Other Financing Sources (Uses)

Transfers In 315,840.00 315,840.00 Proceeds from Sale of Equipment 595,786.71 595,786.71 Transfers Out (5,565,501.00) (6,134,788.68) (6,138,898.88) Other Uses (33,747.85)

Total Other Financing Sources (Uses) (5,565,501.00) (5,256,909.82) (5,227,272.17)

Net Change in Fund Balances (414,506.00) (2,501,942.11) (303,471.10) Fund Balances - Beginning of Year 5,978,389.91 5,978,389.91 6,733,374.57

Fund Balances - End of Year 5,563,883.91$ 3,476,447.80$ 6,429,903.47$

Budgeted Amounts


Budget to GAAP Actual AmountsDifferences GAAP Basis

(1) (30,029.79)$ 17,109,849.04$ 2,046,146.33

39,700.00

460,415.25 (30,029.79) 19,656,110.62

10,162,987.73

4,325,586.91

184,095.91 76,084.41 13,584.38

14,762,339.34

(30,029.79) 4,893,771.28

315,840.00 595,786.71

(6,138,898.88)

(5,227,272.17)

(30,029.79) (333,500.89)

(2) (754,984.66) 5,978,389.91

(785,014.45)$ 5,644,889.02$


Schedule of Revenues, Expenditures and Changes in Fund BalancesBudget and Actual - Public Buildings, Roads and Bridges FundFor the Year Ended September 30, 2008

Explanation of differences:

(1) The Commission budgets motor vehicle ad valorem tax as it is received rather than on the modified accrual basis.

Net Decrease in Fund Balance - Budget to GAAP

(2) The amount reported as "fund balance" on the budgetary basis of accounting derives from the basis of accounting used in preparing the Commission's budget. This amount differs from the fund balance reported in the Statement of Revenues, Expenditures and Changes in Fund Balances because of the cumulative effect of transactions such as those described above.


(30,029.79)$

(30,029.79)$


Schedule of Funding Progress For the Year Ended September 30, 2008

Madison County Exhibit #14 Commission

63

Actuarial Valuation

Date

Actuarial Value of Assets

(a)

Actuarial Accrued Liability (AAL)

Entry Age (b)**

Unfunded AAL

(UAAL) (b-a)

Funded Ratio (a/b)

Covered Payroll

(c)

UAAL as a Percentage of Covered

Payroll [(b-a)/c]

9/30/2007 $95,599,870 $114,833,490 $19,233,620 83.30% $38,704,300 49.70% 9/30/2006* $88,910,173 $105,690,643 $16,780,470 84.10% $37,677,929 44.50% 9/30/2005 $83,310,309 $ 96,260,534 $12,950,224 86.50% $36,178,093 35.80%

* Reflects changes in actuarial assumptions. ** Reflects liability for cost of living benefit increases granted on or after October 1, 1978.


64

Supplementary Information

Schedule of Expenditures of Federal AwardsFor the Year Ended September 30, 2008

Contract orFederal Grantor/ Federal Pass-ThroughPass-Through Grantor/ CFDA Grantor'sProgram Title Number Number

U. S. Department of AgriculturePassed Through Alabama Department of Education

Child Nutrition Cluster:School Breakfast Program 10.553 A31-0000National School Lunch Program 10.555 A31-0000Summer Food Service Program for Children 10.559 A31-0000

Total Child Nutrition Cluster (M)Total U. S. Department of Agriculture

U. S. Department of DefenseDirect Program

Growth Management Planning Assistance (M) 12.613 RA06141-07-01

U. S. Department of JusticeDirect Program

Public Safety Partnership and Community Policing Grants 16.710 2006CKWX0314Passed Through Alabama Department of Economicand Community Affairs

Violence Against Women Formula Grants 16.588 07-WF-PR-005Total U. S. Department of Justice

U. S. Department of TransportationPassed Through Alabama Department of Transportation

Formula Grants for Other Than Urbanized Areas 20.509 RPT - 46

Sub-Total Forward


Assistance Federal RevenuePeriod Total Share Recognized Expenditures

10/01/2007-09/30/2008 13,454.28$ 13,454.28$ 13,454.28$ 13,454.28$ 10/01/2007-09/30/2008 20,464.07 20,464.07 20,464.07 20,464.07 10/01/2007-09/30/2008 129,898.46 129,898.46 129,898.46 129,898.46

163,816.81 163,816.81 163,816.81 163,816.81 163,816.81 163,816.81 163,816.81 163,816.81

10/01/2007-09/30/2008 803,823.00 722,438.00 460,910.98 460,910.98

11/22/2005-11/21/2008 394,891.00 394,891.00 292,307.00 292,307.00

10/01/2007-09/30/2008 110,933.00 83,200.00 80,429.22 80,429.22 505,824.00 478,091.00 372,736.22 372,736.22

10/01/2007-09/30/2008 214,122.00 214,122.00 214,122.00 214,122.00

1,687,585.81$ 1,578,467.81$ 1,211,586.01$ 1,211,586.01$

Budget


Schedule of Expenditures of Federal AwardsFor the Year Ended September 30, 2008

Contract orFederal Grantor/ Federal Pass-ThroughPass-Through Grantor/ CFDA Grantor'sProgram Title Number Number

Sub-Total Brought Forward

U. S. General Services AdministrationPassed Through Alabama Department of Economicand Community Affairs

Donation of Federal Surplus Personal Property (N) 39.003

U. S. Department of Homeland SecurityDirect Program

Assistance to Firefighters Grant (M) 97.044 EMW-2006-FP-00246Passed Through City of Huntsville

Homeland Security Grant Program 97.067 7 TELHomeland Security Grant Program 97.067 5 SHGHomeland Security Grant Program 97.067 6 CBRHomeland Security Grant Program 97.067 6 MMRHomeland Security Grant Program 97.067 6 SHLHomeland Security Grant Program 97.067 6 LET

Total Homeland Security Grant Program Total U. S. Department of Homeland Security

Total Expenditures of Federal Awards

(M) = Major Program(N) = Non-Cash Assistance

The accompanying Notes to the Schedule of Expenditures of Federal Awards are an integral part of this schedule.


Assistance Federal RevenuePeriod Total Share Recognized Expenditures

1,687,585.81$ 1,578,467.81$ 1,211,586.01$ 1,211,586.01$

10/01/2007-10/01/2008 484.14 484.14 484.14 484.14

07/27/2007-12/26/2008 300,000.00 300,000.00 264,181.76 264,181.76

10/11/2007-12/31/2009 200,000.00 200,000.00 114,714.58 114,714.58 10/01/2004-09/09/2008 375,000.00 375,000.00 15,372.00 15,372.00 07/01/2006-09/26/2008 54,375.00 54,375.00 310.26 310.26 08/28-2006-09/26/2008 220,713.50 220,713.50 14,760.49 14,760.49 08/28/2006-09/26/2008 305,000.00 305,000.00 4,070.87 4,070.87 08/28/2006-09/26/2008 160,000.00 160,000.00 6,518.78 6,518.78

1,315,088.50 1,315,088.50 155,746.98 155,746.98 1,615,088.50 1,615,088.50 419,928.74 419,928.74

3,303,158.45$ 3,194,040.45$ 1,631,998.89$ 1,631,998.89$

Budget


Notes to the Schedule of Expenditures of Federal Awards

For the Year Ended September 30, 2008


69

Note 1 – Basis of Presentation The accompanying Schedule of Expenditures of Federal Awards includes the federal grant activity of the Madison County Commission and is presented on the modified accrual basis of accounting. The information in this schedule is presented in accordance with the requirements of OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Therefore, some amounts presented in this schedule may differ from amounts presented in or used in the preparation of the basic financial statements.


70

Additional Information

Commission Members and Administrative Personnel October 1, 2007 through September 30, 2008


71

Commission Members

Term Expires

Hon. Mike Gillespie

Chairman

612 Holmes Avenue Huntsville, AL 35801

2012

Hon. Roger Jones

Member

703 Buddy Williamson Road New Market, AL 35761

2012

Hon. Faye Dyer

Member

1505 Glenwood Drive Huntsville, AL 35801

2012

Hon. Jerry Craig

Member

114 Chambray Drive Owens Cross Roads, AL 35763

2012

Hon. Dale W. Strong

Member

128 Gokee Road Madison, AL 35757

2012

Hon. Morris Brooks

Member

2111 Chadburn Drive Huntsville, AL 35803

2012

Hon. Robert C. Harrison

Member

6420 Green Meadow Road Huntsville, AL 35810

2012

Administrative Personnel Mr. Howard Baites

Administrator

100 North Side Square Huntsville, AL 35801

Appointed

Ms. Judy Teague

Chief Financial Director

100 North Side Square Huntsville, AL 35801

Appointed

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


72

We have audited the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the Madison County Commission (the “Commission”) as of and for the year ended September 30, 2008, which collectively comprise the Commission’s basic financial statements and have issued our report thereon dated November 10, 2009. We did not audit the financial statements of the Madison County Water Department, which represents 91% and 50%, respectively, of the assets and revenues of the Enterprise Funds, business-type activities. Those financial statements were audited by other auditors whose report thereon has been furnished to us, and our opinion, insofar as it relates to the amounts included for the Madison County Water Department, is based on the report of other auditors. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Internal Control Over Financial Reporting In planning and performing our audit, we considered the Commission’s internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinions on the financial statements, but not for the purposes of expressing an opinion on the effectiveness of the Commission’s internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Commission’s internal control over financial reporting. A control deficiency 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 misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the entity’s ability to initiate, authorize, record, process, or report financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the entity’s financial statements that is more than inconsequential will not be prevented or detected by the entity’s internal control. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected by the entity’s internal control.

Report on Compliance With Requirements Applicable to Each Major Program and on Internal Control Over Compliance in

Accordance With OMB Circular A-133


74

Compliance We have audited the compliance of the Madison County Commission (the “Commission”) with the types of compliance requirements described in the U. S. Office of Management and Budget (OMB) Circular A-133 Compliance Supplement that are applicable to each of its major federal programs for the year ended September 30, 2008. The Commission’s major federal programs are identified in the Summary of Examiner’s Results Section of the accompanying Schedule of Findings and Questioned Costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major federal programs is the responsibility of the Commission’s management. Our responsibility is to express an opinion on the Commission’s compliance based on our audit. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the Commission’s compliance with those requirements and performing such other procedures, as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination of the Commission’s compliance with those requirements. In our opinion, the Commission complied, in all material respects, with the requirements referred to above that are applicable to each of its major federal programs for the year ended September 30, 2008. Internal Control Over Compliance The management of the Commission is responsible for establishing and maintaining effective internal control over compliance with requirements of laws, regulations, contracts and grants applicable to federal programs. In planning and performing our audit, we considered the Commission’s internal control over compliance with requirements that could have a direct and material effect on a major federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance, 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 Commission’s internal control over compliance.

Schedule of Findings and Questioned Costs For the Year Ended September 30, 2008


76

Section I – Summary of Examiner's Results

Financial Statements Type of opinion issued: Unqualified Internal control over financial reporting: Material weakness(es) identified? Yes X No Significant deficiency(ies) identified that are not considered to be material weakness(es)?

Yes X None reported

Noncompliance material to financial statements noted?

Yes X No

Federal Awards Internal control over major programs: Material weakness(es) identified? Yes X No Significant deficiency(ies) identified that are not considered to be material weakness(es)?

Yes X None reported

Type of opinion issued on compliance for major programs:

Unqualified

Any audit findings disclosed that are required to be reported in accordance with Section 510(a) of Circular A-133?

Yes X No Identification of major programs:

CFDA Number(s) Name of Federal Program or Cluster

12.613 Growth Management Planning Assistance

10.553, 10.555 and 10.559 Child Nutrition Cluster 97.044 Assistance to Firefighters Grant

Dollar threshold used to distinguish between Type A and Type B programs:

$300,000.00

Auditee qualified as low-risk auditee? Yes X No

Schedule of Findings and Questioned Costs For the Year Ended September 30, 2008


77

Section II – Financial Statement Findings (GAGAS)

Ref. No.

Type of Finding

Finding/Noncompliance

Questioned Costs

No matters were reportable.

Section III – Federal Awards Findings and Questioned Costs

Ref. No.

CFDA No.

Program

Finding/Noncompliance

Questioned Costs

No matters were reportable.

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