Town of Bermuda Run Bermuda Run, North Carolina For the year ended June 30, 2016  Independent Auditors' Reports Basic Financial Statements Information Accompanying the Basic Financial Statements  And    Town of Bermuda Run Table of Contents June 30,2016  Independent Auditor's Report Management's Discussion and Analysis Basic Financial Statements:  1-2 3-12  Government-wide Financial Statements:  Exhibit1 Exhibit2  Statement of Net Position Statement of Activities  13 14  Fund Financial Statements Exhibit3 3 Exhibit 4 Exhibit5 5  Balance Sheet - Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances - Govemmental Funds Reconciliation of the Statement of Revenues, Expenditures And Changes in Fund Balances of Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balances - General Fund and Annually Budgeted Statement of Fund Net Position- -P Proprietary Fund Statement of Revenues, Expenses, and Changes in Fund Net Position - Proprietary Fund Statement of Cash Flows - Proprietary Funds  15 16  tot the Statement of Activities  17  Exhibit6  Special Revenue Fund  18 19 20 21 22-39  Exhibit7 Exhibit8 8 Exhibit9  Notes to the Financial Statements    Required Supplementary Information:  Schedule of the Proportionate Share oft the Net Pension Asset- -L Local Government Employees' Retirement System Schedule of Contributions - Local Government Employees'  40 41  Retirement System  Individual Funds Statements and Schedules:  Statement of Revenues, Expenditures, and Changes inl Fund Balances- Statement of Revenues, Expenditures, and Changes inl Fund Balances- Budget and Actual- - General Capital Projects Fund Statement of Revenues, Expenditures, and Changes in Fund Balances- Budget and Actual - Special Revenue Fund - Gated Security Schedule of Revenues and Expenditures Budget and Actual - (Non-GAAP)  Budget and Actual - General Fund  42-43 44 45 46-47 48 49  Water and Sewer Fund  Other Schedules:  Schedule of Changes in Ad' Valorem Taxes Receivable  Analysis of Current Tax Levy  Compliance Section:  Independent Auditor's Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards Independent Auditor's Report on Compliance for Each Major Federal Program; Report on Internal Control Over Compliance; With OMB Uniform Guidance and  50-51  the State Single Audit Implementation Act Schedule of Findings and Questioned Costs Summary Schedule of Prior Audit Findings Schedule of Federal and State Financial Awards  52-53 54-55 56 57 58  Corrective Active Plan    EDDIECARRICK, CPA, PC Certified Public Accountant INDEPENDENT AUDITOR'S REPORT  To the Town Council Town of Bermuda Run Bermuda Run, North Carolina Report on the Financial Statements  We have audited the accompanying financial statements oft the governmental activities, the business-type activities, the aggregate discretely presented component unit, each major fund, and the aggregate remaining fund information of the Town of Bermuda Run, North Carolina, as ofa and for the year ended. June 30, 2016, and the related notes to the financial statements, which collectively comprise the Town of Bermuda Run, North Carolina's basic financial  statements as listedi in thei table of contents.  Management's Responsibility for the Financial Statements  Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance ofi internal control relevant to the preparation and fair presentation off financial statements that are Our responsibility is to express opinions on these financial statements based on our audit. We conducted our auditi in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Govemment Auditing Standards, issued by the Comptroller General of the United States. The financial statements of the Town of Bermuda Run Tourism Development Authority were not audited in accordance with Government Auditing Standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. Inr making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation oft the financial We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit Inour opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, the aggregate discretely presented component unit, each major fund, and the aggregate remaining fund information of the Town of Bermuda Run, North Carolina, as of June 30, 2016, and the respective changes in financial position, and, where applicable, cash flows thereof and the respective budgetary comparison oft the General Fund and Special Revenue Fund for the year then endedi in accordance with accounting principles generally accepted int the United States of America.  free from material misstatement, whether due to fraud ore error.  Auditor's Responsibility  statements. opinions. Opinions  Member oft the American Institute of Certified/ PublicA Accountants  Eddie Carrick  1  151 Young Drive, Lexington, NC 27292 336-249-2545, Fax336-249-4745    Other Matters  Required Supplementary Information  Accounting principles generally accepted in the United States of America require that! Managements Discussion and Analysis on pages 3 through 12 and the Local Government Employees' Retirement System's Schedules of the Proportionate Share of the Net Pension Asset (Liability) and Contributions, on pages 40 through 41 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted ofi inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us withs sufficient evidence to express an opinion or provide any assurance.  Supplementary and Other Information  Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Town of Bermuda Run, North Carolina's basic financial statements. The budgetary schedules and other schedules as well as the accompanying schedule of expenditures of federal and state awards as required by Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards and the State Single Audit Implementation Act are presented for purposes of The budgetary schedules, other schedules, and the schedule of expenditures of federal and state awards are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the budgetary schedules, other schedules, and the schedule of expenditures of federal and state awards are fairly stated in all Ina accordance with Government Auditing Standards, we have also issued our report dated September 24, 2016, on our consideration of the Town of Bermuda Run, North Carolina's internal control over financial reporting and on our tests ofi its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Town of Bermuda Run, North Carolina's internal control over financial reporting and  additional analysis and are not a required part of the basic financial statements.  material respects in relation to the basic financial statements as av whole. Other Reporting Required by Government. Auditing Standards  compliance. Eddie Carrick,CPA,PC Ccl.o Lexington, North Carolina September 24, 2016  2    TOwN OF  Bermuda Rm NORTH CAROLINA 120 Kinderton Boulevard, Suite IOO Bermuda. Run, NC27006 336.998.0906 Fax336.998.7209 townotbr.com  Management's Discussion and Analysis  As management of the Town of Bermuda Run, we offer the readers of the Town of Bermuda Run's financial statements this narrative overview and analysis of the financial activities of the Town of Bermuda Run for the fiscal year ended June 30, 2016. We encourage readers to read the information presented here in conjunction with additional information that we have furnished in the Town's financial statements, which  follow this narrative. Financial highlights  The assets and deferred outflows of resources of the Town of Bermuda Run exceeded its liabilities and deferred inflows of resources att the close oft thet fiscal year by $9,124,341 (net position). The government's total net position increased by $1,475,438, primarily due to governmental activities, capital grants for road improvements, and a conservative approach to spending. As of the close of the current fiscal year, the Town of Bermuda Run's governmental funds reported combined ending fund balances of $2,439,596 with a net change of $12,984 in fund balance. Approximately 55% of this total amount, or $1,345,795, is restricted or assigned. Att the end of the current fiscal year, unassigned fund balance for the general fund was $1,765,104,or The Town of Bermuda Run's total debt decreased by $161,723 due to payments on the debt for Town Hall of $85,000, payments on sewer debt of $95,277, an decrease in accrued vacation of $1,859, and  132% oft total general fund expenditures for the fiscal year. an increase in net pension liability of $16,695. Overview of the Financial Statements  This discussion and analysis is intended to serve as introduction to the Town of Bermuda Run's basic financial statements. The Town's basic financial statements consist of three components: 1) government- wide financial statements, 2) fund financial statements, and 3) notes to thet financial statements (see Figure 1). The basic financial statements present two different views oft the Town through the use of government- wide statements and fund financial statements. In addition to the basic financial statements, this report contains other supplemental information that will enhance the reader's understanding of the financial  condition of the Town of Bermuda Run.  3    Management Discussion and Analysis Town of Bermuda Run Figure 1  Required Components of Annual Financial Report  Management's Discussion and Analysis  Basic Financial Statements  Government-wide Financial Statements  Fund Financial Statements  Notes to the Financial Statements Detail  Summary  Basic Financial Statements  The first two statements (Exhibits 1 and 2) in the basic financial statements are the Government-wide Financial Statements. They provide both short and long-term information about the Town's financial status. The next statements (Exhibit 31 through 9) are Fund Financial Statements. These statements focus on the activities oft the individual parts oft the Town's government. These statements provide more detail than the government-wide statements. There are three parts to the Fund Financial Statements: 1) the governmental fund statements 2) the budgetary comparison statements and 3) the proprietary fund statements. The next section of the basic financial statements is the notes. The notes to the financial statements explain in detail some of the data contained in those statements. After the notes, supplemental information is provided to show details about the Town's individual funds. Budgetary information required  by the General Statutes also can! bei found in this part oft thes statements.  4    Management Discussion and Analysis Town of Bermuda Run Government-Wide Financial Statements  The government-wide financial statements are designed to provide the reader with al broad overview of the Town's finances, similar in format to at financial statement of a private-sector business. The government- wide statements provide short and long-term information about the Town's financial status as a whole. The two government-wide statements report the Town's net position and how they have changed. Net position is the difference between the Town's total assets and deferred outflows of resources and total liabilities and deferred inflows of resources. Measuring net position is one way to gauge the Town's The government-wide statements are divided into three categories: 1) governmental activities 2) business- type activities and 3) component units. The governmental activities include most of the Town's basic services such as safety and security, transportation and administration. Property tax and state shared revenues finance these activities. The business-type activities are those that the Town charges customers top provide. These include water and sewer services offered by the Town. The final category is component unit. Although legally separate from the Town, the Tourism Development. Authority isi important to the Town.  financial condition.  The Town exercises control over the Authority by appointingi its members. The government-wide financial statements are on Exhibits 1a and 2 of this report.  Fund Financial Statements  The fund financial statements (see Figure 1) provide a more detailed look at the Town's most significant activities. A fund is a group of related accounts that is used to maintain control over resources that have been segregated fors specific activities or objectives. The Town of Bermuda Run, like all other governmental entities in North Carolina, uses fund accounting to ensure and reflect compliance (or non-compliance) with finance-related legal requirements, such as General Statutes or the Town's budget ordinance. All of the funds of the Town of Bermuda Run can be dividedi into two categories: governmental funds and proprietary Governmental Funds - Governmental funds are used to account for those functions reported as governmental activities in the government-wide financial statements. Most of the Town's basic services are accounted fori in governmental funds. These funds focus on how assets can readily be converted into cash flow in and out, and what monies are left at year-end that will be available for spending in the next year. Government funds are reported using an accounting method called modified accrual accounting which provides a short term spending focus. As a result, the governmental fund financial statements give the reader a detailed short-term view that helps him determine if there are more or less financial resources available to finance the Town's programs. The relationship between governmental activities (reported in the Statement of Net Position and the Statement of Activities) and governmental funds is described in a  funds.  reconciliation that is part of the fund financial statements.  5    Management Discussion and Analysis Town of Bermudal Run  The Town of Bermuda Run adopts an annual budget for the General Fund and Special Revenue Fund, as required by the General Statutes. The budget is a legally adopted document that incorporates input from the citizens oft the Town, the management oft the Town, and the decisions oft the board about which services to provide and how to pay for them. It also authorizes the Town to obtain funds from identified sources to finance the current period activities. The budgetary statement provided for the General Fund and Special Revenue. Fund demonstrates how well the Town complied with the budget ordinance and whether or not the Town succeeded in providing the services as planned when the budget was adopted. The budgetary comparison statement uses the budgetary basis of accounting and is presented in the same format, language and. classifications as the legal budget document. The statement shows four columns: 1) the original budget as adopted by the board 2) the final budget as amended by the board 3) the actual resources, charges to appropriations, and ending balances int the General Fund and Special Revenue Fund, and 4) the differences or variance between thet final budget and actual resources and charges. To account fort the difference between the budgetary basis of accounting and the modified accrual basis, ar reconciliation showing the differences int the reported activitiesi is shown at the end of the budgetary statement. Proprietary funds - The Town of Bermuda Run has one type of proprietary fund. Enterprise Funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The Town uses an enterprise fund to account for its water and sewer activity. This fund is the same as the functions shown in the business-type activities in the Statement of Net Position and Statement Notes to the Financial Statements - The notes provide additional information that is essential to the full understanding of data provided in the government-wide and fund financial statements. The notes to the Other Information - In addition to the basic financial statements and accompanying notes, this report includes certain supplemental information detailing thei information provided in the basic financial statements and is presented to allow the reader to gain an in-depth understanding of the financial information Interdependence with Other Entities - The Town depends on financial resources flowing from, or associated with, both the Federal Government and the State of North Carolina. Because of this dependency, the Town is subject to changes in specific flows of intergovernmental revenues based on modifications to Federal and State laws and Federal and State appropriations. Itis also subject to changes ini investment earnings and asset values associated with U.S. Treasury Securities because of actions by  ofActivities.  financial statements begin on page 22 of this report.  presented.  foreign government and other holders ofp publicly held U.S. Treasury Securities.  6    Management Discussion and Analysis Town of Bermuda Run Government-Wide Financial Statements  Town of Bermuda Run's Net Position (Figure 2)  Governemental Activities 2016  Business-Type. Activities 2016  Total 2016 2015  2015  2015  Current ando other assets Capital assets Deferred outflows ofr resources Total assets and deferred outflows ofr resources Long-term liabilities Otherl liabilities Deferredi inflows of resources Totall liabilities and deferred inflows ofr resources Net position: Neti investmenti in capital assets Restricted for: Stabilization by State Statute Streets Unrestricted Total net position  $2,487,549 $ 2,485,720 $ 637,986 $ 373,015 $ 3,125,535 $ 2,858,735 3,953,614 2,845,366 2,259,056 2,343,954 6,212,670 5,189,320 6,455,971 5,343,461 2,897,043 $2,716,969 9,353,014 8,060,430  14,808  12,375  14,808  12,375  146,158 37,711 8,677 192,546  212,604 31,197 41,684 285,485  95,277 30,763 126,040  146,158 307,881 73,837 8,677 228,671 411,525  36,125 36,125  61,960 41,684  3,826,114 2,632,866 2,259,056 2,248,677 6,085,170 4,881,543  825,082 243,586 1,368,642 1,656,035  589,249 179,826  825,082 589,249 243,586 179,826  601,861  342,252 1,970,503 1,998,287  $6,263,424 $ 5,057,976 $2,860,917 $ 2,590,927 $9,124,341 $ 7,648,903  As noted earlier, net position may serve over time as one useful indicator of a govemment's financial condition. The assets and deferred outflows of resources of the Town exceeded liabilities and deferred inflows by $9,124,341 as of June 30,2016. The Town's. net position increased by $1,475,438 for the fiscal year ended June 30, 2016. However, the largest portion (67%) reflects the Town's net investment in capital assets (road improvements, equipment, machinery, utility plant), less any related debt still outstanding that was issued to acquire those items. The Town uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the Town's net investment in capital assets is reported net of the outstanding debt, the resources needed to repay that debt must be provided by other sources, since capital assets cannot be used to liquidate these liabilities. An additional portion of the Town's net position, $1,068,668, represents resources that are: subject to external restrictions  on howi they may be used. The remaining balance of$1,970,503 is unrestricted.  7    Management Discussion and Analysis Town of Bermuda Run government net position:  Several particular aspects of the Town's financial operations positively influenced the total unrestricted  Continued diligence ini the collection of property taxes byr maintaining at tax collection percentage of  99.39%, compared to the state average ofs 97%. Timely maintenance of Town assets to maximize lives. NCDOT grants for road improvements of $748,149  Town of Bermudal Run's Changes in Net Position (Figure 3)  Governmental Activities 2016 2015  Business-type Activities 2016 2015  Tofal 2016 2015  Revenues Program revenues: Charges for services Operating grants and contributions Capital grants and contributions General revenues: Properly taxes Other taxes Other Total revenues Expenses: General government Safety Gate operations Transportation Interest onl long-te term debt Water ands sewer Totale expenses Transfers I Increase inr netp position Netp position, July1 Net position, June 30  512,025 $ 515,436 $ 739,552 $ 556,448 $ 1,251,577 $ 1,071,884  63,759 748,149 379,537 792,793 790,611 511,317 521,338 499,593 445,190  62,379  63,759 748,149 379,537 792,793 790,611 511,317 521,338 29,580 506,643 474,770  62,379  7,050  3,127,636 2,714,491 746,602 586,028 3,874,238 3,300,519  806,319 847,389 28 491,975 510,940 616,979 407,572 6,888  806,319 847,389 28 491,975 510,940 616,979 407,572 6,888  23,500 10,308  23,500 10,308  476,612 488,848 476,612 488,848  1,922,188 1,799,709 476,612 488,848 2,398,801 2,288,557  Increase inr netp position before transfers  1,205,448 914,780 269,990 1,205,448 814,780 269,990  97,180 1,475,439 1,011,960 197,180 1,475,439 1,011,960  (100,000)  100,000  5,057,976 4,265,972 2,590,927 2,393,747 7,648,903 6,659,719 $6,263,424 $ 5,057,976 $ 2,860,917 $ 2,590,927 $9,124,341 $7,648,903  8    Management Discussion and Analysis Town of Bermuda Run  Governmental activities. Governmental activities increased the Town's net position by $1,205,448, thereby accounting for 82% oft thet total growth in net position oft the Town. Though ar recession affected the Town, the increase in net position was the result of a concerted effort to control costs and manage expenditures to minimize the impact of the recession on its citizens. Town management reduced non- essential programs to a minimum and implemented cost saving strategies across Town departments. Certain nonrecurring expenses were either postponed or renegotiated in an attempt to maintain a healthy net position. Management believes healthy investment ini the Town will result in additional revenues, and in that vein added to the Town's net position by investing in capital assets. Though many of the Town's residents were hit! hard by the recession, tax revenue did not appreciably decline in the current year. Town management acknowledges that 2016 was a successful year and plans on improving upon these  approaches as al long-term strategy to realize continued fiscal health.  Keye elements of thisi increase are as follows: Taxr revenues remained steady  Town council has adopted a conservative approach to general fund spending  NCDOT grants for road improvements of $748,149  Business-type activities: Business-type activities increased the Town's net position by $269,990, accounting for 18% oft the total growthi in the government's net position. Keye elements of this increase areas  follows:  Water costs Water and sewer charges Conservative approach to spending Financial Analysis oft the Town's Funds related legal requirements.  As noted earlier, the Town uses fund accounting to ensure and demonstrate compliance with finance- Governmental Funds: The focus of the Town's governmental funds is to provide information on near-term inflows, outflows, and balances of usable resources. Such information is useful in assessing the Town's financing requirements. Specifically, unreserved fund balance can be a useful measure of a government's The General Fund is the chief operating fund oft the Town. Att the end of the current fiscal year, the Town of Bermuda Run's fund balance available in the General Fund was $1,765,104, while total fund balance reached $2,833,772. The Town currently has an available fund balance of 132% of general fund At June 30, 2016, the governmental funds of the Town reported a combined fund balance of $2,439,596 with ar net increase inf fund balance of $12,984. Included in this change in fund balance are increases in the General Fund of $532,699, adecrease in the General Capital Projects Fund of $556,738, and an increase in  net resources available fors spending at the end of the fiscal year.  expenditures, while total fund balance represents 212% of the same amount.  Special Revenue Fund of $37,023.  9    Management Discussion and Analysis Town of Bermuda Run  General Fund Budgetary Highlights: During the fiscal year, the Town did not revise the budget. Generally, budget amendments fall into one of three categories: 1) amendments made to adjust the estimates that are used to prepare the original budget ordinance once exact information is available; 2) amendments made to recognize new funding amounts from external sources, such as Federal and State grants; and 3) increases in appropriations that become necessary to maintain services. Revenues were more than the budgeted amounts primarily because the Town received more sales tax and othert taxes than expected. Expenditures were heldi in check to comply with its budgetary requirements. Proprietary Funds: The Town's proprietary funds provide the same type of information found in the government-wide statements but in more detail. Unrestricted net position in the Water and Sewer Fund at the end oft the fiscal year amounted to $601,861. The total change in net position was $269,990. Other factors concerning the finances of this fund have already been addressed in the discussion of the Town's  business-type activities.  Capital Asset and Debt Administration roads, machinery and equipment.  Capital Assets. The Town's investment in capital assets fori its governmental and business-type activities as of June 30, 2016, totals $6,212,670 (net of accumulated depreciation). These assets include buildings,  Major capital asset transactions during the yeari included thet following additions:  Roundabout construction in process $1,304,887  Town of Bermudal Run's Capital Assets (net of depreciation) (Figure4)  Govemmental Activities 2016 2015  Business-type Activities 2016 2015 $  Total 2016 2015 $1 1,771,626 $ 466,739 993,050 1,069,618 571,200 606,900 589,950 668,823 27,788  Construction inp process $1 1,771,626 $ 466,739 $  Road improvements Buildings Otheri improvements Equipment andf furnishings Plant and distribution  993,050 1,069,618 571,200 606,900 589,950 27,788  668,823 33,286  33,286  2,259,056 2,343,954 2,259,056 2,343,954  $3,953,614 $ 2,845,366 $ 2,259,056 $ 2,343,954 $6,212,670 $5,189,320  Additional information on the Town's capital assets can be found in the Note IIL.A.4 of the Basic Financial  Statements.  10    Management Discussion and Analysis Town of Bermuda Run  Long-term Debt. As of June 30, 2016, the Town had installment notes with Bank oft the Carolinas with an  outstanding amount of $127,500 and $0.  Town of Bermuda Run's Long-term Debt (Figure! 5)  Governmental Activities 2016 2015  Business-type Activities 2016 2015  Total 2016 2015  Installment note Bank of the Carolinas  127,500 $ 212,500 $ 127,500 $-212,500 $  $ 95,277 $ 127,500 $ 307,777 $ 95,277 $ 127,500 $ 307,777  Town of Bermuda Run's Outstanding Debt  The Town's debt decreased by $180,277 during the year based on principal payments made of $180,277. North Carolina general statutes limit the amount of general obligation debt that a unit of government can issue to 8 percent of the total assessed value of property located within that government's boundaries. The Additional information regarding the Town's long-term debt can bei found in Note II.B.6 oft this report.  legal debt margin for the Towni is $42,341,813.  Economic Factors and Next Year's Budgets and Rates  Thei following key economic indicators reflect the growth and prosperity of the Town.  The continued build out of Kinderton Village Residential Community with a new 72 unit single Construction of a 50 bed tower in for the Davie Medical Center = Bermuda Run Campus to open Increased destination driven economic impact from the Twin City Soccer Association tournaments Continued increased use of WinMock at Kinderton for corporate events, weddings, and regional  family section Spring, 2017 ands special events programs.  Increased commercial and retail growth int the Town and surrounding areas  11    Management Discussion and Analysis Town of Bermuda Run  Budget Highlights for the Fiscal Year Ending. June 30, 2017  Governmental Activities: Property tax revenues are expected to increase slightly in conjunction with new construction in the commercial areas, as well as renewed residential family home construction in the residential zoned areas. The Town has budgeted monies to enhance quality of life by interconnecting residential and retail areas with multi-use paths. Other revenues and expenses are expected to remain The Town has chosen not to appropriate fund balance in the fiscal year 2017 budget. Management believes that increased revenues and continued restrictions on spending will maintain the Town's financial position. As the Town considers future revenue sources, it has determined that a $0.01 increase in the property tax rate will result in additional revenues of approximately $52,604 at current values and collection rate. Though management believes current growth will generate enough revenue to support Town operations, a careful analysis of property tax revenue will be considered inf future years' budgets. Business-type Activities: Revenues for the 2016-2017 year are expected to increase slightly due to projected volume increasel ins sales tax distribution from the State of North Carolina.  consistent with the 2015-2016 fiscal year.  Requests for Information  This reporti is designed to provide an overview of the Town's finances for those with an interest ini this area. Questions concerning any of thei information found in this report or requests for additional information should be directed to the Town Manager, Town of Bermuda Run, 120 Kinderton Blvd, Suite 100, Bermuda Run, NC  27006.  12    Exhibit1  Town of Bermuda Run, North Carolina Statement of Net Position June 30, 2016  Component Unit Town ofE Bermuda Run Tourism Development Authority  Primary Government Business-type Activities  Governmental Activities  Total  ASSETS Current assets: Casha andi investments Properly taxes receivable (net) Accounts receivable (net) Restricted cash Total current assets Non-current assets: Capital assets (Note 4): Non-depreciable construction inp progress Other capital assets, net of depreciation Total Capital assets Total assets DEFERRED OUTFLOWS OF RESOURCES Pension deferrals Total deferredi inflows of resources LIABILITIES Current liabilities: Accounts payable Long-term liabilities: Netp pension! liability Accrued vacation Due within oney year Due inr more than one year Totall liabilities DEFERRED INFLOWS OF RESOURCES Pension deferrals Total deferredi inflows ofr resources NETF POSITION Neti investment in capital assets Restricted for: Stabilization by State Statute Streets Tourism Development Unrestricted Totalr net position  2,079,942 $ 637,986 $ 2,717,929 $  10,241 153,779 243,586 2,487,549 1,771,626 2,181,988 3,953,614 6,441,163 14,808 14,808  10,241 153,779 243,586 3,125,535 1,771,626 4,441,044 6,212,670 9,338,205 14,808 14,808  13,448 203,248 216,696  637,986  2,259,056 2,259,056 2,897,043  216,696  37,711 16,695 1,963 85,000 42,500 183,869 8,677 8,677 3,826,114 825,082 243,586 1,368,642  36,125  73,837 16,695 1,963 85,000 42,500 219,995 8,677 8,677 6,085,170 825,082 243,586 1,970,503  36,125  2,259,056  13,448 203,248 216,696  601,861  6,263,424 $ 2,860,917 $ 9,124,341 $  The accompanying notes are ani integral part oft thet financial statements  13        Exhibit3  Town of Bermuda Run, North Carolina Governmental Funds Balance Sheet June 30,2016 General 1,802,115 $ 243,586 671,303 10,241 153,779  Major Capital Project  Total Governmental Funds 2,079,942 243,586 10,241 153,779 2,487,549  Special Revenue $ 277,827  ASSETS Casha andi investments Restricted cash Duet to (from) otherf funds Property taxes receivable (net) Accounts receivable (net) LIABILITIES Accounts payable  (671,303)  2,881,024 $ (671,303) $ 277,827  37,011 $ 37,011 10,241 10,241 825,082 243,586 1,765,104 2,833,772 2,881,024  $  700 $ 37,711 700  37,711 10,241 10,241  DEFERRED INFLOWS OF RESOURCES Properly taxes receivable Total deferredi inflows ofr resources Fund balances: Restrictedf for: Stabilization! bys state statute Streets Assigned for gate operations Unassigned Total FundE Balances Totall liabilities, deferredi inflows ofr resources and fundbalances Amounts reported for governmental: activities int the statement ofr net position (Exhibit 1) are differentb because: Capital assets usedi ing governmental activities are not financial resources andt therefore are notr reportedi in thet funds. ofresources ont the Statement of Net Position Liabilities for earnedr revenues considered deferred inflows ofresources inf funds statements. Pension relatedo deferrals governmental activities: Netp position oft the governmental activities  825,082 243,586 277,127 1,093,801 2,439,596  277,127 277,127  (671,303) (671,303) (671,303) $ 277,827  3,953,614 (16,695) 14,808 10,241 (8,677)  Netp pension liability  Contributions tot thep pension plani int the currenti fiscal year are deferredo outfiows  Somel liabilities, including bonds! payable, are not due andp payablei int the current perioda and are therefore notr reportedin ther net position oft the  Accruedy vacation Installmenti note  $ (1,963) (127,500)  (129,463) 6,263,424  The accompanying notes are ani integral part oft thet financial statements  15    Exhibit 4  Town of Bermuda Run, North Carolina Governmental Funds Fort the Year Ended June 30, 2016  Statement of Revenues, Expenditures and Changes in Fund Balance  Major Capital Project  Total Governmental Funds $ 793,359 511,317 262,845 906,727 4,242 512,025 137,688 3,128,202  Special Revenue $  General 793,359 $ 511,317 262,845 158,578 4,242 137,688 1,868,029  Revenues: AdValoremt taxes Other taxes andl licenses Unrestrictedi intergovernmental revenues Restricted intergovernmental revenues Investment earnings Gatet fees Other revenues Other financing sources; Proceeds from! long-term debt Appropriatedi fund! balance Transfer from general fund Total revenues and other sources Expenditures: General government Safety Gate operations Transportation Debts service Other Financing Uses: Transfer tov water ands seweri fund Total Expenditures and Other Uses Excess ofr revenues and other sources over (under) expenditures and other uses Fund Balances Beginning ofy year, July 1 End of year, June 30  748,149 748,149  512,025 512,025  1,868,029 730,797 28 512,618 91,888 1,335,330  748,149  512,025  3,128,202 730,797 28 475,002 1,817,505 91,888 3,115,219  475,002 475,002  1,304,887 1,304,887  1,335,330 532,699 2,301,073 2,833,772  1,304,887 (556,738) (114,565)  475,002 37,023 240,104  3,115,219  12,984 2,426,612  (671,303) $ 277,127 $ 2,439,596  The accompanying notes are ani integral part oft thei financial statements  16    Exhibit5  Town of Bermuda Run, North Carolina Governmental Funds For the' Year Ended June 30, 2016  Statement of Revenues, Expenditures and Changes in Fund Balance  Amounts reported for governmental: activities in the statement of activities are different because:  Neto changes inf fund! balances total governmental funds  $ 12,984  Governmental funds report capital outlays as expenditures. However, int the Statement of Activities, the cost oft those assets is allocated over their estimated usefull lives and reported as depreciation expense. Thisi ist the amount! by which capital outlays exceeded depreciationf for the current period.  Construction inp progress Capital outlay Depreciation  1,304,887 196,639  1,108,248  Revenues int the statement ofa activities that dor not provide currenti financial resources are not reported asi revenues int the funds. Change inu unavailable revenue for tax revenues Changes inp pension expense Changes in net pension assets Changes in deferred outflows Changes inr netp pension liabilily Changes in deferredi inflows  (566)  (17,103) 2,433 (16,695) 33,007  1,642  Thei issuance ofl long-t term debt provides current financial resources to governmentali funds, while ther repayment oft they principal ofl long-term debt consumes the current financial resources of governmental funds. Neither transaction has any effect on netp position. This amount ist the net effect of these differences int the treatment ofl long-term debt Some oft the expenses reported in the statement ofa activities dor not require the use ofo current financial resources and, therefore, are not reported as  andr relatedi items.  85,000  expenditures ing governmental funds. Compensated: absences  (1,860) 1,205,448  Total changes in net position of governmental: activities  Thea accompanying notes are ani integral part oft thet financial statements  17    E    Exhibit7  Town of Bermuda Run, North Carolina Proprietary Funds Statement of Fund Net Position June 30, 2016  Assets Current assets: Cash andi investments Accounts receivable (net) Total current assets Noncurrent: assets: Capital assets: Construction inp progress Other capital assets, net of depreciation Total non-current assets Total assets Liabilities Current liabilities: Current maturities onl long-term debt Accounts payable Total current liabilities Long-term liabilities: Duei inr more than one year Total liabilities Net Position Neti investment in capital assets Unrestricted  637,986 637,986  2,259,056 2,259,056 2,897,043  36,125 36,125  36,125  2,259,056 601,861 $2,860,917  Total net position of business-type activities  The accompanyingr notes are an integral part of thet financial statements  19    Exhibit 8  Town of Bermuda Run, North Carolina Proprietary Funds For the Year Ended June 30, 2016  Statement of Revenues, Expenses and Changes in Fund Net Position  Operating revenues: Water charges Sewer charges Operating expenses: Administration Water operations Sewer operations Depreciation  $  241,312 498,240 739,552 46,773 5,202 331,695 91,737 475,407 264,146  Operating income Nonoperating revenue (expense): Interest income Otheri income Intereste expense  7,050 (1,206) 5,844 269,990  Total nonoperating revenue (expense) Income before operating transfers Operating transfers in (out)  Change in net position business type activities  269,990 2,590,927 2,860,917  Total net position July 1 Total net position June 30  The accompanying notes are ani integral part of the financial statements  20    Exhibit9  Town of Bermuda Run, North Carolina Statement of Cash Flows Proprietary Funds For the Year Ended June 30, 2016  Cash flows from operating activities: Cash receivedi from customers Cash payment to suppliers of goods and services Cashp payment to employees andbenefits Net Cash Provided By Operating Activities Cashi flows from noncapital financial activities: Transfer from General Fund Sewer assessments  $ 748,752 (378,308) 370,444  7,050 7,050 (1,206) (95,277) (6,840) (103,323)  Net Cash Provided by! Noncapital Financing Activities Cash from capital and related financing activities:  Interest paid Payments on long-term debt Purchase of capital assets  Net Cash Used by Capital and Related Financing Activities Cash flows fromi investing activities: Interest oni investments Net Cash Provided byl Investing Activities Net! Increase (Decrease) In Cash Cash- Beginning of Year, July1 1 Cash- - End of Year, June 30  274,171 363,815 637,986  Adjustments to Reconcile Net Operating Income to Net Cash Provided by Operating Activities: Changes in current assets andl liabilities: (Increase) decreasei ina accounts receivable Increase (decrease) in accounts payable Net Cash Provided (Used) By Operating Activities  Neto operating income Depreciation  264,146 91,737 9,200 5,362 370,444 $ (1,206)  Interest paid  The accompanying notes are ani integral part oft the financial statements  21    Town of Bermuda Run, North Carolina NOTES TO FINANCIAL STATEMENTS As ofor for the Year Ended. June 30, 2016  Description of the unit  The Town of Bermuda Runi is located in Davie County, whichi isi ini the Piedmont area of North Carolina. The Town has a population of approximately 2,606 and covers approximately two thirds of one square mile.  The Town provides water and sewer services toi its residents. LS Summary of Significant Accounting Policies the more: significant accounting policies: A. Reporting entity  The accounting policies of the Town of Bermuda Run and its discretely presented component unit conform to generally accepted accounting principles as applicable to governments. The following is a summary of  The Town of Bermuda Run is a municipal corporation governed by an elected mayor and council. As required by generally accepted accounting principles, these financial statements present the Town and its component unit, a legally separate entity for which the Town is financially accountable. The discretely presented component unit presented below is reported in a separate column in the Town's. financial  statements in order to emphasize that iti is legally separate for the Town. Town of Bermuda Run Tourism Development Authority  The Town of Bermuda Run Tourism Development Authority was established December 1, 2010 for the purpose of collecting a 3% occupancy tax to be used for the promotion of tourism in Bermuda Run. The members oft the Tourism Development. Authonlys.goveming board are appointed by the Town. The Tourism Development Authority, which has a June 30 year-end, is presented as if it were a special revenue fund. Information concerning the Tourism Development Authority can be obtained by contacting the Finance  Officer, Town of Bermudal Run, Bermudal Run, NC.  B.E Basis of presentation  Government-wide Statements: The statement of net position and the statement of activities display the information about the government and its component unit. These statements include the activities of the overall government. Eliminations have been made to minimize the double counting of internal activities. These statements distinguish between the governmental and business-type activities of the Town. Governmental activities generally are financed through taxes, intergovernmental revenues, and other non-: exchange transactions. Business-type activities are financed in whole or part by fees charged to external The statement of activities presents a comparison between direct expenses and program revenues for the different business-type activities of the Town and for each function of the Town's governmental activities. Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expense allocations that have been made in the funds have been reversed for the statement of activities. Program revenues include (a) fees and charges paid by the recipients of goods and services offered by the programs and (b) grants and contributions that are restricted to meeting the operational and capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues.  parties.  22    Notes to the Financial Statements (continued)  B. Basis ofp presentation (continued)  Fund Financial Statements: The fund financial statements provide information about the Town's funds. Separate statements for each fund category govemmental and proprietary - are presented. The emphasis off fund financial statements is on major governmental and enterprise funds, each displayed in a separate column. All remaining governmental and enterprise funds are aggregated and reported as non- Proprietary fund operating revenues, such as charges for services, result from exchange transactions associated with the principal activity of the fund. Exchange transactions are those in which each party receives and gives up essentially the equal values. Non-operating revenues, such as subsidies and  major funds.  investment earnings, result from non-exchange transactions or ancillary activities.  The Town reports thet following major govemmental funds:  General Fund  The General Fundi is the general operating fund of the Town. Itis used to account for alli financial resources except those required to be accounted for in other funds. The primary revenue sources are ad valorem taxes and state-shared revenues. The primary expenditures are for streets and general government  services.  General Capital Projects Fund Special Revenue Fund  This fund is used to account for the construction of a new roundabout.  The Special Revenue Funds account for specific revenue sources (other than expendable trusts or major capital projects) that are legally restricted to expenditures for specific purposes. The Town maintains one  Special Revenue Fund, the Gated Security Fund. The Town reports thei following major enterprise funds:  Water and Sewer Fund  The Town maintains an Enterprise Fund, the Water and Sewer Fund, to account for its water and sewer services. This fundi ist financed and operated int the same manner as a private business enterprise. Itis the intent of the governing body that costs (expenses, including depreciation) of providing these services to the public on a continuing basis be financed or recovered primarily through user charges. Therefore, periodic accounting is necessary for determination of net income and rate control.  C.M Measurement Focus and Basis of Accounting using the modified basis of accounting.  Ina accordance with North Carolina General Statutes, all funds of the Town are maintained during the year  23    Notes to the Financial Statements (continued)  C.M Measurement Focus and Basis ofA Accounting (continued)  Government-wide and Proprietary Fund Financial Statements: The government-wide and proprietary fund financial statements are reported using the economic resources measurement focus. The government-wide and proprietary fund financial statements are reported using the accrual basis of accounting. Revenues are recorded when earned and expenses recorded at the time liabilities are incurred regardless of when the related cash flows take place. Non-exchange transactions, in which the Town gives (or receives) value without directly receiving (or giving) equal value in exchange, including property taxes, grants, and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from grants and donations is recognized in the fiscal year in which all eligibility Amounts reported as program revenues include 1) charges to customers or applicants for goods, services, or privileges provided, 2) operating grants and contributions, and 3) capital grants and contributions, including special assessments. Internally dedicated resources are reported as general revenues rather than Proprietary funds distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principal operating revenues oft the Town enterprise fund are charges to customers for sales and services. The Town also recognizes as operating revenue the portion of tap fees intended to recover the cost of connecting new customers to the water and sewer system. Operating expenses for enterprise funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this Governmental Fund Financial Statements: Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under this method, revenues are recognized when measurable and available. Expenditures are recorded when the related fund liabilityi is incurred, except for principal and interest on general long-term debt, claims and judgments, and compensated absences, which are recognized as expenditures to the extent they have matured. General capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of general long- term debt and acquisitions under capital leases are reported as other financial sources. The Town considers all revenues available if they are collected within 90 days after year end, except for property taxes. Ad valorem taxes receivable are not accrued as revenue because the amount is not susceptible to accrual. At June 30, taxes receivable for property other than motor vehicles are materially past due and are not considered to be an available resource to finance the operations of the current year. Also, as of September 1, 2013, State law altered the procedures for the assessment and collection of property taxes on registered motor vehicles in North Carolina. Effective with this change in the law, the State of North Carolina is responsible for billing and collecting the property taxes on registered motor vehicles on behalf of all municipalities and special tax districts. Property taxes are due when vehicles are registered. The billed taxes are applicable to thei fiscal yeari in which they are received. Uncollected taxes that were billed in periods prior to September 1, 2013 and for limited registration plates are shown as a receivable int these financial statements and are offset by deferred inflows of resources.  requirements have been satisfied.  as program revenues. Likewise, general revenues include allt taxes.  definition are reported as non-operating revenues and expenses.  24    Notes to the Financial Statements (continued)  C. Measurement Focus and Basis ofA Accounting (continued)  Sales taxes and certain intergovernmental revenues, such as the beer and wine tax, collected and held by the State at year-end on behalf of the Town are recognized as revenue. Sales taxes are considered shared revenue for the Town because the taxi is levied by Davie County and then remitted to and distributed by the State. Most intergovernmental revenues and sales and services are not susceptible to accrual because generally they are not measurable until received in cash. All taxes, including those dedicated for specific purposes are reported as general revenues rather than program revenues. Under the terms of grant agreements, the Town funds certain programs by a combination of specific cost-reimbursement grants, categorical block grants, and general revenues. Thus, when program expenses are incurred, there is both restricted and unrestricted net position available to finance the program. Itis the Town's policy to first apply cost-reimbursement grant resources to such programs, followed by categorical block grants, and then  general revenues. D.E Budgetary data  The Town's budgets are adopted as required by the North Carolina General Statutes. An annual budget is adopted for the General Fund, the Gated Security Special Revenue Fund and the Enterprise Fund. All annual appropriations lapse at the fiscal-year end. Project ordinances are adopted for the Roundabout Capital Projects Fund. All budgets are prepared using the modified accrual basis of accounting. Expenditures may not legally exceed- appropriations at the departmental level for all annually budgeted funds and at the project level for the multi-year funds. The Town does not have a current policy which  allows for departmental transfers without council approval.  E.A Assets, Liabilities, Deferred Outflows/Inflows of Resources, and Fund Equity:  1. Deposits and Investments  All deposits of the Town and the Tourism Development Authority are made in board-designated official depositories and are secured as required by State law (G.S. 159-31). The Town and the Tourism Development Authority may designate, as an official depository, any bank or savings association whose principal office is located in North Carolina. Also, the Town and the Tourism Development Authority may establish time deposit accounts such as NOW and SuperNOW accounts, money market accounts, and State law (G.S. 159-30(c)) authorizes the Town and the Tourism Development Authority to invest in obligations of the United States or obligations fully guaranteed both as to principal and interest by the United States; obligations oft the State of North Carolina; bonds and notes of any North Carolina local government or public authority; obligations of certain nonguaranteed federal agencies; certain high quality issues of commercial paper and bankers' acceptances and the North Carolina Capital Management Trust (NCCMT), The Town's investments with maturities of more than one year at acquisition and non-money market investments are reported at fair value as determined by quoted market prices. The securities of the NCCMT Cash Portfolio, a SEC-registered (2a-7) money market mutual fund, are valued at fair value, which is the NCCMT's share price. The Town does not have at formal investment or credit risk policy.  certificates of deposit.  2. Cash and Cash Equivalents  The Town pools money from several funds to facilitate disbursements and investment and to maximize investment income. Therefore, all cash and investments are essentially demand deposits and are considered cash and cash equivalents. The Tourism Development Authority considers all highly liquid investments (including restricted assets) with ar maturity of three months or less when purchased to be cash  and cash equivalents.  25    Notes to the Financial Statements (continued)  3. Restricted. Assets  Powell Bill funds are classified as restricted cash because it can be expended only for the purposes of maintaining, repairing, constructing, reconstructing or widening of local streets per G.S. 136-41.1 through  136-41.4.  Town of Bermua Run Restricted Cash Governmental Activities General Fund Total Restricted Cash  Streets $243,586 $243,586  4. Ad Valorem Taxes Receivable  Ina accordance with State law (G.S. 105-347 and G.S. 159-13(a)), the Town levies ad valorem taxes on July 1,t the beginning of thet fiscal year. The taxes are due on September 1; however, interest does not accrue until the following January 6. These taxes are based on the assessed values as of January 1, 2015. As allowed by State law, the Town has established a schedule of discounts that apply to taxes which are paid prior to the due date. In the Town's General Fund, ad valorem tax revenues are reported net of such  discounts.  5. Allowances for Doubtful Accounts  Allr receivables thatl historically experience uncollectible accounts are: shown net of an allowance for doubtful accounts. This account is estimated by analyzing the percentage ofr receivables that were written off in prior  years. 6. Capital Assets  Capital assets are defined by the government as assets with an initial, individual cost of more than $2,500 and an estimated useful life of more than two years. Purchased or constructed capital assets are reported at cost or estimated historical cost. Donated capital assets are recorded at their estimated fair value at the date of donation. General infrastructure assets acquired prior to July 1, 2003, consist oft the road network and improvements that were acquired or that received substantial improvements subsequent to July 1, 1980, and are reported at estimated historical cost using deflated replacement cost. The cost of normal maintenance and repairs that do not add to the value of the asset or materially extend assets' lives are not Capital assets are depreciated using the straight-line method over thei following estimated useful lives:  capitalized.  Asset Class Road improvements Furniture and office equipment  Life 10 yrs 10 yrs  26    Notes to the Financial Statements (continued)  7. Deferred Outflows/Inflows of Resources  Inaddition to assets, the statement ofi financial position will sometimes report as separate section for deferred outflows of resources. This separate financial statement element, Deferred Outflows of Resources, represents a consumption of net position that applies to ai future period and SO will not be recognized as an expense or expenditure until then. The Town has one that meet this criterion, contributions made to the pension plan in the 2016 fiscal year. In addition to liabilities, the statement of financial position will sometimes report a separate section for deferred inflows of resources. This separate financial element, Deferred Inflows of Resources, represents an acquisition of net position that applies to ai future period and SO wil not be recognized as revenue until then. The Town has one item that meets the criterion for this category- -deferrals of pension expense that result from thei implementation of GASB Statement 68. Int the government-wide financial statements, and proprietary fund types in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund type statements of net position. Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the straight-line discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the straight-line method that approximates the effective interest method. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance cost, except for prepaid insurance costs, are expensed in the reporting period in which they are incurred. Prepaid insurance costs are expensed over Ini 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 debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are ported as other financing uses. Issuance costs, whether or not withheld The vacation policy of the Town provides for the accumulation of up to thirty days earned vacation leave with such leave being fully vested when earned. For the Town's government-wide funds, an expense and liability for compensated absences and the salary-related payments are recorded as the leave is earned. The Town has not recognized a current liability due to thei immaterial nature oft this liability. The Town's sick leave policy provides for an unlimited accumulation of earned sick leave. Sick leave does not vest, but any unused sick leave accumulated at the time of retirement may be used int the determination of length of service for retirement benefit purposes. Since the Town does not have any obligation for the accumulation of sick leave until iti is actually taken, no accrual fors sick leave has been made.  8. Long-Term Obligations  thel life of the debt.  from the actual net proceeds received, are reported as debt service expenditures.  9. Compensated. Absences  10. Net Position/ Fund Balances  Net Position  Net position in government-wide and proprietary fund financial statements are classified as net investment in capital assets, net of related debt; restricted and unrestricted. Restricted net position represent constraints on resources that are either externally imposed by creditors, grantors, contributors, or laws or  regulations of other governments ori imposed byl lawt through state statute.  27    Notes to the Financial Statements (continued)  10. Net Position! Fund Balances (continued)  Fund Balances  In the governmental fund financial statements, fund balance is composed of five classifications designed to  disclose the hierarchy of constraints placed on how fund balance can be spent. The governmental fund types classify fund balances as follows:  Nonspendable Fund Balance = This classification includes amounts that cannot be spent because they are either (a) noti ins spendable form or (b) legally or contractually required to be maintained intact. Restricted Fund Balance - This classification includes amounts that are restricted to specific purposes  externally imposed by creditors ori imposed by law.  Restricted for Stabilization by State statute - portion of fund balance that is restricted by State Restricted for Streets - Powell Bill portion of fund balance that is restricted by revenue source for street construction and maintenance expenditures. This amount represents the balance oft thet total Restricted for Construction- portion of fund balance that is restricted by revenue source for certain Committed Fund Balance -portion of fund balance that can only be used for specific purposes imposed by majority vote by quorum of Town of Bermuda Run's governing body (highest level of decision-making authority). The governing body can, by adoption of an ordinance prior to the end of the fiscal year, commit fund balance. Once adopted, the limitation imposed by the ordinance remains in place until a similar action Assigned fund balance - portion of fund balance that Town of Bermuda Run intends to use for specific  Statute [G.S. 159-8(a)).  unexpended Powell Bill funds. construction expenditures.  ist taken (the adoption of another ordinance) to remove or revise the limitation.  purposes.  Gate Operations - portion of fund balance that intended to be used for the security gate Unassigned fund balance - the portion oft fund balance that has not been restricted, committed, or assigned The Town of Bermudal Run! has ar revenue spending policy that provides guidance forp programs with multiple revenue sources. The Finance Officer will use resources in the following hierarchy: bond proceeds, federal funds, State funds, local non-town funds, town funds. For purposes of fund balance classification expenditures are to be spent from restricted fund balance first, followed by in-order by committed fund balance, assigned fund balance and lastly unassigned fund balance. The Finance Officer has the authority  operations.  tos specific purposes or other funds.  tod deviate from this policyi ifitisi int the best interest oft the Town.  28    Notes to the Financial Statements (continued)  11. Pensions  For purposes of measuring the net pension asset, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the Local Governmental Employees' Retirement System (LGERS) and additions toldeductions from LGERS' fiduciary net position have been determined on the same basis as they are reported by LGERS. For this purpose, plan member contributions are recognized in the period in which the contributions are due. The Town of Bermuda Run's employer contributions are recognized when due and the Town of Bermuda Run has al legal requirement to provide the contributions. Benefits and refunds are recognized when due and payable in accordance with the terms OfLGERS. Investments are reported atf fair value.  II. Stewardship, Compliance, and Accountability:  A. Material Violations of Finance-Related Legal and Contractual Provisions: None  B. Excess of Expenditures over Appropriations: None IL. Detail Notes on All Funds and Account Groups:  A. Assets: 1. Deposits  All the deposits of the Town and the Tourism Development. Authority are either insured or collateralized by using one of two methods. Under the Dedicated Method, all deposits that exceed the federal depository insurance coverage level are collateralized with securities held by the Town's or the Tourism Development Authority's agents in these units' names. Under the Pooling Method, which is a collateral pool, all uninsured deposits are collateralized with securities held byt the State Treasurer's agent in the name oft the State Treasurer. Since the State Treasurer is acting in a fiduciary capacity for the Town and the Tourism Development Authority, these deposits are considered to be held by the Town's and the Tourism Development Authority's agents in their names. The amount of the pledged collateral is based on an approval averaging method for non-interest bearing deposits and the actual current balance for interest- bearing deposits. Depositories using the Pooling Method report to the State Treasureri the adequacy of their pooled collateral covering uninsured deposits. The State Treasurer does not confirm this information with the Town, the Tourism Development. Authority, or the escrow agent. Because of the inability to measure the exact amounts of collateral pledged fort the Town and the Tourism Development Authority under the Pooling Method, the potential exists to undercolaterzation, and this risk may increase in periods of high cash flows. However, the State Treasurer of North Carolina enforces strict standards of financial stability for each depository that collateralizes public deposits under the Pooling Method. The Town has no formal policy regarding custodial credit risk for deposits, but relies on the State Treasurer to enforce standards of minimum capitalization for allp pooling method financial institutions andi to monitor them for compliance. The Town complies with provisions of GS 159-31 when designating official depositories and verifying that deposits are properly secured. The Tourism Development. Authority has not formal policy regarding custodial At June 30, 2016, the Town's deposits had a carrying. amount of $2,659,841 and a bank balance of $2,684,086. The bank balances of the Town were covered by $250,000 of federal depository insurance. The remaining balance of deposits is collateralized under the Pooling Method as enumerated above.  credit risk for deposits.  29    Notes to the Financial Statements (continued)  1. Deposits (continued)  At. June 30, 2016, the TDA's deposits had a carrying amount of $203,248 and al bank balance of $203,248. The bank balances of the TDA were covered by $250,000 of federal depository insurance. Any excess  balance of deposits is collateralized under the Pooling Method as enumerated. above.  2. Investments credit risk.  At. June 30, 2016, the Town had $301,674i invested with the North Carolina Capital Management Trust Cash Portfolio which carried a credit rating of AAAm by Standard and Poor's. The Town has no policy regarding  3. Receivable- A Allowances for Doubtful Accounts 30, 2016 are net of thet following allowances for doubtful accounts:  The amounts presented in the Balance Sheet and the Statement of Net Position for the year ending June  Fund None  June 30, 2016 -0-  4. Capital Assets Primary Government  Capital asset activity for the Primary Government for they year ended June 30, 2016:  Beginning Balances  Ending  Increases (Decreases) Balances  Governmental activities: Capital assets not being depreciated: Roundabout construction in process Capital assets being depreciated: Roadi improvements Building Other improvements Equipment and furnishings Total capital assets being depreciated: Less, accumulated depreciation for: Roadi improvements Building Otheri improvements Equipment Total accumulated depreciation Governmental activity capital assets, net  466,739 $ 1,304,887 $ 2,164,063 $ 892,500 955,181 571,519 4,583,263 1,094,445 285,600 464,142 360,449 2,204,636  $1 1,771,626 2,164,063 892,500 955,181 571,519 4,583,263 1,171,012 321,300 526,043 382,920 2,401,275 - 3,953,614  $  76,567 35,700 61,901 22,471 196,639  $2,845,366 $ (196,639) $  30    Notes to the Financial Statements (continued)  4. Capital Assets Primary Government (continued)  Depreciation expense was charged toi functions oft the primary govemment as follows:  General government Gate operations Transportation  $ 75,305 16,973 104,361 $196,639  Beginning Balances  Ending  Increases Decreases Balances  Business-type activities: Water and sewer fund: Capital assets not being depreciated: Sewer construction Capital assets being depreciated: Plant and distribution Total capital assets being depreciated: Less, accumulated depreciation for: Plant and distribution Total accumulated depreciation  $ 3,244,616 3,244,616 900,661 900,661  $  $ 6,840 6,840 91,737 91,737  $ 3,251,456 3,251,456 992,398 992,398 $2,259,056  Business-type activity capital assets, net $2,343,954 $ (84,897) $  Construction commitments  The government has active construction projects as of June 30, 2016. Aty year-end, the government's  commitments with contractors are as follows:  Remaining  Project  Spent-to-date Commitment $ 1,771,626 $ 151,000 $ 1,771,626 $ 151,000  Construction of roundabout Total  31    Notes to the Financial Statements (continued)  B. Liabilities:  1. Pension Plan Obligations:  a. Local Governmental Employees' Retirement System  Plan Description. The Town is a participating employer in the statewide Local Governmental Employees' Retirement System (LGERS), a cost-sharing multiple-employer defined benefit pension plan administered by the State of North Carolina. LGERS membership is comprised of general employees and local law enforcement officers (LEOs) of participating local governmental entities. Article 3 of G.S. Chapter 128 assigns the authority to establish and amend benefit provisions to the North Carolina General Assembly. Management of the plan is vested in the LGERS Board of Trustees, which consists of 13 members - nine appointed by the Governor, one appointed by the State Senate, one appointed by the State House of Representatives, and the State Treasurer and State Superintendent, who serve as ex-officio members. The Local Governmental Employees' Retirement System is included in the Comprehensive Annual Financial Report (CAFR) for the State of North Carolina. The State's CAFR includes financial statements and required supplementary information for LGERS. That report may be obtained by writing to the Office oft the State Controller, 1410 Mail Service Center, Raleigh, North Carolina 27699-1410, by calling (919)981-5454, Benefits Provided. LGERS provides retirement and survivor benefits. Retirement benefits are determined as 1.85% of the member's average final compensation times the member's years of creditable service. A member's average final compensation is calculated as the average of a member's four highest consecutive years of compensation. Plan members are eligible to retire with full retirement benefits at age 65 with five years of creditable service, at age 60 with 25 years of creditable service, or at any age with 30 years of creditable service. Plan members are eligible to retire with partial retirement benefits at age 50 with 20 years of creditable service or at age 60 with five years of creditable service (age 55 for firefighters). Survivor benefits are available to eligible beneficiaries ofr members who die while in active service or within 180 days of their last day of service and who have either completed 20 years of creditable service regardless of age (15 years of creditable service forf firefighters and rescue squad members who are killed in the line of duty) or have completed five years of service and have reached age 60. Eligible beneficiaries may elect to receive a monthly Survivor's Alternate Benefit for life orar return of the member's contributions. The plan does not provide for automatic post-retirement benefit increases. Increases are contingent upon LGERS plan members who are LEOs are eligible to retire with full retirement benefits at age 55 with five years of creditable service as an officer, or at any age with 30 years of creditable service. LEO plan members are eligible to retire with partial retirement benefits at age 50 with 15y years of creditable service as an officer. Survivor benefits are available to eligible beneficiaries of LEO members who die while in active service or within 180 days of their last day of service and who also have either completed 20 years of creditable service regardless of age, or have completed 15 years of service as a LEO and have reached age 50, or have completed five years of creditable service as a LEO and have reached age 55, or have completed 15 years of creditable service as a LEO if killed in the line of duty. Eligible beneficiaries may elect to receive ar monthly Survivor's Alternate Benefit for life ora ar return oft the member's contributions. Contributions. Contribution provisions are established by General Statute 128-30 and may be amended only by the North Carolina General Assembly. Town employees are required to contribute 6% of their compensation. Employer contributions are actuarily determined and set annually by the LGERS Board of Trustees. The Town's contractually required contribution rate for the year ended June 30, 2016, was 7.41% of compensation forl law enforcement officers and 7.07% for general employees and firefighters, actuarially  ora at www.0Sc.nc.gov.  actuarial gains oft the plan.  32    Notes to the Financial Statements (continued)  a. Local Governmental Employees' Retirement System (continued)  determined as an amount that, when combined with employee contributions, is expected to finance the costs of benefits earned by employees during the year. Contributions to the pension plan from the Town Refunds of Contributions - Town employees who have terminated service as a contributing member of LGERS, may file an application for a refund of their contributions. By state law, refunds to members with at least five years of service include 4% interest. State law requires a 60 day waiting period after service termination before the refund may be paid. The acceptance of a refund payment cancels the individual's Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of At June 30, 2016, the Town reported a liability of $16,695 for its proportionate share of the net pension liability. The net pension liability was measured as of June 30, 2015. The total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of December 31, 2014. The total pension liability was then rolled forward to the measurement date of June 30, 2015 utilizing update procedures incorporating the actuarial assumptions. The Town's proportion of the net pension liability was based on ap projection oft the Town's long-term share of future payroll covered. by the pension plan, relative to the projected future payroll covered by the pension plan of all participating LGERS employers, actuarially determined. At. June 30, 2015, the Town's proportion was 0.00372%, which was an increase of 0.001% For the year ended June 30, 2016, the Town recognized pension expense of $7,458. At. June 30,2016, the Town reported deferred outflows of resources and deferred inflows of resources related to pensions from  were $9,1001 for the year ended. June 30, 2016.  right to employer contributions or any other benefit provided by LGERS.  Resources Related to Pensions  from its proportion measured as of June 30, 2014.  the following sources:  Deferred Outflows Deferred Inflows  ofF Resources  of Resources 9 3,924 4,753  Differences between expected and actual experience Net difference between projected and actual earnings on Changes in proportion and differences between Town contributions and proportionate. share of contributions Town contributions subsequent toi the measurement date  Changes of assumptions pension plani investments  5,708 9,100 14,808 $  Total  8,677  33    Notes to the Financial Statements (continued)  a. Local Governmental Employees' Retirement System (continued)  $14,808 reported as deferred outflows of resources related to pensions resulting from Town contributions subsequent tot the measurement date willl be recognized as a decrease oft the net pension asseti in the year ended June 30, 2017. Other amounts reported as deferred inflows ofr resources related to pensions will be  recognizedi in pension expense as follows:  Year ended June 30: 2017 2018 2019 2020  $  (3,885) (3,885) (3,886) 8,685 (2,971)  $  Actuarial Assumptions. The total pension liability in the December 31, 2014 actuarial valuation was determined using thet following actuarial assumptions, applied to all periods included in the measurement:  Inflation Salaryi increases Investment rate of return  3.0 percent factor including inflation  4.25 to 8.55 percent, including inflation and productivity 7.25 percent, net of pension plani investment expense,  The plan currently uses mortality tables that vary by age, gender, employee group (ie. general, law enforcement officer) and health status (i.e. disabled and healthy). The current mortality rates are based on published tables and based on studies that cover significant portions of the U.S. population. The healthy mortality rates also contain ap provision to reflect future mortality improvements. The actuarial assumptions used in the December 31, 2014 valuation were based on the results of an actuarial experience study fort the period. January 1,2 2005 through December 31, 2009. Future ad hoc COLA amounts are not considered to be substantively automatic and are therefore not The projected long-term investment returns and inflation assumptions are developed through review of current and historical capital markets data, sell-side investment research, consultant whitepapers, and historical performance of investment strategies. Fixed income return projections reflect current yields across the U.S. Treasury yield curve and market expectations of forward yields projected and interpolated for multiple tenors and over multiple year horizons. Global public equity return projections are established through analysis oft the equity risk premium and the fixed income return projections. Other asset categories and strategies' return projections reflect the foregoing and historical data analysis. These projections are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target allocation and best estimates of arithmetic real rates of return for each major asset class as of June 30, 2015 are  included in the measurement.  summarized in the following table:  34    Notes to the Financial Statements (continued)  a. Local Governmental Employees' Retirement System (continued)  Long-Term Expected Real Rate of Return  Asset Class Fixed Income Global Equity Real Estate Alternatives Credit Inflation Protection Total  Target Allocation  29.0% 42.0% 8.0% 8.0% 7.0% 6.0% 100%  2.2% 5.8% 5.2% 9.8% 6.8% 3.4%  The information above is based on 30 year expectations developed with the consulting actuary for the 2014 asset, liability, and investment policy study for the North Carolina Retirement Systems, including LGERS. The long-term nominal rates of return underlying the real rates of return are arithmetic annualized figures. The real rates of return are calculated from nominal rates by multiplicatively subtracting al long-term inflation Discount rate. The discount rate used to measure the total pension liability was 7.25%. The projection of cash flows used to determine the discount rate assumed that contributions from plan members will be made at the current contribution rate and that contributions from employers will be made at statutorily required rates, actuarially determined. Based on these assumptions, the pension plan's fiduciary net position was projected to be available to make all projected future benefit payments of the current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of Sensitivity oft the Town's proportionate share of the net pension asset to changes ini the discount rate. The following presents the Town's proportionate share oft the net pension asset calculated using the discount rate of7.25 percent, as well as what the Town's proportionate share oft the net pension asset or net pension liability would bei ifit were calculated using a discount rate thati is one percentage point lower (6.25 percent)  assumption of 3.00%. All rates of return andi inflation are annualized.  projected benefit payments to determine the total pension liability.  or one percentage point higher (8.25 percent) than the current rate:  1% Decrease (6.25%) $  Discount Rate (7.25%)  1% Increase (8.25%) (67,319)  Town's proportionate share oft the net pension liability (asset)  116,417 $  16,695 $  Pension plan fiduciary net position. Detailed information about the pension plan's fiduciary net position is available in the separately issued Comprehensive Annual Financial Report (CAFR) for the State of North  Carolina.  35    Notes to the Financial Statements (continued)  b. Law Enforcement Officers Special Separation. Allowance  The Town contracts all security and has no eligible lawe enforcement employees. C. Supplemental Retirement Income Plan for Law Enforcement Officers The Town contracts alls security and has no eligible lawe enforcement employees.  Plan Description. The Town contributes to the Supplemental Retirement Income Plan (Plan), a defined contribution pension plan administered by the Department of State Treasurer and al Board of Trustees. The Plan provides retirement benefits to employees employed by the Town. Article 5 of G.S. Chapter 135 assigns the authority to establish and amend benefit provisions to the North Carolina General Assembly. The Supplemental Retirement Income Plan for employees is included in the Comprehensive Annual Financial Report (CAFR) for the State of North Carolina. The State's CAFR includes the pension trust fund financial statements for the Internal Revenue Code Section 401(k) plan that includes the Supplemental Retirement Income Plan for employees. That report may be obtained by writing to the Office of the State Controller, 1410 Mail Service Center, Raleigh, North Carolina 27699-1410, or by calling (919)981-5454. Funding Policy. Article 12E of G.S. Chapter 143 requires the Town to contribute each month an amount equal to five percent of each employee's salary, and all amounts contributed are vested immediately. Also,  the employees may make voluntary contributions to the plan.  d. Other Post-employment Benefits  The Town has not established policies concerning post-employment benefits as of June 30, 2016.  2. Deferred Outflows and! Inflows of Resources Deferred outflows of resources are comprised oft the following:  Source  Amount  Contributions toj pension plan in current fiscal year Changes inj proportion and differences between employer contributions and proportionate share of contributions  $ $  9,100 5,708 14,808  Total  Deferred inflows of resources at year-end are comprised oft the following:  Differences between expected and actual experience $ Net difference between projected and acutal investment earnings on plani investments Changes in proportion and differences between employer contributions and proportional share of  3,924 4,753  contributions  $  8,677  36    Notes to the Financial Statements (continued)  3. Risk Management  The Town is exposed to various risks of loss related to torts; theft or damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The Town participates in three self- funded risk financing pools administered by the North Carolina League of Municipalities. Through these pools, the Town obtains general liability and auto liability coverage of $3 million per occurrence, property coverage upt to $20 million per building per occurrence, workers' compensation coverage up to the statutory limits, and employee health coverage up to a $1 million lifetime limit. The pools are reinsured through commercial companies for single occurrence claims against general liability and auto liability in excess of $500,000, upt to $500,000 for property, and $250,000 upt to $5 million for workers' compensation. The pools are reinsured for annual employee health claims in excess of $150,000. The property liability pool has an aggregate limit of $1,000,000 for the aggregate losses in a single year. After the property pool! has paid out $1,000,000, then the pool will be liable for a $10,000 per claim maintenance deductible on future property The Town has a public officials bond of $50,000 on the Finance Officer and $10,000 on the Tax Collector.  losses for that year. The remainder ofe each claim willl be! borne by the re-insurer.  The Town currently has no flood insurance coverage.  4. Long-Term Obligations: a. Installment Purchase  The Town's installment notes are serviced by the General Fund fort thei town hall building and the Water and Sewer Fund for sewer improvements. These notes are secured by assets pledged. Principal and interest  requirements are appropriated when due. Serviced by the General Fund:  The following obligations were outstanding at. June 30, 2016:  Installment Note with Bank of the Carolinas, commitment of $850,000 at 4.12% payable over 10 years;  monthly payments of $7,083.34 plus interest; balance at June 30, 20160f$127,500. Annual debt service requirements to maturity fori installment note are as follows:  General Fund Year Ending June 30 2017 2018  Principal 85,000 42,500  Interest 6,924 $ 91,924 3,481  Total 45,981  127,500 $ 10,405 $1 137,905  At. June 30, 2016, the Town of Bermuda Run had bonds authorized but un-issued of $-0- and a legal debt  margin of $42,341,813.  37    Notes to the Financial Statements (continued)  b. Changes in Long-term Liabilities  Balance $ 212,500 $ 104  Balance Current Portion  June 30, 2015 Increases Decreases June 30, 2016 of Balance  Governmental activities: Installment Note Net Pension Liability (LGERS) Accrued Vacation Proprietary activities: Installment Note  P 85,000 $ 127,500 $ 85,000  16,695 1,859  16,695 1,963  $ 212,604 $ 18,554 $ 85,000 $ 146,158 $ 85,000  $ 95,277 $  $ 95,277 $  $  Compensated absences for governmental activities have typically been liquidatedi in the General Fund.  C.I Interfund Receivables and Payables  The composition of interfund balances as of June 30, 20161 is as follows:  Due to/from other funds: To From  General Fund General Fund Capital Project  $671,303 $671,303  The interfund balances resulted from the time lag between the dates that (1) interfund goods and services are provided or reimbursable expenditures occur, (2) transactions are recorded in the accounting system,  and (3) payments between funds are made. D. Net Investment in Capital Assets  Governmental Business-type $ - 3,953,614 $ 2,259,056 127,500 $3,826,114 $ 2,259,056  Capital Assets less: long-term debt add: unexpended debt proceeds Neti investment in capital assets  38    Notes to the Financial Statements (continued)  E. Fund Balance  The following schedule provides management and citizens with information on the portion of General fund  balance thati is available for appropriation:  Total fund balance - General Fund Less: Stabilization by State Statute Streets Powell Bill Remaining Fund Balance  $ 2,833,772 825,082 243,586 $ 1,765,104  The outstanding encumbrances are amounts needed to pay any commitments related to purchase orders  and contracts that remain unperformed at year-end.  Encumbrances  General Fund $0  Non-Major Funds  IX. Summary Disclosure of Significant Contingencies Federal and State Assisted Programs  The Town has received proceeds from several federal and State grants. Periodic audits of these grants are required and certain costs may be questioned as not being appropriate expenditures under the grant agreements. Such audits could resulti in the refund of grant moneys to the grantor agencies. Management believes that any required refunds will be immaterial. No provision has been made in the accompanying  financial statements for the refund ofg grant moneys. IV. Significant Effects of Subsequent Events  Subsequent events occurring after the statement of financial position date have been evaluated through September 24, 2016, which is the date the financial statements were available to be issued. There were no subsequent events that came to our attention after the audit that would have a significant effect on the  Town.  39    Town of Bermuda Run, North Carolina Required Supplementary Information Last Three Fiscal Years*  Town of Bermuda Run's Proportionate Share of Net Pension Liability (Asset)  Local Government Employees' Retirement System  2016 0.00372%  2015 0.00290%  2014 0.00260%  Bermudal Run's proportion oft ther net pensionl liability (asset) (%) Bermuda Run's! proportion oft ther net pension liability (asset) ($) Bermudal Run's covered-employee payroll percentage ofi its covered-employee payroll  $ 16,695 $ (17,103) $ 30,555 $ 146,070 $ 175,030 $ 162,623  Bermuda Run's! proportionate share oft the net pensionl liability (asset) as a Plani fiduciary netp position as aj percentage of the totalp pension liability"  11.43% 98.09%  (9.77%6): 102.64%  18.79% 94.35%  The amounts presentedi fore eachi fiscaly year were determined as of thep priorf fiscal year ending June 30. ** This willl be the same percentage for all participant employers in thel LGERS plan.  40    Town of Bermuda Run, North Carolina Town of Bermuda Run's Contributions Required Supplementary Information Last Three Fiscal Years  Local Government Employees' Retirement System  2016 14,808 $ 14,808  2015 12,375 $ 12,375 175,030 $ 7.07%  2014 14,538 14,538 162,623 8.94%  Contractually required contribution Contribution deficiency (excess) Bermudal Run's covered-employee payroll Contributions as a percentage of covered-employee payroll  Contributions ini relation tot the contractually requiredcontibulion  $ $  146,070 $ 10.14%  41    Town of Bermuda Run, North Carolina Forthe Year Ended June 30, 2016  General Fund  Statement of Revenues, Expenditures and Changes in Fund Balance Budget and Actual  (With Comparative Actual Amounts for the Year Ended. June 30, 2015)  Variance Favorable (Unfavorable)  Actual- Year Ended June 30, 2015 $ 784,597 3,761 1,042 789,400 521,338 521,338 203,706 4,117 12,000 219,823 62,379 80,057 142,436 4,675 40,634 27,363 100,000 167,997 1,845,669  Budget  Actual $ 782,250 8,946 2,164 793,359 $ 511,317 511,317 246,921 4,460 11,464 262,845 63,759 94,819 158,578 4,242 37,688 100,000 137,688 1,868,029  Revenues: AdValorem taxes (net of refunds) Current levies Prior levies Penalties andi interest Othert taxes andl licenses: Local options salest tax Unrestrictedi ntergovernmental revenues: Utilities franchise tax Cablet franchise Beer and wine tax Restrictedin intergovernmental revenues: Powell Bill allocation ABC revenues Investment earings Other revenues: Otheri income Grants  $ 756,650  36,709 95,317  416,000  186,000  76,845  120,000 2,500  38,578 1,742  Reimbursement for administrative charges  117,000 1,598,150  20,688 269,879  Total Revenues Other financing sources: Proceeds from! long-term debt Appropriatedi fundb balance Total revenues and otherf financing sources  1,598,150  1,868,029  269,879  1,845,669  42    Town of Bermuda Run, North Carolina  Statement of Revenues, Expenditures and Changes in Fund Balance Budget and Actual (continued)  Variance Favorable (Unfavorable) June 30,2015  Actual- Year Ended  Budget  Actual  Expenditures: General Government Governing Body Administration: Salaries and Employee Benefits Operating Expenses Professional Services Tax collection fees Town Halle expenses Capital outlay Election costs Community Services: Planning andz zoning Community ande economic development Ground/ general maintenance Leafr removal Waster removal Townp projects Posto office Other Total General Government Safety- Traffic enforcement Transportation: Street[ Department: Capital outlay- Right ofv way acquisitions Storm water project Other capital projects Engineering Repairs Other Streetli lights Total Transportation Debts service: Principal interest Total Expenditures Revenues over Expenditures Other Financing Sources (Uses) Transfert toc capital project Transfer tov water ands sewer fund Excess ofr revenues and other sources over (under) expenditures and other uses Fund Balance: Beginning ofYear, July1 Endo ofYear, June 30  $ 13,400 * 12,889 $  511 $ 9,900  164,041 62,726 31,961 15,615 21,833 3,477 299,653 49,069 13,701 85,008 27,090 172,289 36,134 2,379 32,585 418,255 730,797 28  192,092 81,508 31,459 19,509 18,163 15,740 358,471 44,234 55,943 50,834 25,935 170,838 19,818 1,188 40,719 409,509 777,880 23,500 13,342 4,358 15,255 147,477 58,189 98,031 336,651 85,000 10,308 95,308 1,233,340 612,329 (100,000) 512,329 1,788,744 2,301,073  411,550  111,897  518,000 942,950 30,000  99,745 212,153 29,972  24,539 268,390 109,281 110,408 512,618 85,000 6,888 91,888 1,335,330 532,699  533,200  20,582  92,000 1,598,150  112 262,820 532,699  532,699 $ 532,699 2,301,073 2,833,772  43    Town of Bermuda Run North Carolina General Capital Projects Fund  Statement of Revenues, Expenditures and Changes in Fund Balance. Budget and Actual  From inception and for the fiscal year ended June 30, 2016  Actual Current Year  Variance Favorable (Unfavorable)  Project Authorization  Prior Year  Totalt to Date  Revenues: Restricted intergovernmental Grants NCDOT Total revenues Expenditures:  $1 1,365,040 $ 352,174 $ 748,149 $1,100,323 $ (264,717)  1,365,040  352,174  748,149  1,100,323  (264,717)  Roundabout construction Total expenditures Revenues over expenditures Other financing sources: Transfer from operating fund Total other financing sources Revenues and other sources over (under) expenditures  1,706,300 1,706,300 (341,260) 341,260 341,260  466,739 466,739 (114,565)  1,304,887 1,304,887 (556,738)  1,771,626 1,771,626 (671,303)  (65,326) (65,326) 330,043 (341,260) (341,260) (671,303)  (114,565) $ (556,738) $ (671,303)  44    Town of Bermuda Run, North Carolina Special Revenue Fund Gated Security For the Year Ended. June 30, 2016  Statement of Revenues, Expenditures and Changes in Fund Balance- Budget and Actual  (With Comparative Actual Amounts for the Year Ended June 30, 2015)  Variance Favorable (Unfavorable) $  Actual -Year Ended June 30, 2015 $ 515,436 515,436  Budget $ 512,247  Actual $ 512,025 512,025  Operating revenues: Gatef fees  (222)  Fundbalance appropriated Total revenue and other financing sources Operating expenditures: Administrative Gate operations expense Total expenditures and other financing uses Revenues over (under) expenditures Fund Balance: Beginning ofy year Endo ofy year  512,247  512,025  (222)  515,436  50,000 425,002 475,002 475,002  50,000 443,967 493,967 493,967  512,247 512,247  37,246 37,246  $  37,023 $ 37,023  21,469 218,635 $ 240,104  240,104 $ 277,127  45    Town of Bermuda Run, North Carolina Watera and SewerF Fund For the' Year Ended. June 30, 2016  Schedule of Revenues andE Expenditures- Budgeta and Actual- (Non-GAAP) With Comparative Actual Amounts fort the Year Ended June 30, 2015)  Variance Favorable (Unfavorable) June 30, 2015  Actual- Year Ended $ 195,260 361,189 4,250 560,698 9,200 16,130 25,330 100,000 100,000 686,028  Budget  Actual 241,312 498,240 7,050 746,602 $ 117,102  Operating revenues: Water charges Sewer charges Tap fees Nonoperatingl revenues: Sewer assessments HOApoectrembursement Other financings sources: Transfer from general fund Appropriated fundb balance Total revenue ando other financing sources Operating expenditures: Administrative Licenses Charges from general fund Water operations: Bulk water purchases Liner repairs Sewer operations: Engineering Planto operations Maintenance Repairs plant Repairs lines Utilities Capital outlay Other  629,500  629,500  746,602  117,102  960 45,813 46,773 199,379 5,202 204,580 11,302 46,411 6,756 8,243 12,720 32,074 6,840 14,810 139,156 390,509 95,277 1,205 96,482 486,991 259,611  960 50,000 50,960 151,023 27,802 178,824 8,948 71,758 6,111 15,072 21,363 24,894 14,840 162,987 392,771 123,903 5,317 129,219 521,991 164,038  51,500 285,500  4,728 80,920  195,500 532,500  56,344 141,991  Total operating expenditures Other budgetary appropriations: Principal paid onl long-term debt Interest paid Total expenditures and budgetary appropriations Total revenue and other financing sources over (under)e expenditures andbudgetary appropriations  97,000 629,500  518 142,509 259,611  46    Town of Bermuda Run, North Carolina Water and Sewer Fund (continued) For the Year Ended June 30, 2016  Schedule of Revenues and Expenditures Budget and Actual (Non-GAAP) (With Comparative Actual Amounts for the Year Ended June 30,2015)  2016 Actual  2015 Actual  Reconciliation of Modified Accrual Basis to Full Accrual Basis:  Total Revenues and Other Financing Sources Total Expenditures and Budgetary Appropriations Excess of Revenues Over (Under) Expenditures Debtp principal retirement Capital outiay Depreciation  $ 746,602  $ 686,028  486,991 259,611 95,277 6,840 (91,737)  521,991 164,038 123,903  (90,760)  Changei inr netp position  $ 269,990  $ 197,180  47    Town of Bermuda Run, North Carolina Schedule of Changes in Ad Valorem Taxes Receivable For the Year ended June 30, 2016  Balance June 30, 2015 $  Collections and Credits $ 782,250 3,882 1,792 286 10  Balance June 30,2016 $  Year of Levy 2015-2016 2014-2015 2013-2014 2012-2013 2011-2012 2010-2011 2009-2010 2008-2009 2007-2008 2006-2007 2005-2006 2004-2005  Additions $ 787,064  4,814 2,737 927 207 206 67 44 21 227 169 822  6,619 2,719 493 206 77 44 21 227 169 91 140 10,807  (731) 140 787,629  $  $  787,064  $  AdValorem Taxes Receivable- Net Reconcilement with Revenues: Tax- Ad Valorem Adjustments  $ $ $  10,241 782,250 5,379 787,629  Total collections and credits  48    Town of Bermuda Run, North Carolina Analysis of Current Tax Levy For the Year Ended. June 30,2016  Total Levy  Property excluding Registered Motor Vehicles $ 727,625 2,713  Registered Motor Vehicles $ 56,726  Property  Total  Valuation Rate Levy $522,900,667 0.15 $ 784,351  Taxl Levy- Town' Wide Discoveries Abatements and Releases Total for Year  1,808,667  2,713  $524,709,333  787,064 4,814 782,250 99.39%  730,338 4,814 725,524 99.34%  56,726  Less, Uncollected' Tax at. June 30, 2016 Current Year's Taxes Collected Percent Current Year Collected  56,726 100.00%  49    EDDIE CARRICK, CPA, PC Certified Public Accountant  INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVERI FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON ANA AUDIT OF FINANCIAL STATEMENTS PERFORMED IN  ACCORDANCE WITH GOVERMMENT, AUDITING STANDARDS  Tot the Honorable Mayor and' Town Council Town of Bermudà Run Bermudal Run, North Carolina  We have audited the financial statements oft the governmental activities, the business-type activities, the aggregate discretely presented component unit, each major fund, and the aggregate remaining fund information of the Town of Bermuda Run, North Carolina, as of and for the year ended June 30, 2016, and the related notes to the financial statements, which collectively comprise the Town of Bermuda Run, North Carolina's basic financial statements, have issued our report thereon dated September 24, 2016. We conducted our audit in accordance with the and standards generally accepted in the United States of America and the standards applicable to financial auditing contained in Government Auditing Standards issued by the Comptroller General of the United States. The audits statements of Bermuda Run Tourism Development Authority were not audited in accordance with Government financial Auditing Standards, and accordingly, this report does noti include reporting on internal control over financial ori instances of reportable noncompliance associated with Bermudal Run Tourism Development Authority. reporting In planning and performing our audit of the financial statements, we considered the Town of Bermuda Carolina's internal control over financial reporting (internal control) to determine the audit procedures Run, that North are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but the purpose of expressing an opinion on the effectiveness of the Town of Bermuda Run, North Carolina's internal not for control. Accordingly, we do not express an opinion on the effectiveness of the Town of Bermuda Ad deficiency in intemal control exists when the design or operation of a control does not allow management employees, in the normal course of performing their assigned functions, to prevent, or misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, detect in correct, internal control such that there is a reasonable possibility that a material misstatement of the entity's financial statements not be prevented, or detected and corrected on a timely basis. A significant deficiency is a combination of deficiencies, in internal control that is less severe than ar material weakness,  Internal Control over Financial Reporting  Carolina's internal control.  Run, North and or or will deficiency, a yet important enough to  merit attention by those charged with governance.  Our consideration ofi internal control was for the limited purpose described in the first paragraph oft this section was not designed to identify all deficiencies in internal control that might be material weaknesses or deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified. significant these limitations, during our audit we did identify certain deficiencies in internal control, described in Given the accompanying schedule of findings and questioned costs as 2016-1 that we consider to be material weaknesses. As part of obtaining reasonable assurance about whether the Town of Bermuda Run, North Carolina's statements are free from material misstatement, we performed tests ofi its compliance with certain provisions financial ofl regulations, contracts, and grant agreements, noncompliance with which could have a direct and material laws, the determination of financial statement amounts. However, providing an opinion on compliance with those effect on was not an objective of our audit, and accordingly, we do not express such an opinion. The results provisions disclosed no instances of noncompliance or other matters that are required to be reported under of Government our tests  and  Compliance and Other Matters  Auditing Standards. Member oft the American Institute of Certified Public Accountants  Eddie Carrick  50  151 Young Drive, Lexington, NC 27292 336-249-2545, Fax3 336-249-4745    Town of Bermuda Run, North Carolina's Response to Findings  Town of Bermuda Run, North Carolina's response to the findings identified in our audit is described in the accompanying schedule off findings and questioned costs. Town of Bermudal Run, North Carolina's response was not subjected tot the auditing procedures applied ini the audit of thei financial statements and, accordingly, we express no  opinion onit. Purpose oft this Report  The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the etfectiveness of the entity's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government. Auditing Standards inc considering the entity's internal control and compliance. Accordingly, this communication is not suitable for any  other purpose. Eddie Carrick, CPA, PC  acl, CA  Lexington, North Carolina September 24, 2016  51    EDDIE CARRICK, CPA, PC Certified Public Accountant  Report on Compliance for Each Major Federal Program; Report on Internal Control Over Compliance; With OMB Uniform Guidance and the State Single Audit Implementation Act  Independent Auditor's Report  Tot the Honorable Mayor and Members oft the Town Council Town of Bermuda Run, North Carolina  Report on Compliance for Each Major Federal Program  We have audited the Town of Bermuda Run, North Carolina, compliance with the types of compliance requirements described in the OMB Compliance Supplement and the Audit Manual for Governmental Auditors in North Carolina, issued by the Local Government Commission, that could have a direct and material effect on each of the Town of Bermuda Run's major federal programs for the year ended June 30, 2016. The Town of Bermuda Run's major federal programs are identified ini the summary of auditor's results section of the accompanying schedule off findings  and questioned costs. Management's Responsibility applicable toi its federal programs. Auditor's Responsibility  Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants Our responsibility is to express an opinion on compliance for each of the Town of Bermuda Run's major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally acceptedi in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) and the State Single Audit Implementation Act. Those standards, the Uniform Guidance, and the State Single Audit Implementation Act require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the Town of Bermuda Run's compliance with those requirements and performing such other procedures, as we considered We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide al legal determination oft the Town of Bermuda Run's compliance.  necessary in the circumstances.  Opinion on Each Major Federal Program the yeare ended June 30, 2016.  In our opinion, the Town of Bermuda Run complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for  Member oft the American Institute of Certified Public Accounlants  Eddie Carrick  52  151 Young Drive, Lexington, NC 27292 679256.8.38628475    Report on Internal Control Over Compliance  Management of the Town of Bermuda Run is responsible for establishing and maintaining effective internal control over compliance with thet types of compliance requirements referred to above. Inp planning and performing oura audit of compliance, we considered the Town of Bermuda Run's internal control over compliance with the types of requirements that could have a direct and material effect on a major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing our opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness ofi internal control over compliance. Accordingly, we dor not express an opinion on the effectiveness oft the City'si internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance / does not allow management or employees, ini the normal course ofp performing their assigned functions, to prevent, or detect and correct, noncompliance with at type of compliance requirement of at federal program on a material weakness in internal control over compliance is a deficiency, or a combination of deficiencies, timely in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on ai timely basis. A significant deficiency in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not The purpose of this report on internal control over compliance is solelyt to describe the scope of ourt testing ofi internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance.  basis. A  governance.  beeni identified.  Accordingly, this reporti is not suitable for any other purpose.  Eddie Carrick, CPA,PC  ECcl, CPR  Lexington, North Carolina September 24, 2016  53    Town of Bermuda Run North Carolina Schedule of Findings and Questioned Costs For the Year Ended June 30,2 2016  Summary of Auditors' Results Financial Statements  Type of report the auditor issued on whether thet financial statements audited were  preparedi in accordance to GAAP: Unmodified Internal control over financial reporting: Material weakness(es) identified? Significant Deficiency(s) identified that are not considered tol ber material weaknesses? Noncompliance material tot financial statements noted?  X yes  no  yes X none reported yes X no  Federal Awards  Internal control over major federal programs: Material weakness(es) identified? Significant Deficiency(s) identified  yes X no yes X none reported  Type of auditor's reporti issued on compliancet forr majorf federal programs: Unmodified  Any auditi findings disclosed that are required tol be reportedi in  accordance with 20 CFR: 200.516(a)? Identification of major federal programs:  yes X no  Program Name  CFDA# 20.205  U.S. Department of Transportation Highway Planning and Construction Dollar threshold to distinguish between Type A and Type B, programs:  $ 750,000  Auditee qualified asl low risk auditee?  yes X no  54    Town of Bermuda Run North Carolina Schedule of Findings and Questioned Costs For the Year Ended June 30, 2016  Financial Statement Findings Material weakness 2016-01 Segregation of Duties  Criteria: Duties should be segregated top provide reasonable assurance thatt transaction are  handled properly.  Condition: There is lack of segregation among Town personnel.  Effect: Transactions could ber mishandled.  Cause: There are limited number of personnel for certain functions.  Recommendation: The duties should bes separated as much as possible, and alternative controls should be used to compensate forl lack of segregation. The governing body  should provide some of these controls.  Management response: The Town agrees with this finding  III State Award Findings and Questioned Costs  None reported  55    Town of Bermuda Run North Carolina Corrective Action Plan For the Year Ended June 30,2 2016  Financial Statement Findings Material weakness  2016-01 Segregation of Duties  Name of contact person: Lee Rollins, Town Manager  Corrective Action: The duties willl be separated as much as possible and alternative controls will be used to compensate for lack ofs separation. The governing council will become more involved in providing some oft these controls.  Proposed Completion Date: The Council willi implement the above procedures  immediately.  State Award Findings and Questioned Costs  None reported  56    Town of Bermuda Run North Carolina Summary Schedule of Prior Audit Findings Forthe Year Ended June 30,2016  Finding  Status: There were no prior year's findings.  57    The Town of Bermuda Run Schedule of Federal and State Financial Awards For the year ended June 30, 2016  STATE/ GRANTOR'S NUMBER  FEDERAL (DIRECT& PASS-THROUGH) EXPENDITURES  FEDERAL PASS-THROUGH  GRANTORPASSTHROUGN GRANTORPROGRAMITIE Federal Grants:  CFDA NUMBER  STATE EXPENDITURES  U.S. Department of Tanspontaion-Hghway Planning and Construction Pass-through  20.205  $  748,149 **  NCDOT- State Planning and Research  State Grants Powell Bill  NORTH CAROLINA DEPARTMENT OF TRANSPORTATION  38570  $  $  748,149  $  ** Major programs  Notes tot the Schedule ofE Expenditures of Federal and State Financial Awards:  Note 1: Basis of Presentation  The accompanying schedule ofe expenditures of federal and State awards (SEFSA) includes thet federal and State grant activity oft the Town of Bermudal Run under the programs of the federal government and the State of! North Carolina for the yeare ended. June 30, 2016. Thei information int this SEFSA is presented ina accordance with ther requirements of Title 2US Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards andt the State Single Audit Implementation. Act. Because the Schedule presents only a selected portion oft the operations oft the Town of Bermuda Run, itisr noti intended to and does not presentt thef financial position, changes ini net  position, or cash flows of the Town of Bermudal Run. Note 2: Summary of Significant Accounting Policies  Expenditures reported int the SEFSA are reported on ther modified accrual basis of accounting. Such expenditures are recognized following the cost principles containedi in Uniform Guidance, wherein certain types ofe expenditures are not allowable or are limited as to reimbursement. Bermuda Run has electedi not to use the 10-percent de minimis indirect cost rate as allowed under the Uniform Guidance.  58