NORTH CAROLINA STATE
BOARD OF BARBER EXAMINERS
FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2016 AND 2015NORTH CAROLINA STATE BOARD OF BARBER EXAMINERS
Table of Contents
Page No.
Management's Discussion and Analysis …………………………………………………
1 - 3
Independent Auditor's Report ……………………………………………………………
4 - 5
Financial Statements
Statements of Net Position ……………………………………………………………
6
Statements of Revenues, Expenses and Changes in Net Position ……………………
7
Statements of Cash Flows ……………………………………………………………
8
Notes to Financial Statements ………………………………………………………
9 - 18
Supplementary Information
Proportionate Share of Net Pension Liability and Schedule of Board Contributions
Teachers' and State Employees' Retirement System ………………………………
19Page 1
NORTH CAROLINA STATE BOARD OF BARBER EXAMINERS
Management's Discussion and Analysis
For The Fiscal Year Ended June 30, 2016
Financial Highlights
Overview of the Basic Financial Statements
ThefollowingisadiscussionandanalysisoftheNorthCarolinaStateBoardofBarberExaminers'(the"Board")financialperformanceforthefiscalyearendedJune30,2016.Thefollowingfinancialstatementsandfootnotescompriseourcompletesetoffinancialinformation.TheManagement'sDiscussionandAnalysisidentifiessignificanttransactionsthathavefinancialimpactandhighlightsfavorableandunfavorabltrends.Comparativedataforthecurrentyearandthepreviousyearsarepresented in the analysis.
TheoperatingrevenuesoftheBoarddecreasedby$71,659,or8.6%,primarilyduetoareductioninlatefees.TheBoardcreatedanonlinerenewalsystemthatallowedindividualstopaylicensefeesonline.Asaresult,therewerefewerlaterenewals.TheBoardalsosawadecreaseinthenumberofshops that were opened or that renewed their permits during the fiscal year.
TheoperatingexpensesoftheBoarddecreasedby$153,821,or16.6%,primarilyduetotwocauses.First,theBoardmadestaffcutstosubstantiallyreduceitsexpenditures.Second,thefiscalyear2015expendituresincludedanaccruedworker'scompensationclaimsettlement.Sincethesettlementendedthecase,theBoardonlyhadadditionalclaimcostsrelatedtothiscaseofapproximately$4,900infiscalyear 2016.
ThisdiscussionandanalysisisanintroductiontotheBoard’sbasicfinancialstatements,whicharecomprisedofthefollowingcomponents:1)StatementsofNetPosition,2)StatementsofRevenues,ExpensesandChangesinNetPosition,3)StatementsofCashFlows,and4)NotestoFinancialStatements.ThesefinancialstatementsarepreparedinaccordancewithaccountingprinciplesgenerallyacceptedintheUnitedStatesofAmericaasprescribedbtheGovernmentalAccountingStandardsBoard (GASB).Page 2
NORTH CAROLINA STATE BOARD OF BARBER EXAMINERS
Management's Discussion and Analysis
For The Fiscal Year Ended June 30, 2016
Basic Financial Statements
2016
2015
2014
Current assets
430,010$
473,089$
407,436$
Capital assets - net of depreciation
48,873
65,089
77,523
Deferred outflows of resources
35,680
65,659
33,688
Total assets
514,563
603,837
518,647
Current liabilities
493,044
525,976
333,118
Noncurrent liabilities
101,179
71,517
186,989
Deferred inflows of resources
30,123
103,321
-
Total liabilities
624,346
700,814
520,107
Investment in capital assets
48,873
65,089
77,523
Unrestricted
(158,656)
(162,066)
(78,983)
Total net position
(109,783)$
(96,977)$
(1,460)$
Operating revenues
759,599$
831,258$
768,736$
Operating expenses
774,379
928,200
900,404
Operating loss
(14,780)
(96,942)
(131,668)
Non-operating revenues
1,974
1,425
1,794
Changes in net position
(12,806)$
(95,517)$
(129,874)$
ThebasicfinancialstatementsoftheBoardreportinformationabouttheBoardusingaccountingmethodssimilartothoseusedbyprivatesectorcompaies.Thesestatementsoffershortandlong-termfinancial information about the activities of the Board.
TheStatementsofNetPositionpresentthecurrentandnoncurrentpositionsofassetsandliabilitiesseparately.
TheStatementsofRevenues,Expenses,andChangesinNetPositionpresentinformationonhowtheBoard's net position changed as a result of the year’s operations.
ThefollowingpresentscondensedfinancialinformationontheoperationsoftheBoardasofandforthe year ended June 30:
TheStatementsofCashFlowspresentinformationonhowtheBoard'scashchangedasaresultoftheyear's activity.Page 3
NORTH CAROLINA STATE BOARD OF BARBER EXAMINERS
Management's Discussion and Analysis
For The Fiscal Year Ended June 30, 2016
Events Affecting Future Operations
Contacting the Board's Management
ThisfinancialreportisdesignedtoprovideageneraloverviewoftheBoard'sfinancesandtodemonstratetheBoard'saccountabilityforthemoneyiteceivesandexpends.Ifyouhaveanyquestionsaboutthisreportorneedadditionalinformation,contacttheNorthCarolinaStateBoardofBarber Examiners, 5809 Departure Drive, Suite 102, Raleigh, NC 27616-1858.
InOctober2015,theBoardmadesignificantcutstoitsoperationalexpensesinordertoaddressaspendingdeficitinpreviousyears.ThesecutshaveallowedtheBoardtoimproveitslong-termfinancialoutlook,buttheyhavehadanimpactonoperations.TheBoardisfocusedonmovingmoretransactionsonlinetoimprovetheefficiencyofitsoperationsandtoallowittooperatewithamorelimitedstaff.However,theBoardwillcontinuetorequestauthorizationfromtheGeneralAssemblytoincrease fees and allow the Board to improve operations.Certified Public Accountants and Advisors Since 1947
Greensboro, NC | Raleigh, NC | Winston-Salem, NC
Office: 1501 Highwoods Blvd., Suite 300 ~ Greensboro, NC 27410
Mailing: P.O. Box 19608 ~ Greensboro, NC 27419-9608
Phone (336) 294-4494 ~ Fax (336) 294-4495 ~ www.brccpa.com
Member of a Global Association
of Independent Accounting
Page 4 and Consultancy Firms
Independent Auditor's Report
Members of the Board
North Carolina State Board of Barber Examiners
Raleigh, North Carolina
Report on the Financial Statements
We have audited the accompanying financial statements of the North Carolina State Board of Barber
Examiners (the "Board"), an enterprise fund of the State of North Carolina, which comprise the statements
of net position as of June 30, 2016 and 2015, and the related statements of revenues, expenses and changes
in net position, and cash flows for the years then ended, and the related notes to the financial statements,
which collectively comprise the Board's basic financial statements.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these basic financial statements in
accordance with accounting principles generally accepted in the United States of America; this includes the
design, implementation, and maintenance of internal control relevant to the preparation and fair presentation
of basic financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these basic financial statements based on our audits. We
conducted our audits in accordance with auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the audits to obtain reasonable assurance about
whether the basic financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
basic financial statements. The procedures selected depend on the auditor's judgment, including the
assessment of the risks of material misstatement of the basic financial statements, whether due to fraud or
error. In making those risk assessments, the auditor considers internal control relevant to the Board's
preparation and fair presentation of the basic 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
Board'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 of the basic financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinion.
Opinion
In our opinion, the basic financial statements referred to above present fairly, in all material respects, the
financial position of the North Carolina State Board of Barber Examiners as of June 30, 2016 and 2015, and
its changes in financial position and cash flows for the years then ended in accordance with accounting
principles generally accepted in the United States of America.
Page 5
Emphasis of Matter
AsdiscussedinNote1,thesefinancialstatementsarepresentedonlyfortheNorthCarolinaStateBoardofBarberExaminersanddonotpurporttoanddonotpresentfairlytheinancialpositionoftheStateofNorthCarolinaasofJune30,2016and2015,northechangesinitsfinancialpositionanditscashflowsthereoffortheyearsthenendedinconformitywithaccountingprinciplesgenerallyaccepedintheUnitedStatesofAmerica.
Other Matters
Required Supplementary Information
AccountingprinciplesgenerallyacceptedintheUnitedStatesofAmericarequirethatManagement'sDiscussionandAnalysis,onpages1-3andtheSchedulesofProportionateShareofNetPensionLiabilityandBoardContributionsTeachers'andStateEmployees'RetirementSystemonpage9,bepresentedtosupplementthebasicfinancialstatements.Suchinformation,althoughnotapartofthebasicfinancialstatements, is required by the Governmental Accounting Standards Board, who considers it to be an essential partoffinancialreportingforplacingthebasicfinancialstatementsinanappropriateoperational,economic,orhistoricalcontext.WehaveappliedcertainlimitedprocedurestotherequiredsupplementaryinformationinaccordancewithauditingstandardsgenerallyacceptedinteUnitedStatesofAmerica,whichconsistedofinquiriesofmanagementaboutthemethodsofpreparingtheinformationandcomparingtheinformationforconsistencywithmanageent’sresponsestoourinquiries,thebasicfinancialstatements,andotherknowledgeweobtainedduringourauditofthebasicfinancialstatements.Wedonotexpressanopinionorprovideanyassuranceontheinformationbecausethelimitedproceduresdonotprovideuswithsufficientevidence to express an opinion or provide any assurance.
Raleigh, North Carolina
October 21, 2016See Notes to Financial Statements
Page 6
NORTH CAROLINA STATE BOARD OF BARBER EXAMINERS
Statements of Net Position
June 30, 2016 and 2015
2016
2015
ASSETS:
Current assets:
Cash - State Treasurer
418,138$
462,739$
Accounts receivable, net
7,185
10,350
Prepaid expenses
4,687
-
Total current assets
430,010
473,089
Capital assets - net of depreciation
48,873
65,089
Total assets
478,883
538,178
DEFERRED OUTFLOWS OF RESOURCES:
Pension deferrals
4,466
6,066
Contributions to pension plan in current fiscal year
31,214
59,593
Total deferred outflows of resources
35,680
65,659
LIABILITIES:
Current liabilities:
Accounts payable
22,318
30,327
Due to employees
1,118
1,279
Unearned revenue
469,608
409,870
Liability under workers compensation claim settlement
-
84,500
Total current liabilities
493,044
525,976
Noncurrent liabilities:
Accrued vacation
32,634
42,910
Net pension liability
68,545
28,607
Total noncurrent liabilities
101,179
71,517
Total liabilities
594,223
597,493
DEFERRED INFLOWS OF RESOURCES:
Pension deferrals
30,123
103,321
NET POSITION:
Investment in capital assets
48,873
65,089
Unrestricted
(158,656)
(162,066)
Total net position
(109,783)$
(96,977)$ See Notes to Financial Statements
Page 7
NORTH CAROLINA STATE BOARD OF BARBER EXAMINERS
Statements of Revenues, Expenses and Changes in Net Position
Years Ended June 30, 2016 and 2015
2016
2015
Operating revenues:
Registered certificates
292,926$
281,560$
Apprentice certificates
35,450
40,520
Instructor certificates
9,199
13,526
Apprentice exam fees
97,920
64,770
Registered exam fees
24,990
26,660
Instructor exam fees
7,260
8,415
Shop permits
113,857
133,525
Student permits
31,350
30,300
School permits
4,810
4,260
Inspection fees
23,480
33,960
Late fees
71,715
100,705
Fines and penalties
12,923
27,573
Legal fees reimbursed
24,076
44,936
Miscellaneous
9,643
20,548
Total operating revenues
759,599
831,258
Operating expenses:
Salaries and wages
336,862
393,430
Payroll taxes
24,967
28,775
Pension expense
48,981
13,846
Medical insurance contributions
37,391
43,019
Board members' per diem
2,200
3,800
Travel - board members
2,262
3,815
Travel - staff
47,422
65,381
Other contracted services
18,939
20,006
Office rent
66,481
63,273
Telephone
10,479
12,975
Exam
10,818
9,054
Depreciation
16,216
16,381
Equipment rental and maintenance
9,504
10,694
Office supplies
20,138
22,108
Printing
2,066
6,632
Postage
16,334
11,566
Insurance and bonding
9,085
8,946
Legal services
30,138
5,099
Accounting and auditing
9,300
6,900
Computer services
35,075
23,718
Seminar and educational materials
20
460
Civil penalties remitted
9,686
25,834
Workers' compensation claim
4,893
125,512
Miscellaneous
5,122
6,976
Total operating expenses
774,379
928,200
Operating loss
(14,780)
(96,942)
Non-operating revenues:
Interest income
1,974
1,425
Total non-operating revenues
1,974
1,425
Changes in net position
(12,806)
(95,517)
Net position - beginning of year
(96,977)
(1,460)
Net position - end of year
(109,783)$
(96,977)$ See Notes to Financial Statements
Page 8
NORTH CAROLINA STATE BOARD OF BARBER EXAMINERS
Statements of Cash Flows
Years Ended June 30, 2016 and 2015
2016
2015
Cash flows from operating activities:
Cash received from fees
817,815$
928,929$
Cash payments to employees for services
(461,919)
(525,998)
Cash payments for suppliers of goods and services
(262,582)
(211,857)
Cash payments for other operating expenses
(139,889)
(130,802)
Net cash provided by (used in) operating activities
(46,575)
60,272
Cash flows from capital and investing activities:
Purchase of capital assets
-
(4,042)
Interest
1,974
1,425
Net cash provided by (used in) capital and investing activities
1,974
(2,617)
Increase (decrease) in cash
(44,601)
57,655
Cash - beginning of year
462,739
405,084
Cash - end of year
418,138$
462,739$
Reconciliation of operating loss to net cash
provided by (used in) operating activities:
Operating loss
(14,780)$
(96,942)$
Adjustments to reconcile operating loss to net cash
provided by (used in) operating activities:
Depreciation
16,216
16,381
Loss on disposal of equipment
-
95
Changes in assets and liabilities:
Accounts receivable
3,165
(10,350)
Prepaid expenses
(4,687)
2,352
Deferred outflows of resources
29,979
(31,971)
Accounts payable
(8,009)
5,495
Due to employees
(161)
(2,806)
Accrued vacation
(10,276)
1,625
Unearned revenue
59,738
105,669
Net pension liability
39,938
(117,097)
Liability under workers compensation claim settlement
(84,500)
84,500
Deferred inflows of resources
(73,198)
103,321
Total adjustments
(31,795)
157,214
Net cash provided by (used in) operating activities
(46,575)$
60,272$
Supplemental disclosures of noncash capital activities:
Capital asset write-offs
-$
29,408$ Page 9
NORTH CAROLINA STATE BOARD OF BARBER EXAMINERS
Notes to Financial Statements
NOTE 1 - NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES
Description of Organization
Financial Reporting Entity
Basis of Presentation
Basis of Accounting
TheNorthCarolinaStateBoardofBarberExaminers(the"Board")isanindependentStateagency.ItisanoccupationallicensingboardauthorizedbyChapter86AoftheNorthCarolinaGeneralStatutes.ThefiveBoardmembersareappointedbytheGovernoroftheStateofNorthCarolina.The Board is entitled to the services of the Attorney General of North Carolina.
TheBoard'sfunctionistomaintainminimumstandardsforservicesprovidedbybarbers,barberapprentices,barberinstructors,barbershops,andbarberschools.TheBoard'soperationsarefundedprimarily through license fees, license examination fees and other income.
TheaccompanyingbasicfinancialstatementshavebeenpreparedinaccordancewithaccountingprinciplesgenerallyacceptedintheUnitedStatesofmericaasprescribedbyGovernmentalAccounting Standards Board (GASB).
Proprietaryfundsareusedtoaccountforoperationsthatarefinancedandoperatedinamannersimilartoprivatebusinessenterpriseswheretheintetofthegoverningbodyisthatthecostofprovidinggoodsorservicestothegeneralpubliconacontinuingbasisbefinancedorrecoveredprimarily through user charges.
ThebasicfinancialstatementsoftheBoardhavebeenpreparedusingtheeconomicresourcemeasurementfocusandtheaccrualbasisofaccounting.Undertheaccrualbasis,revenuesarerecognizedwhenearned,andexpensesarerecordedwhenaliabilityhasbeenincurred,regardlessofthetimingofthecashflows.Feesreceivedforthevariouslicensesaredeemedearnedwhenthelicense period begins.
Theconceptunderlyingthedefinitionofthefinancialreportingentityisthatelectedofficialsareaccountabletotheirconstituentsfortheiracions.AsrequiredbyaccountingprinciplesgenerallyacceptedintheUnitedStatesofAmerica(GAAP),thefinancialreportingentityincludesboththeprimarygovernmentandallofitscomponentunits.Anorganizationotherthanaprimarygovernmentservesasanucleusforareportingentitywhenitissuesseparatefinancialstatements.TheaccompanyingfinancialstatementspresentallfundsandactivitiesforwhichtheBoardisresponsible.
Forfinancialreportingpurposes,theBoardisanonmajorenterprisefundoftheprimarygovernmentof the State of North Carolina and is reported as such in the State's Comprehensive Annual Financial Report(CAFR).ThesefinancialstatementsfortheBoardareseparateandapartfromthoseoftheStateofNorthCarolinaanddonotpresentthefinancialpositionofthStatenorchangesintheState's financial position and cash flows. Page 10
NORTH CAROLINA STATE BOARD OF BARBER EXAMINERS
Notes to Financial Statements
NOTE 1 - NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
Basis of Accounting (Continued)
Cash - State Treasurer
Accounts Receivable
Capital Assets
3 - 10 years
Unearned Revenues
Accrued Vacation
Non-operatingrevenuesandexpensesincludeactivitiesthathavecharacteristicsofnon-exchangetransactions and consist primarily of investment activities.
ThevacationpolicyoftheBoardprovidesfortheaccumulationofupto30daysearnedvacationleavewithsuchleavebeingfullyvestedwhenearned.Inaddition,effectiveSeptember1,2014allfulltimepermanentemployeesweregivenanadditionalfivedaysofannualleavewhichshallremainavailable until used.
TheBoardclassifiesitsrevenuesandexpensesasoperatingornon-operatingintheaccompanyingStatementsofRevenues,Expenses,andChangesinNetPosition.OperatingrevenuesandexpensesgenerallyresultfromprovidingservicesthatarenecessarytotheBoard’sprincipalongoingoperations.Operatingrevenuesincludeactivitiesthathavecharacteristicsofexchangetransactionsandconsistprimarilyoflicenserenewalandexaminatiofees.OperatingexpensesareallexpensetransactionsotherthanthoserelatedtocapitalandnoncapitalfinancingorinvestingactivitiesasdefinedbyGSBStatementNo.9,ReportingCashFlowsofProprietaryandNonexpendableTrustFunds and Governmental Entities that Use Proprietary Fund Accounting.
ThisclassificationconsistsoffundsdepositedbytheBoardwiththecashaccountsoftheNorthCarolinaStateTreasurer.Becausethesefundsareimmediatelyavailableforexpenditure,theyareconsidered a cash equivalent.
Capitalassetsarerecordedatcostatthedateofacquisition.TheBoardcapitalizesassetsthathaveacostof$5,000orgreateratthedateofacquisitionandanexpectedusefullifeoftwoyearsorgreater.Depreciation is computed using the straight-line method over the following useful lives:
Licensesarerenewedforaperiodofoneyear.Licenseapplications,renewalfees,andexamfeesreceived in advance are deferred and recognized as revenue in the period to which they relate.
Equipment, furniture and software
Whenanassetisdisposedof,thecostoftheassetandtherelatedaccumulateddepreciationareremovedfromthebooks.Anygainorlossondispositionisreflectedinnon-operatingrevenueorexpense for the period.
Accountsreceivableconsistofcivilpenaltiesandlegalfeesduefromadministrativeproceedingsandareshownatbookvaluelessanallowancefordobtfulaccountsof$6,500and$1,800atJune30,2016 and 2015, respectively.Page 11
NORTH CAROLINA STATE BOARD OF BARBER EXAMINERS
Notes to Financial Statements
NOTE 1 - NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
Deferred Outflows and Inflows of Resources
Net Position
Use of Estimates
NOTE 2 - DEPOSITS - CUSTODIAL CREDIT RISK
Cash - State Treasurer
Inadditiontoassets,theStatementofNetPositionwillsometimesreportaseparatesectionfordeferredoutflowsofresources.Thisseparatefinancialstatementelementcalleddeferredoutflowsofresources,representsaconsumptionofnetpositionthatappliestoafutureperiodandsowillnotberecognizedasanexpenseuntilthen.TheBoardhastwoitemsthatmeetthecriterionforthiscategory-contributionsmadetothepensionplaninthe2016fiscalyear,anddeferralsofpensionassetsthatresultedfromtheimplementationofGASBStatementNo.68.Inadditiontoliabilities,theStatementofNetPositionwillsometimesreportaseparatesectionfordeferredinflowsofresources.Thisseparatefinancialstatementelement,deferredinflowsofresources,representsanacquisitionofnetpositionthatappliestoafutureperiodandsowillnotberecognizedasrevenueuntilthen.TheBoardhasoneitemthatmeetsthecriterionforthiscategory-deferralsofpensionexpense that result from the implementation of GASB Statement No. 68.
The Board's net position is classified as follows:
ThepreparationoffinancialstatementsinconformitywithaccountingprinciplesgenerallyacceptedintheUnitedStatesofAmericarequiresmanagmenttomakeestimatesandassumptionsthataffectcertainreportedamountsofassetsandliabilitiesatthedateofthefinancialstatementsandtherportedamountsofrevenueandexpensesduringthereportingperiod.Accordingly,actualresultscould differ from those estimates, resulting in adjustments in future periods.
DepositsincludecashondepositwiththeStateTreasurer.ItistheStateTreasurer'spolicyandpracticefordepositsnotcoveredbyfederaldepositoryinsurancetobecoveredbycollateralheldbythe State of North Carolina's agent in the name of the State.
InvestedinCapitalAssets-ThisrepresentstheBoard'stotalinvestmentincapitalassets,netofaccumulated depreciation.
Unrestricted-Thisrepresentsassetswithnoexternalrestrictionastouseorpurpose.Unrestrictednetassetscanbeemployedforanypurposedesignatedbythegoverningboard,asdistinguishedfromfunds restricted externally for specific purposes.Page 12
NORTH CAROLINA STATE BOARD OF BARBER EXAMINERS
Notes to Financial Statements
NOTE 3 - CAPITAL ASSETS
Cost
Cost
Accum.
Net
6/30/15
Additions
Disposals
6/30/16
Depreciation
Amount
Equipment/
furniture/
software
174,405$
-$
-$
174,405$
125,532$
48,873$
Cost
Cost
Accum.
Net
6/30/14
Additions
Disposals
6/30/15
Depreciation
Amount
Equipment/
furniture/
software
199,771$
4,042$
29,408$
174,405$
109,316$
65,089$
NOTE 4 - ACCRUED VACATION
Accrued vacation consisted of the following at June 30:
2016
2015
Beginning accrued vacation
42,910$
41,285$
Vacation earned
23,936
36,495
Vacation used
(34,212)
(34,870)
Ending accrued vacation
32,634$
42,910$
NOTE 5 - RETIREMENT PLAN
Plan Administration
TheStateofNorthCarolinaadministerstheTeachers'andStateEmployees'RetirementSystem(TSERS)plan.Thisplanisacost-sharing,multiple-employer,definedbenefitplanestablishedbytheStatetoprovidepensionbenefitsforgeneralemployeesandlawenforcementofficers(LEOs)oftheState,generalemployeesandLEOsofitscomponentunits,andemployeesofLocalEducationAgencies(LEAs)andcharterschoolsnotinthereportingentity.MembershipiscomprisedofemployeesoftheState(stateagenciesandinstitutions),universities,communitycolleges,andcertainproprietarycomponentunitsalongwiththeLEAsandcharterschools.BenefitprovisionsareestablishedbyGeneralStatute135-5andmaybeamendedonlybytheNorthCarolinaGeneralAssembly.
Capital assets are comprised of the following:Page 13
NORTH CAROLINA STATE BOARD OF BARBER EXAMINERS
Notes to Financial Statements
NOTE 5 - RETIREMENT PLAN (Continued)
Benefits Provided
Contributions
TSERS Basis of Accounting
ContributionprovisionsareestablishedbyGeneralStatute135-8andmaybeamendedonlybytheNorthCarolinaGeneralAssembly.Employeesarerequiredtocontribute6%oftheircompensation.ThecontributionrateforemployersisseteachyearbytheNCGeneralAssemblyintheAppropriationsActbasedontheactuarially-determinedraterecommendedbytheactuary.TheBoard'scontractually-requiredcontributionratefortheyearendedJune30,2016was9.32%ofcoveredpayroll.TheBoard'scontributionstothepensionplanwere$31,214andemployeecontributions were $19,575 for the year ended June 30, 2016.
ThefinancialstatementsoftheTSERSplanwerepreparedusingtheaccrualbasisofaccounting.Planmembercontributionsarerecognizedintheperiodinwhichthecontributionsaredue.Employercontributionsarerecognizedwhendueandtheemployerhasalegalrequirementtoprovidethecontributions.Benefitsandrefundsarerecognizedwhendueandpayableinaccordancewiththetermsofeachplan.Theplan'sfiduciarynetpositionwasdeterminedonthesamebasisusedby the pension plan.
TheTSERSPlan'sfinancialinformation,includingallinformationabouttheplan'sassets,deferredoutflowsofresources,liabilities,deferredinflowsofresources,andfiduciarynetposition,isincludedintheStateofNorthCarolina'sfiscalyear2015ComprehensiveAnnualFinancialReport.AnelectronicversionofthisreportisavailablebyaccessingtheNorthCarolinaOfficeoftheStateController'sInternethomepagehttp://www.osc.nc.gov/andclickingon"Reports"orbycallingtheState Controller's Financial Reporting Section at (919) 707-0500.
TSERSprovidesretirementandsurvivorbenefits.Retirementbenefitsaredeterminedas1.82%ofthemember’saveragefinalcompensationtimesthemember'syearsofcreditableservice.Amember'saveragefinalcompensationiscalculatedastheaverageofamember'sfourhighestconsecutiveyearsofcompensation.Generalemployeeplanmembersareeligibletoretirewithfullretirementbenefitsatage65withfiveyearsofcreditableservice,atage60with25yearsofcreditableservice,oratanyagewith30yearsofcreditableservice.Generalemployeeplanmembersareeligibletoretirewithpartialretirementbenefitsatage50with20yearsofcreditableserviceoratage60withfivyearsofcreditableservice.Survivorbenefitsareavailabletoeligiblebeneficiariesofgeneralmemberswhodiewhileinactiveserviceorwithin180daysoftheirlastdayofsericeandwhoalsohaveeithercompleted20yearsofcreditableserviceregardlessofage,orhavecompletedfiveyearsofserviceandhavereachedage60.EligiblebeneficiariesmayelecttoreceiveamonthlySurvivor'sAlternateBenefitforlifeorareturnofthemember'scontributions.Theplandoesnotprovideforautomaticpost-retirementbenefitincreases.Increasesarecontingentuponactuarial gains of the plan.Page 14
NORTH CAROLINA STATE BOARD OF BARBER EXAMINERS
Notes to Financial Statements
NOTE 5 - RETIREMENT PLAN (Continued)
Methods Used to Value TSERS Investment
Net Pension Liability
Actuarial Assumptions
Valuation Date
12/31/2014
Inflation
3%
Salary Increases*
4.25% - 9.10%
Investment Rate of Return**
7.25%
TSERScurrentlyusesmortalitytablesthatvarybyage,gender,employeegroup(i.e.teacher,general,lawenforcementofficer)andhealthstatus(i.e.disabledandhealthy).ThecurrentmortalityratesarebasedonpublishedtablesandbasedonstudiesthatcoversignificantportionsoftheU.S.population.Thehealthymortalityratesalsocontainaprovisiontoreflectfuturemortalityimprovements.
PursuanttoNorthCarolinaGeneralStatutes,theStateTreasureristhecustodianandadministratoroftheretirementsystems.TheStateTreasurermaintainsvariousinvestmentportfoliosinitsInvestmentPool.ThepensiontrustfundsaretheprimaryparticipantsintheLong-termInvestmentportfolioandthesoleparticipantsintheExternalFixedIncomeInvestment,EquityInvestment,RealEstateInvestment,AlternativeInvestment,CreditInvestment,andInflationProtectionInvestmentportfolios.Theinvestmentbalanceofeachpensiontrustfundrepresentsitsshareofthefairmarketvalueofthenetpositionofthevariousportfolioswithintheool.DetaileddescriptionsofthemethodsandsignificantassumptionsregardinginvestmentsoftheStateTreasurerareprovidedinthe2015 Comprehensive Annual Financial Report.
Thefollowingtablepresentstheactuarialassumptionsusedtodeterminethetotalpensionliabilityfor the TSERS plan at the actuarial valuation date:
* Salary increases include 3.5% inflation and productivity factor.
AtJune30,2016,theBoardreportedaliabilityof$68,545foritsproportionateshareofthecollectivenetpensionliability.ThenetpensionliabilitywasmeasuredasofJune30,2015.ThetotalpensionliabilityusedtocalculatethenetpensionliabilitywasdeterminedbyanactuarialvaluationasofDecember31,2014,andupdateprocedureswereusedtorollforwardthetotalpensionliabilitytoJune30,2015.TheBoard'sproportionofthenetpensionliabilitywasbasedonthepresentvalueoffuturesalariesfortheBoardrelativetothepresentvalueoffutuesalariesforallparticipatingemployers,actuarially-determined.AsofJune30,2015,theBoard'sproportionwas0.00186%, which was a decrease of 0.00058% from its proportion measured as of June 30, 2014.
** Investment rate of return is net of pension plan investment expense, including inflation.
TheactuarialassumptionsusedintheDecember31,2014valuationswerebasedontheresultsofanactuarial experience study for the period January 1, 2005 through December 31, 2009.
FutureadhocCostofLivingAdjustment(COLA)amountsarenotconsideredtobesubstantivelyautomatic and are therefore not included in the measurement. Page 15
NORTH CAROLINA STATE BOARD OF BARBER EXAMINERS
Notes to Financial Statements
NOTE 5 - RETIREMENT PLAN (Continued)
Actuarial Assumptions (Continued)
Discount Rate
Sensitivity of the Net Pension Liability to Changes in the Discount Rate
Long-Term Expected
Asset Class
Real Rate of Return
Fixed Income
3.40%
Theinformationaboveisbasedon30-yearexpectationsdevelopedwiththeconsultingactuaryforthe2013asset,liabilityandinvestmentpolicystudyfortheNorthCarolinaRetirementSystems.Thelong-termnominalratesofreturnunderlyingtherealratesofreturnarearithmeticannualizedfigures.Therealratesofreturnarecalculatedfromnominalratesbymultiplicativelysubtractingalong-term inflation assumption of 3.19%. All rates of return and inflation are annualized.
Thefollowingpresentsthenetpensionliabilityoftheplancalculatedusingthediscountrateof7.25%,aswellaswhatthenetpensionliabilitywouldbeifitwerecalculatedusingadiscountratethatis1-percentagepointlower(6.25%)or1-percentagepointhigher(8.25%)thanthecurrentrate(dollars in thousands):
Thediscountrateusedtomeasurethetotalpensionliabilitywas7.25%.Theprojectionofcashflowsusedtodeterminethediscountrateassumedthatcontributionsfromplanmemberswillbemadeatthecurrentcontributionateandthatcontributionsfromemployerswillbemadeatstatutorilyrequiredrates,actuariallydetermined.Basedonthoseassumptions,thepensionplan'sfiduciarynetpositionwasprojectedtobeavailabletomakeallprojectedfuturebenefitpaymentsofthecurrentplanmembers.Therefore,thelong-termexpectedrateofreturnonpensionplaninvestmentswasappliedtoallperiodsofprojectedbenefitpaymentstodeterminethetotalpensionliabiity.
Alternatives
Credit
9.80%
6.80%
Real Estate
2.20%
5.80%
5.20%
Global Equity
Inflation Protection
Theprojectedlong-terminvestmentreturnsandinflationassumptionsaredevelopedthroughreviewofcurrentandhistoricalcapitalmarketsdata,sell-sideinvestmentresearch,consultantwhitepapers,andhistoricalperformanceofinvestmentstrategies.FixedincomereturnprojectionsreflectcurrentyieldsacrosstheU.S.Treasuryyieldcurveandmarketexpectationsofforwardyieldsprojectedandinterpolatedformultipletenorsandovermultipleyearhorizons.Globalpublicequityreturnprojectionsareestablishedthroughanalysisoftheequityriskpremiumandthefixedincomereturnprojections.Otherassetcategoriesandstrategies'returnprojectionsreflecttheforegoingandhistoricaldataanalysis.Theseprojectionsarecombinedtoproducethelong-termexpectedrateofreturnbyweightingtheexpectedfuturerealratesofreturnbythetargetassetallocationpercentageandbyaddingexpectedinfation.Bestestimatesofarithmeticrealratesofreturnforeachmajorassetclassincludedinthepensionplan'stargetassetallocationasofJune30,2015(thevaluationdate) are summarized in the following table:Page 16
NORTH CAROLINA STATE BOARD OF BARBER EXAMINERS
Notes to Financial Statements
NOTE 5 - RETIREMENT PLAN (Continued)
Sensitivity of the Net Pension Liability (Asset) to Changes in the Discount Rate
Deferred Outflows of Resources
Deferred Inflows of Resources
Difference between actual and expected experience
-$
7,794$
Changes of assumptions
-
-
Net difference between projected and actual
earnings on pension plan investments
-
7,426
Changes in proportion and differences between
employer contributions and proportionate share
of contributions
4,466
14,903
Employer contributions subsequent to the
measurement date
31,214
-
$ 35,680
$ 30,123
$ (11,453)
(11,453)
(11,507)
8,756
-
$ (25,657)
1% Decrease (6.25%)
Current Discount Rate
1% Increase (8.25%)
EmployerBalancesofDeferredOutflowsofResourcesandDeferredInflowsofResourcesRelated to Pension by Classification
2020
2021
Deferredoutflowsofresourcesanddeferredinflowsofresourcesthatwillberecognizedinpensionexpense:
Years Ending June 30:
2017
2018
2019
Deferred Inflows of Resources and Deferred Outflows of Resources Related to Pensions
Theamountreportedasdeferredoutflowsofresourcesrelatedtopensionsof$31,214willbeincludedasareductionofthenetpensionliabilityinthefiscalyearendedJune30,2017.Otheramountsreportedasdeferredoutflowsofresourcesanddeferredinflowsofresourcesrelatedtopensions will be recognized in pension expense as follows:
$206,301
$68,545
($48,357)
FortheyearendedJune30,2016,theBoardrecognizedpensionexpenseof$48,981.AtJune30,2016,theBoardreporteddeferredoutflowsofresourcesanddeferredinflowsofresourcesrelatedtopensions from the following sources:Page 17
NORTH CAROLINA STATE BOARD OF BARBER EXAMINERS
Notes to Financial Statements
NOTE 5 - RETIREMENT PLAN (Continued)
Deferred Outflow Amount
$ 31,214
Changes in Long-Term Liabilities
Net Pension
Liability
Balance July 1, 2015
28,607$
Prior year adjustments
-
Additions
39,938
Deletions
-
Balance, June 30, 2016
68,545$
Due within one year
-$
NOTE 6 - OPERATING LEASES
The following is a schedule of future minimum rental payments under the leases at June 30, 2016:
Years Ending June 30:
2017
66,242$
2018
67,132
2019
62,852
2020
62,041
2021
10,391
268,658$
TheBoardexercisedthefinaloptiontorenewitsbuildingleaseforanadditionalfive-yearperiodeffectiveSeptember1,2015.Theleaseratesforthefive-yearrenewalaresubjecttotheConsumerPrice Index increase not to exceed 1.5%.
AmountoftheEmployer'sBalanceofDeferredOutflowsofResourcesthatwillbeIncludedasa Reduction of the Net Pension Liability in the Fiscal Year Ended June 30, 2017.
TheBoardhasacopierleasewithmonthlypaymentsofapproximately$576expiringSeptember30,2018.
Totalleaseexpenseunderoperatingleaseschargedtooperationswas$66,481and$63,273fortheyears ended June 30, 2016 and 2015, respectively.Page 18
NORTH CAROLINA STATE BOARD OF BARBER EXAMINERS
Notes to Financial Statements
NOTE 7 - RISK MANAGEMENT
NOTE 8 - CONTINGENT LIABILITIES
NOTE 9 - RELATED PARTY TRANSACTION
NOTE 10 - NET DEFICIT
NOTE 11 - SUBSEQUENT EVENTS
ManagementoftheBoardevaluatedsubsequenteventsthroughOctober21,2016,whichisthedatethefinancialstatementswereavailabletobeissued.Managementdiscoverednosubsequenteventswhich should be disclosed.
The audit was conducted in approximately 110 hours at a cost of $9,670.
TheBoardpaysfeestoafamilymemberofitsstaffrelatedtojanitorialserviceswhichamountedto$4,200 for the fiscal years ended June 30, 2016 and 2015.
TheBoardisexposedtovariousrisksoflossrelatedtotorts;theftof,damageto,andthedestructionofassets;errorsandomissions;injuriestoemployees;andnaturaldisasters.TortclaimsofBoardmembersareself-insuredbytheStateundertheauthorityoftheStateTortClaimsAct.AdditionalcoverageisprovidedtotheBoardundertheState'spublicofficers'andemployees'liabilityinsurancecontractwithaprivateinsuranccompany.TheBoardalsoprotectsitselffromexposurestolossthroughthepurchaseofcommercialinsurance,ofwhichcoverageincludesbuildingandcontents,commercial liability, workers' compensation and employers' liability.
TheBoardisinvolvedinanumberofdisciplinaryhearingsthroughouttheyearwhichariseintheordinarycourseofitsoperations.Intheopinionofmanagement,theresultsofsuchactionsduringthe years under audit do not materially affect the financial position of the Board at year-end.
TheBoardhasexperiencednetoperatinglossesforthepastfouryears.TheBoard'srequestforafeeincreasedidnotpassinOctober2015.TheBoardeliminatedcertainstaffpositionseffectiveJanuary 31,2016,resultinginadecreaseinoperatingexpensesandoperatinglossfortheyearendedJune30,2016.Managementestimatesthedecreaseinoperatingexpensesforthenextfiscalyearwillresultinbudgetedrevenuesexceedingexpenditures(cashbasis)byapproximately$89,000fortheyearendingJune30,2017.ThefeeincreaseproposalwillcomebeforetheNorthCarolinaLegislature again in 2017.
InSeptember2015theBoardreachedthefinalsettlementofaworker'scompensationclaimmadebyaformeremployee.DuringtheyearsendedJune30,2016and2015,theBoardpaidworkers'compensationclaimsofapproximately$89,000and$41,000,respectively,relatedtothisclaim,ofwhichestimatedsettlementcostsof$84,500wereaccruedatJune30,2015.TheBoardisnowcovered under a workers' compensation insurance policy.See Independent Auditor's Report
Page 19
NORTH CAROLINA STATE BOARD OF BARBER EXAMINERS
Proportionate Share of Net Pension Liability and Schedule of Board Contributions
Teachers' and State Employees' Retirement System
Years Ended June 30, 2016 and 2015
2016
2015
Proportionate share percentage of the net pension
liability (asset)
0.00186%
0.00244%
Proportionate share of the net pension liability (asset)
68,545$
28,607$
Covered-employee payroll
336,862
393,430
Proportionate share of net pension liability (asset)
as a percentage of its covered-employee payroll
20.35%
7.27%
Plan fiduciary net position as a percentage of
the total pension liability
94.64%
98.24%
Contributions:
Contractually required contribution
50,789$
82,935$
Contributions in relation to the contractually
required contribution
50,789
82,935
Contributions deficiency (excess)
-$
-$
Covered-employee payroll
336,862$
393,430$
Contributions as a percentage of covered-
employee payroll
15.08%
21.08%