JACKSON COUNTY, MICHIGAN Comprehensive Annual Financial Report Year Ended December 31,2009 Prepared by: Randall W. Treacher, County Administrator/Controller Gerard Cyrocki, CPA Finance Officer Jackson County, Michigan Comprehensive Annual Financial Report Year Ended December 31, 2009 TABLE OF CONTENTS INTRODUCTORY SECTION Letter of Transmittal i-v List of County Officials vi Organizational Chart vii Certificate of Achievement viii FINANCIAL SECTION INDEPENDENT AUDITOR'S REPORT ix-x MANAGEMENT'S DISCUSSION AND ANALYSIS xi-xxi BASIC FINANCIAL STATEMENTS Government-wide Financial Statements Statement of Net Assets 1 Statement of Activities 2 Fund Financial Statements Governmental Funds Balance Sheet 3-4 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Assets 5 Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds 6-7 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities 8 Statement of Net Assets - Proprietary Funds 9-10 Statement of Revenues, Expenses, and Changes in Fund Net Assets - Proprietary Funds 11-12 Statement of Cash Flows - Proprietary Funds 13-16 Statement of Net Assets - Fiduciary Funds 17 Statement of Changes in Fiduciary Net Assets 18 Combining Statement of Net Assets - Component Units 19-20 Statement of Activities - Component Units 21 Notes to Financial Statements 22-56 REQUIRED SUPPLEMENTARY INFORMATION GENERAL FUND Budgetary Comparison Schedule - Revenues and Other Financing Sources 57-58 Budgetary Comparison Schedule - Expenditures and Other Financing Uses by Activity 59-60 JAIL MILLAGE FUND Budgetary Comparison Schedule 61 MEDICAL CARE FACILITY MAINTENANCE OF EFFORT FUND Budgetary Comparison Schedule 62 GASB REQUIRED SUPPLEMENTARY INFORMATION Schedule of Funding Progress 63 Schedule of Employer Contributions 64 Notes to Required Supplementary Information 65-66 Jackson County, Michigan Comprehensive Annual Financial Report Year Ended December 31, 2009 TABLE OF CONTENTS - CONTINUED FINANCIAL SECTION - CONCLUDED OTHER SUPPLEMENTARY INFORMATION Combining Balance Sheet - Nonmajor Governmental Funds 67-73 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances - Nonmajor Governmental Funds 74-80 Schedule of Revenues, Expenditures, and Changes in Fund Balances by Fund - Budget and Actual - Nonmajor Special Revenue Funds 81-94 Combining Statement of Net Assets - Nonmajor Enterprise Funds 95 Combining Statement of Revenues, Expenses, and Changes in Fund Net Assets - Nonmajor Enterprise Funds 96 Combining Statement of Cash Flows - Nonmajor Enterprise Funds 97 Combining Statement of Net Assets - Internal Service Funds 98 Combining Statement of Revenues, Expenses, and Changes in Fund Net Assets - Internal Service Funds 99 Combining Statement of Cash Flows - Internal Service Funds 100 Combining Statement of Fiduciary Assets and Liabilities - Agency Funds 101-102 Combining Statement of Changes in Assets and Liabilities - Agency Funds 103-104 Combining Statement of Fiduciary Net Assets - Pension and Employee Benefit Trust Funds 105 Combining Statement of Changes in Fiduciary Net Assets - Pension and Employee Benefit Trust Funds 106 COMPONENT UNIT FUNDS LAND BANK AUTHORITY Statement of Net Assets 107 Statement of Revenues, Expenses, and Changes in Fund Net Assets 108 Statement of Cash Flows 109 DRAINAGE DISTRICTS Combining Balance Sheet and Statement of Net Assets 110-113 Reconciliation of the Combining Balance Sheet to the Statement of Net Assets 114 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances and Statement of Activities 115-118 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities 119 BROWNFIELD REDEVELOPMENT AUTHORITY Balance Sheet and Statement of Net Assets 120 Reconciliation of the Combining Balance Sheet to the Statement of Net Assets 121 Statement of Revenues, Expenditures, and Changes in Fund Balances and Statement of Activities 122 Jackson County, Michigan Comprehensive Annual Financial Report Year Ended December 31, 2009 TABLE OF CONTENTS - CONCLUDED COMPONENT UNIT FUNDS - CONCLUDED BOARD OF PUBLIC WORKS Combining Balance Sheet and Statement of Net Assets 123-126 Reconciliation of the Combining Balance Sheet to the Statement of Net Assets 127 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances and Statement of Activities 128-131 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities 132 STATISTICAL SECTION (UNAUDITED) MULTI-YEAR AND OTHER FINANCIAL AND DEMOGRAPHIC INFORMATION Net Assets by Component 133 Changes in Net Assets 134-135 Fund Balances - Governmental Funds 136 Changes in Fund Balances - Governmental Funds 137 Changes in Fund Balances - General Fund 138 Assessed Taxable Property/State Equalized Value 139 Direct and Overlapping Property Tax Rates 140 Principal Property Tax Payers 141 Property Tax Levies and Collections 142 Ratios of Outstanding Debt by Type 143 Computation of Net Direct and Overlapping Debt 144 Legal Debt Margin 145 Demographic and Economic Statistics 146 Principal Employers 147 Full Time Equivalent County Employees by Function/Program 148 Operating Indicators by Function/Program 149 Capital Asset Statistics by Function/Program 150 SINGLE AUDIT SECTION REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133 151-152 Schedule of Expenditures of Federal Awards 153-160 Notes to Schedule of Expenditures of Federal Awards 161-162 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 163-164 SCHEDULE OF FINDINGS 165-170 SUMMARY SCHEDULE OF PRIOR YEAR AUDIT FINDINGS 171 INTRODUCTORY SECTION June 30, 2010 To the Board of Commissioners and the Citizens of Jackson County: Transmitted herein is Jackson County's Comprehensive Annual Financial Report of the fiscal year ended December 31, 2009. Jackson County's financial reporting requirements are mandated by Michigan Act 2 of the Public Acts of 1968, as amended. This Act requires that Jackson County issue an annual financial report, and that this report be audited by certified public accountants. This report consists of management's representation concerning the finances of Jackson County. Consequently, management assumes full responsibility for the completeness and reliability of all the information presented in this report. To provide a reasonable basis for making these representations, management has established a comprehensive internal control framework that is designed both to protect the government's assets from loss, theft, or misuse and to compile sufficient reliable information for the preparation of Jackson County's financial statements in conformity with generally accepted accounting principles (GAAP). Because the cost of internal controls should not outweigh their benefits, our framework of internal controls has been designed to provide reasonable rather the absolute assurance that the financial statements will be free from material misstatement. As management, we assert that, to the best of our knowledge and belief, this financial report is complete and reliable in all material respects. Jackson County's financial statements have been audited by Abraham & Gaffney, a firm of licensed, certified public accountants. The goal of the independent audit was to provide reasonable assurance that the financial statements of Jackson County for the fiscal year ended December 31, 2009 are free of material misstatement. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management; and evaluating the overall financial statement presentation. The independent auditor concluded, based upon the audit, that there was a reasonable basis for rendering an unqualified opinion that Jackson County's financial statements for the fiscal year ended December 31,2009, are fairly presented in conformity with GAAP. The independent auditor's report is presented as the first component of the financial section of this report. The County is required to undergo an annual single audit in conformity with the provisions of the Single Audit Act Amendments of 1996 and u.S. Office of Management and Budget Circular A- 133, Audits of States, Local Governments and Non-Profit Organizations. GAAP require that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management's Discussion and Analysis (MD&A). This letter of transmittal is designed to complement MD&A and should be read in conjunction with it. Jackson County's MD& A can be found immediately following the report of the independent auditors. - i - PROFILE OF JACKSON COUNTY GOVERNMENT Jackson County, 707 miles square and with a current population of just over 160,000, is located in the south-central portion of Michigan's Lower Peninsula. The County was incorporated on August 1, 1832. Jackson County is governed by a twelve-member Board of Commissioners. Each Commissioner is elected on a partisan basis for terms of two years from single-member districts. The board annually elects