harrison county, mississippi audited financial statements

HARRISON COUNTY, MISSISSIPPI

Audited Financial Statements

and Special Reports

For the Year Ended September 30, 2010


TABLE OF CONTENTS

FINANCIAL SECTION ……………………………………………………………………………………………………….………1

INDEPENDENT AUDITORS' REPORT……………………………………………………………………………………………..2

FINANCIAL STATEMENTS………………………………………………………………………………………………………….4

Statement of Net Assets……………………………………………………………………………………………………………..5

Statement of Activities………………………………………………………………………………………………………………...6

Balance Sheet - Governmental Funds………………………………………………………………………………………………….7

Reconciliation of Governmental Funds Balance Sheet to the Statement of Net Assets……………………………………...………..8

Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental Funds………………………………………..9

Reconciliation of Statement of Revenues, Expenditures and Changes in Fund Balances of

Governmental Funds to the Statement of Activities……………………………………………………………...…………………..10

Statement of Net Assets - Proprietary Fund…………………………………………………………………………………………..11

Statement of Revenues, Expenses and Changes in Fund Net Assets -

Proprietary Fund……………………………………………………………………………………………………………………..12

Statement of Cash Flows - Proprietary Fund………………………………………………………………………………………….13

Statement of Fiduciary Assets and Liabilities………………………………………………………………………………………….14

Notes to the Financial Statements……………………………………………………………………………………………………..15

REQUIRED SUPPLEMENTARY INFORMATION………………………………………………………………………………….48

Budgetary Comparison Schedule - Budget and Actual (Non-GAAP Basis)

General Fund…………………………………………………………………………………………………………………………..49

Katrina CDBG Fund……………………………………………………………………………………………….......50

Schedule to the Funding Progress - Other Postemployment Benefits…………………………………………………………………..51

Notes to the Required Supplmentary Information…………………………………………………………………….………...……….52

SUPPLEMENTAL INFORMATION…………………………………………………………………………………………...……..53

Schedule of Expenditures of Federal Awards……………………………………………………………………………………..…….54

SPECIAL REPORTS………………………………………………………………………………………………..…………………56

Independent Auditors' Report on Internal Control Over Financial Reporting and on

Compliance and Other Matters Based on an Audit of the Financial Statements Performed

in Accordance with Government Auditing Standards ……………………………………………………………………..………..57

Independent Auditors' Report on Compliance with Requirements Applicable to Each

Major Program and Internal Control Over Compliance in Accordance with OMB Circular A-133……………………………………59

Independent Auditors' Report on Central Purchasing System, Inventory Control System and

Purchase Clerk Schedules (Required by Section 31-7-115, Miss. Code Ann. (1972))…………………………………………………61

Limited Internal Control and Compliance Review Management Report…………………………………………………………………67

SCHEDULE OF FINDINGS AND QUESTIONED COSTS………………………………………………………………………….72

AUDITEE'S CORRECTIVE ACTION PLAN AND SUMMARY OF PRIOR AUDIT FINDINGS………………………………..79

1

FINANCIAL SECTION

4

FINANCIAL STATEMENTS


Statement of Net Assets Exhibit 1

September 30, 2010

Primary Government

Governmental

Activities

ASSETS AND DEFERRED ITEMS

Cash 78,937,771$

Investments and derivative investment instruments 2,172,589

Accrued interest receivable 40,261

Property tax receivable 52,284,078

Premium receivable 452,669

Fines receivable (net of allowance for

uncollectable of $4,076,968) 4,122,947

Loans receivable 597,546

Intergovernmental receivables 9,697,796

Other receivables 3,527

Deferred charges 5,463,876

Deferred effective interest rate swaps - outflows 19,751,815

Land and construction in progress 44,601,612

Other capital assets, net 116,610,917

Total Assets and Deferred Items 334,737,404

LIABILITIES AND DEFERRED ITEMS

Claims payable 5,252,012

Claims and judgments payable 437,341

Retainage payable 323,205

Intergovernmental payables 2,507,129

Accrued interest payable 1,891,915

Deferred revenue 52,284,078

Postemployment benefit obligation 351,398

Long-term liabilities

Due within one year:

Capital debt 6,183,324

Non-capital debt 16,485,716

Due in more than one year:

Capital debt 120,392,185

Non-capital debt 75,289,216

Derivative hedging instruments 19,751,815

Total Liabilities and Deferred Items 301,149,334

NET ASSETS

Invested in capital assets, net of related debt 14,885,205

Restricted:

Expendable:

General government 4,401,892

Debt service 22,616,855

Public safety 10,874,345

Public works 13,425,357

Health and welfare 130,176

Conservation of natural resources 72,915

Economic development 611,833

Capital projects 7,009,445

Unrestricted (40,439,953)

Total Net Assets 33,588,070$

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

5


Statement of Activities Exhibit 2


Net (Expense) Revenue and

Program Revenues Changes in Net Assets

Operating Capital Primary Government

Charges for Grants and Grants and Governmental

Functions/Programs Expenses Services Contributions Contributions Activities

Primary government:

Governmental activities:

General government 28,029,549$ 7,416,061$ 363,264$ -$ (20,250,224)$

Public safety 35,828,037 7,003,502 1,879,244 13,005,865 (13,939,426)

Public works 12,037,003 109,896 10,519,493 - (1,407,614)

Health and welfare 14,783,553 - 1,023,623 391,422 (13,368,508)

Culture and recreation 6,608,492 - 2,723,471 - (3,885,021)

Conservation of natural resources 399,041 - 299,744 - (99,297)

Economic development and assistance 23,195,047 - - 21,666,655 (1,528,392)

Interest on long-term debt 14,463,437 - - - (14,463,437)

Total Governmental Activities 135,344,159 14,529,459 16,808,839 35,063,942 (68,941,919)

General revenues:

Property taxes 56,765,215

Road & bridge privilege taxes 2,202,289

Grants and contributions not restricted to specific programs 14,023,597

Unrestricted gifts and donations 86,573

Investment income 3,496,087

Miscellaneous 3,018,651

Total General Revenues 79,592,412

Changes in Net Assets 10,650,493

Net Assets - Beginning 27,693,457

Prior period adjustment(s) (4,755,880)

Net Assets - Beginning, as restated 22,937,577

Net Assets - Ending 33,588,070$


6

HARRISON COUNTY, MISSISSIPPI Exhibit 3

Balance Sheet - Governmental Funds

September 30, 2010

Other Total

General Katrina CDBG Governmental Governmental

Fund Fund Funds Funds

ASSETS

Cash 21,230,401$ 3,020$ 56,801,636$ 78,035,057$

Investments - - 495,382 495,382

Accrued interest receivable 32,000 - 8,261 40,261

Property tax receivable 32,507,100 - 19,776,978 52,284,078

Fines receivable (net of allowance for

uncollectable of $ 12,368,841) 4,122,947 - - 4,122,947

Loans receivable 582,546 - 15,000 597,546

Intergovernmental receivables 1,101,027 1,492,906 7,103,863 9,697,796

Special assessments receivable 3,527 - - 3,527

Due from other funds 546,000 - 179,012 725,012

Total Assets 60,125,548$ 1,495,926$ 84,380,132$ 146,001,606$

LIABILITIES AND FUND BALANCES

Liabilities:

Claims payable 474,324$ 1,027,491$ 3,750,197$ 5,252,012$

Retainage payable - 323,205 - 323,205

Intergovernmental payables 2,428,054 - - 2,428,054

Due to other funds 258,087 145,000 401,000 804,087

Deferred revenue 36,630,047 - 19,776,978 56,407,025

Total Liabilities 39,790,512 1,495,696 23,928,175 65,214,383

Fund balances:

Restricted for:

Debt service - - 24,508,770 24,508,770

Capital Project Funds - 230 7,009,215 7,009,445

Committed to:

Public safety - - 10,874,345 10,874,345

Public works - - 13,425,357 13,425,357

Health and welfare - - 130,176 130,176

Conservation of natural resources - - 72,915 72,915

Economic development 582,546 - 29,287 611,833

Assigned to:

Other purposes - - 4,401,892 4,401,892

Unassigned 19,752,490 - - 19,752,490

Total Fund Balances 20,335,036 230 60,451,957 80,787,223

Total Liabilities and Fund Balances 60,125,548$ 1,495,926$ 84,380,132$ 146,001,606$

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

Major Funds

7


Reconciliation of Governmental Fund Balance to the Statement of Net Assets Exhibit 3-1

September 30, 2010

Total funds balance - Governmental Funds 80,787,223$

161,212,529

4,122,947

(218,350,441)

(351,398)

(1,891,915)

5,463,876

Derivative investment instruments 1,677,207

Deferred effective interest rate swaps - outflows 19,751,815

Derivative hedging instruments (19,751,815) 1,677,207

918,042

Total Net Assets - Governmental Activities 33,588,070$

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

Other long-term assets are not available to pay for current period expenditures and,

therefore, are deferred in the funds.

Bond issuance costs are not available to pay for current period expenditures and,

therefore, are deferred in the funds.

Capital assets are used in governmental activities and are not financial resources and,

therefore, are not reported in the funds, net of accumulated depreciation $ 119,418,221.

Internal service funds are used by management to charge costs of insurance to

individual funds. The assets and liabilities of the Internal Service Funds are included in

governmental activities in the Statement of Net Assets

Amounts reported for governmental activities in the statement of net assets are different

because:

Deferred inflows or deferred outflows from the changes in fair value on hedging

derivative instruments are not due and payable in the current period and are therefore,

not reported in the funds.

Other postemployment benefits are not due and payable in the current period and,

therefore, are not reported in the funds

Long-term liabilities are not due and payable in the current period expenditures and

therefore are not reported in the funds.

Accrued interest not due and payable in the current period expenditures and, therefore,

not reported in the funds.

8


Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental Funds Exhibit 4


Other Total

General Katrina CDBG Governmental Governmental

Fund Fund Funds Funds

REVENUES

Property taxes 38,720,807$ -$ 18,044,408$ 56,765,215$

Road and bridge privilege taxes 2,111 - 2,200,178 2,202,289

Licenses, commissions and other revenue 2,797,148 - 1,103,086 3,900,234

Fines and forfeitures 1,322,210 - 2,043,783 3,365,993

Intergovernmental revenues 8,643,273 21,618,369 36,203,396 66,465,038

Charges for services 2,643,297 - 2,195,438 4,838,735

Interest income 709,406 - 185,805 895,211

Miscellaneous revenues 1,329,916 - 1,794,288 3,124,204

Total Revenues 56,168,168 21,618,369 63,770,382 141,556,919

EXPENDITURES

Current:

General government 25,875,745 - 759,248 26,634,993

Public safety 26,084,656 - 18,398,256 44,482,912

Public works 53,096 - 14,279,200 14,332,296

Health and welfare 4,760,202 - 9,946,118 14,706,320

Culture and recreation 2,647,647 - 3,747,292 6,394,939

Conservation of natural resources 116,710 - 273,471 390,181

Economic development and assistance 855,835 21,813,689 7,692,295 30,361,819

Debt service:

Principal 225,420 - 6,532,475 6,757,895

Interest 454,910 - 5,412,198 5,867,108

Bond issue costs 4,700 - 4,258,272 4,262,972

Total Expenditures 61,078,921 21,813,689 71,298,825 154,191,435

Excess of Revenues over/(under) Expenditures (4,910,753) (195,320) (7,528,443) (12,634,516)

OTHER FINANCING SOURCES (USES)

Long-term capital debt issued - - 11,934,123 11,934,123

Refunding bonds issued - - 80,370,000 80,370,000

Swap agreement proceeds 776,500 - - 776,500

Proceeds from sale of capital assets 4,120 - - 4,120

Premiums on bonds issued - - 3,503,199 3,503,199

Compensation for loss of capital assets 1,472 - - 1,472

Transfers in 5,294,371 - 223,581 5,517,952

Transfers out (223,581) - (5,294,371) (5,517,952)

Payment to bond refunding escrow agent - - (77,445,000) (77,445,000)

Payment to counterparties - bond termination costs - - (3,690,000) (3,690,000)

Total Other Financing Sources and Uses 5,852,882 - 9,601,532 15,454,414

Net Changes in Fund Balances 942,129 (195,320) 2,073,089 2,819,898

Fund Balances - Beginning 19,232,458 1,594,848 58,304,553 79,131,859

Prior period adjustment(s) 160,449 (1,399,298) 74,315 (1,164,534)

Fund Balances - Beginning, as restated 19,392,907 195,550 58,378,868 77,967,325

Fund Balances - Ending 20,335,036$ 230$ 60,451,957$ 80,787,223$


Major Funds

9


Reconciliation to the Statement of Revenues, Expenditures Exhibit 4-1

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


Net changes in fund balances -governmental funds 2,819,898$

17,969,955

(335,145)

2,831,266

(8,101,228)

493,794

(396,465)

147,168

975,595

(24,216)

(66,397)

Increase in premium on refunding bond (3,503,199)

Increase in other post employment benefits payable (249,305)

Increase in accrued interest payable (1,014,858)

(896,370)

Change in net assets of governmental activities 10,650,493$


Fine revenue recognized on the modified accrual basis in the funds during the current year is

reduced because prior year recognition would have been required on the Statement of Activities

using the full accrual basis of accounting.

Under the modified accrual basis of accounting used in the Governmental Funds, expenditures

are not recognized for transactions that are not normally paid with expendable available financial

resources. However, in the Statement of Activities, which is presented on the accrual basis,

expenses and liabilities are reported regardless of when financial resources are available. In

addition, interest on long-term debt is recognized under the modified accrual basis of accounting

when due, rather than as it accrues. Thus, the change in net assets differs from the change in

fund balances by a combination of the following items:

Increase in deferred refunding bond

Changes in the fair value of hedging and investment derivatives do not represent a current flow

of resources and are therefore not reflected in the funds.

Increase in amortization of bond issuance costs

Increase in amortization of premium

An Internal Service Fund is used by management to charge the cost of issuance of individual

funds. The net revenue (expense) is reported within the governmental activities.

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

Increase in amortization of discount

Increase in compensated absences

Governmental funds report capital outlays as expenditures. However, in the statement of

activities the cost of those assets is allocated over their estimated useful lives and reported as

depreciation expense. Thus, the change in net assets differs from the change in fund balances by

the amount that depreciation of $5,908,436 was exceeded by capital outlays of $23,878,391 in

the current period.

Debt proceeds provide current financial resources to Governmental Funds, but issuing debt

increases long-term liabilities in the Statement of Net Assets. Repayment of debt principal is an

expenditure in the Governmental Funds, but the repayment reduces long-term liabilities in the

Statement of Net Assets. Thus, the change in net assets differs from the change in fund balances

by the amount that debt proceeds of $92,304,123 exceeded debt repayments of $6,757,895 and

by the amount of $77,445,000 bond issues refunded.

In the Statement of Activities, only gains and losses from the sale of capital assets are reported,

whereas in the Governmental Funds, proceeds from the sale of capital assets increase financial

resources. Thus, the change in net assets differs from the change in fund balances by the amount

of the net loss of $329,553 and the proceeds from the sale of $5,592 in the current period.

10


Statement of Net Assets - Proprietary Fund Exhibit 5

September 30, 2010

Governmental

Activities

Self-Insurance

Internal Service

Fund

ASSETS

Cash 902,714$

Premiums receivable 452,669

Total Assets 1,355,383

LIABILITIES

Claims and judgments payable 437,341

NET ASSETS

Restricted for health insurance 918,042$


11

HARRISON COUNTY

Statement of Revenues, Expenditures and Changes in Fund Net Assets - Proprietary Fund Exhibit 6


Governmental

Activities

Self-Insurance

Internal Service

Fund

OPERATING REVENUES

Premiums 5,946,194$

Total Revenues 5,946,194

OPERATING EXPENSES

Claims payments 6,265,616

Administrative 576,948

Total Expenditures 6,842,564

Changes in Net Assets (896,370)

Fund Balances - Beginning 1,814,412

Fund Balances - Ending 918,042$


12


Statement of Cash Flows - Proprietary Fund Exhibit 7


Governmental

Activities

Self-Insurance

Internal Service Fund

Cash Flows from Operating Activities

Receipts for premiums 5,956,375$

Payments for claims (6,615,888)

Payments to administrator for services (576,948)

Net Cash (Used) by Operating Activities (1,236,461)

Net Increase/(Decrease) in Cash and Cash Equivalents (1,236,461)

Cash and Cash Equivalents at Beginning of Year 2,139,175

Cash and Cash Equivalents at End of Year 902,714$

Operating income (loss) (896,370)$

(Increase) decrease in premium receivable 10,181

Increase (decrease) in claims and judgments liability (350,272)

Total adjustments (1,236,461)$


13


Statement of Fiduciary Assets and Liabilities Exhibit 8

September 30, 2010

Agency

Funds

ASSETS

Cash 2,350,987$

Accrued interest receivable 55

Due from other funds 79,075

Total Assets 2,430,117$

LIABILITIES AND FUND BALANCES

Liabilities:

Intergovernmental payables 2,430,117

Total Liabilities 2,430,117$


14


Notes to the Financial Statements


15

(1) Summary of Significant Accounting Policies.

A. Financial Reporting Entity.

Harrison County is a political subdivision of the State of Mississippi. The County is governed by

an elected five-member Board of Supervisors. Accounting principles generally accepted in the

United States of America require Harrison County to present these financial statements on the

primary government and its component units which have significant operational or financial

relationships with the county.

Management has chosen to omit from these financial statements the following component units

which have significant operational or financial relationships with the county. Accordingly, the

financial statements do not include the data of all of the county's component units necessary for

reporting in conformity with accounting principles generally accepted in the United States of

America.

• Harrison County Development Commission

• Harrison County Tourism Commission

• D’Iberville Water and Sewer District

State law pertaining to County government provides for the independent election of County

officials. The following elected and appointed officials are all part of the County legal entity and

therefore are reported as part of the primary government financial statements.

• Board of Supervisors

• Chancery Clerk

• Circuit Clerk

• Justice Court Clerk

• Purchase Clerk

• Tax Assessor

• Tax Collector

• Sheriff

B. Basis of Presentation.

The county’s basic financial statements consist of government-wide statements, including a

Statement of Net Assets and a Statement of Activities and fund financial statements, which

provide a detailed level of financial information.

Government-wide Financial Statements:

The Statement of Net Assets and Statement of Activities display information concerning the

County as a whole. The statements include all nonfiduciary activities of the primary government.

For the most part, the effect of interfund activity has been removed from these statements.

Governmental activities are generally financed through taxes, intergovernmental revenues and

other nonexchange revenues.




16

(1) Summary of Significant Accounting Policies. (continued)

The Statement of Net Assets presents the financial condition of the governmental activities of the

County at year-end. The Government-wide Statement of Activities presents a comparison

between direct expenses and program revenues for each function or program of the county’s

governmental activities. Direct expenses are those that are specifically associated with a service,

program or department and therefore, are clearly identifiable to a particular function. Program

revenues include charges paid by the recipient of the goods or services offered by the program,

grants and contributions that are restricted to meeting the operational or capital requirements of a

particular program. Taxes and other revenues not classified as program revenues are presented as

general revenues of the county, with certain limited exceptions. Internal service fund balances

have been eliminated against the expenses and program revenue. The comparison of direct

expenses with program revenues identifies the extent to which each governmental function is self-

financing or draws from the general revenues of the county.

Fund Financial Statements:

Fund financial statements of the County are organized into funds, each of which is considered to

be separate accounting entities. Each fund is accounted for by providing a separate set of self-

balancing accounts that constitute its assets, liabilities, fund equity, revenues and

expenditures/expenses. Funds are organized into governmental, proprietary and fiduciary. Major

individual Governmental Funds are reported as separate columns in the fund financial statements.

Nonmajor funds are aggregated and presented in a single column.

C. Measurement Focus and Basis of Accounting.

The Government-wide, Proprietary Fund and Fiduciary Funds (excluding agency funds) financial

statements are presented using the economic resources measurement focus and the accrual basis

of accounting. Revenues are recognized when earned and expenses are recorded when the

liability is incurred or economic asset used, regardless of when the related cash flows take place.

Property taxes are recognized as revenue in the year for which they are levied. Shared revenues

are recognized when the provider government recognizes the liability to the county. Grants are

recognized as revenues as soon as all eligibility requirements have been satisfied. Agency funds

have no measurement focus, but use the accrual basis of accounting.

The county’s Proprietary Fund applies all applicable Governmental Accounting Standards Board

(GASB) pronouncements and only the following pronouncements issued on or before November

30, 1989, unless those pronouncements conflict with or contradict GASB pronouncements:

Financial Accounting Standards Board (FASB) Statements and Interpretations, Accounting

Principles Board Opinions, and Accounting Research Bulletins of the Committee on Accounting

Procedure.

The revenues and expenses of Proprietary Funds are classified as operating or non-operating.

Operating revenues and expenses generally result from providing services in connection with a

Proprietary Fund’s primary operations. All other revenues and expenses are reported as non-

operating.

Governmental financial statements are presented using a current financial resources measurement

focus and the modified accrual basis of accounting.




17


Revenues are recognized in the accounting period when they are both measurable and available to

finance operations during the year or to liquidate liabilities existing at the end of the year.

Available means collected in the current period or within 60 days after year end to liquidate

liabilities existing at the end of the year. Measurable means knowing or being able to reasonably

estimate the amount. Expenditures are recognized in the accounting period when the related fund

liabilities are incurred. Debt service expenditures and expenditures related to compensated

absences and claims and judgments, are recognized only when payment is due. Property taxes,

state appropriations and federal awards are all considered to be susceptible to accrual and have

been recognized as revenues of the current fiscal period.

The County reports the following major Governmental Funds:

General Fund - This fund is used to account for all activities of the general government for which

a separate fund has not been established.

Katrina CDBG Fund – This fund, along with others, is used to account for the CDBG federal

assistance revenues and expenditures relating to the rebuilding and recovery efforts of Hurricane

Katrina.

Additionally, the County reports the following fund types:

GOVERNMENTAL FUND TYPES

Special Revenue Funds - These funds are used to account for and report the proceeds of specific

revenue sources that are restricted or committed to expenditure for specified purposes other than

debt service or capital projects.

Debt Service Funds - These funds are used to account for and report financial resources that are

restricted, committed, or assigned to expenditure for principal and interest.

Capital Projects Funds - These funds are used to account for and report financial resources that

are restricted, committed, or assigned to expenditure for capital outlays, including the acquisition

or construction of capital facilities and other capital assets.

PROPRIETARY FUND TYPE

Internal Service Funds - These funds are used to account for those operations that provide

services to other departments or agencies of the government, or to other governments, on a cost-

reimbursement basis. The county’s internal service fund reports on self-insurance programs for

employee medical benefits.

FIDUCIARY FUND TYPE

Agency Funds - These funds account for various taxes, deposits and other monies collected or

held by the county, acting in the capacity of an agent, for distribution to other governmental units

or designated beneficiaries.




18


D. Account Classifications.

The account classifications used in the financial statements conform to the broad classifications

recommended in Governmental Accounting, Auditing and Financial Reporting as issued in 2005

by the Government Finance Officers Association.

E. Deposits and Investments.

State law authorizes the County to invest in interest bearing time certificates of deposit for periods

of fourteen days to one year with depositories and in obligations of the U.S. Treasury, State of

Mississippi, or any county, municipality or school district of this state. Further, the County may

invest in certain repurchase agreements.

Cash includes cash on hand, demand deposits, and all certificates of deposit and cash equivalents,

which are short-term highly liquid investments that are readily convertible to cash (generally three

months or less). Investments in governmental securities are stated at fair value.

F. Receivables.

Receivables are reported net of allowances for uncollectible accounts, where applicable.

G. Interfund Transactions and Balances.

Transactions between funds that are representative of short-term lending/borrowing arrangements

and transactions that have not resulted in the actual transfer of cash at the end of the fiscal year

are referred to as "due to/from other funds." Interfund receivables and payables between funds

within governmental activities are eliminated in the Statement of Net Assets.

H. Capital Assets.

Capital acquisition and construction are reflected as expenditures in Governmental Fund

statements and the related assets are reported as capital assets in the governmental activities

column in the government-wide financial statements. All purchased capital assets are stated at

historical cost where records are available and at an estimated historical cost where no records

exist. Capital assets include significant amounts of infrastructure which have been valued at

estimated historical cost. The estimated historical cost was based on replacement cost multiplied

by the consumer price index implicit price deflator for the year of acquisition. The extent to

which capital assets, other than infrastructure, costs have been estimated and the methods of

estimation are not readily available. Donated capital assets are recorded at estimated fair market

value at the time of donation. The costs of normal maintenance and repairs that do not add to the

value of assets or materially extend their respective lives are not capitalized; however,

improvements are capitalized. Interest expenditures are not capitalized on capital assets.

Capitalization thresholds (dollar value above which asset acquisitions are added to the capital

asset accounts) and estimated useful lives are used to report capital assets in the government-wide

statements. Depreciation is calculated on the straight-line basis for all assets, except land. A full

year’s depreciation expense is taken for all purchases and sales of capital assets during the year.




19


The following schedule details those thresholds and estimated useful lives:

Capitalization

Thresholds

Estimated

Useful Life

Land $ 0 N/A

Infrastructure 0 20-50 years

Buildings 50,000 40 years

Improvements other than buildings 25,000 20 years

Mobile equipment 5,000 5-10 years

Furniture and equipment 5,000 3-7 years

Leased property under capital leases * *

* Leased property capitalization policy and estimated useful life will correspond with the

amounts for the asset classification, as listed above.

I. Long-term Liabilities.

Long-term liabilities are the unmatured principal of bonds, loans, notes or other forms of

noncurrent or long-term general obligation indebtedness. Long-term liabilities are not limited to

liabilities from debt issuances, but may also include liabilities on lease-purchase agreements and

other commitments.

In the government-wide financial statements, long-term debt and other long-term obligations are

reported as liabilities in the governmental activities Statement of Net Assets. Bond premiums and

discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using

the straight-line method. Bonds payable are reported net of the applicable bond premium or

discount. Bond 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 and

discounts, as well as bond issuance costs, during the current period. The face amount of the debt

issued is reported as other financing sources while discounts on debt issuances are reported as

other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds

received, are reported as debt service expenditures.

J. Derivatives.

The County uses interest rate swaps, which are recorded based on criteria set forth in GASB 53,

to manage net exposure to interest rate changes related to its borrowings and to lower its overall

borrowing costs. The derivative instruments are recorded as either assets or liabilities in the

balance sheet at fair value. Gains and losses resulting from terminations of swaps, when they

occur, are recognized as a component of other financing sources and uses in the accompanying

statements of operations and changes in fund balances. Increases or decreases in the fair value of

effective swaps are recognized as deferred effective interest rate swap inflows or outflows in the

accompanying balance sheets. Gains and losses resulting from changes in the fair value of

ineffective swaps are recognized as an investment income in the accompanying statement of

activities.




20


K. Debt Issue Costs, Original Issuance Premiums and Discounts, and Deferred Gains and Losses on

Refunding.

Debt issue costs, which are included in other assets, are amortized over the term of the related

obligations using the effective interest method or the straight-line method when it approximates

the effective interest method. Amortization of debt issue costs is included in interest expense.

Original issue premiums and discounts on bonds payable are amortized using the effective interest

method.

Deferred gains and losses on refundings, which are included in long-term debt, are amortized over

the shorter of the remaining life of the old debt or the life of the new debt using the straight-line

method, which approximates the effective interest method. Amortization of deferred gains and

losses on refunding is included in interest expense.

L. Equity Classifications.

Government-wide Financial Statements:

Equity is classified as net assets and displayed in three components:

Invested in capital assets, net of related debt - Consists of capital assets including restricted

capital assets, net of accumulated depreciation and reduced by the outstanding balances of any

bonds, notes or other borrowings attributable to the acquisition, construction or improvement of

those assets.

Restricted net assets - Consists of net assets with constraints placed on the use either by external

groups such as creditors, grantors, contributors, or laws and regulations of other governments; or

law through constitutional provisions or enabling legislation.

Unrestricted net assets - All other net assets not meeting the definition of “restricted” or “invested

in capital assets, net of related debt.”

Fund Financial Statements:

Fund balances for governmental funds are reported in classifications that comprise a hierarchy

based primarily on the extent to which the government is bound to honor constraints on the

specific purposes for which amounts in those funds can be spent.

Government fund balance is classified as nonspendable, restricted, committed, or unassigned.

The following are descriptions of fund classifications used by the county:




21


Nonspendable fund balance includes amounts that cannot be spent. This includes amounts that

are either not in a spendable form (inventories, prepaid amounts, long-term portion of loans/notes

receivable, or property held for resale unless the proceeds from the collection of those receivables

or from the sale of those properties are restricted, committed or assigned) or amounts that are

legally or contractually required to be maintained intact, such as a principal balance of a

permanent fund. As of September 30, 2010, the County does not have a Nonspendable fund

balance.

Restricted fund balance includes amounts that have constraints placed upon the use of the

resources either by an external party or imposed by law through a constitutional provision or

enabling legislation.

Committed fund balance includes amounts that can be used only for specific purposes pursuant to

constraints imposed by a formal action of the Board of Supervisors, the county’s highest level of

decision-making authority. This formal action is an order of the Board of Supervisors as

approved in the board minutes.

Assigned fund balance includes amounts that are constrained by the County’s intent to be used for

a specific purpose, but are neither restricted nor committed. For governmental funds, other than

the general fund, this is the residual amount within the fund that is not classified as nonspendable

and is neither restricted nor committed. Assignments of fund balance are created by the County’s

management pursuant to board policy.

Unassigned fund balance is the residual classification for the general fund. This classification

represents fund balance that has not been assigned to other funds and that has not been restricted,

committed or assigned to specific purposes within the general fund. The general fund should be

the only fund that reports a positive unassigned fund balance amount. In other governmental

funds if expenditures incurred for specific purposes exceeded the amounts restricted, committed

or assigned to those purposes, it may be necessary to report a negative unassigned fund balance.

When an expenditure is incurred for purposes for which both restricted and unrestricted

(committed, assigned or unassigned) resources are available, it is the county’s general policy to

use restricted resources first. When expenditures are incurred for purposes for which unrestricted

(committed, assigned and unassigned) resources are available, and amounts in any of these

unrestricted classifications could be used, it is the county’s general policy to spend committed

resources first, followed by assigned amounts, and then unassigned amounts.

M. Property Tax Revenues.

Numerous statutes exist under which the Board of Supervisors may levy property taxes. The

selection of authorities is made based on the objectives and responsibilities of the county.

Restrictions associated with property tax levies vary with the statutory authority. The amount of

increase in certain property taxes is limited by state law. Generally, this restriction provides that

these tax levies shall produce no more than 110% of the amount which resulted from the

assessments of the previous year.




22


The Board of Supervisors, each year at a meeting in September, levies property taxes for the

ensuing fiscal year which begins on October 1. Real property taxes become a lien on January 1 of

the current year, and personal property taxes become a lien on March 1 of the current year. Taxes

on both real and personal property, however, are due on or before February 1 of the next

succeeding year. Taxes on motor vehicles and mobile homes become a lien and are due in the

month that coincides with the month of original purchase.

Accounting principles generally accepted in the United States of America require property taxes

to be recognized at the levy date if measurable and available. All property taxes are recognized as

revenue in the year for which they are levied. Motor vehicle and mobile home taxes do not meet

the measurability and collectability criteria for property tax recognition because the lien and due

date cannot be established until the date of original purchase occurs.

N. Intergovernmental Revenues in Governmental Funds.

Intergovernmental revenues, consisting of grants, entitlements and shared revenues, are usually

recorded in Governmental Funds when measurable and available. However, the "available"

criterion applies for certain federal grants and shared revenues when the expenditure is made

because expenditure is the prime factor for determining eligibility. Similarly, if cost sharing or

matching requirements exist, revenue recognition depends on compliance with these

requirements.

O. Compensated Absences.

The County has adopted a policy of compensation for accumulated unpaid employee personal

leave. No payment is authorized for accrued major medical leave. Accounting principles

generally accepted in the United States of America require accrual of accumulated unpaid

employee benefits as long-term liabilities in the government-wide financial statements. In fund

financial statements, Governmental Funds report the compensated absence liability payable only

if the payable has matured, for example an employee resigns or retires.

P. Future Effective Accounting Pronouncements.

For the fiscal year ended September 30, 2011, the County will be subject to Governmental

Accounting Standards Board (GASB) Statement No. 59, Financial Instruments Omnibus.

Management believes that the following effective accounting pronouncements will have some

impact on future financial reporting of the County.

GASB Statement No. 59, Financial Instruments Omnibus. This statement is effective for the

fiscal year ending September 30, 2011. The objective of this statement is to update and improve

financial reporting and disclosure requirements of certain financial instruments by providing more

complete information, improving the consistency of measurements, and by providing

clarifications of existing standards.

GASB Statement No. 57, OPEB Measurements by Agent Employers and Agent Multiple-

Employer Plans. This statement is effective for the fiscal year ending September 30, 2012.

Earlier application is encouraged.




23


The requirements of this statement will allow agent employers to use an alternative measurement

method to produce actuarially based information for purposes of financial reporting on its OPEB

plans. As a result, the cost of compliance of Statement 45 for eligible agent employers such as

the County may be reduced while achieving an appropriate balance between the goals of reliable

measurement of reported information and reasonable cost. Management has not evaluated the

impact of this statement on the County’s financial statements.

GASB Statement No. 64, Derivative Instruments: Application of Hedge Accounting Termination

Provisions. This statement is effective for the fiscal year ending September 30, 2012. Earlier

application is encouraged. The objective of this statement is to clarify whether an effective

hedging relationship continues after the replacement of swap counterparty or a swap

counterparty’s credit support provider. This statement sets forth criteria that establish when the

effective hedging relationship continues and the hedge accounting should continue to be applied.

Management has not evaluated the impact of this statement on the County’s financial statements,

however given the nature of the County’s involvement with interest rate swaps, the potential

impact could be substantial.

(2) Changes in Accounting Standards.

For the fiscal year ended September 30, 2010, the County implemented Governmental

Accounting Standards Board (GASB) Statement No. 53, Accounting and Financial Reporting for

Derivative Instruments. The guidance in this statement requires governments to measure

derivative instruments at fair value in their economic resources measurement focus financial

statements. The changes in fair value of hedging derivative instruments do not affect investment

revenue, but are reported as deferrals. On the other hand, the changes in fair value of investment

derivative instruments (which include ineffective hedging derivative instruments) are reported as

part of investment revenue in the current reporting period.

For the fiscal year ended September 30, 2010, the County implemented Governmental

Accounting Standards Board (GASB) Statement No. 54, Fund Balance Reporting and

Governmental Fund Type Definitions. This statement enhances the usefulness of fund balance

information by providing clearer fund balance classifications that can be more consistently

applied and by clarifying the existing governmental fund type definitions. The fund balance

amounts for governmental funds have been reclassified in accordance with GASB Statement No.

54. As a result, amounts previously reported as reserved and unreserved are now reported as

nonspendable, restricted, committed, assigned, or unassigned.




24

(3) Prior Period Adjustment.

A summary of significant fund equity adjustments is as follows:

Exhibit 2- Statement of Activities

Explanation Amount

To correct prior years errors in recording of capital assets (3,016,317)$

To correct prior years errors in recording debt proceeds (720,688)

To correct prior years errors in recording revenue receivable from other governments (1,164,534)

To correct prior years errors in recording compensated absences (404,008)

To implement GASB 53 retroactively 549,667

Total prior period adjustments (4,755,880)$

Exhibit 4 – Statement of Revenues, Expenditures and Changes of Fund Balances

Explanation

Amount

Revenue receivable from other governments duplicated in prior years:

General Fund

$ 160,449

CDBG Grant Fund

(1,399,298)

Other Governmental Funds

74,315

$ (1,164,534)

(4) Deposits.

Deposits:

The carrying amount of the county's total deposits with financial institutions at September 30, 2010, was

$81,288,758, and the bank balance was $85,273,870. The collateral for public entities’ deposits in

financial institutions are held in the name of the State Treasurer under a program established by the

Mississippi State Legislature and is governed by Section 27-105-5, Miss. Code Ann. (1972). Under this

program, the entity’s funds are protected through a collateral pool administered by the State Treasurer.

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 institution would be

liquidated by the State Treasurer to replace the public deposits not covered by the Federal Deposit

Insurance Corporation (FDIC).

Custodial Credit Risk - Deposits. Custodial credit risk is the risk that in the event of the failure of a

financial institution, the County will not be able to recover deposits or collateral securities that are in the

possession of an outside party. The County does not have a formal policy for custodial credit risk.

However, the Mississippi State Treasurer manages that risk on behalf of the county. Deposits above

FDIC coverage are collateralized by the pledging financial institution’s trust department or agent in the

name of the Mississippi State Treasurer on behalf of the county.




25

(4) Deposits. (continued)

Investments and Derivative Investment Instruments.

Investment balances at September 30, 2010, are as follows:

Less More

Investment Type Fair Value Than 1 1-5 6-10 than 10 Rating

Hancock Horizon

Government Money

Market Mutual Fund 495,382$ 495,382$ -$ -$ -$ AAAm

$10.815M 10Y SIFMA

Basis Swap 209,919 209,919 - - - A2

$14.99M 10Y SIFMA

Basis Swap 214,836 214,836 - - - A2

$40M 10Y SIFMA

Basis Swap 1,252,452 1,252,452 - - - A2

Total 2,172,589$ 2,172,589$ -$ -$ -$

Investment maturities (in years)

The County has entered into three basis swaps that are accounted for as investment derivative instruments

under GASB Statement No. 53 due to the ineffective hedging of the underlying bonds.

Interest Rate Risk - The County does not have a formal investment policy that limits investment maturities

as a means of managing its exposure to fair value losses arising from increasing interest rates. However,

Section 19-9-29, Miss. Code Ann. (1972) limits the maturity period of any investment to no more than

one year.

Credit Risk - State law limits investments to those authorized by Sections 19-9-29 and 91-13-8, Miss.

Code Ann. (1972). The County does not have a formal investment policy that would further limit its

investments choice or one that address credit risk. Credit risk can be measured by actual market value

exposure or theoretical exposure. When the fair value of any swap has a positive market value, then the

County is exposed to the actual risk that the counterparty will fulfill its obligations. As of September 30,

2010, the County has no net exposure to actual credit risk on its derivatives because the total exposure to

each counterparty is a liability to the County. The County does not measure theoretical exposure on its

derivative portfolio.




26

(4) Deposits. (continued)

Custodial Credit Risk Investments - Custodial credit risk is the risk that in the event of the failure of the

counterparty, the County will not be able to recover the value of its investments or collateral securities

that are in the possession of an outside party. The County does not have a formal policy for custodial

credit risk.

Of the County’s investment, $0 of the underlying securities were uninsured, unregistered, and held in trust

accounts by the investment’s counterparty on behalf of the County, not in the name of the County.

Concentration of Credit Risk - The County places no limit on the amount the County may invest in any

one issuer. More than 5% of the County’s investments are in Hancock Horizon Government Money

Market Mutual Fund. This investment is 23% of the County’s total investments and is reported in the

Coast Coliseum Fund. The County’s three derivative investment instruments are an investment with one

counterparty and represents 77% of total investments.

(5) Interfund Transactions and Balances.

The following is a summary of interfund balances at September 30, 2010:

A. Due From/To Other Funds:

Receivable Fund

Payable Fund

Amount

General Fund

Katrina CDBG Fund

$ 145,000

General Fund


401,000


General Fund

179,012

Agency Funds

General Fund

79,075

Total

$ 804,087

The receivables represent the tax revenue collected but not settled until October, 2010, along with

temporary cash loans for grants receivable. All interfund balances are expected to be repaid within one

year from the date of the financial statements.

B. Transfers In/Out:

Transfer In

Transfer Out

Amount

General Fund


$ 5,294,371


General Fund

223,581

Total

$ 5,517,952

The principal purpose of interfund transfers was to provide funds for grant matches or to provide funds to

pay for capital outlay. All interfund transfers were routine and consistent with the activities of the fund

making the transfer.




27

(6) Intergovernmental Receivables.

Intergovernmental receivables at September 30, 2010, consisted of the following:

Description

Amount

Governmental Activities:

Legislative tax credit

$ 749,009

Gaming

352,018

Community Development Block Grant

1,492,906

Additional privilege tax

276,608

Road protection

151,353

Occupancy tax

293,861

Community Capacity Development Office Grant

25,213

State and Community Safety Grant

101,734

Emergency Management Performance Grants

6,255,094

Total

$ 9,697,796

(7) Loans Receivable.

Loans receivable balances at September 30, 2010, are as follows:

Description

Date of

Interest

Maturity

Receivable

West Harrison Water and Sewer

02/98

N/A

N/A

$ 15,000

Harrison County Development Commission

12/00

3.00%

11/20

291,273

Harrison County Development Commission

12/00

3.00%

11/20

291,273

$ 597,546




28

(8) Capital Assets.

The following is a summary of capital assets activity for the year ended September 30, 2010:

Balance

Balance

Oct.1, 2009 Additions Deletions Adjustments* Sept. 30, 2010

Non-depreciable capital assets:

Land $ 6,986,304 $ 154,330 $ - $ - $ 7,140,634

Construction in progress 19,514,479 20,873,413 - (2,926,914) 37,460,978

Total non-depreciable capital assets 26,500,783 21,027,743 - (2,926,914) 44,601,612

Depreciable capital assets:

Buildings 54,372,599 - 75,033 91,525 54,389,091

Improvements other than buildings 39,140,716 - - - 39,140,716

Mobile equipment 20,930,943 2,780,251 1,768,646 4,606,845 26,549,393

Furniture & equipment 2,327,953 47,369 253,654 - 2,121,668

Leased property under capital leases 5,588,599 23,028 208,198 (4,606,845) 796,584

Infrastructure 113,031,686 - - - 113,031,686

Total depreciable capital assets 235,392,496 2,850,648 2,305,531 91,525 236,029,138

Less accumulated depreciation for:

Buildings 15,367,065 1,067,557 49,566 180,928 16,565,984

Improvements other than buildings 15,600,855 1,211,671 - - 16,812,526

Mobile equipment 14,561,712 1,785,865 1,510,382 3,464,016 18,301,211

Other furniture & equipment 1,864,835 138,123 234,124 - 1,768,834

Leased property under capital lease 3,431,037 501,697 176,314 (3,464,016) 292,404

Infrastructure 64,473,739 1,203,523 - - 65,677,262

Total accumulated depreciation 115,299,243 5,908,436 1,970,386 180,928 119,418,221

Total depreciable capital assets, net 120,093,253 (3,057,788) 335,145 (89,403) 116,610,917

Governmental activities

capital assets, net $ 146,594,036 $ 17,969,955 $ 335,145 $ (3,016,317) $ 161,212,529

* Adjustments.

To correct prior year errors in recording capital assets of $3,016,317 from construction in progress.




29

(8) Capital Assets. (continued)

Depreciation expense was charged to the following functions:

General government 943,180$

Public safety 1,898,038

Public works 2,846,931

Health & welfare 48,312

Culture and recreation 169,635

Conservation of natural resources 2,340

5,908,436$ Total governmental activities depreciation expense

Commitments with respect to unfinished capital projects at September 30, 2010, consisted of the

following:

Remaining

Expected Date

Description of Commitment

Financial Commitment

of Completion

Biloxi Courthouse Annex

$ 491,770

April 2012

Library Gulfport

3,260,844

February 2012

Adult Detention Center

770,967

January 2012

Parking Garage

100,848

March 2011

Palmer Creek

287,791

September 2012

Biloxi River Bridge

7,060,760

unknown

County Farm Road Shelter

2,008,652

May 2012

Saucier/Lizana Road Shelter

1,539,491

January 2012

Labouy Road Shelter

2,270,327

March 2012

Long Beach Pavilion

304,066

June 2011

Martin Luther King Jr. Drainage Improvements

253,422

December 2010

Harrison County Courthouse Re-roof

119,132

February 2012

Pass Christian Admin Building

56,200

November 2010

Woolmarket Concession Stand

8,776

November 2010

As of September 30, 2010, the County had the following commitments:

On October 1, 1999, the Harrison County Board of Supervisors entered into a pledge agreement with the

City of Biloxi to finance the City’s Tax Increment Limited Obligation Bonds. The bonds were issued for

a traffic flow and thoroughfare improvement plan project. The County pledged to provide annual

payments equal to the lesser of (a) $1,200,000 per year or (b) one-half the debt service on the City’s Tax

Increment Limited Obligation Bonds. The County’s payments are paid annually from the revenues

generated by tax increment financing.

On September 8, 1998, the Harrison County Board of Supervisors entered into a tax pledge agreement

with the City of D’Iberville to finance the City’s Tax Increment Limited Obligation Bonds for the purpose

of financing the City’s Interstate 110/Interstate 10 capital improvement project in the amount of

$1,135,000. The agreement was amended on July 7, 2003, to include the addition of $3,200,000 in bonds.

The County pledged an amount sufficient to pay the principal and interest on the bond issue.




30

(8) Capital Assets. (continued)

The County pledged an amount sufficient to pay the principal and interest on $1,000,000 of the additional

bonds. The County’s payments are paid annually from the revenues generated by tax increment

financing.

(9) Claims and Judgments.

Risk Financing.

The County finances its exposure to risk of loss related to workers' compensation for injuries to its

employees through the Mississippi Public Entity Workers' Compensation Trust, a public entity risk pool.

The County pays premiums to the pool for its workers' compensation insurance coverage, and the

participation agreement provides that the pool will be self-sustaining through member premiums.

The retention for the pool is $1,000,000 for each accident and completely covers statutory limits set by the

Workers' Compensation Commission. Risk of loss is remote for claims exceeding the pool's retention

liability. However, the pool also has catastrophic reinsurance coverage for statutory limits above the

pool’s retention, provided by Safety National Casualty Corporation, effective from January 1, 2010, to

January 1, 2011. The pool may make an overall supplemental assessment or declare a refund depending

on the loss experience of all the entities it insures.

The County is exposed to risk of loss relating to employee health, accident and dental coverage.

Beginning in 2002 and pursuant to Section 25-15-101, Miss. Code Ann. (1972), the County established a

risk management fund (included as an Internal Service Fund) to account for and finance its uninsured risk

of loss.

Under the plan, amounts payable to the risk management fund are based on actuarial estimates. Each

employee pays a portion of his/her premium through a payroll deduction. Harrison County pays the

remaining portion of the premium on a single coverage policy for its respective employees. Employees

desiring additional and/or dependent coverage pay the additional premium through a payroll deduction.

Premium payments to the risk management fund are determined on an actuarial basis. The County has a

minimum uninsured risk retention to the extent that actual claims submitted exceed the predetermined

premium. The County has implemented the following plans to minimize this potential loss:

The County has purchased coinsurance which functions on specific stop loss coverage. This coverage is

purchased from an outside commercial carrier. For the current fiscal year, the specific coverage begins

when an individual participant’s claim exceeds $200,000.

Claims expenditures and liabilities are reported when it is probable that a loss has occurred and the

amount of that loss can be reasonably estimated. Liabilities include an amount for claims that have been

incurred but not reported (IBNRs).




31

(9) Claims and Judgments. (continued)

At September 30, 2010, the amount of these liabilities was $437,341. An analysis of claims activities is

presented below:

Current Year

Claims and

Balance at

Beginning of year

Changes in

Claim

Fiscal Year

Fiscal Liability

Estimates

Payments

End

2007-2008 $ 770,143

$ 7,263,737

$ 7,135,666

$ 898,214

2008-2009 898,214

6,539,194

6,649,795

787,613

2009-2010 787,613

6,265,616

6,615,888

437,341

(10) Capital Leases.

As Lessee:

The County is obligated for the following capital assets acquired through capital leases as of September

30, 2010:

Governmental

Classes of Property

Activities

Mobile equipment

$ 796,584

Less: Accumulated depreciation

(292,404)

Leased Property Under Capital Leases

$ 504,180

The following is a schedule by years of the total payments due as of September 30, 2010:

Governmental Activities

Year Ending September 30

Principal Interest

2011

$ 188,324 $ 5,009




32

(11) Other Postemployment Benefits.

Plan Description

The Harrison County Board of Supervisors administers the County’s health insurance plan which is

authorized by Sections 25-15-101 et seq., Mississippi Code Ann. (1972). The County’s health insurance

plan may be amended by the Harrison County Board of Supervisors. The County purchases health

insurance coverage from a commercial insurance company and offers health insurance benefit coverage

through the County’s health insurance plan (the Plan).

Since retirees may obtain health insurance by participating in a group with active employees and

consequently receive a health insurance premium rate differential, the County has a postemployment

healthcare benefit reportable under GASB Statement 45 as a single employer defined benefit health care

plan. Effective October 1, 2008, the County implemented GASB Statement 45 prospectively, which

requires reporting on an accrual basis the liability associated with other postemployment benefits. The

County does not issue a publically available report for the Plan.

Funding Policy

No contributions towards other postemployment benefits (OBEP) are made. Employees’ premiums are

funded by the County with additional funding provided by retired employees and by active employees for

spouse and dependent medical coverage. The Plan is financed on a pay-as-you-go basis. The Board of

Supervisors, acting in conjunction with the commercial insurance company, has the sole authority for

setting health insurance premiums for the County’s health insurance plan.

Per Section 25-15-103, Mississippi Code Ann. (1972), any retired employee electing to purchase retiree

health insurance must pay the full cost of the insurance premium monthly to the County.

For the year ended September 30, 2010, retiree premiums rage from $486 to $837 depending on

dependent coverage and Medicare eligibility.

Actuarial Valuation

The County’s Health Insurance Plan’s Report of the Actuary on the Other Postemployment Benefits

Valuation was prepared as of October 1, 2009. The plan has an actuarial valuation performed annually in

order to be in compliance with GASB Statement 45.

Annual OPEB Cost and Net OBEB Obligation

The County’s annual OPEB cost is calculated based on the annual required contribution of the employer

(ARC), an amount actuarially determined in accordance with the parameters of GASB Statement 45. The

ARC was determined assuming the plan would fund the OPEB liability on a pay-as-you-go basis.

The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost

each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed

30 years. The current ARC of $303,073 is .97 percent of annual covered payroll.




33

(11) Other Postemployment Benefits. (continued)

The following table presents the OPEB cost for the year, the amount contributed and changes in the

OPEB plan for the fiscal year 2010:

Annual required contribution

$ 319,608

Interest on prior year net OPEB obligation

4,594

Adjustment to annual required contribution

(4,835)

Annual OPEB cost

319,367

Contributions made

70,062

Increase in net OPEB obligation

249,305

Net OPEB obligation - Beginning of year

102,093

Net OPEB obligation - End of year

$ 351,398

The following table provides for the County’s annual OPEB cost, the percentage of annual OPEB cost

contributed to the plan and the net OPEB obligation for fiscal year 2010:

Percentage

Net OPEB

Annual OPEB

of Annual

Obligation

2010

$ 319,367

21.91%

$ 351,398

Funding Status and Funding Progress

The following table provides funding information for the most recent actuarial valuation date:

Actuarial Valuation Date

October 1, 2009

Actuarial Value of Plan Assets

$ -

Actuarial Accrued Liability (AAL) Entry Age Normal

2,445,632

Unfunded AAL (UAAL)

2,445,632

Funded Ratio

0.0%

Annual Covered Payroll

32,033,942

UAAL as a Percentage of Annual Covered Payroll

7.63%

Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and

assumptions about the probability of occurrence of events far into the future. Examples include

assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined

regarding the funded status of the Plan and the annual required contributions of the employer are subject

to continual revision as actual results are compared with past expectations and new estimates are made

about the future.

The schedule of funding progress, presented as RSI following the notes to the financial statements, is

designed to present multiyear trend information about whether the actuarial value of plan assets is

increasing or decreasing over time relative to the actuarial accrued liability for benefits.




34

(11) Other Postemployment Benefits. (continued)

Actuarial Methods and Assumptions

Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as

understood by the employer and plan members) and include the types of benefits provided at the time of

each valuation and the historical pattern of sharing of benefit costs between the employer and plan

member to that point. The actuarial methods and assumptions used include techniques that are designed

to reduce the efforts of short-term volatility in actuarially accrued liabilities and the actuarial value of

assets, consistent with the long-term perspective of the calculations. Additional information as of the

latest actuarial valuation follows:

Actuarial Valuation Date

October 1, 2009

Actuarial cost method

Entry age normal

Amortization method

Level percentage, closed basis

Remaining amortization period

30 years

Asset valuation method

N/A

Actuarial assumptions:

Investment rate of return*

4.50%

Projected salary increases **

2.00%

Healthcare cost trend rate*

10.00%

Ultimate trend rate

5.00%

Year of ultimate trend rate

2020

*Includes inflation at

0.00%

**Includes wage inflation at

2.00%




35

(12) Long-term Debt.

Debt outstanding as of September 30, 2010, consisted of the following:

Amount Interest Maturity

Description Outstanding Rate Date


A. General Obligation Bonds

General Obligation Public Improvement Bonds 1,065,000$ 6.25-8.9% Nov-10

General Obligation Refunding - 1998 5,200,000 4.0-5.0% Jul-14

General Improvement Bond 2,450,000 Variable Dec-25

General Obligation USM Project 995,000 4.15-7.5% Jan-16

General Obligation - Refunding Series 2005A 6,240,000 3.0-4.0% Apr-18

General Obligation - Refunding Series 2005B 3,135,000 4.0-4.88% Apr-16

Jail Renovation Series 2007 2,070,000 5.90% Oct-17

$2.11 Million Special Obligation Refunding Series 2008A-1 2,110,000 Variable Oct-17

General Obligation Industrial Development Bond, Series 2010D 7,885,000 1.75-6.05% Mar-30

Special Obligation Refunding Series 2008B 15,475,000 5.-5.5% Oct-31

Special Obligation Refunding Series 2008A-2 27,525,000 Variable Oct-30

Special Obligation Refunding Series 2008C 12,865,000 4.0-4.75% Oct-17

Special Obligation Refunding Series 2008D 28,000,000 3.5-5.0% Mar-29

Special Obligation Refunding Bonds, Series, 2010C 9,970,000 2.0-4.25% Mar-30

Special Obligation Refunding Bonds, Series 2010A 30,400,000 5.0-5.25% Dec-39

Special Obligation Refunding Bonds, Series 2010B 40,000,000 Variable Sep-47

Total General Obligation Bonds 195,385,000$

B. Other Loans

MDB Cap Loan 0303 291,273$ 3.00% Nov-20

MDB Cap Loan 0304 291,273 3.00% Nov-20

FEMA Disaster Relief Loan 8,000,000 2.96% Dec-10



Total Other Loans 17,018,506$

C. Capital Leases

Hancock Leasing - Mowers 188,324$ 2.66% Jun-11

Total Capital Leases 188,324$




36

(12) Long-term Debt. (continued)

Annual debt service requirements to maturity for the following debt reported in the Statement of Net

Assets are as follows:

Year Ending September 30 Principal Interest

2011 5,995,000$ 7,434,074$

2012 6,740,000 7,372,219

2013 7,670,000 7,152,854

2014 7,265,000 6,813,883

2015 6,725,000 6,491,846

2016-2020 36,330,000 28,465,910

2021-2025 35,420,000 22,744,222

2026-2030 35,980,000 15,810,778

2031-2035 13,260,000 10,358,563

2036-2040 12,220,000 7,742,826

2041-2045 18,880,000 3,969,983

2046-2050 8,900,000 304,282

Total 195,385,000$ 124,661,440$

Year Ending September 30 Principal Interest

2011 16,485,716$ 1,161,119$

2012 51,268 15,282

2013 52,828 13,724

2014 54,434 12,116

2015 56,040 10,512

2016-2020 312,678 25,628

2021 5,542 14

17,018,506$ 1,238,395$

General Obligation Bonds

Other Loans

Legal Debt Margin - The amount of debt, excluding specific exempted debt that can be incurred by the

County is limited by state statute. Total outstanding debt during a year can be no greater than 15% of

assessed value of the taxable property within the county, according to the then last completed assessment

for taxation. However, the limitation is increased to 20% whenever County issues bonds to repair or

replace washed out or collapsed bridges on the public roads of the county. As of September 30, 2010, the

amount of outstanding debt was equal to 9.72% of the latest property assessments.




37


Current Refunding- On January 28, 2010, the County issued $30,400,000 of special obligation bonds

(Series 2010A - Refunding Project) with an average interest rate of 5.12% to refund $29,159,545 of the

following outstanding bond issues:

Average

Outstanding

Issue

Interest Rate

Amount Refunded

Special Obligation - Coliseum Bond

4.50%

$ 29,159,545

The County refunded the above bonds to restructure its debt to defer the payment of principal due on the

debt and to establish a more fixed interest rate on the bond issue. This refunding was performed in

accordance with Section 31-15, Mississippi Code Ann. (1972) which allows counties to restructure debt.

Current Refunding – On January 26, 2010, the County issued $40,000,000 of special obligation bonds

(Series 2010B – Refunding Project) in conjunction with Series 2010A Refunding Project with a variable

interest rate to refund $38,840,455 of the following outstanding bond issues:

Average

Outstanding

Issue

Interest Rate

Amount Refunded

Special Obligation - Coliseum Bond

4.50%

$ 38,840,455

The County refunded the above bonds to restructure its debt to defer the payment of principal due on the

debt. The refunding was performed in accordance with Section 31-15, Mississippi Code Ann. (1972)

which allows counties to restructure debt. There was no economic gain or loss on the current refundings.

On January 28, 2010, the County entered into an agreement with Bank of America N.A. for the issuance

of an irrevocable direct-pay Letter of Credit to be delivered in conjunction with the Series 2010B –

Refunding Project. This Letter of Credit was necessary to market the Series 2010B Bonds at the levels

that the Series 2010B Bonds were sold and the absence of the Letter of Credit would have materially

impacted the sales price of the Series 2010B Bonds.

On February 11, 2010, the County issued $9,970,000 of special obligation bonds (Series 2010C) to

restructure the Mississippi Development Bank loans that were obtained to repair and renovate the

Harrison County Jail.

On March 23, 2010, the County issued $7,885,000 of special obligation bonds to finance the purchase of

land for the establishment and development of industrial parks.

Prior Year Defeasance of Debt – In prior years, the County defeased certain general obligation bonds by

placing the proceeds of new bonds in an irrevocable trust to provide for all future debt service payments

on the old bonds. Accordingly, the trust account assets and the liability for the defeased bonds are not

included in the County’s financial statements. On September 30, 2010, $79,975,000 of bonds outstanding

were considered defeased.




38


The following is a summary of changes in long-term liabilities and obligations for the year ended

September 30, 2010:

Amount

Balance Balance Due Within

Oct.1,2009 Additions Reductions Adjustments * Sept. 30, 2010 One Year


Compensated absences 2,056,021$ 66,397$ -$ 404,008$ 2,526,426$ $ -

General obligation bonds 181,190,000 88,255,000 6,060,000 (68,000,000) 195,385,000 5,995,000

Capital leases 676,351 - 472,475 (15,552) 188,324 188,324

Other loans 21,903,563 4,049,123 225,420 (8,708,760) 17,018,506 16,485,716

Sub-total 205,825,935 92,370,520 6,757,895 (76,320,304) 215,118,256 22,669,040

Less:

Discount (169,515) - 24,216 - (145,299) -

Add:

Premium 21,453 3,503,199 (147,168) - 3,377,484 -

Total 205,677,873$ 95,873,719$ 6,634,943$ (76,320,304)$ 218,350,441$ 22,669,040$

* Adjustments reflect bond refundings and corrections to prior period reported amounts.

Compensated absences will be paid from the funds from which the employees’ salaries were paid which

are generally the General Fund and Countywide Road Maintenance Fund.

(13) Deficit Fund Balances of Individual Funds.

The following funds reported deficits in fund balances at September 30, 2010:

Fund

Deficit Amount

Federal Grant Fund

$ 10,487

Sheriff's Canteen Fund

4,542

Hurricane Fund

97,510

Jail Repair 2008 Fund

2,540,316

These deficit balances are mainly the result of cost matching and insurance funds not being transferred

into the appropriate construction funds. Also, disbursement of loans to other funds caused the Hurricane

Katrina Fund to have a deficit fund balance.

(14) Contingencies.

Federal Grants - The County has received federal grants for specific purposes that are subject to audit by

the grantor agencies. Entitlements to these resources are generally conditional upon compliance with the

terms and conditions of grant agreements and applicable federal regulations, including the expenditure of

resources for allowable purposes.




39

(14) Contingencies. (continued)

Any disallowance resulting from a grantor audit may become a liability of the County. No provision for

any liability that may result has been recognized in the County's financial statements.

Litigation - The County is party to legal proceedings, many of which occur in the normal course of

governmental operations. It is not possible at the present time to estimate ultimate outcome or liability, if

any, of the County with respect to the various proceedings. However, the County's legal counsel believes

that ultimate liability resulting from these lawsuits will not have a material adverse effect on the financial

condition of the County.

(15) No Commitment Debt (Not Included in Financial Statements).

No commitment debt is repaid only by the entities for which the debt was issued and includes debt that

either bears the county's name or for which a moral responsibility may exist that is not an enforceable

promise to pay. No commitment debt explicitly states the absence of obligation by the County other than

possibly an agreement to assist creditors in exercising their rights in the event of default. There was no

such debt outstanding as of September 30, 2010.

Harrison County and the Mississippi Transportation Commission (Mississippi Department of

Transportation) entered into an Interlocal Cooperative Agreement, dated January 24, 2005 and amended

October 15, 2005 which among other things allowed the County to provide funds necessary to the

Commission (MDOT) for the construction of a Highway Project. The funds came from the $102,000,000

Mississippi Development Bank Bonds, Series 2005 (Harrison County, Mississippi Highway Construction

Project), $9,490,000 Mississippi Development Bank Special Obligation Bonds, Series 2009A (Harrison

County, Mississippi Highway Construction Project), and the $63,295,000 Mississippi Development Bank

Special Obligation Build America Bonds, Series 2009B (Harrison County, Mississippi Highway

Construction Project – Direct Payment – Federally Taxable) dated August 26, 2009. Under the

Cooperative Agreement, the Commission (MDOT) agrees to pay to the Trustee amounts sufficient to pay

the principal and interest on the Series 2005 and Series 2009 Bonds. Nothing in the bonds or any other

document executed by the County will obligate the County financially in any way or be a charge against

its general credit or taxing powers. The total amount outstanding as of September 30, 2010 is as follows:

Amount

Issue Outstanding

Mississippi Development Bank Bonds, Series 2005 94,650,000$

Mississippi Development Bank Bonds, Series 2009A 7,825,000

Mississippi Development Bank Bonds, Series 2009B 63,295,000

165,770,000$

(16) Joint Ventures.

The County participates in the following joint ventures:

Harrison County is a participant with the Cities of Gulfport, Biloxi, Pass Christian, D’Iberville and Bay

St. Louis in a joint venture, authorized by Section 39-3-8, Miss. Code Ann. (1972), to operate Harrison

County Library System. The joint venture was created to furnish Harrison County and the cities within

Harrison County with library service and is governed by a board consisting of five members, with each

entity appointing one member.




40

16) Joint Ventures. (continued)

By contractual agreement, the County’s appropriation to the joint venture was $908,250 in fiscal year

2010. Complete financial statements for the Harrison County Library can be obtained from the Gulfport

branch located at 1300 21st Avenue, Gulfport, Mississippi.

Harrison County is a participant with the Cities of Gulfport, Biloxi, Pass Christian, D’Iberville and Bay

St. Louis in a joint venture, authorized by Section 17-17-307, Miss. Code Ann. (1972), to operate the

Harrison County Wastewater and Solid Waste Management Authority. The joint venture was created to

handle and dispose of solid waste within the County and the aforementioned cities and is governed by a

board consisting of six members, with each entity appointing one member. The County’s appropriation to

the joint venture was $428,813 in fiscal year 2010. Complete financial statements for the Harrison

County Wastewater and Solid Waste Authority can be obtained from P.O. Box 2409, Gulfport

Mississippi, 39501.

Harrison County is a participant with the City of Gulfport in a joint venture, authorized by Section 41-13-

15, Miss. Code Ann. (1972), to operate the Memorial Hospital at Gulfport. The joint venture was created

to provide medical services for the residents of the metropolitan area and is governed by a board

consisting of five members, with each entity appointing two members and the fifth member appointed

alternately by the City and the County. While the hospital is basically self-supporting, the City and the

County both approve the budget and both may issue debt for the hospital. Complete financial statements

for the Memorial Hospital at Gulfport can be obtained from P.O. Box 1810, Gulfport Mississippi, 39501.

Harrison County is a participant with the City of Gulfport and Biloxi in a joint venture, authorized by

Section 61-3-7, Miss. Code Ann. (1972), to operate the Gulfport-Biloxi Regional Airport Authority. The

joint venture was created to provide the Gulfport-Biloxi metropolitan area with air passenger and air

freight facilities and is governed by a board consisting of three members, with each entity appointing one

member. The Harrison County Board of Supervisors appoints two of the six members of the board of

directors. The County’s appropriation to the joint ventures was $115,000 in fiscal year 2010. Complete

financial statements for the Gulfport-Biloxi Regional Airport Authority can be obtained from P.O. Box

2127, Gulfport, Mississippi, 39501.

(17) Jointly Governed Organizations.

The County participates in the following jointly governed organizations:

The Gulf Coast Mental Health and Mental Retardation operates in a district of the counties of Hancock,

Harrison, Pearl River and Stone. The governing body is a four-member board of commissioners, one

appointed by the Board of Supervisors of each of the member counties. The County appropriated

$695,000 for the support of the agency in fiscal year ending September 30, 2010.

Southern Mississippi Planning and Development District operates in a district composed of the counties

of Covington, Forrest, George, Greene, Hancock, Harrison, Jackson, Jefferson Davis, Jones, Lamar,

Marion, Pearl River, Stone and Wayne. The Harrison County Board of Supervisors appoints one of the

27 members of the board of directors. The County appropriated $24,416 for the support of the agency in

the fiscal year ended September 30, 2010.

Mississippi Gulf Coast Community College operates in a district composed of the Counties of George,

Harrison, Jackson and Stone.




41

(17) Jointly Governed Organizations. (continued)

The college’s board of trustees is composed of 23 members, three each appointed by George and Stone

Counties, eight each appointed by Harrison and Jackson Counties, and one appointed at large. The

County appropriated $6,572,128 for maintenance and support of the college in fiscal year 2010.

Gulf Regional Planning and Development District operates in a district composed of the Counties of

Hancock, Harrison and Jackson. The governing body is a nine-member board of directors, three

appointed by the Board of Supervisors of each member county. The County appropriated $10,939 for

support of the district in fiscal year 2010.

Gulf Coast Community Action Agency operates in the Counties of George, Greene, Harrison and

Harrison. The agency’s board is composed of 24 members, one each appointed by the Counties of

George, Greene, Harrison and Harrison, and the Cities of Bay St. Louis, Biloxi, Gulfport and Pass

Christian, with the remaining 16 appointed by the private sector.

Most of the entity’s funding comes through federal grants and the member governments provides only a

modest amount of financial support when the grants require matching funds. The County provided no

financial support in fiscal year 2010.

Mississippi Coast Transportation Authority operates along the Mississippi Gulf Coast. The authority is

composed of the following six members: Harrison County and the cities of Bay St. Louis, Biloxi,

Gulfport, Ocean Springs and Pass Christian. The authority’s board is composed of nine members, two

each appointed by Harrison County and the Cities of Biloxi and Gulfport and one each appointed by the

Cities of Ocean Springs, Bay St. Louis and Pass Christian. The County appropriated $214,375 for the

support of the agency in the fiscal year ending September 30, 2010.

Harrison-Jackson County Emergency Medical Service District operates in a district composed of Counties

of Harrison and Jackson and the Cities of Biloxi, Gulfport and Ocean Springs. The district’s board is

composed of five members, one each appointed by each government. The County provided no financial

support in fiscal year 2010.

Harrison County Gulf Coast Business Corporation operates in Harrison County. The corporation’s board

is composed of 36 members, one appointed by the Board of Supervisors and 35 appointed by the

chambers of commerce in the County. The County provides no financial support.

Mississippi Regional Housing Authority VIII operates in a district composed of the Counties of

Covington, Forrest, George, Greene, Hancock, Harrison, Jackson, Jones, Lamar, Marion, Pearl River,

Perry, Stone and Wayne. The counties generally provide no financial support to the organization.

(18) Defined Benefit Pension Plan.

Plan Description. Harrison County, Mississippi, contributes to the Public Employees' Retirement System

of Mississippi (PERS), a cost-sharing, multiple-employer, defined benefit pension plan. PERS provides

retirement and disability benefits, annual cost-of-living adjustments and death benefits to plan members

and beneficiaries. Benefit provisions are established by state law and may be amended only by the State

of Mississippi Legislature. PERS issues a publicly available financial report that includes financial

statements and required supplementary information. That information may be obtained by writing to

Public Employees’ Retirement System, PERS Building, 429 Mississippi Street, Jackson, MS 39201-1005

or by calling 1-800-444-PERS.




42

(18) Defined Benefit Pension Plan. (continued)

Funding Policy. PERS members are required to contribute 9% of their annual covered salary, and the

County is required to contribute at an actuarially determined rate.

The rate at September 30, 2010 was 12% of annual covered payroll. The contribution requirements of

PERS members are established and may be amended only by the State of Mississippi Legislature. The

County's contributions (employer share only) to PERS for the years ending September 30, 2010, 2009 and

2008 were $3,658,210, 3,544,016, and $3,564,894, respectively, equal to the required contributions for

each year.

(19) Derivatives and Interest Rate Swaps.

Objectives of hedging derivative instruments: The County has entered into interest rate swaps to manage

interest costs related to long-term debt. The following table summarizes the key terms and general

information of the effective hedging interest rate swaps outstanding as of September 30, 2010:

Notional Effective Maturity Fair

Item Type Objective Amount Date Date Terms Value

A

Pay fixed

interest rate

swap

Hedge changes in cash

flows on the Series

2010B 40,000,000$ 1/2/2010 1/2/2020

Pay 4.365%,

receive 70% of

LIBOR (15,193,891)$

B

Pay fixed

interest rate

swap


flows on the Series

2008A-2 27,525,000 10/1/2010 10/1/2031

Pay 2.64%, receive

70% of LIBOR (2,071,691)

C

Pay fixed

interest rate

swap


flows on the Series

2008B 15,475,000 10/9/2008 10/1/2031

Pay 4.301%,

receive variable

rate of LIBOR (2,486,233)

A. On June 26, 2006, the County and the Mississippi Development Bank (collectively the “County”)

executed confirmations with Deutsche Bank AG, New York Branch (the “2006 Counterparty”), in

connection with the execution of an ISDA Master Agreement and documents dated and executed on

February 28, 2008 and revised January 20, 2010 in connection therewith (collectively, the “2006 GO

Bonds Swap Agreement”) in order to hedge the interest rate risk associated with a certain outstanding

obligation of the County. The 2006 GO Bonds Swap Agreement was delivered in conjunction with, and

together with the Confirmations thereto, as described below:

$68,000,000 Mississippi Development Bank Special Obligation Bonds, Series 2005 (MS Bond Program –

Harrison County, Mississippi General Obligation Coliseum/Convention Center Expansion and Refunding

Project), dated February 2, 2005 (the “February 2005 Bonds”) as refunded by the $30,400,000 Mississippi

Development Bank Refunding Bonds Series 2010A (Harrison County, Mississippi General Obligation

Coliseum and Convention Center Refunding Bonds), dated January 28, 2010 issued contemporaneously

with $40,000,000 Mississippi Development Bank Variable Rate Demand Refunding Bonds, Series 2010B

(Harrison County, Mississippi General Obligation Coliseum and Convention Center Refunding Bonds),

dated January 28, 2010




43

(19) Derivatives and Interest Rate Swaps. (continued)

On February 28, 2008 the parties to the 2006 GO Bonds Swap Agreement executed a Forward

Starting Confirmation in connection with the February 2005 Bonds (the “February 2005 Bonds

Novated Confirmation”). The February 2005 Bonds Novated Confirmation has an original

notional amount of $68,000,000, which will equal the outstanding principal amount of the

February 2005 Bonds. The notional amount declines as the principal amount of the associated

debt declines.

Under the revised February 2005 Bonds Novated Confirmation, which the County revised in

conjunction with the issuance of the Series 2010A Bonds, the County pays a fixed payment based

on 4.365% and receives a variable payment based on USD-LIBOR-BBA multiplied by seventy

percent (70%) on each payment date.

On January 20, 2010 the parties to the 2006 Swap Agreement executed a Revised Agreement in

connection with the “February 2005 Bonds Novated Confirmation”, which was executed at the

option of the County to revise Confirmation dated February 28, 2008 between the parties under

the 2006 GO Bonds Swap Agreement concerning the February 2005 Bonds. The February 2005

Bonds Initial Termination Confirmation reflected a negative fair value at the time of revision. A

payment of $8,680,000 would have been owed to the Swap Counterparty had the Swap

Agreement been terminated rather than amended on the Revised Trade Date. The parties have

mutually agreed to satisfy this payment obligation by making a payment to the Swap

Counterparty in the amount of $3,690,000 and increasing the Fixed Rate payable under the Swap

Agreement to compensate for the remaining portion of the payment (the “Fixed Rate

Adjustment”). This payment was made from a portion of the proceeds of the $30,400,000

Mississippi Development Bank Special Obligation Refunding Bonds, Series 2010A (Harrison

County, Mississippi Coliseum and Convention Center Refunding Project), dated January 20, 2010

(the “Series 2010A Bonds”), which carry coupon rates ranging from 5.0-5.25% to final maturity

on January 1, 2034.

B. On October 7, 2008, the County and Mississippi Development Bank (collectively the “County”) executed

a confirmation with Bank of America, N.A. (the “2008 Swap Counterparty”), in connection with the

execution of an ISDA Master Agreement an documents executed in connection therewith (collectively,

the “2008 Swap Agreement”) in order to hedge the interest rate risks with a certain outstanding obligation

of the County. The 2008 Swap Agreement was delivered in conjunction with, and together with the

Confirmation thereto, as described below:

$16,365,000 Mississippi Development Bank Taxable Special Obligation Variable Rate Demand

Refunding Bonds, Series 2008B (Harrison County, Mississippi Variable Rate General Obligation Bonds

Refunding Project), dated October 9, 2008 (the “2008 Bonds”)

On October 8, 2008, the parties to the 2008 Swap Agreement executed a Confirmation in connection with

the 2008B Bonds (the “2008B Bonds Confirmation”). The 2008B Bonds Confirmation has an original

notional amount of $16,365,000, which is equal to the outstanding principal amount of the 2008B Bonds

as of the effective date of October 9, 2008, and terminates October 1, 2031. The notional amount declines

as the principal amount of the associated debt declines.




44


An early termination of this swap transaction may result in the County making or receiving a

termination payment based on the prevailing market interest rates at the time of such termination.

C. On June 26, 2006, the County and the Mississippi Development Bank (collectively the “County”)

executed confirmations with Deutsche Bank AG, New York Branch (the “2006 Swap Counterparty”), in

connection with the execution of an ISDA Master Agreement and documents executed in connection

therewith (collectively, the “2006 GO Bonds Swap Agreement”) in order to hedge the interest rate risk

associated with a certain outstanding obligation of the County.

$27,525,000 Mississippi Development Bank Special Obligation Variable Rate Demand Refunding Bonds,

Series 2008A-2 (Harrison County, Mississippi Variable Rate General Obligation Bonds Refunding

Project), dated October 23, 2008 (the “2008A-2 Bonds)

On November 25, 2008, the parties to the 2006 GO Bonds Swap Agreement executed a Forward

Starting Confirmation in connection with the 2008A-2 Bonds (the “2008A-2 Bonds

Confirmation”).

The 2008A-2 Bonds Confirmation has an original notional amount of $27,525,000, which is equal

to the outstanding principal amount of the 2008A-2 Bonds as of the effective date of October 1,

2010, and terminates October 1, 2031. The notional amount declines as the principal amount of

the associated debt declines. An early termination of this swap transaction may result in the

County making or receiving a termination payment based on the prevailing market interest rates

at the time of such termination.

Risks Associated with the Swap Agreements:

Interest Rate Risk – Although the interest rate is synthetically fixed, the outstanding Confirmations

described above under the respective interest rate exchange agreements, interest payments on the

corresponding variable rate bonds subject to each such interest rate exchange agreement and the net swap

payments will vary as interest rate changes. The County believes, with respect to the transactions

described above, that it has substantially reduced the interest rate risk with respect to the corresponding

variable rate bonds by entering into the interest rate swaps.

Credit Risk – Credit risk can be measured by actual market value exposure or theoretical exposure. When

the fair value of any swap has a positive market value, then the County is exposed to the actual risk that

the counterparty will fulfill its obligations.

As of September 30, 2010, the County has no net exposure to actual credit risk on its derivatives because

the total exposure to each counterparty is a liability to the County. The County does not measure

theoretical exposure on its derivative portfolio.

Each swap agreement requires that the counterparties have credit ratings from at least one nationally

recognized statistical rating agency that is within the two highest investment grade categories, and ratings,

which are obtained from any other nationally recognized statistical rating agencies shall also be with the

three highest grade categories. All of the swap agreements require that should the rating of the applicable

counterparty or of the entity unconditionally guaranteeing such counterparty’s obligations fall below the

required rating, that the applicable counterparty transfer the agreement to an entity that meets the required

rating.




45


Each outstanding swap agreement is with a counterparty that met the required rating as of September 30,

2010.

The table below shows each counterparty rating as of September 30, 2010:

Counterparty

Moody's Rating

S & P

Rating

Deutsche Bank AG

A2

A+

Bank of America NA

Aa3

A+

Basis Risk – The County is exposed to basis risk when the variable payment on its obligations does not

match the variable payment received on its hedges. The February 2008 Novated Confirmation and the

February 2005 Bonds Revised Confirmation under the 2006 GO Bonds Swap Agreement and the

Confirmation under the 2006 Swap Agreement expose the County the basis risk as the relationship

between the USD-LIBOR-BBA and the associated variable rate bonds vary, which changes the synthetic

rate on such Bonds.

The other Confirmations under the 2006 GO Bonds Swap Agreement and all the Confirmations under the

2006 Revenue Bonds Swap Agreement expose the County to basis risk to the extent of the difference

between the BMA Municipal Swap Index and the USSMQ10 Index rate as it appears on the Bloomberg

screen times an applicable percentage. The relationship between these rates will vary over time and any

variation will result in an adjustment to the intended synthetic interest rate.

Termination Risk – Each Swap Agreement is documented by using International Swap Dealers

Association Master Agreement, which includes standard termination events, such as failure to pay and

bankruptcy. The schedule to each Master Agreement includes additional termination events, providing

that the swaps may be terminated if either the County’s or a counterparty’s credit rating falls below

certain levels. The County or the counterparties may terminate a swap agreement if the other party fails to

perform under the terms of the contract.

If one or more of the swap agreements is terminated, the related variable rate Bonds would no longer be

hedged and the County would no longer be effectively be paying a synthetic fixed rate with respect to

these Bonds. Also, if at the time of termination a swap has a negative fair value, the County would incur

a loss and would be required to settle with the applicable counterparty at the swap’s fair value at the time

of termination. If a swap has a positive fair value at the time of termination, the County would realize a

gain that the applicable counterparty would be required to pay. In either case, the County would increase

its interest rate risk because the variable rate bonds would no longer be hedged.

Market Access Risk – Market access risk refers to the ability of the County to continue to access the

capital markets. The County is subject to market access risk in the event that the credit enhancement that

is supporting the variable rate bonds cannot be renewed or extended beyond its original term or if general

market conditions disrupt the variable rate markets.

Rollover Risk – Rollover risk exists when a hedge matures prior to the maturity date of the hedged item.

Except as noted below, all Confirmations are for the term (maturity) of the corresponding variable rate

bonds, and therefore, there is no rollover risk. The February 2005 Bonds Novated Confirmation

terminates prior to the maturity date of the February 2005 Bonds related to such Confirmations.




46


In the event the February 2005 Bonds Novated Confirmation terminates at the termination date thereof,

the County would become subject to the variable interest rates that were previously hedged to fixed rates

as to the February 2005 Bonds.

Foreign currency risk – All derivatives are denominated in U.S. dollars and therefore, the County is not

exposed to foreign currency risk.

(20) Subsequent Events.

Subsequent to September 30, 2010, the County issued the following debt obligations:

Issue

Interest

Issue

Type of

Source of

Date

Rate

Amount

Financing

Financing

11/29/2010

3.60%

$ 2,540,000

Refunding Bond

Tax Revenue

12/1/2011

4.23%

6,000,000

Revenue Bond

Tax Revenue

2/8/2012

2.0-3.0%

5,415,000

Refunding Bond

Tax Revenue

2/8/2012

1.0-2.125%

2,300,000

Refunding Bond

Tax Revenue

Subsequent to September 30, 2010, the County entered into the following transactions:

Description Date Amount

The Community Disaster Loans, principal and accrued interest, were forgiven 11/2011 16,435,950$

Swap #N490583N was terminated 09/2011 N/A



On September 8, 2011, the parties to the Swap Agreement with a trade date of August 16, 2010, a

notional amount of $14,990,000 and an effective date of January 1, 2018 executed a Termination

Agreement (reference number N490534N). The Swap Agreement was originally referenced to the

$20,900,000 Mississippi Development Bank Special Obligation Variable Rate Demand Refunding Bonds,

Series 2005A (MS Bond Program – Harrison County, Mississippi Hurricane Katrina General Obligation

Project), dated January 10, 2006. In consideration of the termination, Harrison County will receive a

payment of $20,000.

On September 8, 2011, the parties to the Swap Agreement with a trade date of August 16, 2010, a

notional amount of $10,815,000 an effective date of January 1, 2018 executed a Termination Agreement

(reference number N490529N). The Swap Agreement was originally referenced to the $14,600,000

Mississippi Development Bank Taxable Special Obligation Variable Rate Demand Bonds, Series 2005B

(MS Bond Program – Harrison County, Mississippi Hurricane Katrina General Obligation Project), dated

January 10, 2006. In consideration of the termination, Harrison County will receive a payment of

$70,000.




47

(20) Subsequent Events. (continued)

On September 8, 2011, the parties to the Swap Agreement with a trade date of August 16, 2010 (as

amended from the previously amended Trade Date of February 13, 2008, which was amended from the

original Trade Date of June 28, 2006), a notional amount of $40,000,000 and an effective date of January

1, 2018 executed a Termination Agreement (reference number N490583N).

The Swap Agreement was originally referenced to the $68,000,000 Mississippi Development Bank (MS

Bond Program – Harrison County, Mississippi General Obligation Coliseum/Convention Center

Expansion and Refunding Project9, Series 2005 dated February 1, 2005. In consideration of the

termination, Harrison County will receive a payment of $525,000.

48

REQUIRED SUPPLEMENTARY INFORMATION


Budgetary Comparison Schedule -

Budget and Actual (Non-GAAP Basis)

General Fund


Variance with

Actual Final Budget

Original Final (Budgetary Positive

Budget Budget Basis) (Negative)

REVENUES

Property taxes 39,319,304$ 39,319,304$ 39,156,732$ (162,572)$

Licenses, commissions and other revenue 2,542,700 2,542,700 2,354,896 (187,804)

Fines and forfeitures 1,559,300 1,559,300 1,326,068 (233,232)

Intergovernmental revenues 7,859,000 7,727,000 7,068,907 (658,093)

Charges for services 2,000,000 2,000,000 2,643,297 643,297

Interest income 902,500 902,500 681,792 (220,708)

Miscellaneous revenues 1,489,000 1,497,000 1,292,395 (204,605)

Total Revenues 55,671,804 55,547,804 54,524,087 (1,023,717)

EXPENDITURES

Current:

General government 25,708,263 28,690,353 25,803,072 2,887,281

Public safety 25,209,440 26,321,540 26,078,973 242,567

Public works 54,786 54,786 53,096 1,690

Health and welfare 5,205,992 5,268,692 4,759,502 509,190

Culture and recreation 2,716,690 2,823,003 2,631,320 191,683

Conservation of natural resources 129,832 129,832 115,458 14,374

Economic development and assistance - 858,200 855,835 2,365

Debt service: -

Principal 533,328 533,328 177,135 356,193

Interest 522,463 522,463 379,968 142,495

Bond issue costs 25,000 25,000 4,700 20,300


Excess of Revenues over/(under) Expenditures (4,433,990) (9,679,393) (6,334,972) 3,344,421


Swap agreement proceeds - - 776,500 776,500

Proceeds from sale of capital assets - - 4,120 4,120

Transfers in 3,150,000 3,278,828 5,541,106 2,262,278

Transfers out (570,756) (597,506) (478,034) 119,472

Total Other Financing Sources and Uses 2,579,244 2,681,322 5,843,692 3,162,370

Net Changes in Fund Balances (1,854,746) (6,998,071) (491,280) 6,506,791

Fund Balances - Beginning 1,854,746 6,998,071 15,631,027 8,632,956

Fund Balances - Ending -$ -$ 15,139,747$ 15,139,747$

The accompanying notes to the Required Supplementary Information are an integral part of this statement.

49


Budgetary Comparison Schedule -

Budget and Actual (Non-GAAP Basis)

Katrina CDBG Fund


Variance with

Actual Final Budget

Original Final (Budgetary Positive

Budget Budget Basis) (Negative)

REVENUES

Intergovernmental revenues 22,028,508$ 30,228,508$ 25,837,419$ (4,391,089)$

Miscellaneous revenues - 594,000 593,468 (532)

Total Revenues 22,028,508 30,822,508 26,430,887 (4,391,621)

EXPENDITURES

Current:

Economic development and assistance 22,028,508 30,803,508 26,032,739 4,770,769


Excess of Revenues over/(under) Expenditures - 19,000 398,148 379,148


Transfers in - - - -

Transfers out - - - -

Total Other Financing Sources and Uses - - - -

Net Changes in Fund Balances - 19,000 398,148 379,148

Fund Balances - Beginning - - (540,128) (540,128)

Fund Balances - Ending -$ 19,000$ (141,980)$ (160,980)$

The accompanying notes to the Required Supplementary Information are an integral part of this statement.

50


Schedule of Funding Progress - Other Postemployment Benefits

September 30, 2010

Actuarial Unfunded

Actuarial Accrued AAL as a

Value of Liability Annual Percentage of

Actuarial Plan (AAL) Unfunded Percent Covered Annual

Valuation Assets Entry Age AAL Funded Payroll Covered Payroll

Date (a) (b) (b-a) (a/b) (c ) ( (b-a) / c)

October 1, 2009 -$ 2,445,632$ 2,445,632$ 0.00% 32,033,942$ 7.63%

51


Notes to the Required Supplementary Information


52

A. Budgetary Information.

Statutory requirements dictate how and when the county's budget is to be prepared. Generally, in the

month of August, prior to the ensuing fiscal year beginning each October 1, the Board of Supervisors of

the county, using historical and anticipated fiscal data and proposed budgets submitted by the Sheriff and

the Tax Assessor-Collector for his or her respective department, prepares an original budget for each of

the Governmental Funds for said fiscal year. The completed budget for the fiscal year includes for each

fund every source of revenue, each general item of expenditure, and the unencumbered cash and

investment balances. When during the fiscal year it appears to the Board of Supervisors that budgetary

estimates will not be met, it may make revisions to the budget.

The county's budget is prepared principally on the cash basis of accounting. All appropriations lapse at

year end, and there are no encumbrances to budget because state law does not require that funds be

available when goods or services are ordered, only when payment is made.

B. Basis of Presentation.

The Budgetary Comparison Schedule - Budget and Actual (Non-GAAP Basis) presents the original

legally adopted budget, the final legally adopted budget, actual amounts on a budgetary (Non-GAAP

Basis) and variances between the final budget and the actual amounts. The schedule is presented for the

General Fund and each major Special Revenue Fund. The Budgetary Comparison Schedule - Budget and

Actual (Non-GAAP Basis) is a part of required supplemental information.

C. Budget/GAAP Reconciliation.

The major differences between the budgetary basis and the GAAP basis are:

1. Revenues are recorded when received in cash (budgetary) as opposed to when susceptible to

accrual (GAAP).

2. Expenditures are recorded when paid in cash (budgetary) as opposed to when susceptible to

accrual (GAAP).

The following schedule reconciles the budgetary basis schedules to the GAAP basis financial statements

for the General Fund and each major Special Revenue Fund:

Governmental Fund Types

Katrina

General

CDBG

Fund

Fund

Budget (Cash Basis)

$ (491,280)

$ 398,148

Increase (Decrease)

Net adjustments for revenue

1,398,818

(4,812,518)

Net adjustments for expenditure

34,591

4,219,050

GAAP Basis

$ 942,129

$ (195,320)

53

SUPPLEMENTARY INFORMATION

Federal Grantor/ Federal Pass-through

Pass-through Grantor/ CFDA Entity Identifying Federal

Program Title or Cluster Number Number Expenditures

U.S. Department of Agriculture

Passed-through the South Mississippi Planning and Development District

Child and adult care food program 10.558 N/A 6,915$

Total U. S. Department of Agriculture 6,915

U.S. Department of Commerce

Passed-through the Mississippi Department of Environmental Quality

Coastal zone management administration awards 11.419 N/A 73,407

U.S. Department of Commerce

National Telecommunications and Information Administration

Passed-through the Mississippi Department of Homeland Security

Public Safety Interoperable Communications Grant 11.555 07PS313 199,515

Total U.S. Department of Commerce 272,922

U.S. Department of Housing and Urban Development

Passed-through the Mississippi Development Authority

Community development block grants/state's program 14.228 R-101-06-1 31,985

Community development block grants/state's program 14.228 R-103-024-02-KED 49,183

Community development block grants/state's program 14.228 R-103-024-01-KED 3,813,551

Community development block grants/state's program 14.228 R-103-024-03-KED 10,693,183

Community development block grants/state's program 14.228 R-109-024-01-KCR 2,836,614


Community development block grants/state's program 14.228 R-103-024-01-KP 6,278


Community development block grants/state's program 14.228 R-103-024-04-KED 153,629

Community development block grants/state's program 14.228 1123-06-024-HS-01 265,601

Total U.S. Department of Housing and Urban Development * 22,402,279

U.S. Department of Justice

State and Local Equitable Sharing 16.000 N/A 1,645,473

Passed through Bureau of Justice Assistance

State Criminal Alien Assistance Grant 16.606 2009-AP-BX-025 31,937

Edward Byrne Memorial State & Local Law Enforcement Assistance

Discretionary Grant 16.580 2007-DDBX-4004 359,448

U.S. Department of Justice - Office of Justice Programs

Passed-through the Mississippi Department of Public Safety

Bulletproof Vest Partnership Program 16.607 10,164

Violence against women formula grants 16.588 08SP1241 19,878

Violence against women formula grants 16.588 09SP1241 10,390

ARRA - Violence against women formula grants 16.588 09WP1241 6,744

47,176

U.S. Department of Justice - Executive Office for Weed and Seed/

Community capacity development office 16.595 N/A 139,347

U.S. Department of Justice - Office of Justice Programs/


Edward Byrne Memorial Justice Assistance Grant 16.738 2007-DJ-BX-0224 275,256

Total U.S. Department of Justice 2,498,637

U.S. Department of Transportation - Federal Highway Administration/

Passed-through the Mississippi Department of Transportation

Highway Planning and Construction Grant 20.205 BR NBIS 070 B (24) 45,360 Highway Planning and Construction Grant 20.205 EFLH 2108 1 BO 6,075 Highway Planning and Construction Grant 20.205 ER 0024 18 B 7,500 Highway Planning and Construction Grant 20.205 ER 0024 19 B 59,888 Highway Planning and Construction Grant 20.205 LBBP 24 9 01 11,865

Highway Planning and Construction Grant20.205

SAP 24 (58)37,344

168,032


Schedule of Expenditures of Federal Awards


54

Federal Grantor/ Federal Pass-through

Pass-through Grantor/ CFDA Entity Identifying Federal

Program Title or Cluster Number Number Expenditures


Schedule of Expenditures of Federal Awards


State and Community Highway Safety Grant 20.600 10-TA-1241 185,250

Total U.S. Department of Transportation 353,282

U. S. Department of Energy

Office of Energy Efficiency & Renewable Energy

ARRA - Energy Efficiency and Conservation Block Grant 81.128 DE-SC0003189 230,439

Total U.S. Department of Energy 230,439

U.S. Department of Health and Human Services

Passed-through the South Mississippi Planning and Development District

Special Programs for the Aging_Title III, Part B_Grants for Supportive Services and Senior Centers 93.044 N/A 13,634

Child and adult care food program 93.053 N/A 8,675

Total U.S. Department of Health and Human Services 22,309

Corporation for National and Community Service

Retired and Senior Volunteer Program 94.002 10SRSMS002 76,913

Total Corporation for National and Community Service 76,913

Executive Office of the President

High intensity drug trafficking area 95.001 N/A 86,532

Total Executive Office of the President 86,532

U.S. Department of Homeland Security

Passed-through the Mississippi Emergency Management Agency

Disaster grants - public assistance 97.036 1604 DR MS 5,404,906

Disaster grants - public assistance 97.036 1794 DR MS 508,244

5,913,150

Hazard mitigation grant 97.039 1604-MS-0255 2,228,625

Hazard mitigation grant 97.039 1604-MS-0261 7,170,350

* 9,398,975

Emergency management performance grants 97.042 N/A 87,480


Office of Homeland Security

Homeland Security Grant Program 97.067 M8HS024T 4,800

Homeland Security Grant Program 97.067 81CO24T3 103,636



Homeland Security Grant Program 97.067 S8IC024T 17,128

Homeland Security Grant Program 97.067 09LE024 30,000

Homeland Security Grant Program 97.067 S09HS024T 10,977

Homeland Security Grant Program 97.067 08HS024 50,000

367,324

Total U.S. Department of Homeland Security 15,766,929

Total Expenditures of Federal Awards 41,717,157$

NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

Note A - Significant Accounting Policies

The accompanying Schedule of Expenditures of Federal Awards is prepared on the modified accrual basis of accounting.

Note B - Community Disaster Loans

The County received Community Disaster Loans in prior years totaling $16,435,950. There are no continuing compliance

requirements associated with these loans. Also, they were cancelled subsequent to the issuance of the financial statements.

* Denotes major federal award program

(continued on next page)

55

56

SPECIAL REPORTS

62

Inventory Control Clerk

1. Finding

Section 31-7-107, Miss. Code Ann. (1972), requires the Inventory Control Clerk to

maintain an inventory system. Adequate control over capital assets requires that

certain data elements be captured in capital asset records for all capital assets.

Required data elements include descriptions of assets, cost, locations, acquisition

dates, disposition dates, serial numbers, inventory control numbers (tag/sticker

numbers), and other relevant information. The presence of these data elements in

capital asset records helps identify and distinguish County assets one from another,

thereby safeguarding County assets from loss or misappropriation. In addition, a

properly maintained inventory system provides assurance with respect to the

accuracy, valuation, and completeness of capital assets balances.

As reported in the prior year’s audit report and the results of current year testing,

several deficiencies in the county’s capital asset records were noted which indicate

material weaknesses in the county’s internal controls related to capital assets.

Failure to properly address these issues could result in the loss or misappropriation

of public funds.

Recommendation

Appropriate control procedures should be established and implemented to ensure

that all items are properly recorded and valued in the County’s capital asset records.

To ensure that the records are accurate and complete, the Inventory Control Clerk

should work with all involved department managers and other individuals as

necessary to perform a comprehensive physical inventory on an annual basis. All

physically inspected items should be properly tagged as required, and additions and

deletions should be recorded as appropriate.

Inventory Control Clerk’s Response

The Inventory Control Clerk will be implementing the following procedures:

Requesting a monthly report from purchasing on requisitions

marked as possible fixed assets in accordance with the MS State

Auditors’ Office fixed asset guidelines and communicate with

requesting departments for additional information to add to the

inventory listing

Communicate with Road Department to ensure that metal brass tags

are made for vehicles, heavy equipment and other outside

equipment so it will be properly marked

Will record the GASB 42 adjustments for impaired assets to ensure

proper value and depreciation

Will implement a system with the Contracts assistant to better track

construction in progress and other capitalized improvements

Schedule 1

Item Amount

Date Purchased Paid Vendor

All purchases were made from the lowest bidder in FY 2010


Schedule of Purchases Not Made From the Lowest Bidder


64

Schedule 2

Item Amount

Date Purchased Paid Vendor Reason for Emergency Purchase

10/6/2009 Motor & lever for county court lektriever 3,185$ Gulf Coast Filing & Document Management Lektriever filing system's motor needed to be replaced for operating

10/14/2009 Freon leak repair 3,875 Engineered Cooling Service Freon leak in chiller

10/20/2009 Parts labor & supplies to repair vehicle 2,843 Mitch Williams Paint & Body Vehicle involved in accident; repairs made

12/18/2009 Replaced the processor for the x-ray machine 2,350 Barco X-Ray The x-ray machine is broken

1/4/2010 Repairs to door at County Farm Fire Station 1,604 Doorways Repairs made to roll-up door at County Farm fire station

2/3/2010 Emergency Kitchen Repairs at Jail 34,687 Billy Harris Plumbing Plumbing repairs made to jail kitchen

3/3/2010 Repair of Heat & Air 3,263 Siemens Energy & Automation, Inc. Tower for heat & air not working

3/3/2010 Emergency Repairs of Fuel Station Pumps 42,222 Hughes Inc. Repairs of fuel station pumps

3/11/2010 Repairs to Gas Pump 1,413 Hughes Inc. Gas pumps at Lorraine Rd. work center not working

4/1/2010 Tents 896 Milner Rental Center For Confiscated Animals

4/8/2010 Fence repairs 21,100 Can't Be Beat Tornado took down fence at Three Rivers ball field

4/29/2010 Repairs to AC Unit at Helth Dept. 3,394 Geiger Repairs to AC unit at health department/(compressor)

5/6/2010 Repairs to Gulfport North Public Elevator 1,840 Coast Elevator Motor on elevator went out

5/11/2010 Emergency Repair to 5 Ton Heat Pump 1,522 Appliance Parts Co. A/C broke down during soccer tournaments; replaced heat pump

5/13/2010 Emergency light repairs 1,797 Miller Co. Inc Lights damaged due to tornado at 3 Rivers ball field

5/14/2010 Emergency Antenna Replacement 3,756 Tessco Inc. Failure of main antenna at Gulfport North tower site

6/1/2010 Labor & materials 5,000 McGills Pump & Well To repair well struck by lightening

6/29/2010 Replace HVAC unit 17,800 Ladner Mechanical HVAC at health department broken/unit replaced

7/1/2010 Replaced refridgerator at community center 2,855 Associated Food Commercial fridge at Good Deeds went out; replaced

7/8/2010 Replaced unit 3,042 Johnstone Supply A/C unit out; unit replaced

7/23/2010 Repairs to lighting at Long Beach ball park 3,509 Miller Co. Inc Lightning hit transformer at Long Beach ball park during tournament

7/14/2010 Emergency repairs to senior center 849 Johnstone Supply Senior Center

7/21/2010 Repairs to generator 3,452 Miller Co. Inc. Generator repairs

8/17/2010 Transfer switch controller replaced 1,244 K&R Services Transfer switch controller out; switch replaced

8/24/2010 Replace/repair lights at ball park 1,399 Musco Lighting Lightning strike at Long Beach ball field

9/7/2010 Repair main power 6,780 Robinson Electric Problem with main power going into Biloxi courthouse

9/7/2010 Elevator repairs 9,669 Coast Elevator Leveling problems with West Side elevator

9/13/2010 Repair field services for antenna protector 1,434 CC Lynch & Associates Repair to river gauges; Wolf River, Biloxi River, Tchoutacabouffa River


Schedule of Emergency Purchases


65

Schedule 3

Item Amount

Date Purchased Paid Vendor

12/14/2009 30 medtronic wireless edge modems 14,610$ Velocitor Solutions

12/14/2009 30 EZIO power drivers and cases 10,049 MS Medical Specialties

12/14/2009 One model 6083 ambulance cot with accessories 6,556 Stryker Sales Corp.

12/14/2009 Fees associated with teaching three EMT classes for local fire personnel 20,865 AMR

12/14/2009 30 sets of ambulance cot accessories 16,861 Stryker Sales Corp.

2/1/2010 14 mobile vision flashback digital video recorder systems 86,640 TCSWare

5/24/2010 dTective forensic video, imager & audio clarification equipment 28,431 Ocean Systems

5/24/2010 Training fee 1,200 Ocean Systems

8/9/2010 Supply bags, ballot bags, and board bags 10,094 A Rifkin. Company


Schedule of Purchases Made Noncompetitively From a Sole Source


66

68

Finding:

Section 9-1-43, Miss. Code Ann. (1972), requires the Circuit Clerk to maintain a fee journal to account

for the receipts and expenses related to the operation of the office. A correct cash balance was not being

maintained in the fee journal and the monthly fee account bank statements were not reconciled to the fee

journal. Failure to reconcile the fee account bank statements to the fee journal could result in the loss of

public funds. Section 9-1-45, Miss. Code Ann. (1972), requires the Circuit Clerk to file an annual

financial report to the Office of the State Auditor each year with accurate information about receipts and

expenses collected and paid which is derived from the fee journal. During the fiscal year, we noted

certain receipts were not accurately posted to the fee journal, therefore inaccurate information was

reported on the Circuit Clerk’s annual financial report submitted to the Office of the State Auditor.

We also noted that an assessment for the “Victims of Domestic Violence” was not being accurately

reflected in settlements to the Mississippi State Treasurer’s office. This amount was erroneously reported

under the “Appearance Bond Fee” assessment. This fee should have been accounted for separately and

disbursed back to the State as the “Domestic Violence” monies. We also noted that certain bond costs or

fees were not assessed on a particular case.

Recommendation:

The Circuit Clerk should ensure that a correct cash balance is maintained in the fee journal and that the

bank statements received each month are timely reconciled to the fee journal. This will result in accurate

reporting of the annual financial report to the State Auditors’ Office. Assessments and fees should be

correctly charged to each case and submitted and reported correctly to the State.

Circuit Clerk’s Response:

In May 2012, the Circuit Clerk has contracted with an outside accounting firm to reconcile the bank

statements from 2010 forward to the fee journal. As of the report date, all bank statements through June

2012 have been received and reconciled to each corresponding monthly fee journal. A correct cash

balance is being maintained and all monthly bank statements will be reconciled in a timely manner to the

fee journal.

Per Section 83-39-31 (1) of the Miss. Code Ann. (1972), there is imposed a fee equal to 2 percent (2%) of

the face value of each bond or $20.00 whichever is greater, to be collected by the clerk when the

defendant appears in court for final adjudication. In review of the findings noted by the auditor, it was

determined that the bonds were not being forwarded to the Circuit Clerk’s office by the Sheriff’s

Department personnel. The assessment was added to the balance due owed by the defendant. The Circuit

Clerk has implemented a procedure to ensure that all bonds are received in criminal cases by sending a

letter to the Harrison County Sheriff’s Office notifying them when a bond was not received on a case.

Per Section 83-39-31 (7) of the Miss. Code Ann. (1972) effective July 1, 2009, a $10.00 fee should be

imposed upon every criminal defendant who posts a cash bail bond, a surety bail bond, a property bail

bond or a guaranteed arrest bond to be collected by the clerk and deposited in the Victims of Domestic

Violence Fund. In some cases, the $10.00 fee was assessed as part of the Appearance Bond Fee and in

most cases, not assessed at all.

We have checked the cases in which this fee should apply, and have added the assessment, and in cases

where the $10.00 was assessed as part of the Appearance Bond Fee, we have removed the $10.00.

69

Sheriff.

The Sheriff’s office is not making bank deposits in a timely manner. The Sheriff’s office is using credit cards in

violation of Senate Bill 2857.

2. Finding:

Management is responsible for establishing a proper internal control system to ensure deposits are made

in a timely manner. During our testing of receipts at the sheriff’s office, we noted that deposits were not

made in a timely manner due to inadequate controls relating to revenue collection at the sheriff’s office.

Inadequate controls related to deposits could result in a loss of assets and improper revenue recognition in

the sheriff’s office.

During our testing of credit card expenditures, we noted several instances where the credit card at the

sheriff’s office was used for office supplies, small tools, postage, etc. In some of these instances sales tax

was charged to the items purchased. Late payment fees and interest was also assessed to the credit card

charges due to untimely payment of credit card statements. Some expenditures on the credit card

statements were also missing the supporting receipts for the items charged or purchased. All of the credit

card expenditures were coded to travel in error. Inadequate controls related to the use of credit cards can

result in unauthorized purchases, misappropriation of public funds and poor budgetary compliance and

reporting.

Recommendation:

We recommend that management in the Sheriff’s office ensure that procedures are implemented and

followed to ensure that receipts from fee collections are properly deposited in a timely manner. We also

recommend that management also limit credit card use to travel only and all charges have adequate

supporting documentation for the travel expense incurred. All other purchases for the sheriff’s office

should be properly procured through the purchasing department.

Sheriff’s Response:

The importance of making deposits in a timely manner is very much understood by our office. After the

2009 audit, it was determined that the cause of the audit findings pertained to our Records and Process

Departments. Those departments were making deposits once a month and as a result of the 2009 audit

findings we immediately started the process of making deposits on at least a weekly basis. In the future

those deposits will be made on a more frequent basis.

The using of the subject credit card for purposes other than for travel has been brought to the attention of

the proper personnel. Effective immediately the credit card use will be limited for travel related purposes

only with adequate supporting documentation. Purchases will be properly procured through the

purchasing department.

County Administrator.

The County Administrator is not properly bonded in accordance with Section 25-1-15, Miss. Code Ann. (1972).

3. Finding:

Section 25-1-15, Miss. Code Ann. (1972), require a new bond in an amount not less than that required by

law shall be secured upon employment and coverage shall continue by the securing of a new bond every

four years concurrent with the normal election cycle of the Governor or with the normal cycle of the local

government applicable to the employee.

70

The county administrator’s bond was written for an indefinite period of time. This would limit the

amount available for recovery is a loss occurred over multiple terms.

Recommendation:

The Board of Supervisors should cancel the current bond and secure a new one for the duration of the

current term. However, as of the date of issuance of this audit report for the FY 2010, we noted that the

county administrator properly secured a new bond for the duration of the current term.

County Administrator’s Response:

Harrison County has resolved this issue and a new bond has been issued with a specific term.

Justice Court Clerk.

The Justice Court Clerk is not properly bonded in accordance with Section 25-1-15, Miss. Code Ann. (1972).

4. Finding:

Section 25-1-15, Miss. Code Ann. (1972), requires a new bond in an amount not less than required by law

shall be secured upon employment and coverage shall continue by the securing of a new bond every four

years concurrent with the normal election cycle of the Governor or with the normal election cycle of the

local government applicable to the employee. The Justice Court Clerk’s bond was written for an

indefinite period of time. This would limit the amount available for recovery if a loss occurred over

multiple terms.

Recommendation:

The Justice Court Clerk should cancel the current bond and secure a new one for the duration of the

current term.

Justice Court Clerk’s Response:

Harrison County has resolved this issue and a new bond has been issued with a specific term.

Purchasing Clerk and Accounts Payable

The Purchasing Clerk and Accounts Payable are duplicating payments on invoices

5. Finding:

Management is responsible for establishing a proper internal control system to ensure all invoices are paid

timely, paid from original invoice, and invoices are properly coded and cancelled after payment. During

our testing of purchasing, we noted that several invoices were paid twice and some payments were made

from the vendor statement instead of the original vendor invoice. Inadequate controls related to

purchasing and accounts payable could result in a loss of public funds and improper expenditures

throughout the County as well as noncompliance with State procurement laws.

Recommendation

We recommend that management implement policies and procedures to ensure that all invoices and

statements are reviewed by purchasing and/or accounts payable to ensure that the balance due has not

been previously paid and is valid as to amount and expenditure classification.

72

SCHEDULE OF FINDINGS AND QUESTIONED COSTS


Schedule of Findings and Questioned Costs


73

Section 1: Summary of Auditor's Results

Financial Statements:

1. Type of auditor's report issued on the financial statements:

Governmental Activities Qualified

Aggregate discretely presented component units Adverse

General Fund Qualified

Katrina CDBG Fund Unqualified

Unqualified

2. Internal control over financial reporting:

a. Material weakness identified? Yes

b. Significant deficiency identified that is not considered

to be a material weakness? None reported

3. Noncompliance related to the financial statements No

Federal Awards:

4. Internal control over major programs:

a. Material weakness identified? No

b. Significant deficiency identified that is not considered

to be a material weakness? None reported

5. Type of auditor's report issued on compliance with major federal programs: Unqualified

6. Any finding(s) disclosed that are required to be reported in

accordance with Section _.510(a) of OMB Circular A-133? No

7. Federal programs identified as major programs:

a. Community Development Block Grant/States program CDFA #14.218

b. Hazard Mitigation Grant CFDA #97.039

8. The dollar threshold used to distinguish between type A and type

B programs: 1,251,515$

9. Auditee qualified as low risk? No

10. Prior year audit finding and questioned cost relative to federal

awards which require the auditee to prepare a summary schedule of

prior audit findings as discussed in Seciton __.315(b) of OMB

Circular A-133? Yes

Aggregate remaining fund information




74

Section 2: Financial Statement Findings

Board of Supervisors.

Significant Deficiency – Material Weakness (Prior year finding)

The Board of Supervisors should establish policies and procedures to strengthen internal controls over

documentation and periodic monitoring of its complex interest rate swap transactions.

10-1 Finding

Harrison County Board of Supervisors is responsible for establishing and maintaining effective internal

controls over financial reporting. Internal control is defined in auditing standards as “a process – effected

by those charged with governance, management, and other personnel – designed to provide reasonable

assurance about the achievement of the entity’s objectives with regard to reliability of financial reporting,

effectiveness and efficiency of operations and compliance with applicable laws and regulations.”

Our audit revealed that the County has entered into multiple complex financial transactions involving

interest rate swap agreements which could subject the County to significant gains and/or losses due to

factors outside the County’s control. As of September 30, 2010, the County has disclosed material

negative fair market values of several of its derivatives in the notes to the financial statements, and paid

$3,690,000 of termination fees on swaps terminated during the year. Our audit procedures indicate that

the County lacks the necessary training and qualifications and has not established adequate internal

control procedures over periodic monitoring of these complex interest rate swaps. Also, it does not

appear that anyone in County management understands whether these agreements represent an effective

interest rate hedge. The County did, through the debt closing process, engage consultants to assist with

these transactions. However, we are unable to determine as to what information or advice the consultants

may have provided to the County.

Recommendation

The County should implement adequate internal control policies and procedures over the accounting and

reporting of derivatives entered into by the County including assigning responsibility for performing

periodic monitoring of these highly complex financial agreements to a qualified person who reports the

status regularly to management and the Board of Supervisors. The Board should ensure that the effects of

future transactions of this nature are reviewed and clearly understood prior to entering into the

agreements.



The Board of Supervisors should establish policies and procedures for managing its debt service obligations,

particularly its derivatives associated with bonded debt, as well as maintaining effective internal control over its

debt transactions.




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10-2 Finding

The Harrison County Board of Supervisors is responsible for establishing policies and procedures for

managing its debt service obligations, particularly its bonded debt, as well as maintaining effective

internal control over its debt transactions. As part of an attempt to reduce its interest expense, the County

has entered into numerous complex transactions involving interest rate swap agreements which in turn

subject the County to the risk of material financial loss.

The Board of Supervisors has not taken appropriate steps to manage this risk of material loss. The Board

has not approved policies and procedures in its Minutes to establish guidelines for the participation in

swap agreements and has not authorized in its Minutes any County employee to monitor the fluctuating

risk of loss in these transactions and to establish adequate internal controls to prevent and detect loss.

However, as of the date of this report, the County has contracted with a derivative specialist but, it is

necessary to ensure that all derivative transactions are reported to the specialist for consideration and

advice.

The Board of Supervisors does purport to follow the Derivatives Policy of the Mississippi Development

Bank promulgated in the 2007 fiscal year but has not approved this policy on its Minutes.

To manage Counterparty Risk, the Mississippi Development Bank policy recommends that the risk be

“reduced by ensuring proper diversification in counterparty exposure.” However, the County entered into

nearly all of its interest rate swap agreements with a single Counterparty.

Three of the six interest rate swap agreements outstanding as of September 30, 2010 constitute investment

derivative swaps because of duplicate interest rate swap agreements attached to one particular debt issue

or because rates and terms agreed upon do not provide an effective hedge. There appears to be no

authority for this type of instrument in the Mississippi Development Bank policies, and in fact, the Bank

cautions that “careful attention should be paid to the relationship between Derivative Contract and the

underlying debt obligation to ensure compliance with accounting rules.” Failure to adequately manage

risks associated with debt service obligations could result in additional financial loss to the County.

Recommendation

The Board should adopt and approve policies and procedures in its Minutes to establish guidelines for the

County’s participation in interest rate swap agreements. The Board should also comply with the

Derivatives Policy of the Mississippi Development Bank.



Financial Data for Component Units should be included in the Financial Statements.

10-3 Finding

Generally accepted accounting principles require the financial data for the County’s component units to

be reported with the financial data of the County’s primary government unless the County also issues

financial statements for the financial reporting entity that include the financial data for its component

units. As reported in prior years’ audit reports, the financial statements do not include the financial data




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for the County’s legally separate component units. The failure to properly follow generally accepted

accounting principles resulted in an adverse opinion on the discretely presented component units.

Recommendation

The Board of Supervisors should provide the financial data for its discretely presented component units

for the inclusion in the County’s financial statements.



The County did not complete the federal grant activity schedule for the fiscal year ended September 30, 2010.

10-4 Finding

An effective system over internal control over federal grants includes properly identifying all revenues

and expenditures, including accruals, on the federal grant activity schedule. The County did not complete

the federal grant activity schedule for the fiscal year ended September 30, 2010. As a result, the auditors

assisted the County in completing the Schedule of Expenditures of Federal Awards. The failure to

properly complete the federal grant activity schedule increases the possibility of reporting incorrect

amounts of federal expenditures, as well as the possibility of excluding a federal grant on the Schedule of

Expenditures of Federal Awards.

Recommendation

The County should properly complete the federal grant activity schedule.

Justice Court Clerk.


The Justice Court Clerk did not adequately document the aging schedule for Fines Receivable.

10-5 Finding

As reported in the prior year, the Justice Court Clerk could not provide documentation to support a

schedule for the aging the Court’s fines receivable and thereby appropriately valuing the Justice Court’s

allowance for doubtful accounts and the net fines receivable. The total amount of fines receivable

includes items that are not valid receivables of the County and the allowance for doubtful accounts is a

rough estimate unsupported by systematic and periodic analysis of outstanding accounts required to

produce a reliable aging schedule. The Justice Court Clerk has not engaged the software provider for

assistance in the data processing required to produce the schedule. As a consequence, the Justice Court

Clerk cannot provide an accurate statement of receivables for reporting purposes, and the lack of timely

information could result in the loss of public funds through the failure to collect valid accounts.




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Recommendation

The Justice Court Clerk, after seeking Board approval, should consult with the Court software provider to

implement a system for analyzing the receivables so that an accurate schedule for aging fines receivable

can be produced and updated monthly as required for collection and reporting purposes.

Circuit Clerk


The Circuit Clerk did not adequately document the aging schedule for Fines Receivable.

10-6 Finding

As reported in the prior year, the Circuit Clerk could not provide documentation to support a schedule for

the aging the Court’s fines receivable and thereby appropriately valuing the Circuit Court’s allowance for

doubtful accounts and the net fines receivable. The total amount of fines receivable includes items that

are not valid receivables of the County and the allowance for doubtful accounts is a rough estimate

unsupported by systematic and periodic analysis of outstanding accounts required to produce a reliable

aging schedule. The Circuit Clerk has not engaged the software provider for assistance in the data

processing required to produce the schedule. As a consequence, the Circuit Clerk cannot provide an

accurate statement of receivables for reporting purposes, and the lack of timely information could result in

the loss of public funds through the failure to collect valid accounts.

Recommendation

The Circuit Clerk, after seeking Board approval, should consult with the Court software provider to

implement a system for analyzing the receivables so that an accurate schedule for aging fines receivable

can be produced and updated monthly as required for collection and reporting purposes.

Circuit Clerk.


The Circuit Clerk has not settled unidentified cash to the General Fund in accordance with Section 27-105-371,

Miss. Code Ann. (1972).

10-7 Finding

Section 27-105-371, Miss. Code Ann. (1972), requires any unidentified cash on hand or in the bank to be

settled into the General Fund of the County. At September 30, 2010, the Circuit Clerk had $497,003 of

unidentified cash in the clearing accounts for both Civil and Criminal. The Circuit Clerk has been

carrying the balance of these unidentified funds since 2003 instead of settling these funds over to the

General Fund of the County. Failure to properly settle unidentified funds could result in loss of public

funds to the County.

Recommendation

The Circuit Clerk should settle the unidentified cash into the General Fund of the County.




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Inventory Control Clerk.


The Board should implement controls to prevent and detect inconsistencies in the subsidiary ledgers for capital

assets.

10-8 Finding

Effective internal controls over capital assets include the maintenance of accurate subsidiary records

documenting asset values. Certain fixed asset control procedures were inadequate for maintaining an

accurate inventory or adequate subsidiary records documenting the existence, valuation, and completeness

of the County’s capital assets. In some instances, beginning balances could not be supported for various

capital asset classifications and contra accounts and in other instances assets were not added or removed

from the subsidiary records in a timely manner.

Recommendation

The Inventory Control Clerk should implement procedures to properly maintain accurate inventory

records documenting the existence, valuation, and completeness of the County’s capital assets.

Purchasing Clerk and Accounts Payable.

Significant Deficiency – Material Weakness

The Board should implement controls to prevent the duplication of payment of invoices and to ensure accurate

posting of payments.

10-9 Finding

Management is responsible for establishing a proper internal control system to ensure are invoices are

timely paid, paid from original invoice, and invoices are properly coded and cancelled after payment.

During our testing of purchasing, we noted that several invoices were paid twice and some payments were

made from the vendor statement instead of the original vendor invoice. Inadequate controls related to

purchasing and accounts payable could result in a loss of public funds and improper expenditures

throughout the County as well as noncompliance with State procurement laws.

Recommendation

We recommend that management implement policies and procedures to ensure that all invoices and

statements are reviewed by purchasing and/or accounts payable to ensure that the balance due has not

been previously paid and is valid as to amount and expenditure classification.

Section 3: Federal Award Findings and Questioned Costs

The results of our tests did not disclose any findings and questioned costs related to federal awards.

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AUDITEE’S CORRECTIVE ACTION PLAN AND

SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS

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The Board of Supervisors will in the future require the Administrator of the bonds to regularly

provide written reports to the Board of the status of the variable rates/swap agreements on the

bonds outstanding which would have been determined through its monitoring of such financial

instruments.

The Board will also require the financial consultant to provide detailed written reports of the

advantages of entering into variable rate bonds with swap agreements compared to fixed rate

bonds as well as the known risk of these instruments prior to pricing and closing any bond issues.

Anticipated Completion Date:

September 30, 2012

Name of Contact Person Responsible for Corrective Action:

Doug Armstrong, 228-865-4119

10-2 Corrective Action Planned:

The purpose and intent of the swap agreements were to protect the County from rising interest

rates in the short term marketplace. It was not intended to speculate on interest rates. Changes in

interest rates impact the market value of interest rate swaps, provided that the floating portion of

the interest rate swap can closely approximate the floating rate bonds then the need to terminate a

swap is not present and thus that termination value does not immediately impact the County.

The County contracted with a derivative specialist to provide the values of the derivatives to be

used by the County and the auditors to prepare the audited financial statements. All information

requested by the specialist on the derivatives was provided.

Harrison County has not formally adopted guidelines to be followed in conjunction with entering

into swap agreements but have informally used the guidelines of the Mississippi Development

Bank to date.

The County has not used an employee to monitor the swap agreements but has contracted with the

financial consultant to be an administrator of the swap agreements and thus monitor those

agreements.

The three interest rate swaps that were classified as investment derivative swaps were connected

to bonds that had been refunded and as all were forward starting swaps they did not require an

ongoing payment exchange. The swaps were terminated in September 2011 and each had a

positive value.

The County will adopt policies and procedures in its Minutes to establish guidelines to be used

when considering future interest rate swap agreements.

Harrison County will authorize an employee, along with the Administrator of the bond issues, to

1) monitor the risk of loss on the swap agreements 2) establish a system of internal controls to

prevent and detect loss and 3) present written reports to the Board of Supervisors detailing any

significant events affecting the value of the swaps.

The Board will also comply with the Derivatives Policy of the Mississippi Development Bank.


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September 30, 2012



10-3 Corrective Action Planned:

Harrison County will provide financial data on entities considered component units for inclusion

in the county’s fiscal year 2011 financial statements.


September 30, 2011



10-4: Corrective Action Planned:

The County will prepare a federal grant activity schedule for future years.


September 30, 2012




Harrison County Justice Court is aware that we should have a report in place to properly age the

fine receivables. I contacted my court system software vendor (PCSS) in October 2011 so they

could help provide me with a solution such as an existing report or for assistance in creating a

new report. They provided several existing reports but none of them would provide all the data

needed. I will contact PCSS again since they will need to prepare an SOW, Statement of Work

and quote a price for the creation of a report that will properly age our receivables. Several

reports were provided that reflected an accurate receivable figure but the amounts were not aged

properly. Justice Court has a collection agency that is receiving past due cases several times a

year. I feel that we are making a faithful attempt to collect all monies due Harrison County.


September 30, 2012


Greg Illich, 228-865-4213

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The Circuit Clerk’s office is aware of the deficiencies in the current software program that is used

to account and report on the accounts receivable of the courts. Our office is currently

comparing other court reporting software to meet the needs of Circuit Clerk’s office and to

ensure more accurate accounting and reporting of all court fines and related receivables. We

will also print and review the A/R aging report on the last day of the month and correct any

discrepancies that are discovered.


September 30, 2012


Gayle Parker, 228-865-1635


The Circuit Clerk’s Office is complying with the Auditor’s findings by reviewing the Civil

Clearing Account to determine the amount of unidentified funds (if any), and said funds will be

turned over to the County Treasury after the review is completed.


September 30, 2012


Gayle Parker, 228-865-1635


The Inventory Control Clerk will be implementing the following procedures:

Requesting a monthly report from purchasing on requisitions marked as possible

fixed assets in accordance with the MS State Auditors’ Office fixed asset

guidelines and communicate with requesting departments for additional

information to add to the inventory listing

Communicate with Road Department to ensure that metal brass tags are made for

vehicles, heavy equipment and other outside equipment so it will be properly

marked

Will record the GASB 42 adjustments for impaired assets to ensure proper value

and depreciation

Will implement a system with the Contracts assistant to better track construction

in progress and other capitalized improvements

Will make regular monthly site visits to departments to spot check to make sure

that inventory is on the departmental inventory listing and is properly tagged

according to state guidelines


September 30, 2012

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Kelly Griffin , 228-865-4185


Harrison County has a software program in place that does address duplicate payments when the

same invoice number is entered into the program. If an error occurs in entering information this

can cause the duplication of payment of an invoice. As an additional checks and balance, a clerk

will review and check the claims docket against the claim before payment is processed to write a

check. More diligence will be placed on the review process in the future to correct this

deficiency.


September 30, 2012



As required by Section ____.315(b) of OMB Circular A-133, the following prior year audit finding to was

corrected as follows:

09-10: Finding:

An effective system of internal controls over the Federal Equitable Sharing program should be

established to assure that transactions are carried out in accordance with the Equitable Sharing

Agreement. The following deficiencies in controls were discovered in the County’s

implementation of Parts 3-5 of the Agreement:

a. The subsidiary ledger and supporting documents for the Federal Equitable Sharing

Agreement did not agree to the amount recorded in the general ledger and did not

reconcile back to the amount reflected on the County’s annual report filed with the United

States Department of Justice.

b. Some forfeited vehicles were sold or scrapped without following the guidelines requiring

deposit of proceeds of the Equitable Sharing account.

c. Donations were sometimes made to community-based programs without following the

guidelines in the Equitable Sharing Agreement.

d. Written policies and procedures were not in place to cover the use of Equitable Sharing

funds for the buy money and informant payments.

Recommendation :

The Sheriff should implement policies and procedures designed to correct internal control

deficiencies in the areas noted: recordkeeping, accounting for proceeds of forfeited vehicles,

donations, and the use of equitable sharing funds for buy money and informant payments.

Status of Finding

Corrected as of December 2011

harrison county, mississippi audited financial statements

Documents