COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2014 winston-salem 2014 Annual Financial Report WINSTON-SALEMWINSTON-SALEM | NORTH | NORTH CAROLINA CAROLINA 1 2014 ANNUAL FINANCIAL REPORT COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2014 The Annual Financial Report is prepared by Financial Management Services. winston-salem WINSTON-SALEM | NORTH CAROLINA Credits Creative Direction and Copy Rachel Barron, Next Level Communications, Inc. Design and Art Direction LinTaylor™ Marketing Group Printing Keiger Printing Photography Jay Sinclair, Cover Photography The City of Winston-Salem Marketing Department Wake Forest Innovation Quarter Wake Forest Baptist Health Rachel Barron Forsyth Technical Community College Winston-Salem State University Salem College 2014 ANNUAL FINANCIAL REPORT City of Winston-Salem, North Carolina ANNUAL FINANCIAL REPORT For the Fiscal Year Ended June 30, 2014 Introductory Section Page Letter of Transmittal 2 Local Economy 4 Community Profile 14 GFOA Certificate of Achievement 25 Organizational Chart 26 City Officials 27 Financial Section Exhibit Page Report of Independent Auditor 28 Management’s Discussion & Analysis 30 Basic Financial Statements 39 Government-wide Financial Statements – Statement of Net Position 1 40 – Statement of Activities 2 42 Fund Financial Statements – Balance Sheet – Governmental Funds 3 44 – Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position 3 1 45 – Statement of Revenues, Expenditures, and Changes in Fund Balances – Governmental Funds 4 46 – Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities 4 1 47 – Statement of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual – General Fund 5 48 – Statement of Net Position – Proprietary Funds 6 53 – Statement of Revenues, Expenses, and Changes in Fund Net Position – Proprietary Funds 7 55 – Statement of Cash Flows – Proprietary Funds 8 56 – Statement of Fiduciary Net Position – Fiduciary Funds 9 58 – Statement of Changes in Fiduciary Net Position – Fiduciary Funds 10 59 Notes to the Financial Statements 60 Required Supplementary Information – Schedule of Funding Progress –Winston-Salem Police Officers’ Retirement, Police Officers’ Separation Allowance, Post-employment Benefits 11 100 – Schedule of Employer Contributions – Winston-Salem Police Officers’ Retirement, Police Officers’ Separation Allowance, Post-employment Benefits 12 101 – Schedule of Changes in Net Pension Liability and Related Ratios, Winston-Salem Police Officers’ Retirement System 13 103 – Schedule of Contributions, Winston-Salem Police Officers’ Retirement System 14 104 – Schedule of Investment Returns, Winston-Salem Police Officers’ Retirement System 15 106 – Schedule of Changes in Net Pension Liability and Related Ratios, Winston-Salem Police Officers’ Separation Allowance 16 107 – Schedule of Contributions, Winston-Salem Police Officers’ Separation Allowance 17 108 – Schedule of Investment Returns, Winston-Salem Police Officers’ Separation Allowance 18 110 WINSTON-SALEM | NORTH CAROLINA Financial Section continued Exhibit Page Combining and Individual Fund Statements and Schedules: Major Funds: Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual – Debt Service Fund 19 115 – Capital Projects Fund 20 116 – Water and Sewer Utility Fund 21 117 – Solid Waste Disposal Fund 22 118 Non Major Governmental Funds: – Combining Balance Sheet – Nonmajor Governmental Funds 23 120 – Combining Statement of Revenues, Expenditures, and Changes in Fund Balances – Nonmajor Governmental Funds 24 122 Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual – Community Development Fund 25 124 – Grants Fund 26 125 – Economic and Housing Development Fund 27 126 – Gasoline Tax Fund 28 127 – Mass Transit Tax Fund 29 128 – Sales Tax Fund 30 129 – Occupancy Tax Fund 31 130 – Cable Franchise Fee Fund 32 131 – Emergency Telephone Fund 33 132 Non Major Enterprise Funds: – Combining Statement of Net Position – Nonmajor Enterprise Funds 34 134 – Combining Statement of Revenues, Expenses, and Changes in Net Position – Nonmajor Enterprise Funds 35 136 – Combining Statement of Cash Flows – Nonmajor Enterprise Funds 36 138 Schedule of Revenues, Expenditures, and Transfers – Budget and Actual – Parking Fund 37 142 – Cemeteries Fund 38 143 – Stormwater Management Fund 39 144 – Transit Authority Fund 40 145 – Public Assembly Facilities Management Fund 41 146 Internal Service Funds: – Combining Statement of Net Position – Internal Service Funds 42 148 – Combining Statement of Revenues, Expenses and Changes in Net Position – Internal Service Funds 43 150 – Combining Statement of Cash Flows – Internal Service Funds 44 152 Schedule of Revenues, Expenditures and Transfers – Budget and Actual – Central Warehouse Fund 45 156 – Fleet Services Fund 46 157 – Information Services 47 158 – Workers Compensation Fund 48 159 – Health Benefits Fund 49 160 – Dental and Flex Benefits Fund 50 161 – Employee Benefits Fund 51 162 Fiduciary Funds: – Combining Statement of Fiduciary Net Position 52 164 – Combining Statement of Changes in Fiduciary Net Position 53 165 Schedule of General Obligation Bonded Debt 54 168 2014 ANNUAL FINANCIAL REPORT Statistical Section Table Page Financial Trends: – Net Position by Component 1 172 – Changes in Net Position 2 174 – General Revenues and Total Changes in Net Position 3 178 – Program Revenues by Function/Program 4 180 – Fund Balances, Governmental Funds 5 182 – Changes in Fund Balances, Governmental Funds 6 184 Revenue Capacity: – Tax Revenues by Source, Governmental Funds 7 188 – Taxable Property Assessed Value 8 189 – Property Tax Rates 9 190 – Principal Property Tax Payers 10 191 – Property Tax Levies and Collections 11 193 Debt Capacity – Ratios of Outstanding Debt by Type 12 194 – Ratios of General Bonded Debt Outstanding 13 197 – Legal Debt Margin 14 198 – Direct and Overlapping Governmental Activities Debt 15 201 – Pledged-Revenue Coverage 16 202 Demographic and Economic Information – Demographic and Economic Statistics 17 204 – Principal Employers 18 205 Operating Information – Full-time-Equivalent City Government Employees by Function/Program 19 206 – Operating Indicators by Function/Program 20 208 – Capital Assets Statistics by Function/Program 21 212 Federal and State Grants Section Page – Report of Independent Auditor 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 216 – Report of Independent Auditor on Compliance For Each Major Federal Program and Internal Control Over Compliance In Accordance With OMB Circular A-133 and the State Single Audit Implementation Act 218 – Report of Independent Auditor on Compliance For Each Major State Program and Internal Control Over Compliance In Accordance With OMB Circular A-133 and the State Single Audit Implementation Act 220 – Schedule of Findings and Questioned Costs 222 – Corrective Action Plan 229 – Summary Schedule of Prior Year Audit Findings 231 – Schedule of Expenditures of Federal and State Awards 232 – Notes to Schedule of Expenditures of Federal and State Awards 240 Certain pages in this report are intentionally blank WINSTON-SALEM | NORTH CAROLINA Letter of Transmittal October 20, 2014 To the Honorable Mayor and Members of City Council and Citizens of the City of Winston-Salem Ever since the merger of Winston and Salem in 1913, the twin City has prospered through the cooperation of its public and private institutions. This was true in the years following the incorporation of Winston-Salem, and it remains true today. The enduring veracity of our City motto was underscored again during the past year, as our community continues to see the tangible benefits of the past decade of efforts by City government and private institutions to diversify our economy, increase our tax base, bring new jobs to our City, and breathe new life into our downtown. Financial Report It is our pleasure to submit the Annual Financial Report for the City of Winston-Salem, North Carolina for the fiscal year ended June 30, 2014. Management of the City of Winston-Salem, North Carolina, is responsible for the integrity and objectivity of financial statements and other representations contained in this annual report. The City’s annual financial report, prepared in accordance with generally accepted accounting principles for units of local government, consists of management’s representations concerning the financial position and results of operations for the fiscal year ended June 30, 2014. North Carolina general statutes require each unit of local government to publish within four months after the close of the fiscal year a complete set of financial statements presented in conformity with generally accepted accounting principles (GAAP) and audited in accordance with generally accepted auditing standards by a firm of certified public accountants. The City engaged Cherry Bekaert LLP, independent auditors, to perform an audit of the City’s reported financial position and results of operations contained in the government-wide and fund financial statements and notes to the financial statements. Their audit consists of an objective outside review in order to provide reasonable rather than absolute assurance that the financial statements are free from material misstatements. Working